(A 26 page version of this shortened document was prepared to be presented to the House Agricultural Subcommittee. However, although I was invited to give the report when I got there, they did not allow me to speak. This is a shortened version of that document which the Committee said would be put in the record. I have not found it on the government website however.)
Main Page
Present March 29th, Letter to BushStatistics of LawsuitBLACK FARMERS NEED YOUR HELP
Bookmarks: IntroductionThe LawsuitImpact of DiscriminationDividing the “Farm Block”Horror Stories
Volume 2, Number 8 (shortened version) October 10, 1999
The Farmer
———————————————————————–
The USDA: Trying to Perpetrate the Perfect Crime
by Dr. Ridgely A. Mu’min Muhammad
Introduction
I hope that each one of you gets a chance to read the Consent Decree of the Black farmers lawsuit against the USDA as written by Judge Friedmen. In that monumental document Judge Friedman states in no ambiguous manner that the Black farmers should not expect to get justice through the courts. He states that the only reason that they have gotten this far is because of their independent, organized and persistent struggle and that the only way that they may receive anything more is to continue in that same mode. He suggested to us that our problem was political and this is why we have shown up here today. He in fact gave us what we call a “Declaration for Independent Action”.
We voiced our opposition to the Consent Decree as written on March 2, 1999 even though many advised us not to, fearing that we might rock the boat. Now since that time the process of implementation of that settlement has born out our greatest fears. Black farmers have not received any money and many fear that they will not receive anything, although the government through the media has given the false impression that the farmers’ checks are waiting at the bank. Although the Black farmers have not gotten a dime from this settlement, bill collectors, banks and other creditors have been harassing these people like vultures chewing on dead flesh.
Here are some of the facts:
1. 40% of the applications have been rejected for such reasons as the “similarly situated white farmer” that the Black farmers chose did not get a loan from FmHA in the same year that the Black farmer applied.
2. Farmers in some areas have been denied access to their own FmHA records, yet their applications have been denied based on information from those same records.
3. Out of over 40,000 requests for applications there may be no more than 100 Track B cases.
4. The estimation of a farmer’s economic damages in Track B is being based on his historical yields, while these same yields were made low because of prior discrimination in the administering of USDA programs.
5. Black farmers are being asked to prove that they were discriminated against while most did not, and do not, know what they were entitled to, because the delivery system for program information was and is faulty.
6. The Consent Decree was signed on “Black Tuesday”, November 3, 1998, the same day that unexpected numbers of Black people showed up to vote.
7. There is a growing suspicion by Black farmers and their city cousins that the USDA does not intend to do right by the Black farmers as evidenced by how the government is handling this lawsuit.
The government may have inadvertently triggered a movement that will expose some agendas that are not favorable for the population growth of Black people. Now let us compare the growth rate of Black people in America between 1910 and 1990 compared to acres of farmland owned. In 1910 the Black population was 9.8 million while we owned almost 13 million acres of farmland. However, by 1990 the Black population had increased to over 30 million while the farmland owned dropped to below 4 million acres. Therefore, we see that the Black population is expanding rapidly while their farmland has almost reached zero.
How can a people sustain itself without land? If there was no racism in America and if Black people were not labeled as “menaces to society”, then such trends would not be alarming.
What are they to eat? Genetically modified foods that have not been tested to insure that no additional allergens have been spliced in that may prove deadly to specific genetic types? Why is the USDA using our tax money to develop “terminator gene” technologies among others, that would not increase food security and nutrition but make a few biotech corporations filthy rich?
Research has already proved that genetically altered foods through gene splicing may carry allergens which may be harmful to selected DNA types. An article from the October 5, 1999 Wall Street Journal states that Monsanto is foregoing its plans to release “terminator genes” into the environment while the USDA, using our tax money, is still researching and pushing such technologies even against public opinion.
Can Black people trust America? What is America’s long term agenda for Black people? What does America hold dear?
The Lawsuit:
The $50,000 is an insult and the process of trying to get that money has been frustrating and insulting to many black farmers. They have been tracked into Track “A” with hardly any Track “B” claims, and many have been even excluded from Track “A” through bad advice given by those trying to help them fill out their forms. Six thousand were expected to participate in this lawsuit but over 30,000 asked for applications, over 18,000 are expected to have filed by October 12, 1999 and here lies the root of the problem: the government does not intend to give out that much money to Black people unless their is a political gun to its head. The figure that was given to the press for the total settlement was around $3 billion. However, even if only 6,000 were given the $50,000 this would amount to only $300 million, one-tenth of $3 billion. So the government never expected to give out $3 billion in the first place, and through the process of elimination, it intends to cut that 18,000 down to a “manageable” figure.
