Agricultural Marketing Act Summary

  • Last updated on November 10, 2022

The Agricultural Marketing Act of 1929 established the Federal Farm Board to make loans to farm cooperatives and to control surpluses of farm commodities.

Summary of Event

In order to understand the impact of the Agricultural Marketing Act of 1929, it is necessary to understand what happened to the American farm sector early in the twentieth century. The second decade of the twentieth century was a good one for farmers. The world had experienced rapid industrial expansion, causing incomes and spending to rise. Demand for agricultural commodities had expanded, giving farmers high prices for their crops. Farmers in the United States were producing large crops and exporting large parts of them to foreign markets. A fixed quantity of good agricultural land caused land prices to go up, making farmers feel wealthier. It appeared that this prosperity would continue indefinitely. [kw]Agricultural Marketing Act (June 15, 1929) [kw]Marketing Act, Agricultural (June 15, 1929) [kw]Act, Agricultural Marketing (June 15, 1929) Agricultural Marketing Act (1929) Federal Farm Board Agriculture;Federal Farm Board [g]United States;June 15, 1929: Agricultural Marketing Act[07270] [c]Laws, acts, and legal history;June 15, 1929: Agricultural Marketing Act[07270] [c]Agriculture;June 15, 1929: Agricultural Marketing Act[07270] [c]Trade and commerce;June 15, 1929: Agricultural Marketing Act[07270] Hoover, Herbert Legge, Alexander Hyde, Arthur M. McNary, Charles L. Haugen, Gilbert N.

Things began to change in 1919, however. European farmers were producing more as they recovered from World War I, and prices started to fall. In 1921, wheat and cotton were selling for half their 1920 prices, and American farmers realized that hard times had returned. By 1923, agricultural commodity prices had started to rise slowly, and farm conditions began to improve. Things were getting better, but conditions for farmers still were unfavorable. Mechanization of farm work promised to help farmers by cutting production costs but was soon to contribute to problems of overproduction.

Agriculture was an important sector in the U.S. economy in the early 1920’s, and Congress believed that help was needed for farmers, even though farm prices were edging up after the drastic drop in the early 1920’s. A major attempt to help was embodied in the five bills introduced in Congress from 1924 to 1928 by Senator Charles L. McNary of Oregon and Congressman Gilbert N. Haugen of Iowa. The McNary-Haugen bills called for an export corporation that would purchase agricultural crops in amounts large enough to keep their prices at acceptably high levels. These purchases were not to be sold domestically but were to be sold in foreign markets. The bills also called for an import tariff to discourage foreign farmers from sending agricultural goods to the United States to compete with domestic products. The first three McNary-Haugen bills did not pass Congress. The last two bills passed Congress but were vetoed by President Calvin Coolidge. Herbert Hoover, Coolidge’s secretary of commerce, was influential in advising Coolidge to veto the bills.

The Agricultural Marketing Act of 1929 differed from these bills in that it focused on improved marketing as a means of aiding farmers. The government, under this act, would encourage formation of national cooperative marketing organizations but would not run them.

As director of the Food Administration and as secretary of commerce, Hoover had participated in the many agricultural policy debates of the late 1910’s and the 1920’s. In 1928, he campaigned for president, promising to call a special session of Congress to deal with farm problems. Hoover had grown up on an Iowa farm and believed that an improved marketing process was the solution to the farm problem. Despite his strong feelings about the issue, once in the office of president he sent no specific legislation of his own to Congress, not wanting to interfere with Congress’s legislative prerogative. Even so, Congress had a good idea what Hoover wanted. It passed the Agricultural Marketing Act, which became law on June 15, 1929.

The overall goal of the act was to put agriculture on an equal footing with other business sectors in the country. The objectives specified to carry this out were to decrease agricultural surpluses, stabilize prices for agricultural commodities and thereby cut down on speculation, and provide help in marketing of agricultural commodities. The act called for the establishment of the Federal Farm Board, which was to have a budget of $500 million.

