SPEAKERS CONTENTS INSERTS
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REVIEW OF FEDERAL FARM POLICY
FRIDAY, MAY 12, 2000
House of Representatives,
Committee on Agriculture,
Boise, ID
The committee met, pursuant to call, at 9:00 a.m., at the City Council Building, Boise, ID, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Chenoweth-Hage, LaHood, Moran, Walden, Simpson, Ose, and Stenholm.
Also present: Representative Hastings.
Staff present: Tom Sell, deputy staff director; Pete Thompson, David Tenny, Christopher Matthews, and Jason Vaillancourt.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. The hearing will come to order.
Good morning and welcome to this ninth of 10 field hearings the House Agriculture Committee is holding in different regions of the country. I would like to thank everyone here for coming to this important event, all of you and certainty all of the members of the committee and other members who have similar interest.
As you may know, we started this series of hearings in Texas in March. We continued to Memphis, TN, Auburn, AL; Raleigh, CA; West Chester, OH; Kutztown, PA; Woodland, CA; and Sioux Falls, SD. At those eight hearings, 40 Members and well over 2,000 people have listened both in the audience and through the Internet. I tell people we carry all the hearings live in real-time over our Internet site. This hearing is one of those.
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I think the time spent by this committee in this endeavor has been very beneficial both to us as well as to members of the audience. And we're certainly pleased to be in Boise today. And we think that our time will be well spent here.
I have the pleasure this morning of introducing the Members who are with us. I am Larry Combest. I represent the High Plains of Texas. On my left is my good friend and neighbor, Charlie Stenholm, who is also from west Texas. On my right, probably don't need to introduce, she is our host, Congresswoman Helen Chenoweth-Hage from western Idaho.
Helen, I think in eight hearings, this is the first time that we had an applause for you. So whatever you're doing, keep on doing it.
Mr. STENHOLM. Mr. Chairman, they came to your district, not mine.
The CHAIRMAN. I think Mr. Stenholm got an applause in my district. Be that as it may, thank you for reminding me of that.
Congressman Ray LaHood from central Illinois, who will be hosting our final hearing tomorrow in Peoria. Jerry Moran represents the western two-thirds of the State of Kansas. Greg Walden represents eastern Oregon.
We don't have to turn this into a contest. We've got one more to go. Mike Simpson, who actually physically today is the host of this location. Doug Ose from California.
And joining our committee today is not a member of the committee but a Member who does have tremendous agriculture interest, and we appreciate the fact that he is here, Doc Hastings from central Washington State.
Today we will hear from 20 people who have built their lives and careers around agriculture. In selecting this panel of witnesses, as we have in every location, we have sought to bring folks together that represent different kinds of agriculture and, in fact, are producers, and that would bring a variety of thoughts to us about what the issues are and the concerns facing this industry. It is my hope that everyone in this room can identify with at least one of these witnesses. And I would certainly encourage anyone, for those of you who are here or for those of you who are listening, who would wish to submit additional testimony, we would invite you to do that. And we will consider that equally as important as those who have officially testified.
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I don't want to speak too long because we're here to listen to you. I want to let you know that all of the people in this committee recognize there is a problem in agriculture. That's the reason that we're here. What's more, we all fundamentally believe that it is in the best interest of this nation to have a strong agricultural industry and diverse, and that we've got to do that not only from the standpoint of our economy, but our national security.
What we want to do is try to answer the question of how can we best accomplish that goal. We want to find out what real producers think, what is working, and what is not working.
When we have completed this, we will have been in all regions of the country asking the same questions and getting quite a consensus of answers, but hopefully finding something that we will be able to move forward on that does have a consensus in agriculture.
I want to again thank everyone for being here and recognize 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'm delighted to see all of you here. I look forward to hearing from the witnesses. This, as you heard the chairman say, is ninth in a series of ten field hearings that we have scheduled around the country. We're coming out to ask farmers and ranchers what you think ought to be changed, what's working, and what's not working. There are some things that are working, but obviously we have a major problem with price, and that is something we are going to be looking at as to how can we, as producers, receive a fair price for that which we produce. And to do that, we're going to have to think outside of the box and that's what we're hoping to pick up, a few ideas here today. Delighted to be here with you. Look forward to hearing from you and then questioning some of the witnesses a little later.
The CHAIRMAN. Mrs. Chenoweth-Hage.
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Mrs. CHENOWETH-HAGE. Thank you, Mr. Chairman. I do have a statement that I will submit to the record in the essence of time.
But I just want to thank you so much, Chairman Combest, for bringing the committee to Idaho. We're a small State with a small population relative to other States, and the fact that you would pay attention to the concerns of the people of the Northwest by holding this hearing in Boise, I am deeply grateful. And I share that gratitude with the people of Idaho.
So, Chairman, thank you very much for bringing the committee here.
[The prepared statement of Mrs. Chenoweth-Hage follows:]
PREPARED STATEMENT OF HON. HELEN CHENOWETH-HAGE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
The CHAIRMAN. Thank you for that warm welcome. We appreciate that very much. Mr. Simpson.
Mr. SIMPSON. Mr. Chairman, I also, in the interest of time, will submit my opening statement for the record.
And I, as Helen, want to welcome all of you and thank all my colleagues for being here in Idaho. It was important, I think, that we come to the Pacific Northwest to be able to hear from the producers in this region.
But I also wanted to tell you when we sat down in January, we were talking as an agriculture committee about what we could do. One of the things we decided to do was obviously hold these hearings around the country and get input from producers instead of just those individuals that we hear from on a routine basis in Washington.
As we sat and talked about it, I don't think anybody realized somebody that hadn't been involved in it like myself, the extent and amount of work that goes into holding ten hearings all around the country in different places. I want to compliment the chairman and the ranking member, because this is the ninth out of 10 hearings and they have made it to every one of those hearings, which had been considerable dedication on their part in both time and effort to get out and listen to the producers. And I think it shows their dedication seeing what we can do to improve the agriculture economy in this nation.
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I will have made it to six of the hearings around the country, and it seems like that's all I've been doing all spring is going to agriculture hearings. But obviously it's very important to both the producers in Idaho and the Pacific Northwest as a whole. And I look forward to hearing the testimony of these witnesses as to what we may be able to do to help bring prices up, because ultimately that's what we have to do if we're going to save the agriculture economy in this country. Thank you, Mr. Chairman.
[The prepared statement of Mr. Simpson follows:]
PREPARED STATEMENT OF HON. MICHAEL K. SIMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
The CHAIRMAN. Mr. LaHood.
OPENING STATEMENT OF HON. RAY LAHOOD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. LAHOOD. Mr. Chairman, I want to say a word about my friend, Helen Chenoweth-Hage, because Helen and I were elected together in 1994. And for those people in the audience, it's sad that Helen is going to be leaving the Congress at the end of this term. But I want all of you to know, and I think most of you know this, Helen has been a tenacious advocate and fighter for the people not only of her district, but her State. Every time we have a hearing, and every time the Secretary of Agriculture comes before our committee, Helen Chenoweth is there fighting for the people of her district.
And I just want to say that because I think most of you know it, but Helen, you've done a great job in representing the people of this State, and particularly the people of your district, and we're going to miss you on the committee. And it's a pleasure to be in your area.
It's great to have Mike Simpson on the committee, but I don't think anybody can match Helen's voice and advocacy for the people of her area.
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The CHAIRMAN. And I might say a very pleasant voice.
Mr. Ose.
Mr. OSE. Thank you, Mr. Chairman. I am reminded that the last time I was Idaho was in the winter of 1976. It has been too long because this State is too pretty to be away from for that long. I'm pleased to be back.
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. It's a delight to be with you. This is my first visit to the State of Idaho and to Boise, and you do have a very beautiful State, at least what we saw of the sunset last night and as the sun rose this morning.
I, too, join my colleagues in expressing our interest in hearing what you have to say. I represent most of the State of Kansas geographically. And we're a wheat, cattle, corn producing district, State. The largest city in my district is about 40,000 people, very rural. And I'm interested to see if you have the same kind of things to say as my farmers and ranchers are telling me, in hopes that we can find some solutions to the problems that our producers face. And not only of keeping farmers on the farm, but allowing the next generations of sons and daughters to have that same opportunity to grow up in rural America.
And I, too, commended your two Members of Congress from Idaho. I don't think there is another delegation in Congress in which both Members, the entire delegation are members of the same committees, agriculture and resources. And both Mike and Helen have been strong advocates. Mike arrived after I did, Helen arrived before I did. But in both instances, they have been there on behalf of the kind of values that we share across rural America.
And I'm delighted to be here with you today and to hear what you have to say in hopes that we can make a difference on your behalf. Thank you, Mr. Chairman.
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The CHAIRMAN. Mr. Walden.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON
Mr. WALDEN. Thank you very much, Mr. Chairman. It is indeed a delight to be here in Boise. And I echo the comments of my colleagues who have gone before about the great job that Mike Simpson and Helen Chenoweth-Hage have done representing those issues that are so critical to those of us that represent rural districts. Sometimes I feel like I'm more a part of the Idaho delegation instead of the Oregon, especially when it comes to some votes.
I would like to introduce two staff people who are here today, back here in the back is Troy Nichols, who works for Senator Gordon Smith. Troy, if you want to stand up. And he'll be coming to work for me as a field rep for the northern and central part of Oregon.
And Brian Hard in the back, who is my senior legislative assistant for agricultural issues. So if you've got issues, talk to him.
I grew up on a cherry orchard in Deschutes, OR, Mr. Chairman, and understood as a young kid what it was like to try and make a living in agriculture. I remember the only summer vacation we ever took in those 11 years when I was on that ranch was when the cherries froze out. And that was because my dad also managed a radio station. So even back in the early sixties, you had to have another job to be able to be in agriculture, it seemed like.
So I'm somewhat familiar, growing up in a farming region, growing up on a farm, what is faced, and it's an enormous problem we face on the farm and on the ranch. And I'm really looking forward to the testimony today, Mr. Chairman. And I thank you and our ranking member for holding these hearings throughout the country so we can hear firsthand from farmers and ranchers about what the problems are. But moreover, about their specific recommendations for what we need to do in Congress to solve those problems so we can have a healthy and vibrant farm economy in this country. It's essential to our security and to our future. Thank you, Mr. Chairman.
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The CHAIRMAN. Mr. Hastings.
OPENING STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
Mr. HASTINGS. Thank you, Mr. Chairman. I want to thank the committee for the courtesy they've shown me in allowing me to be here today to participate in this hearing. I, too, look forward to the testimony that's given.
I wanted to add my 2 cents worth also with Mike Simpson and Helen Chenoweth-Hage because just last month we had a hearing of the Committee on Resources in Pasco, dealing with water and dams and salmon. And I know that's of great interest to everybody here, because without water, obviously we haven't got an agriculture economy in this part of the country.
But I represent a very diverse area in central Washington. It runs from the Oregon border to the Canadian boarder and is very diverse. In fact, it's probably as diverse as any area in the country, with maybe the exception of the central valley of California. And one thing that in those areas—the diversity of crops—that they all have in common, however, that I hear over and over from my growers, and that's that we need more markets in the long term, I'm convinced. I'm sure we'll hear today the testimony that the more markets we have, the better off we'll be.
My growers have been telling me over and over, ''Just give us a level playing field. If we have a level playing field, we'll compete with everybody.'' That's obviously a charge that we take very, very seriously. One of the big tests, as a matter of fact, will be coming up the end of this month when we vote on permanent normal trading relations with China. That will be a test to see the result that Congress has created to the problems that you have.
I look forward to your testimony. I will just point out one other thing when I mentioned, as diverse as we are, I need to put in a plug. Washington State leads the country in production of apples and pears and hops and sweet cherries and spearmint, dry teas, lentils, Concord and Niagara grapes, and asparagus. We also are huge players in wheat and potatoes. I know that's probably sensitive to Idahoans when I say potatoes, but I have to tell you a story.
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I was back at a local supermarket back in Virginia and they were advertising Idaho potatoes. And I'm all in favor of Northwest products, so I went in to buy some and they were from Quincy, WA. That's all right. It's all from the Northwest; we all benefit by that. But there is a bit of pride in Washingtonians in how they grow their potatoes.
So once again, Mr. Chairman, thank you very much for the courtesy you've shown for allowing me to sit with you today.
The CHAIRMAN. Very glad to have you, Mr. Hastings.
I will call our first panel of witnesses. And I will apologize to all the witnesses ahead of time if I happen to mispronounce your name or the city you are from.
I would also ask our witnesses, if they would, please, observe the lights to the extent possible, giving the members as much time as possible to get into an interchange. All of the testimony in its entirety and any additional testimony that you might be wishing to submit will certainly be accepted for the record.
Our first panel, Mr. Klaren Pete Koompin, a potato, wheat, canola producer from American Falls, ID. Mr. Perry Meuleman is a sugar beet and barley producer from Rupert, ID. John Payne is a wheat and barley producer from Waitsburg, WA. Mr. Sherman Reese is a wheat and barley producer from Echo, OR. Mr. Ritchey Toevs is a potato, sugar beet, wheat producer from Aberdeen, ID.
We'll start as introduced and go down the line. And I would ask you to begin, please. Thank you.
STATEMENT OF KLAREN PETE KOOMPIN, POTATO, WHEAT, CANOLA PRODUCER, AMERICAN FALLS, ID
Mr. KOOMPIN. Start with me, Mr. Chairman. You did a fine job with the name. I couldn't produce it until I was 12, especially my first name. Dad rode on a tractor for a couple of days but he had to come up with a name in order to get me out of the hospital because they wouldn't release mother, they said. So the way it came up is he remembered the name of a guy he didn't like. So anyway, I'll get started here.
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Mr. Chairman, members of the House Committee on Agriculture, again, thank you from Idaho and the Northwest for granting this audience on the 2002 farm bill. There are several issues which I believe need to be addressed in the 2002 farm bill. And I'm going to deviate just a second from my written statement with the chairman's permission. I would like to add a couple more thoughts after I finish reading the prepared statement. But hopefully I will still be well within the green light.
First and foremost, please, at the Government's earliest convenience, give me the Government definition of a family farm. For without the definition, I am at a severe disadvantage in the domestic and international markets. For in order for us, my brother and I who have a partnership, to stay in business, we must remain within the Government program. But if the Government uses gross dollars income to define a family farm as it's projecting to do or has some inclination there, then as a potato, wheat, and canola producer, we're out of the parameters as dictated by Washington. And you take 400 acres of potatoes itself will gross over $500,000. Now, if you were talking net income, well, I think then we could probably live with the $500,000. And basically it comes down to please, no more payment limitations.
It might be easier to define what a non-family farm is. And a definition might read, this is something I came up with Sunday: Any farm that is either owned, operated, or joint-ventured by a publicly traded or multinational person or company. Very simple and maybe will solve somewhat of the stigma of what a family farm is. Let's define what it isn't.
Multi-peril insurance, which I'm going to call full-coverage, all-crop, production-only insurance, will work in the United States if it is required for all producers to take and is administered by the FSA offices. As long as actual production is required every year, and is used to figure a historical average, and with the premium adjusted accordingly, then the 5- out of 10-year disasters that some farms experience will probably come to a stop. But we do believe that the Government should provide a farmer caught in these areas an option to CRP this ground or retrain him in some other vocation.
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You may wonder why we're not in favor of revenue insurance. I believe that any type of revenue insurance, whether Government sponsored or privately sponsored, is ripe for fraud. And furthermore, there are plenty of tools available currently for us to market our crops, including but not limited to forward contracts, futures, options, LDPs, and Government guaranteed payments.
No. 3, can the Government get out of farming? Unfortunately, no. The world free market is somewhat like trying to define the family farm. It may look good on paper, but very seldom works in reality. I have come somewhat full circle on this, starting with Jamie Whitten back in the late 1970's, from Mississippi, to thinking he was one way too far and going the other way, where we should get completely out. And I guess I'm somewhere in the middle and maybe leaning toward him.
