SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOC REVIEW OF FEDERAL FARM POLICY
TUESDAY, MAY 2, 2000
House of Representatives,
Committee on Agriculture,
Sioux Falls, SD
The committee met, pursuant to call, at 8:22 a.m., Augustana College, Sioux Falls, SD, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Barrett, Moran, Thune, Gutknecht, Riley, Simpson, Ose, Stenholm, Peterson, Minge, Pomeroy and Boswell.
Also present: Representative Latham.
Staff present: William E. O'Conner, Jr., staff director; Lynn Gallagher, senior professional staff; Wanda Worsham, clerk; Keith Williams, Jason Vaillancourt, Hunter Moorhead, Brent Gattis, Anne Simmons, and Danelle Farmer.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. This hearing will come to order.
We are going to start a few minutes early with the opening statements so that we can begin promptly with the witnesses at 8:30. We think we have ample time for the hearing. I do mention that we do have to depart at 1 o'clock in order to be able to catch a plane that would get us back to Washington in time for votes that will occur there about 6 o'clock. It is also in this hearing, which I think says a great deal for the concern for the region and the concern of Members, is the largest attendance by members of the committee of any of the eight hearings that we have thus far held, and I appreciate everyone's being here today.
Page 2 PREV PAGE TOP OF DOC Good morning and welcome to this eighth of 10 field hearings that the House Agriculture Committee is holding in different regions of the country. I want to thank everyone who is here for coming to this important event, and that certainly includes our colleagues on the committee.
As you may know, we started this series of hearings in Lubbock, TX in March. We continued to Memphis, TN; Auburn, AL; Raleigh, NC; West Chester, OH; Kutztown, PA, and yesterday we were in Woodland, CA. At those seven hearings, more than 125 witnesses have presented testimony and well over 1,700 people have listened in, both in the audience and through the Internet. And I would remind people that all of the hearings of the House Agriculture Committee are available, real time, over the Internet site for the committee.
I think that the time that we have been spending in this endeavor has been very helpful both to the people who have attended as well as to the members, and we are pleased very much to be here in Sioux Falls today and I think our time will be well spent.
I have the pleasure of introducing the Members who are with us this morning. I am Larry Combest, I represent the High Plains of Texas. On my right is my good friend and neighbor, Charlie Stenholm, who is also from west Texas. Bill Barrett represents the western three-quarters of Nebraska, Collin Peterson will be joining us who represents northwest Minnesota. Jerry Moran represents the western two-thirds of Kansas. David Minge is from southwest Minnesota. John Thune is our host today and represents the entire State of South Dakota. Earl Pomeroy is our host to the north and represents the State of North Dakota. Gil Gutknecht represents southeastern Minnesota, Bob Riley is from eastern Alabama, Leonard Boswell represents south central Iowa, Mike Simpson is from eastern Idaho, Doug Ose is from California and joining the committee is a former member of the committee and now a member of the Agriculture Appropriations Subcommittee, Tom Latham, from northwest Iowa.
Today we will hear from 20 people who have built their lives and careers around agriculture. In selecting this panel of witnesses, we sought to bring folks together here in Sioux Falls that represent the different types of agriculture found in this region. It is my hope that everyone in this room can identify with at least one of our witnesses, and we would encourage any individual who wishes to submit written testimony for the committee to do so. That testimony will receive equally as much weight as any individual's testimony who verbally testifies.
Page 3 PREV PAGE TOP OF DOC I do not want to speak too long because we are here to hear from you, but I do want to say that the Members at this table do know that we have problems in agriculture. We all fundamentally believe that it is in the best interest of this Nation to maintain and foster a diverse and strong agricultural sector. So we are here to find answers to the question of how do we best accomplish that goal. We want to hear from real producers what they think is working and what they think is not working in Federal farm policy. We will be, after we have completed the 10 hearings, have been in every region of the country, and we hope that, in the end, that we can find some consensus about what changes that farm policy needs to take.
With that, again, I would thank you for being here, and I would call on the other members, Mr. Stenholm.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. STENHOLM. Thank you, Mr. Chairman.
I associate myself with your opening remarks, I too am delighted to be here. I have enjoyed the previous seven hearings and look forward to another day of hearing some excellent testimony as we look for the solution to the problems facing American agriculture today.
I would like, Mr. Chairman, with your consent, to introduce into the record a statement from Senator Tim Johnson, a former colleague of ours on this committee, for the record.
The CHAIRMAN. Without objection, that is certainly so ordered, and I believe we also have a statement from a number of other officials, as well. We have a statement from Senator Grams, I believe as well without objection, would be entered.
Page 4 PREV PAGE TOP OF DOC [The information appears at the conclusion of the hearing.]
OPENING STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Mr. BARRETT. Thank you, Mr. Chairman.
I congratulate you, again, on your continued leadership in organizing as you suggest the eighth of 10 hearings. It is nice to be in Sioux Falls today, our neighbor to the north. Nice to be here with our host, Mr. Thune. I think it is nice that the hearings are continuing to provide a lot of excellent testimony on possible solutions and ideas to return production agriculture to a more profitable basis. I thank you, and I yield back.
[The [prepared statement of Mr. Barrett follows:]
PREPARED STATEMENT OF HON. BILL BARRETT
THANK YOU, MR. CHAIRMAN, FOR YOUR CONTINUING LEADERSHIP IN ORGANIZING THIS EIGHTH, IN A SERIES OF 10, NATIONWIDE FIELD HEARINGS TO REVIEW FEDERAL FARM POLICY. THESE AGRICULTURE HEARINGS ARE PROVIDING 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 Sioux Falls, SD, and look forward to listening to the concerns of the Northern Plains' producers here today.
There are a number of producers from my home State of Nebraska testifying today, some from my western Nebraska congressional district. In fact, one of the witnesses, Dave Hanna, is from my home town of Lexington, NE.
My congressional district covers the western two-thirds of Nebraska. It is the tenth largest district and is larger than over two dozen States. Today, however, these statistics will fail to impress the Dakotans in attendance as I am upstaged by my good friend and colleague, John Thune, who represents the entire state of South Dakotaand by another colleague and friend, Earl Pomeroy, who represents the entire state of North Dakota! Regardless of size, however, the producers in our respective districts share many of the same agricultural concerns.
Page 5 PREV PAGE TOP OF DOC We are here today to reach the producers affected by the current farm crisis. It is very enjoyable to visit with farmers and ranchers who are not able to make it to Washington due to the demands of farm life.
The last 2 years we have been experiencing harsh economic conditions throughout production agriculture. These harsh conditions can be attributed to numerous factors including weather, low prices, and abundant production. In addition to these factors, an inadequate administration trade policy has exacerbated the situation. As a result, the demographics of the industry have begun to change rather drastically, forcing many fanners out of production or their operations consolidated. Despite efforts to answer these new challenges, many producers remain in economic distress.
As we talk to producers across the nation, certain regional concerns are quite troubling to this committee. Grain imports from Canada, for example, are traditionally a legitimate issue with our northern-tier states. But in recent years, Canadian/U.S. trade issues have been felt directly in States as far south of the border as Nebraska and Kansas. Commodities in these non-border States directly affected by Canadian agriculture policies have included grain and livestock. It is deeply troubling that the Canadian Wheat Board has been allowed to flood the U.S. market with no reasonable response from our Government.
It is no secret that farmers are facing depressed prices as the result of a lower demand for farm products. Last year when faced with similar circumstances, Congress passed a large multi-billion dollar assistance package for producers. The farm economy needed this large boost in income for survival, but additional measures are needed. Crop insurance reform is just one step the Federal Government can take to ensure an adequate safety net for producers. This, in turn, will stabilize the entire industry that is dependent on producers' prosperity.
The House-passed crop insurance bill would provide a new approach to risk protection by providing for additional coverage to producers and establishing a pilot program for livestock protection. Increased premium assistance and improved coverage will allow producers to better protect themselves in an endangered farm economy. When Congress returns this next week, the House and Senate conferees on the crop insurance bill will begin to iron out differences between the House-and Senate-passed versions of the bill.
Page 6 PREV PAGE TOP OF DOC With the global market constantly increasing the importance of flexibility, Freedom to Farm has met certain of these challenges. By providing individual producers with planting flexibility, it has offered farmers the chance to compete on a more level field. However, there have been some justifiable concerns about other aspects of the current farm bill. Providing for an adequate safety net that producers can depend on within the general flexibility principles of the Freedom to Farm Act will be one of the foremost challenges of this committee.
Where do we go from here? What are the best policy options for farmers, processors, marketers and distributors? To help us in Congress find the answers to these questions, field hearingssuch as the one here today in Sioux Fallsare invaluable in our deliberations.
Again, I would like to thank the chairman for his leadership in this time of weak prices by taking the full Committee around the country to hear directly from farmers in rural America. Our farmers are the most important commodities in America. I am anxious to hear from our distinguished witnesses today.
The CHAIRMAN. Mr. Minge.
OPENING STATEMENT OF HON. DAVID MINGE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
Mr. MINGE. Thank you.
As all of know, America has enjoyed the longest period of sustained economic growth in our Nation's history. Tragically, this prosperity has not been shared in the farm economy in the heartland here of the United States. We have been in the throes of an economic depression. And as I look at the area that I represent in southwestern Minnesota, I see more bald eagles than I see beginning farmers. It is a tragic sign as to what is happening in our small communities, in the counties and churches and schools, and unless we are able to, one way or another as a nation, work together to reverse this trend, we are going to see it devour the tradition of modern-scale farming that has characterized our area.
Page 7 PREV PAGE TOP OF DOC I hope that the testimony that we hear today, and at the other sites, will help us fashion a new approach to agricultural policy that will be visionary and will reverse this trend.
The CHAIRMAN. Mr. Moran.
OPENING STATEMENT OF HON. JERRY MORAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS
Mr. MORAN. Mr. Chairman, thank you. I am happy to be with you and my colleagues this morning. I am anxious to hear the testimony of the folks from this region. Welcome to the Northern Plains. We are glad to have the committee in our part of the country. I appreciate Mr. Thune's hospitality in allowing the committee to come hear from our region's farmers and producers and look forward to finding some solutions that we desperately need in rural America. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Pomeroy.
OPENING STATEMENT OF HON. EARL POMEROY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH DAKOTA
Mr. POMEROY. Mr. Chairman, I want to thank you for this hearing, as well as the hearings you have held all across the country. I do not think in the history of the Agriculture Committee we have seen initiative like the one you have launched where we get the folks out of the Washington office building and out into the countryside to hear directly from producers, from the many regions of the country.
I am very grateful to each of my colleagues for coming to the Northern Plains. There are some particular dimensions to Northern Plains agriculture that you are going to learn about this morning. We have had a very, very tough time of it, and the future activities of this committee will figure very prominently in terms of whether some of the people you will be listening to this morning will even be in the business of farming in a year or two from now.
Page 8 PREV PAGE TOP OF DOC I expect we are going to have an auditorium full in the course of the morning, and this is even in spite of the fact that it is prime planting season. Getting a farmer to even come in and have a one-on-one meeting in a coffee shop is a real difficult deal right now, because this is showtime, in terms of getting the crop in. But for that, I think we would have them lined up way down the hall, the interest is so great in what we are doing this morning.
Two aspects of the work immediately before this committee will be extraordinarily important, I think, as we hear through the morning. Finishing the crop insurance bill, which is in conference now, improving crop insurance so that farmers can get the protection they need at an affordable premium, and that if they have a couple of years of loss in a row, they are not going to lose their ability to have an acreage base that gives them adequate protection. That crop insurance bill is terribly important, we cannot pass it soon enough as far as I am concerned, provided we get it right.
Second, developing a disaster response to again get folks through the low-price environment that will continue to be with us into the fall, by all projections. Frankly, we are going to have to get this disaster payment, and we are going to have to, I think, spend a little time on how the disaster dollars are delivered, so that they serve the purpose we identify as foremost to be advanced by this disaster bill.
In our region, we have had the double-barrel hit of bad production and bad prices. And both of these areas need to be addressed.
One of the things I hope the panelists will speak to in the course of the morning is the impact on planting decisions for producers made by the differentials in marketing loan support behind the various commodities. We see a dimension of market loan support behind oilseeds that we do not see behind small grains. The result is continued record acreage going into soybeans, for example, even though price projection is at record lows. Now the only reason that would be occurring is because of a loan rate skewering that I think needs to be addressed by bringing up the loan rates for grains.
Page 9 PREV PAGE TOP OF DOC I think that the disaster delivery mechanism, we can do better than double AMTA, and we still have enough time to design a mechanism that gets the relief out there in a more closely-tailored way to meet our purposes. Nearly half of the last disaster bill went to the largest farmers, the most successful farmers in the country. Now if the goal of the disaster bill is to keep people on the land, maybe we ought to look at how we can tailor getting those dollars to those who most need it in a more effective fashion.
I want, as I conclude, to call your attention to the statement of Roger Johnson, North Dakota's fine agriculture commissioner, that I will submit to the record, Mr. Chairman, along with my own comments. I think for someone wanting a primer on North Dakota agriculture, Northern Plains agriculture and what we need to do it about it, you would be well-advised to read Commissioner Johnson's statement. It will be available to all committee members, and to those of you in the audience, it is available, I think, in the hall or wherever these things are made available.
Again, welcome to the Northern Plains and thank you, Mr. Chairman.
[The prepared statement of Mr. Pomeroy follows:]
PREPARED STATEMENT OF HON. EARL POMEROY
Thank you, Mr. Chairman for holding this field hearing of the House Agriculture Committee in the heart of the Northern Plains. Today's panel of witnesses will provide a comprehensive perspective of the diversity of agriculture in the Northern Plains.
Let me welcome four of my constituents who will be testifying today. Paul Mathiason, of Grand Forks, ND, is a sugar beet and potato producer who farms in the heart of the Red River Valley. Eric Aasmundstad, of Devils Lake, ND, is a corn and soybean farmer. Marcy Svenningsen, of Valley City, ND, is a beef cattle and soybean producer. Al Skogen, of Valley City, ND, is a wheat, barley, and soybean producer. These witnesses will assist the committee in its efforts to create sound Federal farm policy that is for the betterment of the family farmers and ranchers of North Dakota.
Page 10 PREV PAGE TOP OF DOC This morning's hearing is one of the committee's last field hearings it will be holding this year on the future of Federal farm policy. I commend the leadership of Chairman Combest, Ranking Member Stenholm, and all of my colleagues on the House Agriculture Committee for the boldness to take on this most comprehensive task of holding field hearings in every region of the United States. These hearings have been beneficial because they have allowed us as policymakers to hear firsthand the suggestions and concerns of actual producers, who produce the world's most nutritious and abundant food supply.
Mr. Chairman, today's hearing in the Northern Plains will be very informative. In many ways, the Northern Plains and especially my home State of North Dakota represents ground zero in the farm crisis, having experienced the twin evils of production loss caused by severe weather and rock-bottom commodity prices. After all, it is not too distant of a memory to remember the terrific blizzards and floods of 1997 that paralyzed the entire Northern Plains region. Combined with the depression-like commodity prices that our Nation's farmers have been experiencing the last 3 years, many of our region's family farmers and ranchers have been facing an economic crisis that has no modem comparison.
Because of the misfortunes of Northern Plains family farmers and ranchers, they were the first ones in the United States to demonstrate that current farm policy is not working. Moreover, the 1996 farm bill (Freedom to Farm) left our region's farmers without a safety net in times of low commodity prices and disastrous weather, and because of this our economy in the Northern Plains has been devastated.
In 1997, farm income in North Dakota was the lowest in a 10-year span at only $128.4 million. That is an average of only $4,200 per farmer, which is three times below the national poverty rate. In 1998, North Dakota farm income was $745.5 milliononly $144 million was ''real'' farm income and $601.8 million was from Government assistance.
In 1996 when Congress passed Freedom to Farm, farm prices were at near record highs. In April 1996, wheat was $5.32 per bushel, corn was $3.85 per bushel, and soybeans were $7.43 per bushel. Total net farm income (without Government payments) was $54.9 billion in 1996.
Page 11 PREV PAGE TOP OF DOCObviously, with farm prices this high and the promise of expanded markets, less regulation, and improved crop insurance, many farm organizations were willing to take a chance on Freedom to Farm.
I opposed this legislation because of my fear of exactly what we are seeing nowthe abysmal collapse of commodity prices and the lack of a safety net to protect farmers. At the time, opposing Freedom to Farm was not a politically popular position. Many believed that the opponents were afraid of change and not willing to allow the farmer to take advantage of the free market.
Today, 4 years after its passage, my fear has come true. Wheat is now selling at $2.80 per bushela 48 percent drop in price. Corn is now selling at $1.67 per bushela 57 percent drop in price, and soybeans are now selling at $4.33a 42 percent drop in price. Total net farm income for 2000 is projected to be only $40.4 billion, nearly $14 billion below what it was in 1996.
Due to the collapse of commodity prices, Congress has spent more than $15 billion in emergency assistance over the past 2 years to provide economic relief to farmers in these difficult times. The relief that Congress has provided, and is expected to provide again this year, is essential in keeping many farmers in business for another year. On the other hand, farmers deserve better than an annual ad hoc disaster program. Instead of decoupled AMTA payments that are based on a producer's 1985 base planting acreage, farmers need a counter-cyclical farm safety net that protects them when prices collapse.
Along with restoring a price safety net through counter-cyclical payments for producers, farmers should have a reliable, cost-effective crop insurance program that protects them from the adverse effects of weather. I commend my colleagues for its efforts to reform our Nation's Federal crop insurance program. The legislation provides producers with higher levels of premium assistance at lower costs, corrects Actual Production History (APH) levels to recognize weather
Page 12 PREV PAGE TOP OF DOCdisasters that have occurred, and provides incentives that encourage prudent production practices. I urge the conferees to act quickly in approving this important risk management tool for producers.
Again, Mr. Chairman, I commend you for holding this hearing and I look forward to hearing from today's witnesses. Along with my statement, I am submitting the testimony of North Dakota's commissioner of agriculture Roger Johnson into the record. Commissioner Johnson's testimony provides an accurate description of the economic crisis facing North Dakota's family farmers and ranchers and provides sound suggestions on what steps the Committee should consider in its efforts to improve Federal farm policy.
The CHAIRMAN. Thank you, Mr. Pomeroy. Mr. Thune.
OPENING STATEMENT OF HON. JOHN R. THUNE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH DAKOTA
Mr. THUNE. Thank you, Mr. Chairman, and let me extend a warm South Dakota welcome to you, to Congressman Stenholm and to all our colleagues on the House Agriculture Committee. We are honored to have you in our State. This is an issue of great concern to a great number of people, not only from South Dakota but from around this region. And there are a number of them here today from several States.
Agriculture is our No. 1 industry, and every rural main street feels the pain when agriculture loses money. Now the people who are here today are here because they love their farms, because they love their families and because they want to preserve our rural way of life. And I would add, Mr. Chairman, they believe, as do I, that the fight to save rural America is a fight worth having, and I am grateful to you and to Mr. Stenholm for coming to listen, and I want to credit you with the approach that you have taken to this subject in getting us out of the ivory tower in Washington and coming out to the heartland. You have worked together in a bipartisan way, which is the way in which these matters ought to be addressed. Low prices do not follow political boundaries, agriculture should not be a Republican issue or Democrat issue, it is an issue that ought to concern every American.
Page 13 PREV PAGE TOP OF DOC And I am anxious to hear from our producers today. And let me just say to my fellow South Dakotans, and those who are here from other States as well, that this is a wonderful turnout of members. I do not know, in my memory, of any time we have had 14 Members of Congress come to our State of South Dakota to hear directly from producers. So I am anxious to hear the testimony, to participate in questioning of our witnesses, and to help determine which direction we can move as we head into the future in trying to shape farm policy.
So thank you, again, Mr. Chairman, and again, on behalf of South Dakota, we are delighted to have you here in our State.
The CHAIRMAN. Thank you very much. Mr. 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 glad to be here. Thank you for holding this hearing along with the many others. I will be short because I have become acquainted with our chairman. If he says he is going to leave at 1 o'clock, if we want to go with him, we had better be done at 1 o'clock. [Laughter]
And that is good.
First off, I would make this point. We are a rank minority, as Members of Congress on the Agriculture Committee compared to the rest of the country and so on, there is something we have to keep in mind. We have to be super salespeople to get those things done that we need to do. And I think we need to keep that in mind. I would just suggest and ask the people that give testimony today, in your expressions, and say whatever is on your heart, but try to at least tailor it towards what you think is do-able, and keeping in mind that we do not just have a blank check. I know we need help, and as a hands-on farmer, I know that.
But I hope that out of these series of meetingsfor example, the last testimony, Mr. Chairman, we heard down in Lubbock, the last testimony of the last panel to me was one of the most significant statements made. So here today, at this hearing, here in South Dakota, we just might have the best thing that will come forth.
Page 14 PREV PAGE TOP OF DOC And so thank you for your participation and I look forward to hearing from you.
The CHAIRMAN. Mr. Gutknecht.
OPENING STATEMENT OF HON. GIL GUTKNECHT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
Mr. GUTKNECHT. Thank you, Mr. Chairman. I will attempt to be brief as well.
The brilliant philosopher, Johnny Cash, once observed that everything changes, as well it should, the bad ain't forever and the good ain't for good. And we have seen the last several years a tremendous roller coaster that our producers have been on. And we do not have all of the answers or solutions in Washington, that is clear. I would also say that there certainly is not a complete consensus. And the testimony we have heard so far around the country does tend to lead to two conclusions: One, our farmers desperately need access to foreign markets. And there, I think there are some things we can do.
The other thing that we have heard a lot about is trying to develop some kind of a counter-cyclical, shock-absorber type system. I am not certain we can get that done this year, but we are going to have, perhaps, one of the most important votes in the Congress that will affect agriculture for many years to come in about 20 days. And I hope we will hear a little bit about that. And that deals with whether or not we will grant permanent normal trade relations with China. An extremely important issue. And I think agriculture is going to have to speak very loudly and clearly over the next couple of weeks, because I think we are in danger right now of losing that vote.
But I welcome all of the people who are testifying today. I know that several of the people who are testifying from our State of Minnesota, I have met with them before and I think I speak on behalf of all the members of the committee, the quality of the people who are testifying today is second to none, and we thank you for coming forward, and we appreciate your testimony.
Page 15 PREV PAGE TOP OF DOC The CHAIRMAN. Mr. Riley.
OPENING STATEMENT OF HON. BOB RILEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA
Mr. RILEY. Thank you, Mr. Chairman.
I was fortunate enough this weekend to fly into Rapid City and then have the opportunity to drive across your beautiful State yesterday. And I thought we had farms down in Alabama, I have never seen anything quite like what I saw yesterday. It is my first time up here.
Well, one of the things that impressed me as I was driving yesterday is how many people were in the field. And I told my wife, to a large extent, your ability to success is going to be dependent on what we work out in hearings just like this.
We are here to look for solutions. I do not think there is anyone on this panel that has all the answers. And I want to compliment our Chairman for taking this field hearing out to the people who we hope can give us some solutions to these problems.
I have been involved in agriculture for 35 years. I do not think I have ever seen a time when every segment of agriculture in the United States has been depressed. And it has been depressed now for 3 years. We have to find some solutions and we have to find them fast, because as your Representative, Mr. Thune, said a moment ago, we are in danger today of losing something very precious to the American people, and that is the American farm.
So we look forward to the testimony today and we look forward to someone, as Mr. Boswell said a moment ago, that may have a solution to help us end some of these problems. So let me tell you again, you have an absolutely wonderful, beautiful State. I hope that we can come back and visit again. From the Black Hillsit is amazing how much of a diversity you have in this State, from the Black Hills over to the plains. And we have really enjoyed it. We have enjoyed the hospitality and look forward to the testimony. Thank you.
Page 16 PREV PAGE TOP OF DOC The CHAIRMAN. Mr. Simpson.
OPENING STATEMENT OF HON. MICHAEL K. SIMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
Mr. SIMPSON. Mr. Chairman, I will not only attempt to be brief, I will be brief.
I am glad to be here and I look forward to the testimony and I thank Mr. Thune for inviting us to this beautiful part of the country. Thank you.
The CHAIRMAN. Thank you.
OPENING STATEMENT OF HON. DOUG OSE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. OSE. Thank you, Mr. Chairman. I will be brief.
I want to make sure that I compliment both you and Mr. Stenholm for bringing the committee here, and I want to extend my appreciation to Mr. Thune for the numerous occasions on which he has taken me aside and said, you need to think about this, you need to think about that. John, you do a great job, here, and as a freshman, I appreciate your interest in my success. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Latham.
OPENING STATEMENT OF HON. TOM LATHAM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA
Mr. LATHAM. I thank you Chairman Combest for the opportunity to be at least a temporary member of the sometimes-all-powerful Agriculture Committee here today. You and Mr. Stenholm are doing a great job.
Page 17 PREV PAGE TOP OF DOC Being from northwest Iowa and being a farmer myself, coming from a town of 158 people that actually live on a suburbs on a farm about a mile outside of town there, and driving across the district yesterday, and somewhat like Mr. Riley was talking about, and seeing the activity in the field and smelling the earth being tilled yesterday, I wanted to stop the car several times and get out and go back to my real profession.
I am deeply concerned about what is happening, not only on the farm but in the farm communities. And I think what we do here and the input that we get today, it will have a long-term impact on the viability of our rural communities and farm families. And that is why I am very appreciative of the opportunity to join in this hearing today.
I do have to say, with John Thune, he truly is all-powerful, bringing 14 Members of Congress here, but also if you will notice what happened with the market yesterday, John is the only one that can bring a hearing in, raise beans 28 cents and corn 11 cents yesterday. And John, I wish you would just visit Iowa more often. [Laughter.]
Anyway, thank you very much for the opportunity, Mr. Chairman.
The CHAIRMAN. If we stay here about a month, things might get back to better prices.
I would like to introduce now our first panel of witnesses. And I will apologize preemptively about any names that I may mispronounce of, either your names or your hometowns.
Mr. Donald Buhl is a pork, corn and soybean producer from Tyler, Minnesota. Mr. Chet Edinger is a wheat, corn and soybean producer from Mitchell, SD. Mr. Danny Geis is a wheat and grain sorghum producer from Hitchcock, OK. Ms. Cecilia Grevson is a corn and soybean producer from Madison, NE. Mr. Paul Mathiason is a sugar beet and potato producer from Grand Forks, ND. Ms. Joy Philippi is a pork producer from Bruning, NE, and Mr. Mark Schweers is a corn and soybean producer from Wisner, NE.
Page 18 PREV PAGE TOP OF DOC Mr. Buhl, we will start with you and take the testimony of the committee in the order of the way introduced. Thank you for coming and please proceed.
STATEMENT OF DONALD BUHL, PORK, CORN AND SOYBEAN PRODUCER, TYLER, MN
Mr. BUHL. Thank you, Mr. Chairman.
Mr. Chairman, members of the committee, my name is Don Buhl. I am a pork producer and row crop farmer from Tyler, Minnesota. It is my pleasure to have the opportunity to testify today on behalf of the National Pork Producers and America's pork producers.
First, I would like to say that the pork producers enthusiastically support granting China permanent normal trade relations status. This is a one-way trade agreement. The U.S. benefits significantly because China's previously closed market now opens. China's degree of access to U.S. markets remains the same, unlike NAFTA and the Uraguay Round, the United States makes no concessions.
When WTO negotiations began, tariffs on imported pork into China were as high as 43 percent. After a 4-year phase-in period, they will be between 12 and 20 percent, depending on the type of pork. But unless Congress passes normal trade relations, farmers in France and Denmark will be servicing the vast Chinese market, not American farmers. We will be locked out.
In recent testimony, agriculture business consultant Dermott Hayes of Iowa State University said demand for pork by 1.2 billion Chinese consumers could easily boost the value of hogs by $5 per head. Myself and one employee raise 10,000 head of hogs. $5 a head adds $50,000 to our local economy. The grocer, the implement dealer, and if my wife is lucky the furniture store will all benefit.
Gentlemen, this is very, very important to rural America. Chinese customers prefer different cuts of meat than Americans, so the net to our domestic prices for American consumer would not be a harmful thing, but it would certainly benefit us in the agricultural economy.
Page 19 PREV PAGE TOP OF DOC As far as the concerns about other issues, side issues, I believe if we are trading with a country, we are in a much stronger position to address any other issues that concern us, whether they be human relations or whether they be environment or anything else. As long as you are dealing with somebody on a daily or a weekly or a monthly basis and have contact and communication, you are much more likely to implement change.
Under the 1985 Pork Promotion Act, a pork check-off referendum will be conducted if 15 percent of pork producers request it through a petition process. In June 1999, components to our check-off produced USDA with more than 19,000 signatures. Following a statistical analysis, the Agricultural Marketing Service determined that 12,428 of the petitions were valid, far short of the 14,900 necessary to trigger a referendum.
Despite the conclusion reached by AMS, on February 25, Secretary Glickman, citing unspecific powers, unilaterally ordered a referendum on the continuation of the pork check-off. This will probably be held this summer or early fall. It is critically important that this referendum process be fair and transparent, and that only bona fide pork producers be able to vote. Non-producers should not determine my future or that of our industry, and I strongly urge you as a committee to exercise your oversight powers to see that this is done in a fair way.
The check-off is very, very important to me. Research, promotion and education for consumers and myself are the purpose of the check-off. It is a fair and very democratic process in the way that our organization is run. It is vitally important for my future, as a pork industry, to be able to work with other producers, and this provides a mechanism for us to do that. I would say that the Secretary's actions, we will respect, we will proceed and have a positive vote, but I would not want to see that create a precedence for future decisions about the check-off.
Pork producers have taken a proactive approach to protecting our soil, our water and our air. The 1997 environmental dialog on pork production and the innovative on-farm order and environmental assistance program, pork producers have a history of being proactive in the environment. The EPA's new rule on total maximum daily load, however, reveals a new and disturbing trend of environmental out of our reach. EPA wants to expand the TMDL program to address certain agricultural and forestry practices that were not previously regulated under the program, even though they are not scientific.
Page 20 PREV PAGE TOP OF DOC We believe the final rule should be withdrawn or delayed until significant data exists and efforts should be made to strengthen voluntary programs currently under way.
In closing on this particular point, if there is a real environmental problem on my farm, I want to address it. Make sure that the rules that we have are warranted and work.
Finally, we believe Congress should assist all producers in trying to find a way to maximize their share of the consumer dollar. MPPC has launched a number of new initiatives to help ensure that the producers have a fair, transparent and competitive market. We firmly believe that access to information and knowledge will form the foundation of guaranteeing long-term market competition.
Some of our initiatives include: Development of a packer price reporting system that focuses on agricultural procurement costs; passage of the mandatory price reporting act of 1999; the National Pork Producers' producer price reporting initiative, which encourages producers to negotiate with more than one packer, and to report the price to USDA.
Recent publication of the Guide to Marketing Contracts: National Pork conducted, with the University of Minnesota, live hog marketing studies in 1999 and 2000. In addition, MPPC facilitated the creation of a national producer-owned cooperative called Pork America. Pork America's goal is to find new marketing and other value-added opportunities for producers. This type of producer-driven, self-help approach is a good place to put Government dollars.
Concerns over possible market distorting effects of concentration led to a number of resolutions being considered and passed at our recent National Pork Industry Forum.
Our delegates, who are democratically elected from all States who have organizations supported:
Page 21 PREV PAGE TOP OF DOC A study of the structure and competitiveness of the present hog market in by the USDA; a review of the definition of price discrimination, and the Secretary of Agriculture's authority to challenge price discrimination; a USDA study of justifiable price differentials; a study by the Department of Justice on concentration threshold levels to determine whether they should be revised; continued scrutiny of the packing and processing industry to assure adherence to relevant Federal antitrust laws, and the passage of new laws if necessary.
New authority for USDA to review and make recommendations to the Department of Justice regarding approval or disapproval of agriculture mergers, acquisitions and consolidation of agriculture import suppliers; USDA authority to require agribusiness with more than $100 million of sales to annually file information related to corporate structure, strategic alliances, joint ventures and the like.
Establishment of the Deputy Attorney General for Agriculture; and new legislation that requires processors to bargain with producer co-ops.
Mr. Chairman, I want to commend the House Agriculture Committee for its role in the passage of the mandatory price reporting legislation, and urge you to employ the same careful approach with other legislative challenges. I must express my concern, however, that neither Congress nor the administration has yet to provide the remaining $1.35 million for the implementation of Mandatory Price Reporting Act to ensure that USDA can carry out its full legislative mandate in a timely manner. This must be done soon.
The comments that I have made represent the stand of our organization. I have one further comment. Our organization does not address crop subsidies or issues relating to that kind of farm policy. In my opinion, the marketing loan program, with its LDPs, is good Government policy. It protects our grain producers and it also discourages foreign competitors from increasing their production. I believe it is good policy.
Mr. Chairman, cooperation, driven by information and knowledge, rather than confrontation, is the key to finding reasonable long-term solutions to the complex issues impacting American agriculture. Such cooperation can help the industry avoid the negative unintended consequences of legislative and regulatory actions in the long term. And that could harm producers in particular and our industry as a whole.
Page 22 PREV PAGE TOP OF DOC I want to thank each and every one of you for being here today. I appreciate so much your taking the time to listen to our views, and I thank the Chairman for bringing the committee here. I encourage you, as you work, to convince the rest of Congress of the vital importance of agriculture to our Nation. Thank you.
[The prepared statement of Mr. Buhl appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you very much. I would encourage our witnesses, to the extent possible, to maintain somewhere in the 5 minute area to give members ample time to make for certain there is questions, and then giving all of our panels the same time. All of the testimony will be submitted for the record in its entirety.
THE STATEMENT OF CHET EDINGER, WHEAT, CORN AND SOYBEAN PRODUCER, MITCHELL, SD
Mr. EDINGER. Good morning, and welcome to South Dakota. Thanks for having me here.
My name is Chet Edinger, and I am a producer from Mitchell, South Dakota. I and my brother, Charlie, have been involved in a family farm and grain operation in the last 7 years. We raise wheat, corn, soybeans and sunflowers. I am currently serving as past president of South Dakota Wheat, Inc., a producer organization located in Pierre, South Dakota.
Thank you for the opportunity to visit with you today about the features of Freedom to Farm and how Freedom to Farm has worked in the agriculture industry in South Dakota. There are many positives that Freedom to Farm has created in the agriculture sector. Planting flexibility, crop insurance opportunities and the ease of AMTA payments. I oppose a return to supply management programs of old. On my farm, the 1996 FAIR Act gave me lots of power in my own decisionmaking. This is something that has made me a better farmer. However, there are a few things that the FAIR Act has fallen short on. These include crop insurance, conservation issues, value-added incentives and trade.
Page 23 PREV PAGE TOP OF DOC Crop insurance is an excellent management tool that has been a great help in starting my farm and keeping it going in a positive direction. There are some things that need to be added to the current Crop Insurance Program. The first item that needs attention will be some APH corrections. Currently farmers with back-to-back years of disaster cannot utilize crop insurance due to the fact their APH yields slip below T yields and quite low. If a county is declared a disaster, the producer should have the option to not count those years in the APH calculation. Another idea would be to allow the farmer to choose either a 10-year APH or a 4-year APH, or use the T yield as the safety net and the APH does not fall below that.
An additional area crop insurance needs to work is in response to market conditions on quality adjustments. For example, last year with low-protein wheat, winter wheat, many farmers were getting anywhere from 50 to 90 cents a bushel discount for low-protein wheat. However, crop insurance did not pay because the wheat was still above quality adjustment factors. This is a 1999 problem that we saw throughout the whole Wheat Belt, and crop insurance did not respond to those conditions.
Varying premiums. Many farmers have premiums that vary as much as $5 per acre because the rate structure is different from neighboring county to neighboring county on the same APH, same crop, same farmer.
Increase in subsidy. The higher the coverage, the less the subsidy. Last year, some good things happened in higher subsidy for 70 percent and higher coverages. This needs to continue to be higher. If the farmers in Iowa, Minnesota and Illinois have more subsidy for higher premiums, you will see more participation. Right now, the higher coverages are still too expensive for them.
Keep the private sector in crop insurance. The FSA offices are already under a tremendous seasonal workload. Adding crop insurance would add to their burden. Also private industry is very efficient in helping farmers with their insurance needs.
Page 24 PREV PAGE TOP OF DOC Adding livestock insurance. In South Dakota, as much as 80 percent of the farmers utilize crop insurance. That is an excellent risk management tool. Why should the livestock producer not be able to utilize the same tool. Also, more counties need to be added to ensure for forage and forage quality for livestock.
Conservation. Conservation needs to be an integral part of the next farm bill. A conservation incentives program should be one component of a comprehensive farm safety net that rewards farmers and ranchers who practice good stewardship. Above all, conservation should remain a volunteer, locally-led process, because it is local decisionmaking at its best. The CRP program has been excellent in the past, however the present rules make it very difficult to enroll and to then put all the required grass species into that land. Also in my area, CRP rental rates are about $10 per acre under current market rates.
Value added. Value added opportunity exist in today's ag, but what is needed is research such as H.R. 3996 and a value-added tax incentive credit proposed legislation. Both pieces of legislation have provided additional resources for producer-owned value-added processing. And Congressman Thune is a prime sponsor of those bills.
Also on the tax side, we need a small business tax savings account allowing farmers and small family-owned businesses to put money aside tax-free or tax-deferred so when times get tough, we can tap into those funds to shore up the cash flow.
Trade. PNTR is very necessary and important to all farmers. To penalize the government for human rights violation using food and medicine seems to fly in the face of common sense, as all people benefit from these products, not just the wealthy and influential.
Thanks for the opportunity to speak to you today, and I hope I can answer any questions you have from the committee.
[The prepared statement of Mr. Edinger appears at the conclusion of the hearing.]
Page 25 PREV PAGE TOP OF DOC The CHAIRMAN. Thank you. Mr. Geis.
STATEMENT OF DANNY GEIS, WHEAT AND GRAIN SORGHUM PRODUCER, HITCHCOCK, OK
Mr. GEIS. Thank you. On behalf of the Oklahoma Wheat Growers Association, I would like to thank the members of the House Agriculture Committee, Chairman Combest and Minority Leader Stenholm for providing a forum to discuss solutions to the agriculture crisis facing each of us here today. With commodity prices at the lowest level in memory, the Oklahoma Wheat Growers recognizes that U.S. agriculture producers must work cooperatively with Washington to maintain and build upon the prominence of our Nation's agriculture resources and the U.S. agriculture producer.
As we rapidly approach the completion of the current farm program, we are faced with the challenge of finding solutions to issues that have plagued our industry for generations. What the Oklahoma Wheat Growers would like to do is make recommendations for adjustments to a number of issues that will address both the immediate needs of our Nation's wheat producers and provide points of importance to consider in the creation of policy beyond the current farm bill.
As we look to the future of agriculture, in not only the United States, but also globally, we must aspire to provide a policy that will utilize the superior production capabilities of this Nation's producers by financially rewarding their efforts. Policies set forth from now to the end of the current farm bill must culminate in the development of a program that will provide a realistically solid financial floor or safety net that will ensure stability and yet encourage the free enterprise system that makes U.S. agriculture strong.
The continuation of providing American market transition payments in an amount to equal twice the 1999 payment level for the remainder of the current farm program would significantly move U.S. agriculture forward by increasing the farm program baseline for funding. This action, in turn, would need to be accompanied by the establishment of a counter-cyclical economic assistance program that would provide the aforementioned stability. We offer these two solutions for consideration and possible action, as we establish intermediate goals in shaping our next farm bill.
Page 26 PREV PAGE TOP OF DOC Turning our attention to more immediate or short-term objectives, the Oklahoma Wheat Growers has identified a number of issues. The first of these is flexibility. Retention of flexibility is key to the ability of producers to adapt to the changes in the marketplace in which we operate. This flexibility would include the implementation of a provision allowing producers to qualify for a loan deficiency payment for wheat acres that were destroyed due to grazing. We strongly encourage the committee to support the provision contained in the Manager's Report of the Fiscal Year 2000 Appropriations Conference Report, regarding in lieu of LDP payments for graze-out, limiting probability by inhibiting the very freedoms in which our Nation was founded would be a step backwards toward an era of failed agriculture policy.
As mentioned previously, U.S. producers must have accessibility at a global level in order to compete with international competition. That is why we implore each member of the committee to help pass permanent normal trade relations with China. We must also work toward the elimination of all unilateral sanctions against food and medicine as they only inflict suffering upon our domestic producers and encourage our international competition. Elimination of unilateral sanctions, such as those in place with Cuba, should be a top priority in the coming year. We urge action to appropriate larger levels of funding to specific trade programs, such as GSM credit programs, Public Law 480 and any humanitarian assistance program implemented by USDA for the export of U.S. wheat.
