1939: Agriculture

History of a Decade.

The year 1939 brought to a close the most eventful decade in the history of agriculture in the United States. To say that one era in agriculture came to a close and a new era began may be to overstate the case. Yet certainly the decade was one of vigorous transition.

As agriculture entered the decade of the 1930's, it not only hovered on the brink of temporary economic collapse, but it also faced a set of conditions that were remarkably dissimilar to those that had prevailed throughout its whole development and expansion period. Commercial agriculture in America had grown into its immense powers of production in response to the needs of foreign and domestic markets, which were usually ready to absorb all that was produced. Throughout its development period. American agriculture remained a promising field of economic opportunity. Farmers then had few serious marketing troubles. Surpluses were transitory. When they occurred, temporary price declines caused products to move in greater quantity. Occasional over-production usually disappeared fairly quickly in an expanding market at home and overseas.

Moreover, the farmer's land problem was easily, though temporarily solved. No matter how poorly he handled his land, no matter how quickly he wore it out, there was fresh land to go to out West.

Opportunities for better wages drew the excess population from the country to the cities. No one worried unduly about the pressure of population on the land, about the rapid increase in tenancy and tax delinquency, or about erosion and heightened floods. Such problems were considered as typical of 'rural problem areas,' but not as indicative of any weakness in an essentially healthy agriculture.

But as agriculture entered the decade of the thirties, the free land to the West had been taken up. The excess rural population could not find jobs in cities. And the foreign market contracted sharply. More people were compelled to try to earn a livelihood from the land, with prices declining and the land itself rapidly deteriorating.

Economically, the most important development was the decline in the foreign market. This appeared to be a fairly permanent situation. A long-time trend toward reduced exports had been apparent even before the World War, but was temporarily reversed by war-time needs. Beginning in the late part of the nineteenth century, exports declined for nearly two decades. But war-time demands, followed by inflation, changed the situation. For a short time American agriculture experienced great prosperity. Then followed nine years of steady deflation. The United States had become a creditor nation. European nations no longer wished to take unlimited quantities of American farm products; they could not pay the debts already owed.

During the 1920's many farmers came to realize that agriculture's troubles were not transitory ones that might be expected to disappear, as previously, under the forces of expansion. They therefore asked the Government to help. Creation of the Federal Farm Board in 1929 was the Federal Government's first response to the demand for assistance in solving a new kind of farm problem. This was the forerunner of a much more extensive system of Federal aids.

The Federal Farm Board was unable to cope with surpluses for two principal reasons: First, it had no authority to deal with the production of commodities whose prices it sought to stabilize; second, its operations were scarcely started before sales abroad declined still more and industrial depression at home caused prices to fall. Indeed, prices dropped so low that many farmers burned corn rather than coal. Wheat was fed to hogs. Cotton fell to a nickel a pound. Farmers became desperate. They marched on state Legislatures. They formed picket lines, and stopped foreclosure sales by refusing to bid more than a penny for a horse, or a dime for a farm. Martial law was declared in one state. Armed deputies escorted milk trucks to the cities in others.

Then came the banking crisis, a special session of Congress, and the first of a series of action programs which in the aggregate were to form a large public effort to help American agriculture adjust itself to new conditions—specifically, to adjust itself in such a way as to stabilize farm income, to halt the waste of basic resources, to check the decline in farm ownership and to reverse the trend toward rural poverty. The Agricultural Adjustment Administration, armed with the authority which the Farm Board had lacked, launched programs to curtail production and thus reduce the surpluses of cotton, wheat, tobacco, corn, and hogs, offering benefit payments to cooperating farmers. The Farm Credit Administration also began widespread activities in an effort to alleviate farm-mortgage foreclosure distress.

This initial effort was quickly followed by other governmental programs in the agricultural, industrial, financial, and labor fields. In a great economic movement it is not possible to segregate a single factor or force and ascribe to it a given result. But since 1933, the course of agriculture has been upward, with slumps and setbacks, until in 1939 farm income was almost double that of 1932.

Since 1933 the Agricultural Adjustment Administration has paid to farmers nearly $3,000,000,000. The Farm Credit Administration has lent nearly $6,000,000,000, and the Farm Security Administration, Commodity Credit Corporation, and other agencies have lent nearly $1,500,000,000 to cotton, corn, wheat, and other farmers to help cushion the marketing of their products, to set up commodity reserves and to help rehabilitate the poor.

