During the Great Depression, farm foreclosures became a disturbingly routine feature of rural life. Between 1929 and 1933, a third of all American farmers lost their farms in the worst disaster to hit American agriculture. Hundreds of thousands of farm-owning families had their hard-earned land seized from under them. The record number of foreclosures during the late 1920s and 1930s disillusioned farmers and contributed to an unprecedented degree of federal intervention to improve the farm economy.
What contributed to the large number of foreclosures was a farm debt problem that began during the agricultural depression of the 1920s and grew more severe by 1929. Farmers were knee-deep in debt, with about two-fifths of all farmers holding a mortgage and nearly three-fourths requiring credit to produce a crop from year to year. With crop prices declining, farmers were not able to pay off their mortgage loans. For instance, farm prices for cash crops, such as wheat, cotton, tobacco, and corn, fell steadily beginning in 1920. The price of corn dropped 78 percent, from 1.85 per bushel in June 1920 to 41 cents per bushel in December 1921. Prices rebounded somewhat during the mid-1920s, but plunged once again after the stock market crash in 1929. Between 1929 and 1932, crop and livestock prices plummeted by almost 75 percent. The impact on farm earnings was staggering. Farm income declined by 60 percent, from $13.8 billion to $6.5 billion, and the cash proceeds from marketing farm products in 1932 were about one-third lower than they had been in 1919.
As farmers defaulted on loans and made fewer deposits, many small country banks were forced to go out of business. In 1930 and 1931, more than 3,600 banks failed. Those banks, life insurance companies, and farm mortgage lenders that managed to survive had little choice but to drastically reduce the amount of credit they made available to farmers.
Consequently, farm foreclosures became more prevalent throughout the 1920s, and grew to sobering proportions by the 1930s. While the average foreclosure rate between 1913 and 1920 was 3.2 per 1,000 farms, it jumped to 17.4 per 1,000 farms in 1926, and by 1933 had reached 38.8 per 1,000 farms. During 1933, at the height of the Great Depression, more than 200,000 farms underwent foreclosure. Foreclosure rates were higher in the Great Plains states and some southern states than elsewhere. As Lee J. Alston argues in his article "Farm Foreclosures in the United States During the Interwar Period" (1983), farm distress also was more severe in rural areas that were far from urban areas because farm families had fewer opportunities to supplement their earnings with off-farm employment.
The devastating scale of foreclosures prompted many farmers to challenge the workings of capitalism. Throughout the country, farmers vented their anger at public auctions that banks held to sell foreclosed property. In a phenomenon that came to be known as "penny auctions," farmers attending the auctions placed ridiculously low bids on the available land. Anyone who attempted to significantly outbid these farmers faced jeers from the crowd and often risked violent reprisals. In many cases, disgruntled farmers managed to block foreclosure sales.
As farmers decried the increase in farm foreclosures and bank failures, the Herbert Hoover administration attempted to tackle the farm debt problem by establishing for the first time a government bureaucracy dedicated to helping farmers maintain prices. With a budget of $500 million, the Federal Farm Board was charged with making loans to farm marketing cooperatives and establishing corporations that would raise farm prices by buying surpluses. However, Hoover did not commit enough money to the Farm Board to make it work.
It was left to the Franklin Roosevelt administration to address the farm debt crisis through its New Deal programs. The Agricultural Adjustment Act of 1933 grappled with the underlying problem of falling farm prices through its crop production control program. The Farm Credit Administration provided much-needed mortgage relief to farmers. The Federal Farm Bankruptcy Act of 1934, also known as the Frazier-Lemke Farm Bankruptcy Act, enabled some dispossessed farmers to regain their land even after foreclosure on their mortgages. However, the Supreme Court ruled this law unconstitutional in 1935. A number of states passed laws that attacked farm foreclosures directly. Between 1933 and 1935, twenty-five states passed farm foreclosure moratorium laws that temporarily prevented banks and other creditors from foreclosing on farmers who could not afford to make their mortgage payments. Despite these measures, there was no significant decline in the average rate of farm foreclosures until after 1940.
Alston, Lee J. "Farm Foreclosures in the United States During the Interwar Period." Journal of Economic History 43 (1983): 885–903.
Hamilton, David E. From New Day to New Deal: American Farm Policy from Hoover to Roosevelt, 1928–1933. 1991.
Perkins, Van L. Crisis in Agriculture: The Agricultural Adjustment Administration and the New Deal, 1933. 1969.
Saloutos, Theodore, and John D. Hicks. Agricultural Discontent in the Middle West, 1900–1939. 1951.
Adrienne M. Petty