"LIBRARY OF THE UNIVERSITY Of ILLINOIS G30.7 tto.499-513 cop- 2 AGRICULTURE The person charging this material is responsible for us return to the hbrary from which it was withdrawn on or before the Latest Date stamped below ter, 333-8400 ARY AT URBANA-CHAMPAIGN LI61 0-1096 Financial Position of A Representative Group of McHenry County Farmers In the Dairy Region of Northern Illinois 1940-1942 By B. D. Parrish and L. J. Norton Bulletin 512 : UNIVERSITY OF ILLINOIS AGRICULTURAL EXPERIMENT STATION PAGE CONTENTS Purpose and Scope of Study 523 Capital Position of Operators 526 Positions of Owners and Operators Contrasted 526 Operators With Different Debt Ratios 532 Operators With Businesses of Different Size 537 Operators With Continuous Records 541 Cash Income and Expense Patterns 547 Patterns of Owners and Tenants Contrasted 547 Operators With Different Debt Ratios 553 Operators With Businesses of Different Size 555 Operators With Continuous Records 557 Expenditures for Various Purposes 558 Possibilities of Buying Farms From Earnings 559 Some Characteristics of Farms and Operators 562 Owner and Tenant Farms and Operators 562 Farms With Different Debt Ratios 564 Farms of Different Size 566 Changes in Milk Production 567 Total Farm Business 568 Kinds of Credit and How Used 572 Debts of All Farmers 572 Sources of Credit 572 Purpose of Borrowings 576 Changes in Total Debts 576 Factors Influencing Farm Earnings 580 Methods of Selecting Sample and Collecting Data 584 General Summary 586 Findings in Brief 590 List of Tables 591 Urbana, Illinois June, 1945 Publications in the Bulletin series report the results of investigations made or sponsored by the Experiment Station Financial Position of a Representative Group of McHenry County Farmers: 1940-1942 By B. D. PARRISH and L. J. NORTON' EIGE OUTLAYS of capital are essential in modern agriculture. To finance the ownership of farm land, to provide essential improvements, and to acquire the working capital to farm the land and so stock it as to utilize the crops to the best advantage require huge sums. The value of the capital involved in the ownership of farm land in Illinois and the working capital needed for its operation was about 3.2 billion dollars in 1940. Of this sum 2.5 billion dollars repre- sented the value of land and buildings, and .7 billion dollars the value of livestock, equipment, grain, etc. In 1943 wartime prices had in- creased the total by more than one-third. The individuals who own the land or operate it are the ones who must provide the capital needed for the farming enterprise. Altho most economic studies of farming have taken for granted the ability of individuals to finance their farms, it is well known that inability to do so prevents ownership in many cases and cramps operations in other cases. PURPOSE AND SCOPE OF STUDY The original purpose of the present study was to find answers to such questions as these: How much capital is involved in the owner- ship and operation of typical Illinois farms? How is it distributed among the various factors of production? Who furnishes this capital? How do farmers who are short of capital finance their operations? The farms studied were located in McHenry county, Illinois, about 70 miles northwest of Chicago in the milkshed of that city. The period was 1940-1942. As the selected farms were representative of the farms in the county, the findings are believed to apply to the county as a whole and to other similar territory. Some of the findings are general enough to suggest relationships that apply over much wider areas. Any economic study is necessarily restricted to a given period of 1 B. D. PARRISH, formerly Associate in Agricultural Economics; L. J. NORTON, Chief in Agricultural Marketing. 523 524 BULLETIN No. 512 [June, time, some studies to very short times. This fact must be given full weight in any generalizations that are drawn from such studies, for conditions can and do change drastically even in comparatively short periods. The time covered by this study, 1940-1942, was one of rising prices, good crops in the area where the farms are located, and rising incomes. The relationships found between the various factors analyzed in this study will of course apply only to periods when similar condi- tions prevail. If incomes had been shrinking, quite different relation- ships would probably have been found. Studies extending over a long enough period to cover a complete cycle of change from low incomes to high and back to low would of course have more value. This study, however, has interest aside from that suggested by its original purposes. It shows the financial positions and operations of a typical group of farmers just before the country became involved in war, the response which farmers made to the Food- for- Victory pro- gram launched in the first year of the war, and the effect which the first year of the war had on farmers differently situated with respect to finances and to tenure some with ample capital and some short of capital, some out of debt and some heavily in debt, some tenants and some owners, some operators of a small farming enterprise and some of a large enterprise. How did these farmers respond to the calls for greater production? How much were operators who were short of capital hindered in their efforts to expand? These questions are of great public importance, as is also another question: How did these different groups make use of the enlarged earnings which higher prices and expanded production brought them? Answers to these and many other questions besides those which the study was originally designed to answer are to be found in the data here presented. Collection and analysis of data. The basic data for this study were collected by the survey method from 124 farms in 1940, 146 farms in 1941, and 118 farms in 1942. 1 The data regarding assets, debts, net worth, and debt ratios, as well as income and expense, include only the operator's share of the farm business, except in the section dealing with total 1942 farm income. Data regarding size of farm, productivity, land use, and the dairy herd refer to the entire farm unit and not merely to the oper- ator's share. 'The records were collected by B. D. Parrish in 1940, by Parrish and others in 1941, and by Parrish and R. A. Kelly in 1942. The farms were a random sample. Methods used in selecting the samples are discussed on pages 584-586. 1945} FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 525 The data were analyzed statistically by first sorting them on the basis of such factors as tenure of operator, percentage of capital bor- rowed (debt ratio), and size of business. When sorting was done by the last two factors, the records of owners (including part owners) and tenants were kept separate. Various items for all the farms in a given group were then averaged. The statistical significance of a num- ber of the resulting averages was calculated in order to help the in- vestigators to decide what differences were important, but the results of these calculations are not included in this publication. The stability of the difference is of great importance in indicating valid relationships. Three years of data present opportunities for checking such stability. General features of area in which study was made. McHenry county, located on the Illinois-Wisconsin border, is the second county west of Lake Michigan. Production of milk for the Chicago market is the major farm enterprise. Hogs and poultry are kept on most farms, and a few farmers either feed cattle or keep rather large flocks of poultry. The land ranges from level to hilly, but much of it is rolling. Corn, small grains, and legume hay are the main crops and are largely fed on the farms where grown. Except for protein sup- plements, only small amounts of feed- stuffs are purchased. In brief, farm- ing in this county is essentially an intensive milk-producing enterprise in which most of the feed is raised on the farms where it is fed. Many opportunities for nonfarm employment exist in this area, especially in the industries located in the county seat, Woodstock. Proximity to Chicago and its suburbs has caused labor to be drawn off these farms more rapidly than from farms in areas more remote from urban centers. It is not surprising, therefore, that but little surplus labor either male or female was found on these farms at the time of the survey, a period when industry was active. Farming in this county, as in Illinois generally, is organized on a family basis, only a moderate amount of hired labor being utilized, usually not more than one hired man to a farm. The high labor require- ments of the dairy enterprise make it possible, and often necessary, to use considerable family labor. The operation of the farms surveyed in 1940 required an average of 22 months of labor, 6 months of it hired labor and 16 months of it family labor, including the labor of the operator. 