The average Black farmer in Georgia in 1978 owned 150 acres of land. At today’s prices ($1,673 per acre) that represents $250,950 in terms of land, buildings and equipment. It was just that, land, buildings and equipment, that was confiscated from them with the help of the USDA. So on a national basis, $7 billion would be closer to what was taken from these 30,000 or more farmers. Actually in 1978 there were over 30,000 Black farmers in the U.S. who owned land. We don’t know how many there are now because the Census of Agriculture conveniently stopped defining farmers according to race in the early ’80’s.
The apologists for this settlement argue that more than $50,000 can be obtained by going Track “B”. However, the hurdles are set a lot higher for farmers to jump over to obtain such a settlement. And by the way, there is a clause in this settlement that prevents these farmers from appealing the verdict of the arbitrator or ever asking for relief again from the government, even if they may later find that they were damaged more or found more evidence to substantiate their claims. This is significant because the farmer must elect to go Track “B” which requires proof of discrimination like it would be required in a court case but does not have the right of “discovery” as in a course case. This “discovery” issue is important because each Black farmer is required to present a white farmer who was “similarly situated” who got loan services that he was denied. How is one to get that information, if he can not see the records of the white farmers filed with the Farmers’ Home Administration (FmHA)? It was because of this very issue that I was brought in to help farmers who wanted to go “B” see if they could “prove” damages sufficient to warrant the risk in going “B” instead of “A”. Because once you go “B” and lose, you can not go back to “A” and apply for $50,000.
Economic Impact of Discrimination
The rest of this analysis was discovered in the process of researching a way to prove discrimination and damages without access to the records held by the USDA. First, can a trend of discrimination be determined and identified? To do this we chose the top 40 counties in Georgia with respect to acres of land in farms. Then we got the percent of Black population for these counties as recorded in the Georgia Statistical Abstract for 1982. We found that as the percent of Black people in a county increases so does the average size of farms in that county. In fact according to the r-square statistic, over 62% of the variance in the size of farms is explained by percent black population. This is counter to what one would expect since Black farmers are traditionally small farmers when compared to their white counterparts. We checked this analysis by looking at the size of black farms as a function of percent black population and we found that there is almost no correlation .
So what are some reasonable explanations for this observed trend? We found that as long as the percent of black population is low, between 12% and 33%, there is no upward trend in size of farms. However, as soon as the one-third level is reached, then farms start to get progressively larger from an average of about 300 acres, moving up to over 700 acres as they approach 60.8%. The last figure of 60.8% represents the percent black population of the county of Terrell. This is the same county that S.N.C.C. targeted in the 60’s as one of the worst counties in terms of poverty, disenfranchisement and out right racism.
To get a better picture of what was going on, I asked black farmers in Terrell County, Ga to give me a list of 10 black farmers and 10 white farmers that were farming and dealt with FmHA in the early ’80’s. I suggest that a research project be funded to carry out this same type of analysis in all counties of the South with black populations above 33%. With this list I went to the county courthouse where the UCC-1 files and deeds are kept. From the UCC-1 files I developed a list of FmHA transactions of these farmers and from the deed records was able to obtain information on the amount of loans, collateral attached, interest rates and terms.
In 1978 according to the Census of Agriculture there were 31 Black farms in Terrell county averaging 148 acres each. However of the 10 Black farmers that were still alive in 1998 only 6 (six) still owned land and none were actively farming. The average size of land holdings was now 13.84, an average loss of 134.16 acres. This represented an average loss of $224,450 in terms of land, buildings and equipment at today’s prices ($1,673 per acre). In other words the Black farmers in Terrell county lost about everything from 1978 to 1998. What happened?
We compared these 10 Black farmers who at least got one FmHA loan to 10 white farmers who got loans from FmHA. First of all when I asked Black farmers to identify white farmers that got FmHA loans they were right about one half the time. I had to start out with a list of over 20 white farmers to find 10 that had loans from FmHA. Many times the white farmers would get guaranteed loans or loans from banks, production credit associations and land banks. The Black farmers told me that sometimes when they would go to the FmHA office and there were white farmers in the office before them, they would let the white farmers out the back door making it impossible for the Black farmers to find out what was being offered to white farmers.
In 1998 according to the tax records the 10 Black farmers owned a total of 138.41 acres of land with a tax value (40% of market value) of $349,969, while the 10 white farmers owned 2725.83 acres valued at $2,503,939. The Black farms averaged 13.8 acres, while the white farmers averaged 272 acres. Now if we compare the number of loans received by each farmer according to the UCC-1 records at the courthouse, we see that Black farmers received an average of 4.3 loans from 1978 to 1994, while white farmers received twice that amount, 8.2. But what is more shocking is that none of these Black farmers got any of the 3% loans that were supposedly set aside for them in 1978 and 1979. Instead, 5 white farmers received a total of $943,480 of 3% loans in 1978 and 1979. In fact one white farmer alone received $532,850.
