SPEAKERS CONTENTS INSERTS
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00–000 CC
2001
2001
FORMULATION OF THE 2002 FARM BILL
(GENERAL FARM COMMODITIES)
HEARINGS
BEFORE THE
SUBCOMMITTEE ON
GENERAL FARM COMMODITIES
AND RISK MANAGEMENT
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
JUNE 11, GLENCOE, MN; 18, FRESNO, CA; 23 MACON, GA, 2001
Serial No. 107–10
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Part 3
Printed for the use of the Committee on Agriculture
agriculture.house.gov
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COMMITTEE ON AGRICULTURE
LARRY COMBEST, Texas, Chairman
JOHN A. BOEHNER, Ohio
Vice Chairman
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
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GIL GUTKNECHT, Minnesota
BOB 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
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JOHN ELIAS BALDACCI, Maine
MARION 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
Professional Staff
WILLIAM E. O'CONNER, JR., Staff Director
LANCE KOTSCHWAR, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director
Subcommittee on General Farm Commodities and Risk Management
SAXBY CHAMBLISS, Georgia Chairman
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JOHN A. BOEHNER, Ohio,
Vice Chairman
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
JERRY MORAN, Kansas
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
DOUG OSE, California
ROBIN HAYES, North Carolina
CHARLES W. ''CHIP'' PICKERING, Mississippi
TIMOTHY V. JOHNSON, Illinois
MIKE PENCE, Indiana
DENNIS R. REHBERG, Montana
SAM GRAVES, Missouri
MARK R. KENNEDY, Minnesota
CALVIN M. DOOLEY, California
Ranking Minority Member
BENNIE G. THOMPSON, Mississippi
SANFORD D. BISHOP, Jr., Georgia
MARION BERRY, Arkansas
MIKE McINTYRE, North Carolina
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LEONARD L. BOSWELL, Iowa
DAVID PHELPS, Indiana
KEN LUCAS, Kentucky
BARON P. HILL, Indiana
JOE BACA, California
MIKE ROSS, Arkansas
ANÍBAL ACEVEDO-VILÁ, Puerto Rico
RICK LARSEN, Washington
RON KIND, Wisconsin
RONNIE SHOWS, Mississippi
MIKE THOMPSON, California
COLLIN C. PETERSON, Minnesota
CHRISTY CROMLEY, Subcommittee Staff Director
(ii)
C O N T E N T S
JUNE 11, 2001 GLENCOE, MN
Chambliss, Hon. Saxby, a Representative in Congress from the State of Georgia, opening statement
Prepared statement
Gutknecht, Hon. Gil, a Representative in Congress from the State of Minnesota, opening statement
Kennedy, Hon. Mark R., a Representative in Congress from the State of Minnesota, opening statement
Thune, Hon. John R., a Representative in Congress from the State of South Dakota, opening statement
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Witnesses
Anderson, Ron, president, Minnesota Association of Wheat Growers
Prepared statement
Louwagie, Don, president, Minnesota Soybean Growers Associaiton
Prepared statement
Quinn, Andy, corn and soybean producer, Litchfield, MN
Prepared statement
Rynning, Robert, president, Minnesota Barley Growers Association
Prepared statement
Submitted Material
Christopherson, Al, president, Minnesota Farm Bureau Federation, statement
Perish, Alan, treasurer, Minnesota Milk Producers Association, statement
JUNE 18, 2001, FRESNO, CA
Chambliss, Hon. Saxby, a Representative in Congress from the State of Georgia, opening statement
Prepared statement
Dooley, Hon. Calvin M., a Representative in Congress from the State of California, opening statement
Radanovich, Hon. George, a Representative in Congress from the State of California, opening statement
Prepared statement
Witnesses
Bransford, Don , rice producer, Colusa, CA
Prepared statement
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Cameron, Don ,cotton and wheat producer, Helm, CA
Prepared statement
Diener, John, cotton and wheat producer, Five Points, CA
Prepared statement
Errotabere, Daniel, cotton and wheat producer, Riverdale, CA
Prepared statement
Nichols, Chuck, cotton and wheat producer, Hanford, CA
Prepared statement
Palla, Gregg, cotton, wheat, and corn producer, Bakersfield, CA
Prepared statement
Pederson, Craig, cotton and wheat producer, Lemoore, CA
Prepared statement
Pucheu, John, cotton producer, Tranquility, CA
Prepared statement
Submitted Material
Myers, Marvin, producer, statement
JUNE 23, 2001, MACON, GA
Berry, Hon. Marion, a Representative in Congress from the State of Arkansas, opening statement
Bishop, Hon. Sanford D. Jr., a Representative in Congress from the State of Georgia, opening statement
Chambliss, Hon. Saxby, a Representative in Congress from the State of Georgia, opening statement
Hayes, Hon. Robin, a Representative in Congress from the State of North Caroina, opening statement
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Witnesses
Bloodworth, Stewart, cotton, wheat, rye, soybean, and oat producer, Perry, GA
Prepared statement
Heard, Glenn, corn and cotton producer, Brinson, GA
Prepared statement
Lee, Chuck, cotton and wheat producer, Pembroke, GA
Prepared statement
Smith, Donnie, cotton and wheat producer, Willacoochee, GA
Prepared statement
FORMULATION OF THE 2002 FARM BILL
MONDAY, JUNE 11, 2001
House of Representatives,
Subcommittee on General Farm
Commodities, and Risk Management,
Committee on Agriculture,
Glencoe, MN.
[Editor's note: Due to audio difficulties, the transcript of this hearing is incomplete in some places. Attempts have been made to verify the accuracy of all statements and restore them to the fullest extent possible.]
The subcommittee met, pursuant to call, at 9:00 a.m., at the Glencoe Silver Lake High School,Glencoe, MN, Hon. Saxby Chambliss (chairman of the subcommittee) presiding.
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Present: Representatives Thune, Gutknecht, and Kennedy.
Staff present: Christy Cromley, subcommittee staff director; Anne Simmons, and Tyler Wegmeyer.
OPENING STATEMENT OF HON. SAXBY CHAMBLISS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA
Mr. CHAMBLISS. We will call this subcommittee meeting to order.
I thank you all for coming out today, and I particularly thank our witnesses for being here today. We look forward to hearing your testimony. And I also want to thank my good friend Mark Kennedy for hosting us out here and you great people in Minnesota.
I am Saxby Chambliss, and I'm from Georgia. I'm the chairman of the General Farm Commodities and Risk Management Subcommittee. I come from agricultural country in south Georgia where we grow primarily peanuts, cotton, and tobacco down our way, but we do grow some wheat, corn, soybeans, and some of the crops that you all grow up here.
The one thing that we have found out in getting around the country, from an agriculture community perspective, and that is that everybody involved in agriculture has been on hard times for the last several years. We held ten hearings all around the United States last year. We didn't talk to commodity groups, we didn't talk to lobbyists, we talked to farmers and we listened to farmers. And we found out that the problems that are very much in place in California with respect to agriculture are really the same problems that you've got in Minnesota, the same problems we've got in Alabama and Georgia. This year we've had a number of views in Washington where we have heard from commodity groups, with the idea of putting forth rewriting the farm bill this year. We now are about the business pursuant to the direction of Chairman Combest of preparing to rewrite the farm bill. We're going to try to do it this year. In fact, we're going to try to do it in the next 60 days.
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So with that in mind, I made the decision that we needed to go back to the country, narrow our focus on what direction the farmers want us to go in with respect to the next farm bill, and start getting a little more specific. That's why we've asked these gentlemen to come today to testify, and so we can ask some of the questions that we have on our mind in anticipation of trying to draft new Federal farm policy beginning next month.
Again, let me just say to you folks in Minnesota, it ought to be an indication to you of the importance of your sending Mark Kennedy to Congress that we're here. Mark's doing a great job representing you in Washington, and he's a very intelligent young man. He asks the right questions. He's very diligent in his efforts to learn all he can about all agriculture. And he's doing a good job of representing your interests up there. And Mark, I just want to tell you we appreciate the great job you're doing, and we particularly appreciate you hosting us here today.
We also have another Minnesotan, Gil Gutknecht, a very close personal friend of mine. Gil and I came to Washington together back in 1994, and he is a great American and somebody that knows and understands agriculture and somebody that I have great respect for and look to his opinion quite often. He's a good guy, and Gil, thank you for being here.
We have an empty chair right now that's going to be filled in a minute with another good friend, John Thune, from South Dakota. John is on the way from the airport now and should be here shortly.
Let me just, by way of some opening comments, just say that we are here today to hear some new perspectives on how we might improve Federal farm policy. The full committee is leaving no rock unturned. Chairman Combest has heard from a number of commodity groups over the past 2 years on problems with farm policy and what ideal programs they recommend. The committee has heard options ranging from supply management and reserves to keeping the current farm program. Past programs, including target prices, are also being reviewed. There's a number of commodity groups who have testified on behalf of continuing the loan program or deficiency payments and creating a counter-cyclical program.
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I'm holding three field hearings across the country in June to hear from producers on how we might improve on the existing commodity program components and how we might craft a counter-cyclical program to best benefit producers' operations.
This is the only hearing that we will hold on farm policy in the Midwest. We'll be in California next week, and we'll be in Georgia the following week. As you know, Chairman Combest is aiming to write the farm bill and pass it through the committee by August. While some might disagree with the chairman's timeframe, I concur that it is of utmost importance to complete the farm bill this year. Otherwise, we will have new budget numbers to work with. And let me explain exactly what I mean by that, so that we can get this message out to farmers all across America. Because this budget flexability is a new concept, something that we've not had the opportunity to deal with in this way before.
Chairman Combest came up with the idea of flexibility within the farm budget baseline this year. We came up with a number, $79 billion, that's going to be added to the current agriculture baseline over the next 10 years. But instead of taking that number and dividing it by ten and allocating a certain amount of money for each year, we're going to have flexibility in how we use that $79 billion. All of you will remember that with respect to our counter-cyclical program, there have been years that we didn't use that money. But that money was allocated in the budget; it was set aside to be used, and if we didn't use it, we lost it.
This year, under the program that the chairman has crafted, we're going to be able to keep that money in place, and if we use it, fine. But if we don't use it, and we forward it back into the pot, it's available for the next and the remaining years left of the farm bill, whatever they might be. It's a different concept, but it's something that we think is going to give us flexibility so that in those tough years, we'll be able to continue to extend a helping hand to our farmers all across America.
Due to time constraints, we're going to operate under what we call the 5-minute rule here, and that is that we're going to ask our witnesses to limit their testimony to 5 minutes, and we're going to try to limit the time of members' questioning to five minutes, and we'll go in a cycle here as long as we can until the time's up.
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At this time I'm going to look to each of our members to see if anybody has an opening statement. If you want to submit a written statement, we'll take that.
