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FORMULATION OF THE 2002 FARM BILL
(FRUITS AND VEGETABLES)
LIVESTOCK AND HORTICULTURE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
JUNE 19, 2001
Serial No. 10710
Page 2 PREV PAGE TOP OF DOCPrinted for the use of the Committee on Agriculture
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COMMITTEE ON AGRICULTURE
LARRY COMBEST, Texas, Chairman
JOHN A. BOEHNER, Ohio
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
SAXBY CHAMBLISS, Georgia
JERRY MORAN, Kansas
BOB SCHAFFER, Colorado
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
JOHN COOKSEY, Louisiana
GIL GUTKNECHT, Minnesota
Page 3 PREV PAGE TOP OF DOCBOB RILEY, Alabama
MICHAEL K. SIMPSON, Idaho
DOUG OSE, California
ROBIN HAYES, North Carolina
ERNIE FLETCHER, Kentucky
CHARLES W. ''CHIP'' PICKERING, Mississippi
TIMOTHY V. JOHNSON, Illinois
TOM OSBORNE, Nebraska
MIKE PENCE, Indiana
DENNIS R. REHBERG, Montana
SAM GRAVES, Missouri
ADAM H. PUTNAM, Florida
MARK R. KENNEDY, Minnesota
CHARLES W. STENHOLM, Texas,
Ranking Minority Member
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
EARL F. HILLIARD, Alabama
TIM HOLDEN, Pennsylvania
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
JOHN ELIAS BALDACCI, Maine
Page 4 PREV PAGE TOP OF DOCMARION BERRY, Arkansas
MIKE McINTYRE, North Carolina
BOB ETHERIDGE, North Carolina
LEONARD L. BOSWELL, Iowa
DAVID D. PHELPS, Illinois
KEN LUCAS, Kentucky
MIKE THOMPSON, California
BARON P. HILL, Indiana
JOE BACA, California
RICK LARSEN, Washington
MIKE ROSS, Arkansas
ANÍBAL ACEVEDO-VILÁ, Puerto Rico
RON KIND, Wisconsin
RONNIE SHOWS, Mississippi
WILLIAM E. O'CONNER, JR., Staff Director
LANCE KOTSCHWAR, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director
Subcommittee on Livestock and Horticulture
RICHARD W. POMBO, California, Chairman
JOHN A. BOEHNER, Ohio,
Page 5 PREV PAGE TOP OF DOC Vice Chairman
BOB GOODLATTE, Virginia
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
CHARLES W. ''CHIP'' PICKERING, Mississippi
TOM OSBORNE, Nebraska
MIKE PENCE, Indiana
ADAM K. PUTNAM, Florida
COLLIN C. PETERSON, Minnesota,
Ranking Minority Member
TIM HOLDEN, Pennsylvania
LEONARD L. BOSWELL, Iowa
RICK LARSEN, Washington
MIKE ROSS, Arkansas
GARY A. CONDIT, California
CALVIN M. DOOLEY, California
BOB ETHERIDGE, North Carolina
CHRISTOPHER D'ARCY, Subcommittee Staff Director
C O N T E N T S
JUNE 19, 2001
Pombo, Hon. Richard W., a Representative in Congress from the State of California, opening statement
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Johns, Frank, vice chairman, Florida Fruit and Vegetable Association, Hastings, FL
Answers to submitted questions
LaVigne, Andrew W., executive vice-president and chief executive officer, Florida Citrus Mutual, Lakeland, FL
Lyons, William J., Jr, secretary, California Department of Food
Marshall, Maureen Torrey, vice-president, Torrey Farms, Elba, NY, on behalf of United Fresh Fruit and Vegetable Association
McClung, John M., president and chief executive officer, Texas Produce Association, Mission, TX
Wunsch, Josh, member of the board of directors, Michigan Farm Bureau Federation, Lansing, MI
American Vintners Association and the Wine Institute, statement
Florida Tomato Exchange, statement
Page 7 PREV PAGE TOP OF DOC Griffiths, James T., Citrus Growers Association, statement
National Food and Agricultural Policy Project, statement
Ross, Karen, California Association of Winegrape Growers, statement
Sunkist Growers, statement
FORMULATIONOF THE 2002 FARM BILL
(FRUITS AND VEGETABLES)
TUESDAY, JUNE 19, 2001
House of Representatives,
Subcommittee on Livestock and Horticulture,
Committee on Agriculture,
The subcommittee met, pursuant to call, at 10:00 a.m., in room 1300, Longworth House Office Building, Hon. Richard W. Pombo (chairman of the subcommittee) presiding.
Present: Representatives Pence, Putnam, Peterson, Larsen, and Condit.
Staff present: Christopher D'Arcy, subcommittee staff director; John Goldberg, Elizabeth Parker, Callista Gingrich, chief clerk; Anne Hazlett, Claire Folbre, Susanna Love, and Danelle Farmer.
OPENING STATEMENT OF HON. RICHARD W. POMBO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. POMBO. Good morning. This morning the Subcommittee on Livestock and Horticulture will exercise its oversight jurisdiction with regard to fruit and vegetable production in this country with an eye toward the formulation of the upcoming farm bill.
Page 8 PREV PAGE TOP OF DOC Currently, fruit and vegetable production in the United States is valued at nearly $30 billion annually. That figure is projected to rise to about $37 billion in the next 10 years. Today I want to continue the dialog concerning fruit and vegetable production that the full committee began with its hearing on May 2 of this year. I want the Members of this subcommittee, many of whom were not in Congress when the last farm bill was debated, to hear the story of fruit and vegetable farming in today's increasingly competitive and international arena. In this way, I hope that we can fashion a farm bill to meet the needs of the farmers without tying their hands.
All too often, the fruit and vegetable industry has been treated like an afterthought in the development and implementation of U.S. agricultural policy. Much of this is due to the fact that fruit and vegetables are not the traditional program crops, which rely on various subsidy mechanisms. However, in the movement toward an increasingly market-oriented agriculture policy, fruits and vegetables should serve as an example for others, as the rule and not the exception.
At the start of the 106th Congress, this subcommittee's jurisdiction was expanded, at my request, to include fruits and vegetables. One area that I was and remain especially concerned about is the serious threat posed by invasive species to American agriculture. It is for that reason that I strongly supported the Plant Protection Act last year and worked for its passage. That issue remains a priority of mine. I hope that we can determine how to better combat this growing problem in an era of increased and expanded agricultural trade between the United States and a growing number of countries.
Currently, it is very difficult to put a dollar figure on the total adverse economic cost associated with invasive species. This is due in part because no Federal agency compiles such statistics comprehensively. One recent estimate presented at the American Association for the Advancement of Science puts the figure at $123 billion annually, which includes the cost of control, decreased property values, health costs, and a variety of other factors.
Page 9 PREV PAGE TOP OF DOC The testimony we receive will help me and my colleagues to better understand this industry's business and to promote its success. I welcome all of our witnesses and guests here this morning, and I look forward to today's important and timely testimony.
I would like to now recognize our distinguished ranking member, Collin Peterson, for any opening statement he may have.
Mr. PETERSON. Thank you, Mr. Chairman. I welcome the witnesses and look forward to hearing their testimony.
Mr. POMBO. The Chair will accept any other opening statemetns at this time.
[The prepared statement of Mr. Putnam follows:]
PREPARED STATEMENT OF HON. ADAM H. PUTNAM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
I welcome the opportunity today to review Federal agricultural policies affecting our Nation's fruit and vegetable growers for the 2002 farm bill. As a significant contributor to American agricultural production and balance of trade, it is extremely important that the issues affecting fruit and vegetable production play a major role in the development of the 2002 farm bill. Specialty crops including fruits, vegetables, and other horticultural crops currently represent 23 percent of U.S. agriculture's commodity sales.
Historically fruit and vegetable producers have chosen to base their economic decisions on the market place, and not relied on traditional farm programs. However, these markets are extremely volatile and producers face extreme and somewhat unique challenges including labor costs far beyond that of our competitors, subsidized foreign market competition, declining access to crop protection tools and ever increasing environmental regulations. At the same time, plant pests and disease continuously threaten agricultural production. Fruit and vegetable growers and the State and Federal Government struggle to control diseases and pest infestation, costing American farmers billions of dollars annually in lost production.
Page 10 PREV PAGE TOP OF DOC The Federal Government must elevate its financial investment in key programs affecting fruit and vegetable growers and at the same time maintain relative marketplace equilibrium to achieve the industry's growth and prosperity. This investment would fund priorities including: pest and disease prevention and control; conservation incentives; greater use of fruits and vegetables in nutrition programs; international market access and food aid; marketing and fair trading priorities; risk management tools; infrastructure investments; research priorities; food safety and other initiatives of benefit to the produce industry.
With the combined fruit and vegetable sector in the United States at over $30 billion of farm gate value, it is extremely important that all issues affecting these producers be laid on the table for consideration and appropriately acted upon. I look forward to working with my colleagues toward the development of farm policies that will sustain the future financial viability of American fruit and vegetable growers.
Mr. POMBO. I would like to welcome our first person to testify here this morning, Secretary Lyons. Bill Lyons is from California, from my home State. He has been a long-time friend and neighbor, and I welcome you here this morning.
Mr. Secretary, if you are ready, you can begin.
STATEMENT OF WILLIAM J. LYONS, JR., SECRETARY, CALIFORNIA DEPARTMENT OF FOOD AND AGRICULTURE
Mr. LYONS. Thank you, Chairman Pombo, and members of the subcommittee. I thank you for holding this important hearing and for the opportunity to appear before you. In the interest of time and also your relief, I will briefly summarize my full statement.
Prior to becoming Secretary of California Department of Food and Ag, my family and I operated a diversified farming operation centered in the heart of California's Great Central Valley. I know firsthand the challenges that face our family farmers.
Page 11 PREV PAGE TOP OF DOC As head of the California Food and Agriculture Department, I am proud of my Department's 2,300 employees, who work hard to ensure that quality food reaches the consumer, that exotic pests and diseases are detected and eradicated, and that there is an equitable marketplace for California's agriculture products.
Today I would like to describe California's fruit and vegetable community, its current economic situation, and the critical issues it faces.
California's $26 billion agriculture economy leads the Nation in the production of 79 commodities and produces 50 percent of the Nation's fruits and vegetables. Like so much of the farm economy, the fruit and vegetable industry faces low prices and declining markets.
While some commodities are faring betters than others, agricultural property values have declined throughout California and the drastic consolidation of processing and retail facilities impacts the economy of the Central Valley. As this subcommittee knows better than anyone, these are tough times for agriculture. In addition, California's farmers and ranchers, like all of our citizens, struggle with high energy costs.
With this background, let me turn to the policy issues facing the fruit and vegetable industry. I have been working with NFACT and the National Association of State Departments of Agriculture, NASDA, to assist in your efforts to craft a new farm bill.
In 1999, the heads of agriculture departments in New Mexico, Florida, Arizona, California and Texas formed an organization to advocate positions that benefited our States. All of these border States have significant fruit and vegetable production, which was a motivating factor in our forming this coalition.
NFACT States produce approximately 26 percent of all the Nation's agriculture production. NFACT has come to be known for its strong stance on issues such as animal and plant health, food safety, conservation, international and domestic marketing, research and risk management.
Page 12 PREV PAGE TOP OF DOC As we began the farm bill debate, NFACT States held public hearings for producers to express their concerns and opinions about the future of agriculture. In California, we held 10 hearings and are in the process of reviewing the comments from those hearings and will be submitting a report to you within the next few weeks.
As you know, producers are looking at whether or not their future remains with the land. California's agriculture is marked by its diversity and by our farmers' willingness to grow for the market and to meet the changing tastes of consumers.
Five years ago, we did not even track the production of cilantro because it was insignificant. Last year, this crop brought in $17 million to California producers. Throughout this country, farmers are switching from growing a commodity to growing a product for a specific market. As important as this is for domestic markets, it is critical to winning international customers. For example, California is filling a niche market in Japan for high quality short-grained rice.
Farm policy may either foster this dynamic, market-oriented approach or stifle its growth by clinging to policies that no longer assist farmers. The next farm bill must account for and encourage a diversity that accommodates all agriculture, especially crops, livestock, poultry, and aquiculture must be included in the new farm bill.
As an example, many of the existing conservation programs do not address the needs of California agriculture. Often, the payment levels do not reflect the cost of living or land values in the State and the requirements appear to be drafted based on farming methods inconsistent with California agriculture.
The next farm bill must provide assistance in marketing, the creation of a level playing field for international competition, better access to conservation programs, tools to manage risk and other market-based programs that will empower producers. Many important recommendations to accomplish this are included in NASDA's farm bill policy, which I recommend to you and which is supported by the NFACT States.
Page 13 PREV PAGE TOP OF DOC Without diminishing the many issues facing specialty crops, I wish to highlight two critical struggles. One is the continuing threat from exotic pests and diseases, and the other is the competition from foreign growers benefiting from enormous export subsidies.
The fruit and vegetable industry remains at peril from pests and diseases. This subcommittee recognized early that Pierce's disease threatens California's wine industry as well as other commodities. In the last year, we have built a model program involving both Federal, State, local and industry stakeholders, all of whom contributed to the effort. With Pierce's disease, a century old problem is now a multi-billion dollar threat to California's agriculture because of the introduction of a new pest. The glassy-winged sharpshooter was detected in California in the early 1990's, most likely arriving on plants transported from an infested area. The combination of the glassy-winged sharpshooter and Pierce's disease have been likened to matches and gasoline. Our task is to keep them apart while we research a long-term solution.
Pierce's disease reminds us that prevention of the spread of pests and diseases is far cheaper than the enormous cost of controlling them and the damage they inflict to both agriculture and the economy in general.
As you know, California is a hub of international trade and travel. This is an immense economic benefit to the State. However, it also exposes the State and the Nation to increased risk from exotic pests and diseases. Protecting the Nation from this risk is a fundamental role for government and an issue of resources. Congress needs to provide adequate funds to protect American agriculture. I wish to acknowledge this subcommittee's leadership in passing the Plant Protection Act.
We also must look forward to the upcoming exploration of the restriction on the use of AQI user fees. I respectfully request that Congress view this as an opportunity to increase funding for this critical safeguard.
Page 14 PREV PAGE TOP OF DOC I come here as a supporter of trade and as an official of the State that exports in excess of $6 billion in agricultural commodities. My comments about pest issues are not designed to erect a protectionist wall around the State. Rather, with the enormous benefits from bilateral trade comes a responsibility to protect our producers from pest and disease threats, such as Medfly, the glassy-winged sharpshooter, and foot and mouth disease.
On the issue of trade, I must raise an issue that is having a serious impact on California's specialty crop industry. In international competition, some growing areas enjoy advantages over others. However, when foreign governments direct subsidies towards fruit and vegetable growers, domestic growers are unfairly disadvantaged, both in foreign markets and at home.
The primary forum to raise such an issue is during the WTO negotiations, and I hope Congress in general and this subcommittee in particular will insist that U.S. negotiators take on this topic and come away with solutions.
The consequences in California and throughout the country are painful. In our canned peach industry, for example, overproduction and foreign subsidies have eliminated our foreign markets and led to an influx of foreign product into the United States that is being sold at giveaway prices.
Our citrus industry faces unreasonable competition from EU countries that support their industries through a variety of assistance programs, reported by the European Commission to exceed $750 million.
California is working to strengthen its markets. On June 1 of this year, Governor Gray Davis announced he was dedicating $5 million to create a ''Buy California'' campaign to promote local products to local consumers. But we cannot undertake this effort alone. We need a combination of trade and promotion actions at both the State and Federal levels.
In my testimony today, I have attempted to raise some of these challenges facing this industry. As leaders, it is our job to protect and promote this Nation's bountiful harvest in all its diversity.
Page 15 PREV PAGE TOP OF DOC Again, Mr. Chairman, thank you for having me, for inviting me to testify today. At this time, I would be happy to address any questions you or your subcommittee may have.
[The prepared statement of Mr. Lyons appears at the conclusion of the hearing.]
Mr. POMBO. Thank you. And I thank you for your testimony.
To start off, I would like to ask you about the issue of invasive species and pests as being introduced, and specifically about the working relationship between California and the Federal Government and how that is going. And do you have any suggestions for ways that the Federal Government could make it work better than what we are currently doing?
Mr. LYONS. Well, Mr. Chairman, I, in the last 2 1/2 years, have experienced an excellent working relationship with USDA and my Federal counterparts. The only thing that I would strongly suggest is that we really realize how important it is to protect our borders; increased funding in APHIS, strengthening our relationships with the Federal Government in the sense of communication. We in California have trade relationships with countries all over the world. We are a destination for many peoples of the world. So we experience the kind of issues that come with that type of trade, and we need to have strong borders. We urge USDA to strengthen APHIS. We think that is one of the most important things that they can do.
Mr. POMBO. That is one of the areas that this subcommittee has talked quite a bit about, and as we go through the appropriations process, that is one of the things we have asked the appropriators to take a real close look at, because I do think that, with the increased amount of trade, it is important that we address that, particularly with our border States that seem to have the brunt of it.
On the issue of trade, we come from the same part of California, and a lot of the growers in my area are not real happy with some of the trade pacts that we have had in the past. They feel that it is an area for improvement, and I would like to have your comment on that as well.
Page 16 PREV PAGE TOP OF DOC Mr. LYONS. Mr. Chairman, I think it is very important, especially USDA and yourself, members of your subcommittee, to express to our trade negotiators how important some of these trade agreements are, how they impact specialty crops.
I think it appears too often that specialty crops are somewhat set aside in some of the trade negotiations. Some of the very farmers that you represent and that I represent in California experience those kind of issues. We have seen some dramatic problems within the peach industry, the prune industry, the garlic industry. We see people that have been in business producing, as far as I believe, some of the safest, most affordable food supply in the world, not being able to make it. It is a real economic hardship in California.
Mr. POMBO. I have another question, but before I go on to that, I think one of the problems that we have in dealing with that international market is the regulatory environment that we have created, and I think this is one area that the States and the Federal Government need to do a lot more work on, is taking a new look at everything that we expect from our farmers and all the new rules and regulations that continue to come out.
I know as Secretary in California you have tried to address some of those issues, but I think it is something that we need to go much further on if we expect to be competitive in that international market.
Mr. LYONS. Well, I think we need to try to level the playing field as much as we can. If there are requirements that are put on our farmers and ranchers, those same type of requirements should be put on people that we compete with.
The other thing I think would be very important is dispute resolution. When we do have an issue, and you can have issues, we need to get those disputes resolved quickly so that trade can continue.
Mr. POMBO. Finally, I wanted to question you about Pierce's disease. You brought this up in your testimony. How are we doing on that? Is it continuing to spread in California? And how is the working group working?
Page 17 PREV PAGE TOP OF DOC Mr. LYONS. Well, we have been very proud of the fact that many people have compared our Pierce's disease, glassy-winged sharpshooter effort as actually a model of working together with both the industry, the Federal Government, the local government and the State. We are very proud of our efforts. We feel that we are in the process of really containing the disease and the insect. We are learning more and more about the insect as time goes on.
Both our research and biocontrol projects are moving along. I am very pleasedin fact I have a report here I would be very happy to pass on to some of the staff so they can share with the subcommitteewe are very pleased with our efforts. It is an ongoing issue. I mean, we have kind of a sense of a sprint and a marathon. The sprint is to stop the inspect from spreading the disease. The marathon is to find a solution for Pierce's disease. We are looking at a multiyear effort to do that.
Mr. POMBO. Thank you very much. Mr. Larsen.
Mr. LARSEN. Thank you, Mr. Chairman. I want to thank you for holding this hearing today. Your comments with regards to fruits and vegetables being treated like an afterthought at times is very true. I know in my district we are dealing with many issues. Agriculture is dealing with many issues, not only in dairy, but obviously in fruits and vegetables. So I really do appreciate the hearing this morning that you decided to hold.
I just wanted to make a few comments and ask a few questions. Your comments with regards to the peach industry in California, you could have easily removed the word ''peaches'' and put in ''raspberries'' or ''strawberries'' or something like that as it applies to Washington State and my district specifically.
I heard you talk about trade. I heard you talk about conservation. I didn't hear comments with regard to research, and I was wondering if the National Association of State Agriculture Directors had comments with regards to the research title in the farm bill.
Mr. LYONS. I believe that NASDA has some comments on that. I am not sure whether it has been formalized in actually a deliverable form yet. But we look atI know in California, we are at the cutting edge of agriculture, at least we believe we are.
Page 18 PREV PAGE TOP OF DOC Mr. LARSEN. Right behind Washington State.
Mr. LYONS. I was getting concerned about that. I could see the look on your face. We are at the cutting edge along with our neighbors to the north. But we have a strong working relationship, especially with our UC and State college systems, when it comes to research. I think that we need to fund those programs to stay at the cutting edge so that we can compete around the world.
Mr. LARSEN. You discussed trade a little bit. We had a hearing, a full committee hearing a few weeks back with Secretary Veneman and Secretary Evans as well as Ambassador Zoellick. Secretary Evans did testify that in the future agriculture would be placed on the same level with technology and with manufacturing in terms of negotiating with other countries; and it is certainly going to be partly our job to ensure that that continues to occur.
But one concern I have is that, just like agriculture tends to fall behind, if you will, in terms of attention paid to it relative to technology and manufacturing, fruits and vegetables as well tends to fall behind in terms of attention paid to it relative to some of the program crops.
I was just wondering if you had any further ideas about the role that we can play to punch up the attention, if you will, of the critical role that fruits and vegetables play in some of our districts because program crops don't play a large role in some of our districts.
Mr. LYONS. Well, I think, if I may, that is one of the reasons that we formed this coalition called NFACT. And we have had a very good relationship with the Washington State Agriculture Director also. I don't think people understand the importance of specialty crops and its impact across the Nation. We will be delivering a report some time in the next 3 to 4 weeks to the subcommittee and other Members of Congress about the importance of specialty crops within the Nation, at least from just those five States' view. I think just continuing education and continuing involvement.
Page 19 PREV PAGE TOP OF DOC This series of 10 hearings that we held in the State of California was a real eye opener about how important specialty crops are, not just from a statewide perspective, but from a local perspective, too. I have 350 different crops in my particular State, and each one of those crops is important to me, and I think should be important to the State and to the Nation.
Mr. LARSEN. I am going to encourage you to get that report out as soon as possible. You are aware, like on July 9th, the full committee will start the full hearings on the farm bill. The sooner we get that, the more effective, I think, we will be able to make that case.
Mr. LYONS. We are trying to. It is actually at the printers right now.
Mr. LARSEN. All right. All right. Thank you, Mr. Chairman.
Mr. POMBO. Mr. Pence.
Mr. PENCE. Thank you, Mr. Chairman. I would like to associate myself with Mr. Larsen's very appropriate comments about you raising this issue in this hearing, and I also want to thank our witness today, Mr. Lyons, for speaking in English to this nonfarmer member of the Agriculture Committee.
Along those lines, I wondered if I might simply ask your sense of an issue that I don't believe you raised either in your prepared statement or in your opening remarks. But Indiana right now, which is the State that I serve, is, according to the 2000 agriculture statistics produced by Purdue University, we rank second in the Nation in growing tomatoes for processing. My district in particular, in Madison County in Indiana, is home to a company known as Red Gold. We are very proud of it. It does business all over the United States.
It is their judgment, expressed to me and also in the record today, Mr. Chairman, that the contracted crop regulations, which, in effect, prohibit the planting of fruits and vegetables on subsidized or contracted acreage, wages war in effect on the development of more acreage in Indiana for this industry and creating more competition in the industry.