We compared relationship between the present acres of land owned by our 20 farmers and the amount of 3% loans received by them. As the amount of 3% loans in 1978 and 1979 increased so did the amount of acres owned in 1998. In fact 42.5% of the variance in acres owned can be explained by the amount of 3% loans received.
To get deeper at possible causal effects we ran a number of regressions using “acres” as the dependent variable and using “race”, “3%loans” and “UCC” as independent or predictor variables. The best overall model, according to a high r-square, high F-ratio and low probability of no relationship, was model 3. This model states that the number of acres owned is a function of the race of the farmer and his access to 3% loan money. 63.8% of the variance in acreage can be attributed to these two variables. What this means is that if the Black farmers received the average of $94,348 in loans at 3% in 1978 or 1979 they would now own an additional 61.5 acres each, valued at $102,914. If the $40,000,000 that was supposed to go to Black farmers wound up in the hands of white farmers as it did in Terrell county, then this program was responsible for the loss of 26,080 acres of land from 1979 to 1998.
Remember now, we are only looking at relatively small white farmers and not the larger white farmers who benefited in years passed from the government financed production credit associations, land banks and banks for co-operatives. The $40,000,000 of 3% money was supposed to help redress the ills already incurred against Black farmers, but instead was used by the next rung of white farmers to move up a notch. The more Black farmers there were in a county meant the more 3% loan money that would be allocated to that county, which meant that in those counties white farmers got lucky.
These were 7 year loans which matured in 1984 and 1985, which meant that they carried over and through the major farm debt crisis in the early 1980’s. These white farmers were thereby insulated from the rest of the farmers because they were given cheap money that was supposed to go to Black farmers. The interest expense on a $100,000 loan held for 7 years at 3% is $12,354, while at 8 percent (average Black farmer rate) the accumulated interest amounts to $34,450, thereby providing a net savings of $22,096 which could be used for other operating expenses or capital improvements, which could have made the difference in the survival of that farm operation.
Of course this particular law suit does not go back to 1978 and 1979. It starts in 1981 when the 3% money has already been given out to the white farmers, which is unfortunate. By the time the Black farmers get into the FmHA office the interest rates have climbed to 8 and 10%. This is why the number of UCC-1 files does not show a strong relationship with the number of acres once you control for the 3% loan money. We have to look at the amount of money, length of loan, interest rate, timing of the loan and whether the loan was a “supervised loan” or not to be able to see why Black farmers faired worse than white farmers during the 1980’s and 90’s. We must also look at the average returns to assets during this period to understand what was happening. For instance, if the returns to growing soybeans was 4%, which it was from 1987 to 1997 in Georgia, and the cost of capital was 8%, then the farmer lost 4 cents for every $1 that he borrowed. In other words the farmers were living off of their equity during this period which forced many farmers out.
So now the farmers in the law suit are asked to prove that they would have made a profit if FmHA did not discriminate against them from 1981 to 1996. The government responds by saying for instance, “…soybeans did not make a profit during this period so we did you no financial harm by not loaning you money.” It will be interesting to see what finally comes out of the lawsuit. Remember Judge Friedman warned the Black farmers that the courts would not be the arena to get justice. The USDA did not admit guilt in the lawsuit nor did it promise to not discriminate in the future. Therefore the USDA can only be reformed in the political arena.
When the government uses the cost and returns data to argue that the Black farmers would not have made a profit, this begs the question of how then did the white farmer survive in this environment. Were there programs and moneys set aside to keep these white farmers afloat that were not made available to Black farmers?
There are two lessons to be learned from this. The delivery system did not work then and with the same mentality in these counties today, any new program earmarked for Black farmers will not reach the majority of them now. The white farmers will take the benefits, gaining not only a comparative advantage over the Black farmers in their area, but also gaining an advantage over other white farmers who do not have Black farmers to suck off of.
In light of what we discovered next, the injustice done to these Black farmers is more bloody. One white farmer, the same one that got $532,850 got a number of other loans and loan services. In fact this farmer got a continuance on his loans that were past due by two years in 1985 and in default, and got a new loan for an additional $200,000+. Although this farmer was worth over $400,000 in land and buildings in 1998, according to the courthouse records he never paid these loans back while continuing to farm and borrow money from the local banks.
