Coop Farming in Illinois (Part 1):
The National Farmers Union
Brian Wayne Wells
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Throughout the history of North American agriculture, farmers have been attempting to solve their own problems. Farmers have repeatedly joined together in societies and organizations to protect their common economic and political well being. In the United States, one of these attempts of farmers to band together to solve their problems occurred in 1867 with the formation of the National Grange of the Society of the Patrons of Husbandry (or more simply “the Grange). The Grange was formed in the state of Maine in 1867. Following the initial founding of the National Grange, local chapters of the Grange Society sprang up all across the northern rural areas of the nation. At first, Grange meetings were merely social events—community dinners and dances. This was an attempt to solve the problem of loneliness or isolation facing many farm families. However, soon the Grange took a more serious bent and began to protest the political and economic problems faced by farmers.
Chief among the concerns of the Grangers was the exploitation of farmers by private grain elevators and the railroad. Usually the local privately-owned grain elevators exercised a near monopoly over the prices that local farmers received for their crops. Often times this price was much lower than the farmer might have received if some competition in the market had been available to the local farmer. However, such competition was usually not readily available to the farmers. Usually there was only a single grain elevator in each local town. To find competing elevators the farmer would have to carry his grain to more distant elevators. Shipping their products to more distant markets was one means by which the farmers might find a higher price for their farm products. Railroads, the primary method of shipping to those distant markets, but usually railroads also had a monopoly over shipping from local small towns. Usually there was only one railroad in each small town. Thus, railroads could charge what ever they wanted for shipping the farmer’s grain. So railroads, along with grain elevators became the targets of farm protest movements.
The individual farmer felt himself being squeezed between the twin monopoly powers of the railroads and their local privately-owned grain elevators. Accordingly, the political program of the Grange developed into a strong protest against monopolistic price-setting powers of both the railroads and the privately-owned grain elevators. The State of Illinois, reacting to protest agitation on the part of the Grange, passed legislation on April 25, 1871 which required the appropriate state to regulate the rates that local privately-owned grain elevators charged farmers for their services. Regulations for the storage of grain by privately-owned grain elevators were promulgated in January of 1872. In June of 1872, a group of elevators including the Munn & Scott grain elevator of Chicago, Illinois, were sued by the State of Illinois for a violation of these regulations regarding terms and rates of grain storage charged. Munn & Scott appealed the case to the United States Supreme Court to test the constitutionality of the Illinois statute allowing the regulation of grain elevators. This case became the landmark case called Munn v. Illinois, (94 U. S. 113 ). The Grange joined the State of Illinois, in the case. The case was decided by the United States Supreme Court in 1877. This decision upheld the States of Illinois’ right to regulate the rates that grain elevators could charge for the services they rendered. (More broadly, however, the Munn decision recognized the constitutionality of any state government to regulate any private corporations operating within its boundaries. As such, Munn v. Illinois became the foundation of many areas of law including the state’s right to prevent discrimination against people based on race, sex, age or etc.)
The Grange was limited in geographical scope to the northern states of the nation. In the south, the National Farmers Alliance was the most popular farm protest group. Formed in 1876 in Lampasas, Texas, the National Farmers Alliance was political from the start. The Alliance agreed with the Grange in demanding restrictions on the monopolistic power of the railroads. However, whereas northern farmers protested against the monopoly power of grain elevators to set prices, southern farmers had the same complaints against the monopoly power of cotton brokers, banks and local merchants under the crop-lien system of farming. Under the crop-lein system, local merchants and bankers would loan money, seed and equipment to farmers before spring planting. Collateral on this loan was a lien on the expected crop to be harvested in the fall. Since cotton was the only crop that paid well enough to support the principal and interest on these loans, the merchants and bankers required that only cotton be planted by the farmer. Thus the farmer’s fortunes rose and fell economically, each year, on a single crop—cotton. Thus, under the crop-lien system, the farmer had no ability to diversify his crops to protect himself economically from the risk of a bad cotton price in a particular year. If cotton crop prices failed, the farmer would still have to make payments on the loan and the interest charges on that loan continued to pile up.
State government regulation of monopoly power provided some protection from certain unscrupulous actions taken against the farmer, however, farmers eventually began think about working together to market their farm products. The idea was that all the farmers of a given community would be a member of the organization, or cooperative. In the north, this meant that the farmers would own their own grain elevator. They would all become shareholders in this elevator. The farmers would meet once a year in a shareholders meeting and elect a board of directors to operate the cooperative elevator. The board of directors, in turn, would hire all the officers needed to handle the day-to-day affairs of the cooperative elevator.
