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REVIEW OF FEDERAL FARM POLICY
MONDAY, MARCH 6, 2000
House of Representatives,
Committee on Agriculture,
Lubbock, TX
The committee met, pursuant to call, at 9:00 a.m., at the Civic Center Banquet Hall, Lubbock, TX, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Barrett, Boehner, Lucas of Oklahoma, Simpson, Stenholm, and Boswell.
Also present: Representative Thornberry.
Staff present: William E. O'Conner, Jr., staff director; Alan Mackey, senior professional staff; Jeff Harrison, associate counsel; Keith Williams, communications director; Wanda Worsham, chief clerk; and Russell Middleton, minority consultant.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. In keeping with the tradition that we have tried to established on the hearings and meetings of the House Agriculture Committee, we will try again to start this one on time. And let me say to all of you who have come out today, thank you very much for your interest and for your attendance, both those of you who are here as well as those who are the Members of Congress who are here.
I want to take for just a moment, as always, the opportunity to thank some people. In doing so, you always leave some out, but I will run that risk this morning. There have been a few who have been particularly and especially helpful to the setting up of this hearing here in Lubbock, and I want to thank the city of Lubbock for all of their courtesies, certainly for the use of this facility, particularly Ron Lewis who is here.
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Ron Lewis has worked many, many hours to put this together, the Lubbock City Council, certainly, and the mayor. And I want to recognize Sheriff David Gutierrez, who has been extremely helpful with assistance in getting us around in Lubbock and his office.
Good morning and welcome to this first of 10 hearings that the House Agriculture Committee will hold in different regions of the country over the next couple of months. I want to thank again everyone for coming to this important event, and I want to thank my colleagues, our members who are here that are taking their time away from their families, away from their districts, but that show an interest in this effort and coming to my hometown of Lubbock, TX.
Today we plan to hear from 19 people who have built their life around the great sustaining and sometimes excruciating industry of agriculture. We have sought to bring folks representing the different types of agriculture in this great southwest region of the United States and representing a variety of thoughts on the issues facing our industry.
It is my hope that everyone in this room can identify with at least one of these witnesses today, and I would certainly encourage anyone who would wish to submit additional written testimony, that it will be made a part of the official record of the hearing, and it will be as substantive and as important to the committee as anyone who verbally testifies. So, we are making this process available to anyone who wishes to make input.
I have the pleasure of introducing the members of the committee, a few of the 51 who are with us this morning. First of all, I want to recognize the committee's ranking member, my neighbor, and from Texas, who I know many of you know, Congressman Charles Stenholm, who is from the adjoining congressional district. Congressman Bill Barrett from Nebraska is vice chairman of the committee, represents almost all of the farming area of Nebraska in its west, north, and central regions. It's an extremely large district. Congressman John Boehner represents the folks of southwest Ohio. From from Oklahoma's western half, literally the whole western half of the State, Congressman Frank Lucas is with us this morning. Congressman Leonard Boswell is from Iowa, has an extremely large agricultural district in Iowa, and we're very glad that Leonard is with us. From the eastern part of Idaho, Congressman Mike Simpson. The committee also welcomes Congressman Mac Thornberry who represents portions of Lubbock, Amarillo, and who we have an adjoining district as well, and Mac has something further to say about the actual location where we are today, and I will not steal that thunder, and has many constituents here as well.
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I do not want to speak too long because I want to emphasize that we are here to listen. I do want to say that I think all of the members of this table know that we have a problem in agriculture; and, if we didn't, we wouldn't be here. What's more, we all fundamentally believe that it is in the interest of this Nation to maintain and foster a diverse and strong agriculture sector for the future.
So, the question that we are here today, that we would like to try to answer is, how can we best do that? This committee was in Lubbock 5 years ago discussing agriculture policy. At that time, some of you were selling cotton for $1 a pound. Today it takes 2 pounds of cotton to get that dollar. Congress has responded in the last 2 years to depressed prices by providing more than $10 billion in supplemental payments to farmers.
Today we want to find out what really producers think is working and what is not working in our Federal farm policy. We're going to all regions of the country asking the same questions of farmers very much like yourself in the hope that we can find some consensus among producers for farm policy changes that you need. Again, I want to thank everyone for coming.
I would like to recognize Mr. Stenholm for any comments that he might wish to make.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. STENHOLM. Thank you, Mr. Chairman. I'm delighted to be here. Thank you for the leadership in scheduling these 10 hearings that we will be holding around the country for purposes of coming out and talking to producers about what changes, what new direction that we might take regarding agricultural policy to solve what has now become a very real crisis, the price crisis that we have been going through.
We also know we have a weather crisis. There is not much that we can do about that except to try to respond to it, and we know that we're 1 day closer to that rain today than we were yesterday.
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In response to the crisis, I proposed a supplemental income plan that we threw out last year that we will again be putting some finer touches to this year for consideration by farmers and ranchers all over the United States. We do not pretend that it is the answer, but it is one thing that we have proposed. And we anticipate and know already as a result of many of you who have accepted the invitation to come forward with ideas and suggestions, thinking outside the box as to how we deal with very, very real problems facing American agriculture in the internationally competitive marketplace, with environmental rules and regulations, considerations, et cetera.
But we're here today to listen, and that's what we're going to be doing a lot of today, listening, asking a few questions, and hopefully laying the groundwork for what we might be able to do this year to assist us through what most economists are predicting is going to be another very tough year economically for agriculture, but also to begin laying the plans for where we go in 2003.
As I am sure everyone in this room knows, that the current farm bill was designed to be the bill that ends all farm bills, but I think most have had a change of heart today and will be looking at where we go with the Y2K2 problem. And that's what we begin today, is looking for the ideas and suggestions that we might take as a committee and move forward.
Again, I also join in thanking the people of Lubbock, the leadership of Lubbock that has been great to work with for my staff and others to make this a very successful beginning hearing.
The CHAIRMAN. Congressman Barrett.
OPENING STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Mr. BARRETT. Mr. Chairman, I thank you very much for your initiative in bringing the first of 10 regional hearings to Lubbock, your hometown. I think every member of the committee that is here today is pleased to be here, and I am anxious to hear the comments from the 19 witnesses today that we can then carry back to Washington.
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Thank you very much.
[The prepared statement of Mr. Barrett follows:]
PREPARED STATEMENT OF HON. BILL BARRETT
Thank you, Mr. Chairman, for your leadership, vision, and foresight in organizing a series of nationwide field hearings to review Federal farm policy. These agriculture policy field hearings will provide members of this committee a number of possible solutions and ideas to return production agriculture to profitable times. I appreciate the opportunity to be a part of this field hearing in Lubbock and look forward to listening to the concerns of the southern Plains producers here today.
It is no secret that we have been experiencing a critical down cycle in production agriculture. Farmers throughout the Nation greatly rely on several of the same factors, no matter their location. Good weather and decent prices are a basic necessity. However, when one or both of these factors are missing, farmers begin to suffer.
Producers have long known the hardship and struggle that comes with working the land. However, multiple years of adverse conditions and depressed prices have created market conditions for producers unseen since the 1980's. In my home State of Nebraska, these conditions have caused an enormous strain on all of our farmers and ranchers. This strain is not only being felt by producers, but throughout our rural communities.
It is obvious that farmers are facing depressed prices due to a lower demand for farm products. Last year under similar circumstances, Congress passed an assistance package for producers. This aid package provided a much-needed boost to the farm economy. However, I believe additional measures are needed. For instance, producers need crop insurance reform. The House-passed crop insurance bill will provide a new approach to risk protection by providing for additional coverage to producers. In addition, it provides a pilot program for livestock. Increased premium assistance and improved coverage will allow producers to protect themselves from an endangered farm economy. By overhauling crop insurance and looking at risk management in new ways, I believe that we will be able to lessen economic situations such as the one we find ourselves in currently. After much debate, the Senate passed their version of a crop insurance reform bill this past week.
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The current farm program was designed to assist farmers in having less reliance on Federal Government support. It was established at a time when commodity prices and farm incomes were relatively high by historic standards. Transition payments were intended to provide farmers with a path to become independent of Government support. They were fixed in the 1996 legislation, gradually declining each year until 2002. They were designed to provide a steady, predictable support level. In view of the low prices and farm incomes the past few years, we in Congress increased the transition payments.
Where do we go from here? To help us in Congress answer that question, we must first ask and answer some questions regarding what is desired by our nation's producers. Again, I would like to thank the chairman for his strong leadership in this time of weak prices by bringing the full committee out into our nation's farm country to listen to rural America. The best solutions for our farmers and ranchers will not be found in Washington, DC!
Our producers are the most important commodities in America. I look forward to working with my colleagues in providing the best all-around program that producers can depend on within the general principles of a market-oriented farm policy.
The CHAIRMAN. Thank you, Congressman.
Congressman Boswell.
OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA
Mr. BOSWELL. Thank you, Mr. Chairman. I too am very pleased to be here, and I appreciate you holding this meeting here in your home community. Yes, I'm from southern Iowa, but I have a real personal feeling for Texas. I spent a lot of time in Texas in my military days and considered it a second home, in a sense.
But we have a special challenge, it seems to me. And I would guess, the looks of this crowd, Mr. Chairman, folks here see the same thing. We've got a robust economy going on, and the country's doing good, and we're all thankful for that. Of course we are. But the agricultural side is not in step with it, and there is a number of reasons, and we need to do something a little bit different.
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And, so, I'm hoping out of this series of meetings we're having that we can identify what that might be coming from you folks. I think the committee has done quite well in supporting American agriculture in the last couple of years with those emergency payments. They were humongous. And it's my opinion we're probably going to have to do it again. Meanwhile, we ought to be trying to figure out how we can do something, whether it's the plan that Congressman Stenholm was proposing or what else we might come up with, but we need to make some adjustments, and so that's what I'm about.
I know that farming is changing. In my area, where there used to be two, three, four farms, there is one. And in some instances, that's probably OK. But there comes a point where I think there might be a diminished return.
And for me, and I'll never pass up an opportunity to say something about this, it's the stewardship over the land. And I think there is a difference when the person is out there trying to pay for that piece of ground and care for it and make it be there for the next generation and the generation after that.