Page 20 PREV PAGE TOP OF DOC I know that we will hear in this hearing from alternative views of that, people that are interested, organizations that are interested, particularly I think in the statement prepared by our friends from the Florida Citrus Mutual organization, a different view of that.
I wonder if you, Mr. Lyons, could give this Hoosier a sense of that prohibition. Does it in fact provide a legitimate insulation to people in the fruit and vegetable area that it ought to be maintained, or are we to considerif, in fact, the next farm bill contains farm payment programs, are we to consider some modification of that prohibition?
Mr. LYONS. Not speaking on behalf of NASDA, but we both at a national level and even within my State have had many discussions about that particular provision. It is my firm belief that that provision should continue. Basically, we think it is a competitive situation and one that, if an individual is going to enter the farm programs, that they should not also be allowed to plant specialty crops and vegetables.
I believe that I know the NFACT States have taken a position on that, and that will be coming out in this report about extending that prohibition. I believe that NASDA also will be taking that position.
Mr. PENCE. Thank you very much. I have no further questions, Mr. Chairman.
Mr. POMBO. Mr. Putnam, did you have any questions of this witness?
Mr. PUTNAM. Mr. Chairman, I will hold off till the second panel. Thank you.
Mr. POMBO. Mr. Condit just came in. I know that he is going to have a comment or a question or two.
Mr. Condit, before I excuse Mr. Lyons, I wanted to give you an opportunity to say something.
Page 21 PREV PAGE TOP OF DOC Mr. CONDIT. Thank you, Mr. Chairman. I appreciate you holding the hearing today, and I apologize to you and to the Secretary of Agriculture from California for being late, but I had some other commitments that I had to look into.
The only question that I would have, and maybe you have already asked it, Mr. Chairman, is about the electrical crisis in California, the cost of energy to agriculture and what kind of impact that might have on the industry; and if in fact it has a negative impact, do you have any suggestions for us on how we might be helpful on the Federal level?
Mr. LYONS. Well, the energy crisis in California, especially as it affects agriculture, will be extremely severe from everything from pumping costs to processing costs. It will be dramatic this summer to the agricultural sector within California. It is one that I know that Governor Davis has spoken to me a number of times about and one that we are engaged in every day. We need help. As we see this energy crisis spread through the West, it is going to dramatically impact agriculture.
So individuals like yourselves that represent agricultural districts and individuals that come from the urban area have to know that this is going to really impact the agriculture community. Margins are so slim now that these dramatic increases will make the difference on whether some producers survive or don't survive.
Mr. CONDIT. Mr. Chairman, that is all I have. I once again would thank the Secretary for being here and let him know that you and I are extremely proud of him and what he is doing in California, and we are also very proud that he is a secretary that comes from an agriculture family and understands the issues very well. So thanks, Bill, for being here today. I appreciate it.
Mr. LYONS. Thank you, Gary.
Mr. POMBO. Mr. Secretary, before I excuse you, I want to thank you for coming back here and for carrying the banner for the State agricultural secretaries. You are doing a great job in California, and we appreciate having you there. So thank you very much.
Page 22 PREV PAGE TOP OF DOC Mr. LYONS. Thank you. Thank you again, Mr. Chairman.
Mr. POMBO. I would like to call up our second panel of witnesses: Ms. Maureen Torrey Marshall, Mr. Frank Johns, Mr. Andrew LaVigne, Mr. Josh Wunsch and Mr. John McClung.
Ms. Marshall, if you are ready, you may start.
STATEMENT OF MAUREEN TORREY MARSHALL, VICE-PRESIDENT, TORREY FARMS INC., ELBA, NY, ON BEHALF OF UNITED FRESH FRUIT AND VEGETABLE ASSOCIATION
Ms. MARSHALL. Good morning, Mr. Chairman and members of the committee. My name is Maureen Torrey Marshall, and I farm with my two brothers in western New York. Torrey Farms is a family farm operation that specializes in the fresh marketing and processing of vegetables and also grains and, since 1996, includes two dairy operations located in Niagara, Genessee, Orleans and Yates Counties in New York State.
As a current member and chairman of the United Fresh Fruit and Vegetable Association's Education and Research Foundation, I appreciate the opportunity to testify on behalf of United before the committee regarding the future direction of farm policy and its impact on the fruit and vegetable industry.
As you are well aware, United is the national trade organization that represents the interest of growers, shippers, processors, brokers, wholesalers and distributors of produce working together with their customers at the retail and food service level and every step in the distribution chain.
I also come before the committee today as an 11th generation family farmer here in the United States who is extremely concerned about the state of our produce industry and what role Congress and the administration will play in shaping the policy for fruit and vegetable growers across the United States.
Page 23 PREV PAGE TOP OF DOC Over the years, the produce industry has gone through tremendous changes in an effort to remain profitable, satisfy consumer demands, adapt to new technology, and compete in an increasingly global marketplace. Today growers are facing the lowest returns they have seen in decades. Wholesalers and distributors are being squeezed at both ends and retailers and restaurants are facing stiffer marketplace competition than ever. Meanwhile, the consumption of commodity after commodity seems to be stagnating. For fresh produce, this market climate leads to extreme stress between market segments looking to assign blame to one another for their losses and occasionally calls for support programs that would only accelerate the problem.
Fruit and vegetable growers produce crops that are vital to the health of Americans and represent a significant segment of American agriculture. However, because they are not considered program crops, fruits and vegetables are often ignored when it comes to the development and implementation of U.S. farm policy. Yet, like producers of program crops, the fruit and vegetable industry faces significant challenges in the production and marketing of their commodities that must be addressed if they are going to remain competitive in an increasingly global marketplace.
While the rest of the U.S. economy has enjoyed growth and success, much of agriculture, particularly the fruit and vegetable sector, is mired in a deepening crisis. Commodity prices from many produce crops are below the cost of production, and increased Federal regulations, such as the scheduled phase-out of methyl bromide as a fumigant, is expected to result in losses of $500 million, while impediments to international trade are stagnating the industry. Such challenges, coupled with threats from exotic pests, loss of important pesticides under the Food Quality Protection Act, increased buyer leverage cost by retail consolidation, shortages of labor that seemed to increase month by month and the produce industry's inability to get the guest worker legislation enacted for the past 6 years are increasing economic pressures on industry farm operations both small and large.
Page 24 PREV PAGE TOP OF DOC As Congress continues to examine how our present farm policy should be reviewed and modified in this new era of global markets, it is critical that long and short-term solutions be considered that will help the U.S. agriculture industry to remain the world leaders in food production and competitiveness.
For the produce industry, issues surrounding pest exclusion, disaster assistance, food safety, nutrition policy, retail trade practices, technology and research, international trade barriers and promotion, risk management tools, produce inspection activities, and the current prohibition on flex acres are all critical to the future viability of the fruit and vegetable industry.
Let me be clear, while the perishable nature of our products represent unique challenges in highly volatile markets, the industry has not relied on subsidy programs to sustain our business. We are not only proud of our commitment to free markets, but we also believe subsidy programs that sustain or encourage production would be a blow to our industry.
As you are aware, the produce industry has been working together since September through the Produce Industries Farm Bill Working Group to identify areas where Federal farm policy can do the most good. These positions were presented in testimony to the committee by United on May 2, 2000. We strongly encourage the committee to embrace the produce industry's participation in these types of programs to ensure the continued viability of the U.S. fruit and vegetable industry.
This blueprint provides policy options to drive consumer demand for fruits and vegetables while providing menu options that growers can use to strengthen their current economic condition. More importantly, we believe these recommendations also present the opportunity for Congress and the new administration to shift through the perspective of farm policy from supply push to an informed demand pull model.
I strongly state that our industry has fought through the many conflicting views and priorities of different commodities groups and regional organizations to bring you this consensus package of recommendations, and that is a hard job to do.
Page 25 PREV PAGE TOP OF DOC The alternative, I feel, is increasing grower frustration that drives pressure on a commodity-by-commodity basis, triggering calls for narrow relief programs that can divide, not only our own industry, but the committee and the Congress as well.
Let me briefly highlight some of the issues we have targeted in our package and ask the committee to consider these priority issues and areas in more depth as you move the farm bill process forward.
Conservation. Ultimately, the goal of conservation and environmental programs is to achieve the greatest environmental benefit with the resources available. For the produce industry, there continues to be mounting pressures of decreased availability of crop protection tools that can be used to provide the abundant and safe food supply the consumer demands. Because of these factors, the industry should consider any available assistance that encourages producers to invest in natural resource protection measures they may not have been able to afford without such assistance. Specifically, the industry supports doubling the current funding for the Environmental Quality Initiatives Program.
Nutrition priorities. The role of increasing the investment in Federal nutrition funding cannot be overstated. In turn, this investment in nutrition priorities can be utilized to increase the consumption of fresh fruits and vegetables and help Americans reach national health goals. To optimize the amount of fresh fruits and vegetables in the USDA feeding program, we would request a $500 million annual funding outlay for surplus purchases of produce commodities.
International market access. U.S. fruit and vegetable growers face significant obstacles in the development of export markets for their commodities and unique challenges due to the perishable nature of our products. Without further commitment to the export development by the Federal Government and commitment to reducing tariff and nontariff barriers to trade, the U.S. produce industry will continue to lose market share to global market competitors. Specifically, enactment of legislation to increase funding authority for the Market Access Program, MAP, by $110 million is strongly supported by the produce industry.
Page 26 PREV PAGE TOP OF DOC Pest and disease exclusion policy. Economic damages from invasive pests and diseases now exceed $120 billion annually. The fresh produce industry supports expedited and aggressive actions by the Federal Government and cooperation with the industry and stakeholders at the State and local levels to eradicate and protect the domestic market from the increasing threat of exotic pests and diseases entering the U.S. through international commercial shipments of products as well as importation of agricultural contraband by vacationing travelers and commercial smugglers.
We call for enactment of legislation authorizing funding and providing direct responsibility and related expanded authority for APHIS to develop an adequate Emergency Eradication Research Fund that could be accessed to address economic and health threats posed by invasive pests and diseases as determined by the USDA Secretary. This fund would be set up as a revolving account which would be capped at $50 million. Consequently, the fund would be replenished based on fiscal year utilization. We believe this approach will lead to stronger plant and disease eradication efforts, bringing a national commitment to what is now a fragmented and piecemeal approach.
In conclusion, fruit and vegetable growers represent a vital important segment of American agriculture and bring to market crops that are equally vital to the health of all Americans. To help farmers, the Government needs to level the playing field for trade, improve the availability of our risk management tools, fund research to keep the U.S. farmer the best in the world, support marketing orders, purchase of U.S. agricultural products for School Lunch and Nutrition Programs, and then just stay out of the way and let us do our job.
The people in our industry are an endangered species. Very few young people are looking to come into production agriculture, not because of the long hours or the financial risk associated with unpredictable weather, but because of the lack of proactive support by our Government and consumers.
Page 27 PREV PAGE TOP OF DOC We urge the committee to take these issues and the many other challenges facing the fruit and vegetable industry fully into consideration as you move forward in the development of farm policy.
Thank you, Mr. Chairman, and I would be happy to answer any questions that the committee may have at this time.
[The prepared statement of Ms. Marshall appears at the conclusion of the hearing.]
Mr. POMBO. Thank you. Mr. Johns.
STATEMENT OF FRANK JOHNS, VICE CHAIRMAN, FLORIDA FRUIT AND VEGETABLE ASSOCIATION, HASTINGS, FL
Mr. JOHNS. Mr. Chairman, and members of the committee, my name is Frank Johns, and I am vice chairman of the Florida Fruit and Vegetable Association. I am a fourth generation grower based in Hastings, Florida, and I have been farming since 1973. I grow mostly cabbage and potatoes on about 800 acres.
On behalf of the producer members of the Florida Fruit and Vegetable Association, I greatly appreciate the opportunity to appear before you today to speak about some of the challenges facing fruit and vegetable growers in Florida and other States. My comments here this morning touch on just a few of the recommendations contained in my written testimony.
A major concern among Florida's fruit and vegetable producers is Florida's vulnerability to damage from invasive pests and diseases. Florida's recent battles against the Mediterranean fruit fly and the ongoing eradication of citrus canker underscore the need for effective port inspections, pest and disease detection programs, and timely eradication capabilities.
Page 28 PREV PAGE TOP OF DOC When APHIS must wait for OMB approval for CCC funds for critical programs to address these threats, it cannot respond quickly to minimize the impact of pests and diseases. FFVA asks that Congress enact legislation authorizing mandatory funding, direct responsibility and authority for APHIS to develop an emergency pest eradication capability. First year funding would be set at $50 million and set up as a revolving account no-year fund replenished annually at the $50 million cap.
A key recommendation of the USDA's Safeguarding American Plant Resources Report is the establishment of surveys for plant pests and diseases to ensure detection as early as possible. A specifically earmarked survey fund, preferably as a mandatory program within the farm bill, would allow APHIS-PPQ to employ additional inspectors to work with the States to conduct ongoing nationwide surveys to detect invasive species at an early stage.
Therefore, FFVA recommends that Congress establish an annual pest detection survey fund that will ensure early detection of harmful plant pests, diseases or other pathogens that have eluded detection at ports of entry. The mandatory fund would be at the $50 million level, designated as no-year, and replenished annually at the $50 million cap.
In the 1996 FAIR Act, Congress sought to provide planting flexibility for producers who historically participated in farm programs. Fruit and vegetable growers were concerned then and continue to be concerned today that if planting flexibility were applied to fruit and vegetable crops, they would be forced to compete with subsidized producers. Therefore, if the next farm bill contains farm payment programs, Congress should continue the FAIR Act prohibition on planting fruits and vegetables on subsidized or contract acreage. Significant penalties for violation must remain in place.
Since the North American Free Trade Agreement took effect in 1994, U.S. imports of fruits and vegetables have grown dramatically. Provisions within NAFTA intended to safeguard domestic fruit and vegetable producers from price-based import surges have proven to be ineffective.
Page 29 PREV PAGE TOP OF DOC To ensure that the negotiations for the proposed Free Trade Area of the Americas do not lead to increased imports of Florida's most important fruit and vegetable products, FFVA asks that a request-offer approach to tariff reductions be pursued that explicitly authorizes exemption from tariff phase-out for Florida's import-sensitive commodities.
In addition, improved safeguard provisions are needed for import-sensitive fruit and vegetable products. Such safeguards should include all import-sensitive produce commodities, be triggered automatically based on price, not year-end volumes, and should also consider increased exports that occur when a country's currency unexpectedly devalues.
To help our producers promote exports to foreign markets, FFVA asks that annual funding for the Market Access Program be increased from $90 million to $200 million. Congress should enact legislation that also would provide a minimum of $35 million for the Foreign Market Development Cooperator Program, and allow up to 50 percent of the available funds under the Export Enhancement Program to be used for later market development and promotion activities.
As a vegetable grower, the costs of complying with environmental rules and regulations have often made me consider another vocation. Even though natural resource management and conservation programs help ensure an improved environment and more productive farm economy, producers of fruits and vegetables can rarely recoup their investments in these programs.
FFVA recommends the Federal Government provide funding assistance and credit to support conservation initiatives that would ensure a safe, healthy and sustainable environment within produce production areas. An equitable portion of this funding should be specifically earmarked for utilization in fruit and vegetable production areas.
In conclusion, U.S. fruit and vegetable production represents an economically significant segment of our Nation's total agricultural industry. What is more, fruit and vegetable growers produce crops that are vital to Americans. Yet, because they are not considered so-called ''program crops,'' fruits and vegetables have mostly been ignored when it comes to the development and implementation of U.S. farm policy. I urge Congress to consider the issues I have mentioned here today and outlined in my written testimony as you move forward in development of the next farm bill.
Page 30 PREV PAGE TOP OF DOC I thank you for your time and welcome any questions.
[The prepared statement of Mr. Johns appears at the conclusion of the hearing.]
Mr. POMBO. Thank you. Mr. LaVigne.
STATEMENT OF ANDREW W. LaVIGNE, EXECUTIVE VICE PRESIDENT AND CEO, FLORIDA CITRUS MUTUAL, LAKELAND, FL
Mr. LAVIGNE. Thank you. Mr. Chairman, members of the subcommittee, good morning. I am Andrew LaVigne, executive vice-president and CEO of Florida Citrus Mutual, a grower cooperative association representing over 11,500 growers of processed and fresh citrus products. I appreciate the opportunity to testify today, and I have submitted my testimony for the record and will summarize the key points of that statement.
A quick overview. Our industry produces citrus on 800,000 acres in Florida. We are the No. 1 producer of oranges for processing in the U.S. and No. 2 in world behind Brazil. We are the No. 1 producer of fresh and processed grapefruit in the world. During the 1999 and 2000 season, we harvested 298 million field boxes of citrus, representing 76 percent of the U.S. citrus production. Florida's citrus industry provides 27 percent of the State's total farm receipts. And of the citrus that we harvested, 89 percent was processed into juice, and the remainder was sold as fresh fruit. We have in excess of $8 billion worth of economic impact to our State.
We are now completing a season that many people at this table will probably relate to that will likely prove to be the most economically devastating we have experienced in 20 years. The on-tree value of this year's crop is estimated at $805 million, down 30 percent, or roughly $350 million down from last year and the lowest crop value since 19851986.
Page 31 PREV PAGE TOP OF DOC Mr. Chairman, Mutual played an active role in the United farm bill Working Group effort, and we support the overall farm policy in that document and a majority of the proposals contained within the statement presented to you and the House Agriculture Committee on May 2. We won't repeat all of that. We would like to just summarize some of these.
With respect to the actual farm programs for fruit and vegetable growers, given the breadth and the number of those programs, we are currently evaluating the proposals presented by the various industry groups and the potential impacts on our growers.
However, from a conservation perspective, the citrus industry provides a unique benefit to our environment. Citrus trees are planted with the expectation of a 20 to 25-year life-span. This extended productive life greatly benefits the Nation's air, land and water resources. The conservation program concept is attractive to our growers because of the greenbox nature of such programs under WTO guidelines.
With respect to the nutrition title, our key interest here is to attempt to add language that seeks to optimize the amount of 100 percent fruit juice, fresh fruits, and vegetables provided under USDA feeding programs, School Lunch, School Breakfast, and others. Incentives should be included in the legislation to encourage States to purchase domestically grown commodities. The greatest opportunity the U.S. Congress has to impact the health of all of our Americans is to work to improve the dietary education and eating habits of our citizens.
A sound, progressive agricultural research title is key to the citrus industry remaining competitive in the global environment. Our main recommendation under the research title is to establish a $10 million revolving account that would provide matching dollars to commodities seeking to improve their harvesting efficiencies by developing mechanical harvesting machines and abscission chemical products. The Florida citrus industry is working on this at this time and spending roughly $2 million a year of grower dollars.
The citrus industry supports the 300-plus recommendations contained in APHIS's Safeguarding American Agriculture Report. The administration, USDA, Congress and State governments must realize its strong interdiction and detection programs are much cheaper than eradication programs.
Page 32 PREV PAGE TOP OF DOC Our legislative recommendations here mirror the ones at the table: A $50 million revolving emergency eradication fund, as well as enacting a provision that sunsets section 917(5) of the FAIR Act allowing for AQI user fee programs to be used in the AQI program.
Since the passage of the Agricultural Risk Protection Act, or ARPA, by the 106th Congress, the industry is aggressively working with RMA to develop innovative, flexible risk management programs that are more suitable for Florida citrus growers. The farm bill needs to reiterate Congress' support of the provisions of ARPA and encourage RMA to move as expeditiously as possible to implement those programs for the benefit of growers.
Mr. Chairman, I appreciate the opportunity to testify before you here today on behalf of Florida's citrus growers. There are many other issues that are in our testimony that hit to the core of what our industry is looking for on this. We want to stay competitive in this ever-changing international marketplace, and we feel that our growers can do that. We stand ready to assist you in this process in order to come to a conclusion that is favorable to the fruit and vegetable industry as well as the U.S. agriculture industry in total.
Thank you, Mr. Chairman.
[The prepared statement of Mr. LaVigne appears at the conclusion of the hearing.]
Mr. POMBO. Thank you. Mr. Wunsch.
STATEMENT OF JOSH WUNSCH, MEMBER OF THE BOARD OF DIRECTORS, MICHIGAN FARM BUREAU FEDERATION, LANSING, MICHIGAN
Mr. WUNSCH. Thank you, Mr. Chairman, for having me here today, giving me this opportunity to represent my particular group of producers.
Page 33 PREV PAGE TOP OF DOC I am a fruit producer from northwest Michigan. Cherries and apples are what I do. I raise for both the fresh and processed markets. I make my price on the fresh; I take my price on the remainder. On the remainder, I discover I am several steps away from my farm to my consumers. I observe that, every step along the way, those margins are pretty well assured to the others that are involved there. Mine are not. I take the crumbs that are left over. When I am tight with that consumer on my fresh deal, I do fine; the consumer does great. Price to consumer in the grocery store is not a function of farm price, whatever anyone may tell you.
Now, you have been told that you are at the crossroads today, that you are at your day of reckoning, your moment of truth. The fact is a train wreck has occurred. The toothpaste is out of the tube. Congress has in very recent years overseen policies which have severely undermined the market, punished producers by destroying margins, eroding equity, trading hard-earned producer capital for short-term acquisition of cheap, imported consumer goods.
Specialty crop producers have not been here much in the past with their hands out. We have been deeply and, for the most part, successfully engaged in the dynamics of the market. The market has been a reliable source of at least poverty level wages for producers and better for others who understand how the market works. The same community is not as experienced with program or government farming, but it is learning fast.
Some want nothing to do with it. Others wanted to be completely swaddled in your safety net. The diversity of opinion within the ranks of the producer community is remarkably similar to the diversity of opinion regarding this in Congress.
In regard to supplemental financial support for market loss assistance, we in the apple industry continue to request $500 million for help to offset the $1.6 billion that has been taken from the industry through the failure to enforce trade policy. This $500 million shrinks every time a market loss assistance proposal is drafted, and yet Chinese apple juice continues to leak in around a ponderous and ineffective enforcement effort.
Page 34 PREV PAGE TOP OF DOC Risk management, what we call crop insurance. We market guys will tell you that our most painful losses involve 11th hour weather relateds that leave us with enough to make our production costs but no margin. Too bad we can't do a better job of covering the risks of the above-average producer. Fruit and vegetable guys are tremendous risk takers so they have a pretty good instinct for risk management. We need to keep working on this.
Regulatory offsets. The lack of outcome-based regulation has resulted in an interventionist approach that is costly to enforce, ineffective and unfair. Until we can set measurable, realistic and achievable objectives and use a rational rather than emotional evaluation approach, regulation will continue to take an enormous economic toll even on the most compliant. We only ask that the account balance be reconciled.
Domestic food assistance. School lunch is good. Everybody wins. Only customer that buys exclusively U.S. fruits and vegetables.
Trade, from the standpoint of resolving the economic stress within the fruit and vegetable industry, this is the area that it all comes down to. A market system works but only if a market structure is intact. Good trade policy without mutual adherence to terms is no trade policy at all. A dual standard of compliance never worked in our domestic economy, and it certainly doesn't work globally, especially when U.S. farm producers are the designated chumps. Are we the only country in the world that is unwilling to state that we will not support and aid the economic interests of our agricultural producers and the food security of our citizens from any other interest, foreign or domestic?
Credit. In the apple industry, most of our equity has been inadvertently transferred to China. We owe big time. USDA is the major creditor. We are not going to be current or timely on repayment schedules, so our continued future as a revenue source for the Republic is, at best, shaky. If new money is as much of a problem as you all state, perhaps it is time to take a look at some restructuring, some forgiveness loans, reducing and capping interest rates on all USDA loans. As the economy booms, there are some of us making repayments at over 10 and three-quarters percent on USDA loans.
