Farming, Ranching, Industrial Agriculture

Farming Becomes a Business

Agriculture in the Mississippi Valley region underwent major changes after the Civil War. Farmers began thinking of farming as a business with a cash crop of wheat, corn, or cotton instead of a self-sufficient way of life. A farm began to be viewed as an outdoor factory and growing crops as production. Farmers made use of credit and considered such factors as transportation and marketing, just like other businesses. Farming also became increasingly mechanized, which drew farmers into a cycle of purchasing ever more expensive farm machinery. As a result, agricultural production increased remarkably, and America became the world’s breadbasket and top meat producer.

In the late 1800s, rural dwellers started to purchase household goods, tools, and clothing rather than fashioning these items themselves. Mail-order catalogs filled the need for manufactured items in areas where travel to a large city to shop was not practical. Montgomery Ward produced the first such catalog, followed closely by Sears & Roebuck.

Huge “bonanza” wheat farms in Minnesota and North Dakota as well as large, irrigated California fruit and vegetable farms foreshadowed the gargantuan holdings of agribusinesses in the twentieth century. Large corporate farms, using economies of scale, could purchase seed, equipment, and supplies at discounted prices. Because of the size of their businesses, they could negotiate for better rates from the railroads for transportation of their produce. These factors contributed to the profitability of the bonanza farm. Development of the railroad refrigerator car allowed fresh produce from every area of the country to be shipped to markets in the large urban centers.

In the south, large-scale commercial agriculture changed the rural way of life. Entrepreneurial capitalists of the New South extended the business of agriculture beyond the old plantations and into regions of small farms. There was an acute shortage of capital in the south, which posed major obstacles to rebuilding the economy. Without hard currency, Southerners had to operate on credit. Wealthy individuals who extended credit for profit were called credit merchants. Many acquired large holdings of land in the post-Reconstruction south at the expense of small farmers.

The "crop lien" system was one method of the commercialization of southern agriculture. A planter or merchant extended a line of credit at high interest rates to a poor farmer in exchange for a lien on the farmer’s crop. The farmer was thus pressed by circumstances into making a large planting of a single cash crop—usually cotton. Many farmers cultivating the same product caused cash crop prices to drop. Some farmers were able to use the crop lien form of credit to bootstrap themselves into independence and pay for their own seed and supplies in the following years. For other farmers, however, the crop lien proved to be a debt trap from which they could never climb out. Eventually, many lost their farms.

The planter or merchant who extended the credit was often seen as a villain. Their risk was high, however. If the farmer’s crop failed, there was nothing to pay the debt off with and the seed and supplies were already gone. The high interest the credit merchants charged partially reflected the risk they were taking.

As a direct result of the crop lien system, many poor white and black farmers became landless tenant farmers or sharecroppers. Sharecroppers worked the land using the owner’s machinery and seed. They generally got supplies and half the crop for their effort. Tenant farmers worked the land but used their own equipment and draft animals and bought their own seed. They usually earned three-fourths of the cash crop and two-thirds of the subsistence crop. The owner of the land received the remainder as rent.

This system encouraged taking as much as possible from the land on a short-term basis and making no provision for the long term. The economics favored using up the nutrients in the soil without replacing them, and there was no incentive to prevent erosion from wind or water. Tenants and landlords were constantly suspicious that they were being cheated and used by the other. By the 1870s, 20 percent of southern farmers were tenants, most of whom were freed slaves. By 1910, 50 percent of southern farmers were tenants, many newly landless whites. This situation resulted in a massive migration of Americans out of the southern Cotton Belt.

Farming lost its luster in other areas of the country, as well. The labor and equipment required for a cash crop operation were fixed costs that often ran high. Hay balers and combines were expensive, but farmers needed them to remain competitive. Farmers overproduced for the market in an effort to be as profitable as possible, but this drove prices down.

With improved ocean and rail shipping, other countries such as Argentina, Australia, Russia, and Canada began to sell their agricultural products in European markets that had formerly been the exclusive province of American farmers. A smaller market share further depressed farm prices for Americans. Though farmers’ products were unprotected in a competitive world market, import tariffs protected U.S. manufacturers from competition with foreign manufacturers, keeping the price of manufactured goods high. Farmers were caught in a squeeze between low prices for their products and high prices for the manufactured goods they needed.

Agricultural-related trusts, such as the barbed wire trust, fertilizer trust, harvester trust, and railroad trust, fixed high prices that farmers had no choice except to pay. Farmers’ land was often assessed at a high rate by cash-strapped local governments making property taxes unreasonably heavy. Farmers were also hurt by the domestic marketing system, which had developed using multiple layers of middlemen, all taking a share of the profit at the expense of the farmers. Suddenly it was not enough to know how to raise a crop. Farmers also had to be keen businessmen to stay afloat, and many gave up or lost their land and moved to the city to take industrial jobs.