And I think we're failing in that case, at least up in our territory, because they don't have time. They're just too big in some cases. And they come in there in the spring and they plant their crop, and they're gone, and away they go. They don't see the ground until they come back, in some cases the fall, and a lot of things can happen during that time that's pretty detrimental.
So, we've got a big challenge. There is overproduction around the world. We found that out when a number of us—the chairman took several of us out to Seattle and it was quite an eye-opener, quite an education, and we've got some real challenges to recognize all this.
And I'm very appreciative that we've come here today to Lubbock, TX, to start this series that will go on the rest of this year. And with your help, and we're counting on your help, maybe we'll just actually do something very constructive. And that's the goal that I'm here for, and I want to thank you, again, Representative Combest and Stenholm, for holding this hearing. Proud to be here with you, and I'm ready to move on.
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The CHAIRMAN. Thank you, Leonard.
Congressman Boehner.
OPENING STATEMENT OF HON. JOHN A. BOEHNER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO
Mr. BOEHNER. Mr. Chairman, I'm glad to be here in Lubbock, and thank you and Charlie for the opportunity to be here. It's a long way from Ohio. This is my first trip to Lubbock and to west Texas. It's also very flat here. I've got some flat ground in my district, in the northern part of it, but I don't think it's as flat and as wide as this is.
And, so, I'm looking forward to hearing what all of you have to say. As you've heard before, those of us who sit on the House Agriculture Committee aren't the experts. You are. And for us to do our jobs and to do it well, we need your input, your help, your advice, and that's why we're here today, and I look forward to the testimony.
Thank you.
The CHAIRMAN. Congressman Lucas.
OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA
Mr. LUCAS of Oklahoma. Thank you, Mr. Chairman, and thank you, ranking member, for beginning this series of what I think will be 10 exhaustive hearings. I would just remind my colleagues and my fellow farmers and ranchers out there in the audience that the process we begin today to determine, I think, ultimately where our agricultural policy goes next will be no simple challenge. And you know that or you wouldn't be in the industry already.
Since 1933, we have had a myriad of 7-year, 5-year, 2-year, sometimes 1-year farm bills. The fact of the matter is, had we ever have acquired, developed, rode passed, created the perfect farm bill, there would have never been another. We haven't accomplished that yet. Maybe with this process we'll take a step closer in that direction with the next one.
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Thank you, Mr. Chairman.
The CHAIRMAN. Congressman Simpson.
OPENING STATEMENT OF HON. MICHAEL K. SIMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
Mr. SIMPSON. Thank you, Mr. Chairman. I'm also pleased to be here in the great State of Texas. It's nice to be out of the snow of Idaho for a change and come down here and visit Texas. But I appreciate your leadership on holding these hearings around the country. And later on, we'll get to Idaho once the snow leaves.
But as has been mentioned, the answers to the problems in agriculture are going to come from you, not from us. And so I'm glad to be here to listen to those people that are the producers, that are going to tell us what they think some of the solutions may be that we can address in farm policy.
And I'm glad to be here, again, Mr. Chairman. Thank you.
The CHAIRMAN. Thank you very much. Congressman Thornberry.
OPENING STATEMENT OF HON. MAC THORNBERRY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. THORNBERRY. Thank you, Mr. Chairman. First I want to thank you and your colleagues in the Agriculture Committee for allowing me to sit in with you today.
And second, I'd like to welcome all our colleagues and all our guests to the 13th district of Texas. Where we sit is actually in my district. Now, you go a couple of blocks one way or the other way, you get into Chairman Combest's district. But you're in my district here, and I'm pleased to have everybody here.
I also want to say that in these times of problems, I think that the agriculture in our region and all around the country is very fortunate to have you as chairman of this committee, Mr. Stenholm also is in a leadership position on this committee. We've got some tough challenges, but we've also got two gentlemen who have been involved in agriculture their whole lives. They understand the problems, and I think agriculture is lucky to have you in those positions.
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I have a longer statement that I'd like to put in the record, but I just would echo the comments of my colleagues. We've got some very serious problems, and I think nearly everybody in the room knows what some of the answers are. Some of the answers deal with things like taxes and regulation and trade policy. We don't know what all the answers are, however.
And if we're going to come up with an answer that works for agriculture and we can get it passed in Congress, then we need to have a consensus, to the best we can get it, in agriculture. Because the challenge we face is that fewer and fewer folks in Congress represent agricultural districts, much less have the personal kind of experience in agriculture that a number of people on this table have.
So, we've got our challenges ahead of us. We look forward to working with all the people in this room to meeting those challenges, and thank you again for having me here.
[The prepared statement of Mr. Thornberry follows:]
PREPARED STATEMENT OF HON. MAC THORNBERRY
Thank you, Mr. Chairman, for having these hearings about the state of our national farm policy. We have a serious problem, and I hope that what is said throughout the day here in this auditorium, in the coffee shops and feed stores, and on our farms and ranches moves us toward a consensus about the direction we should go.
Building a consensus within the agricultural community is extremely important. Mr. Chairman, you and I have both been around agriculture all of our lives, but fewer and fewer Members of Congress represent agricultural areas, much less have any personal experience in farming or ranching. We've been told that the problem will get worse—not better—after the census, so coming together now on agricultural policy is essential.
As you well know, producers in our part of the country have suffered from very low prices and adverse weather for some time. More and more of our producers are feeling like their future is out of their hands. Weather, trade policy, regulations, and taxes all conspire to make it virtually impossible to break even. We are seeing farmers whose families were some of the first settlers in our region decide they cannot make a living this way any more.
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We have a serious problem, but the question is, ''What do we do about it?'' That's why we are here—to listen to the people who are affected the most.
We know some of the answers. We know that we must have common sense regulatory reform that takes into account the effects of regulations on producers' ability to earn a living and on their costs of production. We have the right to know the costs and the benefits of a regulation and how much of our taxes it will take to implement it.
We know that taxes are too high, and I am very hopeful that this year Congress will vote to abolish the death tax, which costs too many families their farms and other small businesses.
We know that trade is essential, and the United States must do a better job in ensuring that our producers have a level international playing field on which to sell our products.
We know that Congress cannot make it rain, but we can construct a safety net to help producers survive the difficulties mother nature sends our way. And we can have a safety net to help producers survive low prices.
But there is still a lot we don't know for sure. All wisdom does not originate in Washington, DC; there is a lot of wisdom on Texas farms and ranches. We need to hear and benefit from that wisdom today.
Our challenge, Mr. Chairman, is to come up with a plan that really helps agriculture and can get passed into law. It's no easy task. Thank you again for holding this hearing and for inviting me to participate.
The CHAIRMAN. Thank you, Congressman Thornberrry. And all members' statements will be made a part of the record for any additional comments they wish to make.
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I would now at this time like to invite our first panel. One of the things we're finding out is that—and the whole idea of these hearings is to go out into the countryside and talk with people that don't appear at hearings in Washington; and, that is, we think, is something we've been successful in the first, and we'll see if we can in the additional nine.
In order to emphasize that, I would mention to you that the lights that are on the table are 5-minute lights. If you can, summarize your testimony within that period of time.
The first panel today is Mr. Lloyd Arthur, who is a cotton and milo producer from Ralls, TX; Mr. William Kubecka, who is a rice producer from Palacios, TX; Mr. Donald Patman, who is a cotton, corn and soybean producer from Waxahachie, TX; Mr. Ronnie Riddle, who is a cotton producer from Abilene, TX; and, Mr. Mark Williams, who is a cotton producer from Farwell, TX. And they are lined in the order of the introduction.
Mr. Arthur, welcome, and we would begin with you.
STATEMENT OF LLOYD ARTHUR, COTTON AND MILO PRODUCER
Mr. ARTHUR. First and foremost, I would like to give thanks to Chairman Combest and the rest of the members of the Committee on Agriculture for investing time to hear the concerns of the American farmer. Also, I would like to personally thank the chairman, the ranking minority member, Mr. Stenholm, and the rest of the distinguished members of the committee present today for their involvement the last 2 years in changes and additions to the current farm bill.
With those changes, many farmers, including myself, have been able to continue farming during very difficult times. However, with commodity prices being below production cost, future assistance is still needed for the American farmer to survive. The Government assistance does not stop here. The assistance helps our local community, especially in rural areas of the Nation.
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Some agricultural policy changes in the short term, as well as new farm legislation, can, in my opinion, help alleviate some economic hardships. Knowing that uneven production costs exist, the price in other countries I cannot control. I must limit my risks and my expenses.
Crop insurance is an important risk management tool. However, insurance itself is not a comprehensive economic safety net. The adequacy and affordability of crop insurance varies greatly for crop and region.
The current crop insurance program forces producers to carry the same level of insurance coverage on farms in all the county. A producer should be allowed to purchase different levels of coverage for different farming practices, example, irrigation and non-irrigated.
If a catastrophic loss occurs between mid-season and harvest, the amount of coverage lower level policies provide is only 50 to 60 percent of production cost. Insurance policies should allow the higher levels of coverage the same amount of premium discounts as lower levels. This would help producers to cover more of the operating costs in the event of a loss.
In the event of a catastrophic loss, allow a producer to drop that actual loss yield or allow the producer to insert a county average, a T-yield, or some other calculated standard formula to help offset the cost of the following year.
Allow a producer to customize an individual loan rate for his commodity and operation. This would allow a producer and the lending institutions to work together on an individual operation. The flexibility of this choice would allow a producer a chance to control the expense and maximize profits in the individual basis.
The Flexible Fallow Program is such a program providing these options. This would be a policy addition to the current farm bill now in place to allow a farmer a better way to minimize the risk on an individual basis.
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An alternative to the above would be set a loan rate that is more effective. The current loan rate on all commodities, especially cotton, is much below break-even prices.
The uncertainty and inconsistency in farming in America with a reliable safety net has left my operation strained and stressed the last several years. Trying to keep debt at a minimum, farmers cannot continue at today's prices and keep their equity in the farming operation.
Competing in markets beyond the boundaries of the United States has great disadvantages. Unfair trading rules, export subsidies, comparability of labor, environmental issues, and currency valuations all impact trade policy. I believe that the American producers have to go by higher standards and stricter regulations than most producers in other countries. American producers should be compensated for their efforts.