1940 Owners 45 Part owners 14 Tenants 63 1941 51 16 79 1942.. 43 18 57 526 BULLETIN No. 512 [June, CAPITAL POSITION OF OPERATORS Positions of Owners and Operators Contrasted The problem of supplying capital varies with the tenure of the operator. The owner-operator must finance the land and improvements and working capital. The tenant needs only to finance his working capital, in whole or in part, and in some cases to finance minor im- provements. The part owner occupies an intermediate position between these two groups. The farms studied were classified first on the basis of the tenure of their operators; the yearly distribution of those included was as follows: Total 122 146 118 Since the proportions in the different tenure and debt classifications were similar in the other years, the 1941 sample, which was the largest, was taken as representative (Table 1). On December 31 of that year 20 percent of these farmers reported no debts. A slightly higher proportion of tenants than of owners reported no debts, a fact that reflects the lower capital requirements of tenants. The general summary of the capital position of the different tenure groups for each of the three years (Table 2) shows that: (1) the owners and part owners had larger assets because they had more work- ing capital and because they were financing all or part of their real estate; (2) the part owners were the most heavily indebted group; (3) among tenants, the cash-rent group had larger assets than the livestock-share group, as the cash tenants had to furnish all their working capital; (4) the share tenants owning less than half the cows TABLE 1. ONE HUNDRED FORTY-SIX FARMERS IN MCHENRY COUNTY, ILLINOIS, REPORTING DIFFERENT CLASSES OF DEBTS ON DECEMBER 31, 1941 Owners Part owners Tenants All Number Percent Number Percent Number Percent Number Percent Farmers, total ... . 51 100 16 100 79 100 146 100 Farmers with No debts 10 20 1 5 18 23 29 20 Debts 41 80 15 94 61 77 117 80 Long-term debts. . . . 33 65 15 94 4 5 51 35 Short-term debts Both long- and short- term debts . . . 31 23 61 45 10 10 62 67 60 ^ 76 4. 101 69 94. 1945} FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 527 TABLE 2. CAPITAL POSITION OF 146 OWNERS, PART OWNERS, AND TENANTS, 1940, 1941, AND 1942 (Average of beginning and ending inventories each year) Owners Part owners Cash and crop-share tenants Livestock-share tenants Owning half of cows Owning less than half of cows 1940 Number of farms 45 14 323 988 7 896 16 092 16 324 635 8 355 16 280 18 $26 079 6 375 19 704 40 36 652 1 148 5 504 50 37 780 1 568 6 212 37 38 339 1 302 7 037 14 35 054 1 801 3 253 21 35 093 1 439 3 654 13 $6 622 1 381 5 241 9 33 982 426 3 556 8 35 137 392 4 745 7 36 570 438 6 132 Assets . . . $22 892 4 998 Net worth 17 894 1941 Number of farms 51 Assets ... 324 670 Liabilities 5 932 Net worth 18 738 1942 Number of farms 43 . . 325 018 Liabilities 5 085 Net worth 19 933 425,000 20,000 15,000 10,000 5,000 ASSETS AND DEBTS 1941 OPERATORS' I TOTAL -ll ASSETS P -EQUITY I ASSETS OFFSET 'BY DEBTS OWNERS PART CASH L-SHARE L-SHARE OWNERS TENANTS TENANTS TENANTS (50-50) (-50) Fig. 1. Capital and debt positions of operators in 1941. These farmers owned a large share of the capital they used. 528 BULLETIN No. 512 [June, TABLE 3. CAPITAL POSITION OF 146 OWNERS, PART OWNERS, AND TENANTS ON DECEMBER 31, 1941 Livestock-share tenants Item Owners Part Cash Owning Owning less owners tenants" ha , f of 8 than alf cows of cows Number of farms 51 16 50 21 8 Assets Land and improvements $16060 $15479 $ $ $ Machinery and equipment 2170 2374 1923 1923 2209 Horses 271 259 307 313 304 Dairy cattle 2827 3313 2892 1861 748 Other livestock. . 550 524 485 237 420 Feed and grain 2 026 2 464 1 653 1 046 1 644 Insurance, etc 265 235 185 66 350 Total current assets 8 109 9 169 7 445 5 446 5 675 Total farm assets 24 169 24 648 7 445 5 446 5 675 Other investments 1266 944 1299 2 194 Total assets $25 435 $25 592 $8 744 $5 448 $5 869 Liabilities First land mortgage $4189 $5439 $ $ $ Second land mortgage 703 1 444 Other long-term debts 128 547 Total long-term debts 5 020 6 883 547 Chattel mortgages 141 530 917 729 Conditional sales 101 129 93 264 Personal notes 392 536 208 235 100 Unsecured debts 5 52 31 106 287 Interest in arrears 4 20 10 41 Principal in arrears 18 18 20 Other debts 11 07 30 Total short-term debts 672 1285 1266 1380 388 Total liabilities $5692 $8168 $1813 $1380 $ 388 Net worth 19743 17424 6931 4068 5481 Net worth and liabilities $25435 $25592 $8744 $5448 $5869 Debt ratio, percent Total debts to total assets 22 32 21 25 Short-term debts to current assets 8 14 17 25 7 Long-term debts to land and improvements 31 44 ... ... ... Size acres owned 138 122 acres operated . 138 182 146 156 192 number of cows milked 20.8 23.0 22.1 26.5 32.8 The data concerning two crop-share tenants were included in those for cash tenants. were the least indebted group. The light debts of the share group indi- cated how much simpler a tenant's financial problem is when the landlord assumes part of the financial responsibility for the operation of the farm. These facts are shown graphically in Fig. 1. These data indicate what is to be expected that farmers who have adequate capital are likely to be land owners, while those who are short of capital are likely to be tenants. It should be noted, however, that in 1942 these various groups of tenants had assets averaging $6,600 to $8,300. Thus even when the operator does not own the land, his capital requirements in this area are high. The distribution of the operator's capital in each of the five tenure groups on December 31, 1941, is shown in Table 3. Noticeable are the large investments of the owners and part owners in land; the smaller investments of the livestock-share tenants in dairy cattle, particularly 1945] FINANCIAL POSITION OF McHENRY COUNTY FARMERS 529 by those who owned less than half the cows; the generally lighter in- vestments of the tenants in machinery and equipment, other livestock, and feed and grain; and the general tendency for owners and part owners to have larger current assets than the tenants. The owners and cash tenants operated the smallest farms; the livestock-share tenants owning half the cows operated somewhat larger farms; and the part owners and the livestock-share tenants owning less than half the cows operated the largest farms. On December 31, 1941, the equities of these operators in their assets were as follows: livestock-share tenants owning less than half the cows owned 93 percent of their assets; cash tenants owned 79 per- cent of their assets-; full owners, 78 percent; "50-50" livestock-share tenants, 75 percent; part owners, 68 percent. The part owners were using borrowed funds more extensively than were the other groups. Presumably these men were formerly tenants who had borrowed in order to buy land. Progress during the period. Since the farms included in the study were not exactly the same each year, the best index to the prog- ress of each group of operators is the change that took place in their capital position between the beginning and the end of each year (Tables 4 and 5). The reason the land item changed so little was that no allowance was made for any increases in land value during the year. But for both the combined owner and part-owner groups and for the combined tenant groups, current assets in all principal classes increased in each of the three years. The largest increases were in livestock both dairy cattle and other livestock and in feed and grain. Thruout the period both groups increased their assets each year, the increases being larger in 1941 and 1942 than in 1940. It is noteworthy that owners and tenants increased their assets about the same amount. The tenants were able to increase their assets as rapidly as the owners by following different debt policies. Thruout this period the owners were reducing their debts: by an average of $134 in 1940, $455 in 1941, and $914 in 1942. The tenants were increasing their debts in 1940 and 1941 and just about maintaining them in 1942. The owners increased their net worth more than did the tenants. But in relation to capital invested, the rate of increase in the tenants' net worth was more than double that of the owners: Tenants Owners 1940 12.8 4.6 1941 31.1 13.0 1942.. 33.3 17.1 530 BULLETIN No. 512 [June, TABLE 4. CHANGES IN CAPITAL POSITION OF OWNERS AND PART OWNERS EACH YEAR, 1940, 1941, AND 1942 1940 1941 1942 Beginning End Beginning End Beginning End Number of farms 59 Assets Land and improvements .. 315 839 315 817 Machinery and equipment 1 698 1 897 Horses 288 297 Dairy cattle 2 088 2 223 Other livestock 357 379 Feed and grain 1 375 1 668 Insurance, etc 217 233 Total current assets. ... 6 023 6 697 Total farm assets 21 862 22 514 Other investments 997 933 Total assets 322 859 23 447 Liabilities First land mortgage 34 287 3 4 126 Second land mortgage .... 775 694 Other long-term debts .... Total long-term debts... 