Dividing the “Farm Block”
Could this farmer have benefited from the softwood pine tree growing program which deferred his USDA debts for up to 45 years that was authorized by the 1985 Farm Bill written by the very agricultural committee that Sec. Dan Glickman set on? This is a provision which until 1997 black farmers knew nothing about. Who will read the fine print for these black farmers in future legislations? Could this give-away program to white farmers explain why they got larger while Black farmers disappeared? Did this government give billions of dollars away to help white farmers in the south take the land of Black people, while it gave food stamps to the people in the ghettos to keep their bellies full and unaware?
Since softwood pine can only be grown successfully in the South, was this a giveaway program to southern farmers to divide them from their Midwestern brothers, who were also suffering during the farm debt crisis of the early ’80’s? Can the difference in farm programs and availability of unprotected equity (black farm land) explain the differences in the growth of the value of farms between southern and Midwestern farmers as depicted in Graph 1?
Could the reason why Mr. Dan Glickman was brought in to be Secretary of Agriculture be that he knew how to put the lid back on the worms that former Secretary Espy opened up? Was this settlement without “discovery”, as brokered by Mr. Glickman, a tactic to keep this sordid piece of political history hidden from the public? Mr. Glickman, you were on the agricultural committee and was on the floor of the House when Representative Towns of New York read the report of the Civil Rights Commission begging you for your support to prop up the Civil Rights Division of the USDA in 1983? You did and said nothing then, so why should we trust you now? What can you say to the displaced children of these farmers now fighting to survive in the cities without hope, without dreams, who have seen their fathers, mothers, aunts and uncles deprived of life, liberty and property while being humiliated?
Now this out of court settlement was brokered so that these same men you deprived of dignity will not get the opportunity to tell their stories. This society brands our children as “menaces to society”, while criminals in white collars walk around free with their parents’ lands in their hands. The same government employees who allowed and participated in this great theft are still working or getting retirement benefits from the same taxpayers that they stole the land from, and you ask our youth to be civil. Whose interests are you serving?
Seven billion dollars is a modest figure considering how long this charade has persisted and the size of the cost of re-entry into the agricultural industry has become. If the Black farmers are given a just and equitable settlement, what is the environment of agricultural profitability that they will face? Graph 2 is a chart of the Risk and Returns for a Variety of Agricultural Enterprises in Georgia. As you can see the only enterprise that has a reasonable chance of returning a significant return on assets is dry land peanuts. Most enterprises hover around zero and most Black farmers have already been deprived of their peanut quotas. In other words the government gave the taxpayers’ money away to white farmers when there were programs to safeguard farmers’ incomes, and now is talking about giving crumbs to Black farmers and sending them into a lost cause.
There is no profitability in farming. Although farming represents almost 10% of the Gross Domestic Product it only earns 0.39% returns on assets. On the other hand the industries that feed into agriculture, mining and manufacturing, earns a 3.21% return on assets, while the industries that process, transport and distribute farm products earn 2.82% average return on assets. When one goes out in the rural areas, as I have, you find that the same white farmers and their families that benefited from government programs and subsidies are now the owners of the processing plants, feed and seed stores, agricultural chemical companies, tractor dealerships and banks that the black farmers have to utilize to operate. Black farmers can not enter the new vertically integrated agriculture industry segregated from the type of capital and institutions, such as full-service co-ops necessary for survival in a global market.
Graph 3 demonstrates the steady progression away from the small farmer/local farmers market model of the 1940’s and 50’s to the corporate farm/mega-retailer model of today. With the merger of such firms as Monsanto with Delta Pines and Dupont with Pioneer Seed, soon we will be in model 5, a one-firm-corporately-planned economy. And Black people in America will find themselves in the same situation that Black people in Africa now find themselves, landless and dieing.
Vice-President Al Gore champions the cause of saving the environment from degradation attributed to over population and features countries in Africa as representatives of such a threat. One would assume by reading his book, “Earth in the Balance, ” that Africa was overpopulated. One would think that Africa had the greatest concentration of people per square mile than all the other continents. But a little research in the World Book encyclopedia would show you that Europe and not Africa or even Asia is the most densely populated continent in the world. Then what explains the starvation in Africa compared to the opulence in Europe with its caves and hillsides compared with the vast richness of Africa. Could the vestiges of colonialism coupled with policies of international financiers be responsible for the continual flow of undervalued resources from Africa to Europe and America? Could there be such a “beast” as “The Bloodsucker of the Poor”? Is that “Bloodsucker” alive and well and thriving in Washington, D.C.?
