Segment 2 Of 2 Previous Hearing Segment(1)
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THE FARM FINANCIAL CRISIS
WEDNESDAY, SEPTEMBER 15, 1999
House of Representatives,
Committee on Agriculture,
Washington, DC.
The committee met, pursuant to call, at 1:30 p.m., in room 1300, Longworth House Office Building, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Barrett, Ewing, Pombo, Canady, Smith, Everett, Lucas of Oklahoma, Chenoweth, Chambliss, LaHood, Moran, Thune, Jenkins, Gutknecht, Walden, Simpson, Hayes, Fletcher, Stenholm, Peterson, Clayton, Minge, Hilliard, Pomeroy, Holden, Baldacci, Berry, Goode, Stabenow, John, Boswell, Lucas of Kentucky, and Hill.
Also present: Representative Kaptur.
Staff present: William E. O'Conner, Jr., staff director; Tom Sell, Wanda Worsham, Callista Bisek, Jeff Harrison, Alan Mackey, Michael Neruda, Howard Conley, Anne Simmons, and Russell Middleton.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. The hearing of the Committee on Agriculture to review of the farm financial crisis will come to order.
Mr. Secretary, I appreciate very much your coming before this committee today to discuss the farm financial crisis. As this committee discussed at yesterday's hearing, the prices farmers receive for most commodities have now been seriously depressed for the second year. This, coupled with other inherent risks involved in agriculture, has placed farmers and ranchers on precarious financial footing which may have dire economic consequences.
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We have heard a lot of discussion lately on what should be done to help America's farmers and ranchers. In our hearing yesterday, representatives from general farm organizations, the farm credit community and commodity groups presented several plans to us to provide assistance that really addressed the scope of the problem that producers face.
Despite some differences of opinion on the ultimate price tag, there were many areas of agreement on what measures can best provide a solution. We in Congress could develop an economic assistance program to meet the needs of farmers and ranchers and present it to the President for his signature. Frankly, Mr. Secretary, we learned our lesson last year when Congress developed a package in 1998 to help producers in need. We had to do so in the absence of help from the administration. The bill Congress delivered received a veto. Then when we did enact a bill with the assistance package included, it was more than 8 months before producers suffering disaster saw any results.
But we discussed that. The truth of the matter is that farmers and ranchers don't have time for us to go through the same process that we did last year. It makes better sense for us to work together to quickly enact legislation that provides real help to those who need it the most. I hope that we hear from you today a specific proposal to provide much needed assistance to farmers and ranchers that is both endorsed by the President and contains the specific dollar amount recommended by the President.
As I have said in prior correspondence, Mr. Secretary, we look to you to use these resources, personnel, and expertise that you have at your disposal to conduct a comprehensive assessment of the needs of the farm country. This committee takes very seriously its role as an advocate for America's farmers and ranchers.
Already this year we have discussed and acted upon several pieces of legislation important to agriculture. For example, we recently reported out a bill that strengthens crop insurance and provides better risk management tools for farmers and ranchers. However, it is important, as all of these things are, that they will be quite meaningless unless we act now to give farmers the help that will get them into next year. That is the reason that we are here today. Again, I appreciate you coming today. I look forward to your testimony and the questions that our colleagues might ask, and would recognize Mr. Stenholm.
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Mr. STENHOLM. Thank you, Mr. Chairman. I have no opening statement. My opening from yesterday would suffice for today.
Welcome, Mr. Secretary, Mr. Schumacher, and Mr. Collins. I look forward to hearing from you.
The CHAIRMAN. Thank you, Mr. Stenholm. As always, any statements members may wish to submit for the record will be accepted, without objection.
[The prepared statement of Mr. Barrett follows:]
PREPARED STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Thank you, Mr. Chairman. I commend you for your continued hard work to review the farm financial crisis that our family farmers and ranchers are facing. I have been meeting with Nebraska producers throughout this crop year; the crisis is real in every sector of our farm economy. I can promise you that this committee does not need the Wall Street Journal, Washington Post, or the New York Times to tell us what the farm economy is like in this time of low market prices.
I also would like to thank Secretary Glickman for attending this hearing as the Committee reviews the agriculture emergency. However, I wish the Secretary would have decided to cooperate with the committee weeks ago when we asked for input regarding the assistance package. As vice chairman, I will continue to call on the Department to assist this committee until we see a turn around in commodity prices.
We are currently struggling with low market prices and adverse weather conditions. Critics continue to challenge Freedom to Farm. I support Freedom to Farm and will continue to support the underlying principles in this law. We have allowed producers freedom to choose what commodity to plant each crop year. Freedom to Farm has permitted many farmers to alter their individual farm operations to assist them as they implement risk management plans and assess cash flow statements.
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Nebraska farmers are experiencing a number of adversities during this crop year. For instance, the global market has become more important as we move into a more free market for agriculture. Each year Congress authorizes and appropriates money for trade programs to promote U.S. commodities. This year the administration has not used one penny of the money appropriated for the Export Enhancement Program that Congress appropriated for fiscal year 1999. Mr. Secretary, I hope you will express the importance of trade to the President. After all the rhetoric has died down, trade is still the key to improving our commodity prices.
Mr. Secretary, it is imperative that the Department re-evaluate the delivery mechanism of this assistance package. Most producers that I have met with were very happy with the AMTA payment method used last year. But, Mr. Secretary, I remember last year that many of the assistance payments did not reach the farmers until June. As we make critical decisions in the next few weeks—especially regarding this year's method of delivery—we must support our local FSA field offices.
Again, I want to thank you, Mr. Chairman, for holding this hearing. I look forward to working with my colleagues to assist our Nation's farmers.
The CHAIRMAN. Mr. Secretary, you are at the table, along with your esteemed colleagues, if I might introduce them. As we all know, the Honorable Dan Glickman, the Secretary of Agriculture. He is accompanied by the Honorable Richard Rominger—no, he is not.
Secretary GLICKMAN. No, but I will tell him you asked about him.
The CHAIRMAN. As well as Gus Schumacher, Jr., Under Secretary for Farm and Foreign Agricultural Services of USDA, and Dr. Keith Collins, who is the Chief Economist of USDA.
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Mr. Secretary, as we generally try to suggest, your statement will be made part of the record and and we appreciate it if you can summarize your remarks. However, in that this statement only arrived a few minutes ago, I have had a chance to look at it briefly, I doubt that most of the other Members have, I think it might expedite the whole process if you would take whatever time you need to go into whatever explanation you need about what it is that you have to say and propose, and that might save questions later.
At this time, Mr. Secretary, I would ask you to proceed at will.
STATEMENT OF HON. DAN GLICKMAN, SECRETARY, U.S. DEPARTMENT OF AGRICULTURE; ACCOMPANIED BY: AUGUST SCHUMACHER, JR., UNDER SECRETARY FOR FARM AND FOREIGN AGRICULTURAL SERVICES; KEITH COLLINS, CHIEF ECONOMIST; TIM GALVIN, ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE; PARK SHACKELFORD, DEPUTY ADMINISTRATOR, FARM SERVICE AGENCY; AND KEITH KELLY, ADMINISTRATOR, FARM SERVICE AGENCY
Secretary GLICKMAN. Thank you. Mr. Chairman, Mr. Stenholm, members of the committee, it is always a pleasure to be back home. I appreciate your hospitality. Mr. Chairman, I appreciate this hearing. This is a most timely hearing. I might start out by talking a little bit about the complexity of the situation we find ourselves in now. The President has sent over a Statement of Administration Policy, a SAP, on the agriculture appropriations bill which was delivered today. Much of what I am going to say parallels what is in that Statement of Administration Policy, which not only covers the emergency assistance but also the general agriculture appropriations bill that conferees have been appointed in the House.
This is complicated by the fact that it is the appropriators that are going to meet to decide these issues. They will meet in conference on the agriculture appropriations bill, assuming they decide to move ahead on the emergency assistance in that bill.
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So this hearing is appropriate because it gives the administration a chance to at least present some of its ideas that hopefully you will then take to the appropriators, although I am sure that I will be meeting with the appropriators. But this is a kind of an unusual situation, not unparallel to what happened last year which you brought forward with—I must accept as well some of the criticism, that we wrote a lot of stuff in a very hurried time during the appropriations process, and the same thing could happen here. So having this opportunity to make some of our points, I think, is really critical, assuming that these things are done quickly.
The other thing has do with the budget. In addition to the priorities presented in this bill, as you know, the President's priorities are to not spend the Social Security surplus and to continue debt reduction as he has talked about. So both the administration and Congress face some very, very difficult situations as we try to conform all of the appropriations bills, including this legitimate disaster, into a larger picture, which is to attempt to try to keep on the fiscal stability that we have been going on for some period of time. That is going to be a heck of a challenge for us all.
Saying that, if I might—and I apologize for not getting you the statement earlier. Quite frankly, the Statement of Administration Policy was just delivered this morning and I needed to conform my statement to that. We had been working on it for a few days.
Let me just make a couple of comments. First of all, we talked a few weeks ago about having this hearing and trying to identify what the problems were and how we would respond. I don't have to tell you that there are serious problems in farm country. USDA's chief economist and others project that the average 1999 corn crop price will be the lowest since 1987, 26 percent under the average of the last 5 years; soybean prices to be the lowest since 1986, 26 percent under the 5-year average. Wheat, and white rice prices will be about similar in terms of their projections.
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USDA, under the law, is prohibited from publishing projections of cotton prices, and that is something that we might want to talk about at some point: why we can't talk about cotton prices but we can talk about everything else. Be that as it may, cotton prices have fallen sharply as well.
Hog prices have been extremely low. They have recovered to some degree, but they are still below their 5-year average. Cattle prices have recovered somewhat, but USDA still expects that they will for his year be about 6 percent below the 5-year average.
So farmers in some regions of the country are faced with the seemingly improbable combination of low crop yields and low prices. That usually doesn't happen at the same time. It is this year. In Pennsylvania, for instance, corn yields are only 65 percent of normal due to the worst drought on record in the mid-Atlantic region. Many livestock producers in the region were forced to reduce their herds due to a lack of adequate water and feed.
Other disasters are faced. Right now as we sit here, the southeast coast is threatened by what the forecasters are calling one of the worst hurricanes of the century. That may result in damage to the mid-Atlantic region. The same area that was damaged by just a dramatic drought, we might see damaged by floods or wind damage as well.
As difficult as these conditions are, the situation would have been much worse if the administration and Congress in working together did not enact the $6 billion emergency bill last year. Government payments have been a crucial counterbalancing force to low prices, increasing from $7 1/2 billion in 1997 to over $12 billion in 1998, to a projected $16.6 billion this year. So we have over doubled the payments in the last 2 years. While they haven't kept every farmer from a terrible situation, they have helped deal with the misery that some have faced.
Why is the farm economy in crisis, and can you lay all the blame on the 1996 farm bill? I don't believe that you can. I think that the bill fails to help a lot of folks adapt to the problems during low prices, but it is not the cause of the problem. In large part, the crisis is being fueled by 4 consecutive years of record worldwide grain production and weak export demand, both of which are largely—not entirely, but largely beyond the scope of the farm bill. USDA projects that agricultural exports will be only $49 billion this fiscal year, after reaching a record high of nearly $60 billion in fiscal 1996.
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Large global production, the Asian and Russian economic crisis, the relative strength of the U.S. dollar compared to the currencies of our competitors and customers, they have all weakened U.S. exports.
The more appropriate question, however, is the farm bill doing what farm policy should to help deal with the problem and help with the recovery? My answer to that is no, it is not providing a complete answer to that problem. Without getting into the blame game of who caused it or who is responsible for it or everything else, I think our job now is to try to work ourselves out of this situation by making those improvements that are necessary to help us cope with these kinds of problems. The income support payments the farm bill provides, the AMTA payments, are declining at just the time when farmers need help the most. These payments are fixed. They cannot and do not respond to low prices the way that counter-cyclical payments did prior to 1996. In addition, the farm bill capped the price support loan rates so they cannot respond to today's low market prices.
The law also suspended or ended many of the authorities previous Secretaries have had to manage some of these problems. For example, I no longer have the authority USDA had in the past to extend the term of commodity loans, which means that farmers have little choice but to dump their grain into an already dropping market at the end of the 9-month loan. There are no programs to provide longer-term storage, again exacerbating the just cited problem.
While certain provisions of the farm bill have worked and are working well, the safety net provisions are not adequate when prices are low or disasters hit. In previous years, farm bills were counter-cyclical. This farm bill is not. Congress has had to enact some form of ad hoc assistance, emergency loans, livestock assistance, income support, or disaster assistance every year since the farm bill became law. Not only is ad hoc assistance a poor substitute for farm policy, it is a recognition that the underlying policy itself needs repair.
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I again should say Congress has responded to these things to try to deal with the problem on an annual basis. But we should not lurch from one emergency bill to the next. It is not good for agriculture and it is not appreciated by the taxpayers as well. Short-term fixes turn out to be more expensive than carefully planned longer-term programs. I believe that we should work on a farm policy that empowers farmers to not only survive but to prosper.
Frankly speaking, farm policy—and this isn't just today but this has probably been true for several years—has not kept up with the times. We tend to give more support to larger producers and help producers of a very few crops in this country. They are the ones that get all of the payments. We should do a better job of monitoring and helping farmers deal with concentration and provide stronger enforcement of antitrust laws. But most importantly, we need to help farmers change the way they deal with today's marketplace. We should help farmers participate in direct marketing and processing and help them get more of the consumer food dollar.
In addition, we hope that you will pass crop insurance reform to help farmers better manage their risks. It is not too early for Congress to begin to revisit the farm bill and enact broader changes. I am not sure it can be done this year, but I am also not sure that we have to wait to 2002 to get this done either. We are prepared to work with you to craft a farm policy that makes sense, that is responsible, that provides a counter-cyclical income support mission from the farm bill, and allows farmers to prosper in today's changing marketplace.
For this year, as OMB stated in their letter—and I will get you a copy of it—the administration supports spending to address the current financial stress in agriculture. Not only should this bill provide additional income and disaster relief for farmers, it should point the way to strengthen the safety net for the longer term. If not, we will be facing these problems in the future.
I will now summarize the administration's proposals for emergency farm relief:
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Number one, drought and natural disaster relief. The administration believes that Congress should enact the continuation of the single-year portion of last year's Crop Loss Disaster Assistance Program covering 1999 crop losses so that farmers would be compensated if their 1999 crop losses exceed 35 percent of historic yields, roughly the same program as we did before. The payment formula should provide greater benefits to farmers who bought insurance on eligible crops. Those required to purchase crop insurance as a condition of receiving crop loss disaster assistance last year should be ineligible to receive a payment this year if they failed to do so. Again, those who didn't have to buy it last year should not have the disincentive.
The program should be financed through the Commodity Credit Corporation rather than from a fixed appropriation, so as to ensure that there isn't a factoring or reduction based upon a fixed level. That was one of the reasons that we had the delays last year. We are still refining our estimates of the damages but we currently put them in the range of between $800 million and $1.2 billion. Generally speaking, the actual losses in the legislation are a little bit less than what the actual losses are, but those numbers are still being computed and probably will change a little bit as a result of this particular hurricane. A substantial portion of the payments, but not a majority, would go to the drought-affected regions of the mid-Atlantic and the Northeast. In some States this is the driest growing season in history and the drought is severely diminishing yields and wiping out crops from many farmers.
There are other areas that are affected. Long-term drought continues to stress crops in the Pacific Northwest and from the eastern-most corn belt in New England. The California citrus crop has been affected. There is also a significant area of northern North Dakota that was flooded this year, preventing crops from being planted.
Congress should also authorize emergency livestock assistance to help producers who have experienced higher feed cost, reduced livestock production, or livestock mortality losses in weather related disasters. These are uninsurable risks that can place extreme burdens on livestock producers.
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Again, we can use the basic formula of what we did last year to do this. I think it can be done quickly. After Congress suspended USDA's permanent authority to provide emergency livestock assistance, the administration funded programs for 2 years, using the Disaster Reserve which is now depleted. In 1998 Congress provided $270 million in ad hoc livestock assistance. You are going to have to do something along those lines again next year.
So I start out by talking about drought and natural disaster relief because that is where the most eminent need is needed, those whose crops have been wiped out because of acts of God.
The second level has to do with the emergency farm income support. To be sure, there is an immediate need to provide cash assistance to mitigate low prices, falling incomes, and in some places falling land values. I believe that Congress should enact a new program to target assistance to farmers of 1999 crops suffering from low prices. We believe the income assistance component must address the shortcomings of the farm bill by providing some sort of counter-cyclical assistance.
The centerpiece of our proposal is somewhat similar to the proposal that Congressman Stenholm has adopted, has introduced in his bill. It is an Income Assistance Program directed at those with the greatest need: farmers suffering from low prices on this year's crop. The payments, and payment mechanisms, ought to be based on that fundamental driving fact. The income assistance should compensate for this, today's low prices; therefore they should be paid according to this year's actual protection of the major field crops including oilseeds, not based on the artificial calculation done over a decade ago.
Where national net farm income from a particular crop has fallen sharply below the 5-year average, the payment rate would be calculated to make up a percentage of the shortfall. Basically, the percentage will determine how much money is actually spent. You would do that on an aggregate crop by aggregate crop basis, again similar to Congressman Stenholm's proposal.
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We are prepared to work with the Congress and determine an appropriate percentage. The program would be commodity specific and it will pay producers based on falling prices and incomes from the crops they actually plant. Payments would be capped and large farmers should be excluded from receiving payments.
Whereas our income assistance proposal is targeted to those with the greatest need, the Senate plan which doubles AMTA payments—that is the heart of their income assistance plan—makes no attempt to target payments. Moreover—and this is a key distinction—the Senate plan will make payments on past deductions, which may not have any bearing on actual production whatsoever this year, because it is based on the 1985 farm bill formula determining a crop acreage base, which is our purpose for providing assistance for low prices. That is, whatever formula is used to help folks with income assistance, it ought to be based on the fact that those who planted for this year's crop are suffering low prices and it ought to be earmarked to those who actually produced a crop and are suffering the effects of low prices, rather than on a formula that may not be based on production at all.