[The prepared statement of Mr. Chambliss follows:]
PREPARED STATEMENT OF HON. SAXBY CHAMBLISS
As Chairman of the General Farm Commodities and Risk Management Subcommittee, I wish to thank Mr. Kennedy and the folks of Minnesota for hosting the subcommittee in the first of field hearings we are holding in June designed to review Federal farm policy. This is also the first subcommittee hearing I have chaired since becoming chairman in January. Mr. Kennedy, I can assure you that it wasn't too long ago I was sitting in your seat. Keep up the good work for the people of Minnesota, and you'll be here one day.
We are here today to hear producers' perspectives on how we can improve Federal farm policy. The full committee is leaving no rock unturned. Chairman Combest has heard from a number of producers and commodity groups over the past 2 years on problems with farm policy and what ideal programs they recommend.
The committee has heard options ranging from supply management and reserve establishment to keeping the current farm program components. Past programs including target prices are even being reviewed. As a number of commodity groups have testified on behalf of continuing the loan program and decoupled payments (AMTA payments) and creating a countercyclical program, I am holding three field hearings across the country in June to hear from producers on how we might can improve on the existing commodity program components and how we might can craft a countercyclical program to best benefit producers' operations.
As you know, Chairman Combest is leading the House Agriculture Committee to rewrite the farm bill and pass it through committee by August. While some might disagree with the chairman's timeframe, I concur that while it is aggressive, it is of utmost importance to complete the farm bill this year. We have received generous figures under which to craft a new farm bill. We don't need to let those numbers dwindle away by allowing a new budget resolution to pass next year before we implement new farm legislation.
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Mr. Louwagie, I agree with your remark in your written statement that farm bill efforts must be viewed as long-term investments. We in the Agriculture Committee will do our best to craft a farm bill to create positive effects in farm country. However, while we will strive for short-term improvements in the agricultural sector, I don't know if we will necessarily see immediate results. Hopefully our witnesses today will offer some ideas on how we might can improve conditions to ease the burden currently resting on farmers' shoulders.
Mr. CHAMBLISS. Mr. Gutknecht, we'll start with you.
OPENING STATEMENT OF HON. GIL GUTKNECHT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
Mr. GUTKNECHT. Well, Mr. Chairman, I'll be real brief.
First of all, I want to thank you for coming. And I think it's good for the people here in Minnesota to sort of get a flavor of the Georgia accent, because I think people need to understand that we talk about farm policy, and sometimes it's easy to think, well, this is what we would like to have happen here in the upper Midwest. We sometimes forget that it ultimately takes 218 votes to pass anything in Congress, and we have people from Hawaii, and we have people from Maine, and we have people from Georgia. And in order to put all of that together, it takes an awful lot of give and take and some buffing and sanding. So we're delighted to have you here in Minnesota to sort of get a flavor of the problems we face among our producers here in Minnesota.
Also, you mentioned, I'm one of the only Members, maybe the only Member, who serves both on the Agriculture Committee, as well as the budget committee. And I think the good news is we've come out pretty well. And I want to say a special thank you to Chairman Jim Nussle of the House Budget Committee. I think we've done extremely well in agriculture in terms of the budget numbers that are going to be available to us over the next 10 years, especially when you put that in context of what we had said we were going to do just a few years ago in terms of the budget.
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I want to also congratulate and thank Congressman Kennedy's staff. There's a lot of work to put something like this together, and I think they've done a great job.
Let's see—there's one other thing I wanted to do.
I'll think of it in a minute. But I appreciate your coming, and I'll turn it back to you..
Mr. CHAMBLISS. Congressman Kennedy.
OPENING STATEMENT OF HON. MARK R. KENNEDY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
Mr. KENNEDY. Well, again, I want to add my thanks for coming here, Mr. Chairman, and it's great that you can come and hear the Midwestern perspective right here in Minnesota. And one of the very interesting things that I've experienced is, as Gil mentioned, not everybody thinks of agriculture as corn and soybeans and wheat and barley, cattle and hogs and what we think of agriculture here in Minnesota. So it's good to have the opportunity to hear it firsthand.
I also see differences between what I hear in Washington from the national organizations and what I hear from our farmers here in Minnesota. So the opportunity for us to hear directly from you and have it be part of the record and have our chairman here is a great opportunity, and I appreciate you coming here to the Second District of Minnesota to hear that.
I also want to echo what we've all said about the budget. The budget is very important, and we've got a much better farm bill this year. So I'm going to be pushing very hard, as these people are, to get this done this year, and that's why it seems very timely.
But it's also more than just a budget. If we can get the agriculture bill written this year, I think we have some ideas that we'll be presenting that are good. Why wait? Why wait till next year when we can have them benefitting us next year, No. 1. No. 2, by focusing on it this year, you focus on what's good policy, as opposed to merely wrapping it up until election year.
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So I think there's a lot of good reasons why we move forward, and I'm quite happy to be able to move forward in Minnesota. Thank you.
Mr. CHAMBLISS. Mr. Gutknecht?
Mr. GUTKNECHT. The other point that I'd like to make, good staff work here. I want to introduce John Monson. John, will you stand up?
For those of you who don't know John, I've worked very closely with John. He was the district director or the Dodge County director of FSA. Now he's the state director. Very, very professional, knows the farm program extremely well. He's been very helpful to our staff, also in working with Congressman Kennedy's staff, Congressman Peterson's staff, who are on the Agriculture Committee.
So if there are questions that we can't answer, we usually turn to John Monson. He does a great job. So thanks for coming out today, John.
Mr. CHAMBLISS. All right. I want to turn to our panel, and just very quickly, Mr. Ron Anderson, our wheat producer from Hallock, Minnesota; Don Louwagie, our corn and soybean producer from Marshall, Minnesota, and also an outstanding golfer, by the way, found that out yesterday; Mr. Andy Quinn, a corn and soybean producer from Litchfield, Minnesota; and Robert Rynning, a barley producer from Kennedy, Minnesota.
Gentlemen, thank you all again for being here. We're going to start with Mr. Anderson. We'll come right down the row. So Mr. Anderson, the floor is yours.
STATEMENT OF RON ANDERSON, PRESIDENT, MINNESOTA ASSOCIATION OF WHEAT GROWERS
Mr. ANDERSON. Thank you. My name is Ron Anderson, and I farm 2,200 acres of wheat, soybeans, sugar beets, canola, and alfalfa in northwestern Minnesota in the Red River Valley. I have been on the board of directors of the Minnesota Association of Wheat Growers for 9 years, and I'm currently serving as president.
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I appreciate this opportunity to visit with you today about Federal policies that affect our farming livelihood. My farm is about 5 hours northwest of here, just a stone's throw from the Canadian border. The growing conditions in my neck of the woods are much different than they are here in southern Minnesota. In fact, with our short growing season, we probably have more in common with Canadian crop producers, agronomically speaking, than with producers here in southern Minnesota, which has growing conditions more like the Corn Belt. The fact that agriculture and growing conditions here in one state are about as different as they are from California to Mississippi serves as a reminder that when it comes to drafting farm policy, one size does not fit all. I hope you keep that in mind as you develop new farm programs because flexibility is needed in the administration of farm policy rules.
As you all know, we have suffered through 4 straight years of low market prices, coupled with higher production costs in recent years. I figure that the cost per acre these past two growing seasons has risen about $5.60 to $6.27 an acre, or about $14,000 on my farm, primarily because of the higher gas and utility costs that affect everything from fertilizer, fuel, and grain drying, to the expense of hauling grain.
In northwestern Minnesota, not only have we been challenged in the marketplace, but also on the production side of the ledger. The Red River Valley has been in a wet cycle for the past 10 years. The Fargo-Moorhead area, which is in about the middle of the Valley, has averaged an extra 2.65 inches of rain each summer since 1991. That's like getting four months of rain crammed into three for 10 straight years. A meteorologist points out that most teenagers in the Red River Valley do not even know what a hot, dry summer is like.
This wet cycle has reduced crop yields and quality in the Valley, which traditionally has been one of the best production regions in the world. The current wet cycle has resulted in an increase in crop diseases, such as scab or Fusarium head blight in wheat and white mold in soybeans. This spring wet weather prevented many farmers in my area from getting into the field to plant. On my farm, I was only able to see 55 percent of my intended wheat acres and zero acres of soybeans. About 50 percent of the crop acreage in my country will be prevented from planting. This comes to about 165,000 acres. Ironically, in western North Dakota and in Montana, there are wheat producers who were unable to plant because it was too dry.
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I want to thank you and your colleagues for legislative measures that have helped mitigate our losses in the field and the marketplace. Better planting flexibility written into the 1996 farm bill has given me and a lot of other farmers a much greater ability to grown crops in response to the markets and to the needs of proper crop rotation. Before Freedom to Farm, I was basically growing just two crops, wheat and sugar beets. Now I'm growing five, because I'm no longer tied to growing program crops on base acreage. I definitely hope this planting flexibility carries over to the new farm bill. Loan deficiency payments or LDPs have also helped with the extremely low crop prices and should be included in the next farm bill.
Of course, it's well known by now that the lack of price support is a major flaw in the current farm bill. I know there's a lot of farmers who would not be in business today without the emergency AMTA and crop disaster loss assistance that's been paid out in the last 3 years. An emergency AMTA payment and disaster assistance will be needed again this year, until a better price support mechanism is incorporated into the farm program. I would stress that a more systematic price support mechanism will not only help farmers sleep better at night, but also their agriculture lenders.
The unpredictability of the AMTA and the AMTA-plus these past few years has made it more difficult for lenders to extend operating capital. A more stable farm program will do much to help lenders work with farmer in financial planning.
I believe that the counter-cyclical support proposed by the National Association of Wheat Growers will work well on my farm. The counter-cyclical wheat payment will be based on a 4.25 market support price, and the payment will be calculated by subtracting the guaranteed base payment and the higher of either the national average market price or the marketing loan rate. All payments would be coupled from current production and applied to historic bases and yields. A more detailed summary of the NAWG plan is attached, with copies of my testimony.
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I see by the red light my time is up. Thank you very much. I'll answer questions later.
[The prepared statement of Mr. Anderson appears at the conclusion of the hearing.]
Mr. CHAMBLISS. Thank you. Mr. Louwagie.
STATEMENT OF DON LOUWAGIE, PRESIDENT, MINNESOTA SOYBEAN GROWERS ASSOCIATION
Mr. LOUWAGIE. Good morning, Mr. Chairman and members of the committee. I am Don Louwagie, a soybean and corn farmer from Marshall, Minnesota. I serve as president of the Minnesota Soybean Growers Association.
I would like to express our appreciation to you, Mr. Chairman, for conducting these hearings on domestic farm policy alternatives for the next farm bill. We look forward to working closely with your committee and your staff in developing effective legislation.
I would like to begin by briefly describing the policy environment facing soybean producers in recent years and its impact on our consideration of various policy alternatives.
