The Fault Lines of Farm Policy
A Legislative and Political History of the Farm Bill
By Jonathan Coppess
UNIVERSITY OF NEBRASKA PRESS
Copyright © 2018 Jonathan Coppess
All rights reserved.
ISBN: 978-1-4962-0512-4
Contents
Preface,
Acknowledgments,
Introduction: Fault Lines and Farm Policy,
1. The Origins of Farm Policy, 1909–1933,
2. Adjusting to the New Deal and War, 1933–1945,
3. Transition and Turbulence after War, 1945–1949,
4. A Surplus of Problems and Disagreement, 1950–1969,
5. The Commodity "Roller Coaster" and the Crash, 1970–1989,
6. Revolution and Reform Launch the Modern Era, 1990–1999,
7. Cotton, Ethanol, and Risk Management Form the Modern Era, 2000–2010,
8. Old Fights Plague the Agricultural Act of 2014, 2011–2014,
9. Trying to Reason with the Fault Lines,
Appendix 1: Graphs and Charts,
Appendix 2: Bills and Terms,
Notes,
Bibliography,
Index,
CHAPTER 1
The Origins of Farm Policy, 1909–1933
Introduction
History and policy do not offer much in the way of neat, precise beginnings; much is built out of what has come before. For American farm policy as we know it today — direct federal assistance for a select category of commodities — the clearest and most functional beginning point is May 12, 1933, when President Franklin Delano Roosevelt signed the Agricultural Adjustment Act (AAA) of 1933 into law. That bill, however, had roots throughout American history. The most prominent can be found tangled around World War I and policies formulated throughout the 1920s as farmers struggled in the postwar economy. For the sake of an origin story, this history centers on 1921. That was the year two Illinois businessmen who ran the Moline Plow Company demanded policies that would provide "equality for agriculture" with direct federal intervention in the agricultural economy. Their argument distilled to the simple fact that as a business "you can't sell a plow to a busted customer." Farmers had been busted by a confluence of events that caused overproduction and depressed prices.
Long-standing federal policies to encourage settlement had led to what was considered the closing of the American frontier. Much of that settlement took place in the Great Plains. Vast lands were opened to farming, and almost all of them went into wheat. World War I supplied strong demand and high crop prices that further drove expansion of farm land. Wartime demand, however, also accelerated a long trend toward industrialization and urbanization that drove up the cost of goods. When the war ended, farmers kept producing, causing a glut of commodities that depressed prices. The cost of goods continued to climb as did the rest of the economy in the Roaring Twenties. Farmers were caught with high costs, low prices, and depressed incomes.
What a twelve-year political struggle could not accomplish, the Great Depression and the election of Franklin Delano Roosevelt did. The new president and a compliant Congress were aided by a farm coalition consisting largely of the three major commodities: corn, cotton, and wheat. These three commodities represented the major crop production regions in the Midwest, the South, and the Great Plains (respectively). The long, difficult, and ultimately unsuccessful efforts in the twenties had forged a powerful political coalition that backed the new President's efforts to combat the Great Depression. Together, they produced the Agricultural Adjustment Act of 1933 — the first farm bill.
The 1933 act gave the federal government a direct, centralized role in the affairs of American farming — a change largely demanded by farmers. Farmers had fought to create a primary federal role in limiting production to control supplies in exchange for increased prices for the fruits of farmers' labor. They asked the federal government to do for them what they were unable to do on their own. In part, the idea was to replicate what manufacturers and other businesses could accomplish by cutting production, laying off workers, or even closing facilities. Farming was seen as different. When the price of farm commodities fell, millions of individual farmers made individual decisions to try to produce more on their land, and these decisions when multiplied many times over made the problems that much worse. Individual farmers were reluctant to cut production for fear that their neighbors would keep producing and capture any price increases — a basic free rider problem. For farmers, the overriding issue was production that outpaced demand and depressed prices. This issue became known as the "farm problem." Farm policy was created to address it.
As will be seen, the development of federal farm policy fundamentally altered the relationship between traditionally independent farmers and the federal government they often viewed with contempt; in desperate times the farmers abandoned unprotected independence for policies that had once been the concept of radicals. The effort to write the first farm bill was difficult and produced questionable, controversial results. Policies born of an emergency quickly took on a different political life and character. The New Deal era produced no less than six different statutes to combat the Depression in agriculture, but these policies drew sharp distinctions among the interests in the coalition, making the fault lines more prominent and politically challenging. The statutes ignited an intense regional fight over farm policy that would be waged in full during the decades after World War II.
From Golden Era to Postwar Collapse (1909–21)
Before World War I, the American population grew faster than farm production. This growth created strong demand for commodities, and that demand increased prices. Prices increased more than the cost of goods farmers purchased. As a result, farmers experienced strong incomes, and the prewar years from 1909 to 1914 were considered the golden era for agriculture. The golden era did not last long.