The Federal Farm Board was directed to set up national farmer cooperatives as a means of achieving its goals. These cooperatives were to be controlled by farmers and were to be used primarily to improve the marketing of crops. It was believed that the coming together of farmers into a comprehensive organization that could bargain on behalf of farmers would give farmers the power to prevent drastic price declines. The Federal Farm Board was authorized to make loans to the cooperatives to increase their size and efficiency. These loans could be used to build new facilities or for expenses of marketing agricultural crops. Farmers could obtain loans at low rates of interest.

President Hoover persuaded Alexander Legge to leave his $100,000-per-year job as chairman of International Harvester to become the first chairman of the Federal Farm Board. Seven other board members were appointed, representing the major farm commodities. Arthur M. Hyde, as Hoover’s secretary of agriculture, was an ex officio member.

By October of 1929, the Federal Farm Board had succeeded in setting up the Farmers National Grain Associations, Farmers National Grain Associations which were stock companies in each of the major commodities. Stock in the associations was owned by the larger local grain cooperatives. The goal of each of these corporations was to become a large, centralized organization to facilitate marketing for the particular commodity it represented. It was hoped that their sheer size and the coordination of the marketing process they offered would increase the efficiency of marketing agricultural crops, thus stabilizing prices at the desired high levels. The National Grain Associations were also supposed to control agricultural surpluses. Unfortunately, the government also had in place county extension agents, whose job was to help increase production. Getting farmers to control production was difficult, and the Federal Farm Board never succeeded in this task. The government thus, to some extent, operated at cross-purposes, trying to keep prices high while also encouraging production.

Significance

In 1930, the Federal Farm Board decided that its efforts were not succeeding. A surplus of major commodities kept agricultural prices low. Several factors contributed to the surpluses. The United States and Europe had had a few years of abundant harvests, and other countries were restricting imports from the United States and imposing tariffs in retaliation for the Hawley-Smoot Tariff of 1930. Hawley-Smoot Tariff Act (1930)[Hawley Smoot Tariff Act] Farmers were particularly hurt by these retaliatory tariffs because they had long used exports as a means for eliminating agricultural surpluses. Finally, the Great Depression Great Depression;agriculture caused everyone to suffer. Low incomes meant that people were buying less of everything, including farm products.

The surplus in wheat was particularly troubling. Wheat prices fell dramatically, and in response the Federal Farm Board set up Grain Stabilization Boards Grain Stabilization Boards in February of 1930. These boards hoped to control grain prices by encouraging farmers to reduce their output. Chairman Legge of the Federal Farm Board and Secretary of Agriculture Hyde toured the country trying to get farmers to participate in the production control process. They were unsuccessful in getting farmers to cooperate with these programs, so the Grain Stabilization Boards started buying surplus wheat. The purchase program was intended to be temporary, as no one recognized that the Great Depression was going to last for many years. Grain prices continued to fall, and by 1931 farm incomes were at the lowest levels of the century. The Federal Farm Board decided that it could no longer afford to buy grain or to store the grain it had already purchased. Fearing that the grain already purchased would rot in storage, the Federal Farm Board began to sell the grain it owned. This had a further dampening effect on prices and enraged farmers. The public outcry against the sale was so large that Legge resigned as chair of the Federal Farm Board.

The national cooperatives never emerged as the force that Hoover had hoped they would be. They were poorly managed and suffered from the same inefficiencies as the rest of the agricultural sector. They had little lasting effect on American agriculture, and most of them did not survive to the end of the 1930’s.

The price stabilization portion of the Federal Farm Board’s efforts fared no better than did the national cooperatives. The Federal Farm Board found that it could not stop the slide in agricultural prices by buying surplus grains, as illustrated by the case of wheat. Not only did it fail to keep prices from going down, it spent $400 million in taxpayers’ money and disrupted commodity markets. Stabilization was a relatively new idea that was to be used in later legislation; some credit needs to be given to the Federal Farm Board for innovative thinking.

Production controls similarly failed. Hoover thought that if farmers voluntarily cut back on production, surpluses could be eliminated. Legge and Hyde toured the country to try to get farmers to cooperate with this plan. Primarily because the plan was voluntary, farmers did not participate in it. The Federal Farm Board made a special report to Congress in late 1932 in which it stressed that farm policy should include a system that would control the acreage planted. Future farm legislation made this recommendation part of production control programs.