The strength of the dollar greatly affects agricultural exports. Some device is needed to make the playing field level when the competition with other producers that are highly subsidized from their governments.
Investigate the possibilities of trading with other countries that we are not currently trading with and develop those markets. Those countries obtain product from other countries and we lose market share.
The non-acceptance of genetically modified crops originating around the globe, or more recently in the United States, has spread into the market equation. We need sound scientific research to convince the consumer that the products with the GMO's technology are a benefit and not a hindrance. Without the use of these technologies, operating costs will continue to increase even at a higher pace.
The merging of farm-related companies are a major concern. Without competition to keep production input costs down, the need for a viable risk management or safety net is increased.
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The American farmer is not the sole beneficiary of American agriculture programs. Agricultural program payments also benefit consumers as well as local, State, county, and national economies. Many Americans who voice a negative opinion to farm programs and policy do not realize they benefit indirectly from these programs.
And, in conclusion, I would say a strong and ethical safety net for producers is needed, a farm policy that enables producers to receive a fair and equitable price for their commodities, fair competitive markets, and investment in our rural economy, protection of our natural resources for the future, fair and equitable implementation of government programs.
Thanks again to you, Chairman Combest, and the entire Committee on Agriculture for your time, diligence, and efforts to address these policy issues. I hope the information presented to you today will help you make policy that will help American agriculture and rural America prosper for the many years to come. Thus, the priority is to keep the United States of America the leader in agriculture.
Thank you, sir.
[The prepared statement of Mr. Arthur appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Arthur.
Mr. Kubecka.
STATEMENT OF WILLIAM KUBECKA, RICE PRODUCER
Mr. KUBECKA. Thank you, Mr. Chairman, and the other members of the committee. I appreciate the opportunity of being here today. I'm not going to be redundant in my—I'm certain you will hear this appreciation given by all.
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I'm Bill Kubecka from Palacios. I'm a diversified producer growing rice, sorghum, and cotton. I also have a cow-calf operation. Today I not only represent myself, but I also represent the views of 47 individuals that met at a farm policy forum in Bay City, TX, on February 17 to prepare for this hearing.
The 47 individuals came from Brazoria, Calhoun, Jackson, Wharton, and Matagorda County. This gathering was put together by the chamber of commerce of those particular counties and by the county agents. As a group, we agreed to, and I bring to you, the following recommendations concerning farm policy.
Farm policy should provide food security for the United States through the production of abundant, affordable food and fiber and from a profitable agriculture economy. Everyone likes the flexibility of Freedom to Farm, but would prefer a stable market to prevent emergency payments.
I'm kind of going over these different items rather than just reading per se. These are all points that the group came up with.
The safety net provision of the farm bill needs adjustment. We oppose the mandatory set-aside, but could support a voluntarily reduction for higher loan rates on planted acres. Current loan rates are unrealistic to producer costs. LDP's should be based to keep U.S. crops competitive in the world market.
Yield data used in farm programs needs to be updated to reflect current yields. The group felt that the crop insurance can be a risk management tool, but there needs to be changes. The insurance should encourage prudent production and discourage non-production of crops and failed acres solely for the insurance purposes. And I can say we've had plenty of that down on the coast.
The program needs more oversight. We need to link the insurance to the individual rather than to the land. We've got people that are moving and just keep on collecting from the insurance. Insurance coverage should be related to the cost of production. Revenue insurance should be supported.
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We believe that Government assistance should be production based and not limited by the person determination. Profitability has been maintained by the economy of scale. And when you have the person determination, it's just not fitting the form that the farm that we're having to operate today.
Current payment limits do not correspond with efficient production unit size. To be more competitive in the global marketplace, we believe the following must happen: Embargoes and sanctions must be lifted. We must be proactive and aggressive in increasing and holding new markets. We must have help from our Government in research, development, education on traditional crop production and its alternative uses.
Again, these were just kind of labeled that the group came up with. I know we'll have a question-and-answer period, but hopefully some of this, at least you hear what this group of people thinks about the different issues for our present and any future farm legislation. Thank you, Mr. Chairman.
[The prepared statement of Mr. Kubecka appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you very much.
Mr. Patman.
STATEMENT OF DONALD PATMAN, PRESIDENT, TEXAS FARM BUREAU
Mr. PATMAN. Mr. Chairman, and members of the committee, I am Donald Patman, farmer and rancher from Waxahachie in north central Texas, south of Dallas.
I serve as president of the Texas Farm Bureau. I grow cotton, wheat, corn, soybeans, and raise beef cattle. A copy of my statement has been submitted to the committee. I'd appreciate its inclusion in the record. For the hearing, I will summarize my remarks.
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The Farm Bureau supports the overall concept of the 1996 Fair Act, but we also support a review of the act and some modification which we will discuss today. We especially support the flexibility that allows a farmer to respond to market conditions in terms of what to plant, and we recommend this continue to be a part of any farm program.
These payments have been critical to producers, especially during the past 2 years' low prices. We support the addition of a counter cyclical safety net in supplementing the AMTA payments. We recognize that these adjustments must be made when periods of low prices extend several years, as they have currently.
Improving trade is a high priority for Farm Bureau. Since we export about one-third of our product, that is why we have made several suggestions, including the lifting of trade sanctions on agriculture commodities and providing permanent normal trade relations with China. It is important the market promotion and Foreign Market Development Programs be continued.
We also make several suggestions for long-term comprehensive disaster programs to deal with drought and its conditions so producers will not be reliant on special Congressional action each time we have a disaster. Our suggestion is designed to provide assistance to producers of all commodities.
Crop insurance simply has not worked in Texas well in Texas. We support H.R. 2559, legislation passed by the House Agriculture Committee in the last session. I hope it is enacted soon.
From a personal standpoint, I have been participating in a pilot program for central Texas for the past 3 years. This program has worked well for me in that it is affordable and paid well in 1998 during a particularly bad year.
I will be happy to respond to specific questions about this pilot program, as I believe it comes close to what producers are looking for in an effective program.
Special emphasis should be given to a viable risk management program to cover all commodities including livestock. Most livestock producers normally fail to qualify for many of the programs currently available. We support funding for the livestock feed program. It would be beneficial if a revolving fund could be established so that annual designations in funding are not required, which could provide more timely assistance.
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Finally, in regard to the current farm bill, we support the current loan rate structure. Unfortunately, when those loan rates were established, no one expected farm prices to fall below those rates. Nevertheless, the Farm Bureau remains concerned about the Government accumulating large amounts of stocks or loan rates encouraging overproduction in contrast with the market signals.
While the present system is not perfect, we support the current direction and hope that direct income assistance can be provided until commodity prices improve rather than using loan adjustments. We believe that direct assistance is the best alternate for a long-term investment in American agriculture.
Mr. Chairman, we thank you for holding the hearings in Texas and allowing us to testify, and I will be happy to respond to any questions you might have, sir.
[The prepared statement of Mr. Patman appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Patman.
Mr. Riddle.
STATEMENT OF RONNIE RIDDLE, COTTON PRODUCER
Mr. RIDDLE. Mr. Chairman and members of the committee, thank you for coming to Lubbock, TX, to hear producers' thoughts on current farm policy. We appreciate your understanding on the need for an inclusion of those most effected by this legislation.
My name is Ronnie Riddle, and I am a cotton, grain, and livestock producer from Jones County, TX. My father and I farm together, and we derive our entire annual income from our family farming operation.
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Today I am also speaking on behalf of Rolling Plains Cotton Growers, Inc., an organization of cotton producers who work together to improve the conditions of the industry. Our membership includes cotton producers throughout the 29 counties of the central and northern rolling plains of Texas where almost 1 million acres of cotton are grown each year.
It is our interest and purpose to provide new ideas and stimulate some innovative thinking for all future farm legislation, which in turn will affect all producers in this country, especially those who are from the rolling plains of Texas.
Our business is cyclical in nature with unpredictable and unavoidable ups and downs. Governmental assistance is greatly appreciated by producers and is essential for our survival from year to year when market or the weather events result in severe declines in income that endanger our financial stability.
We as producers again will be relying on emergency assistance this year. However, we are concerned that the additional appropriations will not always be available. This variation in producers' payments is a clear indication that the 1996 farm bill does not provide an adequate safety net to producers.
A long-term policy needs to be established that provides comprehensive protection to producers which continue in strengthening the vital partnership between the cotton industry and government. While certain risk management tools are available, they do not adequately protect producers from yield or price declines within a growing and marketing season. Also, these tools do not make up for declines from previous years' price levels.
We need legislation that will address extreme year-to-year variations, particularly those arising from international market events and weather-related losses. This legislation should include some form of payment for producers of all commodities who actually harvested a crop or who have failed acreage due to natural disasters.
We applaud the simplicity and flexibility in the current legislation and believe it should remain in any future farm legislation. However, any new legislation should be designed to address the problems of low prices and provide counter-cyclical relief to those producers and discourage distorted planting decisions.
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We as producers encourage Congress to complete their efforts to reform the crop insurance program. Reform should include, first and foremost, stronger enforcement of compliance regulations to combat program abuse. Second, reform should include a provision that makes an adjustment in the actual production history and take into account the success of efforts such as boll weevil eradication.
We as producers have invested our money in this eradication program, but because of current regulations, it can take as long as 10 years for our insurance yield to reflect the eradication program success. It is essential that this remains a part of the final legislation.
Let me once again thank you for taking time to come hear what is on the producer's mind. You will be hearing a lot of folks talk about problems they are having with low prices, weather, and the absence of the safety net for agriculture. We hope, however, when you take our message back to Washington, it will help you formulate a suitable solution for the agriculture problems that we are all facing. Thank you.
[The prepared statement of Mr. Riddle appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Riddle.
Mr. Williams.
STATEMENT OF MARK WILLIAMS, COTTON PRODUCER
Mr. WILLIAMS. Good morning. My name is Mark Williams. My son, Ryan, and I have a diversified farming operation near Farwell, TX, which is 90 miles northwest of Lubbock. We grow cotton, corn, grain sorghum, wheat, and run stocker calves.
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I would like to welcome the committee to Lubbock, and I appreciate the opportunity to speak at this hearing today. I believe that it is important to first comment briefly on the 1996 FAIR Act. Much of the FAIR Act has been positive, especially added flexibility in the marketing loan. Other positives are cotton's three-step competitiveness provision and the implementation of marketing certificates.