In addition to that, last year Congress allowed producers to receive 100 percent of their AMTA payment at the beginning of the fiscal year. It is important that we continue to provide this flexibility to producers, and Congress should make this a permanent change.
The administration also proposes to make payments to small- and medium-sized hog operations similar to last years SHOP I and SHOP II programs.
The No. 3 item has to do with farm loans. I am going to try to summarize some of this. We recommend funding for additional farm loans, including emergency loans, and we would work with the appropriators on the specific dollar amount that we think would be needed to take us through the year. The demand for USDA loan assistance is about two-thirds higher this year than it was last year, almost 65 or 70 percent higher. More and more farmers are becoming highly leveraged, with limited equity and low incomes due to depressed economic conditions. They are turning to us for help. Some are unable to obtain credit elsewhere, even with the USDA guarantee. Additionally, the recently increased loan limits for FSA guaranteed loan programs is increasing the demand for guaranteed loan funding.
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In addition, funding should be reinstated for loans to finance construction of on-farm storage facilities. I would say that there are many reasons for that. One is to give farmers greater flexibility so they don't have to sell their crop just because there is no storage space.
The other issue has to do with the issue of potential segregation because of the genetically engineered crop issue. There needs to be some way to help farmers if they have to segregate their crop, and we hope that this doesn't become a major international problem. But assuming they have to keep their crops in a more specific situation, I think we need to provide them some assistance to build those facilities.
We also urge Congress to fully fund its request for $10 million for the 2501 program. This is designed to assist socially disadvantaged farmers and ranchers to participate in farm programs.
With respect to the Crop Insurance and the Noninsured Disaster Assistance Program, this is both a high priority for you as it is for us. We have suggested major changes that are in my statement, including raising the coverage floor for the CAT coverage, making higher-level coverage more affordable; and other things that are in there: improving the NAP program by increasing coverage and replacing the area trigger with a Secretarial or Presidential disaster declaration.
I applaud your efforts, and most of the provisions in your bill we do support. However, we do disagree with some of the provisions in your bill. Your bill fails to reform NAP, as proposed by the administration, by replacing the current area trigger so that NAP would become available in counties declared eligible for emergency loans. Also payment levels should be increased to some degree. Last year USDA put a portion of the emergency assistance funds to buy down the Crop Insurance Program. I believe that we would suggest that this also be included this year as well.
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We have several conservation provisions, including we are asking for authority to increase the acreage amount in the CRP program from 36 1/2 million to 40 million acres. This increase would also reestablish the original 1985 enrollment goal of 40 million acres. If the cap is not increased, we will have to accept far fewer acres next year, even though a large amount of acreage may be offered, given current commodity prices. USDA could end up rejecting up to 70 percent of all offers next year. So I would hope that we could get that cap increase. That is something that I think this the appropriators can do.
The EQIP program was created in the 1996 farm bill with an annual mandatory spending level of $200 million. EQIP is essential so that small producers can get the resources they need to prevent agricultural runoff. Livestock producers in particular are being asked to assume the increased cost in management of pollution-related expenses at a time that prices have plummeted. The administration has asked for an increase in the EQIP program over the current authorization of $200 million annually. We would hope that would be in the bill as well.
With respect to trade, and again I am talking from an emergency perspective situation, we are asking for the authority to roll forward unused EEP balances to future years or use those for food aid or other export assistance activities.
We are asking for restoration of funding for the cotton step 2 program, which we think must be done in order to move cotton around the world.
With respect to dairy, we support extending the Dairy Price Support Program, which expires at the end of this year, until the farm bill is terminated. If we don't do that, my judgment is that dairy prices, their volatility could see the testing of those price supports that we have seen in the past. This, of course, is separate and apart from other dairy issues which you are considering right now.
With respect to CCC borrowing authority and program delivery issues, the fact is that the Farm Service Agency does need additional funds beyond those included in the current appropriations bill to implement this year's emergency aid. Similar funding is required to ensure that FSA's computer systems continue to function.
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For NRCS, basic levels of technical assistance for farmers, additional appropriations are needed to deliver the authorities under CRP and the Wetlands Reserve Program.
Finally, additional CCC borrowing authority will be needed. We are dangerously close to using up all current authority. As you know, most of our programs come out of the Commodity Credit Corporation's revolving account. This is because there is a very significant amount of dollars that are being paid out this year to farmers. Current projections are that CCC will exhaust its borrowing authority early in the next fiscal year. It is especially crucial that the final agricultural appropriations bill include the Senate language providing an indefinite appropriation to CCC for its net realized losses. This is consistent with the President's budget request. The House appropriation language would only provide $14.65 billion for CCC, and it is now evident that the House estimate of net realized loss is insufficient, providing only enough funding for about 2 1/2 months in the next fiscal year.
If I just might close, and I realize the length of the statement, I am going to read to you the first paragraph in the disaster assistance part of the letter that Director Lew wrote to Congressman Bill Young on the larger bill.
The President has called for assistance to U.S. farmers and ranchers suffering this year from low commodity prices and natural disasters, including drought. The administration generally agrees with the total additional funding level provided in the Senate bill, but strongly disagrees with the way that the Senate has allocated the funding. The administration supports this additional funding in the context of appropriations requests that can be funded with the non-Social Security surplus, and we will work with the Congress to achieve this result.
I say this to you because I do not come to with you a specific dollar amount of the total package. What we are basically saying here to you is these are the priorities that need to be funded and I have listed those. As a general proposition, we have indicated our support with the Senate, the amount that has been appropriated there, but we are willing to work with you and the appropriators to try to achieve all of the objectives within a reasonable amount that can be funded and not using any of the non-Social Security surplus.
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So I think the most important thing is to not focus on the specific dollars. There has been too much debate in this whole thing about how many dollars we are going to spend and not really enough on what short-term and long-term structural things we can do to make things easier for farmers and ranchers. I think working together, I think we can accomplish all of those objectives and do it within an amount that preserves Social Security and keeps up on the road to debt reduction. So I thank you very much and would be glad to answer any questions that you may have.
[The prepared statement of Secretary Glickman appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Secretary. I wish we could focus more on what we would like to do to help rather than how much it costs. But through the process up here, that becomes extremely difficult. As you know, there is a lot of politics that comes into play here about who has got the money and where is mine coming from and who is going to spend and which pocket it is going from to whose pocket is it going to. But, unfortunately, that is a part of it. The thing has to have a price tag on it. I appreciate your mentioning the fact that you don't have a price tag. And it is difficult to look with such a short period of time at the specific outlines in it and put a price on them, But my initial reaction to it is that probably it absorbs at least all of the money that is in the bill that passed in the Senate that will be going to conference in the relative or near future because there is no real disaster money in there. We are looking at several hundred million and possibly $1 billion, as was suggested by you, in disaster assistance. That would either be in addition to it, or you take what they have provided and you pare it back. That has some very substantial implications, obviously.
We had a heard yesterday from commodity groups and from farm organizations that came in, and there was, I would think—not everyone agreed completely—I think there was a general consensus that getting something out there as quick as we could in a method that the Senate had provided for was appropriate.
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Under the proposal that you have offered, would you have the figures in place to be able to make the calculations and in order to be able to get the assistance to the farmers?
Secretary GLICKMAN. First of all, let me say that there are a variety of vehicles that you could use to get assistance out there. You could use the AMTA payment vehicle, which the Senate has done. I think the positive of that probably is you could get those payments out fairly quickly. The negative of that is some of the money does not go to the people that have suffered losses this year, so you are paying out money——
The CHAIRMAN. But under your proposal as you are proposing, what would be the timeframe?
Secretary GLICKMAN. Let me just get to that. Another possibility would be to use straight loan deficiency payments. But to do that you would have to change the caps, because if you are going to add significantly additional money, you could not accomplish that under the limits that are there right now. The exclusive use of the LDP has some trade implications to it as well.
The third possibility would be to use something along the lines of a formula that Mr. Stenholm talked about. I would ask Mr. Collins to talk just a little bit about—we talked about maybe how quickly could you come up with the computations, how you might do this in order to get—you might explain, for example, how you might do this and how quickly this could be done.
The CHAIRMAN. I don't want to use all of my time in the explanation of the problem. My question is, how soon do you think you could get the payments out?.
Mr. COLLINS. I think that we could get them out in this calendar year.
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The CHAIRMAN. In this calendar year?
Mr. COLLINS. Right. Last year we got the payments out several weeks after the bill was enacted. I think it was in November.
The CHAIRMAN. The AMTA payments?
Mr. COLLINS. The AMTA payments.
The CHAIRMAN. I believe that both in front of the committee and in a press release from the Department, there was—and very positively responded to here, I might say—10 days.
Mr. COLLINS. I think it might take a little bit longer than that, but within that neighborhood I think.
The CHAIRMAN. Within 10 days?
Mr. COLLINS. I can't give you an exact figure, but certainly it is going to be immediate. It is not going to be like the crop loss payments which took us well into 1999 to deliver. What we would have to do if we do it on the basis that the Secretary outlined, which is based on production, essentially what we would do is we already have data on people's planted acreage and we would have to establish a yield and we could pay it based on that. We would not have to have people sign up so we could do it within several weeks, I think.
The CHAIRMAN. Wouldn't the crop have to be harvested?
Mr. COLLINS. Well, that depends. When I said you have to establish a yield, we could use essentially a projected yield. As you move through the fall, our yield estimates get better and better, and we would essentially use an estimated yield to do that.
Secretary GLICKMAN. You would almost have to use an estimated yield in order to get the payments out very quickly.
The CHAIRMAN. Under the program, one of the proposals under the AMTA is there would be an increase in the payment limitation for the AMTA provisions in the Senate by doubling it. What would be the limitation, and would you support raising it under your proposal?
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Secretary GLICKMAN. Well, let me just put it like this. Under the Senate proposal, they proposed doubling the limitation. You are going to have to increase the limitation if you use these same formulas. So whether it is doubling or increasing it in some way, you would have to increase the limitation in order to get it done. There is no other way to do it.
The CHAIRMAN. So you don't have an objection to doubling it?
Secretary GLICKMAN. I don't know if I would commit to doubling it, but it would have to be increased. I accept that.
The CHAIRMAN. As you are targeting, what would be the criteria for targeting?
Secretary GLICKMAN. First of all, you would continue, of course, the $40,000 payment limitation on the basic program, as we have before. Then we have discussed limiting the payments on the emergency side to farmers with gross income of $2 million or less, as we currently do under the disaster program.
The CHAIRMAN. My time has expired. I am sure there will be a number of members that will want to ask a variety of questions. Thank you, Mr. Secretary.
Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.
Mr. Secretary, you were getting the same line of questioning that I have been getting on the committee as to all of the reasons why the supplemental income plan won't work. I understand that, and I think that we are making progress along these lines, and I appreciate the fact that you have now looked at the wisdom of trying to get the payments to the farmers who have actually had the losses, which AMTA does not do. It does not do it in a way in which we advertise it to do, no matter how you want to explain it.
I hope that now that you have made a proposal, that we can on this committee and with the appropriators—of which we are joined here, Marcy Kaptur, the ranking member on our side, is up here. As we kind of work through this, I hope that we can do it in the spirit in which you have answered the question, which you have made in your statement today.
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I want to ask a couple of questions that I did not hear you refer to today. One, in the last few months, there was a ruling concerning the sheep industry, the wool industry, ITC. The President made a commitment, I believe, as a result of—through you, of how that ITC ruling was going to be carried out over the next 3 years regarding the sheep industry. I did not hear any reference to that $100 million that was committed to our sheep industry in order that they might move into the next millennium in the way in which the ITC ruling was in fact made.
Secretary GLICKMAN. Charlie, I cannot answer this question off the top of my head. We are working on it right now, but I will have to get you an answer.
Mr. STENHOLM. That is fine. I understand that. Get back to us on that one.
Second, peanuts. Mr. Secretary, is the Department aware that several economists throughout all peanut producing regions are projecting a minimum of 100,000 tons of 1999 crop order peanuts going under the loan this year and possibly as much as 200,000?
Secretary GLICKMAN. I would ask our economist if he knows that.
Mr. COLLINS. I am sorry, Mr. Stenholm, I can't confirm that estimate.
Mr. STENHOLM. OK. Let's assume for a moment that this is correct because it may or may not be; but if so, then another question which you do not have to answer today, but could you explain how the Department has allowed for an overproduction of peanuts for the domestic market when the USDA was given a mandate in the 1996 farm bill to balance quota production and domestic edible use so that costly surpluses would be eliminated?
Secretary GLICKMAN. I would have to get back to you on that, Charlie.
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Mr. STENHOLM. I would appreciate it.
Because if it is true, and I am particularly sensitive to this because we have been recommending and asking questions and challenging those. Mr. Hatcher—I will give our former colleague who has been making some recommendations on this—if in fact the worst has happened, which I have been predicting might happen, then we have a problem that I think should be addressed in the same spirit in which we are talking about drought losses, we are talking about price income losses as it pertains to another industry. I believe you will concur in that. When the facts are known, we will deal with that in that way.
At yesterday's hearing witnesses suggested as much as $16 billion was needed for emergency farm assistance. The Senate has approved something like $7 billion. Perhaps Congress would be able to provide this amount of money, but we may have additional restrictions, our commitment to reductions under WTO. Our WTO commitment caps the level of trade distorting support at 1986–88 levels to be reduced by 20 percent from 1995 to 2000. Under this formula the cap for this year is $19.9 billion and for the next year $19.1 billion. Can you please reassure us that this year's proposed assistance package would be consistent with our WTO commitment?
Secretary GLICKMAN. The answer is yes, but I would ask Tim Galvin to join me. He is Administrator of the Foreign Agricultural Service.
Mr. GALVIN. Yes, Mr. Stenholm. We have looked at several, probably, options of providing relief this year. Under either the Senate proposal or some of the others being considered, we believe that any of those would come under the $19.9 billion total that you mentioned.
Mr. SCHUMACHER. We have had room under these proposals.
Secretary GLICKMAN. I have talked to Mr. Combest a little bit about this issue because, as you know, under these proposals there are certain that are green box, which are basically not subject to limits, and there are blue box and amber box and all different color boxes. Some of the proposals do fit into production-related payments, which in fact would be a problem if they were all in that category. We don't see that as a problem this year. But in future years it could conceivably be a problem depending upon the level of the payments.
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Mr. STENHOLM. I know the chairman brought this up at a previous time you were here. We look forward to working with you on making sure we get it in the right box. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Ewing.
Mr. EWING. Thank you, Mr. Chairman, and thank you for holding this hearing. Mr. Secretary, thank you for being here.
I want to give you a little scenario as to how your proposal—it is a really good question—how your proposal might play out in central Illinois. We didn't have a bumper crop there. We didn't have the kind of crop that we can raise in a normal year, but we didn't have a disaster either. Where we might raise 175 bushels of corn, we are going to have 125 bushels of corn this year. So we would be off 50 bushels. Under your proposal, would our farmers be paid on the 125 bushels or on the 175 that they normally raised? They are not going to qualify for drought disaster at 125 bushels of corn, but if they are only paid on the 125 bushels, those farmers are hurting because they have lost a sizable percentage of their crop, maybe the part that was real profit, and they are not going to get the payment on that.
Could you say how your program might apply to that?.
Mr. COLLINS. Yes. In that case, if you are paying based on actual production, as the Secretary proposed, you are getting paid on your acreage planted and your actual yield. When you get paid on your AMTA payment, you are getting paid on 85 percent of your historical acreage at your program payment yield, which national average for corn is only 102 bushels per acre. So AMTA is no bargain when you are getting paid on payment production versus actual production even in that case.
Mr. EWING. But, Mr. Collins, under the AMTA payment, you are not penalizing those who have just dry weather, not a real drought. You are not helping those who already have, like the upper Midwest has, a bountiful harvest again this year.
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Mr. COLLINS. What I am saying is that perhaps even in your area, a lower yield due to weather, that yield would still be higher in the program payment yield on which you get a payment.
Mr. EWING. But it won't be as high as the farmers in Minnesota that have a wonderful yield that they don't normally have.
Mr. COLLINS. Let me point out a second thing. Under the Secretary's proposal, the total amount of payments that would go to corn are about the same as they would be under AMTA payments. What is substantially higher, however, would be payments to soybean producers. I think your area would tend to benefit because of that.
Mr. EWING. Going on before my time is up, I would just make the comment that the criticism with the AMTA payment, they may be based on old data, but I think they are fairer than this proposal because of the point that I just made. If there are those who are no longer in farming, because they qualify for an AMTA payment under the 1996 farm bill, it doesn't appear to me that they have to qualify for a second payment because we are creating the second payment. That wasn't part of the original contract. It seems to me that you could clean up the AMTA payments so that we are not paying those out to people who aren't engaged in farming.
Secretary GLICKMAN. Mr. Ewing, you are entirely right. You could create a supplemental AMTA program that does exactly what you are talking about. I still think the proposal that Mr. Stenholm has conceptualized is a better way of dealing with this and has more implications for the longer term, but what you are talking about would be an improvement.
Mr. EWING. I don't want to leave the impression that I don't think Mr. Stenholm's proposal has merit. I think it does. But I do think if we are going to create a new program, we ought to look at situations like Illinois and Indiana and that lots of corn producing country has today, where they are not up to par and yet they are not going to be eligible for drought disaster. This program as you have proposed it will not be fair to those areas this year. That is the bread basket of the Midwest.
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One other point that I would make. On your proposal, Mr. Secretary, there are a number of things in there that I would call desirable but not emergency. If we have to limit our funds, wouldn't it be better that we take those that are truly to address emergencies and not those that could be addressed in next year's deliberations by the Congress?
Secretary GLICKMAN. I suppose you are right. But the question is, what are you calling desirable and what you are calling emergency? Obviously, there are things in there that are perhaps of higher priority than others. But what we have talked about are things that we think need to be done both to deal with the current crisis as well as to provide some relief for the longer term.
For example, I think uncapping the CRP and increasing the amount of acres needs to be in here, because farmers need to be getting the signal that we are doing more than just sending out this year's payment to them. We are doing some longer-term things. And in addition, we need some help on our staff resources to be able to get these payments out and be able to do what we need to be doing. There are some other things in there like that.
