From approximately 1875-1920, North Dakota had many (almost 100) large "bonanza farms," each with thousands or ten of thousands of acres, usually on land that was originally granted by the U.S. government to a railroad company in exchange for building a railroad (and then sold to a bonanza farmer -- or to a group of railroad investors who lived out of state).
After North Dakota became a state, the very first Governor elected was a bonanza farmer. John Miller was a Republican who helped write the ND state constitution and served as Governor of ND from 1889-1891. He then left politics to run his farm. Now, 116 years later, in 2015, the current ND Governor (Jack Dalrymple), also a Republican, is the descendant of a bonanza farmer (from a farm started by a distant cousin of Vice President Dick Cheney, believe it or not). There are Democrats with bonanza farm connections, too. In 2014, George B. Sinner ran and lost as the Democratic candidate for North Dakota's one and only at-large spot in the U.S. House of Representatives. He is the son of former ND Governor George A. Sinner, Governor of ND from 1985 to 1992. The Sinners are descendants of a bonanza farmer. They're Democrats, so they're the good guys.
I will begin with what economists call the Economic Panic of 1873 (connecting the Civil War to Wall Street to Railroads to Farms). It will eventually make sense if you keep reading. More below the orange squiggle.
The Panic of 1873: Jay Cooke & Company
In 1873, Jay Cooke & Company declared bankruptcy. This triggered an economic panic (the old-timey name for a depression or recession).
In the 19th century, the concept of "too big to fail" did not exist. On September 18, 1873, Jay Cooke & Company (a huge Wall Street financial firm) declared bankruptcy. This was a key factor, but not the only one, that triggered the Panic of 1873. There were several other factors. Here's what Wikipedia says:
The Panic of 1873 and the subsequent depression had several underlying causes, of which economic historians debate the relative importance. Post-war inflation, rampant speculative investments (overwhelmingly in railroads), a large trade deficit, ripples from economic dislocation in Europe resulting from the Franco-Prussian War (1870-1871), property losses in the Chicago (1871) and Boston (1872) fires, and other factors put a massive strain on bank reserves, which plummeted in New York City during September and October 1873 from $50 million to $17 million.
Thus, in late 1873, the U.S. economy crashed. The Panic of 1873 lasted a relatively long time, approximately six years, from 1873-1879. At the time, a few people called it "a great depression," until 1929, when we got "THE Great Depression."
Before the Panic of 1873, Jay Cooke & Company was a very successful Wall Street firm that made a ton of money issuing bonds that helped finance the Union Army (The North) in the war against the Confederacy (The South). In The Civil War. Cooke and Company were high-tech innovators in the use of the telegraph. Investors could buy government bonds by sending a telegram to Jay Cooke (sort of like using the internet to invest money by typing your orders into a computer). They used the most modern technology available at the time to connect with their investors.
The North won the Civil War. The government war bonds issued by Jay Cooke were paid back with interest to the investors. Jay Cooke's company made a lot of money and became a big Wall Street company. Then they decided to back the wrong company...
The Northern Pacific (NP) Railroad
Just before the Panic of 1873, the Northern Pacific (NP) Railroad ran out of cash. Which meant Jay Cooke & Co. (who had issued the NP bonds) had to declare bankruptcy. Then the economy crashed. Here are the sordid details.
After the Civil War ended, railroads seemed to be a reasonably good investment and the economy was pretty good. After some initial reluctance, Jay Cooke agreed to underwrite the bonds for the Northern Pacific (NP) Railroad Company, which had big plans to build America's second trans-continental railroad.
You might remember from your high school American history class that the first trans-continental railroad was built by the Central Pacific and the Union Pacific Railroads and they connected to each other in Utah (there was a ceremony in 1869 with a golden spike that connected the two lines, and it was driven into the railroad track by Leland Stanford (the railroad guy who later founded Stanford University in California), blah blah blah). So there was already one railroad that reached across the middle of the country from Missouri and Kansas to Utah and California.