In discussing reform of the current system, it is important to maintain these provisions that have worked well. Despite those positives, it is obvious that Freedom to Farm does have shortcomings. The most glaring is the lack of price protection between a grower's cost of production and the base loan rate.
The current price safety net kicks in only when prices drop below loan, but the loan does not begin to protect a grower's cost of production. Previous to the FAIR Act, farm policy provided assistance in the form of target price protection. However, nothing in current policy addresses the necessity of producer aid when prices are above the loan rate but below cost of production.
The supplemental payments provided to producers over the past 2 years have provided much needed assistance, but depending on the political process to bail us out time and again doesn't appear to me to be an adequate farm policy. Producers and their lenders must have a farm policy in place that will enable them to budget and make decisions for the next year's production.
Well, what are the possible solutions to these problems? I believe that any solution must contain a counter-cyclical component. Congressman Stenholm has proposed his SIP plan to address this need. A program such as SIP could prove valuable in times of low prices, and the added benefit of paying on lost production as well as actual production is very attractive. However, I do have some reservations or questions that make it difficult for me to support the SIP plan at this time.
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Another interesting proposal is the Flexible Fallow Program that would give producers the voluntary option of laying out a percentage of their planted crop acres in exchange for higher loan rates. For example, if a producer agrees to set aside 20 percent of his planted acres of a particular crop, he would receive a corresponding 20 percent increase in his loan rate for that crop.
The current idea is to provide this increased loan rate on a producer's county NASS yield or on his APH; therefore, this would be considered a decoupled payment. Production over his NASS yield or APH Would be supported at the base loan rate for that crop. This plan gives farmers a risk management tool that will allow them to plan their production to meet current demand in response to prices offered by the marketplace.
Today the market is shouting that there is too much cotton and grain, but the grower sees a farm policy that shouts even louder to produce all he can to maximize payments. I think it makes economic sense to have a policy that enables producers to adjust production during times of oversupply.
This program is attractive because it encourages the sound use of productive resources, since only the most fragile or marginal acres would be taken out of production. FAPRI analysis indicates that this program could decrease governmental outlays in the long run and still enhance producer income.
Some groups are philosophically opposed to any program that provides for set-asides. However, the argument can be made that other countries will maintain their support for their farmers in a way that foreign acreage will continue to expand regardless of what U.S. agriculture policy may be.
Most of these same people would be opposed to any increase in loan rates because in their view, commodities placed under loan remain insulated from the marketplace. With the availability of the marketing loan, this is no longer a problem. Therefore, one easy solution to the current lack of a safety net would be to simply increase loan rates and make generic certificate availability a permanent part of the marketing loan.
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These plans all have the potential to provide an improved safety net for producers. If you asked me to pick one, I would instead choose a combination of both coupled and decoupled payment mechanisms. Loan rates should be increased approximately 10 percent, which is less than the amount of the additional AMTA payment made this past year.
Next, producers should have the opportunity to increase their loan rates another 30 percent using the flexible fallow approach. The reason for including flexible fallow is that it actually provides a mechanism for producers to adjust their production based on market conditions.
I'm fully aware that any mention of increasing loan rates turns off many individuals. But, again, under the marketing loan concept, production will not sit in storage waiting for higher prices or forfeiture. End-users will have access to production in a timely manner. Higher loan values will not cause an increase in production over current policy because current policy already demands maximum production. Instead, the addition of a flexible fallow component will tend to reduce production in times of surplus.
Time does not allow me to discuss my views on crop insurance or payment limitations, but I have included comments on both in my written testimony.
Thank you for allowing me the opportunity to discuss my ideas with you today, and I welcome any questions.
[The prepared statement of Mr. Williams appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Williams.
One of the things that makes our job challenging is the fact that—and one of the criteria that we established as we start into these 10 field hearings—and we will have countless hearings in Washington, as well, as we go through this process—is to encourage people to be as specific as possible.
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Because one of the things we find as we go through it, that in trying to look at farm policy, that a suggestion under certain conditions is really good, but then you change some of those conditions, and all of a sudden that suggestion that maybe someone has about a solution dramatically changes. We could all probably spend the an hour each on questions, and I promise you we won't do that.
But we'll have a chance to formulate these somewhat as we go forward, but there is basically two things. One question that I'm going to ask at every hearing we go to—that's going to be my second comment. The first comment I want to make is on crop insurance. A lot of you have mentioned that.
I commend this committee for the action that has been a priority with us all throughout the beginning under its current makeup. We, in a timely fashion, passed not only through the committee, but through the full House, by voice vote, a crop insurance reform bill that I think anyone would say was major. Maybe it didn't go quite as far as we wanted to, but it was a major change, and it was something that has been widely supported. It continues to be.
Finally, the other body that has to do with legislation in Washington has acted, at least from the committee's standpoint, and we expect something to occur in the fairly near future. We're not miles apart on the two bills, and I think the chances look extremely good that we can implement some major crop insurance reform changes in the current year that would be available for hopefully the next crop year.
That's when we set up the timing through the budget process to be available so the money will be there. That's just as a comment. We could have a whole hearing on crop insurance. I know a lot of you have been to a lot of meetings that I haven't.
The question I want to ask you, and I'm going to ask everywhere, is on payment limitations. Mr. Williams, you had mentioned you had some stuff in your statement that you didn't have a chance to get to, but I'm going to give each of you, briefly as possible, hopefully, a chance to comment on that.
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Because the difficulty lies in this, in that you begin to look at a new proposal; and, from that, we're assuming payment limitations are the same. Or in my suggestion would be greater, but unfortunately, that's not always reality.
At some point those payment limitations may become so restrictive that based upon the size of a farming operation, the type of commodity a person is dealing with, whether it's through a loan or whether it's through direct payment, that it just doesn't work. And what may sound really good may not work simply because of the limitation in payment.
If you can, what I would like for you to do is briefly talk about the implications of payment limitations, each one of you, as you view them and what that level should be. We'll start in reverse order.
Mr. Williams.
Mr. WILLIAMS. Thank you, Mr. Chairman. Under an increasing loan rate, if that's your safety net, if you have the marketing loan and the generic certificates, payment limitations would not be a problem under current regulations.
The CHAIRMAN. At the current level.
Mr. WILLIAMS. So, keeping the generic certificate authority would be extremely important. I think there should be some decoupled mechanism also, though, because in every year not everybody makes a good crop. And, so, I think that kind of person may need some payments based on some sort of yield history, APH, NASS, or maybe his program yields or something. And that might still be subject to payment limitations as it is currently.
As some other guys have mentioned, it's just not economical for us to fit our farm to fit these payment limitations, and many of us don't. You see statistics that say farmers only receive $15,000 to $20,000 per entity.
But how many entities does a farmer have? It really doesn't mean anything anymore. I can't tell you an amount that it should be. I actually believe that there should be no limitations whatsoever.
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Another thing that has happened to me personally, I lost my two brothers this past summer. Dealing with having to restructure their farms and the various entities that were involved was a nightmare, and I just don't think it's right for us to have to go through all that. Thank you.
The CHAIRMAN. Thank you, Mr. Williams.
Mr. Riddle.
Mr. RIDDLE. On payment limitations, in my operation, I said it was my father and I, but we also have our wives included on that, too. That way we have the four different entities.
A few years ago we were running into the problem of payment limitations, and now it seems that we have that problem no longer. But I do think if a person had those payment limitations problems, the generic certificates would be a good way to handle that problem. I know there is some large, large corporations out there that are really struggling, but most of the producers in my area are really not hitting the payment limitation problems.
The CHAIRMAN. Thank you.
Mr. Patman.
Mr. PATMAN. As far as this question that you have asked, I guess probably if you go back several years, I'm not sure what time it was, but when the $50,000 limitation first was established, I know that particular year my son and I farmed together. And as far as the Government program is concerned, we left $86,000 on the table that we weren't eligible to partake of because of the $50,000 limitation, and since then down to $40,000.
Historically, I've been farming a long time, and the amount of acres each person farmed was rather small from the fifties on. And to enable to stay in business you had to rent more land or acquire more land to make a living with less net profit per acre; and, consequently, you got more and more land as those that were inefficient or other hardships or drought or disaster, whatever reason, took other sources of income and got out of agriculture.
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As the years have gone on, we find ourself in a situation where when I ride down the road in the country I don't see many different farmers that I meet. Most of them work several hundred acres of land and have to do that in order to maintain an income for, in our case, my son and his family and my family.
So, for payment limitation to be limited, it defeats the purpose of trying to get larger and trying to be efficient and then you're competing against those other people when you leave it on the table and don't take it. Your price per acre goes into how much it takes to make a profit. So, you're at a disadvantage in that area.
So, I don't know what that rate would be. I know that if you say ''take the lid off of it'', you get probably some criticism there. So, somewhere between 50 and taking the lid off, I guess that's the answer.
The CHAIRMAN. That narrows it down.
Mr. Kubecka.
Mr. KUBECKA. Mr. Chairman, we haven't had a problem under the existing conditions as far as payment limits because we were able to structure up. Now, my concern is, is that if the rules change.
I know last week I had people from down from up north and they were wanting to find out how we structured up. And it's legal, I mean, what we've done. The big concern is if these rules change, and that would be adverse. But for the most part, the people in our area have been able to legally structure up to be able to take advantage of these.
Of course, I think what has happened up north, I mean, before, grain had not gotten that many payments. And now this last year when we had so many payments to grain, a lot of people got caught. They weren't structured up. But there are ways to structure up.
Mr. ARTHUR. Mr. Chairman, in 1987 and 1988, we set up our farming entities, and they've been to that same organization since this time, and we have yet to leave any money on the table as far as program payments. Back when the $50,000 limitation was on, we were quite far away from even receiving the total maximum.
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As they get lower, I can see a problem, because if they are lowered, it could be some economic strain on some businesses. I know mine at the 40, we're still fine; but, if it's dropped down to 30, as some proposals I understand may be going to, I think then we would hit a threshold that we would be leaving that money on the table.
As operations get bigger, their production costs don't always stay the same. They increase on a per acre basis, and those operations that do increase, I would see that it would hit that spot a lot quicker.
