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US ag has a role to play in delivering racial equity

Politically fueled opposition to USDA's debt relief program for black farmers highlights the opportunities available for investors willing to harness ag’s unique potential to contribute to social change.

A US Department of Agriculture debt forgiveness program for Black and minority farmers was challenged and put on hold in June 2021, on the grounds the relief package racially discriminated against White farmers.

The dispute reflects a continued politicization of policy – political interests have helped finance the challenge – that threatens to obscure agriculture’s potential role in racial equity among public and private institutions in the US. It also highlights the uniquely tangible social impact available to agricultural investors who are willing to engage pressing issues of racial equality.

“People can debate whether redress is important or not, but looking forward, the US economy benefits from having more inclusion with respect to who owns business, who owns farms, etc. I am in favor of us proactively identifying ways to do that,” McKinsey partner Shelley Stewart told Agri Investor.

Stewart was among the authors of a McKinsey paper that estimated bringing the performance of Black farmers in line with their peers could create $5 billion in economic value. “The federal government has decided that one way to do that is to forgive loans,” Stewart said.

McKinsey’s paper suggested private investments aimed at helping Black farmers bridge the gap with their peers could become part of in-house ESG initiatives.

A key figure in the decades-long drive for debt forgiveness has been John Boyd, a Virginia farmer who is president of the National Black Farmers Association. He told Agri Investor that after having been promised up to $5 billion in debt relief that was due to take effect this year, his organization has since been forced to shift focus toward responding to legal challenges to USDA’s program in 12 states.

“There hasn’t been any support from corporate America to help me with this, and that is shameful,” he said. “You have all of these diversity reports that these companies put out, and they are reading these headlines, but won’t help me.”

Although the most impactful form of support, according to Boyd, would come in the form of direct investment, help with funding legal challenges or easing access to the nation’s top 10 banks and other forms of partnership with institutional investors could also help Black farmers.

“It can be training, equipment partnerships and relationships that they already have, that we do not,” he said. “Farming is about partnerships and relationships and markets; that’s what’s hurting us.”

Black farmers are 3.8x less likely than their non-minority White non-Hispanic peers to use long-term production contracts, according to McKinsey’s report. Boyd described a recent dispute with PepsiCo – which he alleges reneged on an agreement to supply potatoes from Black suppliers – as indicative of how such exclusion has historically helped keep his community from reaching its full potential.

“Many Black farmers are in what we call, in the Black community, ‘slave states’: from Virginia and Delaware all the way down to Texas. We never really recouped from that. We were freed, but free to do what? Free to go where?” said Boyd. “It’s kind of the same story now. I own land, but I don’t have the contracts.”

Landownership anywhere is inextricably intertwined with local history and power dynamics. The owner of any property need not have committed a crime themselves to nonetheless be the beneficiary of past injustice.

Regardless of material impact to distinct portfolios, political interference in the execution of federal spending on agriculture is a trend institutional managers should monitor closely and consider working against.

Although the scale demanded by markets may ultimately keep such efforts from becoming much more than potent symbolic gestures, the most forward-looking among them might heed McKinsey’s call and consider efforts to help improve the position of Black farmers among their ESG-focused agricultural investment strategies.