I believe the USDA needs to get more involved in research funding, i.e., new uses for existing crops, new crops, enhanced environmental production possibilities, the carbon credits and so forth that people are talking about. We need international market access. And probably one of the most important, all phases of transportation efficiencies, both domestic and international need to be addressed by the USDA, for that's where our markets do lie.
With the support of our basic commodities, wheat, feed grain, soybeans, cotton, and rice, these things, if done by the USDA, then will ensure that agriculture will have a dynamic and prosperous future, an industry that I still believe would make Thomas Jefferson proud, and an industry that still is the foundation and driving force of all others, and one I hope my children choose. For agriculture is too big of a consumer in the American economy to be left unattended, and is one of only a handful of industries in the world that takes a renewable free resource, mainly being sunlight, and turns it into a brand new dollar.
Sirs, one last point I'd like to make is the importance of agriculture to the generation of dollars in the American and world economy. And these don't have to be probably said more than once, because everybody can understand them, real simple. Couple cents' worth of wheat we turn into a $1.35 loaf of bread, $1,500 worth of potatoes with another $3,000 worth of processing and $1,000 worth of transportation and soybean oil turns into $48,000 at a quick-serve restaurant. Those are big dollars. That puts a lot of people to work. I would say Micron wouldn't be where it is without the food industry.
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And I'm done. So we'll wait for my other comments that were developed. We'll wait. Thank you.
[The prepared statement of Mr. Koompin appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Koompin. Mr. Perry.
STATEMENT OF PERRY MEULEMAN, SUGAR BEET, BARLEY PRODUCER, RUPERT, ID
Mr. PERRY. Thank you, Mr. Chairman and colleagues of this distinguished panel.
I'm a third-generation Idaho farmer and operate our family farm which was homesteaded in 1904. I farm 560 acres of irrigated land on which I grow sugar beets, alfalfa, seed barley, and malt barley. I presently serve as president of the Idaho Sugar Beet Growers Association and treasurer of the American Sugar Beet Growers Association.
Today I'm representing the 1,260 farm families who raise 252,100 acres of sugar beets in Idaho, Oregon, and Washington. These growers have a direct investment in our cooperatively owned sugar companies of over $350 million. In addition, all of the sugar beet seed for the entire U.S. industry is produced in Oregon's Willamette Valley. Almost $1.3 billion are generated each year in the three States by the sugar and corn sweetener industries.
Taking proactive action to secure the future of the sugar beet industry in the Northwest, in 1994 local sugar beet growers decided to form a cooperative and pursue the purchase of the sugar beet processing company. Our farmers made major capital outlays to purchase their stock in this cooperative. Many mortgage their land to secure these funds. These family funds are not the large sugar beet plantations that some envision. These are family-run operations that are the backbone of our rural communities. Since our financial commitments extend into the next decade, local farmers and bankers have a vital interest in the long-term viability of the sugar industry. Today's prices put us in serious jeopardy.
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I am here to tell you today that individual farmers, family farmers, are U.S. agriculture. And we are in a financial crisis. Since the 1996 farm bill, we have suffered a 25 percent drop in price. Processors and cane refiners are in a situation for the first time in 16 years where they are seriously considering forfeitures of sugar to the Government at the end of July because our price has been below forfeiture price.
There are a number of causes for this crisis. Admittedly, domestic production of sugar was up last year. The more significant forces at work, however, are very much beyond the farmer's control. The first is a quota circumvention scheme that brings a blended product called ''stuffed molasses'' into the United States from Canada. This blatant maneuver, unless stopped now, will add 125,000 tons to our domestic sugar market this year, an amount that our market cannot bear. This product, and others designed solely for circumvention, must be stopped legislatively. We are working with your colleagues in Congress to do so.
The second factor is the overhang of the anticipated Mexican sugar that will have access to our market on October 1. Under NAFTA provisions, Mexico's tariff-free import quota into our market will increase tenfold to 250,000 tons. The anticipation of this supply is also driving our price down.
We also have a WTO access commitment to other foreign sugar producers that we must maintain, regardless of our domestic consumption needs.
Possible solutions and options. The sugar industry has characteristics that make it unique among other commodities, The industry is import, not export, sensitive. By law, it must provide a guaranteed level of access to our market to foreign producers, regardless of domestic consumption needs. It is also subject to the volatility of the world dump market.
There is interdependence between sugar grower and processor. Production cannot be halted when supplies are high and then restarted when supplies return to balance. Sugar growers can neither market nor hedge their crops. Thus, they lack risk management tools available to growers of some other crops. Sugar is a multiyear investment and a high-value product, with total economic costs much higher than most other field crops.
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Options and solutions. Short term: Restore order and balance to the market, removal of excess sugar supplies must occur immediately. This requires a Government purchase of at least 370,000 tons. This would avoid costly forfeitures later and thus minimize economic loss to the Government and protect sugar producers' incomes and investments.
Stuffed molasses and like products designed to circumvent the sugar import quota must be stopped at our borders.
Long term: No. 1, the U.S. Government must negotiate with Mexico to reduce the threat of sugar access at levels that can destroy the balance in the U.S. market.
No. 2, in any future farm legislation, Congress should, through a technical correct measure, reinstate the no-cost provision that was eliminated in the drafting of the 1996 farm bill.
No. 3, Congress should abolish the 1-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 reduced the income of sugar farmers.
No. 4, the bankruptcy provision, which protects growers in the event of a processor bankruptcy or other insolvency was made inapplicable to the 1996–2002 crops in the 1996 farm bill. The language should be reinstated so that growers can be assured of receiving the minimum benefits intended under the sugar policy.
I thank you for the opportunity and the time to express our concerns. I'd be happy to stand for any questions. Thank you.
[The prepared statement of Mr. Meuleman appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Payne.
STATEMENT OF JOHN PAYNE, WHEAT, BARLEY PRODUCER; WAITSBURG, WA
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Mr. PAYNE. Good morning. Thank you, Mr. Chairman and your distinguished panel. My name is John Payne.
I'm a wheat and barley grower from the State of Washington. I have represented agricultural in various ways in the past and still have an active interest in agricultural policy at the Federal level.
A couple of months ago, a few of us farmers got together to talk about what was right with the present bill, what was wrong, and what the problem was. It was generally agreed that Freedom to Farm was working in many ways. The freedom to plant what we want is good, although we still need to be able to plant the hundred-plus crops we are still not able to.
The marketing loan is good. It's a good approach, but we need to address the level of the loan and the inequity of the loan level, for barley specifically. It was also agreed there were other problems and they needed to be fixed, but they weren't the problem. Well, the problem must be low prices. Prices that are at historical lows surely must be the problem. But if you look at the situation objectively, you have to admit the prices are a symptom rather than the actual disease.
This is the problem for wheat: That's 943 million bushels of wheat. That is the extra production we have for this year. It is called the carryover. It is the single biggest reason for our low prices. It is the 500-pound gorilla in the corner for the wheat farmer. It is the main indicator that determines price. This figure is used worldwide to project price trends. And as long as it stays high, we will continue to have to have these meetings to try to solve the problems of agriculture.
It is said, ''The hardest part of finding solutions is identifying the problem.'' So if indeed we have done this, the rest must be easy. I'm not so sure of that. Why do we have such a high level of carryover? Well, the answer is simple and complex at the same time. The simple part is the farmer hasn't sold his wheat. The complex part is why?
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There are those, including me, who thought that having a marketing loan would be enough incentive for a farmer to sell in the year of production and thereby not have a big carryover, and maybe, for the first time in history, the United States would not be the residual supplier for the world.
We could then be like all the other exporters of grains. We would be telling the buyers of our commodities to stock up, because we won't have any when the marketing year ends. Well, no such luck on that. There are many theories of why we won't sell our crops, but when we talked, it seemed to boil down to the simple fact that there weren't enough incentives to sell to outweigh the incentives to hold it. So what do we do? And Congressman Stenholm, if you want to go outside the box, here we go.
I think two things might help. First of all, if you take out a loan or take an LDP on your crop, the clock will start ticking. From that date on, you have 9 months to market your crop. The loan is a recourse and the same rules apply as far as timing if you take a loan deficiency payment. This puts the world on notice that this crop is coming to market and we're going to get rid of it. This is the stick part of the plan, but we need a carrot also.
The carrot is a Marketing Incentive Plan. The MIP would be a payment of, say, 30 cents a bushel to a grower who sells his crop within 30 days of harvest. If he sells within 60 days, it's 25 cents, and so on.
This would allow a person to sell a cash crop and pocket the money if he wants to, or if he wants to take advantage of the possibility of a rising market, he or she could buy calls in the options market with the payment. Of course, he could buy puts if he thinks the plan will depress prices further. This removes many of the excuses we hold on to to hold on to our crop.
The Pro Farmer magazine, in their April 8 edition, made some projections for the coming year with respect to prices. With a carryover of 982 million bushels, for the marketing year 2000–01, they figured the price would be $2.50 a bushel. Wow, big surprise. When they plug in bringing the carryover down to 691 million bushels, they see a price of $3.10. That's a 60-cent increase with the reduction in stocks of less than 300 million bushels. So if we have a stated goal of doing everything we can to keep this problem figured at the lowest possible amount, the better we are able to achieve long-term solutions for American agriculture. With this approach to reducing carryovers, I think we take a big step towards solving the problem.
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I want to thank you very much for your time.
[The prepared statement of Mr. Payne appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Reese.
STATEMENT OF SHERMAN J. REESE, WHEAT, BARLEY PRODUCER; ECHO, OR
Mr. REESE. Thank you, Mr. Chairman. My name is Sherman Reese and I farm in the semi-arid Columbia Plateau of northeastern Oregon. Our operation is a single-family farm, run with the able assistance of my wife, four daughters, my father, and seasonal hired help. We raise multiple classes of wheat and some barley on irrigated and dryland ground in a 10-inch rainfall zone in Umatilla County, Oregon's No. 1 wheat-producing county. I am also the current president of the Oregon Wheat Growers League, and chairman of the Domestic Policy Committee for the National Association of Wheat Growers.
Mr. Chairman, let me thank you and Mr. Stenholm for the cooperative, results-driven, bipartisan way the committee is handling agricultural policy. Rather than get caught up in political posturing in an election year, the committee is coming to the country to hear the input of individual farmers. We're also very appreciative of the work of Greg Walden and his cooperation with his PNW neighbors to secure this hearing. The leadership all of you demonstrate is commendable, and should serve as an object lesson for others in Washington.
Today I wish to emphasize the following point: The 1996 farm bill is not broken, but it is incomplete.
The fundamental principles of the bill remain sound today, despite the depressed nature of commodity markets. U.S. policy should let the market rather than the Government give market signals which determine production. Farmers should be free to plant what makes the most economic and agronomic sense to their individual operations. Subsidies to farmers should be constructed to comply with trade agreements, linking to general support or conservation incentives instead of production or price. Supply management and large grain reserves are failed policies that belong buried in the past. All of these points are positive contributions of the bill.
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Where Freedom to Farm has fallen short are in the areas that were supposed to be completed along with the payment change, and in fact were promised by Congress in exchange for our support of the bill. Those included the broad categories of regulatory relief, aggressive trade negotiation, and research investments. Three years of experience with the lowest real commodity prices since the Depression have also convinced us that the bill lacks an effective safety net. Were it not for the emergency payments authorized by Congress the last 2 years, many farmers would have been forced out of business and the crisis would have been even worse.
Trade negotiation and PNTR. The U.S. Government has made some definite progress in the realm of trade negotiations, despite the global WTO embarrassment in Seattle. We are hopeful that the WTO round can be salvaged after the demonstrations and missteps, and that progress can be made in the next round. While there are legitimate concerns with state trading enterprises in Canada, Australia, and elsewhere, European subsidies are the primary issue that need to be addressed in the WTO. Europe accounts for 85 percent of all export subsidies paid in the world, according to our trade representative.
Paramount in trade negotiations is the urgent need to pass PNTR for China, and aid the accession to the WTO. China is an immense potential market for us, and the proposal on the table for granting them PNTR costs us nothing. And after a nearly 30-year struggle, it replaces the zero-tolerance on TCK with a science-based and achievable standard. The TCK victory is of particular interest to our producers, as it finally establishes a trade based on scientific protocols and makes the vast China market accessible to our wheat.
But beyond the benefits to us, a vote against PNTR will actually compromise the interests the opponents are trying to protect. Denying PNTR to China will cause our competitors to create long-term trade relationships with China. Denying PNTR would succeed in an isolation policy, but that isolated country would be the United States, not China.
Regulatory reform. The blanket of Federal regulations on our farms continues to grow and it imposes an enormous cost on raising food for the nation. Let me highlight a few examples.
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The Clean Water Act has launched a series of basin planning efforts to manage and improve water quality. In our State, agriculture is responding proactively to the challenge, but the very real possibility of heavy-handed enforcement by EPA lurks in the not-too-distant shadows. If their TMDL rule proposal is any example, such a result would have disastrous and counterproductive consequences.
The Endangered Species Act is being used by environmental groups and activist agencies to redraw the landscape in the West. ESA listing and Clean Water Act designations are used as the basis for trying to breach dams, take irrigation water rights, and restrict land use. Prescribe mandated farming and timber practices, stop timber harvest, and impose other heavy-handed, top-down regulation.
The Food Quality Protection Act is far more effective at removing crop protection products from the market than at labeling new ones. We learned this March that even in the registration process, EPA will tell a registrant that they need to give up some of their labeled uses in order to get their label renewed. EPA calls this a ''voluntary negotiation.'' Webster would call it ''extortion.''
We need Congress to fulfill its promise of regulatory reform.
Research funding. We fight an annual battle to ensure that research programs and the right research programs are funded. The administration removes projects each year, and we must come to you and ask that they be restored. This year was a little easier on that score. Perhaps after several successive years of addbacks, the message about the importance of these projects has been delivered. However, continued attention to aggressive investments in agriculture research must be maintained. The challenges in the area of water quality management, end-use quality, niche marketing of specific quality characteristics, production efficiencies, carbon sequestration, air quality, soil erosion, weed management, diseases, and other areas become more daunting each year.
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Providing an adequate safety net. NAWG and its State associations are working to develop a proposal for a countercyclical safety net to be incorporated into the 1996 farm bill. This will take time to develop. In essence, total AMTA payments for 2000, 2001, and 2002 would be made at double the 1999 level, with a corresponding change in the payment limitation until the bill is changed.
Two straight years of emergency assistance highlight the fact that the safety net is inadequate. It's time to provide a predictable, budgetable safety net that my banker will count on the revenue side of my budget.
In the longer term, we believe that a countercyclical structure in place of the emergency assistance will be effective for agriculture and palatable to the public. But in times of economic hardship, it would be good to have the general AMTA support and help family farms such as mine stay in business.
The decoupled payment scheme established in 1996 will continue to be necessary for the foreseeable future, given its exempt treatment by the WTO, given foreign subsidization with which we must compete. It will be important to craft this proposal to comply with WTO provisions, and be ready to defend it.
Thank you again for coming to the Northwest, and for holding these bipartisan hearings around the country. I look forward to working with you, both through NAWG and the Oregon Wheat League, as we work to develop a safety net addition to our existing farm law. Thank you.
[The prepared statement of Mr. Reese appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Toevs.
STATEMENT OF RITCHEY TOEVS, POTATO, SUGAR BEET, WHEAT PRODUCER, ABERDEEN, ID
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Mr. TOEVS. Good morning. Mr. Chairman and members of the House Committee on Agriculture, on behalf of myself as a producer and the National Potato Council, I appreciate the opportunity to testify on the number of ways I feel the Government can be of assistance and where it can be harmful to us in the ability of our growers to produce and market our crop.
First, we feel that any Federal program providing ongoing benefits to growers such as crop insurance or Agriculture Marketing Transition Assistance payments should not be designed or implemented in a manner that distorts the marketplace by providing subsidies which encourage farmers to grow potatoes which they would not do without the subsidy. This is why the NPC strongly supports the amendment to the Senate Crop Insurance Bill by Senator Larry Craig excluding potatoes from premium subsidies for revenue protection.
This is also why the NPC supported the amendment in the 1996 farm bill which expressly prohibited the planting of fruits and vegetables on contract acres, except under certain limited conditions. If the Congress decides to continue any form of contract payments in any newly authorized farm bill, the NPC would strongly support the inclusion of identical language.