The authors of the FAIR Act did not expect the transition from government dependence to market orientation to take place solely as a result of changes in domestic farm policy. They made clear that the overall economic and trade environment of U.S. agriculture needed to be changed to reduce production costs and enhance the competitiveness of U.S. farm exports.
We appreciate that renewed efforts are underway in the new Congress and in the new administration to focus on the problems facing agriculture and to complete the FAIR Act's unfinished agenda. However, even if progress is made in the near future, these efforts must be viewed as long-term investments. As a result, we must assume that conditions during the next several years could remain much as they are today.
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Key elements of the FAIR Act should be maintained in the next farm bill. These include full and unrestricted planting flexibility, which proved to be extremely helpful to farmers in the northwest corner of Minnesota, where disease virtually wiped out a good share of their wheat crop.
In addition, Minnesota soybean farmers believe the following should also be maintained in the next farm bill: Continuation of non-recourse marketing loans, no statutory authority to impose set-asides, and no authority to establish governments or farmer-owned reserves.
Also, we oppose any limitations on marketing loan benefits, fixed income payments, or any counter-cyclical income support payments.
I will now briefly describe our recommendations for domestic farm programs.
Soybean growers support maintaining current oilseed loan rates for 2002 crops, and setting these rates as floors rather than ceilings under the next farm bill. The formula for adjusting loan levels to 85 percent of Olympic average prices in the previous 5 years should be retained, and discretion should be provided to the Secretary to set loan levels above the floor when prices warrant.
Contrary to what some have conjectured, MSGA does not believe the current national average soybean rate of $5.26 has been responsible for most of the expansion in U.S. soybean acreage since enactment of the FAIR Act. We attribute most of that growth to other factors.
First, the incentive to build bases for program crops under previous farm bills has created tremendous pressure to exclude soybeans and other non-program crops from rotations. Introduction of unrestricted planting flexibility and decoupled income support payments reversed this pressure and allowed producers to achieve a more agronomically-optimum crop rotation.
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A second factor was the relatively high soybean prices between 1995 and 1997, compared to prices for other commodities that compete with soybeans for acreage.
Third, new soybean varieties have been developed in maturity groups that are far better suited for northern and western climates than before.
A fourth factor has been the prevalence of scab and other diseases affecting wheat and other crops in northwest Minnesota. Flexibility provided these farmers the opportunity to plant soybeans instead.
Other factors have encouraged soybean plantings in place of corn. For instance, the high costs or limited availability of natural gas and fertilizer have offset recent improvement in corn prices.
I'd like to point out, too, that global consumption of soybeans during the 1990's grew by 56 percent, compared to 27 percent growth in corn and 6 percent in wheat. If we look at U.S. carryover stocks of soybeans this fall, it's expected to be about 12 percent soybeans carryover, corn will be about 20 percent, and wheat about 32 percent. To the extent the soybean loan rate is a factor in planting decisions, reducing it would increase production of crops that are already in greater surplus.
MSGA supports requiring oilseed loans to be repaid at the lower of the Posted County Price or Adjusted World Price.
I'm just going to skip over to we support the AMTA payments. Currently soybeans are not available under the formula for determining payments under Production Flexibility Contracts. We strongly support expanding the PFC program to include soybeans.
We want to support the counter-cyclical income support.
Oilseed producer organizations support replacing the ad hoc emergency economic assistance payments, which have included an oilseed payment with a counter-cyclical support program. After 3 years of improvisation, farmers and lenders need longer-term assurances that a safety net is in place to protect against low prices and provide income stability.
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Then I'd like to go on. Some other issues that soybean growers endorsed the Conservation Security Act, as introduced in the House by Representative Emerson and in the Senate by Senator Harkin.
We support $1.5 billion for conservation payments. In the area of research, as you're aware, we support $1 billion for research funding to help solve these disease problems.
The area of river transportation is of particular concern in maintenance and upgrading of the Mississippi River. Minnesota soybean farmers are at the end of the export line, and depend heavily on the river to export our crops to overseas customers.
River transportation can move more goods with less air pollution, less noise, less fossil fuel than any other means of transportation. It is the most environmentally friendly form of shipping goods and commodities that exists today.
Another promising arena for soybeans and other oilseeds is the area of alternative fuel development. Minnesota led the way in the development of ethanol production.
The Minnesota Soybean Growers is leading the way in the promotion of biodiesel, an alternate diesel fuel. We appreciate the efforts of Senators Paul Wellstone and Mark Dayton and Representatives Gil Gutknecht, Collin Peterson, and Mark Kennedy for their commitment to plant-based alternative fuels. We urge the administration and Congress to include plant-based alternative fuels, such as biodiesel, in its energy plan.
That concludes my statement, Mr. Chairman, and I want to again thank you for convening these important hearings and for inviting me to testify. I will be glad to respond to questions later.
[The prepared statement of Mr. Louwagie appears at the conclusion of the hearing.]
Mr. CHAMBLISS. Thank you, sir. Mr. Quinn.
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STATEMENT OF ANDY QUINN, CORN AND SOYBEAN PRODUCER
Mr. QUINN. Mr. Chairman, members of the subcommittee, good morning. My name is Andy Quinn. I have owned and operated a corn and soybean farm near Litchfield, Meeker County, for the past 33 years. Thank you for holding this series of meetings gathering input from farmers.
You have heard testimony from all of the national farm groups, and it is clear that there is a continued need for some type of farm support. You have been presented with suggestions regarding minor changes to the current farm program, to returning to supply management, to a new counter-cyclical program. The bottom line is that all of the groups agree on the need for a base-line safety net for agricultural. I will keep my comments brief.
I recommend adopting the National Corn Growers Association's proposed counter-cyclical program. However, I personally believe that the National Corn Growers Association proposal is too conservative in the amount of money that they should be targeting towards this program. I believe the proposal could be adjusted in two ways.
First, to provide a better safety net for farmers, I recommend that the new farm program raise the loan rate for corn and other crops to be equalized with the loan rate for soybeans. That means moving the corn loan rate from 1.89 to 2.10 per bushel. My reasoning for this is that the planting flexibility of Freedom to Farm cannot be realized without equalizing loan rates by increasing corn and wheat. This means more funding must be allowed to the National Corn Growers figures for all the national income target.
Second, I recommend the AMTA payments in the new farm bill be equal to the average of the current farm bill. I would like to repeat that because I believe very strongly in this. I recommend the AMTA payments in the new farm bill be equal to the average of the current farm bill. This means 33.2 cents per bushel.
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These two changes make the program only slightly more expensive, but help reduce the risk that future emergency aid programs would be necessary.
I want to commend the committee Members for traveling to Minnesota and for making a concerted effort to really listen to perspectives from throughout America's farmers. Over the past several years, you have received volumes of information from commodity groups in the country. They have brought before you valuable ideas and input, and I applaud their efforts.
Thank you for the opportunity to present my opinion on these farm bills. I will answer questions later if you want.
[The prepared statement of Mr. Quinn appears at the conclusion of the hearing.]
Mr. CHAMBLISS. Thank you, Mr. Quinn. Mr. Rynning.
STATEMENT OF ROBERT RYNNING, PRESIDENT, MINNESOTA BARLEY GROWERS ASSOCIATION
Mr. RYNNING. Thank you, Mr. Chairman. My name is Robert Rynning. I farm in Kennedy, Minnesota with my brother Tim. We farm roughly 3,000 acres of wheat, canola, barley, and soybeans.
I'd like to say that I had to hurry up and jump off of the tractor and run down here and run home again tonight, but I'm afraid in our region—Ron is a neighbor of mine—we are probably looking at 50 percent unplanted acreage for this season. Our FSA director is holding a meeting today to try to figure out acres. So I guess I'm here under a little additional stress also, on top of the program concerns.
I'm here representing barley. I'm president of the Minnesota Barley Growers and also sit on the National Barley Growers. Barley is an individual crop with a very individual problem. We raise half of our production in the country for food use, which is largely malting barley in beer, and half goes as a feed grain. As of right now, our loan rate is set at the feed rate value in relationship to corn. We feel that that could be adjusted somewhat.
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Largely because of this and other factors, as was mentioned in the soybeans perspective, we've lost a lot of acreage in Minnesota and nationally. Nationally we've gone from 13 million acres to 5.8 million in the course of the last 15 years. We have gone in Minnesota from 1.2 million acres to less than 200,000 acres. We're on the verge of collapse of our infrastructure for this industry. It's getting extremely serious. We can hardly support a growers organization, and nationally it's getting very serious.
Our biggest fix and our biggest priority to try to handle this is through the marketing loan. We feel that is our fastest remedy and probably the best. As of right now, if you take the feed value of corn and put barley in relationship to it, it puts us at $1.65 average loan rate. We feel if you added the food value over the last 10 years, you could add 53 cents of value to that formula.
We have adopted a stance using a rebalancing of loan rates taken from the American Farm Bureau Federation proposal. That would place our loan rate at about $2.14.
Now this change for my farm would add roughly 49 cents a bushel or $34.30 an acre. In grain production, that's substantial. It's something that would help. And we do feel it would help bring back some of our acres.
This proposal is also supported by AMBA, which is the American malting barley—Malters and Brewers Association. So it's an industry supported by industry and by National Barley Improvement Council, which is largely industry and producers working together for research. So it's a pretty broad spectrum support for this proposal.
Our next proposal would be the retaining of an AMTA-type payment. We strongly believe that we would like to see funding at $5.6 billion or the equivalent of the 1999 AMTA-type level. We'd like to carry that through in this next farm bill. We do strongly believe that any payments for non-loan eligible crops or non-program crops right now should be an additional funding and not taken out of the proposed amounts or the traditional amounts. That's our position.
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Minnesota Barley Growers strongly support a counter-cyclical type program. We have largely adopted the view of the National Wheat Growers Association. They have figured out—we're a small organization figuring out our own counter-cyclical program and all that entails is very complicated. They have also figured out their program for barley, and we generally like the way that looks. What that would do is set up a market support level of $2.72 a bushel. And that works out using their program of about a 31-cent—this last year would have been about a 31-cent support payment, 31 cents per bushel.
I would like to thank you very much for your time. If there are any further questions, I'd be happy to answer them. Thank you, Mr. Chairman.
[The prepared statement of Mr. Rynning appears at the conclusion of the hearing.]
Mr. CHAMBLISS. Thank you all very much, and we appreciate your being here to give us your thoughts and ideas. Let me—before we get into our questions, let me just say that when we asked the commodity groups to come before the full Agriculture Committee this year and give us their proposals of what they would like to see in the next farm bill, we did that frankly with the idea of that we wanted to hear was basically their Cadillac proposal. And we knew that they would be coming in, or at least we expected them to be coming in giving us the absolute maximum of what they thought it would take to totally satisfy their particular needs through the next farm bill.
