AGRICULTURAL CREDIT IN THE UNITED STATES 937 



It may be broadly stated that previous to the last quarter of 

 the nineteenth century American farmers felt little need of credit. 

 They had been given their land by the Government or had bought 

 it at comparatively low prices. Since agriculture was extensive, 

 expenditures for improvement and equipment were inconsiderable. 

 The virgin soil needed no fertilization, and credit was seldom 

 required except for family supplies during the crop-growing period. 



The western movement, which began to assume large propor- 

 tions about the middle of the nineteenth century, resulted in the 

 opening of vast areas of fertile land adapted to grain growing 

 and of free grazing land on which live stock could be raised at 

 low cost. This resulted in a tremendous surplus of agricultural 

 products, which, owing to the development of railroad and ocean 

 transportation, was thrown on the markets of the world, bringing 

 prosperity to the farmers of America and ruin to those of Europe. 



Partly as a result of this overwhelming flood of production 

 and partly on account of the speculation and inflation which fol- 

 lowed the Civil War, a great increase in land values took place. 

 This gave farmers a broader basis for borrowing, and they took 

 advantage of it to make improvements and to add more land to 

 their farms. Tempted by the high rates of interest and deceived 

 by the reported endless wealth of the new West, eastern and Euro- 

 pean capitalists made loans altogether too freely and often on 

 the security of land practically worthless or located in regions of 

 uncertain crops. The upward movement culminated in the early 

 nineties ; grain farming reached its climax, and overproduction 

 brought the inevitable fall of prices and of land values. 



Prices of farm products reached their lowest point about 1896', 

 but land values continued to fall until 1900. The low prices 

 discouraged production, and the increase in cereal production 

 between 1890 and 1900 was only 26 per cent, whereas there 

 had been an increase of 30.4 per cent during the preceding 

 decade. In many of the great agricultural states soil fertility had 

 begun to decline and the increase in production which did take 

 place was due not so much to more intensive or better farming 

 as to the taking up of new lands west of the Missouri. 