The year 1914 witnessed the end of federal homesteading policies and marked what is known as the closing of the American frontier. The end of homesteading policies and the closing of the frontier also ended the availability of free or very cheap land. Land values quickly increased, some through speculation. Increased land prices caused many landowners, including farmers, to take on more debt. Importantly, America closed its frontier by planting it to wheat. Homesteaders were in the process of breaking up twenty-five million acres of native prairie and turning it over to produce wheat. Located in a windy, semiarid region of the country, much of that land was only marginally suited for row-crop farming.
In addition, in 1914 Congress passed the Smith-Lever Act, which created an extension service to help farmers improve farming and increase production through new techniques and farming practices. The extension service itself dated to the Morrill Act of 1862, creating the land-grant universities, and the Hatch Act of 1887, creating agricultural experiment stations. The use of demonstration farms traced to the William McKinley administration and the work of Seaman A. Knapp in the late 1890s in response to demands from cotton farmers for help in combatting the spread of the boll weevil. Counties began to provide funding for county agents in 1906, and the practice spread quickly as the scope of farm demonstration also expanded; Congress provided appropriations and the U.S. Department of Agriculture (USDA) followed via cooperative arrangements with state agricultural colleges for managing demonstration and education projects. World War I spurred further action to help farmers increase production to meet wartime needs. Among other things, the Food Control Act increased the number of county farm advisors and extension agents throughout the country and helped solidify extension's place in American agriculture.
The war effort also fueled efforts to organize farmers at the county level and through farm bureaus. In many counties an important function of the farm bureau was to raise funds through memberships and provide governance via county boards of supervisors. The effort needed a more definite organization, and it expanded beyond educational and demonstration purposes to cover a broad array of issues facing farmers, including business and legislation. National meetings of the county farm bureaus in 1918 and 1919 led to the formation of the American Farm Bureau Federation, which quickly became the largest and most politically powerful farm organization, in Chicago in 1920. By the time of the Great Depression and the New Deal's attempts to assist farmers in the 1930s, both the Farm Bureau and the extension service created by the Smith-Lever Act were considered "strongly entrenched" in farming, connecting the federal government with individual farmers.
The farm problem, however, was predominantly the by-product of World War I. On June 18, 1914, the assassination of Archduke Franz Ferdinand of Austria sparked war in Europe. As part of its response, the American government encouraged farmers to expand production so that wheat could win the war — and the farmers did. Wheat acres increased from an average of just under fifty-one million during the years 1909 to 1913 to approximately seventy-seven million in 1919. The demands of war created an artificial market for American farm commodities, but the war itself devastated U.S. agriculture's most important export markets in Europe. The war also transformed the U.S. from a debtor nation to the world's single biggest creditor, particularly as compared to the major European nations that borrowed to finance the war. These changes affected trade — none more than the decision by the conservative U.S. government to cease lending to European nations in 1919 and demand repayment from the war-torn nations. This move was an additional blow to the European market for U.S. commodities and damaged American farm exports; it coincided with the peak in wheat acreage.
Land that has been purchased, often on credit, and plowed under to produce a crop does not come out of production easily or quickly; farm production does not readily adjust to changes in the broader economy. Postwar events had little impact on farm production decisions; wheat in the ground had to be harvested. Farmers were left with no options other than to sell into already flooded markets. Prices were severely depressed, which damaged the farmer's purchasing power while magnifying the consequences of large debts on land purchased to expand production for the war effort. At the time, the 1920 crop was the most expensive ever planted, and it produced what was then the second largest crop in history. Commodity prices collapsed at harvest, and heavily indebted wheat farmers were in trouble. According to Murray R. Benedict, by 1921 "American agriculture found itself in a more unfavorable position than it had experienced at any time in the memory of men then living, or possibly at any time since the nation's beginning."
Forging the Coalition on Farm Policy (1921–29)
In their struggles with collapsed crop markets and depressed incomes, farmers demanded federal assistance. The demands for farm policy first arose in the region of the country that grows spring wheat, which runs from western Minnesota through Washington and Oregon. Pressure began to be felt in the capital. In the spring of 1921, Secretary of Agriculture Henry C. Wallace called a meeting of farm leaders in Washington DC. At the same time, members of Congress from farm or rural districts got together to form what was known as the farm bloc to work on behalf of their farmer-constituents. These efforts quickly led to the development of federal policy concepts that would help farmers. Initially, these concepts revolved around fixing commodity prices or using federal purchases of surplus farm commodities that could be dumped in export markets.