The Northern Pacific Railroad planned to lay rails all the way from Duluth, Minnesota (a port on the Great Lakes, which would lead to the Atlantic Ocean and Europe) across the northern United States to Tacoma, Washington (a port on the Pacific Ocean, which would connect to Asia).
Theoretically, once the Great Lakes were connected to the Pacific, trains could carry products from farms (wheat or beef or whatever), and also lumber, coal, ore, and many other things back and forth, east and west. Mail, too. Farmers could ship their products to buyers in distant markets on either ocean and with their farm profits they could order clothes, farm machinery, or even entire houses, to be shipped to them via Montgomery Ward, Sears, or other mail-order companies. The 19th Century version of the internet.
The Northern Pacific Railway sold bonds to raise money to build a railroad across Minnesota through North Dakota and Montana (and eventually Idaho and Washington). Investors paid $100 for each NP bond and they were promised a return of 7% interest per year until the bonds were called. At first, Jay Cooke & Company didn't want to fund the railroad business, but eventually they agreed to back the NP bonds, thinking they could sell them in America (and Europe, too) to people who wanted to earn 7% per year -- and eventually the railroad would make a profit and pay off the bonds. At some point in the future. When the railroad was completed.
A Million Bonds at $100 each, paying 7% per year
That's a lot of money. A million bonds costing $100 each totals $100 million. Consider this: $100 million in 1870 dollars (adjusted for inflation) translates to approximately $1.8 billion in 2014 dollars. Almost two billion bucks in today's dollars. To build a railroad across what was, at the time, mostly empty land. From Minnesota (which was a state) across the empty territory which would become the future states of North Dakota, Montana, and Idaho. Minnesota was a state and Washington was a state, but in between MN and WA almost nobody lived, except some Indian tribes who didn't care much about having a railroad, plus some traders and trappers -- most of whom probably weren't very interested in ordering things from Montgomery Ward or Sears.
Jay Cooke's company sold a lot of the bonds, but they ended up with many bonds they couldn't sell (partly because of the Franco-Prussian War). So they had these bonds paying 7% percent a year, which was kind of OK for a few years, until...
The NP Railroad Ran Out of Money
In the year 1873, the NP railroad, with money from the Cooke bonds, had managed to build tracks all the way from Duluth, MN, to Bismarck, ND. Then they ran out of money. They spent all the money from the bondholders. They stopped paying 7% interest on the bonds. They declared bankruptcy, so they could reorganize. And Jay Cooke's fancy-pants Wall Street company also declared bankruptcy and went out of business (because they were stuck with a lot of unsold bonds). Six years of economic panic/depression/unemployment occurred throughout the U.S. Yes, it was partly because of the Franco-Prussian War in Europe and various other factors, but a key factor in the U.S. was the failure of Jay Cooke and the NP Railroad.
The first thing that happened was the Northern Pacific bonds, with a face value of $100 each, dropped to a price of about $10-20 (because the NP Railroad stopped paying the 7% interest because they had no money). Some investors sold their bonds for whatever they could get, to cut their losses.
The NP railroad was bankrupt but, on the other hand, they did have zillions of acres of land (which I'll explain in a minute). So they came up with a scheme to convert their bonds into land. Because even though they were out of cash...
The NP Railroad Had Lots and Lots and Lots of Land (But No Cash)
The U.S. Congress had given generous land grants to the NP railroad -- for every mile of railroad track laid, the Northern Pacific was given free land -- every other section of land on either side of the railroad tracks for 20 miles north and 20 miles south. A section of land is a square mile (640 acres). Thus, for every mile of railroad track the NP built, the company got 20 square miles of free land. When they got to Bismarck, ND, the company was cash-poor but land-rich.
Now we have to do some two-dimensional math about land.
Acres, Furlongs, Miles, Sections, and Townships
A long time ago, Thomas Jefferson set out the rules for measuring new land for expanding the country to the west. A square mile (also known as a "section") is exactly a mile on each side. Six miles by six miles is 36 square miles, which is called a "township." A township contains 36 sections. 6 times 6 is 36 square miles. Each township had a name, which is nice to know if you're doing genealogical research on your ancestors.