5062 4820 Chattel mortgages 320 315 Conditional sales 8 75 Personal notes 326 348 Unsecured debts 11 10 Interest in arrears 1 3 Principal in arrears 22 43 Other debts 3 5 Total short-term debts. . 691 799 Total liabilities 3 5 753 3 5 619 Net worth 17 106 17 828 Net worth and liabilities 322 859 323 447 Changes Increase in assets 3588 Decrease in liabilities 134 Increase in net worth Excluding cash 722 Including cash 809 Percent increase with cash 67 61 315 961 1 943 268 2 251 360 1 656 249 6 727 22 688 1 163 323 851 3 4 763 967 106 5 836 325 68 447 12 2 40 9 903 3 6 739 17 112 315 921 2 219 268 2 943 543 2 131 258 8 362 24 283 1 190 325 473 3 4 488 880 97 5 465 234 108 426 16 8 14 13 819 3 6 284 19 189 323 851 325 473 31 622 455 2 077 2 361 315 258 2 157 282 2 997 527 2 131 299 8 393 23 651 904 324 555 3 4 252 924 5 176 223 89 377 17 9 20 10 745 3 5 921 18 634 315 155 2 234 322 3 953 731 2 331 288 9 859 25 014 1 075 326 089 3 3 641 827 4 468 210 22 266 17 6 9 9 539 3 5 007 21 082 324 555 326 089 31 534 914 2 448 3 388 Debt ratio, percent Total debts to total assets. . Short-term debts to 24.0 28.3 24.1 current assets 11.9 13.4 8.9 Long-term debts to land and improvements. . . 30.5 36.6 33.9 The above percentages allow for apparent changes in cash position, as discussed on pages 552 and 553. The main reduction in debts was in real- estate mortgages. At the bottom of page 531 are further details concerning net-worth differences between tenants and owners in each of the three years of the study. Obviously this was a period of capital accumulation, reflecting both higher prices and increases in physical assets. Even tho the owners reduced their debts, increases in assets contributed more to increasing their net worth than did debt reduction. The high rate of returns on net worth indicates that in this period it paid to have the use of larger assets even if it was necessary to borrow in order to get them. 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 531 TABLE 5. CHANGES IN CAPITAL POSITION OF TENANTS EACH YEAR, 1940, 1941, AND 1942 1940 1941 1942 Beginning End Beginning End Beginning End Number of farms 63 79 57 Assets Land and improvements. . $ $ $ $ $ $ Machinery and equipment 1 562 1 764 1 676 1 952 1 919 2 100 Horses 358 381 329 308 319 302 Dairy cattle 1542 1770 1836 2401 2363 3086 Other livestock 263 304 301 413 364 507 Feed and grain 1 094 1 335 1 252 1 491 1 404 1 585 Insurance, etc 140 147 154 170 214 223 Total current assets 4 959 5 701 5 548 6 735 6 583 7 803 Total farm assets 4 959 5 701 5 548 6 735 6 583 7 803 Other investments 577 593 473 842 361 708 Total assets 35536 $6 294 $6021 $7577 $6 944 $8511 Liabilities First land mortgage $ $ $ $ $ $ Second land mortgage .... Other long-term debts .... 85 81 65 346 88 173 Total long-term debts. .. 85 81 65 346 88 173 Chattel mortgages 635 814 858 775 660 656 Conditional sales 54 53 70 139 157 46 Personal notes 286 243 214 223 210 219 Personal debts 50 43 53 48 81 19 Interest in arrears 11 17 10 17 9 1 Principal in arrears 1 Other debts 06 55 10 98 Total short-term debts. . 1 036 1 176 1 210 1 208 1 127 1 039 Total liabilities $1 121 $1 257 $1 275 $1 554 1 215 $1 212 Net worth 4415 5037 4746 6023 5729 7299 Net worth and liabilities $5536 $6294 $6021 $7577 $6944 $8511 Changes Increase in assets $758 $1556 $1567 Decrease in liabilities (136) (279) 3 Increase in net worth Excluding cash 622 1 277 1 570 Including cash 603 1677 2169 Percent increase with cash 12.8 31.1 33.3 Debt ratio, percent Total debts to total assets. . 20.0 21.2 17.5 Short-term debts to current assets 20.6 21.8 17.1 Long-term debts to land and improvements ... .... .... Increase. NET- WORTH DIFFERENCES BETWEEN OWNERS AND TENANTS Percent increase in Increase in net worth, net worth, including including cash changes in cash 1940 1941 1942 1940 1941 1942 Owners $ 737 32293 $3 107 4.1 12.2 15.6 Part owners 1042 2581 4068 6.5 15.9 20.6 Cash tenants 787 1916 2418 14.3 30.8 34.4 Livestock-share tenants Owning 50 percent of cows ... 184 1097 1400 5.7 31.0 26.7 Owning less than 50 percent of cows... 440 1 723 2 285 12.4 36.3 37.3 532 BULLETIN No. 512 [June, Operators With Different Debt Ratios One indication of a farmer's financial position is the ratio of his debts to his assets, that is, the percentage which his debts are of the value of property he owns. In this analysis, figures for owners and part owners were combined, as were those for all classes of tenants. How did the size of debts in relation to assets affect the ability of a farmer to acquire further assets and to make financial progress? Among the owners (Table 6 and Fig. 2) the total assets tended to be larger where debt ratios exceeded 20 percent than where they were less than 20 percent or where there were no debts. The more heavily indebted owners had more invested in land and improvements, somewhat more in machinery and equipment, and substantially more in dairy cattle. The cash values of their insurance policies also averaged lower. The owners possessing the largest assets also owned and oper- ated the largest farms as measured in acres; particularly was this true for the 19 farmers with debt ratios of 40 percent and over. The 27 with debt ratios of 20 to 39 percent had slightly larger farms and slightly larger dairy herds, more valuable land, and more valuable cows than did those with lower debt ratios. This group also had a high rate of milk production per cow. TABLE 6. CAPITAL POSITION OF 67 OWNERS AND PART OWNERS WITH DIFFERENT DEBT-TO- PROPERTY RATIOS, DECEMBER 31, 1941 Debt ratio 1-19% 20-39% 40% and over Number of farms 12 9 27 19 Assets Land and improvements 14 694 $12 338 $16 195 $18 005 Machinery and equipment 2 045 1 805 2 189 2 568 Horses 222 262 286 274 Dairy cattle 2 320 2 342 3 172 3 295 Other livestock 668 310 479 667 Feed and grain 2 023 1 736 1 963 2 624 Insurance, etc 375 472 280 53 Total current assets 7 653 6 927 8 369 9 481 Total farm assets 22 347 19 265 24 564 27 486 Other investments 1 917 2 306 701 895 Total assets $24 264 $21 571 $25 265 $28 381 Liabilities First land mortgages . $ $ 1 356 $ 4 845 $ 8 297 Second land mortgages 918 1 799 Other long-term debts 343 Total long-term debts 1 356 5 763 10 439 Total short-term debts 103" 329 739 1 616 Total debts 103 1 685 6 502 12 055 Net worth $24 161 $19 886 $18 763 $16 326 Average debt ratio, percent 8.0 26.0 42.0 Size acres owned 121 117 125 164 acres operated 127 122 134 195 number of cows milked 19.2 21.8 20.9 23.2 Farms with no debts at the beginning of the year were classified in this group. 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 533 These figures suggest either that owners with high debt ratios had borrowed to acquire larger businesses, or that the larger businesses tended to keep the owners in debt. The survey does not show definitely which of these two explanations is correct. It is clear, however, that enough loan capital was available to permit the owners of the larger farms to acquire or to hold their added assets. Among the tenants (Table 7) the relation between size of farm and debt ratio was the reverse of that among owners. The less heavily indebted tenant operators and those that had no indebtedness possessed more assets and had larger businesses as measured by the number of cows, investments in machinery and equipment, and in feed and grain. However, the more heavily indebted tenants had larger investments in dairy cattle. This was probably due to the fact that a large propor- tion of the farmers in this group operated under leases that provided for the ownership of fewer cattle by the landlord than was provided by the leases in the other groups. The fact that 17 of the tenant farmers had debt ratios of 40 per- cent or more indicates the ease with which operators in this area could borrow money to acquire farm assets. The debts of owners (Table 6) were chiefly long-term debts. There were second mortgages only in the groups having an indebtedness of TABLE 7. CAPITAL POSITION OF 79 TENANTS WITH DIFFERENT DEBT-TO- PROPERTY RATIOS, DECEMBER 31, 1941 Debt ratio 1-19% 20-39% 40% and over Number of farms 19 21 22 17 Assets Land and improvements ? ? ? 3 Machinery and equipment 2 241 2 023 1 901 1 604 Horses 328 303 345 246 Dairy cattle 2 312 2 230 2 579 2 483 Other livestock 471 285 498 396 Feed and grain 1 805 1 564 1 428 1 130 Insurance, etc 364 159 107 47 Total current assets' 7 521 6 564 6 858 5 906 Other investments 1 023 1 501 726 Total assets ?8 544 ?8 065 ?7 584 ?5 906 Liabilities First land mortgages ? % ? ? Second land mortgages Other long-term debts 263 859 195 Total long-term debts 263 859 195 Total short-term debts 58 548 1 405 3 053 Total debts 321b 1 407 1 600 3 053 Net worth ?8 223 $6 658 ?5 984 $2 853 Average debt ratio, percent 4.0 17.0 21.0 52.0 Size acres owned acres operated 159 142 164 150 number of cows milked 27.3 21.4 25.7 23.6 Also total farm assets since these tenants had no other farm assets. b Farms with no debts at the beginning of the year were classified in this group. 