The ever-changing global agriculture economy presents many challenges that we must all overcome. If any of us here today are to persist and prosper in agriculture, there must be a commitment made by not only our elected officials but also by USDA and U.S. agriculture as a whole. If U.S. agriculture is to once again rise to the forefront of the marketplace that has become more competitive than at any time in history, we must have the commitment of support from our leadership, as well as the devoted and unified efforts of everyone represented here today toward making the Oklahoma wheat producer, and ultimately United States agriculture successful for generations to come.
Page 27 PREV PAGE TOP OF DOC Thank you.
[The prepared statement of Mr. Geis appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Mathiason.
STATEMENT OF PAUL MATHIASON, SUGAR BEET AND POTATO PRODUCER, GRAND FORKS, ND
Mr. MATHIASON. My name is Paul Mathiason, I am from Grand Forks, North Dakota, I farm in the Red River Valley of the North with my brother. We raise wheat, dry beans, potatoes and sugar beets. I am currently serving as the vice-president of the American sugar beet Growers Association.
Twenty-five years ago or more, the sugar beet growers of the Red River Valley in Minnesota decided to get into value-added agriculture by purchasing their sugar beet processing plants. This has been a huge $1 billion investment by the farmers, but it has been very good for our area by returning a yearly economic impact of $2.3 million to North Dakota and Minnesota. We hire 1,800 union employees for our processing companies at salaries three times the minimum wage. So we are proud of our industry. We are proud suppliers of a high-quality product for our users, on-time delivery and very reasonably priced product.
What has been most important for our area, and with sugar beets, I think, is that sugar beets, contrary to some of our opposition is that it has allowed the small family farms to survive, and with that our small towns have survived, our small churches, our small schools, our suppliers. In other words, rural life as I fondly remember it survives in the Red River Valley in Minnesota, partly because of sugar beets.
But now all that is at risk. Because even though we are the lowest-cost producer of sugar beets in the world and the lowest-cost producer of sugar beets in the Nation, we are seeing such a sharp price reduction in sugar, such as the other commodities, that everything is at risk. So what is the reason for this price drop? One of the first reasons is, we are experiencing a product out of Canada that we call stuffed molasses that is really a blended sugar product, it is brought in through through Canada, re-refined in the United States, and currently is circumventing our tariff rate quota system.
Page 28 PREV PAGE TOP OF DOC We also have a NAFTA agreement with Mexico. When our agreement was made with Mexico, Mexico was an importer of sugar. They have increased their production by 50 percent, and now, October 1, they are supposed to receive a 10-fold increase in access to our sugar market. We see the market as seeing that plum out there just being ready to be picked.
Perhaps another reason, an unintended consequence of the Freedom to Farm bill, is as much as we love the flexibility of planting, it has allowed sugar beets and sugarcane acres to be planted on program crop acres without reduction in AMTA payments.
So today we would ask for some of your help and to its support, the Government purchases sugar, that it be turned into a non-food use, or shipped offshore. We ask you to support any legislation to fix our stuffed molasses problem with Canada. We ask you to support any renegotiations with Mexico that might help us blend our sweetener industries, both our corn syrup and sugar industries together in a way that destroys neither market. We ask in the future farm bills that we eliminate the 1-cent forfeiture penalty that we currently have on our loan program. That has effectively reduced our historical market by a penny. I think it was an unintended consequence. So there are a few things that we think can be done.
In closing, I would like to thank this committee, and especially the chairman, in leading reform in the Crop Insurance Program. Crop insurance is, as Congressman Pomeroy will know, in our area has been very important in the last few years, especially specifically in my area. There was many acres that were not planted last spring, and many of those farmers would not have been farming again this year without it. So we need to thank you for that. Thank you for your Federal disaster payments.
And with that, I would close and entertain any questions that you have. Thank you.
[The prepared statement of Mr. Mathiason appears at the conclusion of the hearing.]
Page 29 PREV PAGE TOP OF DOC The CHAIRMAN. Ms. Grevson.
STATEMENT OF CECILIA GREVSON, CORN AND SOYBEAN PRODUCER, MADISON, NE
Ms. GREVSON. Mr. Chairman and committee members, thank you very much for holding this hearing and for inviting me and giving me the opportunity to testify in front of this important committee.
My name is Cecilia Grevson, and I am a farmer from Madison, Nebraska in the northeast part of the State. My husband, Willard, Senior, and I farm 830 acres of pivot irrigated corn and soybean rotation. I am here today to let you know that the economy in the agriculture community is hurting badly and the Freedom to Farm bill, it is not working and needs to be change.
As an owner and operator of our farm, I can tell you that we do not like handouts from anyone. We would like to get our money from the marketplace and not from the Government. But I believe that it is the Government responsibilityall of usof the security of the country. That means to keep its people well-fed, that mean establishing a safety net for producers. Maintaining a healthy farm economy translates into keeping the small communities alive, and in turn, the whole State economically healthy. Agriculture is Nebraska's largest industry. Farmers are responsible for feeding the United States and parts of the world and, in turn, help to keep the United States balance of payments in the world trade healthy.
At this time, I would like to tell you about the HERO bill, Habitat Enhancement Rotation Option, H.R. 3847 that Congressman Doug Bereuter of Nebraska introduced into the House of Representatives March 8, 2000. I was directly involved in putting this bill together, along with a group of northeast Nebraska farmers, environmentalists, conservationists. Enclosed you will find a copy of the bill and I will tell you the high points of the bill.
Page 30 PREV PAGE TOP OF DOC Number 1, the Secretary of Agriculture shall establish a voluntary program to be known as the Habitat Enhancement Rotation Option, or HERO. It will encourage owners and producers who are parties of a production flexibility contract to rest and rehabilitate up to 25 percent of their contract acres for the purpose of enhancing soil and water conservation and providing wildlife habitat.
Number 2, annual rental payments for such acres shall be based on a rental payment used for comparable acres enrolled in the CRP, conservation reserve program, in each county.
Number 3, duration of the program should not be less than 2 years and no more than 4 years, and could change, depending on the crop shortages.
Number 4, the use of cover crops, such as rye, vetch, oat, clover, et cetera, also could help with the 3-year transition needed for organic farming. This is in addition to all farm programs.
With all these conservation practices, we need more money also for technical assistance for the NRCS, or National Resources Conservation Service. The Nebraska NRCS technical staff has declined 25 percent over the past 10 years, and the demand is double. Also, in rural economic development, we have the Resource Conservation and Development District, RC&Ds. The serious problems in agriculture are directly related to the troubled economies of rural communities. I have personally seen how the USDA's Resources Conservation and Development Program, RC&Ds, is actively helping rural communities improve their local economies. Nebraska currently has seven authorized and funded RC&D areas but State coverage, we will require an authorization of five additional areas. RC&Ds are made up of local people who gain inputs from neighbors to develop an area plan, what needs to be done to improve the quality of life in the area.
In conclusion, farmers are hurting. We need help now. The Freedom to Farm, it is not working and needs to be changed. Some of the areas can be helped. First, set aside 25 percent of the land as needed; second, annual rental payments rate should be comparable to rates that conservation reserve programs in each county; third, minimum duration 2 years, maximum 4, the flexibility depend on actual conditions of supply and demand at the discretion of the Secretary of Agriculture. Increase technical assistance monies from $570 million to $900 million for NRCS. Increase monies from $35 million to $53 million for RC&Ds to authorize the 46 new applications pending.
Page 31 PREV PAGE TOP OF DOC Thank you very much for the opportunity, and I will be available to answer any questions you might have.
[The prepared statement of Ms. Grevson appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Ms. Philippi.
STATEMENT OF JOY PHILIPPI, PORK PRODUCER, BRUNING, NE
Ms. PHILIPPI. Good morning, Mr. Chairman and members of the committee. Thank you for you coming to the Midwest to hear our testimony on the current agriculture policy and the state of the agricultural economy.
My name is Joy Philippi. I am a farmer and a pork producer from southern Nebraska, which is in the third district. I am serving currently as the president of the Nebraska Pork Producers Association. As a farmer and a pork producer, I supported the 1996 farm bill. I still believe in the basic concept of that legislation. I have always used the idea of value-added marketing of my own corn in my farm business plan. The Freedom to Farm legislation created the opportunity for me to enhance my profits by allowing me to raise 100 percent of the corn I need for my small hog operation.
As things are right now, I see there are several major factors that are adversely affecting the future of agriculture in Nebraska and, I believe, in our Nation. The lack of capital available to independent producers, the lack of youth returning to our farms, and the lack of a competitive marketplace. These three factors, along with continued consolidation of corporate agricultural interests have essentially taken away the opportunity of our producers to compete.
Page 32 PREV PAGE TOP OF DOC I believe that risk management programs need to be incorporated into our agricultural policy legislation. Risk management programs, such as those proposed in the crop insurance bill at this time will offer producers the opportunity to take control of their risk. Many of our pork producers lost as much as 40 percent of their equity during 1998 and 1999. If solid risk management programs had been in place, I truly believe this would not have happened. They may not have lost any equity at all.
In my printed testimony today, I discuss the average age of the producer in Nebraska, and the amount of start-up capital it would take to establish a small operation such as mine. A proactive farm policy which would offer payment based on income rather than market loss assistance would allow existing producers the opportunity to transition their operations to young people. Such policies would also allow for a more competitive market system, which we need to have recreated. Subsidies offered to existing producers in the form of market loss payments will not return capital or youth to agriculture. Access to capital, loss of equity and the absence of youth in our rural economy have all contributed to the losses in the average farm income.
We have seen the spread between the economic stability of the social economy and the instability of the rural economy widen. Last summer, the Nebraska Pork Producers Association created a pork equity task force. At our initial meeting of this group, I discussed with them the basic principals of economics that I learned in college. Some producers will choose to compete in a marketplace using high volume and low margins. Others will choose to compete with low volume and high margins. I believe there is room for both of us in our marketplace.
I do believe one thing for sure, and that is, we have to level our playing field. We need a market that is based on quality rather than quantity. As this transition of agriculture continues, I encourage you, our elected officials, to actively pursue knowledge-based risk management programs. Farmers, ranchers and livestock producers do not want any type of long-term Government intervention in the form of payments for market loss. The majority of the producers I know would rather have a system that would ensure the risk, that provides a stable income directly correlated with their average income levels. Today's farmers and ranchers are not afraid to assume risk. It has always been a part of our operation. However, unless we return to a competitive marketplace, some type of Government assistance will be necessary.
Page 33 PREV PAGE TOP OF DOC I would like to thank you again for this opportunity to be here today to discuss these challenges. I believe that, if we work together, we can create a future for agriculture in the Midwest and in our country. Thank you.
[The prepared statement of Ms. Philippi appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Schweers.
STATEMENT OF MARK SCHWEERS, CORN AND SOYBEAN PRODUCER, WISNER, NE
Mr. SCHWEERS. Thank you, Mr. Chairman.
Mr. Chairman and members of the committee, I would first like to thank you for taking time to travel to America's heartland to explore the means to address the problems agriculture faces.
My name is Mark Schweers. Along with my wife and three children, we farm at Wisner, Nebraska, located in Cuming County, one of the largest livestock feeding counties in the country. I am involved with several farm organizations at different levels and currently serve as vice-president of the Nebraska Corn Growers Association. Many of these groups have provided information to me in preparation of this hearing. Today, though, I would like to share with the committee some of the information and thoughts that have been offered to me by my neighbors and friends in Cuming County.
I support the principles of the 1996 farm bill, but with any program, we need to accept changes and improve its effectiveness. We are all aware of the factors that have led to the current situation. And now it is up to all stakeholders to search for ways to return prosperity back to agriculture. The development of markets that was a fundamental goal of the FAIR Act have been limited as a result of factors beyond farmers' control.
Page 34 PREV PAGE TOP OF DOC Three key issues that are currently in front of national policymakers today will have an effect on agriculture, our trade, ethanol and consolidation. The removal of sanctions and trade barriers to provide access for trade of our products is the future of agriculture. The vote on permanent normal trade relations with China is a critical step in opening this market of 20 percent of the world's population to U.S. agricultural products. China has also agreed to eliminate export subsidies of their agricultural products that would allow for a more level playing field on the world markets for all producers.
Ethanol is at a crossroads. Congress and the EPA will have a major role in the future of the renewable and domestically-produced fuel. As we all struggle to find value-added opportunities for agriculture and better environmental answers for our world, ethanol continues to be a true success story. We need to be cautious not to create a knee-jerk reaction as a result of the MTBE problems. In a misguided attempt to solve water contamination problems caused by this petroleum-based product, people are seeking to gut the Clean Air Act. Congress needs to look at long-term solutions to the energy policy, which includes the impact the ethanol industry has on rural America.
The issue of consolidation in several sectors of the agricultural industry may have long-term consequences to the future of agriculture. As the input suppliers, processors and transportation entities merge, some efficiencies may be gained, but the loss of another player in that sector will ultimately reduce competition. Congress needs to provide the resources to support the regulatory process to ensure that mergers are lawful and in the best long-term interest of society.
Regarding issues that affect producers on a more regional basis, the western Corn Belt has different challenges than our counterparts in other areas of the country. Marketing channels, production and local usage result in different demands in our area. The western Corn Belt is a residual supplier of corn and soybeans to the marketplace, thus the burden of storing the surplus supply falls on farmers in this region. Risk management, transportation and storage are unique to this area. We need to have the options to adjust our programs to remain in business. Recently, December corn futures have been in the $2.50 range. In parts of Nebraska, we have a basis level of up to 50 cents per bushel, thus the cash price of corn is well below our cost of production.
Page 35 PREV PAGE TOP OF DOC Congress should consider enacting a farmer-owned reserve program that provides for an extended marketing period. This would increase the options a farmer has to allow for an orderly marketing of products. The proposed loan program for on-farm storage by USDA is a step in the right direction in updating aging on-farm storage, but does not address the marketing period.
There are several other programs that are being considered as enhancements to the FAIR Act that need to be considered and analyzed to fully understand their effects. Congress has the resources and non-biased position to evaluate these programs. Concepts such as flex fallow, green payments, HERO and counter-cyclical options may have merit for the upcoming year in future farm programs. Several of these concepts, or a possible combination, would allow producers to voluntarily take land out of production with an incentive. Market would then determine whether all acres need to be planted or not.
Some will argue that the voluntary acreage reduction would undermine the principles of the FAIR Act. I believe that the intent of the act was that government would not dictate what to plant or not to plant. That was to be a function of the market.
I realize that I have touched on a wide range of issues and not provided detailed background. But my intent was to offer ideas that Congress should study. Your task of researching and developing policy for the Nation's producers and the world's consumers is a monumental undertaking. Again, I would like to thank you for allowing me to provide testimony.
[The prepared statement of Mr. Schweers appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman, and I thank all of the witnesses for your testimony this morning. I heard in your testimony, many of you, this morning, a thread of agreement that we have been hearing in all of our previous seven hearings. One is the overwhelming consensus that the Freedom to Farm is working from the standpoint of flexibility and allowing producers to make their own choices rather than to return to supply management. The overwhelming majority of witnesses and the audiences have stated this.
Page 36 PREV PAGE TOP OF DOC That gives us the challenge, though, of meeting the one criticism that everyone is saying, and that is the safety net is not adequate. That part of Freedom to Farm is not working, and therefore some kind of a supplemental income paymentcontinuing to double AMTA, et cetera, is recognized and necessary, and is recognized in the net farm income figures in which we see, without the appropriation of $22 billion last year, for example, where would we have been? That needs to be looked at.
Ms. Philippi, your recommendation on crop insurance also is one that is beginning to have some semblance of consensus. One of the weaknesses of the current Crop Insurance Program has been we are trying to insure price and yield with the same policy and that cannot be done. You are transferring price risk assurance to a program that most believe can best be handled by market loans and LDPs, et cetera, rather than doing that. So a concept of looking at insuring cost of production, what you spend to make your crop, what you spend to conduct your livestock operation is a proposal that is being worked on, and I hope that we will see that develop over the conference on crop insurance, so that we can at least look at that. That is a long-term proposal that we are going to be looking at.
The question that I have asked each of the panels, and I want to ask each of you, I also will ask for audience participation in this. And several of you testified to it this morning. And that is, do you believe that Congress should immediately lift all unilaterally imposed sanctions, as pertains to food and medicine, and I want to clarify, there was some confusion yesterday as to what I mean by that. One of you mentioned Cuba, that is one of the countries in which we have a sanction, in which we deny our farmers the opportunity to sell to them. All of our ''friends'' are selling to them, and we find that, in all other sanctions the United States has now in place, we deny it, others sell to them, and the judgment now is becoming very clear to many, and that is, does this work to our advantage or disadvantage?
So my question to you, should America lift all economic sanctions, unilaterally implied, as pertain to food and medicine? You may answer with a shake of your headif anyone is shaking yes. If you have no, then I will be glad to have you talk about it, and if you have a qualification, I would like for you to mention that.
Page 37 PREV PAGE TOP OF DOC Mr. BUHL. I do not know how I can emphasize strongly enough my support for your statement. I have never understood the logic behind that type of sanction. That has to happen, yes.
Mr. STENHOLM. The rest of you, if you agree, just shake your head and I will have the record showing the heads are shaking.
Mr. Mathiason, if you have got a different opinion, you may speak to it. Yes.
Ms. GREVSON. Congressman, I think it should be looked at case by case. We do have a problem with Iraq. I believe agriculture should be free to trade in the world, but I do not know all the policies in international trading. I think it should be looked at case by case, I think.
Mr. MATHIASON. I guess I would tend to agree because you bring up Cuba. We do not need one more teaspoon of sugar in this country. If we ship them a boatload of soybeans and get back a boatload of sugar, it is going to be tough on our sugar market.
Ms. PHILIPPI. I believe we really need to considerI agree with Mr. Buhl, I think we need to trade every market that we can. And if the sanctions that are in place now eliminate any one market, we are probably going to eliminate some of our producers and our farmers.
Mr. SCHWEERS. I think that we need to open up all these markets and be available, that we can ship our products wherever possible. Because the sanctions that I can see really have done nothing in some cases to harbor, you know, do anything against these people.
Mr. STENHOLM. I want to post the same question to the audience, because one of the criticisms that we sometimes get with hearings is that the witnesses do not speak for me. So I want to see a show of hands of everyone in the audience that believes that, we, the United States, should lift all unilaterally imposed sanctions immediately.
Page 38 PREV PAGE TOP OF DOC [Show of hands.]
Mr. STENHOLM. Those opposed raise your hands.
[Show of hands.]
Mr. STENHOLM. Looks like about 60 percent for, 40 percent against in the audience, would be my guess.
Then the final question, I hope you can answer this one very quickly. Most of you mentioned this in your testimony, so just a simple yes or no; again if you want a qualification. Do you believe that Congress should vote, during the week of May 22, for permanent normal trade relations with China?
Yes, yes, yes, yes, yes, yes, yes.
The audience, how many disagree with the panel?
How many believe we should not?
[Show of hands.]
Mr. STENHOLM. About 95 percent of the audience agrees with the panel.
For your information, all previous hearings, the witnesses, about 95 percent of the witnesses say we should lift all economic sanctions immediately on all countries. There are some qualifications, as we heard today, and the audience has been running about 90 percent.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Barrett.
Mr. BARRETT. Thank you, Mr. Chairman. I appreciate the testimony of the witnesses. I think it was very, very good.
I guess thinking back a few weeks ago to a hearing that my subcommittee had in Minnesota, along with Mr. Minge and Mr. Gutknecht discussing some conservation issues, and again as they apply to the present Freedom to Farm. Mr. Edinger, I guess you touched on this in your testimony, would you support the administration's proposal to extend the current limit on CRP? We talked about CRP, we talked about wetlands, we talked about the CRET program, or could that money be spent in other areas? Would you talk to me a little about that?
Page 39 PREV PAGE TOP OF DOC Mr. EDINGER. No, the CRP program has been an excellent program. As I touched on, there are a few problems with it in my local area that can be tweaked on and improved upon, but yes, the CRP has been a boon to a lot of people, especially farmers that possibly want to take an early out on farming, put the land in CRP and do that. So I would encourage it, yes.
Mr. BARRETT. You would support the wetlands program, the CRET program and so forth?
Mr. EDINGER. Whenever we can get both the farmers and all the rest of the groups, hunter groups, environmental groups working together, it is usually a win-win situation.
Mr. BARRETT. Thank you. Any other comments on that issue from any of you?
Mr. BARRETT. OK. Ms. Philippi, I was interested in your testimony. In fact, you talked about increasing specialty markets, I believe you were talking about, the pork business being so competitive and the larger producers giving the smaller producers a very difficult time. In your testimony, you talked about future farm policy and agriculture appropriations should be considered to assist those producers willing to assume the risk of marketing their own production. Could you talk a little about that? Are you talking about perhaps a private market, a co-op or what?
Ms. PHILIPPI. Right now there are several closed cooperative ideas being put together in Nebraska. If we can market our product further down the food chain, we have the opportunity to share a lot larger percentage of the dollars received for the product. We are not putting these things together to think that we can be in competition with large packers. That is not the idea. The idea is, we want to share the profit. And that is how they are being put together. But it does take a lot of start-up capital to do such. We have just held some producer meetings in the State for one of those cooperatives, and after 3 nights of talking to producers, we have commitments already of around 80,000 head, and that is not near 100 percent of their production. It is only part of it. But we believe there is a future for Nebraska with that type of marketing system.
Page 40 PREV PAGE TOP OF DOC Mr. BARRETT. A competitive tool that you do not have right now, obviously. Is capital the biggest problem?
Ms. PHILIPPI. Capital is a huge problem. One thing that we did see, when we started losing equity, producers cannot get the money they need now to stay in business. When we look at the opportunities of being involved with the cooperatives, it takes capital to start those things up. And if you do not have equity, you do not have access to capital. And that is one of the big challenges we have out there, is why we are hoping we could address that problem through this committee.
Mr. BARRETT. This would be an assist to you as look at permanent normal trade relations as well, with China?
Ms. PHILIPPI. Yes.
Mr. BARRETT. In terms of capital, I am thinking out loud here, if such an organization were put together, perhaps there might be some help through the market access program, as we know it today. Have you investigated that?
Ms. PHILIPPI. We have looked into several different ideas, and we do know that if we get to a certain point, there are some grants and some funds available. We have used a grant for a feasibility study. But what we are looking at is, if producers can make contributions of capital, some of their own, we see other organizations that are willing to come in and offer parity and co-funding for that. And the producers want to take the risk on this. They do not really want to put this in anyone else's hands.
Mr. BARRETT. Thank you, very much. Mr. Buhl.
Mr. BUHL. I would like to make an additional comment on what you were asking. It seems that there has been a real disconnect between the consumer and the producer of food in this country. And one of the really positive aspects of what you are talking about is to put that link back together. Capital is one thing, technical help in organizing these, I think, is another thing that could be brought to bear by the Government. This is a good place to put Government dollars because what it does is it gets producers involved in really fixing their own economic situation and bettering themselves. So I think it is a good direction to go.
Page 41 PREV PAGE TOP OF DOC Mr. BARRETT. Thank you. Any other comment?
Mr. BARRETT. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Minge.
Mr. MINGE. I would like to thank the panelists for their testimony. It certainly is helpful to us to hear from you and I would like to assure the folks in the audience that the comments that you submit and may be submitted by others who are not in the panel are also carefully reviewed by us.
There are a couple of things that have not come up in the comments that I would like to ask about. And the first is the question of payment limitations. There have been severe criticisms of the farm programs, including the current farm program, because payment limitations have, in many respects, been gutted. And we see significant portion of the benefits going to a few farmers and very large farm operations. How many of you on the panel feel that we should establish payment limitations to try to emphasize that the benefits of the program should be focused on moderate-sized farming operations? Just like Mr. Stenholm asked, I would like to ask for simply a show of hands and if anyone would like to make a comment beyond just a yes or no answer, to feel free to make that type of comment. If I could have a show of hands, how many of you feel there ought to be payment limitations in farm programs?
[Show of hands.]
Mr. MINGE. OK.
How many feel that there should not be payment limitations in farm programs?
[Show of hands.]
Mr. MINGE. OK.
So we have one person favoring them and four not. I would like ask in the audience, how many of you feel that we ought to have payment limitations in farm programs?
Page 42 PREV PAGE TOP OF DOC [Show of hands.]
Mr. MINGE. How many of you feel we should not?
[Show of hands.]
Mr. MINGE. I would say it is about 95 favoring them and 5 percent opposing any limitations.
Ms. GREVSON. I would like to make a comment. How can we do this without having discrimination? That would be the only question I would have before I can yes or not, because the United States does not discriminate against anybody. And that is the only question I have about the payment limitation.
Mr. MINGE. OK. Yes, sir?
Mr. SCHWEERS. My question is, you talk about the moderate size farms. Where do you place a moderate-size farm?
Mr. MINGE. Other comments?
Mr. MINGE. So it is a definitional problem in part for you, as opposed to just whether payment limitations are good or bad, how do you set those payment limitations? OK. Thank you.
Another point I would like to make is that we have had some comments about the FAIR Act, and I believe from the conversations I have had with farmers throughout this part of the country, the flexibility features of the FAIR Act are appreciated, were welcome and are supported. But the safety net and the dollar or the budget investment in the FAIR Act has been much more controversial.
An extension leader in southern Minnesota conducted a survey of farmers and came up with the results that over 90 percent of the farmers felt that the FAIR Act, aside from flexibility, ought to be dismantled and we ought to start over again. And fewer than 10 percent were supportive of the FAIR Act, in terms of any safety net concept or its use of the budget authority for agriculture.
Page 43 PREV PAGE TOP OF DOC How many of you feel that the FAIR Act ought to be rewritten or we ought to start over again with aspects of it other than the flexibility aspects of the legislation?
And if we could just have a show of hands? And if any of you would like to make comments as you did before, I would certainly welcome that. How many feel we ought to start over again in writing the farm bill as opposed to trying to build on the FAIR Act of 1996?
[Show of hands.]
Mr. MINGE. How many feel we ought to leave the legislation currently as a foundation for the Federal farm program?
[Show of hands.]
Mr. MINGE. Let me just ask the audience at large, how many feel that we should use it as a fundamental basis for farm policy in the years to come?
[Show of hands.]
Mr. MINGE. How many feel we ought to start over and rewrite the farm legislation?
[Show of hands.]
Mr. MINGE. OK. It looks like if it is not evenly split in the audience at large, it is slightly more in favor of the current legislation. And on the panel it was a slightly different mix. Yes?
I see that the red light is on and so I want to observe this. And if you please keep any comments you have to very quick and succinct comments. Don?
Mr. BUHL. Congressman, one point, I think the pieces are flexibility, support and access to markets. Of those three, the access to markets probably is the thing that is most lacking from the shift we have had in agricultural policy. We were a supply control policy and now we are trying to be a marketing policy. And that leg is not there. That has to come. Otherwise, I think what we have got we can build on. I want to emphasize that. But we have to have that access to markets and we have to have Congress's support of our agriculture in access to markets. Thank you.
Page 44 PREV PAGE TOP OF DOC Mr. MINGE. Yes.
Ms. GREVSON. My comment at this time would be, farmers are quoted saying that we want Government off our back all the time. So for example, I am in FSA committee in my county, and in my county, before 1995 farm bill, we had 635 farms participating in the Government program. In the year 2000, we have 1,386 farms, and that is an increase of 31 percent. So that has no reflection about how we are being quoted in the country. And the budgets for the farm bill previous to the Freedom to Farm, it was a lot smaller than it is today, farmers were making a living, we had higher prices, we were living well, we were not asking for more hand-outs. We have higher loan rates and we have the 3-year reserve that we can put our corn in the farm and keep it there. Those buildings are empty. We still have them.
And I think, if it worked then, why can we not look back and learn from history. I think we can learn a little bit. That is what my point is, I would like to have the farm bill changed because it is not working the way it is. And we hear all the time we are going to have more AMTA disaster and more disaster and that is costing a lot of money to all of us taxpayers. So if we look back to some of the control we had before, that we already know it worked for 50-some years. I think we can learn something from that. And this is what I come from in that comment, Congressman.
Mr. MINGE. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you. I thank the panel for their testimony. Mr. Geis, appreciate your comments about graze-out and the LDP payment. As you know, your Congressman, Mr. Lucas, has been an advocate of that and we will help in any way we can. We wish the administration would take care of it.
Mr. GEIS. Yes.
Mr. MORAN. But in that absence, we will work on legislation.
Page 45 PREV PAGE TOP OF DOC Disaster relief, many farmers have told me at home in Kansas, as well as the hearings that I have attended, about the significant impact that disaster assistance has had in keeping them in business for another year. I assume that would be true of the farmers on the Northern Plains. I am interested in knowing about the delivery system, and if you have any suggestions about how better the assistance could be delivered. If we ultimately pass a disaster relief package this year, do you want to do something different than what we have done in the past 2 years in increasing the AMTA payment? And I guess I would also ask the soybean producers how they are faring in getting their disaster assistance delivered to them. And I do not know about sugar beets. We used to grow sugar beets in Kansas, and process sugar. That is no longer the case. That part of our agriculture sector is gone, and I do not know about the delivery of disaster assistance to sugar beet growers. Anybody want to tell me how we ought to deliver disaster assistance, if we are successful in being able to do that this year again?
Mr. EDINGER. In regard to the oilseed payment, the first check went out, but I have not received the second check yet. And I believe it is pending, but we do not know where it is going to end up at.
I guess my only comment about that is, if we could get a little better handle on when we sign up what is going to be there so we can go into the bank and say, OK, I know this is going to be coming into my cash flow, and you can punch in your cash flows, it is a little bit nebulous right now. If we can avoid that, I do now know how you would do it with the way it is set up, but if we can tweak that a little bit so we know where we are at.
Mr. MORAN. Any other comments? Mr. Schweers?
Mr. SCHWEERS. I guess as for working with the AMTA payment doubling, that is a good way, a faster way to work through the FSA offices and get it out to the producer. The oilseed payments in my area, we must be looking at 3 weeks yet before we see anything yet. They just keep pushing it off.
Page 46 PREV PAGE TOP OF DOC Mr. MORAN. So the value of the timeliness of the payment by doubling the AMTA payment, because it is known and the process is there, is worth proceeding in that direction?
Mr. SCHWEERS. Right.
Mr. MORAN. Those benefits are well worth it?
Mr. SCHWEERS. Right, yes, I agree.
Mr. MORAN. Any other comments?
Mr. GEIS. One other item also. A year ago you had a livestock assistance program and it ended up, they just kept extending the deadline, extending the sign-up, extending the sign-up to where we did not know when it was coming, we could not count on anything. One suggestion is, when you make a sign-up, you know, deadline, make it stick so we know when it is going to come. Because that one was supposed to be targeted, I think, for seven States, and it ended up, I think, almost every State in the Union qualified for it, and it ended up it did not help very much.
Mr. MORAN. Just to change topics, at least slightly, we often hear, in response to comments about the current farm bill, about we like its flexibility. The most common criticism is we need a safety net or a better safety net. And could you each, or anyone who is interested in telling me, tell me what that safety net is? I hear constantly from farmers, we generally like the flexibility that the farm bill provides, but we need a better safety net. Please define what you mean, in a few words, as what a better safety net would be, how do we create that safety net? Yes, ma'am?
Ms. GREVSON. Congressman, thank you for the opportunity. In my operation, safety net is to have a cost of production. Cost of production in my farm is $2.40 for corn, $5.40 for soybeans. If I look at the prices yesterday, at my local elevator, the corn was $2.12 and $5.15 for the beans. That is not a safety net for my operation. And this is what I think we all mean about safety net.
Page 47 PREV PAGE TOP OF DOC And that would come as maybe a loan rate higher so we can go do the bank and do a cash flow. I do the cash flow at home with my husband, and I have a hard time coming with numbers. I cannot come out with numbers. This year we decided to go organic. So we are going to go in the 3-year time to go organic because we cannot make a living otherwise and we are losing our equity every single year. And this is when I said we are hurting.
Mr. MORAN. Thank you. My time has expired. This is a topic I want to explore with some of the other panels about how do you deliver this, what you call the cost of production, how should it be delivered to our farmers.
Mr. Chairman, thank you for my time.
The CHAIRMAN. Thank you. Mr. Pomeroy.
Mr. POMEROY. Thank you, Mr. Chairman. I will follow up directly on this safety net feature, and I thank the panel for their thoughtful insights on their perspectives of this issue.
Let us, in the nature of questions for the panel, show-of-hand type of response, get a show relative to the feeling of the panel relative to counter-cyclical price protection, as something that might be defined as a component of what we need in a farm program. Not the ad hoc disaster response, but written right into the farm program. How many of you feel we should have that counter-cyclical price protection in the farm program?
[Show of hands.]
Mr. POMEROY. Five of 7. Then I will ask the audience, how many think we should have a counter-cyclical price protection as part of the farm program?
[Show of hands.]
Mr. POMEROY. How many oppose that idea?
[Show of hands.]
Mr. POMEROY. We have got some not voting. Now what do I do?
Page 48 PREV PAGE TOP OF DOC Of those raising their hands, I think we had a 95 for counter-cyclical price protection, five against. Just for the colleagues from out of the area, just some statistics: wheat down about 48 percent market price from when Freedom to Farm was passed. Corn down about 57 percent. And so you see, without some kind of price protection response, the devastating hit that it takes.
So I would hope that counter-cyclical price protectionpreserving planting flexibility but adding counter-cyclical price protection, is something this committee moves forward.
Let us talk about the disaster response, because obviously we are not going to repair the farm bill structurally for the year we are in, we will have to have another disaster program. To show you how critical that has been, in 1997 without a disaster bill, North Dakota net farm income averaged $4,200 per farm. Average. $4,200 per farm. And in 1998 when there was the response of net farm income of $745 million, $144 million was from the market, $600 million was from the disaster response.
So in this environment of awful prices, this disaster support is the only thing keeping us in the game, which means we have got to get it right.
AMTA, it is fast, it is easy, but it is based on production occurring in 1985, which does not have a whole lot to do with the situation in the year 2000. In fact, it is absolutely ludicrous when you think about it. I guess I tipped my hand in terms of where I am coming from on this one. [Laughter.]
Of the panel, do you think this committee ought to look for a more precise way to get relief out or should we stick with double AMTA? Should we look for a new way to get relief out? Hands?
[Show of hands.]
Mr. POMEROY. Double AMTA, hands?
Page 49 PREV PAGE TOP OF DOC [Show of hands.]
Mr. POMEROY. Of those voting, the support is for a double AMTA.
How about the audience? Support for double AMTA? Or the market transition payment, using the same basis that we have used over the last 2 years, taking the market transition payment of the farm bill, doubling it for the purposes of the disaster response. Continuing that approach?
[Show of hands.]
Mr. POMEROY. Should we look for a more precise way to get the disaster relief out? Hands?
[Show of hands.]
Mr. POMEROY. Now in the audience, we have significantly more support for trying to find a more precise way of getting the relief out. Paul?
Mr. MATHIASON. I would just like to make a comment on LDP and marketing loans and so forth, and how they work. And what happens, in those type of programs is that the person that receives the highest bushels per acre, the highest yield per acre, receives the most money. The person that is struggling has not quite touched where Federal crop kicks in, but it has got a low yield, like many people did in our State last year. The person getting 30 bushels an acre gets half the Government support from the LDP or marketing program as the person who gets 60 bushels an acre right across the road.
That is the problem I have with LDPs and higher marketing loans and stuff. The person who really kind of, in a way, needs it the least gets the most support. And that is why I kind of tend to support AMTA.
Mr. POMEROY. Just in closing, Mr. Chairman, is a study that shows that the largest 8 percent of the farms got 44 percent of the payments under AMTA, I think also shows some troubles with that kind of approach.
Page 50 PREV PAGE TOP OF DOC I thank the panel for their insights. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Thune.
Mr. THUNE. Thank you, Mr. Chairman.
Mr. Chairman, I would just again say thank you. I think this committee under your leadership and the leadership of Mr. Stenholm has responded to the crisis in agriculture, at least every year that I have been in the Congress. For 3 years now, we have done a disaster relief package. We are in the process, as you mentioned earlier, of finalizing reforms to the Crop Insurance Program, which is very important as a risk management tool. We passed mandatory price reporting legislation. There are a number of things that we have done. And yet the bottom line is, we still have low prices.
My concern here is this is a rural economy issue, this is a rural economy consideration, because every main street in this State feeds directly off of the agriculture economy. And we need a more permanent solution.
All these producers are asking for is a decent price. They work hard every day trying to make ends meet. I think that solutions like value-added are critical in our response, which is why I have introduced legislation toward that end. But we have got to figure out a way to get better prices at the marketplace.
Now what I would like to do is just ask the panel, if I might, there have been a lot of topics discussed by all the panelists here. We have covered trade, we have covered value-added, we have covered safety net issues, counter-cyclical payments, marketing loan, crop insurance, risk management. Taking away the issue of how we provide financial support, whether it is through AMTA or whatever, if you are looking at what can we do to improve prices in the farm economy, one single thing in the immediate future, the immediate outlook of all the things that have been discussed here today, I would just be interested in getting your response as to what you think that might be. I mean, the things I have mentioned, for example.
Page 51 PREV PAGE TOP OF DOC Mr. BUHL. I think the normal trade relations and eliminating sanctions probably will have the greatest long-term effect of anything. I view other things as bandaids. We can raise more in this country than we can eat. We have to find a way to sell it.
Ms. GREVSON. Congressman, also, the United States has plenty of money, and we know how much money that we have to spend. If we can count ourselves, I find it quite interesting, why do we not maybe use more bio-diesel? Why do we not use more ethanol? Why do we not use more domestic uses? Exports are wonderful, but then we have, in Asia, where the markets crashed and we got holding the bag. We have to also develop our domestic market, and I think I would encourage you to maybe look those avenues.
Mr. THUNE. Chet?
Mr. EDINGER. Over half the wheat we produced and shipped overseasPNTR and trade.
Mr. THUNE. OK. Mr. Geis? One thing that you can name.
Mr. GEIS. I guess one thing that has not been touched on is, I do not know what world Mr. Greenspan is living in, but it sure is not the farm world. I think every time he even talks about raising interest rate, my bank starts printing up those statements saying that they are going to raise my interest rates. That is a big thing for farming, it is capital-intensive, we have got to borrow the money. And every time he thinks the economy is heating up, our interest rates go up. And things are not good in farm country, and I wish somebody would tell Mr. Greenspan that.
Mr. THUNE. Mr. Mathiason, do you want to comment?
Mr. MATHIASON. I have no comment.
Mr. THUNE. OK.
Mr. SCHWEERS. I believe trade is very important, but I also believe, from a corn grower's standpoint, if we replace MTBE with ethanol, I read some figures that that would create a market for 1.3 billion bushels of corn. There is our surplus right there. We would have higher corn prices, the LDPs are gone, we would not hear any of that anymore. That would solve the problem right there. We would be using it.
Page 52 PREV PAGE TOP OF DOC Mr. THUNE. OK.
Ms. PHILIPPI. The one thing I truly believe is we have to return to a competitive market system. It needs to be put back in the hands of the producers of grain and the livestock. If it is in corporate hands, who dominates that market, who sets that price? The people that have low inputs. So if we can get things adjusted around to put it back in our producers' hands, I think we can guarantee ourselves some prices.
Mr. THUNE. I would just add, in what Mr. Schweers said, in agreement, that one of the bright spots in this whole agriculture economy has been ethanol. And I think we have enormous upside potential there, if things start breaking right.
I want to develop your point, Ms. Philippi, a little bit more later on. I see my time has expired. In the interest of giving the other members an opportunity to ask questions, I will wait on that point. But I want to visit a little bit more about concentration later on.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Boswell.
Mr. BOSWELL. Thank you, Mr. Chairman. Some of you might wonder what we feel about PNTR, and I will just tell you right now, I am very supportive of it and I have been from the get-go.
As I cross my district, I leave my farm and go back and forth across Iowa to, I nearly go from river to river, Mississippi to Missouri, just a short 25 milesshort of going all the wayone county, I hear from producers over and over different from what I hear from my farm organizations, and I am tied to several of my farm organizations, of course I am.
From the panel, do you think we ought to have an increase in two things, loan rate and farmer-owned reserve? The first question, do you think we ought to increase the loan rate? Anybody? I just want you to shake your heads, I want to cut my time down.
Page 53 PREV PAGE TOP OF DOC Mr. SCHWEERS. Yes. I believe that increasing loan rate, but I think we should tie it together with some voluntary acreage reduction to reduce some of the surplus, and then we can bring that acres back when the prices are higher, and farm for the market.
Ms. GREVSON. I agree with that.
Mr. BOSWELL. How about the farmer-owned reserve?
