SPEAKERS CONTENTS INSERTS
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REVIEW OF LIVESTOCK AND HORTICULTURE ISSUES AFFECTING CALIFORNIA
LIVESTOCK AND HORTICULTURE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
MARCH 29, 1999, STOCKTON, CA
Serial No. 10612
Printed for the use of the Committee on Agriculture
Page 2 PREV PAGE TOP OF DOCCOMMITTEE ON AGRICULTURE
LARRY COMBEST, Texas, Chairman
BILL BARRETT, Nebraska,
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
SAXBY CHAMBLISS, Georgia
RAY LaHOOD, Illinois
JERRY MORAN, Kansas
BOB SCHAFFER, Colorado
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
JOHN COOKSEY, Louisiana
KEN CALVERT, California
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
GREG WALDEN, Oregon
Page 3 PREV PAGE TOP OF DOCMICHAEL K. SIMPSON, Idaho
DOUG OSE, California
ROBIN HAYES, North Carolina
ERNIE FLETCHER, Kentucky
CHARLES W. STENHOLM, Texas,
Ranking Minority Member
GEORGE E. BROWN, Jr., California
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
VIRGIL H. GOODE, Jr., Virginia
MIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
CHRISTOPHER JOHN, Louisiana
Page 4 PREV PAGE TOP OF DOCLEONARD L. BOSWELL, Iowa
DAVID D. PHELPS, Illinois
KEN LUCAS, Kentucky
MIKE THOMPSON, California
BARON P. HILL, Indiana
WILLIAM E. O'CONNER, JR., Staff Director
LANCE KOTSCHWAR, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director
Subcommittee on Livestock and Horticulture
RICHARD W. POMBO, California, Chairman
JOHN A. BOEHNER, Ohio,
BOB GOODLATTE, Virginia
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
BOB SCHAFFER, Colorado
KEN CALVERT, California
GIL GUTKNECHT, Minnesota
Page 5 PREV PAGE TOP OF DOCBOB RILEY, Alabama
COLLIN C. PETERSON, Minnesota,
Ranking Minority Member
TIM HOLDEN, California
GARY A. CONDIT, Pennsylvania
CALVIN M. DOOLEY, California
MARION BERRY, Arkansas
MIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
LEONARD L. BOSWELL, Iowa
KEN LUCAS, Kentucky
C O N T E N T S
Peterson, Hon. Collin C., a Representative in Congress from the State of Minnesota, opening statement
Pombo, Hon. Richard W., a Representative in Congress from the State of California, opening statement
Arellano, Vanessa S., director of outreach and intergovernmental affairs, California Department of Food and Agriculture
Cubiburu, Florence, California Wool Growers Association
Page 6 PREV PAGE TOP OF DOCPrepared statement
Hemsted, Jerry, president, California Cattlemen's Association
Jeter, John J., president and chief executive officer, Hilmar Cheese Company, Inc.
Kidd, Kenton E., president, California Apple Commission
Lopes, Loren, California Dairy Campaign
Nelson, Brad, California Poultry Industry Federation
Pauli, Bill, California Farm Bureau Federation
Quick, Bryce, American Nursery and Landscape Association and National Council of Agricultural Employers
Radtke, Rod, chairman, California Citrus Mutual, U.S. Citrus Science Council
Rollin, Paul, chairman, Alliance of Western Milk Producers
Smith, Stephen H., Western Growers Association
Souza, Ray, president, Western United Dairymen
Page 7 PREV PAGE TOP OF DOCPrepared statement
Vanden Heuvel, Geoffrey, director, Milk Producers Council
Zech, William, trade committee chairman, California Asparagus Association
Zoller, Broc, California Pear Advisory Board
Bausten, Gene, executive director, Farm Sanctuary, Inc., statement
Warner, Garen, Livestock Transportation, statement
REVIEW OF LIVESTOCK AND HORTICULTURE ISSUES AFFECTING CALIFORNIA
MONDAY, MARCH 29, 1999
House of Representatives,
Subcommittee on Livestock and Horticulture,
Committee on Agriculture,
The subcommittee met, pursuant to call, at 10:13 a.m., in the Radisson Hotel, 2323 Grand Canal Boulevard, Stockton, CA, Hon. Richard W. Pombo (chairman of the subcommittee) presiding.
Present: Representative Peterson.
Staff present: Christopher D'Arcy, staff director, Subcommittee on Livestock and Horticulture; Brent W. Gattis, legislative assistant, and Andy Johnson, minority consultant.
Page 8 PREV PAGE TOP OF DOCOPENING STATEMENT OF HON. RICHARD W. POMBO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. POMBO. The meeting of the Subcommittee on Livestock and Horticulture to receive testimony on the status of prospects of California agriculture will come to order.
It is my sincere pleasure to welcome all of our witnesses and guests to Stockton. Today's hearing is designed as a broad overview of agriculture in the State whose farmers and ranchers feed and clothe America and the worldCalifornia. We will hear from a very diverse group of witnesses today illustrating the breadth and depth of agriculture in this State, most of which now comes under the jurisdiction of this subcommittee.
From livestock and poultry to dairy and fruits and vegetables to water usage and the farm labor supply. I want to hear of the challenges, obstacles, and opportunities faced by the farmers and ranchers of the most productive and diverse agricultural region in the world. I want to continue the dialog which will enable the policy makers to better understand the needs and share the vision of those who produce the more than 250 agricultural commodities in California. This production has an average value of over $73 million a day, each and every day of the year.
California leads the Nation in the production of over 75 commodities, many of which are exclusive to our State. Nearly one-third of our State's total land area, about 30 million acres, are devoted to agriculture production. It is also a testament to our 84,000 farms that they can produce more than half of America's fruits and vegetables from only 3 percent of our Nation's farmland.
California produce, however, extends far beyond this country. Our farms and ranchers export about 20 percent of their production, worth nearly $7 billion. If California were a country, it would be the sixth leading agricultural exporter in the world.
Page 9 PREV PAGE TOP OF DOC Although our State's production is huge with nationally recognized names and brands, the story of agriculture in California is most often the story of families. Families, individuals, or partnerships own more than 92 percent of California farms.
Our farmers also work hard to conserve its vital supply of reliable water using the latest irrigation management. California agriculture is using less water today than 30 years ago, while producing 67 percent more crops. Success stories like this are the rule in California, and I look forward to more of them.
Looking at the witness list and at our guests here today, I see longtime friends and neighbors. I'm glad to be here with you today, accompanied by the ranking member Collin Peterson, and I hope that we can learn from each other.
With that, I would like to yield to the distinguished ranking member, Collin Peterson of Minnesota, for an opening statement he would like to make. Collin has been my friend and my ally on this subcommittee since I took over chairmanship of it. And we agree a lot, more than we disagree, and he truly has been an ally in our efforts.
OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
Mr. PETERSON. Thank you Mr. Chairman. Thanks for those kind words, and I would echo them back. Richard and I have worked well, I think, on the issues. And I'm glad to be out here in California again and get a chance to find out what's on California agriculture's mind. And I'm going to get Richard back to Minnesota one of these days so he can find out what's going on back there. Because this is a big, diverse country, and we have a lot of different interests that don't always head in the same direction.
As many of you may know, in my Statewe are having a terrible time in certain parts of my State. Especially up in my district where we have had diseases in the wheat, and we literally may lose 40 to 50 percent of our producers in some of our counties. One of my colleagues said 40 percent of the farmland had disease this last go-round. And so we have got a serious situation that's even gotten so bad that my colleagues up north are starting to put in dairies. And so we have got a real problem. In the southern part of the State, we have got hog prices going to collapse, which causes a lot of problems. And so we've got our hands full.
Page 10 PREV PAGE TOP OF DOC Richard and I have been working on the dairy situation since we have been in the leadership of this subcommittee. And, as you know, having a difficult situation with all the different parts of the country heading in different directions. And I'm afraid we are going to have another go-round here shortly because the Secretary is going to come out this week with the order reform, which looks like it is going to make everybody unhappy. And I think what's going to come out of that is there is going to be an effort to legislate 1-A and also to create more compacts, which we in Minnesota don't think is a great idea.
And the one thing I would like to say to you, and some you may agree with me and some of you may not, but I think the best thing we can do in dairy is try to get to one policy for the whole country that levels the playing field. And I really believe that California should be part of the Federal order system. And you ought to be working with us to come up with a policy that's good for the long-term future of the country and the country's dairy industry.
We are a manufacturing area like you are. We have more in common than we have differences. And we ought to be allies and working together. I understand your situation here, but in the long-term, I think we would be better off if you were in the Federal order system, and we could get your help to help us fix it.
I am concerned about what's going to happen with this debate over the compacts and the legislating of the pricing system. I don't know exactly where that's going to go, but we could havethe last time we had a go-round on this, we didn't do so well.
The other thing that my folks want us to look at is to extend the support-price system to 2002. They're concerned about what could possibly happen, especially in light of what happened with hogs recently and so forth. There's concern that if we bring a lot more hogs on line that we could collapse these prices. And the trade situation is not what it ought to be in a lot of areas. So I think maybe some of you have similar interests in that regard.
Page 11 PREV PAGE TOP OF DOC The other thing that I have been kind of working on is the whole issue of where we go in trading. As Richard said, you are interested in trade out here in California, but I still have problems with the way we negotiate these agreements.
One of the things I have been working on in Congress, and would appreciate any support they would give me in California, is to try to elevate the Agriculture Committee to a similar level to the Ways and Means Committee in this trade process. Right now, in that fast-track process, we have to give up our power to the USDA. Agriculture is a big part of the whole trade regime, and we ought to be at the table with Ways and Means. And I think if we all hang tough, I don't think they can get fast-track unless the Agriculture Committee comes along and supports it. And I think we have a possible opportunity to try to leverage some more influence in that trade process. And I would ask for any support you could give me to try to do that.
Lastly, I just want to tell a story. I apologize to the Farm Bureau, because you probably won't like this. But just to show you what can happen when people's backs get up against the wall. Two weeks ago I was at a farm Bureau meeting where there was about a hundred farmers. And they were up in the northern part of my district. And they had a vote. And over 90 percent of the Farm Bureau people voted for increased loan rates andwhich is not where you would normally find those peoplebecause they don't know what else to do. That's how serious things are. They don't know how they are going to survive. So you're going to be seeing pressure from some parts of the country to move in a different direction so that they can try to keep their heads above water.
So we have got a lot of challenges. We have got a lot of opportunities. I'm glad to be here in California and look forward to hearing from you and look forward to working with Richard as we proceed on these issues.
Thank you, very much.
Mr. POMBO. Thank you, Collin.
Page 12 PREV PAGE TOP OF DOC I would like to welcome our first panel here this morning. I know that you're familiar with the timing system here. Your entire written statement will be included in the record. We do limit oral testimony to 5 minutes. The lights are in front of you.
I would like to welcome Ms. Arellano from the California State Department of Agriculture and Mr. Pauli from the California Farm Bureau.
Ms. Arellano, if you are ready, you may begin.
Ms. ARELLANO. I am. Thank you, Mr. Chairman.
STATEMENT OF VANESSA S. ARELLANO, DIRECTOR OF OUTREACH AND INTERGOVERNMENTAL AFFAIRS, CALIFORNIA DEPARTMENT OF FOOD AND AGRICULTURE
Ms. ARELLANO. Mr. Chairman and committee members, it is a pleasure to be here today and provide an overview of the California Department of Food and Agriculture.
California's abundant natural resources, fertile soils, and temperate climate allow it to claim to have one of the most sophisticated food and fiber production and distribution systems in the world.
California agriculture is a $26.8 billion industry that produces more than 350 different crop and livestock commodities. This generates more than $70 billion in related economic activity. This has been made possible through continuing advancements in technology and in the innovation of California agriculture.
This past year was a very difficult one for California's agricultural industry. We rang in 1998 with a series of El Nino storms that left over $531 million in agriculture damage, and we closed out the year suffering through a freeze that caused losses to date of over $700 million.
During a typical California December, we can all picture the types of crops that would be vulnerable to a freeze: artichokes, avocados, citrus, nursery stock, and fall and winter vegetables. By far, citrus was the crop that suffered the most damage.
Page 13 PREV PAGE TOP OF DOC Through these challenging times, the Department of Food and Agriculture has worked very closely with a number of local and Federal agencies to bring the necessary relief programs to California. The actions of Governor Davis and our entire congressional delegation should be commended and have resulted in a swift response from the Federal Government.
The California Department of Food and Agriculture has over 1,700 employees. They are scientists, economists, marketing specialists, inspectors, administrators, and communicators who provide the highest level of service to California's food and fiber producers and consumers around the world.
CDFA inspectors examine meat, poultry, vegetables, fruits, dairy, and other foods, to ensure safety and quality. Pest prevention teams work to prevent infestations of unwanted pests and disease. International-trade representatives help growers to create new markets for their products overseas. And biological control researchers work to discover new, environmentally-friendly alternatives to pesticides. These are just a few of the vital functions CDFA employees perform. Some areas of interest to this committee would be our inspection services, animal health and food safety services, and plant health and pest-prevention services, as well as our trade and export programs.
Inspection services provide consumer protection, grading services, and regulation of a wide variety of agricultural commodities, fertilizing materials, commercial feed, and livestock drugs. One program is the Feed, Fertilizer and Livestock Drug Program which ensures that feed, fertilizer, and livestock drugs are safe, effective, and meet the quality guaranteed by the manufacturer. Our shipping-point inspection service operated under a Federal-State cooperative agreement with the USDA that authorizes CDFA inspectors to use Federal grade standards for fruits, vegetables, and nuts, and issue Federal-State inspection certificates.
Animal health and food safety service protects public health, the health of California's livestock and poultry, provides safety of food at its origin, and protects California livestock owners against losses due to animal theft and straying. One area of interest to this committee would be the animal health component that prevents, detects, contains and eradicates exotic animal diseases through surveillance and control of the movement of animals and animal products.
Page 14 PREV PAGE TOP OF DOC Another area would be the California Veterinary Diagnostic Laboratory System, which operates under the UC Davis School of Veterinary Medicine. This system provides California with the highest quality livestock and poultry disease diagnostic support and enhancement of livestock and poultry and health management.
Plant health and pest inspection services protects California's agricultural and natural resources against damage by exotic plant pests and diseases. The pest-exclusion team keeps serious pests out of the State and stops or minimizes the spread of newly-arrived pests or diseases. Each year California's agricultural border stations intercept thousands of unwanted pests from cars, trucks, and buses entering the State. Plant quarantines are enforced within the State by investigators, inspectors, and biologists, with the help of county agriculture commissioners and other team players to keep out unauthorized agricultural commodities.
A program for nursery, cotton, and seed ensures the highest quality planting materials and fiber. The pest detection/emergency projects team is responsible for quickly detecting and eradicating serious exotic pests that may enter the State. Early detection has led to over 60 eradication programs against Medfly, gypsy moth, Japanese beetle, and other devastating pests. The tools for eradicating pests are constantly evolving each year.
An example of a non-native pest that entered the United States Many years ago is the red imported fire ant. Up until last fall, this pest was not known to occur in California. This pest, which is found throughout the southern United States, was discovered infesting areas of Los Angeles, Orange, and Riverside Counties.
The Department has recently released the plan to begin eradication and control treatments and will continue to work with local, State, and Federal Governmental agencies, the nursery industry, and environmental groups to develop a long-term strategy to deal with this non-native pest.
Page 15 PREV PAGE TOP OF DOC In 1997 California exported agricultural commodities valued at nearly $7 billion, making California the leading agricultural exporting State in the United States. In fact, California currently accounts for nearly 20 percent of total U.S. agricultural exports.
Agriculture exports are important to the entire economy. Some economists believe that $1 billion of U.S. agricultural exports support 27,000 jobs in the U.S. economy.
CDFA's agricultural export program works to increase California's economic well-being by expanding a world-wide market and demand for California food and agricultural products and by assisting exporters of those same California products.
In partnership with Federal officials and county agriculture commissioners, along with other Government agencies, California Department of Food and Agriculture will continue to serve the citizens of California, this Nation, and the world by protecting and promoting agriculture domestically and abroad.
That concludes my presentation. If there are any questions, I would be more than happy to answer them. Thank you.
Mr. POMBO. Thank you.
STATEMENT OF BILL PAULI, PRESIDENT, CALIFORNIA FARM BUREAU FEDERATION
Mr. PAULI. Thank you. Good morning, and welcome to California.
I'm Bill Pauli, a winegrape and pear grower from Mendocino County. I am president of the California Farm Bureau, which represents more than 78,000 farming families.
California agriculture is often portrayed as representing large, corporate farms. The truth is, we are primarily family farmers.
Page 16 PREV PAGE TOP OF DOC Each year it becomes more difficult for California farmers to compete in the world market. Our continued success depends on the availability of cost-effective and efficient crop-protection tools, an adequate labor supply, international trade practices that are fair to California producers, and a dependable supply of water. In the time I have this morning, I would like to highlight these issues.
Implementation of the Food Quality Production Act of 1996. The EPA implementation of the FQPA appears to be on a collision course with California and national agriculture. The EPA threatens to impose major regulatory actions based on questionable scientific methodologies and overly conservative default assumptions.
The Farm Bureau's first priority is implementation of FQPA in the spirit in which the law was passed. We are strongly committed to ensuring its implementation. That includes sound science, transparency, balance, and workability. However, we are convinced that the EPA's current implementation plan does not meet these criteria and will severely hamper California agriculture's ability to produce. Therefore, we support a bipartisan legislative effort to correct this issue.
Water. Agriculture requires water in order to be successful. No resource is more obvious or important or in peril than the water needed to grow crops and maintain agricultural production. The process known as CalFed has been broadly endorsed by a number of California stakeholders because it promised a balanced approach to ensure reliability for all water users who depend upon the San Francisco Bay/Sacramento-San Joaquin River Delta system. Congress will vote on important CalFed funding decisions in the months ahead. This Congressional oversight will help shape the future of the CalFed process, which is critical to all of us.
It is important in CalFed that we account for how the money is spent and what results are achieved for the money invested. Everyone would benefit from an audit of the various funds and activities involved in the Bay-Delta management, studies, and operations so that everyone can begin to assess what works and how much it costs to have a functioning system that everyone can rely on.
Page 17 PREV PAGE TOP OF DOC Accountability is very importantdollars spent for programs accomplished. And it's not just more money for everything but storage, and less money for agricultural water.
Finally, we must not overlook the importance of California meeting its 4.4 Plan regarding the Colorado River water supply. To the extent that California cannot rely on water from the Colorado system, additional exports demand will be made on the Bay-Delta system. We cannot ignore how important the 4.4 Plan is to California.
Livestock issues. For many years livestock producers have been faced with below-cost-of-production prices and increased regulatory burden. To make matters worse, Congress has withheld support for country-of-origin labeling, which will allow consumers to make educated buying decisions and provide a clear choice at the retail counter. It is now time to act. We support H.R. 222, and we also announce our support for H.R. 1144.
Labeling is an issue that's important to consumers. It is a consumer issue, not a market-driven issue. The consumer has a right to know on country-of-origin labeling. For too long we have ignored the demands of the consumer to know where their meat products come from.
Price reporting. Farm Bureau also supports H.R. 693, which requires large packers to report the price, volume, and terms of sale on all domestic and imported livestock products. Price reporting and country-of-origin labeling are very important to us.
International trade. Several areas to mention. We support fast-track negotiating authority. This is absolutely essential to California agriculture. Provide permanent, normal relations with China and continue to insist that China abide by the World Trade Organization rules. Provide continued full-funding for international market development and promotion programs and eliminate unilateral sanctions. We believe all agriculture products should be exempt from embargoes, except in those cases of armed conflict.
Page 18 PREV PAGE TOP OF DOC Labor. We all know the importance of H2A reform and the need for a reliable, constant supply of agricultural labor in our State.
Crop insurance. We need a program that's dependable, affordable, and will provide for insurance on multiple crop-year losses. This is very important to our producers.
Pest exclusion, as Vanessa has already mentioned. It has an impact of about $123 million a year on agriculture. Twenty million dollars from the fire ant alone. Without good, effective pest-exclusion and eradication programs, agriculture, and ultimately the consumer, will pay much higher prices for food.
In conclusion, California agriculture has been the Nation's No. 1 farm State for 50 years. California can and will continue to be the world leader in agriculture production if we can have access to cost-effective and efficient crop production tools, an adequate labor supply, open markets practicing fair trade and free trade, and a dependable supply of water.
We need Congress's help to provide balance in regulatory decisions, whether it's the Endangered Species or the Clean Water Act. As landowners, we bear the full brunt of efforts to save species and to set aside more water for environmental purposes, for our land, and for the growth of our cities.
We appreciate you being here today, and we welcome you to answer questions. Thank you, very much.
Mr. POMBO. Thank you. Thank both of you for your testimony.
Mr. POMBO. Mr. Pauli, you mentioned that the Farm Bureau supports a bipartisan legislation to fix the current FQPA situations. What, in your mind, are some of the essential elements of that legislation?
Mr. PAULI. Thank you, Mr. Chairman. I think there's a number of areas that are really important to us as we try to move forward to deal with that. As I mentioned, when we supported very actively that legislation when it was passed. And we believe that, fundamentally, we have to go back to the understanding of the day when that was passed, which we seem to have gotten away from.
Page 19 PREV PAGE TOP OF DOC But, let me give you some specifics. Section 18 exemptions. We simply need to have an effective interim tolerance system for section 18. Very fundamental. The mandate of real-world data. A real problem in terms of what data we're going to use or EPA is going to use to implement after you get it. Very fundamental that it be real-world, science-based data. A delay in the August 1999 deadline until such decisions can be made based on sound science, not bogus, made-up science.
Tolerance exemptions. You know, one of the things that really concerns us is we are going to have products eliminated here in this country that they can use in other countries. If the intent here is to provide a safer product for human consumption, then how do we deal with the fact that if you use a product, then all of a sudden the consumption continues the same but production from outside our country increases dramatically because we no longer can produce it, is the consumer benefited? No. Only the producer has been destroyed by the fact that he can no longer produce that. Then the consumer is still going to get the same product from somewhere elseuse the same product.
The intent is to equal the playing field and protect good, safe products for all of us. That's all dimensions to the problem. Then the methodologies to incorporate cumulative exposure. Those are the areas that we're concerned about.
I think when you look at my written comments, you will see that we have outlined those areas. But we have to find a way to make it more workable and more beneficial, that protects the consumer and at the same time allows the producers to remain in business.
Mr. POMBO. I agree with you on that. Especially from California where the international market and international trade is a big part of the future of agriculture, and it's important.
But what I have concerns about is something you just mentioned. When we adopt a regulatory environment in this country which drives the cost of production up, whether it's through FQPA, PSA, wetland legislation, what have you, it drives up our cost of production. At the same time, if we are knocking down tariffs between us and other countries, what message does that send to our food manufacturers when the cost of production is lower in another country because of our regulatory environment, and we knock down those tariffs? I mean, their boats are coming into our country. Does that not concern you as well?
Page 20 PREV PAGE TOP OF DOC Mr. PAULI. Well, I think it's a simple issue. Are we going to, as a public policy, drive our processors offshore to secure their source of raw agricultural products? Or are we going to try to find ways to keep our producers in business, not only to benefit the economy and the jobs locally, but ultimately to benefit the consumer? And we think we're going to reverse effects.
We are driving the processors offshore where the regulations are not as effective or stringent. And at the same time we are putting people out of business here in our own processing facilities and causing problems related to land use when we're trying to preserve and protect agricultural land. And you're driving us out of production.
Mr. POMBO. So it's a much bigger issue than any of the individual regulatory regimes that farmers have to face, whether it's crop-protection methods or protection of habitat or protection of wetlands. If you take those individually, you can debate those individually. But as you look at them as a whole, it's a much bigger issue than just those specifics. Because now we are talking about the viability of agriculture in California in the future.
Mr. PAULI. I think, Mr. Chairman, one of the things that if you look at the whole picturewhether it's FQPA, whether it's labor, or whether it's issues related to water and water supplyyou know, on one hand we talk about the need for water in agriculture in order to be effective producers and at a low cost. And yet as you take away our water supply, it makes it pretty difficult for us to produce, while at the same time we're talking about how we can protect and preserve agricultural land and keep it in production. And it's pretty hard to have a Government program that on one hand wants to protect and preserve that land, while on the other hand, it is taking away our water.
So we need to take a look at some of these issues in the whole, not just in very narrow or focused issues. And it's easy to focus on FQPA and pesticide reduction without looking at the whole magnitude of these issues.
Page 21 PREV PAGE TOP OF DOC Mr. POMBO. I have a specific question I wanted to ask you, Ms. Arellano.
I have heard thator at least through the rumor millthat California would not be granted a section 18 for Malathion and that restricted use will only be used upon notification to the EPA of a Medfly outbreak. Can you share with the committee any knowledge you have of that?
Ms. ARELLANO Unfortunately, I do not have knowledge on that particular topic. However, I can find out what I can and report back to your committee as soon as possible.
Mr. POMBO. If you could enter that into the record, I would appreciate it. Because that is obviously a major concern of a number of our producers right now.
Ms. ARELLANO. I will do that, Mr. Chairman.
Mr. PETERSON. Thank you, Mr. Chairman.
Mr. Pauli, I was looking at your testimony on crop insurance. And we have a lot of experience with that. And you obviously have some problems that are a little bit different than ours. The fact that you have gotI think it was written in your testimony. Gary Condit brought up the fact that you have 300 crops, and only 30 of them are covered. You are talking about using pilot programs to try to establish those crops.
I would just caution you in that regard. Because I have passed, I think, three or four pilot programs since I have been in Congress to try to address problems that I have in my district. And they have either been ignored, or if they have been implemented, they basically go back to the same old system that they have been working under. So they don't work.
I just want to use this forum to, maybe, point out someor to, maybe, advocate my point of view.
I really think that we need to try to tinker with this program and try to make it as workable as we can for this growing season. But I have come to the conclusion that to try to fix this system is like trying to fix the IRS or the Internal Revenue Code. So we need to, in my opinion, get rid of the whole thing. Go back to square one and come up with a blank slate and move forward.
Page 22 PREV PAGE TOP OF DOC In your testimony you are talking about that the people that actually need the insurance, they can't buy enough coverage. And if they can, it costs too much. We have the same problem. With this actuarial soundness requirement that's put on the Department, that's what gets us into this problem. So I think we needmy own view, after looking at this, we need less Government regulation in this program orrather than more.
In your testimony you said you want to reimburse companies for development of new products. The more I look at this, I think the Government's in the way. And we need to figure out a way to put more competition into crop insurance. And rather than subsidizing the bottom end, rather than subsidizing the insurers and subsidizing certain products, we maybe need to look at opening this system up so people can develop the products and then bringing the Government's help in from the other direction through reinsurance or in some other way where we are not controlling what the companyor what the product is.
But we're recognizing that this is something that is probably not going to be able to be done in the private sector. And we in the Midwest would very much like to work with you in California in coming up with a consensus on how we can change this system so that it works for producers.
What we needand I think it is probably similar to what you needwe need to be able to buy coverage for our risk. If you have got $200,000 in the ground, you need to be able to buy $200,000 worth of coverage. You need to be able to buy it at a price that makes sense within your operation. That's what we need. And I think we have got to get rid of this crop-by-crop mentality and get to a system where we can buy that coverage.
And maybe what we should do, I think, is insure within our operation. So that if you lose that one crop, but you made some money on the others, you still can make a profit. Maybe the Government shouldn't cover it at that point. It should only come in when you actually drop below the $200,000 that you have got into your operation.
Page 23 PREV PAGE TOP OF DOC I just think we have to take a whole other look at the way we do crop insurance. And we need California in the system. We need all of your crops covered, all of your producers covered, as well as the other parts of the country if we are going to make this work.
So I guess my message to you is that we very much want to work with you on this, and that we need to come to some conclusion that we all agree on.
And I guess I would just like your thoughts on whether you think we ought to try to gerryrig this current system or whether we ought to take a look at a less-regulated, more market-oriented type of program.
Mr. PAULI. Thank you, Congressman.
You know, a couple of things occurred to me, and you commented in your opening statement about the fact that producers in your State who were much more inclined a couple of years ago to support free-market, open-market kind of farm programs, Freedom to Farm Act. And we were there too. But now it seems we sort of changed their mind. I think maybe as we have the discussion on insurance, we need to kind of go back and reflect on that a little bit.
One of the things that is clear to me is so many of our agricultural productswhether we're here in California, north or south, whether we're in oranges or hogs or beef or whether we are somewhere in the Southeast or somewhere up in your part of the countryagriculture as a whole has gone through a very difficult time in the last 3 to 5 years. That's reflected in some of our changing attitudes when you talk about price supports, loan support programs, or crop insurance. And, as you mentioned, when your back's against the wall, programs that, maybe, philosophically you are not very supportive of, look pretty darn good.
And that's what kind of complicates it today. We used to always think of a disaster abatement program as one kind of insurance program. Then we start looking at crop insurance because the length of the disaster tends to be longer because of markets, because of sanctions, because of Government interference, because of interest rates or oil prices or different things that we can no longer directly relate to. And so we started to mix those. And now we reflect on income insurance because the banks have sort of started to say we had better have insurance because we can't predict what the Government programs are going to be related to, all the sanctions or some of the thingsor what the CalFed might be related to the water. So you had better have insurance.
Page 24 PREV PAGE TOP OF DOC A lot of this is being driven by Government regulations and the uncertainties created by Government. That's a big part of the whole issue. And so then, ultimately, as producers with our back to the wall, you are faced with choices, which on one hand we prefer not to take but, on the other hand, are the only alternatives we have. And I know it's a real quagmire as we try to determine for all of our various commodities up and down the Statethe 250- to 300-plus commoditiesand what's fair and equitable to them.
How do they pay in a fair way their fair share, so that when their disaster comes, they can participate. I mean, you knowand you take a look. Who are the commodities who are least likely to want to participate? Those that are seemingly less impacted by regulations and are currently in an up-cycle in the marketplace, or those who have been in the down market for 3, 4, 5 years, and under tremendous Government regulations and pressure are much more inclined to try to find a way. Yet they don't have any money. And yet the bankers tell them, ''Look, if you want to go one more year, you had better find one of your congressmen to carry a piece of legislation to be dang sure you're going to be covered in the event there's a disaster.'' And it's a real quagmire for all of production agriculture all over the country, as well as California.
Mr. PETERSON. I wish we had a better solution.
Mr. PAULI. Less Government regulations would be the first place to start.
Mr. PETERSON. Including, I think, your group would go into and sit down and try to put a new one together to get lessmore marketplace and less Government.
Mr. PAULI. Well, I think on a philosophical basis, absolutely. We recognize the inequities and the inefficiencies and how the insurance itself won't carry itself. I mean, from that standpoint, it's fine.
But I know you are going to hear from some other people this afternoon or later this morning related to the freeze damage with the citrus. You know, our members that are citrus producers and the members that are here today and the producers that are here today to talk about that, their backs' against the wall. And they look around the country and they see what's been done, disaster programs in other parts of the country that ought to be treated equitably and fairly as it relates to their disaster. This is a disaster kind of situation. When you start extending that to crop insuranceincome-balancing, all-risk kind of insurance programs have been talked about, then it gets difficult. And we certainly don't have an answer.
Page 25 PREV PAGE TOP OF DOC Thank you.
Mr. PETERSON. Thank you.
Mr. POMBO. Thank you. We thank the first panel for your testimony. If there are any other further questions, we will submit them to you in writing. And if you could answer those for the committee, it would be appreciated.
So I will excuse the first panel. Thank you very much.
Mr. POMBO. I would like to call up the second panel: Mr. Jerry Hemsted, Mrs. Florence Cubiburu, and Mr. Brad Nelson.
You have heard, your entire written statement will be included in the record. And any oral testimony, I request that you limit that to 5 minutes, if possible. I am going to start over here with Ms. Cubiburu.
STATEMENT OF FLORENCE CUBIBURU, CALIFORNIA WOOL GROWERS ASSOCIATION
Ms. CUBIBURU. Mr. Chairman and Congressman Peterson, I would like to thank you for holding these hearings in the district that the chairman and I both call home. I am Florence Cubiburu, the president of the California Wool Growers, active member of ASI, and long-time sheep and cattle producer. I have been involved in the producing, feeding, and marketing lamb and wool my entire life. Our family operation has survived the loss of the National Wool Act, adverse weather, poor markets, and other challenges that come with choosing a life in production agriculture.
However, there are several policy decisions that I would like to discuss with you today that we, as producers, are unable to control through better production practices or more effective marketing. These are issues that require your attention, help, and action. These factors have created volatility in our lamb market that is threatening the continued existence of the sheep industry in California and the rest of the Nation.
Page 26 PREV PAGE TOP OF DOC Our efforts to attain profitability since 1993 have been drowned in a flood of imported lamb meat from Australia and New Zealand. In March 1997, feeder lamb prices were $1.22 per pound. By December 1998, prices had plummeted 41 percent to 72 cents per pound. Prices for slaughter lambs declined from $1.02 per pound in February 1997 to 61 cents per pound in December 1998. That is a 40.1 percent decrease.
During the Easter-Passover time period last year, we witnessed unprecedented market volatility with our lambs selling for 60 cents a pound. And this year is no better. Slaughter lambs this month have been trading for 65 cents a pound.
Imported lamb meat from New Zealand and Australia, fluctuation in foreign currency, uncertainty and instability in international markets, and protectionist policies of foreign governments have become realities that are adversely impacting our markets.
We need to go back to 1993, to the beginning of the Wool Act phaseout. At that time approximately 56 million pounds of imported lamb meat entered the domestic market. By 1997 the amount had risen by 49 percent to 85 million pounds. It's even risen higher since then. Imports have taken market share from domestic producers. In short, the United States has become the relief valve for excess lamb production from other countries.
