In the years following the signing of the Mendota and Traverse des Sioux treaties of 1851, tensions mounted as the US government failed to make payments and provide the food and supplies promised to the Dakota people.
In the treaties of Mendota and Traverse des Sioux, the Dakota ceded 24 million acres of land to the US government and the Dakota people relocated to two adjoining strips of land on each side of the Minnesota River, stretching from northwest of New Ulm to the present-day South Dakota border.
Under the terms of the 1851 treaties, in exchange for their land, the Dakota would receive annual payments of goods and money over a 50-year period, as well as services that included blacksmith and carpenter shops, doctors’ offices, and schools. Private traders, under license from the government, supplied a variety of goods to Dakota villages lining the river valley in exchange for furs and money.
To promote self-sufficiency through European American farming methods, the US government provided farming instruction along with oxen, horses, and other livestock, seed, farm tools, tool repair, milling services, and small farmhouses. The government also encouraged the presence of missionaries to help convert the Dakota to a new way of life.
Fur traders operated on the reservation under license from the government to sell tools, blankets, clothing, firearms, fabrics, traps, cooking utensils, and many other goods. At the Lower Sioux Agency, traders’ stores and homes occupied the area west of the government complex.
While they were not agency employees, the traders’ business and conduct nonetheless had considerable impact on agency operations. The traders extended credit to the Dakota for repayment in furs and more importantly, for the Dakota's annual government payments. As soon as the Dakota received their annual payments, the traders laid claim to a good portion of the money. This was a source of considerable friction in US and Dakota relationships.
After experiencing crop failure, poor hunting, postponed annuity payments by the government, and tightened credit by fur traders, conditions on the reservations became desperate, and tensions were at a breaking point.