Agricultural Depression, 1920–1934

Minnesota farmers enjoyed a period of prosperity in the 1910s that continued through World War I. Encouraged by the US government to increase production, they took out loans to buy more land and invest in new equipment. As war-torn countries recovered, however, the demand for US exports fell, and land values and prices for commodities dropped. Farmers found it hard to repay their loans—a situation worsened by the Great Depression and the drought years that followed.

The onset of World War I in 1914 sparked an economic boom for farmers in the United States. Demand for agricultural products soared as the war-ravaged countries of Europe could no longer produce needed supplies. This created a shortage that drove up prices for farm commodities. In Minnesota, the season-average price per bushel of corn rose from fifty-nine cents in 1914 to $1.30 in 1919. Wheat prices jumped from $1.05 per bushel to $2.34. The average price of hogs increased from $7.40 to $16.70 per hundred pounds, and the price of milk rose from $1.50 to $2.95 per hundred pounds.

To meet the demand, the US government encouraged farmers to produce more. In 1916, Congress passed the Federal Farm Loan Act, creating twelve federal land banks to provide long-term loans for farm expansion. Believing that the boom would continue, many farmers took advantage of this and other loan opportunities to invest in land, tractors, and other new labor-saving equipment at interest rates ranging from 5 to 7 percent. By 1920, 52.4 percent of the 132,744 Minnesota farms reporting to the Agricultural Census carried mortgage debt, totaling more than $254 million.

After the US entered the war in 1917 and continuing into the post-war years, 40 million acres of uncultivated land in the US went under the plow, including 30 million acres in the wheat- and corn-producing states of the Midwest. In Kittson County alone, wheat acreage increased from 93,000 acres prewar to 146,000 acres. Minnesota farmers had nearly 18.5 million acres under cultivation by 1929. The demand for land inflated the price of farm real estate, regardless of quality. The average price of Minnesota farm land more than doubled between 1910 and 1920, from $46 to $109 per acre.

After the end of the war, relief efforts kept the demand for US agricultural products high. Gross exports of all grains in 1918–1919 totaled 525,461,560 bushels. During that period, the US shipped more than 2.9 billion pounds of pork, 1.1 billion pounds of beef, and nearly 8.8 million pounds of dairy products to allied countries, various relief programs, and American Expeditionary Forces overseas.

Farmers continued to produce more, expecting demand and prices to remain stable. As Europe began to recover from the war, however, the US farm economy began a long downward trend that reached a crisis during the Great Depression. Minnesota farmers' gross cash income fell from $438 million in 1918 to $229 million in 1922. In 1932, it fell to $155 million.

With heavy debts to pay and improved farming practices and equipment making it easier to work more land, farmers found it hard to reduce production. The resulting large surpluses caused farm prices to plummet. From 1919 to 1920, corn tumbled from $1.30 per bushel to forty-seven cents, a drop of more than 63 percent. Wheat prices fell to $1.65 per bushel. The price of hogs dropped to $12.90 per hundred pounds.

As surpluses mounted, the federal government promoted lowering production. It also created programs designed to help stabilize prices. The goal was to achieve parity – to bring prices back to prewar levels and equalize the prices farmers received with the prices they paid for goods.

The passage of the Capper-Volstead Act on February 18, 1922 legalized the sale of farm commodities through farmer-owned cooperatives. Co-ops cut out the middlemen who often underpaid farmers for their products. Congress passed the Agricultural Appropriations Act later that year, creating the US Bureau of Agricultural Economics for economic research.

Foreign trade restrictions, such as the Fordney–McCumber Tariff (1922) and the Hawley-Smoot Tariff (1930), imposed high taxes on imports in an attempt to protect US farms and industry. International trading partners reacted by increasing import fees on American goods. US export of farm products declined, surpluses grew, and prices continued to drop. In 1932, Minnesota corn prices fell to twenty-eight cents per bushel, wheat dropped to forty-four cents per bushel, and the price of hogs fell 75 percent to $3.20 per hundred pounds.

With less demand for land, real estate values plunged to an average of $35 per acre by the late 1930s. Farmers struggled to repay loans for land that had lost its value. Rising property taxes, freight rates, and labor costs added to the financial hardships facing many farmers. In Minnesota, the average tax per acre increased from forty-six cents in 1913 to $1.45 in 1930.

The west-central counties of Minnesota suffered from the severe drought conditions of 1933–1934. A combination of poor farming methods and drought caused extensive soil erosion. A grasshopper infestation compounded crop losses in many western counties.

Farmers across the country began to default on their loans. An estimated sixty of every 1,000 farmers in the US either lost their farms or filed for bankruptcy. From 1926 to 1932, 1,442 farms totaling 258,587 acres were lost to foreclosure in Minnesota. Marshall County had the highest number of foreclosures during this period with 191. It was followed by Kittson County with 127 and Pennington County with 123. From 1922 to 1932, 2,866 Minnesota farmers declared bankruptcy.

In spite of the hardships, Minnesota's rural population increased during the 1930s. Many who lost farms to foreclosure remained on the property as tenants. Others moved from urban areas to the country.

On July 29, 1932, farmers met in St. Cloud to organize the Minnesota Farmers Holiday Association. Members staged a thirty-day strike to call a moratorium on foreclosures. The following April the state legislature passed a bill declaring a state of emergency for Minnesota farmers and approving a mortgage moratorium.

Congress passed several farm relief measures in 1933. The first Agricultural Adjustment Act established the Agricultural Adjustment Administration (AAA) and gave it the power to pay subsidies to farmers who voluntarily reduced production. The Federal Emergency Relief Act (FERA), the forerunner of the Works Progress Administration (WPA), provided relief for both urban and rural residents through work projects.

The Resettlement Administration (RA), begun in 1935, moved 300 families from poor quality land in northeastern Minnesota to better farms through programs like the Beltrami Island Project. The RA was replaced by the Farm Security Administration in 1937.

The Supreme Court ruled in 1936 that the AAA was unconstitutional and suspended farm subsidies. Congress, in turn, responded with the Soil Conservation and Domestic Allotment Act. In 1938, a second AAA bill passed that controlled crop production through acreage allotment and soil conservation.

By December 1934, 18 percent of Minnesota's total population was on some form of relief and had received a total of $67,619,854 in benefits. From 1933 to 1936, rural and urban residents in seventy-seven Minnesota counties received federal aid payments. By the late 1930s, the US farm economy finally began to improve.