Agricultural Adjustment Act of 1938

Legislation signed by President Franklin D. Roosevelt on February 16, 1938, that focused on the need for long-term consideration of agricultural production and soil conservation as well as the prevention of potential drought periods.

The Agricultural Adjustment Act (AAA) of 1938 was developed in 1937 as basic price-support legislation to replace the recently discredited AAA of 1933. Title I of the act amended the Soil Conservation and Domestic Allotment Act of 1936, and Title II authorized the secretary of agriculture to argue before the Commerce Commission regarding freight rates on agricultural commodities. The remaining three titles addressed loans and parity payments (government funds provided to farmers that help maintain a stable relationship between the level of farm prices and the general price level), cotton pool participation, and crop insurance.

The new act expanded the soil conservation features of the 1936 act with provisions for water conservation and erosion 4 Agricultural and Mechanical Collegescontrol in semiarid regions. The 1938 act sought to prevent the displacement of tenants and sharecroppers. Title III of the 1938 act redefined parity prices, creating a more precise formulation that included total interest payments and farm estate taxes as well as freight charges and shifts in prices of commodities. Congress also implemented changes in the method of figuring allotments for individual farmers to limit these to commercial growing areas.

This act provided the secretary of agriculture with three measures for controlling major crop surpluses: (1) Payments could be shifted from “soil-depleting” to “soil-conserving” crops by farming operations termed “cooperators” (those that limited production to established quotas); (2) the secretary could announce marketing quotas; or (3) the secretary could provide nonrecourse loans that enabled farmers and growers to hold market crops until the farmer could sell them at adequate prices. Congress authorized the secretary to continue parity payments after receiving congressional allocation of funds. The federal government sent these payments to cooperating producers to compensate them for the difference between market prices and established parity prices.

The AAA of 1938 included several other sections added as amendments to ensure that the legislation passed Congress. For example, Section 202 provided for four regional laboratories to conduct scientific research into new commercial uses of farm products.

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