Page 35 PREV PAGE TOP OF DOC We have got lots of definitions for what agriculture is. We can never seem to agree on that. I think we can agree on a few things that agriculture is not. Agriculture is not Novardis. Agriculture is not Archer-Daniels-Midland. It is not John Deere. It is not Burger King. It is not Sarah Lee. It is not Bayer. It is not Wal-Mart. It is not Hershey Chocolate. Agriculture is something that some guy does with a little dirt and food pops out.
We understand the need for rehabilitation of third-world economies and the importance of creating strong trading partners. But, hey, not on my wallet and certainly not on my wallet alone. We knew we would have trouble converting agriculture over to a market economy when we started talking about a this a few years back with you. We never imagined there would be this degree of difficulty that this change would make for the policy-making process.
Thank you very much.
Mr. POMBO. Thank you.
[The prepared statement of Mr. Wunsch appears at the conclusion of the hearing.]
Mr. POMBO. Mr. McClung.
STATEMENT OF JOHN M. MCCLUNG, PRESIDENT AND CEO, TEXAS PRODUCE ASSOCIATION, MISSION, TX
Mr. MCCLUNG. Thank you, Mr. Chairman.
My name is John McClung. I am president of the Texas Produce Association. We are headquartered in the Rio Grande Valley of Texas. I do want to thank you for holding this hearing today.
I think that when we memorialize agricultural policy in this country, as we will in the 2002 farm bill, we will be taking steps that are probably of as much importance to U.S. agriculture as anything since perhaps the Depression years. It has been never been easy in agriculture in my experience, but these are truly very difficult times. And for those of us in the produce business who have traditionally had relatively little involvement in farm bill programs we are grappling with what our role should rightly be and there is not yet consensus in our ranks, or at least not among my members in Texas, on several of the key farm bill components. I will come back to that in a few moments. But we do recognize, Mr. Chairman, that you have consistently been mindful of fruit and vegetable industry needs; and we look forward to working with you as this process evolves.
Page 36 PREV PAGE TOP OF DOC In Texas, the fruit and vegetable industry has gone through about two decades now, perhaps a little more, of economic decline. We have slipped from the third largest producer of fruits and vegetables among the 50 States to fifth, maybe sixth. We are hopeful that we have turned the corner, but, in all honesty, it is too early to tell.
There are a lot of reasons for this situation, among them freezes and droughts, intense international competition, retail consolidation and our own shortcomings in product development and promotion and marketing. Certainly not all of these factors can be laid at the Government's door, but equally certainly we are in enormous need of enlightened Federal policy if we are ever to be able to stabilize and improve our lot.
If we are to retain a strong agricultural capacity in this countryby that I mean if the Congress and the administration believe that such a food and fiber community is desirable for national security or societal or other reasonsthen the farm bill debate can really ultimately only be over how to pay for it. In other words, the American and world public must pay more, either directly in the marketplace or indirectly through the Government.
I know this sounds simplistic, but when I first became involved in discussions about agricultural policy, going on 30 years ago, the average family in this country spent something in the area of 15 to 17 percent of disposable income on food, as I remember the numbers. The most recent figures I have seen put this percentage at something just over 10 percent, and that is after the spike in eating away from home, eating outside the home, which increases food costs.
For our consumers in this country, the abundant food supply is a miracle, an inexpensive miracle. For foreign suppliers of fruits and vegetables, the U.S. marketplace is a lucrative magnet. For the U.S. economy overall, trade barrier reductions and international agreements such as NAFTA are a source of strength and economic reward. But for U.S. farmers and shippers, these factors combine to make for very tough sledding indeed.
Page 37 PREV PAGE TOP OF DOC So where do we go from here? Perhaps the most contentious issue for fruit and vegetable growers and shippers has to do with direct subsidies. Most of us have concluded that we do not want, at this time, to pursue a traditional subsidy program. I concur with my associates in that decision but with some misgivings. We have credible reasons for not wanting to pursue subsidies in this farm bill.
First, we do not want to submit to the production controls that logically would attach to direct payments.
Second, we do not want to forfeit our ''flex acres'' protections, although we recognize they are not assured in future legislation.
I did want to remark on that point. I hope it is understood that when the flex acres language was put in the farm bill in 1996, it was simply because a very small increase in supplies in most of our commodities results in an enormous swing in prices. A two or three percent increase in supply makes a huge difference in the marketplace for any different commodity. That is the reason to try and keep those folks who are subsidized growing feed grains or food grains or other agricultural product from producing fruits and vegetables and still be subsidized. That is what that was all about. And if we are not to have some sort of direct payment system for fruits and vegetables in this farm bill, then my personal feeling is that the flex acres protections are going to be an imperative for us as we proceed.
And, third, we recognize that there is a finite amount of money to go around from the Government, and the traditional ''amber box'' recipients are ahead of us in that line. Obviously,the fairness of that situation is suspect, but that is the political reality.
We do, however, encourage market expansion programs, both domestic and international. We want to sell more produce. Our problem in Texas is not that we cannot produce enough onions or citrus or cabbage or melons or whatever it may be, it is that, far too often, we cannot sell it profitably. So we ask you to support extension and expansion of the Market Access Program, domestic feeding programs and efforts to educate the public about the dietary health benefits of produce consumption.
Page 38 PREV PAGE TOP OF DOC I must tell you, however, I am farand this is just a personal opinionfar from certain that sales expansion efforts will benefit U.S. producers as much as we would all like and intend. If I am a Central American melon producer or a South African citrus grower or Mexican onion or tomato producer, I view such U.S. market expansion efforts with every bit as much as enthusiasm as my U.S. counterparts, perhaps more. If I am a food retailer, profitability has little to do with origin. Therefore, I would ask that Congress examine every avenue for making sure that revenue from these kinds of programs finds its way to U.S. producers and shippers, when possible, and that is no simple matter. We all know the initial promise and subsequent reality of market expansion under the 1996 farm bill, and I hope accept that a false promise is worse than no promise at all.
I do want to vigorously endorse conservation programs that pay farmers to take acreage out of production for environmental and other wildlife purposes. These types of programs do put much-needed money into the producer's hands and meet the long-terms needs of all Americans, urban and rural.
Yet another area where it is possible for government to make concrete contributions to producers and shippers revolves around the exclusion of foreign pests. You heard a great deal about that today, and I will not belabor that. I will tell you we in Texas are absolutely terrified to think of what would happen if we got citrus canker in our little citrus deal in south Texas, as the Floridians have experienced. It could be absolutely devastating for us. Florida has something like 800,000 acres of citrus. We have in Texas something like 36,000 acres of citrus. You can imagine what would happen.
Now, interestingly in terms of foreign pests, one real problem is that, as the economy has become more difficult, a lot of folks have abandoned their little 5-, 10-, 20-acre groves. It is those little abandoned groves that represent a real problem for industry and for APHIS and the Texas Department of Agriculture in trying to deal with possible problems. We have a Mexican Fruit Fly Eradication Program under way in south Texas, but it is sadly underfunded and understaffed, and one of things we need there is adequate funding to make that Fruit Fly Program work. In any event, APHIS has simply got to be staffed and funded adequately nationwide to address foreign risks.
Page 39 PREV PAGE TOP OF DOC I know I am over my limit, so let me close by saying one other area where we are very interested and very concerned is one of the safety net areas, and that is crop insurance. Many, many of my members continue to be highly skeptical about crop insurance for a couple of reasons.
First, they know it is exceedingly difficult to write policies that eliminate or even minimize the opportunity for abuse. The recent fiasco over watermelon insurance is the stuff of dark humor in many small town restaurants throughout Texas. We have similar if not so visible concerns about the current onion insurance policy.
Second, good farmers or those who believe themselves to be good farmers think crop insurance keeps less skilled and dedicated producers in business and contributes to oversupply.
We also, however, recognize and resign ourselves to the fact that crop insurance is a reality and we are now going to have to focus on how to make it work well. To do that, we want policies that are commodity specific. We want policies that cover, for the most part, true natural disasters, not engineered disasters, manufactured disasters or economic shortfalls, and we want a policing mechanism that discourages insurance farming.
Thank you for conducting this hearing, Mr. Chairman, and allowing me to be here today.
Mr. POMBO. Thank you.
[The prepared statement of Mr. McClung appears at the conclusion of the hearing.]
Mr. POMBO. I thank all the panelists for their testimony.
Mr. McClung, I would like to start with you and then have the other members of the panel respond to it. Recently, there has been a lot of talk about expanding a NAFTA-type program into Central and South America. Without actually having a bill in front of you or legislation in front of you, generally how do you feel about thator the organization that you represent?
Page 40 PREV PAGE TOP OF DOC Mr. MCCLUNG. If that program were to mirror the current NAFTA that we have now, I must tell you that many of my producers would have real mixed emotions about it.
If you look at Texas fruit and vegetable production in recent years, perhaps the company that stands out most visibly would be Star Produce in the west side of the Rio Grande Valley. That is the company that everybody sort of thought of as the Texas answer to California and Florida. Star Produce as of this year is still importing product from Mexico and growing a little bit of product in Mexico, but they have ceased domestic operations as a practical matter. The reason is very simple. They can't compete with the foreign imports.
That is true throughout south Texas. Particularly in those areas in the country where you are talking about commodities that are readily produced in Latin America and elsewhere in the world, you have a real problem.
We recognize that the country overall benefits from the macroeconomics of those kind of agreements that benefit the United States, but agriculture, by and large, producers do not benefit. All of that said, of course, we would have to look at the specifics of an expanded program.
Mr. POMBO. Mr. Johns.
Mr. JOHNS. I mirror Mr. McClung's ideas on that. If it has the same shortcomings as the NAFTA, I believe Florida would be against it.
There are some triggering mechanisms that are not being used and there are some methods of monitoring the flows of commodities that come across that I understand the reason behind it was to be able to level the playing field, but it doesn't seem like it has leveled. It seems like NAFTA has made it even more unleveled. So I would say, if it is along the same lines as NAFTA, our association would be against it.
Mr. POMBO. Mr. LaVigne.
Page 41 PREV PAGE TOP OF DOC Mr. LAVIGNE. Mr. Chairman, realizing the need and the push in the Congress for the trade aspects, we would have serious concerns with respect to an FTAA proposal moving forward.
Our major concern in the international arena as we go forward is Brazil. There are two players in this arena, Florida and Brazil. And if you further degrade the ability of the Florida citrus grower to compete in the international marketplace you make it a cartel and you might as well give them the whole kit and caboodle. At this point, if citrus is not exempt from the FTAA, we would oppose it as it moves forward.
Mr. POMBO. Ms. Marshall.
Ms. MARSHALL. I would mirror what the other gentlemen have said. Any of us that are producing and farming in any of the bordering States, whether it be our southern neighbors or our northern neighbors, we are not able to compete at a level playing field and we have to struggle to meet the imports that are coming in. And as a grower I would be very scared of what is being proposed.
Mr. POMBO. Mr. Wunsch.
Mr. WUNSCH. We get close to the other border, with the other partner in NAFTA. We have concern among our producers in Michigan not only of specialty crops but particularly of program crops, of the effect of the large supplies of Canadian production that is available, particularly to a strong U.S. dollar. Yet looking overall at theat again the apple industry, we know that in the first year of NAFTA the State of Washington prospered greatly from a sale of approximately $60 million worth of product to Mexico. We have got some logical hemispheric trading possibilities, and those are the areas that we should be looking first.
I think our huge, empty neighbor to the north, our rapidly economically developing neighbor to the south gives us a study in contrasts. The paradox is the amount of time we spend cozying up to the likes of the European Economic Union which must just break into laughter every time we have come to the trading table and the Chinese with whom we import $85 billion worth of goods and we only trade back about 12.
Page 42 PREV PAGE TOP OF DOC I would say, yeah, look at something in South America. Look at something in this hemisphere, but learn from what we have done. There are opportunities for all partners, but we need to become more sophisticated traders. It is obvious from our recent track record that we ain't there yet.
Mr. POMBO. Well, thank you.
Mr. PETERSON. Thank you, Mr. Chairman.
Following up on some questionsI was yesterday at the White House and they were promoting what they now call trade promotion authority because the other term is not popular any more, I guess, or whatever. But anyway my question has do with if your groups have a position on whether Congress should grant trade promotion authority to the President.
Mr. McClung, you are first in the barrel there.
Mr. MCCLUNG. Let me take the cowards way out and say my board has not discussed this matter, so it is purely a personal question.
Mr. Peterson, we are talking here about what I know as fast track. Is that what we are essentially talking about here?
Mr. PETERSON. Right.
Mr. MCCLUNG. I think that we have probablymy people probably would endorse fast track but with misgivings.
Mr. PETERSON. My folks have done that, too. The sugar people, the wheat people, we are initially against it, and then they always get kind of browbeat into supporting it, and then when things go to hell they run up here and want us to bail them out.
The sugar people were just in, saying that you guys have got to change NAFTA. Well, that is going to happen when hell freezes over. We have no leverage to change it at this point. So I guess it is hard for me to figure out why, if your groups are concerned about FTAA, which I think they should be, why you would want to take Richard and I out of the equation so we would have nothing to say about it? Because that is basically what you are doing.
Page 43 PREV PAGE TOP OF DOC Mr. MCCLUNG. Well, I think there is a hope that the administration would represent our needs adequately and that the administration should be able to do that without concern of its falling apart here in the Congress. But I certainly share your observations about it.
The sugar industry is an interesting one. Unfortunately, I don't represent those folks. But the cane people have been some of the only profitable farmers in south Texas in recent year.
Mexico is pushing hard to bring more sugar into the United States under NAFTA, and so you pose an interesting dichotomy about why we take the position we take on these things. But, nonetheless, I think my honest answer to you is, yeah, we would probably give the President fast track authority.
Mr. JOHNS. My understanding of the fast track is limited, but I would give my personal opinion on how I understand it to be. Certainly there are opportunities and situations that would evolve where the President should be able to make a quick decision. However, the system of checks and balances was set up for a reason. And if the dealI don't think there is any deal that is going to be that good that needs to be made that quickly without coming back to Congress and the folks who should be able to have the final say on it. So that is my personal opinion of it.
Mr. LAVIGNE. Congressman Peterson, we are still looking at it from our perspective. Given the ground, the make-up has changed dramatically just in the last 2 years with respect to fast track and TPA at this point in the game and the dynamics of how that will unfold.
Again, without some kind of a consideration for specialty crops such as fruits and vegetables, it would be extremely difficult for us to support a fast track proposal.
Ms. MARSHALL. Again, I don't have a group opinion, but I have a personal opinion that we do need to give the President the flexibility to enter into a fast track agreement if we need be. Also, though, we also need to look at how it is going to affect our fruit and vegetable industry and the consequences of it.
Page 44 PREV PAGE TOP OF DOC Mr. WUNSCH. I know you guys are probably tired of getting beaten up on this one, but if, Congressman, you and Richard are interested in assuming the authority, which you have now in the absence of the fast track authority with the administration, that I think we can come and revisit this apple juice dumping concentrate issue again. And I ask you, when is that going to stop?
The fast track authority has appeal because it is going to focus the authority on one individual as far as making some kind of a decision to pull the string on that. The process right now is, at best, impractical. The money that we are losing in the apple industry is hard dollars. It is not play money. That is money that has value, that took generations to amass, and it is being lost in a matter of months.
We need some sort of intervention. We need a mechanism that can respond quickly to enforce the agreements that we make. Is it the President? Well, it might be some President. It might be another President. Is it Congress? Well, in the time it takes me to grow a cherry tree, quite a few of you guys can come and go. So I don't know. Is it the Alan Greenspan of agriculture? Maybe. That is kind of the long haul approach that some of my colleagues were suggesting here. But right now what we have got isn't, with all due respect, working.
Mr. PETERSON. Well, I just might say I don't believe either one of us have either supported fast track or any of the trade agreements. We hate to tell you, but we told you so, and I just hope that people understand what the implications of this are.
I have spent the lastin the last 6 months, I went to South America three times, and I feeltrying to get the committee to go down there more to learn about what is going on because we need to understand this.
The other day I had the Australian ambassador in my office. They tell you that they have to have fast track or these people won't negotiate with you. That is not what they are telling me. They will negotiate with us. So some of this pressure I think is brought about to try to get us out of the loop, frankly, because they do not want to have to deal with us.
Page 45 PREV PAGE TOP OF DOC So I would just encourage all of you to be circumspect as we go through this process so we do not get ourselves in a situation like we are in. We can't do anything about these problems because the mechanisms that were set up in these trade agreements don't work, and we told people they weren't going to work. These side agreements they signed in NAFTA they were not worth the paper to burn them up. Some of us tried to tell them, but we are flat-earthers, those of us who do not see the wisdom of all of this, right?
So, anyway, I think I agree with you more than you think.
Thank you, Mr. Chairman.
Mr. POMBO. Mr. Putnam.
Mr. PUTNAM. Thank you, Mr. Chairman. I thank you for the hearing, and I thank the witnesses for their candid and insightful testimony.
I think you can probably see by the attendance that this is kind of the fruit and vegetable caucus of the Agriculture Committee, and all of us are on the same page when it comes to the conservation and the research and the invasive pests and the trade invasion. It is just a matter of spreading the gospel.
Many of the individual commodity groups that make up fruits and vegetables and nonprogram crops have highlighted the trade issue, and all of us in the Congress tend to be fairly hypocritical on the trade issue in terms of who we want to open new markets with and who we want to make sure we have a level playing field with. And that is part of life and part of geography and part of competition, and we all understand that. But for Ms. Marshall and the others, to what degree as we have these imports flooding the supermarkets and the retail area, to what degree will some type of labelling requirement improve demand for domestically grown fruits and vegetables?
Ms. MARSHALL. This has been a major issue discussed in the produce industry, and you do have conflicting sides to it.
Page 46 PREV PAGE TOP OF DOC My personal opinion on it as a family farmer is I would definitely like to see it happen. I know the retail industry is very much opposed to it because of the cost. But the consumer, young people coming up, they are going to be our consumer, have no idea of where their food is coming from or that when they walk into a produce department anywhere from 40 to 60 percent of that is produced somewhere else.
Many people do not realize that agriculture is the No. 1 industry in New York State, but yet the commodities that we grow, the supermarket shelves havethey are from Canada, they are from Chili, they are from anywhere in the world now, and the local industry and the industry of our State is not being supported. And I do definitely feel, that by requiring the labelling, it would help increase our domestic consumption of fruits and vegetables by just making an awareness.
Mr. PUTNAM. Mr. Wonsch.
Mr. WUNSCH. I guess I would have to echo the likelihood that in the producing community the notion of labelling would have a great deal of support. I do look at the flocks of our U.S. consumers that show up at the Home Depot every weekend, strip the shelves bare of hardware goods made in China and India and here, there and everywhere and not really give a rip about the point of origin and ask myself, what is the importance of labelling? It does increase consumer awareness.
We do have to remember that we were looking at trade as a positive. That means, for instance, if we are in a hemispheric arrangement we are looking at South America for a lot of our fresh veggies and fruit and things in the off season. For the consumer, that is a plus. Sensitivity to labelling, point of origin from the consumer point of view, less every day.
Mr. PUTNAM. Mr. Johns.
Mr. JOHNS. Thank you.
I was just informed that in the State of Florida since 1979 country of origin labelling has been a State law, and the consumers today are 90 percent in favor of that, and they like it.
Page 47 PREV PAGE TOP OF DOC Also, the packer recently did research onI kind of lost my train of thoughtis that nationwide more than half of U.S. consumers had no idea that their store sold anything but produce from the U.S. They were unaware that it came from a foreign country. That is food for thought, I think.
Mr. PUTNAM. Mr. McClung.
Mr. MCCLUNG. If you look at the statistics on why consumers buy what they buy in the produce section, it has much more to do with quality and appearance than it does with origin.
But I alsowe are in the middle, as you all probably know, of the melon season in this country now. Well, cantaloupe and to some extent honeydew have taken a very hard hit here in the last few weeks because of a salmonella contamination problem that has been widely discussed that has caused a couple of deaths and many illnesses in many States. And those melons came from Mexico. Now, it may be that origin labelling in the times of the food crisis or food emergency like that would have more bite with consumers than they do in normal times when people are simply looking at the product and considering the cost. So I think that we would alwaysproducers certainly support country of origin labelling, but I also believe a little like Mr. Wunsch that it may not be all that important in day-to-day commerce.
Mr. PUTNAM. Mr. LaVigne.
Mr. LAVIGNE. As you look at it, echoing what Mr. McClung just said, the consumer is not sure where that product has come from. But one of the biggest burdens growers face today is compliance to make sure that we are producing a wholesome, safe product that our Federal Government requires us to do; and I think country of origin labelling gives some assurance to the consumer that we are following those guidelines, be it pesticides or other water issues in the fields and the groves and that kind of thing.
So Florida has had this on the books for 20 some odd years. It has been effective. I guarantee you the grocery stores have not gone out of business in Florida. They open a new one just about every week. And it is something that the consumer should know. They know it in every other country in the world.
Page 48 PREV PAGE TOP OF DOC Mr. PUTNAM. Thank you, Mr. Chairman.
Mr. POMBO. Mr. Johns, just to follow up on Mr. Putnam's question, I think for us the question becomes, if it has been on the books for 22 years or 23 years in Florida, has it made any difference in terms of the percentage of domestically produced produce the consumer buys? And how does that comparehow does it compare in Florida versus, say, Georgia in what they buy?
Mr. JOHNS. Mr. Chairman, I wouldn't have those numbers off the top of my I wouldn't be aware of those.
Mr. POMBO. If you can get those, I would be interested in those.
Mr. JOHNS. I believe we can get those, without question, yes, sir.
Mr. POMBO. OK. Thank you.
Mr. POMBO. I want to thank this panel very much for your testimony and the answers to the questions. If there are any follow-up questions that we have, they will be submitted to you in writing; and if you could provide an answer for the committee so it can appear in the committee record.
Mr. PETERSON. Mr. Chairman, I forgot to askI was wondering if they could grow square watermelons yet.
Mr. POMBO. Well, thank you very much. I will excuse the panel. The record will remain open for 10 days to accept statements and any additional information that you would like to produce. Thank you for your attendance at the hearing.
The hearing is adjourned.
[Whereupon, at 11:36 a.m., the subcommittee was adjourned, subject to the call of the Chair.]
Page 49 PREV PAGE TOP OF DOC [Material submitted for inclusion in the record follows:]
Statement of William J. Lyons
Chairman Pombo and Members of the Subcommittee, I thank you for holding this important hearing and for the opportunity to appear before you.
Shortly after Californians elected Gray Davis the State's 37th Governor, he asked me to serve as the Secretary of the California Department of Food and Agriculture. Prior to then, my family and I operated a diversified farming operation centered in the heart of California's Great Central Valley. This experience has given me a firsthand understanding of the challenges that face our family farmers. As head of CDFA, I have gained experience in the challenges that state governments face to protect and promote agriculture. I am proud of my Department's 3200 employees who work hard to ensure that quality food reaches the consumer, that exotic pests and diseases are detected and eradicated, and that there is an equitable marketplace for California's agricultural products. Today, I would like to describe California's fruit and vegetable community, its current economic situation, and the critical issues it faces.