Mr. SCHWEERS. Yes.
Mr. EDINGER. Yes.
Ms. GREVSON. Yes.
Mr. BOSWELL. OK. And audience, how many think we ought to increase the loan rate?
[Show of hands.]
Mr. BOSWELL. How many think we should not?
[Show of hands.]
Mr. BOSWELL. How many think we should increase the farmer-owned reserve?
[Show of hands.]
Mr. BOSWELL. How many say no?
That is about what I am hearing when I go across my district, so I just wanted to check in if I am hearing over in Iowa what I would be hearing if I was here. Something for us to think about, Mr. Chairman.
Back to you, sir.
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. Mr. Chairman, I have no questions, thank you.
The CHAIRMAN. Mr. Riley.
Page 54 PREV PAGE TOP OF DOC Mr. RILEY. Thank you, Mr. Chairman. And I will try to keep it brief.
One of the things I would like to ask the panel, we keep talking about our inability to be competitive today, even though we can produce food and fiber probably as cheaply as most people in the country. But I think we have to start looking at our farm sector in a total different light than we have before. There are so many things we can do outside of the Agriculture Committee that I think would be absolutely instrumental in allowing you to be competitive.
When I first got into this agricultural business 35 years ago, there were so many different advantages agriculture had that we do not have anymore. If you had today investment tax credit, if you had accelerated depreciation, if you had an elimination of the estate tax, how much would that affect each one of your farms?
Mr. EDINGER. Tremendously.
Mr. RILEY. We have heard testimony from panelist after panelist that say, we are spending $50,000, $70,000 a year just on insurance because of estate taxes. I think we have to start looking at this in a new light, where we broaden our horizons, where we say that, not only through loan payments, but something as simple as setting up a farmer's individual retirement account. All of us understand that agriculture is cyclical, but on your good years, if you could take 25 percent and set it aside to be used for when times are down, how much impact would that have on each one of your farms?
Ms. GREVSON. I would not know how to answer that. We have not made enough money in the last 4 years to even think about that. [Laughter and applause.]
Mr. RILEY. And that is the basis of my point. [Laughter.]
Ms. GREVSON. I think it would be great, Congressman, if we could have enough money to put aside 25 percent, I think it would be very nice.
Page 55 PREV PAGE TOP OF DOC Mr. RILEY. Well, the one thing that I am convinced of, this country is not going to be able to continue to have $10, $12, $15 billion payments every year. If you take that and spread it out, I had much rather just tell you up front you are going to have this than have to file for the disaster payment. But I do not think that there is a sentiment in Congress that we are going to continue this indefinitely, so we have to come up with something a little more innovative than what we have in the past. Whether it is through a restructuring of our Tax Code, whether it is through incentives that allow you to go out and be more productive with foreign countries that do subsidize their products. I think we are going to have to stop thinking about our farm economy the way we have in the last 4 or 5 years, because I do not think it is good for you, I do not see how you could possibly plan for the next 5 to 10 years based on the farm program we have today.
So as we listen to the other panels, I hope some of you will talk about some of your other structural problemsenvironmental regulations, tax cost, insurance costthat I think that we as a Congress need to broaden our perspective when we start thinking, maybe start thinking outside of the box for a change, and deal with all of your problems, not just your production problems or just your production costs.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Chairman.
Now Mr. Schweers, I believe you are the only one that mentioned market consolidation and the concerns you have with market consolidation. And we have held several hearings in Congress where people come and testify and tell us that there is not a problem there, that they have followed the law and there is still effective competition out there. Could you talk about that a little bit, and your perspective on market consolidation and what is going on there?
Page 56 PREV PAGE TOP OF DOC Mr. SCHWEERS. Well, from my neighbors in the cattle feeding industry, when you can only get one or two buyers to come around during the week, you have got a problem. You only have so many people bidding on your product. So I mean, when they consolidate together, we need more people out there to be working, to be buying.
Mr. SIMPSON. Is it your opinion that we need to review that anti-trust laws and how they are impacting the agricultural industry?
Mr. SCHWEERS. I believe that they should be enforced and fully looked at, at all these mergers. Because consolidation hurts the agriculture industry.
Mr. SIMPSON. Anyone else?
Mr. BUHL. I also made those comments in my testimony, they are in writing. Pork America is one example of something that can bring more of those types of competition into our market. Very, very definitely that is something that needs to be looked at. We in the pork industry have a similar problem, it is not quite as grave yet, but we certainly see it moving in that direction. So please, take a look at that.
Mr. SIMPSON. One other thing that was brought up yesterday in the testimony, someone said they had read a book and the comment was made in the book that prices are global but costs are local. Are we imposing undue costs on the agriculture industry and the producers through our environmental regulations and Clean Water Act, Clean Air Act and on and on and on and other things? Give me your impression of that, anyone?
Ms. GREVSON. Congressman, I think maybe there is some truth to that, but when you look at the overall picture, we have to take care of the environment. This is what we are going to give to our children. So I think it is important that we do take care of it, but we have to keep the producers in mind when we are doing that, because we are the biggest environmentalists you are ever going to meet.
Mr. SCHWEERS. I believe that the regulatory issues should be dealt with on a state-by-state manner, rather than coming down from Washington, because every case is different and our sector is different than, say, what they have in North Carolina. And that affects our producers.
Page 57 PREV PAGE TOP OF DOC Mr. SIMPSON. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Ose.
Mr. OSE. I do not have anything.
The CHAIRMAN. Mr. Latham.
Mr. LATHAM. Thank you, Mr. Chairman.
I really appreciate this panel, and I think it, by the questions asked to the panel and to the audience, I think it shows how difficult finding consensus is.
I will just make a statement. In your testimony you said that we are $1.3 million short as far as enacting mandatory price reporting, and this is something that I take personally, because No. 1, I was the one that got it in the appropriation bill last year with the great assistance of the committee, or they were the ones that made it possible. But also the fact that we fully funded, as an appropriator, I will tell you we fully funded the administration's request. And apparently they misinterpreted the law and now are saying that there is somewhat of a shortage. But Congress, I will tell you fully, appropriated every dollar that was requested. And I would hope, out of the $70-some billion budget at USDA, they could find $1.3 million to make sure that it is enacted as intended. That is somewhat disingenuous, I think, by the department, to say that they have had some kind of a hang-up here, because we did fully fund the request.
One question and it goes to the consolidation issue, the fact of the matter is, everybody here today, every Member of Congress that is here is a friend of agriculture. And we are not the problem, as far as looking at the consolidation issue. The problem we have is convincing our good friends, colleagues that represent Manhattan, Los Angeles, downtown Chicago that there is a problem in farm country. And the fact of the matter is, they think food comes off the grocery shelf. They do not have any idea that there are actually farmers out here who are working and making a living and trying to survive. Being a farmer myself, you becomes very sensitive to that.
Page 58 PREV PAGE TOP OF DOC And I would ask each of you to just, if you can briefly, give an answer to the question that I have asked at several other hearings, is, what difference does it make to someone who lives in Manhattan, New York City, whether the food that they buy at the grocery store comes from a family farm or from a corporation? What difference does it make? They believe that it is top quality, they cannot tell the difference. What difference does it make to them? Help us make the argument when we go back to Washington this afternoon.
Mr. BUHL. First of all, I did not mean to be critical of the committee on the $1.3 million. It was just a matter of, we vitally want to get that implemented. And whatever stands in the way, we want to take care of it.
As far as connecting to the consumer in Manhattan, hopefully they will realize the benefits of a diverse, very efficient family agriculture. If the food is always there and it is always good quality, I can understand that position. But whatever we can do as producers to communicate that to them and the rest of the Members of Congress, we are eager to do.
Mr. EDINGER. Growing up, I happened to spend every winter in Los Angeles in east LA area, so I know a little bit about the metropolitan lifestyle.
Mr. LATHAM. And you survived?
Mr. EDINGER. Yes, that is correct.
Basically, if we can tell them our story, if we put a face and a name with it, the food dollar is so cheap right now, they will not mind buying from the farmer-producer, if they know who we are and could put a face and name with it. We are not telling our story good enough. If we can get our closed co-ops going, get value-added products out there, get our farm label on there with our Jimmy Dean Sausage, so to say, comes from a natural farmer in Iowa, that has a great impact.
Mr. GEIS. I think the biggest difference would be for a consumer, if you want to go into the grocery store and buy a loaf of bread for 75 cents or a dollar, or do you want to go in and buy a loaf of bread for 5 bucks, if the corporation controls it? Congressman Riley, I respect your opinion, I guess I agree to differ about why should we be ashamed that we are getting $10 or $11 billion when we have a how many trillion dollar budget? I cannot keep track of it anymore. When us people in this room provide the safest, cheapest, most abundant food supply in the world and we have never gone hungry in our whole lives. And I am tired of being ashamed of that, and I am tired of people saying we are getting handouts when we provide something that everybody does, every day of their life, which is eat. [Applause.]
Page 59 PREV PAGE TOP OF DOC Mr. MATHIASON. Perhaps one argument we could make is, are the cities large enough now? Do you need any more people? Do you want to empty out the countryside and have us come to town and take your jobs? [Laughter.]
Mr. LATHAM. The question is what difference does it make to them? It does not, as far as they are concerned, it does not, as long as they have cheap food at this counter, they do not care.
Mr. MATHIASON. Well, my point is there are thousands and thousands of jobs created by small agriculture, small family farms. That is the difference it makes to them, because if it is produced by larger and larger farms who need less and less people, we will move to town, and then you have got problems of needing bigger schools, whatever else, those problems would involve.
Ms. GREVSON. My point of view, Congressman, comes from a little different than most of them. I am from a foreign country, I am from Santiago, Chile. It is a large city. I come from a people that wanted to have nice, clean food. So I am from the other side, I have been here 32 years on the farm. My daughter lives in Chicago, I have friends in Manhattan, and those people, they would like to be eating clean, healthy food, they would like to help the producers. We have a public relations nightmare.
And sometimes I look around and I see, we probably are our own enemies. I think the people in the city would be very willing to support us if we tell them the story, because there is money for Greenpeace, there is money for other things, there will be money for that. For example, the organic industry is growing 35 percent a year, the largest growth in agriculture. And the people that are buying are people my age, baby boomers, they have money, they want good, healthyand they trust us. And actually, if you put a farmer in the picture on a milk carton, oh, this is great.
So actually, we have a public relations nightmare, we have to work on that. And the people would be willing to pay for what it takes.
Page 60 PREV PAGE TOP OF DOC Ms. PHILIPPI. In Nebraska, we conducted a focus group on the recognition of Nebraska-raised pork, and how the public accepted or demanded. We found out two things. They definitely want the product to come from a family farm or a farm in Nebraska. It is well recognized. The problem was, they did not know if they were willing to pay more for it.
But the idea for us is, let us produce the product, and let us compete with that product. And I think that focus group really indicates there is a lot of education going on with the consumers nowadays, where their product comes from.
Mr. SCHWEERS. I believe our story continually needs to be told about people working the land, and like they said earlier, placing a face out there, and that it is an individual, not a corporation, producing food, or where it starts from.
Mr. LATHAM. Thank you.
Ms. GREVSON. Congressman, may I ask something?
Mr. LATHAM. One thing, I do not believe you are a baby boomer. You have got to be generation X, right?
Ms. GREVSON. You are very kind, Mr. Iowa.
I lost the line of thought now that I was going to say.
What I wanted to tell you, Congressman, is we always emphasize how much the farm program costs, how much it costing the taxpayers. Why do we not tell the people that this is the cheapest food in the world we have here? We spend 11 cents of each dollar that we earn on food. Why do we not tell that story? I come from a country that, when I left, we were spending 45 percent of my income on food, and so let us tell that story instead of how much money we spending on taxpayers. That would be kind of a turning the tide around.
Mr. LATHAM. I do not think it is even 11 percent anymore, it is probably closer to 8 percent.
Thank you, Mr. Chairman.
Page 61 PREV PAGE TOP OF DOC Mr. BARRETT [presiding]. Thank you. I want to thank the panel for their excellent testimony.
Ms. GREVSON. I appreciate very much the opportunity.
Mr. BARRETT. And I would invite panel No. 2 to join us. Thanks for your testimony, thanks for your forthright answers to the questions.
Mr. BARRETT. We have with us Mr. Craig Blindert, cattle, corn and soybean producer from Salem, SD; John Dittrich, a corn and soybean producer from Tilden, NE; Allan Skogen, wheat, barley and soybeans, Valley City, ND; Mrs. Marcy Svenningsen from Valley City, ND, beef cattle and soybeans; Gerald Tumbleson, corn and pork producer from Sherburn, MN; Scott VanderWal, corn and soybean, Volga, SD; and Mr. Robert Wietharn from Clay Center, KS, corn, wheat and soybeans.
Ladies and gentlemen, you may proceed. Mr. Blindert, we will begin with you. Please proceed.
STATEMENT OF CRAIG BLINDERT, CATTLE, CORN AND SOYBEAN PRODUCER, SALEM, SD
Mr. BLINDERT. I am Craig Blindert, I live in Salem, South Dakota, I am an active grain and livestock producer and a third-generation farmer with investment and participation in four value-added ventures. I would like to thank the members of this committee for the opportunity to outline a proposal sometimes called flexible fallow to enhance the farm policy of this country.
The House Agriculture Committee has asked that we bring specific and detailed proposals in our effort to amend current agricultural policy. I have attempted to do just that. Within the past 2 years, Phil Cyre and I have worked to refine a proposed amendment to the current farm bill. We have worked under some specific criteria.
Page 62 PREV PAGE TOP OF DOC 1. It must be a diversified farm policy, not one-size-fits-all. Flexible fallow has 31 producer choices as proposed, including full production.
2. It must be more market-oriented than today's farm policy. Flexible fallow lets producers plant for the true domestic and international market that is available.
3. It must meet WTO guidelines. Any Government payments under flexible fallow will conform to the trade agreements that we have made.
4. The basic loan rate should be adjustable. It should be possible to adjust the basic loan rates for flexible fallow if input expenses go up or down, similar to the way in which the interest rate is adjusted in monetary policy.
5. It must be a balanced approach. Flexible fallow is an option that will cause all aspects of the commodity markets, producers, input suppliers, lenders, commodity buyers, processors and agribusiness to assess their roles in encouraging or discouraging production of commodities. Flexible fallow is only marginally about set-asides. It is almost entirely about the ability of the producers to recognize and respond to the market signals of those who supply inputs or buy production from them.
6. It must not be a mandatory set-aside. We know that farmers do not favor mandatory set-asides as a feature of farm policy.
Some farm organizations state that they do not favor mandatory set-asides. Flexible fallow is not a mandatory set-aside program. The proposal was not a paid land-diversion program. The proposed amendment is to provide a tool within sound national agricultural policy to provide producers a voluntary option to alter production and meet demand.
The strengths of this proposal would take a great deal of time to list, but some of the obvious strengths include:
1. The proposal will function in a market-oriented manner.
2. It would be most appealing in the so-called swing areas, which are assumed to shift land use patterns when prices for crops are low and allow those areas to return to production when market prices recover.
Page 63 PREV PAGE TOP OF DOC 3. The proposal would self-correct when prices rise.
4. A modest amount of administrative involvement.
5. Provide more flexibility for producers to make cropping decisions based on individual entity situations for economic reasons.
6. Cost is modest to taxpayers and consumers.
7. Modern yield data is used in decisions.
8. ACE acres are not used as a feature of commodity eligibility.
9. Enhanced conservation potential for marginal and fragile lands.
10. Targeted disaster assistance to producers who actually suffer reduced yields during low price situations.
11. Provide potential to improve crop insurance actuaries by removing higher-risk land from production in times of low prices.
The critics of our proposal are sometimes guilty of prejudging the idea before fully studying it. Some may say that this is not a new idea, but it really is. This is a well-documented and detailed proposal. We have taken great steps to have it analyzed and to seek input and support from producers across the country. We have sought out the input and support of individuals and organizations representing producer, conservation, environmental and wildlife interests.
Some may say that our Nation cannot use tools of inventory management in response to weak prices forecast for our production. Some fear that other nations will expand if we reduce our production, even temporarily. I say to you that, when a voluntary, temporary adjustment mechanism is available for producers, there is no proof or data to back up those fears.
Study the history of our export markets and you may agree with me when I say that the expansion of foreign production is not relative to temporary reductions in production from the United States. The greater fear should be our uncertainty as to the willingness of the taxpayer to continue to directly provide payments to producers. We must have the ability to generate response to the marketplace without letting our competitors know in advance how much we will adjust production.
Page 64 PREV PAGE TOP OF DOC Our intent is to bring our proposal to the attention of this committee. We have provided copies of the study done by FAPRI last August. We have also provided the committee with copies of our PowerPoint presentation. I would like to ask that the committee give us an opportunity to come to Washington where we will work to explain the details of this proposal to your staffs, and then work with members of the committee to fully understand the potential of this proposal to help producers, consumers and the taxpayers.
This proposed amendment to the FAIR Act has received the support of a lot of producers from many States. Recently, our very own Senator Tim Johnson of South Dakota, has agreed to draft and introduce legislation in the United States Senate that will, when enacted, provide producers with a voluntary program designed to help us respond to market signals. This legislation is badly needed, and we hope it will be passed and enacted in time for the planning and planting of the 2001 crop.
I welcome your questions. The proposal is very detailed and I hope the members of the committee will agree that it deserves more time for consideration than this forum will allow.
Thank you again for allowing me the honor to appear before this committee.
[Due to its extensive length, the testimony of Mr. Blindert is on file with the committee.]
Mr. BARRETT. Thank you, sir. Mr. Dittrich.
STATEMENT OF JOHN DITTRICH, CORN AND SOYBEAN PRODUCER, TILDEN, NE
Mr. DITTRICH. If I may, I had a card here.
Can that be seen by everybody on the committee?
Mr. BARRETT. Proceed.
Page 65 PREV PAGE TOP OF DOC Mr. DITTRICH. I wish the audience could see it, too, because I think they would find it interesting.
Good morning members of the House Committee on Agriculture, my name is John Dittrich and I am a corn and soybean farmer from northeast Nebraska. I am also policy analyst for the American Corn Growers Association.
I would like to thank Chairman Combest and the committee for holding these field hearings.
Today I would like to present the committee a comprehensive concept farm bill proposal adopted by the ACGA at our national convention in February. The Family Farm Agriculture Recovery and Maintenance Act was written by me in our farm office based on our farm policy. It is a true, grassroots, farmer-written, farm bill proposal, first discussed and passed at a Madison County Farmers Union meeting in Nebraska.
The core concepts of this proposal have also been passed unanimously at the 2000 national conventions of the National Farmers Union, the National Association of Farmer Elected committees and the National Family Farm Coalition. This proposal is now the basis for a developing Family Farm Act that will be drafted as a legislative bill in the U.S. Senate.
Our proposal is rapidly becoming more comprehensive and gaining more support. It is designed to be a positive long-term solution to the problems faced by family farm agriculture today. Much thought and extensive research has gone into the formation of the Family Farm Act proposal. This proposal developed after I compiled a table a last August and September entitled, Key Indicators of the Farm Sector, a 25-year history with inflation adjustments. I would also like to present this table to the committee today as background and justification for our bill, and that chart is here to my right.
This table has received much attention around the country since first release last September. The table covers 12 primary statistics for corn, wheat, soybeans, cotton and rice over a period of 25 years. It uses inflation adjustments to illustrate the effects of inflation on farm programs, farm prices and farm income. And I hope you will, at some point, allow me to present this table to you in more detail, either here or somewhere with better opportunity.
Page 66 PREV PAGE TOP OF DOC However, I would like to summarize some important observations from the key indicators table that go right to the heart of our farm policy debate we are in the midst of. This table shows that:
1. Real inflation-adjusted CC&C loan rates have dropped dramatically over the last 25 years and real farm prices have dropped in a similar manner. Real farm prices are approximately 1/3 of what they were during the decade of the 1970's, the whole decade.
2. On average, export volume of all major commodities has been virtually static over the last 25 years. Irregardless of farm price support policy, trade policy or currency valuations. Our agricultural trade balance has also been static or declining in nominal terms, and has sharply declined in inflation adjusted terms.
3. On the other hand, our domestic use of commodities has increased steadily over the last 25 years. Virtually all of our growth in grains and general commodities over the last 25 years has come from the domestic market, not the export market.
4. Total use of commodities has not declined during the past 4 years and is now at all-time highs, with the exception of cotton. In spite of this, farm prices have collapsed.
5. On a historical basis, ending stocks to use ratios are now tight to modest. Ending stocks or surpluses have not been unusual high during the 4 years of the Freedom to Farm Act, based on a historical basis. In spite of these modest ending stocks, farm prices have collapsed.
6. In spite of increase in yields, real gross income per acre for basic commodities has dropped nearly 50 percent over the last 25 years, in real terms. Including emergency AMTA payments of the past 2 years, gross income per acre has dropped nearly 40 percent over the last 20 years, in spite of increasing yields, and with emergency payments.
7. With emergency AMTA payments included, farmers have received a national average equivalent price of about $2.67 a bushel on corn, and $4.15 for wheat the past 4 years. That is the average over 4 years with all emergency payments included. In spite of these equivalent price levels, we are in a depression, so I would assume the prices have to be better than that and gross income better than that to improve the situation over today.
Page 67 PREV PAGE TOP OF DOC We must base future farm policy on these market realities, on fact and on logic. The business of farming is fundamentally unique, worldwide. It does not and cannot follow the typical supply and demand economics applicable to most businesses. I ask this committee to consider these realities of agriculture.
Our farm program proposal gives farmers the tools to participate in a market economy. Today we are simply forced to be exploited by a market. It is designed to answer the criticisms of past farm policies in the areas of flexibility, forfeitures and trade. Nearly every specific of this proposal is new and unique.
Our voluntary program would:
1. Establish a new market participation loan for all commodities targeted to family-sized farms.
2. Will annually establish CCC loan rates using a unique formula tied to productivity and inflation.
3. Establish a new farmer-owned reserve that buffer price-depressing, high-production years, and ensure food security in drought years.
4. Give the Secretary authority to institute a short-term set-aside if the reserve can no longer buffer several high-production years in a row.
5. Maintain full planting flexibility.
6. Explore a target price system for livestock on a limited volume of production to protect against the dramatic downturns we saw in 1998 in hogs.
7. Establish a maximum level of agribusiness concentration.
8. Initiate negotiations between grain exporting countries to establish market share agreements and shared production cuts when world grain supplies become burdensome.
The solution to our problems must come from a true bipartisan effort. I urge you to disregard any preconceived opinions you have about individuals or organizations. I caution Members of Congress against taking undue advice from ''experts'', whose recommendations have put farmers and Congress in the dilemma we face today. Together we must design a national farm policy and international trade policy that recognizes the market realities of the unique business of farming. If we do not, we will lose the family farm system of decentralized production. Such a system of decentralized production is so successful because it is based on millions of just-in-time, individual decisions made by farmers with generations of institutional knowledge. The loss of that system of decentralization has ramifications far beyond the livelihoods of a million farm families. Indeed, the potential loss of that system should be of grave concern to everyone in the United States. Thank you.
Page 68 PREV PAGE TOP OF DOC [The prepared statement of Mr. Dittrich appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you. Mr. Skogen.
STATEMENT OF ALLAN SKOGEN, WHEAT, BARLEY AND SOYBEAN PRODUCER, VALLEY CITY, ND.
Mr. SKOGEN. Thank you, Mr. Chairman.
I first want to thank the chairman, Larry Combest, the ranking member, Charlie Stenholm and the Honorable Congressman Earl Pomeroy from North Dakota, and other members of the House Committee on Agriculture for recognizing the importance of grassroots input in conducting these hearings.
My name is Al Skogen, I currently serve as the president of the North Dakota Grain Growers Association and as a board member of the National Association of Wheat Growers. I am also vice chairman of the board of Spring Wheat Bakers and a member of Dakota Growers Pasta, both large value-added cooperatives owned by wheat and durum producers in our region.
I farm with my wife and my son near Valley City in east central North Dakota. Our principal crops there are wheat, soybeans and canola, which by the way, is a much different crop rotation than we had just a few short years ago.
As you are aware, producers in the United States have suffered severe economic hardship the past several years, and at the top of the list of those who have been damaged are the producers from the upper Great Plains region. The primary reasons for these losses are water and disease damaged crops, lack of demand and market access for our crops and the subsequent low prices, the lack of proper income safeguards in existing domestic farm policy and a dysfunctional crop insurance system.
Page 69 PREV PAGE TOP OF DOC I am going to get right into what I understand the intent of these hearings to be, and that is solutions for these problems. We have greatly appreciated the efforts of Congress to provide badly-needed emergency assistance, however it is time to place into permanent law a program that would trigger this assistance automatically when conditions beyond our control cause such economic stress to production agriculture. Then and only then can farmers, bankers, consumers, taxpayers and lawmakers predict with some level of confidence the strength of this industry from year to year. It is our belief that we have to think globally to understand consumer needs relating to our products and to fight with all our might to increase market share in the world. However it is vitally important to the wellbeing of our Nation's food producers, its citizens and the economy as a whole, to have a consistent, responsible and fair domestic farm policy.
NAWG, along with the State grower associations, have spent the last several months doing a very objective and non-partisan assessment of current and past farm and trade policy, as well as a review of more recent solutions that have been proposed. Our objective is to develop common-sense solutions to enhance the viability of agriculture in the United States as well as our position in the global trade arena, which we are in today. This plan takes many of the positive components of the current farm bill and combines them with a counter-cyclical safety net that automatically triggers when prices of commodities fall below a certain level. After reviewing other proposed methods to trigger support, we feel the price of the commodity is, itself, the most accurate and fair trigger mechanism available.
While we are in the beginning stages of the economic analysis necessary to properly assess the plan, it is our hope that over the next several years, the cost of this plan will be less than the average annual cost of the last three farm bills, while providing much more stability to American agriculture.
And even more important, it does not detract from but rather enhances the all-out effort we must make to regain world market share that we have given up the last several years. This plan would allow U.S. producers to react to the world market signals while providing a level of support for when prices fall, for whatever the reason.
Page 70 PREV PAGE TOP OF DOCI would like to take you into the key components of this common-sense domestic farm policy proposal.
First, we would maintain the current marketing loan PCP and LDP structure. While this is an area that has caused much debate, it has provided the market with the ability for honest price discovery in the world market while providing some non-production distorting support for farmers. In fact, we believe that the marketing loan for grains could be raised some to provide equity between grains and oilseeds without exceeding the EEU intervention price when adjusted for currency differences.
The second component of this plan is some level of fixed payments, such as the AMTA payment. We propose freezing the payment at the 1999 level which, for wheat, was 63 cents. Some say it is hard to justify a fixed payment, but the fact is, only once in the past 20 years that prices for wheat have averaged over $4.30, while true production costs are much above this level. This is a minimal cost for the stability it provides for producer equity and lender confidence over time.
The third and the critical component of this package is a safety net, designed so that when prices dip below a certain level, a counter-cyclical payment is trigger. This payment would equal the difference between the trigger price and the sum of the fixed payment or the higher the marketing loan or the national average price. Actually, this could be considered the same as a variable market loss payment. The good thing is that, if this assistance is needed, it is already in place and if we do not need it, we simply will not get it. In your handout, I have provided an example of how this formula would work.
The variable payment under our plan would be based on the same production history as the current AMTA payment. In this plan, we have included a method of adjusting support as needed based on a formula that compares some basic input costs on a per-bushel basis, excluding land cost because of its inflationary nature. And actually, by this method, it is possible that as our efficiencies on a per-unit basis improve, the trigger price could come down. The key component, of course, full flexibility would remain, as it is in the current law. Both the fixed and the variable payment are totally decoupled from production. The right given to producers to make critical cropping decisions based on market signals and good economic and agronomic management was the single-most valuable component of current farm law. As is with the market loss payment, we would support a separate payment limit for the variable payment.
Page 71 PREV PAGE TOP OF DOC I would also like to point out that, because in this plan price risk is dealt with, now crop insurance could be simplified and returned to doing what it was originally intended, protect against crop loss. It is our belief that we, as a nation, have the right to a strong domestic policy that allows our farmers the chance to succeed as long as that policy does not distort production based on free-market forces, and this policy clearly accomplishes that. This proposal could be an adjustment to current law by introducing the counter-cyclical concept as another way to calculate the current emergency or market loss payment or it could be the foundation for new farm program legislation.
We feel that these basic elements of a solid domestic farm policy have the ability to stabilize the current disastrous economic conditions that continue to exist in production agriculture, while allowing the forces of global trade to continue to develop. However, we do not, in any way, want to diminish the need for your continued support concerning major trade issues confronting us today.
We need to pass PNTR for China and we need total sanctions reform that prohibits the use of all unilateral sanctions on food and medicine. Free and fair trade does not exist until we are allowed access to markets fairly in all nations.
We need to properly fund all existing trade programs, including market access program, foreign market development, GSM102 and 103 and so on. And along with these, we need to revitalize and adequately fund the EEP program as an effective tool to compete against large EU support subsidies and the wholly unfair marketing practices of STEs.
We need to send the message to our trade partners, and I use that phrase loosely, that we will not stand for the type of manipulation that exists today in the world trade. And to that end, we will do whatever is necessary to maintain and gain back lost market share. Anything less than that commitment will simply not be enough.
On behalf of these organizations that I take part, and the agriculture producers that they represent, I thank you for your consideration and your leadership on these very important issues, and look forward to answering any questions I can regarding these issues.
Page 72 PREV PAGE TOP OF DOC Thank you.
[The prepared statement of Mr. Skogen appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you, sir.
STATEMENT OF MARCY SVENNINGSEN, BEEF CATTLE AND SOYBEAN PRODUCER, VALLEY CITY, ND
Ms. SVENNINGSEN. Thank you, Mr. Chairman, members of the committee. My name is Marcy Svenningsen. I welcome the opportunity to tell you how the current farm bill is affecting our farm and family.
My husband, two children and I have farmed near Valley City, North Dakota for approximately 20 years. We currently have 190 head of beef cows and we raise a variety of crops on about 1,500 acres of land.
I hate to start my testimony by being negative, but I truly cannot find one redeeming quality in our current farm bill. It has been great for agribusiness, but it has sold family farmers down the river. We have lost many family farmers in our area, both large and small. Well-established third and fourth generation farms are calling it quits, and it is not because we are inefficient, it is because the current farm program did not take into account what would happen when a price disaster strikes.
The problem is that the underlying principles of Freedom to Farm were flawed. Rather than planting for the mythical free market, we are forced to plant crops that bring us as close to our cost of production as possible. So much for flexibility. We are spending more time at the ASC office than we ever have before trying to time our LDP payments so we can recoup every dollar possible.
Page 73 PREV PAGE TOP OF DOC I believe that Congress is capable of designing a new farm program that can sustain family farms, ranches and rural communities. This program must be tied to production. It must be targeted to family farmers in order to avoid contributing to even further consolidation. It is imperative that we keep production agriculture in as many hands as possible.
We also need to address supply. Every corporation in the world adjusts inventories by occasionally idling or limiting production capacity. In agriculture, it works a little differently. A farmer is going to produce when prices are high because he can make a profit. He will also produce when prices are low, in order to spread his high fixed costs over as many bushels as possible, even though he may know that there is a worldwide surplus of grain.
I believe we need a farmer-owned reserve so that we can store our grain and market it when prices improve. Some argue that we cannot store our way to prosperity, but it is abundantly clear that we cannot sell our way to prosperity at absurdly low prices, either. At today's prices, it is not possible to make a profit and we are tired of giving away our grain to these huge conglomerates so that they can make a profit on our backs.
Consideration should be given to a short-term CRP program where producers could idle land for 1 to 3 years. It would be beneficial in helping to reduce over-capacity. I do find it ironic that we are discussing over-supply problems when there is a massive famine threatening to explode in Ethiopia. Is the problem really over production or is the problem distribution? It seems as though the countries that need the food the most are countries unable to purchase it. We need to get very serious about humanitarian relief as a way to reduce stocks.
We also need to address the production and marketing distortions and inequities that have been created by our current commodity loan rates. We can accomplish this through establishing a commodity equity program that will increase loan rates to an equal percentage of the cost of production for all commodities. In addition, the loan repayment should be extended to 15 months in order to give us time to take advantage of market fluctuations. If we truly want to revitalize rural America, we should increase loan rates so that they will cover a family farmer's cost of production plus a reasonable profit.
Page 74 PREV PAGE TOP OF DOC In a recent North Dakota poll, 99 percent of the respondents agreed that we were in the middle of an agricultural crisis, 93 percent favored the establishment of some sort of safety net, and 84 percent felt that unfair competition was a major cause of the crisis.
To get to the heart of what is ailing rural America, Congress has to do something about market concentration and anti-trust enforcement. We need a moratorium on further agricultural mergers until the effects of the merger to family farmers and rural communities can be studied in depth and Congress can reform anti-trust laws relating to agriculture.
The basic premise underlying Freedom to Farm was that it would get government out of agriculture, allowing farmers the flexibility to produce for the free market instead of a farm program. Well, if Freedom to Farm has taught us one thing, it is that government does have a vital role to play in Federal farm policy. Food and the farmers who grow it are simply too important to be left entirely to the free market.
In conclusion, farmers need immediate action. Hearings are wonderful things, but only if they lead to getting something accomplished. We are losing too many farmers while we spend time studying what needs to be done. If Freedom to Farm is allowed to run its course until 2002, my husband and I, along with thousands of others, will not be here in 2002 to testify as family farmers. I hope that Congress will make an effort now to write a farm bill that makes sense, a farm bill that will recognize the value and importance of the family farmer, a farm bill that will give us tools we need to survive when prices collapse, or we have grain surpluses.
Earlier I said that Congress was capable of writing a farm bill that can do all these things. My concern is whether they have the will to do it.
Thank you for the opportunity to testify today.
[The prepared statement of Ms. Svenningsen appears at the conclusion of the hearing.]
The CHAIRMAN [presiding]. Thank you. Mr. Tumbleson.
Page 75 PREV PAGE TOP OF DOCSTATEMENT OF GERALD TUMBLESON, CORN, SOYBEAN PRODUCER, VOLGA, SD
Mr. TUMBLESON. Good morning, Mr. Chairman and members of the committee.
We have all talked about the hardships of agriculture and we all know about them and it is known across the country. I will not be following my script, so if you want to follow the script, you are not going to be with me as I speak.
I am Gerald Tumbleson, and I farm in southern Minnesota, and I farm with a brother and two sons and their wives. Now I realize that Human Services gave me a lot of trouble with child abuse when I brought two sons back into agriculture, but I was able to get through that. The two wives do work off the farm, but you would think with that many people out there, we would not have the trouble we have trying to get somebody to volunteer to pick rock, but it is still a difficult thing.
What I would like to get into is investment into the long-term future of agriculture. We are into the year to year to year to year, and that is what the farm programs seem to do. We have about three things in the world that are original products. One is mines, one is technology, and one is agriculture. Now the sun and the wind, you might call it part of that, but I put that into agriculture as I do it. So when we think about this investing into long-term, we think of where we go. Remember when Great Britain had most of the mines? Remember when Japan had the technology? Think about those countries today. I remember when I was in high school, Russia was a big agricultural exporter. What happened to those countries? Look back, look at some history books here. We have got to be careful of how we do this.
Agriculture in the United States has just hit technology change. Just begun. This to me is very exciting, and I wish I was the X generation today so that I could move into it with it.
Page 76 PREV PAGE TOP OF DOC What I want to talk to you this morning about is a carbohydrate ion. The carbohydrate ion is something made from renewable, raised in our soil, a product. The hydrocarbon ion has controlled the United States for a number of years, that is the petroleum industry. It still controls us and they still have the money to control us, and that is the big organization.
Now I represent corn somewhat because I am on the National Corn Grower Board, I have been president of National Corn Growers. I want to speak to you in the carbohydrate ion in the sense of corn. You take a kernel of corn, you can get starch, you can get oil, you can get protein and you can get fiber out of that kernel of corn. Henry Ford built a car out of carbohydrate 1940's, before the war, and then the war changed it. We raise everything we need in the United States, in the world, right here in our soil to do it. What are we doing with it? We are exporting a raw product.
What I want to get to, and if you read the testimony, is into value-added. I think we can move off into that, and I see Congressman Thune has stepped out, but he has co-sponsored a bill on value-added. Now the economic future in agriculture, I think, is in vertical, not horizontal spread. Today, we farm between 2,500 and 3,000 acres in our family. Tomorrow or next year, we can farm with labor and technology, 15,000 acres, and I do not have any problem getting the job done. It is there, technology is there. That is not where we want to go in this thing. We want to move vertically and tie into the next step.
Now I think this committee, along with the thought process, can move us in that direction. We see the tax incentives of the petroleum industry, we have depletion allowances, we have all those taxes, we have taxes for exploration, and then they get paid, they get an incentive for it and they keep incentives going after they have explored and found it. And then producing, they are getting paid double. We do not have that.
These are things that can happen in agriculture, this is the future. I am not looking at next year or the year after, I am looking at 10, 15, 20 years. When I buy a piece of ground, 80 acres, I do not buy it for next year or the year after. I buy it for 20 to 30 years. And if agriculture will start looking in that direction, we will move in that direction.
Page 77 PREV PAGE TOP OF DOC The farm bill we have, right or wrong, we cannot change farm bills every 5 or 6 years. We can critique them and make them work, that is how you make things work. You do not roll over and start over again. If I was to marry somebody different every 5 years, who, you know the trouble I have withmy wife is in the audience today, she is supposed to be picking rock. [Laughter.]
But anyway, what we have to do is we have to look farther out in this process as we are going through this thing, and we can do it.
An interesting concept, as we talk about ethanol. You all understand ethanol? We are taking the oil out of the kernel, the protein, we are taking the fiber out, we are making some fantastic movements in that kernel of corn. Here is an interesting thing when it is going to be a very tough discussion as you discuss this, if you are going to supply a carbohydrate society, you better have a supply. Now what happens when you build a supply? What happens? Do you have a storage someplace? Does that control prices? Where do you go from there? We have the answers to it, I do not have time to explain it to you today, but one item that is very important in getting into this value-added is risk management. We have to have risk management.
And I would welcome any questions later on this and thank you for this opportunity to discuss this with you.
[The prepared statement of Mr. Tumbleson appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. VanderWal.
STATEMENT OF SCOTT VANDERWAL, CORN, SOYBEAN PRODUCER, VOLGA, SD
Mr. VANDERWAL. Thank you, Mr. Chairman, members of the committee.
Page 78 PREV PAGE TOP OF DOC My name is Scott VanderWal. I am involved in agricultural production in a family farm corporation in Volga in east central South Dakota. We operate a cattle feed lot and raise corn and soybeans.
The agriculture economy is tough right now. We have all heard that here today and there is no doubt about it. And I do not, in any way, want to minimize that statement by my remarks here today. But when all was said and done in 1999, it was not too bad financially. The reason for that was the way the farm bill worked. Our net income on our bottom line was roughly equivalent to the amount of support we got from the Government. Now that does not make us feel good, but it shows that the program did work, and we do have a sort of a safety net there built in.
The FAIR Act is working but it needs to be finished, and I want to expound on that a little bit. We as farmers are holding up our end of the deal, and now it is time for Congress to finish its end of the bargain. The ability to adjust crop acreage in response to economic and agronomic factors is very good. The market provides opportunities for pricing while AMTA payments and loan rates provide a partial safety net. The flexibility allows us to determine in advance of planning what products are in demand so that business arrangements can be made.
I strongly urge you and Congress to continue these market-based policies in the FAIR Act. From my point of view, this is the best farm program we have had yet. Look at how other countries react to it. Canadian farmers envy us, and South American farmers wish that we would go back to set-asides so that they could expand.
Some people say we should go back to production controls. We should not do that as we would then lose our flexibility and other countries would just increase their acreages by similar amounts. We have seen this in the past and it would certainly happen again.
Because the FAIR Act is not yet finished, in my view, I must ask for continued assistance. I can justify the request based on the fact that, as I said before, we have done our part but the Government has not yet. I would like to discuss the things that need to be done to complete the promises that were made by Congress.
Page 79 PREV PAGE TOP OF DOC First of all, improve foreign market access. Trade policy reforms must be a high priority as we export roughly one-third of our production. Economic sanctions against other countries must be eliminated. Food and agriculture producers should not be used as a foreign policy tool. There is no record of unilateral trade sanctions ever doing any good from either an economic or political standpoint. They just shut us out of much-needed foreign markets. Our competitors are only too happy to step in then and sell in those markets and we earn the reputation of being a long-term unreliable supplier.
We talked about normal trade relations for China. That must be a very high priority, very important. In order for us to benefit from China's potential, Congress must grant the same trading rights it extends to the other WTO members. If they do not, they will still join the WTO and other competing countries will benefit from having China involved in the WTO. So it is only fair to our farmers and ranchers to allow us access to their markets.