Second, the U.S. Department of Agriculture's Plant Protection and Quarantine Service is essential to the potato industry domestically and internationally. In an era of unprecedented volume in international trade, stable funding to maintain quarantine inspection programs is critical.
In addition to stable funding, the PPQ statutes have long been in need of modernization and streamlining. Civil penalties for import violations have been inadequate. To remedy these problems, legislation has been introduced entitled ''The Plant Protection Act.'' This bill clarifies plant protection and quarantine laws designed to protect the United States from harmful plant pests and noxious weeds.
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Third, we want to discuss our industry's concerns and goals for the new WTO negotiations in agriculture. Although the U.S. potato growers and processors have developed a meaningful export market for U.S. fresh and processed potatoes, U.S. potato products continue to face high tariffs, sanitary and phytosanitary barriers, and competition from subsidized foreign producers both in our domestic and export markets.
To help the U.S. potato producer be more competitive at home and abroad, U.S. growers and processors have two goals for the new round of agriculture negotiation. First, we need a more liberalized and predictable access to foreign markets for our fresh and processed potato exports. The tariffs implied to frozen products often are of greater value than the raw product and the unjustified sanitary and phytosanitary restrictions continue to make it very difficult to export fresh to, for example, Mexico and Japan.
Second, we need assurances that trade-distorting subsidies in the potato sector will be disciplined and reduced or eliminated. Subsidies from Canada have been a longstanding issue for our industry and one we still seek relief from.
In the area of tariffs, the NPC is seeking reductions significantly beyond what was achieved in the Uruguay Round. The Uruguay Round left large disparities in U.S. and third-country tariffs on most potato products. As a result, high tariffs in our key export markets remain a problem.
Last year, the NPC supported the Accelerated Tariff Liberalization initiative to reduce tariffs of fries endorsed by the APEC, Asia-Pacific Economic Cooperation, countries. This position has been absorbed into the WTO negotiations. In the Uruguay Round, many of the APEC countries, which are some of our best markets, were considered developing countries and as such made only minimal tariff reductions from extremely high base rates. Thus, while U.S. tariffs on potato products were reduced across the board below already low U.S. tariff rates, many of our export markets were not required to make similar reductions. To correct this disparity, a different approach to tariff reductions will be needed. One helpful approach is to require significantly larger percentage cuts for higher tariff rates, for example, tariffs of 20 percent or above, and low or minimal percentage cuts for lower tariff rates.
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The NPC is also concerned that many WTO countries have also been slow at removing sanitary, phytosanitary restrictions on potatoes that have no scientific basis. If possible, the scope of negotiations should be broadened to cover SPS disciplines.
In addition, the NPC strongly supports a refined approach to domestic subsidy reform. We urge U.S. negotiators to seek sector-specific reductions and more clearly defined and enforceable rules for nontrade distorting ''green-box'' subsidies that are exempt from reduction.
A good example of this is last week we have been notified that Prince Edward Island has a $500 to $750 per acre subsidy providing a subsidy to the growers to plant cleaner potato seed. And we discussed it with Canada and they understand there is a breakdown between the Federal and provincial agreements under the WTO laws, but what does sound like political pork, I guess to them is just Canadian bacon.
In addition, the NPC strongly supports some of these WTO changes that put the U.S. potato grower on equal footing with other world producers. We also believe that if the agricultural negotiations are to provide any benefit to U.S., U.S. growers and processors, the negotiations must be completed within a reasonable period of time. We urge U.S. negotiators to support intensified negotiations over the next 2 years.
Fourth, in order to take advantage of improved trade opportunities, tools such as MAP, Market Access Programs, must be expanded. The NPC strongly supports reauthorization of MAP up to $200 million. The NPC can demonstrate a direct relationship between having MAP funds and the ability to effectively market overseas.
Panel, as you begin your deliberations to shape the new farm bill, I would like to remind you that in life there are bad problems and there are good problems. Having our youth with guns in the schools is a bad problem. Having an excess of safe, nutritious, and affordable food produced by less than 2 percent of the population is a tribute to the American free enterprise. I ask your decisions in drafting the farm bill are based not on political wishes, but on economic realities. That concludes my prepared remarks.
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[The prepared statement of Mr. Toevs appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you very much. Mr. Raybould, you are issuing a joint statement?
Mr. RAYBOULD. Yes.
The CHAIRMAN. Did you have anything additional?
Mr. RAYBOULD. I'd just like to touch on two or three domestic things if I could, please, sir.
The CHAIRMAN. Do you have prepared testimony? We don't have it for the record.
Mr. RAYBOULD. It was submitted as a joint testimony.
The CHAIRMAN. In the testimony?
Mr. RAYBOULD. Yes.
The CHAIRMAN. Do you have a statement in regard to this specific testimony?
Mr. RAYBOULD. It should have been submitted along with Mr. Toevs'. My name should be on there as well.
The CHAIRMAN. OK. Thank you. Please proceed.
Mr. TOEVS. If there is a problem with that, Mr. Chairman, I'd be happy to remedy that.
STATEMENT OF JEFF RAYBOULD, POTATO, BARLEY PRODUCER, ST. ANTHONY, ID
Mr. RAYBOULD. If I could just take a minute and welcome you to Idaho. I apologize for being late, a little confusion on timing on my part.
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If I could talk about two or three domestic things that are very important to the potato industry. With regard to Federal crop insurance, we strongly support the amendment in the Senate crop insurance bill by Senator Larry Craig, excluding potatoes from premium subsidies for revenue protection.
The potato industry has already experienced marked distortions from revenue insurance provided by private companies. If risk management provides subsidies for this type of insurance, we believe the level of abuse will increase substantially. The temptation will be for potato growers to plant and market for the revenue payment rather than responding to market signals.
Also, in the 1996 farm bill, we had planning flexibility language that limited the ability of people to plant fruits and vegetables on acres that they were getting market transition payments from. And we think that it's very important that we have this language again in any future farm bills where contract payments are made for program crops in the future. Producers who have never received subsidies on their acreage for potatoes, for instance, cannot compete with producers who are receiving a payment on acres and then, in turn, are able to plant that crop. We realize that there needs to be some exceptions to that rule, and currently I believe there are some limited exceptions that allow that to happen under certain circumstances. And we're not opposed to that, but we would support identical language to what was included in the 1996 farm bill to cover that area.
I'd like to talk for just a minute about the Department of Agriculture's plant protection and quarantine service. It's essential to potato industry, both domestically and internationally. The PPQ statutes have long been in need of modernization and streamlining civil penalties for import violations have been inadequate. To remedy these problems, legislation has been introduced entitled ''The Plant Protection Act.'' This bill streamlines, clarifies, and enhances existing plant protection and quarantine laws designed to protect the United States from harmful pests and noxious weeds.
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The National Potato Council supports funding for this important program and opposes any attempts to tap the PPQ funds to fund other programs. And we also support the Craig Kennedy legislation and urge Congress to enact this legislation as soon as possible.
With regard to the Food Quality Protection Act, the National Potato Council supported Congress's recent updates to the U.S. food safety law. However, the new law needs to be correctly interpreted by the EPA and the true intent of Congress followed. We hope that the USDA can provide the needed oversight for the proper implementation of this important food safety law.
Also, the recent developments that have unfolded in Hunts Point, NY, at that terminal market with the inspection service and the abuse and corruption that have taken place there, have concerned the potato industry. USDA has made a lot of promises that they're going to solve that problem, that we're not going to have repeats of that kind of abuse, and violations of the law.
And we hope that Congress will provide the oversight to see that that in fact does happen, that we don't have repeat incidents. Because not only are there individuals who have immediate loss because prices are adjusted from these inspections, but the overall deterioration of market prices because of the low price product that's moved into that market at that time has an impact on every grower.
Mr. Chairman, that would conclude my remarks. And any questions, I'd be willing to answer those. Thank you.
[The prepared statement of Mr. Raybould appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. I just have a couple of questions and some comments.
Mr. Koompin, we have been looking for help in defining a family farm. A family farm in Texas, a family farm in Pennsylvania, a family farm in California, a family farm in Idaho, depends on who's defining it. And maybe you're right, maybe we look at everything that's not a family farm and throw it out and what you've got left is a family farm, but it is difficult.
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And as particularly when you are looking at gross income as the determining factor for payments for programs or whether you are looking at payment limitations or whatever, those are substantially, I think, misunderstood in areas that don't have that conflict and don't have that problem.
It's difficult to talk about the issue of payment limitations and its impact when you are particularly looking at a program, whether or not it works is going to be based upon—or what may seem to be a very good program, once you impose those limitations, then all of a sudden it's a totally different situation.
That's one of the reasons we think people probably have been as accepting and complimentary of the assistance which has come over the past couple years and extra payments is because of the fact that it was an additional payment.
So that's kind of like trying to chase Jell-O. It's hard to grasp it. And so we're looking for it and we're still hoping we can get some help on the thing.
I want to make for sure, Mr. Payne, your proposal on the recourse loan and how that would work is an interesting idea. Is that yours? Is that the association's proposal?
Mr. PAYNE. The association has agreed with the basic principle of——
The CHAIRMAN. Is that the state association?
Mr. PAYNE. State association.
The CHAIRMAN. Has agreed with the basic principle of it?
Mr. PAYNE. Yes.
The CHAIRMAN. I've just got a comment. One of the things that we found of interest back last summer when we were having hearings in our committee in Washington on what was right, what was wrong, what we needed to do, this sort of thing, part of the commodity groups that will go unnamed, came before our committee and read a statement of policy. They said, in all due fairness, they though they ought to tell us that that's the third time it's changed in the last year. And I said, ''And you-all expect us to write long-term farm policy based on what it is that we're told? So it does remain complicated somewhat. But it's interesting, and I think we ought to look at it. We're open to looking at basically anything.
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On the potato issue, I want to make sure I understand exactly what it is that you all were saying. You are supporting a position by Larry Craig that would exempt potatoes from the higher subsidy rates that are being considered in the crop insurance conference report now?
Mr. RAYBOULD. That would be for revenue protection. We have no opposition to the subsidy rates for the risk management portion of the policy.
The CHAIRMAN. Strictly for revenue?
Mr. RAYBOULD. Yes.
The CHAIRMAN. But from the production side or the loss side, you would not want to be excluded from the higher subsidy rates?
Mr. RAYBOULD. No.
The CHAIRMAN. OK. Good. I just needed to make for sure that I understood it. And the whole revenue section is something that has been discussed a great deal. I'll commend this committee for its recognition of the problems in risk management. We, almost a year ago now, passed a major reform, crop insurance. We are now in conference on that with the Senate. And that issue alone probably could have been a subject for most of these field hearings we've had because virtually every commodity all across the country recognizes the need for change. But I did want to make for certain what your association was asking. Mrs. Chenoweth-Hage.
Mrs. CHENOWETH-HAGE. Thank you, Mr. Chairman.
Mr. Koompin, I'm very interested in knowing what your father was thinking out there on that tractor.
Mr. KOOMPIN. I was the second one. Cavin was the first one, so that was pretty simple.
Mrs. CHENOWETH-HAGE. Must have been in a good mood then.
Mr. KOOMPIN. We started out Kovias, and somebody in New York decided we had to be Koompin. I've been accused of being Dutch, but we're actually Greek.
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Mrs. CHENOWETH-HAGE. Well, it's a proud name for your family in Idaho and we're very glad you're here.
You mentioned the transportation issue and that is a huge issue to us. We're seeing railroads being abandoned and reliance on more truck travel to get our products to market. And of course, the threat of the court of Lewiston and the dams being taken out means a major highway in the Northwest is going to be disrupted. It's somewhat capricious, but it seems to be a political reality that we're having to face out here in the Northwest. So I thank you very much for bringing up the transportation issue.
And you mentioned Thomas Jefferson and his proud words, those words being, ''Those who labor in the Earth are the chosen people of God, if ever He had a chosen people, whose breath He has made his peculiar deposit for substantial and genuine virtue.'' And I really agree with him and that is truly our American farmer.
Mr. Meuleman, you mentioned the problem with our sugar beet growers is the total economic cost production is so much higher by comparison. Would you like to elaborate on that for the record?
Mr. MEULEMAN. Well, sugar beets are a specialty crop. And it takes equipment just solely for sugar beets. And so you have a crop out there that you have to buy equipment that's $40,000, $50,000 or more. And all you can use it on is that one specialty crop. And that's why the input is so much higher.
Mrs. CHENOWETH-HAGE. I'm glad we had a chance to get that in the record. Sometimes it's hard for the Congress to understand that. And you provided, for the record, a chart. It's very startling. And it shows a precipitous drop in sugar beet prices.
Mr. MEULEMAN. I think that chart there, since January it has also went down lower than that chart.
Mrs. CHENOWETH-HAGE. What happened in August of last year that caused this tremendous drop in price?
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Mr. MEULEMAN. Well, I think the first was that there was an increase of production domestically. And I think that reason was because all other commodities are low. And sugar beets has been a pretty fair crop. And so they increased plantings. I think the other reason why the prices went down is the anticipation of the Mexican sugar that gets to come starting on October 1 of the 250,000 tons.
Also our stuffed molasses has a fair lean on it. I think that 125,000 tons coming in represents about 43,000 acres of regular sugar beet production. And also with the Mexican, the 250,000 tons represents about 93,000 acres. So where you've got an oversupply of market, it don't take a real big glass to overrun a five-gallon bucket. And I think that's our problem.
And as far as the stuffed molasses, that's circumventing in our tariff-rate quotas. And if it isn't stopped, I think there is opportunities for other companies to say, ''Hey, we can get in on that too.''
Mrs. CHENOWETH-HAGE. Thank you. Mr. Toevs, I took special notice when my colleague mentioned that Washington potatoes are being sold in Washington, DC under the Idaho label. Did you?
Mr. TOEVS. Yes. We're proud of the name.
Mr. KOOMPIN. Obviously everybody else is too.
Mrs. CHENOWETH-HAGE. Mr. Toevs, I wondered how you felt about the ad hoc disaster program which responds to an occasional natural disaster. What is the position of the council and you personally on that?
Mr. TOEVS. I think much in the way Klaren said, that if we designed programs so that actual production history determines payments and premium we'll solve the problem. And then we should politely provide those producers training and perhaps another use for their ground. I just think if I, as a businessman, am going to stay in this business, I can't be competing with a person that only has a good crop 1 out of 5 years, but then that crop depresses my price.
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Mrs. CHENOWETH-HAGE. So anything that happens here has to be more in line with current economic realities is basically what——
Mr. TOEVS. Right. I think actual production history needs to be included.
Mrs. CHENOWETH-HAGE. Very good. Thank you and thank you, Mr. Chairman. I yield back the balance of my time.
The CHAIRMAN. Thank you. Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.
Just a few comments on each of your testimonies. To, I believe this is to Mr. Koompin. When you stated can the Government get out of agriculture, unfortunately, no, I wish more of our producers would honestly answer that question that way instead of the naive answers that are often given, that the basic fundamentals of the current farm programs, somehow if we unilaterally disarm our farmers, that we could complete in the world anymore than if we unilaterally disarmed the military. And I wish we could have more of that sentiment translated to our representatives, because that's the only way we will ever get to the bottom line, is be honest with ourselves.
And of the 160 witnesses that we had so far, one has been very honest. He said, ''The thing wrong with Freedom to Farm is you didn't do what you said you were going to do, make us live with the money we had. And then we would have had probably 30, 40 percent less producers, but maybe the ones that survived would have been doing better.'' One out of 160 said that. 159 have had a different version, recognizing that they and their backers recognized that had we not had the extra moneys appropriated, rural America would be hurting deeply.
But that's part of the fundamental decisions that we're grappling with in the Congress, in which we've got different views. And I'm pretty sure in this audience there are those that would differ radically with what I just said.