The U.S. market is also attractive because we do not have absolute quotas on lamb meat like the European Union. They can sell an unlimited amount of lamb in the American market. Last September the industry united key members of all segments of the lamb industryfrom producers to feeders to packers and processorsin addressing the flood of cheap import product. On September 30, 1998, we filed a section 201 trade action with the U.S. International Trade Commission. On February 9 the Commission voted unanimously that imports from Australia and New Zealand are causing a serious threat to the domestic lamb industry. Last Friday, March 26, the U.S. International Trade Commission announced their recommendation for trade remedy. Once again, their findings were unanimous. They will be recommending that trade restrictions be placed on imported lamb meat over the next four years.
Page 27 PREV PAGE TOP OF DOC Mr. Chairman, we ask for your full support as the ITC recommendations are forwarded to the President. The President will have 60 days to decide on the implementation of trade remedies. Mr. Chairman, we need you to commit to seek implementation of the strongest relief possible and ask for the committee's active support in securing and implementing the most effective trade remedies available under the law.
The wool market continues in a deep depression, with only one half of last year's United States wool clip remaining unsold due to devastatingly low prices. Burlington Industries, the largest purchaser of U.S. wool, recently announced that the company is restructuring with the closure of seven plants and layoffs of nearly 3,000 American workers. They attribute their decision to restructure on foreign currency devaluation and the surge of Asian textile imports. The industry, last November, requested USDA make recourse loans available for wool under the disaster legislation authorizing recourse loans for fiber. The USDA has yet to respond.
Lamb pelts were another key element in determining the price of lamb meat for producers, feeders, and processors. Pelt prices are dependent on our ability to export pelts. However, that market collapsed this fall, due primarily to the Russian economic situation. Pelts that brought $14 in August 1998 are now being salted, dried, and stored, and even discarded to landfills. The pelt credit has simply disappeared. Pelts are included under the GSM credit program, but the industry has no response to this program.
We also urge the committee to press forward with reporting measures to bring equity between the United States and foreign interests for market-price discovery. It is clear that mandatory price reporting is the only avenue left to have imported lamb prices reported similar to the reports made available weekly on domestic lamb.
We also urge Congress to actively pursue country-of-origin labeling requirements. We also ask the committee and the USDA to seek recourse to the deceptive practices of USDA grading foreign lamb. The USDA practice of quality grading imported carcasses leads customers to easily arrive at the conclusion that graded lamb is synonymous with domestic lamb.
Page 28 PREV PAGE TOP OF DOC We also ask that you support forthcoming legislation and administrative actions that will get the National Sheep Improvement Center monies working for the industry.
There are other important issues that I have addressed in my submitted written testimony that are also important to our industry.
Mr. Chairman and committee members, thank you again for visiting this, my home district. And your attentive interest in the challenges facing our industry is greatly appreciated.
Mr. POMBO. Thank you.
STATEMENT OF BRAD NELSON, BOARD MEMBER, CALIFORNIA POULTRY INDUSTRY FEDERATION
Mr. NELSON. Good morning. My name is Brad Nelson, and I am the live production manager for Foster Farms Turkey Division and a board member of the California Poultry Industry Federation. Foster Farms is the largest poultry company in the Western United States and the largest member in the California Poultry Industry Federation.
Today I would like to talk with you about four important issues and our concerns about them. The first one is antibiotic resistance. Questions have arisen again about whether using antibiotics in poultry and livestock production increases antimicrobial resistance among certain human pathogens. This is not an issue of antibiotic residue being in the meat. Critics claim over-reliance on antibiotics on the farm causes pathogens, such as salmonella and campylobacter to become resistant. A case for such a claim has not yet been proven. However, public debate and media reports have resulted in consumer activist groups calling for a complete farm ban on the use of antibiotics that are also used in human medicine. We urge you to consider five key points regarding this issue:
Page 29 PREV PAGE TOP OF DOC (1) Antibiotics are important in poultry production. They are used to treat diseases that appear in the flocks and to prevent diseases from emerging.
(2) Poultry companies are committed to the safe, judicious use of antibiotics on the farm and would not take any deliberate action that would diminish the effectiveness of antibiotics in human medicine.
(3) Any effort at this time to change the approval process for antibiotics would be premature and might actually increase resistance.
(4) The poultry industry has serious concerns about any change in the approval process at this time because the CVM does not have any scientific data necessary to make such a change.
(5) The poultry industry strongly recommends that CVM first conduct a comprehensive, qualitative assessment of the real risks associated with on-farm antibiotic use. The results will determine what changes in the approval process are needed and ensure that regulatory action diminishes, rather than inadvertently increases resistance.
The second item is environmental regulation. The Federal Government has embarked on a major effort to regulate non-point-source pollution that may be attributable, in part, to poultry and livestock production. This is outlined in the EPA/USDA unified national strategy for animal feeding operations.
At the same time, our industry recently presented the poultry environment with a dialog report. This report, which involved EPA, USDA, all segments of the poultry industry, including the California Poultry Industry Federation, State regulators, and other stakeholders, makes way for a voluntary framework to improve water quality. It has the potential to be much more positive as it addresses each State's own important issues concerning nutrient management plans.
Please consider the following points about environmental regulations in poultry: The poultry industry is committed to sound environmental stewardship and is taking proactive steps to further enhance water quality in regions where we produce and process poultry.
Page 30 PREV PAGE TOP OF DOC Second, the poultry industry is concerned that the unified strategy could prove more costly than anticipated while yielding relatively minor environmental gains.
And finally, the California poultry industry strongly recommends Congress approve no new environmental legislation until the results of implementing the Poultry Dialog and State guidelines, like California's own Nutrient Management Plan, and/or environmental guidelines from national poultry organizations have been evaluated.
The third issue is HACCP implementation. FSIS in January 1998 began implementing the new Hazard Analysis Critical Control Points inspection system, known as HACCP. Several problems arose that were examined by Representative Pombo and his committee in May of that year. We appreciate the improvements that resulted from the outcome of that meeting, but we still feel there are some unresolved issues.
By FSIS's own recent admission, the agency is falling behind in its effort to remove old layers of the old inspection system. The agency should be able to provide a timetable for removing the unnecessary layers by January of 2000.
No. 2, FSIS inspectors still are resisting HACCP.
No. 3, the agency still in not fast-tracking new inspection technologies. They are requiring extensive testing protocols for new technologies in the plants.
Again, I want to thank Congressman Pombo and his committee for the outstanding May 1998 hearing and for getting the agency to commit to HACCP implementation improvements. Many improvements in the second phase of implementation are attributed to those efforts.
The final thing I wanted to talk about was about user fees for meat and poultry and egg inspection. We know of no other consumer, producers, or labor industry organization or any other public policy group which supports imposing a food tax for meat, poultry, and egg inspection. We urge you to oppose the administration's request to assess user fees, either in whole or in part, for federally-mandated meat, poultry, or egg inspection.
Page 31 PREV PAGE TOP OF DOC Thank you very much for allowing us to present this information to you today.
Mr. POMBO. Thank you.
STATEMENT OF JERRY HEMSTED, PRESIDENT, CALIFORNIA CATTLEMEN'S ASSOCIATION
Mr. HEMSTED. Chairman Pombo, Mr. Peterson, we thank you for the chance to give testimony today.
California Cattlemen's Association has been in effect since 1917. I am a producer from Red Bluff, CA, and a fourth-generation Californian in the livestock beef cattle industry. Our comments today will focus on some of the most onerous problems that we in the livestock industry face.
I'm sure it will be no surprise our first one is the Endangered Species Act. We think that it needs to be remanaged to where we get sound science, basic science, and third-party peer review on listings. Currently, one individual with anecdotal information can start and complete the listing process for a new species. Additionallyadditionally, delisting a species is almost impossible, even if the species was erroneously listed in the first place.
Second, Government actions after a species is listed most often diminishes the productive value of the land and leaves the landowner struggling to make a living.
The current act does not give protection to landowners who wish to enter into a safe-harbor agreement. If the landowner wishes to comply with such a voluntary agreement when a defendantwhen a defendant in an Endangered Species Act legal wins a decision, court costs and attorney fees should be paid for by the plaintiff. Currently, if the plaintiff is successful, their costs are reimbursed by the Government, and they can initiate another lawsuit against a landowner, frivolous or not. If this is not feasible, then no reimbursement for either party should be the norm.
Page 32 PREV PAGE TOP OF DOC Currently, we're working with the EPA in developing an animal feeding operation strategy. Our members have participated with the EPA in feedlot tours throughout the State and are committed to protecting the quality of water in California. However, conditions vary between facilities based upon species, climate, geography, geology, sources, and locations of the potential water rights. We encourage a simple, streamlined process that assists owners in developing and gaining approval for site-specific plans. We also request that funding for sound, responsive, and technical assistance. We would encourage the committee to work with the livestock industry and the EPA to arrive at a solution that is workable for all involved.
The third thing, death taxes. Death taxes are a terrible thing. Our members work for generations to build ranches, and they can be destroyed in one fell swoop by an individual passing away. Death taxes are to nobody's benefit. Even the environmental community are starting to realize that when a ranch has to pay its inheritance taxes for property, they have to be sold off in pieces to pay that inheritance tax. And we wind up with development taking over a lot of viable ranch and farming ground. The California Cattlemen's urges your support in eliminating this unfair and unnecessary tax.
Private property rights. Taking of private property continues to be of huge concern to our members. We would urge congressional action that would require Federal agencies to prepare takings impact analyses that are fair to the landowners and mandates alternatives be identified that would avoid or minimize the taking of private lands. We also support easier access to court for landowners disputing agency actions and on privateon the taking of private lands.
Foreign trade. The continuation of the USDA's Market Access Program is paramount to our industry. As the global market increases, U.S. producers need assistance in opening up markets overseas that might otherwise try and prevent our products from entering their country. The European Union ban on our beef products needs to be stopped. If the EU does not comply by the May 13, 1999, deadline, the California Cattlemen's Association requests Congress to take strong action, including retaliation. We have negotiated with the EU for a long time, and our producers' confidence in free and fair trade will erode quickly if this is not resolved.
Page 33 PREV PAGE TOP OF DOC As mentioned earlier, there are many ideas on country-of-origin labeling for products entering our country. Our membership has voted to support the labeling of imported products. We believe our membership would like to see labeling at the retail level on imported whole muscle cuts and processed meat products. We are concerned, though, about the cost and the ability to identify and verify products that contain imported and domestic product. Research and evaluation of the process on mixed products should be conducted quickly so that the industry can assess the cost and the benefits associated with labeling mixed domestic and foreign products.
The farm policy. The California Cattlemen's believe that legislation is needed for QUALTO inspection of products where State processing facilities can ship interstate meat products so that they canso that we can cut down and increase the competition for the concentration that has happened in the packing industry.
Right now New Zealand, Australia, and South America ships meat into the United States under QUALTO consideration. We in California cannot ship State-inspected products to another State in the United States. There is something a little wrong with that. Of the food-borne outbreaks in the United States, none have originated from a State facility. They have all been from the concentrated packing industry. So we feel this is a real necessity in increasing competition to the large packing considerations.
We would also like to see the Packers and Stockyards Administration create a dealers trust for the protection of the small cow and calf producers against a commission dealer going over the hill with his funds forof the sale of his cattle to a third party. We have tried this before, and it has failed because of some other interest. But we still feel that it is viable.
Thank you very much for your time. We appreciate presenting our information to you.
Mr. POMBO. Thank you. Thank all of you for your testimony.
Page 34 PREV PAGE TOP OF DOC
Ms. Cubiburu, can you tell me what the projection is for the California sheep production in the next 7 years if effective trade relief is implemented?
Ms. CUBIBURU. We believe, Congressman, that if, in fact, trade relief is implemented, that we will be able to begin strengthening the infrastructure that has eroded so devastatingly since these imports started to flood the country and flood, particularly, California.
I believe that we could, with good conscience, encourage the young people that we are now not encouraging to come into the business. Just because the future looks so dim with the prices the way that they are, I think if we got effective trade relief, that we could encourage these young people to come on the family farm or even the people thatmaybe their parents weren't involved in sheep production, but they're interested in it. So I think that the fact of trade relief is just critical for us, and I am optimistic that if we got it, we would see sheep numbers begin to increase. And it would be a snowball effect for the infrastructure would also become much stronger.
Mr. POMBO. Just to followup on that. If you lose the infrastructure for sheep production in Californiaquite frankly, throughout the countryhow difficult is it going to be to rebuild all of that?
Ms. CUBIBURU. You know, I don't think it's going to be easy. But I'm encouragedas you are well aware, we have the Sheep Improvement Center. There are dollars that will be available, if they ever come forthwith, that could be used.
Presently in California we're in a voting period. We are voting on a State Sheep Commission checkoff. And I feel confident that that will pass, and that will be a good tool for strengthening the infrastructure again.
Mr. POMBO. Recently, California passed an initiative that dealt with predator control. How pervasive a problem is predators within the sheep industry in California today?
Page 35 PREV PAGE TOP OF DOC Ms. CUBIBURU. It's a terrible problem. And it's practically wiped out sheep numbers totally in counties like Humbolt; Mendocino. It's a little more manageable here in the San Joaquin Valley, but there are parts of California that virtually don't have sheep any longer because of the predator situation. And now with this new law the tools are totally taken away from us.
Mr. POMBO. What percentage of production is lost to predators, currently?
Ms. CUBIBURU. Congressman, I really don't have accurate numbers on that. I probablyI would venture to guess that it's probably about 10 to 15 percent.
Mr. POMBO. I am very interested in what the impact on the sheep industry currently is going to be once you have lost the ability to control predators. If you could answer for the recordgive us an idea of what current losses are and what probable losses are going to be once you have lost the ability to control predators, I would be very interested in that. At future hearings that we will have, I am sure this issue will come up all over the State.
Ms. CUBIBURU. OK. I'll get that information to your committee.
Mr. POMBO. Thank you.
Mr. POMBO. Mr. Nelson, we hear concerns that the EPA-USDA unified strategy for animal feeding operations would prove more costly than beneficial. Do you share that concern?
Mr. NELSON. I certainly do. Right now with the poultry company under the Poultry Dialog and California's own Nutrient Management coming in, we are striving for the same goal, and that is clean water. And controlling of a Federal-regulated program is just going to be doubling up of the same goals.
Page 36 PREV PAGE TOP OF DOC Mr. POMBO. There seems to be a lot of concern about permitting under the strategy, but the EPA estimates that only 5 percent of all animal feeding operations need to be permitted as concentrated animal feeding operations. Do you agree with that assessment?
Mr. NELSON. The numbers that they use are just looking at animal unit sizes and saying that they are just branches of this site will be no more pertinent. But also in the regulations it talks aboutthey said in certain water situations, and the majority of facilities do have water runoff. So it really does influence a much larger populationin bringing our operations and many more family farms.
Mr. POMBO. Recently, it's been proposed that States identify their specific watersheds for at-risk watersheds and that any confined animal feeding operations located within those watersheds would be required to get a permit if you just follow along with what they're proposing. One of the interesting things to me is that if you look at identifying watersheds within the State of California, you have everything between the coastal range and the Sierras identified as a watershed. Would that take in a considerable amount of animal feeding operations in your industry?
Mr. NELSON. Yes. That is the part of the regulations that involves so many more feedlot operations.
Mr. POMBO. So even a relatively small family-run operation would still fall within the regulations because of this new way of looking at the entire watershed?
Mr. NELSON. That is correct.
Mr. POMBO. Mr. Hemsted, one of the things that you bring out in your written and oral testimony is the regulatory environment the modern-day cattle operation operates under. Whether that is the environmental regulation under the auspices of Endangered Species, Clean Water Act, and now we're dealing with Clean Air Act, regulations of feedlots, all of this combined, how effective is that in pushing up your cost of productionin production of cattle operations today?
Page 37 PREV PAGE TOP OF DOC Mr. HEMSTED. Well, as an example, todayour markets have been kind of in the tank for the last couple of years. But in today's market, we could be making money if it wasn't for the Government regulations that we're having to incorporate to operate our feedlot businesses.
Mr. POMBO. So you believe that the Government-mandated regulatory environment is putting the cattlemen, at least in California, in a position of losing money?
Mr. HEMSTED. Definitely.
Mr. POMBO. What happens if we have a sustained period of time where it is not profitable in rangelandin cattle operations? What happens to the cattle operations?
Mr. HEMSTED. Well, you lose the family farmer. Today about 85 percent of our producers nationwide have been on their ranches for more than two generations. And you will lose the family farmerthe farm-rancher family. It will be corporate agriculture.
Mr. POMBO. We have already heard that the sheep growersthat you're obviously not going to switch over and raise lamb. What do you do with your ranch?
Mr. HEMSTED. You make it a real estate subdivision. The view line in California will change in the upland areas because they will be guest homes and dude ranches and that sort of thing. So these people can still maintain a certain amount of their land, but it will be used for the next 15 million people coming into California, as projected, by the year 2020.
Mr. POMBO. One of my major concerns with the viability of agriculture in California is that our regulatory environment makes it impossible for people to do business in California and throughout the United States. It's as a result of that we force more and more production and more and more food production offshore. And I don't know what the future of agriculture is if we make it so attractive for our food manufacturers to go offshore. And what happens to all of this open space in agriculture that people in the cities love so much if we regulate you out of business?
Page 38 PREV PAGE TOP OF DOC Mr. HEMSTED. Well, two things are going to happen. Because South America is sitting there, as you probably know, with lots of cattle they have available to come into our market. That's why we have stressed that the North American Free Trade Agreement has still lots of loopholes in it and lots of problems. We need to fix those problems before we go into a lot of South American countriesinto NAFTA, number one.
Number two is what the Farm Bureau said earlier. Let's get our grade stamp that says ''USDA,'' not ''Canada DA'' or ''New Zealand DA.'' It's the United States Department of Agriculture grade stamp. Sure, it has to be inspected for its wholesomeness and its health requirements. USDA inspected does not mean USDA choice steer.
Mr. POMBO. Well, thank you very much for your testimony.
Mr. PETERSON. Thank you, Mr. Chairman.
I am somewhat familiar with the Montana sheep industry, and we have got a little bit in my district. Is your industry similar to running on pasture and run the sheep up in the mountains in the summertime like they do in Montana?
Ms. CUBIBURU. Yes, more or less.
Mr. PETERSON. And the predators, let's talk aboutwere they coyotes, mostly?
Ms. CUBIBURU. Mostly coyotes.
Mr. PETERSON. And the animal damage people are not allowed tolike in Montana, they go out in planesfly around and shoot them.
Ms. CUBIBURU. Welcome to California.
Mr. PETERSON. Although, I hear, ''I like that.''
Ms. CUBIBURU. We're not allowed to shoot them.
Mr. PETERSON. The State stopped this?
Page 39 PREV PAGE TOP OF DOC Ms. CUBIBURU. Yes.
Mr. PETERSON. Well, we have somethingwe're learning a little bit about that. We finally got the timber wolf delisted. Finally, to the point where they are going to allow us to delist the wolf because we have got about three times as many as we need. And they are eating a lot of sheep, by the way, and calves and whatever else.
But now the legislaturethis just shows you how political this stuff is. This Native Species Act is supposed to be based on science and all this. This guy named Ed Meece, has been the defender of the timber wolves and has been the researcher that has done all the work. At one time he was kind of on the other side of this issue. Now he says that all we need is 1,600 wolves. And if we get any more than that, they are going to come over into the farm country and start eating everything.
They set up this commission where they put the Sierra Club and all these people out there. They have now determined we need to have 5,000 wolves instead of 1,600 before we can start shooting them. We have a fight in the legislature right now about whether we are going to be able to hunt or trap the additional wolves. One house has said we can, and the other house said we can't. And we're kind of where the Governor will probably decidemaybe he'll go wrestle the wolves down.
Anyway, it's political, a lot of this stuff, and it really doesn't have anything to do with science. People live in the city. They don't have to deal with this stuff, and they like the idea of wolves running around and whatever. It's a big problem.
Lastly, I was not in favor of eliminating the Wool Act. I was one of those that thought it was going to be a big problem, and it has been. I have people come in and talk to me. New Zealand people, for example, say that we no longer can provide a consistent supply of fresh lamb meat year-round. And so one of their arguments is that wethat if we don't allow them to bring in their fresh lamb, we're going to lose customers because they won't be able to buy it on the shelves 12 months out of the year. I have had some grocery store people and marketing people tell me the same thing. I suppose this is kind of a Catch-22.
Page 40 PREV PAGE TOP OF DOC And what happened was, when you lost the wool and mohair program, it forced a lot of people out of business. So, my question is: Is that true? The State that we are in right now, are there times of the year where there might be part of the country where they can't get fresh lamb on the shelves? Do you know?
Ms. CUBIBURU. Speaking for myself personally, not for the California Wool Growers, because that's a sensitive issue. And there are producers that absolutely do not want to see foreign lamb come in here.
Mr. PETERSON. I understand that.
Ms. CUBIBURU. However, I do agree with that statement. That because of the decline in sheep numbers sinceparticularly since the loss of the Wool Actand thank you for your support, incidently. We need to have some imports come in here. Because we don't want to lose the people that have started to consume the product. However, there is a difference between allowing some and being inundated by it. Iin the corner where we are definitely inundated by it.
And we have our own processors that are also importers. So, it's getting to be a problem that is quite devastating to our industry.
Mr. PETERSON. Well, yes. The only good news is that New Zealand doesn't have any more grass. We were over there. They were switching some of the sheep land to dairies, which is causing quite a problem. So, the biggest problem is they have got all this grass, and they can produce stuff pretty darn cheap.
With the free trade agreements that we have entered intowhich, by the way, I did not support. And NAFTA has got a lot more problems than just South America. But the only good news is, I think there's a limited amount of product that can come in from there because they don't have any more grassland that they can put any more sheep on. So, at some point or another, they're limited in the amount that they can export, which doesn't do us a lot of good right now, but maybe in the long term.
Page 41 PREV PAGE TOP OF DOC I would like to see you do something to stabilize your industry. It's a real tragedy thatto basically make a decision that give our industry away to foreign countries, which is basically what we did when we got rid of the Wool and Mohair Act.
Thank you all for your testimony.
Mr. POMBO. Thank you for your testimony. We will excuse the panel. I don't want anybody to leave. We're going to take just a 2-minute break, and we will reconvene the hearing.
Mr. POMBO. We are going to call the hearing back to order. We have our third panel up here.
We have Mr. Geoffrey Vanden Heuvel, Mr. Paul Rollin, Mr. Ray Souza, Mr. John Jeter, and Mr. Lopes. I want to thank you for joining us here for our third panel.
Let's start with Mr. Vanden Heuvel.
STATEMENT OF GEOFFREY VANDEN HEUVEL, DIRECTOR, MILK PRODUCERS COUNCIL
Mr. VANDEN HEUVEL. Thank you, Mr. Chairman. And Mr. Peterson, welcome to California. We are very happy that you are in California to talk about dairy policy.
The year 1999 is shaping up to be a critical year for dairy policy. And there are two fundamental programs that have supported the dairy industry for decades. And that's the Support Purchase Program and the Federal Milk Marketing Order Program. And both of them have served the industry very well. California has a State order, but we depend for our success on the success of the Federal order program. And we are very concerned about what we see as some real threats to the Federal order program that are coming up in 1999. And we want to highlight a few of those threats that we see to the order program.
Page 42 PREV PAGE TOP OF DOC The order program actually exists to maintain a balance of power between producers as sellers and processors as buyers. And this balance of marketing power has allowed producers to be successful in marking our product.
When we look at what's ahead for the Federal Milk Marketing Order Program, we see the USDA coming out in the next week or two with Federal order reform. And we are concerned about all the talk about legislating differentials and what we see as a real desire to actually supersede the rush to judgment on orders before we really even know what USDA has come up with in these orders. And we are concerned about the long-term viability of the program. Because our history in the past has been that when we began to use either the support program or the order program for something different than what they were intended to do, that we have ended up in trouble.
And so we're concerned about this 1-A versus 1-B discussion that was taking place in Congress. And we want to urge your committee that when order reform comes out in the next week or two that you urge the industry to do thorough analysis. And we need to have some serious policy discussions about the implications of those orders before we rush into positions and politicizing that order. We are very concerned that if it gets overly politicized too early, we risk losing the whole program.
The second thing that concerns us is this compact fever that's sweeping Congress and sweeping the United States. It's very difficult for us. We support producers, and we don't want to make this thing get into regional battles. And we understand some of the concerns, particularly in the Southeast, of producers about income. But we see compacts as having some problems, and we think that if we're not careful, compacts could undermine the order program. And the order program, as we stated, is so fundamental to the long-term success of the dairy industry.
Another one of these very serious threats to the order program is this proposal by Kraft to suspend the minimum pricing provisions of orders to allow for forward contracting. The minimum price provisions of orders is how you maintain the confidence in the order program because it's that minimum price provision that assures processors of equal raw product costs. And it assures producers of getting the market value for their milk. And, so, we see the Kraft proposal as being undermining to orders. And we see that without the orders, the dairy industry starts looking like what poultry and like what hogs are looking at now where you have reduced marketing strength for producers and much more of, almost, a sharecropper relationship with the powerful buyers. So we're concerned about that forward contracting.
Page 43 PREV PAGE TOP OF DOC We think that if you're really concerned about the dairy industry, you want this transition to be successful. We're going to do an awful lot to this industry in 1999, from big price movements to implementing new orders. And we think that terminating the support program at the end of the year doesn't give us a chance to get adjusted to the new order. So we think that there's a very good argument that the support program ought to be continued for a while to allow us to adjust to some of these other things.
The final point I would like to make is on water. And there's been a big concern in California about our ability to grow enough alfalfa to support our industry. And I provided the committee with a chart of the increase in alfalfa acreage over the past year or two. And what we have seen is the water situation is no more surer than it was 5 or 6 years ago. But we are seeing a shift in cropping patterns and an increase in alfalfa acreage. And I think that bodes well for the dairy industry, and I wanted to bring that to the committee's attention.
Mr. POMBO. Thank you.
STATEMENT OF PAUL ROLLIN, CHAIRMAN, ALLIANCE OF WESTERN MILK PRODUCERS
Mr. ROLLIN. Good afternoon, Congressman Pombo, Mr. Peterson. I appreciate the opportunity to present information before the panel today.
I am a dairy farmer and run what we consider a family farm ofwith my two sons, one managing the cropping operation, and one manages the dairy facility. I am chairman of the Alliance of Western Milk Producers, and we appreciate the opportunity to be here today concerning the status and the prospects for the California dairy industry. With the limited time available, I would like to discuss what we call dairy's Y2K problem, the DEIP program and international trade.
Page 44 PREV PAGE TOP OF DOC During the turbulent times surrounding the formulation of the 1996 farm bill, the producer side of the dairy industry agreed to phasing down of the dairy price support program from $10.35 to $9.90 per hundredweight. It was also determined that the support purchase program would be replaced on January 1, 2000 with a recourse loan program.
Whether correct or not, the dairy industry believed that we could see more progress made with expansion of export markets and further opening of world markets to U.S. dairy goods. In fact, due to the European Union maneuvering the allowable subsidized export levels of cheese and butter, and actually increasing the level of subsidy on nonfat milk powder, U.S. dairy export opportunities in any significant quantity are fewer today than they were in 1996.
Let me assure you, the California dairy farmer can compete with any commercial milk producer in the world if there are no subsidies of product sales and no competition from State trading companies. The problem is that this is not the world market today. The world price of dairy products is set by EU subsidies and competing State trading companies. Is that a free market? It is not. And is it a fair market? Not at all.
This is what we call dairy's Y2K problem, the end of the support program safety net with no real marketplace alternatives. Cooperative economists estimate that this will cost milk producers $2.7 million a year in revenue because of a $1.74 a hundredweight drop in the price of milk used to manufacturer cheese, butter, and nonfat dry milk. I might add, that those products then form the basis by which fluid milk prices are set. If those prices are lower, it means the fluid milk price gets lower. The whole market comes down to $1.74.
We understand that Congress is beginning to explore solutions to provide all of agriculture with better risk-management tools, including those involving producer revenues. The Alliance, along with the National Milk Producers Federation, has been actively investigating dairy program alternatives as well. It will be a tremendous challenge for Congress to develop agricultural program alternatives and thoroughly evaluate them this year, let alone enact legislation.
Page 45 PREV PAGE TOP OF DOC All the other commodity programs are phased down over the full term of the 1996 farm bill through the year 2002. Unlike all others, our safety net will be taken away in 277 days. Without a viable alternative, dairy farmers generally, and California producers especially, are facing a financial disaster come January 1, 2000.
That is why the Alliance urges this subcommittee to champion treating dairy farmers like other producers of other commodities who will have their safety net continued through 2002 and do the same with the dairy's safety net. This will give Congress and the industry time to thoroughly explore policy alternatives for the 21st century.
Part of dairy's safety net and a market development tool since before the 1996 farm bill, has been the Dairy Export Incentive Program. The DEIP program has served the industry well. However, it could be of even more use to the industry and to controlling Federal spending if the unused DEIP allocations, totaling some 75,000 metric tons of nonfat dry milk, could be rolled over by the USDA to be reallocated. We need your help in convincing the U.S. trade representative of this. And have it carry forward in future DEIP years. For the past several weeks the Commodity Credit Corporation has been buying 4 to 6 million pounds of nonfat dry milk powder per week at the support price of $1.01 a pound. If that product were DEIPed instead, the Government's cost would be closer to 40 cents.
The Alliance has sent a letter to USDA Secretary Glickman with copies to the subcommittee's chairman, as well as the chairman of the Senate Agriculture Committee. And in the letter we said: Finally, we agree that a rollover of unused export subsidies is legally permissible under WTO. As a member of the Agriculture Trade Advisory Committee has said, and I fully concur, it is time that the United States operates on the same basis as other major agriculture powers, such as the European Union. For the well-being of our negotiating position in the next World Trade Organization round of talks, the United States and USDA need to take an aggressive posture and rollover unused DEIP allocations to the full extent permissible by the law. To do anything else would be detrimental to our position in future trade talks. The Alliance urges members of this subcommittee to urge the USDA to do what Congress directed USDA to do in the 1996 farm bill. Operate the dairy program in the most cost-efficient way possible. Rolling over unused DEIPs will accomplish that.
Page 46 PREV PAGE TOP OF DOC Finally, we are deeply concerned about the prospects for future world trade negotiations. Recently EU announced that progress was made when its members agreed to reduce dairy supports a total of 15 percent, beginning at the rate of 5 percent a year, starting in the year 2003. That is ridiculous. Under GATT I thought we were going to start reducing subsidies 4 years ago, not 4 years from now.
When Congress takes up the issue of fast track, the Alliance urges this subcommittee to lead toin an effort to tell our trade negotiators what Congress expects to see in the next World Trade Agreement brought to Congress to be ratified. To reduce import tariffs, and quotas without an end to dairy product export subsidies would be unilateral disarmament on the part of the United States. It would put the burden of balancing the world dairy marketplace on the backs of the American dairy farmers.
Chairman Pombo, members of the subcommittee, the Alliance appreciates your efforts on behalf of the California dairy industry, and we look forward to working with you on the challenges that lie ahead.
Mr. POMBO. Thank you.
STATEMENT OF RAY SOUZA, PRESIDENT, WESTERN UNITED DAIRYMEN
Mr. SOUZA. Good morning, Mr. Pombo, Mr. Peterson.
Thank you for holding this hearing at such a critical time and giving us the opportunity to testify. My name is Ray Souza. I am a dairy producer in Turlock, CA, and am currently the president of Western United Dairymen.
As you know, the industry is going through an unprecedented transitionmaking milk market order reforms, co-op mergers and realignment, the positioning of the dairy industry in a fair global market, and, of course, environmental issues. Many of these challenges will take time and careful analysis.
Page 47 PREV PAGE TOP OF DOC We feel a 2-year extension of the current support program is a reasonable and appropriate action. We believe they provide a helpful safety net so that the industry may carefully analyze the changes before us and develop reasonable, responsible solutions. We believe it will respond well to the EU's extension of the current dairy programs through the year 2005. And it would be consistent with the time frame provided to other commodities under the Fair Act of 1996.
Western United Dairymen also supports a continuation of marketing orders. Marketing orders have served the industry well. A responsible but orderly marketing of a constant supply, it has a stabilizing effect on producers. The revised orders are expected to be closely aligned with the California State order. And the Western United Federal Milk Marketing Order Committee has set an April 13 date to review the revised Federal milk marketing orders for recommendation to the Western United board. This committee is made up not only of Western United producers and members, but also of other organizations and/or allied groups.
We also wish to express our extreme concern and opposition to forward contracting. Contracting outside of the pool and minimum pricing poses a serious, if not fatal, threat to the pooling concept. It seriously undermined all the good work invested in Federal order reform. It potentially pits producer against producer and region against region.
Western would also support congressional assistance in fair application of new trade agreements. The EU has extended their current dairy program from 2005 to 2006 and will increase quotas beginning in the year 2000. We look to you for guidance and assistance in providing us, the U.S. dairy industry, with options so that we can meet this challenge. We believe that extending DEIP funding has the greatest potential at leveling the playing field with our competitors. And we, too, support rolling over the DEIP funding.
We would also ask you to strongly discouragestrongly discourage sound science-based technology from being used in the marketplace.
Page 48 PREV PAGE TOP OF DOC This concludes my testimony. Thank you for this opportunity.
Mr. POMBO. Mr. Jeter.
STATEMENT OF JOHN J. JETER, PRESIDENT AND CEO, HILMAR CHEESE COMPANY, INC.
Mr. JETER. Mr. Chairman and Congressman Peterson, my name is John Jeter, and I am the chief executive officer and president of Hilmar Cheese Company. I'm also an officer and on the executive committee of the Dairy Trade Organization in California and Washington.