Agriculture still faced serious problems as the year 1939 came to an end. The world continued steadfastly to pursue nationalistic policies, making it extremely difficult to deal successfully with problems which even under normal conditions of trade would require a long time to solve. However, by 1939 the search for a permanent solution by the Federal, state, and local governments and by individuals had become more persistent and more basic. It is now generally recognized that the dislocations in agriculture have national, regional, and local aspects which must be dealt with as such.

Nationally, the most significant fact is that, year in and year out, the farm plant is overlarge for its market—even for a market in which the poorest in cities are supplied with free food and sales abroad are upheld partly by subsidy payments to exporters. Each agricultural region not only has the problems caused by an overlarge plant and a small purchasing power of many large groups of our population, but also has distinctive problems of soil erosion, floods, depletion of timber resources, the farming of submarginal land, the rapid trend toward tenancy, the pressure of excess population on the land and the rehabilitation of the poor in agriculture. Furthermore, each individual farm has its distinctive problem of readjustment that is basic to its income and the conservation of its productive soil. The progress made in national, regional and local adjustment by the close of the decade of the thirties appeared to be only the beginning of a long period of adjustment.

Looking back, the direction of transition seems clear. It appears to be away from an agriculture primarily concerned with satisfying world markets at whatever the cost to land resources, to a conservational, permanent type of agriculture, in which the needs of the land and our own people are considered first, and world markets second. This transition involves a readjustment of people to the land, which after 150 years of unguided settlement, promises to be a long, difficult, and sometimes painful task.

Legislation in Aid of Agriculture.

For six years, 1933 to 1938, the Congress responded to the needs of agriculture with a series of far-reaching agricultural acts. Of a score of such laws, at least a dozen were of major importance. The series began with the Agricultural Adjustment Act of 1933, which was designed to raise farm prices by controlling the production of certain staple commodities through acreage limitations. Since this act was in part invalidated by the Supreme Court in 1936, two other major farm acts have been passed—the Soil Conservation and Domestic Allotment Act of 1936, and the Act which supplemented it, the Agricultural Adjustment Act of 1938. These acts were designed to help farmers conserve their soil and fertility resources and to increase their incomes. (See also UNITED STATES: Supreme Court Decisions.)

In the interim, acts were passed to cope simultaneously with other aspects of the farm problem. Congress authorized the United States Department of Agriculture to aid in the rehabilitation of the disadvantaged in agriculture, to control soil erosion, to purchase and develop submarginal land for uses other than agriculture, to promote forestry, to develop water facilities in arid and semiarid areas, to stimulate foreign trade in farm products, to improve agricultural credit facilities, to treat land for flood-control purposes in flood-source areas, to dispose of crop surpluses, to develop new uses for farm products, to assist with agricultural marketing and to perform other public services.

As far as legislation was concerned, the year 1939 was relatively quiet. The Congress passed several acts, but for the most part these were designed to improve existing programs authorized by previous acts. The Soil Conservation and Domestic Allotment Act of 1936 and the Agricultural Adjustment Act of 1938 were amended in several particulars. The so-called '80 per cent provision' of the former Act was repealed. This provision had required producers of wheat, corn, cotton, and rice to plant at least 80 per cent of their acreage allotments as a condition to benefit payments. Another amendment permitted the AAA to advance benefit payments to producers for the purpose of paying premiums for crop insurance.

The Agricultural Adjustment Act of 1938 was amended so as to permit the Secretary of Agriculture to convert state marketing quotas for tobacco to state acreage allotments; to permit the Secretary to proclaim tobacco marketing quotas at any time during the year, rather than on Nov. 15 only; to provide that national acreage allotments for wheat should not be less than 55,000,000 acres, and that the national cotton allotment should not be less than 10,000,000 bales, in any one year. Also, an amendment provided for announcing corn marketing quotas one month later than before.

An amendment to Sec. 32 of Pub. No. 320, 74th Congress, provided that surplus commodities might be distributed among persons of low income; previously, such distribution was only to relief groups.

The Commodity Credit Corporation was authorized by a joint resolution to sell acquired surplus commodities to foreign governments under certain restrictions. An act of Congress permitted the Corporation to accept strategic and critical materials produced abroad, such as rubber, for some of the surplus commodities it held.

State legislatures, however, were more than usually active during the year considering legislation in aid of agriculture. In 1939 soil conservation districts legislation was enacted by 10 states, bringing the total number of state soil laws to 36. In order to permit counties to guide the settlement of people on land in the future, and thus prevent recurrence of past mistakes, several states passed rural zoning laws, raising the total to 11. Tenancy legislation was considered by 5 states and passed in 3, in the three instances the legislation was designed to improve tenure arrangements and protect tenant farmers in the leasing of farms. Other state laws dealt with problems of forestry, management and disposal of tax delinquent land, administration of state and county lands and revision of the property tax.

