38 BULLETIN 874, U. S. DEPARTMENT OF AGRICULTURE. 



If the primary cause for the "boom" was the marked increase in 

 the net income of farms, it is in point to consider what conditions 

 were responsible for this increase. 



It is sometimes asserted that it was due to the fact that the dollar 

 had fallen to less than half its purchasing power before the European 

 war. Sometimes this cause is invoked as the immediate cause of the 

 rise in the value of farm land, on the assumption that if the dollar is 

 worth only half as much as formerly it should require twice as many 

 dollars to purchase the same farm as formerly. Sometimes the more 

 indirect explanation is offered, that the fall in the value of the dollar 

 has resulted in a great rise of the prices of farm products — specifically 

 $23 hogs, S2 corn, etc. 



It should be clear, however, that people buy farm land primarily 

 because of the desire for the net earnings to be derived from owner- 

 ship. Net earnings attributable to the land are not only dependent on 

 the prices of products, but also on the expenses of production. If 

 prices of products are doubled and the expenses are also doubled, 

 the net earnings attributable to the land, expressed in dollars, also 

 will be doubled. If expenses increase in greater proportion than 

 prices of products, net income will increase in less proportion than the 

 prices of products. Conversely, if the expenses of production increase 

 in less proportion than the prices of products net earnings will increase 

 in greater proportion than the latter. 



As a matter of fact, the latter tendency seems to have prevailed 

 during the period 1914 to 1918, inclusive. The December price of 

 corn for Iowa increased 112 per cent from 1914 to 1918, while the 

 price of oats increased 62 per cent. The January price of hogs in- 

 creased 150 per cent from 1915 to 1919. * 



On the other hand, the wages of farm labor -without board increased 

 112 per cent from 1914 to 1918, inclusive, and the average prices of 

 17 important commodities used by farmers in production increased 

 85 per cent. 2 Moreover, during this period farmers used many kinds 

 of equipment bought at the earlier prices of the prewar period, such 

 as machinery, work horses, harness, etc. It should be noted that the 

 rise in prices of farm products reached its peak in August, 1919, a 

 time when the "boom" was at its height. 



In short, expenses did not increase as rapidly as the prices of prod- 

 ucts. Likewise, land values lagged behind, for some time was required 

 before the increase in net earnings attributable to the land was fully 

 reflected in the demand for land. There is a widespread belief in 

 Iowa that the demand for land was even retarded during the war 



1 The January pn(;es of hogs for 1915 and 1919 arc taken because they are the nearest comparable figures 

 to those for December of the preceding year in each case. The difference is only 1 month instead of 

 ] 1 months, as would have been the case in comparing December and January of identical years. 



■ Including various kinds of farm machinery, fertilizers, harness, lumber, fencing, and other items. 

 These figures as well as those for Iowa prices of farm products arc from the "Monthly Crop Reporter." 