Hilmar Cheese Company is a 15-year-old, privately-held cheese and cheese byproducts manufacturer owned by 11 families, all jersey dairymen, who now produce more cheese on one site in a year than any other place in the world. In today's testimony I would like to highlight what I think are three important key questions.
The first one is: Where is the dairy industry today? First we are coming off the best economic year for dairy producers and dairy processors in a long, long time. We have had a good year.
Second, the dairy industry is in the midst of massive consolidation. The number of significant players is shrinking rapidly, and the size of those left is growing, conversely. And this is true for both co-ops and privates. With the decrease in the level of the support program and its elimination at the end of the year, competitive pressures have increased, fueling potential opportunities and challenges. It's a tougher environment ahead, and the trend of consolidation will continue.
We also continue to see milk production move to the West, and particularly California. The West, interestingly enough, is impacted much less by Federal orders, yet continues to grow, while the Midwest and East struggle to find their place in the changing dairy landscape ahead.
Page 49 PREV PAGE TOP OF DOC The California State milk order has clearly proven to be more responsive, dynamic, and less intrusive than its Federal counterpart. And I think the results have been nothing short of phenomenal to California dairymen and processors.
And lastly, and probably most importantly, in regards to where the dairy industry is today, the dairy industry is at a crossroads. You might say that we have been moving forward toward an industry characterized by less Government intervention and regulation, while looking back over our shoulder wondering if we should go back the other way. We believe that the crossroads we are at is best characterized by the current Federal price regulatory environment and the Federal order reform situation. After, literally, years of work, we will very likely come out with a system that is very much like the current system. It really isn't reform. This result will be liked by those who are less efficient and disliked by the innovative and progressive. It will make those of us in California continue to be thankful that we have chosen not to be in a Federal system greatly impacted by those whose intent is to protect regional areas from valid efficiency and competitive pressures.
So we're at a crossroads regarding: Will we continue the support program or go to another means of income support or insurance like the Dairy Producer Income Support Program? Will we continue using regional compacts an a means of protecting local, regional dairy interests from competitive pressures? Will regulators set prices, or will the market?
I might add that the real issue here is an issue of focus. Will we focus on the customer and invest to meet the new and exciting needs of the next generation of consumers, or will we focus on Government as the answer and invest massive amounts of time and resources to argue about how we will divide up a pie that, in many cases, is getting smaller by the year because of neglect and backward thinking.
An example of this, I think, would be fluid, fresh milk. Typically, much of our energy goes into arguing about how high we can get class 1 prices via regional compacts or other means. And then next we argue about how producers will divide up these extra revenues. As we do thisand look to Government for the answer rather than the customerper capita fluid milk sales continue to decline. Our efforts should be focused on increasing income through innovation, product development, and efficiency. So we're at a crossroads.
Page 50 PREV PAGE TOP OF DOC The next question is: What are the potential opportunities for the dairy industry? And we feel that the opportunities are many and varied. Put simply, milk is the most complete food on Earth. And it was designed to be everything for somebody. Its diverse array of components give endless marketing opportunities for those who have the inclination and necessary skills. And I have listed in my testimony many of the opportunities that are ahead of us.
And one that I'll mention is just the export markets. Some export markets are currently available for those who are willing to invest, like whey and whey fractions. Hilmar Cheese currently exports over 75 percent of its production of whey products. Our export business has grown over 25 percent per year in each of the past 3 years, despite challenges from the Asian economies. There are great opportunities internationally for those with commitment and the ability to understand where they fit.
And finally, the last question is: What are the threats or obstacles that will stop us from taking advantage of the opportunities ahead of us? And I think it gets back to the issue of us being at a crossroads. And the crossroads is more Government price regulation and intervention or less. And the threat to all the potential opportunities ahead is a continuation of a dairy policy that had its origins in the 1930's and has encouraged many in the dairy industry to work at half speed, while other segments of the food industry have innovated at warp speed.
We need to continue to make progress towards moving toward the market and the customer as the answer. We would ask you to stay the course. Continue to demand that Government play a less intrusive role in the future dairy industry. Encourage us to go to the marketplace for answers.
Thank you, very much.
Mr. POMBO. Thank you.
Page 51 PREV PAGE TOP OF DOCSTATEMENT OF LOREN LOPES, CALIFORNIA DAIRY CAMPAIGN
Mr. LOPES. Yes. Thank you, Mr. Chairman and Congressman Peterson.
And I'm representing the California Dairy Campaign, about 350 family-operated dairy farmers in California. And our slogan is, ''Dairymen Working for Dairymen.'' All our members are also members of the National Farmers Union in Washington DC. And we sell our milk to cooperatives, as well as proprietary plants, and even some bargaining co-ops.
Dear committee members, our objective is to provide dairy farmers with some means of handling the extreme volatility in the marketplace. Traditional price programs have been ineffective because they work in opposition to the marketplace. They created an incentive for overproduction and required Government intervention to purchase surplus supplies. This is inefficient and does little more than keep dairy producers a step away from bankruptcy.
The fact remains that in the production of a perishable commodity, which is a vital nutritional component of most Americans' diets, the farmer is at the market disadvantage. He must sell his products every day, and he must sell it close to his dairy. And by force, his dairy is in a remote area. This means that most farmers have less than three buyers to choose from; and in some cases they only have one. Despite the fact that the buyers may be a cooperative of which the farmer is a member, the cooperative is often unable to offer the farmer a better price than what the national market will bear. Because dairy farmers throughout the United States face the same lack of market power, the national market price is not representative of a truly competitive market.
Recognizing the social value of dairy production, the people of the United States have voted to implement a variety of programs to enable dairy producers to remain in business, despite their lack of bargaining power in the marketplace. Some of these programs have worked; others have been less successful. The California Dairy Campaign has put together a comprehensive, market-driven safety net program, which assures farmers of a living wage, evens out the extreme fluctuations in the marketplace, and costs less than any previous programs.
Page 52 PREV PAGE TOP OF DOC At the heart of the safety net program is a recognition that if consumers are to be assured of the steady availability of dairy products at a stable price, then our dairy farmers must produce enough milk to meet domestic needs at all times. Because cows produce every day and milk is perishable, the dairy farmer must have an accurate understanding of his part in total domestic consumption. In this modern information age where all production data is tabulated at the State and national level, it is sloppy business management or worse to have the near-constant state of overproduction, which the low prices to farmers would indicate.
The trick is to get our Government programs in line with the actual production data and create programs which help producers to meet America's supply needs without overproducing. The California Dairy Campaign proposal would do this through the implementation of a market-oriented safety net program which is tailored to ensuring stable supplies without overproduction.
The safety net program would be based on the national average cost of production. The cost of production would be used as a starting point because of the need of consumers to have a reliable supply of locally produced milk. It is only through having a reliable supply of locally produced milk that the consumer prices stay low and stable. This is illustrated by the areas of the country which have become milk deficient. In all of these areas, the price of milk has fluctuated and gone up despite the claims of the dairy industry that more efficient producers in geographically remote areas will result in lower prices.
By ensuring that producers will get approximately their cost of production, consumers are guaranteed a stable, reasonably priced, locally produced supply of a significant dietary staple. The partnership between the consumer and the producer represents a reasonable social undertaking, providing that the relationship between producer and consumer is market-oriented and fair.
The only way to ensure that a floor price based on cost of production is market-oriented is by linking the floor price directly to the consumer demand. Under the CDC proposal, producers will be assured of a floor price for the production of a volume of milk equal to the national domestic usage. Production above consumer demands will be forced to compete at world market prices. This is, producers will be assured of world price only, not cost of production. This would create a disincentive for producers to produce more than the domestic needs. Supply would be tailored to demand, and prices would remain at more stabile levels. Similarly, without overproduction, it is unlikely that prices would fall below cost of production, and the Government program would not be required.
Page 53 PREV PAGE TOP OF DOC By making this support program work with the market signals, instead of against market signals, the CDC proposal will save taxpayers millions of dollars and will ensure a living wage to farmers and will preserve stable, local production and will ensure that consumers receive a high-quality, reasonably-priced dairy product.
Also, we do support one national price for manufactured milk. We also do support California entering the Federal milk marketing order. However, there has been some problems with the Federal marketing order this year. And the California system seemed to out-price the Federal order system. So it didn't give us a lot to sell this year.
We also want to expand DEIP as much as we can and roll it over. We also support an extension of the support programsomething like 3 percent of the domestic usage. And we support country-of-origin labeling and also investigation of the path of concentration.
And that's my testimony, and I thank you.
Mr. POMBO. I thank you.
I thank all of the panel for your testimony. Obviously, there are a number of different views when it comes to California dairy and the right direction to go. Not having any desire to relive what we went through in the 1995 farm bill and the difficulty that that was to come up with some kind of dairy policy that would work nationally, but I would remind you, the panelists, that I believe we went through probably 35 or 40 different rewrites of national dairy policy.
And as we went through that process and came up with a new way of handling it, someone else would have a problem. And we would try to deal with that problem. And once we did that, it would cause someone else to have a problem. And we rewrote and rewrote and ran the numbers and tried to figure it all out.
We finally got to the floor with that legislation, and someone else came in with a different piece of legislation, one that some of you supported. And that passed. And now that it passed, we're a couple of years into this, and it's not working out so well. And now the threat is that we're going to bring more legislation to the floor to undo what many of you thought we should do before.
Page 54 PREV PAGE TOP OF DOC Once we open up this door, there's no going back. And whether we end up back with a fully-regulated, Government-mandated dairy system, which some of you may want, or whether we end up with a totally deregulated dairy system, which some of you may want, I can't tell you. Because when this thing hits the floor and we open up that door, I can't tell you where the votes are going to fall down. And I can't tell you what which direction the momentum is going to carry us.
If there is legislation brought to the floor that mandates a 1-A proposal, there will be legislation on the floor that mandates a 1-B-type proposal, and there will be legislation on the floor that mandates total deregulation of dairy. And there are advocates for all those positions. And who ends up with the most votes at the end of the day, I wouldn't even venture to guess at this point. It all depends on what the latest spin is.
All of you are very well aware of the latest campaign in California that's going after the dairy industry. You are very well aware of the spin that's put on the average consumer that somehow the dairymen are getting rich off the current program, and it's a Government-mandated program that's driving up the cost to the consumer. I'm sure that you would all have something to say about that as to whether or not that's an accurate depiction of what is happening in the dairy industry. But I do think it can point out to you just how powerful a media-driven advertising campaign can be in dictating what the average consumer believes is happening in the dairy industry today. Very little of it is based on reality, but it's what's being proposed out there.
And if you take that to the national level and you allow this thing to come out on the floor, I don't think any of you are going to be happy with it where we end up on it. I know that it will take out of the control of this committee anything that we can do with dairy once that happens. We have had this happen to us before. Collin said something about this in his opening statement. But you take out of control of the Agriculture Committee which direction we're going to go by opening this thing up on the floor, and you are truly rolling the dice with the future, because you won't know where we end up with it.
Page 55 PREV PAGE TOP OF DOC And we have had testimony here today that outlines some very different ideas on what the future of the dairy industry can be. And it may be on one end, or it may be on the other end. But we really don't know at this point where that's going to go.
I would like to ask you in regards to forward contracting and what some of the concerns are. And I know, Ray, you brought it up in your testimony. I would like to explore this a little bit more with you in terms of what your concerns are in terms of having forward contracting as an option.
Mr. SOUZA. Our main concern, of course, is the suspension of minimum pricing. And what you do in forward contracting is you support up a pricing system outside of the order. And I think that is a direct threat to the pooling concept. Someone spoke today about the consolidation of processors today. I think the producers are going to have to be empowered as well. And by setting up an outside system, I think it's really to the competitive advantage of the processors and those buyers of our milk.
Mr. POMBO. Why do you believe it's not an advantage to the producer to be able to lock down a price?
Mr. SOUZA. Well, we don't have a problem locking down the price, as long as it's above the minimum price set by the orders. That's when you pit the producer against producer and region against region. I think you go against the whole entire process of market orders.
Mr. POMBO. Do you think that there are producers, on a voluntary basis, who would lock in their price over a period of time that's below the market order?
Mr. SOUZA. If we're talking about locking in a supply, we can do that today. Yes. And I think that's always aproducers that would take advantage of that if it was afforded to them. But I think today, with the consolidation that we see going into the industry, it is more imperative that we have this pooling system today than it has ever been before.
Page 56 PREV PAGE TOP OF DOC Mr. VANDEN HEUVEL. Congressmen, I echo Mr. Souza's concerns. The Federal order programthe existence of orders has caused the dairy industry to develop in such a way that producers are empowered. Producers in the dairy industry have some marketing power because of the order system. It is the minimum price provisions in the orders that give them meaning. And processors accept orders based on the premise that there is equal raw product lost in most processors. If you allow someone to come into an order and forward contract at a different price, it creates competitive pressure within processors. And soon the willingness of processors to live in an order system that allows their competitors to have a better price or a better advantage than them evaporates.
So you can have forward contracting or you can have orders, but I don't think you can have both.
Mr. ROLLIN. Mr. Chairman, in addition, there are vehicles out there presently available in terms of options and futures markets in the Chicago Mercantile Exchange and also in the Coffee, Sugar, and Cocoa Exchange that allow producers to protect themselves for prices, if they so choose.
Mr. POMBO. Mr. Jeter.
Mr. JETER. I guess one of the issues is the customer. And the customer wants stable prices. And to get stable prices is by forward contracting. And so, to me, it's a just a change the industry needs to implement and go through. We need to be innovative. We need to do this. And for us being private co-ops today, can forward contract. Their shippers are their owners. And we are at a competitive disadvantage in a day the producer goes to a co-op versus us because we have our hands tied behind our back. I guess that's a concern to us. We think we need to go down that road of forward contracting.
Mr. POMBO. Mr. Lopes.
Mr. LOPES. I think the market order system has to be protected at all cost. That's the only thing we have left that creates orderly marketing and guides the money between the processor and the producer. It doesn't really set the price where we would like it to be, but it has some fairness and accountability. But we can't have two orders working against one another. If we lose the Federal marketing order system, it won't be long until we'll lose the California marketing order system. I feel that I'm not being anti-California; I'm just being realistic that we need to be part of this whole national market.
Page 57 PREV PAGE TOP OF DOC A lot of our production goes into the national market. It would make it a lot easier for us to get together and have a consensus to a solution. And I know that it seemed like there was a lot of differences in our testimony, but I think that most of us were saying here that we're not sure that we can step off the cliff to deregulation.
Mr. POMBO. Well, there are people here that would rather have dereg than the current system. But most people are opposed to stepping off the cliff into deregulation. But that's the risk we're taking right now. And once you open up the farm bill, you open it up. You don't just open it up to what you want. You open it up to the whim of Congress at that point.
There are very few Members of Congress that represent the dairy industry. There are very few that have a constituency of the dairy industry in their districts. Most people in Congress represent suburban or urban areas with no agriculture. So you open up this door, and you're taking a real risk as to where we're going to end up.
I'm not saying that we're not going to do it. I'm just saying that once this happens, I can't guarantee where we end.
Mr. LOPES. I can understand that. Do you have any ideas to make it more acceptable?
Mr. POMBO. We have tried over the past couple of yearsboth of us to try to come up with new tools and new ways of looking at this. That's one of the reasons why we started talking about the idea of forward contracting as another tool, as an option that you guys would have.
The response that I have gotten, for the most part from producers, is not really what I expected, in terms of having that option. And if it's totally voluntary and it's an option that's out there, I just think it's something that we need to look at as another tool.
Mr. LOPES. Who would manage the forward contract?
Page 58 PREV PAGE TOP OF DOC Mr. POMBO. Hopefully, you.
Mr. LOPES. Individually, out there in the marketplace, we would make our own forward contracts?
Mr. VANDEN HEUVEL. Mr. Chairman?
Mr. POMBO. Yes. Go ahead.
Mr. VANDEN HEUVEL. I don't think that it's fair to characterize the dairy part of the 1995 farm bill one way or the other at the moment. We have had, probably, the most successful last 6 to 10 months than we have ever had in the dairy business and, certainly, in my lifetime. So if things are pretty good on the dairy ranchand we're just now finding out what orders are going to look like. We haven't seen them yet. In all fairness, we need to give this thing a chance at success. And that's why I'm concerned about trying to legislate fluid differentials, which seems to be the 1-A, 1-B debate. I'm concerned about contracting. I'm concerned about compacts. You know, let's give this reform a chance to work and so let's hold the line.
The only thing that I can say is, if you look at 1999, whatthe events that are going to happen in the dairy industry in 1999. You had high prices, a huge drop in milk prices in February, March. During April, May, or June we are going to be talking and arguing about the implications of Federal order reform.
Whatever is there is going to get implemented the 1st of October. It's the fall of the year. There's a lot of milk that moves around the country in the fall of the year because of supply and demand patterns. They have to do that with those new rules. And then 6 weeks, 7 weeks, 8 weeks later you kick the support program out from underneath the industry, which basically has been the way we have done business in most of our lifetimes.
It's like taking a sick person and giving them four or five different treatments. And we need to be careful about what we do here. And that's why we urge the committee to kind of hold the line and say let's give this thing a little bit of time. There's no one in the dairy industry that ought to be going broke. It's not like we have our back up against the wall. We are a little bit different than some of the other commodities, and we need to be cautioning any kind of radical action.
Page 59 PREV PAGE TOP OF DOC Because, Mr. Chairman, you are exactly right. When we get on the floor, who knows what we're going to have. I think he we need some patience right now, and let this thing work out and not go opening this thing up until we give it some time to get implemented.
Mr. POMBO. I can tell you that both Collin and I have people in our offices every single day from different parts of the country who either have a new legislative proposal that they want adopted which changes current dairy law, or they have a new compact that they want to adopt for a different region of the country. And it'swe see this every single day.
We haven't even seen the orders yet. We don't even know exactly what the Secretary's going to propose. And we already have other members in Congress coming to us saying we are going to have legislation to do a 1-A or a 1-B, before we have even seen what the Secretary is going to recommend. I mean, that train is moving already, and we haven't even seen what the proposal's going to be.
Mr. PETERSON. Well, I think that we all need to keep in mind that the reason we had a good year doesn't have anything to do with the Government. It had to do with the weather. And let's keep it in perspective and not pat ourselves on the back too much.
And I think the second thing I will say is that this is going to be on the floor, whether you like it or not. And it is not going to be rational. There are five people in Congress that maybe understand this; and they may be lying about it. And, the likely outcome is that we will get 1-A legislated. We will get compacts legislated. And we will lose the support program. That's probably the likely outcome of what will happen if this getsthat's probably what will happen.
From our perspective, we don't see where that gets us in the right direction. We don't really mind other parts of the country trying to stabilize their situation, as long as they don't screw up the rest of us. And I guess I have a little bit of a problem with that Mr. Jeter.
Page 60 PREV PAGE TOP OF DOC I understand where you're coming from, but you're probably too close to the situation. You are saying that somehow or another the Government's not managing what you are doing in California. Well, I would argue that you have more governmental involvement than we do in Minnesota.
You have got quotas. California standards. The thing that you have got going is you have got a closer governmental unit that you can actually deal with. And you can get some unanimity, and you can make it happen. But to say that you don't have Government involvement, I don't agree with you.
Mr. JETER. I think I said we were less impacted by the Federal
Mr. PETERSON. Well, right. And you have got to see where we're coming from. We're not trying to undo what you have got, because you are being successful. We have said that if you come into the order, we'll let you keep your quota. We'll look at California standards. We told the Southeast, if you don't have a compact, we'll give you your class 1 differentials.
What we're concerned about is the Government distorting the marketplace to our disadvantage when we can't control it. And that's what's going on with a lot of this stuff, in terms of us in the Midwest. And so, I don't really want to come out here, necessarily, and screw up California. But I don't think we're going to get this fixed if you guys aren't in the loop.
What's going to end up happening is you're going to be used as an excuse as to why we need Northeast compacts, why we need Southeast compacts, why we need Northwest compacts. They're going to say, ''Well, California's got it.'' And because California is a State, they can do it. You know, for these other regions to do it, they need the Federal Government's blessing. But that's, I think, going to be part of the argument.
So, how we get through this quagmire, I'm not exactly sure. I was in a meeting up in the Rules Committee. And there were 49 Members of Congress there. Now, if you know anything about Congress, it is literally impossible to have a meeting and get that many members of Congress to show up. I mean, it's unheard of. And this was about 1-A. And they had the Secretary there. I wasn't supposed to be there, but I went. And they went through this litany of speech after speech about if they didn't have 1-A, the world was going to come to an end. And the Secretary sat there and listened to them for a long time.
Page 61 PREV PAGE TOP OF DOC And finally he says while they were all arguing, we are losing three dairy farmers a day and all this problem. He said, ''Let me get this right. 1-A is basically what we have had over these last number of years. And you're telling us that if we don't keep what we have had that's been losing these farmers, that the world's going to come to an end?'' And I think that kind of sums up what the problem is. We are fighting over this 1-A, 1-B thing, when it is really on the margin of what some of its problems really are.
And the frustration we have got is that, more than likely, this is going to get taken away from us. Because they can't get what they want out of us. So they are going to go to the floor where they can confuse everybody, which is what happened last time. And Richard's right. We don't know what we're going to end up with.
So, I don't know what I concluded from all of that, other than we have got a lot of problems and challenges. But, I just would again ask you folks in California to understand where we're coming from. We're not trying to screw you up. But we're just trying to get a situation where the Government doesn't put us at a disadvantage. And, the last thingit was Tony Coehlo from your area who legislated the class 1 differentials that are now causing us all this problem.
You know, you guys weren't even in the deal. So, if I can still have a minute or two, I'd like to ask Mr. Rollin aboutin your testimony, you said there's going to be a $1.74 drop in the price?
Mr. ROLLIN. That is the expectation, according to some dairy economists.
Mr. PETERSON. Now, we haven't been on support since 1991. So how could that be? Are you talkingthat you think we're going to $8 milk? Is that what you are saying, without supports? Just so I understand what you're saying.
Mr. ROLLIN. The Government buys components, particularly nonfat is what they have been buying of late, at a price of $1.01. If the world price is 60 cents, that's $4.
Page 62 PREV PAGE TOP OF DOC Mr. PETERSON. I understand. So what this economist is saying, is that if we're going to go to supports, we're going to goifthat whatever is going to happen next year, we're going to end up with so much extra powder that the Government's going to have to buy ita significant amount to the point we're going to drop the world price down?
Mr. ROLLIN. If we don't have a support program.
Mr. PETERSON. We haven't been on support since 1991. And what is going to happen between now and then that's going to mean that we would have dropped the supports?
Mr. ROLLIN. The value of powder on the open market today is at support. Butter is a little higher. Cheese is a little higher.
Mr. PETERSON. There's not very much of the powder that's on support.
Mr. ROLLIN. Four to six million pounds.
Mr. PETERSON. Which is?
Mr. ROLLIN. A week.
Mr. PETERSON. So, how much is that?
Mr. JETER. The Government is buying 4 to 6 million pounds a week of nonfat powder. That's what he said.
Mr. PETERSON. I'm trying to understand. What are we going to buy the next yearof powder?
Mr. ROLLIN. It's difficult to say. The production is on the increase at the present time, as a result of prime prices we had for the last six to eight months. And as any other good farmer will do, we'll manage to overproduce a good thing and kill it. And we're right in the middle of doing it.
Mr. PETERSON. So, this economist that you are quoting is expecting us to have an oversupply to the point where we're going to
Page 63 PREV PAGE TOP OF DOC Mr. ROLLIN. Yes.
Mr. PETERSON. We would have gone to supports if we had supports in place?
Mr. ROLLIN. The other thing that happens is you are impacted on the powder side, and that value diminishes. If you are a powder producer, you try and find less negative outlets for your product. And then if there are justifiable premiums for quality for odd shipments and so forth, those service charges for extra items begin to be eroded.
Mr. PETERSON. So, you would send the powder to Wisconsin and put it into cheese, in other words?
Mr. ROLLIN. We have done a lot of that.
Mr. PETERSON. Well, also on the compacts. You didn't say anything about compacts. I don't assume you guys are for compacts.
Mr. ROLLIN. We don't have a position on compacts. But I find it a little difficult to oppose compacts when we have one here.
Mr. PETERSON. How about you, Mr. Souza?
Mr. SOUZA. We have not taken a formal position. But that would be an opportunity that we would like to have that opportunity, if we're forced to.
Mr. PETERSON. I guess that's it. Other than to say, I had a discussion with the Secretary Glickman about a week ago, I guess it was. And he has told me he is in the process of trying to move that now. One of the reasons that he was not moving before was because of the price situation and what was going on in the industry. But as I understand it, he is going to be pushing the administration and our people to wrap that up. And we're hoping he's successful.
Thank you. Mr. Chairman.
Mr. POMBO. Just to followup on the question on compacts. I know that last week we had discussions with a number of membersa number of people in the industry. And there's some fear that the biggest threat to the current order system is the compacts.
Page 64 PREV PAGE TOP OF DOC And there is talk amongst the members that you are either in a compact or you are in a marketing order, and that you can't be in both. If we end up opening the door on this, and in that part of that legislation will be if you are in a compact, you are out of the Federal order.
So once we start opening this thing up, obviously, folks from Collin's area, even though they're very similar to us in a lot of ways, also have some very different concerns because of their geography and where they are. So you start saying, OK, we're going to let the Southeast or the Southwest or whoever go in on a compact, and they start saying, OK, that's fine. You can have your own compact, but you're out of the marketing order system. Which has all the things that you're afraid of dumped in, on top of being locked out of specific markets. Which I think would have an even more devastating impact on the industry as a whole. It's obviously somewhat complicated.
But I appreciate all of your testimony, and we'll continue to work with all of you as we find out exactly what's going to happen in the next few months. But thank you all for your testimony.
I would like to call up panel No. 4. Mr. Stephen Smith, Mr. Bryce Quick, Mr. Kenton Kidd, Mr. Rod Radtke, Mr. Broc Zoller, and Mr. William Zech.
Thank you for joining us. Your entire written testimony will be included in the record. If you could limit your opening statements to 5 minutes, that way we will have more time to deal with the questions and some of the issues.
Mr. Smith, you may begin.
STATEMENT OF STEPHEN H. SMITH, BOARD MEMBER, WESTERN GROWERS ASSOCIATION
Mr. SMITH. Thank you, Mr. Pombo, for letting me speak before your committee.
Page 65 PREV PAGE TOP OF DOC My name is Steve Smith. I am a third-generation family farmer located in Turlock, CA. My family grows melons and other fruit and vegetable crops in several locations in the San Joaquin Valley. I'm here as a director of Western Growers Association, and I submitted written testimony on behalf of WGA.
But I don't want to read that testimony. I would like to comment on more specific issues that are critically important to me and Western Growers Association.
International trade issues are extremely important to WGA members. My own operation has grown because of our ability to export to the Pacific Rim over 30 percent of our melon and asparagus crop. A lot of those issues are technical, so I will not speak to them. Rather, our written testimony fully addresses our concerns.
Let me first touch on the California water situation, as it's probably the most critical issue facing the California farmers today. I know that you realize that California's population is expected to explode into the 21st century.
We need to start planning now for our future water needs. California currently has a very real water-supply problem. We have been fortunate the last 5 years have been years of above-average rainfall. But the underlying truth is that in normal water years, there is an insufficient supply to meet demand. The last 2 years over a billion dollars has been invested or obligated for ecological improvement actions. These fixes have been needed.
However, investment has not been matched with actions to improve water supply and water storage. We in agriculture fully recognize that water is a valuable resource. My own company has invested several million dollars in drip-irrigation and other water-saving practices.
Farmers statewide recognize the need to invest in water-efficient practices but are unwilling to do so, in many instances, because of the high cost relative to the uncertainty of future deliveries. I think that's affecting a lot of growth in some of these more water-efficient processes.
Page 66 PREV PAGE TOP OF DOC The second issue I'd liked to focus on is the Food Quality Protection Act. As we mentioned before in earlier testimony, as you know, WGA continues to have concerns with the implementation of FQPA. The availability of viable and cost-effective cost-protection products is critical to our industry.
Some of these products used by fruit and vegetable growers may be in jeopardy of being removed from the market due to policy decisions but the U.S. EPA. As a representative of many minor crops with few pest-control alternatives, WGA is not only concerned about the potential loss of useful tools, but it is also concerned about how any transition for growers will be handled.
There are many new, even safer chemistries available to agriculture for pest control. In our own operation, we have reduced aerial applications of pesticides significantly by using a natural product that we introduce systemically through the soil to the melon plant, thereby reducing white flies and aphids without any residue on the fruit.
What we need to do is to streamline the process by which these now safer, environmentally-friendly tools can be registered. My crops tend to lose pest controls first and receive new tools last. WGA is appreciative of any legislative measures that provide the agency with a time to implement FQPA properly, which takes the needs of growers into consideration.
Another issue I would like to address is my concern with the current and increasing labor shortage in California agriculture. In 1998 Western Growers strongly supported legislation to establish a new agricultural guest worker program and was disappointed that this legislation was not included in the Omnibus Appropriations Bill approved by Congress in October. Legislation to reform the H2A guest worker program is very important to the California fresh produce industry. An effective guest worker program is needed to ensure that legal workers are available to harvest perishable crops when the number of domestic workers is insufficient for this purpose.
Page 67 PREV PAGE TOP OF DOC In recent years, the current H2A program has proven to be cumbersome and inefficient when faced with the task of supplying significant numbers of guest workers on short notice. Growers in Imperial Valley who recently completed a winter vegetable harvest have told me that many acres of broccoli, lettuce, and other vegetables were not harvested because of poor prices and shortage of labor. Had prices been better, there simply would not have been enough labor to harvest the crop, despite increasing wages.
As a grower in the San Joaquin Valley, I'm deeply concerned about the labor supply available to harvest our crops this summer.
The last matter I would like to discuss is our grave concern regarding an apparent change in the Clinton administration's policy with respect to the planting of fruits and vegetables by subsidized agricultural producers. On March 18, Secretary Glickman testified before the House Committee on Agriculture regarding implementation of disaster resistance legislation approved by Congress in 1998 and suggested several amendments to the 1996 farm bill. In his written statement, he made the following recommendations as a way to improve the 1996 farm bill: Expanding planting flexibility so that producers can elect to plant fruits and vegetables if they choose to do so.
I would like to take this opportunity to say that Western Growers is strongly opposed to this recommendation. As you know, the 1996 farm bill prohibits the planting of fruits and vegetables on USDA contract acres. This policy is largely consistent with the 1990 farm bill. WGA, along with other fresh produce organizations, worked very hard to ensure that Congress enacted these policies in both 1996 and 1990, because we believe it is necessary to ensure that unsubsidized producers of fruits and vegetables are not put at a competitive disadvantage against growers who receive USDA contract payments.
Rather than improving the 1996 farm bill, we believe that this recommendation would cause great disruptions in fruit and vegetable markets. It's our long-standing position that growers wanting to plant fruits and vegetables and nuts should be willing to forfeit all present and future Government subsidies on such acreages. WGA urges you to take a look at this issue and prevent its implementation.
Page 68 PREV PAGE TOP OF DOC Thank you, Mr. Chairman.
Mr. POMBO. Thank you, Mr. Smith.
STATEMENT OF BRYCE QUICK, BOARD MEMBER, AMERICAN NURSERY AND LANDSCAPE ASSOCIATION AND NATIONAL COUNCIL OF AGRICULTURAL EMPLOYERS
Mr. QUICK. Thank you.
Mr. Chairman, my name is Bryce Quick. I represent the American Nursery and Landscape Association, the National Council of Agriculture Employers, which board I sit on, and Monrovia Nurseries. Unfortunately, Jim Poorbaugh can't be with us today. He took ill this morning, so I will be providing the testimony that has been prepared for Jim.
By way of background, Monrovia Nurseries is an employer of 1,500 agricultural workers. Monrovia is one of our largest nursery growers in an industry that is considered the fastest growing in agriculture today. By USDA accounts, the nursery industry is the third-largest commodity now. And it's growing by the year, behind corn and soybeans. But they are one of our larger employers.
And for this reason, a lot of the panelists today have discussed issues and we appreciate them bringing up these issues. FQPA, pest exclusion issues, water issues. We also appreciate your leadership on, particularly, the Food Quality Protection Act. But labor is something that we, as the nursery industry and other industry needs a lot of help on.
Wages and benefits account for almost 67 percent of Monrovia's operating expenses. In my written comments I discuss the difficulties many agricultural growers in California and the rest of the country are having finding and keeping legally documented workers and the discovery that many we thought were well-documented are not. There is great uncertainty and anxiety among many in agriculture concerning the ability to profitably harvest their crops.
Page 69 PREV PAGE TOP OF DOC Much of agriculture is very capital intensive. There is great investments in establishing facilities, as well as orchards, vineyards, and other production areas. We borrow money with the understanding that we pay it back after a successful harvest. We face the uncertainty of weather, infestations, insects, or diseases. We now face uncertainty because of lack of confidence in procuring or retaining an available, legally-documented work force.
There has been increased activity by the INS removing undocumented workers from the fields. Naturally, INS targets farmers during harvest or peak periods when they can least afford to lose their work force. The number of workers removed is a surprise to growers because we really want to employ legally-documented workers. And the documents provided do look valid. We want to do the right thing.
In the past couple of weeks we have read articles in the newspaper where INS has stated that they are backing off on worksite enforcement. To a degree, this is true. INS states that it doesn't have the necessary resources to round up all of the illegals in the country. But, in fact, one INS agent and the Social Security Administration accountant can do the work of a thousand on the ground with the new electronic verification systems that Congress has put in place.