CALIFORNIA FRUIT AND VEGETABLE INDUSTRY
The history of the California fruit and vegetable industry is a history of the state. Early farmers transformed exotic luxury items, such as citrus, almonds, and walnuts, into American staples. In the process, these farmers sold not only their crops but also promoted the state itself. Generations of Californians came to the state enticed by the attractive scenes on packing crates and the promise of long growing seasons and rich soil. Today, California leads the Nation in the production of 79 commodities and produces 50 percent of the nation's fruits and vegetables.
Like so much of the farm economy, the fruit and vegetable industry faces low prices and declining markets. While some commodities are faring better than others, agricultural property values have declined throughout California and the effects of the drastic consolidation of processing facilities are still having an impact on the economy of the Central Valley. As this subcommittee knows better than anyone, these are tough times for agriculture.
Page 50 PREV PAGE TOP OF DOC In addition, California's farmers and ranchers, like all of our citizens, struggle with enormous energy costs. Rates for electricity for farming operations are up 30 percent and diesel prices are soaring. Through our new fast track approval process, the State recently has licensed 16 new power plants, the first one just four months after Governor Davis took office. Ten plants are currently under construction and four will be online this summer. Meanwhile, though California leads the Nation in electricity conservation, our farmerslike citizens throughout the western states face huge energy prices.
II. FLEXIBLE POLICIES FOR DIVERSIFIED AGRICULTURE
With this background, let me turn to the policy issues facing the fruit and vegetable industry. I have been working with the NFACT and the National Association of State Departments of Agriculture to assist in your efforts to craft a new farm bill and to help all America's farmers and ranchers meet the many present and future challenges facing production agriculture.
In 1999, the heads of agricultural departments in New Mexico, Florida, Arizona, California, and Texas formed an organization to advocate positions that benefited our states. All of these border states have significant fruit and vegetable production, which was a motivating factor in our forming this coalition. NFACT has coalesced into an organization known for its strong stance on issues such as animal and plant health, food safety, conservation, international and domestic marketing, research and risk management.
As we headed into the farm bill process, NFACT states held public hearings for producers to express their concerns about the future of agriculture. In California, we held 10 hearings and are in the process of reviewing the comments from those hearings. As you know, producers are looking at whether or not their future remains with the land.
California's agriculture is marked by its diversity, and by our farmers' willingness to grow for the market and to meet the changing tastes of consumers. Five years ago, we did not even track production of cilantro because it was insignificant; last year, this crop brought $17 million to California producers. Throughout this country, farmers are switching from growing a commodity to growing a product for a specified market. As important as this is for domestic markets, it is critical to winning international customers. For example, California now produces more cherries for the Japanese market than for the domestic market and is also filling a niche market in Japan for high quality short-grained rice.
Page 51 PREV PAGE TOP OF DOC A farm, like any business, must have the ability to anticipate the needs of its customers and the demands of the market. Government policies that provide farmers with the tools to help themselves will empower farmers to succeed in the marketplace. Consumers have shown they will pay a premium for items that meet a particular desire and farmers who satisfy this niche may capture that additional revenue. This entrepreneurial spirit, long a tradition in California, is increasingly part of agriculture nationwide.
Farm policy may either foster this dynamic, market-oriented approach, or stifle its growth by clinging to policies that no longer assist farmers. The next farm bill must account forand encouragea diversity that accommodates all agriculture. As an example, many of the existing conservation programs do not address the needs of California's agriculture. Often the payment levels do not reflect the cost-of-living or land values in this state and the requirements appear to be drafted based on farming methods inconsistent with California agriculture. The next farm bill must provide assistance in marketing, creation of a level playing field for international competition, better access to conservation programs, tools to manage risk, and other market-based programs that will empower producers. Many important recommendations to accomplish this are included in NASDA's farm bill policy, which I recommend to you.
III. CRITICAL ISSUES
a. Pests and Disease Issues
Without diminishing the many issues facing the specialty crops, I wish to highlight two critical struggles: One is the continuing threat from exotic pests and diseases and two, is the competition from foreign growers benefiting from enormous export subsidies.
The agricultural industry remains at peril for pests and diseases that may wipe out entire agricultural operations. This subcommittee recognized early that Pierce's disease threatens California's wine industry, as well as other commodities. In the last year, we've built a model program involving Federal, state, local, and industry stakeholders, all of whom contribute to the effort.
Page 52 PREV PAGE TOP OF DOC The California grape industry has long coped with Pierce's disease. In the 1880's, the disease destroyed 40,000 acres of grapes around Anaheim Significantly, a new vector transformed this century-old problem into a multi-billion-dollar threat to California's agriculture. The glassy-winged sharpshooter was detected in California in the early 1990'smost likely arriving on plants transported from an infested area. This insect is known to feed on hundreds of species of plants, using its needle-like mouth to tap into the water-conducting tissues of a plant. In addition to its mobility and its varied food sources, it is an especially dangerous vector because of its sheer thirst: equal to, in relative terms, a 150-pound human drinking 4,300 gallons of water a day. The combination of the sharpshooter and Pierce's disease has been likened to matches and gasoline. Our task is to keep them apart while we research long-term solutions.
Pierce's disease reminds us that prevention of the spread of pests and diseases is far cheaper than the enormous cost of controlling a pest or disease and the damage they inflict to both agriculture and the economy in general.
As you know, California is a hub of international trade and travel. This is of immense economic benefit to the state and we support the continued expansion of markets and the flow of goods and of people. However, it also exposes the state and the Nation to increased risk from exotic pests and diseases. Protecting the Nation from this risk is a fundamental role for government and it is an issue primarily of resources: Congress needs to appropriate adequate funds to protect American agriculture.
I wish to acknowledge this subcommittee's leadership in passing the Plant Protection Act. While I understand that appropriations are different from the issues debated in a farm bill, I ask you to continue to address the issue of adequately funding our safeguards and look for innovative methods of financing prevention and eradication efforts. We look forward to the upcoming expiration of the restriction on the use of AQI user fees and respectfully request that Congress view this as an opportunity to increase funding for this critical safeguard, and not as a chance to move those appropriated dollars to some other account.
Page 53 PREV PAGE TOP OF DOC I come here as a supporter of trade and as an official of a state that exports $6 billion in agricultural commodities. My comments about pest issues are not designed to erect a protectionist wall around the state. Rather, with the enormous benefits from bilateral trade, comes a responsibility for increased vigilance to protect our producers from pest and disease threats, such as Medfly and the glassy winged sharpshooter.
B. TRADE THAT IS FREE AND FAIR
On the issue of trade, I must raise an issue that is having serious impacts on California's specialty crop industry. Without question, some growing areas enjoy competitive advantages over others. This will always produce winners and losers in a global competitive market. However, when the European Union directs its subsidies toward its fruit and vegetable growers, domestic growers are unfairly disadvantaged, both in foreign markets and at home.
The primary forum to raise such an issue is during the WTO negotiations and I hope Congress in general and this subcommittee in particular will insist that U.S. negotiators take on this topic and come away with solutions. The consequences in California and throughout the country are painful. In our canned peach industry, for example, overproduction and foreign subsidies have eliminated our foreign markets and led to an influx of foreign product in the U.S. that is being sold at give-away prices. Our citrus industry faces unreasonable competition from EU countries that support their industries through a variety of assistance programs, reported by the European Commission to exceed $750 million.
California is working to strengthen its markets. On June 1st of this year, Governor Davis announced he was dedicating $5 million to create a ''Buy California'' campaign to promote local products to local consumers. But we cannot undertake this effort alone; we need a combination of trade and market promotion actions at both the state and Federal levels,
In my testimony today, I have attempted to raise some of the challenges facing this industry. As leaders, it is our job to protect and promote this nation's bountiful harvest, in all its diversity. Further, we want family farmers and ranchers to thrive and prosper, not just because they are an important source of economic growth, but also because they represent a way of life. They are a unique and indelible part of our national character.
Page 54 PREV PAGE TOP OF DOC Again, I thank you for having invited me to testify. At this time, I would be happy to answer any questions you may have.
Statement of Andrew W. LaVigne
Mr. Chairman, Members of the Subcommittee, good morning. I am Andrew LaVigne, Executive Vice President and CEO of Florida Citrus Mutual, a grower cooperative association representing over 11,500 grower members of processed and fresh citrus products in Florida. I appreciate the opportunity to testify before you today regarding the reauthorization of the Federal farm bill. We see this process, and eventual revision of the United States' farm policy, as a new and unique opportunity for the Florida citrus industry.
Our industry produces citrus on 850,000 acres in Florida. We are the number one producer of oranges for processing in the U.S. and number two in the world behind Brazil. We are the number one producer of fresh and processed grapefruit in the world. During the 19992000 season, Florida harvested 298 million field boxes of citrus representing 76 percent of the U.S. citrus production. Florida's citrus industry provides 27 percent of the state's total farm receipts. Of the citrus harvested, 89 percent was processed into juice and the remainder was sold as fresh fruit. We have in excess of $8 billion dollars worth of economic impact on our state.
Most of Florida's producers are third and fourth generation citrus growers who would prefer to pass that legacy on for many generations to come.
If you consider the number of acres we have in production, we offer an invaluable environmental benefit to the fragile ecosystem of Florida. Our groves provide ideal habit to wildlife and endangered species; we combat exotic and noxious weeds; we provide needed rainwater recharge and storage; as well as many other benefits.
Unfortunately, we are now completing a season that will likely prove to be the most economically devastating we have experienced in over 20 years. The on-tree value of this year's crop is estimated at $805 million, which would be down 30 percent, or $350 million, from last year and the lowest value crop since the 198586 season. Much like growers across this nation, Florida's citrus growers cannot afford to have too many more seasons like this one.
Page 55 PREV PAGE TOP OF DOC Mr. Chairman, as you will no doubt hear several times today, farm gate receipts for the produce industry are reaching $30 billion. The fruit and vegetable sector is a strong and viable part of the U.S. agriculture industry and a vital part of the diet of America's citizenry. I will not attempt to repeat much of the testimony you heard earlier, but I will offer some suggestions on revisions to our farm policy that will help citrus, as well as the fruit and vegetable industry, remain a strong part of American agriculture.
Federal Farm Programs. Florida Citrus Mutual played an active role in the United Fresh Fruit and Vegetable Association's (UFFVA) farm bill Working Group and we support a majority of the proposals contained within the statement presented to the House Agriculture Committee on May 2, 2001. However, there are a few areas of specific interest to Florida's citrus growers and I would like to highlight those at this time.
Most importantly, we strongly support the working group's overall farm policy goal:
''Federal farm policy should be developed for the produce industry which ensures good producers are not put out of business due to forces beyond their control. Congress should utilize the farm bill to allocate funding that ensures the produce industry receives a proportionate share of the outlays of our industry program priorities. This investment would fund program priorities including: conservation incentives; loan mechanisms; nutrition; international market access and food aid; pest and diseases prevention initiatives; marketing and fair trading priorities; risk management tools; infrastructure investments; research priorities; food safety initiatives, and other initiatives.''
With respect to actual farm programs for fruit and vegetable growers, I want to state that many industry umbrella organizations have presented proposed farm bill programs for the industry. Given the breadth and diversity of these programs, we are currently still evaluating them for their potential impact on our growers. So, at this time, we are not prepared to provide a position of support or opposition to any programs that may be established specifically for the fruit and vegetable industry.
Page 56 PREV PAGE TOP OF DOC However, I would like to add that, from a conservation perspective, the citrus industry, as well as other perennial crops, provide a unique benefit to our environment. Citrus trees are planted with the expectation of a twenty to twenty five year productive lifespan. Growers do not plant groves in anticipation of changing crops next year or in five years.
This extended productive life greatly benefits this nation's air, land and water resources.
Other benefits to the environment from citrus production are:
On sandy soils, land that remains planted in citrus provides significant water recharge to the Floridian aquifer, Florida's main source of drinking water.
This planted acreage reduces the spread of noxious and exotic weeds.
Citrus trees provide an important CO2 exchange function for the environment.
Land planted in citrus provides a rich wildlife habitat (especially for threatened and endangered species requiring large areas such as the Florida Panther).
Development mitigationdecrease infrastructure and sprawl.
In general, agrochemical inputs on citrus land are non-intensive and comparatively minimal over the course of one season to the next.
The conservation program concept is attractive to our growers because of the greenbox nature of such programs under WTO guidelines.
Federal Nutrition Programs
The greatest opportunity the U.S. Congress has to impact the health of all Americans is to work to improve the dietary education and eating habits of our citizens. We hear on a daily basis about the benefits of consuming ''five fruits and vegetables a day'' for promoting health, preventing disease, and improving our overall quality of life. Therefore, agriculture policies related to nutrition programs should support strategies that help Americans reach national health goals and ultimately reduce health care costs.
Page 57 PREV PAGE TOP OF DOC The Florida citrus industry has spent a great deal of grower dollars to research the health benefits of Florida orange juice and fresh citrus products. Those benefits are supported by the American Cancer Society, American Heart Association, and the March of Dimes. It is imperative that the policies proposed in the farm bill reflect these benefits.
One key area of interest to us, under the Federal nutrition programs is language that seeks to optimize the amount of 100 percent fruit juice, fresh fruits and vegetables provided under the USDA feeding programs (including School Breakfast, School Lunch, Child and Adult Care, TEFAP, FDPIR, Elderly Nutrition Programs, and CSFP). Incentives should be included in the legislation to encourage states to purchase domestically grown commodities.
Agricultural Research. Sound, progressive agricultural research is the key to the Florida citrus industry remaining competitive in this global environment. The demands on growers have increased dramatically over the last decade and new, innovative production practices must be researched and refined in order to keep the industry in production.
The U.S. citrus industry has been working together to coordinate and consolidate research across the country. Through cooperative funding and research, USDA-ARS, USDA-CSREES,
land grant universities and other interested entities are seeking to find solutions to challenges such as: improved harvesting efficiencies; the prevention, detection and eradication of exotic pests and diseases; improved production and harvesting systems; new pest and disease resistant varieties; increased research on the nutritional benefits of 100 percent orange and grapefruit juice, and fresh citrus products; and many other areas of research. The research title of the farm bill should strongly support such nationally coordinated research efforts.
The fruit and vegetable industry is under siege from exotic pests and diseases being introduced into this country. Just over the last few years, we have seen introductions that have devastated growers and created a public relations nightmare for USDA, state departments of agriculture and the impacted industries. We simply cannot allow these introductions to continue and research is the key to ensuring the risk of introducing exotic pests and diseases is dramatically curtailed.
Page 58 PREV PAGE TOP OF DOC Our main recommendation under the research title is to establish a $10 million revolving account that would provide matching dollars to commodities seeking to improve harvesting efficiencies by developing mechanical harvesting machines and abscission chemical products.
The Florida citrus industry is currently spending in excess of $2 million a year to develop such equipment and chemicals. USDA spent a great deal of time and money in the 1950's and 1960's to improve harvesting for major commodities and has since basically suspended the program. Cooperative research and funding between producers, USDA, state universities, and private entities must be reinstated in order for producers to stay competitive with countries whose growers pay labor on a per day basis the equivalent of what Florida producers have to pay labor on a per hour basis. Enactment of legislation authorizing funding and directing the ARS and CSREES to conduct research in the areas of mechanized harvesting and new production and processing methods for fresh and processed fruits and vegetables is also important.
Pest and Disease Exclusion Policy. The Florida citrus industry strongly supports the continued efforts by members of Congress to implement legislation that enacts the 300+ recommendations contained in APHIS' ''safeguarding American Agriculture Report.'' It is vitally important that we update our procedures for pest and disease detection, interdiction and eradication. As I stated earlier, American agriculturalists cannot continue to sustain the losses they have incurred through the introduction of foreign pests and diseases.
It is our hope that given the extremely high cost of eradicating citrus canker, plum pox virus, Pierces disease, Asian long horn beetle, and other diseases, the USDA, Congress
and state governments will realize that strong interdiction and detection programs are much cheaper than eradication programs.
In addition to general research, our specific legislative recommendations in this area are:
Page 59 PREV PAGE TOP OF DOC Enact a provision that establishes a $50m revolving emergency eradication/research fund. This will enable USDA-APHIS to address pest and disease interdiction and eradication programs under the direction of the Secretary.
Enact a provision that sunsets Sect. 917(5) of the FAIR Act allowing for all user fees collected under the Agricultural Quarantine Inspection (AQI) program to be utilized by the AQI program.
International Market Access and Food Aid Programs. The Florida citrus industry has benefited greatly from the Market Access Program over the last decade. The MAP program, and its successor programs, have enabled growers to develop and compete in international markets against commodities that are greatly subsidized by foreign governments.
These programs must continue, in a modified form, in order for the fruit and vegetable industry to participate and take advantage of the international markets that our government has worked so diligently to open.
Our recommendation for the trade title is the enactment of legislation to increase funding authority for the Market Access Program (MAP) from $90 million to $200 million. In addition, the MAP program should be altered to provide flexibility in expanding the five-year stipulation for international product promotions under the MAP based on existing market access and trade barriers.
Risk Management. Since the passage of the Agricultural Risk Protection Act (ARPA) by the 106th Congress, the industry is aggressively working with RMA to develop innovative, flexible risk management programs that are more suitable for citrus growers. Tree insurance, fruit insurance and revenue plans are all in various stages of development and modification.
The farm bill needs to reiterate Congress' support of the provisions of ARPA and encourage RMA to move as expeditiously as possible to implement those provisions.
In closing, one key message that the Florida citrus industry has asked me to impart on this subcommittee, and the Agriculture Committee as a whole, as you move forward in reviewing and reauthorizing the Federal farm bill, is that a sound, domestic supply of fruits, vegetables and 100 percent fruit juices is important to our nation's economy, security, and health. We ask that you consider our recommendations for the 2002 farm bill in a favorable light. Our industry, like all other agriculture industries across this country, is
Page 60 PREV PAGE TOP OF DOCstriving to remain competitive in an increasingly global marketplace. The policies enacted in this new farm bill will lay the groundwork for the long-term viability and sustainability of our industry.
I appreciate the opportunity to testify before you on behalf of Florida's citrus growers. We stand ready to assist you in this process in order to come to a conclusion that is favorable to the fruit and vegetable industry, as well as U.S. agriculture in total.
Statement of James T. Griffiths
This Statement is filed on behalf of Citrus Grower Associates, Inc. (CGA) of Lakeland, Florida. CGA is a non-profit cooperative association whose active grower membership represents something close to 100,000 citrus acres in Florida. This membership does not include any members who are intimately associated with a processing facility. Membership is scattered throughout the entire citrus growing area.
The writer, James T. Griffiths, is a grower. He has been an integral part of the Florida citrus industry since going to the Florida Citrus Experiment Station in February 1946 to begin a scientific career investigating the biological control of citrus insects. After working for the University of Florida until 1951, his career has included three years as a fertilizer salesman, 8 years as a production manager managing some 6,000 acres of citrus grove, eight years as general manager of a citrus processing and packing facility, 13 years as Special Projects manager for Florida Citrus Mutual, and since 1981 and continuing to the present time, he has been the Managing Director of CGA.
According to the USDA 2000 Fruit Tree Census, the Florida citrus industry is comprised of some 665,000 acres of oranges, 118,000 acres of grapefruit and approximately 50,000 acres of mandarin type specialty fruit. California-Arizona contains about 216,000 acres and Texas about 29,000 acres. Florida citrus is a part of a horticulturally diverse tree fruit industry in the United States. The tree fruit industry is part of the fruit and vegetable industry which offers U.S. consumers the safest and the best quality produce grown anywhere in the world. Collectively, these farmers have been independent. They have been offered few subsidies from the Federal Government over the last 65 years except for the benefits of USDA research, a few conservation programs which have been available from time to time, as well as some direct help following disasters such as freezes.
Page 61 PREV PAGE TOP OF DOC Over that period of time, the Federal Government had failed to successfully prevent the introduction of exotic pests. Diaprepes root weevil and the Tristeza virus plus its vector, the brown citrus aphid, are examples of this failure. The platitudes of those who extol the benefits of ''free trade'' and have made moves in that direction with NAFTA and now with Free Trade for the Americas are misguided in that they seem to believe that the United States is entering into a world of ''free trade'', rather than a world of ''managed trade'' in which it appears that others manage better than the United States.
The citrus industry of Florida has evolved over the last 75 years from a parochial fresh fruit industry to being the second largest producer of orange juice and the
primary producer of grapefruit juice in the world. That has been accomplished under the security of a protective tariff that was created by the Smoot-Hawley Tariff Act of the early 1930's when frozen concentrated orange juice was not even dreamed about. In general the Florida industry only became aware of that protective situation following the disastrous freeze of 1962, but we had built an industry based on that Federal security
We are competitive with the Brazilians in growing oranges and in processing them, but because of the differences in labor costs that are the direct result of Federal minimum wage and regulation, we cannot compete in the cost of harvesting the crop. We will never be able to compete with the low cost labor found in Mexico, Central America and Brazil when it comes to harvesting. Not only can we not compete cost wise, but without labor from Mexico and Central America, which is often illegal, we could not even get the
crop picked today.
Outlined below are those suggestions that can be useful in the continuance of our competitive capability. This Committee must decide whether or not they are all proper inclusions for the Farm Bill. These are certainly pertinent to the maintenance of the Florida citrus industry and with it of Florida's rural social and farming society. This is a society which, for the good of Florida, needs to be maintained.
Page 62 PREV PAGE TOP OF DOC The United States' retail market is the envy of the world. Therefore, there is a real push on the part of most other worldwide producers to want to share in the monetary benefits of this market. The entry of Spanish Clementine tangerines into the United States over the past few years has utterly devastated the tangerine market for domestic producers. Maybe we sold more wheat or maybe we sold more corn, but we've sold tangerines at much lower prices in the United States as a result. That may be a benefit to the American consumer, but it is a difficult situation.
If ''free trade'' means growing and producing where it can be performed the most economically, then we should be growing oranges on the sand hills of Central Florida, but if it means only economical production where harvesting wages are low and labor is plentiful, then the American citrus grower, fruit grower or vegetable grower is on his way out of business. Free trade is a euphemism espoused by those who too often do not properly understand. Adam Smith literally meant laissez faire; he didn't mean ''managed trade in a regulated world''. That is where we live today.
TARIFF:The Florida Citrus industry requests that the current tariffs at their currently agreed to levels have no further reduction until such time as the Florida citrus industry, through
innovation, mechanization and labor reduction is able to compete with Brazil and Mexico in the cost of harvesting the crop. The Federal Government can be helpful to us in that manner.
The tendency of the Federal Government in recent years to condone the consolidation of businesses at all levels has crated a trend in the Florida citrus industry where the processors are getting larger and are often owned by external capital. Individual farmers are becoming fewer and they are being replaced with large corporate enterprises, which are commodity oriented. And the chain store is consolidating and bargaining more effectively. It may be time for another Teddy Roosevelt to look at consolidation, or trusts, as an anti-competitive wedge and act accordingly.
Page 63 PREV PAGE TOP OF DOC HARVESTING RESEARCH: There is a need to expand federally sponsored research, either directly through USDA-ARS or through grants. Florida needs expanded work in developing and improving harvesting equipment, so as to mechanize fruit removal either with the use of robotics for fresh fruit operations, or for processing through mass harvesting removal by shakers with the inclusion of abscission chemicals.