In the 1890s many of these farmer-owned cooperatives sprang up across the Midwestern United States. These farmer-owned cooperatives built new grain elevators or purchased old ones and built or purchased dairy creameries. Thus, in many rural communities of the Midwest there was true competition for the farmers products—corn, wheat and milk. These early cooperatives faced a widespread opposition from railroads, grain companies, banks and many newspapers. Shortly after the turn of the century, two significant farm organizations were organized in support of the cooperative movement.
In the south, the Farmers Alliance was broken by the organized and united power of the cotton brokers, the banks and the railroads. Accordingly, in 1902, the National Farmers Union was organized in Point, Texas by Newt Gresham and a number of other farmers. Newt Gresham became one of the main organizers of the Farmer’s Union. Newt Gresham knew how to persevere in the face of adversity. He had been orphaned at the age of 10 years. Thus, at an early age he had become totally self-reliant. He was self-educated, had worked the land for most of his life and became the chief organizer for the Farmers Alliance.
In 1911, another farmers group was formed—the American Farm Bureau Federation was organized in Binghamton, New York. Both of these farm organizations agreed on the benefit of cooperatives to the average farmer. The American Farm Bureau began forming some cooperatives in the 1920s. (Cockshutt: The Complete Story compiled by the International Cockshutt Club, Inc. [American Society of Engineers Press: St. Joseph, Michigan, 1999] p. 78.) These Farm Bureau affiliated cooperatives were located, mainly, in Michigan, Ohio and Indiana. Farmers Union cooperatives were mainly located further west (Wisconsin, Minnesota and the Dakotas) and extended south as far as Oklahoma and Texas. However the two organizations developed an entirely different philosophy regarding governmental assistance to farmers in distress. The National Farmers Union supported government assistance and government regulation of the farm markets in time of distress. The America Farm Bureau tended to be opposed to all governmental interference in the farm economy.
One of the early cooperatives formed in the Midwest, was the Equity Cooperative Exchange of St. Paul, Minnesota which had been formed in 1908. In 1914, Equity Cooperative built their own grain elevator on the banks of the Mississippi River in St. Paul. However, Equity had trouble finding buyers for its grain because of the discriminatory actions of private grain companies. For example, Equity was denied a seat in the privately-owned Minneapolis Grain Exchange because of this opposition led by the Minneapolis Chamber of Commerce. Accordingly, Equity started their own grain exchange—the St. Paul Grain Exchange in 1914.
The free-wheeling free enterprise economy of the 1920s worked against the cooperatives. Equity Cooperative was forced into bankruptcy in the 1920s and in 1926, the Farmers Union Terminal Association took over the assets of Equity, in order to continue the goals of the cooperative movement in North America. True to its Farmers Union philosophy the Farmers Union Terminal Association supported stronger regulations on the inspection of grain and governmental regulation of the weighing and calibration of the scales within elevators to assure honest weighing practices.
The severe economic depression of the early 1930s brought renewed vigor to the cooperative movement in the United States. Farmer-owned cooperatives surged in numbers across the Midwestern states. On June 1, 1938, the Farmers Union Terminal Association re-organized itself as the Grain Terminal Association (GTA).
Leading organizers of the Farmers Union, like Charles C. Talbot founder and president of the North Dakota Farmers Union; Bill Thatcher, a legislative lobbyist for the Farmers Union in Minnesota; and A.W. Richer, now became involved with GTA.
In the early 1930’s, Myron William (Bill) Thatcher became the general manager of the GTA. Over the 30 years that Bill Thatcher served as general manager of the developed contacts and friendships with politicians, including President Franklin Roosevelt, Secretary of Agriculture Henry Wallace, Senator Hubert H. Humphrey of Minnesota and Republican Senator Milton Young of North Dakota. Because of the political philosophy of the Farmers Union which tended to support governmental support of farmers in trouble, most of the political contacts that Bill Thatcher generated on behalf of the Farmers Union/GTA tended to be overwhelmingly members of the Democratic Party. Both in 1932 and 1936, the Farmers Union supported Franklin Roosevelt, while the American Farm Bureau did not. Accordingly, the Farmers Union evolved into a traditional major constituency of the Democratic Party similar to the way the AFL (the American Federation of Labor) and the CIO (the Congress of Industrial Organizations) became major constituent parts of the Democratic Party among urban laboring people.