The Social Security Administration letters to employers have become the most perplexing of recent developments in agriculture. To receive a letter stating that a large percentage of your work force has mismatched names and Social Security numbers is a traumatic occurrence. Growers state that some of the names on the list are the last ones you would expect to see there. A nursery foreman of 10 years in California had to be let go from one southern California nursery. Two 9-year employees, both supervisors, and an 8-year employee who had three children born in this country turned up on the list at another nursery. The two supervisors both spoke English and had good computer skills. They were making a new life for themselves and their families. What will happen to them now is unclear.
Page 70 PREV PAGE TOP OF DOC Because these employees are rarely deported, they have the potential to become more of a drain on society than they ever were before. To replace these folks at a busy time, after all the training, is a major problem. At Monrovia we have begun the electric verification of all new hires for this reason. We spend a lot of time training and can't afford to spend the time, only to run the risk of losing them latermaybe when you need them the most.
EVS sounds like an easy solution. It's not. Replacing lost workers or recruiting new ones is not easy. Nurseries maintain a more stable work force year-round. And we have noticed from the overall number of applicants on employment lists and percentage of suitable applicantsnot all of agriculture is year-round. And EDD is directing the unemployed to year-round employment. This is a fact that comes from the welfare reform in 1996.
At Monrovia last year, we asked EDD for help in replacing workers. They referred nine workers to us. Five of these workers lacked legal documentation. Of the nine referred, one stayed on. If we want agriculture to flourish and prosper, if we want new blood to enter agriculture and help produce the food and fiber this Nation and world needs, then we need your help to reduce the inconsistency many of us fear when it comes to staffing our operations.
Agriculture faces the greatest uncertainty in employment. We also have the most to lose if our work is delayed by a few weeks, or, in some cases, just a few days. I can think of no other industry with a similar situation.
Mr. Chairman, we appreciate the leadership you provided last year and in the years past in attempting to revise the H2A, for example, and streamline it. We must get the job done this year. We cannot wait another year. Too many operations will be lost if we cannot level the playing field for farmers. We want to do the right thing. Agriculture in the past has been accused of crying wolf. The shortage isI'm here to tell youvery real.
We look forward to working with you to develop a program that works for growers and workers. To demonstrate this commitment, we have invited on the national level, various civic, ethnic, and church groups to sit at the table to discuss the needs of workers and employers. We are hopeful that a bipartisan solution can be achieved as a result of the efforts that you're involved in.
Page 71 PREV PAGE TOP OF DOC Mr. Chairman, thank you again for your leadership and the opportunity to discuss these issues.
Mr. POMBO. Thank you.
STATEMENT OF KENTON E. KIDD, PRESIDENT, CALIFORNIA APPLE COMMISSION
Mr. KIDD. Chairman Pombo and Representative Peterson, thank you for the opportunity to testify before the committee concerning the key issues of importance to the California apple industry.
My name is Kenton Kidd. I serve as president of the California Apple Commission. We came into existence September 1, 1994, serving the producers and handlers of the California apple industry through the generic promotion of California apples throughout the world as the fourth-largest producer in the United States. Our industry's future may well depend on the outcome of the following issuesduplication here with some of the other people, but I think they're certainly important issues.
Food Quality Protection Act. Growers routinely deal with weather and market fluctuations. But those challenges pale in comparison to the threat posed by the Food Quality Protection Act, which threatens the continued availability of the most valuable and vitally-important pesticide uses on apples. Apple growers must have access to pesticides to effectively manage and control the devastating pests and diseases that can destroy an entire crop.
For example, 48 percent of California's apple acreage is sprayed with the organophosphate azinphos methyl, trade named Guthion, to control coddling moth and leafrollers. The loss of this valuable material would force growers to use more costly, less effective, and less environmentally friendly pest management strategies. Yet, this critical pesticide, along with seven other organophosphates and several carbamate pesticides used on apples, may soon be cancelled as a result of FQPA implementation.
Page 72 PREV PAGE TOP OF DOC We urge your committee's continued oversight of the EPA's implementation of this act to ensure its actions are fair and based on sound science. If we lose critical pesticides, it is imperative that adequate research and transition programs are made available to lessen the anticipated devastating impact to the apple industry. We strongly support increased USDA research into environmentally-friendly pest management strategies and cooperative extension programs to identify and disseminate new technology to growers.
Market Access Program. The California Apple Commission utilizes funds provided by the USDA Market Access Program, called ''MAP,'' to conduct international marketing and promotional activities in the United Kingdom and Taiwan. The U.S. Apple Export Council manages our program, and our growers contribute 51 cents for every dollar in MAP funds we receive.
According to a recent study by USDA, the European Union and other foreign countries are outspending the United States by a factor of 20 to 1 in export subsidies and promotion. In addition to $7.2 billion in export subsidies, our leading foreign competitors spent a combined $924 million in 1997 to promote their exports.
Since MAP was originally authorized in 1985, funding has been reduced by more than 50 percent from $200 million to $90 million. Given what our foreign competitors are doing, our industry strongly believes it is time to restore funding for this vitally important program to its original level of $200 million.
H2A reform. California's apple producers have experienced a tight labor supply due to restricted migration, a full-employment economy, and more effective enforcement of employer sanctions laws.
Currently, the only means of obtaining legal, temporary alien workers is through the H2A program. Yet many who have attempted to utilize this program indicate it's overly bureaucratic, costly, and frequently fails to provide labor in a timely manner. Its use is so litigation-prone that few growers are willing to attempt to use it. We believe the H2A program needs to be improved to enhance its effectiveness and efficiency. As currently structured, it is unworkable and effectively unavailable to most agricultural employers. We applaud past efforts of the House Committee on Agriculture to reform the H2A program and strongly urge your leadership in obtaining meaningful reform during this session of Congress.
Page 73 PREV PAGE TOP OF DOC In conclusion, the California apple industry looks upon the coming year with mixed feelings about what the future may hold. We have come to accept Mother Nature's moodiness, and we're hopeful that she will welcome the upcoming apple crop with a warm embrace and ideal growing conditions.
We have learned to anticipate and react to the challenges created by an often volatile and highly-competitive world market. We're hopeful that the Asian financial crisis will give way to restored prosperity and opportunities for increased apple export sales.
Finally, we look to you to ensure our industry's continued access to critical crop protection tools through fair and science-based implementation of the Food Quality Protection Act, to enhance our ability to keep pace with our overseas competitors by increasing it to $200 million foreign promotional funds available through the Market Access Program, and to ease the labor crisis confronting our industry by approving an affordable and workable H2A reform program.
Thank you, Mr. Chairman, for this opportunity to present these views on the behalf of the California apple industry.
Mr. POMBO. Thank you.
Mr. POMBO. Mr. Radtke.
STATEMENT OF ROD RADTKE, CHAIRMAN, CALIFORNIA CITRUS MUTUAL, U.S. CITRUS SCIENCE COUNCIL
Mr. RADTKE. Good morning, Mr. Chairman and Mr. Peterson. My name is Rod Radtke. I'm here today representing California Citrus Mutual and the U.S. Citrus Science Council. I'm in my second year as Chair for the organization representing citrus growers farming well in excess of 100,000 acres with a farm gate value exceeding half a billion dollars. I manage 1,500 acres of citrus and several hundred acres of olives and other commodities.
Page 74 PREV PAGE TOP OF DOC My written statement will provide depth to the issues I wish to raise today. One is the EPA's implementation of the Food Quality Protection Act and the inefficiencies it has created. Because of the FQPA and because the industry provided sound science, a Special Review on Triazines is significantly behind schedule. While the industry has ensured that the registrants have met all deadlines imposed, and we have provided responses to the EPA use concerns, the EPA has changed the review process and then failed to meet any of those self-imposed deadlines. Even more serious is EPA's desire to impose their inexperience to a Medfly eradication program.
Well before the expiration of an existing section 18 for the use of Malathion to eradicate Medflys, California's Department of Food and Agriculture and the Department of Pesticide Registration submitted a new application. EPA has cited the need to review Malathion under the auspices of FQPA. They have taken significant amounts of time to determine that the minuscule amount of product is a problem, knowing full-well the exposure in an eradication program is infinitesimally small.
Simultaneously, they questioned the systems approach used to trigger specific eradication efforts, which are clearly out of their jurisdiction. Their inefficiency exposes industries, such as citrus, tree fruit, grapes, and some vegetables, to significant economic damage. Should a widespread infestation occur, they want California to ask permission to protect billions of dollars of product, which supplies thousands of jobs and millions of dollars. This is inexcusable, evidenced by EPA's inability to work with Florida, adding to the cost of that eradication program. EPA, as a Government agency, doesn't seem to tell us that they're here to help. They seem to tell us they're here to shut us down.
CCM's second area of concern dovetails with Medfly outbreaks. The Nation's pest-exclusion program has become extinct as Congress has failed to appropriate sufficient dollars, which it collected via user fees, to APHIS. Congress must eliminate the 1996 farm bill agreement that allows Congress to withhold dollars specifically collected for pest exclusion and place them in a special fund as a budget offset.
Page 75 PREV PAGE TOP OF DOC The $12 to $14 million Congress thinks it has saved in recent years is more than offset by extended expenditures for eradication efforts. Pests like fire ant in Orange County, the Chinese long-horn beetle in Chicago, and fruit flies in California are introduced because our present system is inadequate.
Your committee must lead the way to remove the restrictions allowing USDA/APHIS access to all user fees. Exotic pests and diseases are a real threat. Has your committee asked why Florida needs Federal help to eradicate an insidious disease such as canker? It is because the job is not properly being done.
This leads to our third area of concern. Since 1912 Congress has mandated that USDA/APHIS protect domestic agriculture. And yet, with the August 1998 Argentine citrus proposal, the USDA/APHIS has chosen to rewrite law and policy without congressional oversight. USDA has proposed for the first time in history to allow product into the United States. From known pest and disease infected areas. The USDA has proposed, without scientific peer review, mitigation measures the world bodies continue to debate in various forums. The USDA, with extensive outreach to a petitioning country and none to domestic industry, submitted a proposal that is so scientifically full of holes it makes Swiss cheese look solid.
This committee and Congress must completely review how and why USDA/APHIS can allow well-intended public policy to get so far ahead of science. This is a highly complicated issue involving trade, science, and administrative issues. There has to be a thorough break, and the industry would welcome the subcommittee's involvement. In an effort to allow you more time to work on these issues, I will terminate my verbal statement at this point.
And, again, on behalf of the California citrus industry and the Science Council, I thank you for the opportunity to participate.
* Mr. POMBO. Mr. Zoller.
Page 76 PREV PAGE TOP OF DOCSTATEMENT OF BROC ZOLLER, MEMBER, CALIFORNIA PEAR ADVISORY BOARD
Mr. ZOLLER. Thank you, Mr. Chairman. And good afternoon to you and Mr. Peterson.
My name is Broc Zoller. I'm an agricultural production consultant and have functioned as an agricultural pest-control advisor since 1972. I'm a farmer and a partner in a packing operation in Lake County, CA. I'm a member of the California Pear Advisory Board, and I'm here on behalf of the California pear industry.
I'd like to touch on three issues, here, very briefly and get in line with some of the other presenters in what they have said.
We support the full and fair implementation of FQPA, the Food Quality Protection Act. This act was a monumental occurrence, when it was passed, for the future of agriculture. And it was intended to replace a rather outdated Delaney clause. In spite of the intent, the EPA has chosen to develop new powers involving risk assessment and riskto develop new pesticide regulation. What doesn't show up in the risk analysis, I would like to convey to you today. The pear industry has been a leader in developing alternatives to pesticides. This began in the 1970's with the publishing of Rachel Carson's book ''The Silent Spring''. IPM, or Integrated Pest Management, became a priority since those days. Our industry has spent literally millions of dollars investing in pesticide use reduction. Some of these methods have resulted in awards. We received awards from the Department of Pesticide Regulation here in California as a result of these efforts. We became a charter member in the U.S. Environmental Protection Agency's Environmental Stewardship Program. As a result, we are one of the insiders and being recognized for our reductions in pesticide use.
As an example, in my own business, 25 percent of my consulted acreage currently uses the technique called ''mating disruption,'' which is a way of controlling the coddling moth, our principal pest. Seventy-eight percent of my own personal acreage uses this technique. This has resulted in savings in pesticide and pesticide that doesn't reach the environment in the form of organophosphatesone-half and one-third, two-thirds, sometimes, of the amount. In spite of that, the remaining use that is required is absolutely necessary because the mating disruption technique is not a stand-alone technique. It requires some augmentation by pesticides.
Page 77 PREV PAGE TOP OF DOC The EPA needs to take time to use real pesticide data, as was intended in the passage of FQPA, and not simply make blanket assumptions from risk-assessment models. We can't, frankly, understand in California why this is not done, since we're probably close to two decades now, we've had to report to our State 100 percent of the pesticide uses that go on our property. This data is freely available. It can be obtained on websites. We're not sure why it is not being used.
The EPA's current use of extreme assumption jeopardizes our IPM programs which have been 25 years in the making. We're deathly afraid that the one solution that we have developed here as an industry is in grave jeopardy. Reduction in pesticide numbers itself promotes overuse of the ones that remain, in that they become less effective because of resistance considerations. We hope that you will consider this when directing EPA in their directions with FQPA itself.
The second issue, increasing the difficulty that we're having in employing legal farm labor. Here again, I get in line. Currently, the options available to us are indigenous labor, our country is enjoying unparalleled prosperity right now. And we're finding that there are fewer and fewer people on the farms to do this work. And the options are legal hires of outside the U.S. labor force, and mechanization. Our industry has tried mechanization and continues in this effort, but currently we can't find the substitutes for the labor resources themselves. And, consequently, we support any action that might be available in establishing guest worker programs.
The third issue I would like to touch on is the limited access of California pears in new markets due to phytosanitary and tariff-related barriers. We're denied access to many markets in the world such as Japan, Korea, China, Argentina, and Chile, to name some, due to phytosanitary barriers. This is a delicate issue and one that I'm sensitive to both sides of. Some of these barriers may be unjustified. And some of the initiatives that we operate under could use some scrutiny. An initiative that could significantly increase trade for California pears would be one that strengthened the Sanitary and Phytosanitary Agreement. In particular, there are two changes that should be considered.
Page 78 PREV PAGE TOP OF DOC The first would require members to standardize methods for quantifying risk assessment. The second would be a common definition of a ''reasonable risk.'' We understand that each member may wish to set its own level of acceptable risk, and this would be to have something that would be agreed upon. But if we can't agree on what levels are acceptable, that would be a more convenient framework to operate under.
California pears also face unreasonable tariffs or denied access in some other countries, like China, India, and the European Union. In addition to general tariff reduction, the United States should press for elimination of Europe's entry-price system. While it appears that the tariffs were cut in the Uruguay Round, the duties being collected on some U.S. products have more than doubled. On paper it looks like the EU has reduced its tariffs, but in practice, they appear to have increased.
Thank you for your consideration.
Mr. POMBO. Thank you.
Mr. POMBO. Mr. Zech.
STATEMENT OF WILLIAM ZECH, TRADE COMMITTEE CHAIRMAN, CALIFORNIA ASPARAGUS COMMISSION
Mr. ZECH. Thanks, Mr. Pombo, Mr. Peterson.
When I saw Mr. Zoller was going to be here, I didn't think I'd be last. But I guess I got stuck behind him. But I'm real glad to be here. And you have got our written statement, and if you read it at your leisure, I would appreciate it.
What I really want to talk about is just how important trade policy is to the asparagus industry. We are a small industry. Our gross sales are usually about $7 million. But trade policy is very important to us because we export 25 to 30 percent of our products and export them to over 15 markets around the world. It's important to us because if we don't have those export markets, then we have to ship domestically. And we have opened our doors on the trade area.
Page 79 PREV PAGE TOP OF DOC We have opened our doors to all this foreign competition, and we welcome that. That's fine. Mexico is supplying all kinds of fresh asparagus now, in direct competition to us. And we don't oppose that. That's fine. We've gone through the NAFTA process. The tariffs are being eliminated or are being reduced, and we welcome the competition. But we also need your help to open foreign marketsto help us open foreign markets and to get fair treatment overseas.
Specifically, on the tariff front, we still face tariffs in Japan. We still face tariffs in Switzerland and Germany. We basically face tariffs in almost all of our export markets. And we would really appreciate your help in getting some reciprocity in that area.
In the nontariff barrier front we're facing a lot of phytosanitary concerns. And, Mr. Pombo, you know all about this because we have an issue going right now with Taiwan. Where Taiwan importers came to one of our members who is shipping them potatoes and said, ''Gee, we would love to buy your asparagus.'' And as he looked into it, he couldn't ship asparagus over there, even though they want it, because they claim that there could be an issue with the burrowing nematode. But we got USDA involved and APHIS, and we don't have the burrowing nematode in California.
You have taken a lot of time and effort on this, and we really appreciate it. But it's frustrating for us that we still can't ship there. I know you are on top of this issue, but it's just symptomatic of the issues that we face. And we appreciate your help. And we're going to ship asparagus to Taiwan, I guarantee you, with your help.
And then the other area in the nontariff area, which a lot of people spoke about, so I won't waste your time on it.
On the promotional front, I believe that we are now finally sending you guys more money than what you're giving back to us. Isn't that how the balanced budget, kind of, works?
Page 80 PREV PAGE TOP OF DOC Mr. POMBO. Right.
Mr. ZECH. OK. So that's how I understand it. So we would really appreciate if you would consider getting back to the old MAP level of $200 million. For our little industry, it's been a big help, Mr. Peterson, to get that money. Because we're a small industry. Our total California Asparagus Commission budget is half a million dollars. How do we compete with these foreign promotional programs that just dwarf it in size?
And the MAP money has been really important to us because we have been able to do market awareness programs in Japan and Germany and in Switzerland. And we have seen our exports to those markets dramatically increase. Right now they're a little bit down, but I think that's because of the exchange rate. But we need to keep on that front, because when the dollar becomes weaker, what goes up must come down. When it becomes weaker, we want to be in a position to capitalize on that.
So I want to thank you for coming out here and meeting with us. And I'm a local boy, so if either of you are interested in seeing an asparagus farm, see me. I would love to give you a tour.
Mr. POMBO. Thank you.
Just to start off with, I'd like to ask you guys about the nontariff trade barriers that exist.
Mr. Radtke, correct me if I'm wrong, but you have a concern with Argentina exporting their product into our market without us following established protocol for bringing in a product from a foreign country and the possibility that that is going to bring a pest into our market; is that correct?
Mr. RADTKE. Yes. Our concern isn't with Argentina any more than it would be with South Africa or Australia. Our concerns are strictly phytosanitary, in that they didn't present a proper scientific review before they began the negotiations and discussions with the Argentinian group and promoting this importation of the fruit.
Page 81 PREV PAGE TOP OF DOC We compete with Argentina around the world already. The issue isn't a trade-restriction thing. It's strictly that we're concerned about their citrus problems becoming our citrus problems.
Mr. POMBO. Now, Mr. Zoller, you specifically mentioned Argentina, as well, as keeping our product out of their market. What specific phytosanitary barrier exists with getting into their market right now?
Mr. ZOLLER. I believe, in this case, it's probably the disease fire blight, which we have in America and California. It is a very devastating disease, and they probably have some real concerns about its introduction into their country. The question is: Can it be introduced on fruit or not? And that's the subject of risk assessment, currently. That's why some standardization would be helpful.
Mr. POMBO. When you hear Mr. Peterson and myself talk about concerns that we have over trade agreements and how they are being implemented, I think this right here points out exactly what my concern is, in that it seems like we play by different rules than they play by. And that's a very real barrier that we have when we get into the next round of trade negotiationswhat it really means.
Personally, I feel if everybody played on the same field, I wouldn't have a problem with it. And there are crops that would benefit hugely by it. And there are other crops that we would probably get hurt on it if it was a totally level playing field.
But when I hear stories like thisand I have heard a lot of themit really makes me wonder why we are not on the same page as everybody else. Why are we so quick to make some decisions to open up our markets and very slow to put pressure on other countries to open their markets to us? In the livestock industry, I know we have some very real problems with the same type of issues that directly impact our local livestock producers.
All of you brought up the Food Quality Protection Act and the feared impact that that's going to have. And we have been moving, what I feel, is very, very slowly in responding to what is a real threat. It is there.
Page 82 PREV PAGE TOP OF DOC In that light, I would like to ask you, in this world of international trade and international competition, if we were to adopt a regulatory scheme which eliminated crop-protection ability within our industries here, how does that impact you in competing on the international market?
Each and every one of you in the crops that you represent is in a very real international market. And there's competition that's very intense. If we adopt that policy that says you cannot use certain crop-protection methods in this country, but your competitors can use those, can you still effectively compete in that international market?
Mr. SMITH. I would like to say that we in the melon industry compete directly with Mexico. And that's a very good example, and you bring up a very important point. No, we cannot compete with it. It's not a level playing field.
And I'm even seeing now where I see certified organic product coming into the United States from Mexico and from Turkey and from other countries. Who is there certifying that? That's a real key thing for an American farmer to commit to certified organic. And I just don't see the follow-up and a plan in our organization to see who is actually certifying that.
But you're absolutely right-on on that, our ability to compete without the tools that we need to survive.
Mr. POMBO. Mr. Kidd.
Mr. KIDD. Well, I asked a member of the Consumer's Union at a conference down at the united convention down in San Diego that same question. I said, ''How are we going to police, so to speak, other countries that may not be doing what we are restricted in doing?'' And yet we have the safest food in the world. I think it's going to be the safest, but we probably can't grow it. That's what it's looking like. And the answer I got is, ''Well, we're just going to have to trust them.''
Mr. POMBO. Just like on everything else.
Page 83 PREV PAGE TOP OF DOC Mr. KIDD. That's right.
Mr. POMBO. Mr. Radtke.
Mr. RADTKE. I agree with everything that's been said at this point. The level playing field is all that we're looking for. That would be based on the correct sciencenot comparing the oranges to pears or apples, if you willthat both of these situations, based on sound and proper and correct science could be taken care of. And let the proper science dictate, not the political science.
Mr. POMBO. Mr. Zoller, specifically with you, your industry has been very out front in IPMin Integrated Pest Management and has done a huge amount of work over the years. And yet you are as threatened as any producer in terms of the elimination of crop-protection methods.
Mr. ZOLLER. It will be very frustrating if, as it has been rumored, we lose organophosphate use. Because use of these materials is absolutely necessary to implement the techniques we have for pesticide reduction itself. And also, we know from having lost other pesticides, that the more pesticides there are, the less of them we use. It's when they become few in numbers that we are forced to rely on just a few that we start having resistance difficulty and we start having repeat applications. That's when the problem in the environment occurs. So we're very concerned that this policy would lead to this type of an outcome.
Mr. POMBO. Mr. Zech, you're a producer. You pay the bills for your chemicals and water and everything else. Do you put on any more than you absolutely have to of anything?
Mr. ZECH. Absolutely not. I mean, it costs money, one, and then it's a food-safety issue. I mean, we use the bare minimum. The way I look at it, if I don't see a couple bugs and some weeds, then I'm spraying too much. So we use the bare minimum.
Page 84 PREV PAGE TOP OF DOC One thing I would likeand it is difficult because we are competing with producers who are under a complete different set of guidelines. And, as Mr. Smith said, we really don't know what they're doing. And I don't want to say they're doing anything. But we really don't know.
And that brings up, for me, an issue, which is the country-of-origin labeling. I think it's a disservice to the American consumer that we don't do that. And then they can decide. Not just because I'm in the business, but I think that the American consumer is very intelligent. And if they want to buy produce which is grown under the highest safety standardswhich I believe we are doing that in the United Statesthat they would prefer the United States produce over imported produce. So I would really like to see country-of-origin labeling on all produce.
Mr. POMBO. Mr. Peterson.
Mr. PETERSON. Well, Mr. Zech, I supported your MAP program, even though we don't use it much in Minnesota. But I regret to inform you that we are not in a surplus yet. Unless you want me to spend your Social Security money on MAP. Maybe they do in California, but they don't want to do that in Minnesota. We're big spenders, but not Social Security money. Anyway, we just went through a big fight on the budget.
But, we're probably going to end up with another attempt by the anti-corporate-welfare types to have a vote to eliminate the MAP during some pointthe corporation process or something. And the budget caps are tight. So it's going to be tough, at least right now, to get any big increase on anything.
We're having problems getting the funding for stuff that thespending caps are actually quite a bit below what they were at last year. And instead of having an increase, we will have cuts. I will continue to support it, but I just want to make the record clear that there are some of us that don't think we are in a surplus yet, so we ought not to spend it. If we ever do get to a surplus, we think that we ought to start paying off some of the debt before we start giving it away for whatever other reason. Because it will reduce your interest rates, and it will be better for the country.
Page 85 PREV PAGE TOP OF DOC Mr. Chairman, I thank you for letting me come to California and learn. It's been an educational experience, and I have enjoyed it.
Mr. POMBO. I won't debate the budget right now.
I want to thank this panel for your testimony, thank my colleague, Mr. Peterson, for coming out to California to hear from California agriculture on some of the problems that we have.
I think it's very apparent from the testimony that we have received here today that Government regulation still plays a very large role in your everyday life. And that a lot of the regulatory schemes that we have come up with over the years don't exactly work. And it's somewhat frustrating that we went through the farm bill process and eliminated, to a large degree, the regulatory process that was in place over agriculture with the promise that there would be regulatory relief on the other side. And that regulatory relief just has not happened yet.
And a lot of the issues that we deal with and that you deal with in your everyday lives are Government caused. And that is extremely frustrating, that we still have that and that we have not been able to address those issues. You have weather to contend with and pests and everything else to contend with that, thankfully, the Government can't yet control. But there are a lot of things that we do control that I wish we didn't.
But I appreciate all of your testimony. And there may be further questions that arise from reviewing the written testimony that you turn in. And if that happens, we will submit those questions to you in writing. And if you could respond in kind, it would be appreciated.
Again, I want to thank you, Collin, for coming out and thank all of you for being here today. Thank you.
[Whereupon, at 1:25 p.m., the subcommittee was adjourned, subject to the call of the Chair.]
Page 86 PREV PAGE TOP OF DOC [Material submitted for inclusion in the record follows:]
Testimony of Vanessa S. Arellano
Mr. Chairman and committee members, it is a pleasure to be here today to provide an overview of the California Department of Food & Agriculture (CDFA).
California's abundant natural resources, fertile soils, and temperate climate allow it to claim to have one of the most sophisticated food and fiber production and distribution systems in the world.
California agriculture is a $26.8 billion industry that produces more than 350 different crop and livestock commodities. This generates more than $70 billion in related economic activity. This has been made possible through continuing advancements in technology and the innovation of California agriculture.
This past year was a very difficult one for California's agricultural industry. We rang in 1998 with a series of El Nino storms, that left over $531 million in agricultural damage, and we closed out the year suffering through a freeze that caused losses to date, of over $730 million. During a typical California December, we can all picture the types of crops that would be vulnerable to a freeze; Artichokes, Avocados, Citrus, Nursery stock, and fall & winter vegetables. By far, citrus was the crop that suffered the most damage. Through these challenging times, the Department of Food & Agriculture has worked very closely with a number local and Federal agencies to bring the necessary relief programs to California. The actions of Governor Davis and our entire congressional delegation have resulted in a swift response from the Federal Government.
The California Department of Food & Agriculture has over 1,700 employees. They are scientists, economists, marketing specialists, inspectors, administrators, and communicators who provide the highest level of service to California's food and fiber producers and consumers around the world.
Page 87 PREV PAGE TOP OF DOC CDFA Inspectors examine meat, poultry, vegetables, fruits, dairy and other foods, to ensure safety and quality; pest prevention teams work to prevent infestations of unwanted pests and disease; international trade representatives help growers create new markets for their products overseas; and biological control researchers work to discover new, environmentally friendly alternatives to pesticides. These are just a few of the vital functions CDFA employees perform.
Some areas of interest to this committee would be our Inspection Services, Animal Health and Food Safety Services, and Plant Health and Pest Prevention Services, and our Trade and Export Programs.
Inspection Services provide consumer protection, grading services and regulation of a wide variety of agricultural commodities, fertilizing materials, commercial feed, and livestock drugs. One program is the Feed, Fertilizer & Livestock Drug Program (FELD) which ensures that feed, fertilizer and livestock drugs are safe, effective and meet the quality guaranteed by the manufacturer. Our Shipping Point Inspection service operated under a Federal-State Cooperative agreement with USDA that authorizes CDFA inspectors to use Federal grade standards for fruits, vegetable, and nuts, and issue Federal-State inspection certificates.
Animal Health and Food Safety Service protects public health, the health of California's livestock and poultry, provides safety of food at its origin, and protects California livestock owners against losses due to animal theft and straying. One area of interest to this committee would be the Animal Health component that prevents, detects, contains and eradicates exotic animal diseases through surveillance and control of the movement of animals and animal products. Another area would be the California Veterinary Diagnostic Laboratory System which operates under the U.C. Davis School of Veterinary Medicine. This system provides California with the highest quality livestock and poultry disease diagnostic support and enhancement of livestock and poultry health management.
Page 88 PREV PAGE TOP OF DOC Plant Health and Pest Prevention Services protects California's agricultural and natural resources against damage by exotic plant pests and diseases. The Pest Exclusion team keeps serious pests out of the State and stops or minimizes the spread of newly arrived pests or diseases. Each year, California's agricultural border stations intercept thousands of unwanted pests from cars, trucks and buses entering the State. Plant quarantines are enforced within the State by investigators, inspectors and biologists, with the help of County Ag Commissioners and other team players to keep out unauthorized agricultural commodities. A program for nursery, cotton, and seed ensures the highest quality planting materials and fiber. The Pest Detection/ Emergency Projects team is responsible for quickly detecting and eradicating serious exotic pests that may enter the State. Early detection has led to over 60 eradication programs against Medfly, gypsy moth, Japanese beetle and other devastating pests. The tools for eradicating pests are constantly evolving. Each year the State makes a large investment in research and development for the best available technologies.
The importance of pest prevention to both the U.S. and to California is obvious when you consider the economic impact of infestations of nonnative fruit flies like the Mediterranean or Oriental fruit fly. However, there are hundreds of other serious nonnative weeds and insects that can seriously impact the State's horticultural industry and our environment.
An example of nonnative pest that entered the U.S. many years ago is the Red Imported Fire Ant. Up until last fall, this pest was not known to occur in California. This pest, which is found throughout the southern U.S., was discovered infesting areas of Los Angeles, Orange, and Riverside Counties. Known for its aggressive behavior and its painful sting, this ant can interfere with outdoor activities, harm native wildlife, and requires expensive certification and treatment regimes in nurseries in quarantined areas.
The Department has recently released a plan to begin eradication and control treatments and will continue to work with local, State, and Federal Governmental agencies, the nursery industry, and environmental groups to develop a long term strategy to deal with this nonnative pest. This effort will cost the State millions of dollars of public and private funds in eradication and control costs and in lost sales for shipping nurseries.
Page 89 PREV PAGE TOP OF DOC In 1997, California exported agricultural commodities valued at nearly $7 billion making California the leading agricultural exporting State in the U.S. In fact, California currently accounts for nearly 20 percent of total U.S. agricultural exports.
Top products from California include: milk and cream, grapes, nursery products, cattle, cotton, almonds, hay, lettuce, tomatoes, strawberries, oranges, chickens, broccoli, eggs, walnuts, rice, carrots, wheat, and peaches.
Major markets for California food and agricultural products include Japan, Hong Kong, Korea, Canada, and Mexico.
Agricultural exports are important to the entire economy. Some economists believe that $1 billion of U.S. agricultural exports support 27,000 jobs in the U.S. economy. Furthermore, each dollar of agricultural exports will generate $2.59 in economic activity.
CDFA's Agricultural Export Program works to increase California's economic wellbeing by expanding worldwide market demand for California food and agricultural products and by assisting exporters of those same California products. The program is active in the area of trade development, trade policy, and informational services that are made possible through strategic partnerships with other State and Federal Governmental agencies and private trade associations.
In partnership with Federal officials and County Agricultural Commissioners, along with other Government agencies, CDFA will continue to serve the citizens of California, this Nation and the world by protecting and promoting agriculture domestically and abroad.
That concludes my presentation. If there are any questions, I will be pleased to answer them.
Statement of Bill Pauli
Page 90 PREV PAGE TOP OF DOC Good morning and thank you for the opportunity to come before you today to discuss issues facing California's agriculture industry. I am Bill Pauli, a winegrape and pear grower from Mendocino County. I am President of the California Farm Bureau Federation, which represents more than 78,000 member families.
California agriculture is often portrayed as representing ''large, corporate'' farms. The truth is we are primarily family farms, which is not understood by many members of Congress and the public.
Each year, it becomes more difficult for California farmers to compete in the world market. Our continued success depends on the availability of cost-effective and efficient crop protection tools, an adequate labor supply, international trade practices that are fair to California producers, and a dependable supply of water. In the time I have this morning, I will highlight these issues and engage in a discussion about what we all can do to overcome these challenges.
I. IMPLEMENTATION OF THE FOOD QUALITY PROTECTION ACT OF 1996
The U.S. Environmental Protection Agency's (EPA) implementation of the Food Quality Protection Act of 1996 (FQPA) appears to be on a collision course with California agriculture. EPA threatens to impose major regulatory actions based on questionable scientific methodologies and overly conservative default assumptions. That would sacrifice safe crop protection products for ineffective, expensive alternatives. Integrated pest management programs that reduce chemicals are threatened. It would increase prices and reduce quality, selection, and availability of the most abundant, wholesome and affordable food supply in the world.