Production and Supplies.

Again in 1939 farmers produced abundantly. Although the harvested acreage was 3 or 4 per cent under that of 1938, yields per acre were unusually high for most crops. Many of them were higher than in any recent year except 1937, when several all-time records were set. Especially large were the bumper crops of tobacco and soybeans.

Wheat production was a notable exception. The total for 1939 was only 739,445,000 bu., about 190,000,000 less than the crop of 1938 and somewhat under the average for the 10-year period 1927-37. Yet total wheat supplies, due to the large carry-over, are more than ample. Wheat still remains on the list of products designated as surplus and available for purchase under surplus-disposal programs. Standing at 993,000,000 bu. at the end of the year, the total supply is about 100,000,000 bu. less than at the end of 1938.

The corn supply—3,093,000,000 bu. is above the average for the 5-year period, 1928-32. by 375,000,000 bu. Production for the year 1939 was 2,591,063,000 bu. or about 50,000,000 bu. greater than in 1938. A large amount of corn consequently entered storage under Government loan. The supply of all feed grains, however, is about 4 per cent less per animal unit than in 1938. Owing to the drought, severe shortages exist in certain localities, while there is abundance in others.

Although domestic production of cotton in 1939 was about 100,000 bales less than in 1938, cotton on hand in the United States after the year's crop was harvested almost reached the peak set in 1932-33. This over-large supply probably totals 25,800,000 running bales. Stocks under Government loan rose 3,000,000 bales to 10,000,000.

The tobacco crop was the largest on record. Production of flue-cured and Burley types was especially high. The supply of all types on hand at the end of the year stood at nearly 3,895,000,000 pounds, an increase of 200,000,000 pounds within the year.

Production of animal products, which has been increasing steadily since 1937, amounted to a total dressed weight of beef, veal, pork, lard, lamb, and mutton, of 9,496,000,000 pounds in the first nine months of 1939. This may be compared with 8,927,000,000 pounds for the same period in 1938. Feed supplies were fairly abundant at the close of the year and farmers entered 1940 with prospects of furnishing still larger supplies.

Production of milk and dairy products remained at stable levels, milk production totaling 108,000,000,000 pounds, a very slight increase for the year. Butter production of 2,250,000,000 pounds was somewhat below that for 1938. Consumption increased so markedly during the year that stocks of dairy products on hand became considerably smaller. Butter supplies are still abnormally high and surplus-disposal programs for distribution of butter to the needy operated throughout the year. The Federal Surplus Commodities Corporation was authorized to purchase 50,000,000 pounds during the 1939-40 fiscal year.

The crops of grapefruit, oranges, raisins, and peaches were huge. Because of a total production above that for 1938 and close to the record crops of 1937, American consumers were well supplied with all kinds of fruits.

The year brought large harvests of asparagus, snap beans, cantaloupes, lettuce, onions, green peas, and spinach, which more than offset the smaller crops of beets, cabbage, carrots, cauliflower, celery, cucumbers, peppers, and tomatoes. Generally, consumer demand increased sufficiently to improve vegetable prices.

These records of production and supplies on hand emphasize again that the American farm plant is out of tune with its market. The current cotton supply, for example, is sufficiently large to supply the world for two years with all the American cotton it needs, even if no additional cotton were grown.

Agricultural Prices.

See PRODUCTION AND TRADE.

Cash Income in 1939.

Cash income from marketings during the year 1939 remained at practically the same level as in 1938. The figure for the year was estimated at $7,625,000,000, or about $2,000,000 less than the estimate for 1938. Distributed among the 6,920,000 farm families, this income would amount to $1,102 for each family, and $238 for each person living on a farm. But of course the farm income is not so evenly distributed. Thousands of farm families are totally unemployed, many only partially employed, and have very meager incomes.

Government payments were much higher than in 1938. These brought total cash income for the year to $8,300,000,000, compared to $8,109,000,000 in 1938. Government conservation and parity payments were $675,000,000. This rise in a single year from $482,000,000 was due to the Parity Payment Program, one of the programs authorized by the Agricultural Adjustment Act of 1938, which operated for the first time in 1939. Under this Act, national acreage allotments are determined for cotton, corn, wheat, and rice, at amounts that will furnish adequate supplies for all expectable demands. The national allotments are then distributed among states, counties, and individual farms. In order to qualify for payments, a farmer keeps his plantings of soil-depleting crops within his acreage allotments.