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I totally agree with you on the issue of insurance. Somehow, someway, we have got to get a recognition—I'm not sure we're going to get it in this conference, but as we look ahead to 2000, 2003, you cannot fundamentally do one thing or two things with one program. Ensuring price and ensuring yield with the same program does not work because the rest of the crop produced then in the case of potatoes and other specialty crops, when you can have an insurance program that helps you get into a business, that's not workable in the real world. And I couldn't agree more with you. And I hope that we will find ways to avoid revenue assurance, but also look for better ways to ensure cost of production, what you are actually spending.
And there are some proposals that we've got thinking outside of the box that time will not permit me to go into, but I ask each of you in your association to look carefully at these proposals when they are developed, to compile projects over the next year so that we might pick out the better ones for consideration for the next farm bill.
Sugar, the stuffed molasses question, people are bending the rules. And when you bend the rules, ultimately you've got to get in trouble. And there are some multinational companies that are bending the rules. And I hope that we will find a way to look at that and say, ''We've got rules, live by them.''
That gets into the fundamental question I'm sure we will have another battle with this year as to whether we need to keep a sugar program or not. Because there are those that are buying our sugar, consumers not benefiting. But there are those buying it that somehow, someway, believe that our producers can live with the dump price of the European market. And we have not been able to successfully—well, we keep winning, that's the good news. But you're right on target on that.
Let me say to those of you who point out one of the weaknesses of the current farm bill has to do with that we haven't dealt with the regulations, you're right. And also from the standpoint of increased investment and research and market access programs and some of the things that can help us compete in that market, all I've got to say to you, under the current budget, forget it. There is no money in it. We do not have the money to do that, what you are asking us to do. I think that's a mistake. We had a constructive alternative we thought, but it was not to be. So, as much as I'd like to see it, we'd like to keep what we've got.
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The one area that several of you mentioned, and this is one that I've been posing to each and every one of the witnesses and the audience on, because I think this is fundamental, if we're going to compete in the world market, we've got to compete in the world market, period. And that means we, I think, and this is a question that I want to ask of you: Do you believe that the United States should immediately lift all unilaterally imposed sanctions that we have applied to other countries as pertains to food and medicine?
Let the record everyone at the witness table is saying yes, all. Now that's all.
Now the audience, show of hands of you who disagree with the witnesses. If you disagree with the witnesses and believe there are cases in which the United States unilaterally is saying ''We shall not sell food to those countries,'' and somehow that's good, if you disagree with that, raise your hand.
Let the record show there is no one disagreeing with this panel.
Next question, permanent normal trade relations with China. We will vote during the week of May 22. Right now, we may not get a majority of the House Agriculture Committee to support permanent normal trade relations. And I cast no disparagement on any of my colleagues who disagree or anyone else who disagrees on this. It's something you've got to come to grips with. But I want to ask you the question: Do you believe that we should vote to lift all—or to pass permanent normal trade relations with China? Let the record show all six witnesses are saying yes.
Now, anyone in the audience disagrees with the table? One, two, three, four, five. I saw five hands being raised. Therefore, approximately 100 people in the audience, 95 have said they agree with the witnesses at the table and five disagree. For the record, that's about what each of the previous 2,000 audience members and 160 witnesses have said. We've had about 95 percent of the witnesses say yes, we should lift all unilaterally imposed sanctions and that we ought to vote for PNTR. My time is expired; I'll amplify a little bit more on that in the next round.
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The CHAIRMAN. Mr. LaHood.
Mr. LAHOOD. Thank you all for being here. If I could just ask each of you to say if there was one thing that you could do to improve the lot of farmers and ranchers, there is one thing, only one, what would it be? Start down there.
Mr. KOOMPIN. Thank you, Mr. LaHood. I guess, real quick, that after being in the game only 25 short years, I would say if you support the five basic crops at some livable level, marketed to the world at market level, you'll support all crops raised in the United States from apples to zucchinis. All 50 States have the ability to grow those five crops. And that would probably keep more people on the farm than trying to be everything to everybody to every crop.
Mr. LAHOOD. Good point.
Mr. MEULEMAN. I guess the first thing I would be looking at, we as farmers are not looking at lot of handouts. All we're asking is a fair return on our product. I think if we could establish that, we could all stay in business.
Mr. PAYNE. It would be my wish that the U.S. Government and the United States people would support agriculture at the same level you do. It's that simple.
Mr. REESE. Speaking for wheat, I would like to see the European subsidies on wheat completely removed. I think that would make a big difference.
Mr. RAYBOULD. What I think we need to do is we need to go out and we need to do market development in the world. And we need to do whatever it takes to get our products exported and create market here at realistic levels where we can return our cost of production and provide for our families and the communities that we live in. But we've got to look outside of our borders and we've got to do whatever is necessary, whether it be coming with our own subsidies to compete with an EU or working through the WTO to get their subsidies removed. We've got to get on a level playing field with our competition.
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Mr. TOEVS. Our future depends on exports. We as U.S. producers are provincial. We don't appreciate how big the world is. We're not the Dutch trader that's been doing this for 300 years. We need extensive education, explain to people how important it is. Start from the basics. It's a personal relationship.
When I sell to a Japanese buyer, it's a personal relationship. We need help through FAS. Man, we have good people in FAS and that makes all the difference in our interest in the country. India, we have a great person there and he's getting the door opened up. But you go to Thailand and very little has happened in 10 years. It just, it takes personal relationships with other companies to move the American product and help out an American producer. I can help out a multinational. We can help out our large processor, but he's going to source that product from whichever plant is closest, wherever it is in the world. To actually move American product, we as a producer have to develop that personal relationship with a foreign customer.
Mr. LAHOOD. One of the things that I thought I might have heard today and surprised me a little bit, is because of your proximity to Canada, that there might have been more heartburn and anxiety about imports from Canada. But since I haven't heard it, I'm going to assume that that is not a big problem. Is that a wrong assumption or a right assumption?
Mr. PAYNE. I don't think you've heard from the cattlemen yet, so I'm sure you will. I can comment on that partially. Being a barley grower, what we see is subsidized barley going into Canadian cattle to get the price down. They do not, most of the time they do not bring barley directly to the United States, although they do some. But what we really see is the barley coming in with four legs on it.
Mr. TOEVS. We have a huge problem with french fries, potatoes, both fresh and processed. We were a net importer in fries in February of this year for the first time ever from Canada. We are a net importer. We export about 13 percent of our total frozen product and about four percent of our total production is export. But our border is that wide open.
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In January, we went up to Lethbridge to speak to the Western Potato Council to explain to them how we need to work together, how the WTO probably didn't open any doors for us. And I spoke for 15 minutes and the audience got done and the audience had no question where their product was going to go. It's coming to the United States. They have no problem deciding where their export market is. We have to find new markets.
Mr. KOOMPIN. Mr. LaHood, I think the override question—NAFTA is fine. I think we have blinders on in agriculture and think that NAFTA isn't good. We sell two-thirds—we don't need to go through those numbers. But when you have a 40 percent exchange rate, from the basic economics, if I was ConAgra, I'd build my next potato processing plant in Canada. And there is no advantage in raising anything potatowise in Canada versus the United States except for that 40 percent. And we don't need a one to one. If we could get even 85 percent to one, there is no advantage other than on the very far east coast. That's it. But that affects us everywhere.
Mr. LAHOOD. Thank you, Mr. Chairman. Go ahead, I'm sorry.
Mr. PAYNE. I guess part of the reason that Canada was not mentioned specifically is because a lot of us have gone through this maze before, when we actually do get to someone with a beef, we all of a sudden have the same departments looking in our face. And they said we don't want to make our neighbors to the north upset. And it's kind of a brick wall sort of thing.
Mr. LAHOOD. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Chairman. Let me follow up on that question. I noticed somebody in one of the testimonies said subsidies in Canada have been a longstanding issue for our industry and one that we seek relief from. Obviously with stuffed molasses there is a problem. Clearly molasses is being used as a means to go around NAFTA and bring sugar into this country. 125,000 tons I think was mentioned. What is happening with that now? I understand that was taken to dispute resolution and we ultimately lost, right?
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Mr. MEULEMAN. The international trade court in November, the judge that looked at it said it was caprecious on our decision. We have since appealed. It is in the appeal board now. The earliest we can expect will be this month, May. And it could run 6 months.
Mr. SIMPSON. I understand last night that the Secretary announced that the Government was going to provide 50,000 tons of sugar?
Mr. MEULEMAN. I just heard that this morning, yes.
Mr. SIMPSON. So what we're saying, essentially, then, is that 125,000 tons of that is going to be from Canada?
Mr. MEULEMAN. Essentially, yes.
Mr. SIMPSON. And you are suggesting in your testimony that we need to purchase 370,000 tons to bring the prices of sugar up?
Mr. MEULEMAN. Yes.
Mr. SIMPSON. Can you tell me exactly what that means in price?
Mr. MEULEMAN. Well, the number, the net cost of purchasing and the disposal of 370,000 tons would be around $125 million and would probably avoid all forfeitures. The $279 million sugar producers paid into the U.S. Treasury in the past 9 years is more than double than the probable cost of this action. So as of the first disposal action, the Government exposed them to a forfeiture of sugar of value of over $550 million with an annual storage cost of $30 million or so. The cost to the Government would be a lot less than the forfeitures if they purchase it.
Mr. SIMPSON. Can we anticipate that since the Government is going to be buying 125,000 tons from Canada—to me, I don't know how else you look at that that we will see increased stuffed molasses coming in?
Mr. MEULEMAN. If we get a ruling against us, I can see that there would be more stuffed molasses coming in, yes.
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Mr. SIMPSON. I read in the paper not too long ago that potato producers, different organizations in Idaho and Canada had gotten together and started talking about the fact that producers in both countries were kind of under the gun and that they were trying to get together and form some alliance and work together. Could you tell me a little bit about that?
Mr. RAYBOULD. Mr. Simpson, in mid-April, that meeting was held here in Boise. And it included representatives from clear across the United States, as well as Canada. It's my understanding they are going to have another meeting on about the 6th of June, somewhere in that time frame, and continue discussions about how they might implement a North American Bargaining Association that would bargain with these multinational companies on a continent basis rather than letting one region be pitted against each other.
Mr. SIMPSON. Is it your opinion that this a Canadian versus U.S. producer problem more than it is a potato producer versus processor problem?
Mr. RAYBOULD. Well, it comes back to what Mr. Koompin said about the exchange rate. I'm interested to see how they put this program together because the minute a french fry comes out of a processing facility in Canada, it's got a 40 percent advantage over anything that we can produce down here. And how the volumes of potatoes that the companies committed for would be allocated out within the whole North American continent, I think would be an area that would be very difficult to try and negotiate. But possibly we could get our arms around it. I think it's something that needs to be explored.
Mr. SIMPSON. One last question, then I'll let this opportunity pass to help some of my colleagues that are not from the Pacific Northwest try to understand this issue. We have kind of a unique transportation system up here to get grain to the coast and a few other things, i.e., the Columbia River. And as you all know, the talk has been about removing dams and the impact that would have on the transportation system down the Columbia River. What impact would the transportation costs have on your industry in the cost to getting wheat in the cost and somewhat so forth?
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Mr. PAYNE. The figures are all around the town, but if we were to lose four dams, it would, at very minimum, if we could get to Portland with the wheat, just physically, because there aren't enough rails, there are not enough cars, there are not enough trucks, so putting all that aside, they're talking 50 cents just to start. And that's just with no headaches or anything. That's just where you start.
Mr. REESE. I think the other issue is what will that do to the transportation systems left in terms of crowding the rail, crowding the highway system. Each one of those barges is about 100 trucks. And so do we want to replace those barges with 100 trucks going down the highways?
Mr. SIMPSON. Each barge that goes down would require 100 trucks to replace?
Mr. REESE. Right, about 100,000 bushels.
Mr. SIMPSON. Thank you.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you.
Mr. Koompin, thank you for raising this issue of the size of the family farm. This is my sixth field hearing I've participated in across the country. It is a topic that matters. And you gave me a topic to talk about to my farmers back home. On the radio this morning from Boise, ID, we talked about the definition of a family farm. And I think you may have hit upon something that I think is important. You defined by exclusion rather than by inclusion.
You all are talking, except in the wheat area, about many issues that I'm less familiar with than my colleagues from the Pacific Northwest. I'm interested in knowing, Mr. Meuleman, on the trade negotiations with Mexico and the October 1 import date, is somebody out there advocating, actively working for changes that will protect domestic sugar production? We used to produce sugar beets in Kansas, in the extreme northwest Kansas on the Colorado line. Both our processing facilities as well as producers are gone. And is there somebody out there that's championing the cause within the Department of Agriculture, within the State Department? Is there a solution in the works?
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Mr. MEULEMAN. Our American sugar beet growers' office, the executive treasurer, yes, he is working on negotiations to try to change the language. We did have a site letter agreement that was signed on some of these agreements, that Mexico, though, doesn't recognize.
Mr. MORAN. Do we have U.S. officials negotiating with them to solve this today?
Mr. MEULEMAN. Yes, we do.
Mr. MORAN. Is the same true on this issue of stuffed molasses, are there U.S. officials pursuing either enforcement or—either the Canadians or with the processors on this issue?
Mr. MEULEMAN. The U.S. Customs was the one that defined that it was illegal about a year ago. And then it went to the international court and the judge there overruled us. So now it's in appeals court. And we figured we couldn't do anything until we get that appeal, which could be from May, up to 6 months. So we went to the legislators. And we're going to try to solve the problem legislatively. And I think there are 23 legislators signed on to that bill.
Mr. MORAN. In Congress?
Mr. MEULEMAN. In Congress, yes.
Mr. MORAN. Thank you very much. Mr. Payne, you talk about wheat, which I do relate to, and particularly about the carryover, the supply. Do any of your suggestions or solutions include an additional set-aside production management, production control options, or do you believe that they are self-defeating?
Mr. PAYNE. They are self-defeating. You cannot control the supply with 12 percent of the wheat in the world. We tried it. We found out we couldn't do it before.
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Mr. MORAN. And many of our panelists have talked about the importance of a level playing field. And I heard that consistent theme here today. Do you sense that we're making any progress? And if not, what can we do, particularly as related to the European community, to get their attention?
It is nice for all of us to talk about the importance of a level playing field, but are we ever getting there and what is the incentive for particularly the European community to negotiate away the competitive advantages they have? And where I'm headed is should we be attempting, and I think that Mr. Raybould indicated you'd like to see us subsidizing what the Europeans do. Is that what it's going to take in order to get the European community and others to respond favorably to the ongoing negotiations?
Mr. PAYNE. I guess that may have been me talking about the support that European Union gave its agricultural sector. It's more of a mind-set, I think, than anything else. With us being such a small amount of population of the United States, we are not thought of as the European farmer is thought of in Europe. And, well, in fact, we're just jealous, is all. I mean, they're held up as the savior to the European Union. And, of course, even the people in town are supportive of that. And basically we're just jealous, is all.
Mr. MORAN. Well, my question is what do we do as policy makers? And I'll explore this with another panel. What do we do to get these negotiations to succeed? Is it the export enhancement program? What tools should we be using to get the attention of the European community? I don't understand what incentive they have to voluntarily walk away from their subsidized system of agriculture. And I'm looking for the leverage.
Mr. KOOMPIN. I have a thought. Basically it comes back to the export enhancement. You read in the paper, so I guess once it makes the paper, then it's reality, they were feeling the financial pressure of meeting $2 wheat. It was costing them a whole bunch of money. It was costing them more than it was us. And that started, that'll eventually help. And there are plenty of hungry people in the world, and I guess the United States, with this problem that Ritchey pointed out, which is a grand problem to have. I guess in all of the thousands of years in history, we're awfully short-minded to think this is constant. It's not. It's something that the United States and the European Union, through technology, and the American farmer starting with Thomas Jefferson, has created. So it's a great problem to have. There is a lot of people that could use $1.90-wheat. I can't afford to produce it at that, but the Government and their wherefore all, that's where the USDA needs to step in. Say, ''OK. We need to get it to the people that need it. And let's take the Europeans on in the international market head-to-head.''
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Mr. MORAN. Thank you very much for your responses. I apologize for attributing somebody else's words to you two gentlemen.