We in Florida can produce a box of fruit or a pound of orange solids as economically, if not more so, than anywhere in the world. We certainly produce more boxes of fruit per acre than anywhere else, but the minimum wage, OSHA, EPA regulations, etc. price labor out of the market for competitive harvesting.Therefore, we must mechanize in order to compete in the world market. Since 1992, more than $7 million in grower money paid to the Florida Citrus Commission has been diverted for the use in the development of mechanical harvesting devices. This includes about one-half million dollars each year to work on abscission chemicals. It is the belief within the industry that abscission chemicals offer the opportunity to enhance the productivity of hand picking or robotic picking, but it also offers the opportunity to reduce the cost of the energy required to shake the tree to remove the fruit. An abscission chemical properly applied might put all the fruit on the ground in a matter of two or three days where it can be picked up just as readily as the golf ball sweeper picks up golf balls on the driving range. Expanded research and Federal dollars added to Florida dollars can make this a reality, not only for the Florida citrus grower but also for tree crops throughout
the United States.
MEDICAL RESEARCH: Recent developments in the understanding of enzyme systems both in the intestine and the liver clearly indicate that there are chemical compounds in grapefruit juice which have the ability to increase the uptake of drugs, particularly those expensive prescription drugs associated with lowering cholesterol and with controlling blood pressure. It would be desirable for the USDA to include grant money to allow a better understanding of this phenomenon so as to be able to lower drug costs, particularly for senior citizens, while at the same time combating the drug propaganda that people should avoid drinking grapefruit juice while taking the drug.
Page 64 PREV PAGE TOP OF DOC TREE INSURANCE RESEARCH: There is also a real need for expanded economic research activities to develop and explain how tree insurance against tree loss, not only for citrus, but for other tree crops, could be properly funded so as to legitimately allow the individual grower to insure himself against loss from disease or acts of god in the same way that he insures his home against the perils of fire and wind storm. Under a condition where the mortgage companies gain security by requiring tree insurance, costs should be reasonable.
INCOME INSURANCE: Insurance against the loss of income, based on perhaps the previous 5 years of income tax statements, would be a useful tool for keeping the citrus farmer in business.
MINOR USE CHEMICALS: Talking about harvesting and abscission chemicals would not be complete without addressing the EPA registration process for Minor Use chemicals for fruit and vegetable production. FIFRA clearly provides that EPA is to measure the danger of a given chemical against the proportionate magnitude of its use or the magnitude of the exposure of the entire population. Thus, a true Minor Use chemical would be a product used only on a Minor Use crop. Florida oranges, although representing about 650,000 acres, is a truly Minor Use when that is the only crop using the material. Even if we put it on every acre, the potential risk from that use can be nothing like that when the chemical is applied to millions of acres, as many chemicals are today. However, EPA has never recognized this situation.
Minor Use today is defined as a chemical for which efficacy has been demonstrated on the crop, but only after it has been shown to be safe because it has already been used on a major use crop. That is not what was originally intended. There needs to be a change in that attitude and in those regulations. We would be hopeful that this could be included, not just for an abscission chemical for harvesting, but for anything else that we might
want to use exclusively on a true Minor Use crop.
The suggestions made by organizations such as United Fruit and Vegetable Association, American Farm Bureau, Florida Citrus Mutual and the Florida Fruit and Vegetable Association certainly apply to citrus as they do for other fruits and vegetables. We endorse those requests. We have tried to emphasize here some things that could be especially important for maintaining citrus on the sand hills of central Florida and the flat lands that extend Southwest of Okeechobee and along the east coast of Florida.
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Statement of Karen Ross
The California Association of Winegrape Growers (CAWG) would like to provide comments for your consideration regarding the upcoming discussion on the farm bill. CAWG was created in 1974 to be an advocate for California winegrape growers on state, national and international issues. CAWG represents the growers of more than 60% of the state's annual tonnage of grapes crushed for wine and concentrate. The 2000 crush totaled a record 3.95 million tons with an approximate value of $1.89 billion. Total winegrape acreage is estimated to be 568,000 acres including 110,000 non-bearing acres.
Two factors have contributed to the recent dramatic growth in winegrape plantings. One is strong consumer demand at a time of short harvests which has resulted in high prices and excellent returns on investment. The other has been low commodity prices which have caused growers to convert cropland to high-value specialty crops like winegrapes that were enjoying higher prices. As with other farm crops, this will change if the delicate balance between supply and demand turns into a cycle of excess supply, spiraling prices and low or no profit margins. It is clear to us that this country must have programs in place to maintain the economic health of all segments of agriculture. As a representative of a crop that traditionally has not been part of farm bill discussions, our comments will provide our general view of what this country's ongoing farm policy should address.
California's vineyards have tremendous potential for keeping land in agricultural production, making agriculture an attractive career choice for future generations and being the global market leader in quality, value and customer choice. It is our position that now is the time to invest in the fundamentals and partner with government to protect and enhance all of agriculture's ability to compete in the global market.
Price Support Programs Must Not Allow Specialty Crop Production on Diverted or Set Aside Acres
Page 66 PREV PAGE TOP OF DOC Winegrape growers do not have a price support program such as that for corn, wheat or cotton. We believe we are doing well without such a program. Therefore, we strongly urge that price support programs for other crops not contain features, which could adversely impact winegrapes. In situations where a program allows acreage to be diverted in exchange for complying with requirements of that program, we oppose allowing specialty crops such as winegrapes to be produced on that diverted acreage. To allow participants in farm support programs to become winegrape growers on set-aside or diverted acreage would provide an unfair advantage to the subsidized grower and could lead to over-production of winegrapes and a dilution of quality of winegrapes.
Increase the Authorization Level of the Market Assistance Program (MAP)
We strongly support HR 98 by Representative Hastings, which would increase MAP's authorization lever from $90 million to $200 million annually. MAP provides matching funds for pre-
approved generic promotion efforts for the export of agricultural commodities. Our wine industry has been an active participant in this excellent program. Exports of U.S. wine continue to grow and with our recent plantings we now have the capacity to increase our global shipments even more dramatically. We ask that this legislation be included in the farm bill or be passed as a separate bill without delay.
Increase and Broaden Research and Extension
Research is the key to keeping American farmers competitive in global markets. Funding for agricultural science and education has stayed nearly level while the challenges facing our food production system have continued to escalate. That is why we urge Congress to double funding for agricultural research, extension and education over the coming five years. This effort will require an increased investment of $500 million in FY02. It is absolutely critical that we ensure that a sufficient allocation is provided to meet the nation's current and future food and agricultural science and education needs.
Page 67 PREV PAGE TOP OF DOC Research is a basic part of the infrastructure on which agriculture can build its future. Whether it's to focus on health and nutrition, improving quality and taste, increasing efficiencies and lowering costs of production, or improving our ability to farm in harmony with nature we need to make up for those years when basic agricultural research has not been funded adequately. At the same time we must also increase support for Cooperative Extension Service. Our farm advisors are the transfer agents from lab to vineyard. Grower outreach, demonstration and education of research findings is critical to making the research investment an effective tool for the end users. California winegrape growers are especially interested in seeing investment in the Agricultural Research Service and Cooperative Extension for the development of sustainable farming practices. We need technical support to help develop biologically and environmentally sound practices for grape growing so that we continue to be economically viable.
Protection from Invasive Pests and Diseases
In a world with free and easy movement of people, products and plant materials, we increase the chances of exotic pest and disease infestations that could potentially devastate our agriculture and environment. In a borderless global economy, there has been a measurable increase in new intrusive pests entering the U.S. and California. Right now, the California winegrape industry's existence is at stake due to the onslaught of Pierce's Disease carried by the Glassy-winged Sharpshooter.
The constant threat of the introduction of invasive pests demands that we be prepared to respond immediately to new infestations and, more importantly, be proactive with research and planning to detect and prevent new infestations. APHIS must be fully funded to protect agriculture and its export markets. Through port inspections, quarantine treatments, detection surveys and eradication efforts we can prevent the introduction of new invasive species and the spread of existing ones. It is critical that our nation's agriculture and natural resources be protected from foreign countries' pests, even though we favor free trade. We need state and Federal Governments working closely together to eliminate conflicting actions and to assure a rapid response when new pests are introduced.
Page 68 PREV PAGE TOP OF DOC We also need to invest in research and technology to establish basic scientific knowledge about invasive pests and our ecosystems. With the requirement of the WTO system for all member countries to treat all trading partners equally and the same as domestic producers, it is critical that we develop state-of-the-art science to apply to pest risk assessments and analyses in order to comply with international standards and still protect our agriculture and natural resources.
Support Existing Conservation Programs and Create New Conservation Initiatives
We support the continuation of conservation programs that provide technical, eduational and financial assistance to eligible farmers and ranchers to address soil, water, and related natural resource concerns on their lands in an environmentally beneficial and cost-effective manner. We understand you and Senator Smith of Oregon have introduced legislation to create a new Conservation Security Program. It is designed to provide a flexible voluntary approach to conservation practices on land in production as a complement to other Federal conservation programs. Financial incentives are an appropriate way of sharing the cost with farmers for providing environmental and natural resource benefits for all of society.
Crop Insurance Programs
While improvements have been made in crop insurance programs, vine and tree crops do not receive the benefits this program provides to traditional row crops. We urge the Agriculture Committees to support prompt implementation of the pending study on the feasibility of a crop insurance program for vine and tree replacement.
Your support for the wine and winegrape community is greatly appreciated. Please do not hesitate to contact me or our government affairs advisor, Fowler West of The Washington Group (202/7892111) if you have any questions.
Page 69 PREV PAGE TOP OF DOCStatement of John M. McClung
Mr Chairman, members of the subcommittee, my name is John McClung, and I am president of the Texas Produce Association, headquartered in the Rio Grande Valley of south Texas. Thank you for this opportunity to appear before you today.
I want to commend you and your colleagues, Mr. Chairman, for calling this hearing. U.S. farm policy, as it will be memorialized in the 2002 farm bill, is of enormous import to all of us. It is my belief that the long and difficult debate over this legislation that we all will participate in during the months ahead will be critical to not only the financial wellbeing, but perhaps the very existence, of a strong domestic agricultural sector. American agriculture today is, arguably, more fragile than at any time since the Depression years. For those of us in the produce business, who traditionally have had relatively little involvement in farm bill programs, these are uncertain times and I must admit that there is not consensus in our ranks, or at least among my members in Texas, on several key farm bill components. We recognize, however, that you, Mr. Chairman, have consistently been mindful of fruit and vegetable industry needs and we look forward to working closely with you as the process evolves.
The produce industry, in Texas, has just gone through two decades or more of economic decline. We have slipped from the third largest producer of fruits and vegetables among the 50 states to fifth, maybe sixth. We are hopeful that we have turned the corner, but in all honesty, it is too early to tell. There are many reasons for this situation, among them freezes and droughts, intense international competition, retail consolidation, and our own lack of foresight in product development, promotion and marketing. Certainly not all of these factors can be laid at government's door, but clearly we need thoughtful, enlightened Federal policy if we are to ever be able to stabilize and improve our lot.
If we are to retain a strong agricultural capacity in this countryif the Congress and the Administration believe that such a food and fiber community is desirable for national security or societal or other reasonsthen the farm bill debate can only be over how to pay for it. In other words, the American and world public must pay more, either directly in the marketplace or indirectly, through the government. I know this sounds simplistic, but when I first became involved in discussions about agricultural policy nearly 30 years ago, the average family spent some 1517 percent of disposable income on food, as I remember. The most recent figures I have seen put the percentage at just over 10. And that's after the spike in eating outside the home, which increases food costs. For our consumers in this country, the abundant food supply is a miracle. An inexpensive miracle. For foreign suppliers of fruits and vegetables, the U.S. marketplace is a lucrative magnet. For the U.S. economy overall, trade barrier reductions and international agreements such as NAFTA, are a source of strength and economic reward. But for U.S. farmers and shippers, these factors combine to make for very tough sledding indeed.
Page 70 PREV PAGE TOP OF DOC So where do we go from here? Perhaps the most contentious issue for fruit and vegetable growers and shippers has to do with direct subsidies. Most of us have concluded that we do not want, at this time, to pursue a traditional subsidy program. I concur with my associates in that decision. We have credible reasons for that position. First, we do not want to submit to the production controls that logically would attach to direct payments. Second, we do not want to forfeit our flex acres protections, although we recognize they are not assured in future legislation. Third, we know that there will be a finite amount of subsidy money to go around, and the traditional amber box recipients are ahead of us in line. Obviously, the fairness of that latter situation is suspect.
We do, however, encourage market expansion programs, both domestic and international. We want to sell more produce. Our problem in Texas isn't that we can't produce enough onions, or citrus, or cabbage, or many other crops. It's that far too often we can't sell them profitably. So we do ask you to support expansion of the Market Access Program, domestic feeding programs, and efforts to educate the public about the dietary health benefits of produce consumption, among others. I must tell you, however, that I am far from certain that sales expansion efforts will benefit U.S. producers as much as we would all intend. If I am a Central American melon producer, or a South African citrus grower, or a Mexican onion or tomato producer, I view such U.S. market expansion efforts with every bit as much enthusiasm as my U.S. counterparts, perhaps more. And if I'm a food retailer, profitability has little or nothing to do with origin. Therefore, I would ask that Congress examine every avenue for making sure that revenue from these kinds of programs finds its way to U.S. producers and shippers, and that's no easy task. We all know the initial promise and subsequent reality of market expansion under the 1996 farm bill, and I hope accept that a false promise is worse than no promise at all.
I do want to vigorously endorse conservation programs that pay farmers to take acreage out of production for environmental and/or wildlife purposes. These types of programs do put much needed money in the producer's hands, and they meet the long-term needs of all Americans, urban and rural. Along the lower Rio Grande River where I live, some 95 percent of the native Tamaulipan scrub thorn habitat is gone, cleared years ago for agriculture and urbanization. Now, we're in the process or putting some of it back. The producers I represent generally support these programs, assuming they are paid promptly and fairly for the voluntary diversion of their land. As famous as Texas red grapefruit justifiably are, our total production comes from less than 30,000 acres in eleven little counties in the southernmost corner of the state. Both private and public studies have shown that in recent years, ecotourism in those counties has contributed more to the local economy than the citrus crop. This fact is not lost on those producers who are in a position to capitalize on land diversion or other ecotourism opportunities.
Page 71 PREV PAGE TOP OF DOC Yet another area where it is possible for government to make concrete contributions to producers and shippers revolves around the exclusion of foreign pests. We in Texas shudder to think what would happen to our little citrus deal were we to get canker in our groves, as Florida has. We do have Mexican Fruit Fly, which the government is trying through an underfunded and understaffed program to eliminate. We are threatened by Medfly and Oriental Fruit Fly, to name just a couple of others. And there are many other pests that could devastate our crops. The U.S. Department of Agriculture, specifically the Animal and Plant Health Inspection Service and the Agricultural Research Service, simply must be staffed and funded adequately to address these risks effectively.
Let me close with a brief reference to one element in the much discussed safety net, specifically, crop insurance. Many of my members continue to be highly skeptical about crop insurance for at least a couple of reasons. First, they know that it is exceedingly difficult to write policies that eliminate or even minimize the opportunity for abuse. The recent fiasco over watermelon insurance is the stuff of dark humor in small town eateries throughout Texas. We have similar, if not so visible, concerns about the current onion insurance policy. Second, the good farmersor those who think they are good farmersbelieve crop insurance keeps less skilled and dedicated producers in business, and contributes to oversupply. Most of these individuals, however, have resigned themselves to the fact of crop insurance, and now are determined to focus on the writing of policies that preclude the most egregious abuses. To do that, they want policies to be commodity specificwhat works for onions doesn't work to cantaloupe. They generally want insurance to cover true natural disasters, not manufactured disasters or economic shortfalls, and they want a policing mechanism that discourages insurance farmers.
There are, of course, other program areas worthy of discussion, but this isn't the time or place. Again, thank you Mr. Chairman for recognizing the special problems and needs of the produce industry, and for including us in the farm bill process. As always, my association looks forward to working with you and the Congress as the farm bill advances.
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Statement of Maureen J. Marshall
Good morning Mr. Chairman and members of the committee, my name is Maureen Torrey Marshall and I currently serve as vice president of Torrey Farms. Torrey Farms is a family-farm operation that specializes in the fresh marketing and processing of vegetables and grains, and since 1996 includes two dairy operations located in Niagara, Genessee, Orleans, and Yates counties in New York State. As a current member and Chairman of the United Fresh Fruit & Vegetable Association's Education and Research Foundation (United), I appreciate the opportunity to testify on behalf of United before the Committee regarding the future direction of farm policy and its impact on the fruit and vegetable industry. As you are well aware, United is the national trade organization that represents the interests of growers, shippers, processors, brokers, wholesalers and distributors of produce, working together with their customers at the retail and foodservice level and every step in the distribution chain. I also come before the Committee today as an 11th generation family farmer who is extremely concerned about the state of the produce industry and what role Congress and the Administration will play in shaping policy for fruit and vegetable growers across the United States.
Over the years, the produce industry has gone through tremendous changes in an effort to remain profitable, satisfy consumer demands, adapt to new technology, and compete in an increasingly global marketplace. Today, growers are facing the lowest returns they've seen in decades. Wholesalers and distributors are being squeezed at both ends and retailers and restaurants are facing stiffer marketplace competition than ever. Meanwhile, the consumption of commodity after commodity seems to be stagnating. For fresh produce, this market climate leads to extreme stress between market segments looking to assign blame to one another for their losses, and occasional calls for support programs that would only exacerbate the problem.
Page 73 PREV PAGE TOP OF DOC Fruit and vegetable growers produce crops that are vital to the health of Americans and represent a significant segment of American agriculture. However, because they are not considered program crops, fruits and vegetables are often ignored when it comes to the development and implementation of U.S. farm policy. Yet, like producers of program crops, the fruit and vegetable industry faces significant challenges in the production and marketing of their commodities that must be addressed if they are to be competitive in an increasingly global marketplace.
While the rest of the U.S. economy has enjoyed unprecedented growth and success, much of agriculture, particularly the fruit and vegetable sector, is mired in a deepening crisis. Commodity prices for many produce crops are below the cost of production and increased Federal regulations, such as the scheduled phase out of methyl bromide as a fumigant, is expected to result in losses of $500 million, while impediments to international trade are stagnating the industry. Such challenges, coupled with threats from exotic pests, loss of important pesticides under the Food Quality Protection Act (FQPA), increased buyer leverage caused by retail consolidation, shortages of labor, and the produce industry's inability to get guest worker legislation enacted for the past six years are putting increasing economic pressures on industry operations both large and small.
As Congress continues to examine how our present farm policy should be reviewed and modified in this new era of global markets, it is critical that long and short-term solutions be considered that will help the U.S. agriculture industry to remain world leaders in food production and competitiveness. For the produce industry, issues surrounding pest exclusion, disaster assistance, food safety, nutrition policy, retail-trade practices, technology and research, international trade barriers and promotion, risk management tools, produce inspection activities, and the current prohibition on flex acres are all critical to the future viability of the fruit and vegetable industry.
Page 74 PREV PAGE TOP OF DOC Let me be clear. While the perishable nature of our products presents unique challenges and highly volatile markets, the industry has not relied on subsidy programs to sustain our businesses. We're not only proud of our commitment to free markets, but we also believe subsidy programs that sustain or encourage production would be a devastating blow to our industry.
Farm Bill Policy Recommendations
As you are aware, the produce industry has been working together since September through the Produce Industry's Farm Bill Working Group to identify areas where Federal farm policy can do the most good. Those positions are embodied in testimony delivered to the Committee by United on May 2, 2000. We strongly encourage the Committee to embrace the produce industry's participation in these types of programs to ensure the continued viability of the U.S. fruit and vegetable industry. This blue print provides policy options to drive consumer demand for fruits and vegetables, while providing a menu options that growers can use to strengthen their current economic condition. More importantly, we believe these recommendations also present the opportunity for Congress and the new administration to shift the perspective of farm policy from supply push to an informed demand pull model.
I strongly state that our industry has fought through the many conflicting views and priorities of different commodities groups and regional organizations to bring you this consensus package of recommendations. The alternative, I fear, is increasing grower frustration that drives pressure on a commodity by commodity basis, triggering calls for narrow relief programs that can divide not only our own industry, but the Committee and the Congress as well. Let me briefly highlight some of the issues we have targeted in our package, and ask the Committee to consider these priority areas in more depth as you move the Farm Bill process forward.
ConservationUltimately, the goal of conservation and environmental programs is to achieve the greatest environmental benefit with the resources available. For the produce industry, there continues to be mounting pressures of decreased availability of crop protection tools that can be used to provide the abundant and safe food supply the consumer demands. Because of these factors, the industry should consider any available assistance that encourages producers to invest in natural resource protection measures they might not have been able to afford without such assistance. Specifically, the industry supports doubling the current funding for the Environmental Quality Incentives Program.
Page 75 PREV PAGE TOP OF DOC Nutrition PrioritiesThe role of increasing the investment in Federal nutrition funding cannot be overstated. In turn, this investment in nutrition priorities can be utilized to increase the consumption of fresh fruits and vegetables and help Americans reach national health goals. To optimize the amount of fresh fruits and vegetables in the USDA feeding programs, we would request an $500 million annual funding outlay for surplus purchases of produce commodities.
International Market AccessU.S. fruit and vegetable growers face significant obstacles in the development of export markets for their commodities and unique challenges due to the perishable nature of our products. Without further commitment to export market development by the Federal Government and commitment to reducing tariff and non-tariff barriers to trade, the U.S. produce industry will continue to lose market share to global market competitors. Specifically, enactment of legislation to increase funding authority for the Market Access Program (MAP) by $110 million is strongly supported by the produce industry.
Pest and Disease Exclusion PolicyEconomic damages from invasive pests and disease now exceeds $120 billion annually. The fresh produce industry supports expedited and aggressive actions by the Federal Government, in cooperation with the industry and stake holders at the state and local levels, to eradicate and protect the domestic market from the increasing threat of exotic pests and diseases entering the U.S. through international commercial shipments of products, as well as the importation of agricultural contraband by vacationing travelers and commercial smugglers. We call for the enactment of legislation authorizing funding and providing direct responsibility and related expanded authority for APHIS to develop an adequate emergency eradication/research fund that could be accessed to address economic and health threats posed by invasive pests and diseases as determined by the USDA Secretary. This fund would be set up as a revolving account (no-year fund) which would be capped at $50 million. Consequently, the fund would be replenished based on fiscal-year utilization. We believe this approach will lead to stronger plant and pest disease eradication efforts, bringing a national commitment to what is now a fragmented and piecemeal approach.
Page 76 PREV PAGE TOP OF DOC Conclusion
Fruit and vegetable growers represent a vitally important segment of American agriculture and bring to market crops that are equally vital to the health of all Americans. To help farmers, the government needs to level the playing field for trade, improve the availability of risk management tools, fund research to keep the U.S. farmer the best in the world, support marketing orders, purchase of U.S. agriculture products for school lunch and nutrition programs and then just stay out of the way.
The people in our industry are an endangered species. Very few young people are looking to come into production agriculture, not because of the long hours or the financial risks associated with unpredictable weather, but because of the lack of pro-active support by our government and consumer. We urge the committee to take these issues, and the many other challenges facing the fruit and vegetable industry fully into consideration as you move forward in the development of farm policy. Thank you and I would be happy to answer any questions the sommittee may have at this time.
Statement of Josh Wunsch
Mr. Chairman, I am Josh Wunsch, an apple and cherry producer from Traverse City, Michigan and a member of the Michigan Farm Bureau Board of Directors. Michigan Farm Bureau appreciates the opportunity to present this testimony on the future direction of national policies concerning fruits & vegetables within the next farm bill. Michigan Farm Bureau is the state's largest general farm organization, representing over 45,000 farmer member families. Our testimony today represents the farmer and production side of the fruit and vegetable industry. Michigan Farm Bureau supports the proper mix of public policy tools that will enable our members to improve their net farm income, enhance their economic opportunity, and preserve their property rights while enhancing the nation's environment.