Government payments of all kinds constituted in 1939 an addition of 8.9 per cent to the cash income of farmers.

Gross farm income, including the value of goods consumed on the farm, income from marketings, commodities placed under loan and Government payments was estimated at about $9,500,000,000. This may be compared with a total of $9,290,000,000 in 1938, and $10,425,000,000 in 1937.

Early in the year it appeared that farm income would be considerably less than in 1938. For the first half of the year it actually averaged 5 per cent less. This was due partly to a somewhat smaller volume of farm trade and partly to lower prices. By midsummer a drastic decline in cotton income was expected; improvement was anticipated only in income from feed grains and fruits. By October the outlook for the year was better. Prices of farm commodities advanced markedly in September and some improvement in the rate of consumption occurred. By the end of the year income from cotton and meats was estimated to be as large as in 1938; income from grains vegetables, and fruits larger; and income from dairy products only slightly below that for the previous year.

But farm welfare cannot of course be measured only in terms of cash income and prices. More important is: How much goods can the farmer buy with his cash income? On this basis, farmers in 1939 were about 1 per cent better off than in 1938.

The Drought.

The year 1939 was peculiar in that it was a year of abundant production as well as a year of widespread drought. The supply of food and feed crops was more than ample in spite of drought for two reasons: (1) The drought was least intense in some of the most productive areas, and (2) carryovers of farm products on farms, partly by reason of the operations under the ever-normal granary program, were large.

The drought developed in an unusual way. Early in the spring every indication pointed to a particularly severe moisture shortage in the Northern Great Plains States. June rains afforded considerable relief; and crops harvested in the area were about normal. Then in midsummer drought struck the Ohio Valley and the Middle Atlantic States. Conditions grew most serious in southern New York, northern Pennsylvania, and northern New Jersey. In early fall, drought returned to the Northern Great Plains and occurred also in the Southern Plains States. After mid-August little or no rain fell in parts of Colorado, Wyoming. South Dakota, Nebraska, Kansas, Oklahoma and Texas. This area, largely livestock grazing and wheat country, entered the winter in poor condition. There was little grass for livestock and very little moisture for seeding winter wheat. Pasture conditions were less than 50 per cent normal, and observers in the Southern Plains area predicted that unless the spring of 1940 was unusually favorable, dust storms would be severe in 1940 and the 'Dust Bowl,' which has contracted in area for several years, would expand.

Although it caused no shortage in total feed supplies, the drought presented the problem of getting the necessary amounts of an ample supply into the hands of those farmers and stockmen who most needed feed.

Exports and Imports.

Foreign trade in agricultural products was unusually small in the fiscal year ending June 30, 1939. Imports of supplies supplementary to those produced in the United States came to a total lower than for any year in five. Exports were the lowest in four years. Three factors contributed particularly to this result. First, purchasing power and industrial activity abroad were less than normal; second, foreign competition for world markets grew increasingly active, and third, American cotton was offered in the world market at a slightly higher price than cotton from other countries. The fact that domestic supplies of livestock had not yet completely recovered from the effects of the two droughts of 1934 and 1936 accounted in part for a small export sale of animal products.

Recovery from the droughts of 1934 and 1936 resulted also in reduced imports of a large number of items. Supplementary imports for the fiscal year were valued at $381,000,000 less than in the previous year. About one third of this decline occurred in grains and feeds. Imports of corn declined $45,000,000 and imports of wheat $42,000,000. Other reductions in imports rising out of the return of good growing weather were in eggs, butter, cheese, and other dairy products. Another third of the decline was due to decreased industrial activity during the fiscal year, which affected importation of such important products as hides and skins, sugar, and wool. The remaining third of the decline was represented by vegetable oils, oil seeds, and similar products. Imports of foreign types of tobacco, for blending with American types, remained at a high level, reflecting the steady upward trend of all tobacco consumption.

Farm products made up a smaller proportion of the total exports from the United States than ever before. This was due, however, largely to the sharp decline in cotton shipments. If cotton is omitted from the totals, the value of agricultural exports, while somewhat lower than in 1937-38, was higher than in any of the six preceding years.

Exports of agricultural products other than cotton were $156,000,000 greater in value than for the 1936-37 fiscal year. This was due largely to an increase of $104,000,000 in the value of exports of grain and flours. There were also increases of $17,000,000 in fruit exports, $14,000,000 in tobacco exports and $12,000,000 in exports of pork and lard.