Release from over-regulation is another one. There are many regulatory burdens that we deal with from day to day that cost us a tremendous amount in terms of money, time and resources.
Risk management tools were discussed and we need to work on that. And there is a bill in Congress that is heading in the right direction. A better insurance program that is affordable and provides good coverage would let us take control of our own destiny.
The weak spot in the safety net aspect of this farm bill is that, if I have a reduced crop due to drought or some other peril, I do not get the LDP payments, and we all know that. A good Crop Insurance Program that is affordable and would pay decent would take care of this problem. If we have good risk management tools to use, there are good rewards for those who are willing to think outside the box.
Tax reform is another one. There have been attempts in Congress to approve the farm and ranch risk management program, FARRM. This would certainly help us out. In addition, the Federal estate tax should definitely be eliminated.
Page 80 PREV PAGE TOP OF DOC Just a couple other points I would like to make quickly. The Regulatory Fairness and Openness Act in 1999, this is basically the fix to the Food Quality and Protection Act, which is has the potential if the EPA enacts it the way they would like to, to cancel the registrations on many of the crop protection chemicals and herbicides and insecticides that we use at this point. And I might add that we use safely and responsibly. Loss of these products would lead to a huge reduction in quality, quantity and safety of our food supply.
The Export Enhancement Program was funded in the bill to the tune of $1.5 billion, but has been used very little. I urge you to use those funds.
The Farm Income Fairness Act, this is a bill which clarifies that farmers and ranchers do not have to pay self-employment tax on cash rent income and CRP payments. We have not had to pay self-employment tax on these things up until now, and if we are forced to start, it could be a huge, huge hit to the bottom line of family farmers.
And then the use of MTBE should be eliminated from our gas supply. But I am not saying when I say that that the current oxygenate requirements should be ended. Let us fill that need with ethanol, we can do it as American farmers. What could make more sense? It could decrease our reliance on foreign oil, and it is good for the environment. It creates jobs, economic activity, uses our products and increases domestic prices.
In closing, I know that dealing with agriculture policy is a daunting task and I appreciate your efforts very much in Washington and in holding these hearings around the country. Again, I want to stress that Freedom to Farm is working. Please preserve it and keep the promises that were made when it was passed and give it a chance to really work. It was the right thing to do in 1996 and it is the right thing to do now.
Thank you again for the opportunity to appear before you today.
[The prepared statement of Mr. VanderWal appears at the conclusion of the hearing.]
Page 81 PREV PAGE TOP OF DOC The CHAIRMAN. Mr. Wietharn.
STATEMENT OF ROBERT J. WIETHARN, CORN, WHEAT, SOYBEAN PRODUCER, CLAY CENTER, KS
Mr. WIETHARN. Mr. Chairman and members of the House Agriculture Committee, first of all I thank you for giving me this opportunity to testify today.
I want to share my thoughts of American agriculture policy and vision for the future in agriculture. My name is Bob Wietharn, I am a 39-year-old farmer from Clay Center, Kansas. I produce corn, soybeans, wheat, milo and maintain a hog operation. I am also involved in several other enterprises. I could talk about many different issues here today, however because my time is so limited, I am going to focus on what I sincerely believe to be the most important resource this country has. This resource, produced by the American family farmer is far more valuable than all agriculture commodities combined. This resource is so valuable, indeed it is priceless. Without this resource, we would soon find ourselves going hungry. The resource I am describing here today is kids raised on a family farm.
I am sharing a picture of my three kids. My older daughter, Jessica, is a freshman in high school and involved in 4H and FFA. Jenna, my younger daughter, is also involved in 4H, says she wants to live on a farm someday. My son, Joe, is starting his first year in 4H. He says he wants to grow up and be just like his dad. All three of these farm kids are learning about responsibilities, about becoming productive individuals. This comes from the different tasks they do around the farm, all the way from helping me wean pigs to irrigating crops. Yes, you could call me a proud father.
I am the third child of four siblings. My oldest brother, Gary, currently is vice-president of Dawn Foods. I asked Gary recently what he considers to be the most important characteristic when he interviews and hires an individual. Quote, ''When interviewing potential candidates, I give a lot of credit if they have a farming background. New employees with farming background tend to work harder and do a better job at making common-sense decisions.''
Page 82 PREV PAGE TOP OF DOC My older sister, Gail, married a farmer and lives just north of our farm. Her and her husband, Mike, have three very successful kids.
My younger brother, Rick, is a plant manager for Novartis at Lincoln, Nebraska. I asked him what helped him be so successful. And I quote, ''Most of what I apply in my engineering job I learned on the farm, not in college. What I learned growing up on the farm is practical. What I learned in college is theoretical. I believe the combination of the two is what helps set me apart from others.''
As you can tell, the Wietharn farm has produced many successful people.
The trend we see in agriculture is towards fewer and fewer family farms. I see several reasons for this. New technology, the environment, economic forces, but most of all, Government agriculture programs bring this about. We should promote a healthy environment in which farm families not only survive but they can prosper.
Let me give you some ideas on how we might accomplish this.
First, I think USDA should reinstate the low-interest loan program to young and beginning farmers. I am living proof that this program worked very successfully in the past.
There should be a subsidized farm income insurance program for young and beginning farmers.
A farmer should be given the authority to start an income average savings account that was spoken about before.
Freedom to Farm should, in no way, should be abandoned. However, it should be enhanced.
There should be higher levels of affordable revenue coverage on all commodities. Under no circumstances should we go back to the past paying farmers through set-aside programs not to produce.
Page 83 PREV PAGE TOP OF DOC Loan rates should be raised and tied to inflation or the cost of production. This would send a signal around the world that the U.S. Government supports the American farmer.
Reinstate the farmer-owned reserve. This would be a direct benefit to the producer for securing the food inventory this country needs.
We must stop the merger mania that is currently taking place in the corporate world. Private, competitive enterprise is what makes this country so strong. More funding should be directed to universities for agriculture research.
This would prevent the ownership of the future gene pool by one or two companies.
Government policy needs to eliminate the use of food as a weapon against other countries to force their compliance to our beliefs.
Let us get tough on trade. Stop importing from countries that will not open their markets to our agriculture products.
These programs and others represent a very small price for the American taxpayer to pay to enjoy the cheapest, safest, most bountiful food supply in the world.
I challenge you to ask yourself one question when making the decision on agriculture programs: How will this affect American farm kids? I am sure we cannot stop the decline of farm families, but we have the responsibility to make every effort to keep this priceless resource available as long as we can.
I would like to add a new twist this old saying, you can put a boy on the farm, but you cannot put farming in a boy.
Thank you very much for your time, and I would like to publicly thank my wife, Debbie, and my family for their support to allow me to be here today. Thank you.
[The prepared statement of Mr. Wietharn appears at the conclusion of the hearing.]
Page 84 PREV PAGE TOP OF DOC The CHAIRMAN. Thank you very much. Mr. Barrett.
Mr. BARRETT. Thank you, Mr. Chairman. And again, thanks to the panel for some excellent testimony.
Mr. Dittrich, thanks for a thoughtful presentation. It is an interesting concept, we have not had a chance to look at it in any depth yet, but in looking at it very quickly, two questions.
You talk about family-sized farms. Can you describe what you are talking about there?
Mr. DITTRICH. That obviously is a difficult thing to define, and that is a contentious issue, but it is an issue that is at the forefront of our farm policy debate. And currently this proposal does not have a specific way to do it, and I have been working on it with other people for the last month or so trying to come up with something. I think it will probably come down to just arbitrarily assigning some volume of production that will be eligible for the loan. That has been part of the policies of the various organizations that have supported it in the past.
There are some other ideas, but it has to be something that is statistically verifiable on an annual basis by USDA or Census of Agriculture.
Mr. BARRETT. I am sure you will let us know when you determine what it is.
Mr. DITTRICH. Well, targeting is a concern, obviously from this whole committee, and it is something you cannot run away from. I mean, I am not talking to you at all, but I mean, in general, we in agriculture cannot run away from. So we are attempting to address that concern.
It is interesting that one of the primary supporters of this program, the National Family Farm Coalition, who probably represents the smaller farmers in the country, is the least fan of targeting, because they think that, in general, if you raise farm prices, all boats will rise. And so they are not as concerned as many people about the targeting. Other people are concerned about the targeting, so we are trying to address it.
Page 85 PREV PAGE TOP OF DOC Mr. BARRETT. Thank you.
The other question, as I looked at your outline of the bill, do you not, under this concept, eliminate marketing loans?
Mr. DITTRICH. No, we do not eliminate marketing loans. We modify the marketing
Mr. BARRETT. What is a substitute?
Mr. DITTRICH. The substitute is an extended loan, where you have a 9-month initial loan and an option to extend the loan for 9 more months. And then the loan deficiency payment option is eliminated, but you can still pay back at below the county postedor at the posted county price, if it is below the loan rate.
We believe the loan deficiency payment program, in itself, as a separate entity or sector within the marketing loan, is a real price depressor, and it encourages poor marketing by a lot of farmers, because they go into their ASCS office, they get the LDP, they think they are set, and at that point, they are actually at risk of getting the low loan rate prices. And then also, it has a poor public perception because many people have the feeling that the loan deficiency payment is extra income above the loan, and it is not. So that is the differences, Congressman. You can pay back below the market, or below the loan rate, so it is very similar to what we have now. The loan deficiency program would be eliminated, or option would be eliminated, and the loan could be extended for 9 more months. So it is a modification.
Mr. BARRETT. OK. Thank you very much.
Mr. VanderWal, I was interested in your testimony in which you said the FAIR Act is getting blamed for low prices, and there are some who certainly believe that. There are others that believe that markets have probably a greater effect on low prices than anything else.
I would be interested in hearing from the panel whether you believe that the farm bill does have a direct link to low prices. Anybody? Ms. Svenningsen.
Page 86 PREV PAGE TOP OF DOC Ms. SVENNINGSEN. Yes, I think it does have a bearing on low prices. Talking about LDPs, all LDPs do is subsidize corporations. They are able to buy our commodities at fire sale prices, they do not have to pay for them. I believe that it has a depressing factor on our market. And I am not in favor of LDPs, and I think it just subsidizes corporations.
Mr. BARRETT. Other members of the panel? My time has expired, but I would be interested in just a quick comment.
Mr. BLINDERT. I actually believe that. What I got up here goes through FAPRI analyses on production expenses, loan rates, and the loan rate is set at such a level that it is above variable expenses. Any loan rate above variable expenses increases any loan rate. So what we have going on, if you get loan rate prices for crops, you are basicallyit is this simple, you are going to lose less money than if you do not plant.
As you can see on corn, it is $29.25 an acre. You would lose if you end up with a normal crop. So everybody is going to try to get a higher crop than normal. So profit or loss, if you do not plant, is $107.
You get over here on wheat, it is worse. You get over here in cotton, Mr. Combest and Mr. Stenholm's area, it is really severe. You lose $72 there, you lose $85.
And I want to correct you on this. When you look at these figures here and you see land costs there, the $75 an acre on corn, that is FAPRI's analyzed numbers and it reflects land values that some of the ground is paid for, some of it is cash rent, some of it is share rent.
Mr. BARRETT. Thank you.
Let me just see a show of hands? Do you believe that there is a link between the low prices and the current farm bill? Definitely?
[Show of hands.]
Page 87 PREV PAGE TOP OF DOC Mr. BARRETT. Disagree?
[Show of hands.]
Mr. BARRETT. OK. My time has expired, that is what I needed, an expression from the panel. Thank you very much.
Mr. Chairman, I yield back.
The CHAIRMAN. Mr. Minge.
Mr. MINGE. I see that we also have the Easter Rabbit here. I am not sure what role that will play in the hearing.
I would like to thank the panelists for their testimony. And Mr. Tumbleson, you invited at the end of your testimony a question, and I would like to ask that question because I am curious as to what your comment is. And that is, what is the relationship between crop insurance and the value added concept that you are advocating so capably?
Mr. TUMBLESON. There is quite a connection there, and that is why I did notthe farm program and prices, prices of grain, we need them, but what did $5 corn do to us? We have to look beyond this. That is where we get into the value-added thing here. $5 corn broke a lot of farmers, and when we talk about risk insurance, or risk management, what I am talking about in the value-added, put it into this perspective: If you live in Philadelphia, you own a $200,000 house, you can get insurance on that house at $100,000 that is affordable. Anything above that is not affordable. So you put insurance on that house of $100,000.
Now you have $50,000 in your savings account in case the house burns down. But an opportunity exists in downtown Philadelphia to get into a private practice that you want to get into, and it is $100,000. You have $50,000 in the savings account and you go to your bank and say, I have $50,000 and it is going to cost $100,000 to get into this business. And he will say, yes, I will loan you the other $50,000. Great. Fantastic, is it not? You have your business started. You can go. Next week, your house burns down. You have $100,000. You cannot even build a house. You cannot even borrow the money to build the house. Your bankers loaned it for your business, you are done.
Page 88 PREV PAGE TOP OF DOC That is where risk managementand Mr. Combest, he and I have talked about this, this is so fantastic, what this Agriculture Committee has done and the way they are going on risk management, that frees up the money in a savings account or asset in land for one reason. If I have two bad years, I can still farm. But if I can get a risk coverage to cost of production, I could take that money and invest it into value-added and to vertical. I could now try to compete with the big corporations, and we can do it through this type of thing.
Mr. MINGE. OK. Thank you.
I would like to ask a more general question, and that is, it relates to land values. One of the features of farm programs that has haunted us is that the money that we have invested is quickly translated into increased land value. And that has been one of the major criticisms of the FAIR Act, that we have shoveled billions of dollars out the back door of the U.S. Treasury primarily to stabilize land values, or to improve land values. It is quickly capitalized into rent, and so on.
And the question I would like to ask, we have had several farm proposal concepts that have been outlined here, is have you identified a way to take the money that we would invest at the Federal level in farm programs and try to make sure that the benefit of this is chiefly directed towards the producer and the income of the family that is in that farming enterprise, as opposed to translating this into cash rent increases or increasing land value, which makes it even more difficult for a beginning farmer to launch the enterprise? Mr. Dittrich, yes, please.
Mr. DITTRICH. This is a common question of what do we do about land values. And I guess I would approach it from this idea. The gross income that I pointed out in my chart that farmers receive per acre has fallen about 50 percent in the last 20 years, and the land values have still risen. All I can say for sure is that that gross income per acre has left my rural community. That gross income per acre has left my school district, it has left my town, it has left the businesses. And some increase in land values and rents is perhaps justified because this country depends on increasing home values and lives by that, and increasing wages drive home values, for example, up.
Page 89 PREV PAGE TOP OF DOC Well, no one wants home values to drop 50 percent to help the average wage earner out. Everybody wants salaries to be slowly rising, and home values, in turn, slowly rise. So I do not thing it is altogether negative that land values and the assessed value of land and the taxes paid on land, if the income is there and it is paid by the land and the production of the land, that is good for rural communities.
So I think that, first, I do not thing land values will take it all, I guess, to summarize. I do not think land values would take all of the increased prices away because it is only about a third of your total production cost. And second, some increase is not bad for rural communities. Bottom line is farm prices must increase, and I really like the comments by Mr. Thune. Farm prices must increase to make things better than they are today. There is no other option, unless you increase AMTA payments even more.
Mr. MINGE. Well, I see that the red light is on and I would just like to ask, if any of the rest of you have comments, if you could just give us a call or submit a letter or something like that, unless you just have a one-sentence comment that you could add in here that would be helpful.
Mr. BLINDERT. Flexible fallow kind of addresses that. Basically, instead of having AMTA payments or a disaster program, it is targeted in there, just to the people that have low-price, low-yield environments. And also, the flip prices, where you would be better off planting crops on a national average basis is about 2.40 for corn, $5.60 on beans and $3.53 on wheat. So that is not going to raise land values, no.
Mr. MINGE. Yes?
Mr. SKOGEN. I was just going to say, in North Dakota, we do not have the urban sprawl problem that you do in many parts of the country. And so the inflating land costs has not been quite as big a problem. And I think the truth is, the profitability drives land costs up in our area and not specifically Government payments. It is profitability, whether it comes from higher grain prices, above-average crops or farm program payments.
Page 90 PREV PAGE TOP OF DOC Mr. MINGE. Thank you.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you. Just a few comments.
Mr. VanderWal, legislation has been introduced to address the issue of self-employment taxes regarding CRP payments, and I think every member of the agriculture panel here today is a co-sponsor of that legislation. There are now more than 90 Members of Congress, and that is an issue that we hope to be able to address. In the State of Kansas, additional taxes, self-employment taxes, is about $16 million a year, and of course, the IRS wants to go back 3 previous years, so we are talking about a sizable chunk of money.
And Ms. Svenningsen, I appreciate your comments about supply and demand. It has become clear to me over time that in agriculture, supply and demand does not work the way I learned about it in my economic classes in college. And it is clear that farmers produce more to cover their fixed costs of being in business. And so when we have low prices, we would expect reduced production, but instead we have the same or more production to try to make ends meet. And so I think, as we try to find the economic solutions to agricultural issues, we have got to remember that, maybe what has been drilled into our brain does not always work in your profession.
And I, of course, appreciate the testimony of my constituent, I think it is a great reminder that, yes, this is about dollars and cents, whether or not we are going to be able to make ends meet does matter, but it is also something more than that. It is about whether or not my children are going to grow up in rural America and whether they are going to, if they choose, be able to raise their family in rural America, and it is about our way of life. And so I think, clearly, those of us who serve on the House Agriculture panel recognize that our responsibilities are somewhat greater than just to farmers. It is about a way that we might be able to save the character of this country.
And so I commend my friend from Kansas for reminding us about even a more noble aspect of what we are about here, and I really appreciate the panel's comments and commentary. I have got to spend some time on the testimony of Mr. Blindert and Mr. Dittrich on trying to figure out the details of what you are telling me, and I will try to get educated and may be back in touch with you. Appreciate it.
Page 91 PREV PAGE TOP OF DOC And Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN. Mr. Pomeroy.
Mr. POMEROY. Thank you, Mr. Chairman.
I would begin with the observation that it is a darn lucky thing that Mr. Wietharn is a handsome fellow because his kids are like Xerox copies of you. I wish you could see them in the audience, it is a beautiful family. Do they pick rock? [Laughter.]
Some things are universal, all across the country.
It is unusual, in fact, maybe unprecedented to have disaster bills responding to price collapse. Disaster bills are you think of for drought, for floods. But without price protection in the farm program, we have had the disaster bills responding to price collapse.
Now across the panel, is there general agreement that that has been appropriate for Congress to pass disaster bills relating to the price collapse? All in favor? Across the audience, all in favor? Any opposition?
Then in that feature, I would say Freedom to Farm has failed in this respect. Something has got to be done when prices collapse, so that this ad hoc disaster year after year can be improved upon. Counter-cyclical price protection, if we can figure out a way to get it into the farm program, I think is going to be terribly important so we do not have this annual ad hoc disaster issue.
As we look at this year's disaster program, let us talk about, for a moment, how it works. I would like your chart up, if you do not mind, Mr. Blindert, the blue one. Using the AMTA payment, double AMTA payment, as a response to price disaster, is basing the relief upon production histories back in 1985. Now in North Dakota, we have had a 100 percent increasethat is what has happened to prices. [Laughter.]
In North Dakota, we have had a 100 percent increase in soybean planting sine 1996 alone. And if you look under soybeans, you can see why. That is where the price protection has been, under their loan rate. The oilseeds were not program crops, so they got built in a loan rate. That is totally different, in terms of the amount of protection it affords, to the other commodities.
Page 92 PREV PAGE TOP OF DOC Now what you have got is farmers moving into these oilseeds but getting AMTA payments based upon their old production histories. So if I am a corn and soybean farmer, suddenly I am a lot more into soybean than I am into corn. I get the loan rate support behind corn, I get the double AMTA based on my corn base that was in existence in 1985. And is that why, Mr. Blindert, we have got a system where we are not necessarily targeting our disaster relief to where the low prices are really whacking the producers.
Mr. BLINDERT. I do not know if you noticed the schedule that I did, but I did re-align the loan rates and lowered soybeans and upped wheat because wheat was so bad. Now I do not know if that is politically acceptable, but at least they are in line.
Mr. POMEROY. It is not. I mean, what I think we need to do is raise the up, we need to restore equilibrium. FAPRI has told me that you do not have loan rates behind oilseeds covering cost of production. So I think what we need to do is raise everybody else up, restore the equilibrium so you do not have market-induced planting of oilseeds, but you do have an equitable measure of risk protection behind the others.
Mr. BLINDERT. Yes, sir.
Mr. POMEROY. Mr. Skogen, Grain Growers, comment on that one?
Mr. SKOGEN. Yes, we support the equalization of loan rates between commodities. We, too, recognize the disparity in the wheat and barley, for example, in the lower loan rates, and it is our hope that we can equalize that and still provide long-range protection against periods of low prices.
Mr. POMEROY. But without targeting, do you see this consolidation accelerating rather than stabilizing?
Ms. SVENNINGSEN. I think all you have to do is go to North Dakota and look at the number of auction sales that we have, if you want to see consolidation going on. We are losing family farmers all the time. We have to have a farm program that is going to target family farmers, that the country is going to say, we value family farmers, we want rural kids, we do not need more people in town. And so it is absolutely essential that we have a farm bill that targets family farmers and puts the importance where it needs to be. [Applause.]
Page 93 PREV PAGE TOP OF DOC The CHAIRMAN. Mr. Thune.
Mr. THUNE. Thank you, Mr. Chairman. Let me just being by crediting Craig Blindert and Phil Cyre, who I think is here also, on a lot of hard work put into this proposal. There has been a lot of effort made to perfect it, and in working with and getting a reaction, response from different people and from producers. I think that there are a lot of things about flex fallow that I think makes some sense. I like the way that obviously it distributes income a little bit differently, it is voluntary, it emphasizes conservation, it is consistent with WTO, which I think is also going to be something that will be raised in terms of trade policy and how domestic support programs impact our trade policies.
But I think, the perception in just visiting with other members, even of this committee, and other Members of Congress about it, the perception that you will have to overcome in order, I think, to move this forward is that it is a supply management program, and that in fact, what we are doing is taking land out of production and trying to control the supply side of it instead of looking at new ways to market.
But like I said, I think that there has been a lot of work put into this already, and it has come a long ways. And I think it deserves a more lengthy examination and review by this committee. I hope that we will have an opportunity to really look at this in light of where we want to go with farm policy, because there is a lot of validity to what you are trying to do.
I would just ask one question of it, Craig, and I have seen some FAPRI analysis of this, but I come back to the bottom line, all the positive aspects of the programs we have talked about today, things that we can do to help, better support the farm economy in this country. What will it do to improve prices? Bottom line, what will be the hopefully upward impact on prices and how, in a theoretical sense, will that happen?
Mr. BLINDERT. I have been conversing with Gary Adams down at University of Missouri, and Dr. Ed Smith from Texas A&M lately, and they tell me thatand I have been trying to get them, the next time that they analyze this, because I think there is a possibility, I do not know, but some type of market behavior, and that has not been analyzed in this. Because we do not know for sure what is going to get planted. It will be the job of the market to get it up close to the cost of production to encourage you to plant. So we are talking a behavior change in the market.
Page 94 PREV PAGE TOP OF DOC Right now we have a just-in-time philosophy in stocks. Stocks are not that high. It is just that, according to this chart, if you lose less money by planting than by not planting, you are going to plant. And the market knows that. They do not have to reach for nothing. So there will be a behavior change. And that is how the price will increase.
Mr. THUNE. That would, I think, apply domestically. My question would be whether or not foreign countries might step up production in some of those if we take land out of production?
Mr. BLINDERT. I have also heard this, too. They say, well, if we have set-asides, corn production is going to go up. And if we get the price low enough, they are not going to plant. We had a 15 percent increase in corn acres last year in Argentina, a 4 percent increase in Argentine soybean acres, and a 1.8 percent increase in Brazilian soybean acres. So they are still planting and they are still expanding. And the theory is, at $5 and less, they shut their Cats off, they do not break up any more new land. At $6, they warm them up. At $7, they start them up and they go day and night.
The flip price on here is $5.75, according to the FAPRI analysis, but they do not have a set-aside expense in there for some type ofI think taking care of your set-aside acres. So actually, the flip price is down to about $5.60. So it does not get high enough to encourage any of that. Thank you.
Mr. THUNE. OK. Let me just ask, too, if I could, just kind of poll the panel here as to what your view is of that, very quickly because I am out of time, I see. But is this a concept that you would support, yes or no?
Mr. DITTRICH. Yes or no, that is tough for me to do. I think that the idea of voluntary set-asidesand ours is a voluntary set-aside program, too, and the idea of raising loan rates are key to both of our proposals, and it is just key to raising farm prices. You have to do something about, too. There is a reality agriculture that you just cannot deny. And I would disagree with Mr. Blindert that production goes up, that production rises ifthat farmers have the ability at all, irregardless of price, to cut production. If you examine it closely on an individual basis, a farmer cannot cut production on his farm voluntarily. That is reality, no matter what the price. And there is a real good study I have seen on world price, world production in subsidized versus unsubsidized countries. And actually, the production has risen the most or equal in totally unsubsidized countries, like Australia, versus the most subsidized country, European Union. The reality is, farmers will plant every acre they can, no matter what the price. And we have to address that in farm policy.
Page 95 PREV PAGE TOP OF DOC Mr. THUNE. OK. Just quickly, anybody?
Mr. SKOGEN. It is a fact that our market share of export to the five major wheat exporting countries in the world, the U.S. market share of that amount of export dropped from 50 percent to under 30 percent during periods of production controls in the United States. Somebody simply steps in and fills the gap.
The reason that it is legal under WTO rules is because all the other countries appreciate that, when we cut back production, so that they can increase with their market share.
Mr. THUNE. Anybody else want to comment on that?
Mr. TUMBLESON. When you have that program, be careful of the carbohydrate society when you do this, because if you are going to supply the carbohydrate society, you have to have a supply. The Congressman from California, when we were out there trying to sell ethanol with the corn growers, the first question is not, are you going to be able to supply us? I do not know what it is. That question. So if you are going to increase to a carbohydrate society, remember, you have to have a reliable supply.
Mr. VANDERWAL. Just very quickly. These gentlemen have done a lot of work on this and I commend them for that. But I am not convinced that it is going to work. I do not get excited about set-asides because of the factors that we mentioned before, being in a worldwide economy. The bottom line that I always go back to is you cannot idle your way to prosperity.
Mr. WIETHARN. No, I do not support set-aside, either. I think the other countries will increase their production. I do support higher loan rates with higher revenue coverage to support the farmer through the down cycle.
Mr. THUNE. Thank you, Mr. Chairman, my time is expired.
The CHAIRMAN. Mr. Boswell.
Page 96 PREV PAGE TOP OF DOC Mr. BOSWELL. Thank you, Mr. Chairman. I think we have figured out it does not take a rocket scientist to figure out that we have got to have a price or you do not make it. And I think I have heard it over and over, here and back home and so on. How do we get there? And there has been some interesting presentations here. The FAPRI presentation, Dr. Harl, as you know, is quite involved in that, and I appreciate that.
I do not know, Mr. Chairman, I do not want some of these folks not to be out there on the farm. And I guess there is a certain amount of realism has to be in here. I have felt like, and you can tell by looking at the hair on my head, I have been around a while, and I think I personally, in my engagement, have failed to recognize soon enough that we, the farmers, have got to be in the value-added, we have got to look on out there. And we have not done it. We have got vehicles to do that, but we have not done it.
First off, I do not want you leaving the farm next year. You have got to have a price. I do not want you leaving the farm. And I want these kids to get a chance to farm. I am going to support the extra payment, I hope we can do it better, and I am going to work with my colleagues to try to figure out something to get in this risk management side. I think we have got to do it better. We have got to share the value-added, and you and I have got to be willing to invest something in it.
Then we get around to your question is, what do we got left after all the other things going on, to invest something? So I hear people sayingnow this panel, more than the previous panel, that you think that the loan rate ought to be increased. To what degree should it be increased? Up to the cost of production or what? And maybe somebody could comment on that, that are in favor of it, and then I am going to give my time back to the Chairman, because he needs it. Comment?
Ms. SVENNINGSEN. Congressman Boswell, I heard you say something about you would support the extra payment. The extra AMTA payment, I assume, is what you are talking about. My first comment would be, I do not believe that is the best vehicle to use.
Page 97 PREV PAGE TOP OF DOC Mr. BOSWELL. Temporary. I am only thinking temporary.
Ms. SVENNINGSEN. I understand, even temporary, I do not believe that it is the best vehicle. We need a price for our product, and we need to have an increase loan rate this year. I feel that is the best way to go. It is going to put the money into the hands of the producers, which is where it needs to go in the first place.
And so, as far as the cost or as far as the increase in the amount of the loan rate, it needs to be at least as high as the cost of production, and why should we be willing to settle for cost of production? I need to make a living on my farm, something we have not done for quite a while. If I was not working in town, we would not be farming today. It is ridiculous that 1,500 acres of land and 190 head of cows will not support a family of four. I could not think about sending my kids to college on the money that we make off our farm. It barely supports itself. It has not been.
I want a price for my product, I want a fair price, and I want to be able to make a prosperous living while I am doing it. I work hard and I deserve that.
Mr. BOSWELL. I agree. Mr. Chairman, back to you.
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. Thank you, Mr. Chairman. I am going to take an opportunity to pose a couple of questions, particularly I think these hearings have been so interesting, at least to me, to see the various kinds of agriculture around the countryand I was struck, and I know that you cannot compare soybean growers to grape growers, but it was interesting in listening to all of the testimonyand I want to get to Mr. Tumbleson and let him have a few minutes to talk about a couple of his ideas, or at least develop some of the thoughts he has talked about. But it is so interesting to me, because when you talk to the grape growers, I mean, they are certainly concerned with production, but the overwhelming amount of energy and what they do is about marketing. And yet it strikes me that, when you get some of the row crops we produce here in the upper Midwest, we spent all of our time concentrating on production, and almost no time on marketing. And that is where the value-added comes in.
Page 98 PREV PAGE TOP OF DOC Mr. Tumbleson, you have been a very good friend and a trusted advisor, and I wonder if you could spend just a minute or two exploring the whole notionyou have talked to me many times about we concentrateand I do understand, and if you are worrying about making payments, the price per bushel is extremely important. But at some point, we do have to begin to change that debate and talk about revenue per acre. And then second, what we can do from a public policy standpoint, to begin to encourage producers to be much more involved in that value-added, in the marketing side of the commodities we produce. So I would yield to you.
Mr. TUMBLESON. Well, what happened is, I had a grandfather that talked to me when he was farming, if he could get a nickel more for his corn, he was going to be in good shape. I had a father that did the same thing, and I look in the mirror.
So what has happened here that price has not solved our problems out here in agriculture, and as we move into that, you said it, the profit per acre. I do not even like to say this with this crowd here, because they are going to throw something at me. If I get a dollar a bushel, that is a price of corn. But if I invested that in a corn processing plant or something, and I wind up with the money coming back that amounts up to $3 a bushel, look at what I have made per acre. When I fed cattle, and we used to feed a lot of cattle, we did that thing. That was the profit per acre.
Now what this committee can do is you can set up the structures that we can do that. You can set up so we do not have the expertise, as farmers, to set up the businesses. We cannot own all the businesses. I would like to, but we cannot. We have to share in this, we have to join in with the structures that are out there and get some of that value. If you were feeding pigs a year ago, like I was, there was a lot of money made in pigs. Did I get it? No, I did not. But had I had been able to invest in that, that would have come down, I would have made my profit per acre.
Now the worry I have, and there is a lot smarter people in this world than I am, is that Mr. Minge just mentioned it, when we do that, when we invest into this vertical thing, set up the structure so that it does not come back and all get put into land. And if that happens, we have failed, just like he said. We can set that structure up through your tax programs, through your incentives, and we can move through that. I am confident that you have the ability to do that, then we will have farmers. If I have a farm or if I am farming 800 acres and she is farming 800 and he is farming 800, we go together, we have, what, 2,400 acres? That is a great operation. We still are independent producers, but over here we are together.
Page 99 PREV PAGE TOP OF DOC Now I am not going outbid her land because then it is going to ruin what would happen vertically here, and that things starts to work. It is all out there, it is sitting there. If you can pass some laws in that tax structure of that thing, it will work, and it is available to us.
Mr. GUTKNECHT. Thank you. Mr. Chairman, I will yield back the balance of my time.
The CHAIRMAN. Mr. Riley.
Mr. RILEY. Thank you, Mr. Chairman.
To the panelists, you did a great job. You asked some very thought-provoking questions.
One of the things that strikes me, though, and I would like to hear your comment, when you come from a State like Alabama where we do not have these huge farms like you do in the upper Midwest, and I think each one of you are exactly right, we need to do everything humanly possible to make sure that your children can stay on that farm, that they have the option to do that. But at what point, and how do we differentiate between what a family farm is and a corporate farm?
Mr. Tumbleson just brought up a point a moment ago that, if each one of you had 800 acres and you formed a co-op or whatever, and went in together, when does that cease to be a family farm? And how do we determine, as a committee,I think all of us want to preserve that family farm. But at what structure? Do we do it by acres, do we do it by income, do we do it by revenue, do we do it by product? Yes, sir.
Mr. DITTRICH. I think bottom line is, in the big picture, and that is what we really try to look at all the time, is the big picture, farm prices in general must rise. And if your farm prices in general rise, farms of all sizes, particularly family-sized farms, will benefit. And then we should target, as our program does, we should force more market risk on the larger farmers, and that provides some targeting, quite a considerable targeting to that family farm. And we think of a family farm, I am sorry, I am not getting to what you want.
Page 100 PREV PAGE TOP OF DOC Mr. RILEY. No, that is fine.
Mr. DITTRICH. The family farm, we feel, is basically an operation that most of the labor is provided by the farm family. That is kind of a general rule that we use. And so someone that has a very high number ofmuch of the labor is provided off the farm would tend to be towards something we do not consider a family farm. It is a difficult issue, but that is an angle we look at it.
Mr. RILEY. All right.
Mr. WIETHARN. I believe the definition of a family farm is when the ownership lives and resides and works on the farm, also, and maybe not to the self, that all the employees are off the farm or the majority of the employees are on the farm, but the families that are there and employed, maybe it is outside employees, but allows the kids to participate in some of the things that they can participate, to teach those kids the type of living style and what it takes, the responsibilities to become productive individuals.
Mr. RILEY. Thank you.
Ms. SVENNINGSEN. I kind of say this tongue-in-cheek, I kind of like Senator Dorgan's idea on how to determine a family farm. He said, lock a bunch of people in a room, and throw out everything that is not a family farm, and by the end of the day, you come up with a definition for a family farm. It is a tough thing to talk about.
I would also say that, we have already kind of defined a family farm in some respects. We have payment limitations in the FAIR Act. And what happened to them? Somebody hit the payment limitation, and the first thing they did is, you doubled it. And then somebody else had some problems with it, and so you basically removed the caps on it. If you are not going to stick to what you are going to set up, there is no point in having it in the first place. [Applause.]
That is just it. You have to decide what you are going to do and then stay with it.
Page 101 PREV PAGE TOP OF DOC Mr. TUMBLESON. I want to make one little point on that family farm. We call it a farm family, because we need them all for rock picking. What happens here is, you can incorporate, a subchapter S or whatever it is. Is that now not a family farm? And this is done strictly for tax reasons. And that is what I was getting to in the value-added. And then when Congressman Moran was talking about his tax for self-employment tax, do you realize farmers, if they do that, do a subchapter S, which is still a family that is farming, we have self-employment tax on land rented to that, we are the only thing in the United States that gets caught in that. And you have the ability to change that. Please do.
Mr. RILEY. That is a good point. Thank you, Mr. Chairman. [Applause.]
The CHAIRMAN. Mr. Latham.
Mr. LATHAM. Thank you very much, Mr. Chairman.
Mr. LATHAM. First of all, I want to thank the panel. Many times, you have kind of abstract testimony without any concrete proposals, and this panel has got some very, very concrete proposals that I think are all worth looking at and considering.
I always carry with me my Quick Facts and Census of Agriculture, it is USDA from 1997. And in this, there is a chart about the number of family farms, and going back to 1969, and in 1997, there is about a third of the family farms from 1969 no longer here. And it is a steady decline.
I can tell you as someone who still lives on the home place, when I was growing up, in our part of the country, we had four farms in every section, and very viable family operations. Today, you are lucky if there is one farmer on a section. Most of them are occupied by someone who works in town, somewhere else. And I went through our plat book a few months ago, and went through the four townships, and I could find in the last 20 years, three people who had come back. And looking at the farm sites, hundreds of people who had left. So I mean, this is not a recent change. This has been happening, and I think a lot of it goes to what Mr. Tumbleson was talking about. Today he is able to operate 2,500 acres. 15 years from now, probably that same family farm is going to be able to operate 15,000 acres. And it is scary, when you think about the rural communities and what that does, if we do not address the idea of value added and trying to have new economic growth in rural America.
Page 102 PREV PAGE TOP OF DOC There is something called the economy of scale, and anybody who has bought any equipment lately, or inputs, understands that. And my one concern, and I appreciate the idea of raising loan rates to cover the cost of production, but I really question what that does as far as making the acceleration of the size of a farm happen much more quickly.
If you guarantee no loss, if you take the risk out, who do you compete with? You compete with everyone who has money, and comes into that operation is going to be able to buy you out if there is no risk of loss. Could you address that?
Ms. SVENNINGSEN. My comment takes you back to the family farm. You can address that by setting a cap on the amount that people can get. And as soon as you set the cap down so that it is the size for a family farm, if you want to farm half the county, go ahead, but we are only going to give you payments up to a certain point, and that is it. And then at that point, I think that you can do it. I do not think it is inevitable that we are going to lose, that we have to lose family farmers. It just depends on how the program is designed.
Mr. LATHAM. OK. Anyone else have a comment? Yes, sir.
Mr. DITTRICH. I think that we should consider what causes expansion. And two things that it has been evident to me over the years that has caused expansion are two, desire by a farmer, or need, and opportunity. Low prices and poor economics force a farmer to desire more land because he tries to spread his costs over morefixed costs over more acres. So the desire and the need is there because of low farm prices to expand.
The other thing that has allowed the expansion to occur is opportunity. As farmers go broke, there is more opportunity. So you have the need to expand because you have to, because of low farm prices, and you have the opportunity because your neighbor is going out of business. Well, how do you reverse that? If you have a general level of economic health that is better, the need to expand is less because you do not need more acres, and the opportunity is much less, because the families are much more stable and the land does not turn over.
Page 103 PREV PAGE TOP OF DOC So I think, beyond the targeting, we must also address those thoughts. Need and opportunity. And if you improve the general health of the farm economy, need is less and opportunity is less.
Mr. LATHAM. OK. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.
I ask unanimous consent that Bunny be given 1 minute for purposes of addressing the committee.
The CHAIRMAN. If there is not an objection.
Mr. STENHOLM. The story on thisit is round, maybe a little bigger.
This was given to me by some long-time friends, and it was a result of a comment that I made at a previous hearing in which I said, we have been chasing this rabbit, I have, for 34 years. And they said, you have now caught it, here is the string, we want it tied around your finger.
That is the spirit in which these hearings are being held, and I think it is a perfect living example of why we are here and why we are talking and why I appreciate so much many of the suggestions that have been made, particularly Mr. Blindert, Mr. Dittrich. Mr. Dittrich, I know we have not had a chance to sit down and have the visit we will have, because I think your chart and your numbers showing that, no matter what our prices have been, no matter what our policy has been, no matter whether we use all the EEP or do not use all the EEP, we are not exporting any more pounds today of corn, of beans, of cotton, than we were 25 years ago.
And I have posed this question to many more learned than I to explain this and to help us in our committee deliberations determine what do we need to do differently if we are truly going to gain additional market share. And I think that is something we have to look at as we design the next farm program.
Page 104 PREV PAGE TOP OF DOC And Mr. Blindert, I think you perhaps have done as good a job as anyone we have had in the previous 135 of coming up with a specific recommendation. Whether it is good or not, whether it is perfect or not, it is a suggestion that deserves considerable amount of thought and I think as you have heard from the questions of the members here today, that we will, in fact, look at that. There are a lot of myths out there right now, and one of which, Mr. Dittrichand I do notin the limited amount of time, we cannot go into in-depth, but we will have the opportunity in the full Agriculture Committee in Washington and elsewhere, to thoroughly go into some of these specific points as we get to them.