Page 77 PREV PAGE TOP OF DOC The provisions that must be decided upon in the next farm bill will have a large impact on the people who produce food and fiber for this country and the world. Our producers face decreased prices for many commodities, increased input costs, increased global competition and increased regulatory costs. These factors are not expected to change soon. Each of these factors contributes to the profitability of our farmers and their survival in this industry. Farmers live in a changing economy and face many situations in which they have no control over including prices, weather, increasing regulations and disease.
The economic condition of many of our fruit and vegetable industries has changed dramatically in recent years. Industries such as apples and asparagus have been devastated economically by the impact of a lack of enforcement of trade agreements and the government's social policy for drug trafficking. These industries are not in financial duress because they have over-produced for what the market can handle, but rather are facing severe economic stress due to factors out of their control.
Based on the conditions and issues outlined above, Michigan Farm Bureau proposes the following recommendations for the next farm bill that we believe will assist the fruit & vegetable industry:
SUPPLEMENTAL FINANCIAL SUPPORT
Market Loss AssistanceWe support $1 billion in market loss assistance for producers of fruits & vegetables for the 2001 crop year. $500 million of that should be allocated to apple producers, $25 million to asparagus producers and the rest to industries that have suffered similar economic conditions. We believe market loss assistance is the best way to provide economic assistance to industries that have been financially damaged due to factors beyond their control.
Tree Assistance ProgramWe support reauthorization of the Tree Assistance Program (TAP). TAP provides payments for replanting to eligible tree and vineyard growers who incurred losses due to natural disasters, including plant diseases, insect infestations, droughts, freezes, and related conditions. While the current program has been helpful to many growers, changes are needed to make the program more effective, including elimination of the payment limit and acreage restriction.
Page 78 PREV PAGE TOP OF DOC 3) Payment LimitsWe opposes any kind of payment limit or targeting of benefits.
Farm Bureau believes there is a need for a new environmental policy framework. We need to move beyond the current debate over whether the public has the right to mandate features and/or farming practices in the rural landscape. We are at that proverbial fork in the road and have concluded that mandates are not only counter-productive but more important, inefficient. Our members understand that there is need for a different set of tools and farm policy options. We believe market forces and government programs can work together to enhance the nation's productivity and environmental objectives.
There is little doubt that we have made strides in improving our environment over the last three decades. By nearly every measure our environment and natural resources are in much better shape than at any time in our lifetimes. As the demand for environmental enhancements increase it is important that we examine the public policy tools we have at our disposal and determine whether they are appropriate or not.
The public now desires open space, wildlife habitat, scenic vistas, diverse landscapes and recreational activities. These are clearly more ephemeral policy goals that require a more delicate and site-specific policy approach that necessitates the cooperation of the landowner more than ever before. The existing environmental policy framework is not equipped to function in a way that is most efficient in achieving the policy objectives we are faced with in the future. Command and control mechanisms do not provide an incentive for farmers to produce what the public desires. A new, more efficient and effective approach should be developed to assist farmers in providing the public with what it demands. We support $2 billion for a program that is voluntary, provides sufficient economic incentive and clearly defines the benefits that society at large derives from agriculture.
Page 79 PREV PAGE TOP OF DOC Bridging the gap between where we are now and where we want to be in the future requires an expanded public investment in agriculture. Part of this public investment directly positions agriculture for renewed growth. Increases in conservation incentives are needed for responsible growth in our industry. We encourage this Sub-Committee to consider the following principles as we work together to find the right mix of policy options that will enable farmers the opportunity to step up to this new challenge:
Allow the market to determine the value for these new public attributes;
Provide voluntary participants with an annual guaranteed incentive payment, not simply a cost-share or ad hoc payment;
Provide incentives for both implementation and maintenance of conservation and environmental practicessomething that has been lacking in the past;
Make incentives available to ALL producers including fruit and vegetable producers;
Provide incentives that conform to WTO green box requirements;
Do not replace or disturb any existing or future payment program unless participants choose to opt out of traditional farm programs in return for a higher level of incentives;
Provide program participants the opportunity to improve the quality of rural life and increase rural economic development by providing a stable and diverse presence for agriculture; and
8. Allow confidential conservation plans to provide an improved level of assurance and accountability of the conservation efforts undertaken by the program participants.
EQIPWe support conservation cost share funding. The current EQIP program does not provide producers the assistance needed to meet current and emerging regulatory requirements. Conservation cost share funding should be increased in order to assist producers with the cost of meeting Federal, state and local environmental regulations. EQIP should maintain current authority to provide funding to all producers including fruits and vegetables. We support EQIP authority with improvements in the program to:
Page 80 PREV PAGE TOP OF DOC Provide broader third-party technical assistance authority, which would allow farmers to hire consultants to provide technical assistance;
Eliminate priority areas which would allow all producers regardless of location to participate in the program; and
Simplify program participation requirements.
Environmental Incentive PaymentsWe support a voluntary environmental program that provides producers with additional conservation options for adopting and continuing conservation practices to address air and water quality, soil erosion and wildlife habitat. This would be a guaranteed payment to participants who implement a voluntary management plan to provide specific public benefits by creating and maintaining environmental practices. The management plan would be a flexible contract, designed and tailored by the participant to meet his or her goals and objectives while also achieving the goals of the program.
We support allowing farmers and ranchers the opportunity to voluntarily participate in a program that provides the public with the environmental features they actually want in agricultural areas. It would also provide participants with an alternative source of income that would, in some cases, provide an additional safety net. The proposal is based on the concept that farmers and ranchers can produce and market more than traditional agricultural commodities. They can also produce and market what might be called public environmental benefits. Not only would agriculture be able to produce and market food and fiber, it would also be able to produce and market environmental amenities that the public desires. Examples include erosion control and improved water quality, ecological services such as nutrient filters and carbon sinks, habitat, bio-diverse landscapes and recreational opportunities, and rural amenities such as visual aesthetics and scenic vistas.
We believe participants should be given the opportunity and flexibility to develop a management plan that provides environmental benefits but without land retirements or easements, to provide environmental benefits in return for a payment. The length of the contract period would be flexible and tailored to meet the participant's situation. Practices covered under such a proposal could range from accepted good farming practices already implemented on the farm to establishment of a comprehensive environmental management plan.
Page 81 PREV PAGE TOP OF DOC A management plan and any information resulting from it would be confidential, and the property of the producer. If any incidental or minor regulatory noncompliance within the scope of the management plan is discovered in the course of plan development, the producer should have a grace period of one year to get in compliance without being liable for penalties. Producers who are in good faith compliance with their management plans, but through no fault of their own become non-compliant with environmental regulations, would have one year to correct the noncompliance without being liable for civil or criminal penalties.
This concept would provide (a) incentives to all agricultural producers; (b) participants with an annual guaranteed per acre incentive payment; (c) incentives for not only implementation, but also maintenance of conservation and environmental practices; and (d) an opportunity to provide family farms additional financial assistance beyond current programs.
Implementation of an environmental incentives program should be adopted.
While we recognize Congress just spent 18 months and $8 billion reforming the crop insurance program, we believe an effective risk management program reduces the need for ad hoc disaster payments and allows producers to actively manage their own risk. The following recommendations to the Adjusted Gross Revenue (AGR) pilot program will make improvements and increase producer participation:
Maintain and enhance the premium subsidies
A method needs to be developed to deal with the bad years in the historical record that is used to set the AGR equivalent of an APH yield. The new basis for insurance each year needs to offer meaningful risk protection to the producer.
Higher coverage options above 65 percent need to be available for farmers who produce only 1 or 2 crops on their farm.
Page 82 PREV PAGE TOP OF DOC Pilot areas need to be expanded, but still targeted to the specialty crop industry, which AGR was designed for.
Implement as many of these changes within the RMA regulations and rules for the 2002 crop year.
Farm Bureau also supports:
The actual production history (APH) staying with the land.
No reduction of APH in areas under disaster declaration.
The right of the producer to choose between APH and county FSA transitional yield (T yield) in the determination of crop insurance yield coverage.
Farm Bureau opposes:
Means testing for crop insurance participation or eligibility for assistance; and
Crop insurance participation as a requirement for eligibility in other government farm programs.
Disaster AssistanceWe believe an effective risk management program will reduce the need for ad hoc disaster programs and allow producers to actively manage their own risk. However, until this is achieved, we support:
A disaster assistance program that includes low interest loans and/or grants until an improved crop insurance program is available for all commodities.
In declared disaster areas, a payment to producer based on the difference between the producer's yield for that year and the producer's APH; and
The ability of a producer to receive disaster assistance in the year of the disaster even if harvest is scheduled the following year.
Increased regulatory costs on all levelsFederal, state and localcontinue to drain producers economic viability. The annual cost of Federal regulations borne by farmers and ranchers is estimated to be a staggering $20 billion. Farmers understand the importance of protecting the environment. Their livelihood depends on it. However, the expenses that are incurred to meet compliance are taking a heavy toll on already shrinking farm incomes. Michigan Farm Bureau recommends a regulatory offset program that would compensate producers for costs involved in complying with Federal regulations. Two examples of costly regulations impacting the fruit and vegetable industry are:
Page 83 PREV PAGE TOP OF DOC FQPAImplementation of the Food Quality Protection Act (FQPA) by the Environmental Protection Agency may result in unnecessary restrictions or cancellation of some vital crop protection products. It is critical that as EPA proceeds with the reevaluation of tolerances as required by FQPA, that they not base adverse action against an existing tolerance on unreasonable or unreliable assumptions, anecdotal information or exaggerated models, in lieu of sound scientific data and policies. Many FQPA implementation issues remain unresolved. A loss of key crop protection materials will cost growers millions on dollars on less effective, more costly products and pest control processes and may also result in reduced yields due to poorer quality. A system needs to be developed and implemented that will identify critical registration losses and then provide significant resources to compensate growers for reduced yields and/or quality.
MSPAThe Migrant and Seasonal Agricultural Worker Protection Act (MSPA) imposes standards for employment, housing, and transportation provided for migrant farm workers. Many MSPA housing regulations impose occupancy requirements that significantly exceed state or local housing occupancy requirements or hotel and motel safety and sanitation regulations. MSPA transportation regulations are complex and subject to misinterpretation by regulators, who assert that common car-pooling arrangements among workers are MSPA violations. While family farms are exempt from MSPA, farmers and farm labor contractors are generally responsible for MSPA compliance. These specific regulations and standards impose excessive regulatory and economic burdens on producers.
DOMESTIC FOOD ASSISTANCE
School Lunch and Domestic Feeding ProgramsSchool food programs have helped to establish proper dietary habits among young people. We recommend that the school meals program be improved. We support the donation of fruits and vegetables to schools participating in the national school food program and oppose any efforts to change to cash or letter of credit in lieu of U.S. produced commodities.
Page 84 PREV PAGE TOP OF DOC We continue to encourage the use of U.S. produced agricultural commodities and products in school food and nutritional programs and the P.L. 480 export program. We encourage increased funds for USDA commodity bonus purchases of fruits and vegetables.
In the interest of promoting worldwide health and welfare, we support full funding for the current pilot program for an international school lunch program using American-produced products.
As we moved to a more market-oriented farm policy in 1996, it was very evident that we would need an aggressive trade policy to further develop export markets. In that regard we note that:
Congress has not passed trade promotion authority.
Congress did pass permanent normal trade relations for China, but now the Chinese must follow through on their commitments.
We made progress in sanctions reform just a few months ago, but didn't completely eliminate sanctions. This sends a negative message to our trading partners.
The last administration refused to help us maintain our competitiveness by using the Export Enhancement Program. This program has been authorized at almost $500 million per year, however less than $5 million has been utilized per year for the last four years.
Agriculture talks within the WTO are progressing, but we can't make real progress toward additional reform until we launch a comprehensive round of negotiations.
Trade has not been an evenly divided two-way road for fruits and vegetables. Our producers are competing against production and export subsidies in foreign nations. Fruit and vegetable producers in this country are at a tremendous disadvantage and are unable to compete on this un-level playing field.
We support the following provisions in the area of the trade title:
Page 85 PREV PAGE TOP OF DOC 1) Expand Agricultural ExportsFarm Bureau supports an increase in funding for expansion of agricultural exports. With over one-third of our production moving into the export market, expanding those markets rather than allowing them to continue to shrink is key to the recovery of the current farm economy crisis. Opening markets and leveling the playing field is more important than ever. We cannot afford to remain on the sidelines while other countries use similar export programs to capture our markets. We strongly support the following programs:
Title I of the PL 480 program is used to provide overseas food aid, also known as Food for Peace, which includes concessional sales. Opportunities to use fruits and vegetable in the PL 480 program must be expanded.
The Market Access Program (MAP) uses funds to aid in the creation, expansion, and maintenance of foreign markets for U.S. agricultural products by forming a partnership between non-profit U.S. associations, cooperatives, small businesses, and the USDA to share the costs of overseas marketing and promotional activities such as consumer promotions, market research, trade shows, and trade servicing.
The Export Enhancement Program (EEP) helps products produced by U.S. farmers meet competition from subsidizing countries, especially the European Union. The major objective of the program is to challenge unfair trade practices. With unfair export competition on the rise in many fruit and vegetable commodities, we must expand the use of EEP to help counter these practices. The EEP authorization level has been at least $478 million over the past four fiscal years, however the past administration never utilized any more than $5 million in any of those fiscal years. EEP should be reauthorized at the maximum levels consistent with export subsidy reduction commitments made in the WTO agreement.
2) Trade Agreement EnforcementActions such as illegal dumping of Chinese apple juice concentrate have caused enormous economic duress on producers of specialty crops. The apple industry waited for nearly three years to get a favorable ruling on the apple juice concentrate anti-dumping suit against China. China is now continuing to circumvent the tariffs imposed by that ruling by transshipping their juice concentrate into this country via Hungary and other countries. Through all of this, millions of dollars and critical markets have been lost, producers have went out of business, and consolidation in the industry has accelerated due to a lack of timely enforcement of current trade laws. The timeframe and procedure for filing 201 investigations, anti-dumping and countervailing duty cases, etc., is too lengthy, costly and cumbersome for specialty crop industries that are seasonal and/or regional in production. Modifications must be made that will allow for producers to seek a more immediate resolve to trade dispute cases that disrupt the marketplace.
Page 86 PREV PAGE TOP OF DOCAGRICULTURAL CREDIT
Producers need a variety of credit sources at the lowest possible interest rates. Farm Service Agency (FSA) is an important source of capital for those who cannot qualify for other financing. We support:
expansion of the guaranteed loan program
the FSA providing adequate levels and terms of credit in a constructive and responsible manner
a review and recommendation of appropriate FSA agency policy on loan term limits, loan size limits, and interest rate subsidies
Farmers throughout the country have cited the increased cost of regulations, unfair foreign trade practices and low commodity prices as some of their biggest obstacles. While America's farmers said they would accept major reforms in farm policy in 1996 in exchange for tax reform, regulatory reform and improved opportunities for trade, needed reforms in those areasconsidered key to the success of the programsimply have not occurred.
Farm Bureau looks forward to working with the Agriculture Committee on developing a new farm bill that will make agriculture profitable in the 21st century.
Statement of Sunkist Growers
Thank you for providing Sunkist Growers with the opportunity to offer our views concerning the upcoming formulation of the farm bill as it relates to the fruit and vegetable sector of our agriculture industry. As we have discussed repeatedly over the past few years, the marketplace dynamics present for citrus growers in the 21st century are far different than those that Sunkist encountered in the 19th century when our cooperative first began.
As you are aware, Sunkist Growers is a non-profit cooperative marketing association owned by and operated for the benefit of its 6,500 farmer-members who produce approximately sixty-five (65) percent of Arizona and California citrus fruit. It was formed to market its members' produce, to develop and maintain reliable markets and gain the best return for their fruit, and to consistently supply consumers with top quality fresh citrus fruit and processed citrus products.
Page 87 PREV PAGE TOP OF DOC Sunkist is principally engaged in the sale of fresh oranges, lemons, grapefruit and tangerines, and the manufacture and sale of citrus juice and peel products. Those activities generate average gross sales approaching $1 billion dollars annually, making Sunkist the largest citrus marketing cooperative in the world.
Given that background, we would like to provide our perspective of the marketplace in which we compete and describe some of the trends we have seen of late. These activities are challenging Sunkist's and other American citrus growers' ability to compete both domestically and internationally.
TRADE PRIORITIES AND PERSPECTIVE
Recognizing that Sunkist exports approximately 30 percent of our farmer-members' fresh citrus, and those volumes generate roughly 45 percent of their fresh fruit revenue, international trade is a priority for our cooperative. Sunkist's trade priorities are organized in two distinct visions. One is a short-term list of goals and the other a longer-term view. We are aware that as a one hundred and 9-year-old farmer cooperative, Sunkist's definition of short term may be different than other recent entrants into the international trade arena. However, we view our short-term goals as readily achievable and controllable by motivated policy-makers.
Short term. Tariff Harmonization/Elimination of Non-Tariff Barriers/Reduction of Subsidies/Increase in WTO Green Box Programs
Tariff Reductions/Elimination of Tariff Barriers
In defining those barriers to trade in markets of significance to our farmer-members, it can be stated that, in the short term, we are most concerned by the apparent lack of reciprocity in the terms and conditions of citrus trade between the United States and several of our key trading partners. This is expressed by unjustifiably high tariffs and denial of market access to our fruit on the basis of alleged, non-scientific phytosanitary concerns.
Page 88 PREV PAGE TOP OF DOC The following examples illustrate some of the trade inequities we face around the world:
Argentina continues to deny market access for citrus from Arizona, Florida and other U.S. production areas. In response to the U.S. opening of our market to Argentine citrus last year at virtually duty free status, Argentina more than doubled its tariff (12 percent to 25 percent) on U.S. citrus earlier this spring and just this month imposed a dual currency exchange rate that imposes an additional 8 percent cost on our fruit into Argentina. These inequities must be aggressively addressed by United States negotiators in direct bilateral talks with the Argentine government and in multilateral forums of the World Trade Organization. FTAA becomes meaningless if harmonizing terms of trade are not implemented.
The European Union (EU) continues the practice of a discriminatory tariff preference scheme that extends to preferred Mediterranean basin countries up to an 80 percent discount from the common external tariff applied to citrus fruit, meanwhile imposing upwards of 20 percent duty on American sweet oranges. Previous efforts by the US government to remedy this unfair trade practice failed despite a favorable opinion rendered by the GATT-Dispute Resolution entity. These conditions have effectively removed us from competition in Europe. This trade inequity continues to this day. It is difficult to explain to our growers why Spanish citrus is allowed entry into the U.S. marketplace virtually duty free while our California and Arizona grown oranges are competitively excluded from European markets by this longstanding discriminatory tariff practice compounded by heavy subsidization of their citrus industry by the EU and member state governments.
In Korea we face both high duties (64 percent out of quota and 50 percent in quota) and a tariff-rate import quota controlled by the Korean citrus industry. Furthermore, the low bid standard used by Korea for in-quota bids provides a competitive advantage to foreign low cost producers over higher quality and higher cost producers like the U.S.
Page 89 PREV PAGE TOP OF DOC In light of these brief examples, and as the U.S. approaches a new WTO Round, we support the President's request for Trade Promotion Authority. We believe it can serve as a powerful weapon in establishing reciprocity in our trading relationships. Since the Uruguay Round a decade ago, the U.S. has led by example in support of liberalized open markets. Unfortunately, and to our disadvantage, many of our trading partners have not followed that example.
Rather than continue the status quo to our significant competitive disadvantage, we urge that all trade agreements contain provisions within for the immediate harmonization of tariffs and the terms and conditions of trade, should our trading partners fail to adhere to their commitments. We must have the same access to their markets as they enjoy to ours.
Reduction/Elimination of Trade-Distorting Subsidies
The extensive subsidies provided to foreign competitors by the EU and member states have created trade-distorting consequences that work to our competitive disadvantage. This affects American producers not only in European and other foreign markets, but also increasingly in our own domestic marketplace.
A case in point is the increasing volume of Clementine mandarins exported to the U.S. from Spain. It is estimated that the Spanish Clementine industry alone receives governmental subsidy of at least 180 million ECU annually. The lack of transparency of their subsidy regime makes it difficult to definitively quantify. However, EU records confirm governmental support of at least $15 billion annually for the European horticultural sector. In contrast American fruit and vegetable producers, including U.S. citrus farmers, receive NO government subsidy.
Therefore, we urge our negotiators to press for a sectoral initiative aimed at elimination of these blue and amber box subsidies for horticultural products by a date certain. If European and other trading partners are resistant to this reform, proof of their continued subsidy should be grounds for implementation of countervailing duties on those subsidized products when imported into the U.S. marketplace.
Page 90 PREV PAGE TOP OF DOC Increase in Authorization/Funding for WTO Green Box-Compliant Programs
As the battle with foreign producers has grown more intense, in previous years the U.S. government has taken the unusual tactic of disarming our American producers by reducing, and threatening to eliminate, resources for the few matching fund programs that support advertising and trade promotion in our foreign markets.
The Market Access Program (MAP), along with the Foreign Market Development program (FMD) are among the few countermeasures that U.S. producers have against the massive government subsidization of our foreign competitors. These programs are WTO compliant.
Suggestions have been made that the current $90 million authorization for MAP should be adjusted for inflation, since that funding level has failed to keep pace with that economic indicator for a number of years.
However, it is important to recognize that the currently authorized level is a significant reduction from previous years, and that our competitors have not reduced their levels of similar supports, but rather increased them. The EU spends $100 million to promote their products in the U.S. alone, while the MAP program supposedly covers the needs of U.S. agriculture worldwide. Simply adjusting an under-funded effort to only keeps pace with inflation is accepting a status quo with record trade deficits for the U.S. This does not yield the beneficial impact Congress envisioned for such export programs.
We strongly urge the restoration of a portion of the previous authorization for MAP from the current $90 million to an amount up to $200 million annually as provided in the bipartisanly supported HR 98.
Effective and Efficient Management of Sanitary/Phytosanitary Issues
Allegation of SPS issues is the current weapon of choice as the most effective means of protecting markets from competition. For this reason, we recognize that once the tariff-related barriers to trade are eliminated or marginalized, and subsidies reduced or eliminated, most of our battles for market access will be fought over pest/disease-related issues and the appropriate treatments for them.
Page 91 PREV PAGE TOP OF DOC Preservation of the exclusive science-based framework established during the Uruguay Round for addressing SPS issuesthe SPS Agreementis essential to our future ability to resolve such matters fairly. However, the dispute resolution mechanisms currently in place typically move very slowly. An expedient, science-based resolution of such issues is essential to maintain trade flows to countries that advantageously hide behind unreasonable SPS standards with the intent of disrupting agricultural imports.
To a great extent, our ability to effectively and thoroughly address and resolve SPS issues in the course of trade will depend upon the adequacy of resources and funding of our Federal and state enforcement agencies. Specifically, we urge a substantial increase in appropriated funds for APHIS and ARS to address these issues.
Safety Net for Growers Suffering Market Losses
Due to the aforementioned inequities in our trading relationships, and the destructive results that these disadvantages have created, our farmers are suffering through some extremely difficult financial times. Market prices in certain sectors of the citrus industry have dropped so low as to move farmers toward consideration of a ''safety net'' to alleviate their distress and provide a reasonable expectation of at least covering their operational and production input costs.
To more accurately assess the desires of the California-Arizona citrus industry, Sunkist has asked our 6,500 member-growers to complete a survey to advise us of their preference in addressing this market distress. Over 1,000 grower-members responded, providing a statistically reliable survey.