So, as far as limitations, I would believe that right now, in my operation, I can stand where they're at. But if they're getting lowered, it would become a problem.
The CHAIRMAN. Well, and I'll end with that, and let others go. But let me just remind you of this, and think in your own, each individual operation how this would have affected you. If you recall, the last 2 years under the emergency decisions, those limitations have been lifted substantially, and each of the additional payments has been as a separate payment, therefore it was not subject.
Think about how your operation would have been affected had all of those payments been made under the limitation and not been able to be lifted. And that's the concerns I've got as we look forward on this thing. We've got some people that would like to see them substantially different, and that can dramatically change the implications of the way that a program may or may not work.
Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.
The chairman's question is one in which we do have to come up with a rational answer, particularly if we look at flexible set-asides, increasing market rates. Anything that will increase the probability of more payments from the Treasury is going to make this a continuing political problem, one of which we have to come up with a best possible answer. And eliminating payment limits is not an option politically for us.
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The first question I want to ask can be answered ''yes'' or ''no.'' Do you support the elimination of all unilaterally imposed trade embargoes? All? If there are any exceptions, please state them.
Mr. ARTHUR. I would say I would like the lifting of all sanctions. Those countries needing products, they eventually get them from other sources, and we're losing that market share. If for one reason or another why those were set, and if it has been years past, evidently whatever we were hoping to obtain from those sanctions at the time may or may not be working, and I don't see us cutting our own throat as American producers and having sanctions against those countries when we can supply them with their needed products.
Mr. KUBECKA. Asked for a simple answer, yes.
Mr. PATMAN. Yes, very much so.
Mr. RIDDLE. [Nods.]
Mr. WILLIAMS. Yes, sir.
Mr. STENHOLM. By that answer, I assume that each of you, then, would support the granting of permanent normal trade relations with China? Yes?
Mr. PATMAN. Yes.
Mr. STENHOLM. Let the record show that everybody's head was shaking ''yes.''
I think in each of your testimonies, you submitted concern about the fact that we really have not achieved the kind of a fair market opportunity for American agricultural products in the world market, and I think we all agree to that.
But it's also interesting as we now see, and I say this very respectfully, that we have some farmers who believe that we should we should not pursue a level marketplace. We have those who oppose the granting of permanent normal trade relations with China, and they do so respectfully. But we're going to need to spend a little bit of time educating, not today, but over the days and weeks ahead, regarding this, because that's critical to us.
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And we also have exceptions being placed whether we should lift the sanctions on Cuba as one of the exceptions, and I think here it's awfully important, if we can, to come together with a unified position from agriculture, or otherwise it makes it very difficult for those of us who have to carry the water.
Question here: Each of you mentioned risk insurance, crop insurance, et cetera. As the chairman stated, the Senate has finally passed a bill out of the committee. We hope to go to conference soon and begin working through this.
But one of the things that has become evident, and I noticed in your testimony, several of you stated this, the difficulty of insuring price and yield with one policy or one option. And, therefore, one of the questions that we're going to have to resolve is: How do we separate? How can we insure price?
Some of you mentioned cost of production. I'm very interested in that cost. Cost of borrowed input is another way that we insure that. And then we have, either through market loans and, interesting, for everybody's consideration, those who believe that increasing the market loan is a way to go with policy, the cost on an annual basis of most of the numbers being suggested is $7.5 billion.
And, therefore, that gets us back to the payment limitation question in a hurry. Because if we should have world prices where they are with a market loan where it needs to be, then we have really gotten into some problems, or I like to call them opportunities regarding the chairman's first question.
One thing I would ask you to look at as we look at how we deal with the limitation question, is look at how we might use a recourse loan as part of the overall package of tools available to us, in which we would have a market loan that would be applicable to all of the production, but part of it would be recourse in which it would be up to the individual producer to market without any help other than your market skills, how you would receive from that particular component of your total package. I ask you to just look at that.
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The flexible fallow question, we're hearing more and more of that. Those of you that suggested giving an option, of those that would like to set aside a little bit more of their production for whatever reason in order to receive a little higher of a market loan makes sense.
So, the main question I wanted to ask, and I'll ask each panelist just as the chairman has asked his, but the other I throw out just for suggestions and look forward to working with you in the days ahead as we try to fine tune, as all of you pointed out, some of the holes in some of the proposals that have been made. We need to fill those holes.
The CHAIRMAN. Mr. Barrett.
Mr. BARRETT. Thank you, Mr. Chairman. I was pleased to hear a couple of you touch on genetically modified organism. I think, Mr. Arthur, you mentioned it first. And in middle Nebraska, in that black rich soil, about a third of our cotton is altered, about a little over 50 percent of the soybeans are modified. I understand that you are also doing some here.
Now, can you give me some idea, any of you, if you know, what percentage of your cotton is modified?
Mr. ARTHUR. I think it varies in my county. Some use very little and some go 100 percent, but in my personal operation, about 50/50.
Mr. BARRETT. Is that generally the case with the rest of you?
Mr. WILLIAMS. Mine would be closer to 90 percent.
Mr. BARRETT. Ninety percent?
Mr. WILLIAMS. Yes.
Mr. RIDDLE. Mine would be closer to probably 25 percent.
Mr. PATMAN. In years past, it has been about 50 percent. But this coming year, we plan on cotton to have 100 percent of it, sir.
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Mr. BARRETT. Pretty much all over the board then.
Mr. PATMAN. Yes.
Mr. KUBECKA. In our area, it's a low end, 20, 25 percent.
Mr. BARRETT. What changes in your operation, if any, are you making now with reference to the problems we're having with the EU and their reluctance to buy transgenic cotton? What changes are you making? What do we need to do to help you make changes?
Mr. ARTHUR. Right now in the equation, I don't see that I'm making personal changes to get to that market. My concern is, though, is their ability to turn down this product if and when it hits the market and the separation between that, the extra cost between keeping those conventional and non-conventional commodities separate between cross-pollination in the field from harvest equipment.
Those things, I can see contamination. And if I have a product that's non-conventional or being sold as non-conventional and it has some of those contaminants, how is that going to hurt my market? Those are things that we need to address, percentage of what's tolerable and not tolerable.
Mr. BARRETT. Bill?
Mr. KUBECKA. In our area we've just backed off of them because we've——
Mr. BARRETT. I'm sorry. You backed off?
Mr. KUBECKA. Backed off, yes.
Mr. BARRETT. That's what I'm getting at. OK.
Mr. PATMAN. I guess probably what the concern is that I have, I guess, back in the back of my mind is, I understand the European community situation wanting to protect their agriculture, protect their farmers. I don't really know how strong a case they have for there being anything wrong with these particular products. I guess I'm a little bit maybe not trusting to the fact that maybe this is just a smoke screen thrown up to the fact that this may not be the bottom line.
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I guess probably through the years, we have increased the seeds of different crops, different things. They've got better and better and better, and we've done different things to them. I don't know what the end would be the GMO's. I don't know the results of what is good and what is not. I'd like to know what's actually true and what's just presumption.
Mr. BARRETT. Thank you.
Mr. Riddle.
Mr. RIDDLE. I'm personally 100 percent into GMO. This last year and will be again this coming year. I've had no problem with the selling end of it on a personal basis.
My question is, is if you have like you was talking about, the European, are you going to have different countries just following suit? Just one country determines that there is something harmful with it and it may be corn, it may be cotton, whatever product you're talking about, if one country takes a lead and the others start following suit, there we are as individual producers hung with a product that we can't get rid of.
Mr. BARRETT. So potential loss of market doesn't concern you a bit?
Mr. RIDDLE. Yes, it does.
Mr. BARRETT. Mr. Williams.
Mr. WILLIAMS. Well, I think it has become a trade issue more than a health or environmental type issue, and I think our Government needs to protect our trade interests, especially with the European community.
Mr. BARRETT. Thank you.
Mr. Chairman, with the time I have remaining, let me ask any of you that want to answer the question. As I understand it, about 88 percent of the farm and ranch land in Texas is a sole proprietorship, about 9 percent, I think, is joint, perhaps, about 3 percent is corporate.
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What problems do you see, have you had? Any suggestions with regard to consolidation?
Mr. WILLIAMS. I can see problems, especially in the livestock sector, selling some of our products. Many of these companies have a captured market of their to their own product, such as the case in hogs and beef cattle. And sometimes it gets very hard to sell your cattle when you need to sell them, because they're just not in the market at that time.
Mr. BARRETT. Thank you. I appreciate that comment. My time has expired.
The CHAIRMAN. Thank you. Mr. Boswell.
Mr. BOSWELL. Thank you, Mr. Chairman. I think, Mr. Patman, you made the comment about somewhere in your testimony about the loan rate should be raised under some circumstances; and, later on, maybe I misunderstood you, that was not a good idea to raise the loan rate. And I wonder if you would clarify that.
Mr. PATMAN. No, sir, in any comments I said we were happy with the way the present program existed and we had a concern about the raising of the loan rates. And the reason for that was, is the statement was, is we was afraid that people would plant for that particular commodity.
And that I guess probably back in the back of my mind I still remember that for years and years when we planted, our crop went into the Government loan. As the season progressed the next year, it looked like there might be little chance of getting something for it, then those crops were sold back onto the market, and down goes the market, and we're back into that same cycle of going through the Government loan and then participate.
I would like to see some way that that didn't happen again and for the Government not to be into the business of selling commodities. And I know I don't want to be your enemy, and I appreciate all the help that, we receive from the Government. But somehow or another I think the trade issue is more important and getting those products out, because in the cotton, we just probably have less than 20 percent of production of cotton.
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So, I see trade as more of an issue for long term.
Mr. BOSWELL. Thank you.
Mr. PATMAN. Short term would be OK, long term I wouldn't.
Mr. BOSWELL. Short term, OK. I understand what you said now. Thank you for that.
We continue to hear comments about the trade issue, the Government ought to do a better job on the trade side. I think that's a good point, but I'm waiting for somebody to tell us how that we go to the European Union or the Pacific Rim when they've got an overproduction situation, and we show up that we want to sell to them. And, actually, they're glad to see us, but they was hoping that we would buy from them.