Mr. RAYBOULD. Could I add to that? I just think that maybe we should target those export enhancement programs. We pick a market that we want that makes them hurt in the European Union. And we go into that market, we target it and we try to make them feel some pain so they'll want to come and negotiate with us.
Mr. MORAN. It's been suggested French wines, for example. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Ose.
Mr. OSE. Thank you, Mr. Chairman. I'm a little bit interested in the testimony of Mr. Meuleman. One of the sugar processing plants is actually in my district. So I particularly read your testimony twice. I'm a little curious, the stuffed molasses issue, clearly there is a company in the United States that is finding a benefit from importing stuffed molasses, refining the sugar out of it, uses it as an in-product, shipping the residue back to Canada for further use. Who is that?
Mr. MEULEMAN. It's Heartland, Inc., in Michigan, I believe it is right there. Their big story is that they're just a little company, but actually they are part of EFPM, what they do is take the sugar and they add it to molasses and water, ship it over into the United States, they spin it out and sell the sugar, sugar coating on cereals and such.
Mr. OSE. The only possible explanation I can come up with sitting up here is that the currency differential allows Heartland to report on its bottom line more profit than it would if it bought that sugar here domestically.
Mr. MEULEMAN. Yes. We believe that that sugar is coming from Brazil. They buy it on the world market.
Mr. OSE. Comes from Brazil, goes up to Canada, gets mixed——
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Mr. MEULEMAN. Yes, and gets shipped down here and spun back out. The molasses and water is sent back to Canada, put the sugar back in, send it back. It's a way to get around the legal laws. And I kind of look at it as if you've got a pen full of cattle and you've got a weak spot in your fence and one gets out, if you don't fix that fence, pretty soon there is a lot more out there.
Mr. OSE. Let me go on to another item. Flying in here, I couldn't help but notice the topography is pretty barren except where there is water. Even in the land of fruits and nuts we get that part. I'm curious, your water comes from—there is a lake—I mean, we flew over a lake to the Northwest a little bit. Is that a Federal project, State project?
Mr. MEULEMAN. I don't know here in Boise. I think it was probably——
Mr. KOOMPIN. Anderson Ranch Dam.
Mr. MEULEMAN. Anderson Ranch Dam is one, but farther up on the headwaters of the Snake, it comes from up around. Jackson Lake is our first lake. We got Jackson Lake, Palisades Lake, American Falls Reservoir, and Minidoka Reservoir.
Mr. OSE. Are those State or Federal projects?
Mr. MEULEMAN. They are Federal projects.
Mr. OSE. Are you experiencing the same pleasure we are with this tiered pricing that the Bureau of Reclamation——
Mr. MEULEMAN. No.
Mr. OSE. Maybe I shouldn't mention it then. So you have a situation where you have a fixed single price?
Mr. MEULEMAN. Yes, we do.
Mr. OSE. And the term of your water contracts is how long?
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Mr. MEULEMAN. Well, I think it goes on forever. Or does it? I don't know.
Mr. KOOMPIN. Most of them work, that's how we got the American Falls. Falls irrigation was a 50-year project, started in 1959, so in 2009, that project is paid off. We then go from a district to a company, I understand. And we will be a private company with shareholders in the American Falls Reservoir, which Twin Falls is totally paid for. When they rebuilt the American Falls Dam, the Government did kick in some money due to shoddy workmanship in 1927, I guess, I don't know what excuse they used, but the dam only lasted 50 years, and they had to rebuild it. It's BOR, Bureau of Reclamation controls all water.
Mr. OSE. So the bureau operates it and the Government operating costs and amortization costs of the facility itself. And at the end of the 50-year contract, the expectation is that the fee title of the facility transfers to a new entity?
Mr. RAYBOULD. Mr. Ose, that would be a wonderful thing. I'm the chairman of the irrigation district who is seeking transfer of title to our Bureau of Reclamation storage facility.
Mr. OSE. To or from?
Mr. RAYBOULD. To our irrigation district from the BOR. We have a contract, a space holder contract. The bureau agrees to store water in space that they provide for our use. It's different than a water delivery contract. We don't have tiered pricing. We pay the O & M for the operation of the facilities, plus we have been required to pay back the initial construction costs of the facilities.
And in our case, we have completely paid out. It would be like if you had bought a home and completely paid for it and then the mortgage company said, ''Well, we don't think we are going to give you the deed.'' We're in negotiations to get the deed.
Mr. OSE. My time is about up. I want your phone number.
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Mr. RAYBOULD. I'll be happy to provide that.
Mr. OSE. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Walden.
Mr. WALDEN. Thank you very much, Mr. Chairman. I want to go back to this molasses issue because I was reading a bit on the Heartland decision. And I don't know who wants to take this, but isn't it true that the court basically didn't even look at the record of information when they made their decision? They didn't look at the evidence? I mean, Heartland never really disputed the fact they were stuffing their molasses.
Mr. MEULEMAN. I guess personally I felt their decision was here was a big sugar giant taking on a little company and I feel that's what solely she made her decision on. She didn't look at the facts.
Mr. WALDEN. The legislation that you mentioned, can you tell me who the lead sponsor is on that? Who are you working with?
Mr. MEULEMAN. Senator Larry Craig.
Mr. WALDEN. Is there a House version on that?
Mr. MEULEMAN. I don't know for sure.
Mr. WALDEN. We'll check with Senator Craig's office as well. There was a comment made about the European Union recognizing the cost of their subsidies. We had a meeting, I believe Congressman Simpson, maybe Congresswoman Chenoweth-Hage was there as well, part of the State legislature met with the European Union trade minister who, after we pushed him pretty hard on their subsidies, did make the comment that as these eastern block companies begin to want to come into the EU, they weren't quite sure how they were going to be able to continue at the same subsidy level. So I hope they just fall on their own sword on this level. But go ahead and make the comment.
Mr. PAYNE. That has been brought up many times. But I can produce statements of 8 years ago that said, ''Well, now, don't worry about the EU because they'll never stand for all this cost for all these years.'' And they have just continued to do it. I mean, 60 percent of the EU's budget is——
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Mr. WALDEN. I'm not making that argument at all. I just hope they do swallow and choke on their subsidies at some point. But it does get to the issue of PNTR, because one of the deciding issues for me on the bilateral agreement has been this argument. And I'd like your individual reactions to it.
That for agriculture, this is actually a good trade agreement. We're not left at the back of the bus, the bilateral agreement with China, and because of the lowering of the TRQs, the sanitary and phytosanitary standards, the access to the market, all those things. And that if we fail as Congress to pass PNTR, the Chinese have the ability to deny us access to this agreement while extending those low reductions and all to the people who are subsidizing and eating our lunch, the EU. Is that not accurate?
Mr. PAYNE. You got it.
Mr. WALDEN. So really, the feat of PNTR, the only people we can really stick it to is not the Chinese, but to the American farmers, let alone other businesses. Would you each respond to that, please? Because I don't think that's all that well understood.
Mr. PAYNE. I think you'll find that there is going to be a lobbying blitz next week by most all agriculture groups. Your offices hopefully will be inundated with agriculture people trying to add them to drive this point home, because it's the ultimate irony if this is defeated. It's just absolutely the ultimate irony.
Mr. REESE. The point that's been made several times in this panel is that we're an export-dependent industry, in almost every level and almost every crop. By denying PNTR to China, we are arbitrarily denying ourselves the largest market in the world. And why would we do that? And so from the standpoint of American agriculture, it's absolutely imperative that this be passed. And you're right. By doing that, that would also solve at least partially, I hope, some of the European subsidy problems.
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Mr. WALDEN. Anybody else want to briefly comment on that?
Mr. RAYBOULD. Just to say that we are in no way going to impact what the Chinese Government does with their people by denying this. We have the opportunity, we have the status to move product in there and help.
Mr. KOOMPIN. That, and one last point I think that a lot of people haven't realized that I've found sitting on the promotion board, Japan, China, Korea, the bulk of those people who are now doing a lot of the purchasing, and regardless of how great the Internet is, we will do business like the Chinese and Japanese and Koreans will, and that is one-on-one, eye to eye, that initially will make the sell. We will service it over the computer, but we won't make the initial sale.
The bulk of those people there—I met three ladies, KFC whatever, all were educated at the University of Idaho. They were thrilled to death to come back over here on the promotion trip. Almost anyone who is in a position to buy, to procure, who is educated in the United States, they are very, very fond of where they got their education, have a very close tie to the United States.
We have an opportunity that Russia, that France, England, do not have. We have those ties with those people and those need to be recognized or those people will hurt. We'll hurt those people by not doing it.
Mr. WALDEN. I was in China with Secretary Glickman 2 weeks ago, and I think the figure they said is there are 50,000 Chinese students studying in America today. And it is those relationships long-term that will help us.
My final comment, because my time is up, is I want to commend Congressman Hastings, for his legislation on MAP funding to $200 million authorization. I know I'm a co-sponsor of that, as I assume other members of this committee are as well. It's incredibly important. The final comment I'll make is we've got to spend more time talking about TMVL and UPA issues because that's going to kill us if we don't get these two straightened out.
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Mr. TOEVS. Congressman Walden, could I comment on that?
Mr. WALDEN. Yes.
Mr. TOEVS. On the PNTR issue, I think we're overstating the total volume that moved into China, because Hong Kong has been an open door to that country. But one of the critical things in establishing a new marketplace is teaching the consumer to like what we produce. The U.S. in frozen fries uses a russet and white type potatoes. Holland will be our largest competitor there. We need to be the first in that market, show them the superior quality. Let them know that ketchup tastes best on a white fry. I mean, it's just critical that we have access to those markets the same time the rest of the world does.
Mr. WALDEN. It's interesting you say that, because the secretary in our delegation toured a Fred Meyer-like store or Albertsons-like store, big grocery and variety store, where they were just unveiling and putting on the shelves American beef from Texas. They had bought hazelnuts from Oregon, sunflower seeds from North Dakota, apples from the great State of Washington, which obviously were raised in Oregon and labeled Washington—I tasted them. They were really good, and citrus from Florida. And the one comment and then I'll be quiet, I've really gone over my time.
The one consistent comment we heard from buyers of agricultural products to consumers to other officials was the quality of American-produced, whether it was cotton they needed to blend with their inferior versions, or the produce and the meats. By the way, the beef was specially packaged. We'd never buy it. It was this thin little strip thing, roll; I mean, I've never seen it. But we're talking advantage of what they need to buy. And it was very well received.
The CHAIRMAN. Mr. Hastings.
Mr. HASTINGS. I didn't mean to open up this whole thing when I was talking about Washington potatoes, but I'm glad I did. Mr. Ose brought up one thing that's not related to our discussion here on the farm bill, but I do believe it needs to be elaborated on, especially for those of you that grow irrigated crops and are in irrigated areas. We in the Northwest obviously are very reliant on water, as I mentioned in my opening remarks. At some time, I know right now we are learning, I think, a hard civics lesson that we are taught in school and that lesson is that a government that is big enough to give you something, in many respects is big enough to take it away. And we in the Northwest are the beneficiaries of these Federal water projects.
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And at some point, because of the payback you are talking about, sounds like you are doing this in Oregon, at some time, I think those of us in the Northwest are going to have to realize that it may be beneficial for us at the end of the day, sometime in the future, to completely own these projects that are funded, because we are paying them back. And my message to you is that I'm certainly willing to explore that, and I think my colleagues here in the Northwest are willing to explore that. But nothing is going to happen in that regard unless the emphasis of that discussion comes from you. So I would just invite you as commodity groups and individual farmers and irrigation board members and whatever you are to explore that with us. Because I'm certainly willing to listen to see where that comes. Because with these other Federal laws that Mr. Reese had mentioned earlier with the Endangered Species Act and Clean Water Act, that affects all of us.
What I would like to do, though Mr. Payne did bring up a very interesting concept. And that is thinking outside the box, as Mr. Stenholm said we ought to be thinking about. Because the reason I say this, I think it's appropriate to say it from this standpoint, this is the year 2000. Who would have thought 100 years ago in 1900 when we were largely an agrarian society that 100 years hence, i.e., right now, that American agriculture would probably have been made up of producers of about less than 2 percent of the total populous. And yet that same 2 percent is not only feeding more than we can feed in this country, but we're exporting products across the world.
And that is probably the highest compliment you can give to American agriculture. But yet farm policy is largely a political event. And a political event when you are only 2 percent of the population is pretty tough to deal with. That's really the political realities of where we are. So Mr. Koompin, he's offered a suggestion of thinking outside the box.
And, Mr. Reese, your farm is in close proximity to John's. I know you're just across the Blues a little bit, or down the river a little bit. Your rainfall may be a little less than what John's is, but you use the same transportation system. And you are a head of the Oregon Wheat Association. I don't know if John's talked to you about that, but from what you've heard he's talked about, just give me your observations of it.
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Mr. REESE. One of my jobs is nondomestic policy chairman at the national level which includes farm policy. Unfortunately, Mr. Payne didn't bring that before my committee. But I am intrigued by it. And I think it's something that NAWG would love to take up and discuss within our own bailiwick before we bring it up. But I think it has some merit.
Mr. HASTINGS. The only reason I say that is there is going to be a farm bill. And then with the realities of population that is in total agriculture as I mentioned before, I certainly think that needs to be explored. And I would be willing to look at that also. Sometimes these ideas come and we tend to look at stockpiling it rather than selling it. And, John, it sounds to me this is like a huge marketing tool. And any marketing tools we can use I think would be very beneficial. So, John, go ahead and respond.
Mr. PAYNE. What we're trying to do is get rid of that old joke, the difference between a farmer and a dog is when you let the dog in the back door, he quits whining. That's the approach we're trying. We would like that joke to go away. So if there is an incentive there to be able to take a position without actually owning a cash crop, then he doesn't have much to whine about.
Mr. HASTINGS. OK. Thank you very much. Thank you, Mr. Chairman.
The CHAIRMAN. I want to thank the panel. I've got to say in full disclosure, my first trip to Idaho was 2 years ago. And I told Helen and Mike after I made that trip that it's first time in my life that I've ever eaten in a restaurant and asked for doggie bag for the potato. That's something to be proud of. Now I found out it may have come from Washington. You-all got good potatoes up here.
Mr. SIMPSON. Mr. Chairman, that Washington potato came from Idaho.
The CHAIRMAN. Whatever. Thank you very much. And we'll call our second panel of witnesses to the table at this time.
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Mr. Greg Garatea, who is a livestock producer from Paul, ID; Mr. Gregory Goertz, who is a wheat and cattle producer from Wheatland, WY; Mrs. June Hartley, who is an onion, wheat, and corn producer from Nyssa, OR; Mr. John Hays, who is a cow/calf operator from Unity, OR. Mr. Brad Little is a wool producer from Emmett, ID. Mr. Felix Tomlinson is a tree fruit producer from Hood River, OR. Mr. Richard Wittman is a crop, cattle, and timber producer from Culdesac, ID.
We will take a brief recess before we begin this panel.
[Recess.]
The CHAIRMAN. Mr. Garatea, if you would, please.
STATEMENT OF G.C. ''GREG'' GARATEA, LIVESTOCK PRODUCER, PAUL, ID
Mr. GARATEA. Welcome to Idaho. Welcome back to Idaho. I'm the current president of the Idaho Cattle Association. I'm a private lands rancher and have a small feedlot in the Magic Valley, which is south central Idaho.
I'd like to briefly bring up a current issue, that being the fire in Los Alamos which is turning into a total disaster right now. What I want everybody to reflect back over the last 10 years is the increase of wildfires and intensity of these wildfires. And I know there is going to be an investigation that happens after this fire, and I want the people of powers that be to recognize the contribution grazing has to reducing fuel loads so these fires aren't so intense. We also recognize, as ranchers, the tool of controlled burning as it enhances forage and wildlife habitat. We also understand the intensity of these fires if the fuel load is not reduced.
As I travel around the State of Idaho as the president and talk to other ranchers and feedlot operators, I'm totally amazed and mind-boggled at just how bloated and intrusive our Government has become, both on our private and our business lives. And to bring it home, 30 years ago, the Idaho Cattle Association had a total of 23 resolutions on the books, not one of them dealing with private property. The year 2000, we have 129 resolutions to deal with, over half of them dealing with private property, public lands, and endangered species.
