The Agricultural Adjustment Act was a 1933 New Deal law that tried to rescue American farmers from the Great Depression by paying them to grow less, on the theory that smaller harvests would push crop prices back up. President Franklin D. Roosevelt signed it on May 12, 1933.1Signed by President Franklin D. Roosevelt on May 12, 1933 Farm income rose more than 50 percent within three years, but the program displaced hundreds of thousands of tenant farmers and sharecroppers, and the Supreme Court struck down its funding mechanism in 1936. Congress rebuilt the program on a different legal foundation, and that replacement still sits in the United States Code today.
Why Congress Passed the Law
American agriculture had been collapsing for more than a decade before Roosevelt took office. Wartime demand during World War I pushed farmers to expand; when European production recovered, the surplus crushed prices. Cotton that fetched 35 cents a pound in 1919 was below 6 cents by 1931. Wheat followed the same path down. Some farmers found it cheaper to burn corn for fuel than to haul it to market.
The Depression layered a debt crisis on top of the price crisis. Banks foreclosed across the Midwest and South. At “penny auctions,” neighbors intimidated outside bidders so foreclosed families could buy their own farms back for a few cents. Talk of open revolt was reaching Washington, and the political pressure for federal action was serious.
How the Program Worked
The mechanism was straightforward: pay farmers to take land out of production, and let a smaller supply push prices up. Secretary of Agriculture Henry A. Wallace ran the program and defended it publicly, arguing that deliberate scarcity was the only realistic way to stabilize farm prices.
The law covered seven “basic” commodities to start: wheat, cotton, field corn, hogs, rice, tobacco, and milk and dairy products. The target price was “parity” — the level that would give farmers the same purchasing power they had between August 1909 and July 1914. Tobacco used a later base period, August 1919 through July 1929.
Plowing Under and Slaughtering Hogs
Because the law passed after planting season, the 1933 crops were already in the ground. The government responded by paying cotton growers to destroy 25 to 50 percent of their planted acreage. Roughly 10 million acres of growing cotton were plowed back into the soil.
The hog program drew even sharper criticism. Starting in August 1933, the federal government bought about 6.4 million pigs and sows and pulled them off the market. Around five million of the lightest hogs, averaging about 53 pounds, were processed into inedible grease and fertilizer. Meat from pregnant sows went to relief programs for the unemployed. Destroying food while roughly a quarter of Americans were out of work was politically brutal, and Wallace spent considerable energy defending the choice.
Benefit Payments and the Processing Tax
Farmers who signed voluntary agreements to limit their acreage received “benefit payments” meant to close the gap between the depressed market price and parity. The money moved cash into rural communities that had effectively fallen out of the money economy. By 1935, farm income was more than 50 percent higher than in 1932, and AAA rental and benefit payments accounted for about a quarter of that gain.
The payments were funded by a tax on the first domestic processing of each covered commodity. Flour millers paid on every bushel of wheat they ground. Cotton ginners, meatpackers, and dairy processors paid the same kind of tax on their raw materials. The revenue was earmarked entirely for the AAA, creating a closed loop in which the processing side of the food chain financed the production side. The Roosevelt administration liked the design because it kept the program out of general Treasury fights. That same design was what the Supreme Court eventually killed.
Who Was Hurt by the Program
Benefit checks went to landowners, not to the people who actually worked the fields. In the Cotton South, where millions of Black and white sharecroppers and tenant farmers depended on planting land they did not own, that structure created a destructive incentive. Landowners who cut their acreage no longer needed as many hands. Contract provisions were supposed to protect existing workers, but many landlords evicted tenants and kept the full federal payment.
An estimated 900,000 people lost their homes and livelihoods between 1933 and 1934 as planters reduced acreage. Sharecroppers, with the weakest legal standing, were displaced at higher rates than tenant farmers who managed their own plots. Black tenant farmers lost their positions at rates comparable to sharecroppers of both races.