A recent study by Auburn University and Texas A&M University concludes that the elimination of organophosphates and carbamates could be counterproductive as a matter of public policy. That action would: reduce yields, create more variable prices, increase pest resistance, increase food prices, increase imports, and reduce consumption of fruits and vegetables. These effects will be felt by the entire Nation with an estimated decline in economic output of $17 billion and a loss of 209,000 jobs.
Page 91 PREV PAGE TOP OF DOC Farm Bureau's first priority is implementation of the Food Quality Protection Act of 1996 (FQPA) in the spirit in which the law was passed. We are strongly committed to ensuring that its implementation includes sound science, transparency, balance, and workability. However, we are convinced that EPA's current implementation plan does not meet these criteria and will severely hamper California's agriculture industry. Therefore, we support a bipartisan, legislative effort that addresses the issues detailed in this testimony.
Sound science is the use of reliable data produced using validated methods. Transparency describes a regulatory process that is open to public scrutiny, invites and encourages participation by stakeholders and an informed public, and follows due process. Balance means appropriate concern for both risks and benefits, and proper allocation of Government resources among competing priorities within EPA. Workability means administering the FQPA in a practical and realistic manner that incorporates the perspectives of the scientific, political, regulatory, agricultural, environmental and public health communities.
Sound Science: Implementation must be based on sound science and reliable information.
In his April 8, 1998 memorandum to Secretary of Agriculture Dan Glickman and EPA Administrator Carol Browner, Vice President Al Gore states: ''Regulatory decisions should be based on the best science and data that are available.''
This statement addresses the need to utilize the ''data call-in'' provision written into the law (section 405 of the FQPAsection 408 of the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C. 346a). Much of the data required to make fully informed decisions on tolerance levels and exposure rates is available within the industry.
Industry has the resources and desire to work with EPA to fulfill all data gaps necessary to safeguard public health while meeting the needs of U.S. agriculture. We stand ready to provide this information to assist EPA during the tolerance reassessment process. In the meantime, it is only reasonable that interim tolerances be established.
Page 92 PREV PAGE TOP OF DOC The use of overly conservative default assumptions when actual data are available overestimates risk and benefits no one. Revoking tolerances based on maximum-use default assumptions when data are available is not called for in the law that requires EPA to use ''reliable'' and ''available'' data in tolerance decisions. Many of life's basic necessities utilized on a daily basis (i.e., table salt) would be determined potentially dangerous if based on unrealistic and unfounded assumptions. If EPA works with industry to fill data gaps, the need for default assumptions will be eliminated. Therefore, the data call-in provisions of the law must be fully implemented.
Arbitrary deadlines established by FQPA are forcing EPA to make critical decisions with little or no scientific justification. August 1999 is EPA's first deadline. Even though the scientific methodologies have not been determined, the EPA has publicly stated it will meet its deadline. Forcing an agency to complete a specific quantity of work with no regard for the quality is unacceptable. EPA must be given the time to develop scientifically, peer-reviewed methodologies that incorporate the best science and all available and relevant data.
Transparency: Implementation must be transparent and EPA's decision making logic should be clear to all parties. The public must be informed of the criteria used to assess risk and the process by which decisions are reached.
The Technical Reassessment Advisory Committee (TRAC) has been successful in allowing interested parties to have access to information and policy. Farm Bureau has actively participated in the process and is encouraged by the progress made in developing science policies. However, this committee was only formed for a short period and does not have the authority necessary to ensure continued communication and a balanced implementation. Only Congress has the authority to insist that EPA re-evaluate its current plan and follow the original intent of the law.
Information should be shared directly with those, such as Farm Bureau and other industry associations, who have the best access to the individuals affected most by decisions, the producers. EPA must develop a communication mechanism that allows for a free flow of information.
Page 93 PREV PAGE TOP OF DOC Balance: Implementation must be balanced. As EPA considers canceling pesticide uses as a result of the tolerance reassessment and reregistration process, the Agency must give higher priority to the review and approval of new products. Consideration must also be given to current programs utilized within the industry, which work to reduce chemical use and increase biological practices.
Section 18 of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) authorizes EPA to exempt a State or Federal agency from the provisions of FIFRA, if EPA determines that emergency pest conditions exist. Under the FQPA, EPA must establish a tolerance and the tolerance must meet the new FQPA ''reasonable certainty of no harm'' safety standard. The result of this change has been the shifting of EPA resources from new product registration and approval to tolerance reassessment, including tolerance approval under section 18. This has resulted in a situation that has delayed new registrations and the shift from older products to newer, safer products.
To remedy this situation, EPA should adopt an incremental risk approach to evaluating and approving section 18 tolerances. This approach was presented to EPA's Pesticide Program Dialogue Committee, but rejected. EPA should reconsider this approach.
Under FQPA, both EPA and USDA are required to promote Integrated Pest Management (IPM) programs and to consider a pesticide's use within an IPM program.
Farm Bureau supports the widespread promotion and use of IPM as a method of reducing costs, risks, liability and total dependence on farm chemicals. IPM can reduce risk of crop loss, lower the per-unit cost of production and reduce liability from chemical damages. IPM is a defensible use of pesticides because it focuses use where problems have been identified.
Integrated pest management (IPM) programs have been used to reduce pesticide use since its inception. Most of the pesticides targeted by EPA as high-risk compounds are used in IPM programs. While alternatives exist for some crops, other crops, specifically so-called minor crops, have few, if any, alternatives. In some cases, the loss of broad-spectrum pesticides means that farmers may have to use more than one alternative to achieve the same result that a single pesticide produces now. Farm Bureau urges this committee to closely evaluate the effect FQPA will have on successful IPM programs.
Page 94 PREV PAGE TOP OF DOC Workability: Implementation must be workable. If it is decided that certain existing products do not fit within the FQPA ''risk cup'', producers should be given the opportunity to provide input to final use decisions, as well as sufficient transition time to adapt to new or alternative products and practices.
Vice President Gore's April 8 memo addresses transition by stating: ''Implementation of the law will require transition to new pest management strategies for certain pesticide users. EPA and USDA should work together to address transition challenges in future years.''
Transition periods that allow an incremental phase-out of a canceled product is necessary to give research efforts adequate time to develop safe alternatives. Farm Bureau is committed to work with State and Federal officials to provide adequate funding for agricultural research and technical assistance to reduce the impact of chemical cancellations. However, our involvement relies on a good faith effort by EPA to provide adequate transition periods for those affected to research and perfect new practices.
USDA has a vital role in serving as the farmer's representative throughout implementation. Until recently, USDA's Office of Pesticide Programs had only taken a minor role in collecting and evaluating data critical to the reassessment process. At this time, USDA is evaluating the preliminary reregistration eligibility decisions and providing input to EPA. However, this program needs additional resources if it is expected to continue working with EPA to implement FQPA.
Research is the forgotten element within this entire process. California, the Nation's largest agricultural producer, should be leading the way in finding new chemical alternatives. While the University of California and California State University systems have accomplished much for agriculture, more can be done. However, without support from Congress, California will continue to receive less than its fair share of Federal agriculture research dollars.
Page 95 PREV PAGE TOP OF DOC Water. Agriculture requires resources in order to be successful. No resource is more obvious or important and imperiled than the water needed to grow crops and maintain agricultural production. The process known as CalFed has been broadly endorsed by a number of California stakeholders because it promised a balanced approach to ensure reliability for all water users dependent upon the San Francisco Bay/Sacramento-San Joaquin River Delta system. Congress will vote on important CalFed funding decisions in the months ahead. This Congressional oversight will help to shape the future of the CalFed process which is critical to your constituents and all Californians. Part of CalFed's original charter was to prevent disproportionate impacts on any one set of constituents, whether positive or negative. CalFed is in danger of further delay. A process that has engendered balanced thinking and more active efforts to reach negotiated agreements on water supply availability and related issues is now endangered. It is important to minimize any further delays and keep CalFed on track for decision making as soon as possible. Any further postponement could be deadly to this broad-based, collaborative effort.
Certain principles form the cornerstones of any successful resource management process, in particular CalFed. These principles include the need for a balanced approach to contributions made to meet Bay-Delta requirements for fisheries, ecosystem restoration, watershed management, water quality and water supply integrity. Thousands of acres of land have been proposed for retirement in the Delta. We caution that no one should expect the answer to all Bay-Delta concerns can be had for the price of an acre-foot of agricultural water or the cost of fallowing or retiring previously productive agricultural land. Another cornerstone is the need to honor agreements with and obligations to water users. To the extent that Delta improvements must be made to meet contractual obligations to various water supply users and the in-Delta obligations, we support such improvements to the same level that we support other agreements made with various water users over the years and the laws that authorize and protect those agreements. This leads to our next principle, which is the primacy of State water law and the structure for processing permits, water rights allocations, and related management tools for meeting Bay-Delta obligations and other water quality and water supply needs. The institutional arrangements envisioned by CalFed offer the best hope to comply with various State and Federal regulations efficiently.
Page 96 PREV PAGE TOP OF DOC Another principle of the CalFed process is to provide incentive and opportunity to bring operational flexibility into the system, particularly through additional surface and groundwater storage arrangements. We believe storage options would help to insulate water users from further degradation of their property rights. This operational flexibility also would benefit fisheries and ecosystem requirements by facilitating, among other things, the movement of water at times when natural flows and other system constraints do not provide water when and where it is needed.
Finally, we must not overlook the importance of California meeting its 4.4 Plan regarding the Colorado River water supply. To the extent that California cannot rely on water from the Colorado River system, additional export demand will be made on the Bay-Delta system. We cannot ignore how important the 4.4 Plan is to the overall scheme of California water supply reliability.
We have been fortunate in California within the last 5 years to enjoy a good water supply. Unfortunately, this situation has meant the system under CalFed administration has not been tested the way it would be in dry or critically dry years. Part of this testing of the system should be accounted for in any kind of water year by looking at the effects various activities have on continued agricultural and other productivity; whether that activity is water acquisition, habitat restoration, installation of barriers in the south Delta, or additional storage placement, just to cite a few examples. Whatever authority is used to undertake an activity should include the requisite environmental review so that impacts can be assessed and evaluated for the ''balanced approach'' pledge of CalFed. It is equally important to account for how money is spent and what results are achieved for the money invested. Everyone would benefit from an audit of the various funds and activities involved in Bay-Delta management, studies and operations so that everyone can begin to assess what works and how much it costs to have a functioning system that everyone can rely on to their relative benefit.
Page 97 PREV PAGE TOP OF DOC We believe CalFed currently is the most logical approach to coordinating the myriad agencies with jurisdiction over Bay-Delta concerns. If this system falls apart, we will be catapulted back to previous stalemates, in-fighting and wasted resources. The most likely way for this process to fall apart is if people continue to feel we are not making progress, that there is no accountability either in the system or in the ways that money is being spent, and if there is no end in sight that would allow decision making within a reasonable timeframe for stakeholders to be productive in their various endeavors.
III. Livestock Issues. For years, livestock producers have been faced with below cost of production prices and increased regulatory burdens. To make matters worse, Congress has withheld support for country-of-origin labeling which will allow consumers to make educated buying decisions and provide a clear choice at the retail counter. Now is the time to act.
Country-of-Origin labeling: Farm Bureau supports H.R. 222. Today, we announce our additional support for H.R. 1144, introduced by Representative Helen Chenoweth of Idaho. H.R. 1144 will only allow the ''domestic'' label to be used for meat products from animals born, raised and processed within the United States.
Surveys show the general public supports country-of-origin labeling. For years, those who control beef and lamb marketing have ignored the consumer. We cannot ignore the consumer and survive. The time to move H.R. 1144 is now and we must not compromise this bill to the point where it becomes worthless to the consumer. Many of our trading partners require our products to be labeled to show it came from the United States. Countries with labeling requirements include Canada, Japan, Australia and others.
H.R. 1144 also addresses the reporting of foreign products as domestic production. Currently, live animals are shipped to the United States for slaughter. However, these live animals are not considered imports under current USDA reports. This bill requires a record of the country-of-origin. It should also require that the product be reported as imports, and not part of the domestic supply. Producers have listened for years as economists indicate that domestic supplies are too high to warrant higher prices. It's only fair to show that foreign-raised products are reported as imports, regardless of where they are processed.
Page 98 PREV PAGE TOP OF DOC Price Reporting: Farm Bureau supports H.R. 693 which requires large packers to report the price, volume and terms of sale of all domestic and imported livestock and livestock products.
Captive supply arrangements can greatly influence market prices. Our producers need information to make educated marketing decisions. We do not expect packers to report the individuals they contract with, but reporting expected delivery dates, and the prices received are essential for an effective marketing strategy.
Country-of-origin labeling and price reporting alone will not solve all the problems of the livestock and poultry industries. However, if Congress passes these bills, American producers will be given the opportunity to differentiate their product from imports and make marketing decisions based on sound market information. These changes represent a positive first step for our producers.
Price reporting and country-of-origin labeling are minor fixes to complex issues facing the livestock industries. We urge you to help move these bills. We also request your support and Congressional oversight into the impact of packer concentration, unfair trade practices affecting the livestock sectors, and the disjointed way commodities are priced.
How can record low hog prices and continued low beef prices not be reflected in the prices paid by consumers?
Periodic hearings should be held to review the effect of packer concentration on the livestock industries. We believe Congress should help evaluate the current regulatory obstacles that keeps our producers from integrating in this industry. We need to eliminate any obstacles and encourage producer marketing efforts that will take the product from the field to the consumer.
Unfair trade practices continue to haunt our producers. The European Union has prevented the import of beef based on scientifically unjustified phytosanitary standards regarding our products. We support administrative and legislative measures that level the playing field.
Page 99 PREV PAGE TOP OF DOC We support the American Sheep Industry Associations' trade petition against lamb imports. We are on the brink of losing this industry in the United States. They need your support in this fight.
IV. International Trade. The Farm Bureau supports development efforts of new markets while at the same time strengthening our commitments to established markets around the globe. California agriculture's continued success depends on a strong export market unencumbered by sanctions, non-tariff trade barriers, and unfair trade practices.
In 1997, California agriculture exported nearly $7 billion in agricultural goods, down slightly from 1996 totals. This is a result of the current financial situation in Asia. California agriculture will continue to maintain a strong presence in the Pacific Rim since this region represents six of the top 10 markets for California agricultural commodities. Japan, California's largest export market, is the critical link to expanded trade in this region. However, the 1999 outlook for Japan is not positive. Prices are expected to continue to fall and economic output is expected to contract. Under such conditions, the Japanese stock market cannot be expected to show any real sustained recovery, real wealth will continue to evade Japan's domestic consumers, and U.S. exports to Japan will continue to wither.
The U.S. Department of Agriculture estimates that 1999 agricultural exports will be less than $50 billionan amount that is $10 billion less than the value of our Nation's agricultural exports in 1996. The U.S. agricultural trade balance for 1999 is estimated to be $12 billion, the lowest since 1987. This decline in exports will likely impact California greatest.
To achieve fairer and freer trade Congress should:
Pass fast-track negotiating authority that will address:
Binding agreements to resolve sanitary and phytosanitary issues on the basis of sound scientific principles in accordance with the Uruguay Round Agreement on agriculture;
Page 100 PREV PAGE TOP OF DOC Tariff equalization and increasing market access by requiring trading partners to eliminate tariff barriers within specified time frames; and
Changes in international agreements that would facilitate and shorten dispute resolution procedures and process.
Provide permanent normal trade relations with China and continue to insist that China abide by World Trade Organization rules.
Provide full funding for international market development and promotion programs.
Eliminate unilateral sanctions. We believe all agricultural products should be exempt from embargoes except in the case of armed conflict. Should a trade embargo or restriction be declared under such circumstances, the embargo should apply to all trade, technology, and exchanges. An embargo should not be declared without the consent of Congress.
An element of international trade that must be addressed as we prepare to enter the 21st century is fair trade. California agriculture and our numerous minor crops are often left out of trade discussions or used as the bargaining chip to secure a deal.
California's Brussels sprouts farmers have been forced to deal with dumping from Mexico in three of the last four seasons. Due to the relative small size of the industry in California, the concerns of Brussels sprouts farmers are not heard by the United States Trade Representative. The United States must address issues of fair trade that have a negative impact on our producers prior to moving ahead with new trade agreements.
Dried apricot farmers face a similar situation. Currently, Mediterranean product imported from Turkey is heavily subsidized and is forcing California's producers out of the market. This year, packers in California are refusing to extend new contracts to domestic producers because the cost of apricots from Turkey are cheaper than the cost of production in California. This difference in price is a result of Government subsidies and not cost of production.
Page 101 PREV PAGE TOP OF DOC According to a study conducted by Dr. Parr Rosson of Texas A&M University, the North American Free Trade Agreement (NAFTA) is a having a positive overall impact on U.S. agriculture. However, in a micro-economic view many winners and losers are beginning to emerge. Among the losers are fruit and vegetable producers. In the 5 years since NAFTA's inception, fresh fruit and vegetable exports to NAFTA countries have declined two and five percent, respectively. During that same time period, fresh fruit and vegetable imports from NAFTA countries have increased 100 and 75 percent, respectively.
In the United States, agriculture continues to have a trade surplus with the rest of the world, but slower growth in Asia and the effects of commodity price deflation are both hurting our exports. Congress must continue to work towards a global marketplace that respects healthy competition and rejects trading practices designed to negatively impact America's farmers.
V. Labor. Last year, members of the House Agriculture Committee were key supporters in our drive to enact an emergency guest worker program. We applaud that commitment and commend the efforts of California Representatives Richard Pombo, George Radanovich and others who battled in the closing hours of the 1998 budget negotiations to retain the H2A reform language in the final proposal, but to no avail.
The need for a reform bill is even greater today, and we are determined to succeed with similar legislation this year.
Sectors of California's farm economy suffered losses last year due to worker shortages. Employers faced great uncertainty from day to day whether they would have an adequate work force. No other sector of the economy faces greater obstacles than agriculture, due to the seasonal and migratory nature of the work.
Our Nation's economy remains strong with employment in all sectors extremely tight. Farm-worker shortages are already occurring in California, and as the season progresses, those shortages will likely grow worse. Even though this is not solely a California problem, we have the most at stake if shortages develop. California agriculture's problems will become the Nation's problems, since our State provides nearly half of the country's fresh fruits and vegetables.
Page 102 PREV PAGE TOP OF DOC Already this spring, asparagus growers in the Imperial Valley have abandoned portions of their fields in an effort to keep up with the harvest in the rest of the field. Last year was a below-normal production year in California. If we experience normal or above normal harvests, the situation will be worse. Many critics claim there is a simple answer; employers should simply pay more, and the workers will come. That didn't happen last year and it's not likely to happen this year. Last year, agricultural groups in the San Joaquin Valley worked with social service agencies in an attempt to attract domestic workers. The efforts failed to produce more than a handful of potential workers throughout the entire Valley.
We can't wait for a crisis to develop before we act. We urge this committee to lead the way in working for an H2A program that is workable. Such a program would provide an important safety net for agricultural employers and be beneficial for farmworkers as well.
The Government Accounting Office (GAO) estimates that 600,000 farm employees are working illegally in the United States. These disenfranchised workers lack legal standing and the usual protections. They enter the United States at great peril and face the constant fear of deportation. Under a reformed H2A, they will be fully protected by established labor standards, will receive proper compensation for their transportation into the United States and will also receive housing or a housing allowance. Domestic and foreign workers will be protected by a prevailing wage standard.
Can Congress defend the status quo? I believe not. Is there a better way? Absolutely. Those who voted in the last Congress to permit an additional 60,000 H1B foreign visas to work in our high-tech computer industry have an obligation to apply those same standards to agriculture.
The potential farm labor crisis poses the greatest threat to those commodities already weakened by foreign competition. Last year, many olive growers did not harvest their crop due to labor shortages, higher labor costs and weak market prices. For these growers another money losing year could be their last.
Page 103 PREV PAGE TOP OF DOC Crop Insurance Reform. A dependable, voluntary crop insurance program will play a significant role in both production financing and the development and implementation of successful marketing plans. There is no doubt the current program needs to be modified to stimulate increased producer participation and provide better coverage levels and options across more crops, regions and production practices. The current crop insurance program does not meet the needs of California agriculture.
The existing program's structure makes it impossible for the program to provide adequate or even minimal protection to crops grown in California. As such, a good first step towards improving crop insurance is to allow a regional approach. USDA must be given the flexibility to address the needs of unique areas of the United States. A farmer in California may not be able to relate to some of the problems a farmer in Iowa is facing. Yet, the current crop insurance program treats everyone as though they are growing the same crops under the same conditions and facing the same external threats. Implementing a regional approach for crop insurance programs will deal with such problems.
In addition to having more flexibility, the program needs to be more affordable. Under the current program, as farmers purchase higher coverage, the cost rises disproportionately. This disincentive is particularly troubling in California where, due to the costs of production, a farmer typically needs to purchase higher coverage in order to provide an adequate safety net. However, to buy enough coverage to make crop insurance meaningful, the price of the insurance becomes cost prohibitive. Our growers are caught in a classic Catch22 situation. Crop insurance does not provide them with adequate protection unless increased coverage is purchased. However, if increased coverage is purchased, the farmer can no longer afford crop insurance.
California grows more than 300 commodities. Crop insurance is simply not available for many of our commodities. As Representative Condit pointed out at a recent risk management hearing, programs currently exist for only 30 California crops. Due to statutory and regulatory constraints, the USDA Risk Management Agency is unable to develop or introduce new programs in a timely manner. On average, it takes five to 7 years before a new program created by USDA is available to all producers. This timeline is unworkable. Crop insurance reform should permit USDA to work in a more efficient manner so new programs can be developed with greater speed. One way to achieve this is to provide the Risk Management Agency greater flexibility to use pilot projects, including such pilot projects on a nationwide scale, and to reduce the regulatory procedures required to develop and update policies
Page 104 PREV PAGE TOP OF DOC The private sector could alleviate some of these problems, however there are no incentives for a private company to develop a new product. The Risk Management Agency states that it is not authorized to compensate private entities for development and maintenance costs associated with new products. Additionally, any new product developed by a private company must be made available, immediately, to all companies. This creates an unfair situation where private companies are unable to recoup any of the costs associated with research and development. The net effect of this is that any company that successfully develops a new program is penalized for bringing the new product onto the market. These disincentives have stifled innovation and severely limited the number and quality of risk management tools available to farmers and ranchers. The Risk Management Agency should be authorized to reimburse companies for the costs associated with developing successful new products.
California has experienced several disasters the last couple of years ranging from severe flooding, rain damage, freezes and fires. Under the existing program, our growerseligible yields were severely reduced because they encountered multi-year crop losses. Crop insurance reform must offer some type of protection for multi-year losses.
It is painfully obvious that the current crop insurance program simply does not work. We look forward to working with Congress in order to reform crop insurance so that it meets the needs of all of California's agricultural producers.
Pest Exclusion. California's continued agricultural prosperity is anchored in its ability to protect against pests and disease that threaten production and our ability to export.
A Cornell University study estimates that foreign plant and animal pests cost the United States nearly $123 billion a year. The fire ant, California's newest exotic pest, costs the Nation approximately $20 billion per year. Other non-native pests found in California that require intensive monitoring and resources include the Mediterranean Fruit Fly, Oriental Fruit Fly, Mexican Fruit Fly, and the Africanized honey bee. California agriculture has much to lose if our Nation's pest eradication programs do not continue to receive adequate funding and support from Congress.
Page 105 PREV PAGE TOP OF DOC California agriculture has been placed in a difficult situation with a proposed ruling by the USDA/Animal Plant Health Inspection Service (APHIS) to allow citrus to be imported from Argentina. California agriculture supports free trade and expansion of markets, as stated earlier, however we do not support the introduction of product that will result in the infestation of exotic pest. APHIS has proposed to allow product to be imported from areas within Argentina known to have pests not found in California. This is a precedent we cannot support. The industry needs time to analyze the situation more thoroughly to determine the adequacy of the science used in the risk assessment process.
Farm Bureau supports increased funding for APHIS. Additional resources are necessary to increase the level of monitoring throughout the country needed to eliminate the threat of non-native pest.
Conclusion. California agriculture has been the Nation's No. 1 farm State for the past 50 years. California can and will continue to be a world leader in agriculture production if we have access to cost effective and efficient crop protection tools, an adequate labor supply, open markets practicing fair trade, and a dependable supply of water.
The challenge for California farmers is to remain competitive, to make a profit so that we can stay in business. For many of our commoditiessheep, olives, dried fruits, cut flowers, to name a few, that job is getting tougher every day. In some cases it's the result of unfair trade competition. It's also getting harder to compete because of regulatory burdens. We need Congress' help to provide balance in regulatory decisions whether its the Endangered Species or Clean Water Act. As landowners we bear the full brunt of efforts to save species, to set more water aside for environmental purposes or the growth of our cities. It is my goal, as president of the State's largest general agriculture organization, to see that we, as an industry, work to resolve many of the issues brought before you today.
Thank you for your continued support of California agriculture and the opportunity to present these comments. The California Farm Bureau Federation looks forward to our continued partnership on issues affecting agriculture.
Page 106 PREV PAGE TOP OF DOC
Testimony of Jerry Hemsted
Chairman Pombo and distinguished members of the Subcommittee on Livestock and Horticulture, I am Jerry Hemsted, a rancher from Red Bluff, California currently serving as the president of the California Cattlemen's Association. Thank you for the opportunity to be with you today to present oral and written testimony on the Government influences on the California beef cattle industry.
The California Cattlemen's Association is a trade association that was formed in 1917 and represents all segments of the beef cattle industry. We have over 3,000 members involved in seedstock, cow/calf, stocker and feeding operations.
Although our industry faces challenges everyday from climatic and market conditions, we are increasingly impacted by local, county, State and Federal regulations that threaten our livelihood. Our comments today focus on some of the most onerous problems which, if corrected, could greatly improve the viability of this ever shrinking industry.
Endangered Species Act. I am sure this is no surprise to the committee, but our industry is negatively impacted by the implementation and interpretation of the Endangered Species Act. Basic scientific requirements and third party peer review of proposed listings need to be implemented. Currently one individual with anecdotal information can start and complete the listing process for a new species. Additionally, delisting a species is almost impossible even if the species was erroneously listed in the first place. Secondly, Government actions after a species is listed most often diminishes the productive value of the land and leaves the landowner struggling to make a living.
The current act does not give protection to landowners who wish to enter into a safe harbor agreement. If a landowner wishes to comply with such a voluntary agreement then the landowner should be given protection from further listings and other actions. Finally, when a defendant in an Endangered Species Act legal wins a decision, court costs and attorneys fees should be paid by the plaintiff. Currently, if the plaintiff is successful, their costs are reimbursed by the Government and they can initiate another suit against a landowner, frivolous or not. If this is not feasible then no reimbursement for either party should be the norm.
Page 107 PREV PAGE TOP OF DOC Environment. CCA is deeply involved in the current action by EPA to develop an Animal Feeding Operation strategy. Our members have participated with the EPA in feedlot tours throughout the State and are committed to protecting the quality of the water in California. However, conditions vary between facilities based upon species, climate, geography, geology, source and location of potential water bodies. We encourage a simple, streamlined process that assists owners in developing and gaining approval for site-specific plans. We also request funding for sound, responsive technical assistance. We would encourage the committee to work with the livestock industry and the EPA to arrive at a solution that is workable for all involved.
Tax and Credit. Death is a terrible thing to tax and the Estate Tax needs to be eliminated. Our members work for generations to build scenic, productive, environmentally sensitive ranches that provide for their livelihood, provide habitat for wildlife and provide an aesthetically pleasing viewshed for their neighbors and travelers. The death tax causes the destruction of all of these values. Congress' Joint Economic Committee concluded that death taxes generate costs to taxpayers, the economy and the environment that far exceed any arguable benefits. The California Cattlemen's Association urges your support in eliminating this unfair and unnecessary tax.
We understand there is some action to allow farmers and ranchers the opportunity to defer a portion of their income for up to 5 years. We would support this additional tool necessary to smooth out the cyclical nature of the agricultural businesses.
Property Rights. Takings of private property continue to be a huge concern for our membership. We would urge congressional action that would require Federal agencies to prepare takings impact analyses that are fair to the landowner and mandate alternatives be identified that would avoid or minimize the taking of private land. We also support easier access to court for landowners disputing agency actions that take private land.
Page 108 PREV PAGE TOP OF DOC Foreign Trade. The continuation of USDA's Market Access Program is paramount to our industry. As the global market increases, U.S. producers need assistance in opening up markets overseas that might otherwise try and prevent our products from entering their country.
There are many ideas on Country-of-Origin labeling in the beef business. Our membership has voted to support the labeling of imported products. We believe our membership would like to see labeling at the retail level on imported whole muscle cuts and processed meat products. We are concerned about the cost and ability to identify and verify products that contain imported and domestic product. Research and evaluation of a process on mixed products should be conducted quickly so the industry can assess the costs and benefits associated with labeling mixed domestic and foreign products.
The European Union ban on our beef products needs to be stopped. If the EU does not comply by the May 13, 1999 deadline, the California Cattlemen's Association requests congress to take strong action including retaliation. We have negotiated with the EU for too long and our producers confidence in free or fair trade will erode quickly if this is not resolved.
Farm Policy. The California Cattlemen's Association feels legislation is needed to allow the interstate shipment and sale of State inspected beef. Many smaller plants have State rather than Federal inspection in their plants. These plants must meet all of the food safety requirements of Federal inspection but they are prohibited from shipping their products interstate. With the packing industry so concentrated, this is an opportunity to improve the viability of small plants and maintain some competition in the meat packing industry.
The cattle industry has few, if any, risk management tools for revenue loss. The Livestock Feed Program was eliminated and now we have difficulty even getting disaster assistance for forage loss. Our industry needs a voluntary disaster insurance program administered by USDA similar to some of the programs available for other commodities. Currently our industry is prohibited from participating in USDA's insurance programs. We would ask the committee to support legislation to resolve this problem.
Page 109 PREV PAGE TOP OF DOC Cattle Marketing. We are asking for support for legislation to create a dealer trust. This trust would be similar to other trusts administered by the Packers and Stockyards Administration except this trust would give protection to sellers of livestock on sales made to dealers and market agencies buying on commission. This trust would specifically give protection to our cow/calf and stocker producers in the State.
Conclusion. I know I have covered a breadth of issues in this testimony but the breadth of issues facing our industry is growing. We certainly appreciate your attention to the needs of the livestock industry here in California and look forward to working closely with the committee to address these issues. If you have any questions regarding comments made in this testimony, please feel free to contact John L. Braly, our executive vice president, or myself.
Again, we thank you for the opportunity to present testimony to the Subcommittee on Livestock and Horticulture. Our association is ready to assist the committee in anyway possible.
Testimony of Florence Cubiburu
Mr. Chairman and members of the subcommittee, on behalf of California's sheep producers we greatly appreciate your leadership in conducting this hearing in the State on the serious situation facing farmers and ranchers.
Loss of the National Wool Act in 1993 has been every bit as devastating to the sheep and goat industries as we predicted at that time. California sheep producers who have survived the loss of the program find themselves once again at a critical crossroad financially. Our efforts to attain profitability since 1993 have been drowned in a flood of imported lamb meat from Australia and New Zealand. In March 1997, feeder lamb prices were at $122.75 per cwt. and December 1998 prices had plummeted 40.9 percent to $72.50 per cwt. Last fall in some areas of the country growers with lambs to sell couldn't get a single quote. Prices for slaughter lambs declined from $102.75 per cwt. in February 1997 to $61.50 per cwt. in December 1998, a by 40.1 percent decrease.
Page 110 PREV PAGE TOP OF DOC California lamb feeders and producers were the first in the Nation to be hit with the devastating fall in the U.S. lamb market. The equity of, and borrowing ability of, the lamb-feeding segment of the industry was wiped out in 1997 and 1998. California producers were faced with a declining lamb market during the Easter/Passover period. Last April and May, we witnessed unprecedented market volatility with our lambs selling for less than $60 per cwt. As a result, sheep operations in California declined from 3,700 in January of 1998 to 3,300 in January of 1999. The breeding sheep inventory fell from 360,000 head to 345,000 head during the same period. The total sheep inventory for the State now stands at 810,000 sheep and lambs.
Slaughter lambs this month, have been trading for $65 per cwt. The vast majority of California spring lambs will be sold between now and the end of June. Mr. Chairman, as you can understand the situation is serious for producers and feeders alike. The result is a decreased ability to obtain credit from our lenders or re-invest in the infrastructure of our industry. The continued market volatility and low lamb prices are the major factors.
In 1993, approximately 56.5 million pounds of imported lamb meat entered the domestic market. By 1997, the amount had risen by 49 percent to 84.4 million pounds. It's risen even higher since then. From January to September 1998, 76.9 million pounds of imported lamb meat entered the United States, a 19 percent increase from the first nine months of 1997.
Imports have taken market share from domestic producers, increasing from 20.7 percent of the market in 1996 to 30 percent of the market during the first nine months of 1998. In addition to the exploding volume of imports, the investigative report of the U.S. International Trade Commission concluded that in eight product categories; such as racks, ribs, loins, legs and shoulders, imported lamb prices undercut U.S. prices 79 percent of the time by margins averaging 20 to 40 percent.
In short, the U.S. has become the relief valve for excess lamb production from other countries. The Australian dollar declined by 24.4 percent and the New Zealand dollar dropped by 27.8 percent between January 1997 and September 1998. The recent devaluations have encouraged Australia and New Zealand producers to export their production of lamb meat to the United States rather than sell to their own depressed markets or to Asia.
Page 111 PREV PAGE TOP OF DOC The U.S. market is also attractive becauseunlike the European Union, which has absolute quotas on lamb meatan unlimited amount of lamb can be sent to the American market. The surge of imports now swamping the market threatens to capsize the U.S. sheep industry. Australian producers told the International Trade Commission that exports of fresh chilled lamb meat are projected to increase 21 percent in 1998and by another 24 percent in 1999. New Zealand's figures are even higher. Their exports of fresh chilled lamb meat were projected to increase 83 percent in 1998 and another 36 percent in 1999.