Mr. EWING. You are absolutely right. We have to provide for the staff to do that work. That is part of the emergency. But I am somewhat reluctant to put what I consider desirable in an appropriations bill when it ought to come through this substantive committee.
Mr. PETERSON. If the gentleman would yield, if I could just make the point, in northwestern Minnesota 90 percent of the crop wasn't even planted. So in the southern part of my district, we have wonderful crops. But people need to understand that the farmers out there are wiped out and I need to——
The CHAIRMAN. The gentleman's time has expired. Mrs. Clayton.
Mrs. CLAYTON. Thank you. I wanted to raise the question on two points. One, do you know what we have spent in terms of emergencies for the last 3 years to get a feel for—what is the total of the emergencies?
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Secretary GLICKMAN. You are talking about the emergency agricultural spending?
Mrs. CLAYTON. Right. Last year was $6 billion, was it?
Secretary GLICKMAN. About $6 billion last year.
Mrs. CLAYTON. This one is $7 billion?
Secretary GLICKMAN. The Senate bill was about $7 1/2 billion. $7.4 billion is what they have in their bill. There are other proposals over here, but that is what the Senate has.
Mrs. CLAYTON. In addition to our regular AMTA program?
Secretary GLICKMAN. Yes.
Mrs. CLAYTON. Is there any way that we can compare what we were doing to respond to the reciprocal safety net as to what we have now, the kind of greater emergency now that we have a hurricane? I am just trying to get a feel for how we are now doing more fiscally than we were doing before.
Secretary GLICKMAN. Perhaps Mr. Collins can talk about the last 15 or 20 years, generally, how much we are spending on an annual basis.
Mr. COLLINS. One way to answer that is to look at total outlays on price support, income support and related programs spent by the Commodity Credit Corporation. As you know, the all-time record spending was $26 billion in 1986 when we were in the farm credit crisis. That was a large outlay in response to the weak markets at that time. That support spending generally fell as you move into the 1990's, and exports and markets got better. By 1997 the total CCC spending was down to about $7 billion. Now, in 1998 it went to about $10 billion.
This year we are in right now, fiscal year 1999, the most recent estimate that the Department has done is that it is over $18 billion for this year. So we are moving back up but not approaching the record of the mid–1980's.
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However, on direct payments to farmers on a calendar year basis, our current estimate is roughly—the Secretary said $16.6 billion in calendar year 1999. Last year that was $12.2 billion. The year before that it was $7.5 billion. So you can see that the farm crisis of 1999 has escalated the payments both directly to farmers and the general price and income support activities of the Commodity Credit Corporation.
Mrs. CLAYTON. You mentioned in your prepared remarks that we need to do something over the long term. I was wondering, what can you propose to do other than what we are currently doing in responding to this emergency that is going to be increased come another month because of what we know the weather is going to do, because the emergency is based on the drought and other things beyond the price support. So we know as we consider this, we ought to be considering a larger anticipation of appropriation, because this is not going to be sufficient to respond to an ever-escalating emergency, yet we have blinders on. The only way we can respond to our farmers is to keep doing this and do nothing structurally to prevent—we need a safety net of some intervention until we do reform the farm bill so we don't do this every 3 or 6 months. I am just trying to find out what you are proposing rather than suggesting that we should do it.
Secretary GLICKMAN. As you know, I do not have the authority to reduce supply. I cannot exercise authority on set-asides or any other mechanisms to try to get price up by reducing supply other than through exports and trade. Obviously, trade is a critical part of this picture. I would point out that the level of humanitarian assistance by our Government this year is five times what it was last year and about three and a half times what it has been, on average, of any year in the last 5 years. So we are trying to move as much as we can in humanitarian assistance as well as export markets.
But quite frankly, the currency problems with the very strong U.S. dollar and weakness in demand has affected our farm exports. That is truly a big part of the farm safety net that is not working as well as we certainly would like to see it.
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In connection with supply, I have recommended increasing the CRP which would bring about another 10 to 12 percent of acreage into that program, uncapping that program so you would have more people eligible to putting acreage into long-term land retirement programs, as well as on farm storage and other methods to keep particularly grain from having to be thrust on the marketplace, and extending commodity loans so they don't all mature at one time and their grain is not dumped out at one time. In addition to that, what you are doing on crop insurance is trying to find ways to give people more acceptable risk management.
Truthfully, in the longer term, a trade and effective Risk Management Program are really the only real ways that you are going to provide long-term help to the American farmer.
There is also permanent livestock feed assistance. That is all part of the disaster type of effort.
Mrs. CLAYTON. My time is going to run out. Let me just insert the concern I also share about peanuts. And obviously you can't control the prices, but part of the arrangement when we continue to support the peanuts program was with the understanding that this wouldn't be done without some constraint or some monitoring of the program. So we want to make sure that that doesn't get us in a situation that Congress as a whole would then be forced to take a negative position in the area of peanuts.
I want to make the point about the emergency is always when the rain is falling in your house. Emergency is always when you are in need. I can tell you that the African American farmers are in dire straits right now, not only because of the drought but also because they are losing their lands. I don't know if anything speaks to that in here. I know that will be coming up, as you well know, here this week if they can get up here. They are not where they can make a crop. They are just desperately trying to stay in farming.
So I don't know—if the emergency request speaks to this at all, I don't see it. If you can get back to me, I will accept that.
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Secretary GLICKMAN. We have full funding of the 2501 Farm Outreach Program. We asked for that last year, which is $10 million. That is in this emergency request and we hope that Congress responds to that request.
Mrs. CLAYTON. The direct loan—and my time is up—is the other one, I just want to let you know.
Thank you, Mr. Chairman. You have been overbearing with me.
The CHAIRMAN. Thank you, Mrs. Clayton. Mr. Pombo.
Mr. POMBO. Thank you, Mr. Chairman. Mr. Secretary, I just have one question I wanted to ask and it was, I think, more of a long-term question and not so much a short-term. I know the implications of what you are trying to do is for the most part to take care of a short-term farm crisis that we have.
In your statement you say that one enlarged part of the crisis is being fueled by 4 consecutive years of record global grain production and weak export demand with substantial loss in our exports over the past few years. But in the conservation part of your statement, you talk about taking additional land out of production.
Aren't we establishing a long-term policy there of losing world market share because we are taking our land out of production? And I believe that that land, whether it is CRP or WRP would be permanently taken out of production because the end result is that the world demand will not be there for the crop because our international competitors are increasing their production, and we will be permanently losing a world market share by doing that.
I know that most of the WRP land that has been taken out is being permanently taken out. I believe that with CRP, even though that is a shorter-term contract, I believe that is being permanently taken out because of the long-term impact of this policy.
Secretary GLICKMAN. I think that is a good question. Let me make a couple of comments. When you go out and talk to farmers, there is very strong support in the countryside for maintenance and expansion of the CRP program. One of the reasons why is those payments on some of their more erodible acres allow them to farm their other acres that they would not have the capital resource to do. So the biggest support comes from farmers that have both CRP land and nonCRP land and are able to use that money for cash flow purposes to stay farming.
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Second of all, the intent is to maintain this Farm Conservation Program, these acres which are vulnerable or highly erodible. We are less than half of the total acres that we had out of production in the early and mid–1980's with this program. We had close to 80 million acres in set-aside authority and in the conservation program in the 1980's. Even with this authority, we are about half of that or slightly less than half of that.
The intent is to have the most vulnerable acres out of production. For emergency purposes, those acres, if we ever truly needed them, they could go back into production. I have the authority. Right now we have big surpluses. I don't call these supply management programs but they do tend to reduce production to some degree. They are extremely popular. But we have an obligation to maintain their conservation orientation and not just allow any acres to go into long-term retirement.
Mr. POMBO. I understand that, Mr. Secretary, but my point is that you are taking this land out of production. That market share is going to be replaced by some someone and is being replaced by someone currently because our foreign competitors are filling that market share. That is why our exports have dropped. That is why we have this glut in this country of product; it is because we are not being able to export it. For a number of international economic reasons, we are not able to export it. So that land comes out of production, then you end up with the CRP land.
These aren't 10-year contracts because in 10 years we either have to renew those contract so these guys can continue to pay off their loans or we have to go to them and say, sorry, we don't have the money, but there is no market for your crop now because we lost the international market share.
Secretary GLICKMAN. Well, yields are continuing to go up dramatically. The amount of production is going up in the world domestically and overall. It is true that there is some shifting lately. But I would point that even with the lack of exports, the volume of exports is not down very much at all. It is the value of the exports that is down, because the price is down considerably because of the international currency concerns and because of weaker demand.
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Mr. POMBO. To take the first part of your statement that says in large part this crisis is being fueled by 4 consecutive years of global grain production— take the first part of your statement, then. We are permanently losing that market share by continuing to take more land off the market. I know in the short term, there are a lot of people that need this program. The reason CRP is so popular across the country is because the guys need the money. They are desperately trying to figure out a way to hold onto the ranch. That is why it is so popular. It is not because they love your program, it is because they need the money.
It is my concern in terms of a long-term policy, are we establishing that we are going to be a smaller player in the international market because of these kinds of initiatives that we have adopted in the recent past?
Secretary GLICKMAN. I would like, if possible, for Keith Collins to respond. I would have to say again the amount of land on long-term land retirement is half of what it was 15 years ago.
Mr. POMBO. But 15 years ago, we didn't have the international competition that we have today.
Mr. COLLINS. I think, Mr. Pombo, there are situations when you put land into the CRP, it can hurt your competitiveness. I don't think we happen to be in one of those situations now, however. In fact, if you look at our market share over the last couple of years, it has even gone up for some commodities. Soybeans is a terrific example. The flexibility of the 1996 act which has resulted in more soybean production has improved our position in the global markets for soybeans. That is true for corn as well. We have commodities like cotton where our market share has fallen dramatically, but that has nothing to do with the CRP because very little cotton land goes into the CRP.
I think that when have you got tremendous increases in yields like we have in the United States, national corn yields now over 130 bushels an acre, soybean yields now approaching 40 bushels an acre, when you have those kinds of yields and you have the huge increases in stocks that we are observing now, the highest levels since the early 1990's and the mid–1980's for our major commodities—you have no farmer owned reserve, you have no price support for grains, you have marketing assistance loans which allow markets to clear—then it is very hard for me to see how putting a few acres into the CRP—we are talking about very few here; we have 325 million planted acres of principal crops each year in the United States, and the Secretary's proposals to go from 36.4 million acres to 40 million acres in the CRP, which is 3.6 million acres, I believe, out of a crop land base of about 400 million acres, I simply don't see how that is going to measurably affect our market share in world markets.
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Mr. POMBO. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Pomeroy.
Mr. POMEROY. Mr. Chairman, I would begin by asking unanimous consent to allow our colleague, Marcy Kaptur, to sit in Mr. Bishop's seat. I don't think that he is here today.
The CHAIRMAN. The Chair would object for the reason that we have had a number of Members over the year on our side of the aisle come and request a place. If once we start that, I don't know where to stop it. We have a full complement of hearings.
Ms. Kaptur is very welcome to join us here today. But I have asked other Members in the past if they would only observe from afar, and for that purpose I would object.
Mr. POMEROY. Mr. Chairman, I have sat at a lot of dais at a lot of other committees and I am sorry that you reached that conclusion. I do appreciate the fact that you have held this hearing and I will direct my question to Mr. Glickman.
I am going to read to you, Mr. Secretary, from the White House statement at the time that you signed the freedom to farm bill. Quote, ''I am signing H.R. 2854 with reservation because I believe the bill fails to provide an adequate safety net for family farmers. Fixed payments in the bill do not adjust to changes in market conditions which would leave farmers and the rural communities in which they live vulnerable to reductions in crop prices or yields. I am firmly committed to submitting legislation, working with Congress next year to strengthen the farm safety net.''
Just to show you the prescience in those remarks, wheat at that time, at the time of the signing in April 1996, was $5.32 a bushel; in August of this year $2.80 a bushel, a collapse of 48 percent. Corn, $3.85 a bushel; and in August of this year $1.67, a collapse of 57 percent. Soybeans, $7.43; in August of 1999, $4.33, a collapse of 42 percent.
Clearly this Congress, I don't care Republicans or Democrats in control, would never pass a bill under this environment that is the new farm bill. This farm bill sent the largest payments to farmers at the time prices were the strongest they have been, in fact, almost 50 percent higher across the commodities above what they are now.
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I would note, Mr. Secretary, however, that the next Congress the President alluded to has come and has gone. And I say as a friend, the initiative you advanced this afternoon is, in my view and the view of those I represent, overdue. But it is better late than never to discuss a rational way to reestablish counter-cyclical price support for farmers. I think the heart of what you have told us today is you have told us you want several things in the disaster package. You want to extend the marketing loan period. You want to have some funding available to construct on the farm storage. You want additional funding behind egg mediation services and the $2 million in the Senate bill. You want to fund the crop insurance support for the year 2000. You want support for production difficulties, drought and others. Those are components, correct, that you envision in the disaster response?
Secretary GLICKMAN. Correct. And credit, too.
Mr. POMEROY. And credit, too. Thank you. But in addition to all of those, I think the most important component that you advanced is a new delivery system. Now, would you tell us again why that works better than AMTA payment plus like we have done in the past to get money out there?
Secretary GLICKMAN. The AMTA payment is based largely on historical computations of production, some of which date back over 10 years ago. We believe in the case of a natural disaster or in the case of an income loss disaster, that you ought to make those payments based upon actual losses with respect to production that was done in 1999, and the AMTA payment just—supplementing an AMTA payment doesn't do that. Some people didn't produce anything in 1999 or produced another crop that was not necessarily complemented with a loss. So we think using the AMTA formula may get half of the problem but not all of the problem in terms of people who actually suffered losses to it. The other thing is that I think experience has indicated the AMTA——
Mr. POMEROY. Is that another way of saying that——
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Secretary GLICKMAN. There is no oilseed coverage under the AMTA program at all. We didn't know it at the time but in hindsight it seems to have built a lot of those payments in the land values which may not have necessarily been real in connection with income values. Let me tell you in addition to that, Mr. Ewing had an interesting point. He said why not just refocus the AMTA payment and take out the historic production and give the payments only to those who have actually produced and suffered losses. I said that would be an improvement because that would get only to those people who have suffered losses.
I also thought this was an opportunity for us to maybe pick up on what I thought was a very good suggestion to Mr. Stenholm, which was to try to set the record for an alternative means of distributing payments which would be more realistic with respect to farmer's income which have suffered such dramatic losses. The AMTA payment is not based at all on revenues or income or anything like that. Mr. Stenholm, I think, has come up with an apparatus to make these payments on a formula based on how a farmer is actually doing.
Mr. POMEROY. In short, one of the biggest flaws of the farm bill is it sends out money irrespective of commodity prices so that as now when commodity prices have collapsed the scheduled payments are at their lowest point so far. As irrational as that is, using AMTA as a support delivery system is also irrational because it is also based on production history pre-1996 and therefore not relevant to the crop year that we are in that is producing the losses. Is that at the heart of it?
Secretary GLICKMAN. That certainly is part of it.
Mr. POMEROY. My time has expired. Thank you, Mr. Chairman. Thank you, Mr. Secretary.
The CHAIRMAN. Mr. Canady.
Mr. CANADY. Thank you, Mr. Chairman. I would like to thank you for your leadership in conducting the hearing today as well as the hearing yesterday. These are critical issues for the committee to address. I also want to thank the Secretary. I want to focus particularly on some issues that are of concern to my State of Florida, and in particular, express my appreciation to the Secretary of the efforts of the Department to respond to the threats posed by pest and disease to the industry in our State.
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Producers of fruits and vegetables, as we all know, have been significantly impacted by agricultural losses this year. Fruit and vegetable growers in several areas of the Nation have faced devastation due to pest and disease infestation as well as market- and weather-related causes. While the Senate took the first step in addressing the needs of these farmers by allocating $50 million toward compensation of growers of fruits and vegetables, losses out in the country in this sector far exceed that amount. I believe that we need to continue working to develop a comprehensive review of crop losses to fruit and vegetable growers. I hope that serious consideration will be given to damages suffered by these farmers as we consider agricultural disaster assistance.
In Florida, citrus growers have been dramatically impacted by citrus canker in the last year. As we are experiencing this current storm we are concerned that because of those weather conditions, we can actually see further spread of canker. I think it has been demonstrated in the past that winds associated with storms have helped spread that disease. Over 125,000 citrus trees and been ordered destroyed by USDA due to this disease which causes a devastating threat to citrus production. I wish to express my appreciation again, Mr. Secretary, to you for your recognition of the critical nature of this situation through the Department's declaration of emergency eradication funding earlier this year as well as your efforts and those of the committee to provide growers protection from citrus canker through crop insurance coverage.
However, at this time, citrus producers whose trees and livelihood have been destroyed receive no actual compensation for their losses. So crop insurance will be in place for the 2000 crop year; producers currently have no protection against crop damage due to citrus canker. We ask that for this year only until crop insurance coverage is available, citrus growers be compensated for tree losses. I believe it is also imperative that we provide USDA the resources that it needs to prevent pest and disease from entering the country before they cause such large economic harm to crops. We would ask that the USDA's Animal and Plant Health Inspection Service be provided emergency funding for interdiction and prevention of pest and diseases.
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Again, I appreciate very much the proactive efforts of the Department with regard to the situations that we have faced in Florida. I want to thank the chairman and the staff of the committee for their assistance in helping address these needs. I would just invite you, Mr. Secretary, to respond to the concerns that I have raised.
Secretary GLICKMAN. First of all, let me say that this has been a very high priority working and taking money out of the CCC as well as working cooperatively with Bob Crawford in the State of Florida Agriculture Department. Your State has taken a real leadership in this area. This is a growing problem with canker as well as Medfly and other pests, both domestically occurring as well as invasive species.
One of the things we are asking for is more money to deal with this horrendous problem of invasive species, APHIS inspection and that kind of thing. I wonder if Mr. Schumacher might comment a little on the insurance issue.
