July 23, 2021 Dispute Resolution Magazine

Sowing an Updated Dispute Resolution System

The time has come to reinvigorate mediation programs - and make sure they serve all members of the US agricultural community

Janie Simms Hipp and Toni Stanger-McLaughlin

Introduction: how we got here

In the 1980s, the agriculture sector was dealing with many shocks to the system. As a history published by the Federal Deposit Insurance Corporation (FDIC) notes, the agriculture production increases of the 1970s caused "inordinate excess followed by a harsh reversal," a boom-bust pattern dramatically different from normal agricultural cycles. The bust was a tornado of increased land prices, a lack of stringent agriculture lending regulations, inflation, and trade battles.

The agriculture sector has been built on trade among nations for centuries. Various authoritative sources have charted the startling statistics. In 1970, as the FDIC history states, exports of agricultural products were at around $6 billion (11% of all production) but by 1981 exports had risen to a peak of $44 billion (or about 22% of all production). But in 1982, according to another government publication, grain exports fell by 7.3 percent, and in the next two years, overall US agriculture exports had declined by $6 billion, a dramatic drop that left farmers reeling. The monetary policies of the 1980s, initiated to control inflation, in combination with a reduction in foreign demand for agricultural products, exacerbated the direct and indirect burdens on producers. While this is a very simple description of a very complex system, the bottom line is that all these actions wreaked havoc on agricultural producers' lives and livelihoods. 

This combination of factors led the nation into what has been called the Farm Financial Crisis, a phenomenon that is now the subject of agricultural economics and policy classes around the country. What many of those courses might not focus on, however, is the fact that these events came at a time when dispute resolution resources, processes that agricultural producers could have relied on in real time, were lacking. Without any such resources, farm and ranch foreclosures escalated in many areas around the country, with no chance to hit a "pause button" so agriculture producers could reassess their situations and work to recover or recapture their operations. As one writer noted in a chronicle of the farm crisis in Iowa, the Farm Credit System (FCS) "adopted an aggressive campaign to push delinquent borrowers into foreclosure . . . [borrowers] were delinquent because of their low income and their increasing expenses, neither one of which they could control."

Lending in a time of crisis

When the Farm Financial Crisis hit, the nation's banking sector was in an upheaval. The savings and loan industry was under assault and collapsing, removing local financing resources from many small communities. The Farm Credit System, or FCS, which had substantial holdings in farmland mortgages, was especially hard hit by the decline in farmland prices. In 1984, the principal credit agency of the US Department of Agriculture (USDA), the Farmers Home Administration (FmHA), estimated that about 30 percent of the $22 billion in FmHA loans outstanding were delinquent. Interest rates soared into double digits (by 1980, the prime rate average was 15.3 percent) with no clear sense of when they might decline, which meant that agriculture producers had a hard time getting and servicing capital. Farmers and ranchers need to buy expensive equipment, so high interest rates affected those purchases, too. Agriculture bank failures reached 51.7 percent, forcing many to seek help from the federal government.

The impetus behind mediation programs           

As foreclosures multiplied, lenders felt considerable urgency to move quickly toward liquidation of farms and ranches, pressure that was especially intense for the FCS and the FmHA, which combined held more than $40.6 billion in real estate debt in the agriculture sector. But they encountered resistance in the courts. In 1983, a group of plaintiffs sued the US Department of Agriculture in Coleman v. Block, challenging the Farmers Home Administration foreclosure practices, which included cutting off access to resources that would support family living and farm operating expenses after a decision to accelerate or liquidate the farm had been made. Once the Coleman class was certified, the foreclosures that were rapidly accelerating through the country were stalled. By November 1983, the case covered 285,000 farmers and stopped 16,000 foreclosures nationwide. 

Coleman v. Block and many other cases filed during this time challenged the authority of the federal government to force farms into foreclosure without recognizing and complying with basic constitutional due process, rushing to foreclosure without giving farmers and ranchers the time or right to contest their debt and provide documentation to support timely payment of the debt or seek means to ensure their continued survival. The Coleman case brought much of the foreclosures to a stop and provided much-needed time for farmers to catch their breath as well as time for other measures to come to the forefront as ways to stanch the bleeding. Sarah Vogel, one of the attorneys who led the Coleman case towards class certification, also provided testimony to Congress seeking other measures to address the crisis that had firmly taken root in rural areas of the country. Farm advocates fought to bring attention to the crisis in the media and more importantly, in the halls of Congress. The complex issues farmers were facing had no easy resolution at that time. 