Let me just give you some numbers. I've already mentioned to you that we have added in the base line. For the next 10 years we have right at $79 billion. We will be taking $5.5 billion of that and maybe some additional. We're going to decide on Thursday of this week exactly how much money is going to be added into a supplemental for this year. But whatever the number is, whether it is $5.5 billion with an additional after-payment based on 1999 figures, that's what it will be. There may be some additions to that. But that would come off that $79.5 billion. We were very happy to get that $79 billion over the next 10 years.
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But just as an example and something for you to think about, in terms of what we're going to have to deal with, the barley proposal by the National Barley Growers adds $6 billion per year above the current CBO baseline. The National Corn Growers proposal adds $36.1 billion over the current baseline for the years 2002 through 2008 on 5 years. The soybean proposal adds $10.4 billion to that same 5-yer period, 2002 through 2008, and the National Wheat Growers proposal adds $5.2 billion above the current CBO baseline.
So that is something that we're going to have to wrestle with. But in fairness to the folks that came forward to testify, we asked for the Cadillac proposal. That's what we wanted, because we know times are tough, and we do want to hear exactly what you thought it would take over the next 5 years to have a perfect situation exist out there.
Now, I think one or two of you mentioned payment limitations, and everybody we've heard from has said that they would like to see payment limitations eliminated, and I'm assuming that all of you agree with that. With respect to payment limitation—and I'd like each of you to address this—do you believe that the elimination of payment limits would encourage producers to expand their farming operations, encourage production, or would it simply aid in covering their production expenses?
Mr. Anderson, we'll start with you.
Mr. ANDERSON. You're correct. Referring to endorsing the payment limitation provision, in answer to your question, I don't think that will skew or offset overproduction because of payment limitations. The fact is in our area the family farm, because of the profit margin currently on each acre, our farms are getting [inaudible]. And to the non-farmer, these payment limitations sound like a huge sum of money, and they are. But I don't believe that they will offset or artificially overproduce those particular crops. Those additional payments are very critical. And as farmers diversify and entities are developed for the farm, that is a main issue in my part of the country.
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Mr. LOUWAGIE. Thank you. As far as the soybeans, there has been considerable discussion at annual delegate session in February and at the director board meeting. I think there's a very strong feeling that they really don't work. If you have payment limitations, it seems like you have several members of the family taking part in receiving the payments, husband and wife, and so there is a way to get around them.
Second, I think the payment limitation would prevent our farmers from competeing in the world market, because definitely sometimes the global market is cheaper than what farmers can produce for and the payments help him compete and survive.
Mr. QUINN. I, too, believe that farmers are finding a way around it. They will stop creating—other farm family members from having to be brought in, from farmers who are allowing the landlord to take the rent. ''Payment limitations'' is a word that you have not been able to enforce, I believe. Thank you.
Mr. RYNNING. I believe very similarly to the other three. Payment limitations, just in general, I don't believe work. There's just too many ways to deal with that if you seriously want to. There's a lot of money involved. So they don't really serve a purpose, other than making people feel good. And that's generally the position of our national and state board also is that we really don't see the need for the payment limitations, and I don't think it accomplishes what people hope it will. I know they believe that it will pare down the growth inside the farms, but I just don't see that as happening. So I really don't see the need for it. Thank you..
Mr. CHAMBLISS. I think all of you are correct. I'm not sure the current system would work very well. And you're all in the same situation. It's this fear that we have, and that is we have farmers who farm the crop insurance program and that's one of our problems with crop insurance. That same thing happens with the payment limitation. There are ways to get around it, and you can hire a good lawyer and figure out a way to incorporate this and that. I hear what you're saying, there are ways to get around payment limitations.
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In all fairness, though, that is one way to try and get all of these programs to fit within the budget numbers that we have, and that is something we're going to have to look into very, very carefully.
Nobody mentioned set-aside programs, if you can give me a quick answer on whether or not you favor set-aside programs, if anybody has a comment on that.
Mr. ANDERSON. Wheat farmers do not favor set-aside programs. The story behind that has traditionally been back in the past farm bill we set aside on my farm, 26 percent of the land I didn't plant. Australia, Canada, and these other competing countries have told us that the best thing we can use to develop wheat production is our farm program, and we do not want to see that. We have the lowest plantings of wheat in the United States in 30 years, and we have these lower prices. Setting aside more acreage is not going to help this situation.
Mr. LOUWAGIE. The soybean growers would oppose set-asides and has always opposed them. The reality is that setasides don't work. We've looked at that for the last 4 or 5 years where they brought in soybeans and meal in spite of very low prices, which indicates that if set-asides created a shortage and higher prices, soybeans would be imported into the United States. Not that there's been a lot of them imported, but apparently soybeans can and will be brought in if there is a benefit. Thank you.
Mr. QUINN. I, too, also believe that there's nothing to be gained in the set-aside, too many options to lose. It's harder for us to put set-aside ground in than to put in a crop and take care of it. The weeds are more prevalent, and then it's harder the next year. Several instances like this, I believe that you should not have a set-aside program.
Mr. RYNNING. Well, as he says, it's kind of difficult.
I'm afraid we only have maybe 1,600 acres this year. But again, to the question, I personally don't have quite as much problem with the set-asides, many farmers, and both our associations, the state and the national, are against them. Personally, I'm not quite as opposed to them as maybe even as the others who sit here. But in the end, essentially they're right. It really doesn't help us that much. Thank you..
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Mr. CHAMBLISS. All right. Thank you. Mr. Gutknecht?
Mr. GUTKNECHT. Thank you, Mr. Chairman. My grandma used to say the darkest part of the night is just before the dawn. And I think there are some reasons to be optimistic right now. As bad as things may seem, there's at least evidence that the Chinese are having problems with this year's crop, some weather problems. They may well be coming back in the market. We were literally into our fourth year of record world-wide production, and in spite of that, with a little help from Congress and so forth, we've kept as many of the young farmers out there on the farms as possible.
It's my hope that over the next 10 years we won't have to spend $79 billion. Because at the end of the day, the real answer for agriculture, in my opinion, is to find more markets. And, you know, as we talk about trade policies, to the credit of Chairman Chambliss, as well as the full committee chairman, we've had a number of meetings about trade and market opportunities. There's a story, at least a rumor out—and we hope that that will be confirmed today—that the President and the EPA administrator are not going to grant a waiver to the State of California in terms of clean air standards. That's really a big, big positive, I think, for agriculture. So it's not just about international markets either. We've got to help you find more markets here in the United States, in terms of energy, in terms of other products that we can produce.
But one of the things I want to get back to—and this is one of my concerns, and I don't have an answer, perhaps you can help—I know the corn growers have been extremely helpful to me in trying to work through this, and that is we continue to come back and talk about price per bushel. And as we were coming into this meeting this morning, we were talking about how I can remember—it wasn't so many years ago—that my uncles, if they got 60 to 70 bushels per acre of corn, they were pretty happy with that crop. But now, if you're not getting at least 200 bushels to the acre, at least down in my district, you know, you don't even want to show up at the county fair. And it seems to me as long as we continue to chase price per bushel, we're sort of caught in this cycle.
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Now I do believe in a counter-cyclical program. I do believe we've got to do more in terms of finding markets, both domestically and internationally. I think that's all part of the equation. But can you talk to me a little bit about ways that maybe perhaps we can pursue more of a strategy that's built on dollars per acre? And here's the reason: I would like to figure out a way long-term—and I don't know if we can do it in the next 60 days, we need some help from people that are a whole lot smarter than I am, but, you know, as long as we chase price per bushel, we get back to sort of a cyclical argument. And worse than that, we've been so fortunate, at least in our part of the country, that we really haven't had much of a crop failure.
Now I don't know what's going to happen up in the Red River Valley this year—you know, some of you folks up there in terms of whether you can even get the crop in—but I think it's a good example of, you know, it doesn't matter if we guarantee you $2.20 a bushel if you don't have any bushels to sell. And I'm wondering, is there any way you can help us think through how we can move more to a wrap-around program that deals more with dollars per acre? Does that make any sense to you? And you don't all have to be first.
Mr. ANDERSON. Yes, I heard that discussion before, you know, you can get a price for bushel consistently, but if you don't have any bushels—in my case in the Red River Valley, we're facing that situation. What could happen is the prices go up, and if we don't have a crop, how do we take advantage of that?.
I'm not so sure, this might be counter [inaudible], but if we didn't have a little—[inaudible] on crop insurance so when this situation happens, they're not [inaudible]. Maybe there is, you know, a per-acre program, whether you get the crop or not. I don't know if that's clear or not. But I'm not so sure if there is such a thing as what we're trying to address, something that would guarantee revenue, regardless of the crop. I'm not sure if I'd want a [inaudible] like that.
Mr. LOUWAGIE. You asked a good question. I don't know how to answer that. The fact that it's pretty hard to reward income without bushels. In other words, yes, I agree everybody needs operating costs, so many dollars an acre to survive, LDP, AMTA and disaster payments have worked well for farmers to have an income. I'm happy to see the CRC coverage program to protect against short crops or low per-acre income. That's the only comment I have.
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Mr. QUINN. I agree that this is a rather difficult question to answer, because in my situation, up until this year was the first year I've ever taken crop insurance, because the worst crop we had was 1993, of it being wet, and even that I wouldn't being eligible because of 1993 was [inaudible]. But I did buy it this year because you helped reduce the rate. I believe that the counter-cyclical payment will help on some of this. Other than that, I really don't have an answer. Thank you.
Mr. RYNNING. Well, that is the opposite of us.
Basically 6 out of the last 8 years we were stressed financially. We've just been stretched, the weather has been far too wet and will probably last 5 or 10 more years. Basically, if you're talking dollars per acre, it would seem to me you're talking an amplified AMTA type program. That's based off dollars per acre.
And I don't know where that would go. I really don't.
If you could have a two-prong attack, basically, on the program covering maybe some price risks and the crop insurance that would cover it, mainly the production risks. That seems to be what the original intent of crop insurance were. But I think that would maybe be more balanced than looking at it as an AMTA-type payment. I don't know.
We haven't really thoroughly analyzed it, to tell you the truth. That would take some time to do. Thank you.
Mr. CHAMBLISS. Mr. Thune.
OPENING STATEMENT OF HON. JOHN R. THUNE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH DAKOTA
Mr. THUNE. Thank you, Mr. Chairman and Congressman Kennedy, for your hospitality. It's good to be here and to have our neighbor, Mr. Gutknecht, here. We all have a lot of similarities in South Dakota with many of the issues you deal with in this region. One is not running into traffic when you're trying to get to a hearing in farm country. But that was the problem this morning coming out of the Cities. But in any case, it's good to be here. I appreciate the panel and their testimony.
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This is an issue that we are trying to deal with in a very short period of time, hoping we can write a new farm program in the next few months and give producers some predictability about what the future's going to be [inaudible] next year.