Hoover did not recognize immediately that his farm plans were not working, so no adjustments to the plans were made during his presidential administration. His top farm advisers, Legge and Hyde, shared Hoover’s vision of how to help the farmers and so did not offer alternative plans. In Hoover’s defense, it is likely that the McNary-Haugen plans introduced in the 1920’s would not have fared much better. The onset of the Great Depression, coinciding with increased production made possible by the mechanization of farm production, made the Federal Farm Board’s goals nearly impossible to achieve.

Hoover had high hopes for solving farm problems with voluntary participation by farmers. He had seen what had happened to farmers in the Soviet Union and did not want the government to intervene on such a large scale. Farmers did not choose to participate in Hoover’s plans, however, and even if they had, the low budgets available to the Federal Farm Board doomed the stabilization plans to failure.

Congress became disenchanted with the Federal Farm Board and cut its 1932-1933 budget by 60 percent. Hoover lost the 1932 presidential election to Franklin D. Roosevelt, who had his own ideas about what should happen in the farm sector. Roosevelt abolished the Federal Farm Board in 1933, effectively ending the influence of the Agricultural Marketing Act of 1929. In 1933, Congress passed the Agricultural Adjustment Act, Agricultural Adjustment Act (1933) which was the New Deal’s New Deal;agriculture programs attempt to help farmers.

By 1935, farm income was 50 percent higher than it had been in 1932. Key elements of the 1933 act were declared unconstitutional in January, 1936, and later that year, new farm legislation was passed. As was suggested by the Federal Farm Board, production controls were a key element in the new plans. Agricultural Marketing Act (1929) Federal Farm Board Agriculture;Federal Farm Board

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Benedict, Murray. Farm Policies of the United States, 1790-1950. New York: Twentieth Century Fund, 1953. Provides a detailed discussion of American farm policy, starting during the period when the United States was primarily an agricultural country.
  • citation-type="booksimple"

    xlink:type="simple">Davis, Joseph S. On Agricultural Policy, 1926-1938. Stanford, Calif.: Food Research Institute, 1939. A collection of presentations and articles written during this time period. Not a systematic presentation, but interesting because of when it was written and because Davis was a Federal Farm Board economist.
  • citation-type="booksimple"

    xlink:type="simple">Hamilton, David. From New Day to New Deal. Chapel Hill: University of North Carolina Press, 1991. Focuses on the farm policies of the Hoover and Roosevelt administrations. Attributes the failure of Hoover’s policies to the Depression as well as to misconceptions about the nature of the farm problem.
  • citation-type="booksimple"

    xlink:type="simple">Kirkendall, Richard. Social Scientists and Farm Politics in the Age of Roosevelt. Ames: Iowa State University Press, 1982. Shows how the events of the 1920’s, including the Agricultural Marketing Act of 1929, led to the farm policies of the Roosevelt administration.
  • citation-type="booksimple"

    xlink:type="simple">Nourse, Edwin G. Marketing Agreements Under the AAA. Washington, D.C.: Brookings Institution, 1935. Provides a short summary of the Agricultural Marketing Act of 1929 and goes on to show how the Agricultural Adjustment Act, the legislation that replaced the 1929 act, resembled legislation of the early 1920’s.
  • citation-type="booksimple"

    xlink:type="simple">Rasmussen, Wayne, and Gladys Baker. “A Short History of Price Support and Adjustment Legislation and Programs for Agriculture, 1933-65.” Agriculture Economics Research 18 (1966): 68-79. Brief, insightful, nontechnical discussion of the Agricultural Marketing Act of 1929 and the agriculture programs that followed it.
  • citation-type="booksimple"

    xlink:type="simple">Tweeten, Luther. Foundations of Farm Policy. 2d rev. ed. Lincoln: University of Nebraska Press, 1979. Basic introduction to farm policy includes only brief discussion of the Agricultural Marketing Act of 1929 but places the act in the context of agricultural policy in general.

Coolidge Is Elected U.S. President

Great Depression

Roosevelt Creates the Commodity Credit Corporation

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