Great Depression – Farmers

These days, not much is taught about what it was like during the Great Depression. The American Farmer was hit hard during those years and forever changed the landscape for family-owned farms. Did you ever wonder how so many of the small farms in America became owned by big businesses? The Great Depression years were the beginning of that transfer. First I will share the story of a farmer named Ole Swanson and his path from owner-operator to renter of his family farm. Then I will provide more general information about the growth of farming in the mid-west and what came after regarding farm ownership.

By 1912, Ole, then 35 years old and a renter had accumulated some $2,000 in cash, two teams of horses, a reasonable supply of implements, a few brood sows, and some cattle. He decided to buy his deceased father’s farm of 160 acres in Southern Minnesota for $20,000. He paid $2,000 in cash and gave another $8,000 second mortgage to the estate and a $10,000 first mortgage to an insurance company. Between 1912-1920, because of exceptional thrift and competence, Ole was able to pay off the entire second mortgage of $8,000, besides improving his barns, adding more cattle to his herd, increasing his equipment, building a porch, to his home, and making other improvements, as well as buying furniture, rugs, and books, and giving his children an adequate education. Between 1920-1928 Ole found that his expenses were increasing. He had to pay more for labor and goods; however, because of the drop in agricultural prices, his income was constantly falling. In those years, he was unable to amortize his remaining $10,000 mortgage and he found his standard of living was rapidly declining. By 1925 his net income for his labor had fallen to less than $400 annually. His 18-year-old daughter, who had become employed in town as a typist, with no experience, and without invested capital, was earning $15 per week, or nearly $800 per year, almost twice what Ole was earning for his labor during that period. In 1929 Ole was unable to pay the interest of $600 and taxes of $300 and he was compelled to give the insurance company a chattel mortgage for the interest debt. Then in 1930, he was compelled to give a larger chattel mortgage. In 1931 his gross income was insufficient to meet either taxes or interest and the insurance company foreclosed the mortgage in 1932.

At the age of 55, Ole was again a renter on his father’s farm – the farm that he had been born and which he had labored for a quarter of a century; having lost his entire equity of $10,000, he was left to carry a burdensome chattel mortgage. With a mortgage of $10,000 on a 160-acre farm – the farmer must pay $3.60 interest per acre plus taxes of $1.90 per acre or $5.50 per acre. With oats selling at 10 cents a bushel times the forty bushels he may be able to raise per acre will provide less than his overhead. He still has the cost of twine, tool repair, labor, seed, and interest on the equity he has on the farm. Ole, now a renter estimated his gross income at the price levels in 1932 would be about $800 for the year. As the owner paying interest and taxes would be $900, but as a renter, he would pay one-third of his sales or about $265. From the insurance company (now the land owner) side, they will receive $265 in rent payments, collect no interest, and pay about $300 in taxes. The new owners have no previous labor nor personal attachment to the land; therefore, no improvements will be made to the farm or maintenance to the buildings.  Many small farmers found themselves in this same situation, moving from owners to renters of the family farms.

During this same period, there was a large number of people moving to the mid-west (corn-belt) to start their own small farms. Organized before the Civil War, its early citizenry was purely American pioneer stock which withstood the attacks of Indians and the vicissitudes of border existence. A large group of Irish immigrants and a larger group of Scandinavians also arrived. In the early days of the century Iowa, along with the rest of the Middle West, enjoyed a gradual, conservative increase in the values of farm products and farm real estate. Men who had homesteaded their farms from the government, paying $2.50 or $3.00 per acre, saw the price of land gradually increase to around $100 per acre, thereby building up comfortable fortunes. Early investors at $7-$15 per acre profited by that same increase. This increase in values was the result of pioneer efforts in the building and improvement of those farms and of the States in which the efforts were put forth. During 1919-1920, farm prices shot sky-high almost overnight. Bankers, lawyers, doctors, ministers, and town barbers would leave their offices and clients to drive around looking to buy options and contracts on farms where they could find them. They would pay a few hundred dollars down and expect to sell the rights before the following March brought settlement day. Prices skyrocketed from $100 to $250 and $400 per acre without regard for the producing power of the land. During this period insurance companies were bidding against each other for the privilege of making loans on Iowa farms at $90-$100 or $150 per acre. Prices of products were soaring, and everyone was on the high road to comfort, wealth, and luxury. Second, third, and fourth mortgages were considered just as good as government bonds. Money was easy and every bank was ready and anxious to loan money to anyone on the possibility that he would make enough in these trades to repay the loans almost before the day was over. Those payments were paid on March 1, 1920, but the outlook turned sour after that.

The next decade was marked by a gradual decrease in the price of farm commodities, a shrinkage in farm values, and increasing attempts by the note holders to collect second, third, and fourth mortgages that were taken out during boom times. During the high-growth periods, towns had grown, new roads were created and paved, and schools and other new facilities were built – all creating a greater need for taxes, both local and state. Holders of the primary mortgages were not quick to foreclose on the farms but the pressure was building. During 1931-1932 the tidal wave of foreclosure actions hit. Deficiency judgments and the resultant receiverships were the clubs they used to make the honest but indigent farm owners yield immediate passion for the farms.

Men who had sunk every dollar they possessed in the purchase, upkeep and improvement of their home places were turned out with small amounts of personal property as their only assets. In some areas, as much as 25% of the farms with mortgages were foreclosed and sold at auctions and insurance companies and outside corporations became absentee owners. Large numbers of farms held by these outside interests are administered by men who do not have a sympathetic appreciation of local conditions. The farms were farmed by renters that paid the company a portion of the gross sales of the product regardless of operating expenses. The Share-cropper (renter) might be required to pay the entire price of the goods if the quantity and market price fall below what was expected. The Share-cropper may not have enough money to buy seeds and plant the next season; however, cannot use the land for collateral and may have to move away. There are many stories over the following years about difficult times and events that lead to the vast ownerships of a large number of smaller farms by large corporations that would later be farmed with large expensive equipment and temporary labor. These corporations now control the major markets for farm products, including beef, pork, and chicken.