The Agricultural Adjustment Administration (AAA) aimed to boost farm prices during the Great Depression by cutting down on agricultural surpluses. The goal was to restore farmers' purchasing power to levels similar to those seen in the stable period of 1909-14.
To achieve this, the AAA used a 'domestic allotment' plan. Farmers who voluntarily reduced their acreage or production of key commodities like wheat, corn, cotton, tobacco, rice, hogs, and milk received subsidies. This approach helped limit supply and raise prices.
The Commodity Credit Corporation was created to support these efforts. It provided loans and purchased specific commodities to stabilize prices. The AAA also gave direct payments to farmers to compensate for lost income due to reduced production.
To fund these subsidies, the government imposed a tax on processors, such as millers or slaughterhouses. The tax was based on the difference between current market prices and the target 'fair exchange value' of the goods.