It seems to me, at least right now, if you look at the agricultural economy, that the prevailing theory is we lose a little bit on each sale and make up for it in volume. And you can only do that for so long. If you look today at where prices are relative to what costs are and the fact that it actually costs more for a gallon of gas today than you receive for a bushel of corn at the elevator, there's something wrong with that picture. And that's not something that we can sustain for a very long period of time. So we'd be interested to hear what producers and your organizations have to say about how we frame this in the farm bill.
One of the things I just want to ask a question on is wheat growers and barley call for increases in loan rates, as well as maintaining AMTA payments and then creating counter-cyclical payments, which is one thing that's in common, I think, among all groups is that we need some sort of safety net counter-cyclical program. Corn and beans want to keep, I guess, loan rates at the current levels. Those of you that have wheat and barley that are in favor of increased loan rates, if you're going to increase the loan rate, why would you need to maintain the AMTA payments? And farmers union has similar [inaudible], and that is the 80 percent cost of production basically, set the loan rate at that level. And it would seem like this is going to get to be a pretty rich program. And there are certain restraints we have to operate with, which the chairman noted earlier.
You guys care to comment on that?
Mr. RYNNING. I guess for us it's a basic level for survival in the economy. Really, the figures we've seen in the loan levels and some other markets are pretty much at a minimum for us to make growing barley feasible right now. We're dealing with an international market that's based off of a 51-cent Australian dollar or 65-cent Canadian dand 85-cent Euro along with European subsidies, whatever they feel it's appropriate. That's not a workable market for us. Now a couple years ago, I had very litttle barley. It was down to 87 cents a bushel. It was not economically feasible. And because the loan rate is so low, we had some real problems getting acres, even supporting a state organization.
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So I think to make it feasible and to keep—so that the crop and its infrastructure can hang on long enough for there to be a turn-around, of course there will. It will come. We will have better prices at some point. But we have to keep the infrastructure of the industry there. The oat industry has had real problems in the United States, and they've lost a lot of that. And we are struggling right now not to follow the oat industry. We'd like to be a viable crop. And the only real way we can see of accomplishing that, especially in the short-term, long-term we'd love to do through the market. But right now that doesn't seem very viable. Thank you.
Mr. ANDERSON. I would agree with Robert, but as far as wheat, we'd like to see [inaudible] increased, at least on my farm. I am actually planting soybeans, which I've had some success with in the last 3 years. In northern Minnesota, 10 miles from the Canadian border, soybeans don't grow there very long [inaudible] because of the loan rate. The prices have remained so that the loan rate even looks good. So the loan rate on wheat is [inaudible] volume, at least the loan rate part.
Mr. THUNE. That's one question I was going to ask, too, and that is to what degree are the government policies dictating planting decisions, if you're following me. Ideally you want to see market signals drive your decisions, and it seems to me, at least today, that there are a lot of the farm program provisions that are ultimately what a lot of producers don't want in terms of making their decision about what they're going to plant. And that's a good example of that, and that's why there's a lot of strong argument for it.
Mr. ANDERSON. That's true. And the [inaudible] of the farm, that was good, the flexibility was good. But now because of the loan rates, we're actually going back to doing what we tried to get away from, growing crops just because of a government program. Like I said, the loan rate [inaudible] but the economics do work better than the growing wheat.
Mr. THUNE. I'm sorry, go ahead.
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Mr. QUINN. I said that I was very in favor of raising the loan rates and AMTA payment because I personally grew 75 percent corn, 25 percent soybeans on my farm. Since you've come out and it's called the Freedom to Farm, and made your own decisions, it's been 45 percent corn and the rest soybeans. Because it hasn't been too hard to figure that I can make more money raising soybeans than corn. This is why I think we need a better balance, and we want to see the corn loan rate raised to soybeans. We want to see it raised.
Mr. THUNE. That seems to be the consensus view that we hear. One quick question, if I might, on AMTA payments—actually, maybe you can answer this in a two-part question: One is, to what level are rental rates being impacted by the AMTA payments here, and secondly, having to do with computation of AMTA payments, do the—using the sort of outdated history. A lot of people we hear—it depends on which, I guess, commodity you're in more than anything else—but say we ought to use more recent production history in figuring AMTA payments, rather than going back to some baseline that's 15 years old.
So a couple questions. One is having to do with those AMTA payments, how they're impacting rental rates, and secondly, should we be using different data in terms of making those payments?
Mr. ANDERSON. In response to your first question, when this last farm bill was being developed, whatever date was on the AMTA payments and that this money would go to landowners instead of the farmer. In my area, the Red River Valley, I would say over 90 percent of the land contracts are cash rent. The conditions have been in the tank for so long now that the AMTA payments have not become an issue in land rent. At least, it hasn't been in any of my [inaudible]. I'm renting over a thousand acres. That has not been an issue in negotiating land. The government program has never been a part of that. That's never been a factor in the land rent. [inaudible], again, in my area, don't get hung up on these AMTA payments going to the nonproducer, because I don't think that is the real issue.
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The second part of your question on basis, because of the shift from wheat on my farm, from 1800 acres of wheat down to 1200 acres, and I'm using soybeans, canola, alfalfa, other crops, because of the flexibility, obviously my higher wheat base is beneficial to keep that. Even though, like you said, it's 15 years old. And that's a legitimate question, why are we using old bases and old yields? And as far as a wheat grower's perspective, that's the reason why. If we go to a program where we go into a soybean base, yes, [inaudible]. But we have been told to refigure and recalculate bases, yields, go back in history.
A good friend of mine is director of our FSA office.
They simply do not have the staff and resources to go back. We are encouraged and we're thankful that this farm bill may be developed in the next couple of months. But that, you will find, is a great stumbling block, to go back and [inaudible].
Mr. LOUWAGIE. You certainly asked some good questions.
I think part of the AMTA payment is because of the lack of income in the farm sector and that has been a quick source and a very helpful source at times of low prices to help with that shortfall. If we look at northwest Minnesota, they have mediocre crops, and LDP have not worked well. Certainly that AMTA payment has come in very handy and very helpful.
As to whether it's raised rents or not, that's hard to tell whether it's AMTA that might increase the rents or whether it's the fact that the margins are so thin that larger farmers with larger equipment can probably farm more efficiently and be better compensated with the larger acreage, which I'm sure that is as much a driving factor as farm payments creating larger farms. Thin margins and tight credits have enabled farm contracts to start in west Minnesota.
Mr. QUINN. The AMTA payment I believe doesn't cause farm rent increases. Because every farmer thinks that he can make it on this year's, it's going to be a better year. And he figures, I can raise better corn than my neighbor. And he's renting the ground, not because of what he's going to get from AMTA, he's renting it mainly because he wants to prove that he's the biggest and the best farmer there is.
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What was the other question? I forgot.
Mr. THUNE. I can't remember either. I think it had to do with using more recent production history.
Mr. QUINN. Oh, yes. I would be against that taking new readings. I'd have to look at it and see where I would lie with the new farm program. Because I have a higher corn mix, because I raised 75 percent corn before this farm bill, where I have come to raising more soybeans, just due to the fact that I can make more money.
Mr. RYNNING. Yes. As far as effect of AMTA on rental rates, I would attribute more of a little bit of stabilizing effect, maybe, not so much just keeping land rentals higher, but there are times where it might help just that little bit so you're not having quite as wild fluctuations up and down in the rental market, which is good for the person receiving rent. I don't care to renegotiate my rent every year. I pay my uncle rent, my grandfather rent, a lot of that is close family, a lot is retired neighbors. You want to be fair, and you want things to stay somewhat stable. And I think it might have a slightly stabilizing effect on rental rates, but not a big one. I don't think it's enough of a business decision for us to be strongly influenced.
Bases: When you're talking to other growers, for me, personally, I like to keep the same, organizations have basically said that. But a lot of times visiting with producers, you get an almost 50–50 split. Some say well, it would be good, and some say no, let's keep it the way it is. So I think just talking to farmers it's kind of an up-in-the-air-type thing. I think it's better and easier to stay with what we've got. That's a personal feeling..
Mr. CHAMBLISS. Mr. Kennedy.
Mr. KENNEDY. Thank you all for your great testimony and your responses to the questions. I held a series of six agriculture forums in the last several weeks, and many of the farmers that I talked to said it [inaudible] the farm programs. And 250 wrote letters, signed letters for immediate delivery to the President on not granting California the waiver from Federal clean air requirements. I'm hearing that he's going to make the right decision. That'll be very good news for our corn farmers. I think we all seem to be reasonably well fed here in the country. And we're probably going to need a lot more of it [inaudible] more demand for our product.
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And I know that the soybean growers have a proposal as to how we can similarly work to expand demand and grow [inaudible], and maybe if you could just take a second to respond on that, I'd appreciate it..
Mr. LOUWAGIE. Thank you. You're probably aware that the Federal Government passed a mandate where it's required by I believe 2006, that the sulphur content of fuel (500ppm) be lowered to 15 ppm, which virtually eliminates the lubricity in diesel fuel. And some type of additive will be needed to be added to diesel fuel to add lubricty to diesal fuel. And we in Minnesota are recognizing—and I think it's probably national, too—that we're so dependent upon foreign oil. I believe it's something like 65 percent. They have the ability with the price to do what they want. They have the ability to maintain control of supply and price.
In viewing the fact that if you look at soybean oil—or like I say, all vegetable oils [inaudible] marketing. We have two billion-plus pounds of surplus soybean oil stored in the United States, but really we don't have a use for it. And if we could put it to a mandate of 2 percent, we could have that diversity to the fuel, we could at least clean up the air. Two percent would be 2 percent better than a 100 percent of diesal. We're probably looking at the cost as well, which should be about 40 percent of the price of soybeans.
So if you could raise that price, say, from 14 to 15 cents to maybe 22 cents a pound, bearing in mind that seven or eight pounds per gallon, we could virtually be adding six, seven cents to the pound, times seven pounds, we'd be adding 75 cents to the price of soybeans, clean up the air, use up the excess vegetable oil, and that would certainly help the economy.
Mr. KENNEDY. And thank you. That's something we need to work on, see if we can't make progress in that area as well. As our chairman stated, we have a good amount in the budget, 70 million to add on top of our 90-some million dollar baseline. We also have the flexibility to allocate it by years. And it was also mentioned, we need to make some balancing [inaudible], if we add them up, go above that number.
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So we've wrestled with trying to [inaudible] that can still be paid out in very good years, with trying to make the counter-cyclical portion of the farm bill so that we could raise the loan rates or add on a dollars per acre payment, as Congressman Gutknecht referred to. Or as we look to beef up the conservation programs, [inaudible], and we're also [inaudible] that we need to invest more in our conservation.
How do you encourage us to try to balance between a fixed payment, a counter-cyclical payment, and conservation program [inaudible]?
