TRACTOR TRIVIA and other interesting stuff 2/29/2024

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What caused the agricultural depression during the Roaring Twenties?

 

Numerous posts I’ve done have made mention of the agricultural depression that followed the end of World War One and its negative impact on farm machinery and tractor manufacturers. I have studied the history of that economic downturn and found that it was a simple matter of supply and demand coupled with some irrational exuberance.

Midwestern grain farmers did well during the first decade and a half of the twentieth century. The Homestead Act provided availability of vast expanses of fertile land and the westward expansion of the railroads provided an affordable means of shipping harvests to eastern metropolitan areas. European immigrants with farming experience and skilled craftsmen alike migrated to the Midwest. Many communities sprung up along railroad lines with large Co-Op grain mills and elevator/storage silos to help farmers send their crops to eastern cities and foreign markets.

The Industrial Age was providing improved agricultural equipment and agricultural research had brought about greater crop yields. Also, hardy winter wheat development meant that crops could be harvested and shipped in the summer when weather was more favorable. The wealth of a farmer was only limited by their ability to plant and harvest more land, demand and prices were rising and times were good.

With the outbreak of World War One in 1914 the demand for grain went up dramatically because most European farm lands had become battlefields. The European breadbasket countries were now at war with Great Britain, France, Belgium and Italy cutting off their normal source of grains. The demand was increased as Allied nations brought in troops and horses to aid Western European countries in the war effort. Prices for corn went up from $0.99 per 100 pounds in 1913 to $ 2.58 in 1919. Wheat prices shot up from $ 0.90 a bushel to $ 2.45 in the same timeframe. Demand was exceeding supply and farmers were buying more land and equipment to produce more and more crops believing that the increased grain prices would go on forever. Even after the Armistice ending World War One was signed in November of 1918 the worldwide demand was strong because recovery in Europe took time. The net income of U.S. farmers, after paying for supplies, rent, taxes, and interest on their loans and mortgages, increased 120 percent from 1914 to 1919 (the net income of the non-farming population increased 75 percent during those years).

The booming farm economy supported the manufacture and sale of agricultural equipment. Small manufacturers were turning out agricultural equipment and skilled workers were making improvements to existing devices and inventing new ones to aid the farmer.

By 1920, European agriculture was returning to normal, pre-war trade with former enemies had been re-established. European nations had borrowed so much money from the U.S. that they no longer had money to buy food from U.S. farmers.  This led to a collapse in demand and a rapid decline in farm prices. Corn dropped from a 1918 high of $2.58 per100 pounds to $0.79 per100 pounds in 1922, wheat went from $ 2,45 a bushel to about $ 1.00 at the same time.

Many farmers had borrowed heavily to buy more land and equipment during the war years.  Almost overnight, they were crushed by low prices for their production and hefty fixed costs for equipment payments, taxes and interest on loans and mortgages.

Prices for grain rebounded somewhat after 1923 but burdened with heavy debt loads farmers weren’t buying any new equipment. The value of farm crops dropped relentlessly beginning in 1925 until 1932. Wheat prices were $ 0.49 per bushel and corn dropped to $0.44 per 100lbs in those years. Black Friday, October 1929, may have begun the Great Depression for the rest of the economy but agriculture in the midwest had already been suffering for ten years prior to the depression.

War is an undesirable way to end an economic catastrophe but as World War Two began in Europe the demand for U.S. farm products increased and prices rebounded. 

Wheat prices rose from about $0.70 per bushel in 1940 to over $1.90 per bushel by the end of 1946. American grain helped feed starving nations and became a significant component of foreign aid after World War II.

The Great Depression began 10 years earlier for midwestern grain farmers and farm equipment manufacturers than it did for the rest of the nation.  Those who were, relatively free of debt, and good at tightening their belts were able to make it through the bad times between 1921 and 1941.  Late arrivers, those who expanded their farms at inflated, wartime prices, and those who overextended their debts and mortgages, struggled and sometimes lost everything.