534 BULLETIN No. 512 [June, $24,000 - 18,000 - INVESTMENTS AND DEBTS OWNERS AND PART OWNERS 12.000 ---- 6,000 -m-m-m- 1-19 20-39 40+ DEBT RATIO 1-19 20-39 40+ DEBT RATIO Fig. 2. Total investments and debts of operators having different debt ratios, December 31, 1941. When the farms of no-debt owners were left out of consideration, the total investments of the remaining owners were posi- tively correlated with debt ratio; that is, the more heavily indebted owner- operators had the larger investments. The reverse was true for tenants, the more heavily indebted tenants having the use of less capital. 20 percent and over. These latter groups had the largest short-term debts. Mortgage debts of the most heavily indebted group of owners represented 60 percent of the value of land and improvements. Progress during the period. From Table 8 two significant obser- vations can be made concerning the average assets and liabilities of owners and part owners in each debt-ratio group for the three years. (It should be remembered that the farms were not identical from year to year.) The situation in 1941 is shown in Fig. 3. First, altho all groups increased their assets each year during this period, the increases were largest where the debts were highest. The more heavily indebted owners built up their assets and reduced their debts to a greater extent in each of these three years than did the less heavily indebted owners. The amortization principle, which normally involves payment in proportion to the size of the loan, partly accounts 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 535 TABLE 8. CHANGES IN ASSETS AND LIABILITIES OF OWNERS AND PART OWNERS WITH DIFFERENT DEBT-TO-PROPERTY RATIOS, 1940, 1941, AND 1942 Year Num- ber of farms Debt ratio, per- cent End of year Changes during the year Increase in net worth Assets Liabilities Increase pj in assets .~~ Ha- 36 Ex- cluding cash In- cluding cash Percent increase (with cash) No debts 1940... 12 324 24 29 358 264 583 3 103 3 447 3 1 108 (103>>) 1 663 3 447 1 005 1 663 3 1 4 762 660 370 3.2 7.0 15.2 1941 . 12 1942 9 Debt ratios of 1 to 19 percent 1940 11 7 8 6 320 21 23 251 571 056 3 1 347 1 685 1 317 3 360 3 926 1 432 1 230 028 3 299 1 156 2 460 3 1 2 453 284 268 2.4 6.7 11.1 1941 9 1942 . 15 Debt ratios of 20 to 39 percent 1940... 24 30 26 23 324 25 25 030 265 222 37 295 6 502 5 871 3 602 3 1 779 1 438 1 323 554 025 3 925 2 333 2 463 3 2 3 880 535 206 5.4 14.4 17.7 1941 . .. 27 1942. . 25 Debt ratios of 40 percent and over 1940... 12 49 42 40 324 28 29 299 381 096 311 800 12 055 11 582 3 910 3 2 051 1 768 1 69 723 226 3 979 2 774 2 994 31 3 4 038 019 440 8.6 20.2 27.7 1941 . . 19 1942 12 Less than one-half of 1 percent. b These are increases. for the large payments the most heavily indebted farmers made. But some of these men made payments in addition to those required by the terms of their loans. It is clear that in the owner group debt reduc- tion went hand in hand with increase in assets. Second, the rate of increase in net worth became larger as debt ratios became higher. This was true in each of the three years. Two reasons for this were: (1) the rate earned by the operators of the more heavily indebted farms exceeded the cost of borrowing and thus increased the rate earned on the owner's net worth; (2) these more heavily indebted farms tended to be larger than the more lightly indebted farms, and in a period of favorable earnings large farms pay better than small farms. In each group of tenants (Table 9) the assets were increased during each of the three years. The group with the lowest debts and the group with no debts did somewhat better, in general, than the two groups with the highest debts, but the situation was not clear-cut in this respect. Thruout the period these men were all accumulating capital, while changes in their debts varied. Debts tended to increase in the low-debt and no-debt groups and to be reduced in the group with 536 BULLETIN No. 512 [June, TABLE 9. CHANGES IN ASSETS AND LIABILITIES OF TENANTS WITH DIFFERENT DEBT-TO-PROPERTY RATIOS, 1940, 1941, AND 1942 Num- Year ber of farms Debt ratio, per- cent End of vear Changes during the year Increase in net worth Increase . Liabili- in assets ties excluding cash De- crease in lia- bilities Ex- cluding cash In- cluding cash Percent increase (with cash) No debts 1940 IS 37 401 $ $ 916 3 33 % 949 3 774 11.2 1941 19 4 8 544 321 2 182 (32 1) 1 861 2 076 28.5 1942 12 2 9 518 208 1 658 (208) 1 450 2 618 30.5 Debt ratios of 1 to 19 percent 1940 16 9 37 040 3 613 3 833 3 (82) 3 751 3 694 11.5 1941 ... 21 17 . 8 065 1 407 1 996 (868) 1 128 1 402 23.0 1942 23 11 8 080 890 1 748 (290) 1 458 2 015 31.2 Debt ratios of 20 to 39 percent 1940 ... . 20 29 35 922 31 705 3 355 3 (54) 3 301 3 546 13 4 1941 22 21 7 584 1 600 946 274 1 220 1 887 34 9 1942 .. 13 17 9 635 1 656 1 092 550 1 642 2 478 34 6 Debt ratios of 40 percent and over 1940. 1941. 1942. 12 65 34 535 32 946 31 134 3(559) 3 575 3 369 28.3 17 52 5 906 3 053 1 134 (218) 916 1 343 56.1 9 41 6 656 2 734 1 668 239 1 907 1 532 51.6 These are increases. $3.000 2,000 1.000 NET WORTH INCREASE DOLLARS E3 PERCENT OWNERS AND PART OWNERS 1-19 20-39 40+ DEBT RATIO 1-19 20-39 40 + DEBT RATIO Fig. 3. Change in net worth of operators with change in debt ratio, 1941. As measured in dollars, the increase in the net worth of owners, but not of tenants, became larger as the debt ratio increased. In both groups, however, the percentage increase became larger as the debt ratio increased, indicating that in this period it paid to use' borrowed capital. 7945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 537 debt ratios of 20 percent to 39 percent. In the high-debt group they tended to increase in the first two years and to decline in 1942. The tenants were, in general, using their credit to build up their assets. The possibilities that existed for farmers with comparatively small capital of their own to build up assets is illustrated by the increase in net worth among the tenants having debt ratios of 40 percent or more. These men increased their net worth, on the average, by amounts ranging from somewhat more than a quarter to somewhat more than a half in each of these three years. As was true with owners, the tenants having the highest debt ratios had the highest percentage increases in net worth; but unlike the owners having high debts, these high-debt tenants were not < operating the larger farms. Operators With Businesses of Different Size A good measure of the size of a farm business is the number of productive man work units required in its operation in the course of a year. 1 As would be expected, the size of the business correlated di- rectly with the amount of farm capital invested in each key item land and improvements, machinery and equipment, dairy cattle, and TABLE 10. CAPITAL POSITION OF 67 OWNERS AND PART OWNERS HAVING FARM BUSINESSES OF DIFFERENT SIZE, DECEMBER 31, 1941 Size of farm in productive man work units*. . . Under 400 400-549 550-699 700 and over Number of farms 16 16 20 15 Assets Land and improvements . $ 9 800 $13 743 $19 277 $20 300 Machinery and equipment 1 124 2 074 2 705 2 893 Horses 130 308 272 369 Dairy cattle 1 393 2 859 3 209 4 331 Other livestock 233 411 717 785 Feed and grain 806 1 589 2 699 3 365 Insurance, etc 298 239 280 207 Total current assets 3 984 7 480 9 882 11 949 Total farm assets . 13 784 21 223 29 159 32 249 Other investments 1 453 479 1 378 1 413 Total assets . 215 237 $21 702 $30 537 $33 662 Liabilities Long-term debts . 3 2 238 % 4 267 $ 6 622 $ 8 641 Short-term debts 551 687 578 1 566 Total debts . $ 2 789 $ 4 954 $ 7 200 $10 207 Debt ratio, percent 18 23 24 30 Average size of farm Number of man work units 310 489 621 830 Number of acres owned 69.8 107.6 161.6 194.6 Number of acres operated 70.6 117.1 178.3 225.2 Number of cows milked 11.7 18.6 23.4 30.7 See definition given below 'A productive man work unit is that amount of productive farm work (as distinguished from necessary but unproductive work) that can be performed at average intensity and efficiency in a 10-hour day. 538 BULLETIN No. 512 [June, feed and grain (Tables 10 and 11). Among the owners, the larger farms had the higher debt ratios, but among the tenants these two factors were not correlated (see also Fig. 4). Per man work unit, the tenants had about $10 invested in farm operating capital; the owners had between $13 and $14. The lower value for tenants reflects the effect of the tenants' sharing with the land owners the responsibility for providing capital. The owners of the $3 0,000 20,000 ASSETS AND DEBTS OWNERS AND 10,000 - H UNDER 400 550 700 UNDER 400 550 700 400 549 699 + 400 549 699 + SIZE OF FARM IN PRODUCTIVE MAN WORK UNITS Fig- 4. Assets, debts, and debt ratios of men operating farms of different size, December 31, 1941. For owners but not for tenants the debt ratio in- creased with size of farm; it averaged slightly over 20 percent. 