The results of that survey indicated:
32 percent wanted significant regular government payments (subsidies) such as the program crops receive.
36 percent wanted no government assistance and favor allowing market conditions to prevail.
Page 92 PREV PAGE TOP OF DOC 32 percent favor some type of cost-of-production insurance program.
It is important to remember that these growers comprise 65 percent of California's total citrus production. Given those figures, it is clear to us that fully two-thirds of California citrus farmers express the need for some type of governmental assistance to address market losses and the distress being suffered by the industry over the past 2 years.
We believe that this assistance could be provided under the whole farm operational cost insurance program that USDA's Risk Management Agency is currently piloting in seventeen states called the Adjusted Gross Revenue (AGR) program. This program was designed with significant information derived from specialty crops, though it covers both insurable and non-insurable crops alike.
Under AGR, individual farmers have the opportunity to purchase risk coverage that would provide a payment to them should their returns drop below their actual cost of production and operations. These growers must also be covered under at least a catastrophic crop insurance policy, in the event of freeze or other weather-related events. Also participants must provide five years' worth of Schedule F tax forms, detailing their production/revenue histories and from which an average return will be calculated. This requirement provides significant security to the issuers of the policies and increased safeguards against fraud or market-distorting results.
Unfortunately, this very promising AGR program is currently not available for California specialty crop producers even as a pilot program. USDA's California Risk Management Agency office has asked for AGR to be expanded, but the Washington, DC office denied that request.
Therefore, we ask that USDA be encouraged to expand the AGR program to California. This administrative action is easily achievable, and would provide specialty crop producers with a reasonable safety net program that does not in distort production, requires farmer payment for risk services and proof of the participant's track record of production.
Page 93 PREV PAGE TOP OF DOC This program deserves the attention of the Committee. It can become a cost effective safety net sought by farmers. It does not attract participants who seek to harvest a Federal subsidy check rather than a crop.
NUTRITION, CONSERVATION, RESEARCH AND PEST EXCLUSION
In addition to our specific recommendations for the citrus industry, Sunkist strongly supports the United Fresh Fruit and Vegetable Association's recommendations to bolster the U.S. government's role in procurement, promoting and supporting nutrition, conservation, research and pest exclusion for America's specialty crop industry in general.
These suggestions are innovative and forward-thinking proposals that seek to increase demand for healthy fruits and vegetables, promote more efficient methods of production to serve that increased demand, and also protect those crops from the risks of pests and disease that have proven, and will continue to be such a significant ongoing challenge to our competitive future. Sunkist believes that United's package of budgetary outlays presented for the full Committee's consideration represents a strategic, timely and non-trade distorting investment to meet critical needs in the U.S. fruit and vegetable industry.
Thank you for the opportunity for Sunkist Growers to comment during this important process. We look forward to working with the subcommittee during the coming months as this new farm bill takes shape.
Statment of the American Vintners Association and the Wine Institute
The Wine Institute is the trade association of 550 California wineries responsible for 80 percent of our Nation's wine production. The American Vintners Association is the trade association of 650 wineries in 44 States.
Our membership is very concerned about the plight of grape growers in the Temecula region of California where a very serious outbreak of Pierce's disease vectored by an exotic pest, the glassy-winged sharpshooter (GWSS) has occurred. This disease has devastated growers in the last 5 years where almost 1,000 of the 3,000 acres of vines have been lost to the disease. Once infected, the grapevines become a source and reservoir of the Xylella fastidiosa bacterium which causes the disease. According to Professor Alexander Purcell (University of California, Berkeley), where Pierce's disease is vectored by GWSS, vine removal of diseased vines is critical to control strategies. This is particularly true in the early stages of the disease.
Page 94 PREV PAGE TOP OF DOC The seriousness of the Pierce's disease outbreak was recognized last year by the Department of Agriculture which declared an ''Emergency Because of Glassy-Winged Sharpshooter'' on July 7, 2000 in order to ''conduct a program in California to control and prevent the spread of glassy-winged sharpshooter and Pierce's disease in California and to other non-infested areas of the United States.''
The 106th Congress conferred authority on the Department of Agriculture to compensate growers for losses due to Pierce's disease under the provisions of section 804 (c) of the Agriculture Appropriations bill for 2001 (P.L. 106387) and the Agricultural Risk Protection Act of 2000 (P.L. 106224). To be helpful and effective, this compensation needs to be based on vine replacement costs and lost income in a manner analogous to the compensation provided by the USDA for Plum Pox and Citrus Canker.To date, the department has not acted to implement in such a manner. Instead it has directed compensation for crop loss in a way that is inappropriate for this perennial crop. It does not compensate growers adequately and is inaccessible for most growers because technical limits on thresholds of loss and eligibility requirements disqualify virtually all growers.
On behalf of the grape growers who face loss of their vineyards, we urge you to direct the USDA to provide meaningful compensationso that growers who have suffered catastrophic losses from Pierce's disease spread by GWSS, an exotic pest recently introduced to Southern California, can be compensated for their losses. It can be accomplished best by requiring the USDA to direct the Animal and Plant Health Inspection Service to implement vine loss and income loss in a manner similar to the tree replacement and income loss provisions for growers who have suffered losses due to Citrus Canker and Plum Pox. There should not be limits to payments for individual growers nor grower eligibility requirements based on gross income.
A Pierce's disease compensation program providing for vine replacement and income loss is required to provide a vital safety net for grape growing in California where more than 90 percent of the Nation's $3.1 billion grape crop is produced. Grapes currently are the sixth largest crop in the United States and the highest value fruit crop. Grapes represent more than 4 percent of the net value (excluding government payments) of all crops produced in the country.
Page 95 PREV PAGE TOP OF DOC We appreciate your consideration of this important request.
Florida Fruit & Vegetable Association, Answers to Submitted Questions
FFVA appreciates the interest of the Subcommittee in country-of-origin labeling and is pleased to present this additional information.
At the June 19 hearing of the Livestock and Horticulture Subcommittee of the House Agriculture Committee, Chairman Pombo asked that the Florida Fruit & Vegetable Association (FFVA) provide information regarding consumer buying practices of fresh produce as a result of country-of-origin labeling. The research data provided below suggest that US consumers would likely purchase a greater proportion of domestically grown produce if labeling were available.
Regrettably, FFVA is unaware of any research tracking actual consumer purchases based on the presence of country-of-origin labeling. The ratio of domestic versus imported fresh produce in US retail stores changes frequently, sometimes daily, based on wide variations in supply, quality and pricing of fruits and vegetables. Therefore, it is difficult to accurately track consumer purchases based on labeling alone, since there are so many other variables in the purchase decision.
COUNTRY OF ORIGIN CONSUMER SURVEY RESULTS
Charlton Research Survey
Domestic Preference. In a 1996 national survey conducted by the Charlton Research Company in California, 500 consumers were asked to rank their first choice of country of production when purchasing fresh fruits and vegetables. The following is a ranked order of stated preference:
United States 87 percent
Mexico 2 percent
Page 96 PREV PAGE TOP OF DOC Chile 4 percent
Costa Rica 2 percent
Israel 1 percent
Africa 1 percent
Labeling Support. The 1996 Charlton Research Company survey also showed that Americans strongly support a law requiring labeling the country of origin on all fresh produce sold in the U.S. Three-quarters, 74 percent, favor such a concept compared to only 13 percent who oppose and another 13 percent who are unsure.
Agriculture Institute of Florida Research
Labeling Support. In 1997, the Agriculture Institute of Florida commissioned the University of South Florida to conduct an attitudinal survey of 400 Florida consumers. Results showed 96 percent either ''agreed or strongly agreed'' that all produce should be labeled so buyers will know from what country it comes. Only 4 percent were in some degree less concerned about the labeling issue and 13 respondents had no opinion about produce labeling.
Vance Publishing Research
Labeling Support. In 1999, Vance Publishing commissioned a national survey of more than 2,000 produce consumers on a variety of issues related to imported produce. The survey asked consumers to rate their level of agreement with mandatory store identification of imported produce's country of origin. Results were based on a scale of 16 rating.
6 Definitely Agree 63 percent
5 13 percent
4 9 percent
3 9 percent
2 2 percent
1 Disagree Completely 4 percent
Page 97 PREV PAGE TOP OF DOC Produce Safety. The 1999 Vance survey asked consumers' perceptions of the safety of U.S.-grown fresh produce compared with imported fresh produce. Results showed 70 percent believed domestic fresh produce to be safer than imported fresh produce, 20 percent said about the same, 7 percent didn't know and 3 percent said U.S. fresh produce was worse than imported fresh produce.
Consumers Unaware of Imports. Remarkably, the Vance research showed that many US consumers are unaware that their stores carry imported fruits and vegetables. In the survey, 18 percent of consumers said their primary grocery stores do not carry imported produce, despite the profound increase in imported products on store shelves in recent years. Another 20 percent didn't know if their stores stocked imported produce and the remaining 63 percent were aware their stores sell foreign produce.
Concerns about Imports. The 1999 Vance survey found 54 percent of consumers had concerns about purchasing imported fresh produce, 45 percent had no concerns and 1 percent didn't know.
Reasons for Concern. Among consumers who had concerns with purchasing imported fresh produce, the following were ranked as reasons for concern:
Health/Safety 48 percent
Growing Conditions/Chemicals/Fertilizers 47 percent
Cleanliness/Handling 33 percent
Freshness 12 percent
Containers Used For Transportation 4 percent
Trade/Labor Issues 4 percent
CONCLUSION. In the United States, fresh fruits and vegetables remain some of the few products that are still not required to show country-of-origin labeling. Yet, the availability of fresh produce from all over the world has never been greater for American consumers. The producer members of FFVA encourage the Congress to consider the potentialbenefits to consumers and to the agriculture industry of incorporating country-of-origin labeling in our national farm policy.
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Statement of National Food and Agricultural Policy Project
The National Agricultural and Policy Project (NFAPP) is a Congressionally funded research center whose mission is to analyze and provide growers and policy makers with relevant information on a variety of topics that impact the U.S. fruit and vegetable industry and consumers. NFAPP develops a 10-year baseline projections on production, prices, consumption and trade for fruit and vegetables. In addition, it provides timely analysis on ongoing policy discussions. Past policy studies have analyzed farm labor availability, the Food Quality Protection Act, the Market Access Program, specialty crop insurance, food safety, foreign direct investment, trade in produce, and dietary health promotions, among others.
In terms of value, the U.S. fruit and vegetable industry is the largest in the world and is the third largest, behind China and India in terms of quantity produced (FAO). In 1999, cash receipts for U.S. fruit and vegetable farmers reached $29.4 billion, making it the third largest agricultural sector behind cattle ranching and oilseed and grain farming.
Fruit and vegetable farming operations are very diverse and range from small family businesses growing produce for local markets to international agribusinesses trading produce in world markets. In 1997, there were 112.9 thousand fruit, nut and vegetable farms, cultivating 12 million acres. This acreage is about evenly divided between fruit and vegetables and represents 3.87 of total U.S. harvested crop land. Still, the produce sector accounts for about one-fourth of all crop receipts in the United States. Intensive cultivation practices and the high value of fruit and vegetable crops account for the high amount of total farm sales represented by this small amount of acreage.
According to the 1990 Farm Costs and Returns Survey, the average fruit and vegetable farm is run by a middle-aged individual who owns most of the land and has low liabilities. Despite relatively high crop values, the typical farmer is asset rich, but cash poor because of the high cost of producing high quality, visually appealing products for the fresh market. For crops going to processors, costs are lower but so are prices. With some exceptions, it has not been possible for farmers in this sector to obtain great benefits from labor saving technology. Therefore, more than half of cash expenses still goes to wages. Consequently, changes in labor market conditions have a direct impact on the bottom line. In the short-run, labor costs are influenced by the need to harvest highly perishable commodities quickly. In the long-run higher off-farm wages have lured workers and farmers' children to the cities, making growers increasingly dependent on the supply of (immigrant) guest workers.
Page 99 PREV PAGE TOP OF DOC Still, farmers have long learned to adapt to cost pressure by increasing productivity. In fact, from 1990 to 1994, productivity increased at an average annual rate of 3.51 percent for vegetables and 3.17 percent for fruits, in comparison to 2.96 percent for all farm output. The sources of these productivity increases are attributed to extension, education, infrastructure improvements, and public and private research and development. However, well controlled expenses are just one side of the picture, farmers also have to contend with uncertainty derived from price and yield variability, ability to adopt new technology, lawsuits, changes in consumer preference and changes in government regulation. According to a 1996 USDA survey, fruit and vegetable growers operating in irrigated land are most concerned with price variability and changes in government regulation. Generally, vegetable farmers are very flexible in responding to changes in price and demand conditions but fruit farmers, who grow crops with long production cycles, cannot adjust as readily.
Growers nevertheless, attempt to actively manage these risks through crop diversification, as well as by keeping credit lines open, working off-farm, outsourcing production, and contracting own production. Generally, sophisticated price risk management tools are not available because future contracts for most fruit and vegetable commodities are non-existent. Insurance packages, especially revenue insurance, is also largely absent. With little or no government sponsored safety net in place, large numbers of fruit and vegetable growers choose not to face their economic challenge alone. Farmers organize trade associations, marketing orders, and join cooperatives to defray costs and disperse risk.
Although the variety of fruit and vegetables grown in the U.S. is wide ranging, the industry is dominated by the four major perennial crops, namely, grapes, oranges, apples and almonds, and five major (annual) vegetable crops: potatoes, tomatoes, lettuce, melons and onions. Although production occurs in many states, production is concentrated in three major states, California, Florida, and Washington. In 1999, California alone accounted for 55.2 percent of the total value of U.S. fruit and nut production and 40.8 percent of the total value of U.S. vegetables. Clearly, problems thought to be local problems, like California's current energy crisis, can have implications for the entire fruit and vegetable sector. The environmental conditions amenable for fruit and vegetable production in these leading states have also attracted new residents making urban encroachment a growing problem.
Page 100 PREV PAGE TOP OF DOC During the last decade, there have been significant changes influencing fruit and vegetable marketing channels. Three of the most significant ones are rising consumer expectations, widespread adoption of information technology and the rise of powerful retail chains. Consumers have come to expect a steady flow of clean, safe, unblemished crops marketed in attractive environments. In response to these expectations, retailers demand packed, branded, and PLU-coded crops of a given quality, delivered at precise times, and in specified quantities. As larger crop volumes flow through retail chains, the new supply requirements are changing the fruit and vegetable market channel structure. Shipping point firms are increasingly bypassing terminal markets and are taking on more marketing functions in an effort to integrate their supply chain with that of retailers and institutional buyers. As a result, there has been considerable rationalization among growers and shipping point firms.
Despite recent difficulties in channel relationships over retail practices, particularly slotting fees, most fruit and vegetable organizations understand that they share a common cause with retailers. Namely, to meet consumer wants/needs. To that end, fruit and vegetable firms strive to be cost and quality competitive by integrating where possible and by establishing good relationships with processors and retailers in order to gain market access. Processors and retailers in turn, often formalize these relationships through contracts. In fact, according to the USDA, in 1993, 47.4 percent of the value of fruit, vegetables and nursery production was under contract.
In summary, the fruit and vegetable sector is very market oriented and continually adapts to market and institutional changes. Current trends are increasing diversity in ownership, producing fewer and larger farms, concentrating production in key states, while smaller operations exploit market windows and cater to niche markets. The entire system has also changed from being local and seasonal to international and year-round. Therefore, the industry is challenged to meet consumer demand for a continuous supply of highly perishable products that are grown in widely dispersed and highly seasonal production regions.
Page 101 PREV PAGE TOP OF DOCCURRENT ECONOMIC STATE OF THE U.S. PRODUCE INDUSTRY
One way to gauge the health of an industry is to evaluate the value of its output over time. Making such an evaluation shows the overall strength of the U.S. produce sector to have weakened. Produce cash receipts have grown from $26 billion in 1995 to an estimated $ 29 billion in 2000, but the rate of growth in cash receipts has diminished. Between 1993 and 1996, produce cash receipts grew by an average of 5 percent per year, compared to 3 percent per year between 1997 and 2000. Loss of momentum is particularly noticeable in the vegetable sector, where the rate of change in cash receipts has gone from 6 percent to 2 percent during the same time period. The recent deceleration of cash receipts reflects large U.S. and foreign production levels in countries such as Argentina, Brazil, Canada, Chile, China, Mexico and Peru, the high value of the dollar, weak economic conditions abroad during 1998 and 1999, and stagnant domestic consumption.
Fruit and vegetable intake data shows domestic consumption to be rising but only slightly. Between 1989 and 1991 Americans consumed 4.5 servings per day compared to 4.9 servings during 1994 - 1996. This is the bare minimum amount of intake recommended and is 2 servings short of energy based nutritional recommendations. A number of studies also suggest that while economic prosperity has allowed ever more health conscious consumers to upgrade diets, disadvantaged populations are least likely to consume the recommended amount and variety of produce. Given the relationship between food and health, not meeting dietary recommendations translates into lower productivity and higher medical costs. Since altering eating patterns to help meet dietary recommendation requires changes in the way U.S. produce is marketed, priced and distributed, this has prompted the formation of a variety of public and private initiatives whose goal is to improve produce consumption levels. As a whole, the industry has sought to influence eating habits not only through product innovation that provides greater value and convenience but also by partnering with charity organizations and the ''5 a Day for Better Health'' program. In addition, producers also strive to serve costumers abroad and recent developments in trade have been particularly profound.
Page 102 PREV PAGE TOP OF DOC During the mid 1990's, the value of U.S. fruit and vegetable exports rose sharply to $10.24 billion in 1996, up by a third from 1993. The produce trade deficit reached a decade low of $ 771 million in 1994. However, by 1998, a sluggish global economy and a strong dollar slowed exports and accelerated import competition. Between 1997 and 2000, fruit and vegetable exports grew by a paltry 1 percent, while imports grew by 7 percent. Indeed, by 1999 the U.S. was running a decade high $ 5.9 billion produce trade deficit.
At present, the resumption of global economic growth and a weakening of the dollar has rejuvenated trade, pushing exports to $10.81 billion in 2000. Yet, this figure is only 5 percent higher than the previous year's exports and only 2 percent higher than 1997 exports. Over the medium-term, U.S. produce exports are expected to increase, as the economies of key trading partners expand. However, recovery will be slow for some processed and storable commodities, like almonds, prunes, raisins, and tomato products, that already have high stock levels.
Crops particularly stricken by the softer market conditions include apples, specialty citrus, grapes, lettuce, potatoes, and watermelons, all of which have seen declines in price. Furthermore, prices for apples, potatoes, and grapes are expected to remain low for the 2001 through 2002 seasons. This prompted Congress to authorize market loss assistance for apple growers and the USDA will pay fresh potato growers to divert a portion of their crop to alternative uses. Although there are some signs of recovery, given recent developments in macroeconomic indicators, it is too early to tell if the deceleration trend in produce cash receipts will reverse. A review of the outlook for some of these and other leading crops is presented next.
OUTLOOK FOR MAJOR FRUIT AND VEGETABLE CROPS
Almonds: U.S. almond prices are expected to fall this year, and may stay low through 2002 due to large supplies. An increase in planted and harvested acreage and higher than normal yields may contribute to a record crop this year. Current NFAPP estimates place the crop at 911.4 million pounds (about 456,000 tons), of which 869 million pounds (about 434,000 tons) are expected to be marketable. Almonds are the largest U.S. horticultural export, commanding an 82 percent world marketshare. Already, this year's expected large crop is putting downward pressures on global almond prices, which are expected to decline about 5.5 percent during 2001. These declining prices, though, should help further boost exports.
Page 103 PREV PAGE TOP OF DOC In 2000, U.S. almonds exports reached 242 million Mt and $662.4 million in value. This year, shipments to traditional markets are displacing Spanish exports and expanding in emerging markets such as China, India and Taiwan. The recent export trends and improving U.S. domestic consumption should help stabilize prices. By the middle of the 2002 crop season, prices should partially recover.
Apples: The story for apples is much like that for almonds. Stagnant domestic consumption of fresh apples, overproduction, especially in Washington state, and tougher competition in both domestic and export markets continue to put downward pressures on grower prices. Growers in the major producing states of Washington, New York, Michigan, California and Pennsylvania, are starting to look at more profitable alternative land uses. These and other less transparent problems continue to preoccupy industry leaders as they scramble to seek solutions.
NFAPP's estimates put the 2001 apple crop at 10,669 million pounds (254 million boxes). This is about 1.0 percent larger than USDA's estimate of 10,598 million pounds (252 million boxes) for the 2000 crop. Based on recent plantings, increasing bearing acreage, and expected increases in yield, NFAPP expects U.S. apple production to increase at an average rate of 1.3 percent per year through 2010. The larger crop volumes through the years suggest persistent downward pressures on grower prices, unless domestic consumption and exports improve dramatically, or the industry comes up with an effective and cost-efficient way to manage supply.
Grapes: California's grape industry, which accounts for a little over 90 percent of the entire U.S. grape industry, has been under tremendous pressure since last year, when the effects of increased acreage, planted beginning in 1993, came into bloom. Both El Nino and La Nina weather patterns had effectively dampened the effect of new bearing acreage on production until this time. In 2000, a record 3.2 million tons of wine grapes were crushed for wine. This was a 20 percent larger volume than the 1999 crush, and about 10.3 percent larger than the last record crush in 1997. Also, about 130,000 acres of recently planted acreage may start bearing fruits soon. Faced with a continued oversupply, growers have already started removing acreage. However, the oversupply problem goes beyond grapes for crushing for wine. Large supplies and increased foreign competition have all contributed to a glut in the raisin market.
Page 104 PREV PAGE TOP OF DOC California's 2000-01 raisin crop is estimated to reach a decade high of between 427 to 440 million tons. This figure is 32 percent higher than last season's crop and 30.8 percent higher than the five year average. Despite a favorable export outlook, flat domestic demand and massive supplies prompted the Raisin Advisory Committee to assign 53 percent of the crop as free tonnage. Since the reserve price for reserve raisins is much lower than for free raisins, the large amount to be diverted is likely to drag down total grower return. Given that prices are set before the actual price discovery process takes place, there was wide disagreement between buyers and sellers regarding the amount of free and reserve raisins and ultimately, preliminary prices.
According to the University of California, in 1998 the breakeven price for a 40 acre farm in the San Joaquin Valley (given a 2 ton base yield) was $965 per ton and $985 for a 140 acre operation. Consequently, while it remains to be seen what the 100 percent grower return will be, it is hoped that final return is at least in line with these estimates. Relief efforts such as USDA's 96,532 ton raisin diversion program and 30,000 ton raisin purchase will greatly aid to reduce reserve tonnage and carry-over into the next season. Thus, during the next several years, capacity issues and the management of California's wine, table and raisin grape supply may be the most important challenges facing the industry.
Citrus: The U.S. orange crop for 2000-01 is expected to be smaller than earlier estimates indicated. On February 8, 2001, the USDA forecast put production at 285.2 million boxes, down from their previous forecast at 291.2 million boxes. The decline reflects problems with frost in several growing areas in Florida. Estimates for Florida have been revised down from 229 million boxes to 223 million boxes. If the current estimates for Florida, California, Texas and Arizona hold, the 200001 crop will still be about 6 percent smaller than the 199900 crop.
All the same, large juice inventories due to large domestic and Brazilian supplies from last year, dropped orange prices to $2.57 per box. In an effort to increase sales, growers are looking for new markets in places like Australia, China, India and Mexico. The U.S. citrus industry is also becoming more closely integrated into the global economy. Due to direct investment and processor consolidation, Brazilian and U.S. multinationals now control at least 50 percent of Florida processing capacity. U.S. specialty citrus growers are also seeking to expand sales abroad.
