The Federal Farm Board (FFB) was established in June 1929 and intended to provide direct government assistance for agriculture. The FFB's $500 million budget was larger than any previous program authorized for a nondefense expenditure. Many Americans were still farmers, many of whom had been hard hit economically since the end of World War I. FFB supporters sought to strengthen farmer cooperatives and develop price stabilization systems. Years of populist discontent with government currency decisions, northeastern banking dominance, and poor credit terms for farmers inspired federal leaders to take an active role in agricultural affairs.
The timing of the FFB was terrible. The Smoot-Hawley Tariff of June 1930 carried import duties to highs unseen since 1828 (known as the “Tariff of Abominations”), causing severe damage to exports. Competitive traders responded in kind and created burdensome tariffs on goods that U.S. firms planned to export or sought other trading partners. In the year after Smoot-Hawley was enacted, U.S. foreign trade decreased more than 50 percent. In response to the burgeoning crisis the FFB stepped up loans to farmers and purchases of farm supplies, hoping to protect American goods for future exports when market timing was ideal. Federal credit banks were liberal with loans to agricultural cooperatives so farmers could time their crop releases.
The Grain Stabilization Corporation was established and began purchasing wheat. Initially, U.S. prices were boosted and FFB officials calculated an upcoming world wheat shortage would cause importing nations to rely heavily on U.S. sources. Canadian and Argentinean competitors grew their export businesses significantly during this period; buyers did not wait for the United States to make the surplus available.
Corporations set up under the Farm Board lost $345 million in futile efforts to buy up surpluses. Larger inventories caused prices to fall further. In mid-1931 they ceased buying as prices continued to slide. In 1919 wheat fetched $2.16 per bushel; in 1932 it was 38 cents. Cotton dropped from 41.75 cents per pound in 1919 to preharvest 1932 rates of 4.6 cents. FFB officials received severe criticism. After the FFB asked southern farmers to destroy every third row of cotton, some southern politicians recommended that farmers instead destroy every third member of the FFB.
In response, Hoover turned to populist rhetoric, accusing speculators of depriving farmers of income and undermining public confidence by manipulating the market. Other critics called short-sellers “hyenas” and “crocodiles.” Chicago Board of Trade officials countered that high yields, market management by the FFB, and reduced consumption were all to blame for price drops. Reaction to the economic catastrophe was severe. In Nebraska, farmers burned corn to keep warm. In Iowa, the former head of the state's Farmers’ Union formed the militant Farmers’ Holiday Association, which in 1932 called a farmers’ strike and forcibly blocked deliveries of produce. Dairy producers dumped milk in ditches. Withholding products from the market was a primary form of protest. One popular slogan read, “Lets call a Farmer's Holiday, a Holiday let's hold. We'll eat our wheat and ham and eggs, and let them eat their gold.”
By 1932 gross farm income fell to $5.3 billion, a drop of nearly $12 billion since 1919. The value of U.S. farms dropped by more than $35 billion. Between 1930 and 1934 nearly 1 million farms passed from their owners to mortgage holders.
Agriculture continued to be viewed differently than other sectors of the economy—one worthy of subsidies. Congress passed the Agricultural Adjustment Act in May 1933 with the hopes of reviving farming interests. The measure paid farmers subsidies not to plant part of their land and to destroy specific livestock (hogs, for example) with the hope of managing prices by limiting quantity. Creating artificial scarcity to drive up prices was not popular with many farmers and disturbing for some participants, but the action was a direct outgrowth of a poor economy and a desperate attempt to manage output in the face of reduced demand. Within four years of inception the FFB was disbanded.
See also: New Deal ; Subtreasury Plan
Davis, Joseph S. “The Program of the Federal Farm Board,” American Economic Review 21 (1): 104–113.
Ferguson, J. David, and Thomas E. Hall. The Great Depression: An International Disaster of Perverse Economic Policies. Ann Arbor: University of Michigan Press, 1998.
Folsom, Burton, Jr. New Deal or Raw Deal? New York: Simon and Schuster, 2008.
Heflebower, R. B. “Price Stabilization under the Farm Board,” Journal of Farm Economics 12 (4): 595–610.
Macdonald, Dwight. Henry Wallace: The Man and the Myth. New York: Vanguard Press, 1948.
Rothbard, Murray. America's Great Depression. 5th ed. Auburn, AL: Ludwig Von Mises Institute, 2000.
Time Magazine, “National Affairs: Hoover on Shorts,” July 20, 1931.