Mr. SCHUMACHER. I think we, as Dan Ackerman is here, I would commend him and his staff. We worked very closely with you. I think we made some progress on the citrus canker. If the committee wishes or the Appropriations Committee wishes to authorize an emergency bill for the funds for APHIS for emergency support, that would certainly be welcome, I am sure, by APHIS.
To be honest, Mr. Canady, we are a little light on the Senate bill on fruits and vegetables. You alluded to that in your statement. You may hear more from Mr. Minge, Mr. Baldacci, other members of the committee as we look at the northeast, mid-Atlantic, and other States whose fruit and vegetable producers have been very severely impacted initially in this summer by the drought.
And perhaps as this hurricane reaches right at the harvest at some of the fall crops, we are probably light on fruits and vegetables. We hope to take care of that in the disaster program, but we need to have the assistance of the conferees on that to freshen up however they wish to go. We feel the public disaster is the right way to go, and fruit and vegetables would be included in that program.
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Secretary GLICKMAN. I would just say on the citrus canker, I think by next year there will be an insurance program in place for the trees. You need money for this year.
Mr. CANADY. Yes. Our problem is this year the trees are being destroyed. They are just gone. They are moved because they have to be, and that is an absolute loss to the growers. And there is nothing now in place to help those people who are suffering now.
Secretary GLICKMAN. I don't think there is any statutory problem. I think we need to get some money in the appropriations bill to cover this. I don't know what Floridians you have on the Appropriations Committee——
Mr. CANADY. I think that we have some. Thank you. We will work with them as well as you to accomplish that. Thank you.
The CHAIRMAN. Mr. Holden.
Mr. HOLDEN. Thank you, Mr. Chairman, for holding this very important hearing. Mr. Secretary, I want to thank you for all of the attention that you have given to the drought stricken States, particularly Pennsylvania.
Mr. Schumacher, after the month of August, I think that he qualifies as a resident of Pennsylvania. He spent a lot of time up there, and we truly do appreciate that. But the message that I heard loud and clear during August, during the recess was the last time, that our farmers need is low debt. Low interest loans will not do that much for them.
You said that in your opening statement, and I appreciate that. You pretty much hit the nail on the head: We need cash assistance, we need livestock feed assistance, we need some attention to specialty crops that we have in a very diversified agricultural community in Pennsylvania.
I appreciate your willingness on that, but I must tell you, Mr. Secretary, I am a little bit concerned about the figure that you are arriving at. I know that you said it is not etched in stone and not specific, but I am just a little concerned that a figure between $800 million and $1.2 billion, that when the figures given to FSA in the snapshot in early August was damages in Pennsylvania somewhere around a half billion dollars.
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I know that Chairman Shuster likes to say that in Pennsylvania we have more road miles to maintain than New York and New England combined, but I don't think we can say we have more farm acres to be concerned about than New York and New England, the mid-Atlantic States. I am just a little bit concerned that the dollar amount is just not there.
Secretary GLICKMAN. Let me just say this. The bulk amount of this year's disaster, I don't the majority of it; but a big chunk of it is in the mid-Atlantic and the Northeast. The figures are what they are. These are numbers that go into our farm service agency offices, and then those losses are then computed in accordance with the standards that have been computed for years. There is no effort on our part to try to minimize those losses. They what they are.
What we found last year, by the way, with the big drought in Texas and North Dakota and other places is the actual losses that came in were substantially less than what had been anticipated before. We thought it might be 5, 6, 7 billion dollars, and it turned out to be slightly over $2 billion. That was what was actually brought in to the farm service agency offices. I want to make sure that people get compensated in accordance with the same kind of program that they did before and get the payments out as quickly as we did before. I do know that Pennsylvania does have a big chunk of those mid-Atlantic losses.
Mr. HOLDEN. So you are open to numbers that might be higher or might be lower? It is not just the numbers that came in.
Secretary GLICKMAN. Let me put it like this. Last year's bill had an aggregate amount to be spent on natural disaster assistance. Now, assuming that we don't do that this year, then if a farmer has a certain amount of loss in the past, a 35 percent loss, I guess it is—if it exceeds 35 percent, and then there is a computational formula that you go through. Then that farmer would be almost immediately eligible to go to his or her office and get a payment reflecting that.
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That is what we hope would be done this year. If we have a factor, a cap on that, then we have got to wait for everybody to come in, improve their losses, and take a percentage off of that number. Which we did this last year; we were at about 83 or 85 percent. We weren't factored down very much even with the number that Congress provided.
Mr. HOLDEN. Second, Mr. Secretary, on the issue of crop insurance, we are going to need your assistance on the legislation that we moved out of the committee.
As you know, Pennsylvania's participation is very low, somewhere around 20 percent. We need to have more options, more opportunities as the midwestern States do. We are able to have some report language, with the help of the chairman and Mr. Stenholm, inserted into the bill. We just ask for your help to try to make sure that Pennsylvania has more options. We need some opportunities for whole farm insuring and some other things that we are very much interested in so we can have that participation number be much greater than it is.
Mr. SCHUMACHER. Mr. Holden, one of the things you and I talked about extensively in our trips—one is to work more on the whole farm insurance and work with the Secretary in Pennsylvania, Penn State. We look forward to doing that. What is also interesting is we looked last year at—Pennsylvania received about $5 million in indemnity.
Already this year we are likely to pay out roughly $50 million, maybe as high as $60 million so far. The farmers will be benefitting from that. It is working better than it did last year, I think in part, because of the 30 percent buy down. More farmers in your State took crop insurance. It is likely that your farmers are already receiving the first payments. I think $20 million has already gone out, and we expect $50 or $60 million will go out to your farmers. Still lower than other States but moving in the right direction, especially if we can work with your university and get this whole farm which many of your farmers would like.
Secretary GLICKMAN. This northeast drought after spending a little time up here, really—you get educated very quickly, and realize that our crop insurance program is largely built on a farm program which is largely built on, frankly, the depression-era programs which are largely heartland, row crop, traditional production programs.
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That is the large part of what they served, and so, therefore, crop insurance is often based on historical production in computing yields. If you haven't been in the program for 60 years, sometimes you don't have the histories in order to build it so people aren't as interested in getting involved. They don't have their cultural involvement, or else the compensation isn't very good.
This has taught me that we have to do a much better job of providing this program for all farmers in all parts of the country, particularly specialty crop growers, fresh fruit and vegetable growers. Over 10 percent of the farmers in this country are in the mid-Atlantic region, 12 percent, I think it is.
Mr. HOLDEN. Forty thousand in Pennsylvania.
Secretary GLICKMAN. Almost 200,000 farmers in the mid-Atlantic region. That is a lot of farmers. That is more than in my State and more than a lot of the States surrounding my State. Sometimes over the years, I think these people tended to get ignored in the program. It is nobody's fault, just kind of the way that the programs work because they were largely traditional row crop, heartland-related programs. This may help us more nationalize the way that we set our crop insurance program.
Mr. HOLDEN. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you. Mr. Lucas from Oklahoma.
Mr. LUCAS of Oklahoma. Thank you, Mr. Chairman. My constituents have a very strong positive feeling about CRP. If I could, Secretary Glickman, could you tell me will you be opening all of the remaining 5 million acres for bid?
Secretary GLICKMAN. The 5 million——
Mr. LUCAS of Oklahoma. We have 36 million authorized, 31 actually out. Will you be opening the remaining 5 million acres?
Secretary GLICKMAN. I am going to ask Parks Shackelford of the FSA to talk a little bit about this. We have about 31 million acres that are currently——
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Mr. SHACKELFORD. Approximately 31 million acres under contract at this time. We have about 500,000 of those acres are going to expire at the end of the next fiscal year. We continue to reserve acreage for the high priority practices, the continuous sign up, and the conservation reserve enhancement programs. We can only enroll in the next sign-up about 1.6 million acres. That is one of the arguments for increasing that cap so that we can have a much larger general sign-up.
Mr. LUCAS of Oklahoma. When will the enrollment period, the sign-up option, be available on that 1 million acres?
Mr. SHACKELFORD. The secretary is going to announce that within the next year or two.
Mr. LUCAS of Oklahoma. So I guess, Mr. Secretary, the next question that they would have asked in my town hall meetings, if you have 40 million total acres to use, would you open all of it up?
Secretary GLICKMAN. Yes, although we continue to reserve some acres for the high priority CREP, Conservation Reserve Enhancement Program, which we have done in Illinois and Oregon and some of these States where we have offered some acreage for very highly erodible-prone acres.
Mr. LUCAS of Oklahoma. And I can tell you, Mr. Secretary, that out in the heartland in our whole region, your area and my area, they harken back to the days when the main folks from soil conservation, and I have a difficult time explaining your policies to them in my town meetings as to why all of these reservations are made of these side things. Ultimately, though, you do make the final decision, correct, Mr. Secretary?
Secretary GLICKMAN. Correct, but I would say that the 1996 farm bill contains the criteria in which we follow in those CRP acres.
Mr. LUCAS of Oklahoma. One other question that comes at the top of my town meetings, Secretary Glickman, how much money is still remaining in the 1999 accounts for the export enhancement program?
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Mr. SCHUMACHER. Most of the money is remaining in that account.
Mr. LUCAS of Oklahoma. How many hundred million would that be, just a guess?
Mr. SCHUMACHER. Several hundred million.
Secretary GLICKMAN. That is one of the reasons why we have asked for the authority if that money is not used, to roll it over into other export programs.
Mr. LUCAS of Oklahoma. So that means that I would anticipate in the remaining weeks of fiscal year 1999 that we would not see any feed money used for the purpose that it was initially appropriated for?
Secretary GLICKMAN. I would say that is undecided.
Mr. SCHUMACHER. That is also why, Mr. Secretary, we pushed so hard on the humanitarian aid where we basically have a very large amount, I think in total, 3 or 4 million tons of wheat at a minimum. As the Secretary said earlier, we have seen that as the best targeting way of moving some of these stocks that built up overseas.
Mr. LUCAS of Oklahoma. But ultimately, Mr. Secretary, you have the final signature on those decisions?
Secretary GLICKMAN. That is correct.
Mr. LUCAS of Oklahoma. If I could for just a moment, I would like to address a question to Dr. Collins. The comment was made earlier about having 325 million acres either in cultivation or could be counted as such. Did I understand you correctly, Dr. Collins?.
Mr. COLLINS. Yes. I said that on average, in recent years, we have had about 325 million acres planted to the 15 principle crops in the United States.
Mr. LUCAS of Oklahoma. Out in my region of the country, they like the flexibility provided in the 1996 farm bill. Consistently while they are suffering mightily from the price and they understand our export problems, they nonetheless advocate that something happen. Time and time again the comment has come up looking, I suppose, towards a CRP in its present form and its past form, that either you manage supply—as some of my colleagues might use the phrase here—crop by crop and in essence return to the old days or try to address the overall availability of those resources, primarily being land, that generates this extra supply, so to speak. Because in most of this century our best export times have either been during major global weather abnormalities—is that a polite way of saying drought around the world—or because of wars.
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We are now, hopefully, in an even period of time perhaps now. How many acres of that 325 million above and beyond the 31 million that is presently out of production would have to have a dramatic effect on overall prices, a question asked in my coffee shops back home?.
Mr. COLLINS. There is no on/off switch to raising prices. For each few million acres that you put in the CRP, you are going to get some price effect. We use sort of standard relationships. For example, if you take out a million acres of corn, a million acres of corn production through some kind of acreage control program, that might raise corn prices 3 to 4 cents as bushel. It just depends on how far you go.
Mr. LUCAS of Oklahoma. Working in a century where we have ever increasing productivity, yielding more and more on the same amount of acres, where there is only a limited amount of dollars apparently for people who need that product to buy that product, don't we just have a limited number of options and how we address that since we can't repeal the markets, we can't repeal supply and demand. Don't we have, Dr. Collins, to address the big picture?
Mr. COLLINS. I think that we do. This goes back to Mr. Pombo's point as well, to programs, old acreage, or in fact CRP can affect production. But to the extent that they raise market prices and create incentives to produce, people figure out other ways to go around that. One of the reasons that we eliminated acreage reduction programs was because there was a school of thought they weren't very effective in the first place. You get yield increase that offset them. You get people bringing other land into production, crop-land pasture, for example.
Mr. LUCAS of Oklahoma. But ultimately, though, when we don't use all of the resources that are available to us in the eyes of the folks back home, they start to look at these other options as some way to work out of the box we are in. Of course, I am a proponent of using all of the options we have presently available.
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Thank you, Mr. Secretary. Thank you, Mr. Chairman.
Secretary GLICKMAN. May I just make one comment? Congressman Lucas does raise a pretty good point. One of the options has to be a deliberate effort to find another use for that growing crop in addition to the export markets or domestic consumption.
I happen to be one who believes that sometime in this next millennium we will use our land to grow crops for fuel in significant quantities. Now, for whatever reason, either the price of oil has reached a point where it is starting to get a little more attractive to do that or whether it is because of global warming and the whole issue of carbon sinks, that we are going to find the techniques on cellulosic and biomass conversion are going to be to the point where we will be able to farm our soil for energy in significant amounts. But until we get to that amount we have to hold rural America together and rural America is still production agriculture.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Minge.
Mr. MINGE. Thank you, Mr. Chairman. I would like to begin by thanking Mr. Schumacher for visiting some of the congressional districts over the last few weeks. He happened to be in Minnesota last Friday and Saturday, spent time in my district even though I was here in Washington with other matters. We were very honored to have you. I know that the farming community was pleased that you came to our State and the State officials and, I might say, our Governor is neither Democrat nor Republican. You visited truly on a bipartisan basis. Thank you. That was not meant to be a slight at any party.
I have just eight quick points I would like to make and then ask for some comments on a couple of them. First, I heard a great deal at home about the importance of our recognizing economic disasters and you as the Secretary having the authority to declare an economic disaster or the President without having to go through an act of Congress.
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Second, there is continuing and significant interest in the conservation programs and the use of the conservation reserve program, the continuous sign up and some of the incentives that you have offered for cover and other matters. I would like to emphasize the importance of that and encourage that you continue to do that.
Third, there is concern about anti-trust policy. I recognize this has some long-term implications, but I would like to urge that you recommend to us what needs to be done with the packers and stockyards act, if anything, to make it a more effective tool to deal with the concentration and vertical integration and the merger and acquisition activity that is going on in such a rapid pace in our economy. I would also like to compliment you on including hogs in your proposal. I know that livestock traditionally has not been a part of the Federal farm program, but certainly we have seen with the collapse of hog prices the necessity of our taking some type of action that is significant.
Next I would like to compliment you on your comment about biomass use of our crops. We certainly have an opportunity with ethanol and its use in the reformulated gasoline program to move into markets formerly served by MTBE that has now fallen into disfavor; and, hopefully, we could do something on a more—even emergency basis to take some of our crops off the market here in 1999 and the year 2000 to meet the needs in reformulating gasoline program.
I would also like to compliment you for your emphasis on credit. And I agree wholeheartedly with you, and I have a proposal that I would like to give you at the end of this hearing.
And I would like to ask, Mr. Chairman, if I may include that along with the economic disaster material that I have as part of the record.
The CHAIRMAN. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. MINGE. I would like to emphasize two points here in closing and ask your comments on those in the economic disaster.
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The first is that I think it is absolutely critical that our disaster assistance go to producers and not for the benefit of land ownership. I would like to make sure that you include in the record here your comment as to how you feel that would be most effectively done. You have talked about Mr. Stenholm's proposal. I certainly see that offers an alternative. If that is a better way to get benefits to producers as opposed to land ownership, I would like to make sure that we cover that.
Finally, international trade. I am very concerned that we open up additional markets and we have the very best trade policy and opportunity for American agricultural products. But I am concerned at the same time that our trade policies seem to be focused on simply opening markets. We have forgotten about the importance of stability, and we have forgotten about the difficulties that volatility in prices are creating for our farmers as a result of our becoming increasingly dependent on international marketplaces.
I would like to urge that in our trade negotiations, we make a number one priority finding stability and dealing with problems of price volatility and that, number two, we recognize the cost of a strong dollar to the American farmer and that there be something as an offsetting national policy if we have a strong dollar and that is costing us X cents a bushel, we somehow in our farm program don't leave our producers holding the bag for those certain cents a bushel.
And I would like to ask, then, in closing, No. 1, is there some support you can provide us on this economic disaster option? And I think you perhaps heard about it; I have three resolutions from county boards on this particular matter.
Secretary GLICKMAN. I will try not to answer every one. Let me say this. I heard about this economic disaster. There is no statutory authority for me to do any kind of an economic disaster. The only thing you have got is something under the FEMA authority where Mr. Witt has some very extensive powers in the event of a natural disaster that he can use for loans and moving assets around, and presidential declarations can sometimes do more. The only thing I can do is implement what I can do under our statute.
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Mr. MINGE. We would like to have you consider this as an alternative type of statutory authority and like to have the administration's recommendation to Congress.
Secretary GLICKMAN. When I go out and declare a state of disaster or region of disaster and people find out it doesn't mean much more than loan interest loans and maybe some SBA assistance on occasion, there is a lot of disappointment out there because they think it tends to mean more than it actually does.
If I can make comment on one other thing, on the issue of antitrust policy, of course, we have won some and lost some in the packers and stockyards, and we are trying to upgrade that. I will tell you right now, as you know, there is a merger being discussed, Smithfield-Murphy Farms, which would be a very significant merger in the hog arena; and we are in the process of preparing a letter to the Justice Department which will indicate our concerns about that particular merger. So I feel very strongly that it is important that USDA be engaged in these consolidation issues.
Mr. MINGE. I see that my time is up. I would simply like to ask, Mr. Chairman, if we could hold the record open and if they could supply a statement respecting how Mr. Stenholm's proposal might provide producers, as opposed to land ownership, with greater benefit if that option is chosen; or if you don't think that is the case, if you could provide us with that information.
The CHAIRMAN. Without objection, the record will be open for 10 days for additional comments under questions from members or witnesses.
Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you.
Yesterday I expressed my appreciation to you for holding a field hearing in Kansas this Saturday, and I would like to express my same appreciation to Secretary Glickman for his willingness to participate and Dr. Collins as well. We look forward to having you at the Kansas State fair on Saturday.