Shipments of cotton fell to the lowest level since 1882. They were 54 per cent below the average for 1936-37. Four explanations are advanced. Textile activity in Japan, the United Kingdom, France, Italy, and Canada, all important purchasers of American fiber, was exceptionally quiet. At the same time, stocks in foreign hands were large. Two other factors were the trade policies of foreign totalitarian industrial countries, and the slightly higher asking price for American cotton relative to competing varieties.

Effect of War on Foreign Trade.

When war broke out in Europe there was a quick speculative rise in many commodity prices. An appraisal of the effects of the first two months of war showed clearly that the war depressed foreign trade of American agricultural products as a whole. A large wartime demand was expected for dried fruits and pork products, but this demand failed to appear. On the other hand, the anticipated shrinkage in demand for tobacco and fresh fruits came almost immediately. There was a pickup in demand for a few commodities. Soybeans were the outstanding example. Exports were 150 times larger in September and October than in the year before. But the total value of increases in minor items was slight compared to the decreases, that occurred in the major items, such as pork products, fresh fruits, wheat, and tobacco. The belligerent countries took substantially less of these products, and increased purchases by Scandinavian countries did not offset the losses. The largest declines in shipments to belligerents during the first two months of war were in wheat, 86 per cent; fruit, 60 per cent; tobacco, 73 per cent; and bacon, which suffered least, 22 per cent.

The export situation for cotton, however, showed a sharp turn for the better. Exports of cotton in the July-October period of 1939 rose, about a third over shipments in the same 4-month period a year earlier. This rise was not attributed, however, primarily to war. Chief factors in the upturn were the almost complete exhaustion of European stocks of American cotton and the inauguration of the Federal cotton-export-payments program. These factors more than offset the loss of cotton markets caused by allied blockade of German-controlled areas.

As the year came to a close a great question mark hung over export trade in agricultural products. The blockade had closed trade with Central Europe. The Allies, further, had pooled economic and financial resources, and were beginning to buy through centralized purchasing commissions. Applied trade controls tended to favor sources other than the United States. The purposes apparently were to take up supplies that might otherwise be obtained by Germany, to deal directly with governments rather than through normal channels of trade, and perhaps to preserve United States exchange for purchase of war materials other than agricultural products.

Progress in Soil Conservation.

For 40 years the United States has been awakening slowly to the need for conserving basic resources. The first public efforts toward conservation, given force and direction by a dwindling timber supply, led to the establishment of the national forests. More recently the need for conserving farm lands and grasslands has been appreciated, and programs directed toward this objective have outstripped forest conservation in scope and intensity.

One of the principal physical consequences of misuse of sloping lands is accelerated run-off and soil erosion. In 1934, shortly after the Soil Conservation Service was created, a reconnaissance survey of land conditions was undertaken. Although such a survey is not detailed or precise, it is nevertheless useful. Among the facts brought out were: (1) On 37 per cent of the total land area of the United States—mostly flat, gently undulatory, or forested—erosion had been slight; (2) on 41 per cent erosion had removed from one-fourth to three-fourths of the topsoil; (3) on 12 per cent erosion had removed more than three-fourths of the original surface soil; and (4) 3 per cent of the land area had been completely destroyed for tillage. (The rest, about 7½ per cent, consists of canyons, badlands, and rough mountain areas.) This rate of soil destruction is greater than that prevalent in any other nation, though no nation in the world outside Western Europe has its soils on a maintenance basis.

Why do so many users of land in the United States misuse it? Lack of knowledge, is of course, one important reason. But even if all land users understood conservation techniques many would be unable to put their knowledge into practice. Social and economic factors often stand in the way. Fluctuating prices cause much mismanagement, for example. If prices are unduly low farmers plant more acres, including those on steep hillsides, in an effort to have more to sell at the reduced prices. If prices are unduly high, farmers again tend to expand production, in the hope of getting large profits. Stable prices and income are, therefore, basic to conservational management.

Our traditional attitude toward land has not as yet changed greatly. It is a pioneer attitude. We had plenty of land during the period when our land policies and concepts were formulated. We developed a speculative interest in land, and also a strong sense of the rights of private property, without developing a strong compensatory sense of the social responsibility that goes along with handling land. Then, too, some farming systems are inherently soil destroying unless certain precautionary measures are employed. This is especially true of farming in single cash crop areas like the Cotton Belt and parts of the Corn Belt and wheat belts. A third factor is tenancy, which for a decade has grown at the rate of 50,000 farms a year. Most tenants have only a short-term interest in the land they farm. To meet charges for rent and other fixed expenses, they must produce a larger proportion of cash crops than is good for the land. What happens to the soil therefore cannot be a primary concern of a short-term tenant. Certain imperfections in credit methods and in the property tax also discourage conservation farming.