Each square mile (a "section") contains 640 acres.
An eighth of a mile is called a "furlong" -- which is why, if you ever go to a horse-racing track, you will see six-furlong races or seven-furlong races, but you'll never see an eight-furlong race -- because eight furlongs is a mile (so they call it a "one-mile race"). So one square mile is eight furlongs on each side, which is 8 x 8 = 64 square furlongs. And a square mile has 640 acres, divided by by 64, which means that there are ten acres in a square furlong. If you're not good at math, ignore the previous paragraph.
Can you visualize how much land counts as an acre? Maybe not. Imagine an American football field (American-style football, not European soccer). A football field, not counting the end zones, is really really close to the size of an acre. Voila! Now you can visualize an acre. 640 football fields (without end zones) will fit into a square mile ( also known as "a section").
So, to continue the story...
Did I mention NP Railroad Ran Out of Money at Bismarck, ND?
So, it's 1873. Jay Cooke is bankrupt, and the Northern Pacific (financed by bonds from Cooke) has gone bankrupt. The whole country plunges into a depression (or "panic"). But Congress had promised the NP Railroad that for every mile of railroad they built the NP Railroad would get every other section of land for twenty miles on each side of the railroad.
The Northern Pacific had no money, but they had lots of land. They needed to convert the land into cash. But the sections of land that the NP didn't own were being offered to homesteaders at relatively low prices by the U.S. government. And thus...
The Price of NP Bonds Crashed
The company ran out of money and stopped paying 7% interest. Some rich investors who bought $100 bonds were willing to dump them at a price of $10 or $15 or $20.
NP needed to sell the land and retire the bonds. So they came up with two plans...
Plan 1: Bondholders Could Convert $100 of Bonds to $110 of Land
This sounded like a good deal to many investors. The bonds had a $100 face value, but the bonds had stopped paying interest and were selling for very far below face value. Trading a $100 bond for $110 worth of land sounds better than getting maybe $10 or $15 in cash. And if the bondholders traded bonds for land, the NP railroad could stop paying them that pesky 7% interest every year.
But investors didn't necessarily want virgin prairie land. To plant anything, you'd have to plow it twice (yes, twice). The first time you'd just bust up the sod -- hence the word "sodbuster." You'd need a big heavy plow and a team of maybe six or eight horses or oxen, just to dig through and chop up the prairie grass roots to get to the black dirt underneath. Then you'd have to plow it a second time, usually at a right angle to the first plowing, to break it up more, so you could plant wheat or something else (but mostly wheat). The second plowing was easier and could be done with only one or two animals.
After the sod was busted and after the land was plowed, you could plant and grow crops and eventually sell the land for a higher price -- because it was ready for planting. It was (formerly useless) prairie land converted into farmland suitable for growing crops.
Plan 2: The Cass-Cheney (Dalrymple) Farm Was The First Bonanza Farm
The people running the railroad wanted to create a farm that was a good example, one that grew crops and made money. That way, bondholders could be convinced to convert their bonds into land. North Dakota was called "The Siberia of America." They wanted it to be called "The Nile of America" (because Ancient Rome got its grain from Egypt). Bread and circuses.
From North Dakota State University: Dalrymple Farm (you should click on the link to see the picture)--
In 1874, James P. Power, land commissioner for the Northern Pacific Railroad, purchased 11,520 acres about 20 miles west of Fargo. The land was purchased for General George W. Cass (President of the Northern Pacific) and Benjamin P. Cheney, a director of the railroad. The Cass-Cheney farm became the first Bonanza Farm. Cass and Cheney hired Oliver Dalrymple to manage their new farmland. The photograph below is enlarged and cropped form a stereoview taken by F. J. Haynes in 1877, when he had a studio in Moorhead. As you can see, wheat farming was labor intensive.