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When I produce and sell cattle, I am paid for the quality and the quantity that I generate, plain and simple. I'm paid more for better quality and paid less for a lesser quality. I would like to see the Government possibly use that same theory, in other words, using a vision, identify the target you want us to go for, the goals you want us to go for, then stand back and let American ingenuity and creativity take hold. Let us determine how and which way we're going to meet that goal and get to that goal. And get away from the mind-set of micromanaging and a one-shoe-fits-all type mind-set.
Currently, environmentally, from environmental standpoints in the State, the Cattle Association introduced legislation this past year which attempts to unify all oversight administration and enforcement of both Federal and State environmental rules and regulations under one umbrella, that being the Idaho State Department of Agriculture. We felt in doing this it would simplify and reduce duplicity and it would be good for the Government, the association, and most of all, the environment. The bill passed, the Governor signed it. We have one more major step to work with, and that's reaching a memoranda of understanding with the Environmental Protection Agency, which will be a four-signature document between the association, Department of Environmental Quality, Department of Agriculture, and EPA. That is under negotiation right now. We hope to have a target date the first of July.
Hopefully this can be used as a model for the United States where we put all rules and regulations under one hat. The dairymen preceded us. And they did it in a different way in Idaho. They did it through strictly an MOU, whereas we've gone to legislature and MOU.
The TMDL situation was mentioned earlier. Idaho, because of court action, is probably farther ahead than a lot of people in the United States. We're having problems. Cost of compliance is going to be burdensome. It could put some agricultural people out of business. We also question some of the authority that the EPA is using. And we question whether they have statutory authority on some of the rules and regulations that they're throwing at us.
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As far as private property goes, the Idaho Cattle Association has made the Major Species Act the No. 1 priority. We feel, especially as it pertains to private property, we feel it's probably one of the single most acts that could affect private property and the disposition of it.
The CARE Act, or Conservation Reinvestment Act we are totally opposed to, for one simple reason. It does not have a no-net loss of private property clause in it. Idaho is two-thirds public lands as it is, and we cannot afford to lose any more private property. And the timing could not be worse for an act such as this because of the agricultural economy. Everybody is worried about the landscape of the United States. What's the landscape of the United States going to be like 10 years from now, if $45 billion is given to the Government to spend on land acquisition? And you're going to be in a buyer's market because all the people in agriculture are broke. And they aren't going to be willing sellers. So let's just think of our landscape 10 years from now.
We oppose executive orders, especially as it's currently relating to the Antiquities Act. Unfortunately, this probably wouldn't be an issue if we didn't have the situation that's going on right now. And we feel that it's being abused.
Taxes, we need to rescind the death tax. It's crippling our industry. Reduce the capital gains tax, and immediately impose 100 percent deduction on our health insurance premiums.
We are striving hard, and we need your help to rescind the USDA grade stamp on imported carcasses and imported live cattle. We are and are affected by fat cattle coming into the Northwest to be harvested. And they've been given the USDA grade stamp.
We're in favor of the country-of-origin labeling, whether be it mandatory or voluntary, just so the consumer knows where the product is coming from.
We're striving to get legislation through for a dealer trust, which would be similar to the packers' trust, which gives a producer priority lien on payment of their livestock. Should a dealer go belly-up or bankrupt or inability to pay, we take priority lien before banks or anybody else. It's just common sense that a producer should have that protection.
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Crop and disaster insurance, we're in favor of assisting commodity groups, should it be an act of nature. We're opposed to any payments for low prices for cyclical market situations.
Thank you, and I'll stand for questions later.
[The prepared statement of Mr. Garatea appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Goertz.
STATEMENT OF GREGORY J. GOERTZ, WHEAT AND CATTLE PRODUCER, WHEATLAND, WY
Mr. GOERTZ. Thank you, Mr. Chairman and members of the House Agriculture Committee, for being so willing to take the time to listen to the agriculture producers from around the nation. I am Greg Goertz from Wheatland, Wyoming. I'm a wheat and cattle producer. My wife and I harvest 2,000 acres of wheat per year, and raise and sell 250 cows from our cow herd each year.
I serve as chairman of the Farm Service Agency State Committee in Wyoming, and am on the board of directors of the Wyoming Wheat Growers. I served as county commissioner for 4 years, and gave up politics to try and save the farm. I think I made the wrong decision 10 years ago. I should have stayed in politics.
I want to share with the committee five ideas that I've developed for our area to help agriculture through this crisis and protect family farmers until long-term solutions can be developed.
First is the lengthening of commodity loans. Potential savings of at least $167 million should be reason enough to push for a change. The carryover grain stock is projected to be very high this year and lengthening the loan period would not be building stocks. The control of some of the stocks would only be moved into producers' hands instead of the grain companies.
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Congress needs to amend the FAIR Act to read, ''A market assistance loan under section 131 shall have a term of 30, plus interest for the first 9 months.'' Commodities would remain in control of the producers and not have to move into the pipeline, causing lower prices.
Basis levels have increased because terminals have more commodities on hand than they can get sold. The terminals must pay interest and have storage costs while holding commodities until they can find a market to get rid of them. They cover the cost by increasing basis levels and the producer ends up covering this cost through lower prices.
The producer should be given a marketing tool to store commodities and keep control of it. If prices rose over the long period, the producer wouldn't be eligible for market gain on the outstanding loan, and would also be required to pay interest for the first 9 months.
If 50 percent of the current wheat, corn, and soybean loans remained in effect and didn't need a market gain, it would save the Federal Government an estimated $277 million, plus they would have to pay the interest for a savings to the Government of $84 million, for a total of $362 million.
Second item is the Environmental Quality Incentive Program or EQIP. There is lack of adequate funding in the present EQIP program and we need single-year contracts. We need to be allowed to use slippage of funds from year to year. And we need local control. The locally elected county committees and conservation district boards know what conservation is needed in their areas, so give them more control over conservation programs. We also need to eliminate cost share bidding.
The third item is crop insurance. I purchased crop revenue coverage insurance to reduce our risk. When we purchased the policy in September, our local price was 50 cents under Kansas City, which is a little larger than it normally was. When the harvest price or CRC was established, my local price was 90 cents under Kansas City. We weren't covered for this additional 40 cents per bushel loss, so the insurance didn't do us any good. The harvest price for CRC coverage should be based on posted county prices instead of the future's market prices.
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Fourth item is Loan Differential Payments or LDPs. State FSA committees need more say in setting of loan differentials to establish LDP rates. The system is flawed when the price of corn in a large area is the same when LDP rates vary by 20 cents per bushel or more between counties.
Fifth item is the Conservation Reserve Program, CRP. With time, I have seen the damage this program has done to our community. Whole farms are now being bid into CRP and the equipment sold and the operator retires. CRP wasn't designed to be a retirement or a set-aside program. That is what it's turned into. This hurts local communities and takes away the opportunities for young farmers to start and expand their operations. This could be solved by only allowing 25 percent of any farm to be enrolled in CRP. How much of the world's market share have we lost by cutting production?
In conclusion, these imposed changes won't solve the problems completely. My local loan rate is $2.30 per bushel. And in a 58-cent NAFTA payment and a 58-cent market loss payment, if we get it, for a total of $3.50. And I'm still at least a dollar under the cost of production. $3.50 per bushel is 75 cents less than I was guaranteed under the old program 10 years ago. Certainly my costs have gone up.
I need projections from basis changes in my local price. Two issues I have raised, lengthening market loans and a change in the pricing of CRC insurance would help me do this. How did the price difference between my farm in Kansas City go from 50 cents to 90 cents in less than 2 years? Transportation and storage costs couldn't have increased that quickly.
Give me the tools to hold a crop until there is a demand for it. Market loss payments are appreciated and have allowed many producers to remain in operation for another year. But we can't use them in next year's cash flow with any reliability. Most operations are having a very difficult time cash flowing, so we need to know if we can expect cash payments or an increase in price.
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Agriculture producers want to produce and feed the world. In order for us to accomplish this, we need an equitable price for our commodities. We are the world's best conservationists and efficient producers, so save our rural communities and allow us to do what we do best and produce an equitable crop for an equitable price.
Thank you again, Mr. Chairman.
[The prepared statement of Mr. Goertz appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mrs. Hartley from Nyssa.
STATEMENT OF JUNE S. HARTLEY, ONION, WHEAT, CORN PRODUCER, NYSSA, OR
Mrs. HARTLEY. Good morning. Distinguished members of the committee and ladies and gentlemen, I am very appreciative of the opportunity to be here today. And I'd like to thank my Congressman, Greg Walden, for arranging this.
I'm dressed in black today because I am mourning. I am mourning the imminent death of the American family farm. I am here as a representative of my own family farm and many of my neighbors in Malheur County. Since people found out that I was going to be here today, I have been inundated with phone calls and with ideas of things that I must tell you in the 5 minutes that I have for you. So I'll just kind of do the best I can to give you all those ideas.
First, I want to say that almost everything I have to say has already been said this morning, so I'll just try to say it in a little different way. I'll tell you a little story about what happened to my husband and I at a breakfast table. I had served him some grapefruit. And it was rather small, canned grapefruit, but it was sweet, quite tasty. And he said, ''June, where did this grapefruit come from?'' I looked on the can and it said ''Grown, produced in Israel.''
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Well, I had cooked him some cut oats and I thought surely oats were safe. But my curiosity was aroused. I looked on this box and I found, ''Grown and produced in Ireland.'' Well, now I'm really curious and so I go to the orange juice bottle and I see that the orange juice that we're having is reconstituted from juice from Brazil. So then I look at the bacon and I find that it was grown, produced, hogs from Canada. My husband and I just came unglued. Our entire breakfast came from foreign soil.
And this was the week that my neighbors and I began to dump our No. 1 colossal onions. And if you have not seen those, they are about this big. A big, perfect onion, no market for it. So, as I said, I'm kind of a curious person, so I went to several local grocery stores and I looked at the onions that were there. They didn't look very good. They were priced three pounds for a dollar. But the point was that they weren't very good. So it took a lot of time for me to coerce the produce managers to go into the back room and tell me where those onions were from because they weren't marked as to origin.
That day, I went to five grocery stores. The onions were from Peru and Mexico while we dumped superior onions on the ground. Now, something is wrong here, folks. I'm not against NAFTA, but something has gone wrong with it. Look at it this way: The American farmer has a stranglehold on them. Soon foreign producers will have us in the same hold. And if we think that OPEC has hurt us with their control of the oil industry, if we think that $2 a gallon hurts our pocketbook when we go to buy gas, wait until they get control of the food of the world. And if we continue our present policies, that's going to happen because the family farm is going to be extinct.
Lowering and dropping tariffs on the products that come into our country, while continuing to accept duties and tariffs on American products, has amounted to a sellout of the American producer. The foreign countries continue to protect their farmer while ours has been sacrificed. Could it be that they know something that we in our country have forgotten? That a country is only as strong as its breadbasket, that even national security is at risk here.
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Napoleon said that an army marches on its stomach. And what will happen to us as a nation if that stomach becomes empty, squeezed by free-trade policies. Foreign countries continue to boycott our food. For example, I attached an exhibit that tells how the Mexican Government recently placed a duty on our meat imports.
Incidentally, I would like to say that my husband and I have been in this industry for 50 years. For 46 years we had a family feedlot, 2,000 head a year, which we sold locally through Armour & Company and then IBP and other local producers. But we no longer have that. Our corrals stand empty. They will never be full again. The family cattle producer is gone forever.
Now, Mr. Clinton in his letter of January 24, 2000, to Congress has stated that tariffs average 31 percent. And by January of 2004, they'll be reduced to 14 percent. By 2004, it will probably be too late for a lot of us. Farmers are being forced out through bankruptcy and inability to get financing. An average of a 34 percent tariff on our exports to other countries, is this acceptable? And consider this: Do we really think that the Chinese peasant who earns 13 cents an hour is the answer to our farm problem? And do we think that the Mexican peasant who doesn't have pesos to buy shoes for his children, do you really think that that is the answer to our agricultural problem? I think we need to look at this a little bit.
Our dollar value is so strong that other nations really want and they need a share of it. And this has been addressed. These nations grant export subsidies to their farmers. This allows them to profit, even though the goods that flow into our country are of inferior quality and they are below even their production cost.
Mint oil last year and this year is being brought into the country at the $5 and $6 level from China and India. It's an inferior oil. It's mixed with our domestic oil and then sold cheaply on our markets when it costs us $14 a pound to produce it. This picture is not pretty, but it's only one example of the unfair practices that affect our market. What I'm saying is we haven't negotiated, folks. We've just said, ''This is a wonderful thing. We want you to buy our thing. We want you to buy our food and we'll buy your things. You go ahead. You subsidize your people. We'll just take whatever you want to give us.''
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There is a couple other things that I want to address. The taxes was brought up today. Depreciation tax schedules put a farmer at a definite disadvantage. Tractors and farm machinery are depreciated over a 7-year period. It would be a great help to the agriculture community if we could deduct the cost of our machinery as a one-time business expense as suggested by primary presidential candidate Steve Forbes.
Income averaging has helped, but it needs to be more inclusive. One time I discussed this with Senator Craig and he told me, ''But land prices haven't gone down,'' so I checked into that a little bit. Land prices have gone down in our area from 18 to 22 percent. And most of the sales are to people who are not wanting to farm, who just want a way of life. Well, I have news for them. They will not be able to afford the property taxes on that land if it's not farmed. And if the inexperienced try to farm, well, they'll be in worse shape than those who are forced to sell out.
Bankruptcy laws and regulations need to be looked at. That's been addressed today.
Bonding requirements need to be looked at. This past 2 years farmers in our area have been severely hurt by businesses going bankrupt and not paying for the produce they have purchased. Because these unpaid-for products are considered the property of the failing business in the bankruptcy proceedings and the farmer receives little or no return for his crop. One of the problems here is that the bonding requirements are so low that they could not possibly pay out. For instance, people are allowed to buy grain from farmers in the area with a $50,000 bond. That would not cover one farmer's grain. That needs to be looked at.
I have a lot more to say. I know the orange light is on. Five minutes isn't very long to express feelings. And I've been very nervous today because—and ordinarily I'm not nervous, but this is my life I'm talking about and my neighbors' lives. Recently I was in the U.S. Capitol and I noticed something on the wall that really touched my heart. And it said, ''When tillage begins, the other arts follow. The American farmers, then, are the founders of human civilization.'' Daniel Webster wrote those words in 1840. We are now at a crossroads of that civilization.
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My fellow Americans, will we continue to sacrifice the American farmer, the American laborer, the American citizen on the altar of free trade? American consumers, will you continue to be a part of this stupidity? Let us rise up and say ''Enough.'' Let us use some wisdom in our negotiations. Let's put our country first and let us name the United States of America the most favored nation. Only by doing this will we save the destiny of our great land.
Thank you very much.
[The prepared statement of Mrs. Hartley appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Hays.
STATEMENT OF JOHN V. HAYS, COW/CALF PRODUCER, UNITY, OR
Mr. HAYS. Chairman Combest, members of the committee. At this time, Congresswoman Chenoweth, we would like to thank you from Oregon for all you've done for us. You've been a voice for the Northwest for years. We're going to miss you. We appreciate all you've done. You went above and beyond the call of duty and you don't know how much it's appreciated by the people in our State. We really appreciate that.
Representative Walden, you're doing a great job for a freshman. We like you. Keep up the good work.
I thank you for the opportunity to testify before you today on behalf of myself and many thousands of ranchers who will not be heard. My name is John Hays. I live at Unity, OR. I'm president of the Oregon Cattlemen's Association. I'm a fifth generation cattle rancher on the same ranch. We have about 23,000 deeded acres now. I lease another 30,000 acres of private land and I run 116,000 acres of Forest Service and BLM managed land.
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I understand the U.S. Constitution directs Congress, article I, section 8, to '' * * * provide for the common defense and general welfare of the United States * * *.'' There could not be a greater need than food security for either our defense or our general welfare. We can never allow this Nation to become reliant on foreign nations for our food for our citizens. American ranchers and farmers produce the safest, healthiest, and most affordable food in the world, a record we have proudly maintained throughout history.