So, how do you sell somebody something they don't need at this time with this overproduction thing? I think somehow we've got to be a little more realistic about that, because I know a number of people that are super sales people, which you don't sell somebody something they don't need and want. And it worries me some because we had our discussions in Seattle with the European parliament members, and I think they're just cutting us out, I personally think, on this GMO stuff just because they're oversupplied themselves, so they're using it as an excuse.
We challenged them to challenge our science. They've got smart people. Just tell us what is wrong with our science if you don't think it's good. And, also, if you believe the science, the scientific part of actuarial application of numbers, how do you think we're going to get ready to feed the population that's 6 billion now and then the forecast in another 30 or so years to be 12 billion? You don't wait till the 29th year.
Mr. Chairman, a lot of interesting discussion on that as we continue to have some dialogue with people. I find it very interesting this morning to hear how many folks here are tied to the GMO situation, Mr. Barrett's questions. So, I don't have any answer for that, but it's a concern.
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I saw a few heads nod. I don't know if this is out of order or not, but I just wonder, a lot of people in the audience don't have a chance—or won't be at the table, but would you want—the loan rate thing, I get so many conflicting responses around my own area.
How many would like to see the loan rate raised? Anybody?
[Show of hands.]
Oh, a lot of hands went up. How many don't want to see it go up? How many do not want to see the loan rate go up?
[Show of hands.]
Remarkable difference.
Thank you, Mr. Chairman, I appreciate it.
The CHAIRMAN. That's what makes our job so much fun.
Mr. BOSWELL. Yes.
The CHAIRMAN. Mr. Lucas.
Mr. Lucas of Oklahoma. Thank you, Mr. Chairman.
And I guess first off I would like to ask kind of a general question of the panel in an up, down, or neutral sort of sense, what are land prices doing in your home communities the last 2- or 3-year trend? Neutral, up, down? Has there been any property change hands to have a gauge?
Mr. ARTHUR. I would think it was somewhat neutral, possibly a little lower, but it's mainly neutral at the time, to lower.
Mr. KUBECKA. Neutral to agriculture. Of course, commerical real estate values are going up from the robust economy; but, agriculture is neutral.
Mr. PATMAN. From the eighties, land prices were extremely high, then we hit the bottom, and then began to come back to a degree. But what has brought it back has been development in towns and industries and not agriculture.
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Mr. RIDDLE. It's neutral to a little bit lower.
Mr. WILLIAMS. Stable prices.
Mr. Lucas of Oklahoma. Stable prices. I would like to address this particular question to Mr. Patman. Your background sheet with your testimony says you've been farming for 51 years, an accomplishment itself. So, you started in 1949?
Mr. PATMAN. I got out of high school in 1949. My first year was in 1950. I've raised cotton every year of that particular time.
Mr. Lucas of Oklahoma. What was the horsepower rating of your first tractor?
Mr. PATMAN. Well, I don't know what those team of mules would pull.
Mr. Lucas of Oklahoma. That answers the question in a clear way. And what's the size of the typical——
Mr. PATMAN. But an F–12 and V-Farmo (phon.) was the first tractors, yes, sir.
Mr. Lucas of Oklahoma. F–12, those great knuckle busters, yes. So, what would be the rating of the typical machine now on your operation?
Mr. PATMAN. What's the typical? We use 12-row equipment, yes, sir.
Mr. Lucas of Oklahoma. Twelve-row equipment. I guess my question to you, and maybe to the whole panel is, one of the things that's one of the background underlying issues is the rate increase in productivity we've had in this last half of the century.
Mr. PATMAN. We have, sir.
Mr. LUCAS [continuing]. In American agriculture, whatever the commodity crop might be; and, that's been, I think, personally, one of the big challenges that our farm bills have faced every time you try and craft legislation that fits a set of circumstances, either through mechanical advances or seed advances, or whatever, we increase our productivity, and that kind of runs off and runs off and leaves us.
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And I think that's the question I would like to put to you or anyone in the panel who would like to address that. Do you see the productivity continuing to advance? You don't have to answer this if you don't want to; should we try to take that into consideration as a factor in our farm policy?
Mr. PATMAN. I think probably the question could be answered dependent upon a lot of other things. I think probably depending how we're affected as far as the seed we can use and the method in which we can use to take care of it and the availability of good quality seed.
I think in the direction where we're going now, I think productivity will go up. Most all of our production is black land. We're dependent upon the rain.
By the same token, through the years, we have increased production through better methods of taking care of that plant regardless of what it might be. And with the cooperation with seed companies and different and the structure that's with agriculture has improved also, so it's helped us increase.
It depends in the future whether this cooperation will continue, whether we're pressed harder to use the good sound practice that we can raise good crops under. So, if things continue the way they are, yes, it will increase. But it, there again, depends upon the product, the seed that we can use.
If we go back to some of the older seeds, no, we can't compete with it. Because when we first started farming, if you made a half a bale of cotton, you made a good crop. This year, that won't start. So, if I've clouded the water, I'm sorry.
Mr. Lucas of Oklahoma. You've answered the question.
Mr. ARTHUR. If I could make a comment on that, I believe that's our goal, is to increase—or decrease our inputs and still gather that maximum production. There is a fine line, however, on your input cuts. If you cut fertilizer or seed or whatever, that you are going to find a fine line that you do decrease production.
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To address your tractor issue, and—and I've got it on page 7 of my testimony, that in 1988 we went to larger equipment to be more efficient, to cut labor costs and everything. And I would like to say, it's in the record there on my written statement, that in 1988 I purchased a 195 horsepower tractor for $64,850; and, today I was quoted a 205 horsepower for $110,000.
We haven't had an increase in commodity prices to adjust the inflation of our farm inputs.
Mr. Lucas of Oklahoma. Absolutely.
Mr. WILLIAMS. Mr. Lucas, I would like to address that by saying that my son and I have about a 4,500-acre farm, and some people would say that's large. But we have one planter for that farm. We have one sprayer. I don't even own a cultivator. I have one fertilizer application rig.
So, I've structured my farm the most economical way I can possibly do it. And, yet, through the Government farm programs, you tell me that that farm is too large. A 4,500-acre farm would be four times over the limit.
And that's the take I have on it, that with increased productivity, we need to address the payment limitations to address the increase in efficiency.
Mr. STENHOLM. Gentlemen, time has expired.
Mr. Simpson.
Mr. SIMPSON. Coming from Idaho, let me first say that I was very pleased that none of you indicated you were going to start raising potatoes. But since we started talking about GMO's for just a minute, I will tell you when we met in Seattle with the European parliamentarians, I had the opportunity to meet with several of them individually and just sit and talk about this subject.
And it was kind of interesting that their take on it was, while they as individuals probably didn't have a problem with it and they had looked at the science and so forth and believed that most of these were safe and so forth, their answer was, ''Our consumers don't believe that.''
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And until we can convince the European consumer that it's safe, then we've got a problem selling those abroad. We have to raise what the consumer is going to purchase, so we've got a big sales job in front of us in terms of GMO's and so forth. That was my experience coming out of Seattle.
But let me ask you some questions about the loan rate again. Let's get back to that for just a minute.
Mr. Patman, as I understand it, that you think the loan rate structure is OK and that increasing the loan rate structure would increase overproduction in those crops; is that right?
Mr. PATMAN. That's my concern, I think probably cotton is the one that I produce that I'm most concerned about. I am afraid that if you increased the loan rate, it will have a false security out there for someone to plant just for the program.
Somewhere down the line, I would like to see agriculture be able to get their income from the marketplace rather than from different types of programs. I think if we could shoot for that. And I think in the meantime, we probably need to work together that we can work towards those ends.
What we would like for Congress is to give us a level playing field, the best we can, throughout the world. And then I think it's up to us to support you in that endeavor.
Mr. SIMPSON. Do I understand that the other four of you suggest an increase in loan rates would be beneficial; is that right?
Mr. ARTHUR. Yes, sir.
Mr. SIMPSON. Are you concerned about what was just raised, that it will cause overproduction and consequently lower prices, and if we don't have those foreign markets to sell our products to, that we're just going to drive prices further down?
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Mr. WILLIAMS. As I said in my testimony, I think the current policy demands maximum production as it is. We're trying to maximize our LDP payments. I don't see where increasing the loan rate moderately would have any affect on production.
And with all due respect to Mr. Patman, he worries about it being stored, when under marketing loan, of course, it's not being stored. It's being moved to the market just like it should be, anyway. So, I don't see any concern with raising the loan rates.
Mr. RIDDLE. I feel that raising the loan rates would help the producer. One reason is because, for example, this year, I was one of the few producers of my area that actually produced a crop. And to be able to get more income and be competitive against the man that completely destroyed his crop and collected the insurance and disaster, it would just give me just a little bit more income to be more competitive against that.
Mr. KUBECKA. Of course, my statements came from the group. Personally, I feel that we have to be competitive. I think we've got a bigger challenge here; and I'll just kind of give you a summary of what I've seen in agriculture, and I've been in it since, what, early seventies.
Back when I was growing up, if you wanted to make more, you worked harder. Well, now, we get maximum amount of labor. We have to have 100 percent of our labor. Then we started getting bigger equipment, and that progress has been going on all along. And I see we've gone through about four stages through here. We've maximized our labor. We maximize our equipment. We're maximizing our technology. And now, to me, the only thing that I can do to make anything better is to be a better manager.
Now, the challenge is, is who gets the profit out of agriculture? And I think this is a very big challenge for all of us, because as a unit, we all represent our fellow producers, but there is so many of those out there that we'll never be able to compete with industry as far as what they take out of agriculture.
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So, we are dependent on the Government, basically, take up for us. Now, unless we want to let that go by the wayside and let industry call the shots.
Mr. ARTHUR. I believe an increase in commodity rates is a small component of a risk management system. I don't think itself is the answer. I think several other things, insurance, changing the insurance structure, making all of our risk management tools that we have available and could be made into flexible for a person's own individual operation.
Cotton producing in my own county, there is different theories and methods of how of producing that crop. Some are better. But it is an individual operation, and each person should have, I believe, a chance to customize that operation to fit his individual needs at the bank or living or whatnot.
So, I believe it's a component within the structure. It's not an individual answer.
Mr. SIMPSON. Would it be an accurate statement, do you believe, that regardless of all the rest of the farm policies, the most important thing we've got to do is find markets for the products we grow? I mean, we've got to have a more aggressive Federal Government in our foreign markets.
