by Dr. Ridgely Abdul Mu’min Muhammad

In previous articles we have discussed how the economic system can make useful land useless and
how land can be a liability instead of an asset. However, with a change in the economic environment
that same piece of land can be made useful. The question is whether the market is willing to pay a
price that the farmer can make a profit by using the land to grow a crop.

At one time (1910) black farmers owned over 16 million acres of land. That number has been
reduced to less than 3 million acres and yet much of that acreage is not being used to grow crops or
raise livestock. Much of this land is actually owned by people who live in the cities but have
inherited the land from deceased relatives. Many of these city dwellers are interested in moving
back to the land but do not know how they can make that land economically useful.

To help us understand the dynamics of the problem and discover possible solutions, we will use
Muhammad Farms as a typical farm in the Southeast, where most of our black farmers used to farm.
When the Honorable Minister Louis Farrakhan redeemed 1600 acres of farmland in Terrell County
Georgia in 1995, the previous owner was only farming about 82 acres of the land. About 600 acres
were in timber and wetlands and the other 800 plus crop acres were sitting idle held in a government
set aside program which paid the owner about $35 per acre. In other words the government was paying
the owner $35 to rent his land and let it sit idle.

These 800 acres had grown over in weeds and we had to decide on whether to take the land out of
the program or leave it in. Our mission of course was to use the land to grow food for our people,
but we could not and can not afford to lose money in the process. One of the crops that we wanted to
grow was wheat. In 1995 when we got the land, wheat sold for $3.37 per bushel. Since that time wheat
has gone down as low as $2.17 in 2000 and as high as $4.42 in 1996. To make a decision on growing
wheat or just renting the land out to the government we have to know how much it costs to grow the
wheat. The University of Georgia estimates that it takes about $115 in variable costs to grow an
acre of wheat. This $115 includes items like seed, fertilizer, fuel and labor but does not include
the cost for the tractors, equipment, taxes or the cost of the land.

The average yield per acre in Southwest Georgia is about 40 bushels per acre. In 1995 wheat sold
for $3.37 per bushel. If we multiply this price of wheat times 40 bushels we get a per acre revenue
of $134.80. When you subtract the cost of production ($115) you are left with a net return of $19.80
per acre. On the other hand, the government is offering $35 per acre not to farm the land. If you
subtract this “rent” from the returns ($19.80-$35), you would make $15.20 more by renting
it out than by growing wheat. Therefore, it would make economic sense to rent the land to the
government and not grow wheat in 1995.

Now when we do these same type of calculations and put them on a time chart from 1995 through
2008, we can understand why farmers in some years will grow wheat, while in other years would choose
to rent their land out to the government or someone else (see chart below). This chart shows that in
1995 thru 1998 a farmer could make money on growing wheat, but only in 96 and 97 would he make more
from growing the wheat than renting the land out. From 1998 thru 2002 the farmer could not even
cover his variable costs (Variable Returns were negative), so definitely he would rent the land out
and not grow wheat. From 2003 thru 2007 the farmer could make a little money by growing wheat, but
the money he would receive from the market would be less than what he could get just by renting the
land out. Therefore, it would be wiser to rent the land out, get the $35 per acre and not grow
wheat.

Evidently this is what a lot of farmers did across America because world wheat reserves have
dropped by 14 million metric tons, the lowest in 25 years. However, this fall futures prices for
wheat to be harvested in July of 2008 have jumped up to as high as $9.61 in August of 2007. This has
led farmers to increase wheat acreage from 60.4 million acres for the 2006/2007 season to an
estimated 62.2 million acres for the 2007/2008 season. Thus, this anticipated high price for wheat
has had the expected effect, causing farmers to plant more, but the increased acreage has now
lowered the anticipated price down to $7.88. This price could even go lower depending on yields in
this country and abroad.

So as the market price for wheat fluctuates, so do the economic signals that induce a farmer to
grow wheat or let the land sit idle. These market conditions are out of the hands of the individual
farmers unless they take another strategy which we have done at Muhammad Farms. When prices fell as
low as $2.17 in 2000 we decreased our wheat acreage but decided to get into what is called
value-added processing. We began to mill our wheat into flour and sell it directly to members of our
buying clubs in the cities.

One bushel of wheat weighs 56 pounds. Therefore a bushel of wheat can yield about 11 five pound
bags of whole wheat flour. Now if we can sell this flour for $3.00 per bag, we can get $33 per
bushel of wheat instead of $2.17 in a bad year or even $9.61 in an exceptional year. By going a step
closer to the consumer the farmer can pull himself out of the fluctuations of the market, which he
has no control over and get a much higher value for his product.

This is a better strategy as long as he can find the buyers. However, if people are not baking
bread, cakes, pies or cookies, but would rather pay $3.00 per loaf for bread, then the farmer is
left with no choice but to react to the market which means not grow wheat in most years. Now if the
consumer understood how much money they could save by buying one of these new bread making machines,
whole wheat flour and baking bread for themselves, they just might be able to help black farmers
turn useless land into something useful. They also would be eating healthier.

Dear consumer, a five pound bag of whole wheat flour from Muhammad Farms can supply you with five
loaves of bread weighing one pound each. If this five pound bag of flour costs you $3.00, you could
make five loaves of bread at a little over $3.50 ($0.70 per loaf) including the cost of the other
ingredients. You are now paying about $15 for the five loaves of bread at the grocery store. Please
do the math, make the choice and help make non-useful land useful once again. It is not “rocket
science”, just a matter of choice. Eat to live or die broke.