Because of the advocacy by Vogel and others, the tide finally began to turn in the direction of farmers after the passage of the Agricultural Credit Act of 1987 (ACA). The ACA provided additional rights to agriculture producers to seek and have the opportunity to restructure their farm and ranch debt. Congress also passed the Agriculture Mediation Act during that time, which provided a new program for agriculture producers. The Agriculture Mediation Act included significant new funding to create state-level agricultural mediation programs that could seek certification of mediation programs and launch state-level dispute resolution programs designed to address the unique needs of those in agriculture. Those programs trained mediators at the state and local level who had skills in mediation and also skills or training in agriculture.

The mediation process allowed producers to assemble their creditors in a collaborative manner, with the end game being continued and realigned production systems that allowed farms and ranches to survive instead of the foreclosure practices that were emptying the rural landscape of many working farms and ranches and decimating rural communities. These mediation programs were an essential way to stem the loss of the farms, ranches, and supportive agricultural services that are the very fabric of rural economies.

Other laws and programs of this time provided new help for the agriculture sector, including the provision of much-needed funding for mental health and suicide prevention services for affected communities. Many key national advocacy, legal services, and agriculture technical support organizations still at work today - such as FarmAid, the Farmers Legal Action Group, and the Intertribal Agriculture Council - got their start in this turbulent period.

Racial equity and justice in lending

The farm crisis hit farmers and ranchers who were Black, Indigenous, and people of color (BIPOC) especially hard, exacerbating the long-term impacts that discrimination, injustice, and inequitable treatment have always had on farmers and ranchers who are not part of the white male agriculture establishment.

This country has always had farmers and rancher who are in the BIPOC and women communities, but they are far outnumbered by the predominate white, male agriculture community. They have always had great challenges gaining access to much-needed resources such as equipment, land, capital, technical support, crop insurance, and fuel. And as we all know, in times of economic downturn and scarce resources, discriminatory practices can take on an even uglier turn. We see these same issues arising today. Economic challenges hit those who are already under pressure even harder than those who have experienced generations of access.

During the late 1980s and early 1990s, many in the BIPOC agriculture communities began to gather stories of horrific discrimination. The legal community connected with those communities, and four significant class action cases were filed to try to illuminate and alleviate the wrongs that had occurred and were continuing, and force change on behalf of those communities. The Pigford case (Black farmers), the Keepseagle case (Native farmers), the Love case (women farmers), and the Garcia case (Latino farmers) were all filed during this period but in truth could all trace their origins back to the tumultuous period of the 1980s. Each case remained within the federal court system in active litigation for almost two decades, and each had its own trajectory.

While all the class action cases were ultimately settled through significant discussions involving lawyers for the plaintiffs, the USDA, and the Department of Justice, the cases might never have been settled if not for an administration inclined toward resolution. From the time that President Barack Obama took office in January 2009, securing settlement parameters of the cases to such a degree that claims processing could occur was a priority for his administration.

Why is this history important, and what is the agriculture sector facing now? With climate change continuing to affect agriculture production systems, the COVID-19 pandemic rocking the food supply chains, and economies all around the world reeling, some see a new, far more complex farm credit crisis on the horizon. While some producers are maintaining equilibrium during this challenging time, others are reliving the challenges of prior decades.

The current increases in land values, international trade disputes, and the decline of international economic growth will all have short- and long-term impacts on the agriculture sector. An April 2020 report predicted that COVID-19 would cost farmers $20 billion in net farm income by the end of the year. Farm delinquency rates are now rising, and the Federal Reserve Bank of Kansas reports that the volume of delinquent farm real estate and operating loans increased by 17 precent and 13 percent respectively. Yet some reports show an increase in income among some types of producers, and as the USDA increases farm support payments to ensure stability in the sector, the impacts of those payments is being unevenly felt at the farm and ranch level. The takeaway from these situations is clear. We are in a complex situation - much like in the 1980s - and many of the issues facing producers are again outside their control. Now is the time for us to turn to the past, update the tools created more than 30 years ago, ensure that they serve all members of the agricultural community (not just a few), and put those updated tools into action.

Why agriculture mediation still matters

After the mediation programs were created, the USDA formed an office called the National Appeals Division, which handles the appeal of administrative actions and is a tool for farmers and ranchers to use in addressing problems in relationships and with adverse decisions from the only agency focusing on supporting the nation's agriculture sector. Many lenders that once were required to acquiesce to mediation to maintain their Certified Lender Program (CLP) status as agriculture lenders lobbied states to amend state laws to reduce the requirements for lenders to mediate disputes, thus lessening the positive impact of mediation programs on those they were designed to serve.