Some progress has been made in removing or alleviating causes of soil misuse. But in 1939 it was realized that efforts up to then represented only a start. For several years farmers have been helped by public programs to shift from soil-destroying land uses to soil-conserving uses, and to make use of known soil-conserving and soil-building practices. This is one of the two major benefits farmers expect from the Agricultural Adjustment Administration's program. In this program conservation is looked upon as an objective equally as important as restoring stability to farm income. At the same time, the Soil Conservation Service, by making available technical aid, equipment, and planting materials, is helping farmers to meet the specific technical and physical problems in controlling soil erosion and treating land for purposes of flood control. In its rural rehabilitation and tenant purchase programs, the Farm Security Administration finds that conservation and building up of the soil must accompany rehabilitation of the people who use the land.

Late in 1939 the Secretary of Agriculture, recognizing that 'land is still wearing out faster than we can restore it,' directed that all Federal agricultural programs be reoriented so as to help farmers and other land users make more rapid progress in their efforts to achieve conservation. These involved detailed changes in the programs administered by the Soil Conservation Service, Farm Security Administration, Agricultural Adjustment Administration, and other Federal agencies.

Demonstration Projects.

Initially, the Soil Conservation Service concentrated its principal conservation efforts on intensive demonstration projects. About 180 watershed demonstration projects, of 25,000 acres each, were established in various sections of the country. Reasonably complete control was established in these areas but they represented of course mere dots on the map of the United States. Consequently, beginning in 1937, expanding somewhat in 1938, and reaching sizeable proportions in 1939, the Soil Conservation Service realigned its work so as to render assistance to a much larger number of farmers. With no increase in funds, the technicians changed from intensive work on a few million acres of land to extensive work on more than 100,000,000 acres. Also, in 1939, by cooperating with Farm Security Administration supervisors, committee-men of the Agricultural Adjustment Administration and supervisors of locally organized and directed soil conservation districts, who in turn work with a high percentage of all farmers, the Soil Conservation Service was able to aid still more farmers with the technical information necessary in all soil and water conservation work.

District Plan.

A highly significant conservation development of the year was the growth of the soil conservation district plan of attack. Districts are organized voluntarily under state laws by groups of land operators for the specific purpose of readjusting and regulating land use practices in the best interests of the community. Management rests with local people who elect supervisory officers. All land use regulations are approved by referendum vote of the land occupiers before going into effect. In the Great Plains area, for example, farmers in districts have agreed, by referendum, to turn no more sod on land vulnerable to wind erosion. Districts undertake to carry out soil conservation operations with the assistance of such public agencies as may be in position to give help. At the close of the year some 198,000,000 acres of land had been included within 187 soil conservation districts in 27 states. The Soil Conservation Service helped farmers in districts by lending them equipment, such as graders, tractors, terracers, and small implements formerly used in demonstration areas, by making planting materials available, and by supplying technical help.

Insecurity of Tenure.

Almost one farmer in ten cooperates in the rural rehabilitation program carried on by the Farm Security Administration. Aid is given needy farmers through loans which are based on improved farm management plans. Late in 1939, FSA supervisors were directed to give special attention to soil conservation practices in drawing up management plans for borrowers. Recognizing that insecurity of tenure is one of the principal fundamental causes of misuse of land, the Farm Security Administration was directed to intensify its efforts to help borrowers obtain longer-term and better written leases.

Needy farm families who receive grants from the Farm Security Administration hereafter, whenever feasible, must agree to do appropriate conservation work on their own farms.

Crop Rotation.

The Farm Security Administration also set out to encourage crop diversification, announcing a policy of approving loans only when farm plans provide for growing more than one cash crop. This policy is expected to popularize the practice of crop rotation in single-crop areas. The year also witnessed increased activity in 'unit reorganization'—a program designed to help farmers adjust their farm units to a more economic size and to increase the use of grass crops in areas not suited to intensive cultivation.

Conservation Payments.

Changes in the AAA program for 1940 were made in order to place more emphasis on conservation. Payment rates were revised so as to encourage the use of desirable conservation practices normally not carried out on a large number of farms. To do this within the limits of available funds, it was necessary to decrease credits for seedings and other common conservation practices for which payments have been made in the past. Under a new provision, farmers on small farms could earn a minimum payment of $20. Another change permitted farmers to earn an additional $30 by planting a specified number of forest trees. A project for growing legume seeds in the Northwest for use in the Southeast, where conservation calls for an increase in the acreage of winter legumes for winter cover and green manures, was expanded; and all county and state AAA farmer-committeemen were directed to require farmers to meet stricter performance requirements before granting credit for soil-building practices—the basis on which conservation payments are made.