Successful farmers could produce near miraculous harvests with the new mechanized farm equipment, but with low prices they were sometimes no better off for all their effort. Natural disasters such as bitterly cold winters, drought, storms, insects, crop and livestock diseases, erosion, and depletion of the soil all took their toll. The terrible heat and drought of the late 1880s proved too much even for the bonanza farms. Many farmers of the plains were forced to give up, and the entire plains region became economically depressed in the 1890s. Farmers of the east were generally less affected by adversity than their counterparts in the west and south because eastern farmers had much lower transportation costs to the great urban centers and had generally been established longer and had little, if any, debt.

The single cash crop now came to be seen as a liability, and farmers began to opt instead for an income from diverse farming sources, such as wheat, sorghum, corn, oats, cattle, and hogs. If one failed, there might still be an income from the others. In spite of hardships, farmers of the plains as a group continued to be successful, particularly with grains.

The economy of post-Civil War America grew at an astonishing pace, providing most Americans with a higher standard of living. The urban middle class became comfortable, even fashionable, and for the first time many Americans had time and enough money to afford leisure activities. Cities provided social and cultural opportunities on a large scale.

By contrast, farming, especially on the plains, still meant hard work, long hours, loneliness, and isolation. Farm life was particularly arduous for women. A farm wife cared for her children, did the housework, prepared all meals on a wood stove (even baking the family’s bread), sewed most of the family’s clothes, did laundry on a scrub board with lye soap she made herself, raised a vegetable garden and canned the excess for consumption in the winter, milked cows, churned butter, fed livestock, gathered eggs, killed and plucked chickens, and did whatever else needed to be done. Social opportunities were few, leisure activities were of the homespun variety, and following fashion was out of the question.

Living on a farm was no longer idealized as a way of life. Though the number of farming families nearly doubled by the turn of the century, the urban population quadrupled and manufacturing far outstripped farming in producing wealth for the nation. For these reasons, farmers’ status and relative influence in America declined. Farmers were underrepresented politically, and new laws often favored business interests at the expense of the farmers. Though they represented half of the population in 1890, farmers were independent and individualistic by nature and found it difficult to organize effectively. Angry farmers often embraced radical ideas about how they could obtain fairer treatment. Slowly they realized that they must band together with a common agenda in order to be effective in gaining recognition of their needs.

One particularly galling problem to farmers was that deflation from an insufficient supply of gold currency meant they had to pay back loans and mortgages with dollars that were more valuable than when they borrowed the money. This had the effect of compounding interest on their loans. The Greenback Movement of 1868 sought relief from deflation by increasing the supply of paper currency. Printing negotiable paper dollars would relieve the demand for gold coins.

The National Grange of the Patrons of Husbandry also became a serious political force in grain-growing states. Founded in 1867 as a social organization, the Grange established cooperatively owned stores, grain elevators, and warehouses in an effort to economize member’s expenses. Grangers also experimented with cooperative marketing of farm products and cooperative purchasing of seed, fertilizer, machinery, and other commodities. By mid-1879, there were Granges in 14 states, mostly in the west and south, and Grange membership approached one million.

Similar to the Grange, the Farmers’ Alliance of the late 1870s in Texas organized cooperatives to combat high freight costs. The Farmers’ Alliance evolved into the nationwide People’s Party or Populists who demanded a bimetal (gold and silver) currency base in order to increase the amount of money in circulation and prevent deflation. The Populists attempted to unite rural farmers and urban labor into a single political party to counter the enormous influence of business on government and the making of laws and regulations.

Farmers elected Grange candidates to state legislatures, which began to enact a patchwork of laws, mostly aimed at unfair railroad and warehousing practices. Grange-dominated legislatures passed laws that established what farmers considered reasonable rates and that outlawed business practices farmers felt were unjust. Before the state-established shipping rates, railroads had charged whatever they could get to transport goods. Different localities could be charged radically different rates for shipping the same distance. If only one railroad served an area, it could elicit a much higher rate than in areas where the railroad faced competition from another line. Customers had no choice but to pay what was asked. Railroads would cut manufacturers and large shippers rock-bottom deals due to the volume of their freight business. They would then attempt to make up their profit by charging smaller, individual shippers, such as farmers, much higher rates.

The railroads objected to infringement on their prerogative to set rates, claiming that it was their right to charge whatever they wished. The Supreme Court case of Munn v. Illinois (1877) upheld the states’ rights to determine maximum freight and warehouse charges because railroads and warehouses served a public interest beyond their own private interest of earning a profit.

In Wabash, St. Louis & Pacific Railway Company v. Illinois or the Wabash Case (1886), however, the Supreme Court denied the states’ rights to regulate commerce that crossed state lines, since that right was reserved by the Constitution to the federal government. In response to the plight of farmers as well as to the widespread practice among the railroads of giving kickbacks and preferential treatment to certain customers, the U.S. Congress in 1887 passed the Interstate Commerce Act and created the Interstate Commerce Commission. Subsequently, the railroads were required to publish their rates and were not allowed to charge a different rate without giving public notice.

Initially, the Interstate Commerce Act was not very effective, but it established that Congress could and would regulate businesses engaged in interstate trade. As time passed, laws were crafted that better addressed the extremely complex dealings of the railroads.