[Panel nods.]
Mr. SIMPSON. Thank you.
The CHAIRMAN. Mr. Thornberry.
Mr. THORNBERRY. Thank you, Mr. Chairman.
I just want to ask about one area. A number of you, beginning with you, Mr. Arthur, talked about the flexible fallow proposal where you would buy a higher loan rate by taking some land out of production. Some people look at that and say, ''Well, what's going to happen is what has happened with CRP. The most unproductive land goes out of production, and so you're really not going to cut back on your supply if you follow that approach.''
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And so some people are thinking, well, maybe we don't need to take number of acres out of production. What we need to do is take production out, look at the actual production history of that farm and say, ''I agree to take out this much of my cotton production or so forth in exchange for this kind of loan rate.''
Is that something you've thought about? What do you think about that? And should you also have restrictions on how much water you can pump out from under that ground? Which is another idea that is being floated around to add to that proposal.
Mr. ARTHUR. Well, you're correct in the philosophy that each person could individually farm this operation. For the amount of acres that's reduced, I believe there is going to be some farmers out there that's going to say, ''Hey, I'm going to plant it wall to wall because they're cutting back acres, therefore, there is going to be more marketplace, so I have a better opportunity to sell a much bigger crop.''
So, I don't know how much acres is actually going to be cut out. There's going to be some farmers planting 30 percent set-aside, and there's going to be some 5 percent. We won't know until actual certification time. I just like the flexible part of it that I can go to my lending institution and say, ''Here, I'm more or less contracting or I have a floor for my price in the event of a catastrophic market loss.''
I don't believe it's for everyone, and I don't think everyone would sign up 100 percent on it.
Mr. THORNBERRY. I would be interested in other comments you all have on that.
Mr. KUBECKA. Well, I believe that, in essence, what you're getting back to is supply and management, and I think that's a big decision. If we're going to get support, we've got to be controlled somewhat. I don't have that answer. I don't know where we should go because there are so many other factors that affect that, basically what we do on an international playing field. So, that's a tough, tough call to say one way or the other.
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I agree with Mr. Arthur here that—and I've seen it happen in our area—where one person cuts, the other person increases. So, I have my question whether it'll do any good.
Mr. PATMAN. If on my present operation, if I had the opportunity to take a percentage of set-aside, what you're saying, from 5 to 30 percent to raising your loan rate to the maximum, I would go the maximum set-aside of 30 percent to have the largest loan rate. And, yes, I would put the best cotton, best land in those particular acres, I think, like everybody else would.
The other scenario that you had there, probably it'd depend upon where you had your normal FSA yields or established yields. Most of the people, I think, in our part of the country, their yields far outsee what they have on at the ASC.
That would depend on how you would go, would make a factor in there. But it would be interesting to choose.
Mr. RIDDLE. To your second question, there is no water in our area at all. We're completely dry land, so I wouldn't have an answer for that. As far as the flexibility, we enjoy the flexibility of the program, by you've got to realize our producers are the world's best producers and the world's worst marketers. We've been that way for years, and it looks like we're going to stay that way for years.
As far as being able to move land around and take some out, I personally have no problem with that because I enjoyed the flexibility in the past years when we were able to put 5 to 10 to 15, 25 percent set-aside because I also had a cattle operation which I could sew grain on that and graze that land. And it was a great program for me, and I appreciated it.
Mr. WILLIAMS. Mr. Thornberry, your first comment on how would we work if we just set aside a certain amount of production, I don't understand how that would work because I might agree to set aside 20 percent of my production, and then I not make anything. So, how much have I set aside? I don't think you could pick that because production is so varied year in and year out.
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I don't view this Flexible Fallow Program as as a strict supply management because each individual makes the determination. So, in other words, just like everybody said, I may decide to do it and my neighbor may decide not to do it. And it's the first or only program that I've seen talked about this year that actually lets the producer make that decision.
So, I think it's more of a market type farm program than what we've had in the past. I think flexible fallow has a chance to be meaningful. It would be important that you make some of the regulations fairly tight on what land you're allowed to set aside to prevent slippage, and that's one way you could control that and make it a little bit more meaningful. Thank you.
Mr. THORNBERRY. Thank you.
The CHAIRMAN. Mr. Stenholm had a follow-up question.
Mr. STENHOLM. Mr. Riddle, you, in response to Mr. Simpson's question regarding the increasing of the loan rate, stated a very interesting comment in which you said this year, by producing cotton, you were at a disadvantage over those who did not make a crop. And, therefore, increasing the loan rate would give you a more level playing field.
Would you expound? What did you receive for your cotton?
Mr. RIDDLE. I can't tell you the exact amounts right now. We're still getting payments. I'm in the pool program.
Mr. STENHOLM. If you had sold at harvest time?
Mr. RIDDLE. If I would have sold at harvest time, I would have received probably, at loan rate, would have been 50 cents, 48 to 50 cents; and, then that would have kicked me out if I had put it in the loan, so of the——
Mr. STENHOLM. Were you insured?
Mr. RIDDLE. Yes, I was.
Mr. STENHOLM. If you had not harvested a crop, what would that cotton have brought you?
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Mr. RIDDLE. Counting the disaster and the insurance?
Mr. STENHOLM. No, just counting the insurance.
Mr. RIDDLE. Sixty-two cents a pound.
Mr. STENHOLM. So, your incentive was to not harvest?
Mr. RIDDLE. That's the way the program seems to be set up at the moment.
Mr. STENHOLM. I appreciate you clarifying that, because that's the comment that I made earlier about our current insurance program in which we attempt to insure both price and yield with the same entity or the same policy or the same policy. It's making it very, very difficult.
And you make a very valid statement in which you, by harvesting, were put at a disadvantage; and, there are some that are asking that if we are going to insure it at 62——
Mr. RIDDLE. I believe 63.
Mr. STENHOLM [continuing]. Then why isn't it worth the 62 cents for those that harvest it versus those that didn't harvest it? And that's a question that I think will come up in the conference on crop insurance this year as we look at this year's program as well as how we design the program for the future.
And I thank you for clarifying that.
The CHAIRMAN. I thank the witnesses very much for your testimony. And, as again, would encourage you, if there is additional comments, we would be happy to accept them.
I will now call our second panel to the table. Mr. Dale Artho, who is a grain sorghum producer from Wildorado, TX; Mr. Coby Gilbreath, who is a corn producer from Dimmitt, TX; Mr. Paul Hitch, who is a cattle rancher and feeder from Guymon, OK; Mr. Henry Jo VonTungeln, wheat and cattle producer from Calumet, OK; and Mr. Tommy Womack, who is a wheat producer from Amarillo, TX.
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I would remind our guests and our witnesses that the Committee on Agriculture broadcasts its hearings over the Internet. We have done that in Washington. We are taking that on the road with us. And it is being done here, and it will be throughout the 10 field hearings that we have.
I will just mention that our next set of field hearings will be March 17 in Memphis, TN, and March 18 in Auburn, AL.
And we would take the witnesses' testimony in the order they were introduced.
Mr. Artho, welcome and please proceed.
STATEMENT OF DALE ARTHO, GRAIN SORGHUM PRODUCER
Mr. ARTHO. Mr. Chairman, members of the committee, welcome and thank you for this opportunity to testify. The gravity and weight of today's hearing does not escape me. This hearing is the beginning of a process that will determine whether I and many of my fellow producers will be able to continue our farming operations.
My name is Dale Artho, and our operation is located west of Amarillo. Production includes dry land and irrigated sorghum, sorghum seed production, wheat, corn, dry edible beans, and cattle.
Because of the drought of 1998 and low prices in 1999, I am in the process of refinancing land to meet my financial obligations and operate in fiscal year 2000. In my business, I expect to use equity in times of economic severity. And make no mistake, this can be a process of self-liquidation.
In preparing for today, I had to determine if this committee would demand that my profitability come from the global marketplace or stay the course of trying to achieve profitability under the present cheap food and fiber policy for U.S. consumers. The issues and solutions I would like to address today are ones we face as a result of this paradox.
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I've had the privilege of traveling to South America, Asia, and Cuba on humanitarian food or trade missions and was an MGO delegate to talks in Seattle. This has reinforced my view that the United States must pass fast-track trade authority and lift sanctions. If U.S. farmers are going to be used as defense contractors for foreign policy, then agriculture should be compensated as our defense contractors.
I encourage you to help facilitate innovative methods that allow producers to vertically integrate into the marketplace, methods that help producers to be partners in the market and not price-takers.
Due to consolidation in agriculture and diminished competition, anti-trust regulation and enforcement is critical. A program allowing commercial banks to provide packaging and grouping of guaranteed loans. If a guaranteed loan meets the strict requirements of the commercial banking industry, that bank would have the ability to group loans of similar risk and at different guaranty levels.
This would speed the process and create a partnership between banking, agriculture, and government. We urge you to ensure that sorghum is treated by the public research sector on a per planted acre basis equal to the same level as other crops in research programs.
We have experienced problems with inequities in the LDP rates. We should determine the LDP's by looking at the terminal market closest to a given county. Sorghum farmers in Colorado, Oklahoma, Kansas, New Mexico, and the Texas Panhandle experience a financial penalty because of the geographical distance to the Gulf markets. Documented market penalties have exceeded 30 cents per hundred weight.
Loan rates. USDA recently used their discretionary power to lower the sorghum loan rates. Such actions prompt producers to plant crops that do not fit the agronomic potential of a geographic area, increasing the Government's financial liabilities.
I believe it is environmentally irresponsible to use non-renewable resources to grow other crops on my farm, crops that will require more water, additional fuel, and higher levels of fertilizer, simply because Government policy appears to make other crops more lucrative.
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To prevent possible abuse in insurance, the farmer-elected FSA county committee should become the gatekeepers for RMA to determine the insurance eligibility of a crop within their county. Olympic averaging should not be used on coverage above 75 percent. Disparity and inequities created by crop insurance should also be a priority. Sorghum is a low-risk crop, but I have seen lower rates charged to higher risk crops.
Payment limits must be removed and the use of certificates continued. If the logic limiting agricultural producers to a payment limit is valid, then why does the Government not limit doctors, lawyers, or defense contractors to the same levels? U.S. supply management policies will not keep foreign countries from bringing sensitive land into production, nullifying any attempts the U.S. Government might make at supply management.
