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
Agricultural Adjustment Act of 1938 3control 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.