Progress in Rural Rehabilitation.

During the depths of the depression more than 1,000,000 farm families were in urgent need of relief. Unwise use of the land, too many people attempting to make a living from scanty resources, as well as ruinously low prices for the cash crops grown by these families was largely responsible for their condition. The great majority were the victims of long-neglected soil erosion, careless and unscientific farming practices, inadequate acreage, insecure tenure and overburdening debts in a period of low prices for farm products.

Most of the families needed not relief grants but a program of self help, which the Congress authorized. This program is now carried on by the Farm Security Administration. Its purpose is to help distressed farm families, largely outside the stream of commercial agriculture, readjust their use of available resources in ways to improve their incomes and eventually to become self-sufficient. A family is eligible to take part only when it cannot get adequate financing from any other source, when it has the backing of substantial citizens in its own county, and owns or is able to rent a farm which can produce a living.

In each county, the program is in charge of a rehabilitation supervisor. When a family requests assistance, the first step is to find the causes of trouble, and the second, to work out a farm and home management plan that will overcome the difficulties and enable the family to become self-supporting. In a sense, this is a new American form of education, coupled with the pioneer custom of 'character banking': The farmer and the supervisor go over the farm situation in detail and decide what changes can be made to increase the family's income. A home management specialist and the farmer's wife work out a similar plan for the home, planning better and thriftier ways of providing a good diet and decent clothing. Periodically, the supervisor and home management specialist visit the family to check on progress and give further help.

In 1938-39, some 589,046 families, or almost one farm family in ten, took part in the program. Loans averaged $397 and drew interest at 5 per cent. The money was used to purchase things farmers need to make a living—a horse or a mule, a plow, seed, fertilizer, a pressure cooker for canning, a few pigs and chickens.

During 1939 a study of progress of rural rehabilitation families was completed. Records submitted by 232,947 families, including 1,186,302 persons, were studied. These records show many of the families who applied for loans were cultivating acreages too small to support even a subsistence enterprise. They were helped to find additional land or larger farms. The cultivated acreage for the whole group rose from 70 to 131. The 63,000 borrowers who had taken part in the program only one year owned 77,710 work animals at the time they received loans, and 137,710 a year later. Borrowers doubled their number of poultry and hogs, and increased the number of cattle for subsistence living from 2.2 head per family to 3.9 head. To care for their stock, they increased their acreages of feed and forage crops a third. The proportion of written leases climbed from 37 per cent to 85 per cent.

Living standards improved. For all families studied, milk production largely for home consumption rose from 99 to 495 gallons a year, and meat production for home consumption from 85 to 377 pounds. Egg production for home consumption almost quadrupled. Those participating in the program planted gardens to supply their kitchens and the quantity of fruits and vegetables stored increased from 51 to 221 quarts a year per family. The decrease in cash outlay for food, owing to the gardening and canning projects, resulted in larger expenditures for lasting improvements. Net worth per family increased $269—an addition of $62,773,173 to the wealth of their communities.

The collection record on loans was good, considering the destitute condition of the borrowers, except in the drought areas of Kansas, Nebraska, North Dakota, and South Dakota, where collected loan maturities averaged 50 per cent. Despite the fact that none of the borrowers was considered a safe commercial risk, it is expected that fully 80 per cent of the money loaned will be returned to the Federal Treasury.

Using the Surplus.

For some years crop surpluses have persisted—surpluses in the sense that supplies were too large in relation to the effective market. While land use adjustment programs helped to forestall unreasonably large production of some commodities, there has been profusion of food at reasonable prices. Yet millions of Americans lack the purchasing power to buy it in adequate quantities. To help bridge the gap between plenty and want and at the same time rid the market of the surpluses most detrimental to agricultural welfare, several types of public programs emerged.

Through the Federal Surplus Commodities Corporation, the Government purchases products which, if permitted to hang over the market, would depress prices unduly, dislocate market flow and waste food. The Corporation disposed of these products in several ways to about 3,340,000 needy families in 1939.

During the fiscal year 1938-39 almost 2,000,000,000 pounds of foodstuffs were purchased at a cost of $66,500,000. About 40 different commodities were bought and turned over to the states for distribution through relief agencies. About 30,000,000 pounds went into free lunches for some 890,000 school children.