15 largest farms had $24 invested in land and improvements per man work unit, whereas the owners of the smallest farms had $32 so in- vested. This difference is due partly to the fact that there were more part owners among the owners of the largest farms. Examination of the financial progress of these farmers reveals that 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 539 in both the owner and the tenant groups size of business was positively correlated with the extent of the increases in net worth (Tables 12 TABLE 11.- -CAPITAL POSITION OF 79 TENANTS WITH FARM BUSINESSES OF DIFFERENT SIZE, DECEMBER 31, 1941 Size of farm in productive man work units . . . . Under 400 400-549 550-699 700 and over Number of farms 13 24 21 21 Assets Land and improvements , .go % 2 $ Machinery and equipment 703 1 604 1 966 3 105 Horses , 189 345 308 369 Dairy cattle 1 192 2 120 2 906 2 966 Other livestock 329 499 366 365 Feed and grain 717 1 190 1 717 2 088 Insurance, etc 48 141 263 186 Total current assets 1 . 3 178 5 899 7 526 9 079 Other investments 44 526 1 550 867 Total assets . 23 222 36 425 29 076 29 946 Liabilities Long-term debts .30 2 209 $ 776 2 288 Short-term debts 751 888 1 512 1 550 Total debts . . 2 751 $1 097 22 288 21 838 Debt ratio, percent 23 17 25 18 Average size of farm Number of man work units 306 487 610 927 Number of acres owned Number of acres operated 90.1 133.2 151.6 218.3 Number of cows milked 12.0 19.7 24.8 35.9 Also the total farm assets since these tenants had no other farm assets. * 4,000 OWNERS AND PART OWNERS UNDER 400 550 400 549 699 SIZE OF FARM IN 700 UNDER 400 PRODUCTIVE 400 550 700 549 699 + MAN WORK UNITS Fig. 5. Amount and percentage of increase in net worth of operators in 1941. The dollar increases were positively correlated with size of farm in each group of operators, tho the increases in the tenant groups were less than in the owner groups. The percentage increases were much greater in the tenant groups than in the owner groups, but in the tenant groups the rate of increase tended to decline with size of farm rather than to in- crease, as in the owner groups. 540 BULLETIN No. 512 [June, TABLE 12. CHANGES IN ASSETS AND LIABILITIES OF OWNERS AND PART OWNERS OPERATING FARM BUSINESSES OF DIFFERENT SIZE, 1940, 1941, AND 1942 Year Num- ber of farms Debt ratio, per- cent End of year Changes during the year Increase in net worth Assets Liabili- ties Increase in assets excluding cash De- crease in lia- bilities Ex- cluding cash In- cluding cash Percent increase (with cash) Less than 400 productive man work units 1940 17 20 18 17 316 215 15 237 15 329 33 177 2 789 2 583 3 314 285 607 3 24 261 265 3 338 546 872 3 462 442 868 3.6 3.6 7.1 1941 . . 16 1942 . . 11 400 to 549 productive man work units 1940... 15 21 23 17 321 397 21 702 24 170 34 510 4 954 4 029 3 640 1 517 1 585 3 (98) 591 841 $ 2 2 542 108 426 $ 2 2 684 333 919 4.1 14.9 15.4 1941 . 16 1942 . 13 550 to 699 productive man work units 1940 18 24 24 19 328 238 30 537 27 678 36 702 7 200 5 168 3 618 1 733 1 529 3 196 362 1 092 $ 2 2 814 095 621 3 2 3 769 558 136 3.6 11.5 14.8 1941 . 20 1942 . 20 700 productive man work units and over 1940 9 32 30 22 330 937 33 662 32 668 3 9 912 10 207 7 139 3 958 3 009 2 103 3 605 580 1 181 31 3 3 563 589 284 31 4 5 745 116 681 8.6 19.0 23.8 1941 15 1942 . 17 This is an increase. TABLE 13. CHANGES IN ASSETS AND LIABILITIES OF TENANTS OPERATING FARM BUSINESSES OF DIFFERENT SIZE, 1940, 1941, AND 1942 Year Num- ber of farms Debt ratio, per- cent End of year Changes during the year Increase in net worth Assets Liabili- ties Increase De- in assets crease excluding in lia- cash bilities Ex- cluding cash In- cluding cash Percent increase (with cash) Less than 400 productive man work units 1940... 10 29 23 5 32 744 3 222 4 491 3 786 751 234 3 535 527 751 3 (363) (240) 204 3 172 287 955 3 124 869 1 080 6.6 37.3 28.6 1941 13 1942 7 400 to 549 productive man work units 1940... . . . . 17 19 17 18 35 348 6 425 7 250 3 991 1 097 1 321 3 545 1 055 1 879 3 (79) (46) (33 1") 3 466 1 009 1 548 3570 1 382 1 756 13.8 28.6 34.1 1941 24 1942 20 550 to 699 productive man work units 1940... . . . . 17 24 25 16 37 564 9 076 9 884 31 817 2 288 1 584 3 582 2 Oil 1 502 3(141") (538) (187a) 3 438 1 473 1 315 3 642 1 825 2 377 11.6 30.2 31.1 1941 21 1942 16 700 productive man work units and over 1940... 19 16 18 10 37 872 9 946 10 761 31 244 1 838 1 122 31 223 2 316 1 603 3 (61) (308") 594 31 162 2 008 2 197 3 851 2 375 3 075 14.1 33.4 36.0 1941 21 1942 . . . . 14 T.hese are increases. 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 541 and 13). In the period covered, such correlation was to be expected, for production was profitable and the larger the business the higher was the net income. Among the owners, the percentage increase in net worth also tended to increase with the size of the business, but among the tenants it did not increase so uniformly. Moreover, during this period, with the exception of 1942, the rate of increase tended to rise from year to year. The situation in 1941 is shown in Fig. 5. All groups of owners reduced their debts in all three years except in 1940, when one group increased their debts. This confirms the observation on this point made on page 529. All groups of tenants increased their debts in all three years except in 1942, when two groups reduced their debts. These increases by tenants reflected their efforts to build up working capital. Thru these three years this policy proved to be wise. The question is: Will these men be able to foresee when the trend of income will be reversed and liquidate their indebt- edness before their incomes begin to decline? As a group their debts were not large; in none of the subgroups did the average debt ratio exceed 20 percent of the assets at the end of 1942. Operators With Continuous Records Records were obtained concerning the businesses of 72 operators for 1940, 1941, and 1942. Changes in the financial position of these men are shown in Tables 14 and 15 and in Figs. 6, 7, and 8. There was a moderate increase in the value of machinery and equip- ment, the increases between December 31, 1939, and December 31, 1942, being $391 for the owners, $733 for the part owners, $534 for the cash tenants, and $557 for the livestock-share tenants. The value of this class of property increased each year, even in 1942, when the output of farm machinery was restricted. The most marked increase was in the value of dairy cattle. Between the beginning and the end of the period owners showed an increase of $1,783 in this class of livestock; part owners, $2,113; and cash tenants, $1,708. The increase in the value of other livestock was also marked, particularly on the part-owner and cash-tenant farms. Feed and grain inventories also increased substantially. The increase in the value of the assets on these farms was marked, considering conditions in the period covered. As pointed out before, the debts of owners and part owners were being reduced during this period, while until 1942 those of the tenants were increasing. The aver- age debt ratio of owners declined from 23.1 percent on December 31, 1939, to 14.7 percent on December 31, 1942; the average debt ratio 542 BULLETIN No. 512 [June, M W E i O 3 y H z w Q ss: . wo -t On - A<^ OPO H o H"" OQ - Q W Z 03 < s H " |s u UT* 00 *' 0.' 00 ^f. OOt^Ti" oo oom r^oO>f>f)*O \r> cs oo cscs t-t QO -< O t-- Tf *-H O\ O O^^f *o vO'^co^Of) N 1 09. trt^ftfc ID CS t^ ^H 00 O* t^ O fO ^ VO'HOO'* tS (A W. (XJ. 8t^ t^ tt" o poo l/),H f*J CS OOTj* Tf CO TfO^f O Tf *-H i/> OOCSO i^ -H t>- h fl t*5 CS >O ^ *O ^* t^ ^< Tf *O O '^ ^-< i/>^ cs *H vOcs fO ^ loOOr*^ bo. t/i t/i t/i. t/5- O 10 ^ oo ; j; ill \\l\\ \2 ' ' ' O 2 a |J co C pj ' "S K 3 S 3 ' 'TjTJTj sa : 2 35 : S .a : : : uJ5 J< : "2-|i i i! jjjji. iy iiwi ii i if a jjiPSgli s^sss (d 'i c MM.s s 10 ^ S gi3 ^ ? s l!!s!I1Lii||| .|||jfiJI| Iffli ! III ? Jill** 111! ,11 II Z < JO O W 7945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 543 (A M. ONtSfS-* W). M. M. 2 SsS W5I-K5 oooesmwj oooo<*)s -< 00 * I?- * < 3VOMM-H ^.-.0 Mi ~~ 2 ^ - ' 0-0 >0 -.