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Western Settlement and the Price of Wheat, 1872–1913

Published online by Cambridge University Press:  11 May 2010

C. Knick Harley
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Abstract

The expansion of staple agriculture into the American West after the Civil War was an important event in the economic history of both the United States and the world. This migration of commercial farmers transformed the world's commodity markets. We would expect to find that these farmers were responding to price signals in a commercial fashion. Curiously, the existing literature has failed to detect a price responsiveness in western expansion. This failure appears to stem from a lack of appreciation of the importance of the spatial distribution of prices in the late nineteenth century. This study shows that when this factor is considered, the expansion of western cultivation clearly is connected to the prevailing local price of wheat.

Type
Articles
Information
The Journal of Economic History , Volume 38 , Issue 4 , December 1978 , pp. 865 - 878
Copyright
Copyright © The Economic History Association 1978

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References

1 The World Wheat Economy, 1885–1939 (Cambridge, Mass., 1953), p. 109Google Scholar.

2 “On Certain Parallelism in Form Between Two Historical Processes of Productivity Growth,” Agricultural History, 50 (1976), 112Google Scholar.

3 Fisher, Franklin M. and Temin, Peter, “Regional Specialization and the Supply of Wheat in the United States, 1867–1914,” Review of Economics, and Statistics, 52 (1970), 134–49CrossRefGoogle Scholar; Cooley, T. F. and DeCanio, Stephen, “Rational Expectations in American Agriculture,” Review of Economics and Statistics, 59 (1977), 9–17CrossRefGoogle Scholar. The quotation is from Fisher and Temin, p. 137.

4 U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, 1960), p. 123Google Scholar.

5 See Strauss, Frederick and Bean, Louis H., Gross Farm Income and Indices of Farm Production and Prices in the United States. USDA Technical Bulletin No. 703 (Washington, 1940), p. 34Google Scholar. This series is used by, among others, Shannon, Fred, The Farmer's Last Frontier, Agriculture, 1860–1897, (New York, 1945), pp. 192, 417Google Scholar; Higgs, Robert, “Railroad Rates and the Populist Uprising,” Agricultural History, 44 (1970), 291–97Google Scholar.

6 For detailed discussion of this process see C. Knick Harley, “Transportation, the World Wheat Trade, and the Kuznets Cycle,” Paper presented at the MSSB Conference on Exports and National Economic Growth, 1975 (Princeton, forthcoming). For earlier treatments see Veblen, Thorstein B., “The Price of Wheat since 1867,” Journal of Political Economy, 1 (1892)CrossRefGoogle Scholar and L. B. Zapoleon, Geography of Wheat Prices, USDA Bulletin No. 594 (1914).

7 See Bogue, Allen, From Prairie to Corn Belt: Farming on the Illinois and Iowa Prairies in the Nineteenth Century (Chicago, 1963), pp. 123–29Google Scholar.

8 These data are the same as those used by Fisher and Temin. There are serious problems with the quantity data (see Fisher and Temin, “Regional Specialization,” pp. 136–37). The total output for the United States certainly is too low particularly for the 1860s and 1890s. These problems are discussed at length by Holbrook Working in “Wheat Acreage and Production in the United States Since 1866: A Revision of the Official Estimates,” Wheat Studies, 2 (1926)Google Scholar. He provides a revised series for total U.S. output based on disappearance data. Unfortunately there is no way to extend this procedure to the state-by-state data.

In the statistical analysis, some adjustments were made to the acreage data in some years. The reported data are estimates of acreage harvested in principal grains. In certain years of harvest failure because of weather or pest conditions, large acreage was abandoned. This creates some large temporary downward fluctuations in the acreage series. Since the regression analysis was run on changes in output, these observations created both a large, spurious, downward move and subsequently, a large upward move. These spurious variations in the production series were removed by interpolating between adjacent years. This, of course, removes a few degrees of freedom, but with over 300 observations has little impact. The following observations were interpolated: Indiana, 1899, 1900; Iowa, 1894, 1903; Missouri, 1894; Kansas, 1894; Nebraska, 1894, 1903; North Dakota, 1900, 1902; South Dakota, 1894. Crop failure in each of these years may be independently confirmed.

9 This justification of the railroad variable suggests that the influence of railroads may have been non-linear and may have ceased at some level of railroad density. No attempt has been made to specify the model in order to incorporate these possibilities.

10 This is a logistic adjustment. An alternative, linear formulation was also tested. Here desired acreage was a linear function of the explanatory variables and increases in acreage were a proportion of the difference between actual and desired acreage. This specification was less successful, either because of the linear specification of the desired area or because of the adjustment specification.

11 The procedure is a Chow-test, involving an F-test on the ratio of residual sums of squares See Johnston, J., Econometric Methods (New York, 1963), 136–38Google Scholar.

12 These are year-end prices of hogs and “other” cattle. These prices were used rather than corn prices. Although corn was the largest crop in many mid-western states, it was overwhelmingly an intermediate input into meat production. Animal prices are, therefore, more appropriate variables.

13 For discussion of the world wheat market and its long-run trends, see C. Knick Harley, “The Price of Wheat, Western Settlement, and the World Wheat Market, 1850–1913,” Discussion Paper, Department of Economics and Commerce, Simon Fraser University, May 1978.