While one can look to several factors that caused the Great Depression, one factor was overproduction of farm products. During the World War I, farmers expanded food production to meet the demands of the nations at war. Following the war, production was not immediately curtailed. Farmers were caught in a boom-or-bust cycle in the postwar decade. While the countries of Europe and the United States were at war, farmers raked in money. But peace brought an end of high farm prices and to massive purchases by other nations, as foreign production reentered the stream of world commerce. Many farmers invested their wartime profits in more land and more machinery with the thought of growing even more crops, but such plans did more harm than good. In Minnesota, for example, the season-average price per bushel of corn rose from fifty-nine cents in 1914 to $1.30 in 1919. Wheat prices jumped from $1.05 per bushel to $2.34. The average price of hogs increased from $7.40 to $16.70 per hundred pounds, and the price of milk rose from $1.50 to $2.95 per hundred pounds. After the end of the war, relief efforts kept the demand for U.S. agricultural products high. Gross exports of all grains in 1918–1919 totaled 525,461,560 bushels. During that period, the U.S. shipped more than 2.9 billion pounds of pork, 1.1 billion pounds of beef, and nearly 8.8 million pounds of dairy products to allied countries, various relief programs, and American Expeditionary Forces overseas.

After the European countries began producing more, American farmers were producing more than the American people could use and the price of farm goods dropped so low that many farmers couldn’t make enough money to pay off their huge debts. Corn, which had sold for 70 cents a bushel in the early 1920s, dropped to 10 cents a bushel. Hogs, which used to bring in nine cents, only brought in three cents per pound. Some farmers found it was cheaper to burn their corn for fuel than to haul it to market. If they couldn’t sell enough to make mortgage payments, some farmers began to sell off their belongings. New machinery, that had hardly been used, had to be auctioned off before it was even paid for. The cycle continued until many farmers had to give up the entire farm. The banks and tax collectors wanted their money, but farmers did not have any to give them. In 1924 alone more than 2,500 farms were lost in mortgage foreclosure actions. America’s ability to produce farm goods had clearly outrun its capacity to consume it. 

As surpluses mounted, the federal government promoted lowering production. It also created programs designed to help stabilize prices. The goal was to achieve parity – to bring prices back to prewar levels and equalize the prices farmers received with the prices they paid for goods. The passage of the Capper-Volstead Act on February 18, 1922 legalized the sale of farm commodities through farmer-owned cooperatives. Co-ops cut out the middlemen who often underpaid farmers for their products. Congress passed the Agricultural Appropriations Act later that year, creating the U.S. Bureau of Agricultural Economics for economic research.

Foreign trade restrictions, such as the Fordney–McCumber Tariff of 1922 and the Hawley-Smoot Tariff  of 1930, imposed high taxes on imports in an attempt to protect American farms and industry. International trading partners reacted by increasing import fees on American goods. U.S. export of farm products declined, surpluses grew, and prices continued to drop. With less demand for land, real estate values plunged to an average of $35 per acre by the late 1930s. Farmers struggled to repay loans for land that had lost its value. Rising property taxes, freight rates, and labor costs added to the financial hardships facing many farmers.

When Franklin D. Roosevelt was elected President in 1932, he moved decisively to deal with the farm crisis and a radical new approach to farm recovery was embraced when Congress established the Agricultural Adjustment Administration. Through artificial scarcity this agency was to establish parity prices for basic commodities. Parity was the price set for a product that gave it the same real value, in purchasing power, that it had enjoyed during the prosperous period from 1909 to 1914. The Agricultural Adjustment Administration would eliminate price-depressing surpluses by paying farmers to reduce their crop acreage. Unfortunately the program did not work as envisioned. New legislation was passed in 1936 with the Soil Conservation and Domestic Allotment Act. These programs paid subsidies to farmers if they planted soil-conserving crops, like soybeans, or let their land lie fallow. The second Agricultural Adjustment Act of 1938 permitted parity payments if farmers observed acreage restrictions on commodities like cotton and wheat. Other provisions of the second Agricultural Adjustment Act of 1938 were designed to give farmers not only a fairer price but a substantial share of the national income. Both goals were partially achieved as the nation slowly recovered from the Great Depression.