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Secretary GLICKMAN. We will try to be saying a few things different than today.
Mr. MORAN. Mr. Secretary, who should I direct my criticism, my concern, to within the administration? As you know, I held a town hall meeting in lots of places during the month of August, and the story that was prevalent—among many stories in agriculture that was prevalent is the issue of trade with Iran, and during the month of August while back in Kansas, the story was that although we had lifted sanctions against the country of Iran, this administration had failed to authorize the use of credits or other trade tools to consummate any sale of grain to that country.
And the story was that the European Community, they didn't have that reluctance. At least the rumor is they sold a million metric tons of wheat to that country, that now Canada is doing the same thing, and yet we have failed to engage in those markets.
Earlier this year I had written President Clinton encouraging him to lift those sanctions. I was pleased; I complimented him and the administration when they did so. But why is it we fail to take the necessary steps to compete in the world market to sell wheat and other farm commodities around the world?
Secretary GLICKMAN. First of all, Gus, do you want to give him a little idea of where our sales to Iran are.
Mr. SCHUMACHER. I am very pleased. Corn we sold 50,000 and I think yesterday we also heard we sold another 100,000. So we sold 150 thousand tons of corn without the need for GSM on the GSM issue that is a debate. We feel that this is a country that has continuing problems and that there is—administration feels that the GSM program is not suitable at this time, but always under review for sale. There are some—we were monitoring Canada, who apparently may or may not have used—we are trying to find out—and that is why we need some changes to the WTO Agreement because they are not transparent. They are not telling us whether they did or did not use credit for that sale of wheat.
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At the moment, the administration is focusing on cash sales to Iran. And of course GSM is always under review. We have noted your letters and your concerns—also letters of the other members of this committee.
Mr. MORAN. It would be very difficult for me to criticize you personally, Mr. Schumacher, but when you say ''we'' I guess you mean the Department of Agriculture is in agreement that at this time GSM credit should not be utilized?
Secretary GLICKMAN. Let me take that question although I wish Gus would take the question.
Mr. SCHUMACHER. I will take it.
Secretary GLICKMAN. There is an interagency process here. There is not always unanimity within that process but it is the Government's position that at this stage we should watch and see how the cash sale sanction policy proceeds. And as Gus said, we sold at least 100, maybe 150 tons of corn in recent days to Iran, but the item remains under review. So the policy is still evolving and is open.
Mr. MORAN. It is always a struggle for me as a Member of Congress to figure out who to complain to and who to criticize because it is—you and I have been through this discussion of the use of EEP, for example, and there is an interagency group that makes those decisions. It would be nice if in a direct way we could put our fists around the collar of somebody and say we need your attention and we need assistance, because I can tell you at least the psychology would be tremendously different if it was U.S. wheat being sold, 2 million metric tons perhaps instead of having to hear about once again it is Canada and Europe that are making the sales.
On a different topic, Mr. Secretary, I have had conversations with the Department of Agriculture. This is probably not one that matters to other members of the committee, but we have a significant problem in southwest Kansas with FSIS and lack of meat inspectors. It has a direct impact upon our agriculture producers both in the livestock arena—we feed, as you know, a lot of cattle—it also has an impact on the cattle market.
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We again are in the same circumstance that we have been in for a number of months, except with a hiatus of about 1 week in which there are an insufficient number of inspectors to keep the plants operating at full capacity. So I don't know whether you intend to ask for additional resources. I don't particularly understand what the problem is in regard to fully staffing meat inspection in the plants, the processing plants, at least in southwest Kansas.
Secretary GLICKMAN. Let me just say, in fact, next week I am meeting with both the heads of the major trade associations like AMI and the Broiler Institute, but also the CEOs from some of the meat and poultry companies to discuss this. We have asked, or are in the process of asking for the funds, and we are not talking about a significant amount of funds, I would say in the neighborhood of maybe $5 million or so for the full—to bring in enough inspectors to be able to fully complement the force. I mean, as much as anything, it is a budget situation and—but this talks about a food safety initiative. It is in the emergency. We have asked for additional monies. Some of those may be for inspectors. I can't tell you that, but clearly we need some additional money for inspectors.
Mr. MORAN. I appreciate that. It is a significant issue. The last thing we need is less competition in the packing industry, and I would encourage you to include the necessary resources and whatever management changes are necessary to see those plants are fully staffed.
Thank you, Mr. Chairman.
Thank you, Mr. Secretary.
The CHAIRMAN. Mr. Goode.
Mr. GOODE. Thank you, Mr. Chairman. I want to say thanks, as others have, for holding this hearing and for the Department of Agriculture being here.
Mr. Secretary, at the beginning of your remarks, you indicated that you wanted to see the aid for the farmers done within the context of a balanced budget without using Social Security money. I certainly concur with that.
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As things stand now, would you—does that include emergency spending or not include emergency spending?
Secretary GLICKMAN. I am not in a position to judge that. I can tell you that the administration believes that roughly the dollars in the Senate proposal, and I said in the general sense, could be done and not affect the surplus, Social Security surplus. Whether part of that is emergency and part isn't, or all is or all isn't, or if some goes in this year and some goes in next year, they think it can be accommodated.
Mr. GOODE. My point being, whether it is labeled emergency or not an emergency, where it would make a difference on the year; but you think you can do it for ending this year, if you use any, without touching Social Security?
Secretary GLICKMAN. That is the opinion of the OMB folks who basically have written this letter to Chairman Young on this appropriations bill.
Mr. GOODE. Last point: My observation would be if you have to squeeze up agriculture some and squeeze down some going to Kosovo and some of the foreign countries.
Thank you.
Secretary GLICKMAN. Thank you.
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. Thank you, Mr. Chairman. I would attach myself to the comments of Mr. Goode as well.
First of all, can I make sort of an editorial comment on behalf of the folks in my area? As long as we have you here, just a real quick question: Has the Department discarded the notion of a National Cotton Council LDP?
Secretary GLICKMAN. No, but it is, in fact, as I have said before, you know, I personally favor a National Cotton Council LDP rate. But based upon a variety of factors, including a hearing here where there was a lot of concern expressed, we agreed to go a little bit slower on this; and it is clear from the timing that that is not going to get done for this crop year. My judgment is that as long as prices remain low and we continue to use LDPs significantly, we need to equalize these loans.
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Several people here from Iowa, Mr. Boswell and others, have talked—I have been out there and I have seen the differences in the loan rates between different States, different counties and that kind of thing. But at this stage, it does not appear we have it ready to go.
Mr. GUTKNECHT. I wanted to get that in, because that is a real concern out in my area. We are willing to work with you on a simplified LDP formula. We understand you can't really explain it. I can't explain it. The system is too complicated. We ought to come up with something else.
Let me also thank you and all the folks of the Department. I think you have been extremely helpful. I really want to congratulate you on not being in the business of finger-pointing. I think it really doesn't solve any problems, and I think some of the people around this town tend to find fault like there was a reward for it. At this point, I think we have got to look at what we can do.
Let me just say, I think based upon the testimony that we had yesterday, you would find general consensus on some kind of emergency cash infusion. I think the more we look at it, the more I have heard, I think it is going to have to be patterned somewhere along the AMTA payments. I don't know if there is a better way to do it if we are going to get the money out there quickly.
I think there is also a consensus that we are going to have to extend the loan period somehow, because at this point, especially in the upper Midwest, we have got an awful lot of grain that has to come to market here in the next several weeks.
I think there is also a consensus we need to do something in terms of on-farm storage; as my colleague from Minnesota talked about, a moratorium of some kind on mergers. There is a real concern out there about the breakneck speed that seems to be going on in terms of consolidation. There is a consensus, I think, on this committee that we need vigorous enforcement of the antitrust laws.
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And frankly, I think it is time to review the Packers and Stockyards Act. I think members on both sides are willing to work with you on that.
I want to echo something else that has come up several times and come up in all my town hall meetings and that is there has to be aggressive use of our enhancement export tools, particularly right now. We simply can't eat all that we grow, and we need to get more of it moved out into other markets.
Finally, I would say on a short-term basis it seems to me we can work with you and hopefully very soon can have a mandatory price reporting bill on the President's desk to deal with livestock.
But long term—I really want to get to this—you made a very important point. I think there are really a couple of fundamental questions; maybe it reduces to one. The long-term question is really this: Can we create a farm program that acts as a counter-cyclical shock absorber while preserving the farmer flexibility that allows the farmer to plant to the market rather than the dictates of the Federal Government? I think embedded in that question is, can we create a revenue insurance program, for example, that focuses more on revenue per acre rather than price per bushel?
I think that is the long-term question that this committee and your department need to work on and come up with a whole new plan. And looking back at where we were 5 years ago or 3 years ago or 2 years ago, I am not certain that really solves the problem, but I think we can learn from the mistakes of the past.
I just ask, do you think we can work together on that?
Secretary GLICKMAN. Yes. I must tell you I do believe over the longer term farmers don't take the price of a bushel to the bank; they take income to the bank. But we have not yet devised a formula whereby, for a reasonably affordable rate, a farmer can either protect or insure himself against wide variations in income or in revenue, but I really think that ought to be our goal, long term, in terms of farm policy.
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There is another thing. You know, it is very interesting. While our farmers are suffering, it is ironic, almost every farmer in the world is suffering right now. There isn't a farmer in almost any country in the world that isn't going through the same problems our farmers are going through. Now, I have to worry about our farmers in this country, but it reflects kind of a worldwide deflation as it relates to commodities, and we have seen it in terms of most of the hard commodities that are being produced here.
And what has struck me is that for the last 60 years I think our farm policy, to some extent, has been a little bit like the Field of Dreams where Kevin Costner was there and said, ''If we grow it, they will buy it.'' and I think the philosophy has to be much more where the farmer is in control of what he grows, what the price of it is, how it is processed, how it is marketed, the nature of the products that are going to be grown in the future, the consumer demands in the future.
I mean, the world of agriculture is going to be a lot more sophisticated in the future than it has been in the past. What we have got to make sure of is that our programs meet that world; and right now the current programs, while they are well intentioned, they don't seem to be very effective at meeting those problems. So whether it is income or revenue coverage assurance—you know, it is interesting.
You know the fastest part of agriculture today? Direct marketing. Farmers markets. Not everybody can participate in that. But that is the fastest growing part of American agriculture where a farmer does not have to sell his commodities to a multinational grain company and take what he gets, where he can go directly to the consumer and say, here's my product. I am setting the price for this product. And then you negotiate it across the board.
Now, it is not a very big part of agriculture yet, but it is an example of what we are going to have to do to get more of agriculture into that mode.
Mr. GUTKNECHT. Mr. Secretary, if I could just have one more second.
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You have said you will recommend the President veto House bill 1402 if it reaches his desk. Do you stand by that?
Secretary GLICKMAN. I do.
Mr. GUTKNECHT. Thank you.
The CHAIRMAN. Mr. Baldacci.
Mr. BALDACCI. Thank you very much, Mr. Secretary, Mr. Combest. We appreciate hearing your analysis, and Mr. Schumacher and your staff have been very helpful.
We want to thank you and your staff for the help during the drought disaster in Maine. And Greg Frazier in your office, and Gus and people involved at USDA were very helpful, so we appreciate their assistance. I also appreciate their Representative, Marcy Kaptur. And we met earlier with Representative Walsh on the Appropriations Committee and Representative Holden and myself are working together to make sure that the Northeast and the mid-Atlantic are not forgotten as this disaster agriculture appropriations moves forward in trying to make sure that the appropriate resources are going to those farmers. And I think your analysis of maybe historically they haven't been a part of the process and they need to get engaged as we have a national agriculture program, I think are very well accepted and received here.
One of the things that I think does cause me some concern is that I know that it is nice to talk about these things, but I also know where the rubber hits the road is with the financing, and it is my sense that we are not at an appropriate level yet where we will be a relief to agriculture. I guess I am kind of a little fuzzy as to where we are in that discussion and where we need to go, but it is the sense that I get that we are at the Senate level.
Secretary GLICKMAN. All I can tell you is what we have put in the letter to the appropriators. That basically indicates and I will repeat it, the administration generally agrees with the total additional funding in the Senate level. I think it is clear that that doesn't say, you know, we are actually bound by every dollar therein, but you know, again within the context, as you know, about nontrust fund spending and all the other factors, it complicates it for all of us.
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Mr. BALDACCI. I guess—and I am not as much of an expert as many of the experts you have, but the sense that I have been getting has been that if you want to be able to do an appropriations bill in an emergency within that bill, that it probably—you would have to be aware of the concerns about maybe incorporating on top of that bill maybe some disaster aid that you have talked about, along with increases in conservation to be able to—and also the program that Representative Stenholm was referring to earlier that you have been working with. And I am not sure what level that gets us to, but I think at that particular level, all of a sudden it becomes a lot clearer to some of us who have been working on this.
And the other thing is, I would encourage maybe more analysis on staff resources other than just including staff resources. I think that is still a little unclear as to what level of staff resources. I think we need them; I don't know what level we are at in the recommendations.
And I would appreciate and do appreciate your firm stand on the noninsured program in the fruits and vegetables in the nonprogram crops because they need to be part of the assistance package.
One question that was also mentioned to me was the—you mentioned how you quintupled the humanitarian aid and food assistance package. The question was, is how much more—even though that is a lot and a large amount, how much more is available for that kind of an effort and what if any additional resources do you need in order to work on that?
Mr. SCHUMACHER. On the last question, of course, you see this under CCC authority. Much of this came under 416(b) which is that authority.
When the Secretary testified this afternoon, it is very important, as we go through the conference, Mr. Baldacci, that we make sure we have additional headroom on CCC so we can continue to support humanitarian aid at the current and perhaps, if needed, further levels, but the limit will be the CCC borrowing authority, which we need to have some further headroom on it.
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Mr. BALDACCI. I will just sort of close by saying I appreciate your effort to address the issues and not to engage in going back over time in what was and what wasn't. But having been a part of those discussions back in 1995, it just seems to me, and I have mentioned it to others—it seems to me since we have done Freedom to Farm, it just seems like we are spending more money than we would have otherwise spent. And while I have been assured we don't have any more of the problems that we had over the history of agriculture, I think that there would be a real question as to whether we have gotten true value from the measure of this program, because I think that we have ended up pouring more—billions after billions after billions, and not knowing where the bottom is to all of this before we even had a semblance of that program.
So I hope that as we address these disasters that we start looking at ways to make sure that we don't have these problems, or as deep problems, into the future because I know we cannot afford—if we did not have the financial resources in the budget at this point, you know, it wouldn't be that much of an issue; but I think down the road we may not enjoy those financial surpluses. So in order to bail out these circumstances, I think it is important to have some long term, and I am glad that you have incorporated some of that thinking in your proposal.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Barrett.
Mr. BARRETT. Thank you, Mr. Chairman.
Thank you, Mr. Secretary. It is always good to see you back before this committee.
Because of the amount of questions, the time that has been spent, most of my questions have been answered, but a couple of clean-up perhaps for my edification.
Did I understand you to tell Mr. Gutknecht that the largest, the fastest growing segment of American agriculture is the farmers market?
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Secretary GLICKMAN. Direct marketing, which is more than just farmers market, but it is a percentage growth. It is not in aggregate terms, but in percentage growth, direct marketing is the biggest part of the farmer's dollar increase in recent years.
Mr. BARRETT. It is rather amazing. It is a significant figure.
Secretary GLICKMAN. It is still small, but we have roughly about 3,000 farmers markets, plus thousands and thousands of roadside stands. But what people are finding is that it is extremely profitable. It is very labor intensive, but you can grow basically the kind of crops that are suitable if you live fairly near an area that has either an urban or suburban population. Even if you are in road crop country, small amounts of acreage can grow significant amounts of the kinds of crops that can be direct marketed. It is a big augmentation factor for income purposes.
Mr. BARRETT. Another thought, perhaps, building on Chairman Combest's opening comments: I have introduced a bill to raise the LDP cap from $75,000 to $150,000.
Do you support this proposal?
Secretary GLICKMAN. What I have said was, this is somewhat similar to what is in the Senate bill, and it is clear that if we are going to continue to go down the road of—at least for the time being, of low prices, you are going to have to have some increase in the cap. I am not authorized to tell you it ought to be $150,000, but I am telling you that it ought—the $75,000 cap is not sufficient for many producers.
Mr. BARRETT. But you are not telling me that you support the $150,000 either?
Secretary GLICKMAN. I am not endorsing a specific number now, but I am saying it is clear the current cap is probably not sufficient.
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Mr. BARRETT. The Senate version is identical, as you know, $75,000 to $150,000.
Secretary GLICKMAN. Right.
Mr. BARRETT. Do you have reason to believe the President would support that number?
Secretary GLICKMAN. Well, he probably would listen to my suggestions on this particular issue, I presume.
Mr. BARRETT. If the payment limitations are not raised, what does the Department project, if anything, about forfeitures and how much is it going to cost the taxpayer?
Secretary GLICKMAN. We don't have costs, but there clearly will be some additional—I don't want to sound like Edgar Bergen and Charlie McCarthy.
Mr. SHACKELFORD. Congressman, at this time, we are still working on some analysis, but we don't have a specific amount for the forfeitures. But clearly if the cap is not increased, there will be forfeitures. While that does not result in a significant cost because we have to turn around and resell the grain and move it, it is certainly a burden for the producer. And it is probably important to note that by increasing the payment cap, we also do not increase costs because as a producer gets up to that payment limit, the thing the producer should do is then place every other bushel above that level under the loan and then forfeit it, which costs the producer money, ties up storage for a 9-month period. And the staff advocates a change.
Mr. BARRETT. Thank you very much.
Dan, in your written testimony, something jumped out at me. You talked about crops specific and counter-cyclical. It occurs to me that LDPs are probably both of those things, all of the above. Then isn't raising the payment limitations this year consistent with the administration's position?
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Secretary GLICKMAN. I certainly don't think it is—you mean the payment limit on the LDP?
Mr. BARRETT. Yes.
Secretary GLICKMAN. I certainly don't think it is inconsistent. I am not authorized to tell you to what level, but we are not opposed to that.