While most thinking Americans appreciate the importance of U.S.-grown food, our Government is unwilling to acknowledge this and inform American consumers what they are eating or even what country it originates in. This makes no sense. Government agencies do little to enhance our ability to produce but rather choose to restrict our activities with a constant stream of new, overburdensome regulations.
I consider myself and my neighbors to be excellent stewards of the land and water, yet Federal agencies treat those of us at the beginning of the food chain as if we were environmental criminals of the worst kind.
Let's not forget it was the Federal Government that encouraged pioneers to settle west and produce food and wealth for this country, which by the way, food and fiber production is still providing the only major new wealth enjoyed by this country.
Many promises were made to our pioneers about the cheap land and water. Contracts were drawn up to protect our settlers and enticements were offered to help endure the hardships of the new, unconquered land. States were to have authority over the waters of their respective territories.
My great-grandmother and her sister came out; she was widowed before they left, both of them were. They came out with 11 kids. So I know what they did. I hope I have the same blood.
Now, a new, corrupt industry has been formed to control and eliminate cattle production on federally managed lands by filing frivolous lawsuits that ranchers must financially defend. This conflictive industry makes big profits and solely exists to create continuous restrictions on the land and waters of the producers.
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What makes the matter worse, several Federal agencies either seem to go along with the conflictive industry or they have their own agenda that causes just as much havoc. I used to wake up in the morning and look forward to the challenges of food production. Of course, nature/society offered many like diseases, catastrophic droughts, floods, fires, and a crash of the marketplace, but we expect those kinds of things and manage to cope with them.
We accept this way of life, actually not much different than my great-grandfather endured. We want to improve our cattle herd and create projects to improve the environment. But now I wake up facing one meeting after another simply to protect my rights to existence. Ranching and farming isn't fun anymore. Actually, it's a nightmare. Young people are leaving in droves and not coming back, often witnessing the escalation of losing the battle that their parents have endured at the hands of government bureaucracies, a government they believe was designed to protect them, not destroy them.
What can the Government do to help? Don't let regulations like the Endangered Species Act, Clean Water Act, Antiquities Act, along with the run-amok Federal agencies dominate our land and livelihoods. Our Government should be fighting for us. Let those of us that are skilled and trained in this area provide the food security of the nation, not bureaucrats and ecoterrorists who are preying on our lives and livelihoods. Food security is the first line of defense of this country. We producers start the food chain. Let it be a U.S. food chain. Be proud of our U.S. producers by labeling our food products and label those from other nations too. We will successfully compete with global food production, if it is done fairly.
In the United States Marine Corps, we had a saying, ''Either lead, follow, or get the hell out of the way.'' The U.S. Government must do no less. When we producers are actually enhancing the environment, don't come after us with a shotgun and heavy-handed enforcement. When we need help with fair trade issues with other nations, support us, and then come out with guns-a-blazing as fast as possible.
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When we producers have demonstrated the ability to produce abundance while protecting and enhancing the environment, be willing to learn from us. Use our expertise and follow our lead. The new farm bill will probably need to have a safety net for some commodities, but do not let your guard down. We cannot let what happened to the last farm bill happen again. An example, there was to have been a comprehensive committee to study the state of agriculture as the Freedom to Farm, the previous farm bill process played out, but the committee was formed too late to prevent the disastrous state of agriculture today.
We producers are not a bunch of dummies that simply whine about the Government and do nothing to help ourselves. As president of the Oregon Cattlemen's Association, I have been developing a brand new beef product called Oregon Trail Beef. Oregon Trail Beef is designed to guarantee quality and safety and, most important, be locally grown. This object is to provides a little profit back to the local ranchers and rural farm communities. It will also help with about 1,000 jobs and put money back in our pocket we could once do. We're doing this on our own.
Mr. Chairman and members of the committee, only those things you extract or produce from the earth provides new wealth for this country, our State and our local communities. Rural communities across the State of Oregon have an economy crisis with high unemployment, having to shut down nursing homes, hospitals, cut back on school programs like Vo Ag and FFA programs. We minimize road maintenance departments and reduce staff for other county services. One would think that rural areas would be the most affluent, since this is where the food chain begins. It should be. There should be a clamoring of young people wanting to get back into agriculture or stay in agriculture, but they are not. Far too often, law, rules, and regulations are created to cause problems. Something is definitely wrong. Help us fix what is wrong and defend what is right. Thank you.
[The prepared statement of Mr. Hays appears at the conclusion of the hearing.]
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Mrs. CHENOWETH-HAGE [presiding]. The chair recognizes Mr. Little for his testimony.
STATEMENT OF BRAD LITTLE, WOOL PRODUCER, EMMETT, ID
Mr. LITTLE. Well, thank you, Chairman Chenoweth. And I am very delighted to have this good of a turnout. I wish more of agriculture in the Pacific Northwest to—I've seen hearings on Capitol Hill have half the turnout that we have here. So we're very pleased to have you here.
We operate a family farm that starts at the edge of Congressman Walden's district and travels through Congressman Chenoweth's district and ends up in Congressman Simpson's district. As you said about it being arid, we've got to go a long way to get enough feed to get a lamb fat. So we go a long way. Right now, our sheep are just a half-hour from this building. And they're doing fire suppression and wildlife habitat enhancement on Fish and Game lands just here on the edge of Boise. Hopefully they are getting fat also.
We've been through in the sheep industry an incredibly serious economic situation. My dad sold wool for a dollar and a half in 1954 and I just got the wool check a week ago and it was 20 cents. The wool industry is just gone. And this is coming from a person who was an unadulterated free marketeer. Under Charlie Stenholm's tutelage, I've started to see the error of my ways and we do have to do something. In the sheep industry, we were very fortunate and had a good counsel to file the 201(k)s. We were successful and the president awarded us the damages and it's made a significant difference in the lamb market. Of course, the wool market is still in terrible shape.
I don't know who you blame. We've heard a lot today about 40 percent exchange rate problems as they've got in Canada. We had that with Australia and New Zealand. We heard a lot about European subsidies. Right now just the sheep industry in Europe is getting $2 billion a year in subsidies.
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The other part of it that I blame part of it on is the overfinancing, overleveraged southeast Asian market which was causing a sucking sound for wool that couldn't be sustained. And when the financial market collapsed in southeast Asia because they were overfinanced, the wool market collapsed behind.
I think what would I have done if 15 years ago I'd have been testifying in Australia before a group of such august members of their governing body to decide about the wool program that was there, because that's what caused the problem we have in the wool market. They just couldn't say no to the problem. They just kept filling the faucet and kept producing more and more wool. And of course, the problem with wool, it's a nonperishable commodity. It doesn't spoil like onions and potatoes. And I don't know how long it's going to take to get out of this jam.
So I've left my free-market upbringing, much to the august of my father. And the 201 case has been one of the ways, right now we've got some kind of control on the imports of lamb and it's made a big difference in the lamb market. The wool market is still a disaster. We don't have a program for this. We're very fortunate here in Idaho, most of our income comes from land. As the chairman and Congressman Stenholm state, wool is a much bigger part of it and it's a bigger problem for them.
Twenty-five percent of sheep farmers have gone out of business in the last few years. In just the last year, we've lost two-thirds of the U.S. capacity to process American wool, two-thirds of the capacity. That would be like IBP and ConAgra going out of the beef business. I want to applaud Congress for what's happened this last week in the sub-Saharan and the Caribbean trade bill.
There were remedies that are going to take care of some of the problem where the textile industry is moving overseas. But control of international currency exchange, trade policy, and support programs or something of a safety net of some kind has got to be addressed. And I don't know how you do that in a long-term farm bill, because these things pop up like wildfire. That's why the ITC case was so successful for us.
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Another thing in the sheep industry that is very important, which you on this committee have been supportive of, and that's the wildlife services budget, which is under assault by the animal rights people on a year in, year out basis. We can't survive on the west where such a big base is public lands without—I just hauled another guard dog—we've got wolves within an hour of this building right now on the Boise front. And if we don't have the professional wildlife services to protect ourselves, to help with the professional, we're going to be out of business.
This is a great example here in Boise of the urban economy versus the rural agrarian-based economy that's very depressed, as June alluded to. And I know you ladies and gentlemen have an incredible challenge. And I'm glad you've got it and not me. Thank you, Mr. Chairman.
[The prepared statement of Mr. Little appears at the conclusion of the hearing.]
Mrs. CHENOWETH-HAGE. Thank you, Mr. Little. And the chair recognizes Mr. Tomlinson for testimony.
STATEMENT OF FELIX D. TOMLINSON, TREE FRUIT PRODUCER, HOOD RIVER, OR
Mr. TOMLINSON. Thank you, Madam Chairman and members of the committee.
I'm Felix Tomlinson. I'm a pear and apple grower from Hood River, OR. And I welcome the opportunity to be here and testify. The testimony is mine, with input from my fellow growers, some area packers, trade organizations like the Northwest Hort Council, the Pear Bureau, and the Hood River Grower-Shipper Association, and as a regional bank's senior agriculture representative.
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According to your letter inviting me to appear, you wanted to hear about specific policy issues. Uppermost in all of our minds is profitability and the ability to stay in business. Let me start by giving you the current Pome Fruit Farm economy position. The industry has had 2 years of large losses. Most growers are in serious financial condition, or will be if the situation continues for 1 or 2 more years. Possibility of this occurring is uppermost in growers' minds.
We have experienced setbacks before, but the reasons have been more straightforward. This time the conditions are so complex and variable that a solution for us in the near term looks bleak.
What is happening in the global markets, in the domestic markets, and in our ability to control costs, and in the attitude of the American public, and the administration towards the farm community, may preclude a timely solution.
Loss of our markets. Consolidation of domestic retail operations has changed the selling dynamics of fruit and other agricultural commodities. 70 percent of our domestic production is now purchased by seven to ten buyers. Nearly 50 percent of domestic sales are to only four buyers. Retail prices are not falling while producers' prices are plummeting. I figure we growers are paying for these megalopolises.
Point, development of controlled atmospheres, called CA, storage has allowed domestic production of fruit to be available on a near year-round basis. CA is expensive, but prices have traditionally risen in the spring to cover the extra costs. Imports from the southern hemisphere are now arriving in the spring without the added costs of storage and with a labor advantage. Fruit prices are not rising; they are falling.
Point, exports have been a long-term part of pear and apple production planning. Capital spending on infrastructure, storage, and marketing allowed us to mitigate the effects of production variables on market prices. Now we are unfairly frozen out of markets while suffering from near unhindered imports. There are all types of innovative tariffs and subsidized programs around the world to keep us from having the same opportunities afforded other countries.
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Point, after years of exporting our technology, equipment, research, and on-farm expertise and efficiencies, the receiving countries are competing with us in markets we have developed, with distinct advantages in labor, shipping, and fewer regulatory restrictions.
Point, we have the Market Access Program, MAP, which has been effective. This program needs to be increased and broadened without increasing the cost to growers. We are at a disadvantage to other countries. In 1997, the European community spent $672 million on subsidies for fresh pears alone and $2.3 billion on their apple industry. This country spent $90 million on all commodities in the MAP program.
Point, the true tariff picture needs to be exposed and vigorously enforced. Noneconomic tariffs need to be closely monitored with penalties for infractions. Our high dollar has kept us at a disadvantage in world markets. The fruit industry's traditional positive trade balance is jeopardized. Subsidy or compensation should be considered. And that's a new position for me.
Point, regulatory fees need to be eased. The high cost of registering new chemical needs to be borne by the consumer, who benefits most and wants them most, and not by the grower. A more streamlined process to register new chemicals is working better, but improvements are still needed. Worker housing and safety improvements need continued grants and low-cost loans for repair and new construction. Agriculture is the only industry that provides housing for migrant workers.
Point, availability and treatment of farm labor in this country needs a commonsense approach. We are treating our only source of farm labor—and in the fruit business we are very heavy to labor—treating our farm labor like criminals and enemies, while allowing high-tech foreign workers into the country at will. 168 Mexican nationals died in our desert last year. Why is the Government doing it to its farmers and these fine people? This is a shameful episode in this country. The irony is that we need these workers to help grow, harvest, and help process our food. We have the lowest unemployment rate in 40 years. The Congress, and specifically this committee, must be involved in a positive way.
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Point, environmental activity is getting completely out of hand. In Hood River, we have reacted in a positive and proactive way. We have spent time, energy, and money to develop a comprehensive, sustainable agriculture program for all of our growers. There is such a proliferation of environmental groups that they are starting to conflict with each other. Agencies are tied up in knots. We need a breather to go forward with our program, which seems to go unheeded by the environmentalists in their rush to find the next headline. I brought, as part of the testimony, a program that we've started, the guidelines for that program. And I've included on the stand over here a poster board as illustration of what we've done since 1994 to try to be proactive in this area. We've spent our own money and the program is going fine and it's covered more broadly in the written testimony.
Current activity by the Environmental Protection Agency and the National Marine Fishery Service enforcing the Clean Water Act and Endangered Species Act is burying us in further regulation and costs. The potential is there for these two acts administered by these agencies to put us out of business, irregardless of all the other problems.
Point, finally I would like to discuss land issues, and they have been discussed already. Although this is an area that is probably more local and out of this body's jurisdiction, look at it as important in the overall picture. Like most farmers, the major asset we have left is the land. As time gets tougher, the land becomes our collateral for operating money. Value has been close to establishment costs for orchards because there has been a market as farmers expand for efficiency. If farm economy does not turn around, who are you going to sell to? Your neighbor, who is in the same condition? I don't think so.
Farmland restrictions in almost every State try to protect high value farmland. If it's so valuable, why aren't we making any money? If restrictions preclude me from splitting off a piece to raise capital, what then? Some of that $10,000-an-acre ground that we could have for fruit is now $2,000 per acre. Who buys now? Some vertically integrated, global postured, foreign conglomerate? Or, as was mentioned earlier, the Government?
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This is a bleak picture. The 1998 pear crop was large and low prices might be explained, except the 1999 crop was 1 million boxes less, and prices are still going down the first week in May with more fruit unsold than last year. As I stated at the beginning, this is a complex and variable situation. We have never been faced with one exactly like this before. Farming has always been risky and we can usually overcome most crop problems close to home. This time is different. We need help. I have been told the European community and Japan support their farmers to such a high degree because World War II is still in mind and the people realize that starvation would have been the alternative without the family farm base. Certainly is, we would not be as strong a nation if we relied on others for our basic food supplies.
And, Madam Chairman, although I didn't have it in my testimony, I have failed to mention I would like to thank this body for the emergency funds that we have had. They've been a few gulps of air to a drowning person for most of us. So thank you.
[The prepared statement of Mr. Tomlinson appears at the conclusion of the hearing.]
Mrs. CHENOWETH-HAGE. Thank you, Mr. Tomlinson. The chair recognizes Mr. Wittman for testimony.
STATEMENT OF RICHARD L. WITTMAN, CROP, CATTLE, TIMBER PRODUCER, CULDESAC, ID
Mr. WITTMAN. Thank you, Madam Chairman.
Good morning, I guess it's still barely good morning, members of the Agriculture Committee and welcome to Idaho. My name is Dick Wittman. I am one of four family members in a diverse farm, cattle, and timber operation in northern Idaho. I'm here speaking today on behalf of the USA Dry Pea and Lentil Council and the Pacific Northwest Direct Seed Association. I'd like to cover three things today, education and stewardship, second, my definition of the family farm, and third, Federal crop insurance reform. And throughout these topics, my whole theme should be, ''It takes a team effort.''
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We're in the middle of a national crisis in setting policies for natural resource management. The problem is our society is ill-informed about our environment and how food and fiber is produced. And the problem will only get worse as long as farmers, loggers, and environmentalists each try to push their views individually on society.
Our farm recently received recognition as the Millennium Farm/Family for stewardship and education efforts. The real credit belongs to others who have joined us in a number of team efforts. Practices like sediment ponds, terraces, stream bank restoration, direct seeding, and reforestation would not be happening without support from NRCS, Department of the Lands, and no-till groups like the Pacific Northwest Direct Seed Association.
