1938: Agriculture

In the pioneering period of this nation the average farm family achieved a good livelihood by hard work. Free or cheap land was abundant. The market was growing at home and abroad. Technical improvement enabled the products of American farms to compete easily in foreign trade. Crop failures and economic crises caused difficulty from time to time, but the damage was temporary and seemed incidental to the march of progress.

Suddenly the outlook changed. The pioneering process itself, with its reckless land exploitation, had planted seeds of woe and economic changes sowed an additional crop. With the closing of the frontier, submarginal farming developed. Meantime commercial farming developed more capacity than the market required. Foreign countries that had once been avid for American crops, because they could sell factory goods here, began to close their doors. Then came the world-wide post-war depressions. In consequence American agriculture found itself in a perplexing transition. Evolved largely for trade with Europe, it had to readjust its output to a reduced demand and simultaneously to cope with the results of misdirected settlement, soil destruction, and land speculation, along with international complications produced by a world-wide redistribution of farm enterprises.

Rural-Urban Relationship.

Everyone recognizes today that the farmer's problem is the nation's problem. When agriculture lacks a solid business foundation, and cannot profitably sell its crops, the consequences are vital for the entire population. Some of them are obvious. Farmers cannot purchase their usual quota of the factory output; urban unemployment increases; so-called non-commercial or self-sufficing ways of rural life increase through the continual creation of small poor farms on poor land; millions of rural poor require relief; the gap widens between farm operation and farm ownership and absentee interest in the agricultural land increases; farm lands deteriorate through the inability of impoverished farmers to practice soil conservation; and public agencies have to make increasing expenditures for agricultural relief.

Apparently, however, there is insufficient understanding of the degree to which the agricultural problem is an urban problem. Clearly the only permanent way to restore the prosperity of agriculture is through an increased supply of nonfarm goods for which farmers can exchange their products on an equitable basis. It makes no difference whether the increase takes place at home or abroad, provided it comes into the market as purchasing power for agricultural commodities. In other words, the presence of agricultural surpluses indicates the lack of a sufficient urban demand. Under these circumstances farmers are compelled to try the application of ordinary business practices. They must decrease the farm output until the surpluses cease to glut the market.

Production and Supplies.

In 1938 the farmers of the United States produced large surpluses of many crops. Supplies of nearly all food crops were large. The production of wheat, rye, rice, and buckwheat combined was 25 per cent above the 1927-36 average. It was 14 per cent above the 10-year average of the period just prior to the recent drought years. The wheat crop estimated at 940,220,000 bu. was the third largest on record. With the carry-over of 154,000,000 bu. of old wheat the new crop raised the supply to nearly 1,100,000,000 bushels; there was little prospect of selling much over two-thirds this amount. Corn production as estimated in November was 2,480,958,000 bushels, as compared with a 10-year (1927-36) average of 2,306,150,000 bu. The corn crop was above average in all but the Western States and in parts of the Great Plains.

Cotton production (12,137,000 bales) was considerably below the record crop of 18,946,000 bales in 1937, but the world carry-over of American cotton at the beginning of the season was exceptionally large. Added to the carry-over from 1937, the cotton crop of 1938 put the total world supply of American cotton in running bales at about 25,700,000 bales or enough to meet normal domestic and export requirements for nearly two years. The United States Government was holding about 10,000,000 bales as collateral for loans to growers. Tobacco production was estimated at 1,470,922,000 lb., or about 5 per cent below the fairly large production of 1937. Total production of feed grains was about 95,000,000 tons as compared with 100,000,000 tons in 1937 and an average of 89,000,000 tons during the preceding 10 years, in which period four years of extensive drought occurred. This feed-grain supply was unusually large in relation to the number of livestock on farms. Some fruit crops promised new high production records, notably grapefruit, oranges, and pears. But the combined tonnage of apples, peaches, pears, grapes, cherries, plums, prunes, apricots, and cranberries was 21 per cent smaller than in 1937, though 2 per cent above the 10-year, 1927-36, average.

Generally favorable weather conditions and the fact that farmers' plans for the new crop year were already well advanced before the enactment of the Agricultural Adjustment Act of 1938 accounted for the large production. There was a decrease in cotton acreage but a large increase in acreage of other crops. Rainfall was sufficient in most areas from the eastern Great Plains eastward. There were no widespread harmful deficiencies in soil moisture. In fact, the improved weather conditions suggested that perhaps the previous long drought period had spent itself and that rainfall might be more abundant in immediate future years. Crop yields per acre, though about 8 per cent below the record yields of 1937, were above those of any other season since 1929, and 8.6 per cent above the 1923-32, or the predrought, average.