The backlash produced one of the era’s most striking labor organizations. In July 1934, seven Black men and eleven white men met at the Sunnyside School in Poinsett County, Arkansas, and founded the Southern Tenant Farmers’ Union, organized with the help of local socialists H. L. Mitchell and Clay East. The interracial union challenged planters who pocketed federal payments meant to be shared with tenants. It never won the structural reforms it sought, but it forced national attention onto a policy that treated landowners and farmworkers as if their interests were identical.
Why the Supreme Court Struck It Down
The processing tax lasted less than three years. In January 1936, the Supreme Court ruled in United States v. Butler that the Agricultural Adjustment Act of 1933 was unconstitutional. The case came out of a Massachusetts cotton processor, Hoosac Mills, whose receivers refused to pay the tax.
In a 6–3 decision, the Court held that regulating agricultural production was a power reserved to the states under the Tenth Amendment. Justice Owen Roberts, writing for the majority, concluded that the processing tax was not a genuine tax for the general welfare but a device to coerce farmers into complying with a federal production-control scheme Congress had no authority to impose. The tax, the appropriation, and the payments were, in his words, “parts of the plan — the means to an unconstitutional end.”
Justice Harlan Fiske Stone dissented sharply, calling the majority opinion “a tortured construction of the Constitution” and warning that “courts are not the only agencies of government that must be assumed to have the power to govern.” His broader view of the federal taxing and spending power eventually won out in later decades. In the meantime, the ruling stripped the AAA of both its money and its enforcement authority.
What Replaced It
Congress moved within weeks. The Soil Conservation and Domestic Allotment Act of 1936 paid farmers to adopt soil-conserving practices, such as planting grasses and legumes instead of “soil-depleting” crops. The soil-depleting crops happened to be the same commodities that had been in oversupply. The critical change was that payments came from general Treasury revenue rather than an earmarked processing tax, and the stated federal purpose was soil conservation rather than production control. The practical effect resembled the original AAA, but the constitutional framing was different enough to survive.
Two years later, Congress passed a fuller replacement: the Agricultural Adjustment Act of 1938. This version grounded federal authority in the Commerce Clause, arguing that agricultural production directly affected interstate commerce, and it kept funding in the general Treasury. It also added tools the 1933 law lacked. Wallace’s “Ever-Normal Granary” became law, stockpiling surplus grain in strong years and releasing it during shortages. The 1938 Act established the first federal crop insurance program. And it authorized marketing quotas — hard limits on how much of a commodity could be sold — subject to approval by affected farmers in referendums.
Wickard v. Filburn
The 1938 Act’s constitutional footing was tested in Wickard v. Filburn (1942). Roscoe Filburn, an Ohio farmer, was assigned a wheat allotment of 11.1 acres and planted 23. He argued the excess was for his own livestock and family and never entered interstate commerce, so Washington had no jurisdiction over it.
The Supreme Court unanimously disagreed. Even wheat grown for home use, the Court held, affected interstate commerce in the aggregate: if enough farmers grew their own instead of buying it, the cumulative effect on market prices would be substantial. The decision handed Congress an unusually broad power to regulate economic activity and locked in the 1938 AAA.
Why the 1938 Law Still Matters
The Agricultural Adjustment Act of 1938 was never repealed. It remains codified as permanent federal law, and that status shapes every modern farm bill. When Congress passes a farm bill, roughly every five years, it temporarily suspends the 1938 Act’s price-support provisions and substitutes updated programs. If a farm bill expires without renewal, the law reverts to the 1938 and 1949 permanent authorities, which would require the USDA to set support prices using the original 1910–1914 parity formula.
Parity-based prices today would run far above modern market prices, sending food costs and federal spending up together. That reversion threat is treated as intolerable enough that it effectively forces Congress to pass new farm legislation rather than let existing programs lapse. It is the single most reliable pressure point in farm bill negotiations, and it is the reason a Depression-era statute still sits at the center of American agricultural policy.