Pay attention to those names -- Cass, Cheney, and Dalrymple. George Cass was the President of the NP Railroad. It's not a coincidence that Fargo, ND, is located in Cass County (it's named after him). Benjamin P. Cheney was on the board of directors of the NP. After checking around I found out that Benjamin P. Cheney is a second or third cousin (a few times removed) of former VIce President Dick "What A F*cking Dick" Cheney. And what about Oliver Dalrymple, who was hired to manage the farm? He's a direct ancestor of
Jack Dalrymple, the current Governor of North Dakota. Cass and Cheney were distant/absentee land owners and they hired Oliver Dalrymple (who had a law degree from Yale) to manage the bonanza farm -- with the promise that after a certain number of years, they would give Dalrymple a percentage of the land. It eventually became know as the Dalrymple farm.
Here are a few other bonanza farms and their stories:
The Amenia & Sharon Farm
The Amenia & Sharon Farm (which began with about 28,000 acres) was about 20 miles west of Fargo, on the railroad tracks. It got its name from the 27 investors who converted their (almost worthless) railroad bonds into land. The investors were from Amenia, New York, and Sharon, Connecticut. Hence, the name of the farm. The farm owners started a small town with a railroad depot and a grain elevator. It was called Amenia, North Dakota which, in the census of 2010 had a small population of 94 people. The Democratic Governor William Guy (Governor from 1961-1973 -- longest-serving governor in ND history) was from Amenia. He started farming in 1948, which means he wasn't directly connected with bonanza farms (except insofar as he lived in a city created by a bonanza farm).
The Grandin Farm
This farm was about 30 miles north of Fargo/Moorhead. Here's a link: Grandin Farm. 40,000 acres. Managed by Oliver Dalrymple (ancestor of the current Governor of ND).
The Raymond Farm
Here's a link: Raymond Farm.
John B. Raymond had a bonanza farm about 12 miles north of Fargo. Raymond, also known as Delegate Raymond, got his start by using some veteran's benefits to buy land. In 1881, Raymond had 6000 acres, of which 200 were planted. In 1883, Captain Chase purchased a one-third interest in Raymond's farm and it was expanded to 15,000 acres, of which 6,000 acres were planted in wheat in 1883. At the time the farm was 10,000 acres, Raymond employed 10-12 full-time men. This number was increased to 35 men during seeding and 75 men at harvest.
The Kingman Farm
Richmond T. Kingman purchased 1400 acres of land from the NP Railway. He had one of the first farms to grow corn. Here's a link: Kingman Farm.
Paying Out Dividends -- Making the Investors Happy
A lot of bonanza farms sent out annual reports. This year we made money. But last year we lost money. The investors wanted a 7% return on their bonds. When they got a dividend, they were happy.
At some point, the value of the land grew to a point where it made more sense to sell the land than to grow crops and hope to make a profit. So the bonanza farms gradually faded away around the 1920s.
Days of Heaven
OK, this is not North Dakota (I think this movie was set in Kansas), but you can see workers going out to work on a farm on a train (from the movie "Days of Heaven"):
The ND Bonanza farms needed workers for planting (in the Spring) and harvesting (in the Fall). So migrant workers (often recent immigrants from another country, usually white) would flock to North Dakota at those times. They'd get free room and board on the farm and they'd get paid a decent wage. Apparently, the railroad companies would let them ride free (because that way, the railroads would get grain from the farms to ship to Minneapolis or Duluth).
There were temporary employment agencies in Fargo that would ship out workers to farms (week after week) for planting in the Spring. Then lots of workers in the Fall, for harvesting. I've heard that the population of Fargo would double when the migrant workers were in town.
Most farms had a no-alcohol policy, And many farms (if the owner was a Christian) didn't do any work on Sunday. And North Dakota was technically a dry state, but Minnesota was wet. So after the workers were done working, some would come back to Fargo ND and go next door to Moorhead MN (which had liquor bars and whorehouses) to spend their earnings.
I've heard a story that in the 1930s my grandfather's sister Astrid (who was a school teacher who lived in Moorhead) would tell people she was from Fargo because she didn't want people to think she was from Moorhead, which was such a sinful place.