Mr. ANDERSON. Well, I was going to get to that. The Conservation Security Act is something we're very concerned about. And I think all of us on the panel agree that the environment—it's been said a hundred times, that farmers are obviously concerned about their environment, their soil [inaudible]. Although we support the Conservation Security Act, we are concerned that too great an emphasis is put on that as the next farm bill. I'm very concerned about that.
On my farm I've got 2,200 acres of flat, straight, square, quartered sections. I don't have ponds, I don't have wetlands. I mean, it's prime farmland. That's what that land is meant to do. If there was a farm program that was very key on conservation measures, what would that do for me?
Now this is a true story. Last week, I was up very early. I had a black bear run across my land in the morning. I had ducks and geese flying out of the ditches because it's so wet. I had two moose run across my farm later that afternoon, and a racoon took the power out of our farm because he was up on a pole. If I had any more wildlife on my farm, I'd have to open a zoo. We have [inaudible] and they're a very heavily-farmed area. We have environmental concerns and issues, and we are taking care of the environment.
So to answer your question, how do we balance these things, I would put more emphasis on AMTA, a counter-cyclical plan, keeping [inaudible]. We don't have that thing filled up yet, I don't think. So how much more conservation do we put [inaudible] very concerned on my farm. If there's a new farm bill that's allocated a large part of this money to a conservation program, it won't be good for me because I just don't have those opportunities to preserve the conservation.
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And again, the emphasis on the AMTA payment [inaudible] absolutely critical. This has kept many of my neighbors in business. And the uncertainty of the next [inaudible], I would encourage that 5.5 be earmarked as the minimum and [inaudible] payment on wheat, we've got Ron and I literally, the day that I [inaudible], and it's got to be announced [inaudible].
Mr. LOUWAGIE. I think it's probably going to be vital.
I'm going to still need AMTA payments, market loans, to help us to compete during times with poor prices to help us survive. But I think also looking at conservation programs, not farming the erodible land, and so that we could probably—maybe there's areas of doing a better job of preserving the land and the energy, and I think all farmers are trying to do that. And if there's better farming practices that we can use, I think we'd all benefit from that, and maybe that's an area where we need incentives. Conservation programs are needed and costly.
Another thing, I'm not sure that you can mandate all that through the Federal Government, but I think a lot of that is going to depend on each state. Minnesota is relatively flat with very little soil erosion, and to go to areas where any type of terrain you're going to have a lot of runoff. So I think there's incentive things we can do there to help. Thank you.
Mr. QUINN. Across from my farm a neighbor had a piece of ground put into the program. It was beautiful. Seven-foot high the grass grew. But you didn't let him stay in the program because he missed his bid. I think you ought to take the program and extend it—or excuse me, give the farmers preferential treatment that got a good stand on their grasses. This thing—my son hated to go pheasant hunting then because he's not tall enough. He couldn't see the birds it was so thick. But he missed the bid by $5 an acre, and he had to plow it up. And right now it's in [inaudible].
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As far as the AMTA payment goes, we need it. It's drastic. Without the second-half AMTA payment, the majority of farmers would have been broke in Minnesota. I believe very strongly in the AMTA payment because thank goodness you gave us a second-half disaster AMTA payment. It was very critical with making ends meet in my farming operation.
Mr. RYNNING. I guess for the issue of AMTA, is still needed. And as a level, the 1999 level at $5.5 is kind of our minimum. But farmers are pretty used to having good years and bad years and making investments and saving on good years. We'll know how to use the money. If it's there, we'll use it.
Then as far as conservation, some portions of it, we will support into it. We'd like to see it as new funding, not take it away from other places. If they're going to payments for things we're already doing, that's fine. It's a little beter to adjust things here and there to just make things a little better. That's fine. Having a major portion of conservation funding be in the farm program, I'm not so sure on that. That's just a view of it. Thank you.
Mr. KENNEDY. Thank you very much..
Mr. CHAMBLISS. Gentlemen, I think you can see from the questions that everybody's asked, that there is a tendency towards making sure that this next farm bill—and I think we did in the last one—but I'd like to be sure that the money that the Federal Government spends gets in the hands of those folks who are really suffering the loss, and that's the producer. I understand in different parts of the country, you have different scenarios. Government payments are actually going into the value of land to raise costs to you, which we've heard some folks say, whether it's increasing cash rents that people have to pay, which we've heard several people talk about.
One thing that—and I don't know whether we're going to have a cookie-cutter approach from the standpoint of trying to develop a general farm policy, and then delve into each of the commodities and see whether or not that policy will fit within the framework of that cookie-cuttered approach or are we going to go and treat each crop differently, the way we've done in years past. But there is a basic underlying part of most commodity programs today that seems to be working fairly well. And all of you all have mentioned it in one form or another, and that's the marketing loan.
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Now the marketing loan has basically always been a non-recourse type loan. And it seems to, in most instances, work well.
Mr. Quinn, you've mentioned that you support the National Corn Growers proposal that they came to us with. As a part of that proposal, they are suggesting that we move away from the non-recourse loan to a recourse loan.
Let me just ask you all generally what your thought is with respect to a non-recourse marketing loan versus a recourse marketing loan.
Mr. QUINN. Well, this would be some place that I differ from the National Corn Growers Association.
Mr. CHAMBLISS. Why did I think that?
Mr. QUINN. I think we ought to leave it the way it is.
I hate to talk against my national board, but it's—that's something that I really am against us doing to the loan program. I'll just leave it at that.
Mr. RYNNING. I guess I'd have to say the same. I certainly wouldn't want to see it change. And I think some of us were quite surprised when the corn growers came up with that position. It certainly isn't a position advocated by the barley growers. We'd like to have it stay the same. And I think it's a very workable system. And I think we do in general keep the flow of the commodity going quite well. I just don't see that as a problem. We're not hearing stories of farmers having storage bin after storage bin full of barley right now. The industry may, but that's not reflected because of that situation. So I wouldn't want to see it change.
Mr. LOUWAGIE. I guess I'm always open to looking at new possibilities and ways to improve our farm programs against the corn growers. The marketing loan has certainly worked very well for soybeans. As you noticed in our talks, our exports have increased in the last 10 years to 50-some percent. And you look at carryout in this crop year soybeans—12 percent versus corn, maybe 19, 20, or up to 30 on the wheat. So for soybeans the market loan has worked well. It has enabled us to compete on the world market, which is really what we want to do. Thank you.
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Mr. CHAMBLISS. Mr. Quinn, let me just say that the proposal that the corn growers put forth was a very, I thought, a very interesting, a very forward-looking proposal. While you and others would not agree with it, to their credit, I think your national organization did a very good job of thinking through this, going out in the field, talking to folks, putting ideas out there, and then developing a policy, based on what they heard, plus based on what they thought might work. And there are some other commodities that have come forward and said the same thing. I don't know where we'd go with that, but I thought they did a good job of thinking through and coming up with that proposal.
Mr. Anderson, let me direct this one to you. In your testimony, you suggest that the lack of price support is a major flaw in the current farm bill. As I said early on, one of the options that we are looking at is going back to the target price system or, in any event, changing the direction of farm policy. In the next farm bill, if we continue to give you the flexibility to choose what you plant, and you were guaranteed a certain price, above and beyond the loan rate, for your crop at harvest, how would you decide what to plant and at what quantity, and do you think that such a scenario might tend to encourage overproduction?
Mr. ANDERSON. No, I don't think so. I think what I would do is—for example, [inaudible] we have markets for $4.25. I would go back to the traditional cropping rotation. However, the disease that we've experienced in the last several years in northern Minnesota has taught us one thing, and thankfully the [inaudible] farm bill we can plant other crops.
So I think the decision I would make would be probably a split between what agronomically works on the farm and of course what financially works on the farm. I don't think—I think I would continue those [inaudible]. The rotation of soybeans on wheat is fantastic. You've [inaudible] on a minimum of four bushels per acre will be grown [inaudible] soybeans. So I would say agronomically it works financially.
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But in the case of barley, we were growing barley.
Although we knew that financially, it wasn't financially a good decision, but agronomically, the whole long-term rotation of the crops, the wheat and sugar beets and barley [inaudible] wasn't making that much money on a [inaudible]. Thank you..
Mr. CHAMBLISS. Thank you. Mr. Gutknecht?
Mr. GUTKNECHT. Well, thank you, Mr. Chairman. And I apologize. I have to run here in just a couple of minutes. Fortunately all the questions that I really wanted to ask have been asked, and I want to thank the panel. You've done an excellent job. Thank you for taking time out of your busy schedules to be with us today.
I know sometimes there's a tendency to believe that Congress doesn't listen, and I don't think that's really fair. We've been listening a lot. The problem of course we have is ultimately trying to squeeze about a hundred billion dollars' worth of requests into a $79 billion package. And ultimately, another big problem we face—and I'm not asking for your sympathy, but you need to understand that in the House it takes 218 votes to pass a bill, in the Senate it takes 50 votes, plus the vice-president, or 51, depending on the circumstances. So at the end of the day, ultimately we're going to have to find some consensus.
The other problem we have is once in a while explaining the rationale for having a farm program at all to an increasingly urban and suburban constituency. And even in my district I'm surprised how often I'm confronted by people at the barber shop or the grocery store or church, whatever, wondering why it is that over half of net farm income is now coming from Federal Government programs, and why is it that we're continuing to subsidize agriculture. And I think we need to do a better job of explaining, both to our constituents and to our colleagues in the Congress, that really, I think the fundamental answer to that question is, we cannot afford to take a risk of losing a generation of younger farmers. That's a national resource, and it's one that we cannot afford to lose.
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At the same time, I think we in Congress have to do a better job in Washington of explaining some of the factors as to why we are where we are. And you've done a pretty good job today, but I think maybe we should once again remind all of us that, you know, we're in the fourth year of almost unprecedented worldwide production. That's partly about technology, and that's also about weather patterns. And we know, as great farm [inaudible] Johnny Cash said, that everything changes, as well it should, the bad ain't forever, the good ain't for good. And we will see some change in that, and hopefully it will work to our advantage.
The other thing that was mentioned—and I want to thank you—when you look at the value of currencies around the world, American agriculture plays a huge [inaudible]. The last round of the [inaudible] trade talks, I think our negotiators did a miserable job of defending agriculture. We allowed the Europeans to subsidize their agriculture up to a [inaudible] up to $6 1/2 billion in American dollars, as opposed to our programs, which were limited to something like $300 million in agriculture and support enhancement programs. So we really placed ourselves in a very difficult circumstance in a tough world market.
And against that environment, I think we in Congress are prepared to do our share. But please do understand that not everybody's going to get everything that they want because there just are not going to be enough dollars to go around in terms of putting this farm bill together. But we are listening, and we are trying to put together the best package we can to make certain we don't lose an incredibly valuable national resource, and that is another generation of young farmers willing to go out there and take a chance in this. Because it is a tough business. It's especially tough when you've got weather problems, you know, either too much rain or not enough rain, you've got wheat scabs, you've got all those other things working against you.