Preserve planting flexibility, decoupled AMTA payments must be retained and increased. Does it not make more sense to keep food production on land that is already in production? All of my acreage is covered by crop insurance, but crop insurance does not provide capital to make land or machinery payments. Without the additional AMTA payments, failure would have been a certainty last year.
A financial safety net must be added. Payments from this safety net should be a supplement to the present AMTA payments and be paid only to those who produce an eligible crop on AMTA acres.
My ability to be a responsible steward of the land is determined by profitability. Without profitability, my ability to maintain sound conservation practices is greatly diminished. Environmental regulations not based on science diminish civic cooperation.
I hope to pass my land to my children. This is just one reason that I believe farmers are true environmentalists and are the first line of defense for our strategic food supply.
I also urge you to pass the farm accounts, eliminate the inheritance tax, the marriage penalty tax, and provide full deduction of all health care premium costs as well as eliminating taxes on capital gains.
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Thank you. You have my sincere cooperation as you take on this enormous task, and I'll help you any way I can.
[The prepared statement of Mr. Artho appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you.
Mr. Gilbreath.
STATEMENT OF COBY GILBREATH, CORN PRODUCER
Mr. GILBREATH. Thank you, Chairman Combest, Ranking Member Stenholm, and the House Agriculture Committee members. Thank you for the opportunity to speak to you on agriculture issues concerning Texas farmers.
My name is Coby Gilbreath, I'm a farmer from Castro County, TX. Our family operates a farm where we grow corn, cotton, wheat, and cattle 80 miles northwest of Lubbock.
Through financial analysis, I know that I'm an efficient farmer. Our family farm is financially sound in areas of debt management and repayment. We're good marketers, good risk managers, using all the tools available to lessen those risks. But after having done what appear to be all the right things, without your assistance, our operation wouldn't have paid out.
I want to thank each one of you for the additional ad hoc type monies that you approved in 1998 and 1999, my lender thanks you, as well as the small businesses in my town. Again, I thank you very much.
Mr. Stenholm, you'll notice I cleaned up my remarks from the Agriculture forum in Waco somewhat, so that brings us to today.
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The Federal Agriculture Improvement and Reform Act of 1996, known by many as the FAIR Act or Freedom to Farm has indeed provided producers with more freedom. Farmers are now able to base their crop plans on environmental stewardship and the marketplace.
I believe that the environment and economic benefits justify continuing planting flexibility and the freedom of the FAIR Act. However, farmers know and realize that there are deficiencies in the safety net. Personally, I would enjoy an increase in the loan rate. But as a member of the link in the chain of agriculture as an industry at a whole, I realize how difficult that is to accomplish and facilitate to the entire industry.
The supplemental income payment, or SIP, as proposed by Congressman Stenholm merits consideration. However, one problem associated with the SIP proposal is that the payments are based on a national formula. Farmers involved in regional or localized crop disasters would not be protected if growing areas in other areas were not affected.
This could be remedied by basing the formula on the NASS, or National Agricultural Statistic Service reporting districts or on county level. Lengthening the 5-year average in the proposal to 7 or 10 years on the price side might also help.
The administration's proposal referred to in the coffee shop at SIP lite, because it's less filling but tastes great and provides a third less substance, lowers the payments toward the limits and combines the proposed SIP program with the AMTA payments and targets mostly lifestyle farmers with off-farm jobs. Furthermore, it does little, if nothing, to remedy the problems and situations addressed in this testimony.
The flexible fallow proposal deserves discussion also. Some have several concerns about flexible fallow such as potential to encourage overproduction, the impact on end-users, and that growers would hit the LDP payment much quicker, causing forfeitures to the Commodity Credit Corporation. If these concerns are addressed, this voluntary program might fit well with the current farm bill to provide a level of counter-cyclical support.
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There are some other issues that affect the new farm bill's legislation and the success of it. Crop insurance reform, that's been brought up very many times today. The worst case scenario was for producers to produce one-half the normal yield. The best case was to grow a better or normal crop. That way, you got more back from the safety net in terms of LDP. We appreciate the leadership on the House Agriculture Committee in the passage of the first phase of crop insurance reform. It is now time for the Senate to act.
Second would be the CRP program. It should be maintained at the maximum enrollment, taking fragile lands out of production and helping protect our Nation's streams and rivers.
Third, the production of ethanol for fuel. Using ethanol would improve air quality and would consume an additional 600 million bushels of corn annually, adding approximately 35 cents to the value of every bushel of corn. Congress should also oppose efforts to waive or eliminate the oxygenate requirement in gasoline.
Fourth, overregulation, it attacks us from every facet, raising the cost of producing, manufacturing, and distributing goods and services. The costs of our inputs are always going up. We in production agriculture have no one to pass our costs on to.
Trade, we have the opportunity to extend permanent normal trade relations to China. It is now time for two-way trade, time to open their markets to our agriculture products.
There are two issues concerning LDP eligibility. Currently crops in pasture form are not eligible for LDP payments. Producers should not be penalized for making decisions to add value to crops through livestock grazing. The decision to graze would better promote flow and movement of these crops through the market. Isn't that what the LDP was developed for, to keep commodities moving through the market and not in the loan?
Second is aflatoxin. Corn should be eligible for the loan and LDP as long as aflatoxin levels are below 300 parts per billion. The crop insurance program should indemnify any producer with corn exceeding 300 parts per billion.
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Gentlemen, our Nation enjoys a cheap, abundant, safe supply of food. Oh, we support cheap food for the American consumer, but the American farmer must be compensated for his management, labor, capital, and risk. We need payment limitations raised to more accurately represent the size and scope of production agriculture. At the very least, the limit should be maintained at the current level.
In summary, we support current planting flexibility with a better safety net, it's too early to endorse a specific plan, but we feel both the SIP, proposed by Congressman Stenholm, and the flexible fallow plans deserve further study. We support increasing the payment limits as not to punish production agriculture for its efficiency.
Permanent Trade Relations with China should also be granted and LDP eligibility of aflatoxin corn and grazing crops should be addressed. Congress should support ethanol as an oxygenate in gasoline, and the House and Senate should continue to conference on a crop insurance reform bill.
All that is certain is that there will be change, changes to farm programs in this vast Nation of ours are always needed to keep up with an ever-changing industry. Let's make some changes for the good.
Thank you for your time. Thank you for the opportunity to share our gratitude and our concerns in regards to your upcoming business on our behalf. We look forward to working you with you in any way that we can during this important process. Thank you.
[The prepared statement of Mr. Gilbreath appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you.
Mr. Hitch.
STATEMENT OF PAUL H. HITCH, CHAIRMAN, TEXAS CATTLE FEEDERS ASSOCIATION
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Mr. HITCH. Good morning, Chairman Combest, Mr. Stenholm, and members of the committee. My name is Paul Hitch, and I am here today as chairman of the Texas Cattle Feeders Association and as a rancher, cattle feeder, and grain producer from Guymon, OK. Our family corporation includes operations in Oklahoma and Kansas.
We appreciate the opportunity to provide our views on farm policy that affect the livelihood of our members. Few sectors of agriculture have been spared from low prices during the last several years. Cattle feeders in the seven major feeding States lost over $3 billion in equity during 1995 to 1999.
As you consider possible changes to current farm policy, we urge you to continue the two key concepts that we feel are embodied in the current FAIR Act. First, continue to minimize farm policy that distorts the competitive market system; second, implement no new programs that benefit one segment of agriculture at the expense of another segment.
TCFA supports reduced Government involvement in the production and marketing of agriculture commodities and we oppose Government supply management programs. Our experience in the volatile and cyclical cattle market has proven time and time again that the market provides the most efficient, although sometimes painful, signals to producers on what to produce and what not to produce.
So, what should Congress do to address the current agricultural crisis? TCFA urges Congress to aggressively pursue those additional elements of farm policy reform highlighted during the debate on the FAIR Act adoption.
First, stronger policy and financial support is needed to remove unfair trade barriers, open foreign markets, and increase exports of U.S. value-added agriculture commodities. Producers of most agriculture commodities will rely more and more on foreign markets for increased demand and therefore higher prices. Our competitors continue to use subsidies to unfairly increase their exports and trade barriers to cheat U.S. producers out of important markets.
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Mr. Chairman, we appreciate and applaud leadership efforts by you, Mr. Stenholm, and others to implement carousel retaliation in response to EU trade barriers. We also appreciate the committee's leadership in recent trade issues involving Canada and the northwest pilot project that has allowed 175,000 head of feeder cattle exports to Canada. And in keeping pressure on our neighbors to the south, to ensure that efforts by Mexican producers to close the border to U.S. beef are decided on sound science and fair trade policy rather than on politics.
We encourage the committee's continued support for full funding of the Market Access Program and the market development programs through third-party cooperators. Second, we need expanded efforts to reduce unfair and unproductive regulatory burdens on U.S. producers. Farmers, ranchers, and cattle feeders continue to face one regulatory burden after another.
We recognize the need for and support fair, cost-effective, and science-based regulations to ensure that we not only protect consumers and the environment, but do so in a cost-effective and economically viable manner. We are concerned that recent proposals such as EPA's AFO/CAFO and the TMDL programs forced upon many States exceed EPA's statutory authority and will significantly increase operating costs for producers without appreciable protection for the environment.
Mr. Chairman, we truly appreciate yours and the committee's strong oversight efforts with these and other EPA proposals. We encourage you to continue in hopes of avoiding a lengthy court battle between industry and EPA. On an another front, we also appreciate Congressional efforts to address tax inequities, especially efforts to eliminate death taxes.
Third, greater Federal investment in agricultural research is needed to increase efficiency and resolve environmental, food safety, cattle health, and other challenges faced by U.S. producers. Historically, one of our competitive advantages over foreign producers has been leading edge research and development programs supported by the Government and the private sector.
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USDA must maintain the scientific expertise to protect producers from disparaging claims about the safety of our food and the quality of our environment. We applaud Congressional efforts to increase funding to help resolve food safety questions. We urge Congress to not only restore, but to increase funding for important environmental programs such as EQIP.
Mr. Chairman, turning to the issue of ensuring prod