To those of you who have suggested ethanol as value-added, I have done a 180. I opposed that 2 years ago, because I represent, as Mr. Combest does, the Oil Patch and there were very few folks in this room very sympathetic to the oil producers going out of business about a year and a half ago when we had the lowest prices of oil in the history of our country. Most of us farmers, even in the Oil Patch, my fellow farmers, were enjoying 50-cent diesel and 79-cent gasoline, and there was no complaints. But boy, when it went to a buck and a half, we started complaining.
And one of the things that we have done in the Oil Patch now is recognize that we need a little sympathy, too. The oil producers, independents, are a little more of a minority than any of us, we farmers are, and therefore there is something in a national energy policy that can use that which we can produce in a renewable resource for purposes of national security. And biodiesel and ethanol and all of this are some excellent ideas in value-added that need to be seriously considered. And you have been proposing this, many of us have been on the other side for a very good reason.
It was very difficult for me to explain to my folks in the Oil Patch why we should subsidize competition when they would not be able to make money at the price of oil. And now today, we know that $20 or $25 oil, we can all live with. Ethanol can be an economically achievable product.
Page 105 PREV PAGE TOP OF DOC Value added, Mr. Dittrich, one thing you need to point out, I think, a little better, and that is, yes, domestic consumption has gone up, but most of that is value added. We are exporting more pork, more beef, than we have ever before in the history of our country. And that is soybeans and corn that is being exported. And we need to look at that as we explain those very interesting charts.
The one question again I want to ask each of you, do you believe that we ought to immediately, or this year, eliminate all unilaterally-imposed sanctions on the ability of American farmers and ranchers to sell into the international marketplace? Yes or no? If you have a no, respond. Otherwise, the heads are all shaking yes.
Mr. BLINDERT. Yes, with questions, sir? Excuse me, I got, yes, with questions.
Mr. STENHOLM. All right.
Mr. BLINDERT. I believe in free and fair trade. Does China have a history of complying with past trade agreements?
Mr. STENHOLM. Wait a minute, I am not asking you the China question yetwell, OK. All right. That is fair. It will be just as good on the China question.
Mr. BLINDERT. OK. Thank you, sir.
What is China's real goal on trade? Is there intent to increase imports of commodities from the United States, or is China's goal to import our advanced agricultural technology to increase grain production and compete on the Pacific Rim export market? Now I want to refer to a chart about ten pages in, on my testimony, of actual corn production and calculated production with U.S. technology. And they saythis was done by Iowa Statethat China could produce 2.9 billion bushels more corn with our advanced technology. And I am not against that. But will China's laws allow technology fees to be collected or will their farmers be able to use our technology at reduced cost, because their laws do not allow collection of technology fees? Similar to Argentina's laws that do not allow collection of Roundup Ready technology fees, this is sort of a trade distortion. I guess those questions that I would like to kind of know.
Page 106 PREV PAGE TOP OF DOC Mr. STENHOLM. Everyone else said yes?
Mr. TUMBLESON. Yes. I believe that with the thing, when we talked about that, if we live in a capitalistic society and love it and believe in it, why are we against it other places? Once these people realize they are living in athey have the same opportunity, we do not have to worry about human rights. Capitalistic society solves those. That is how we do it.
Mr. STENHOLM. And the other question is, do you believe that we ought to have permanent normal trade relations voted by the Congress during the week of May 22? Yes or no? Yes, with qualifications?
Mr. DITTRICH. Yes.
Ms. SVENNINGSEN. If we are talking about PNTR with China, we are past the sanctions now? I would conditionally support PNTR, and that condition would be as long as it is a trust but verified situation.
The other thing I would like to make one comment about is trade. I have heard a lot this morning, a lot of talk about trade like trade is going to be the savior of agriculture. And I do not believe that. I think that it is excellent, we have to work on it, we need to open up trades, but all these countries that we have sanctions against have been eating. They are buying wheat, they are buying stuff someplace else. So the minute that we lift our sanctions, that is not going to mean that we are going to immediately rush in and sell them all this stuff. And so I think it is important that trade is an aspect of looking at increasing prices for farmers, but it is not going to be the savior for American agriculture and for farmers.
Mr. TUMBLESON. Trust and you will be trusted.
Mr. STENHOLM. One final comment on the rabbit, this rabbit was made in China. [Laughter.]
Now Ms. Svenningsen, I do not want an answer today, but I just make this point, regarding land values and cost. If we just refuse to buy anything from China, we would not be buying a billion dollars a week from them today. That it is so simple, except it does not work that way, because the American people are going to buy where you can get the best value, and it is going to be competition. And if we choose to ignore that, we are going to be in trouble. The same is true for land. If we farmers would just stop paying the rent associated with the increased value of increased loans, the rent would not go up. But I understand why we do not do it. I am just saying, there are no simple answers to the question, except that is an answer that would work, but it just does not work that way, because your neighbor is going to take that opportunity to farm that land they have had their eye on for a long time. And we cannot legislate against that.
Page 107 PREV PAGE TOP OF DOC The CHAIRMAN. Thank the panel very much for your participation. And we call now our third panel. Mr. Eric Aasmundstad, corn and soybean farmer from Devil's Lake, ND; Mr. David Hanna, alfalfa producer from Lexington, NE; Mr. Brian Hanson, a soybean producer from Racine, MN; Ms. Kristi Noem, corn, soybean and wheat producer from Castlewood, SD; Mr. Ron Olson, corn, soybean and wheat producer from Waubay, SD; and Mr. Douglas Schmale, who is a wheat and millet producer from Lodgepole, NE.
Mr. Aasmundstad, we will begin with you. Mr. Aasmundstad, please proceed
STATEMENT OF ERIC AASMUNDSTAD, CORN AND SOYBEAN FARMER, DEVIL'S LAKE, ND
Mr. AASMUNDSTAD. Good afternoon, Chairman Combest and members of the House Agriculture Committee. We thank you for this opportunity to come out and comment on the farm program. My name is Eric Aasmundstad. I am a wheat and barley and edible bean producer from northeast North Dakota. I also own and operate a custom harvest business that runs in six States, and I am also the president of the North Dakota Farm Bureau.
We feel there are components that must be incorporated in a counter-cyclical safety net to better protect producer concerns and to better address taxpayer concerns. We believe these concerns will best be addressed if a budgeted assistance program is in place rather than an emergency disaster package. The disaster funds have been a Godsend, but have not addressed the real problem.
An equalization of loan rates is required to level the playing field between crops to ensure that cropping decisions are not distorted by potential program coverage. We support raising the loan rate for corn and wheat to the same percentage of the national average cost of production of soybeans. We do not advocate lowering the soybean rate. However, the loan rate on a particular commodity should never exceed 100 percent of the national average cost of production.
Page 108 PREV PAGE TOP OF DOC The LDP has become an accepted safety net feature of the farm program. It could be improved to address weather-related disasters. Currently, if a crop is lost due to some weather phenomenon, a producer has no way of accessing an LDP. We would encourage Congress to amend this program to allow producers to receive a payment based on either actual production history or county average yield. This would provide some sort of support to those producers who experience weather-related disasters.
The current AMTA payments should remain decoupled from any future counter-cyclical safety net payments. Combining those payments for limitation purposes would be counter-productive to producer support. Unilateral supply management will only harm our farmers and give the advantage to our competitors. The proposed flexible fallow concept is nothing more than a graduated set-aside program. We cannot endorse this or any set-aside program. It would only send the wrong message to our competitors. We must not allow other countries to gain market share as we reduce production.
There has been talk of implementing a farmer-owned reserve. We cannot store our way to prosperity. The U.S. currently warehouses a disproportionate share of the world's grain reserves. We must not add even more to those reserves. Expanding U.S. agricultural exports through market development is a more appropriate avenue to pursue. We support increased funding for the Market Access Program, the Foreign Market Development Program and Export Enhancement Program. Discretionary export programs like Public Law 480 must continue to be funded as well.
Additionally, any time the United States extends credit to other nations, we should demand that those countries use that credit to purchase U.S. commodities.
If our Government is reluctant to aggressively develop those markets and export our commodities, we believe that producers should be compensated for lost income due to lack of trade. North Dakota Farm Bureau has developed a farm recourse export equity proposal which would tie compensation to farmers who lost export markets. Under this proposal, a formula would establish a compensatory payment to producers based on the difference between current prices and carry-over stocks compared to prices and carry-over stocks when the FAIR Act began. We believe this would encourage Government action to export commodities and reduce stocks.
Page 109 PREV PAGE TOP OF DOC Trade is paramount to increasing agricultural profit. In order to successfully negotiate meaningful trade agreements with other countries, the administration needs to have fast-track authority immediately. We have been hindered in our efforts to access markets by the lack of fast-track authority while our competitors capitalize on our ineffectiveness. The opportunity for U.S. producers to participate in the greatest potential growth market in the world is about to be voted on in Congress.
We must grant PNTR to China. It is imperative that we have access to this market. Without it, our farmers will be unable to compete and they will be financially hard-pressed to survive.
Sanction reform is also needed. Unilateral sanctions on food and medicine have never attained the desired goal because other countries are willing to supply those products to the sanctioned countries. Furthermore, denying food and medicine does nothing to punish a foreign power, only people. The American people are also hurt as the reduced commodity prices our farmers receive require huge infusions of tax dollars to supplement agricultural earnings.
When the FAIR Act was enacted, farmers were promised regulatory reform. To date, most of the reform has been of the more restrictive variety. Our crop protection tools are now scrutinized more intensively under the pretext of ensuring a safe food supply. Many of these pesticides are being targeted for removal through the Food Quality Protection Act. This review process must use scientific, documentable facts, not worst-case assumptions. And while our crop protections are being systematically removed, we import commodities from other countries produced with the very pesticides that are banned here.
We must level the playing field. North Dakota has led the battle for chemical harmonization with our NAFTA partners. Recognition, acceptance of chemical research and a joint chemical registration process are needed immediately. We believe these changes, coupled with the full implementation of the provisions of the FAIR Act that are yet to be put in place, will provide the safety net features that producers need.
Page 110 PREV PAGE TOP OF DOC Thank you for this opportunity.
[The prepared statement of Mr. Aasmundstad appears at the conclusion of the hearing.]
Mr. BARRETT [presiding]. We thank you. Mr. Hanna.
STATEMENT OF DAVID HANNA, ALFALFA PRODUCER, LEXINGTON, NE
Mr. HANNA. Chairman Combest and other members of the committee, I appreciate the chance to speak before you today. My name is David Hanna and I am from Lexington, Nebraska, Bill Barrett's hometown, so do not hold it against me.
I feel that I am here today representing the alfalfa producers. We come from an area called alfalfa center in the old days, and we produce a lot of alfalfa. And I want to bring up a point that I think everybody leaves alfalfa out of the picture when we are looking at all of our programs.
It is a friendly crop, it is an environmentally friendly crop, and I am not going to go with my notes because of time today. But I think all of you know what alfalfa hay is.
It is grown in over 40 StatesI did dig that up in preparation for that, and we have a lot of acres of it. When the Government programs first came into effect, I can remember my grandfather trying to play the program. And it is no different today. Last year and the year before and the year before that, since 1995, the Freedom to Farm, alfalfa had a chance to be a very good cash crop, and we started out that way. In 1996 and 1997, as all the rest of the agriculture commodities started to fail, so did alfalfa.
The point I want to bring up today is that, when the LDPs are brought into effect, and when the AMTs are brought into effect, a lot of times a commodity is left out of the picture. If we were heavy into hay, which a lot of us were in our area because we produce a lot of livestock and we support them with our alfalfa production, we have a number of processors that create pellets that can be exported out of our area into Texas, into Mexico, and used to be in Europe and other areas. I provided charts basically to say that some of those opportunities are no longer with us.
Page 111 PREV PAGE TOP OF DOC I want to bring up a couple of points. If we are going to have LDP, if we are going to have AMT, we need to consider the fact that we are leaving some of the people without any security net. I took a big hit for three years, I have no option. Hay is a 5- to 7-year product. If I put alfalfa in, I plan on it being there for 5 years. If the LDP comes in, I have no way that I can tear up a crop 2 years after I put it in and come out.
I brought up two points that I wanted to bring up. If the farm program is administered so that all planted acres are treated with the same payment, then alfalfa, as a crop, would be evaluated on its market value, and not whether we can get there in time for an LDP.
I want to stand corrected on my point No. 1, I want it to be included in the Crop Insurance Program. My congressional group has informed me that that is in place within the USDA. I did pursue it. Alfalfa is not an insured crop in the State of Nebraska, it is not in most of the States around me, however there is two counties, I understand, in South Dakota that have it, and we have started pursuing it. But talking with the insurance industry, they are just now starting to express an interest.
I feel that alfalfa is a good product, it is something that is a great cash crop for many, many people in our area, and I want to bring a concern that all of them have that are heavy into alfalfa. We were left out and we want to bring that point to your attention. Thank you.
[The prepared statement of Mr. Hanna appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you. Mr. Hanson.
STATEMENT OF BRIAN G. HANSON, SOYBEAN PRODUCER, RACINE, MN
Mr. HANSON. Mr. Chairman, members of the committee, good afternoon. I am Brian Hanson, a soybean and corn producer from Racine, Minnesota. I am here today representing myself and the members of the Minnesota Soybean Growers Association and the American Soybean Association.
Page 112 PREV PAGE TOP OF DOC U.S. soybean producers know that profitability depends on enhancing market demand and increasing global competitiveness. We have historically tried to look to the marketplace rather than the Federal Government as our source of farm income. This orientation is underscored by our dependence on exports. Nearly half of all soybeans and soybean products are sold abroad. The ASA has consistently represented these interests in its positions on international trade and domestic farm policy.
In the debate on the FAIR Act, ASA endorsed Freedom to Farm, once it was made clear that soybeans would be treated equitably with other crops. We continue to support the FAIR Act. Unrestricted planning flexibility enables producers to optimize crop selection and reduce operating costs, maximizing our opportunity for profitability. Combined with the marketing loan program, this approach is highly consistent with orientation toward domestic and foreign markets.
It was recognized by Congressional supporters that Freedom to Farm would make U.S. agriculture more dependent on the world marketplace, requiring greater access to foreign markets. It was also recognized the decreasing dependence on Government support would mean less interference in production agriculture and that producers would need to have access to more effective risk management tools. Accordingly, Congress and the administration made a number of amendments at the time to policies and programs that would help make the FAIR Act work. The list includes, trade policies that reflect the importance of foreign markets and competitiveness to U.S. agriculture and the elimination of unilateral economic sanctions. And those are just a few of a long list of issues that were mentioned earlier by Mr. VanderWal and others.
It is now several years after the FAIR Act was enacted and few of these commitments have been honored. We believe the best response to the continuing crisis in the U.S. farm economy is for the administration and Congress to address and complete the unfinished agenda of policies and programs they agreed to undertake back in 1996. We do not support going back to the old farm program, and oppose making set-asides or other supply management programs and eligibility requirement for any Government soybean program benefits.
Page 113 PREV PAGE TOP OF DOC ASA supports examining farmer income safety net concepts that would provide increased support when prices or revenue decline. However, there are many unanswered questions and issues about the effects and implications of such counter-cyclical income support proposals. The ASA and MSTA will work with Congress in examining income support proposals. A guiding principle we will insist upon is that soybeans be treated equitably with other crops.
With commodity prices continuing near record lows and many issues yet to be resolved on counter-cyclical proposals, the ASA supports providing a supplemental AMTA payment to offset continuing low crop prices. For the same reason, we also support another economic loss payment to oilseed producers this year. Soybeans and other oilseeds and not part of the production base in the formula for AMTA payments.
We commend Congress for recognizing the situation last year by providing $475 million in payments to producers of 1999 crop oilseeds. In the event Congress decides to increase the amount of any supplemental AMTA payments this year, ASA supports a proportionate increase in the oilseed payment.
Another issue of critical importance to soybean producers is the marketing loan program. We do not need to reduce the loan rate or the safety net. The solution is to enhance demand through greater trade expansion, export promotion, food aid, biodiesel use, reform of the unilateral U.S. economic sanction and other steps that will drive prices above the loan rate.
We very much appreciated Secretary Glickman's decision not to lower this year's loan rate to $5.13 per bushel. Whenever Congress considers changes in the marketing loan program, we will support making the current $5.26 level a statutory minimum rather than a cap.
Another issue that only began to emerge in 1996 is the erosion in U.S. agriculture exports caused by the failure to develop a workable process to address science-based regulatory decisions on biotechnology-derived crops. ASA and MSTA have been one of the lead commodity organizations working to educate foreign customers about the safety and value of soybeans and soy products derived from biotech. These efforts are made possible by funds received from the soybean check-off and the USDA's foreign aid service, and we are leading in efforts to educate domestic audiences on the safety of biotech products and the reliability of our country's science-based regulatory process.
Page 114 PREV PAGE TOP OF DOC We commend the administration for its excellent job in negotiating WTO trade agreement with China last fall. But there is another critical step that must take place if we are to benefit from this historic trade agreement. We must get Congress to approval normal trade relations with China.
As a farmer who invests hard-earned dollars, we have a very successful check-off program that develops markets such as China. I feel it is not right for this market to be denied to me yet fulfilled by my foreign competitors.
Regarding market access and sanctions, I would like to thank Representative Minge for his help in trying to open up agriculture trade with Cuba.
As you know, we successfully managed to get biodiesel included as an approved alternative fuel under the Energy Policy Act. Since that time, we have continued to build on that success with new biodiesel programs and legislative efforts designed to increase demand for soy-based fuel products. All of my diesel engines now burn biodiesel, and all of my gas engines burn ethanol. I am very please at the performance of these superior products and am very proud to use this fuel. And I am very pleased with Representative Gutknecht's work to promote biodiesel. ASA appreciates the efforts of Congress and the administration to focus the Nation's attention on the value of biodiesel. Such efforts will increase demand for soybeans, benefit the environment, enhance our Nation's energy security and mean better prices for soybeans in the future.
In conclusion, as a farmer from Representative Gil Gutknecht's district, I would like to take this opportunity to recognize and thank Representative Gutknecht for his support to Minnesota and U.S. soybean farmers. Thank you for allowing me to speak to you today.
[The prepared statement of Mr. Hanson appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you. Ms. Noem.
Page 115 PREV PAGE TOP OF DOCSTATEMENT OF KRISTI NOEM, CORN, SOYBEAN AND WHEAT PRODUCER, CASTLEWOOD, SD
Ms. NOEM. I would like to thank the entire Committee on Agriculture and especially Chairman Combest and Congressman Thune for agreeing to hold these hearings today.
I am honored to stand before you and express my view on Federal farm policy and how it is currently affecting family farms and ranches. I am a partner in a family farm operation near Hazel, South Dakota. My heart is in farming and I have a desire to see family farm operations not only survive but excel in the 21st century. I also serve on the Farm Service Agency State Committee, and as a State committee, we have facilitated listening sessions in every region of our State to garner information that would be useful to USDA and to Congress.
Producers throughout the State of South Dakota are very concerned about the state of their industry today. After losing many of their neighbors and fellow farmers and ranchers to the third straight year of economic hardship and disaster in the production agriculture industry, hundreds of farmers attended these listening sessions to give their input in what they see as problems and give possible solutions. It is on their behalf that I am testifying today, as well as my own.
In the last 6 months, I have lost two of my neighbors. They both lived within 2 miles of my farm. They were good farmers, they made good decisions. I thought they would outlast me and my family. They were good stewards of the land and they were good neighbors. The most important part of my story is that I am not unique. It is happening all over America. The problem is now is that we are losing good farmers. We are losing productive men and women who made good decisions, who did things right and were still forced to shut down. Many factors have played a part in this and the Government has an ability to overwhelmingly impact the industry of agriculture with administrative and legislative changes. Is it of benefit to the people of the United States to keep all areas of the Nation productive and populated? If rural America is eliminated and the cities grow because of it, a whole new circle of problems will exist, including higher crime rates, poverty, water and waste treatment issues. To truly be an independent nation, we must not be dependent on other countries for food. We can only be sure of the safety of our food when we produce it.
Page 116 PREV PAGE TOP OF DOC In 1996, when the Freedom to Farm bill was passed, I was optimistic. I liked the flexibility of the program as do many producers. I have not had one producer tell me that they did not like the flexibility within this farm bill. Producers are not asking you to do their jobs for them. We just want a safety net within Freedom to Farm. They are only asking for the tools that they need to accomplish this job.
Price, price, price. At every single farm meeting we held, that was the No. 1 issue. There would not have been a single producer at any of those meetings if they were getting a fair price for their products. Let us not approach this situation from any other direction than how can we get a fair price? We ultimately do not want emergency aid or ad hoc disaster bills. We cannot say that this farm bill is truly working when the only reason farmers paid their bills last year was because of the emergency aid and because of the LDP monies from the Government. If you took those dollars out of the equation, I do not know of a single farmer that would have turned a profit last year. We just want to be able to compete. Give us the programs, give us the tools that we can use to get a price.
First we need a safety net. We need an alternative to turn to when prices start to drop, a tool that we can voluntarily utilize to support the price of our product. The flexible fallow amendment is an excellent example of this concept, and I have done a 180 degree turn on this concept. I truly have. When I sat down, it took me a whole year to really back up this product. The producer decides if he is willing to take acres out of production in order to guarantee a price for his commodity. The more I read it, the more I like it. There are some unanswered questions yet, but it is one of the best tools that I have seen proposed. It is a voluntary program, but it is finally a way that a producer has some control over the price that he will get for his commodities.
There should be permanent programs put into place to address issues concerning livestock producers. They need to be afforded the same opportunity commodity producers have and not have to be reliant on disaster programs that come too little too late. This would include livestock insurance. Sheep producers need to have their wool incentive payments returned. Country of origin labeling should be implemented on all meat products. The consumers should get the right to choose.
Page 117 PREV PAGE TOP OF DOC All sanctions and embargoes should be removed from food. Food should be made available in every country regardless of their political standings. We as a nation need to send the message to the rest of the world that it is never right for anybody to ever go hungry. If one of the fundamentals of this farm bill is to increase market access, you have the remarkable opportunity right now to make that happen.
Anti-trust laws need to be enforced. We need to realize that the less effectual players that we have in the game, the more control those players have over the price. Unfair competition needs to be addressed and eliminated. If things are allowed to progress the way they are headed, we will free enterprise ourselves into a food industry that is controlled by a few who no longer have a need to compete or to keep prices low. We need to enforce the laws that we have now.
One tool that would prove very useful is a farmer-owned reserve. A program that may be implemented to pay a producer for storage fee to keep the grain on hand. This program would work hand-in-hand with the facility loan program that is coming right now.
On the domestic side, USDA needs to promote growth and development of value-added industries. All imported commodities need to be held to the same standards as our domestic products. Wetland determinations and CRP/EBI scores are often computed and interpreted differently from State to State. There should be no inequities across State lines.
As a member of the South Dakota Farm Service Agency State Committee, and as a producer, I am very concerned about the future of our agency. Our agency is one of the most valuable assets the American producer has available to them. The producers have a relationship with those county office employees and realize their important roles in delivering the programs. The employees are people who live in their communities, they eat at the local cafes and they sit by them at ballgames. Because of budget restrictions, reductions in force and office closings are a very real possibility. The county and State offices are minimally staffed to accomplish all of the duties that their workloads dictate. None of the recent disaster programs even factor into that workload. The link between you, you guys sitting right here, is that county office. And the grassroots input comes through that county office out to each of those individual producers. Funding must be available to provide that tool to those American producers. We simply needed that fundamental, and I appreciate your efforts on that.
Page 118 PREV PAGE TOP OF DOC As far as crop insurance goes, there has been debate whether FSA should be involved in crop insurance or not. If FSA was ever to become involved in crop insurance, it should only be on the compliance side. FSA should not get involved in selling crop insurance.
These are a few of the issues I feel need to be dealt with to provide a future to American producers. A way of life is changing here in the heartland, and I believe we as producers are up to the challenge. I have heard many different things in what is going to happen to this farm bill that we have right now. And if we are truly going to live with it for the next 2 years, then we need to put programs and tools into it that make it viable for the next 2 years. And you have heard lots of proposals here today, and there is also proposals here today for entirely new farm bills that I hope you will take the time to glance at the written testimony that is submitted, too, and be looking 2 years down the road for when we are looking at a whole new farm bill, too.
[The prepared statement of Ms. Noem appears at the conclusion of the hearing.]
The CHAIRMAN [presiding]. Mr. Olson.
STATEMENT OF RON OLSON, CORN, SOYBEAN AND WHEAT PRODUCER, WAUBAY, SD
Mr. OLSON. Mr. Chairman, members of the committee, my name is Ron Olson. I farm with my wife, I raise corn, soybeans and alfalfa on a farm near Waubay, South Dakota, and I currently serve as the president of the South Dakota Corn Growers. I really want to say an appreciation, and a thank you for coming to South Dakota to hear our concerns of agriculture producers like me, and I especially want to thank Representative Thune for his leadership in arranging these meetings.
Page 119 PREV PAGE TOP OF DOC I am not the best reader so I am going to try and just ad lib through my written testimony. Throughout the last few years, when people asked me, what do farmers need to make a better living on the farm, my feeling is, as Gerald said before is, value added, vertically integrating with closed cooperatives.
As a young farmer, when I go out and try and purchase land, and you pencil it out, it comes out at 6 percent and you have got to borrow money at 9, as a businessman, it does not work. But when you look at a cooperative, returning 20, 30 percent, hopefully that works. We do not need to farm as much land, we can keep more people on the land. I really believe that is the way farmers need to look. I know farmers have this idea in their mind that the more land I have, the more power I have, and we need to change that idea and keep more younger farmers on the land.
And in this State, we are producing more and more ethanol. We just started up a 12 million gallon plant in Heron. They are building a 40 million gallon plant in Wentworth. I am on a steering committee, and hopefully this summer we will be selling shares for another 40 million gallon plant in Milbank. That is almost 100 million gallons of ethanol.
And so what I am asking you is that the California issue is a huge issue for South Dakota corn producers, and we need that expanded, we need a stable, consistent expanding market for ethanol so we can make a living out here as farmers, and invest in these cooperatives and return.
I look over the years, and you look at what has succeeded in agriculture, and living in northeast South Dakota, I travel to North Dakota a lot, and the sugar beet industry has been a closed cooperative for 20, 30 years, and those farmers have really succeeded in that industry. And so I would like to see the corn and soybean producers get into that same mode and so we can make more money off each acre, so we do not have to compete with our friends and neighbors.
Page 120 PREV PAGE TOP OF DOC So I ask you that this California issue is a huge issue. This summer, I will be out asking my friends and neighbors for millions of dollars. And if me, the steering committee, if that plant fails, I will have to face all my friends and neighbors and they are going to ask me, why did that fail? Failure is not an option. We do not want to go out and sell failure. We want to succeed, we want to bring farmers into this ethanol industry and make a living for farmers so we have a viable living out here in South Dakota. And there is other States as well.
In closing, I just would like to thank the Congressmen for coming to South Dakota and the other States, and really listening. I think we really feel like we have gotten your ear and you have really listened to us. So thank you.
[The prepared statement of Mr. Olson appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Schmale.
STATEMENT OF DOUGLAS SCHMALE, WHEAT AND MILLET PRODUCER, LODGEPOLE, NE
Mr. SCHMALE. Thank you, and thank you members of the committee for still being here at the bitter end.
My name is Doug Schmale, I am a wheat producer from western Nebraska. This has been my profession for the past 17 years. I am currently a member of the Nebraska Wheat Marketing Board and I am a past board member of both the National Association of Wheat Growers and of the United States Wheat Associates.
We are all aware of the problems in production agriculture today. Solving these problems will require that we recognize the realities of the business environment in which farmers operate. First and foremost, there is an appropriate role for supply management as part of U.S. farm policy. Supply management does not mean that we stop trying to develop markets, that we cease using every means available to export or that we eliminate the cropping flexibility of Freedom to Farm. What it does mean is that we accept the fact that there are things that limit how much grain we can domestically consume or export into the world market. The mythical level playing field does not now and never will exist. The strength of the U.S. dollar, personal and political relationships between buyers and sellers, export sanctions, these things all greatly affect the volume of grain that we can export, and will continue to do so in the future.
Page 121 PREV PAGE TOP OF DOC And Mr. Stenholm, if I might make a comment here. I certainly support the removal of unilateral sanctions. However, I am not naive enough to believe that they will ever permanently disappear.
Supply management does not mean a return to the fixed bases of previous farm programs. There are ways to create a voluntary supply management program such as the flexible fallow concept that still allow producers complete freedom in planting decisions. No other industry, when faced with a problem of excess inventory, tries to solve that problem by further increasing production.
Between the 1995 and 1998 U.S. wheat crops, total consumption of wheat actually increased, but the price of wheat decreased over 40 percent. Why? Because our ending stocks increased over 250 percent. We cannot blame the current crisis in agriculture solely on export demand when total consumption has, at times, actually increased.
Second, a reserve program should always be part of farm policy. A reserve program is a means to level out fluctuations and supply, not the substitute market it became in the early 1980's. To properly construct a reserve program, we need to have definite caps on the number of bushels that can be placed into it and we need to have a release mechanism that is solely triggered by an unusually high price. The Secretary of Agriculture should have no discretion as to when bushels are released from a reserve.
If we do these things, a reserve program can not only stabilize producer prices and income, but can also enhance our worldwide competitiveness. What better way to ensure for our customers that we will always have product available than to have that product in inventory. What better way to discourage increased production by our competitors than for them to know that we have inventory that will come onto the market when price dictates. But unless we lock that inventory away from the market in a reserve, it will excessively depress prices and producer income.
Page 122 PREV PAGE TOP OF DOC Third, direct payments to producers need to be counter-cyclical. There is no reason to provide an income transfer to producers in times of adequate commodity prices. Doing so merely inflates land rental rates and prices. Failure to provide adequate income supports during times of depressed prices results in destabilization of the entire agricultural industry. Direct payments should also be subject to limits. There is no reason to transfer income to producers who simply do not need it and who use it to prey on other producers.
Finally, commodity loan rates need to be both raised and balanced between crops. With a marketing loan program, the argument can no longer be made that we are somehow hurting ourselves by raising loan rates. If you truly believe that markets exist, then loan rates, even at higher levels, become a moot point and there should be no objection to setting them at these higher levels.
Shifting to a topic not directly related, income supports, I would like to compliment the committee for passing legislation to improve the Federal Crop Insurance Program. Your recognition of the fundamental soundness of this program and the benefits that can be achieved by enhancing it will prove to be one of our best long-term policy decisions. I would urge the conferees to adopt the Senate provisions related to fraud and abuse, and to also provide integrity to this program by preventing cooperatives and associations from purchasing CAT coverage for their members.
In summary, for agriculture in this country to survive and prosper, we must base public policy on reality. We must also ensure that upcoming trade negotiations continue to allow us the needed flexibility to design appropriate domestic farm programs. I am not advocating a return to portions of previous policies that did not work, nor am I advocating a continuation of failed current policy. Rather, I am hoping that we can objectively select and implement programs that meet the needs of today's marketplace.
Thank you. I would be happy to answer any questions.
Page 123 PREV PAGE TOP OF DOC [The prepared statement of Mr. Schmale appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you all very much on the panel.
I will tell the Members that we have checked, there will be a vote at 6 o'clock. In order to make that, we have to leave here at 1 o'clock. The Chair is going to take the prerogative of recognizing the members who have constituents, are from this area, for questioning, beginning with Mr. Barrett.
Mr. BARRETT. Thank you, Mr. Chairman.
Mr. Hanna, I appreciated your comments about the alfalfa industry, particularly as it relates to our area, our county. I recall the days when that county, our county, was the alfalfa producing center of the world. And as you suggest, it has been in a bit of a decline in the recent past.
Very quickly, is there not some kind of a disagreement yet between producers and processors on Federal farm policy regarding alfalfa?
Mr. HANNA. Basically there has always been disagreement amongst the various groups in the Platte Valley where we have such diverse crop deal. I would say yes, you are absolutely right, between corn and alfalfa, there has always been disagreement. Our concern basically is that, with the current program, if you are heavy into alfalfa, like a number of us are, we are left out.
Mr. BARRETT. Do you see a resolution of the disagreement, soon?
Mr. HANNA. Soon? No, I do not.
Mr. BARRETT. Thank you. In the interest of time, I yield, Mr. Chairman.
The CHAIRMAN. Mr. Minge.
Page 124 PREV PAGE TOP OF DOC Mr. MINGE. Thank you, Mr. Chairman.
One comment I would just like to make is that we have heard from all three panels today and I have unfortunately not been in all the hearings around the country, but we have not had any comment about organic or sustainable farm operations that include direct marketing or identity preserve marketing, and I recognize this is not a high percentage of the farm products that are being raised in this part of the country or nationally, yet it is a very fast-growing part of the farm economy, and it offers some income opportunities and some diversity in farm operations. And I would just hope that, as we proceed, that we do have input with respect to those types of operations, and that we make sure that, as we craft changes in the farm program, that we are sensitive to what is going to be successful in those areas to ensure that that type of sustainable organic farming is part of the continuing farm horizon or landscape.
I would like to thank the panelists and in the interest of time, I will yield back the balance of my time.
The CHAIRMAN. Mr. Thune.
Mr. THUNE. Thank you, Mr. Chairman. I know we are trying to wrap up here, so I will be brief, too.
But I would like to pick up on one point. Kristi, you had mentioned in your testimony that you thought it was important, and I happen to agree, that our anti-trust laws be enforced because we are seeing a lot of activity out there in the agriculture economy, agribusiness consolidation concentration, which I think is having a dramatic impact on the prices that are paid to our producers. And I guess I would be curious to know, because I have drafted some legislation, Leonard Boswell from Iowa, is a co-sponsor along with a number of others in the House, that would address this whole issue.
Our impression has been that, yes, we need to enforce current laws, but in the absence of that being done, that we may need to strengthen the laws that we have. And so, I would be curious to know from members of the panel whether or not you think that the laws that we have on the books are sufficient or whether or not we need to strengthen anti-trust laws. When it comes to the whole issue, I am not talking about all mergers being bad, I am talking about promoting competition in the marketplace because competition is ultimately what is going to be critical in terms of ensuring that we have got fair prices.
Page 125 PREV PAGE TOP OF DOC Anybody care to answer?
Mr. HANSON. With respect to the fact that I in no way intend to imply that I have read the whole law books on this issue, I am sure, but I am confident that there is, as with a lot of other issues in my life, plenty of laws on the books, if we just deal with them.
Ms. NOEM. I guess I have had the same feeling. Any time you want to strengthen those, though, go right ahead.
I think we see this issue, though, in every industry. We have seen it in the telecommunications industry, we have seen it in the software industry, so I do not think we are unique. I think where we have struggled is that we do not bind these industries together and fight it together. We have not done that. And what is really disturbing to me is that, just now, Purdue is being investigated by the U.S. Justice Department. I do not know of a single poultry producer. They have not been around for a long time, and it really disturbs me that right now is when they are being investigated. I do not want to wait until all my neighbors that are pork producers and beef producers and cattle producers, until they are all gone and then we will say, oh, wait, I think we have got a problem here.
So if you want to go ahead and strengthen them, I will do anything you want.
Mr. THUNE. I think the chicken is already out of the barn in the poultry business, so to speak. Anybody else care to comment on that?
Mr. THUNE. I would be curious to know, I would just ask the audience here today, too, a straight-forward, simple question, are the laws that we have on the books to ensure competition in agriculture adequate and sufficient, or do we need to strengthen the laws that we have? How many people think that the laws that we have today are adequate to do the job?
Page 126 PREV PAGE TOP OF DOC VOICE. If enforced?
Mr. THUNE. If enforced, yes. Yes, well, I guess maybe I ought to rephrase that question.
But how many of you think that we need to strengthen the laws that we have to further promote competition?
[Show of hands.]
Mr. THUNE. OK, that is good to know. And as I indicated, that is something that we are in the process of working on, what I think is a very responsible approach to that. But it is an issue which I hear a lot in traveling across the State, and I know you mentioned, in your listening meetings out there, too, that the FSA conducted, I am sure it came up a lot.
But I want to make sure that everybody else has an opportunity to ask questions, Mr. Chairman. So I would just close by saying again, thank you for bringing the committee out here. I think it is critical that members of this committee hear directly from producers across this country. I think this is a very useful exercise and will be helpful to us as we begin to shape and fashion farm policy. So thanks again for coming to South Dakota, thanks to all the panelists, great testimony. We appreciate it very much.
The CHAIRMAN. Mr. Pomeroy.
Mr. POMEROY. Mr. Chairman, I want to echo my colleague from South Dakota's expression of thanks. This has been a great morning. We have had a lot of testimony, it has gone by very quickly. Each of the presenters, I thought, made their points well and generally within the time limit. In terms of hearings go, and I have gone to a lot of hearings, this has been a really good one.
One of the things you could kind of sense from the morning, though, is there is still a variety of sharply different perspectives within agriculture in terms of what we ought to do. And it is difficult for us because you are the experts and you are telling us different things.
Page 127 PREV PAGE TOP OF DOC One of the things in North Dakota that has been important, I think, is efforts by the Farm Bureau and Farmers Union to try and find common ground so that we might have some greater consensus in terms of how we go forward. Eric Aasmundstad is the new president of Farm Bureau, but those efforts are continuing, I trust, and greater consensus on this notion of counter-cyclical price protection now is going to continue to emerge through your talks?
Mr. AASMUNDSTAD. Well, that is what we are trying to accomplish, is decide those areas that we can agree on and work towards them, yes.
Mr. POMEROY. And generally, you are of a mind that counter-cyclical price protection in the farm program is going to be helpful?
Mr. AASMUNDSTAD. We support that. What form it takes, that is another thing, but yes, we support the concept of the counter-cyclical safety net, absolutely.
Mr. POMEROY. Well, I mean, that is a start. That is an important starting point. And I think Mr. Schmale's point, payments to farmers when prices are high does not make any sense whatsoever, and not having any payments when prices are low is catastrophic to family farmers. So that is a starting point, this notion we should have counter-cyclical price protection, we can move forward from there.
The other thing I would like you to address in my limited time, perhaps no one is going to be more responsible for the crop insurance reform to pass this Congress than Chairman Combest who got it on the agenda of the House Agriculture Committee early, got it out of the House with virtually a unanimous vote. That put tremendous pressure on the Senate where the going was much tougher to get a bill out. We are now in conference committee. You are from Devil's Lake, ND, an area that has dealt with more production difficulties than ever. I would just like you to have a chance to comment to the chairman on the importance of crop insurance, particularly relief in multiple-year disaster situations.
Mr. AASMUNDSTAD. Well, one of the things that we certainly feel has to be done, when dealing with crop insurance and multi-year disasters like we faced in the area I am from, is something has to be done to address the drop in the APH for multiple-year disasters. Or the exorbitant rise in premium because of multiple-year disasters. No one can control the weather. That is one of the things beyond our control. We are facing the better part of 5 years of below-average yields, above-average disease, what have you, and we feel that those are things that very much have to be addressed. And also, we wholeheartedly support the inverted subsidies, the higher levels of coverage receiving the greater subsidy, those are things we feel are very important in the risk management through crop insurance.
Page 128 PREV PAGE TOP OF DOC Mr. POMEROY. Thank you, Mr. Chairman.
The CHAIRMAN. Just on my own time, to respond just briefly, and I appreciate your saying that, we think in the House bill there is substantially more help, particularly in the areas of yield adjustments. Recognizing that that has been one of our major problems in the past, and to make the program better, we have got to make those changes. We are about over a billion dollars better off in that area than the Senate bill. And as well, I would mention that from the premium side, in many instances, the Senate bill is less-than-current law. I do not see how we could bring a bill to the House floor and ask the people to vote for premium subsidies less than current law.
Mr. GUTKNECHT. Thank you, Mr. Chairman.
In the interest of time, I will not really ask a question, but for the benefit of the panelists, I want to thank Mr. Hanson for his excellent testimony and thank you for the kind comments.
One of the things I hope that members of the audience have noticed today, there are differences of opinion, not only among the people who have testified, but among members of this committee in terms of what direction agriculture policy should go. But the one thing I hope you all understand is that we all believe in the future of agriculture, and we may see things differently, particularly on the supply side, there is a very heated debate on this committee in terms of what the Federal Government can do to regulate supply, and I think most of us are open to listen to any suggestion as we go forward, whether it is flexible fallow, or whatever we call it, different programs.
It does strike me, though, that we in Congress, we change laws, we amend laws, we repeal laws, but there is one law that we simply cannot repeal, and that is the law of supply and demand. And if there are limited numbers of things we can do to affect the supply side, it seems to meand I want to go back to something Mr. Hanson said, Mr. Schmale said that there are things we can do in terms of value added, because we have got to look at ways that the farmer can get a larger percentage of the food dollar.