Mr. BARRETT. In the case of Mr. Lucas, who inquired about the condition of the EEP program, the President continues to talk about increased trade; and we have, as you suggested, hundreds of millions of dollars in a pot.
The obvious question: Why aren't we using it?
Secretary GLICKMAN. Well, I think the question is, we made the choice of using food donations as the primary way of getting rid of these very significant inventories that we had, and we have, and—as well as the GSM credits.
How many metric tons of food donations this year do we expect? Ten million metric tons, in excess of 10 million metric tons and the judgment was made, and that, by the way, is dollars and crop out of our inventory, and the judgment was made that that was a better way of dealing with the supplies, as well as future markets.
Mr. Schumacher.
Mr. SCHUMACHER. What we felt, that the—on the EEP of limits of about, a little—around $500 million and primarily would have benefited on wheat.
What we have done on the humanitarian aid, we have a variety of—wheat is included and a very important one.
Secretary GLICKMAN. It is the largest part, by the way.
Mr. SCHUMACHER. We have added a number of products to that, for example, beef and pork which normally are not part of humanitarian aid; and I was noticing when we did the pork tender a few weeks ago, that did give a bit of lift, surprised me a little bit, a little more lift than I anticipated to the pork price. So I think the way we have done it—and we have basically doubled the amount we would have used—I think it is in excess of a billion dollars in humanitarian aid. We felt this was better targeted, a broader base, and helped people that really needed the food.
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Mr. BARRETT. The farmers in my area certainly cannot understand why these funds are not used. This seems to me—and my time has expired—but this seems to me to be a wonderful tool that the administration could use to help the existing trade situation, which needs to be enhanced.
Any final comment?
Mr. COLLINS. I would be happy to address that question. We have looked at the Exporting Enhancement Program a lot over the last couple of years, and while we have estimated that it could have some increased effect on wheat exports, principally because that is where most of the authority is to use EEP under our WTO obligations and it could have some effect on price, neither one of those is very large; and in fact we have looked at using as much as $400 million of EEP for wheat, and we cannot find that to be a cost-effective way to use the money. It drives down the world price much more than it increases the U.S. price; it increases the U.S. price only a fraction. Because we believe that the—EU would meet our EEP escalation in kind with their own restitutions, the way we operate EEP is we are—we cannot use it in certain regions of the world, principally South America. We forgo market share there as other countries come in and use that as we start exporting more to other areas of the world.We also drive down the world wheat price, encourage consumption of wheat at the expense of feed grains, typically corn, and it costs us our corn exports.
It also, we believe, attracts Canadian wheat imports into the United States, and you remember the problems we had when we had Canadian wheat imports coming into the United States when we were using EEP aggressively, so we kind of think, on balance, it opens up more problems than it solves.
Mr. BARRETT. Thank you very much. Perhaps this is a point for further conversation at some future point in time.
Thanks for your indulgence, Mr. Chairman.
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The CHAIRMAN. Mr. Boswell.
Mr. BOSWELL. Thank you, Mr. Chairman. Like you, Mr. Barrett, we are kind of at the end of the string here, but things that we have got on our mind are very important. I think it has pretty much been said. I would like to associate with my neighbors, Mr. Barrett, Mr. Minge, and Mr. Goodlatte. I am very concerned, and I believe you have touched on it, that these emergency monies would get to producers and not to absentee landowners or landowners that are already collecting a very good cash rent in most cases, so I want to emphasize that point. I don't know how—maybe—how you are going to do that. We have talked all around it today.
The other thing is, on the antitrust thing, are there any tools that the Department of Justice needs in your opinion that we ought to act on to help out with our situation? I just think that there is a bigger thing going on there than is getting appropriate attention right now.
Secretary GLICKMAN. They operate primarily within the Clayton Act, the Sherman Act, the Federal Trade Commission Act, and those are very general statutes that deal with a lot of questions, market share. And then there is a price discrimination statute; that is the one we administer, the Packers and Stockyards Act.
Mr. Boswell, in the last few years, we have increased—you know, we sued IBP. We have sued Farmland. We sued Excel. We just lost a case involving IBP. I was very disappointed, a circuit ruled against us when we filed a case alleging preferential pricing practices by a major feedlot. We sued a couple of the other major packing companies for violations.
But I think mandatory pricing—I think if that legislation gets through, the process will be helpful in getting more transparency to the pricing, so everybody will know what everybody else is getting in the process.
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But the current head of the Antitrust Division, Joel Klein, went out to Iowa, your State. He was with Mr. Mike Dunn, our Under Secretary, and Senator Harkin and maybe Senator Grassley as well. He got an earful about the Justice Department's need to monitor these antitrust cases very closely. I think he is doing that. This case of Smithfield-Murphy Farms is one that is attracting an enormous amount of attention in farm country because it relates to the whole issue of vertical integration in a major part of the livestock industry.
There is no question we are going to take a very active, engaged role in the Justice Department's approval or disapproval process of that merger. We don't have any regulatory responsibility with respect to that, but we do clearly have a, quote, ''friend of the court'' responsibility.
Mr. BOSWELL. I appreciate that. I will talk to you.
The day is getting late here—the hour is, but with our packers and stockyard operation, it is fairly new in our State. It seems like they could be a little more aggressive on the Excel situation, but I will talk you to about that later.
And lastly, on the LDP thing we have been discussing, I frankly am disappointed we haven't moved quicker on this. We are going into another crop year. It is a pretty heavy hit on some of us, a very heavy hit. I guess I understand from what you have said that this crop year is going to pass by.
Secretary GLICKMAN. I frankly believe so. That is, I would say, a fair statement. I would have to say to you my personal belief is that the thing does need to be modified and made uniform.
Mr. BOSWELL. I heard you say that months ago.
Secretary GLICKMAN. But this is a matter that may cost, depending upon how it is done, several hundred million dollars, and because of that, it is going through the process that these things go through.
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Mr. BOSWELL. That is a factor. You have got to deal with it, but it doesn't take a rocket scientist to figure out it is very, very unjust the way it is being worked now.
So I will just close out. Thank you, Mr. Chairman, for the meeting, and I appreciate being here.
The CHAIRMAN. Thank you, Mr. Boswell.
Mr. Chambliss.
Mr. CHAMBLISS. Thank you, Mr. Chairman.
Mr. Secretary, when you are thinking in terms of that humanitarian aid and sending that wheat, which could be converted into bread, something that has a lot of protein in it that those folks need, of course, is peanut butter; and I hope you remember that in deciding what you think ought to be sent to these folks.
Secretary GLICKMAN. That would solve Mr. Stenholm's problem if we could donate peanut butter.
Mr. CHAMBLISS. That was the next thing I was going to mention to you. Going back to what Charlie said, this has the potential of being a very serious problem for our peanut farmers next year. If we have tonnage going into the loan program that he alluded to, and it looks like this is a very real situation, then we are looking next year somewhere between a $20 and $40 assessment per ton on our peanut farmers. And if it is our fault that that has happened, then we need to figure out a way to compensate those folks for it, and we need to start thinking about that now rather than wait until next year.
Secretary GLICKMAN. We will look at that immediately. I am going to try to get you a report, and Charlie as well, within the next few days on this.
Mr. CHAMBLISS. With respect to peanuts and tobacco, of course, which are major crops in my region, last year in the disaster program we didn't provide specifically for payments to go to peanut and tobacco farmers.
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This year, the Senate, looking at the fact that there was no provision for peanut and tobacco farmers last year, knowing that they don't receive AMTA payments, those programs don't receive AMTA payments, knowing that the cost of production has been just as significant with peanuts and tobacco as with all other crops and knowing that the tomato spotted milk virus has wreaked havoc on peanuts and tobacco in our region particularly, the Senate did earmark some money for peanuts and tobacco in this emergency aid program; and I want to make sure the administration is supportive of those provisions.
Am I correct?
Secretary GLICKMAN. We haven't taken a position on those particular provisions. This is not in the President's letter, so I can't give you a dispositive answer to that. There is nothing in here negative about it, but we have largely focused on the operation of the general AMTA program, as well as the natural disaster component of it, without getting into the specifics, crop by crop.
Mr. CHAMBLISS. Would you check on that and follow up with me, please?
Secretary GLICKMAN. Yes.
Mr. CHAMBLISS. Thank you.
You were a little bit vague in your statement with respect to your support of step 2, and I want to make sure I understand that.
Secretary GLICKMAN. We are clearly in support of the SHOP II program.
Mr. CHAMBLISS. The few aspects of SHOP II, some folks are talking about fixing it for a year and some through the end of the farm bill. We are talking about a $429 million number to fix it through the end of the farm bill, and that, I hope, is a position that you are taking that we need to fix it to the end of the farm bill.
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Secretary GLICKMAN. I have asked our chief economist to answer that, because I do think it needs some clarity.
Mr. COLLINS. I think the issue in the Senate bill was addressed by lifting the cap on SHOP II payments, which was $701 million, which we exhausted, so that would fund it up to the year 2002. I think that one of these letters indicates that it supports funding it for the rest of this year. It would strike me that that is a difficult thing to do because we get into the situation we got into last year where you get to the termination of the SHOP II funds, and then what that does is that causes a great deal of uncertainty in the marketplace, and then people start bunching exports and you exhaust the funds without having much effect on exports.
So it does strike us that the way it is presented in the Senate bill is probably the reasonable way to go.
Secretary GLICKMAN. We can support the Senate language on that. I want to make that clear.
Mr. CHAMBLISS. You also have made reference in your statement to the fact that you want payments kept and that large farmers should be excluded from receiving payments. And I hope we are not thinking that just because somebody exceeds the $2 million in gross income that he hasn't suffered one heck of a loss, because all that means with prices like they are today is that he suffered more of a loss than that smaller farmer out there. And before you make up your mind on that, I hope we will be able to discuss that, because our large farmers are hurting just as bad as our small farmers; and we tend sometimes to try to think that because they have a large gross income, that their net income is also large. But with prices like they are, as you well know, that means their net income—their net loss is just more so than it would be if they didn't have that gross income.
There is a provision in the Senate emergency bill with respect to crop insurance, funding crop insurance for the next fiscal year. As you know, we got that $6 billion for 2001 through 2004; but their bill funds it in 2000, and it basically funds the bill as has been scored that came out of this House. And I hope you all will support that because we have been round and round, and Ken Ackerman has done a great job of working with us on that and coming up with a good program; and I know we have got some differences, but there are some things about you all's bill that we didn't like and we came to what I thought was a good compromise.
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That is critical, as you know, and I hope you will support that provision on the Senate bill.
Secretary GLICKMAN. Are you talking about the buydown provision? What specifically are you talking about in the Senate bill, the 30 percent buydown?
Mr. CHAMBLISS. Yes.
Secretary GLICKMAN. I certainly support that.
Mr. CHAMBLISS. Lastly, I sympathize with what you have said about the method of delivery by the use of the AMTA program. We wrestled with this last year, and it was really Mr. Barrett's idea which I jumped on immediately. I think it was a great method of delivery because it is quick. But in a lot of instances it is not fair, and you have alluded to that; and we had some discussion here yesterday with actual farmers who agreed that it is not fair.
I don't know what a fair method is that will allow the money to get into farmers' hands immediately, but one thing that I would like to see you do is to make sure that the producer receives whatever the disaster portion of the AMTA payment is, and I assume we could do that fairly accurately by just letting the local folks at the FSA office make the determination of whether or not the landowner is sharing in the risk.
Now, the law says he is supposed to get that AMTA payment, but frankly I know that is not always the case. But there ought to be a method whereby we can ensure that the guy that suffered the loss actually gets the disaster AMTA payment if that is the method that we use this time around.
Is that a possibility?
Secretary GLICKMAN. I think so. Again, you have to deal with—that is the law on the disaster side?
He says that is the law.
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Mr. CHAMBLISS. It is, but Parks knows well, too, that that has been abused, but we can ensure on the disaster portion of it that it goes to the actual individual that was a producer that had the loss. Thank you.
The CHAIRMAN. Mr. Peterson.
Mr. PETERSON. Thank you, Mr. Chairman. And thank you, Dan, and all your people for all the help you have given us.
I want to correct your statement, with all due respect when you just mentioned North Dakota being under water and northwestern Minnesota, unfortunately, is under water. Again, this is from Pete and Sandra Hapka from Warren, MN. They sent this in yesterday. It has got—we now had about 10,000 lakes. We now have about 11,000. You can go water skiing. These are wheat fields, potato fields.
This is August 25. We were under water in May; we are still under water. I would just like to read this letter. If you want to take this down. We are going to give this to you and you can put this in your archives. But they said:
I put together a photo and input of ideas about northwest Minnesota for you to use at the Agriculture Committee meetings. I pray it happens and soon. It is awful here. And thank you.
These and other areas have had one year of problems versus other areas having 7 years like this area. If our government can spend money at a moment's notice on Kosovo, I pray they don't forget our suffering in northwest Minnesota. The looks in the people's eyes, the slumped shoulders, et cetera, you'd think northwest Minnesota was a war zone with so much sadness. Sandra and Pete Hapka.
I have been up there, and it is just—you can't believe what is going on with people and I just want to make sure you understand that in Roseau County, we have had—80 to 100 percent of the crop is gone; Pennington County, 70 percent; Kittson County 50 percent; Beltrami, 75 percent. Up in northwestern Minnesota we are wiped out again.
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This is about the seventh time in a row this has happened. Talk about losing 50 percent of our farmers, and you have heard all of this before. So I just want to make sure that you understand that we have got a serious problem, and whatever disaster that we put together, it needs to be—take this into consideration. And the suggestion I got from most people up there is, what you did last time worked pretty well, and there was a lot of work put into that and that would be a suggestion of maybe a good way to address this situation.
Secretary GLICKMAN. On the flooded lands issue, we will look at that obviously. The other thing I have to tell you, we will be affirmatively designating either today or tomorrow a disaster declaration for a lot of the counties that you said. I won't repeat them all, but the letter is going to get up to me I think sometime today, and I will sign it either today or tomorrow.
Mr. PETERSON. We finally got the presidential, and the Secretary will help a few people anyway, but it is going to take some kind of additional help beyond whatever we are talking about here today to keep these people in business another year.
Secretary GLICKMAN. I would suggest that you had better make sure you follow this flooded lands issue in the appropriations process.
Mr. PETERSON. We have been.
The other thing that we discussed before, and I don't know exactly if this could be dealt with in appropriations, but I had some language on this 25 percent cap in the CRP. In Roseau County, 41 percent of the farmers in the last sign-up offered their land, and then we ran up against the cap and your position was you didn't have any authority to raise it even though the State committee had asked us to raise it.
Frankly, it is probably not the best solution in the world, but for a lot of those farmers, it is the only way that they are going to be able to hang on to the farms, some of which have been in their families for 100 years. So I would like to work with you and with members of the committee to try to see if we can do something about that 25 percent cap in those counties; if the local committees decide it is OK, kind of leave it up to the local people, because that would be a big help to a lot of people that really have no other way out. Because they have had—after 7 years of losses you can about imagine their equity is gone. The price isn't there anyway. Even if they had a bumper crop, there is really not enough profit there to make any headway back.
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They don't need any more loans. That is not the solution.
It is something that could help. We would appreciate your help in that area.
And then lastly—and we have got to go vote here, we in the larger context, of course, have this price problem. I am a cosponsor of Charlie's bill and I think what you said today I agree with. I voted, I think, last year against the farm disaster package because—partly because it had the AMTA payment situation in it, and I just think that we are giving money to people that have suffered no damage, and we are not doing the things that people need, such as these people in northwest Minnesota. And we can just do a lot better job of targeting, and I think what you talked about today makes a lot of sense and look forward to working with you on that.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Secretary, obviously a lot of Members who have asked questions have left. But that doesn't take away the interest of the Members that haven't. If you could bear with us; we will do a couple of votes. We should be back within 10 minutes.
The CHAIRMAN. We will stand in recess for just a moment.
[Recess.]
The CHAIRMAN. The committee will reconvene.
Mrs. Chenoweth.
Mrs. CHENOWETH. Thank you, Mr. Chairman.
Mr. Secretary, it is good to see you, and gentlemen.
Mr. Secretary, you have been asked a number of times by my colleagues about the Packers and Stockyards Act, and I wanted to frame my question because I want to concentrate on that.
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Back in 1921 when this body was considering and did pass the Packers and Stockyards Act, at that time we had five packers who monopolized less than 50 percent of the market, and 20 years ago we had four packers that monopolized 36 percent of the market. And today, as you know, we have four packers who are monopolizing 87 percent of the beef packing.
Now, IBP has termed this the death march for our producers, and I think that is chilling. I know it is to you, and I know it is to me. So that is why I am keying in on this question. Although you have answered my colleagues' concerns, I want to ask specifically, knowing those figures, when the act was passed that would serve as—I would think, as a threshold for any future determination as to whether there is, number one, predatory pricing and/or monopolistic practices, that is to say, less than 50 percent of the market being dominated by five packers.
Under section 203 of the Packers and Stockyards Act, you were given broad enforcement powers. In fact, the power to impose fines, levy injunctive relief for these producers. So I am asking you if you are considering using the broad powers that you have that Congress gave you. I appreciate the fact that you are going to be contacting, or that you are contacting, the Justice Department, but we are not real anxious to give up to Justice Department that which—the power that you have. And I know you will be working with them, but we need your help today, now, because I have to identify with the comments that even Mr. Minge said about what we need here is not year-to-year, month-to-month handouts. What we need is stabilization in the price of production and access to the marketplace.
So, Mr. Secretary, that is my question. Will you use the powers that you have, as well as—well, let me give you a chance to answer that.
Secretary GLICKMAN. Let me just answer a little bit with an anecdote.
One of the first things I did when I became Secretary was to sue IBP under the Packers and Stockyards Act, alleging that they were engaged in preferential pricing practices whereby they preferred certain Kansas ranchers in terms of the purchase for their feedlot operations. And to make a long story short, the case has gone all of the way to the Eighth Circuit Court of Appeals, where the court basically said that I must basically prove a causal relationship between size and market power and collusion in bad pricing practices.
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To be honest with you, those are very difficult cases to prove because rarely do you have a memo from one company to somebody else in the company that says let's conspire on these prices. It requires a whole lot of types of information.