Congress did not pass the new Agricultural Adjustment Act until February 1938. In spite of the late start, farmers adjusted their cotton acreage and production, but the new law was too late to help the wheat farmers since the winter wheat crop was already in the ground. The total wheat area seeded for 1938 harvest was nearly 81,000,000 acres, but the harvested acreage due to abandonment was 10,000,000 acres less. The wheat acreage harvested in 1938 was 7,000,000 acres above that of 1937. There were no effective acreage adjustments in 1936 and 1937, since the United States Supreme Court had ruled out the production-adjustment programs under the original Agricultural Adjustment Act. Hence the carry-overs of export crops were substantial.

The total area of the principal crops for harvest in 1938 was 335,000,000 acres, as compared with 332,000,000 acres in 1937, and a 10-year average, 1927-36, of 335,000,000 acres. Neither the acreage nor the production of the farms in 1938 was in balance with the market. Low yields in the drought years had caused farmers to maintain a large acreage of the principal crops. Approximately the same acreage in 1937, with good yields and without generally effective crop adjustments, resulted in price-depressing surpluses. Crop adjustments in 1938 prevented any substantial additions to the accumulated surpluses of cotton and corn. But for wheat the lack of an adjustment program permitted another big seeding and big harvest, with further large increases in wheat supplies.

World Supplies and American Exports.

Marketwise, cotton and grains were in the least favorable situation. There was some prospect of increased consumption by domestic cotton mills, but the consumption of American cotton by foreign mills showed no tendency to pick up materially. Foreign cotton production for the 1938-39 season was about enough less than in the preceding season to offset the increase that occurred, because of reduced consumption, in the carry-overs of foreign cotton. Cotton exports in 1938, however, were at extremely low levels and the outlook for increases was not at all bright.

World wheat supplies (not counting those of the U.S.S.R. and of China) for the year beginning July 1, 1938, were about 600,000,000 bu. more than on July 1, 1937. Foreign exporting countries as well as the United States had larger crops. There was evidence that wheat from the United States would meet with keener competition and some likelihood that our exports for the crop season would be less than in 1937-38. The average farm price of wheat in the United States was lower in 1938 than the year before. In August the United States Department of Agriculture announced terms on which it would purchase wheat for export as part of an effort to hold our place in the world's wheat trade. In December the Department had purchased 40,000,000 bu. of wheat for export. Additional exports brought the total to 63,000,000 bu. exported or to be exported as of November 1938. World wheat imports were about one-third lower than in 1929, since the importing countries had increased their own production. Even an unchanged American proportion of the world's wheat trade would have meant a reduced volume.

The tobacco outlook was more favorable. Certain developments, however, threatened our position. The United Kingdom, which formerly took about 50 per cent of our flue-cured exports, maintained a preference for tobacco from the British Dominions and India. China, once the market for one-fourth to one-third of our flue-cured exports, had expanded its domestic production prior to the hostilities with Japan. There was likelihood that our proportion of foreign tobacco consumption would decline; flue-cured exports from the United States should remain about the same.

Fruits had been the most rapidly expanding farm exports for 30 or 35 years, and the outlook was still good for continued large fruit exports, though expansion in the trade seemed likely to be less rapid. There were increased exports of animal products such as pork and lard during the year but the foreign demand for these products was far smaller than in the 1920's.

Foreign demand for our agricultural products, though still considerable, has required only the production of from 20- to 50,000,000 acres since the depression of 1929, as compared with the production of more than 80,000,000 acres in the peak years of the 1920's. American agriculture grew up to supply the world market as well as the home market. When its production for export cannot be sold, or can be sold only at a very low price, crops produced for the domestic market fall in price, too, even if the consumption of food and fibers at home remains normal. Hence the tremendous importance of the export problem. (See also PRODUCTION AND TRADE: Prices.)

Domestic Consumption.

Moreover, the outlook for domestic consumption was not too good. True, consumption per capita had been stationary for years or only slightly downward. Even the depression did not greatly change the American diet. The per capita consumption of milk and milk products fell off a little in the depression years. The consumption of sugar, of green vegetables, and of citrus fruits increased: the consumption of cereals declined. Generally, with farm production still abundant, the domestic consumption continued in almost pre-depression quantities.