Page 129 PREV PAGE TOP OF DOC Today, for example, on a box of Wheaties, I am told that Tiger Woods gets 10 cents for allowing his picture to be on a box of Wheaties. The farmer who grows that wheat gets less than 2 cents. Now there is something wrong with the economic equation that says that farmers get such a small percentage of our overall food dollar, and it seems to me, from a Federal farm policy, we have got to figure out ways to help you get a larger share of that food dollar. And when we do that, net farm income, I think, will go up.
Mr. HANSON. I have got a picture with me, if we can put it on the cover, that would be $10 for my corn, I think.
Mr. GUTKNECHT. Yes?
Mr. SCHMALE. If I could offer one comment on the concept of value added. I am a wheat producer, which predominantly is a bulk commodity. Half of it is exported, the dramatic growth in the world is going to come in Southeast Asia which is an export market. I cannot make a bread product, a value-added product in this country and put it on a boat for 2 months and get it to Asia and have to be an acceptable product. I think we have to recognize that there are differences in commodities and some of them lend themselves more to a value added than others, and that is a very important thing. It is not a panacea.
Mr. GUTKNECHT. No, and I am not saying it is. And we do not have a perfect solution. But I do believe that if we work together, we can come up with some things, including biodiesel and ethanol, which I think have enormous potential for many of the row crop producers in my area. If they can get a larger percentage, and if we can encourage more use of those kinds of things, ultimately that is how we add value.
I give back the balance of my time, Mr. Chairman.
The CHAIRMAN. Mr. Latham.
Mr. LATHAM. Mr. Stenholm makes, I think, a very, very important point in talking about the sanctions, what are embargoes as far as I am concerned. We have 40 percent of the world under some type of an embargo today. And if you follow the chart line with our U.S. exports, they follow directly with the price of commodities. The higher the price of the commodity, the greater our exports are. What does that tell you? That tells you that we are the supplier in the world of last resort. And the fact of the matter is, the reason we are the supplier of last resort is because we have the kind of sanction embargo policies in place today, out of the 120 embargoes in the last 80 years, 61 have been put on in the last 7 years. We are in a positionand Congress is part of the problem also, but the fact of the matter is, we are our own worst enemies as far as our Government embargo trade policy. Thank you.
Page 130 PREV PAGE TOP OF DOC The CHAIRMAN. Thank you gentlemen. Mr. Stenholm.
Mr. STENHOLM. I want to ask you all the same questions I have asked the previous panels. How many of you believe that we ought to lift all unilaterally-imposed sanctions? Mr. Schmale, I understandI am not naive, either, that it is going to happen. But that isbutyes, yes, yes, yes, yes, yes.
Ms. NOEM. I support it on food and on drugs.
Mr. STENHOLM. Food and medicine, that is what I am asking. OK.
And how many of you believe we ought to approve permanent normal trade relations with China? Yes, yes, yes, yes, yes, yes.
One just brief final comment, Mr. Chairman, I think it would be helpful if we all quit using the words supply management. That is a four-letter word today. Inventory management is a much, much more acceptable word, every business in America practices inventory management. [Applause.]
The CHAIRMAN. I want to thank all of our witnesses for very enlightening testimony, all of the members who have come and spent time away from their homes and their districts and their families, and I want to thank all of you for coming. We are here because we are interested in agriculture. We do not look at this as just another business that it is in trouble. We all have agriculture constituencies, we have all come from agriculture, and we understand this is a way of life. This is a scary prospect when people start looking at the chance of losing their way of life, and what is it that is going to happen to them and to their families. That is why we are here, and we are going to do everything we can to make sure that this time next year, you are all still farming, if you want to be.
Thank you very much, and without objection, the record of today's hearing will remain open for 30 days to receive additional material and supplementary written responses from witnesses to any questions posed by members of the panel.
Page 131 PREV PAGE TOP OF DOC This hearing is adjourned.
[Whereupon, at 1:00 p.m., the committee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Testimony of Allan Skogen
I first want to thank the Honorable Chairman Larry Combest, the Honorable Ranking Member Charlie Stenholm, the Honorable Congressman Earl Pomeroy, and other members of the House Committee on Agriculture for recognizing the importance of grass roots input in conducting these important hearings. These bipartisan hearings are very much appreciated.
My name is Allan Skogen. I currently serve as president of the North Dakota Grain Growers Association and as a board member of the National Association of Wheat Growers. I am also the vice-chairman of the board of Spring Wheat Bakers and a member of Dakota Growers Pasta, both large value-added cooperatives owned by wheat and durum producers from our region. I farm with my wife and son near Valley City in east central North Dakota. Our principal crops are wheat, soybeans, and canola, which, by the way, is a much different crop rotation than we had just a few short years ago.
As you are aware, producers in the U.S. have suffered severe economic hardship the past several years and at the top of the list of those who have been damaged are the producers from the upper Great Plains region. Estimates are that over 15 percent of my neighbors in North Dakota and Minnesota have been driven from their farms recently due primarily to losses of both income and equity, as well as the lack of assurances that this situation will soon improve.
The primary reasons for these losses are water and disease damaged crops, lack of demand and market access for our crops and subsequent low prices, a lack of proper income safeguards in existing domestic farm policy, and a dysfunctional crop insurance system. But, I expect you have heard that before and undoubtedly will again before these hearings conclude.
Page 132 PREV PAGE TOP OF DOC So, I am going to get right into what I understand the intent of these hearings to be, and that is solutions to these problems. We have greatly appreciated the efforts of Congress to provide badly needed emergency assistance, however, it is time to place into permanent law a program that would trigger this assistance automatically when conditions beyond our control cause such economic stress to production agriculture. Then, and only then, can farmers, bankers, consumers, taxpayers, and lawmakers predict, with some level of confidence, the strength of this industry from year to year.
It is our belief that we have to think globally to understand consumer needs relating to our products and fight with all our might to increase market share in the world. However, it is vitally important to the well being of our nations food producers, its citizens and the economy as a whole, to have a consistent, responsible, and fair domestic farm policy.
NAWG, along with the state grower associations, have spent the last several months doing a very objective and non-partisan assessment of current and past farm and trade policy as well as a review of more recent solutions that have been proposed. Our objective is to develop common sense solutions to enhance the viability of agriculture in the U.S., as well as our position in the global trade arena we are in today.
The NAWG plan takes many of the positive components of the current farm bill and combines them with a counter-cyclical safety net that automatically triggers when commodity prices fall below a certain level.
After reviewing other proposed methods to trigger support, we feel the price of the commodity is itself the most accurate and fair trigger mechanism available.
While we are in the beginning stages of the economic analysis necessary to properly access the plan, it is our hope that over the next several years the cost would be less than the average annual cost of the last three farm bills while providing much more stability to American agriculture.
Page 133 PREV PAGE TOP OF DOC Even more important, it does not detract from, but rather enhances the all out effort we must make to regain world market share that we have given up the last several years. This plan would allow U.S. producers to react to the world market signals while providing a level of support for when prices fall, for whatever the reason.
Now I would like to take you into the key components of this common sense domestic policy proposal.
First, we would maintain the current marketing loan, PCP, and LDP structure. While this is an area that has caused much debate it has provided the market with the ability for honest price discovery in the world market while providing some non-production distorting support for farmers. In fact we believe the loan rate for the grains could be raised to provide equity between grains and oil seeds without exceeding the EU intervention price when adjusted for currency differences.
The second component is some level of fixed payments such as the AMTA payment. We propose freezing this payment at the 1999 level, which for wheat was 63 cents. Some say it is hard to justify a fixed payment but the fact is only once in the past 20 years have prices for wheat averaged over $4.30 while true production costs are much above that level. This is a minimal cost for the stability it provides for producer equity and lender confidence over time.
The third and critical component of this package is a safety net designed so that when prices dip below a certain level, a counter-cyclical payment is triggered. This payment would equal the difference between the trigger price and the sum of the fixed payment and the higher of the marketing loan or the national average price. Actually this could be considered the same as a variable market loss payment. The good thing is that if this assistance is needed it is already in place and if we do not need it, we won't get it.
Page 134 PREV PAGE TOP OF DOC The variable payment would be based on the same production history as the current AMTA payment.
The economic problems of farmers are driven not just by lower prices as some may think, especially when you consider the amount of emergency funding appropriated the last three years, but more so by a slow creeping virus known as higher production costs. In this plan we have included a method of adjusting support as needed based on a formula that compares some basic input costs on a per bushel basis, excluding land cost because of its inflationary nature. (By this method it is actually possible that as our efficiencies improve on a per bushel basis the trigger price could come down.)
Full flexability would remain as it is in current law. Both the fixed and the variable payment are totally decoupled from production. The right given to producers to make critical cropping decisions based on market signals and good economic and agronomic management was the single most valuable component of current farm law.
As is with the market loss payment a separate payment limit should be established for the variable payment.
CONCEPT BULLET POINTS
Establish a trigger price that would be in place so when prices dipped below a certain level, a counter-cyclical payment would be triggered (safety net).
This payment would equal the difference between the trigger price minus the sum of the AMTA payment and the higher of the marketing loan and the average price as determined during the normal marketing months.
AMTA payments would remain and frozen at 1999 levels.
The current marketing loan mechanism would remain the same,
However, in the case of the grains, the loan level could be raised somewhat to create equity between grains and oil seeds without creating production distortions.
Page 135 PREV PAGE TOP OF DOC Full flexibility remains-all AMTA and variable payments are totally decoupled from production.
A separate payment limit would be in effect for the variable payment.
The trigger would be adjusted annually to reflect the change in some production costs, not to include land cost.
I would like to point out that because price risk is dealt with in this plan, now crop insurance could be simplified and return to doing what it was originally intended, protect against crop loss. And, it could do so with higher levels of coverage at less cost.
It is our belief that we as a nation have the right to a strong domestic policy that allows our farmers a chance to succeed as long as that policy does not distort production based on free market forces and this policy clearly accomplishes that.
This proposal could be an adjustment to current law by introducing the counter-cyclical concept as another way to calculate the current emergency or market loss payment, or it could be the foundation for new farm program legislation.
We feel that these basic elements of a solid domestic farm policy have the ability to stabilize the current disastrous economic conditions that continue to exist in production agriculture while allowing the forces of global trade to continue to develop. However, we do not in any way want to diminish the need for your continued support concerning major trade issues confronting us today.
We need to pass PNTR for China and total sanctions reform that prohibits the use of all unilateral sanctions on food and medicine. Free and fair trade does not exist until we are allowed to access markets fairly in all nations.
We need to properly fund all existing trade programs including the Market Access Program, Foreign Market Development Program,PL480, GSM102/103 and section 416. And along with these we need to revitalize and adequately fund the EEP program as an effective tool to compete against the Large EU export subsidies and the wholly unfair marketing practices of STE's.
Page 136 PREV PAGE TOP OF DOC We need to send the message to our trade partners, and I use that phrase loosely, that we will not stand for the type of manipulation that exists today in world trade, and to that end we will do what ever is necessary to maintain and gain back lost market share. Anything less than that commitment will simply not be enough.
On behalf of these organizations in which I take part and the agricultural producers they represent I thank you for your consideration and leadership on these very important issues, and look forward to answering any questions I can regarding these issues.
Testimony of Cecilia Grevson
Mr. Chairman and committee members:
Thank you very much for giving me the opportunity to testify in front of this important committee today. My name is Cecilia Grevson. I am a farmer from Madison, Nebraska, in the Northeast part of the state. My husband, Willard Sr., and I farm 830 acres of pivot irrigated corn and soybeans rotation. I am here today to let you know that the economy of the agriculture community is hurting badly and that the Freedom to Farm bill is not working. It needs to be changed.
As an owner/operator of our farm, I can tell you that we do not like handouts from anyone. We would like to get our money from the market place and not from the government, but I believe that it is government responsibility (all of us) for the security of the country. That means to keep its people well fed, that means establishing a safety net for producers. Maintaining a healthy farm economy translates into keeping small communities alive, and in turn, the whole state economically healthy. Agriculture is Nebraska's largest industry. Farmers are responsible for feeding the United States and parts of the world. This in turn helps to keep the United States balance of payments in world trade healthy.
At this time, I will tell you about the HERO Bill (Habitat Enhancement Rotation Option Bill #3847) that Congressman Doug Bereuter of Nebraska introduced in the House of Representatives on March 8, 2000. I was directly involved in putting this bill together along with a group of Northeast Nebraska farmers, environmentalists, conservationists, etc. Enclosed, you will find a copy of the bill. I will tell you the high points of the bill.
Page 137 PREV PAGE TOP OF DOC 1. Secretary of Agriculture shall establish a voluntary program to be known as Habitat Enhancement Rotation Option (HERO). It will encourage owners and producers who are parties of a production flexibility contract to rest and rehabilitate up to 25 percent of their contract acres for the purpose of enhancing soil and water conservation and providing wild life habitat.
2. Annual rental payments for such acres should be based on a rental payment used for comparable acres enrolled under CRP (Conservation Reserve Program) in each county.
3. Minimum duration should be two (2) years and not exceed four (4) years and could be extended if needed. It could be suspended in times of crop shortages.
4. The use of cover crops such as rye, vetch, oats, clover, etc. also could help with the three (3) year transition needed for organic farming. This is in addition to all other farm programs.
5. Technical Assistance for NRCS (Natural Resources Conservation Service). The Nebraska NRCS technical staff has declined 25 percent over the past ten (10) years while demand for assistance has nearly doubled.
6. Resource Conservation & Development (RC&D)
The serious problems in Agriculture are directly related to the troubled economies of our rural communities. I have personally seen how USDA's Resource Conservation & Development Program (RC&D) is actively helping rural communities improve their local economy. Nebraska currently has seven (7) authorized and funded RC&D areas, but state coverage will require the authorization for five (5) additional areas. RC&Ds are made up of local people who gain input from the neighbors to develop an area plan on what needs to be done to improve the quality of life in their area.
In conclusion, farmers are hurting and we need help now. The Freedom to Farm bill is not working and it needs to be changed.
Page 138 PREV PAGE TOP OF DOC Some of the ways to help are:
Set aside 25 percent of the land as needed.
Annual Rental Payment rates should be comparable to rates for Conservation Reserve Program (CRP) in each county.
Minimum duration of two (2) years, maximum, no more than four (4) years. Flexibility depends on actual conditions of supply and demand at the discretion of the Secretary of Agricuture.
Increase technical assistance money from $570 million to $900 million for NRCS.
Increase monies from $35 million to $53 million for RC&Ds to authorized the 46 new applications pending.
Thank you very much for this opportunity. I will be available to answer any questions you may have.
Testimony of Donald Buhl
Mr. Chairman and members of the committee:
My name is Donald Buhl. I am a pork producer and row crop farmer from Tyler, Minnesota. I market 10,000 hogs annually, while farming 300 acres of corn, 300 acres of soybeans and 30 acres of oats. It is my pleasure to have the opportunity to testify today on behalf the National Pork Producers Council (NPPC) and America's pork producers.
The National Pork Producers Council is a national association representing 44 affiliated states that annually generate approximately $11 billion in farm gate sales. According to a recent Iowa State study conducted by Otto and Lawrence, the U.S. pork industry supports an estimated 600,000 domestic jobs and generates more than $64 billion annually in total economic activity. With 10,988,850 litters being fed out annually, U.S. pork producers consume 1.065 billion bushels of corn valued at $2.558 billion. Feed supplements and additives represent another $2.522 billion of purchased inputs from U.S. suppliers which help support U.S. soybean prices, the U.S. soybean processing industry, local elevators and transportation services based in rural areas.
Page 139 PREV PAGE TOP OF DOC PORK PRODUCERS SUPPORT PNTR
America is prospering economically to a degree I have not witnessed in my lifetime. I am proud that our nation's farmers have provided the fuel for this great economic era by producing the world's safest, most abundant and inexpensive food. Ironically, while our fellow citizens bask in prosperity and all it allows, America's farmers find it increasingly difficult to make a decent living on the land.
Low commodity prices, weather events, export barriers, and costly regulations are just some factors that have made it increasingly difficult for many farmers to compete in the quickly changing global marketplace. Congress has the opportunity to positively impact several of agriculture's problem areas and allow farmers and livestock producers to remain vital contributors to our national economy.
First, I would like to say Pork producers enthusiastically support granting China permanent normal trade relations (PNTR) status. Nothing is as important to the future prosperity of American agriculture than eliminating the barriers that keep our products out of foreign markets.
The pork package negotiated by the United States with China has the potential, if fully and fairly implemented, to transform China into the single greatest export opportunity for U.S. pork producers.
This is a one-way trade agreement; the U.S. benefits significantly because China's previously closed market now opens. China's degree of access to the U.S. market remains the same. Unlike NAFTA and the Uruguay Round, the United States makes no concessions. Additionally, entry into the WTO forces China to abide by an international system of international trade rules. For the first time, there will be options available if China fails to honor its agreements.
When WTO negotiations began, tariffs on imported pork in China were as high as 43 percent. After a four-year phase in period, they will be between 12 and 20 percent, depending on the type of pork. But unless Congress passes PNTR, farmers in France and Denmark will be servicing the vast Chinese market, while American farmers will continue to be locked out.
Page 140 PREV PAGE TOP OF DOC In recent testimony before the Senate Finance Committee, agribusiness economist Dermott Hayes of Iowa State University said demand for pork by 1.2 billion Chinese consumers could easily boost the value of hogs by $5 per head. That is good news for hog producers, who suffered through historically low prices in 1998 and 1999.
Hayes added that because Chinese consumers prefer different cuts of meat, increased hog exports to China would not raise domestic prices for the American consumer.
Recently, China published rules implementing the Bilateral Agreement on U.S.-China Agricultural Cooperation. The agreement, which was signed in April 1999, provides that any importer in China can import pork from any federally inspected U.S. pork plant.
On April 2, the first shipment of pork was shipped from San Francisco to Shanghai under the terms of the Bilateral Agreement. The air-freighted shipment of ribs and pork sausages was imported by City Supermarket Company Limited, an upscale retailer in Shanghai.
PORK CHECKOFF REFERENDUM
In 1985, Congress enacted into law the Pork Promotion Act, allowing America's pork producers to collectively pool their resources to fund promotion, research and education programs to and to enhance consumer demand for their product.
The Act states that if 15 percent of bona fide pork producers request a referendum to determine whether the program should continue, the U.S. Department of Agriculture (USDA) would conduct one. While other promotional Acts gave the USDA Secretary the authority to order referenda at his discretion, the Pork Promotion Act specifically does not.
In June of 1999, opponents of the pork checkoff presented USDA with more than 19,000 petition signatures. However, following a thorough statistical analysis, the Agricultural Marketing Service (AMS) determined that 12,428 of the petitions were valid, far short of the 14,986 necessary to trigger a referendum.
Despite the conclusion reached by AMS, on February 25, USDA Secretary Glickman, citing unspecified powers, unilaterally ordered a referendum on the continuation of the pork checkoff program.
Page 141 PREV PAGE TOP OF DOC It appears that the referendum will be held sometime in late summer or early fall. Pork producers believe it is critically important that that this referendum be conducted in a fair and transparent manner and that only bona fide pork producers be able to vote. Non-producers should not determine my future or that of our industry, and I strongly urge the committee to exercise its oversight powers to see that this does not happen.
Pork producers have taken a proactive approach to protecting our water, soil and air. The groundbreaking 1997 Environmental Dialogue on Pork Production and the innovative On Farm Odor and Environmental Assistance program are but two examples in a long catalogue of actions pork producers have taken to ensure that environmental protection and modern pork production go hand in hand. By the end of this year, EPA should issue the final AFO/CAFO and Effluent Limitation Guidelines regulations as well. Pork producers are fully prepared to meet environmental requirements that are science-based, achievable and affordable.
EPA's new rule on Total Maximum Daily Loads (TMDLs), however, reveals a new and disturbing trend of environmental overreach. The purpose of the TMDL program is to identify sources of water pollution and allocate control responsibilities to reduce pollutant loads in places where water quality standards are still not being achieved, even after point sources have installed pollution control technology.
EPA wants to expand the TMDL program to address certain agriculture and forestry practices that were not previously regulated under the program even though there is scant scientific data on which to base its judgements. EPA's proposal has been roundly criticized by agriculture, state and local officials and others as unworkable, costly and beyond EPA's regulatory authority.
In response to the release of the preliminary rule, Sens. Robert Smith (R-N.H.) and Michael Crapo (R-Idaho) have introduced legislation that would delay the final rule's publication for 18 months while the National Academy of Sciences studies the quality of science EPA used in developing its proposal to revise the TMDL program. The Smith-Crapo legislation would call for a significant increase in funding for innovative programs that mitigate water quality problems.
Page 142 PREV PAGE TOP OF DOC Also, the president has proposed a healthy increase in funding for USDA conservation programs, which we applaud. However, conservation funding without the technical assistance to help farmers implement new conservation enhancements could lead to wasteful spending. Please make sure the budget of the Natural Resources Conservation Service is adequate to help farmers meet new environmental requirements.
ADAPTING TO A CHANGING MARKET
Finally, we believe Congress should assist all producers trying to find a way to maximize their share of the consumer dollar.
Global competition, new technologies, and consumer demands are but a few of the factors that are rapidly changing the U.S. pork industry and all of American agriculture. In some ways, we must recognize that in order to prosper, we must think of ourselves as more than producers of a commodity. We must find ways to capture the value of what we produce well beyond the farm gate.
The pork industry is becoming more concentrated at every level, yet we continue to be less concentrated than the poultry industry or other livestock sectors.
Concentration in the pork packing sector has grown from 32.2 percent in 1985 to 56.3 percent in 1998, while concentration in the production segment has grown from negligible levels in the early 1980's to about 18 percent. Vertical Integration or the percentage of hogs owned by packers has gone from an estimated 6.4 percent in 1994 to roughly 24 percent today.
NPPC has launched a number of new initiatives to help ensure that pork producers have a fair, transparent and competitive market. We firmly believe that access to information and knowledge will form the foundation for guaranteeing long-term market competition. That is why NPPC has focused so much effort in the areas of information dissemination and in helping producers understand and make use of that information to make knowledge-based business decisions.
Page 143 PREV PAGE TOP OF DOC These initiatives include:
Development of a packer price reporting system that focuses on actual procurement costs.
Passage of the Mandatory Livestock Price Reporting Act of 1999.
The NPPC Producer Price Reporting initiative which encourages producers to negotiate with more than one packer and to report the price to USDA.
Recent publication of the ''Guide to Marketing Contracts'' whose goal is to help producers make more informed decisions about marketing contracts and their terms.
NPPC also conducted, with the University of Missouri, live hog marketing studies in 1999 and 2000.
In addition, NPPC facilitated the creation of a national producer-owned cooperative called Pork America. Pork America's goal is to find new marketing and other value-added opportunities for producers.
Concerns over the possible market distorting effects of concentration led to a number of resolutions being considered and passed during the recent 2000 National Pork Industry Forum.
A study of the structure and competitiveness of the present hog market by USDA;
A review of the definition of price discrimination and the Secretary of Agriculture's authority to challenge price discrimination;
A USDA Study of Justifiable Price Differentials;
A Study of DOJ Concentration Threshold Levels to determine whether they should be revised;
Continued scrutiny of the packing and processing industry to assure adherence to relevant Federal antitrust laws and the passage of new laws if necessary;
Page 144 PREV PAGE TOP OF DOC New authority for USDA to review and make recommendations to DOJ regarding approval or disapproval of agricultural mergers, acquisitions and consolidation of agricultural input suppliers.
USDA authority to require agribusinesses with more than $100 million in sales to annually file information related to corporate structure, strategic alliances, joint ventures and the like.
Establishment of a Deputy Attorney General for Agriculture and;
New legislation that requires processors to bargain with producer cooperatives.
Mr. Chairman, I want to commend the House Agriculture Committee for its role in the passage of mandatory price reporting legislation and urge you to employ the same careful approach to other legislative challenges.
I must express our concern, however, that neither Congress nor the Administration has yet to provide the remaining $1.35 million for the Mandatory Livestock Price Reporting Act to ensure that USDA can carry out its full legislative mandate in a timely manner. This must be done soon.
Mr. Chairman, cooperation driven by information and knowledge, rather than confrontation, is the key to finding reasonable long-term solutions to the complex issues impacting American agriculture. Such cooperation can help the industry avoid the negative ''unintended consequences'' of legislative and regulatory actions that, in the long term, could harm producers in particular and the agricultural industry in general.
Thank you for bringing the committee here today and for giving me the opportunity to share the views of pork producers on these important issues.
Testimony of Eric Aasmundstad
Page 145 PREV PAGE TOP OF DOC Good morning, Chairman Combest and members of the House Agriculture Committee and thank you for this opportunity to comment on the farm program. My name is Eric Aasmundstad. I am the president of North Dakota Farm Bureau.
We feel there are components that must be incorporated in a counter-cyclical safety net to better protect producer concerns and to better address taxpayer concerns. We believe that taxpayer concerns will be best addressed if a budgeted assistance program is in place rather than an emergency disaster package. The disaster funds have been a godsend but have not addressed the real problem.
FARM PROGRAM IMPROVEMENTS
An equalization of loan rates is required to level the playing field between crops and to insure that cropping decisions are not distorted by potential program coverage. We support raising the loan rate for corn and wheat to the same percentage as soybeans. We do not advocate lowering the soybean rate.
The Loan Deficiency Program has become an accepted safety net feature of the farm program. It could be improved to address weather-related disasters. Currently, if the crop is lost due to some weather phenomenon, a producer has no way of accessing an LDP payment. We would encourage Congress to amend this program to allow producers to receive a payment based on either actual production history or a county average yield. This would provide some support to those producers who experience weather-related disasters.
Crop insurance reform is vital. Affordability is paramount to an effective insurance plan that will be universally accepted. We support current proposals before the House and Senate that encourage maximum participation by providing increased and inverted premium subsidies. Producers must not be penalized due to multi-year disasters lowering actual production history (APH) yield and subsequent payments or by having premiums raised exorbitantly. Options for whole farm coverage and cost-of-production insurance should be explored further.
Page 146 PREV PAGE TOP OF DOC The current AMTA payment should remain separate from any future counter-cyclical safety net payments for the purpose of payment limitations. Combining those payments for limitation purposes would be counterproductive to producer support.
We cannot support an acreage set-aside program as a component of a counter-cyclical safety net. Unilateral supply management will only harm our farmers and give the advantage to our competitors. The proposed ''flexible fallow'' concept is nothing more than a graduated set-aside program and is not something that we can endorse. It would only send the wrong message to our competitors. We must not allow other countries to gain market share as we reduce production.
EXPORT MARKETS AND TRADE
There has been talk of implementing a farmer-owned reserve. We cannot store our way to prosperity. The U.S. currently warehouses a disproportionate share of the world's grain reserves. We must not add even more to those reserves. Expanding U.S. agricultural exports through market development is a more appropriate avenue to pursue. We support increased funding for the Market Access Program, the Foreign Market Development Program and the Export Enhancement Program. Discretionary export programs like PL480 must continue to be funded as well. Additionally, any time the U.S. extends credit to other nations, we should demand that those countries use that credit to purchase U.S. commodities.
Senator Conrad has introduced a Farm Income and Trade Equity act. Included in his proposal is a provision to increase export enhancement funds to levels that would be competitive with the European Union. We support that concept to give our farmers equal export opportunities.
If our government is reluctant to aggressively develop those markets and export our commodities, we believe that producers should be compensated for lost income due to the lack of trade. North Dakota Farm Bureau has developed a Farm Recourse Export Equity (F.R.E.E.) proposal, which would tie compensation to farmers with lost export markets. Under FREE, a formula would establish a compensatory payment to producers based on the difference between current prices and carryover stocks compared to prices and carryover stocks when the FAIR Act began. Please refer to attachment 1 for examples. We believe this would encourage government action to export commodities and reduce stocks.
Page 147 PREV PAGE TOP OF DOC Trade is paramount to increasing agricultural profitability. In order to successfully negotiate meaningful trade agreements with other countries, the administration needs to have fast track authority immediately. We have been hindered in our efforts to access markets by the lack of fast track authority while our competitors capitalize on our ineffectiveness. This does not supercede or remove the authority of Congress, but does allow the U.S. to negotiate in good faith with potential trading partners.
The opportunity for U.S. producers to participate in the greatest potential growth market in the world is about to be voted in Congress. We must grant permanent normal trade relations with China. It is imperative that we are able to compete in that market. Without it, our farmers will not be able to compete. They will be financially hard pressed to survive.
Farm Bureau has long been concerned with ensuring that agricultural shippers have competitive shipping options, both inter- and intra-modal. Whether the problem is monopoly market power enjoyed by railroad companies in the western states, needless restriction and general lack of availability of deep-water bulk cargo capacity for U.S. coastwise agricultural trade due to the Jones Act; Federal restrictions that prevent states from allowing use of heavier trucks where appropriate for the transportation of bulk agricultural commodities; the aging and deteriorating inland waterway infrastructure in the Upper Midwest, or proposals to breech Lower Snake River dams that create a critical waterway transportation system for wheat to West Coast ports, transportation bottlenecks are already eroding the competitive advantage traditionally enjoyed by U.S. farmers in world markets.
In our state, either railroads or trucks move commodities. The lack of competition in either transportation mode reduces the price of farm commodities offered at the elevator, and reduces farmers' income.
Page 148 PREV PAGE TOP OF DOC First, I would like to comment on truck transportation. In the rural states where Farm Bureau members live, restrictions on truck weight often constrict the ability to move bulk cargo like agricultural products in the most efficient manner possible. A great deal of what farmers produce moves on trucks, either to a loading facility or to the point of end use. Current law limits the weight of trucks used on Federal aid highways to 80,000 lbs. It is quite possible to exceed this 80,000 lbs. limitation without filling a hopper trailer to capacity. Running a truck half-full is no way to maximize efficiency and income for farmers. Farm Bureau supports H.R. 1667, the Safe and Efficient Transportation Act as it will make a simple but important change in Federal law by allowing states to permit the use of trucks weighing as much as 97,000 pounds on their highways.
Rail service and rates are most important transportation issues for North Dakota producers. As a general rule, agricultural shippers are unable to command the market power to deal with a railroad company on an equal footing as a major coal mining company or electrical utility might be able to do. We are often forced to deal with poor service, like trains that are not delivered in a timely manner, or trains that may not be picked up for days or weeks, causing missed connections to our customers. Farmers and agricultural shippers must also absorb extremely high freight rates that railroad companies can demand due to their monopoly market power.
The real-world experience of American farmers demonstrates that competition would be helpful. In 1980, there were 42 Class I railroads operating in the United States. Today, only two railroads carry the vast bulk of the traffic that moves west of the Mississippi River, and in many areas they do not compete with each other. Any merger that would have the effect of further concentrating the market power of railroad companies will be of concern to farmers and agricultural shippers. Also, given the limited number of players left for possible future mergers, it is likely that any future merger will have international trade consequences, facilitating movement of commodities like grain and timber produced in Canada into United States markets.
Page 149 PREV PAGE TOP OF DOC Grain producers in western states pay very high rates to ship their grain. Over the years, the Interstate Commerce Commissionand the Surface Transportation Board that succeeded itdetermined with the powers granted by the Staggers Act that a shipping rate of 160 percent of a railroad's variable costs (labor, transportation, fuel, etc.) is full return of the railroad's cost of capital. Further, the Staggers Act determined that railroad rates greater than 180 percent of variable cost are excessive.
In a fact-finding proceeding conducted recently by the STB known as ex parte 575, the North Dakota Public Service Commission, the North Dakota Wheat Commission and the North Dakota Grain Dealers Association submitted shipping cost figures to the STB in March 1998 regarding shipping rates from North Dakota to Portland. According to that submission, shipping rates averaged 229 percent to 257 percent of variable cost; using rate figures from the fourth quarter of 1995.
But rather than concentrate on economic theory like percentages of variable cost, one can look at prices per bushel to move grain on rail cars from certain locations in North Dakota to major grain ports like Portland. According to a quick survey of grain shippers in my state, BNSF now charges about $1.22 per bushel to ship Hard Red Spring Wheat from Minot to the Pacific Northwest.
BNSF charges $.96 to ship corn from Crete in southeastern North Dakota to the Pacific Northwest. If you compare these per-bushel shipping prices to the market being offered in these areas of my state ($2.75 a bushel for wheat at Minot and $1.74 a bushel for corn in Crete, per Grainline.com on March 2), you can see that farmers in my state are working three to four months each year to pay BNSF to haul their grain to market.
It's important to remember that every penny in shipping cost that results from a lack of meaningful competition is borne by farmers in the form of lower grain prices at the elevators where they sell their grain. We believe meaningful competition among rail service providers would help alleviate this problem. It is hard to see how further rail mergers will serve the interests of agricultural shippers in gaining more competition.
Page 150 PREV PAGE TOP OF DOCREFORMS
Sanctions reform is also needed. Unilateral sanctions on food and medicine have never attained the desired goal because other countries are willing to supply those products to the sanctioned countries. Furthermore, denying food and medicine does nothing to punish a foreign power, only people. The American people are also hurt; as the reduced commodity prices our farmers receive require huge infusions of government funds, tax dollars, to supplement agricultural earnings.
When the F.A.I.R. Act was enacted, farmers were promised regulatory reform. To date, most of the reform has been of the more restrictive, more onerous variety. Our crop protection tools are now scrutinized more intensely under the pretext of ensuring a safe food supply. Many of those pesticides are being targeted for removal through the Food Quality Protection Act. This review process must use scientific, documentable facts, not worst-case assumptions.
And while our crop protectants are being systematically removed, we import commodities from other countries produced with the very pesticides that are banned here. We must level the playing field. North Dakota has led the battle for chemical harmonization with our N.A.F.T.A. partners. Recognition and acceptance of chemical research and a joint chemical registration process are needed immediately.
We believe these changes, coupled with the full implementation of the provisions of the F.A.I.R. Act that are yet to be put in place, will provide the safety-net features that producers need.
Thank you again for this opportunity.
Testimony of Scott VanderWal
Mr. Chairman, members of the committee, my name is Scott VanderWal. I am involved in agricultural production in a family farm corporation at Volga in east central South Dakota. We operate a cattle feedlot and raise corn and soybeans. I am responsible for the crop production and management, as well as the overall financial management for the entire operation. I sincerely appreciate the opportunity to visit with you today about Federal agricultural policy.
Page 151 PREV PAGE TOP OF DOC I would like to preface my remarks with a few general statements, and then get to some finer details on farm policy, how it affects our farm, and where I think we should go from here.
The agriculture economy is tough right now, and I do not in any way want to minimize that statement with my remarks. 1999 was not too bad financially when all was said and done. For our operation in particular, it was one of our better years in recent history. However, the reason for this is the support that came from the Farm Program. Our net bottom line income was roughly equal to the program support totals. This does not make us feel good, but does show that the program is working and the safety net is fairly well intact in a year of large supplies and low prices. The FAIR Act has worked well for us, as we have had excellent crops in general the last four years. One weakness in the program is the fact that in times of reduced yields, loan deficiency payments are not received. This would really cut into our net income, as the LDP's were a very large share of the support payments we received.
FAIR ACT IS WORKING
The FAIR Act is working as it was designed. We as farmers are holding up our end of the deal, and now it is time for Congress to finish its end of the bargain. I will start with the advantages of the current program, and then discuss the things that still need to be addressed by Congress. Producers are now reallocating resources in a very efficient manner under the FAIR Act. The ability to adjust crop acreage in response to economic and agronomic factors is very good. The market provides opportunities for pricing, while the AMTA payments and loan rates provide a partial safety net. The flexibility allows us to determine in advance of planting what products are in demand, so that business arrangements can be made. Forward contracts and other marketing tools can be used to transfer financial risk to help satisfy lenders. I strongly urge Congress to continue these market-based policies in the FAIR Act. This farm bill is discouraging overseas acreage expansion, and is encouraging importing countries to rely on trade and increase demand. From my point of view, this is the best farm program we have had. And if that's not enough validation, look at how other countries react to it. Canadian farmers envy us, and South American farmers wish we would end it and go back to set-asides, so they could afford to clear more land and expand.
Page 152 PREV PAGE TOP OF DOC Some people say we should go back to production controls. We should not do that, as we then would lose our flexibility, and other countries would just increase their acreage by at least the amount we set aside. This has been proven in the past and would certainly happen again. The FAIR Act is also accused of not having an adequate safety net. It may not be perfect, but it is a lot better than the old programs. If you would, think back to 1995. We had high prices, but very little to sell, and then had to pay back the advance deficiency payments. I ask you, what kind of safety net is that?
Raising loan rates seems to be a popular idea to ''fix'' the program. History has shown that higher loan rates tend to send an incorrect supply/demand signal and upsets the balance. Also, what would many farmers do if loan rates were raised? Human nature tells us we would just pay more for land, and eventually, higher loan rates would in essence be built into land costs for all of us. Then we would be right back where we started, with higher costs and very tight or negative margins again.
The FAIR Act is getting blamed for the low prices and large supplies we now have. This is unfounded, as we have had very favorable weather worldwide the last four years, which resulted in bumper crops. At this same time, slumping Asian demand exacerbated the problem.
Because the FAIR Act is not yet finished in my view, I must ask for continued assistance. I personally would like to see the government out of agriculture, although this seems like a far away dream. But I can justify the request based on the fact that, as I said before, we have done our part, but the government has not yet.
Additionally, a counter-cyclical payment measure for the remaining years, such as continued Market Loss Assistance payments, would be appropriate, although the loan deficiency payment does act as a sort of counter-cyclical payment already. The note to add here, again, is the reality of not receiving that payment in a short crop situation.
I would now like to discuss the things that need to be done to complete the promises made by Congress when the FAIR Act was passed. At that time, we were told that it would include increased export activity, relief from over-regulation, additional and improved risk management tools, and tax reform. These promises have received some attention from Congress, but have not happened for the most part.
Page 153 PREV PAGE TOP OF DOCIMPROVED FOREIGN MARKET ACCESS
Trade policy reforms must be a high priority, as we export roughly one-third of our production. Open trade is not only fair to us; it encourages increasing incomes worldwide, which leads to higher demand for our products.
Economic sanctions against other countries must be eliminated. It has been proven that sanctions do not work, and food and agricultural producers should not be used as a foreign policy tool. There is no record of unilateral trade sanctions producing anything favorable from either an economic or political standpoint. They simply shut us out of much needed markets. Our competitors are only too happy to move in and sell in these markets, and we earn the long-term reputation of being an unreliable supplier. From the humanitarian side, it is immoral to withhold food or medical supplies from countries that are oppressed by their leaders. The leaders we are trying to sanction are not hurt, but the people are. It just ''kicks them while they are down''.
Permanent Normal Trade Relations for China must be a very high priority in Congress. China is our fourth largest trading partner now, and is the most important growth market in the world. U.S. Government studies predict that China could account for over one-fourth of U.S. agriculture exports within ten years. Within one year of accession, China could be a market worth over $3 billion for our farmers and ranchers. In order for us to benefit from this potential, Congress must grant China the same trading rights it extends to the other 134 WTO members. If we do not do this, they will still join the WTO, and other exporting countries will realize these gains. I understand the arguments against this move, such as human rights problems, and opening our markets to them. However, we will not have any influence over them if we do not trade with them. We cannot export our values and social reforms other than through continuous influence. Also, we import many products from China now. Just go into any store and look around. Many of the products on the shelves are made in China. It is only fair to our farmers and ranchers to allow us access to their markets.
Page 154 PREV PAGE TOP OF DOCRELIEF FROM OVER-REGULATION
There are many regulatory burdens that we deal with every day that result in a tremendous cost in terms of money, time, and other resources. Our current struggle here in South Dakota to make wetland rules comply with Federal law and be consistent with other states is just one example. Also, the listing of endangered species with very little scientific information is wrong and causes tremendous difficulties. The proposed listing of the Black-tailed Prairie dog is one example of this situation. Farmers are good stewards and want to do a good job of conservation. Decreasing some of the regulatory burden and letting us operate more freely would result in better conservation practices, and enhancement of wildlife and recreational opportunities. The Food Quality Protection Act is another example of good intentions gone the wrong way. We could end up with wholesale cancellations of crop protection products that are now used safely and responsibly. Congress must pass the Regulatory Openness and Fairness Act of 1999, and get the EPA on the right track.
ADDITIONAL AND IMPROVED RISK MANAGEMENT TOOLS
A lot of work has been done to develop a more comprehensive crop insurance program that would allow us to better protect against yield and price variations. More than ever, farmers are relying on crop insurance as our primary risk management tool. A better crop insurance program that is affordable and provides good coverage would let us take control of our own destiny from that point on. It would cost the government some money, but Congress could take funds from the current disaster and add hoc programs and use them on crop insurance. As I said before, the weak spot in the safety net aspect of this farm bill shows up if I have a reduced crop due to drought, flood, or other risk. I do not get the loan deficiency payments if that occurs. A good crop insurance program could take care of this problem. Additionally, we need to do a better job of marketing and creative thinking. If we have good risk management tools to use, there are good rewards for those who are willing to ''think outside the box''.