I say to you the following: Has the Department of Agriculture over the last 30 or 40 years been as aggressive as we should have been in terms of amplifying its resources and enforcing the law? Probably not. However, saying that, we have in the last couple of years reorganized the packers and stockyards to make it a more enforcement-related organization.
To bring antitrust cases is always extraordinarily complicated. That is why the Government tends to bring very few cases and focus on the big ones unless you have actual proof of conclusion.
It is troubling to me these four packers have 87 percent of the market. It is not just in agriculture; it is in banking, it is in health care, it is in a lot of different things. And for many years, I think there was a hands-off view of antitrust issues by a lot of administrations in government. I think that is changing now. Cases are being brought.
So the bottom line is this: Packers and stockyards is largely a predatory pricing statute. It is not an antitrust statute in terms of which I can, let's say, shut down an industry or prevent a merger from taking place. Now, what I can do, however, under both that authority, as well as general authority, is to try to do my best, if there is going to be a merger, to make sure it is as procompetition as possible; and in the Cargill-Continental case, we suggested several things that the Justice Department did in terms of their final judgment on the issue to try to get a spinoff of certain assets so that it would be as non-anticompetitive as possible. And we intend to engage very aggressively the Smithfield Murphy farms issue.
All I can tell you is, I agree with what you are saying. I want to use our authorities under Packers and Stockyards fully. I suspect we are significantly underfunded and don't have the resources that we need to really engage aggressively, because you need top-flight lawyers, top-flight economists, top-flight enforcement people. We have good people, but I don't think probably over the years we have had the numbers of people that we need to do the work that needs to be done.
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But this is a very serious problem, and just—not just in the meat packing business but in all segments of American agriculture.
Mrs. CHENOWETH. Thank you, Mr. Secretary. And I appreciate your answer very much.
And I just also want to ask you the question you expected from me, and that is, the Congress asked that by last April you have a report back to them on country-of-origin meat labeling and the direct-impact cost that that might generate. We are still waiting for that report and it seems to be a fairly objective—not a subjective thing that you would have to do.
So when do you think we might get the report?
Secretary GLICKMAN. I am fully apprised of the fact that you do not have that yet. I don't know if I can give you a specific time, but it should be fairly shortly.
You deserve the report. It is obviously a controversial subject, and it is a rather complicated subject because there is the country-of-origin labeling on raw product. There is labeling on processed product and everything in between, but I will do my best to get you that as quickly as possible.
I don't have it yet. I can't tell you exactly where it is, whether it is—is it at OMB or do we have it? Mr. Galvin has said that it is basically finished at the Department, but OMB and USTR are taking a look at it.
Mrs. CHENOWETH. Can you personally nudge them for us?
Secretary GLICKMAN. Sure.
Mrs. CHENOWETH. Thank you, Mr. Secretary.
The CHAIRMAN. Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman. Under Secretary Schumacher, first let me congratulate you for your trips to the field and listening to farmers. I thought you did an exceptionally good job in Michigan. I hope we can culminate the peach issue and make it retroactive so it is fair to Michigan peach growers.
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Secretary GLICKMAN. What did we promise you out there?
Mr. SMITH. All kinds of things, Mr. Secretary.
But, Mr. Secretary, I also would like to commend you on the tremendous study that you have made, understanding and being aware and concerned with what happens to agriculture. I think it is a particularly precarious time. As I talk to my farmers, I, like many members of this committee, have had many meetings. There wasn't the support for doubling the payment limitation to $150,000 or increasing it from $75,000. And I think I would like you to consider the fact that we are in a different ball game, not simply of what is convenient or maybe equitable to the super-large farmers, but that we have only got so much money to spend. And if we are going to have some kind of limitation on money, then that means that we pay everybody a little less per bushel, or we are more stingy in terms of our LDPs, et cetera. And I don't see it as a huge task to limit the amount of nonrecourse loans that are available as you somehow start equating the amount going under loan and what might result in terms of a forfeiture or a payment.
I would like to call to your attention that you sort of implement some concern for this when you say on page 3, ''Frankly speaking, farm policy has not kept pace with the times. We tend to give more support to larger producers . . . we should do better.''
On the top of page 5, talking about supplemental price support payments, you say, ''Payments would be capped and large farmers would be excluded from receiving payments.'' I would suggest a better way than doubling those payments might be to reopen the appeal application process where families could—where farmers could include their spouse. A lot of farmers have done that and thought they might reach the cap. Now that we are in a new environment where the cap is going to be easier, I would suggest if it is possible, you might want to open that application process for additional family members that might be eligible and subject to a separate cap.
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Here again, let me—if my computer—if my little calculator is right, currently on the price of corn, we are talking about a farmer that produces 10,000 acres of corn that would reach the $75,000 cap with only one cap. I have got 15—3,750 acres of soybeans that would reach the cap and something around 10,000 acres of wheat that would reach the cap. So we are talking about relatively large farmers.
If I am incorrect on this——
Secretary GLICKMAN. If you are correct on those numbers, then I would agree with you, but I don't—the staff behind me says your numbers are not correct.
Mr. SMITH. What I am figuring is today's price is 7 cents differential between the support price and the market price on corn. It is a 50-cent difference between the support price of $5.26 on soybeans. $5.26 compared to today's prices is what I figured. And likewise on wheat, I figured today's price is $2.21 compared to $2.35 support. So calculate it. Let me know the differences. Figure that out.
Secretary GLICKMAN. We will try to work it out.
Mr. SMITH. But this is a very large farmer; and if they have already included their wife, included maybe a couple of their kids in that farming operation, then it is the exceptionally large farmer that we are talking about helping. If it means reducing the payments to the smaller farmers, let's look at that carefully.
Let me ask you a question on AMTA payments. Mr. Stenholm has got an idea that I think has a certain amount of logic and reason that you supported. Do you have information that would suggest that the AMTA payment is not directly related to crop production? I mean, our county offices know exactly what is happening to that land that has developed the program crop acreage that goes into the formula for AMTA payments. We know a lot about those farms. We know a lot about the rental agreements. Are your calculators and computers good enough to relate the AMTA payments?
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Mr. COLLINS. There is obviously a correlation between AMTA payments and production, but look what has happened with production in the last 4 or 5 years. We had the lowest wheat acreage——
Mr. SMITH. We are not reimbursing farmers anywhere near their losses in many cases. These are tillable acres. Except for CRP which reduces your AMTA payment, these are tillable acres which are producing something. I am nervous and concerned about a situation where we reward farmers for planting a crop that is going to be in surplus. So I want somehow that market incentive to not encourage farmers—like on my farm I just planted more soybeans because I can break even at the LDP support on soybeans.
Mr. SHACKELFORD. One thing you need to understand for the most part, the AMTA pavements are based off the acreage planted on that farm from 1981 through 1985 before bases and yields were frozen. Now people have built base outside of the program, but that is where most part is. There is no requirement that the crop be planted.
Mr. SMITH. No farmer is going to let that land stand idle. I would suggest you have no information that land is out there standing idle that could be planted to something.
Mr. SHACKELFORD. One would argue that people exaggerate that say about the amount of land that is idle; but I think it is a small percentage, but there is some that isn't. The only requirement under the law is that it be maintained in an agricultural use so it can't go into some other business or it can't go into a non-agriculture use but it can lay idle. Other things can be done with it.
Mr. SMITH. You are a farm boy. You grew up on a farm.
The CHAIRMAN. The gentleman's time has expired.
Mr. SMITH. Farmers are going to plant that land if it is out there.
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Thank you, Mr. Chairman.
The CHAIRMAN. Mr. LaHood.
Mr. LAHOOD. Thank you for coming back, Mr. Combest. Thank you for sticking around, Secretary Glickman, and your staff. I appreciate it very much. I want to make just a couple of questions. I am going to send you the same letter that I sent to Attorney General Reno regarding Smithfield-Murphy.
I think this is going to be very, very bad for the pork industry and anything you can do to look into it, see if there are any violations of antitrust laws. I appreciate very much what you said. Bigger is not better. These mergers are not good for agriculture. They are not going to be good for agriculture in the long run, and so I am grateful to you for whatever you can do to look into it to see if there is anything that can be done to prevent it because I think it is bad.
I wonder if you will consider selling off some pork as you did earlier this year. The pork producers are going out of business in groves. Now, one of the things that really helped was not—the money you got out to them August 1, it helped a little bit but not much. It was way too late. A lot of them didn't get their payment until about August 1, and Gus, I know you work very hard. I don't want to disparage you, but the bureaucracy somehow from the time that we passed it to the time they got their payments, a lot of them went out of business. But selling off the pork to Russia was a big deal. It actually made the price go up. Is there any possibility of doing that again this year?
Secretary GLICKMAN. Maybe Tim or Gus might talk a little bit about pork.
Mr. SCHUMACHER. I think as I said earlier that the 50,000 tons that—when the bidding finally was agreed to did have a modest price impact on pork, 50,000 tons. Right now we have a team in Russia doing an assessment of the overall situation in their food system, looking how the current donations were handled and looking at their needs coming up. We will have to see what the assessment comes back on pork. I don't believe they requested any further pork at this time, but we are still looking at that very, very carefully.
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Secretary GLICKMAN. Any other pork on the horizon in terms of what you can say?
Mr. SCHUMACHER. No. What is unusual is we normally don't include meat in humanitarian and so this is a first effort, and I think the results speak for themselves.
Mr. LAHOOD. Pork producers believe it really made a difference. Did they ask for pork earlier? Is that the reason we did it?
Mr. SCHUMACHER. Yes. They requested some pork.
Mr. LAHOOD. I hope they ask for it again because I think it can make a difference. The other payment is just too, little too late.
What about exports? What farmers in the 14 counties that I represent are saying particularly as you know corn and bean farmers, they are going to have a huge harvest and there is still a lot of corn and beans in the elevator. I know you talked about exports at length, but exports are the key. They really are. And I know we are not going to pass fast track. And I have beat that horse already several times this year. Every time I have seen you, I have asked you about it. I know the President is not going to get behind fast track, and we are not going to pass it unless he gets behind it. That is a big market for us. That would be a huge market.
But what about Asia? What about Russia? What about—I know the President was talking to the premier. Can you talk about that a little bit? Is there any opportunity to sell off any of the surpluses? And I know you mentioned we are doing a lot of that already.
Secretary GLICKMAN. I think the aggregate numbers look mildly optimistic. Gus, you may want to comment on that.
Mr. SCHUMACHER. I think one of the things that was done, we have actually for next year are projecting the base bottoming out. We are looking at $50 in value. The volume, we are up 10 million tons on the projection for this coming—on our basic bulk grains so we are doing pretty well on volume. A little bit better on price. Our meats are moving a little bit better than we anticipated, especially pork and beef, not just donation but overall. We are really turning the corner on beef and pork. And corn is up on the volume of exports. We have seen a little burp up on soybeans, a little to China; and I did mention earlier 150,000 tons of corn we sold cash in the last few days to Iran. So a little bit better on that; but we still, I think, need to look at the safety net back home as the Secretary articulated earlier. Trade is a very important safety net, but I think with this tremendous overhang, the key that was mentioned on inventory, we are going to need some help on farms, on farm storage; and there has got to be a balance.
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Mr. LAHOOD. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. LaHood. Mr. Thune.
Mr. THUNE. Thank you, Mr. Chairman and Mr. Secretary, and your staff here for your indulgence as well. I appreciate the opportunity to participate in this today. It is a subject that is very important to all of us obviously, and there isn't a day goes by where I don't think a lot of us visit with people in our agriculture communities who aren't going through this crisis in different ways; and we are all as you know struggling to come up with solutions that we think will work, will get the job done. Most of them I think rightfully—particularly we are talking about now involve financial assistance and we are working up here.
I appreciate your suggestions today and with many of our colleagues in this room to provide the financial support that is going to be necessary for our suffering producers. At the same time I would be interested in knowing as well, there are some steps I think that can be taken that would help producers in my part of the country without spending a dime; and there is a procedural change that can be made, doesn't even take a change in regulation which would help producers in the eastern part of South Dakota better use their soil resources and that has to do with the whole wetlands issue.
In fact, we are awaiting a decision from you as to whether or not producers in part of South Dakota will have more flexibility in dealing with their land when it involves wetlands; and I have asked you via letter to comply with the decision of the South Dakota NRCS director lifting a moratorium on wetlands. I am curious to know if that is something you intend to improve.
Secretary GLICKMAN. The only thing I can tell you, Congressman, is I expect the situation to resolve in a direction issue this week. So there has been a lot of discussion of this. I was briefed on this fairly extensively a couple of weeks ago. There has been a lot of controversy about this; but we need to resolve it, and your letter plus others in your delegation will have an input on that, but that is the best I can tell you now.
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Mr. THUNE. Can you tell us if that is going to be an affirmative decision.
Secretary GLICKMAN. I can't tell you anything more than that right now. We will call you up.
Mr. THUNE. A couple other things if I might quickly and I appreciate your comments on antitrust issues. I agree I think we need to more aggressively address those, and there are a lot of things that have been thrown out. Over the course of the August break, I heard a lot of different suggestions. And I am curious to know what the administration's position might be with regard to some legislation that would prevent packers from owning cattle that aren't ready for active slaughter.
Secretary GLICKMAN. I don't think we have taken a position on that yet. As you know, we of course are in the process of reviewing this work petition rule which has been hanging around for about 3 years, which of course indirectly tries to get to this problem through a regulatory solution. I met with those folks yesterday actually, and right now I think at least from a staffing perspective, the feeling has been that I don't have the authority to do what they want me to do.
But what we have done as a result of their request is I have asked for a peer review of aggregate economists around the country including some they chose to take a look at that to determine whether I could take any administrative action along those ways. I know that I guess it is—I don't know if you have gotten involved in legislation. I think Senator Johnson has introduced something along those lines. We haven't taken a position yet.
Mr. THUNE. I am anxious when you have looked at what you might come up with in that respect. The other question I would just ask—and this maybe is directed at Mr. Collins—but another thing we hear a lot about is the need to set aside, to idle acreage, decrease production out there. I am just wondering what your thoughts are as to what the implications would be both on production worldwide as well as price if in fact either voluntarily or in some other form we decided to in this country idle acreage and take land out of production.
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There have been some proposals that have been advanced that would tie a higher loan rate, for example, to a decrease in their set-aside of a certain amount of acreage and my question, I guess—and this is probably more of a theoretical one than anything else—but what your thoughts might be to implications on production and price and what percentage does the United States today—what do we produce as a percentage of the world market? My impression is somebody is going to step in if we idle acreage.
Mr. COLLINS. I think the heart of your question is an issue that was debated extensively in the mid–1990's. We had annual supply control authority from essentially 1933 through 1995. The debate in the mid–1990's focused around whether those were very effective or not, whether we really were taking as much production out as indicated by the amount of land we were setting aside. And a lot of the conclusions that were reached at that time was that people idled their more marginal land and on the whole, those programs were not that effective in taking land out of production and that there were studies that were done that looked at for every acre we took out of production, how many acres of production were brought in around the rest of the world.
Different studies gave different estimates there. But generally most concluded that there was some effect. To the extent that set-aside programs raised prices, then they had some encouraging effect on bringing land into production in other countries as well as land in other States, yield increasing practices, for example, higher use of inputs in response to the higher prices. So it is a difficult question. Set-aside can raise prices but also to the extent it raises prices is going to encourage acreage response both in the United States and around the world.
Mr. THUNE. That would, I guess, be my sort of assessment of it based on what we have seen in past experience, but there is a lot of discussion I am sure as you know about——
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Mr. COLLINS. The term people use for that is slippage. It was big in the mid–1990's. For every acre you take out, somebody comes back in to offset it so there is slippage in the acreage production programs. That is one reason why I think they met their fate in 1996.
Mr. THUNE. Thank you all. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. Thune.
Mr. Secretary as much as I agree with the fact that we ought to be dealing with the issue rather than trying to make this thing—I am sorry, Mr. Fletcher, I apologize. I didn't see you down there. Mr. Fletcher is recognized. That didn't come out of his time.
Mr. FLETCHER. Thank you for yielding to me. Thank you, Mr. Chairman and Mr. Secretary, for coming here today and certainly it is much-needed discussion on the plight of our farmers and particularly in my district in Kentucky. I had the opportunity visiting a number of farms and looking at the drought results as well as talking to farmers particularly with several years of misfortune that has left them in rather dire conditions.
I asked one farmer—I remember the name of Tom Barnes. I said how long is it going to be before you really are in dire need of emergency relief. He said it is now. So I think it is imperative when he talked about—when we looked at his tobacco, he had been able to irrigate some of his and his corn so part of it looked pretty good. Just down the road or those that hadn't. It is quite devastating, stress, black shank, and some other things and devastated much of the tobacco. Corn the same way. Irrigation wasn't available. With this emergency relief that is in the Senate—and I know Mr. Chambliss addressed this, additionally the administration has been pretty hard on tobacco and that has resulted in some difficult times for tobacco farmers and I think it is important that we have a legal crop here that we support those farmers to make sure that they are able to continue to produce and make a livelihood.
And not only that but be able to diversify also, and so I would strongly encourage you to support this—support in the emergency supplemental bill for our tobacco farmers. The President, I remember in the State of the Union, said he wanted to protect the small farmers; and these are truly small farmers. There is a lot of effort by them to diversify, but pulling the rug out from under them is not going to give them the opportunity to do that. So I would hope that you would be in support of that.
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It is not a tremendous amount when you look at the entire emergency relief, $327 million, but it is a tremendous impact on our district and our farmers. We have discussed with them produce production. We have some efforts in there for fresh produce. We obviously don't have the tillable soil to compete with other areas of the country that can process vegetables and fruits and things, but we can provide a lot of direct marketing of fruits; and they have done very well in that, but they need the funds and the support, efforts such as the Senate emergency relief and some of the things that we have offered here.
Let me ask you also, I appreciate you declaring Kentucky a disaster relief area because of the things we have mentioned here. What can be done to trigger some other exemptions? For example, in the Conservation Preservation Program, land that is set aside to allow when we declare an emergency—maybe you can help me understand this better—why we can't have our cattle graze on that land and use it for haying or grazing.