Even in the face of uneven support and skepticism toward state mediation programs, by February 2020, 42 states had certified mediation programs. Studies in Minnesota conducted in 1986 and again in 1990 regarding the effectiveness of mediation within the state concluded that the program was successful. Overall, mediation has become a staple of many state court systems, especially in the areas of family law and drug enforcement. Tribal court systems, for example, systematically engage in dispute resolution or community healing and reconciliation.  While the National Appeals Division was created as a system to address adverse actions taken against agriculture producers by the USDA, we still need a system of mediation. Mediation can avoid costly and time-consuming administrative appeals and ultimately litigation, but its best and highest use is to keep people on the land and in farming and ranching.

When it was first introduced, agriculture mediation was an unfamiliar process for both borrowers and creditors. Many people resisted engaging in mediation. While many states embraced the programs created during that previous tumultuous time, unfortunately the state-based agriculture mediation programs were never as widely accepted, adopted, or utilized across the board as they could have been, and they experienced highs and lows, trying to expand and use their teams of qualified mediators for services beyond credit mediation. And, as often happens, we tend to look back on older tools and think they might not be helpful today. But we do not need to recreate the wheel of agriculture mediation programs. We can look at what worked in the past and embrace changes that will allow for a modern, more inclusive program.

Some are now calling for a new generation of agricultural mediation suited to today's realities. The number of agriculture producers is declining, and transition to the next generation of food producers is crucial.. The agricultural finance system is becoming more and more short-term in its lending practices. The crop insurance system is more robust than it was, but in many cases it disincentivizes climate-smart land and resource management in favor of ensuring short-term income security. Any new approach to agriculture or the systems that support it must have resources tailored for both large and small operations because their needs can be dramatically different. The vast majority of the nation's farms and ranches are small to mid-sized, and most new and beginning farms and ranches definitely fall into that category. In addition, BIPOC producers need advocates who have the expertise to tailor their services to the unique needs of communities whose farming and ranching operations tend to be small to mid-sized and who grow much more diverse agriculture products than those of their large-scale counterparts.

Inclusion is still essential. Even as states enacted mediation laws and incorporated the USDA mediation program certification, many communities within those states were left out of participation. Tribal governments, which have their own jurisdictional authority outside that of the states they reside in, were never served by agriculture mediation programs. Furthermore, many tribes are now creating their own agricultural laws, and if their programs seek to become certified as agriculture mediation programs, the laws governing those programs would need to be re-examined to determine whether amendments are in order.

Much is at stake. Chester A. Bailey, who was then working at USDA, explained it well in 1994. "When agricultural business is lost in a small town," he wrote, "a ripple effect occurs. With each job lost, there is less money spent at the local service station, the grocery store, equipment dealer, and farm supplier. Soon the local tax base is eroded, school budgets are affected, and major local employers go out of business or are disrupted."

If we do not approach the 2020s and beyond with creativity and problem-solving that secure the future of individual and independent farmers and ranchers, we could lose an entire next generation of those producers and suffer the ripple effects of their loss for decades. What assisted farmers in the 1980s and 1990s can help farmers in 2020 and beyond - as long as those tools and programs are updated and revised to meet today's needs.

Supporting a new, diverse cadre of mediators to help our domestic food producers - whether in rural, urban, tribal, or suburban locations - will benefit a new generation of farmers and ranchers. Ensuring that the mediators of tomorrow are as diverse as the communities they serve will improve the delivery of much needed mediation services. What Chester Bailey noted more than 25 years ago still holds true: when we save producers, we also save the agricultural economists, the communications and media creators, the scientists, the lenders, the veterinarians, the lawyers, the conservationists, and the Main Street businesspeople who are all critical to our communities.

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    Janie Simms Hipp

    CEO of the Native American Agriculture Fund

    Janie Simms Hipp is the CEO of the Native American Agriculture Fund, which provides grants to eligible organizations for business assistance, agricultural education, technical support, and advocacy services to support Native farmers and ranchers. She was the founding Director of the Indigenous Food and Agriculture Initiative at the University of Arkansas. She can be reached at jhipp@nativeamericanagriculturefund.org.

    Toni Stanger-McLaughlin

    Native American Agriculture Fund Regional Director

    Toni Stanger-McLaughlin serves as the NAAF’s Regional Director and federal liaison. Previously, she served as the director of Tribal relations for the Indigenous Food and Agriculture Initiative. She can be reached at tstanger@nativeamericanagriculturefund.org.