So I just wanted to say a special thank you to all of you for coming, and I want to say a special thank you to Congressman Kennedy and his staff, because it takes a lot of work to put something like this together. And finally, just a big thank you to Chairman Saxby Chambliss for coming up here and sharing with us some of his southern charm. Thank you.
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Mr. CHAMBLISS. Thank you, Gil. We'll miss you.
Mr. Thune?
Mr. THUNE. I appreciate having some neighbors from South Dakota here, too, but maybe not, I don't know. Let me—just a couple of thoughts, too, and perhaps a couple of questions. One—I noted a couple of you in your testimony talked a little bit about conservation, and I am a prime sponsor in the House of the Conservation Security Act. And I guess my view is that this farm bill, there's going to be a conservation component to it. And the question for us is: What do we do? Do we expand the existing programs that we have today, which is CREP [inaudible], some of the others, and do [inaudible] that allows producers to continue to produce and not sacrifice income [inaudible]. And the Conservation Security Act, in my mind, there are a lot of things about it that [inaudible] sense. One, it is voluntary. Two, it is incentive-based, it is—the decision-making is local, it's not dictated from Washington. There's a lot of flexibility for producers to decide what makes sense on their farms, what they might be able to do to enhance self-conservation, water run-off, all those types of things that at least in South Dakota are the same as in Minnesota, perhaps not on the same level.
But in any case, the question I pose is this: Does it make more sense to increase set-asides, to increase the [inaudible] acreage, or to come up with some program, realizing that budgetwise, the commodity programs in this farm bill are going to probably be the highest priority. We're going to address the counter-cyclical issue and all those things, but I think it's fair to say that the environment that we are in today, that we will have a fairly—there will be a conservation piece to this farm bill. At what level, at what cost, I don't know. But does it make more sense to encourage producers to idly set aside, to take land out of production and be compensated for that, or to have some sort of a program, whether Conservation Security Act or some variation thereof is the basis for how we treat conservation in this farm bail.
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And I would also add that where I come from, the wildlife production side of it, pheasants are a huge thing. That's about the only thing that's making any money in agriculture, and so why wildlife habitat is a concern in our state, as is conservation, because we do have a lot of the [inaudible]. Frankly, we have to figure out a way to manage that better. I realize you have different issues here, and you have different issues in Georgia and other places too, but would anyone care to comment on that?
Mr. ANDERSON. Well, if it were constructed where a farm like mine could qualify on those things, and maybe even an objective to do that would be [inaudible], those kind of compensation or subsidies, in a round-about way, is [inaudible] to these trade talks. Well, then maybe that's a way to fund income support through conservation practices. That would actually work on some of our farms, you know.
That may be an alternative method of getting that money in there. Because some of these conservation methods work quite well in that [inaudible].
Mr. THUNE. I think that most conservation programs we have today, as well as the Conservation Security Act, the current rule would fit in the green box.
Mr. LOUWAGIE. I'm not sure which is the best way to approach it, but I can say on our farm we could be putting something in the ground into the CREP Program, which is working out very well. The fact that when we have these high waters, we have education and trees, a lot better than tilled loose soils on the farm ground, as far as flooding. The other part of it is we're starting to see a lot more pheasants and natural animals than we have seen in the past, so there's certainly some benefit to that area. Thank you.
Mr. QUINN. I'd like to thank you for your good pheasants out there, because I travel out to [inaudible] South Dakota every December to go pheasant hunting with a group of farmers. I believe there's going to be strong support for continuing the bill, and we shouldn't forget that the pheasants, like something alongside of corn, other grains that they are eating, I find that by the time we get out there in December, you don't want to hunt the set-aside acres. You want to find a farmer who has corn, soybeans, whatever. But due to the farm and the environmentalists, I think you are going to have to have a little bit of the farm organizations' support on this, and I will support you also.
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Mr. RYNNING. Yes. I think because of all of the issues brought up by the other gentlemen, I think there has to be a serious look at, and there's definitely ways to help agriculture. And I think the green box is probably the—the green box issue is probably bigger than we all want to admit right now. It could be a much bigger issue further down the road. And having a program developed that works for farmers and everybody concerned is important, and that's something to start with.
So yes, I think it is going to play a pretty important role. How that's funded gets to be a little trickier question. We'll leave that up to you guys. Thank you.
Mr. THUNE. I appreciate very much your answers and your testimony as well. And I don't know if the chairman is intending to wrap this up here pretty soon, but I'd like to say thank you for your testimony. We are listening, we want to do this right. We want to do it in a way that incorporates the views of producers, and hoping to design a bill that isn't going to make everybody happy, but is based on a consensus of what we're hearing out there, what producers are asking for. And I think there are some good developments, positive developments out there. And Gil mentioned a lot of the issues, economic issues that are affecting agriculture. Those aren't probably going to go away any time soon.
But it's encouraging to me to see some of the positive signs on the horizon. The President, we're told, is going to deny the waiver that California's asked for [inaudible], which is a big deal for value added. It's something that I'm very interested in my state, not only because of the additional dollars it puts in the pockets of the producers, but also what it does for the economy. In South Dakota we have a lot of small towns that are really struggling to make it, and we have to be looking at things that we can do to improve the economic outlook, help [inaudible], and ethanol, biodiesel, all these sorts of things are really right on the mark. And I hope that we can do something in this bill, too, that encourages and promotes those types of activities. Because in addition to opening up export markets, we've got to do something here in this country that helps [inaudible] the markets for our products.
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So I appreciate very much your testimony and your input and look forward to working with you trying to draft something better, maybe a better bill that will hopefully provide a better sense of where we need to go in the future of this country with farm policy. Thank you.
Mr. CHAMBLISS. Thank you. Mr. Kennedy?
Mr. KENNEDY. Well, again, I would just like to begin by thanking everyone for coming in and the staff for setting up this event and my fellow Members and Chairman Chambliss for coming here and you for giving your testimony. And I do think that with the [inaudible] going to be able to invest [inaudible]. A lot of issues you talked about, as well as [inaudible]. And my goal is that we keep our Minnesota pheasants and things like [inaudible] that we don't export the pheasant hunters to South Dakota. And the conservation program's going to help us do that.
But as everybody's been mentioning, we have to try to, you know, balance many of these programs. Every single one of the organizations proposed a counter-cyclical program, over and above the loan rate, that was generally a dollar per acre in actual income guaranteed. And, you know, as I talk to farmers around the district they don't understand this, and they don't appreciate it, and they don't know whether it's good or bad for them.
So I asked you before to talk about the balance between a few different things, and I'll ask you once again, because we need your input to help us make these balancing decisions so we come back with a program that reflects what you want. And we're saying, should we just take that loan rate that much higher or come up with a counter-cyclical payment that's based on an income-per-acre basis? And how should we balance the amount of money we allocate to each of those two programs? Because I am concerned about years like this year, where it's hard to get a crop in the field, and that we may not have quite the yield, and then if we move more towards a dollar per acre or a dollar of revenue, something that's going to give us a better, stronger safety net for times we don't have those crops. And I want to [inaudible] you guys in how you balance this [inaudible] higher loan rate with coming up with a dollar-per-acre type of safety net on top of that.
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Mr. ANDERSON. OK. The question now is a solid AMTA program, which equates as a dollar per acre, I would put as number one. My AMTA payment is around $20 an acre, and it's spread all over my whole farm. It's very significant. Good news or bad, that is coming. We could raise the loan rate, but [inaudible] AMTA will. So I would prioritize the counter-cyclical AMTA-type program being ahead of just raising the loan rates.
Raising the loan rates helps my bushels when I need cash flow before I do my final market. That's very helpful. But the loan rate is actually below the cost of production, so that's only short-term help. So I'd put it in that order.
Mr. LOUWAGIE. I guess I would probably have to say the loan rate is very important to us. If I look back 7 or 8 years ago, when we talked about loan rates, I didn't probably think they were very important. I just wanted to go to the bank and get the loan. It was certainly helpful to have that guaranteed amount for so many bushels. As of the last 2 or 3 years grains were much lower in price, I think we had soybeans crop to $3.80, I think corn was about a buck ten, a buck eighty. Some dramatic drops in prices take that type of price for the marketing loan to offset that, even though it hasn't been the price we really need it to go to. Certainly the AMTA payment has helped in times of poor yields and been very helpful to us.
Another thing I think that's very important is the Federal crop insurance. It's certainly a way of helping us to lock up some dollars and guarantee to have insurance in the bank so that we know we're going to be around next year. So it's probably a combination of those things. Thank you.
Mr. QUINN. I like the loan rate because—for several reasons that I've mentioned previously. It helps an awful lot at the beginning of the year, depending on your tax decisions of January or December, to walk in and get a loan on a commodity to go pay the bank off. I don't think we would be very welcome if we said we didn't care for the loan rate, because that would mean we'd only get a loan of what the corn is worth, about a buck thirty, and that really hurts.
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I'd like to say that I'm—I believe that the corn growers have put a lot of thought, and we were part of it, into their program. But just because I didn't believe in one portion doesn't mean I didn't believe in the package.
Mr. RYNNING. For me, I guess the counter-cyclical portion is made, on a historic basis, on a projected-type yield, which shouldn't even [inaudible] in a year where you don't get the crop in, because it's based on historical facts. So we maybe get something out of that even if we didn't get something in the ground, and AMTA, of course, would be there. That's very important because you can absolutely rely on it. Now as a producer going before crops, that would probably be my most important.
But as a representative of Minnesota barley growers and national barley growers, I would say in a situation with barley, by itself, standing alone, the loan rate is by far the most important. Because we feel that's a big factor in [inaudible], I think that doesn't have much effect on our acreage and our production, but the loan rate really does.
So that's two different perspectives there. But as a farmer, I've always liked the loan rate, a little higher loan rate, and always felt we could produce it and make, you know, real benefits out of having a strong loan rate. My view has changed somewhat in the last 8 years, where we've had [inaudible] on our production side. And to get a loan or an [inaudible], it's all about [inaudible]. Thank you.
Mr. KENNEDY. Thank you for your input. And that's all for me.
Mr. CHAMBLISS. I have two quick points I want to address before we wind up.
Mr. Louwagie, there's been an obvious trend towards crops moving from certain commodities into soybeans over the last several years. And did you have any recommendations on how we slow down that trend or is that trend good, should we promote that trend, or where is the soybean association on that issue?
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Mr. LOUWAGIE. Let me add the fact that we have less soybean carryout than corn or wheat. I think the fact that you're basically trying to put some dollars to help the farmers, and most farmers have soybeans with their rotation, whether it be wheat farmers or corn farmers. I think we will be able to grow even more soybeans. The world market I believe is going to continue to grow, especially as we get into biodiesal as a fuel. We mentioned trying to, in some of the poorer countries of the world, get some more soybean protein foods into their lunch programs and using private volunteer organizations to help us with this. I believe there's still more room for soybean production, and I don't have a problem with them growing more soybeans. I hope that answers your question.