Mr. Chairman, our industry has united key members of all segments of the lamb industry from producers, feeders to packers and processors in addressing the flood of cheap imported product. On Sept. 30, 1998, representatives of the U.S. lamb industry filed a section 201 trade action with the U.S. International Trade Commission. On February 9, the Commission voted unanimously that imports from Australia and New Zealand are cause of serious threat to the domestic lamb industry. The U.S. International Trade Commission is scheduled to announce its recommendations for trade remedy on March 26 and to transmit those recommendations to the White House by April 4. The President then has 60 days to decide on implementation of trade remedies, either the recommendations of the ITC as submitted, with modifications or to decline implementation of relief. It is absolutely critical that the administration implements the most effective trade relief possible. We ask for the committee's active support in securing implementation of the most effective trade remedies available under law.
The U.S. industry has requested a tariff-rate quota for 4 years to bring price equity between foreign and domestic lamb products. This measure would strengthen the lamb market and prevent the import surges we are experiencing. This remedy proposed by the industry would go a long way toward restoring the optimism and confidence in the industry needs to stay in business, earn a normal profit and restart the needed investment in the lamb meat business.
I wish I could speak on a better situation for the other products of sheep production, but unfortunately, I cannot. The wool market continues in a deep depression with fully one-half of last year's U.S. wool clip remaining unsold due to devastatingly low prices.
Page 112 PREV PAGE TOP OF DOCWe are now entering the 1999 wool shearing season with a bleak outlook for wool prices. Burlington Industries, the largest purchaser of U.S. wools, recently announced that the company is restructuring with the closure of seven plants and layoffs of nearly 3,000 workers due to the surge of Asian textile imports. They attribute their decision to restructure on the strong American dollar, financial crisis in Eastern Europe and Asia and the surge in Asian textile imports. Finer wool might bring 35 cents a pound today, with coarser wool at five cents a pound! The industry last November requested USDA make recourse loans available for wool under the disaster legislation authorizing recourse loans for fiber. USDA has yet to respond to the request. I might add, that this program is not the complete fix that is needed, but rather a temporary measure that would help producers' cash flow during this market depression. It would help some, but not all, producers in the short run.
The marketing loan provisions for wool as debated in the Senate Committee on Agriculture for the 1996 farm bill would be of more assistance to a broader range of producers. We urge that consideration of livestock programs or safety net provisions include this marketing loan proposal supported by the wool producers.
Another key source of revenue is lamb pelts, which is heavily dependent on export. However, that market collapsed this fall due primarily to the Russian economic situation. Pelts that brought $14 in August are now being salted, dried and stored, or worse, discarded to landfills. The pelt credit has disappeared for lamb and we now understand companies may be charging producers and feeders fees to dispose of pelts. Pelts are included under the GSM credit program but the industry has no response to this program. We urge the USDA to provide the committee with additional options that could be made available to the pelt market.
Lamb market reporting is also a public policy decision that needs to be addressed and would help the domestic sheep industry. Nearly 30 percent of the lamb trade in the U.S. is not reported through USDA. Importing companies have refused all industry and USDA requests for wholesale price reporting. It is clear that mandatory price reporting is the only avenue left to have imported lamb prices reported similar to the reports made available weekly on domestic lamb. The pilot program approved last fall is a first step but obviously does not meet the full need of the industry. We urge the committee to press forward with reporting measures to bring equity between U.S. and foreign interests for price discovery in this market.
Page 113 PREV PAGE TOP OF DOC The domestic industry's ability to compete in the marketplace depends largely on our ability to differentiate our product from that of our foreign competitors. The mixing of imported and domestic lamb cuts in the meat case continues to increase in frequency. Brand names are now in use that clearly aim to indicate the product may be domestic when it is not. Therefore, lamb cuts at the retail level should be labeled as to origin. Again, meat importers and foreign meat producer organizations have refused industry requests to identify their product to accurately inform the consumer. We urge Congress to actively pursue labeling requirements.
Another onerous action that affects our industry is the increased USDA practice of quality grading imported carcasses. Companies to sell imported lamb as USDA Graded blatantly utilize this practice. Since nearly ninety percent of domestic lamb is consistently quality graded, customers infer that graded lamb is domestic. This practice of grading foreign lamb carcasses, Mr. Chairman, is widely protested by many producers, feeders, lamb packing and processing companies and we urge every recourse be sought to end this deceptive practice.
The National Sheep Industry Improvement Center was established in the 1996 farm bill as an innovative new way of capitalizing infrastructure and value added marketing ideas in the sheep and goat industries. Because the Center was mandated to take a new approach of investing in an industry, and the subsequent need to develop a new delivery system, there have been a number of bureaucratic delays. The bottom line to the industry is a holdup in getting program funds to the industry. This program is not a cure for all of the industry woes, but it is an important tool to get capital in to the industry and a critical tool in the domestic lamb industry's adjustment plan as filed with the U.S. International Trade Commission. We encourage you to support administrative and legislative remedies that are forthcoming to put this program on a fast track.
We encourage the committee in its consideration of crop insurance reform to include livestock. We urge the committee to consider revamping the existing crop insurance program and establishing a ''revenue insurance program'' that would provide insurance based on income not production losses.
Page 114 PREV PAGE TOP OF DOC We urge the Committee on Agriculture to continue in support of the domestic lamb and wool industries priorities in trade agreements under consideration. In addition to the trade relief already outlined, the European Union maintains absolute quotas on lamb imports, as well as over $2 billion annually in subsidies to its sheep industry. We cannot ignore this problem and must work to either open up the European markets to remove some of the pressure from Australian and New Zealand's over production on the U.S. market or we can establish equitable measures for American producers.
On wool trade issues we urge the committee members to carefully consider the ramifications on the domestic wool production and the textile industry under the proposed Caribbean Basin Initiative, African Growth and Opportunities Act, and the importer led effort to single out wool fabric tariffs for reduction/elimination.
Mr. Chairman and committee members thank you again for visiting my home district and your attentive interest in the challenges facing the lamb meat and wool industries.
Testimony of Brad Nelson
Good morning. My name is Brad Nelson, and I am the live production manager for Foster Farms Turkey Division and a board member of the California Poultry Industry Federation. Foster Farms is the largest poultry company in the Western United States and the largest member of the California Poultry Industry Federation.
The California Poultry Industry Federation represents the meat poultry industry in the State, including chickens, turkeys, squabs, ducks and game birds and the allied member companies that serve the industry.
On behalf of the industry and my company, I want to thank Chairman Pombo and his committee for holding these hearings in the center of one of the richest agricultural valleys in the world. This State's poultry industry appreciates your leadership with a variety of issues that affect our industry and issues that also will affect other agricultural industries here and throughout the nation.
Page 115 PREV PAGE TOP OF DOC Today I would like to talk with you about four of these important issues and our concerns about them. They include Antibiotic Resistance, Environmental Regulation, HACCP Implementation and User Fees.
Antibiotic Resistance. Questions have arisen again about whether using antibiotics in poultry and livestock increases antimicrobial resistance among certain human pathogens. Critics claim over-reliance of antibiotics on the farm causes pathogens such as Salmonella and Campylobacter to become resistant. They say the resistant bacteria are transferred through the food supply to humans, thus reducing the effectiveness in human medicine of antibiotics that also are used on the farm. In October 1997, an official with the Minnesota Department of Public Health released an abstract of a study that purports to prove Campylobacter in chickens and turkeys is becoming resistant to fluroquinolones, a class of drug approved used to treat E. Coli infections in poultry. Because fluoroquinolones are used to treat dangerous enteric diseases in humans, this developmentif truewould be serious. The study has been peer reviewed, but not accepted for publication.
This renewed public debate forced FDA's Center for Veterinary Medicine (CVM) in December to propose a framework for approving antibiotics that would be used on farm. The agency proposed to divide drugs into several categories, according to their importance in human medicine, and then further subdivide them according to the perceived risk of resistance development. The agency also wants to require extensive new pre- and post-approval resistance studies as well as post-approval monitoring or resistance. CVM originally wanted to include on-farm monitoring and testing but appears to be backing off that position.
The proposed framework's biggest flaw is that no one knows whether it will work because no one has conducted a comprehensive, qualitative assessment of the real risks associated with on-farm antibiotic use. The framework nonetheless in March spawned news reports and editorials from The New York Times, USA Today, the Los Angeles Times, the Dallas Morning News, and ABC News. A leading consumer activist organizationCenter for Science in the Public Interest (CSPI)last week submitted a petition to CVM asking the agency to ban the use as a growth promotant of any antibiotic used in human medicine. CVM is not likely to grant the petition, but CSPI's action has increased the political pressure for some type of action.
Page 116 PREV PAGE TOP OF DOC We urge you to consider five key points regarding this issue:
(1) Antibiotics are important in poultry production. They are used to treat diseases that appear in the flocks and to prevent diseases from emerging. The poultry industry also uses antibiotics to promote more efficient growth. Antibiotics can improve growth by suppressing in poultry organisms that would compete with the turkey (for example) for the nutrients found in feed.
(2) Poultry companies are committed to the safe, judicious use of antibiotics on farm and would not take any deliberate action that would diminish the effectiveness of antibiotics in human medicine.
(3) Any effort at this time to change the approval process for antibiotics would be premature and might actually increase resistance. An official of the Centers for Disease Control has been quoted as saying antibiotic resistance has risen in human medicine because doctors do not have enough antibiotics available for their use. If CVM changes the approval process and veterinarians have to rely on a narrower spectrum of antibiotics, resistance could increase in farm animals.
(4) The poultry industry has serious concerns about any change in the approval process at this time, because CVM does not have the scientific data necessary to make a change. In July 1988, the National Research Council released a report that concluded antibiotic resistance ''does not pose an immediate public health threat'' and that significant information gaps hinder the Government's ability to enact new regulations.
(5) The poultry industry strongly recommends that CVM first conduct a comprehensive, qualitative assessment of the real risks associated with on-farm antibiotic use. The results will determine what changes in the approval process are needed and ensure that regulatory action diminishes, rather than inadvertently increases, resistance.
Environmental Regulation. The Clinton administration has embarked on a major effort to regulate non-point source pollution that may be attributable in part to poultry and livestock production. Two activities are of particular interest to the poultry industrythe EPA/USDA Unified National Strategy for Animal Feeding Operations and the recently concluded Poultry Dialogue.
Page 117 PREV PAGE TOP OF DOC Vice President Gore recently unveiled the final draft of the Unified Strategy, and it calls for legislation or regulation to require comprehensive nutrient management plans on virtually all grow-out operations. The Unified Strategy also would seek to ensure that all feeding operations with more than 1,000 animal units obtain pollution control permits before operating. The California poultry industry, other State poultry organizations and the national industry organizations have several concerns with the Unified Strategy, including concerns that EPA and USDA are grossly underestimating the number of feeding operations that would have to be permitted, that feed control may have to be included in a nutrient management plan, that State and local water quality improvement is not taken into account and that financing of the regulatory program remains unclear.
The Poultry Dialogue, meanwhile, has the potential to be much more positive as it is implemented with State voluntary ''Nutrient Management Plans'' that address issues particularly important to each State. The Dialogue, which involved EPA, USDA, all segments of the poultry industry including the California Poultry Industry Federation, State regulators and other stakeholders, resulted in voluntary framework to improve water quality. The California Poultry Industry Federation has formed its own ''Nutrient Management Committee''and I serve a co-chairmanto formulate plans that will manage and voluntarily regulate the use of poultry waste after it leaves the barn. Our efforts are moving swiftly ahead, and members of our committee include Cal-EPA officials, University personnel, California Department of Agriculture, USDA, EPA and other State agencies and officials.
Please consider the following points about environmental regulations and poultry:
(1) The poultry industry is committed to sound environmental stewardship and is taking proactive steps to further enhance water quality in the regions where we produce and process turkeys.
Page 118 PREV PAGE TOP OF DOC (2) Poultry industry leaders recently completed a ''Poultry Dialogue'' with EPA, USDA, State regulators and other stakeholders. The result is a voluntary framework for improving water quality that we are working to implement throughout the industry.
(3) The California poultry industry plans to supplement that framework with its own state ''Nutrient Management Plans'' which will significantly reduce the risk of pollution on all poultry operations. We are expecting a strong compliance rate with these voluntary guidelines.
(4) The poultry industry is concerned because the Unified Strategy could prove more costly than anticipated while yielding relatively minor environmental gains.
(5) We are also worried because growers will be required under the strategy to write nutrient management plans and then enforce them not only on their own farms but on those that haul their waste away for reuse as a fertilizer and on the farmer who applies the waste as fertilizer.
(6) Finally, we are dismayed that the Unified Strategy does not take into account environmental improvements made at the State and local level. This could lead to unnecessary Federal regulations being applied where local ones already have enhanced water quality significantly. Similarly, the strategy would not prohibit States from enacting more stringent regulations so you could have a vicious cycle of needlessly duplicative environmental regulation.
(7) The California poultry industry strongly recommends Congress approve no new environmental legislation until the results of implementing the Poultry Dialogue and State plans like California's ''Nutrient Management Plan'' and/or environmental guidelines from national poultry organizations have been evaluated.
HACCP Implementation. FSIS in January 1998 began implementing the new Hazard Analysis Critical Control Points (HACCP) inspection system in the nation's largest poultry and meat processing plants. Problems arose during the first months of implementation, primarily because of poor inspector training, inspector resistance to the new system, the agency's insistence on using regulatory (rather that scientific) HACCP and the layering of HACCP on top of the old organoleptic inspection system.
Page 119 PREV PAGE TOP OF DOC Representative Pombo's subcommittee conducted a hearing in May 1998 that examined these problems and obtained several USDA commitments. FSIS promised to remove all unnecessary layers of the old inspection system by January 2000, when the smallest processing plants must implement HACCP. The agency also promised to improve inspector training and to fast track the approval of HACCP-based technologies that could improve food safety.
In the interim, medium-sized plans implemented HACCP this past January. There have been fewer problems during this second-phase of HACCP implementation. The agency made an attempt to train inspectors better in HACCP principles, and agency leaders also have worked more cooperatively with plants during this phase. However, several promises made at Mr. Pombo's 1998 hearing remain unfulfilled:
(1) By FSIS' own recent admission, the agency is falling behind in its effort to remove layers of the old inspection system.
(2) FSIS inspectors still are resisting HACCP. They have filed suit to stop the agency from implementing alternative, HACCP-based inspection models in a series of pilot plants around the country.
(3) The agency still is not ''fast-tracking'' new inspection technologies. FSIS officials are requiring extensive testing protocols for new technologies in the plants.
(4) FSIS still is using command-and-control regulatory tactics by dictating that plant HACCP plans contain certain critical control points.
Congressman Pombo and his committee should be thanked for the outstanding May 1998 hearing and for getting the agency to commit to HACCP implementation improvements. Many improvements in the second phase of implementation are attributable to his efforts. However several major commitments made by USDA at the hearing remain unfulfilled and other implementation problems persist, and the subcommittee needs to continue addressing them. They include:
Status of Regulatory Review and De-Layering. The agency should be asked to provide a timetable for removing unnecessary layers of the old inspection system by January 2000, as they promised the subcommittee last May. They also should be asked to indicate what regulations they are looking at removing and which they are keeping as well as their rationale for those decisions.
Page 120 PREV PAGE TOP OF DOC Fast-Tracking New Technology. Despite FSIS' commitment to the subcommittee to fast-track new technologies, industry continues to face numerous roadblocks to implementing in-plant technologies that could improve the microbial profile of meat and poultry products. Most recently, FSIS indicated it is still going to require time-consuming testing protocols for new technologies that would be used in the HACCP pilot plants. There is no reason why FSIS needs these testing protocols; they simply can compare microbial test results after the technology is implemented with baseline pathogen test results. The subcommittee should ask FSIS to justify this decision.
Inspector Support for HACCP. The inspectors' union lawsuit seeking to halt the HACCP inspection pilots is proof that inspectors still do not support HACCP. FSIS' strong stance against the suit is appreciated, but the subcommittee should ask FSIS to detail its long-term plans for ending the acrimony with inspectors over HACCP implementation.
Command and Control Continues. FSIS assured the subcommittee that it is committed to a science-based HACCP system, yet it has twice in recent weeks virtually mandated the inclusion of specific critical control points (CCPs) in all plants' HACCP plans. Under a true scientific HACCP program, the plant should have the flexibility to determine its own CCPs, in accordance with the plant's HACCP analysis. The subcommittee should ask FSIS to explain its two recent decisions regarding mandated CCPs.
User Fees for Meat, Poultry and Egg Inspection Programs. The California poultry industry joins growers and processors nationwide in opposing the administration's request for new user fees for meat, poultry and egg inspection programs in its FY 2000 budget submission to Congress. In reality, these so-called ''user fees'' for Government mandated food safety inspection programs represent a tax on consumers, livestock producers and the meat, poultry and egg processing industries. Our industry appreciates the leadership of Congressman Pombo in the fight against new poultry and meat inspection user fees, and we encourage this subcommittee and their colleagues to continue fighting vigorously against the fees.
Page 121 PREV PAGE TOP OF DOC At a time when the rural farm economy is of so much concern, a food safety tax could hurt the 500,000 workers who depend on the economic well-being of the meat, poultry and egg industries. With much of the industry located outside urban centers, the additional economic burden of such a tax could lead to a loss of jobs and damage businesses, large and small, that depend on the economy of rural America. Further, ''user fees'' would have a negative impact on many livestock, poultry and egg producers who are currently working through a period of depressed prices for their goods.
Recently, the U.S.. Department of Agriculture's National Advisory Committee on Meat and Poultry Inspection unanimously recommended that the authority to impose ''user fees'' not be sought, either through legislative, or in presentation of the FY 2000 budget. The committee also reaffirmed its view that ''the funding of basic meat and poultry inspection remains an appropriate Federal Government responsibility which should be funded from general tax revenues.''
Meat, poultry and egg inspection is a public health function mandated by Federal law for nearly a century. The public, not industry, directly benefits from Federal food safety inspection programs, and the general public has always funded these programs. Such a food safety tax would also create the perception that inspectors are being paid by the industries they are supposed to regulate and could erode public confidence in Federal safety inspection programs.
Finally, we know of no other consumer, producer, labor or industry organization, or any other public policy group, which supports imposing a food tax for meat, poultry and egg inspection. We urge you to oppose the administration's request to assess user fees, either in whole or in part, for federally mandated meat, poultry or egg inspection.
Thank you very much for allowing us to present this information to you today.
Page 122 PREV PAGE TOP OF DOCTestimony of Geoffrey Vanden Heuvel
Mr. Chairman and members of the subcommittee, Milk Producers Council (MPC) is a producer trade association with about 200 members located primarily in Southern and Central California. We are appreciative of the opportunity to testify before you today. This hearing is timely as 1999 is shaping up to be a critical year for dairy policy.
Our major concern is the growing number of threats to the long-term success of the Federal Milk Marketing Order program. At this crucial time, it is very important for all of us to recognize the value of the Federal milk marketing order (FMMO) program to the success of all producers, including California producers. The FMMO program was passed by Congress many decades ago specifically to protect producers. It is a producer program. It is producers who must petition to establish an order in the first place, producers must vote to approve an order and producers hold the power to vote out an order if they think one is no longer operating in their best interest. According to a USDA publication the program's purpose is as stated:
''Because the supply of milk cannot easily be turned on and off to fit the supply of milk to demand, the marketing system often runs into trouble with milk prices. At times, marketing conditions can result in wildly fluctuating prices which work unnecessary hardship both on those who depend on milk for a living and those who depend on it for food. Federal milk orders are used to stabilize conditions for fluid milk-to make the buying and selling of fluid milk an orderly process upon which dairy farmers, milk dealers and consumers alike can depend.''
In essence, Federal orders were established to create a balance of power between producers as sellers and processors as buyers.
The success of this program is absolutely essential to the success of the California dairy industry, as well as to the success of the dairy industry in the entire United States. For us in California, even though we have a State order instead of a Federal order, it is the presence of the Federal order system elsewhere that creates the regulatory environment that makes our State order possible.
Page 123 PREV PAGE TOP OF DOC The stability that orders provide has, in large measure, allowed producers to control their own destiny. Federal order protections and powers have facilitated the creation of large and successful cooperatives, which are owned and controlled by producers and give producers marketing power.
By contrast, look at producers in the poultry, pork and beef industries which were developed without marketing orders. In many cases, producers in these industries are captives of a few, very powerful buyers which leaves producers with very little marketing power.
Dairy producers in the United States, therefore, have greatly benefited from the existence of the marketing order program. Since the California State order depends, in many ways for its legitimacy on the existence of the Federal milk marketing order system, any threat to Federal orders are also a threat to us. There are a number of such threats that we would like to bring to your attention.
Federal Milk Marketing Order Reform: After several years of work, USDA is on the verge of submitting their proposed rule for Federal Milk Marketing Order reform. The proposed rule will be comprehensive and complicated. It will also likely be controversial. We hope people will take the time to seriously analyze the details in their full context and resist the urge to immediately rush to judgment and take negative positions on the proposed rule. We urge your committee to conduct additional field hearings around the country to receive analysis of the proposed rule from all segments of the national dairy industry before any bills are introduced in Congress which would in anyway modify or change the proposed FMMO rule of USDA. This effort is too important to do in a rushed, haphazard way. MPC was very concerned about all the political attention that has been given to the 1A verses 1B fluid differential controversy that raged in Congress. While the level of fluid differentials are important, there are other components of the FMMO proposal that will be just as important, if not more important to the long term success of the program. Congress should insist on a thorough and thoughtful analysis from all segments of the industry before taking action to supersede the work of USDA.
Page 124 PREV PAGE TOP OF DOC Compacts: Compact fever is sweeping the Eastern United States. From Kansas, Missouri and Texas east to Florida and up the Eastern seaboard, State legislatures are passing compact legislation which will enable their States to join class 1 compacts if Congress authorizes them. The existing Northeast Dairy Compact is scheduled to expire when Federal order reform is implemented on October 1 of this year.
The implications of having nearly the entire Eastern United States wrapped into a class 1 compact is frightening. The way compacts work, of course, is to wall off a certain region of the country and have those States impose a much higher class 1 price within that region with the extra revenue going to producers in that area. Dr. Ken Bailey, an agricultural economist from the University of Missouri, recently completed an economic analysis of the impact of expanding dairy compact beyond just the current New England States. He made the following conclusion:
''Within a dairy compact region, dairy producers receive a higher effective farm price...They react by expanding production...Consumers pay more for fluid milk... milk consumption declines...Greater milk production and less milk consumption results in more milk being used for class 3 and 4 purposes. These products are sold on the national market... resulting in lower national wholesale prices for butter, nonfat dry milk and cheese which lowers class prices in all Federal (and State) orders.''
Dr. Bailey's analysis shows that states with compacts can improve milk prices for their farmers, at least in the short term, but they do so at the expense of those States that do not have compacts. Therefore, it is likely that if Congress were to extend the authority to establish class 1 compacts to all States, most would have to join.
However, States like California who utilize the vast majority of their production as manufacturing products will be at a distinct competitive disadvantage. Long-term, compacts are bad economic policy. Milk marketing orders are only successful long term if they establish minimum milk prices that are subject to the economic law of supply and demand. Because they raise class 1 prices to levels which exceed the true market value of class 1, compacts cause oversupply. The surplus milk generated by the higher prices depresses manufacturing milk prices. This in turn drives down class 1 prices necessitating even higher class 1 ''premiums'' to maintain the higher-class 1 compact price.
Page 125 PREV PAGE TOP OF DOC This type of non-market oriented policy will greatly disadvantage California producers and undermine the long-term viability of milk marketing orders. While MPC had been willing to accept a ''temporary'' Northeast Dairy Compact limited to six small New England dairy States, implementing compacts more broadly will undermine the order program and ultimately harm producers.
Forward Contracting: Kraft Foods is pushing for legislation which would suspend the minimum price provisions of Federal orders to allow for forward contracting of milk. It is precisely the minimum price requirement of Federal orders that makes them work. First, it allows processors to be assured of equal raw product costs with their competitors. Second, it assures producers of receiving a price that reflects the market value of their product. Suspending the minimum price provisions of Federal orders to accommodate forward contracting violates these two essential principles and, in MPC's opinion, will essentially gut and destroy the intent of the milk marketing order program.
Forward contracting cuts into another value of the marketing order program that is often taken for granted, that being its permanence. A forward contract by definition is a sale of a specific amount of milk for a specific price for a specific period of time. While producers may be in a good negotiating position to bargain for apparently favorable terms when a forward contract is executed, what happens when the contract expires? Producers could very well be in a vulnerable position and forced to accept unfavorable terms in the next contract.
It is exactly this vulnerability that led producers to want to establish marketing orders in the first place. If producers in a particular area want to forward price their milk and therefore place their future in the hands of the ''Krafts'' of the world, current rules allow them to vote out the Federal order in their area.
There are also other ways of managing price volatility such as the futures and options markets which can be used to manage risk without threatening the orders. This proposed legislation, far from providing producers with a risk management tool, puts producers in great danger by undermining the order program, which is the foundation upon which the marketing structure of the dairy industry is built.
Page 126 PREV PAGE TOP OF DOC Support Program/The Processors Producer Income Support Proposal: Although we have known it for several years, the elimination of the support purchase program is only months away. The experts estimate that there will be about 160 million pounds of surplus nonfat dry milk (NFDM) floating around looking for a home after the end of the support program. It is estimated that the price of all NFDM could drop to $0.85 per pound if no provision is made to clear this surplus from the market. A NFDM price of $0.85 per pound represents a drop of about $1.50 per cwt. for class 4a in California from the existing support price level. This drop would also be reflected in lower class 2 and 3 prices because they are directly tied to the 4a price.
The International Dairy Foods Association (IDFA), the national processors lobby, is proposing an income support program which would have the U.S. taxpayer send checks to dairymen when the spread between the price of milk and the price of feed is narrowed to some prescribed amount.
The analysis we have seen shows that this proposal either provides very little support for producers or it is extremely expensive for the Government. In either case, MPC does not believe that the industry should look to the taxpayer for direct income support. With all the challenges facing the industry right now, the best course for Congress is simply to temporarily extend the support program at the current price levels until the industry has had some time to adjust to the changes that will come about as a result of Federal Order reform.
Environmental Challenges: There are other issues facing the dairy industry that we would like to bring to your attention. It is becoming very clear to us that the public is watching the dairy industry's impact on the environment. The dairy industry is coming under increased scrutiny by the regulatory agencies. As the level of enforcement of environmental regulation increases, so do the opportunities for pro-active, constructive solutions to the environmental problems we face.
The two primary environmental concerns in the Chino Valley are the dairy industry's impact on ground and surface water. In addition, there are re-emerging concerns about the dairy industry's impact on the air quality in Southern California.
Page 127 PREV PAGE TOP OF DOC The biggest challenge facing us is how to deal with manure. Urbanization in the Chino Valley has deprived the industry of farmland that used to be available for manure spreading. Cost and logistic problems have stalled the development of alternative disposal opportunities for manure outside the Chino Valley. Consequently, the stockpiles of manure on the ground in the dairy area have grown to significant proportions. This large amount of stockpiled manure threatens both the ground water and surface water quality, not only in the Chino Valley, but also in areas located downstream from the dairy area. Orange County depends on the Santa Ana River, which runs through the Chino Valley, as a major source of their drinking water supply. Much of the surface water problem facing the Chino Valley dairy industry is caused by uncontrolled urban runoff created by the cities uphill from the dairy area. These cities developed without building adequate flood control facilities. So the rainwater that falls on pavement and rooftops in urban areas gathers into a torrential flow which inundates the dairy area. Current regulation prohibits dairy operations from discharging water off of their facility except in extraordinary rain events. About one third of the dairies in the Chino Valley are in the path of this uncontrolled urban runoff and become overwhelmed with the surface water flow that enters their property. Since they cannot hold this water, they release it downstream. This of course, has a negative surface water quality impact on the Santa Ana River and in Orange County. Something must be done to address these concerns and fortunately, something is being done.
Milk Producers Council is providing vital leadership in the development of the Santa Ana River Watershed (SARW) Group. This is a self-selected group of approximately 25 agencies and organizations that regularly meet to collaborate and coordinate specific initiatives to address watershed problems. The dairy industry's manure management and surface water quality problems are top priorities of the SARW Group. Through the efforts of this group, Federal, State and local dollars have already been secured to begin to address the flooding concerns. Money has also been obtained to work on a region wide manure management strategy. Further initiatives include seeking significant funding for regional groundwater de-salters and wildlife habitat planning. We believe that through these types of pro-active, collaborative efforts, combined with a positive, good stewardship ethic from dairy producers, we will be able to meet the public's expectations for a suitable environment as well as meet our needs to remain economically viable.
Page 128 PREV PAGE TOP OF DOC On the issue of the Joint USDA/EPA Confined Animal Feeding Operation Strategy, MPC believes the strategy is consistent with what we are trying to accomplish in the Chino Valley. We especially support the provisions that allow the States to continue to be the primary implementer of water quality regulation. We appreciate the incentive-based approach and hope that EPA stays committed to it.
What will be needed from Congress to make that strategy a success, is a commitment to help fund the infrastructure improvements that will be necessary to carry out the goals of the program. In the years since the passage of the Clean Water Act we are told that the Federal Government has invested over $55 billion to help point source industries comply with the act. Now that the focus of the regulators has turned to agriculture as a non-point source of water quality impact, it should come as no surprise that it will take a significant Federal investment to help the industry comply. The good news is that dairy producers are genuinely interested in being good stewards of the environment and are already taking steps to accomplish that goal.
Statement of Paul Rollin
The members of the Alliance of Western Milk Producers appreciate the opportunity to talk with the subcommittee today concerning the status and prospects for the California dairy industry. With the limited time available, I would like to discuss what we call Dairy's Y2K problem, the DEIP program, and international trade.
During the turbulent times surrounding the formulation of the 1996 farm bill, the producer side of the dairy industry agreed to a phasing down of the dairy price support program from $10.35 per hundred pounds of milk to $9.90 per hundredweight (cwt.). It was also determined that the support purchase program would be replaced on January 1, 2000, with a recourse loan program.
Page 129 PREV PAGE TOP OF DOC Whether correct or not, the dairy industry believed that it would see more progress made with expansion of export markets and the further opening of world markets for U.S. dairy commodities. Unfortunately, little progress has been made in opening markets to U.S. dairy goods. In fact, due to the European Union maneuvering the allowable subsidized export levels of cheese and butter, and actually increasing the level of subsidy on nonfat milk powder, U.S. dairy export opportunities in any significant quantity are fewer today then in 1996.
As you know, the California dairy farmer can compete with any commercial milk producer in the world if there are no subsidies of product sales and no competition from State trading companies. The problem is that this is not the world market today. The world price of dairy products is set by EU subsidies and competing State trading companies. Free market? No. Fair market? Not at all.
This is what we call dairy's Y2K problem, the end of the support program safety net with no real marketplace alternatives. Cooperative economists estimate that this will cost milk producers across America $2.7 billion a year in revenue because of a $1.74 drop in the value of milk used to manufacture cheese, butter and nonfat dry milk.
We understand that Congress is beginning to explore solutions to provide all of agriculture with better risk management tools including those involving producer revenues. The Alliance, along with the National Milk Producers Federation, has been actively investigating dairy program alternatives as well. It will be a tremendous challenge for Congress to develop agriculture program alternatives and thoroughly evaluate them this year let alone enact legislation.
All the other commodity programs are phased down over the full term of the 1996 farm bill, through 2002. Unlike all the others, dairy's safety net will be taken away in just 277 days. Without a viable alternative, dairy farmers generally and California producers especially are facing a financial disaster come January 1, 2000.
Page 130 PREV PAGE TOP OF DOC That is why the Alliance urges this subcommittee to champion treating dairy farmers like the producers of other commodities who will have their safety net continued through 2002 and do the same with dairy's safety net. This will give Congress and the dairy industry time to thoroughly explore policy alternatives for the 21st century.
Part of dairy's safety net, and a market development tool since before the 1996 farm bill, has been the Dairy Export Incentive Program (DEIP). The DEIP program has served the industry well. However, it could be of even more use to the industry and to controlling Federal spending if the unused DEIP allocations totaling some 75,000 metric tons of nonfat dry milk powder were rolled over by the USDA and the USTR into this and future DEIP years. For the past several weeks, the Commodity Credit Corporation has been buying four million to six million pounds of nonfat dry milk powder per week at the support purchase price of $1.01 a pound. If that product were being DEIPed instead, the Government's cost would be closer to 60 cents a pound.
The Alliance has sent a letter to USDA Secretary Glickman with copies to this subcommittee's chairman as well as the chairman of the Senate Agriculture Committee. In the letter we said:
''Finally, we agree that a rollover of unused export subsidies is legally permissible under the WTO. As a member of the Agriculture Trade Advisory Committee, I believe it is time that the U.S. operates on the same basis as other major agriculture powers such as the European Union. For the well-being of our negotiating position in the next WTO round of talks, the U.S. and USDA need to take an aggressive posture and rollover unused DEIP allocations to the full extent requested by the DEIP Coalition. To do less will be detrimental to the progress that can be made in future trade talks.''
The Alliance urges members of this subcommittee to urge USDA to do what Congress directed USDA to do in the 1996 farm bill, operate the dairy program in the most cost efficient way possible. Rolling over unused DEIP will accomplish that.
Page 131 PREV PAGE TOP OF DOC Finally, we are deeply concerned about the prospects for future world trade negotiations. Recently, the European Union announced that progress was made when its members agreed to reduce dairy export subsidies a total of 15 percent at the rate of 5 percent a year starting in 2003. That is ridiculous.