Secretary GLICKMAN. There are procedures in certain circumstances where CRP acreage can be used for haying and grazing in emergency situations.
Mr. FLETCHER. What do we need to do to get that available now, because we have got some immediate problems.
Secretary GLICKMAN. Maybe Parks can tell you. It is done on occasion.
Mr. SHACKELFORD. We do have a procedure and we have done it where generally there needs to be a 40 percent loss in pasture or forage in the county as well as a 40 percent increase or decrease in the precipitation. The problem is we have gotten late enough in the year now that it is generally not as useful to the livestock producers to have that and also haying or grazing at this time of year can be very harmful to the wildlife goals of the program which are laid out in the statute.
Mr. FLETCHER. We are worried about our cattle right now and people's livelihoods. I understand some of our other concerns. This is not a major environmental impact we are talking about here, and I would like to see whatever effort can be made to give some emergency relief because we are having folks use up their winter hay, winter feed right now because they are not able to graze on some of these lands and that would have an impact. Looks to me like it ought to be something that ought to be triggered, at least to look at it in particular areas for immediate relief. I would hope you would be able to do that.
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Secretary GLICKMAN. There may be some emergency feed assistance in this bill.
Mr. FLETCHER. There is. We certainly want to also encourage you to support that as well.
Water supplies is an extreme problem. We used to have some programs for empowerment. We have very little of that. I wonder if there is anything that can be done for empowerment and water supply.
Secretary GLICKMAN. Actually in the emergency conservation area, there are monies for, let's say, drilling wells, moving water, I believe.
Mr. SCHUMACHER. We had $84 million. I don't know what we are down to now. We have been making those funds readily available.
Mr. FLETCHER. There were some available. I know if they happen to drill a dry well, they don't get reimbursed for that. It makes it very difficult for some of these small farmers to put up the money in hopes they do get that. I would hope we could get some direct assistance to them. The ponds are dry. They need to be deepened empowerment. Those sorts of things. We just have some very tough times in central Kentucky.
Secretary GLICKMAN. I will talk to our State Director and just see whether he has been using any of those monies in the way you have been talking about.
Mr. FLETCHER. One last thing. On some of the fields with corn and soybean and things, if we can allow rather than taking that to market because it is not going to be marketable and yet if we don't take that to market, it decreases the total county production when we look at some of the support we will get in other payments. I wonder if there is a possibility of using some of that. In other words, we are having—to my understanding if they do not harvest a particular area and if they use that to feed cattle, then that will count against them in the amount of productivity for the county for later payments. Is that accurate?
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Mr. SHACKELFORD. I think what you might be saying is that if they don't harvest the crop, it is not eligible for a loan deficiency payment.
Mr. FLETCHER. That is exactly.
Mr. SHACKELFORD. The way the loan program operates, if a producer produces a bushel of corn, we may offer that producer a loan on that corn. That corn is used as collateral. Or the producer can choose to take a loan-deficiency payment and forego use of the loan. Without the collateral we can't offer a loan, and we can't make the payment. That is the way the program is designed.
Mr. FLETCHER. Thank you very much, and I appreciate your help.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Secretary. I appreciate the opportunity to ask a couple of questions. First of all, I have had several of my barley producers talk to me about the barley loan rate as it relates to the corn loan rate. It is about 82 1/2 percent of the corn loan rate. Their concern is that unless we increase that—as you know it is based on the feed value and that data hasn't been updated since 1974 and according to new strains of barley and so forth, sometimes it actually has a feed value in excess of corn rates. I understand that you have the authority to adjust that loan rate administratively; is that correct?
Secretary GLICKMAN. I think that is correct. I think it was adjusted slightly last year, 3 cents up last year. We look at it each year.
Mr. SIMPSON. Our fear is if we don't adjust the loan rate up, it will in fact be an incentive to go into other types of grain production that is already in oversupply. I appreciate your taking a look at that loan rate and do what you can with that. We will send a letter requesting you take a look at, if you would.
If you would just discuss with me for a minute what is the Department doing to prepare itself for the Seattle round of the WTO talks that are coming up.
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Secretary GLICKMAN. Plenty. We held a series of listening sessions around the country, 12 of them that I attended; Under Secretary Tim Galvin attended. They were very well represented. They were all over the place, Indianapolis, Iowa, Washington. And in addition to that, we have our own advisory committees that are advising us on the next WTO round. The President was just at the APEC meeting in New Zealand where the Deputy Secretary was there representing the interests of American agriculture.
I was in Argentina about 3 weeks ago to meet with our Cairns Group partners, mostly agriculture ministers of countries like Argentina, South Africa, Australia, Canada, basically, mostly the old British Commonwealth countries. But I was invited as a guest down there because I told them we were not a member of the commonwealth. I wanted to make that clear to them. But anyway, there is the upcoming quint that I am going up to Montreal in 2 weeks to meet with the EU, Canada, Japan, United States, and Australia to talk about WTO related to strategy.
Essentially what we have said is our goals are to reduce export subsidies to get rid of state trading enterprises, to get rid of unnecessary tariffs in agriculture, and then to maintain the scientific basis of the sanitarian and sign sanitarian agreements so we don't let unsound science govern those things, and it is going to be tough. I have told people I believe agriculture is the cutting edge issue in this next WTO round. It will basically dwarf everything else in terms of both complexity and controversial nature.
I have seen reports in the press today some of the EU agriculture ministers, the German minister said we are going to stick with our subsidies no matter what, although he tends to be slightly more reasonable on these issues. The French agriculture minister and I have been in kind of a conflict situation in terms of the preservation of their subsidies which we think are quite harmful, so it is going to be very, very tough.
Mr. SIMPSON. I have read somewhere something about a strategy, what they call it, the autumn harvest——
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Secretary GLICKMAN. Early harvest.
Mr. SIMPSON. Early harvest, where we put off the agriculture issues until we resolve the other issues in the WTO. I hope we don't do that. I hope it is upfront and that agriculture is our number one priority when we go there. I am glad to hear you are taking this very seriously. As you may have heard, Senator Craig and Senator Dorgan of North Dakota and Congressman Pomeroy and myself have formed a trade caucus where we are trying to talk to the producer groups and we would certainly appreciate talking about people in your Department about those issues that are important so that from the congressional standpoint, we can put pressure on to make sure agricultural interests are on the front burner when we go to the WTO round in Seattle. I appreciate it very much. Thank you very much.
The CHAIRMAN. Mr. Secretary, the whole idea at some point the administration or we don't have the luxury of not having some kind of a price at some point on what it is we do. There has got to be a cost involved. It is going to be a dollar amount. Whether it is CCC or whatever it is, at some point we are going to have to deal with that.
My question to you is this: the administration letter outlined basically that the ballpark price, the ballpark figure of $7.4 billion in the Senate is basically acceptable. Then they outline a program. There is no cost associated with that program. My question is this: I think that given the number of things, for example, that have been outlined as the direction to take when you add it all together, it is going to be substantially more than the $7.4 billion. Let's say that comes in substantially more. My question is then does the amount that the administration is supporting go up to that point or does it stay at where it is and you pare back the program to fit it?
Secretary GLICKMAN. I wish I could give you a precise answer to that question because I think it may relate to other things like other appropriations bills.
The CHAIRMAN. I am sure it may.
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Secretary GLICKMAN. All those kinds of things. But I would say this. The letter indicates a ballpark figure and that is what it is, a ballpark figure.
The CHAIRMAN. I understand that.
Secretary GLICKMAN. That means it is not necessarily a rigid figure, and I think it is also inferred that everything that is in the proposal is supposed to come up to what the aggregate number is. So for the time being, we are trying to get all of these numbers within the ballpark figure. But I would also say that in the negotiating of this final proposal in the appropriations process will depend on a lot of factors that may influence that, whether it can go up or not based upon emergency designations; need for offsets or non-offsets and other things that both you and Charlie know more about than I do.
The CHAIRMAN. Those are obviously all the problems we are confronted with. Here the right hand and left hand aren't talking to each other. I am just using it as an example; $7.4 billion over here, but here is a problem we really would like to implement. We can do that too, but the two may not mesh. This great program that sounds really good may not fit within this number so do I scale back the program and then substantially have an impact on the way people may view how much it actually does help them or do I raise the money? And so at some point we are going to have to come to that balance. Secretary GLICKMAN. I agree with you. Look, to be honest with you, the letter says $7.5 billion. You have to presume at this stage that that is the aggregate amount of money that we are dealing with.
The CHAIRMAN. I understand. I am not trying to put you on the spot. What I am just trying to say is for the future, when we get down to the short rows and we have to start making a final decision, what really may sound good may not fit. This box may be bigger than this box. It may not sound quite as good, and it may not look quite as good. As we begin to pare back, people may have different viewpoints on whether this is the proper thing to do.
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I just wanted to lay that out as a part of the discussion because at some point that is going to have to come to closure, and it is going to have to be something that obviously we address before the end product is done. I would just simply say that in general support of the concept, that is the $7.4 billion outlined as it is, it may not get to where you want to or Charlie wants to or others want to get to. Basically, that has been determined, that is what the cost of that is. And so there was a fairly general broad view of support of that concept yesterday. So before we totally abandon that, we might need to really look at the proposal that you are making within the context of $7.4 billion once it is determined if it is going to run substantially over that. If I didn't misunderstand also what you said earlier, is that where the money comes from? Is part of it emergency? Did I hear you to say that it is—part of it maybe this year, part of it is maybe next year?
Secretary GLICKMAN. First of all, I don't think there is any question that a big chunk of this is emergency spending. That is from a lay perspective. You can't look back and look at the composition of these dollars and realize that a lot of it is genuine emergency spending that would meet that characterization even under the most conservative terms. Maybe more in that category than less to help you with the offset issue. I don't know.
The CHAIRMAN. But I want to make sure about the years situation. This is the subject that is being discussed.
Secretary GLICKMAN. I am probably repeating what I have been hearing, that is that there is some discussion to try to move this quickly in order to get into this fiscal year. I am not in a position to say that I endorse that or not——
The CHAIRMAN. But you are not in a position to say that you wouldn't necessarily consider that either?
Secretary GLICKMAN. No, I am not in that position.
The CHAIRMAN. Point being this. That is being looked at. As you know, we are trying to look at all varieties in different ways, and we don't know where the end is going to come out. But the point is this: If that does occur and if that is acceptable, that money has to be—the checks have to be cut by the end of the fiscal year.
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Secretary GLICKMAN. Perhaps.
The CHAIRMAN. They do. It could be scored some other way from here. But when the budgeters look at it, the checks will have to be cut by the end of the fiscal year. The only point being is that if this is attracted, it is something that maybe is agreeable to move forward in, that is going to take tremendous expedition on the part of the conference, at least on those portions that would be 1999 money. It is going to have to take tremendous expedition on the part of the President to get the bill signed, and it is going to test your 10 days that you did so well on last time.
Secretary GLICKMAN. Let met tell you what. This may not be possible.
The CHAIRMAN. It may not be. But that was mentioned. I wanted to try to clarify that somewhat because that is—again, it may not be an option that works but it is an option that is being reviewed and looked at.
Secretary GLICKMAN. It appears to me that this entire budget process this year is treading a lot of new territory.
The CHAIRMAN. It is. It is by, I think, a whole lot of treaders. But it is still something obviously that—things have to be scored and things have to have a price tag attached to them. We can't just simply delay them until later on. We don't always agree with the way that is done, but those are the things that we have to live in. We don't feel that we can go to the farmers and say, oh, gee, we would love to help you but because of some arcane budget rule—we want to do everything that we can to help the farmers recognizing the constraints that we are bound by. I guess that I am just asking that as we go through this. I am very hopeful that there can be a very open and honest and up front on top of the of the table. It has never been any other way than that with you, I want the record to show, but as we are trying to solve this problem I am hopeful that we can look at a variety of options and recognizing that many of them——
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Secretary GLICKMAN. I would just say to you that the chief of staff, Mr. Podesto, who is a former staffer of the Senate Agriculture Committee, and I talked about this this morning. He indicated an interest in working with the authorizing and appropriating committees to try to work——
The CHAIRMAN. We noticed the fact that he mentioned there were negotiations going on with Congress in a speech that I think he made yesterday. We are very anxious to be a part of those negotiations. Mr. Stenholm.
Mr. STENHOLM. Mr. Chairman, I guess I am a little bit disappointed. I thought the Senate's proposal for a 13-month year would take care of that question. We got 30 more days to write that check.
The CHAIRMAN. I would go for it. We can have 2 days in the same day in Congress. We might as well have another month in the year.
Mr. STENHOLM. Mr. Secretary, in your statement you recommend additional funding for field service agencies. How much funding is going to be needed to deliver the emergency assistance within the box the chairman has just described to you, the $7.4 billion, given our experience of last year?
Secretary GLICKMAN. I would ask, if possible, that Mr. Kelly of FSA can maybe talk about what they need for current services, and he can be responsive to you.
Mr. KELLY. Thank you, Mr. Chairman. My name is Keith Kelly. Congressman Stenholm, to keep it at current levels, just to maintain the level of employment that we are doing right now which includes a large number of temporary employees to assist in the LDPs we are doing right now, it would take approximately $80 million to do that. That is the additional amount of money that would be needed on the current budget that we have sitting before us right now.
I want to point out one other thing within that. That is part of that is the tools you have and the employees that you have, and there is about $35 million tied up in a cap on the commodity credit with regards to our data processing equipment, that if that is not funding within raising up the cap to the original level, we would have to reduce employment to pay for that.
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We have got to keep the computers running that are running right today turning out LDP payments and the same computer programs that turn out the disaster payments. In summary, just to keep it where we are at right today with employment, to keep it straight level before we hit October 1, it would take an additional $80 million to do that probably. That does not include what may be in some new disaster program that you may be coming forward with. A new emergency program, depending on how that is configured, that would be in addition to that.
Mr. STENHOLM. Have you conveyed that to the appropriators, I am quite sure; or you will?
Secretary GLICKMAN. Yes. We will. We will let them know what the needs are.
Mr. STENHOLM. Given our experience with this LDP load, it has just been phenomenal in itself in many of the offices, and we still have a lot of folks dragging their feet about the most efficient use of our employees, too. I am assuming that we are going to make some additional progress along that line before this year is out, too. Mr. Schumacher?
Mr. SCHUMACHER. Mr. Stenholm, I want to make sure that we included with whatever the emergency package is, but the temporary employees that you provided to Congress last year were very, very helpful. I am sure that we are going to need additional temporaries over and above the maintaining the tremendous workload that Keith has mentioned, and that we need to sort out this computer issue as well. So the three issues, maintaining staff, the computer issue, and temporary employees.
Mr. STENHOLM. Also in your statement, you recommend additional funding for farm loan programs. How much additional funding is needed, and which accounts do you anticipate will be the most in demand?
Secretary GLICKMAN. I don't have a breakdown of the numbers, but it does include funding for all of the key programs including guaranteed operating loans as well as all of them. I don't know, Keith, do you have any numbers there? I don't have it with me.
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Mr. KELLY. I don't have the exact breakdown. It increased all of the numbers based on, predicated on the demands that went on this year. I just need to go back to compare the demands of this year with the supplemental requests that went on. In 1998 we did $2.1 billion worth of lending in all of the variety of programs. Here we are at 1999, we are at $4.1 billion. Not quite doubling, but we are up considerably.
With that, knowing that we are in the same economic situation or worse than we were a year before given the price structure, I am anticipating demands and needs. The requests are up there in all categories to move up accordingly to the needs this year. We are just going to barely make this year through with very little money left over.
Mr. SCHUMACHER. Just if I may, Friday and Saturday, I met with a number of farmers bankers in our farm services credit; that is sort of a heavy user of farm service credit. But they were saying we normally went $125 to $150 million. They are looking at going up to $350 million, a three times increase, increased 70 or 80 percent. With the kind of crisis that we are all seeing out there, the demand on our credit in all categories, particularly emergency loans, is going to be very strong.
We have made a number of adjustments counseled by Mr. Combest and yourself on the PLP and guarantee, and I think with that adjustment there was a kicking in. So right across, we are going to see a much higher demand of credit than even we have seen this year. We would not want to come back for additional emergency supplemental requests. We want to get it done. We will work with the appropriating committee on that.
Mr. STENHOLM. I think given the financial situation we find in agriculture, it is a given that we are going to see much more demand. And unfortunately, we have not made near the progress that we should have been making the guaranteed lending program work acceptably so that we might get the kind of cooperation from our private sector, from our banks, and PCAs. I remember the first hearing that Chairman Combest had in Lubbock a couple of years ago in which we discussed this issue and the frustration that was present. Mr. Secretary, we have not made the kind of progress that we should have made for whatever reasons. I hope that we can finally bring about a little bit more of that resolution and solution, too.
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One other comment in my remaining time. I hope everybody understood what is a joke about the 13-month year in this, but all of this hurrying up that some are talking about, that might help with the caps, it might fudge a little bit whether we stay under the caps or we don't or what is emergency and what is not. But the bottom line to this is we are still going to be spending Social Security Trust Fund dollars for all of this, every penny of it.
Therefore, I hope that all of my colleagues who are working at this will recognize that we just can't play games forever. It is going to be time for the Congress and the President to sit down and negotiate these numbers and this box that the chairman suggested that we can work with you on.
I hope that is going to happen sooner, not later, or we will be seeing you again about Thanksgiving or Christmas. As much as I like you, Mr. Secretary, I just as soon not be looking at you come Christmas.
Secretary GLICKMAN. The feeling is not mutual. I would just as soon be sitting with you all of the time. In fact, if you two guys were running the budget show, we could probably work these things out.
Mr. STENHOLM. We are working on that, too. Thank you. I appreciate all of you, your indulgence today. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Secretary, thank you and your colleagues. It is been a long afternoon, I know, for you. But as you know, this is a big problem what we have a great deal of concern about. And I am sure that we will be discussing it in the future.
Secretary GLICKMAN. Thank you very much.
The CHAIRMAN. This hearing is adjourned.
[Whereupon, at 5:18 p.m., the committee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:] "The Official Committee record contains additional material here."
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