-.lOVC M. M. M\ Ss ^ mo r^xs--i O>O oow>ts M. M. J8. CNo UTJ" I^OOO .4 f) -H m *# lO'J'tSfN 10 H 'COf^'O potscs >.v : : : :J sets rrent assets id and improvemen 3 TS -a Number of farms Assets Land and improvemenl Machinery and equipm Horses Dairy cattle Other livestock Feed and grain Insurance, etc Total current assets Total farm assets . . Other investments . . . Total assets Liabilities Total long-term debts . Total short-term debts Total liabilities .... Net worth Net worth and lia Changes Increase in assets .... Decrease in liabilities. Increase in net worth Excluding cash .... Including cash Percent increase . . . Debt ratio, percent Total debts to total as Short-term debts to cu Long-term debts to lat Size Productive man work Acres, total Number of cows milke Months of labor tota hire 544 BULLETIN No. 512 [June, of part owners declined from 39.6 percent to 24.5 percent. This latter group reduced their short-term debts from an average of $1,640 to an average of $989. The average debt ratio of the cash tenants declined from 13.1 percent to 10.0 percent, a decline reflecting a larger increase in assets than in debts; and the average debt- ratio of the livestock-share tenants declined from 23.2 percent to 12.7 percent. Between the above dates the farms operated by owners increased by an average of 2 acres; those operated by part owners, 20 acres, and by cash tenants, 9 acres; while livestock-share tenants reduced their farms an average of 2 acres. All groups increased the number of cows milked; the greatest change was made by owners, who averaged an increase of 2.7 cows each. The number of months of labor used on these farms changed but little over this three-year period. The increase in value of livestock and of feed and grain in this $30,000 25,000 20,000 15,000 10,000 5,000 ASSETS AND DEBTS 1940-1943 OWNERS PART OWNERS [EQU DEB EQUITY] V. DEBTS; 1940 1941 1942 1943 1940 1941 1942 1943 Fig. 6. Capital and debt positions of owners and part owners on identical farms, 1940-1943. The amounts of capital used by these operators increased, whereas their debts were reduced, particularly in 1943. 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 545 period reflected, in large part, the rise in prices. When individual farm- ers buy and sell livestock frequently, as they do in this area, there is no practical way to inventory it except at current values. Changes in numbers of animal units are of interest, therefore, and are shown in Table 16. On the whole, except on the larger farms in 1942, the number of dairy cattle on these farms tended to increase. Over the three-year period, the owners of the larger farms increased their herds more than the owners of the smaller farms. The reverse was true for the tenants, those on the small farms increasing their herds more than those on the larger farms. No marked increase occurred in the numbers of hogs inventoried. The group of owners having the largest farms and the two groups of tenants on the larger farms had fewer hogs at the end of the period 4 12,000 10,000 8,000 6,000 4,000 2,000 ASSETS AND DEBTS 1940-1943 CASH TENANTS UVESTOCK-SHARE TENANTS [EQUI ['-. DEB Ml 1940 1941 1942 1943 1940 1941 1942 1943 Fig. 7. Capital and debt positions of tenants on identical farms, 1940-1943. The amounts of capital used by these farmers increased sharply during this period, while debts remained about constant. 546 BULLETIN No. 512 [June, TABLE 16. CHANGES IN ANIMAL UNITS ON 72 IDENTICAL FARMS DURING 1940, 1941, AND 1942 Tenure, and size in terms of Numbei productive man of work units farms r Animal units on hand on December 31 Over-all change 1939 1940 1941 1942 Dairy cattle Owners and part owners Less than 400 7 15.2 21.8 27.4 36.8 10.6 18.4 26.4 45.8 15.9 23.2 27.7 39.0 14.5 21.4 27.2 49.1 15.1 24.9 29.5 41.4 14.6 23.9 29.2 49.8 16.7 25.4 30.6 41.0 16.3 24.0 28.6 49.8 +1.5 +3.6 +3.2 +4.2 +5.7 +5.6 +2.2 +4.0 400-549 11 550-699 11 700 and over 7 Tenants Less than 400 6 400-549 7 550-699 13 700 and over 10 Hogs Owners and part owners Less than 400 7 .13 .36 1.26 1.95 .05 .21 1.74 2.12 .38 .56 .95 1.55 .54 .35 1.71 2.13 .20 1.00 1.50 1.73 .92 .20 1.63 2.46 .16 .73 1.40 1.22 1.06 .40 1.26 1.96 + .03 + .37 + .14 -.73 + 1.01 + .19 -.48 -.16 400-549 11 550-699 .11 700 and over 7 Tenants Less than 400 6 400-549 7 550-699 13 700 and over . . . . 10 Poultry Owners and part owners Less than 400 7 1 5 1 2 1 1 1 5 400-549 11 1 1 1 2 1 4 1 2 + 1 550-699 11 1 4 1 2 1 3 1 6 + 2 700 and over 7 1 2 1 4 1 7 1 5 + 3 Tenants Less than 400 6 1 3 1 2 1 i 1 2 _ i 400-549 7 1 5 1 5 1 6 1 4 i 550-699 13 1 9 1 g ' 2 700 and over 10 1 4 1 5 1 3 1 3 1 than at the beginning. There is no evidence to indicate that hogs were increasing at the expense of dairy cattle in this intensive dairy area in this period. The tendency for the operators of the larger farms to curtail the number of hogs at the end of 1942 probably reflected labor shortages. When labor is scarce, farmers concentrate on the things which they consider most important. -*..; Likewise, numbers of poultry were increased but little. The owners in the three groups of larger farms increased their flocks, but all the tenant groups reduced theirs. It may be that with better incomes from milk there was less necessity for these tenants to keep poultry in order to realize a little extra income. Beef cattle and sheep were of negligible importance on these farms. These comparisons indicate that in expanding production in re- sponse to increased demands, farmers in this area put the major em- 7945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 547 $4,500 3,000 1,500 NET-WORTH INCREASES ON IDENTICAL FARMS DOLLARS E3 PERCENT 40 20 1940 1941 1942 OWNERS 1940 1941 1942 PART OWNERS 1940 1941 1942 L-SHARE TENANTS Fig. 8. Increases in net worth of all operators on identical farms, 1940- 1942. In 1940 the increases were small, but in 1941 and 1942 they were rather substantial. Altho dollar increases were larger for owners and part owners than for tenants, the percentage increases were larger for the two tenant groups. phasis on their primary product milk. Labor difficulties will doubtless accentuate this trend for the rest of the war period. CASH INCOME AND EXPENSE PATTERNS In the capital patterns discussed in the foregoing section, increases in assets included whatever increases resulted from the retention of farm-raised property as well as from cash transactions. The following analysis deals with cash income and expense only. Patterns of Owners and Tenants Contrasted The receipts and expense patterns of the various tenure groups are shown in Tables 17 to 19 for three years. Cash receipts include all cash taken in, including that for off-the-farm work and amounts bor- rowed during the year and not repaid. Expenses include expenditures for operating, for new farm capital, for cash living, and for interest payments. The net paid on old debts (those owed at the start of the year) is shown separately in these tables and is further pictured in Fig. 9. Gross borrowings and debt repayments are shown in Fig. 10. 548 BULLETIN No. 512 [June, M w z I 8 as a X < in w i 5 H 8 H 5 > gg H Q O Z Si c/To o^; Z O 1" as o CQ ** f*5 *C O *** ^f ^i-tn^if) ^ i/> rc *** ^ f^ O (S f* ^ *O O ^x cs ^ cs O '-^ cs ^* *-" O ** NO O *-< ^ ^** cs fl O O o * $5>OCCCS^OOQ OO^Ot^-r^O * -^vOesO^OO ^nOOvr^O ^ ^cs^es S T-'* cso C'iO r 'S' M '~ | CC CO^OOf*5^'OCS ^, CS1OH O ~HT-<^< CSC5 ^ - CS rj* O t^ CS PO 1O 1O CN CS O 1O 00 O OiOOOO < T)> \O>-iO001^ 00 00 f) 1O O PO 10 t^ IO 1^ O O f*5 O PO O O C> lO'-'QiOt^'H ro o rfOOCJM^io * 00 O ^-H CO O ' ^ *- 10 -i O *- 1 z o o 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 549 550 BULLETIN No. 512 [June, Id 06 1 w x. Q P O S5 P ENTS OF AND 19 BORROWINGS, AND DEBT REPA LEASES, 1940, 19 CMTj< CMCSP -tfl/X toppoooop T)O P CS- f p 4P So. ,-i o cs oo PO *- oo i-~ p -H r~ -i fecNPOo'l/icNO **-* VO P ^. ^H \O 'H P CN -^ CS P *_4,_OOPPP t-*^*l/)^OPC>100 OOCS^*CNP -HCNCOPOOlO ^* ID *O T- PO ^^ PO 00 CS 00 O 00 tft tft tft j cs ' P P : 00 fS CS -rH -O lOPPOOOP tft tft tft ! OP PPO HCMP ) ^-1 P *-< ^H ^< POP -no 'i 1 10 <*) )CS-HP JOVCNP< CSPO PO( < -< 1~- O\ O> P 00 C?vpt^.**CS tft tft tft OOPlOPOTji *\o CSPOPOP ^H -H * CSP tft tft tft Number of far Operator's cash Crop sales Livestock sales Dairy product Other income* Current unpaid bor Total cash incom perator's cash expense Livestock purchases . . Capital purchases. . . Current farm operati Interest Family living Total cash expense Net cash income . . r bt ings and debt paid on old deb t paid on old d borrowings. . . . repayments. . . . borrowings un 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 551 Thruout the period and in each group the largest sources of cash income were the sales of dairy products and livestock, chiefly dairy cattle. For the various tenure groups these items represented from two- thirds to four-fifths of the cash income. Crop sales were not important. "Other income," which included AAA payments, poultry and egg sales, off-the-farm work, etc., was quite an important item, particularly on the owner and part-owner farms, averaging in the three years 14 per- cent of the total cash income for the owner group, 22 percent for the part-owner group, 12 percent for the cash tenants, and 12 percent for the livestock-share tenants. 