The most influential farm policy proposal of the twenties came from George Peek and Hugh Johnson of the Moline Plow Company in 1922. Titled "Equality for Agriculture," their proposal also sought federal intervention in the farm economy. Peek and Johnson took aim at American tariff policy, alleging that it created inequality for farmers by protecting domestic industry from lower-priced imports. Tariff policy was unfair to farmers because it increased the cost of manufactured goods, many of which the farmer had to purchase to farm. Peek and Johnson also argued that, unlike industry, farmers could not regulate production to domestic demand; farmers too often produced surplus. In response, they proposed that federal policies reestablish a fair exchange value for farm products, which they defined as the cost to the farmer for producing the crop plus a profit, known as the "cost of production" measure. The Peek-Johnson concept also called for the federal government to purchase domestic commodity surpluses. The surplus commodities would then be sold in export markets with a tariff to protect the domestic market. The entire effort would be financed using an "equalization fee" that would be charged back on producers of the commodity at a rate to cover the loss on the export sales.
A regional, commodity-based coalition began to form around the Peek-Johnson proposal. The farm problem was spreading eastward from the wheat regions into the midwestern Corn Belt during 1923 and 1924. Secretary Wallace added his support to the proposal, apparently contradicting his boss, President Calvin Coolidge. In 1924 the proposal was turned into legislation drafted by USDA officials and introduced in the House by Agriculture Committee chairman Gilbert N. Haugen (R-IA). Senator Charles L. McNary (R-OR) introduced it in the Senate, and the bill became known as the McNary-Haugen legislation. The specifics would evolve over multiple bills from 1924 to 1928 but in general tracked the original Peek-Johnson concept. The bills sought to establish a government corporation that would purchase farm commodities in order to increase prices to an equitable level; the commodities could then be sold to domestic buyers at the equitable level. The corporation would sell any surplus in export markets at world prices, using tariffs to protect domestic markets. Farmers would be assessed an equalization fee to cover the costs.
The McNary-Haugen legislation began with little political support in Congress. It was defeated on the House floor in 1924 with strong opposition from southern and eastern representatives. The South had yet to experience the farm problem because cotton and tobacco prices remained high thanks to reopened European markets. Support for the legislation built quickly, however. The American Farm Bureau Federation elected a president from Illinois in 1925, which changed that organization's position. By 1926 farmers in the southwestern states had expanded cotton acres, especially irrigated lands in Texas and California. The expansion contributed to a collapse in cotton prices as farmers added nearly ten million cotton acres from 1922 to 1925. Southern interests negotiated changes to the bill to add their support. The legislation now covered the three main commodity and political regions: the South, Midwest, and Great Plains. While strengthened, the coalition was not yet strong enough to get a bill through Congress. Farm interests responded by applying pressure in congressional elections. Congress passed the bill in 1927, but President Coolidge vetoed it. This effort was repeated in 1928, when Congress again passed McNary-Haugen, but it was again vetoed by the president. The Senate failed to override the veto.
The Senate's failure to override President Coolidge's veto left the impression that McNary-Haugen was dead politically; the presidential election would soon confirm it. Farm policy supporters failed to derail the Republican nomination of Herbert Hoover, but they did force him to begin acknowledging the farm problem. He promised to push Congress on legislation, but he opposed McNary-Haugen. The Democratic nominee had been more responsive to the farm interests and more receptive to McNary-Haugen, but Hoover won in a landslide. Hoover carried every state in the Wheat and Corn Belts, meaning his opposition to McNary-Haugen did not hurt him with farmers at the ballot box. Adding to the defeat, Republicans increased their House and Senate majorities. The dissonance between lobbying for farm relief but voting for candidates opposed to it was conclusive, and the election results were the end of McNary-Haugen policy. The long fight to get a bill enacted had failed, and farm interests had to reconsider their push for federal assistance.
Farm concerns had apparently registered with the new president, however. President Hoover called a special session of Congress to help farmers and pushed through a program to provide loans to agricultural marketing cooperatives in 1929. The program also created "stabilization corporations" to help with surplus commodities. Hoover signed the bill into law in June. It had taken eight years and multiple bills to get a law on the books that was intended to help farmers. The final product, however, was one favored by business and industry instead of the farm organizations. In retrospect, this may have been somewhat of a blessing in disguise for farm interests and farm policy given what was on the horizon. The 1929 act barely had time to get started before the stock market crashed in late October. That crash took the national and world economies with it, igniting the Great Depression. The 1929 act completely failed to help farmers; the Great Depression overwhelmed its meager authorities. Arguably, the failure of the 1929 act coupled with the long fight for assistance throughout the twenties set the stage for the efforts that were to come next.
The farm problem's persistence and its expanding national scope set in motion the political forces behind farm policy. Farm interests organized; they learned from failure, adapted and gained political sophistication. Most important, they built a coalition that spanned vast regions of the country and brought together three of the major commodity and farming interests. Dairy and livestock concerns were also involved. This geographical reach provided a broad political base that would help congressional vote counting. The creation of that coalition also created the primordial fault line of farm policy. From the beginning this fault line was subject to competing interests and political forces, most notably between cotton and corn (the South and Midwest).
(Continues...)Excerpted from The Fault Lines of Farm Policy by Jonathan Coppess. Copyright © 2018 Jonathan Coppess. Excerpted by permission of UNIVERSITY OF NEBRASKA PRESS.
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