Page 105 PREV PAGE TOP OF DOC U.S. Grapefruit production for the 2000-01 season is estimated at 2.5 thousand tons. This represents an 8.5 percent decline from last year and is roughly the same level as 1998-99. Notwithstanding the smaller crop, accumulated juice inventory is placing downward pressure on prices. At $ 1.94 per box, May 2001 prices are 32 percent down for the same period last year and significantly below the 1990-92 $5.77 per box average.
It is expected that 2000-01 U.S. tangerine production will be 14 percent below last year and of higher quality. These conditions are expected to have a positive impact on prices and may allow growers to recover lost ground. May 2001 tangerine prices are 44 percent higher than a year ago but to place it in perspective, the current price is 11.7 percent lower than the $15.11 1990-92 average. Despite a strong dollar, producer organizations have taken the initiative by expanding citrus sales overseas, particularly in emerging markets such as China.
At home, the industry as a whole has been recently afflicted by plant disease and shifting consumer preference. Citrus canker was most recently detected in south Florida in 1986, and poses a grave threat to all citrus crops because no chemical is known that completely destroys it. Despite extensive quarantine efforts, by1999 citrus canker reached as far north as Hillsborough County. To date, 579 thousand residential and 1.3 million grove trees have been destroyed to control the outbreak. On February 2000, a state-wide state of emergency was declared and renewed efforts are underway to survey and decontaminate the entire state. While having to incur pest related costs and deal with rising energy and labor costs, growers have also been adapting to meet consumer preference.
There are indications that consumer taste is shifting to sweet, seedless and easy to peel citrus products. Consequently, U.S. producers are identifying, developing and phasing-in new varieties. Growers have been assisted by public sector researchers who are working to develop new citrus varieties that can thrive in Florida's humid conditions. However, the transition may be difficult as the return on these new investments will take time to pay off. Thus, the viability of this industry is as dependent as ever on the type of continuous research that improves productivity and also identifies and develops new products and messages that appeal to domestic and foreign consumers.
Page 106 PREV PAGE TOP OF DOC Lettuce: Iceberg lettuce remains the dominant lettuce variety in terms of acreage, production and farm value. During 1992-2000 head lettuce production increased at an average rate of only 0.5 percent per year. Except for 1997 when production was comparable to pre-1992 levels, production declined during 1992-1998. Production appears to have improved since 1999, a situation that has been helped by the continuous resurgence of head lettuce in restaurant salads, including white table-cloth restaurants. During 1992-2000, harvested acreage declined at an average rate of 0.8 percent per year but increases in yield led to a net increment in annual volume produced. Farm value of head lettuce increased at an average annual rate of 8.9 percent during 1992-2000 despite a 14 percent decline in 1994, a 35 percent decline in 1996, a 14.5 percent decline in 1998 and 8.4 percent decline in 1999. In 2000, the farm value of head lettuce was about $1.26 billion, 14 percent less than the highest farm value for the period ($1.46 billion) in 1995 when acreage and production were both down by 11 percent from the previous year.
Per capita consumption declined at an average rate of 0.2 percent per year during 1992-2000. Exports also declined at an average rate of about 2.8 percent per year while imports increased at an average annual rate of 19.6 percent. In 2001, acreage is expected to decline in response to overall lower prices in 1999 and 2000.
In the past two years, growers appear to better match expected demand with acreage, a trend that may help alleviate the problems of oversupply that plagued the industry in the past. With this trend, though, the industry may lose an important portion of its growers made up mostly of small speculative growers. On average, retail-f.o.b. margins have consistently widened for iceberg lettuce during 1990-2000. The 2000 average margin is estimated at 55.5 cents per pound, 23.0 percent higher than the 1992 margin of 45.1 cents per pound. Many head lettuce grower-shippers have blamed the recent retail consolidation in the supermarket industry for the dismal grower price of lettuce, in the presence of higher retail prices and wider margins in recent years. Specifically, there is concern that retail prices have responded more to f.o.b. price increases than f.o.b. price decreases. Other issues of concern to grower-shippers include slotting fees and the request for services, especially for bagged salads.
Page 107 PREV PAGE TOP OF DOC Romaine and other leaf lettuces (R&L) continue to sell well, and outperform iceberg lettuce. Romaine, especially, remains a hot salad item with food-service and grocery store shoppers and this appeal to consumers is forcing changes in the structure and mix of lettuce production. Growers have consistently increased R&L acreage since 1992 and are expected to continue to do so into the near future, probably at the expense of iceberg lettuce acreage which appears to be holding at about 200,000 acres. R&L acreage increased at an average rate of 6.5 percent per year during 1992-2000 in response to changing consumer demand and the popularity of Caesar and packaged salads. R&L-based blended salads, salad kits, and Romaine hearts continue to appeal to an increasing number of consumers who seek convenience.. Production and farm value of R&L also grew at 8.3 percent and 11.4 percent, respectively, during the period. These trends are likely to continue beyond 2001. In 2000, production of R&L reached 2.6 million cwt while farm value of production was about $603 million. R&L consumption rose at an average rate of 7.5 percent per year during 1992-2000. Exports increased at an annual rate of 8.6 percent while imports grew at about 26 percent per year during 1992-2000.
Melons: U.S. Spring watermelon acreage has been reduced by 14 percent this year due to oversupply and low prices a year ago. This situation was particularly acute in Texas and Georgia where watermelon sold for between $4 and $5 per cwt last year. Growers are making adjustments to stay profitable and some have switched acreage to cantaloupes, honeydews and other melon varieties. Producer organizations have also renewed efforts to increase consumer demand through research and marketing efforts. Consequently, a late start, lower output and greater promotion may help strengthen prices this year.
Yet, this is by no means certain. Recent developments outside U.S. grower control have affected the industry. In May, the Food and Drug Administration stopped shipment of all Mexican cantaloupes from Nogales, AZ, that were traced to an outbreak of foodborne illness believed to have caused two deaths. A single outbreak may have a lasting impact on the market as the reputation of the product may be damaged in the mind of the consumer. Negative publicity then, tends to decrease demand and depress market price. Hence food safety affects both public health and grower profits. The industry has recognized this long ago and has taken an active role to ensure it produces a safe product. In fact, most cases of melon contamination have been traced to imported product.
Page 108 PREV PAGE TOP OF DOC Onions: A smaller crop and strong demand is pushing prices up in 2000-01. Onion growers experienced a 24 percent decline in cash receipts compared to the previous season due to a record 73.56 million cwt crop during 1999-00. However, growers are regaining some ground as a smaller storage onion crop last year and strong export demand have lifted the U.S. average onion price 15 percent over the extreme low of 9.78 per cwt a year ago.
Likewise, Spring and Summer season onion growers in AZ, CA, GA, NM, TX and WA saw an average 12.9 percent price decline between 1999 and 2000 but conditions are improving. Acreage in Texas and Georgia is down from a year ago and a wet winter in Texas delayed and prevented planting. In Georgia, the Vidalia Onion Committee reports acreage is 20 percent down from a year ago. Accordingly, the combination of a smaller late crop and lack of imports growth is improving prices. The outlook for this year's storage crop is less certain. Still, it is expected that after having experienced financial losses in recent times, growers will exercise caution and restrict acreage by 3 percent. Given a strong export outlook and if supply stability materializes, U.S. onion growers may continue to experience positive market conditions into the next season.
Potatoes: Increased acreage and higher yields resulted in a record high potato production in 2000. The 516 million cwt produced during the 2000 season, coupled with flat domestic demand and a record high Canadian crop, has resulted in exceedingly low grower prices and very high stock levels. During the October through February marketing period, the USDA estimates that fresh market potato prices dropped by 36 percent from the previous year while contracted French fry potato prices declined by 3 percent. Potato farmers continue to experience economic hardship across the board but growers producing for the fresh market and those without contracts are much worse off.
In an effort to prevent a potato market collapse, growers and trade organizations are exploring a variety of ways to reduce production and raise prices. Potato grower organizations have called for 10 to 15 percent reduction in acreage and have promoted diversion programs. Donations have been made to charity and USDA is currently spending $ 10.25 million to divert fresh potatoes into livestock feed, ethanol and charitable uses. Despite these efforts, potato stocks as of June 1, are 34 percent higher than a year ago having reached a record high 63.2 million cwt. level.
Page 109 PREV PAGE TOP OF DOC On the positive side, potato disappearance is also higher than last year, but a diminishing potato trade surplus, a lack of attractive alternative crops and rising production and processing costs in the Pacific Northwest, creates some doubt as to whether there is enough demand to substantially diminish stocks and enhance prices. Consequently, the short-term outlook for the potato industry is uncertain. The consensus is that if stocks are not significantly depleted and Fall production not reduced, prices will continue to trend down. Thus, facing a mature domestic market and intense competition from Canada and Europe, boosting U.S. potato exports and finding new and alternative uses for potato products will surely lessen the financial hardship brought about by declining farm prices the next time around.
Tomatoes: With a farm value $1.16 billion in 2000, the fresh tomato market is third largest after lettuce and potatoes. Florida is the major supplier during Winter while California dominates in the Summer. A year-round supply is ensured by supplementing with tomatoes imported mainly from Mexico. In recent years, an increasing supply of greenhouse tomatoes and rapidly rising imports has suppressed grower prices.
The U.S. fresh tomato industry was hard hit in 1999 when favorable weather conditions pushed domestic production up by 13 percent from a year earlier and total farm value declined by 17 percent. This year, adverse weather in California and Florida is keeping supply in check. Florida shipments are off by 13 percent from the previous year while volume from California is expected to remain steady. Although the fresh tomato industry has partly recovered, the market rebound is likely to inspire acreage expansion in Mexico, the main U.S. competitor. In addition, intense competition from greenhouse tomatoes is likely to exert downward pressure on field-grown tomato grower prices.
Demand and production for U.S. greenhouse tomatoes has risen over the last decade. Domestic consumption has gone from 4.01 million cwt in 1998 to 5.12 million cwt in 2000 while domestic supply has grown from 1.45 million cwt in 1998 to 1.83 million cwt in 2000. During this time, U.S. consumers have been willing to pay to pay a premium for a vine ripened, cosmetically pleasing product. For this reason, the average unit value for greenhouse tomatoes is often more than twice that of field grown tomatoes.
Page 110 PREV PAGE TOP OF DOC Appealing prices have encouraged production and attracted imports. For instance, the volume of Canadian imports went from 1.36 million cwt in 1998 to 2.24 million cwt in 2000. As a result, U.S. producer's have seen their domestic market share decline from 36.2 percent in 1998 to 35.7 percent in 2000 while Canadian market share has risen from 33.9 percent in 1998 to 43.7 percent in 2000. Since import growth has exceeded the rise in domestic consumption, the price premium is beginning to narrow. On March 28, 2000, U.S. greenhouse tomato growers petitioned the International Trade Commission to initiate an antidumping investigation of Canadian greenhouse tomato imports. The Commission is currently pursuing this matter and a ruling is expected later this year.
Regardless of a growing U.S. appetite for greenhouse tomatoes, it is doubtful whether U.S. producers will ever regain past profit levels. Soft prices are expected to persist into the near future as Canadian suppliers continue to benefit from lower water and energy costs. Processed tomato growers are also being affected by rising energy costs and developments abroad.
Notwithstanding a 16 percent reduction in processed tonnage during 2000, California processed tomato growers continue to experience the after effect of a record high12.25 million ton 1999 crop. Flat domestic and export demand has kept tomato product inventory at above average levels and exerted downward pressure on tomato paste prices.
Growers are attempting to balance supply and demand by cutting back processed tomato acreage. It is estimated that California processed tomato acreage will fall by 14 percent leading U.S. production to decline by 12 percent. Processed tomato prices are then expected to stabilize or rise modestly if a balance is achieved. Nine month disappearance increased by 9 percent over the previous year and a positive export outlook as well as continuing popularity of tomato products could help enhance income.
Despite these favorable developments, the industry continues to face a variety of challenges at home and abroad. In the short-run, rising energy costs are expected to increase growing and processing costs and this could add between 2 and 3 cents (10 percent) to the final price of paste. In the medium-term overcapacity in the industry could make the story to repeat itself yet again. Long term, U.S. processed tomato growers will continue to be challenged in global markets by less efficient but highly subsidized European Union competitors.
Page 111 PREV PAGE TOP OF DOC Production Expense Outlook. As with the rest of the agricultural economy, fruit and vegetable farmers are currently facing rising input costs. Increases in fuel and energy costs have placed upward pressure on production costs. In particular, growers in California, have seen the viability of the industry undermined by high energy prices. Power delivery uncertainty in this state has threatened to disrupt cooling, drying and water pumping activities. These activities are very time sensitive, given the narrow windows of production and perishable nature of produce. On the positive side, falling U.S. interest rates have helped to offset the increase in costs of production.
Long Term Outlook. Over the next several years, NFAPP expects the produce sector to continue to recover from the current market situation. Forecasts of world economic growth project steady increases in economic activity abroad. This should increase the demand for U.S. fruits and vegetables, while ongoing negotiations on multilateral and unilateral trade agreements may lead to more sustainable export levels.
Given these conditions, between 2001 and 2010, NFAPP projects total farm value of produce to increase at an average rate of 2.3 percent per year, reaching $37.0 billion in 2010. During this baseline projection period the value of fruits and tree nuts, and vegetables and melons will increase at an average rate of 2.1 percent and 2.5 percent per year, respectively, due to an increase in production and modest increases in price. The farm value of fruits and tree nuts is expected to reach $16.7 billion by 2010, while the value of vegetables and melons is expected to reach $20.3 billion.
Statement of the Florida Tomato Exchange
The Florida Tomato Exchange (Exchange) welcomes the opportunity to present its view to this Committee. The Exchange represents the majority of first handler of fresh tomatoes in Florida and its members ship a substantial portion of the tomatoes grown in the United States during the winter months. Because of our experiences in a variety of areas in which this Committee has an interest, we believe the comments and concerns we make should be seriously considered.
Page 112 PREV PAGE TOP OF DOC We fully support the comprehensive presentation of the United Fresh Fruit & Vegetable Association presented to the full Committee on May 2, 2001. It is the best effort to date in addressing in a comprehensive manner the issues of importance to the fruit and vegetable industry. In an earlier Congress, we participated in the successful effort to get a fruit and vegetable title in the farm bill, but in spite of the language recognizing the importance of the industry, a proposed study of the industry wasn*t completed. We hope that times have changed and that real progress will be made in this farm bill on issues affecting our industry.
The Exchange was one of the handful of organizations that opposed NAFTA. We believed NAFTA would increase shipments to the U.S. at our growers expense, and we were right. The harm was immediate and real. The so-called transition provisions in NAFTA were first negotiated to a lower level than we were promised and then became ineffective when Mexico unilaterally devalued the peso by 40%. Worker transitional assistance also was ineffective for workers in rural Florida. And the provisional relief provisions in the NAFTA implementing legislation, designed specifically to help Florida*s pepper and tomato growers, in fact, did not. The Exchange pursued this relief twice and we were denied relief. In fact, we were told that there was no relief for Florida tomato growers because the trade laws do not apply to seasonal growers. And, lastly, we obtained a promise in writing from the President that he would take prompt action if a surge or surges negatively impacted our prices. The surges came, the harm was felt, and the promises, the relief, the transitional provisions, none of them worked.
The bottom line is the Florida tomato growers were harmed by NAFTA and the promises and remedies did not help. This lesson should be taken to heart in all future trade negotiations.
A postscript: An anti-dumping suit was brought against Mexican producers-exporters in 1996. A preliminary positive dumping finding was made and the Commerce Department and the Mexican producer-exporters entered into a voluntary suspension agreement that has brought some relief to our growers.
Page 113 PREV PAGE TOP OF DOC In addition, the Committee should be aware that the U.S. greenhouse tomato industry is proceeding with a dumping action against the Canadian greenhouse tomato industry.
The Exchange recently testified before the U.S. International Trade Commission concerning the impact of EU subsidies on the U.S. fruit and vegetable industry. EU is subsidizing directly and indirectly its fruit and vegetable growers with hundreds of millions of dollars. In 1997 for tomatoes alone EU subsidized its growers in excess of $5 billion. How are we to compete with this? And, where is our government when we need them? The answer, of course, is we can*t compete with the treasuries of foreign governments.
The Exchange strongly urges this Committee to maintain the current policy of prohibiting fruits and vegetables from being grown on acreage that benefits from a Federal subsidy. Our growers will be put at a competition disadvantage by our own government if this policy is changed. The only fair policy is not to allow fruit and vegetable production on acreage in USDA subsidized programs.
FRUIT AND VEGETABLE FEEDING PROGRAMS
Much, much more can be done to increase the purchases (and consumption) of fresh fruits and vegetables. This is good farm policy and good nutrition policy. Congress must take steps to double or even triple the amount of fresh fruits and vegetables used in the feeding programs. Moreover, Congress should revisit the issue of having the military here and abroad get fresh U.S. fruits and vegetables. Maybe, if the military forces in Europe got U.S. fruits and vegetables, the EU might take some action to eliminate or substantially reduce its subsidies.
In addition, Congress must take steps to ensure to the maximum extent possible that the fruit and vegetables consumed in the feeding program are produced in the U.S. More specifically, for example, state agencies (not the Federal Programs) spend the bulk of the money for feeding children. States have been known to buy subsidized produce from foreign suppliers. While in some cases such purchases may be necessary (no domestic supply available), in most cases we believe that a lower price in the main determinant. Accordingly, we recommend that the law be changed to provide incentives and disincentives to state agencies to buy more U.S. grown fresh fruits and vegetables.
Page 114 PREV PAGE TOP OF DOC Also, with regard to fresh fruits and vegetables, monies used to purchase commodities must also provide for the special needs of transporting and storing fresh produce.
Establishing a supplemental benefit for Food Stamp recipients at participating retail outlets and farmers markets and adding specifically fruits and vegetables to the WIC monthly food package are additional concrete measures that are win-win for the growers and consumer.
These recommendations will result in more domestically grown fruits and vegetables being consumed, higher prices for growers in the commercial market, better nutrition for those in the feeding programs who may need it the most, and importantly no subsidies for domestic fruit and vegetable growers.
The Perishable Agricultural Commodities Act (PACA) provides for fair dealing in the produce industry. At the heart of the produce transaction in the inspection, sometimes at shipping point and sometimes at the destination. Last year, USDA*s inspection service was caught in a scandal involving bribes given by buyers to Federal inspectors at the Hunts Point Terminal in New York City. While individuals have gone to jail, the industry*s faith in the inspection system has been shaken.
As you know, last year Congress approved $71 million to modernize and improve the inspection system throughout the U.S. We urge Congress to ensure that the industry is brought into the process to provide advice on how best to make the inspections better. For example, every shipment of tomatoes leaving Florida is inspected and, if the inspection service is going to be computerized as we have been told, then we believe the shipping point inspection should be available to the inspector at the destination and both inspections immediately should be available to the parties to the transaction.
A related fall-out of the Hunts Point scandal is that many shippers did not receive full payment for produce shipped to Hunts Point because the bribed inspector improperly down-graded the quality of the shipment. Because these shippers were not at fault, because they are entitled to be fully compensated for the value of their shipment, because Federal inspectors were at least a primary cause in shippers not getting paid the full amount due them, and because receivers at Hunt*s Point are ongoing out business without paying the shippers due to actions taken against them by the PACA Branch at USDA, Congress should establish a special fund to compensate legitimate victims of the Hunts Point Inspection scandal.
Page 115 PREV PAGE TOP OF DOCMETHYL BROMIDE
Methyl Bromide is necessary to the production of tomatoes. There is no suitable alternative especially for our growers in South Florida. Congress must take action to support the continuance of the use of methyl bromide at least as long as our foreign competitors can use it. To unilaterally disarm against competitors is misguided policy at best.
Fruit and vegetable producers do not receive a fair share of the research dollars allocated to agriculture production. Given the lack of participation in most other funding issues for programs to help producers, more funding is needed for fruit and vegetable priorities. While some research has been conducted which has helped fruit and vegetable growers, such research has been limited and in general has addressed specific issues. Such research is important, but more research for fruits and vegetables is clearly needed and warranted.
Given the importance of methyl bromide to our growers, we ask Congress to make research in this area the number one priority and that new funds and reallocated funds be directed to address this issue now. The phase-out of this chemical when there is no viable alternative and when our competitors can still use methyl bromide on fruits and vegetables shipped to the U.S. is fundamentally unfair and will directly harm many U.S. farmers.
The Exchange further believes an assessment of the research dollars now being spent is warranted so that it can fairly be determined whether or not the fruit and vegetable industry is receiving its fair share relative to net farm value.
Research for fruit and vegetable producers should focus on nutrition, conservation, prevention of the introduction of harmful invasive pests, diseases, and noxious weeds, and improvements in production, marketing and promotion activities that will allow our growers to remain competitive.
Page 116 PREV PAGE TOP OF DOC Most of Florida*s tomato shippers operate under Federal Marketing Order No. 966. The order has been in operation for many years and does an outstanding job in promoting the orderly marketing of fresh tomatoes throughout the U.S. Proposed changes to the order are reviewed by USDA and by the USTR. We believe it is fair to give each agency a reasonable time to review the proposed changes and then, if no comments are made, the proposed changes should go into effect. We have experienced long delays without explanation to the point where the marketing season had started and the rules governing the marketing had not been approved. Accordingly, we seek legislation permitting each agency a full opportunity to review proposed changes to marketing orders but if there has been no comment or objection with written explanation after 30 days of submission of such changes to the agencies, then the proposed changes automatically go into effect.
TRADE AND APHIS
Tomato shippers rely exclusively on the marketplace. They are capitalists. They are free traders. No one is more supportive of free trade than a tomato shipper. However, tomato shippers support for free trade is not absolute, is not unquestioning. Unfair trading practices, such as dumping cannot be tolerated. Unfair subsidies are not acceptable and must be challenged. Free trade is not now a reality. Trade is managed, tolerated, permitted, traded.
We believe trade must be fair. There is no question trade will increase and tomato growers fully support and want to participate in increased trade. But, tomatoes do not participate in the Food for Peace or Food for Progress. Tomatoes do not receive the benefit of export credit and other allowances and are not subsidized. Tomatoes and other commodities should be a part of our agricultural export regime.
With increased exports inevitably there will be increased imports. Trade statistics bear this out. With developing countries (and some developed countries) their primary export commodities to the U.S. are agricultural products, and more particularly, fruits and vegetables. Again, agricultural trade statistics support this conclusion. The problem, and it is a big problem, is that the U.S. agricultural policy devotes little attention to the invasive pests, diseases, and noxious weeds that enter the U.S. undetected and then spread to domestic crops. A single out-break of citrus canker, or white fly, plum pox virus, or Pierce*s disease can devastate an entire industry and cost the U.S. Treasury hundreds of millions of dollars. Setting aside $4 million dollars in an emergency fund for APHIS to deal with these disasters clearly is inadequate and borders on the irresponsible. Serious funding of APHIS on an ongoing basis is needed now and a $50 million carry-over fund to immediately address outbreaks is also called for. Certainly, a serious look at how we protect our crops is in order.
Page 117 PREV PAGE TOP OF DOC The Florida Tomato Exchange welcomes the opportunity to submit this statement. We have made recommendations on issues about which we feel most strongly and we hope the Committee will seriously consider them. We will work with the Committee, its members, and staff to develop a 2002 Farm Bill that provides for the needs of fruit and vegetable growers really for the first time ever.