Page 155 PREV PAGE TOP OF DOCTAX REFORM
There have been attempts in Congress to approve the Farm and Ranch Risk Management Program, although without success yet. These FARRM accounts would allow us to level out our income from year to year. We could put some money away in a good year and then take it back out of these accounts in a bad year. Making the tax implications friendlier toward this situation is the main point of the bill. In addition, eliminating the Federal estate tax would be much appreciated. It is a grossly unfair tax and makes passing on the family farm a very difficult task in many cases.
REGULATORY FAIRNESS AND OPENNESS ACT OF 1999
I have some other things that Congress can do to complement farm policy and potentially have a very positive impact on the agriculture situation. First, as I alluded to before, is the Regulatory Fairness and Openness Act of 1999. This act would correct the problems we are having with the implementation of the Food Quality Protection Act by the EPA. We could stand to lose many of the crop protection products we now responsibly and safely use in producing the safest, most abundant, least expensive food supply in the world. The EPA must be restrained from pursuing its internal agenda to eliminate much or most of the pesticide use in this country. Loss of these crop protection products would lead to a huge reduction in the quantity, quality, and safety of our food supply. In addition, food prices would increase greatly. In times of shortages, more imports from other countries may be needed, which could result in many food quality and safety issues. We could not regulate pesticides uses in other countries and could end up importing the very things we banned in this country.
Export Enhancement Program
The FAIR Act provided $1.5 billion for EEP, but the administration has used very little of those funds. We need to take advantage of this program and use it as provided.
Page 156 PREV PAGE TOP OF DOC Farm Income Fairness Act
I would like to urge your full support for the Farm Income Fairness Act (HR 4260), which clarifies that farmers and ranchers do not have to pay self employment tax on cash rent income and CRP payments. Self employment taxes are not charged on other investments or rental property that people own outside of agriculture. It is only fair that income from CRP and rental property be treated the same. Agriculture is being singled out by the IRS, and it is not fair to farmers and ranchers.
Renewable Fuel Requirements
The use of MTBE should be eliminated from our gasoline supply. It is damaging to the environment and we have an excellent replacement for it in ethanol. The current oxygenate requirement, however, should not be terminated, as some are advocating. I urge you to continue that requirement and let agriculture fill that need. What could make more sense? It would decrease our reliance on foreign oil and is good for the environment. In addition, ethanol plants create jobs and economic activity, use our product, and increase domestic corn prices. I urge Congress to continue the current tax treatment for ethanol producers, and other incentives that encourage producer participation in further processing of our products.
I know that dealing with agricultural policy is a daunting task, and I appreciate your efforts in Washington, and in holding these special hearings. Again, I want to stress that Freedom to Farm is working. Please preserve it, keep the promises that were made when it was passed, and give it a chance to really work! It was the right thing to do in 1996, and it is still the right thing to do now. Thank you again for the opportunity to appear before the committee today.
Page 157 PREV PAGE TOP OF DOCStatement of Robert J. Wietharn
MR. CHAIRMAN AND MEMBERS OF THE U.S. HOUSE COMMITTEE ON AGRICULTURE:
FIRST OF ALL, I THANK YOU FOR GIVING ME THIS OPPORTUNITY TO TESTIFY TODAY. I WANT TO SHARE MY THOUGHTS OF AMERICAN AGRICULTURE POLICY AND VISION FOR THE FUTURE IN AGRICULTURE.
MY NAME IS ROBERT J. WIETHARN. I AM A 39-YEAR-OLD FARMER FROM CLAY CENTER, KANSAS, IN THE NORTH CENTRAL PART OF THE STATE. I PRODUCE CORN, SOYBEANS, WHEAT, AND MILO, AND MAINTAIN A FARROW TO FINISH HOG OPERATION. I AM ALSO INVOLVED IN SEVERAL OTHER ENTERPRISES.
THE PAST 2 YEARS HAVE BEEN THE MOST CHALLENGING IN MY 20-YEAR FARMING CAREER. I AM SURE A LOT OF THAT IS RELATED TO BEING IN THE HOG ENTERPRISE. AS ALMOST EVERYONE IS AWARE, 1998 WAS ONE OF THE WORST YEARS FOR HOG PRODUCERS.
I COULD TALK ABOUT MANY DIFFERENT ISSUES HERE TODAY. HOWEVER, BECAUSE MY TIME IS LIMITED, I AM GOING TO FOCUS ON WHAT I SINCERELY BELIEVE TO BE THE MOST IMPORTANT RESOURCE THIS COUNTRY HAS. THIS RESOURCE, PRODUCED BY THE AMERICAN FAMILY FARMER, IS FAR MORE VALUABLE THAN ALL AGRICULTURAL COMMODITIES COMBINED. THIS RESOURCE IS SO VALUABLE THAT IT IS INDEED PRICELESS. WITHOUT THIS RESOURCE, WE WOULD SOON FIND OURSELVES GOING HUNGRY. THE RESOURCE I AM DESCRIBING IS KIDS RAISED ON A FAMILY FARM.
I'M SHARING A PICTURE OF MY THREE KIDS TODAY. MY OLDER DAUGHTER, JESSICA, IS A FRESHMAN IN HIGH SCHOOL AND IS INVOLVED IN FFA AND 4-H. JENNA, MY YOUNGER DAUGHTER, IS ALSO INVOLVED IN 4-H. SHE SAYS SHE WANTS TO LIVE ON A FARM WHEN SHE GROWS UP. MY SON, JOE, IS STARTING HIS FIRST YEAR IN 4-H. HE SAYS THAT HE WANTS TO GROW UP AND BE JUST LIKE HIS DAD. ALL THREE OF THESE FARM KIDS ARE LEARNING ABOUT RESPONSIBILITY AND ABOUT BECOMING PRODUCTIVE INDIVIDUALS. THIS COMES FROM THE DIFFERENT TASKS THEY DO AROUND THE FARMALL THE WAY FROM HELPING TO WEAN PIGS TO IRRIGATING CROPS. YES, YOU COULD CALL ME A PROUD FATHER.
I AM THE THIRD CHILD OF 4 SIBLINGS. MY OLDEST BROTHER, GARY, CURRENTLY IS A VICE PRESIDENT OF DAWN FOODS. PREVIOUSLY, HE HELD A REGIONAL MANAGER POSITION FOR CON AGRA. I RECENTLY ASKED GARY WHAT HE CONSIDERS TO BE THE MOST IMPORTANT CHARACTERISTIC WHEN HE INTERVIEWS AND HIRES AN INDIVIDUAL. ''WHEN INTERVIEWING POTENTIAL CANDIDATES, I GIVE A LOT OF CREDIT IF THEY HAVE A FARMING BACKGROUND. NEW EMPLOYEES WITH FARMING BACKGROUNDS TEND TO WORK HARDER AND DO A BETTER JOB AT MAKING COMMON SENSE DECISIONS.''
Page 158 PREV PAGE TOP OF DOCMY OLDER SISTER, GALE, MARRIED A FARMER AND LIVES JUST NORTH OF OUR FARM. SHE AND HER HUSBAND, MIKE, HAVE THREE VERY SUCCESSFUL KIDS.
MY YOUNGER BROTHER, RICK, IS A PLANT MANAGER FOR NOVARTIS AT LINCOLN, NEBRASKA. I ASKED HIM WHAT HAS HELPED HIM BE SO SUCCESSFUL. AND I QUOTE, ''MOST OF WHAT I APPLY IN MY ENGINEERING JOB, I LEARNED ON THE FARM, NOT IN COLLEGE. WHAT YOU LEARN GROWING UP ON A FARM IS PRACTICAL; WHAT YOU LEARN IN COLLEGE IS THEORETICAL. I BELIEVE THE COMBINATION OF THE TWO IS WHAT HELPS SET ME APART FROM OTHERS.''
AS YOU CAN TELL, THE WIETHARN FARM HAS PRODUCED MANY SUCCESSFUL PEOPLE, MULTIPLY THEIR CONTRIBUTIONS TO THE AMERICAN SOCIETY.
SO, HOW CAN WE MAKE SURE THERE IS AN AMPLE SUPPLY OF FARM KIDS FOR THE FUTURE? I AM NOT SURE WE CAN. BUT THAT DOESN'T MEAN WE SHOULDN'T TRY. THE TREND WE SEE IN AGRICULTURE IS TOWARD FEWER AND FEWER FAMILY FARMS. I SEE SEVERAL REASONS FOR THIS: NEW TECHNOLOGY, THE ENVIRONMENT, ECONOMIC FORCESBUT MOST OF ALLGOVERNMENT AGRICULTURE PROGRAMS BRING THIS ABOUT.
I AM NOT SAYING THAT WE SHOULD SUBSIDIZE EVERY PERSON WHO WANTS TO RAISE HIS OR HER KIDS ON THE FARM. WHAT I MEAN IS THAT WE SHOULD PROMOTE A HEALTHY ENVIRONMENT IN WHICH FARM FAMILIES NOT ONLY SURVIVE, BUT THEY PROSPER. LET ME GIVE YOU SOME OLD, AND MAYBE NEW, IDEAS ABOUT HOW WE MIGHT ACCOMPLISH THIS IMPERATIVE GOAL.
1. FIRST, I THINK USDA SHOULD REINSTATE THE LOW INTEREST LOAN PROGRAM TO YOUNG, BEGINNING FARMERS. I AM LIVING PROOF THAT THIS PROGRAM WORKED VERY SUCCESSFULLY IN THE PAST. I WOULD NOT BE HERE IF I HAD NOT OBTAINED A LOW INTEREST LOAN FROM FHA TO BUY MY FIRST FARM WHEN I STARTED MY FARMING CAREER IN 1980. I AM HAPPY TO REPORT THAT I PAID MY LOAN IN FULL SEVERAL YEARS AGO. TIMING IS EVERYTHING IN FARMING. THE LOW INTEREST RATE PROGRAMS ARE AN ESSENTIAL TOOL TO ASSIST YOUNG, BEGINNING FARMERS SURVIVE THE INEVITABLE AGRICULTURAL CYCLES IN THEIR EARLY YEARS.
2. THERE SHOULD BE A SUBSIDIZED FARM INCOME INSURANCE PROGRAM FOR YOUNG, BEGINNING FARMERS. THIS PROGRAM COULD PERHAPS BE HANDLED THROUGH THE PRIVATE SECTOR IN CONJUNCTION WITH THE CROP REVENUE COVERAGE PROGRAM (CRC).
Page 159 PREV PAGE TOP OF DOC3. A FARMER SHOULD BE GIVEN THE AUTHORITY TO START AN INCOME AVERAGING SAVINGS ACCOUNT. I BELIEVE CANADA HAS A SIMILAR PROGRAM. THIS ALLOWS A FARMER TO PUT PART OF HIS INCOME INTO A SAVINGS ACCOUNT DURING A HIGH-INCOME YEAR FOR WITHDRAWAL DURING A LOW-INCOME YEAR. THIS RESULTS IN A TAX SAVINGS AND PROVIDES A MECHANISM TO LEVEL OUT HIS INCOME, ALL AT LITTLE EXPENSE TO THE AMERICAN TAXPAYER.
4. FREEDOM TO FARM SHOULD IN NO WAY BE ABANDONED. HOWEVER, IT SHOULD BE ENHANCED. THERE SHOULD BE HIGHER LEVELS OF AFFORDABLE REVENUE COVERAGE ON ALL COMMODITIES. UNDER NO CIRCUMSTANCES SHOULD WE GO BACK TO THE PAST, PAYING FARMERS THROUGH SET-ASIDE PROGRAMS TO NOT PRODUCE. UNDER THIS SCENARIO, OUR COMPETITORS AROUND THE WORLD WILL PRODUCE WHAT WE FAIL TO PRODUCE.
5. LOAN RATES SHOULD BE RAISED AND TIED TO INFLATION OR COST OF PRODUCTION. THIS WOULD SEND A SIGNAL AROUND THE WORLD THAT THE U.S. GOVERNMENT SUPPORTS THE AMERICAN FARMER. IF PRICES WERE LOW, THE FARMER WOULD BE PAID A FAIR PRICE THROUGH THE LOAN PROGRAM. IF PRICES WERE HIGH ENOUGH, THERE WOULD BE NO COST TO THE AMERICAN TAX PAYER.
6. REINSTATE THE FARMER-OWNED RESERVE. THIS WOULD BE A DIRECT BENEFIT TO THE PRODUCER FOR SECURING THE FOOD INVENTORY THIS COUNTRY NEEDS.
7. WE MUST STOP THE MERGER MANIA THAT IS CURRENTLY TAKING PLACE IN THE CORPORATE WORLD. IF OUR ANTI-TRUST LAWS ARE NOT STRONG ENOUGH TO STOP THIS, SOME NEW LAWS SHOULD BE PUT INTO PLACE AND SHOULD BE ENFORCED. PRIVATE COMPETITIVE ENTERPRISE IS WHAT MAKES THIS COUNTRY SO STRONG.
8. MORE FUNDING SHOULD BE DIRECTED TO UNIVERSITIES FOR AGRICULTURE RESEARCH. THIS PREVENTS OWNERSHIP OF THE FUTURE GENE POOL BY ONE OR TWO COMPANIES.
9. GOVERNMENT POLICY NEEDS TO ELIMINATE THE USE OF FOOD AS A WEAPON AGAINST OTHER COUNTRIES TO FORCE THEIR COMPLIANCE TO OUR BELIEFS. THIS STRATEGY ONLY HURTS THE AMERICAN FARMERS' EXPORT MARKET, WHICH LOWERS THE PRICE FARMERS RECEIVE FOR THEIR COMMODITIES. IF THIS TACTIC IS ABSOLUTELY NECESSARY, A PROGRAM MUST BE IN PLACE TO COMPENSATE THE AMERICAN FARMER FOR HIS OR HER LOSS.
Page 160 PREV PAGE TOP OF DOC10. GET TOUGH ON TRADE. STOP IMPORTING FROM COUNTRIES THAT WILL NOT OPEN THEIR MARKETS TO OUR AGRICULTURE PRODUCTS. THIS CAN ONLY HELP THE AMERICAN FARMER TO RECEIVE MORE OF HIS OR HER PROFIT FROM THE MARKET PLACE.
THESE PROGRAMS AND OTHERS REPRESENT A VERY SMALL PRICE FOR THE AMERICAN TAXPAYER TO PAY TO ENJOY THE CHEAPEST, SAFEST, MOST BOUNTIFUL FOOD SUPPLY IN THE WORLD.
LET ME CHALLENGE YOU TO FIRST ASK YOURSELF ONE QUESTION WHEN MAKING A DECISION FOR THE FEDERAL GOVERNMENT ON AGRICULTURE PROGRAMS: HOW WILL THIS DECISION AFFECT AMERICAN FARM KIDS?
I KNOW WE HAVE TO FACE REALITY. I'M NOT SURE WE CAN STOP THE DECLINE OF FARM FAMILIES. BUT WE HAVE THE RESPONSIBILITY TO MAKE EVERY EFFORT TO KEEP THIS PRICELESS RESOURCE AVAILABLE AS LONG AS WE CAN. THIS REMINDS ME OF AN OLD SAYING: ''YOU CAN TAKE THE BOY OFF THE FARM, BUT YOU CAN'T TAKE THE FARMING OUT OF A BOY.''
I WOULD LIKE TO ADD A NEW TWIST TO THIS OLD SAYING: ''YOU CAN PUT A BOY ON THE FARM, BUT YOU CAN'T PUT FARMING IN A BOY.''
THANK YOU VERY MUCH FOR YOUR TIME. I WOULD BE HAPPY TO ADDRESS ANY QUESTIONS YOU HAVE FOR ME.
Statement of John M. Dittrich
Good morning members of the House Committee on Agriculture. My name is John Dittrich. I am a corn and soybean farmer from northeast Nebraska. I am also Policy Analyst for the American Corn Growers Association.
I'd like to thank Chairman Combest, and the committee, for holding these field hearings in order to look for solutions to the crisis in agriculture we now face. And I thank you for the opportunity to testify today.
My responsibility as Policy Analyst is to provide factual and historical analysis of farm programs, farm economics, and related statistics. Then, based on that analysis and our organizational policy, to provide specific policy ideas to be discussed by our members.
Page 161 PREV PAGE TOP OF DOC Today, I would like to present to the committee a comprehensive concept farm bill proposal adopted by the ACGA at our national convention in February. ''The Family Farm Agriculture Recovery and Maintenance Act'' was written by me in our farm office. It is a true grassroots, farmer written, farm bill proposal, first discussed and passed at a Madison county Farmers Union meeting in Nebraska.
The core concepts of this proposal have also passed unanimously at the 2000 national conventions of the National Farmers Union, The National Association of Farmer Elected committees and the National Family Farm Coalition. This proposal is now the basis for a developing ''Family Farm Act'', that will be drafted as a legislative bill in the U.S. Senate. Our proposal is rapidly becoming more comprehensive and gaining more support. It is designed to be a positive, long- term solution to the problems faced by family farm agriculture.
Much thought and extensive research has gone into the formation of the Family Farm Act proposal. This proposal developed after I compiled a table last August and September entitled ''Key Indicators of the Farm Sector, a 25-Year History, with Inflation adjustments''. I would also like to present this table to the committee today, as background and justification for our farm bill proposal.
This table has received much attention around the country since first released last September. The table covers 12 primary statistics for corn, wheat, soybeans, cotton, and rice, over a period of 25 years. It uses inflation adjustments to illustrate the affects of inflation on farm programs, farm prices, and farm income. I hope you will at some point allow me to present this table to you in more detail.
However, let me summarize some important observations from the ''Key Indicators'' table that go right to the heart of our farm policy debate.
1.Real, inflation adjusted CCC loan rates have dropped dramatically over the past 25 years, and real farm prices have dropped in a similar manner. Real farm prices are now approximately one third of what they were in during the decade of the 1970's.
Page 162 PREV PAGE TOP OF DOC 2. On average, export volume of all major commodities has been virtually static over the past 25 years, regardless of farm price support policy, trade policy, or currency valuations. Our agricultural trade balance has also been static to declining in nominal terms, and has sharply declined in inflation adjusted terms. This indicates that we are not exporting more raw grain commodities in the form of increased net exports of value-added foods or meat.
3. On the other hand our domestic use of commodities has increased steadily over the past 25 years. Virtually all of our growth in total use has come from the domestic market.
4. Total use of commodities has not declined during the past four years, and is now at all- time highs, with the exception of cotton. In spite of this, farm prices have collapsed.
5. On a historical basis, ending stocks to use ratios are now tight to modest. Ending stocks or surpluses have not been unusually high during the four years of the Freedom to Farm Act. In spite of this, farm prices have collapsed.
6. In spite of increasing yields, real gross income per acre for basic commodities has dropped nearly 50 percent over the past 25 years. Including emergency AMTA payments of the past 2 years, gross income per acre has dropped approximately 40 percent.
7. With emergency AMTA payments included, farmers have received a national average equivalent price of about $2.67/bushel for corn, and $4.15/bushel for wheat, for the past 4 years. These equivalent price levels have given us our depression today.
To conclude, we must base future farm policy on market realities, fact, and logic. The business of farming is fundamentally unique worldwide. It does not and cannot follow the typical supply and demand economics applicable to most businesses.
I ask this committee to consider these realities of agriculture. Our farm program proposal gives farmers the tools to participate in a market economy, versus the exploited bystanders farmers are today. It is designed to answer the criticisms of past farm policies in the areas of flexibility, forfeitures, and trade. Nearly every specific of this proposal is new and unique. Our voluntary program would:
Page 163 PREV PAGE TOP OF DOC 1. Establish a new ''market participation'' loan for all commodities, targeted to family sized farms.
2. Annually establish CCC loan rates using a unique formula tied to productivity and inflation.
3. Establish a new Farmer Owned Reserve, that will buffer price depressing high production years, and ensure food security in drought years.
4. Give the Secretary authority to institute a short-term set-aside, if the reserve can no longer buffer several high production years.
5. Maintain full planting flexibility.
6. Explore a target price system for livestock on a limited volume of production.
7. Establish a maximum level of agribusiness concentration.
8. Initiate negotiations between grain exporting countries to establish market share agreements and shared production cuts when world grain supplies become burdensome.
The solutions to our problems must come from a true bi-partisan effort. I urge you to discard any pre-conceived opinions you have about individuals or organizations. I caution members of Congress against taking undue advice from ''experts'' whose recommendations have put Congress and farmers in the dilemma we face today.
Together, we must design a national farm policy and international trade policy that recognizes the market realties of the unique business of farming. If we do not, we will lose the family farm system of decentralized production. Such a system of decentralized production is so successful because it is based on millions of just-in-time individual decisions, made by farmers with generations of institutional knowledge.
The loss of that system has ramifications far beyond the livelihoods of a million farm families. Indeed, the potential loss of that system should be of grave concern to everyone in the United States. Thank you.
Page 164 PREV PAGE TOP OF DOCStatement of Kristi Noem
I would like to express my appreciation to the entire committee on Agriculture and especially Chairman Combest and Congressman Thune for agreeing to hold this hearing today. I am honored to stand before you today and offer my view of Federal farm policy and the way it is currently affecting family farms and ranches.
I am a partner in a family farm operation near Hazel, SD. This farm has been in my family for four generations. My heart is in farming and I have a desire to see family farm operations not only survive, but excel in the 21st century. I also serve on the Farm Service Agency State Committee, and as a committee we facilitated ''listening sessions'' in every region of the state to garner information that would be useful to USDA and Congress. Producers throughout the state of South Dakota are very concerned about the state of their industry today. After losing many of their neighbors and fellow farmers and ranchers to the third straight year of economic disaster in the production agricultural industry, hundreds attended these listening sessions to give their input on what they see as the problem and give possible solutions. It is on their behalf that I am testifying today. I have lost two of my neighbors in the last six months. They both lived within two miles of my farm. They were good farmers. They were farmers that I was sure would outlast me and my family. They made good decisions, were good stewards of the land, and good neighbors. One of them has gone to work for a farmer who is ten times the size of an average farm in our area. The other has an engineering degree and has been searching for a job for the last 3 months. His family may be forced to move. The most important part of my story is that it is not unique. It is happening all over America. I do not believe that the government needs to keep every farmer out here on the land without taking into consideration how he operates his business. The problem is, we are losing good farmers now. We are losing productive men and women who made good decisions, who did things right, and were still forced to shut down.
Many factors have played a part in the situation we are facing now, including rock-bottom prices, shrinking global demand, increased farmed acres, and record world production. The government has the ability to overwhelmingly impact the industry of agriculture with administrative and legislative changes. Is it of benefit to the people of the United States to keep all areas of the Nation populated and productive? If rural America is eliminated, and the cities grow because of it, a whole new circle of problems could exist, including higher crime rates, poverty, and water and waste treatment issues. To truly be an independent nation, we should not be dependent on other countries for our food. We can only be sure of the safety of our food when we produce it ourselves and know exactly how that food is grown.
Page 165 PREV PAGE TOP OF DOC In 1996, when the ''Freedom to Farm'' bill was passed, I was optimistic. I liked the flexibility of the program, as do many of the producers. I have not had one producer tell me that they do not like the flexibility. We need a safety net within freedom to farm. Producers aren't asking you to do their jobs for them, they are only asking for tools needed to accomplish that job.
Price, Price, Price. At every farm meeting we held, that was the number one issue. There would not have been a single producer at any of those meetings, if they were getting a fair price for their products. They are getting less for their commodities now than they received 50 years ago, while all of their input costs have increased a hundredfold. Let's not approach this situation from any other direction than how can we get a fair price. We ultimately don't want emergency aid or ad hoc disaster bills. We can't say that this farm program is working, when the only reason farmers paid their bills last year was because of emergency aid and LDP monies from the government. If you took those dollars out of the equation, I don't know of a single farmer that would have turned a profit. We just want to be able to compete. Give us programs, give us tools, that we can use to get a price.
First, we need a safety net. We need an alternative to turn to when prices start to drop. A tool that we can voluntarily utilize to support the price of our product. The Flexible Fallow Amendment is an excellent example of this concept. The producer decides if he is willing to take acres out of production in order to guarantee a price for his commodity. It is a risk management tool that gives the producer options. The more I read it, the more I like it. The are some unanswered questions within the proposal, but one of the best tools I have seen proposed. You will hear/ have heard about this proposal today, and the majority of the producers I have talked to believe it is a viable option. They would keep their freedom to farm and have some control over the floor of their price. I have always believed that if America cut back on its planted acres, some other country may increase theirs in response. We have proven that we have no control over other countries policies. It is unrealistic to base a farm policy on what others may, or may not do. Overproduction has added to the drop in prices the last three years and this is one tool to address that issue.
Page 166 PREV PAGE TOP OF DOC There should be permanent programs put into place to address issues concerning livestock producers. They need to be afforded the same opportunities commodity producers and not have to be reliant on disaster programs that come too little too late. This would include livestock insurance opportunities. Sheep producers need to have their wool incentive payments returned. Country of origin labeling should be implemented on all meat products. The consumers should be given the opportunity to choose.
All sanctions and embargoes should be removed from food. Food should be made available to every country, regardless of their political standings. We as a nation need to send the message to the rest of the world that it is not right for anyone to ever go hungry. If one of the fundamentals of this farm bill is to increase market access, you have a remarkable opportunity right now to help make that happen.
Anti-trust laws need to be enforced. We need to realize that the less effectual players we have in the game, the more control those players have over the price. Unfair competition needs to be addressed and eliminated. If things are allowed to progress the way they are headed, we will free enterprise ourselves into a food industry that is controlled by a few who no longer have a need to compete and keep prices low. America's cheap food policy would no longer exist and poverty and hunger could become very real to many more within our borders. Maintaining a cheap food policy in our country frees up more disposable income to funnel back through the economy. Perdue is now being charged by the United States Justice Department with unfair and deceptive practices in dealings with poultry producers. I don't know any poultry producers. Most of them have been out of business for a long time. It is too late for the vast majority of them. Let's not allow the same thing to happen to the pork, cattle, sheep, and commodity markets. We need to enforce the laws on the books now.
One tool that could provide very useful would be a farmer owned reserve. A program may be implemented to pay the producer a storage fee to keep the grain on hand. This program could work hand in hand with the facility loan program that is soon to be implemented. All of the grain would not be hitting the markets at one time, thus preventing a large market drop. Also, the United States has always struggled with increasing the amount of commodities that it exports. This would maintain a ready supply to fill our export needs at any time, resulting in the United States being considered a reliable supplier. On the domestic side, USDA needs to promote the growth and development of farm cooperatives and value-added ventures. This would create and expand market opportunities for farmers.
Page 167 PREV PAGE TOP OF DOC All imported commodities should be held to the same standards as our domestic product. If the same requirements are not met, they should not be allowed to compete in our marketplace.
I would like to see policy implemented that would prevent misinterpretation of procedure within USDA programs. Wetland determinations and CRP EBI scores are often computed and interpreted differently from state to state. There should be no inequities across state lines and producers need to be given equal opportunity to participate in all USDA programs.
As a member of the South Dakota Farm Service Agency State Committee and as a producer, I am very concerned about the future of the agency. Our agency is one of the most valuable assets the American producer has available to them. The producers have a relationship with the county office employees and realize their important role in delivering the programs. The employees are people who live in their communities, eat at the local cafes, and sit by them at ball games. Because of budget restrictions, reductions in force and office closings are a very real possibility. The county and state offices are minimally staffed to accomplish all of the duties their workload dictates. None of the recent disaster programs even factor into that workload formula. The link between you and the grassroots farmer and rancher is that county office. Funding must be available to provide that tool to the American producer. We simply needed that supplemental.
These are a few of the issues that I feel need to be dealt with to provide a future for American producers. A way of life is changing here in the heartland. I believe we, as producers and stewards of the land, are up to the challenge. All we ask for is a fair playing field and the opportunity to spend our lives doing what we love to do. I appreciate the opportunity to share my concerns with you.
Page 168 PREV PAGE TOP OF DOCStatement of Ron Olson
Mr. Chairman, members of the committee, my name is Ron Olson. My wife and I raise corn, soybeans and alfalfa on our farm near Waubay, South Dakota. I currently serve as president of the South Dakota Corn Growers Association and have represented our state as a voting delegate at the National Corn Growers Association Annual Meetings for the past two years.
Thank you for coming to South Dakota to hear more about what concerns agriculture producers like me. We especially appreciate the leadership of Representative John Thune in arranging for this meeting.
Corn prices this year are forecast by USDA to be in the range of $1.85 to $1.95 per bushel. My average cost of production is $2.33 per bushel. Other commodities are in similar shape. One of the solutions to this problem is to simply grow more corn to bring the cost of production down so that the numbers work. We've been able to do that for a couple of years. Until we develop some more new markets or jump-start the export market possibilities, an abundance of corn just means a lower price. The LDP program has helped some, but it's also driven us back to increased reliance on the government. I'm not sure that's in our best interests.
Many people want to pin agriculture's current problems on the 1996 farm bill, Freedom to Farm. In all fairness, however, Freedom to Farm did NOT cause the current economic crisis in agriculture. Abandoning it is not the answer. There were many other contributing factors. Congress needs to take action on the issues that will enable us to work in coordination with the 1996 Act. We need a commitment to research to keep us competitive in the future by unlocking new uses, maximizing production levels and preventing major disease problems. We need affordable, effective crop insurance tools to help us manage the risks Mother Nature hands out. We need a strong, global economy and access to markets around the world. We need a tax system that allows us to keep a reasonable portion of what we earn. We need viable, efficient transportation systems to transport our commodities at home and to markets. Because those things are not fully in place, I find myself in a very difficult position today - along with many of my fellow farmers in South Dakota and across the nation.
Page 169 PREV PAGE TOP OF DOC There are a few things that would make the 1996 farm bill benefits more equally shared among all producers today:
Storage - Support restoration of a storage facility loan program. Also, enact an ''Orderly Marketing Program'' to provide short-term storage assistance without encouraging grain stockpiling. All corn would be eligible for the program, which would provide participating farmers with a sliding-scale payment of three cents for each bushel stored for the first two months, two cents per bushel for the third and fourth months, and one cent per bushel for the fifth and sixth months - or a maximum of 12 cents per bushel over six months.
Marketing Assistance Loan Program - Oppose any decrease in the loan rate. Also, support efforts to improve the calculation for loan deficiency payments (LDPs) by: a) urging USDA to give producers the choice of having their LDPs set in the county in which the corn is grown or the county in which it is marketed; and b) urging USDA to set the posted county price as the average of the two adjusted terminal prices for that county.
In South Dakota, we raise about 350400 million bushels of corn each year. One-fourth to one-third of it is fed to livestock here in the state. That's the original enterprise for adding value to grains. Another 20 million bushels is processed into ethanol. Ethanol production adds instant value of about ten cents per bushel to the corn in the immediate vicinity of the ethanol plant, but also provides spin-off value in the form of additional jobs in a local community. Conservatively, ethanol production adds about 50 cents to a bushel of corn when all calculations are done. Cooperative ownership of ethanol processing facilities offers additional potential for a dividend to shareholders. That's why I'm working with a group in the Milbank area to build a 40-million gallon per year, producer-owned cooperative ethanol plant. It will use about 15 million bushels of corn per year in my area. A group of farmer-investors just broke ground near Madison, about 50 miles northwest of Sioux Falls, for a similar 40-million gallon per year ethanol plant. Farmers are actively looking for ways to move further up the value chain. Ethanol holds great promise for us.
Page 170 PREV PAGE TOP OF DOC However, if the market for ethanol in California and the East Coast, along with other significant areas across the Nation doesn't materialize, we're going to be in trouble. We've asked you and others countless times what the market potential for ethanol is in the future. We believe that the use of ethanol in reformulated gasoline is the right choice for a number of different reasons, and keeping the environment clean is one of the biggest of those reasons. There's no need to sacrifice clean air for clean water when you can have both if you use ethanol. Farmers like me need your help to make sure that we have a market for major value-added industry like the corn-into-ethanol system.
My area has been wet for a number of years. It's been a challenge to farm some of the land in the northeast part of South Dakota, as well as many other areas of the state. When we tried to do some small things to make it better, we found that regulations were tying our hands. As I look ahead, I see more and more regulations coming down the pike. Well-meaning people who do not understand production agriculture are trying to develop policy to protect the environment. Farmers are excellent environmental stewards, and their contribution to improved water quality, erosion control, and protecting wildlife habitat must be recognized. We breathe the same air, and like to swim and fish and hunt, just like everyone else. Partnerships with those interested in preserving and protecting the same land that we own are important, and need further exploration. We have several suggestions.
One is to be able to enroll those wetlands, bordered by filter strips which are enrolled into CRP, into the continuous CRP signup program. A relatively simple rules change within USDA would allow this practice.
Rewarding farmers financially for excellent conservation practices would be another. Senator Harkin's proposal has some possibilities.
Mitigation of wetlands (by farmers) holds promise IF some compromises are reached.
Changes in rules and legislation that allow these things to happen are essential.
Page 171 PREV PAGE TOP OF DOC South Dakota is populated with family farmers and rural communities. My wife and I have four children, we live in the country and work on the land. To compete, I need access to tools like the ones I mentioned. I believe that you can help me find them. If you want additional input from me or from others in the South Dakota Corn Growers Association, we're ready to visit with you any time.
Statement of Mark Schweers
Mr. Chairman and members of the committee, I would first like to thank you for taking the time to travel to America's heartland to explore means to address the problems agriculture faces.
My name is Mark Schweers. Along with my wife and three children, we farm and have a small cow-calf operation at Wisner, Nebraska, located in Cuming County, one of the largest livestock feeding counties in the country. I'm involved with several farm organizations at different levels and currently serve as vice president of the Nebraska Corn Growers Association. Many of these groups have provided information in preparation of this hearing. Their feedback has helped form some of my ideas and concepts. Today, though, I would like to share with the committee some of the information and thoughts that have been offered by my neighbors and friends from Cuming County.
I support the principles of the 1996 farm bill, but as with any program, we need to accept changes that improve its effectiveness. We are all aware of the factors that led to the current situation, and now it is up to all stakeholders to search for ways to return prosperity back to agriculture. The development of markets, which was the fundamental goal of the Fair Act, has been limited as a result of factors beyond farmers' control.
The results of the lack of available markets have forced farmers into producing traditional crops. The high fixed cost of production agriculture requires farmers to utilize every available acre resulting in a constant increase in the carryover of commodities.
Page 172 PREV PAGE TOP OF DOC Three key issues that are currently in front of national policymakers today and will have an effect on agriculture are trade, ethanol, and consolidation. The removal of sanctions and trade barriers around the world to provide access for trade of our products is the future of agriculture. The vote on permanent normal trade relations with China is a critical step in opening this market of twenty percent of the world's population to agriculture products. Along with the potential market, China has agreed to eliminate export subsidies of their agriculture products that would allow for a more level playing field on the world market of all producers. China will develop trade agreements with other countries. It only makes sense to bring them into the WTO to ensure accountable open access to all markets.
Ethanol is at a crossroads. Congress and the EPA will have a major role in the future of renewable and domestically produced fuel. As we all struggle to find value-added opportunities for agriculture and better environmental answers for our world, ethanol continues to be the true success story. We need to be cautious not to create a ''knee jerk'' reaction as a result of the MTBE problems. In a misguided attempt to solve water contamination problems caused by a petroleum-based product, people are seeking to gut the Clean Air Act. Congress needs to look at long-term solutions to energy policy, which includes the impact that the ethanol industry has on rural America.
The issue of consolidation in several sectors of the agriculture industry may have long-term consequence to the future of agriculture. As input suppliers, processors, and transportation entities merge, some efficiencies may be gained, but the loss of another player in that sector will ultimately reduce competition. Mergers that affect transportation and the livestock industry have received most of the attention lately, but we must monitor every sector of the industry. Congress needs to provide the resources to support the regulatory process to ensure that mergers are lawful and in the best long-term interest of society.
Page 173 PREV PAGE TOP OF DOC Regarding issues that affect producers on a more regional basis, the Western Corn Belt has different challenges than our counterparts in the other areas of the country. Marketing channels, production, and local usage result in different demands in our area. The Western Corn Belt is the residual supplier of corn and soybeans to the market place. Thus, the burden of storing the surplus supply falls on the farmers of this region. Risk management, transportation, and storage are unique to this area, and we need to have the options to adjust our programs to remain in business. Recently, December corn futures have been in the $2.50-$2.60 range. In many areas of Nebraska we have a basis level of 40 to 50 cents per bushel. Thus, the cash price of corn is well below our cost of production.
Risk management that is provided under the 1996 farm bill is a component that has simply not been effective for producers. Nebraska producers, who are some of the highest users of crop insurance in the country, have found many of the programs simply not feasible. The improvements that Congress has made to the Federal Crop Insurance program, though slow in coming, have been dramatic. Passage of legislation now before Congress, will enable producers to manage risk much better than in the past.
Congress should consider enacting a Farmer Owned Reserve program that provides for an extended marketing period. This would increase the options a farmer has and allow for an orderly marketing of products. The proposed loan program for on-farm storage by USDA is a step in the right direction in updating aging on-farm storage, but doesn't address the marketing period.
There are several other programs that are being considered as enhancements to the Fair Act, that need to be considered and analyzed to fully understand their effects. Concepts such as Flex Fallow, Green Payments, Hero, and counter-cyclical options may have merit for the upcoming year and the future farm programs. Several of these concepts, or possibly a combination, would allow producers to voluntarily take land out of production with an incentive. The market would then determine whether all acres needed to be planted or not.
Page 174 PREV PAGE TOP OF DOC Some will argue that a voluntary acreage reduction would undermine the principles of the Fair Act. I believe that the intent of the act was that the government would not dictate what to plant or not plant. That was to be a function of the market.
I have provided a brief overview of ideas that would enhance the principles of the Fair Act and provide for a more stable agriculture system. Congress has the resources and the non-biased position to evaluate these programs.
Your response to the current situation in agriculture needs to be a combination of near and long-term actions. China trade and ethanol market development will provide the needed near-term markets. The other programs should be studied to evaluate their place in the current and future farm bills. Your task of researching and developing policy for the nation's producers and the world's consumers is a monumental undertaking. Again, I would like to thank you for allowing me to provide input that I hope will help in your process.
Testimony of Danny Geis
On behalf of the Oklahoma Wheat Growers Association, I would like to thank the members of the House Agriculture Committee, Chairman Combest and Minority Leader Stenholm for providing a forum to discuss solutions to the agricultural crisis facing each of us here today. With commodity prices at the lowest level in memory, the Oklahoma Wheat Growers Association recognizes that U.S. agricultural producers must work cooperatively with Washington to maintain and build upon the prominence of our nation's agricultural resources and the U.S. agricultural producer.
As we rapidly approach the completion of the current farm program, we are faced with the challenge of finding solutions to issues that have plagued our industry for generations. What the Oklahoma Wheat Growers Association would like to do, is make recommendations for adjustments to a number of issues that will address both the immediate needs of our nation's wheat producers and provide points of importance to consider in the creation of policy beyond the current farm bill.
Page 175 PREV PAGE TOP OF DOC As we look to the future of agriculture in not only the United States, but also globally, we must aspire to provide a policy that will utilize the superior production capabilities of this nation's producers by financially rewarding their efforts. Policy set forth from now to the end of the current farm bill must culminate in the development of a program that will provide a realistically solid financial floor or ''Safety Net'' that will insure stability, and yet encourage the opportunistic free enterprise system that makes U.S. agriculture strong. The continuation of providing American Market Transition Payments in an amount to equal twice the 1999 payment level for the remainder of the current farm program would significantly move U.S. agriculture forward by increasing the farm program baseline for funding. This action, in turn would need to be accompanied by the establishment of a counter cyclical economic assistance program that would provide the aforementioned stability. We offer these two solutions for consideration and possible action as we establish intermediate goals in sculpting our next farm bill.
Turning our attention to more immediate, or short-term objectives, the Oklahoma Wheat Growers Association has identified a number of issues. The first of these issues is flexibility. Retention of flexibility is key to the ability of producers to adapt to the changes in the market place in which we operate. This flexibility would include the implementation of a provision allowing producers to qualify for a Loan Deficiency payment for wheat acres that were destroyed or abandoned due to grazing. We strongly encourage the committee to support the provision contained in the managers Report of the FY2000 Appropriations Conference Report regarding ''in lieu of'' LDP payments for graze-out. Limiting profitability by inhibiting the very freedoms in which our Nation was founded would be a step backward toward an era of failed agricultural policy.