Mr. CHAMBLISS. OK. And Mr. Rynning you made a comment with respect to not using the existing monies to afford additional profits or additional commodities coming under the provisions of AMTA. I just want to make sure that I hear where you're coming from. We've got soybeans and sugar and peanuts already that have asked to participate in AMTA payments that are not participating now, and what I'm hearing you say is that you would like to see the 1999 base for AMTA payments kept and that any additional commodities that come in have funding be added to that 1999 base funding.
Mr. RYNNING. Yes, that is correct. That is my position.
Mr. CHAMBLISS. Well, let me once again just thank all of you all for being here. I think this dialogue has been certainly good for us. And I hope you're seeing some of the ideas that we're having to wrestle with and the difficulty in trying to bring it to some conclusion. But you know what? We have said over and over again that if we approach this farm bill, that the worst thing we could have happen is a bunch of Members of Congress and other bureaucrats in Washington try to decide what's best for the farmers of America. So what we have tried to do is to get out here and talk to you all and listen to you and make sure that when we do write this farm bill, that we write the very best farm bill that we can for all America.
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I'm particularly interested in several of your comments, particularly you, Mr. Louwagie, about crop insurance. And Mr. Quinn, you went to crop insurance this year for the first time ever. That was exactly the idea that we were promoting when we crafted and wrote that crop insurance package last year. We were hoping that every farmer in America would go with the crop insurance program.
We folks in the Southeast have been very dilatory about getting into the crop insurance program for exactly the reason that you talked about. And if you're a good farmer, overall you're probably going to get enough yield not to qualify year in and year out. In those tough years that we think crop insurance is critically important to the planning of every farmer—and we wanted to put the decision on the farmer and the banker, as opposed to putting it on the government, when it came time to decide whether or not to buy crop insurance.
And we hope that's what we're doing. And based on what you said, I'd be hopeful that we're going to have all, or at least more, farmers participating in the crop insurance program. We still have got some kinks in it we've got to get worked out.
Once we get through this series of hearings, I will tell you that we're going to come back with some more hearings on crop insurance and another issue that I'm going to address right now, and that is the issue about biotechnology. As I look across the table, I see folks who are directly benefitting from what's happened in the field of biotech over the last several years. And our friends across the ocean have given us problems there, and we've got to help solve that problem. We've got to get the mindset away from the idea that's there's something wrong with GMOs, that the seeds that you all are putting in the ground now are absolutely 100 percent totally safe, and they produce safe and beneficial crops, and at the same time, allow you to plant seeds that are more disease resistant and are giving you higher yields than you've ever seen before. And I think that's critically important.
And we're going to be coming back into the field this fall. Mr. Quinn, we're probably going to do this in South Dakota sometime between October and December. I just want to pick that time of the yeararbitrarily.
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Mr. THUNE. Mr. Chairman, I would just officially like to hold this meeting in South Dakota sometime in the fall. And some of Congressman's Kennedy's constituents cross the line and hunt over there, and we appreciate that very much.
Mr. CHAMBLISS. Another practical agricultural experiment. And another issue that frankly this committee doesn't have jurisdiction over, but everybody in Washington [inaudible] agricultural trade, because I think that it is so critically important for the long-term viability of agriculture. We [inaudible], and under NAFTA, as well as under [inaudible], it's not just the fault of the previous administration. I fault every administration that negotiated those trade agreements.
But to the credit of the last administration, they negotiated what I think is a very good agreement for China or with China. And I was one of those folks who've been on the fence and voted both ways on normal trade relations with China, but I think that was an excellent agreement [inaudible] those folks, and I would love for two billion people in China, who one of these days are going to have more money than ever to buy products, buying peanuts and [inaudible] and smoking our cigarettes, and they'll do it because that is a good trade agreement. And we're going to continue to try to develop more and better trade agreements with everybody across the world.
Let me just close by again recognizing Mark. Mark, thank you, and particularly your staff. I know that they're the ones that really did all the work for putting this together, and my staff, which is extremely complimentary, for the work that they did on this. I thank all of you all for coming out today.
Again, I come from south Georgia and particularly in the heart of agriculture country. My district, the Eighth Congressional District of Georgia is the second largest peanut-producing district in the country, we're the second largest timber-producing district in the country, we're in the top 10 in tobacco production and the world's largest cigarette manufacturing plant is located in our district. I have about 95 percent of the peaches in Georgia grown in my district, plus we grow every kind of fruit and vegetable, cabbages, cucumbers, squash, eggplant. So as I get around the country, I love to tell folks that if you can eat it, wear it, or smoke it, chances are it came from my district.
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But we do appreciate you folks coming out and listening to us today. And again, I want to commend our witnesses for taking time to be with us. I promise you we'll listen to you, and when we get back, we're going to be taking your ideas and incorporating them into the farm bill that we're going to be drafting.
Also, I also want to commend our staff, Christy, Tyler, and the others back here. These folks worked tirelessly to get this event put together, and we appreciate you guys' hard work.
So with that, we're going to close the hearing and we are adjourned. Thank you.
[Whereupon, the subcommittee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Statement of Don Louwagie
Good morning, Mr. Chairman and members of the committee. I am Don Louwagie, a soybean and corn farmer from Marshall, Minnesota. I serve as president of the Minnesota Soybean Growers Association.
I would like to express our appreciation to you, Mr. Chairman, for conducting these hearings on domestic farm policy alternatives for the next farm bill. We look forward to working closely with your Committee and your staff in developing effective legislation.
I would like to begin by briefly describing the policy environment facing soybean producers in recent years, and its impact on our consideration of various policy alternatives.
The FAIR Act's Unfinished Agenda. The authors of the FAIR Act did not expect the transition from government-dependence to market-orientation to take place solely as a result of changes in domestic farm policy. They made clear that the overall economic and trade environment of U.S. agriculture needed to be changed to reduce production costs and enhance the competitiveness of U.S. farm exports.
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We appreciate that renewed efforts are underway in the new Congress and in the new Administration to focus on the problems facing agriculture, and to complete the FAIR Act's unfinished agenda. However, even if progress is made in the near future, these efforts must be viewed as long-term investments. As a result, we must assume that conditions during the next several years could remain much as they are today.
Policy Assumptions. Key elements of the FAIR Act should be maintained in the next farm bill. These include full and unrestricted planting flexibility, which proved to be extremely helpful to farmers in the Northwest corner of Minnesota, when disease wiped out the wheat crop.
In addition, Minnesota soybean farmers believe the following should also be maintained in the next farm bill: continuation of non-recourse marketing loans, no statutory authority to impose set-asides, and no authority to establish government or farmer-owned reserves. Also, we oppose any limitations on marketing loan benefits, fixed income payments, or any counter-cyclical income support payments.
I will now briefly describe our recommendations for domestic farm programs.
Marketing Loan Program. Soybean growers support maintaining current oilseed loan rates for 2002 crops, and setting these rates as floors rather than ceilings under the next farm bill. The formula for adjusting loan levels to 85 percent of Olympic average prices in the previous five years should be retained, and discretion should be provided to the Secretary to set loan levels above the floor when prices warrant.
Contrary to what some have conjectured, MSGA does not believe the current national average soybean loan rate of $5.26 per bushel has been responsible for most of the expansion in U.S. soybean acreage since enactment of the FAIR Act. We attribute most of the growth to other factors.
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First, the incentive to build bases for program crops under previous farm bills had created tremendous pressure to exclude soybeans and other non-program crops from rotations. Introduction of unrestricted planting flexibility and decoupled income support payments reversed this pressure, and allowed producers to achieve a more agronomically optimum crop rotation.
A second factor was the relatively high soybean prices between 1995 and 1997 compared to prices for other commodities that compete with soybeans for acreage.
Third, new soybean varieties have been developed in maturity groups that are far better suited for northern and western climates than before. Last year, virtually all of the expansion in soybean plantings occurred in North and South Dakota, Minnesota, Wisconsin, Michigan, Nebraska, and Kansas.
A fourth factor has been the prevalence of scab and other diseases affecting wheat and other crops in NW Minnesota. Flexibility provided these farmers the opportunity to plant soybeans instead.
Other factors have encouraged soybean plantings in place of corn. High costs or limited availability of natural gas and fertilizer have offset recent improvement in corn prices. Also, the continuing disruption of foreign and domestic U.S. corn markets resulting from the StarLink debacle may be contributing to this year's expected decline in corn plantings.
Global consumption of soybeans grew by 55.7 percent in the 1990's. This compares to 26.9 percent for corn and only 6.2 percent for wheat. As a result of continuing strong domestic and foreign demand, U.S. carryover stocks of soybeans this fall are expected to total about 12 percent of use. By comparison, corn stocks are projected at about 20 percent of use, and wheat supplies will be 32 percent of use. To the extent the soybean loan rate is a factor in planting decisions, reducing it would increase production of crops that are already in greater surplus.
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MSGA supports requiring oilseed loans to be repaid at the lower of the Posted County Price or an Adjusted World Price (AWP). The AWP would be set on a weekly basis in reference to prices of all oilseeds delivered at major foreign markets, including freight costs.
The purpose of using an Adjusted World Price is to ensure that U.S. soybeans and other oilseeds and oilseed products are competitive in both foreign and domestic markets under the next farm bill. U.S. crops are currently marketed at prices that reflect the domestic market, but not overseas markets. Basing loan repayment on values that directly reflect the prices of our competitors in foreign oilseed markets would address this situation, and would also help offset the negative effect of the high value of the Dollar on U.S. exports.
PFC (AMTA) Payments. Currently, soybeans are not included in the formula for determining payments under Production Flexibility Contracts (PFCs). MSGA strongly supports expanding the PFC program to include soybeans.
Counter-Cyclical Income Support. Oilseed producer organizations support replacing ad hoc emergency economic assistance payments, which have included an oilseed payment, with a counter-cyclical income support program. After three years of improvisation, farmers and their lenders need
longer-term assurances that a safety net is in place to protect against low prices and provide income stability.
The concept of compensating producers for low income based on acres complements the marketing loan program, under which benefits are tied to actual production. It addresses a perennial shortcoming in the Federal crop insurance program. Every year, many producers experience below-average yields, but not low enough to qualify for crop insurance coverage. This low-yield gap in income support would be at least partially offset by providing payments on harvested acres.
In our view, this proposal will not count against U.S. commitments to reduce trade-distorting domestic support in the WTO. Paying producers on 85 percent of their current year acreage would support classification as a production-limiting (blue box) program, which would be exempt from discipline under the Uruguay Round Agreement.
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Other Farm Bill Priorities. Mr. Chairman, there are other important priorities that need to be addressed in the next farm bill.
MSGA, along with its national organization, the American Soybean Association, has endorsed the Conservation Security Act, introduced in the House last year by Representative Emerson and in the Senate by Senator Harkin.
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