Horror Stories from the Countryside:
While helping the Black farmers determine the economic damages done to them by the USDA, we were told many stories about how the county supervisors got rich by taking Black people’s land:
1. Many Black farmer have told us that as long as they did not try to get loans to buy land, they could sometimes get operating loans. But as soon as they applied to purchase land they were not qualified and not given additional operating capital if they were lucky to buy that land otherwise.
2. Most Black farmers were never told that they could put 50 acres of marginal land in pine trees and get their loans deferred. In the meantime white farmers were getting FmHA loans to buy their farms in foreclosure.
3. A Black farm family in Alabama was forced to sell off their land on their 140 acre farm to pay off their debt and save their home, then told three years latter that they had to get $20,000 to save that same home. Evidently the money that the county supervisor was supposed to put against their debt was not handled properly, so at a later time the supervisor offered them a “write down, buy out” option for $20,000. This family now owes the IRS for taxes on the write down.
4. In a similar situation in Georgia, a Black farmer found out from an outside source that FmHA was offering “write downs” on debts, so he was able to get his debt written down to $160,000. He went to the local bank and secured a loan for that amount which his lawyer was supposed to deliver to FmHA. After two years of paying $20,000 per year against his new bank loan he was given a notice of foreclosure from FmHA. He filed bankruptcy and almost died.
5. Another farmer in Georgia went to FmHA and applied for an operating loan in January of 1981 for $35,000. They approved the loan in March, but he did not get the first installment of the money until June. However, they only gave him $21,000, which they demanded back the next month because he did not live up to some type of agreement. The farmer paid the $21,000 back in July. However, at the end of the year and additional $14,000 of crop insurance money went straight to FmHA and a tax bill from the IRS came in January of 1982. Now where did that $14,000 go, because the farmer only received $21,000 of the $35,000 that was approved?
6. Black farmers were almost always given “supervised loans” which meant that they had to go to the FmHA office to make any purchases adding time and delays in their operations. In addition they seldom knew how much money was still left in their account, nor how much of the income that they were forced to turn over was actually placed against their debts until foreclosure notices came.
7. Black farmers were seldom given loans to buy top notch equipment but forced to buy old equipment from white farmers who had loans from FmHA, or the local banks, allowing these farmers to dump warn out equipment and get the down payment for new equipment. One farmer in Georgia was the farm manager for 12 years with a white farmer operating 2,000 acres of row crops. The white farmer died in 1995 but owed a lot of money to the local bank. The bank loan officer sat down with the FmHA county supervisor and filled out a loan application for, not with, the Black farmer to purchase all the equipment of the deceased white farmer at inflated prices while FmHA would guarantee the note. However, there was a drought the next year, and ASCS refused to pay him disaster money, so he could not pay on the note. The bank foreclosed and suddenly the value of the equipment was much less than the amount of the loan, so they came and took additional equipment not financed by the loan and now are after his house.
8. The yield basis on Black farm land was kept low while the yields on the white farmers were allowed to grow over time. This meant the county average yields were always above the Black farmers. Now the amount of deficiency payments or crop insurance payments was based on the average county yields. Since the Black farmers base was always below the county average, most years they never got deficiency payments while the white farmers got all the money.
9. FmHA was supposedly set up to provide loan services to farmers who could not get loans from commercial banks. However, white farmers would go to the local banks and get short term loans while they were waiting on their government loan check from FmHA. Most Black farmers had to get higher interest credit from the fertilizer and chemical dealers owned by these same white farmers, government officials and/or their families.
10. A black peanut farmer had a bad year due to a drought. He was not allowed the common practice under such conditions to transfer his peanut quota. He was denied disaster payments and the next year his allotment was taken away because he had not used it in the previous year.
11. A common method of hiding discrimination in a given county was to always have one are two Black farmers that would get money and a few white farmers who would be denied money. Usually the token Black farmer was allowed to sit in on committee meetings, but not allowed to vote.
12. When Black farmers were forced into bankruptcy, the courts would pay off the white creditors while leaving black creditors stranded.
In light of the above information the choice of a “Monitor” for the class action suit is crucial to insure a modicum of justice in this faulty process. The monitor must know farming and USDA programs and stipulations to insure that Black farmers get a fair hearing.
After the lawsuit, since the USDA has not admitted discrimination nor promised not to discriminate, there must be another delivery system of programs and money set up to give Black farmers a chance to compete in this new economic environment. The USDA has proven itself to be incapable of fairness and justice while continuing to foster programs and research to hurt Black people
We recognize that only congress has the ability to formulate the specific legislation to help remedy the plight of the Black farmer. The question is how to generate the necessary political will to carry the vote and sustain its implementation.
Present Statistics of Lawsuit
Top of page
Main Page