4 10,000 7,500 5,000 2500 --- 1940 1941 1942 OWNERS GROSS INCOME AND PERCENT OF DEBTS PAID 1940 1941 1942 PART OWNERS 1940 1941 1942 1940 1941 1942 CASH TENANTS L-SHARE TENANTS Fig. 9. Total income and percentage of old debts repaid in 1940, 1941, and 1942. In each group owners, part owners, cash tenants and livestock-share tenants both total income and percentage of old debts repaid increased each year. From the standpoint of financing the business, the percentage of cash resulting from net borrowing is important. It indicates the extent to which operators depend on current borrowings for working capital. (The unpaid balance of such borrowings does not indicate fully the importance of borrowing in providing operating capital because it does not include repayments made during the year.) For owners the net- borrowing figure was low, ranging from 3.7 to 6.9 percent of current receipts in the various years; for part owners also it was low, ranging from 2.4 to 8.4 percent. For cash tenants it ranged from 9.4 to 17.1 552 BULLETIN No. 512 [June, $1,800 1,200 600 GROSS BORROWINGS E3 AND REPAYMENTS 1940 1941 1942 OWNERS 1940 1941 1942 PART OWNERS 1940 1941 1942 1940 1941 1942 CASH TENANTS L-SHARE TENANTS Fig. 10. Gross borrowings and debt repayments in 1940, 1941, and 1942. All groups increased their debt repayments each year. Except for livestock- share tenants, whose borrowings were quite uniform from year to year, borrowings in 1941 were larger than in 1940 and smaller than in 1942. Owners reduced their debts during these three years. Cash tenants increased theirs in 1940 and 1941 but reduced them slightly in 1942. percent; and for livestock-share tenants, from 7.1 to 13.7 percent. These borrowings declined in importance during the period. Current operating cost was the most important item of expense, making up from two-fifths to one-half of the total in the different groups. Next in importance were family living expenses, which in the several groups varied from one-sixth to one-third of the total cash expenses. Next in amount were capital purchases other than livestock, purchases which made up one-eighth to one- fourth of the total cash expense. The amounts spent for livestock varied from about 3 percent of the 1940 cash expense of livestock-share tenants owning less than 50 percent of the cows to 16 percent of the 1942 cash expense of cash tenants. Payment of interest was the least important item, varying from 4 to 7 percent for owners and part owners, and from .2 to 3.3 per- cent among the various groups of tenants. Changes in cash position. Receipts increased more than expenses in this period. The 1942 cash receipts and expenses exceeded the 1940 receipts and expenses as shown at the top of page 553. How were these increased cash balances used? In these calcula- tions any income used in building up physical inventories was included in expenses. The three obvious uses for the remainder were: (1) the payment of old debts, (2) the building up of cash resources, and 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 553 Increase in net Cash receipts, Cash expense, cash receipts, 1942 over 1940 1942 over 1940 1942 over 1940 Owners $2 370 #1 020 #1 350 Part owners 4 114 2 076 2 038 Cash tenants 2 594 1 486 1 108 Livestock-share tenants Owning half of cows 1 538 517 1 021 Owning less than half of cows 3 065 2 236 829 (3) the making of outside investments. It was difficult to obtain data from farmers as to changes in their cash positions. Therefore, such changes were not included in the data collected. Likewise, in 1942 it was difficult to obtain data regarding purchases of Government bonds on a sufficiently uniform basis to warrant inclusion of such purchases in the averages. These farmers, however, appear to have considerably increased their holdings of cash and of bonds, especially in 1942. After net payments on debts owed at the beginning of the year were deducted, the following cash balances were not accounted for. Part of these balances may reflect errors in the basic data, but it is believed that they chiefly represent changes in cash position: 1940 1941 1942 Owners $ 43 #283 $ 815 Part owners 228 293 1 243 Cash tenants 110 479 716 Livestock-share tenants 242 264 386 Owning half of cows -356 269 260 Owning less than half of cows 66 250 621 These data suggest that cash balances increased but little in 1940, increased moderately in 1941, and increased substantially in all groups in 1942. By the end of 1942 holdings of cash or Government bonds were beginning to be rapidly built up. Apparently these farmers were beginning to accumulate cash reserves for investment or for future periods when incomes might not be very favorable. Operators With Different Debt Ratios The income and expense patterns did not vary significantly for the groups with different debt-to-property ratios (Tables 20 and 21). In all but two of these eight groups, 1942 increases in cash or in bond purchases were substantial. Among the owners, the differences between cash receipts and ex- penses tended to be positively correlated with debt ratios (Table 22). As has been pointed out above, the larger farms had the higher debt 554 BULLETIN No. 512 [June, TABLE 20. INCOME, EXPENSES, BORROWINGS, AND DEBT REPAYMENTS OF OWNERS AND PART OWNERS WITH DIFFERENT DEBT RATIOS, 1942 Debt ratio 1-19% 20-39% 40% and over Number of farms 9 perct. 6.3 31.2 54.9 7.6 lOO" 6.5 19.2 53.8 20.5 100 3 200 746 3 328 1 019 68 35 361 3 462 858 2 077 92 968 34 457 904 31 096 -192 46 3 68 1 096 68 15 perct. 3.7 13.9 62.1 19.0 1.3 100 10.4 19.2 46.6 2.1 21.7 100 7 ! * 1 3 & $ 2 34 2 $1 $ 1 25 perct. 196 2.8 968 27.8 848 54.3 732 10.3 338 4.8 082 100 684 13.8 509 10.2 515 50.5 271 5.5 997 20.0 976 100 106 363 743 19.8 407 432 338 % 3 2 39 * 1 2 1 96 3 51 i i i 539 706 910 777 379 311 652 264 681 462 200 259 052 606 446 12 520 747 379 12 perct. 5.8 18.3 42.0 29.8 4.1 100 10.4 20.2 42.8 7.4 19.2 100 5 ! Operator's cash income .3 478 . 2 357 Dairy product sales . 4 149 579 .37 563 Operator's cash expenses .3 314 932 Current farm operations . 2 614 Interest 996 34 856 2 707 3 2 707 Borrowings and debt repayments Net paid on old debts Cash not accounted for Percent paid on old debts Current borrowings unpaid at ratios. Net cash incomes and amounts of cash unaccounted for in- creased in all groups from year to year. Among tenants there was no definite tendency for size of cash balance to be correlated with debt ratio, but these balances tended to increase from year to year (Table 23). TABLE 21. INCOME, EXPENSES, BORROWINGS, AND DEBT REPAYMENTS OF TENANTS WITH DIFFERENT DEBT RATIOS, 1942 Debt ratio . 20-39% 40% and over Number of farms 12 23 13 9 Operator's cash income Crop sales % 185 Perct. 3 f, 242 perct. 4 1 3 179 per 2 ct. 5 3 30 perct. Livestock sales 1 173 19 2 1 155 19 5 1 417 20 o 964 19 7 Dairy product sales 3 951 64 7 i, ''IS 54 2 4 127 58 1 2 506 51 3 Other income 593 9 7 484 8 2 707 10 389 8 Current unpaid borrowings. . . . Total cash income V, 208 110 3.4 100 S3 830 O V 10 to i^ s 0 ^od-'^ !^r~tO' ^to - D o ji 5"S c - ^^ ^ "> O I M * r ts W5. tA ttO. 09 S S : 65 65 65 < 1 -^ 2 ^t 00 f} O *-< O ^" O* - Ov u. "S- d 8 oo -^ ^H fo cs | p ll ||o M IO 00 PO f> O U >, ,e3 C*O "O 65 65 65 \O to N >O O f* 00 O *O S fc |1 8 OO^tN ^.-c ^00 ' ^00 ac Vi A Wl u oo 65 65 65 ^ S ' 5-S2 ^ *. *". "^ "*. ^ . "* "1 U, M |i| O *O ^H to t^ K H i 3^<-> N (S t^ S (S ' in ,< tA w* tA U ^ S w cnji< DO S 65 65 65 >o ^IO^O^CN to ^ O S sa o^o >o o Ox S Q C Q IO > to 1 ts I f. -f. .' '10 MOK-to 10 V3 * o S (2 s lO^tS S-H tS ^, 1/5fO " N o ^ to t^ to 3 C ^<-H in 1 O> rt >o O> to ts t ts U H tA 2 S i m P a, [ *pS^ Illl *I o*^ *^ m 1 t . SI itii !s J | |I| ^ | ||!| ||| || "o |!c-o II -3 "o-olo cfa {3 u J^v-s^j^j v^Oflj., ^f.^^4* 0*2] 1 ^a'>-^ sj 5S | ij-i 1 | 1||1 &S5 15 Z HrtJ < 2 Z^UZ 2 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 571 g 65 65 65 V 65 65 65 o g f) ^" *O (S PO f*5 O* V s Ol *-. ^ ^J* O* f*) *> * ^ t- * fs cs O f^ t- *H r*3 O (- b O [i] a ft Is H 550-699 65 65 65 M O r^ c^ r* cs ro oo -- C m rt tA tA ^ ^ ^ H S3 S'S 3 MM M 65 65 65 fe cs m 10 10 >< CO Sf t^ O *f ^O ** o\ f*} (S f> f)t/> t** ^ O *^ O O^(S'~ OvOO (SfO "> o Q 8 \o oo PO ^* ^ ^ o Tf (S Xj M S t- (S & 11 Ov s ^ (S f MM w 2 s MM M I .65 65 65 O o 65 65 65 a N mZ<* 2^ ^oo 2 en i 1 tf) O O^ ^* o fS Ov (S(S )S oo m \o o 9 b 1 (N C"< S ?S t- m t^ p*^ ^ ^G \f> ^ r* MM. (^ b P MM . 00 ! 