Butter figured most prominently among surplus commodities in 1939; some 122,000,000 pounds were purchased. Among other commodities were 119,000,000 pounds of cabbage, 76,000,000 pounds of dried beans, 9,100,000 boxes of grapefruit, 1,800,000 boxes of oranges, 20,200,000 pounds of raisins, and 800,000 barrels of corn meal.

Food Order Stamp Plan.

Distribution of surplus commodities to needy families up to 1939 was carried on outside the regular channels of trade. During the year the Food Order Stamp Plan was inaugurated. This is a plan for distribution within established trade channels. Tried first in a few cities, the Plan received universal approbation and was extended. It is expected that 100 cities will utilize this method of distribution by July 1940.

The following illustration for a family of four demonstrates how this plan expands consumption and improves the diet of city relief families. Sixteen orange stamps, each worth 25 cents, are issued to each relief family of this size instead of the cash payment of $4 formerly earmarked each week for food. The orange stamps are exchanged at face value for food supplies. Having thus made certain that each family will continue to spend its full former allowance for food, blue stamps are issued at the rate of one blue stamp for each pair of orange stamps. Thus, a family of four can spend for food 16 orange stamps and 8 blue stamps worth a total of $6. This represents a 50 per cent increase in food purchasing power.

Blue stamps may be spent only for surplus commodities designated from time to time by the Secretary of Agriculture. Grocers cash the stamps at local banks. The principal advantages attributed to the Food Order Stamp Plan are: (1) It secures distribution of surplus commodities to needy families without diminishing their regular food purchases; (2) regular channels of trade are utilized; (3) the commodities on the list, among which are butter, eggs, fruits, and vegetables, help to balance the diet; and (4) grocers become better salesmen generally for the surplus farm products.

The Export Market.

Another outlet for surplus commodities is the export market. Since the World War, many factors and forces combined to curtail the export market for agricultural products. It has been pointed out that loss of part of the export market with the consequent backing up of supplies in the domestic market was one of the principal causes of farm distress since 1920. Tariffs were raised throughout the world, countries endeavored to place themselves on self-supporting bases, foreign countries offered bounties to home producers, and newly-settled countries entered the world market. One of the major problems of American agriculture therefore is to regain and hold on to as much of the world trade in farm products as is consistent with the maintenance of American productive resources.

One effort to enlarge exports was the wheat export plan which came into prominence in 1939. Out of 118,000,000 bushels of wheat (including wheat flour) exported in 1938-39, 94,000,000 bushels moved because of Federal assistance. The Federal Surplus Commodities Corporation bought wheat on the market and sold it to exporters at prices which enabled them to compete on a depressed world market. The Division of Markets and Marketing Agreements of the Department of Agriculture paid indemnities directly to exporters. Pecans and some cotton were moved under a similar plan.

A cotton-for-rubber trade agreement was negotiated with England. The United States agreed to give about 600,000 bales of cotton for about 80,000 tons of rubber. The exchange, although slowed down by shipping difficulties brought on by the War, was proceeding satisfactorily by the close of the year. About 100,000 bales of cotton valued at close to $5,000,000 had cleared United States ports.

Crop Insurance for Wheat.

One title of the Agricultural Adjustment Act of 1938 provides for a public program of crop insurance for wheat. The year 1939 was the first crop year for the program. During the seeding year 1938-39, some 395,000 wheat growers applied for crop insurance, and 165,000 applications were accepted. Policies covered about 7,500,000 acres of wheat land in 1,300 counties in 30 states. The program was open to all wheat growers; not only to those whose principal crop was wheat.

Growers who insured their crops were guaranteed a minimum production of 70,000,000 bushels. For this protection they paid the equivalent of 7,200,000 bushels of wheat in premiums. Ninety-nine per cent of the premiums were paid in cash, which was immediately converted into wheat by the Federal Crop Insurance Corporation.

Premiums were computed on an actuarial basis. Rates were determined by yield data for each region, and for each farm insured, for a base period, 1926-35. In the first year, no printed policies were issued. Applications were accepted and premiums paid in one operation handled by county AAA committees.

Because of drought in the principal wheat states, losses for the crop year were severe. Yields were 10 per cent below average for the 30 states represented, and 13½ per cent below average in the five important hard winter wheat states. One participating farmer in four collected indemnities. In the hard winter wheat belt, one farmer in two collected. Premiums received were 7,200,000 bushels, and settlement payments were 9,500,000 bushels approximately. About $1,400,000 of the $20,000,000 capital reserve was expended to make up the difference.

More than twice as many farmers are expected to participate in 1940. By Nov. 20, 1939, 302,000 winter wheat growers had paid the premiums. Participation was expected to reach 400,000.