As mentioned previously, U.S. producers must have accessibility at a global level , in order to compete with international competition. That is why we implore each member of the committee to help pass Permanent Normal Trade Relations with China. We must also work toward the elimination of all unilateral sanctions against food and medicine, as they only inflict suffering upon our domestic producers and encourage our international competition. Elimination of unilateral sanctions such as those in place with Cuba should be a top priority in the coming year. We urge action to appropriate larger levels of funding to specific trade programs, such as GSM credit programs, PL480, and any humanitarian assistance programs implemented by USDA for the export of U.S. wheat
Page 176 PREV PAGE TOP OF DOC The ever changing global agricultural economy presents many challenges that we must all overcome. If any of us here today are to persist and prosper in agriculture, there must be a commitment made by not only our elected official, but also by USDA, and U.S. Agriculture as a whole. If U.S. Agriculture is to once again rise to the forefront of a market place that has became more competitive than at anytime in history, we must have the commitment of unwavering support from our leadership, as well as, the devoted and unified efforts of everyone represented here today toward making the Oklahoma wheat producer and ultimately, United States Agriculture successful for generations to come. Thank You.
Statement of Marcy Svenningsen
I welcome the opportunity to tell you how the current farm bill is affecting our farm and family. My husband, two children and I have farmed near Valley City, North Dakota for approximately 20 years. We currently have 190 head of beef cows and raise a variety of crops on about 1500 acres of land.
I hate to start by being negative. But I truly cannot find one redeeming quality in our current farm bill. It's been great for agribusiness but it has sold family farmers down the river. We have lost many family farmers in our area, both large and small. Well-established third and fourth generation farms are calling it quits. It's not because we're inefficient, it is because the current farm program didn't take into account what would happen when a price disaster strikes.
The problem is that the underlying principles of Freedom to Farm were flawed. Rather than planting for the ''mythical'' free market, we're forced to plant crops that bring us as close to our cost of production as possible. So much for flexibility. We are spending more time at the ASC office than we ever have before trying to time our LDP payments so we can recoup every dollar possible.
Page 177 PREV PAGE TOP OF DOC I believe that Congress is capable of designing a new farm program that can sustain family farms, ranches and rural communities. This program must be tied to production. It must be targeted to family farmers in order to avoid contributing to even further consolidation. It is imperative that we keep production agriculture in as many hands as possible.
We also need to address supply. Every corporation in the world adjusts inventories by occasionally idling or limiting production capacity. In agriculture, it works a little differently. A farmer is going to produce when prices are high because he can make a profit. He will also produce when prices are low in order to spread his high fixed costs over as many bushels as possible even though he may know that there is a world wide surplus of grain.
Of course, in the free trade environment, the U.S. is limited in its ability to raise market prices because we can't effectively manage domestic supply if we can't manage imports. The old acreage specific supply management programs and EEP can't work anymore because if they did begin to increase prices by reducing domestic supply, we'd just become a magnet for imports.
I believe we need a Farmer Owned Reserve so that we can store our grain and market it when prices improve. Some argue that we can't store our way to prosperity, but it is abundantly clear that we cannot sell our way to prosperity at absurdly low prices either. At today's prices, it is not possible to make a profit and we're tired of giving away our grain to these huge conglomerates so that they can make a profit on our backs.
Consideration should be given to a short-term CRP program where producers could idle land for one to three years. It would be beneficial in helping to reduce over capacity. I do find it ironic that we are discussing over-supply problems when there is a massive famine threatening to explode in Ethiopia. Is the problem really over-production or is the problem distribution? It seems as though the countries that need food the most are the countries unable to purchase it. We need to get very serious about humanitarian relief as a way to reduce stocks.
Page 178 PREV PAGE TOP OF DOC We also need to address the production and marketing distortions and inequities that have been created by our current commodity loan rates. We can accomplish this through establishing a commodity equity program that will increase the loan rates to an equal percentage of the cost of production for all commodities. In addition, the loan repayment should be extended to 15 months in order to give us time to take advantage of market fluctuations. If we truly want to revitalize rural America, we should increase loan rates so that they will cover a family farmer's cost of production plus a reasonable profit.
In a recent ND poll, 99 percent of the respondents agreed that we were in an agricultural crisis, 93 percent favored the establishment of some sort of safety net and 84 percent felt that unfair competition was a major cause of the crisis. To get to the heart of what is ailing rural America, Congress has to do something about market concentration and anti-trust enforcement. We need a moratorium on further agricultural mergers until the effects of the merger to family farmers and rural communities can be studied in depth and Congress can reform anti-trust laws relating to agriculture.
The basic premise underlying Freedom to Farm was that it would get government out of agriculture, allowing farmers the flexibility to produce for the free market instead of a farm program. Well, if Freedom to Farm has taught us one thing, it is that government does have a vital role to play in Federal farm policy. Food and the farmers who grow it are simply too important to be left entirely to the ''free market''.
In conclusion, farmers need immediate action. Hearings are wonderful things but only if they lead to getting something accomplished. We are losing too many farmers while we spend time studying what needs to be done. If Freedom to Farm is allowed to run its course until 2002, my husband and I, along with thousands of others, won't be here in 2002 to testify as family farmers.
I hope that Congress will make an effort now to write a farm bill that makes sense. A farm bill that will recognize the value and importance of a family farmer. A farm bill that will give us the tools we need to survive when prices collapse or we have grain surpluses. Earlier I said that Congress was capable of writing a farm bill that can do all these things - my primary concern is whether they have the will to do it. Thank you for the opportunity to testify today.
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Statement of Douglas Schmale
I would like to thank the Chairman and members of the committee for conducting this field hearing. The opportunity for farmer input into agricultural policy legislation is very much appreciated.
My name is Douglas Schmale. I am a dryland wheat and millet producer from Western Nebraska. Dryland grain production has been my profession for the past 17 years. I am currently a member of the Nebraska Wheat Marketing Board and a past officer of the Nebraska Wheat Growers Association, and a past board member of both the National Association of Wheat Growers and U.S. Wheat Associates.
We are all aware of the problems in production agriculture today. Solving these problems will require that we recognize the realities of the business environment in which farmers operate, rather than continuing to base public policy on rhetoric and political ideology.
First and foremost, there is an appropriate role for supply management as part of U.S. Farm Policy. Utilizing supply management does not mean that we stop trying to develop markets, that we cease using every means available to export our production, or that we eliminate the cropping flexibility of Freedom to Farm. What it does mean is that we accept the fact that there are things that limit how much grain we can domestically consume or export into the world market. The mythical ''level playing field'' does not now, and never will exist. Wheat is a food grain, and it is ludicrous to assume that governments will not continue to intervene in the marketplace of such a vital basic commodity. The strength of the U.S. dollar, personal and political relationships between buyers and sellers, export sanctions; all of these things greatly affect the volume of grain that we can export, and will continue to do so in the future.
Utilizing supply management does not mean a return to the fixed bases of previous farm programs. There are ways to create a voluntary supply management program, such as the Flexible Fallow concept, that still allow producers complete freedom in planting decisions. No other industry, when faced with the problem of excess inventory, tries to solve that problem by further increasing production. Between the 1995 and 1998 U.S. wheat crops, total consumption of wheat actually increased, but the price of wheat decreased over 40 percent. Why? Because our ending stocks increased over 250 percent. We cannot blame the current crisis in agriculture solely on export demand when total consumption has at times actually increased. Production agriculture must begin to behave like any other business, and match its output with demand.
Page 180 PREV PAGE TOP OF DOC Secondly, a reserve program should always be part of farm policy. After all, isn't food security the underlying reason that we have an agricultural policy? A reserve program is a means to level out fluctuations in supply, not the substitute market it became in the early eighties. To properly construct a reserve program, we need to have definite caps on the number of bushels that can be placed into the reserve, and we need to have a release mechanism that is solely triggered by an unusually high price. The Secretary of Agriculture should have no discretion as to when bushels are released from a reserve. If we do these two things, a reserve program can not only stabilize producer prices and income, but it can also enhance our worldwide competitiveness. What better way to ensure for your customers that you will always have product available than to have that product in inventory? What better way to discourage increased production by competitors than for them to know that you have inventory that will come on to the market when price dictates? But unless we lock this inventory away from the market in a reserve, it will excessively depress prices and producer income.
Thirdly, direct payments to producers need to be counter-cyclical. There is little reason to provide an income transfer to producers in times of adequate commodity prices. Doing so merely inflates land rental rates and prices and invites criticism by taxpayers. Failure to provide adequate income supports during times of depressed commodity prices results in destabilization of the entire agricultural industry. Direct payments should also be subject to limits. There is no reason to transfer income to producers who simply do not need it, and who use it to prey on other producers.
Finally, commodity loan rates need to be both raised and balanced between crops. With a marketing loan the argument can no longer be made, nor should it even bear discussion, that we are somehow hurting ourselves by raising loan rates. If you truly believe that markets will exist, then loan rates, even at higher levels, become a moot point and there should be no objection to setting them at these higher levels. If you acknowledge that loan deficiency payments are going to be made, then you are also acknowledging that commodity prices won't adequately be meeting producer needs and that higher loan rates are needed for producers to survive.
Page 181 PREV PAGE TOP OF DOC Shifting to a topic that is not directly related to income supports, but is still vitally important to the agricultural economy, I would like to complement the committee for passing legislation to improve the Federal Crop Insurance Program. Your recognition of the fundamental soundness of this program and the benefits that can be achieved by enhancing it, will prove to be one of our best long-term policy decisions. I would urge the conferees to adopt the Senate provisions related to fraud and abuse, and to also provide integrity to the program by preventing co-operatives and associations from purchasing CAT coverage for their members.
In summary, for agriculture in this country to survive and prosper, we must base public policy on reality. We must also insure that upcoming trade negotiations continue to allow us the needed flexibility to design appropriate domestic farm programs. I am not advocating a return to portions of previous policies that did not work, nor am I advocating a continuation of failed current policy. Rather, I am hoping that we can objectively select and re-implement proven, successful programs that meet the needs of today's marketplace.
Thank you for your time and attention. I would be happy to answer any questions.
Testimony of Joy Philippi
Mr. Chairman, members of the committee, thank you for the invitation to speak with you today.
My name is Joy Philippi, I am a farmer and pork producer from Bruning, Nebraska which is located in the southern part of Nebraska. I am the fourth generation of our family to farm our land, which, has been in our family since 1882.
Our farm has always been involved in diversified, farm production. Currently I produce corn, grain sorghum, and soybeans on 400 acres in Thayer County. I am also involved in swine production, owning and operating an iso-wean nursery.
Page 182 PREV PAGE TOP OF DOC At the present time I am serving as president of the Nebraska Pork Producers Association. This organization is a grass-roots organization, which represents all of the independent pork producers of Nebraska.
When the 1996 farm bill was passed I joined many of my colleagues in support of this legislation. I still support the basic concepts of this legislation.
The transition of agriculture, continues to effect every commodity being produced, several key issues need to be considered by this committee and congress prior to establishing new farm policy.
Farm Policy in our country needs to be knowledge driven. Currently our Farm Service Agency offices have the system of delivery, in place to coordinate risk management programs, which would be based on income and individual producer efficiency, rather than losses.
As the competitive marketplace continues to disappear through the consolidation of large agribusiness, the need for risk management programs becomes greater.
The Federal crop insurance reform legislation HR2559, already passed by the House of Representatives, endorsed a plan, which will help producers manage the risk involved in commodity production.
Two key elements in this legislation involve appropriations, which would allow the USDA Risk Management Agency to conduct pilot programs nationwide on livestock risk insurance. These programs would serve as proactive insulation, for our livestock producers.
These pilot programs would allow affordable risk management for producers through insurance on market production losses and environmental threats. Producers, would be allowed to purchase insurance, which would guarantee at least a cost of production level of return. The environmental insurance program would serve as a win-win solution for both the producer and the environment.
I believe in order for agriculture to remain a sustainable industry in this country, we, must place the risk in the hands of the producers, not the large corporations.
Page 183 PREV PAGE TOP OF DOC When this risk is placed in corporate hands, they also gain leverage regarding the costs of inputs for production. Volume based integrated corporate control of inputs, allows them the opportunity to produce commodities at a lower cost of production. Thus, they also control the market place, making the individual producers only residual suppliers.
The creation of further farm policy to create a system where producers make investment, such as insurance premiums, will allow for a much cleaner production and marketing system. Risk Management programs will help level the playing field and allow existing producers to begin participating in a reestablished competitive market place.
One caution, many corporations believe they offer similar risk management programs, for producers. I have been offered programs to market my livestock at a set price, with volume controlled input costs and guaranteed access to slaughter space.
I have also been offered a risk management crop production program, where I would not even have to set foot in to my fields. A corporate controlled local business would spray, plant and even harvest my grain.
Both of these programs were offered as risk management programs, however, the only risk being managed is the corporate risk which is tied to mass production. In the fine print in both agreements it stated that I would be held responsible for the quality of the commodity produced with discounts to be added to the final payment. The grain program even included a projected cash flow, which included government payments and projected LDP payments, since the market price would be low.
Last year as our organization dealt with mandatory price reporting legislation it became evident that the issue was more than price reporting. Price discovery, price discrimination and market access were also issues targeted as contributors to the loss of a competitive market place. At the National Pork Industry Forum in March the delegates passed MT#5 A , a resolution which addresses these market problems.
Page 184 PREV PAGE TOP OF DOC The motion as approved by producers stated:
NPPC oppose unjustified price discrimination, but support administrative action and legislation that clarifies the definition of and prohibits price discrimination and reiterates the authority of the Secretary of Agriculture to challenge such discrimination.
1. That the NPPC press for aggressive enforcement of the Packers and Stockyards Act, prohibition of discriminatory practices under current authority.
2. NPPC encourage a study to define and calculate justification of price differentials including factors such as volume, time of delivery and carcass specifications, etc.
Our organization supported this motion and supported the creation of the Mandatory Price Reporting legislation by Congress.
If our existing producers can return to profitable marketing levels, it will also address another problem in agriculture, the lack of youth entering production agriculture.
Today's agricultural production economy, is capital intensive. The access to capital for young producers is almost non-existent. Virtually every person who wishes to become a farmer or livestock producer must have a connection to an existing farmer. A risk management type program with parameters offering some type of risk insurance or compensation for the existing producers could be quite beneficial.
Another option, which could be incorporated into such a system would be tax incentives and credits for the existing producer who is willing to provide assistance to young producers wishing to secure capital. As we see the average age of our producers increase we also see the number of farm operations decrease.
As it pertains to the age of farmers and the lack of youth in the industry the following figures might be beneficial to understanding the problems. In Nebraska the average age of a producer is about 57 years and less than 5000 farmers are under the age of 35. The average farm is less than 875 acres. If you round that figure up to 1000 acres at $2,000 per acre and add in a swine facility and some equipment you have an initial investment of $3.5 million.
Page 185 PREV PAGE TOP OF DOC At 10 percent the interest alone is $350,000 while at the same time the expected net agricultural income is between $35,000 and $50,000 per year.
We must somehow provide our independent producers profit per unit produced for them to capitalize this type of an enterprise and give them the opportunity to realize a gain of more than a minimum wage job. I believe this also could be achieved through some type of risk management programs which not only help insure income, but also offer some education to producers wishing to participate in a transitioning agricultural economy.
These figures do not include the loss of producers during 19981999. In Nebraska we lost over 900 pork producers during 1999. This loss was accompanied by a 13 percent loss in total production. First quarter figures released by USDA in March indicate some recovery of production, however there are no statistics, which indicate concretely which producers are returning to production.
In discussing capitalization it is important to also consider the rapid consolidation of agriculture and the changing of a food system to a centralized system from a decentralized system. The supply chain system that we are moving toward, promises shared profitability between all segments. However we must question the advantages given to larger, well capitalized, corporate production systems. Easy access to capital for such systems, allow for discriminatory advantages to be gained both through procurement and marketing plans.
Access to capital, loss of equity and the absence of youth in our rural economy, have all, contributed to the losses in the average income levels in our rural economy in Nebraska. We have seen the spread between the economic stability of the social economy and the instability of the rural economy widen.
Economists, have suggested there will be a benefit to the social economy as farmers, ranchers and livestock producers, who have strong work ethics, enter the social work force. It also suggests that the farmers, ranchers and livestock producers are leaving the rural economy by choice. I am not convinced that they are leaving by choice, but as the only way left to support their families.
Page 186 PREV PAGE TOP OF DOC As we see our economy change in Nebraska and across the Midwest we have also witnessed a record number of producers increasing their knowledge and making investments in cooperative type production and marketing systems.
With the lack of a competitive market system for agricultural commodities producers are looking for their own markets, where they will be able to avoid the commodity markets being corporately driven. Future farm policy and agricultural appropriations should be considered to assist those producers willing to assume risk of marketing their own production.
Commodity production based on volume will continue. Producers large enough to participate in the commodity market place should also have the opportunity to assume their own risk.
Segmented market production, where more profit per unit is achieved supports the independent producer and infrastructure of rural economies.
Agricultural specific appropriations are needed to assist the creation of such closed cooperatives. Capital needed for start up costs and production improvements by producers should be made available through low interest loan programs similar to those being offered to small main street businesses.
There should also be some type of consideration given to diverting government monies into a fund, such as that which has been created to assist farmers wishing to expand their on farm grain storage. If a construction fund can be created for grain storage, could a similar loan program be created for those wishing to expand or improve their independent livestock operations?
As we continue to see the consolidation and integration of the agricultural industry, the creation of knowledge based risk management programs should become a priority for our legislative leadership.
Farmers, ranchers and livestock producers do not want any type of long term, government intervention in the form of payments for loss of market price. The majority of the farmers I have talked with would rather have a system, which, would insure their risks and provide a stable income directly correlated with their income levels.
Page 187 PREV PAGE TOP OF DOC Today's farmers and ranchers are not afraid to assume risk, it's part of their occupations, however until our competitive markets return, some type of government assistance will be necessary.
Statement of Paul Mathiason
My name is Paul Mathiason and today I am representing 3,700 farm families who raise over 700,000 acres of sugar beets in Minnesota and North Dakota. I farm with my brother in the Red River Valley of the North, near Grand Forks, North Dakota. We raise potatoes, navy beans, wheat, and sugar beets on 2500 acres. I also serve as vice-president of the American Sugarbeet Growers Association.
For years the experts in agriculture have said that the way to survive in production agriculture is to diversify and add value to raw commodities through vertical integration. Over 25 years ago my family, neighbors, and several thousand other sugar beet growers like myself did just that. We put our own money on the line and bought and invested in our own sugar companies. Today we are grower owners of three large sugar beet cooperatives with seven processing facilities located in Minnesota and in eastern North Dakota.
As an owner of my cooperative I simply cannot choose to get in and out of the business on a year to year basis. Cooperatives need stability and long range commitments to survive. As a successful cooperative for over 25 years we have made long term financial commitments in our company and in our employees. We must now find a way to sustain grower owned cooperatives for the long term through a stable domestic and international trade policy that provides a fair and stable market.
My fellow sugar beet growers have a direct investment in our cooperatively owned sugar companies of over $1 billion. The local financial institutions have a substantial amount loaned to individual farmers for co-op stock, operating and machinery loans.
Page 188 PREV PAGE TOP OF DOC But there is much more at stake than the farmer's investment. Our cooperatives employ 1800 union employees for our processing season at average wages of nearly three times the minimum wage, plus benefits. We employ several thousand more workers to help with the harvest. We purchase fertilizer, seed, chemicals, fuel, parts and machinery, and other household goods and services from local suppliers in our small towns.
According to the Department of Agricultural Economics at North Dakota State University, the sugar beet industry has an economic impact of $2.3 billion to Minnesota and North Dakota. The industry also provides nearly 33,000 full-time equivalent primary and secondary jobs and generates over $50 million in tax revenues to our state budgets. Those monies go to support our schools, roads, and human services so vital to our rural communities. The impact is huge to say the least.
I think the most important thing that growing sugar beets does for our area is that it has allowed smaller family farms to survive. The average sugar beet grower in our region raises about 200 acres of sugar beets along with other crops. This allows small towns to keep their churches, schools, hospitals and small businesses open. Even so we continue to see many of our small towns drying up.
Sugar has not been immune from the price drop experienced by other crops. Since the 1996 farm bill was passed, wholesale refined sugar prices (this is effectively the price our sugar beet growers receive) have dropped by over 25 percent. That is troubling enough but what even is more troubling is that the lower prices to our sugar beet farmers have not been passed on to the Nation's consumers either. In fact, in that same time period prices for products made with sugar such as cereal, cookies, cakes, candy, and ice cream which we buy in the grocery store have all increased between 6 to nearly 10 percent. The large industrial sugar users of this country are simply lining their pockets with additional profits at the expense of the American farmer and consumer.
Page 189 PREV PAGE TOP OF DOC And now, even though we are the lowest cost producer of sugar beets in the world, this price drop is threatening our very existence. We continue to witness sugar beet growers getting out of the business in our region. They can no longer afford the financial risk required to grow the crop. Every spring my brother and I spend nearly $600 per acre to grow a crop of sugar beets. With such huge sums of borrowed money there is no room for even the slightest of errors.
So who loses? Obviously, hardworking farm families and our employees who would not be able to find similar good paying jobs in our area. As schools consolidate or eventually close because of declining enrollments, our small towns and communities continue to lose.
A number of factors have contributed to the price drop. Most significant of all has been the problems caused by Mexico as part of the NAFTA agreement. Since the passage of NAFTA, Mexico has increased its sugar production by nearly 50 percent due to the government subsidies their government provides in the form of interest rate buy downs, debt restructuring, and subsidized interest rates. The U.S. market is a convenient dumping ground for their excess sugar.
Meanwhile, world sugar, transhipped through Canada in the form of stuffed molasses continues to leak into the United States by circumventing the quota. It is estimated that the amount of sugar coming into our market from Canada displaces enough sugar that could be grown from over 40,000 acres of sugar beets. That is significant.
The 1996 Freedom to Farm Bill provided an opportunity for farmers to grow the crops they would like to grow. The increased flexibility with the government providing direct payments to farmers was a good thing. Unfortunately, it encouraged acreage to move from some program crops to sugar beets. With no profitable alternatives growers have grown more sugar beets and sugarcane. It is their only alternative to stay alive. For these reasons we have seen our lowest prices for sugar beet farmers in nearly 20 years.
Page 190 PREV PAGE TOP OF DOC Our region grows over 700,000 acres of sugar beets accounting for about 45 percent of this Nation's sugar beet production. If the sugar beet cooperatives in our region are driven out of business these 700,000 acres would most likely be planted to other crops already in surplus. The switch would simply drive down prices for those commodities as well. Two examples would be edible beans and potatoes. Since most sugar beet production in the country is grown in the same regions as these two crops it could drive down prices for edible bean and potato growers in Michigan, Nebraska, Colorado, Idaho, Maine, and Washington, besides our own region.
So what is the solution?
The sugar program has operated at no cost to the taxpayer for many years and in fact sugar farmers have contributed $279 million to the U.S. Treasury since 1990 in the form of a marketing assessment. We would like to ''draw on that account''. The Federal Government has responded in a very responsible manner by providing billions of dollars in emergency assistance for other crops to help farmers nationwide survive this difficult farm crisis we are in. sugar beet farmers applaud the effort that the Federal Government has made on behalf of these other crops.
To restore order and balance to the market, removal of sugar supplies must occur immediately. This requires a government purchase of sugar for non-food use domestically or removal from our borders. This would avoid much more costly government forfeitures later and protect sugar producers' incomes and investments.
Stuffed molasses and like products designed to circumvent the sugar quota must be stopped at our borders. This can be done legislatively. The U.S. Customs Department has determined that this product has no commercial use, and considers it a circumvention.
Our government must negotiate with Mexico to reduce the threat of Mexican sugar access that can destroy the balance in the U.S. market for both U.S. and Mexican sugar producers.
Page 191 PREV PAGE TOP OF DOC Congress needs to direct the Administration to use all available authorities to ensure that the program is administered properly to avoid costly government expenditures. The recent debate regarding our government purchasing sugar is all the more reason that problems with Canada and Mexico be fixed as quickly as possible.
Congress should abolish the one-cent forfeiture penalty on sugar. The 1996 Farm Bill imposed this penalty on any producer who forfeits on a government CCC loan when non-recourse loans are in effect. While aimed at maintaining a no-cost program by discouraging forfeitures, the penalty effectively and substantially reduces the income of our family farmers.
The bankruptcy provision which protected growers in the event of a processor bankruptcy or other insolvency was made inapplicable to the 19962002 crops in the 1996 Farm Bill. The language should be reinstated so that growers can be assured of receiving at least the minimum benefits intended under the sugar policy.
The USDA is attempting to alter American sugar consumption patterns with ill regard for science by changing the recommended dietary guidelines. In their efforts to fight obesity in this country they are recommending that Americans reduce their intake of sugar. I applaud the USDA in their efforts to fight obesity but there is no scientific evidence to link obesity with normal intakes of sugar given proper exercise. The USDA should focus the debate on the lack of exercise in this country and should be advised to use sound science when setting the dietary guidelines.
Mr. Chairman, as you can see the issues are very difficult and will have severe consequences for American sugar beet farmers, our rural economies, and this Nation's consumers if not addressed properly. I appreciate your concern on such matters. And before I close I want to compliment you and the committee for all of the hard work you have done to try and make the crop insurance program more workable and affordable for farmers. We deeply appreciate those efforts. Thank you for allowing me to testify today.
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Testimony of Brian Hanson
Good morning, I am Brian Hanson, a soybean and corn producer from Racine, Minnesota. I am here today representing the members of the Minnesota Soybean Growers Association and the American Soybean Association.
U.S. soybean producers know that profitability depends on enhancing market demand and increasing global competitiveness. We have historically tried to look to the marketplace rather than the federal government as our source of farm income. This orientation is underscored by our dependence on exportsnearly half of all soybeans, soybean meal and soybean oil is sold abroad.
ASA has consistently represented these interests in its positions on international trade and domestic farm policy. During the Uruguay Round negotiations, we supported eliminating all import tariffs and export subsidies to create a Level Playing Field for oilseeds and oilseed products. In the debate on the FAIR Act, ASA endorsed Freedom to Farm once it was made clear that soybeans would be treated equitably with other crops.
ASA AND MSGA CONTINUE TO SUPPORT THE FAIR ACT.
Unrestricted planting flexibility enables producers to optimize crop selection and reduce operating costs, maximizing their opportunity for profitability. Combined with the marketing loan program, this approach is highly consistent with orientation toward domestic and foreign markets.
It was recognized by Congressional supporters that Freedom to Farm would make U.S. agriculture more dependent on the world marketplace, requiring greater access to foreign markets. It was also recognized that decreasing dependence on government support would mean less interference in production agriculture, and that producers would need to have access to more effective risk management tools.
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Accordingly, Congress and the administration made a number of commitments at the time to policies and programs that would help make the FAIR Act work. The list includes:
Trade policies that reflect the importance of foreign markets and competitiveness to U.S. agriculture;
Elimination of unilateral economic sanctions;
Aggressive use of export assistance and promotion programs;
Increased humanitarian food aid programming;
Reform of the crop insurance program and development of new risk management tools;
Increased funding for agricultural research;
Relief for farm families in the tax code;
Reform of regulatory burdens on agriculture.
It is now several years after the FAIR Act was enacted, and few of these commitments have been honored:
The effort to pass Trade Negotiating Authority, formerly referred to as fast track, was first derailed, then defeated.
The agreement on China's accession to the WTO was nearly lost, and is now hostage to politics surrounding the pending vote on China PNTR.
Legislation to repeal existing sanctions on agricultural and medical products was unceremoniously torn out of the FY-2000 agriculture appropriations bill last year;
Funds authorized for the Export Enhancement Program continue to be unused, either for EEP or for other export assistance and promotion programs;
The funding source for the Foreign Market Development (Cooperator) program was transferred from appropriations to the CCC, but no minimum funding level has been authorized;
Page 194 PREV PAGE TOP OF DOC Cuts in funding for P.L. 480 continue to be proposed and approved;
A crop insurance reform bill has finally been completed, but the number of producers using the program will not increase substantially;
FARRM accounts were included in last year's tax bill, but it was vetoed;
Funds were provided for the $120 million Agricultural Research Initiative, but reductions continue to be proposed in the ARS budget;
Progress was made in restoring income averaging as a means of evening out taxes, but estate tax laws continue to hurt agricultural producers;
The regulatory environment for agriculture has deteriorated significantly since 1996.
The limited progress made on commitments made by Congress meant there were no new sources of demand, nor protection against losses when supplies rose and prices fell in 1998 and 1999. This spring, record soybean plantings on over 75 million acres, suggest a return to historic low prices and lower soybean producer income during next fall's harvest.
ASA and MSGA view the FAIR Act as a work-in-progress and strongly believe that producers cannot fully realize the promise of Freedom to Farm until Congress and the administration make good on their commitments
ASA and MSGA believe the best response to the continuing crisis in the U.S. farm economy is for the administration and Congress to address and complete the unfinished agenda of policies and programs they agreed to undertake back in 1996.
We do not support going back to the old farm program, and oppose making set-asides or other supply management programs as an eligibility requirement for any government soybean program benefits.
We also oppose establishing a reserve for soybeans, increasing acreage for supply control purposes the Conservation Reserve Program, or using environmental objectives to justify establishing an acreage reduction or set-aside program in the form of a short-term CRP.
Page 195 PREV PAGE TOP OF DOC ASA supports examining farmer income safety net concepts that would provide increased support when prices or revenue decline. However, there are many unanswered questions and issues about the effects and implications of such counter-cyclical income support proposals.
The Supplemental Income Program advanced by Representative Stenholm last year and the administration's proposed Income Assistance Program, both base payments to producers on a percentage of the difference in revenue for a crop between the current year and the Olympic average during the previous five years.
This approach provides a good level of protection in years following a period of relatively high prices and revenues. However, as the lower prices in recent years are included in the five-year average, the revenue base will decline sharply.
The administration's proposal also limits AMTA payments to a cap of $40,000 per producer. This would substantially limit a program that is intended to compensate producers for economic loss, based on a farmer's actual production. It will most certainly exclude the participation of a substantial percentage of U.S. soybean farmers.
Any income support program must be equitable with regard to the size of a producer's operation.
ASA and MSGA will work with Congress in examining income support proposals. A guiding principle we will insist upon is that soybeans be treated equitably in any program.
ASA is very interested in developing a farm program that would provide additional income support to producers who voluntarily implement appropriate conservation practices. We believe that pursuing the public policy goals of protecting the environment while supporting farm income through sensible, voluntary measures is a concept that farm groups, environmental groups, and Congress should further explore.
Page 196 PREV PAGE TOP OF DOC As we move forward to determine how to provide income in the next generation of farm programs, it is critical that the relationship between our domestic farm programs and U.S. obligations under the Uruguay Round Agreement and the next WTO negotiations be fully considered.
In the Uruguay Round, the U.S. and other countries agreed to cap and reduce the amount of assistance provided under programs that distort production and trade. These so-called amber box programs include marketing loan gains and LDPs, input subsidies, and direct payments linked to production. Unless provided through green box programs that are exempt from reduction, including AMTA-type or conservation stewardship payments, future income support will likely be subject to discipline. The expectation of further reductions in amber box outlays in the next WTO round makes attention to this relationship even more important.
With commodity prices continuing near record lows and with many issues yet to be resolved on counter-cyclical proposals, ASA supports providing a supplemental AMTA payment to offset continuing low crop prices and depressed farm income.
For the same reason, ASA also supports another economic loss payment to oilseed producers this year. Soybeans and other oilseeds are not part of the production base and formula for AMTA payments.
We commend Congress for recognizing this situation last year by providing $475 million in payments to producers of 1999 crop oilseeds. Faced with continuing low prices for the 2000 soybean crop, we ask that our producers be treated equitably. In the event Congress decides to increase the amount of any supplemental AMTA payment over last year's level, ASA supports a proportionate increase in the oilseed payment.
Another issue of critical importance to soybean producers is the marketing loan program.
With U.S. and world oilseed prices well below loan level for the past two years, this program has been essential in providing an income safety net as well as keeping our products competitive in foreign markets.
Page 197 PREV PAGE TOP OF DOC The prospect of receiving a higher marketing loan gain or LDP may have been a small factor in the 1.5 million acre increase in soybean plantings in 1999. It may be again, if USDA's forecast for an additional 1.5 million acre expansion is realized in 2000.
The solution, however, is not to reduce the soybean loan and safety net.
The solution is to enhance demand through greater trade expansion, export promotion, food aid, biodiesel use, reform of unilateral U.S. economic sanctions, and other steps that will drive prices above the loan rate.
ASA and MSGA very much appreciated Secretary Glickman's decision not to lower this year's loan rate to $5.13 per bushel. Whenever Congress considers changes in the marketing loan program, ASA will support making the current $5.26 level a statutory minimum rather than a cap.
With regard to administration of the marketing loan program, ASA and MSGA believe that many of the questions and concerns raised in 1998 were resolved through adjustments in how FAS calculates Posted County Prices and Loan Repayment Rates. As a result, very few complaints were received on administration of the 1999 loan program. ASA continues to support maintaining the existing system, basing PCPs and repayment rates on terminal markets rather than changing to a national LDP program.
Another issue that only began to emerge in 1996 is the erosion in U.S. agricultural exports caused by the failure to develop a workable process to address science-based regulatory decisions on biotechnology-derived crops. ASA and MSGA have been one of the lead commodity organizations working to educate foreign customers about the safety and value of soybeans and soy products derived from biotech seedstock. These efforts are made possible by funds received from the soybean checkoff and USDA's Foreign Ag Service. In addition, ASA is leading efforts to educate domestic audiences on the safety of biotech products and the reliability of our country's science-based regulatory approval process.
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I believe that two of the most important trade issues facing the agriculture community today are China's accession to the World Trade Organization and the importance of the United States establishing permanent Normal Trade Relations with China.
ASA and MSGA commend the administration for its excellent job of negotiating the WTO agreement with China last fall. That agreement paves the way for expanded U.S. access to the Chinese market, which could mean as additional $ billion a year in farm exports to China. That is the good news, but there is another critical step that must take place if U.S. farmers are to benefit from this historic trade agreement.
We must get Congress to approve permanent Normal Trade Relations with China.
ASA and MSGA will actively lobby Congress to approve PNTR. Failure to obtain permanent Normal Trade Relations with China will stifle U.S. trade and give our foreign competitors free access to vast Chinese markets.
As I said earlier, agriculture is very dependent on exports, and no nation offers more export potential than China. China is home to one of every five people on earth, with an economy growing at 7% a year. U.S. agriculture wants access to that expanding market.
As you know, two years ago ASA and MSGA successfully lobbied to get biodiesel included as an approved alternative fuel under the Energy Policy Act. Since that time, we have continued to build on that success with new biodiesel programs and legislative efforts designed to increase demand for soy-based fuel products.
Last August, USDA demonstrated its support for renewable fuels when Secretary Glickman announced that USDA would purchase an unprecedented level of 20,000 gallons of biodiesel. About the same, President Clinton signed an executive order to triple use of bioenergy and bio-based products by the year 2010.
Page 199 PREV PAGE TOP OF DOC We ask your support for the legislative efforts now underway in the House and Senate that would allow biodiesel to compete for funds in the Congestion Mitigation Air Quality Improvement program. This legislation would expand that program's authority to allow funding of alternative fuel projects that include purchases of biodiesel.
ASA and MSGA appreciate the efforts of the Congress and the administration to focus the nation's attention on the value of biodiesel. Such efforts will increase demand for soybeans, benefit the environment, enhance our nation's energy security, and mean better prices for soybeans in the future.
USDA TASK FORCE
On another matter, I would like to say that Minnesota soybean farmers are very concerned regarding recent recommendations by a task force at USDA relating to commodity promotion and research programs. The soybean checkoff created by Congress has worked very well. New uses for soybeans, an FDA approved health claim, quality programs and strong marketing and promotion programs have benefited soybean farmers nationwide.
However, USDA is proposing new procedures and processes that will most likely make the commodity programs LESS efficient and MORE bureaucratic.
These programs do not need additional procedures, which divert valuable funds away from programs to sell soybeans, to increased administrative costs. Before these recommendations are imposed, a cost analysis should be done to determine the actual cost of the recommendations on the program.
In conclusion, as a farmer from Representative Gil Gutnecht's district, I would like to take this opportunity to recognize and thank Representative Gutnecht for his support to Minnesota and U.S. soybean farmers.
Thank you for allowing me the opportunity to speak to you today.
Page 200 PREV PAGE TOP OF DOC Background regarding the level of the soybean loan rate.
Concerns have been expressed that the soybean loan rate of $5.26 per bushel does not reflect the historical price relationship with the corn loan rate of $1.89 per bushel, and that the disparity is increasing production of soybeans at the expense of corn and other crops. ASA and MSGA do not believe this is the case, and would offer the following evidence:
Since 1995, the area planted to soybeans has increased by 11.5 million acres. Almost 10 million acres of this expansion occurred in 1996, 1997, and 1998, when market prices were above the loan rate. This increase in soybean acres was driven by: (a) the production flexibility offered to farmers under the 1996 FAIR Act; (b) market returns; and (c) the interest of farmers in major corn/soy regions to move toward a more sustainable 50/50 corn and soybean rotation.
While the area planted to soybeans in 1999 did increase by 2.4 percent over the 1998 area, most of this increase can be attributed to: (a) continued movement by farmers to establish a 50/50 corn/soy rotation; (b) new soybean crushing plants operating in the western soybean belt; and (c) research that has produced soybean varieties that are better adapted to northern and western climates and conditions. Almost 80 percent of the 1999 increase in soybean acres occurred in Iowa, Nebraska, and South Dakota, where three new soybean processing plants have recently been built, and where research has developed higher yielding soybean varieties that are better suited to western corn belt conditions.
Tightness of available credit also may have played a role in causing some farmers to plant soybeans rather than other crops, even though total returns may have indicated otherwise. Many agricultural lenders reduced the size of production loans to farmers in 1999 as overall commodity prices fell. Faced with reduced loans but with the same (or more) land to farm, some producers may have opted to plant slightly more soybeans than other crops because the variable costs of production for soybeans are lower than similar costs for corn, wheat, and cotton. According to the most recent USDA data, average per-acre operating costs were $79.32 for soybeans, $91.33 for wheat, $154.31 for corn, and $243.83 for cotton. Thus, some farmers' planting decisions were influenced more by the tightness of agricultural credit than by relative commodity loan rates or prices.
Page 201 PREV PAGE TOP OF DOC If the 1999 soybean loan rate were out of alignment with the corn loan rate, one would expect to see more land devoted to soybeans than corn in major corn/soybean producing states. However, just the opposite is true. In 1999, the area devoted to corn production exceeded the area devoted to soybean production by 1.4 million acres in Iowa, 100,000 acres in Indiana, 100,000 acres in Minnesota, and 4.3 million acres in Nebraska. In Illinois and South Dakota, the amount of land devoted to corn and soybean production in 1999 was equal. Additionally, 1999 corn area actually expanded in key corn and soybean producing states, including Illinois and Indiana.
Background regarding how payments were determined under the Oilseed Payment Program
As with any new program, there have been questions about how the criteria for eligibility and the amount of oilseed payments were determined. In the fiscal year 2000 agriculture appropriations bill, Congress provided that only producers who experienced low oilseed prices on 1999 crop oilseeds were to be eligible for payments. Congress further provided that payments would be based on the higher of 1997 or 1998 certified acreage planted to an oilseed, and the higher of a producer's proven yield in 1997 or 1998 or the county average yield. However, since the purpose of the program was to compensate producers of 1999 crops, first time producers of an oilseed were allowed to use their 1999 production data.
ASA supported using historical data rather than basing payments on actual production because we did not want the program to provide an incentive to increase soybean production in future years. If payments were based on 1999 production, farmers would factor expectation of another payment into their planting decisions. ASA did not want encourage producers to plant for the program instead of the market.
Another concern is that basing payments on actual production would be extremely trade distorting, and would raise strong objections in the WTO. The United States is already defending several programs, including supplemental AMTAs, marketing loans, and export credits, against charges of reneging on our commitments in the Uruguay Round. Adding a new program that clearly distorts production and trade would encourage our competitors to follow suit.
Page 202 PREV PAGE TOP OF DOC ASA appreciates the concerns of producers who were ineligible for payments because, while they grew soybeans in 1997 or 1998, they did not or may not have been able to plant soybeans last year. However, we do not believe the program was unfairly designed or administered, and we will again support targeting payments to producers experiencing low prices for the 2000 crop based on historical rather than actual production data. ASA supports updating the historical years used for determining the oilseed payment to include the 1998 and 1999 crops.