65 65 65 *O o 'O en to u g i 65 65 65 O ,-1/5 1 2 S2S S! 2S ** en en en ^ , o o - S- S3 2S M ' 3 IO * 1O "'vo W -^ c z rt 1 MM ^ 2-0 u n e -y 1 M I I I ^ N ^S 0: 3 65 65 65 "O aj KO ^ 1 fc ^* * in &> t+j O .y o I N 5^ N S 2 J Z o'S i s sdss as; as "*' oo s to o* i^ fs r ^M ' & MM M. ^ en e| MM M .2-0 (^ p^ 65 65 g o 2 l| e> 65 65 65 -o E " o D c 1 ? " c *** "en? 3 ** * ** I 111 if 1^ F iiflitiiiil i l|l i| &3 1^ Z H(2-J ZS J 572 BULLETIN No. 512 [June, of the farm business (Table 41). On the tenant farms the tendency of rates earned to increase with size of business was even more marked than on the owner farms. Since production was profitable in 1942, the farms producing the most would earn the highest rates. In the owner group the smallest farms, measured by size of business, pro- vided an average labor and management wage (farm) of $812, whereas the largest farms yielded $4,557. Similar figures for the smallest and largest tenant farms were $1,223 and $4,890 respectively. On the tenant farms both the tenant's labor and management wage and the rate earned on the landlord's investment increased with size of farm. More of the smaller than of the larger tenant farms were rented for cash, and so not all the landlords of the smaller farms shared in the increased income. KINDS OF CREDIT AND HOW USED Debts of All Farmers At the end of 1942 the farmers included in this study owed, on the average, one-third as many short-term as long-term debts (Table 42). The long-term debts of owners and part owners were secured chiefly by first mortgages, only 15.6 percent of the long-term debts of owners and 24.6 percent of those of part owners being second mortgages or other kinds of debts. Short-term debts of owners and of tenants consisted largely of personal notes or chattel mortgages, altho among tenants chattel mortgages were more important than among owners. In 1942 these two forms of debt represented 86 percent of all short-term debts. Conditional sales contracts and personal debts were of minor importance. Sources of Credit Owners. At the beginning of the period (December, 1940) the Federal Land Bank, individuals, insurance companies, and the Land Bank Commissioner were the principal holders of the long-term debts of owners (Table 43). During the period the importance of the Federal Land Bank and the Land Bank Commissioner as holders of long-term debts increased in this sample, that of insurance companies increased slightly, while individuals became less important. Commercial banks were not important in this field. The three principal holders of short- term debts of owners and part owners at the beginning of this period were commercial banks, individuals, and the Production Credit Associ- 7945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 573 -OOMO 1/5 f) CS (S l/> >O t N oo 1 OOt^'ffJ ^ 3J'*S CS ^ ts oo o\ tA ws. c/r 0) i w s 1 \O "1 00 00 2HS22 !*> o Ov - 00 >0 * t^ O - \0 g O -t * N r-.'o'o^cs-'es ' H _ oo ^ H o cs a oo cs . M. CM 8 . 000 oo -^.-oo-o -f 00 2 ~! rri -(.' ^' _ Qv d . -* a >O ts M 1 00 oog ^ CS^^OVTC-^. O cd ^t- *3 5^ irtt --t Qp m ^_| a A V ^4 H cs o^ H WJ. <. Qts o 000 s CN i/> t^- *O lO O ^O -t ..o\ C CN en *-" l/l J* Q Wl M. w 5 Q . g g ^ 1 ^^:- H^; t. t^cs (s >o Ho* 2 S * OOO M o> rO-^O^^-O O T-< o J rt <*CN "0 ^S^'*"^ en - o o cs j^ro (2 . s 04 H W H 03 1 p *~ o 3CS-*OO ^J-O w g t~~ rs -f -T Q w ** W O u A W5. fa M IB TJ. co en N ts . _H ^" oo 'O^- rs csr^ J C^ OOi- ^ f} U *"" oo 12 H M Wl u 2 \o ^ o *o cs O ~* ^^ 00 O t^ t^ W c S ; 00 *-< -H IOOO (S-H (d IF ^ o ^ O O M (*) ^J 09. Wi H z 1O OOO ^N n & t^ CN o * ts u i s 82 'O *o ^ o fs ^ -i u oj -i >0 "5 -H (S t^ O O >O T rs tsir>Tj(^H O . . . . in >-i a - IB ^ . |||g|| I " Ortffl-ogi* ' < o^t3-o'E SS^g^S. Illll FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 575 a B I O Cfl H 55 O S a a < df s S ^" 00 O ^ O ^ OOOOPOvOtC>100^HfO CT* ^ W4 WQ. OcOflo o oo -_.;-j -.j ^ t^ TH if) T}< oo o ^** oo 11 1* ^H M O OWOt^O ts 'I* t-- t^ 0 to (N Wl <. O OOOOOO N >OsOo)toO ts~O WroOOOO -H 10 t^\o>O<^f v <'O toes ill : s ':! : ;: ilJjIJiJiill 1 i |i; stfM If igil atSO S pQ --J2 ^^j : ,g g. m ra g rt *** "5 5 -^ M *** m C ? * J ^jGcd^o3 4) ww liwnrti'fx.v "- .. ija * *H1fi]j8|!Ill a sB-alilSi s ^le-a.^= > o-3.gy|.Sfcg Siillilll iillllllllllisll riHlX S*" 111 R 576 BULLETIN No. 512 [June, ation. At the end of the period, the importance of individuals as sources of credit had increased, that of commercial banks had declined, and that of the Production Credit Association had increased moderately. Also, the importance of the Farm Security Administration and of cattle dealers had increased, altho both were of minor importance to owners. Tenants. Among tenants the sources of credit were more varied (Table 44). Cash tenants used somewhat different sources of credit from share tenants. At the end of 1940 one-fourth of the short-term credit used by tenants came from commercial banks and about the same proportion came from the Farm Security Administration. Indi- viduals, cattle dealers, and landlords, all held about 10 percent each, and implement dealers and the Production Credit Association each held about 7 percent of the total. At the end of 1942 the importance of in- dividuals and cattle dealers had increased, the importance of landlords and implement dealers had not changed much, while, in the sample of tenant farms studied, the importance of the banks, the Farm Security Administration, and the Production Credit Association had declined. This situation suggests a trend toward financing by agencies which have some interest other than the extension of credit. Purpose of Borrowings The owners' long-term borrowings were principally for refinancing, altho they borrowed a little for improvements (Table 45). The tenants' long-term borrowings were to buy farms or other property. Two tenants purchased farms in 1941, and one in 1942. In 1940 and 1941 the short-term borrowings of owners were for four principal purposes: operating expenses, and the purchase of farm equipment, dairy cattle, automobiles and trucks; in 1942 they borrowed for only two of these purposes: operating expenses and purchase of dairy cattle. The short-term borrowings of tenants were for the same purposes except that they did not include the purchase of trucks and automobiles, a fact that indicates the tendency of tenants to borrow only for purposes quite directly connected with farm production. In 1942 tenants continued to borrow to buy farm equipment and to refinance. All these purposes are legitimate uses of credit. Changes in Total Debts In each year the owner and tenant debts secured by each class of long-term mortgages declined (Tables 46 and 47). The greatest de- clines were in loans held by commercial banks and individuals, the 1945} FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 577 TABLE 45. PURPOSES FOR WHICH EACH YEAR'S BORROWINGS WERE USED Owners and part owners Tenants Purpose of borrowing 1940 1941 1942 1940 1941 1942 Long-term borrowing Total $5 773 9 535 $4400 $3000 $25700 $12635 Percent of total Purchase of land 000 100 80.2 Improvements 17.6 26.6 4.5 Refinancing 82.4 73.4 95.5 100 Nonfarm property 000 00 19.8 Short-term borrowing Total $15167 $29950 $18928 $28086 $53076 $36338 Percent of total Purchase of Dairy cattle , 13.8 24.0 47.2 25.1 36.3 36.8 Other livestock 2.7 .1 1.2 Horses .7 2.3 .1 Farm equipment 13.9 33.1 4.8 30.2 21.7 21.7 Automobile and truck 29.0 16.4 1.6 4.7 10.1 4.4 Current operating expenses 30.5 20.3 34.4 28.3 15.8 14.4 Personal debts 2.0 .5 4.5 3.0 6.2 3.6 Sealed corn 3.2 2.0 Interest in arrears 3.9 3.1 1.4 1.5 .2 Principal in arrears 2.3 .4 .3 Back taxes .7 .4 .1 Loan reamortization 1.8 2.8 Refinancing 4.7 8.1 17.7 least in loans held by insurance companies. The Federal Land Bank and the Land Bank Commissioner occupied an intermediate position in this respect. The changes in the short-term debts of owners were more varied. Loans by commercial banks to owners declined, particularly in 1942. Loans by the FSA declined in 1940 and 1941, but increased again in 1942. Loans by the PCA increased in 1940 and 1941, but declined in 1942. Loans by individuals were reduced in 1941, but increased in 1940 and 1942. The owners reduced the net amount of their debts each year 2.3 percent in 1940, 6.8 percent in 1941, and 15.4 percent in 1942. Among tenants, debts increased 12.1 percent in 1940; this rise repre- sents an increase in loans from each source except from finance com- panies and merchants. In 1941 the loans 'from commercial banks, from the FSA, and from individuals were reduced. In 1942, while the ten- ants were substantially reducing their short-term debts they were at the same time increasing their long-term debts by practically the same amounts. During this year they reduced all their short-term debts except those to cattle and implement dealers. It is probable that for the rest of the war period the new credits in this area will be used increasingly for purchases of land by tenants who have accumulated enough cash to make a down payment and for purchases of new equipment when it again becomes available. 578 BULLETIN No. 512 [June, at a ~ a ^ 5 oS Q z < t/3 CS '* WOv Z^ Q < O^T S| 3ft o o Ho z 5 M z en Z w ^ o p. Z w S3 U 8 g z u i u a z u | H U < t- Tf m 10 oo oo oo *o-* i ' i i i i i i i + 1 T i i i +77 M MI O f} & -O m m *f CM 10 < fO CM IO IOCM -fOlO \O 00 T* 00 CM *O ^ O *O *O 00 00 -^00 CMPOO^^^ *OO*VO | I I I I i I -H^UI I I O CM 10 10 IIMIII II, T. _|_ II --|CM| III ,* oo <* * "> O 1945] FINANCIAL POSITION OF MCHENRY COUNTY FARMERS 579 CQ /> u Q< II H - _o o 3 f& Id U o c u cfl 4JJ3 OH U 1/5 OOCS-H-* -IO -fStS -T)< O"H ...!.. O1 ^" -t "H . . !/> f. 'f. tfii i/500(^. *^ f*5 -O ... l/> . e/1 SI vK oo ... n^ NOON wtSTtts oofj^Hts *+ oocsoo O J'fS'O | ^i^t^HfSOO'-' t^l W ><> O | H ? : : : ' ? ' +7+++5ST :+ : i + 7 + ++ + +++77+ :+ : : :g c5 -O