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Agricultural Marketing Act

In the U.S., the first step for agricultural marketing was initiated by the Agricultural Marketing Act of 1929.  The Act was introduced as a measure to stop the downward twisting of crop prices.  The Act sought to help farmers in buying, selling, and storing agricultural surpluses.  Farm organizations were generously provided with financial assistance.  The Act introduced several federal programs to provide financial guarantees to farmers.  Programs were also started to provide price stability for crops.  The Act introduced schemes for farmers to organize themselves and their markets to survive oversupply and falling crop prices.  The Act was the first step for all the later price support subsidy programs.

The most important contribution of the Act was the creation of a federal farm board.  The board consists of eight members.  The board created several agricultural cooperatives.   The agricultural cooperatives were created to stabilize farm prices.  In order to reduce commodity surplus, the cooperatives must get voluntary agreement from farmers.  The board adopted two methods to limit the falling of a crop price.  The methods adopted were:

  • reducing land under cultivation;
  • purchasing large amounts of commodities; and
  • holding and storing the products from sale until market prices rose.

The board appropriated financial funds to loan the cooperatives.  Additionally, the federal farm board created board’s marketing cooperatives.  Marketing cooperatives were created to buy cotton, grains, and wool.  The marketing cooperatives provided arrangements for storing the agricultural products.

However, the board failed to stop the steady decline in crop prices.  The reasons for failure were:

  • The board was not able to prevent overproduction by the majority of farmers; and
  • The Act provided for voluntary crop limitation programs.

In order to rectify the defects in the Agricultural Marketing Act,1929, several amendments were brought in 1933 and 1935.  The powers of the board were transferred to the Governor of the Farm Credit Administration[i].  The Farm Credit Administration is an independent agency in the executive branch of the government.  The agency is mainly composed of the Federal Farm Credit Board and the Governor of the Farm Credit Administration.  The agency includes other personnel employed in carrying out the functions, powers, and duties vested in the Farm Credit Administration.

To place the agricultural industry with other industries on equal footing, the Act encouraged effective merchandising of agricultural commodities in interstate and foreign commerce.  The Act aimed to protect, control, and stabilize the currents of interstate and foreign commerce in the marketing of agricultural commodities and agricultural food products[ii].  The agency functions by:

  • minimizing speculation;
  • preventing inefficient and wasteful methods of distribution;
  • encouraging the organization of producers into effective associations for greater unity of effort in marketing; and
  • promoting the establishment and financing of a farm marketing system.

Association and corporations are working under their own control.  The farm marketing system comprises of a producer-owned and producer-controlled cooperative association and other agencies.  The agency prevents and controls surpluses in agricultural commodities.  The agency works by orderly production and distribution.

Moreover, the administration must maintain a revolving fund.  All funds derived from the sale, lease, operation, or other disposition of any property by the US under the Act must be made part of the revolving fund[iii].   Interest rates cannot be made in excess of the rates set forth in notes or other obligations taken by the Federal Farm Board or the Farm Credit Administration for loans made from the revolving fund.  Moreover, the amount of any interest collected in excess of the rates set forth or contracted for must be refunded out of the revolving fund.  Additionally, the excess interest can be credited to the borrower’s indebtedness.

A cooperative association can apply to the administration for a loan from the revolving fund.  The loan is generally given for merchandising of agricultural products and for the construction of financial facilities[iv].

The administration functions in cooperation with other executive branches of the government.  The administration must also cooperate with all states and territories.

[i] 12 USCS § 2241.

[ii] 12 USCS § 1141.

[iii] 12 USCS § 1141(d).

[iv] 12 USCS § 1141(e).

Inside Agricultural Marketing Act