A farm crisis describes times of

agricultural Agriculture or farming is the practice of cultivating Plant, plants and livestock. Agriculture was the key development in the rise of Sedentism, sedentary human civilization, whereby farming of Domestication, domesticated species created food ...

recession In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...

, low

crop A crop is a plant that can be grown and harvested extensively for profit or subsistence. When the plants of the same kind are cultivated at one place on a large scale, it is called a crop. Most crops are cultivated in agriculture or hydroponic ...

prices and low farm

income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...

s. The most recent US farm crisis occurred during the 1980s.

Crisis of the 1920s and 1930s

A farm crisis began in the 1920s, commonly believed to be a result of high production for military needs in

World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...

. At the onset of the crisis, there was high market supply, high prices, and available credit for both the producer and consumer. The U.S. government continued to instill inflationary policy following World War I. By June 1920, crop prices averaged 31 percent above 1919 and 121 percent above prewar prices of 1913. Also, farm land prices rose 40 percent from 1913 to 1920. Crops of 1920 cost more to produce than any other year. Eventually, a price break began in July 1920 which squeezed farmers between both decreasing agricultural prices and steady industrial prices. Examples of decreasing agriculture prices include: By 1933, cotton was only 5.5 cents per pound, corn was down 19.4 cents per bushel, and hogs declined to $2.94 instead of their respective 1909-1914 average prices of 12.4 cents per pound, to 83.6 cents per bushel, and $7.24 per hog. Furthermore, a region of the great plains was hit by an extreme drought which added to the agricultural difficulties of the time.

Reformation of the 1920s and 1930s

Throughout this crisis there were many attempts to form Farmers' Unions. This was difficult considering the lack of effective communication technology, the lack of electricity on many farms, and the overall size of the country. The

Agricultural Marketing Act of 1929 The Agricultural Marketing Act of 1929, under the administration of Herbert Hoover, established the Federal Farm Board from the Federal Farm Loan Board established by the Federal Farm Loan Act of 1916 with a revolving fund of half a billion dolla ...

intended to bring government aid to cooperatives. It allowed the

Federal Farm Board The Federal Farm Board was established by the Agricultural Marketing Act of 1929 from the Federal Farm Loan Board established by the Federal Farm Loan Act of 1916, with a revolving fund of half a billion dollars Agricultural Adjustment Act The Agricultural Adjustment Act (AAA) was a United States federal law of the New Deal era designed to boost agricultural prices by reducing surpluses. The government bought livestock for slaughter and paid farmers subsidies not to plant on part ...

(AAA), which was enacted on May 12, 1933, aimed to bring back pre World War 1 Farmers' abilities to sell farm products for the same worth they were able to buy non-farm products. The Act involved seven different crops: corn, wheat, cotton, rice, peanuts, tobacco, and milk. Farmers were paid to not plant those seven crops, thus decreasing supply and returning to market equilibrium. In order to prevent noncooperative farmers from taking advantage of other farmers decreasing supply the bill states "is to keep this noncooperation minority in line, or at least prevent it from doing harm to the majority, that the power of the Government has been marshaled behind the adjustment programs" In other words, the benefits from payments to cooperative farmers were designed to be more beneficial than being noncooperative and flooding the market. The AAA was deemed unconstitutional on January 6, 1936. Further reformation included

Farm Credit Act of 1933 The Farm Credit Act of 1933 () established the Farm Credit System (FCS) as a group of cooperative lending institutions to provide short-, intermediate-, and long-term loans for agricultural purposes. Specifically, it authorized the Farm Credit Ad ...

, which allowed farmers to re-mortgage no longer affordable property, as well as the

Frazier–Lemke Farm Bankruptcy Act The Frazier–Lemke Farm Bankruptcy Act was an Act of Congress passed in the United States in 1934 that restricted the ability of banks to repossess farms. The U.S. 73rd Congressional Senate bill S. 3580 was signed into law by the 32nd Preside ...

1980s crisis

The United States experienced a major agricultural crisis during the 1980s. By the mid-1980s, the crisis had reached its peak. Land prices had fallen dramatically leading to record foreclosures. Farm debt for land and equipment purchases soared during the 1970s and early 1980s, doubling between 1978 and 1984. Other negative economic factors included high interest rates, high oil prices (

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...

) and a strong dollar. Record production led to a fall in the price of commodities. Exports fell at the same time, due in part to the 1980

United States grain embargo against the Soviet Union The United States grain embargo against the Soviet Union was enacted by US President Jimmy Carter in January 1980 in response to the Soviet Union's invasion of Afghanistan in 1979. It remained in effect until Ronald Reagan ended it in 1981 upon tak ...

. The

Farm Credit System The Farm Credit System (FCS) in the United States is a nationwide network of borrower-owned lending institutions and specialized service organizations. The Farm Credit System provides more than $304 billion in loans, leases, and related services t ...

experienced large losses, which were the first losses since the

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

.History of the 80s - Banking and the Agricultural Problems of the 1980s. Federal Deposit Insurance Corporation
/ref> The price of farmland was a significant factor. Credit availability and inflation had contributed to an increase in the price of farm land. Demand was further bolstered by high farm incomes and

capital gains Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares ...

on farm real estate, when many farmers expanded their existing operations. The value of farmland increased so drastically that it attracted investment from

speculators In finance, speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable shortly. (It can also refer to short sales in which the speculator hopes for a decline in value.) Many s ...

. Agricultural banks felt the impact of the crisis. There were 10 bank failures in 1981, only one of which was an agricultural bank. In 1985, the number rose to 62, of which agricultural banks accounted for over half.

References

{{reflist Agricultural economics

Crisis of the 1920s and 1930s

Reformation of the 1920s and 1930s

1980s crisis

See also

References