When Congress takes up the issue of fast track, the Alliance urges this subcommittee to lead the effort in telling our trade negotiators what Congress expects to see in the next world trade agreement brought to Congress to be ratified. To reduce import tariffs and quotas without an end to dairy product export subsidies would be unilateral disarmament on the part of the U.S. It would put the burden of balancing the world dairy marketplace on the backs of American dairy farmers.
Chairman Pombo, members of the subcommittee, the Alliance appreciates your efforts on behalf of the California dairy industry and we look forward to working with you on the challenges that lie ahead.
Testimony of Ray Souza
Chairman Pombo and members of the subcommittee:
Western United Dairymen wishes to welcome you to California and to thank you for holding a hearing on dairy issues at this critical time in the dairy industry.
There has been such a rapid growth in milk processing and distributing acquisitions coupled with mergers of major producer cooperatives that things are not as we normally knew them. We are confident that everything will work out as the industry leaders planned. However, Western United Dairymen strongly encourages the United States Congress to extend the support price program at the current price levels and to continue dairy product purchases through the Commodity Credit Corporation through the period of time covered by the Fair Act for other commodities.
Page 132 PREV PAGE TOP OF DOC We are confident that the foundations of the program that are now being laid by major cooperative planning to establish industry self-help operations will be successful. These programs can best be brought to fulfillment if the timeframe is extended as we and others are requesting. History has shown that the support price program has been successful over the years. Therefore, a simple 2-year extension of a successful program is a moderate and reasonable request.
We appreciate the continued interest of Congress in modifying the Federal Milk Marketing Orders. We know that the stability that they give to the industry has been invaluable over the years. We trust that as Congress reviews the new proposal, they will act in a judicious manner to make Orders acceptable to the majority of dairymen and that the orders can continue to provide a sound marketing framework for the nation's milk producers.
In our review of the proposals found in the first draft, we believe there is going to be far more compatibility between the federal marketing orders and the prices they generate and the California order and the prices it generates. We have already scheduled committee meetings to review the final proposal to determine Western United Dairymen's course of action on the alternatives of the two programs before us.
We strongly support the continuation of the Federal Milk Marketing Orders.
We are very concerned about the discussions going on around the country about milk order price suspension to allow for forward contracting. While there are provisions in the federal orders that allow transactions outside of the orders. We believe that price suspension and forward contracting would provide the opportunity to completely erode the strength and stability of the orders to the majority of producers while giving a few producers a gambling chance. We strongly oppose ''outside the pool and minimum pricing provision'' forward contracting. Marketing companies can still compete fairly if they are subject to the same raw product purchasing conditions. History has shown that companies compete very effectively as they grow and develop. We do not want to sacrifice uniform producer stability for the wants and objectives of a company's wholesale pricing policy. We urge this panel to not allow a departure from current contracting alternatives no matter how attractive it may sound.
Page 133 PREV PAGE TOP OF DOC The final issue that we want to call to your attention is that of the upcoming trade negotiations. We applaud the lofty goals and objectives of the negotiators. These goals would be great if they were obtainable and adhered to by all parties alike. However, we are disturbed by the recent protest by farmers all over the regions covered by the European Union. One theme of their protest dealt with commodity subsidies. From our point of view, they made it very clear the farmers of the EU would not stand for an income decrease because of falling support prices to comply with negotiated trade regulations. Therefore, we conclude that the opportunity exists for the EU negotiators to lower milk subsidies while instituting income replacement programs. This two-fold approach would put U.S. producers at a distinct trading disadvantage. We want Congress to watch the upcoming preparation for trade talks very carefully to ensure that the ''level playing field'' is truly level and that the ambition for trade negotiations does not sacrifice the U.S. dairy industry.
In closing, we would encourage the ''rule makers'' in Congress and the administration to develop an understanding of and appreciation for a very simple fact of dairy management. Whether a dairy family is the sole source of labor for the herd of milk cows or they hire other families to help them, it takes approximately one family per 100 cows to operate the dairy. Therefore, to develop programs that reach only the single-family dairies and ignore the remaining hardworking families on the multiple-100 cow dairies is wrong from a moral and a policy position. All families in the dairy industry deserve equal consideration. The recent program to distribute the $200 million federal disaster relief is a prime example of the discrimination against those workers on larger dairies by depriving the operation's owner a chance to forward some economic assistance on to them.
To briefly recapitulate our positions:
Strong support for a simple extension of the dairy price support program for two more years.
Page 134 PREV PAGE TOP OF DOC Strong support for continuation of the modified Federal Milk Marketing Orders.
Opposition to forward contracting outside of the minimum pricing and pooling structure.
Assisting the fair application of new trading agreements.
Recognition that larger dairies operated by multiple families are as important to the industry as is the single-family farmer operating a small dairy.
We appreciate the privilege of participating in the democratic process of addressing the Government and trust that you will seriously consider our requests and concerns.
Statement of John J. Jeter
My name is John Jeter. I am the chief executive officer and president of Hilmar Cheese Company. Thank you for allowing me to present this testimony on status and prospects for California agriculture. I'm presenting this testimony for Hilmar Cheese Company.
Hilmar Cheese Company is a privately held cheese and cheese by-products manufacturer located in the central part of the San Joaquin Valley. We have been in business for approximately 15 years. The company is owned by 11 familiesall of whom own and operate jersey dairies in the surrounding area. The company was originally designed to produce a value added product from milk particularly suited for cheese. We now produce more cheese on one site in a year than any other place in the world. At our site in Hilmar, we process over 7 percent of the milk produced in California and make over 8 percent of the cheddar and jack cheese produced in the United States. We are excited about the opportunities ahead for the dairy industry and appreciate being able to give this testimony today.
In today's testimony, I would like to address several key questions and issues which face the dairy industry. It's our belief that how these issues are addressed will have great impact on the direction and viability of the dairy industry in the near and long term. These issues are as follows:
Page 135 PREV PAGE TOP OF DOC Where is the dairy industry today?
What are the potential opportunities for the dairy industry in the future?
What are the threats or obstacles that will stop us from achieving our full potential and taking advantage of the opportunities that are ahead of us?
Where is the Dairy Industry Today? First, we are coming off the best economic year for dairy producers and dairy processors in the past 50. Sustained high milk prices (and very low feed prices) in 1998 injected tremendous amounts of margins and capital into dairy producers throughout the United States. These high price levels were sustained for a much longer period of time than expected, undoubtedly due to the amazing strength of the U.S. economy in general. We all are now awaitingand seeing the first signs ofthe expected massive production response from these conditions last year.
Second, the dairy industry is in the midst of massive consolidation and is moving to the west. The number of significant players is shrinking rapidly and the size of those left is growing, conversely. The merger mania that the dairy industry is now experiencing is simply what many other industries have seen in earlier years. It's our opinion that the dairy industry has remained as fragmented as it has for as long as it has because of the relatively high amount of price intervention by Government. With the decrease in the price level of the support program (and it's elimination at the end of this year), competitive pressures have increased, fueling potential opportunities and challenges. Essentially many of those in the industry who were strong enough to exist in the old environment are simply not up to the equity, investment and innovation requirements of a less Government intrusive industry perceived to be in the future. The trend of consolidations will continue.
We continue to see milk production move to the west (particularly California). Processors and marketers of dairy products look to the west for large, incremental and efficient quantities of milk to meet their growing needs. The west, interestingly enough, is impacted much less by Federal ordersyet continues to grow while the Midwest and east struggle to find their place in the changing dairy landscape ahead.
Page 136 PREV PAGE TOP OF DOC The California State milk order has clearly proven to be more responsive, dynamic and less intrusive than its Federal counterpart. It's clear that every segment of the California dairy industry has benefited from a working partnership between State regulators, focused on the utilization of valid economic and strategic strengths, and processors, dairymen, marketers and consumers. The results has been nothing short of phenomenal. In short, the California dairy industry has been the most dynamic segment of U.S. agriculture in the past 50 years.
Lastly, the dairy industry today is at a crossroads. You might say that we have been moving forward toward an industry characterized by less Government interventionwhile looking back over our shoulder wondering if we should go back the other wayback toward more intervention and support from government. We're at that point where we will have to decide how serious we really are about moving our focus away from government as the answer to our problemsto a more market driven system where good, valid competitive pressures are felt throughout and the customer becomes the focal point of our efforts, rather than the Government.
We believe that the crossroads we are at is best characterized by the current Federal price regulatory environment and the Federal order reform situation. After literally years of work, we will very likely come out with a system that is very much like the current system. This result will be liked by those who are less efficient and disliked by the innovative and progressive. It will make those of us in California continue to be thankful that we have chosen not be in the Federal systema Federal system where policy and industry direction are determined by those far distant from us in Californiaby those whose intent is to protect regional areas from valid efficiency and competitive pressures. It would seem that past, current and potentially future Federal policy is designed to protect the right of every State to have its own dairy industry. Is this valid? Are other agricultural industries like this? Do we need to produce every ag commodity in every region?
Page 137 PREV PAGE TOP OF DOC Specifically, we're at a crossroads regarding:
Will we continue the support program? Will it end? Or will we go to another means of income support or insurance?
Will we continue using regional compacts as a means of protecting local, regional dairy interests from competitive pressures?
Will regulators set prices or will the market place?
I might add that the real issue here is much more than simply determining what role Government will play in the dairy industry. It's really a question of focuswhich in our opinion is everything. Will we focus on the customer and invest to meet the new and exciting needs of the next generation of consumers or will we focus on government as the answer and invest massive amounts of time and resources to argue about how we will divide up a pie that is in many cases getting smaller by the year because of neglect and backward thinking?
An example of this would be fluid, fresh milk. Typically, much of our energy goes into arguing about how high we can get Class 1 prices via regional compacts or other means. Next, we argue about how producers will divide up these extra revenues. As we do this, and look to government for the answer rather than the customer, per capita fluid milk sales continue to decline. Nationally, they have declined by 8 percent over the last 15 years. Our efforts should be focused on raising income through innovation, product development and efficiencyultimately adding value from the producer to the consumer.
We are at a crossroads.
What are the Potential Opportunities for the Dairy Industry? The opportunities are many and varied. Putting them in public testimony is like revealing your strategic plan. So I will keep them general in nature. Put simply, milk is the most complete food on earth. It was designed to be ''everything for somebody.'' Despite what we may think about milkit is one of the most diverse products in existence. Its diverse array of components give endless marketing opportunities for those who have the inclination and necessary skills to see where milk components can fit in the food chain to the benefit (economically and nutritionally) of everyone concerned.
Page 138 PREV PAGE TOP OF DOCOther opportunities include:
growth of an efficient milk supply in the western United States (this will obviously give challenge to other regions in the United States)
growth of the cheese market
growth of the pizza business
growth of food service and fast food and its diverse and economical array of new product opportunities
customer focused product innovationlike the milk chugs introduced by Dean Foods
use of dairy ingredients in new beverage marketsapart from the traditional milk beveragegiving us the ability to take back some of the share of stomach we have lost to soft drinks and juices
new milk nutritional informationlike the positive benefits of calcium
new capabilities to fractionate basic milk componentsgiving us the ability to target and segment specific markets to achieve specific results
cheese as a more diverse ingredient and flavoring agent
export marketssome export markets are currently available for those who are willing to invest (like whey and whey fractions) and some currently are not as available due to long standing international barriers to trade. Hilmar Cheese Company currently exports over 75 percent of its production of whey products. Our export business has grown over 25 percent per year for each of the past 3 years, despite challenges from the Asian economies.
Hilmar Cheese Company staff has traveled extensively and invested heavily in foreign markets in the last 5 years. We have also made great progress in trying to understand where we fit in the international marketplace by visiting Argentina, New Zealand, and Europe during the past 3 years. There are great opportunities internationally for those with commitment and the ability to understand where they fit.
Page 139 PREV PAGE TOP OF DOC What Are the Threats or Obstacles That Will Stop Us From Taking Advantage of the Opportunities Ahead of Us? To understand the primary threat to the United States, and specifically California, dairy industry we must get back to an earlier comment made regarding the fact that the dairy industry is at a crossroads. The crossroads is more government price regulation or less. The directional answer to this question will determine our focus for the future. The threat to all the potential opportunities ahead is a continuation of a dairy policy that had it origins in the 1930's and has encouraged many in the dairy industry to work at half speed while other segments of the food industry have innovated at ''warp speed.'' The one issue that will impede the dairy industry from taking advantage of the many opportunities ahead will be the threat of more intrusive government price regulation and/or a support program that does more than act as a safety net.
We need to continue to make progress moving toward the market and customer as the answer. We ask you to not back away from the clear directional decisions made in the 19951996 farm bill. We would encourage you to look at the Dairy Producer Income Support Program. We feel this might very well be a valid safety net to help producers navigate through a more market-oriented environment ahead.
The other threats to the dairy industry could come in the areas of environmental stewardship, food safety, and unfair trade. We have clearly made significant strides in the areas of food safety and environmental stewardship. Both of these areas must be seen as both opportunities and threats.
Trade issues probably fall into the same category. As mentioned earlier, there are some dairy trade opportunities currently. As we negotiate new agreements, it's critical that we not give more access to the best market in the world (the United States)unless we get reciprocal access to markets of equal value. We just simply can't get beat at the bargaining table.
Page 140 PREV PAGE TOP OF DOC In summary, we in the dairy industry in California have had the opportunity to experience great success in the past 20 years. We believe that our success is due to valid economic conditions allowed to play out through the marketplaceto the benefit of consumers throughout the United States. Stay the course. Continue to demand that government play a less intrusive role in the future dairy industry. Encourage us all to go to the marketplace for answers.
Thank you very much for allowing us to give this testimony. I would be happy to answer any questions you might have for me.
Statement of Western Growers Association
Thank you, Mr. Chairman, for the opportunity to address the Subcommittee on Livestock and Horticulture regarding agricultural matters of interest to Western Growers Association (WGA).
International Trade. I will first focus on agricultural trade in light of the upcoming World Trade Organization (WTO) Ministerial Conference in Seattle in November of this year, and the ongoing discussions in the Free Trade Area of the Americas (FTAA) trade forum.
At the outset, let me say that prior to any multilateral trade negotiations, our trade policy officials must have a good understanding of what the obstacles are that U.S. agriculture is facing in world trade. The U.S. Trade Representative and the U.S. Department of Agriculture's Foreign Agricultural Service must become knowledgeable about agricultural policies throughout the world especially domestic and export subsidies.. They must know our competitors tariff rates (i.e., those currently being applied by our trading partners) and they must know what nontariff trade barriers have been put into place which effectively keep our products out. I personally believe some of our past failures in multilateral trade negotiations have been the result of a lack of information on the part of our negotiators. I trust that Congress will help ensure that this will not be the case in the new Seattle Round.
Page 141 PREV PAGE TOP OF DOC WGA will continue to inform USTR and FAS negotiators on areas of interest to fruit, vegetable and nut producers. Also, as a member of the Agricultural Policy Advisory Committee (APAC) to USTR and USDA, I will personally do my part in keeping our officials as fully informed as possible.
Transparency. When the Uruguay Round Agreement was signed, our trade negotiators always referred to increased transparency as one of the fundamental changes in our multilateral trading system. We were led to believe we could easily obtain information from the WTO on the production, subsidies, or trade of any WTO member country.
Unfortunately, such is not the case. We still are not able to obtain specific information about the level and types of subsidies which our foreign competitors receive, especially those in the European Union. General information on production and export subsidies to European agriculture is available. According to the U.S. Department of Agriculture, EU export subsidies in 1997 totaled over $6 billion, with almost $1 billion devoted to fruit and vegetable exports. Further in 1997, over $1.8 billion was provided to the EU horticultural industry in intervention aids.
However, data on individual fruit and vegetable products is sometimes obfuscated and very difficult, if not impossible, to obtain from European governments or various other institutions. In contrast, data on U.S. fruits and vegetables is are readily available to the public from the U.S. Department of Agriculture and our land-grant colleges. Although Canada is our number one export market for fresh fruit and vegetables, data on support from the Canadian Federal Government, together with that from the provincial governments, also needs to be more open.
How is it that our Government can enter into serious trade negotiations without having this type of information available and fully understood by our negotiators? Before the next round of WTO negotiations begins, the U.S. Government should demand that the European Union, its individual member States, and other WTO members provide fully transparent information pertaining to their fruit and vegetable subsidy regimes. Only then will we have a fair chance at getting a successful trade agreement for the U.S. fruit and vegetable sector.
Page 142 PREV PAGE TOP OF DOC Another example where transparency is important is the area of phytosanitary issues. Because most of the barriers to exports of fruits and vegetables are phytosanitary restrictions, WGA is very interested in discussions in the WTO Committee on Sanitary and Phytosanitary Measures (SPS).
Given these issues, the U.S. must be more diligent in pursuing more transparency in future multilateral negotiations.
Harmonization of Labeling and Marking Requirements. In international agricultural trade, practically all nations require some specific type of labeling, and most of the developed nations require country of origin marking. The labeling requirements are quite specific, such as the size of the lettering, where the lettering should be placed, etc. The inconsistency of such requirements among the various countries causes problems for exporters, who must expend a great deal of time constantly reviewing the differing restrictions of the importing countries. Unfortunately, our trade policy officials do not seem concerned about the effect such inconsistency has on the smooth flow of trade.
Members of WGA who export fruit, vegetables and nuts are constantly reviewing the marking and labeling requirements of importing countries. If the exact size requirements are not met, the shipment is delayed or rejected outright. This impedes trade and imposes great expense to exporting firms. Further, the expense is compounded when there are frequent changes made by the importing country and the product is not allowed to enter. As you know, this is especially costly when the product is perishable.
Negotiation of More Than One Sector. All multilateral trade negotiations should include all sectors, not just agriculture. Without discussions across many sectors, I believe it would be virtually impossible to reach an agricultural agreement with the European Union (EU) to reduce trade barriers. The administration, however, has called for a new round of multilateral trade negotiations, which is now being referred to as the Seattle Round. I believe this new round may be even more difficult than the Uruguay Round, in light of the refusal of a number of countries, such as France and Japan, to agree to any further reductions in agricultural subsidies.
Page 143 PREV PAGE TOP OF DOC Strengthening WTO Sanitary and Phytosanitary Rules. Signing the Uruguay Round Agreement has not meant that all countries view the Sanitary and Phytosanitary Agreement on an equal basis. Obstacles are still being erected to U.S. fruit, vegetable and nut exports under the guise of phytosanitary concerns. For example, in Japan the Ministry of Agriculture, Forestry and Fisheries (MAFF) has halted shipments of U.S. lettuce because of thrips and aphids, insects which are also found in Japan and therefore should not cause a problem. Despite the fact that these insects do not meet the WTO definition of a quarantine item which should be restricted, Japan continues to treat them as such. Thus, the lettuce is subjected to methyl bromide fumigation, which essentially destroys the lettuce, or refused entry. WGA believes that the potential increase in exports of lettuce to Japan, absent this barrier, could range from $100125 million annually.
While the Animal and Plant Health Inspection Service (APHIS) has worked with the Argentine plant health inspection service and proposed a rule to allow certain citrus to be exported from Argentina to the U.S., Argentina continues to delay action on exports of fresh fruit from California. For example, in 1995, Argentina suspended imports of fruit because of the presence of the Oriental fruit fly. Despite the fact that the U.S. has continuously provided Argentina with data on its detection and treatment programs for this pest, Argentina still has not completely lifted its suspension.
Additionally, scientific information has been submitted to Argentina which demonstrates that the Walnut Husk fly does not pose any risk to stone fruit. Argentina's acceptance of U.S. data on its detection and treatment programs for this pest could result in additional exports of stone fruit from the San Joaquin Valley in the range of $100300 million annually.
The WTO SPS rules should be strengthened to ensure that scientific data provided to a foreign country is reviewed within a specific time period to ensure that phytosanitary barriers are not raised merely to delay or halt imports.
Page 144 PREV PAGE TOP OF DOC Symmetry in Tariff Reductions. The United States has relatively low tariff rates for fresh fruits, vegetables and nuts. It does not make sense to negotiate from a zero duty, or to reduce our tariff to zero, and allow our trading partners to continue their tariffs at a level that effectively keeps our exports out of their markets. However, this has been the case in many instances in past trade negotiations. The U.S. will accept a tariff reduction, but allows the foreign country to very slowly phase out its tariff over a 10- or 15-year period. What benefit do we gain when the U.S. provides an open market but still cannot gain access to our trading partner's market because of a high tariff?
Our negotiators should explore very carefully an equalization of tariff rates. Otherwise, world trade remains unfair and the U.S. industry remains on an uneven playing field.
Mr. Chairman, I am very concerned that no one in our Government appears to be concerned about these issues, especially the elimination of subsidies in the Seattle Round. Certainly, no one in the European Union appears to be remotely thinking along these lines.
Yet, it is my opinion that if the United States wants to enter into a new round of multilateral trade negotiations, and if the U.S. Congress wants to provide the administration trade negotiating authority under fast track legislation, then our negotiating objectives must contain language calling for the total elimination of Government subsidies in the fruit and vegetable sector.
I believe that the United States must attack the European Union's subsidies very aggressively. The U.S. horticulture industry receives no subsidies from our Government, and we have given the EU 6 years under the Uruguay Round Agreement to adapt to reduced Government support. The Seattle Round must provide for the total elimination of any further agricultural subsidies.
Further, we must attack in an equally aggressive manner the phytosanitary barriers that are erected by other countries which bar our exports. For example, Chile is a country that espouses free trade and that exports millions of dollars worth of fruit and vegetables to our market, but allows minuscule imports from the United States because of questionable phytosanitary concerns. I intend to work with our trade officials to find a way to amend the Agreement on Sanitary and Phytosanitary Measures to curtail these restraints when science does not support the claims.
Page 145 PREV PAGE TOP OF DOC Again, thank you Mr. Chairman for this opportunity to share our concerns. The development of U.S. trade policy over the next few years will be very important for our industry, and we look forward to your leadership on these issues.
Guest Worker Legislation. In 1998, Western Growers Association strongly supported legislation to establish a new agricultural guest worker program and was very disappointed that this legislation was not included in the Omnibus Appropriations bill approved by Congress in October. As the new Congress prepares to again consider this issue, WGA looks forward to working towards passage of bipartisan legislation to deal with the critical labor concerns of the California fresh produce industry.
Legislation to reform the H2-A guest worker program is very important to the California fresh product industry. An effective guest worker program is needed to ensure that legal workers are available to harvest perishable crops when the number of domestic workers is insufficient for this purpose. The inability to secure a sufficient number of workers in a timely fashion to harvest perishable crops results in adverse consequences for growers, workers, and consumers of fresh fruit and vegetables.
In recent years, the current H2-A program has proven to be cumbersome and inefficient when faced with the task of supplying significant numbers of guest workers on short notice. As our industry continues to experience localized labor shortages throughout California, the need for a reformed program continues to grow.
WGA looks forward to working with Congress to craft bipartisan guest worker legislation that meets the needs of agricultural employers, workers, and which also does not contribute to the problem of illegal immigration. We especially appreciate Chairman Pombo's active leadership on this issue.
Food Quality Protection Act. Western Growers Association continues to have concerns with the implementation of the Food Quality Protection Act, approved by Congress in 1996. As you know, the availability of viable and cost effective crop protection products is critical to our industry. Some of these products used by fruit and vegetable growers may be in jeopardy of being removed from the market due to policy decisions by the U.S. EPA.
Page 146 PREV PAGE TOP OF DOC We are particulary worried about the continued use of conservative assumptions in the risk assessments and the time line the agency is moving on for making decisions on organophosphates. While the TRAC process has greatly improved the communication and openness of the U.S. EPA, the agency has been moving ahead with risk assessments without first establishing the science policies needed to conduct these risk assessments. It is unclear how the agency will coordinate the two processes. In addition, the preliminary organophosphate risk assessments indicate that the agency is still using out-dated or questionable data even when better data is available. The agency must learn to take the time to do it right before making any judgements on compounds.
As a representative of many minor crops with few pest control alternatives, WGA is not only concerned about the potential loss of useful tools, but it is also concerned about how any transition for growers will be handled. Minor crops tend to lose pest control tools first and receive new tools last. The energy for FQPA implementation has sapped resources away from new registrations, further limiting grower options. WGA is appreciative of any legislative measures which provide the agency with the time to implement FQPA properly, as intended by Congress, and takes the needs of growers into consideration. Again, we appreciate Chairman Pombo's leadership efforts on this issue.
Again, WGA appreciates the opportunity to appear before this subcommittee today. We look forward to working with you on this and other issues that arise during the 106th Congress.
Statement of Bryce Quick, on Behalf of James A. Poorbaugh
Mr. Chairman and members of the subcommittee, my name is Jim Poorbaugh. I am vice-president and general manager of Monrovia, a wholesale nursery grower in Azusa, California. We have locations in both California and Oregon. I am testifying before you today on behalf of the National Council of Agricultural Employers (NCAE) and the American Nursery and Landscape Association (ANLA).
Page 147 PREV PAGE TOP OF DOC The NCAE is a national association representing growers and agricultural organizations on agricultural labor, employment and immigration issues. NCAE members hire over 75 percent of the nations agricultural labor force. Its members include farm cooperatives, growers, packers, processors and agricultural associations. NCAE was actively involved in the legislative process that resulted in the enactment of the Immigration Reform and Control Act of 1986 (IRCA) and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA). NCAE's representation of agricultural employers gives it the background and experience to provide meaningful comments and insight into issues concerning immigration policy and how it affects the employment practices of its members' businesses and the availability of an adequate agricultural labor supply.
ANLA is the national trade association for the nursery and landscape industry. ANLA represents 2,500 production nurseries, landscape firms, retail garden centers and horticultural distribution centers, and the 16,000 additional family farm and small business members of the State and regional nursery landscape associations
Mr. Chairman, the H-2A Temporary alien labor program must be reformed this year. The reasons are simple. Full employment and recent Government activity have shown that agriculture does not have an adequate legal labor supply. Let me provide some background.
Our industry has felt the effects of the laws, which prohibit the employment of people without proper work authorization and documentation. We know this from conversations with our associates at conventions, committee meeting's, casual conversations and personal experiences.
The problem comes from several different directions:
Low employment in our economy has reduced the number of applicants available for hire.
Stepped up activity from INS in apprehending undocumented workers.
Page 148 PREV PAGE TOP OF DOC Social Security requesting verification of names and number mismatches.
I can tell you emphatically that ANLA and NCAE members are letting us know that labor is a major problem and that, in many cases, it is getting to an economic breaking point. In 1996 the warning signals were very clear about the pending crisis. Today that crisis is at the door and it will affect this nation's labor intensive agricultural industry and supporting industries and economies.
A number of activities and events are converging on Agriculture leading to this crisis. Among the most powerful influences have been increased INS enforcement, border interdiction, social security number verification, and high levels of employment in the country.
WHAT HAS BEEN THE EFFECT OF INS ENFORCEMENT ACTIVITY IN AGRICULTURE?
Mr. Chairman, the Congress, over the past several years, has provided massive new funding for INS to get control of the illegal immigration problem in this country. I am here to tell you that this is directly affecting the Agriculture industry.
Let me give you a few examples. In California, the State using the largest number of hired agricultural workers in the U.S., the INS has been very active. In Fresno and adjacent counties, INS audits led to the removal of numerous illegally documented workers this past year from citrus, dairy, and tree fruit growers. These workers were apprehended in the fields, in the packinghouses, and central meeting locations. Farmers losing these workers placed job orders with the Employment Development Department (EDD), the State job service charged with referring unemployed workers with no positive end resultdespite unemployment numbers of 44,000 in Fresno County alone.
In Orange County, a vegetable farmer had a majority of his workers apprehended after an INS check of his workers' employment eligibility status. The activity created a major labor shortage during his peak harvest time. This grower also turned to the EDD for workers and placed an order for 150 workers to replace those who were apprehended by INS. Over the next ten days, the job service referred only three people to work for the farmer. Only one showed up for work. And that person worked for only three days. As a result, the farmer lost a total of 80 acres of beans and cabbage. These immediate losses are bad enough; however, the lack of an adequate workforce prevented him from planting his next crop and, as a result, he had no crop to harvest in December.
Page 149 PREV PAGE TOP OF DOC All of these growers have faced economic hardship.
THE SOCIAL SECURITY ADMINISTRATION ENUMERATION VERIFICATION SYSTEM IS IMPACTING THE AGRICULTURE LABOR SUPPLY.
To help ensure more accurate reporting of Social Security information, the SSA promoted the voluntary use of EVS, an Enumeration Verification System. The system is intended to ensure that names and Social Security numbers reported on W-2 Forms match SSA records and that employee accounts are properly credited with earnings. Few people can argue with the need to do that.
Growers using EVS throughout the country for new hires are receiving feedback from SSA informing them that large percentages of their W-2 names and social security numbers do not match. Many employers are receiving letters back from SSA indicating that a large percentage of their employees names and numbers from their tax returns do not agree with SSA's records. SSA informs employers in these letters that the mismatched information must be corrected and returned within forty five days of the warning letter and further warns that if the employer's report is not corrected after the second filing with the SSA, the employer may be penalized by the IRS.
This presents two problems for the employer and the employee. If the worker is still employed and on the mismatch list, he must go immediately to the local SSA office to straighten out the problem. If he can't rectify the matter, the employer has no choice but to let the employee go, even if it occurs during peak harvest of the perishable product.
The second problem is that because of the seasonal and temporary nature of the work, many of the workers who show up on the mismatch letters are no longer with the grower. While this doesn't always affect the grower immediately, it does affect the grower and workers in the future as these workers come back to the farm to work in subsequent seasons. Returning employees can only work for the grower after they have addressed the mismatch or error with SSA. This makes the filling of employment needs more difficult.
Page 150 PREV PAGE TOP OF DOC Mr. Chairman, to make matters even more difficult for growers, it appears the information gathered by the SSA is now being used for purposes unrelated to Social Security number verification. We understand that the SSA, on occasion, shares the results of its EVS information with the INS. The effectiveness and quick turn around of the EVS reports to employers, coupled with the inability to obtain workers from the EDD, is forcing many agricultural employers to consider their options, including using legal temporary alien workers.
Mr. Chairman, we do not oppose EVS or the INS verification system. Our concern is that when these programs screen out unauthorized workers then there must be an effective way of replacing those workers.
Employers want to obey the laws but they also want to remain in business. Employees who must be let go are often relatively long-term employees, many are supervisors. A sudden loss of workers puts us in a difficult position to harvest our crops.
AGRICULTURE HAS ATTEMPTED TO MEET ITS LABOR NEEDS BY WORKING WITH STATE WELFARE OFFICIALS.
While agriculture has not been able to meet its labor needs through domestic recruitment efforts or through the use of State job service offices, it has not given up in its efforts to do so. In fact, during the debate on IIRIRA, some in Congress suggested that agriculture could meet its labor needs as a result of the recently enacted welfare reform legislation. In California, the agriculture industry, led by the NISEI Farmers League, accepted this challenge and initiated a task force involving major agricultural counties in the San Joaquin Valley of California, State welfare officials and EDD (the State job service). This task force later named ''CALWORKS'' held a statewide summit that produced guidelines and objectives to deal with the use of welfare recipients and the unemployed in agriculture.
The task force concluded that there were measures that could indeed be taken by the local welfare delivery agencies and agricultural employers to encourage welfare recipients and the unemployed to take jobs in agriculture. However, in all candor, welfare officials have tried to moderate our enthusiasm by explaining that the new welfare law creates a strong incentive for unemployed persons to seek year around jobs, rather than the seasonal jobs that are characteristic of agriculture. These officials have informed us that persons who receive public assistance and work in agriculture will be required to seek full time employment.
Page 151 PREV PAGE TOP OF DOC The second function of the CALWORKS summit was to create a partnership with the Employment Development Department to match job orders with workers. In August and September of 1998, the EDD was overwhelmed with a flood of job orders. EDD's performance was disappointing. Even the counties with the highest unemployment numbers provided only a handful of workers. I would encourage the committee to review the Labor shortage report produced and submitted to this hearing by the NISEI Farmers League, which details these efforts and results.
Mr. Chairman and members of the committee, the agriculture industry and the Nursery Industry to which I belong can not wait another year to find a resolution to this rapidly expanding labor problem. The survival and health of the industry depends on it.
Unfortunately, as the legal domestic labor supply dwindles, agricultural employers must turn to legal temporary alien workers under the H-2A program. The existing H-2A program has failed to be a reliable source of temporary and seasonal alien agricultural workers for many who have tried to use it. It is characterized by extensive complex regulations that hamstring employers who try to use it and by costly litigation challenging its use when admissions of alien workers are sought. The regulatory burdens leave growers waiting with uncertainty and anxiety with regard to whether they will be certified by the Department of Labor (DOL) to obtain workers in a timely manner. This is especially important with regard to the production of perishable commodities.
We applaud the efforts that many of you made in 1998 to pass legislation to reform the badly broken H-2A Temporary and Seasonal Worker Program. We must work together to get the job done in 1999.
Mr. Chairman, I want to thank you and the committee for the opportunity to address this important hearing. The NCAE and ANLA look forward to working with you in the months ahead to address the needs of agricultural growers and workers in this country.
Page 152 PREV PAGE TOP OF DOC Testimony of Kenton E. Kidd
Mr. Chairman, thank you for the opportunity to testify before your committee concerning the key issues of importance to the Californian apple industry. My name is Kenton Kidd and I serve as president of the California Apple Commission.
The California Apple Commission came into existence September 1, 1994. We serve the producers and handlers of the California apple industry through the generic promotion of California apples throughout the world. We gather and disseminate information to the apple industry, generate apple research, participate in generic advertising programs for the apple industry including apple educational activities directed toward the general public. We also are involved in public relations work involving people throughout the world.
