ABSTRACT
This chapter presents price and production data to test some of the conventional generalizations about overproduction and economic depression in wheat-growing areas of the United States during the 1920’s. Data on mortgage foreclosures, farm bankruptcies and price disparity all suggest that wheat farmers suffered more than any single commodity group from the postwar agricultural crisis. Basic price theory tells that a firm in a competitive industry, such as wheat farming, maximizes profits by producing output at the level where marginal cost equals market price. The drop in wheat prices that began in late 1920 had tapered-off significantly by mid-1921, so that the drop in acreage planted was much less in 1921 than it had been in 1920. The chief maladjustment “in the wheat industry itself” was viewed as overproduction, caused largely by wartime expansion and the difficulty farmers faced in reducing their production capacity to peacetime demand.