Our industry's future may well depend on the outcome of the following three issues: implementation of the Food Quality Protection Act; funding for the Market Access Program; and reform of the H2A program. I plan to discuss each of these issues in turn, following a general description of the California apple industry's current status.
California Apple Industry. Our industry views the approaching end of the 1998 crop's marketing year as the most devastating year California's apple growers have ever experienced. California's is the fourth largest fresh apple producer in the nation. According to USDA figures we produce close to 20 million 40 lb. boxes of apple of which approximately 8 1/2 to 9 million are fresh pack with the balance being processed.
Food Quality Protection Act. Mr. Chairman, you and your colleagues are well acquainted with the challenges that agricultural producers face in producing a high-quality, affordable crop. Growers routinely deal with erratic weather and market fluctuations. But those challenges pale in comparison to the threat posed by the Food Quality Protection Act (FQPA), which threatens the continued availability of the most-valuable and vitally-important pesticides used on apples.
Page 153 PREV PAGE TOP OF DOC Our fresh pack, due to the El Nino weather pattern, will end up at 6 million boxes which will be short 2 million boxes and the processing will be much worse due to a $10 per ton offer on juice apples during most of the season. Apples cannot even be picked for processing at that low figure.
In the apple industry we must control a range of persistent insects and diseases that can destroy an entire crop. Apple growers must have access to pesticides to effectively manage and control these devastating pests.
For example, 48 percent of California's apple acreage is sprayed with the organophosphate azinphos methyl (trade named Guthion) to control codling moth and leaf rollers. Both of these pests attack the fruit, making it unmarketable in the fresh or processing market. The loss of this valuable material would force growers to use more costly, less effective and less environmentally friendly pest management strategies. When increased pest-management costs are combined with crop losses from damaged or unmarketable fruit, the economic burden may be too great for many growers to withstand.
And yet, this critical pesticide, along with seven other organophosphates and several carbamate pesticides used on apples, may soon be cancelled as a result of FQPA implementation. We therefore urge your committee's continued attentive oversight of the Environmental Protection Agency's implementation of this act, to ensure its actions are fair and based on sound science.
If a fair and science-based implementation process results in the loss of critical pesticides, it is imperative that adequate research and transition programs are made available to lessen the anticipated devastating impact on the apple industry. Our industry strongly supports increased USDA research into environmentally-friendly pest management strategies and cooperative extension programs to identify and disseminate new technology to growers.
Market Access Program. The California Apple Commission utilizes funds provided by the U.S. Department of Agriculture's Market Access Program (MAP) to conduct international marketing and promotional activities in the United Kingdom and Taiwan. The U.S. Apple Association's (USApple) U.S. Apple Export Council (USAEC) manages our program, and our growers make a matching contribution of 51 cents for every dollar in MAP funds we receive.
Page 154 PREV PAGE TOP OF DOC Last fiscal year, USAEC was awarded roughly $550,000 in MAP funding, which was matched with industry contributions of approximately $270,000. As much as we appreciate the assistance we receive from USDA, it simply is not enough when compared to the amount of funds expended by our foreign competitors to promote their products.
According to a recent study by USDA, the European Union and other foreign countries are outspending the United States by a factor of 20 to 1 in the arena of export subsidies and promotion. In addition to $7.2 billion in export subsidies, our leading foreign competitors spent a combined $924 million in 1997 to promote their exports. More recently, many of these same countries have announced ambitious plans to sharply bolster their export promotion expenditures in an effort to increase their share of the world market.
Since MAP was originally authorized in 1985, funding has been reduced by more than 50 percent from $200 million to $90 million. Given what our foreign competitors are doing, our industry strongly believes it is time to restore funding for this vitally important program to its original level of $200 million.
H2A Reform. California's apple producers have experienced a tight labor supply due to restricted migration, a full-employment economy and more effective enforcement of employer sanctions laws.
As is the case with other producers of labor-intensive crops, apple growers are concerned about the legal status of their workers who provide employment authorization documents that appear valid and thus must be accepted, but turn out to be fraudulent once audited by the Immigration and Naturalization Service. Recent letters from the Social Security Administration to employers indicating that a substantial number of employees have provided invalid social security card numbers heightens this concern.
Currently, the only means of obtaining legal temporary alien workers is through the H2A program. Members of our industry in other regions of the country who have attempted to utilize this program indicate that it is overly bureaucratic, costly and frequently fails to provide labor in a timely manner, which is essential to the harvesting of perishable products like apples. Moreover, its use is so litigation-prone that few growers are willing to attempt to use it. This has been the case in California.
Page 155 PREV PAGE TOP OF DOC Our industry believes that the H2A program needs to be improved to ''enhance its effectiveness and efficiency.'' The H2A program as currently structured, by regulation and policy, is unworkable and effectively unavailable to most agricultural employers.
We applaud past efforts of the House Committee on Agriculture to reform the H2A program and strongly urge your leadership in obtaining meaningful reform during this session of Congress.
Conclusion. In conclusion, the California apple industry looks upon the coming year with mixed feelings about what the future may hold.
As apple growers, we've come to accept Mother Nature's moodiness and we're hopeful that she will welcome the coming apple crop with a warm embrace and ideal growing conditions.
As apple marketers, we've learned to anticipate and react to the challenges created by an often volatile and highly-competitive world market. And, we're hopeful that the Asian financial crisis will give way to restored prosperity and opportunities for increased apple export sales.
Finally, as members of the nation's apple industry, we look to you to ensure our industry's continued access to critical crop-protection tools through fair and science-based implementation of the Food Quality Protection Act. We look to you to enhance our ability to keep pace with our overseas competitors by increasing to $200 million foreign promotion funds available through the Market Access Program. And, we look to you to ease the labor crisis confronting our industry by approving an affordable and workable H2A reform program.
Thank you, Mr. Chairman, for this opportunity to present these views on behalf of the California apple industry.
Statement of Rod Radtke
Good morning Mr. Chairman, members of the subcommittee. My name is Rod Radtke and I'm here today representing California Citrus Mutual. I am in my second year as Chair for the organization representing growers farming well in excess of 100,000 acres which produce citrus with a farm gate value exceeding half a billion dollars. I manage 1500 acres of citrus and several hundred acres of olives and other commodities.
Page 156 PREV PAGE TOP OF DOC The first issue I wish to raise to the committee is the implementation of the Food Quality Protection Act, FQPA, and the inefficiencies it has created with the Environmental Protection Agency. Our industry has always been a strong supporter of sound science dictating policy. Too often political science appears to get higher billing and certainly more notoriety in the press. Thus, when EPA announced a Special Review for Triazines, an important family of herbicides across the country, farm organizations rallied to provide science and place false rumors and innuendos to rest.
Grower groups from over 30 States formed the Triazine Network. Citrus Mutual was asked to assume one of three Vice Chair roles. The group consists of entities representing farmers producing corn, sorghum, citrus, sugar cane, tree fruit, table grapes, apples and a myriad of other commodities. They contacted registrants to insure complete cooperation between the Agency, registrants and grower groups. Deadlines were imposed by EPA regarding comment submission; additional scientific data, suggested mitigation measures and label recommendations. Use data clearly showed that previous assumptions were in error. Each and every deadline has been met by either the registrants or the growers.
Self-imposed deadlines by EPA have never been met. Policies have been changed regarding the Special Review such as submission to a Science Advisory Board instead of a Science Advisory Panel. This formal submission has been scheduled and canceled at least three times. This is a distinct difference. An in-house review was completed well over a year ago, portions were leaked, and the report has never seen the light of day. Was it because the report was deemed favorable by industry and the registrant? We know the conclusions were a surprise to officials at EPA.
EPA argues that new cancer guidelines need to be reviewed. This is now scheduled for Spring 1999. EPA states the priority of Organophosphate (OP) supersedes this review. At one time this deadline was August 1999. That is now being pushed back. In a letter dated March 17, 1999, EPA acknowledges the slippage and responds that Triazine pesticides are in the first tier of pesticides EPA is reevaluating. Of course in the same letter, it was the OP's that received first priority, as mentioned above.
Page 157 PREV PAGE TOP OF DOC EPA has finally stated that 2002 is the completion date for this review. One could argue that since growers still have access to the materials, what is the problem? The problem is trust and credibility. FQPA is being used as an excuse for inefficiency.
Another example is the registration of an herbicide that could reduce the use of Triazines. It was our understanding that EPA would accept work completed by California's Department of Pesticide Regulation in an effort to reduce the workload and time necessary to review the registration package at EPA. It didn't work. Citing FQPA overload, this material could be registered by September 30 of this year. Thus, growers will be using more of an alleged offending material this Spring for weed control, when in fact, an alternative could have been available had EPA been more efficient.
The third example I wish to cite is the foundation for a major crises in California agriculture. Mr. Chairman, you are well aware of the Medfly issue. You and your staff have been well briefed on the cultural and economic impact of an infestation. You also know that the major eradication tool for a significant infestation, particularly in a cultural area, is Malathion.
Again, a coalition of California Agricultural groups met with representatives of the California Department of Agriculture and CAL EPA. to discuss a time frame for a section 18 submittal to ensure the availability of this material in the case of a crises. Our ability to use this material expired December 1998. The formal application was submitted allowing ample time for a review without endangering production agriculture.
EPA cannot get the job done. They cite FQPA criteria. They report that Malathion is a serious cancer-causing agent. FQPA requires a tremendous number of assumptions causing the infamous risk cup to overflow. But, they're not sure as it relates to the eradication program for a number of reasons, to numerous to mention. Suffice to say, 90 days after the review should be completed, it is still unclear as to whether California agriculture will have access to this tool during a crises.
Page 158 PREV PAGE TOP OF DOC EPA would have California beg, as they did Florida during an outbreak, to commence an eradication program which requires the use of this tool. Mr. Chairman, Malathion use is not the first line of defense, it is the last line. EPA's FQPA excuse caused untimely delays in Florida adding to the controversy and the cost. EPA seeks to impose themselves into an eradication program. They question when Malathion is needed; they question the integrity of a program in which they have no expertise. They are expanding their agenda into areas unwarrented. They're now communicating to this organization that a new class of material, Spinosad, be considered for eradication. They are questioning the systems approach pioneered by CDFA and the registration review by CAL EPA who pioneered the most advanced food safety registration program in the nation.
Our own review indicates the registrant is not enamored with their product being used in this manner. Our Department of California is not yet comfortable with Spinosad as an eradication tool. A number of questions have developed, but in the meantime, it is California agriculture that is defenseless.
Your committee, Mr. Chairman, needs to thoroughly review the inefficiencies at EPA being caused by FQPA and the associated cost to agriculture. Your committee needs to review the FQPA implementation process and assist in streamlining the review effort. Today, industry is told that if a residue is not found, EPA must assume that one exists. This hampers the process, as the risk cup becomes full prematurely, thus, slowing the complete review. Surely Congress did not mean to strangle EPA or industry. Surely Congress did not provide a foundation for inefficiency. This reassessment by Congress is long overdue and should start with your committee.
Medfly and Malathion lead to a second major issue CCM wishes to call to your attention. The issue is adequate funding for pest exclusion. Invasions of foreign pests and diseases are bleeding our financial resources dry. The Chinese Long Horn Beetle in Chicago; citrus canker in Florida; the fire ant in the Southwest, White Fly, Karnel Bunt; and of course, California's infamous fruit flies. These are foreign invaders landing in our Country because our pest exclusion system is broke.
Page 159 PREV PAGE TOP OF DOC Why is it broke? Because Congress does not allow USDA/APHIS access to the user fees established to address the point of entry problem. For the past several years Congress has failed to authorize APHIS to utilize all the dollars collected. Congress has earmarked these funds to a special account for a budget offset. Meanwhile, the invasion continues creating excessive costs at both the State and Federal level that could be mitigated. It's an old cliche, but one that is very appropriate. Congress has been penny wise and pound foolish.
The 1996 farm bill prevents a portion of user fees from being utilized by USDA/APHIS. These dollars were placed in a specific account for deficit offset purposes. There is no budget deficit; Congress should remove the cap and allow access to these funds. The President has recently signed an Executive Order to review the influx of invasive species. Congress could solve much of that problem by allowing dollars to be utilized in an effort to enhance our defenses at points of entry. Your committee should lead the way in removing the 1996 farm bill restriction.
Invasive species, Medfly, eradication, quarantinesall words associated with the issues above. As these problems magnify, USDA exacerbates the potential calamity. How? By advocating the importation of citrus from Argentina. For the past 87 years, or since the Plant Quarantine Act of 1912, Congress has mandated that USDA protect domestic agriculture from the threats of foreign pests and diseases.
In August 1998, USDA, without the benefit of Congressional oversight, decided that this policy should be undone. Succinctly stated, our concerns regarding this proposal are:
(1) In a fundamental policy change, USDA was advocating the importation of product from a known disease and fruit fly infested area.
(2) In a fundamental policy change, USDA was supporting the use of a systems approach for disease mitigation measures.
Page 160 PREV PAGE TOP OF DOC (3) USDA had conducted extensive outreach with the petitioning country and next to none with the potentially impacted industry.
(4) USDA was proposing a more relaxed standard for one country than another regarding the same disease and possibly leading to WTO actions and certainly more petitions.
(5) USDA did not engage in a vetting or a peer review process during the promulgation of this proposal.
The Chair should clearly recognize that our concerns are scienced based, not economic. Our industry competes in a global market. Our industry faces off-shore imports daily in the marketplace. Never has our industry mounted such a high level concern over the importation of product. And, the Chair should recognize that this issue cannot be fully explored in a statement such as this. It is highly complex and a tremendous amount of work has been done to achieve the limited goals accomplished. Industry desires greater involvement by the committee but only after a thorough educational process has been completed.
To ensure that no other industries can be blindsided by a proposal such as this, our industry is suggesting that the following amendments be introduced to proposed APHIS reorganization legislation:
(1) Risk assessments should undergo rigorous, independant peer review.
(2) Risk assessments must indicate all sources of data and identify experts relied upon.
(3) Risk assessments should be prepared or funded by the petitioning country.
(4) APHIS should have the specific mission to assist the domestic industry in their efforts to gain access to new markets.
(5)APHIS should adopt regulations that specify the procedures and standards which govern export matters and import petitions. Issues such as transparancy, notice and comment, and structure should be incorporated into these regulations.
Page 161 PREV PAGE TOP OF DOC Mr. Chairman, as I conclude my statement, I recognize that this is an ambitious agenda that I laid out. But, Mr. Chairman, it is a critical one to insure the viability of agriculture, particularly fresh fruits and vegetables as we enter the new millenium. You have the committement of California Citrus Mutual to work with you in these areas. Thank you for the opportunity to participate in this important foundation laying hearing.
Testimony of Broc Zoller
Good Morning Mr. Chairman, members of the subcommittee, my name is Broc Zoller and I am the president of an Agricultural Consulting Firm, an Agricultural Pest Control Advisor, a farmer, a partner in a pear packing company and a member of the California Pear Advisory Board. I am here on behalf of the California Pear Industry and on their behalf, I would like to thank the Committee for the opportunity to outline some priority issues of the industry.
In brief, I offer three issues for consideration. They are:
1. The full and fair implementation of the Food Quality Protection Act;
2. maintaining an adequate and affordable supply of farm labor;
3. improving access to new markets through the reduction/elimination of phytosanitary restrictions and tariffs.
In the limited time we have this morning, I would like to expand briefly on each of these three points.
1. First, the Food Quality Protection Act dramatically changes the way pesticides are evaluated and registered by the Environmental Protection Agency, given the burdensome .nature of this 1996 law we need to make sure that EPA implements the law fully and fairly.
The passing of the Food Quality Protection Act (FQPA)was a monumental event for the future of agriculture. The Act, intended to improve the outdated Delaney Clause, was the hope of agriculture for much needed reform in crop protection. Unlike its original intent the FQPA has given EPA the power to develop new regulations that
Page 162 PREV PAGE TOP OF DOCwill have a major, lasting impact on American Agriculture and our ability to produce the worlds most abundant, affordable and safe supplies of food and fiber. In addition, EPA's actions will impede our ability to control roaches, flies, fleas, ticks and all the other disease-carrying pests.
The issue here is how pesticides are going to be regulated in the future and whether farmers, golf course superintendents, hospital officials and just plain homeowners will continue to have the pesticide products that protect and improve our daily lives in so many ways.
The Pear Industry in California has been a leader in developing alternative pest control programs. Specifically, Integrated Pest Management (IPM)has been a priority for the California Pear Industry over the last 25 years. With an enormous investment in, research, implementation, experimentation and crop loss, pear growers in California have spent millions of dollars developing a progressive, effective and sensible IPM program.
The program in California, a recipient of California Department of Pesticide Regulation's IPM innovator award and recognized as a charter member of United States Environmental Protection Agency's Pesticide Environmental Stewardship Program, has served as a model example of how an industry can utilize its resources to reduce overall risk and simultaneously improve efficacy.
A key component to the success of the pear industry's pest management program is the ability to have the tools (pesticides)to effectively control pest problems. These tools which have been the backbone to an effective and reduced risk program are in serious jeopardy under the current EPA process to implement the FQPA. Despite much good work, EPA has not taken full advantage of existing FQPA provisions that would permit the science to be worked out satisfactorily, without the loss of valuable pesticides and/or their uses. One of the problems here is that EPA is using extreme assumptions and computer models to make decisions about specific pesticides, rather than actual data from real-world pesticide use. EPA and the registrants need to be given the time to perform the scientific studies necessary to comply with the intent of FQPA as well as maintain the tools necessary for profitable farming.
Page 163 PREV PAGE TOP OF DOC We support the full and fair implementation of the Food Quality Protection Act but do not support the current EPA process of implementation that could essentially destroy not only our livelihood, but our high quality food supply, and over 25 years of work on a pest management program for California Pears that has considerably reduced pesticide use.
2. The second area that should be addressed is the increasing difficulty in employing legal and affordable farm labor.
The ability to employ people to assist with producing, harvesting and packing our crop becomes more difficult each year as labor restrictions tighten and the availability of a legitimate source of qualified people diminishes. The pear industry and the agricultural industry as a whole continue to address this issue by supporting programs that would supply an adequate and affordable labor supply.
The future competitiveness of California agriculture and agriculture in general is dependent on several factors. (1) the ability to legally hire farm labor from outside the United States. (2) the development of a mechanized process of producing, harvesting and packing pears.
The pear industry in California has attempted to mechanize or improve the process but has been unable to identify a reasonable or effective alternative to decrease the amount of resources needed to produce this labor intensive crop. This currently leaves us with the first alternativeto legally hire farm labor outside of the United States.
We support guest worker legislation that is affordable and fair to the industry as well as the workers. This legislation must be free from burdensome regulations and overwhelming reporting and paperwork.
The pear industry realizes that it is their responsibility to hire legal farm labor and to verify their credentials. At the same time the industry, and employers in general, have assumed increased levels of responsibility for determining the legality of a worker. This increased level of responsibility has vindicated the employer as the policeman for the government which is time consuming and costly.
Page 164 PREV PAGE TOP OF DOC We support a system for verifying the legality of our labor supply but don't want the costly burden of policing what is the Government's enforcement obligation.
3. The third is the limited access of California Pears to new markets due to phytosanitary or tariff related barriers.
California Pears are denied access to many major markets like Japan, Korea, China, Argentina, Chile and Australia due to phytosanitary barriers. Many of these barriers are unjustified and do not use a sound scientific base for justification.
An initiative that could significantly increase trade for California Pears would be one
that strengthened the Sanitary and Phytosanitary (SPS) Agreement
In particular two changes should be considered.
The first would require members to standardize methods for quantifying the risk presented by the importation of commercially packed product.
Members should be required to take into account actual commercial conditions rather than academic worst case scenarios when determining risk. In many cases when one quantifies the actual risk presented by importing commercially grown and packed products, that risk is negligible.
Secondly, a common definition of reasonable risk is needed.
While it is understood that each member may set its own level of acceptable risk, some level of risk must be acceptable to all signatories. If, for example, it can be scientifically shown that the likelihood of a disease being transmitted on a commodity is one outbreak in 38,462 years, it should be universally accepted that the risk is negligible or an acceptable level should be established. It would help if the SPS Agreement provided some guidelines on what would be considered a reasonable level of risk.
California Pears also face unreasonable tariffs or denied access in countries like China, India and the European Union. With the exception of a few sensitive commodities that each country, for political reasons, might need to exclude, significant and swift tariff reduction should be encouraged.
Page 165 PREV PAGE TOP OF DOC In addition to general tariff reduction, the US should press for elimination of Europe's entry price system. While EU tariffs were to have been cut in the Uruguay Round, the duties being collected on some US products have more than doubled. On paper it looks like the EU has reduced its tariffs, but in practice they have increased.
Statement of William Zech
Mr. Chairman and members of the subcommittee, on behalf of the California Asparagus Commission, I greatly appreciate this opportunity to address the subcommittee and bring to your attention the key issues facing our industry at this time. I want to commend Chairman Pombo for scheduling this hearing and for his leadership on agricultural issues in Congress.
As a grower of asparagus who exports a significant amount of our production, and also as chairman of the International Trade Committee for the Commission, I can tell you that the California asparagus industry faces many challenges today. Most importantly, we must strive to be competitive in increasingly globalized markets, where we face competition from many developing countries, including Peru, Chile and China. As such, I will focus my comments today on U.S. trade policy as the number one issue for the California asparagus industry.
Our industry has already proven that we are committed to pursuing international markets with a bold export strategy. Proof of this lies in the fact that we currently export to over 15 foreign markets. A good example of our success is the case of Switzerland. Our industry has worked closely with USDA's Foreign Agriculture Service (FAS) for many years to reduce the trade barriers which prevented us from exporting to the Swiss market during a large part of our shipping season. This work is now paying dividends in increased sales to the Swiss market.
Despite our success in exporting to a number of international markets, and despite the implementation of the Uruguay Round trade agreement in 1995, we must continue to pursue new foreign markets if we are going to compete on a global basis. However, we still face trade barriers in many of our international markets. These barriers take the form of both tariff and non-tariff barriers which prevent us from implementing aggressive export strategies. If we are to be expected to compete in the global market, it is incumbent upon the U.S. Government to pursue and implement effective trade policies that provide greater access to foreign markets.
Page 166 PREV PAGE TOP OF DOC Given this situation, the California Asparagus Commission has a number of comments with respect to U.S. Federal trade policy.
First, we believe it is critical that one of our trade policy goals in the upcoming World Trade Organization multilateral negotiations be the elimination of export subsidies by all WTO nations. According to a recent article in the AgExporter, a USDA/FAS publication, the United States is currently being outspent by a 20 to 1 margin in export and trade promotion subsidies by our foreign competitors. Most notably, the European Union in 1997 spent about $7.5 billion in export and promotion subsidies for its food products, including fresh fruit and vegetables. There is no way that U.S. agricultural producers can continue to compete in the long run against competitors who receive such high levels of public subsidies.
While we support the elimination of Government subsidies for agriculture as an important objective in future WTO trade negotiations, we believe it is imperative that Congress maintain or even increase funding for the Market Access Program as a way of increasing our negotiating leverage with our trading partners. MAP has proven to be very successful in assisting California agriculture producers to break into international markets. However, program funding has been reduced from $200 million per year in the early 1990's to only $90 million annually in the past few years.
The California asparagus industry has participated in MAP for many years, and we have found the program to be very successful in its objective of increasing U.S. agricultural exports. While we understand that it was necessary to reduce spending in order to balance the Federal budget, now that the budget is in surplus, and it is clear that the European Union and other trade competitors are not willing to reduce export and promotion subsidies, Congress should consider restoring MAP to its original funding level of $200 million annually.
Another critical trade issue of importance to the California asparagus industry is that we continue to face phytosanitary barriers that are based on very questionable science. The most recent example of this is the failure to gain access to the market in Taiwan, which we believe has great promise for fresh California asparagus exports. Despite the placement of orders by several importers in Taiwan, this market remains closed, purportedly because their Government believes that imports of U.S. asparagus may carry a pest called the burrowing nematode. The Government of Taiwan maintains this stance despite the fact that USDA's Animal and Plant Health Inspection Service has provided them with documentation which states unequivocally that (1) asparagus cannot be a host to the burrowing nematode, and (2) the California Department of Food and Agriculture maintains that California is completely free of the pest.
Page 167 PREV PAGE TOP OF DOC Our industry was hoping to begin shipping to Taiwan earlier this month. However, Taiwan recently informed APHIS that they will require more research to be completed which demonstrates what CDFA and USDA already believe to be scientifically sound. This will take time and will result in our losing access to this promising export market for the 1999 season. While Taiwan is not a member of the WTO, we find it disturbing that a nation with which we have such strong relations would not be more cooperative on phytosanitary problems. Despite the disappointing outcome of this matter, we greatly appreciate Chairman Pombo's efforts to bring this issue to the attention of both the Clinton administration and Taiwan officials.
This matter illustrates the fact that approval of the Sanitary and Phytosanitary (SPS) provisions of the Uruguay Round agreement have not been as successful in removing phytosanitary trade barriers as the agriculture community had hoped. Therefore, the WTO SPS rules should be strengthened to ensure that scientific data provided to a foreign government must be reviewed within a limited time-frame in order to ensure that phytosanitary barriers are not used to stop or delay agricultural imports. This should be another top priority for U.S. negotiators in the upcoming WTO trade talks.
Other issues that should be on the U.S. list of objectives in the trade talks include: (1) symmetry in tariff reductions; (2) greater transparency in WTO procedures; and (3) harmonization of labeling and marking requirements. Achievement of these objectives will enhance the ability of California asparagus growers to pursue an aggressive export strategy in both new and existing foreign markets.
Mr. Chairman, again, I want to thank you for scheduling this hearing and for the opportunity to represent the California asparagus industry before you today. We look forward to working with you and other members of the subcommittee during the 106th Congress.
Submitted Statement of Gene Bauston, MPS, Executive Director, Farm Sanctuary, Inc.
Page 168 PREV PAGE TOP OF DOC I am writing to urge members of this committee to take appropriate steps to prevent the marketing and slaughter of nonambulatory livestock (i.e. animals who are too sick or injured to stand and walk).
It is impossible to move nonambulatory livestock (also called ''downed animals'') humanely, and they are commonly dragged with chains or pushed with forklifts. When then Secretary of Agriculture, Edward Madigan, saw videotape of downed cows being dragged on network television, he said he was ''disgusted and repelled''.
In 1995, the State of California enacted a law prohibiting the sale of downed animals at livestock markets and banning their delivery to State inspected slaughterhouses. Similar measures are currently up for consideration in Washington, DC, and I respectfully urge members of this committee to foster their adoption.
The Downed Animal Protection Act, H.R. 443 and S. 515 in the 106th Congress, prohibits the marketing of nonambulatory livestock at intermediate markets and requires nonambulatory livestock at these facilities to be humanely euthanized. We encourage the Livestock and Horticulture subcommittee to hold hearings to discuss this matter.
The Downed Animal Protection Act has been before both the United States House of Representatives and the United States Senate since 1992, but it's progress has taken a back seat to ongoing administrative efforts. Between 1991 and 1997, the United States Department of Agriculture (USDA) undertook a routine surveillance program to remedy concerns regarding the humane handling of livestock, including nonambulatory livestock, at intermediate markets.
During its surveillance, the USDA discovered various problems regarding the care and handling of downed animals, and the Agency attempted to correct these problems under its existing statutory authority, the Packers and Stockyards Act. However, the USDA's efforts were abruptly ended in 1997 when the Agency attempted to prosecute a stockyard for leaving a downed cow on a pile of dead animals. An Administrative Law Judge ruled, ''there is nothing in the [Packers and Stockyards] Act which indicates that the [Packers and Stockyards] Act was designed to protect a cow... Nowhere in the [Packers and Stockyards] Act is the Secretary of Agriculture given any jurisdiction to prevent an animal's suffering, injury, or death...''. This ruling clearly demonstrated the need for a legislative solution, and in the 105th Congress, the Downed Animal Protection Act reached a milestone, gaining over 100 cosponsors in the United States House of Representatives.
Page 169 PREV PAGE TOP OF DOC In addition to the Downed Animal Protection Act, a petition has been filed with the Food and Drug Administration and the Department of Agriculture seeking a prohibition on the use of downed animals in the human food supply. The petition, docket number 98P0151/CP1, argues that downed animals are ''diseased'' and, therefore, unfit for human food. This petition has received widespread supporteven among livestock producers, and we urge members of this committee will do whatever they can to foster its adoption.
The handling, inspection, and slaughter of nonambulatory livestock at USDA inspected slaughterhouses is a cumbersome, inhumane, and time consuming undertaking. Federal inspectors and plant personal have limited time and resources which could be better spent.
Nonambulatory livestock represent a very small percentage of livestock sold, and prohibiting their marketing and slaughter would cause no undue economic hardship. In fact, many stockyards and slaughterhouses already refuse to accept these incapacitated animals.
Consumers expect a wholesome food supplyone that does not include meat from nonambulatory livestock. People are appalled when they learn that animals who are too sick even to stand are slaughtered for human food with the approval of USDA.
The costs associated with passing the Downed Animal Protection Act and petition 98P0151/CP1 are negligible, while the benefits are significant. We respectfully urge you to advance these common sense proposals.
Thank you for your time and thoughtful consideration.
Statement of California Dairy Campaign
Dear committee members,
Our objective is to provide dairy farmers with some means of handling the extreme volatility in the marketplace. Traditional price support programs have been ineffective because they work in opposition to the marketplace. They created an incentive for overproduction and required government intervention to purchase surplus supplies. This is incident and does little more than keep the dairy producer a step away from bankruptcy.
Page 170 PREV PAGE TOP OF DOC The fact remains that in the production of a perishable commodity, which is a vital nutritional component of most Americans' diets, the farmer is at a market disadvantage. He must sell his product everyday, and he must sell it close to his dairy and by force his dairy is in a remote area. This means that most farmers have less than three buyers to choose from, and in some areas they only have one. Despite the fact that these buyers may be a cooperative of which the farmer is a member, the cooperative is often unable to offer the fanner a better price than what the national market will bear. Because dairy farmers throughout the United States face the same lack of market power, the national market price is not representative of a
truly competitive market. Furthermore, as the cooperatives merge there is even less competition and prices
are driven still lower.
Recognizing the social value of dairy production, the people of the United States have voted to implement a variety of programs to enable dairy producers to remain in business despite their lack of bargaining power in the marketplace. Some of these programs have worked, others have been less successful. The California Dairy Campaign has put together a comprehensive, market-driven safety net program, which assures farmers of a living wage, evens out the extreme fluctuations in the marketplace, and costs less than any previous programs.
At the heart of the safety net program is a recognition that if consumers are to be assured of the steady availability of dairy products at stable prices then our dairy farmers must produce enough milk to meet domestic needs at all times. Because cows produce everyday and milk is perishable, the dairy farmer must have an accurate understanding of his part in total domestic consumption. In this modem information age, where all production data is tabulated at the state and national level, it is sloppy business management (or worse)to have the near-constant state of overproduction which the low prices to farmers would indicate.
The trick is to get our government programs in line with the actual production data and to create programs which help producers to meet America's supply needs without overproducing. The California Dairy Campaign proposal would do this through the implementation of a market oriented safety-net program., which is tailored to insuring stable supplies without overproduction.
Page 171 PREV PAGE TOP OF DOC The safety net program would be based on the national average cost of production, The cost of production would be used as a starting point because of the need of consumers to have a reliable supply of locally produced milk. It is only through having a reliable supply of locally produced milk, that consumer prices stay low and stable. This is illustrated by the areas of the country which have become milk deficient. In all of those areas, the price of milk has fluctuated and gone up despite the claims of the dairy industry that more efficient producers in geographically remote areas will result in lower prices.
By insuring that producers will get approximately their cost of production, consumers are guaranteed a stable, reasonably priced, locally produced supply of a significant dietary staple. This partnership between the consumer and the producer represents a reasonable social undertaking, providing that the relationship
between producer and consumer is market oriented and fair.
The only way to insure that a floor price based on cost of production is market-oriented is by linking the floor price directly to consumer demand. Under the CDC proposal, producers will be assured of a floor price for the production of a volume of milk equal to the national domestic usage. Production above consumer demand will he forced to compete at world market prices. That is, producers will be assured of world price only, not cost of production. This would create a disincentive for producers to produce more than the domestic needs. Supply would be tailored to demand and prices would remain at more stable levels. Similarly, without overproduction it is unlikely that prices would fall below cost of production and the Government program would not be recognized.
By making the support program work with market signals instead of against market signals, the CDC proposal will save taxpayers millions of dollars, will insure a living wage for farmers. will preserve stable, local production and will insure that consumers receive a high quality. reasonably priced dairy products.
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Statement of Garen Warner, Livestock Transportation
I am writing to you about an issue that adversely effects the beef industry in California and throughout the United States, and I ask that this letter be included in the record of the March 29, 1999 Stockton, CA Livestock Subcommittee field hearing.
As a rancher whose business depends on consumer confidence in the safety of our food supply, I urge you and other Members of Congress to prevent nonambulatory livestock, specifically those animals who are too sick or injured to stand, from being marketed and slaughtered under USDA inspection.
When consumers see pictures and videotape showing the transportation and handling of nonambulatory livestock, they are understandably upset. It is impossible to move these animals humanely, and it is hard to imagine anything worse for consumer confidence than for nonambulatory livestock to enter the food supply. No conscientious livestock producer markets nonambulatory livestock, and it is now illegal to sell these animals at auctions in California. However, a few unscrupulous individuals are selling downed livestock for slaughter at USDA plants, and they give the rest of us a bad name.
We hope you will take the necessary steps to prevent the USDA from allowing these debilitated animals from being used for human food. Thank you for your time and attention.