The Camp Wittman Outdoor Camp is a success because agriculture, forestry, wildlife, and recreation entities are working together with schools and youth organizations to make knowledge occur. You can help us in two ways. First, push for a more clear national vision of what natural resource education is and the concept of a systems approach. And second, we need your help to promote more partnership approaches for delivering environmental education and conservation initiatives.
My second topic is the family farm business. What picture comes to your mind when you hear the term ''family farm''? Is it something like this? I don't know a person around that's not familiar with this picture. It's not my view of the family farm. Is it the big corporate conglomerate farm that's taking over the world? I don't think that's it either. This is two generations of family farm. The old farm and the young partnerships that are running the business today.
I believe that a family farm is a team of business professionals that possess all the skills it takes to be successful in business. We must be efficient, globally competitive, environmentally sensitive, and high-tech. Farm policies should be designed to help a larger share of farmers work towards this idea. You cannot define a family farm with size, diversity of crops, or gross income. The recent administration proposal to target, quote, ''family size operators with smaller incomes,'' quote, is unworkable.
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Senator Lugar pushed a concept called the ''choice plan'' during the crop insurance debates. I support his concept of encouraging farmers to adopt more risk-averse practices. And in my written comments, I've added a number of items that should be added to his list. If you want to save the family farm, your emphasis should be on empowering us first to implement every good management practice possible that we can; and second, do everything you can to create a favorable business climate in which to operate. This will assure the heritage can pass on to future generations.
I'd like you to consider two things with respect to the family farm. First, maybe you should consider tying the next round of market loss payments to prove that we have adopted more sound farm management practices; and second, continue to deliver the promises you made with Freedom to Farm, opening up world markets, streamlining regulatory processes, and improving risk management tools.
This brings me to my final subject, better crop insurance reform. Improving risk management is a critical part of making Freedom To Farm work. And I commend each of you on the committee who have made many efforts during this past year to improve this program. I was privileged to be part of the Northwest team that worked on crop insurance reform. And it was through a team effort that we were able to move beyond typical farm criticisms to actual solutions.
Two problems continue to plague the viability of Federal crops. First, the program is focused on single crops. It fails to look at cropping systems and discourages transitions to more innovative farming methods. We're being told today, ''Extend your rotations, grow all new crops, change your tillage practices.'' And when we do, then they come and slap us on the hands and say don't do that. There is no way you can get risk protection.
The second major problem is that the APH that sets the basic foundation for yield guarantees seldom reflects realistic production potential. As you work towards a successful conclusion to the reform process, I ask you two issues.
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First, make sure you protect the provisions that encourage new crop development, new program development for alternate crops, and also systems approaches to risk management. And don't sign off on conference legislation until there is a workable solution for fixing the APH problem. I strongly endorse the concept of eliminating one to 2 years of history in a 10-year history.
In closing, I thank all of the members of the Agriculture Committee for the efforts you put forth to building, I think, a brighter future for agriculture. And I challenge you to think teamwork as we look for better ways to educate the public, build viable family farms, and strengthen our farm management systems.
[The prepared statement of Mr. Wittman appears at the conclusion of the hearing.]
Mrs. CHENOWETH-HAGE. Thank you very much, Mr. Wittman. And I want to thank the members of this panel for their outstanding testimony. It was very interesting, very informative.
I want to begin with Greg Garatea in my questioning. The fuel load issue that you brought up is exceedingly interesting. And we've not been able to allow the livestock to graze on the adjudicated allotments, and so we have a continued fuel loading problem. Can you explain, for the record, why grazing does help the fuel load problem besides just keeping down the grasses? What happens out there when the plains burn and what kind of grasses come back and the seasonal necessity to graze?
Mr. GARATEA. If I can, Madam Chairman, I'll take a swing at it. I'm a private lands rancher but I have a good friend down the table who is a public lands rancher who can probably answer it better than I can. But I can say this: One of the problems when you have a high fuel load like we have when controlled burns get out of control, is the burn is so hot that it has a tendency to kill the good grasses or the good forage that we want to come back. So once you have a burn that is that hot, then you start back at the beginning of plant succession. And typically your beginning of plant succession are your weeds and your unfavorable plants. And you have to go through many years for that succession to increase or take hold so you get the favorable plants back. Plus the fact of the wildlife habitat. Typically the unfavorable plants are not the plants that favor wildlife habitat. And that's probably the biggest problem with the large fuel load is just the sheer heat and intensity of the burn. And it basically sterilizes the soil. I concede to Brad Little.
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Mrs. CHENOWETH-HAGE. Mr. Little.
Mr. LITTLE. That's the first time he's ever conceded to me, Madam Chairman.
Of course, one of the problems, Madam Chairman, just recently, is I heard the Forest Service here in response to the crisis that exists with our friends down in Los Alamos. They said, ''Well, we're going to burn 22,000 acres this year.'' I think they're a third of the way there. The Boise and Payette National Forest and the Sawtooth Forest and the BLM, they haven't even scratched the surface of what needs to be done if they're not going to harvest timber and they're going to keep cutting grazing.
And you can bet that the Secretary's study and after Chairman Diminichi gets done with them, they're going to have so many more layers of bureaucracy that instead of getting 22,000 acres burned, they are going to burn 8,000 and it's just going to exacerbate an already bad situation. We've got to use timber harvest and domestic livestock as a tool to reduce those fuels.
I've got a friend in the sheep industry that grazes the ridges right outside of the city of Los Angeles as a tool—they've finally given up—they're not going to try a controlled burn on the end of Los Angeles. And they are paying him big money to be out there right now to reduce those fine fuels on the edge of Los Angeles. And that's the problem, is there is just not enough money in the Federal treasury to put the kind of controls you've got to have for enough controlled burns to do any good.
Mrs. CHENOWETH-HAGE. And here in this high desert climate, the pioneer species that comes back right after a fire is the sheep grass. And it can be grazed down in the spring, can't it? June, July, August, the livestock won't touch it. And it's so susceptible to very hot fires.
We have seen this Boise front burn with very devastating fires. I think it's your allotment that is the Boise front. We would much, much rather have sheep out there than we would see it burn like it is.
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Mr. LITTLE. So would I, Madam Chairwoman.
Mrs. CHENOWETH-HAGE. I wanted to ask Mr. Hays, I understand that the Oregon Cattle Association are leading the recall of the Governor of Oregon for his decision on dam breaching. And then I also wanted to ask you another question. But let me ask you this one on dam breaching first.
Mr. HAYS. Yes. This has come to be the last thing. We had a meeting in Portland, OR. We were sitting down there in a beautiful setting on the Columbia River, just went through 30 processing plants of processed foods that take 2,400 to 3,000 containers a month up the river. We've allowed people to build these communities up along the rivers and clear into Portland, which will flood. There would be 10,000 trucks that would have to take over the flow of not using the river for barges. This, and a number of things, is actually his holdup on agriculture. It's a green situation in our place.
We, just like you, are talking about your fires. We burned up some of the beautifulest forests in the world. I've got trees that are infected. Because we've even gotten out, and we can't even cut the burned stuff. And I've got a little mill there that we're running in Unity, OR. We've got 29, 30 people. And they're taking the nice poles out there and cutting them up and not even letting us use them. We're making furniture and we're putting people to work. When people run away, the logging industry leaves; there is nothing left for these people. They are busted down to nothing. Their pride's gone.
And it's so unselfish to people that have private land, which I do alongside the forest. My timber is terrible now because of the bug infestation. This is something that the environmentalists think they've won on, and they seem to. The day they can throw away the 33-cent lawsuit with a stamp and a deal and make them come up, plus if they lose the case, the lawyers also responsible for paying part of this thing, if they think it's such a good idea.
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We have been tested three times here right now with one organization, an environmental group in Oregon. And it's back with the Governor and we won. We've won three of them. But what have we won? It cost us $2 million to $3 million to fight it. Those people ought to be responsible for it if they think they're right. I'm sick and tired of it.
Mrs. CHENOWETH-HAGE. Thank you, Mr. Hays. I also wanted to say with regard to the testimony of Mr. Little, we do have a very serious problem here in Idaho with both depredation of our livestock, our calves and our sheep. It's a very serious, serious problem. And I'm working now with Representative Joe Skeen, who is chairman of the Agriculture Appropriations Subcommittee to work to get dollars into the States that are affected with wildlife depredation, wildlife that is protected by the U.S. Government. So I will be in constant touch with you on that particular issue.
And in closing, before the chairman comes back, I want to say to June Hartley, thank you so much for your outstanding testimony. You really rang a bell. And the fact is that here in Idaho we had apples left on the tree right here. We're one of the largest marketing organizations, Albertsons' markets—this is their home, corporate offices. And while we had other apples pulled out of the grocery stores.
And then after Mr. Tomlinson's testimony, I think it was you, Mr. Tomlinson, that testified to the fact that there is $2.3 billion in pear subsidies or in apple subsidies and 672 million in pear subsidies. Your testimony on concentration was very good. It's a big problem and we need to work on it to save the family farm.
I have so many more questions. I will submit them in writing.
At this time the chair recognizes Mr. Stenholm.
Mr. STENHOLM. Thank you, Madam Chairwoman. And 5 minutes are so short a period of time, but just a few observations. I've picked up a lot from you.
On the crop insurance recommendations from this panel and others, you are right on target and I hope that we will—and I expect that we will, because we do have to make some changes in this area. And you've had some excellent, excellent points. And we've heard a few of these in other hearings, and I hope we can build on this.
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Mr. Wittman, your conclusion, one of the best things Congress can do for agriculture is send a message that farmers must take individual responsibility for developing proficiencies in basic management function beyond producing, that's the answer. We have to start living in the real world. And so much testimony we hear, continue to hear, not living in the real world. If we're going to do something about our own future, we've got to do it ourselves. You can't just talk about how bad it is and expect a solution unless we, as producers, are willing to do something about it.
I represent the oil patch as well as the cotton patch. Not a single person in this country was complaining about $10 oil 15 months ago, even in my district which 90 percent of my constituents don't produce oil. But boy, were we complaining when it went to a buck and a half and in some regions $2. We cannot produce oil in this country for $10 a barrel any more than we can compete with sugar or cattle or anything else that's subsidized, apples, whatever, cannot do it. But yet we continue to hear philosophy expressed that makes us all feel real good but has no practical way.
And finally, I wanted to hold my head in shame, Brad, when you said that I have convinced you to drop your free market philosophy. That bothers me in the heart, But in the head, we better drop our free market philosophy because it is foolish to believe that we in the United States can unilaterally disarm our producers and compete in a market that subsidizes like others do. But yet we still have folks in the rhetoric that keep talking about it and that doesn't help us. When you are a minority voice like we in agriculture are, you've got to look for some allies somewhere other than producers. And we have such a difficult time doing that by our folks, by our representation, by our testimony, such difficult times. But we better do it and we are doing it.
My son and I look forward to Memorial Day break every year to go home to plant cotton and cut wheat. I'm going to be 50 percent employed this year. Our wheat crop is totally destroyed. We will not put a combine in the field, my son and our farm. Now, we're going to dry plant the cotton. We're in the worst drought since 1952 right now. But we're adjusting as best we can. We're some of those that absolutely are very appreciative of crop insurance and disaster programs because it's all that's kept me and my district in business, as many of you have testified.
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Now, it's awfully important for us on the beef side too. Let's talk about facts. We complain about Canada when we're in this region of the country. We complain about Mexico when we're in my region of the country. But the facts are we are now a net exporter of cattle. We are selling more than we have imported. And you can't have it just one way. We can't always complain about the imports and at the same time say we've got export. And we are doing it, thanks to the cattlemen. You are doing a wonderful job through your promotion program, your check-off program, all of the things that the cattle leadership are doing. We are now selling more to the world than we are buying in beef and yet we still keep complaining about imports. Well, here again, we're working on that. Canada was not allowing our feeder cattle to go into Canada. They're now doing it. We've had a threefold increase. We're gradually making it. We've got to do more in that.
It does no good for us to complain, we need to trade—we need to negotiate better. Charlene Barshefsky negotiated one of the best trade agreements with China that I have seen in my 21 years in Congress and my 15 years actively involved in agriculture before that and yet we still complain that's not good enough.
Finally, my time is out. I'm going to ask you the same question I asked others. How many of you believe we ought to lift all unilaterally imposed sanctions on food and medicine? If you shake your head yes, I will regard you as yes. I see yes, yes, yes, yes, yes, yes, yes. Unanimous. All right.
On PNTR, how many of you believe that Congress should vote for PNTR for China the week of May 22? Yes, yes, I believe you said no, yes, no, no, yes, yes, yes.
Mr. TOMLINSON. I've got mixed feelings about it in the fruit business because of their fruit sites, depending on what the conditions are. Generally, yes.
Mr. STENHOLM. I understand. I have mixed emotions too. It's not a perfect panacea for anything, but from the standpoint of voting no, it's pretty simple. We unilaterally tell China, ''We're not going to trade with you; we're going to let everyone else,'' they're going to get into the WTO no matter what we do. If we say no—but we don't have time to debate it. I just want an honest show of expression from you. And I believe on this one there were two of you, three of you that have reservations. So I will record you as no. So there are four of you that say yes and three of you that say no. And that's the way we will record it. And I've already asked the audience. Thank you, Mr. Chairman.
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The CHAIRMAN [presiding]. Mr. LaHood.
Mr. LAHOOD. I'm sorry I was out of the room, and if this was discussed through Helen's questioning, we won't get into it. Did you talk about country of origin, ladies and gentlemen? Any of you can answer this. It doesn't make a difference. Why do you think that country of origin is relevant? And what does it mean for your region of the country? And I tell you, I know more about this just because I sit next to Helen on the Agriculture Committee. And as I said, every time Secretary Glickman wants to know how their studies come out, and their study has come out and it wasn't very favorable. And then Helen was on a couple of my farm radio shows in my district promoting it. So I'd like to hear it.
Mrs. HARTLEY. Can I answer it?
Mr. LAHOOD. Of course. Any of you can.
Mrs. HARTLEY. Well, I'd like to address that. I think it's very important for the American consumer to know where the produce is coming from because they are not regulated like we are. They are not regulated according to insecticide, pesticide. In some of the Third World countries they even use streamlined fertilizer. I think our consumers have a right to know that. I think they have a right to know that this produce is packed in processing plants that don't have to meet the regulations that we do. It's for the protection of the consumer that I feel that it should be.
Mr. LAHOOD. Anybody else?
Mr. HAYS. Yes. I definitely think it's a food safety issue, which a lot of people don't want to get into. Our main reason for doing it, we're starting a brand-new beef product in Oregon is because we're tired of people taking our profits, which is, we're in the top of genetics, we're in the top of everything in the Northwest in cattle, and we're having our cattle taken and some of the pieces are being blended with foreign meats. People don't realize what they're getting. This shirt off my back might be made in Pendleton, OR, it might be made in Taiwan, but something that goes into your stomach should be limited.
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But we're taking the ball to the hands ourselves. We're going to have our own product. We're going to get ''retailistic'' in Oregon. That's what we're going to do. We've got, it was a shot in the dark. I've got over 100,000 head of cattle right now presold. We've got growers that we're going to put horticulture back in our pocket. But you definitely need this country of origin. It's clear out of line. That makes our product that's superior should be identified as a superior product. We take a lot of time to do this, but we've all got to be in the chain of flow.
We can't have the big packers making the money. We can't have the feeders making the money. We can't have the processors making the money. And the retailers who are making the money is where we're getting killed. If you look in the grocery stores now, you put a label on a product, you get more money for it. That's what we're doing.
Mr. LAHOOD. How about pork? Is there a lot of pork coming over from Canada these days? Anybody know?
Mrs. HARTLEY. In the stores there is a lot of bacon and ham.
Mr. HAYS. That's another thing. The pork industry, you've only got two or three major people, there is no market. You have no market and you've only got one person dictating the price that you sell for. And that's why a lot of people are out of this market. Dairy industry is coming back. I think Idaho might possibly be the number one dairy State within a few years. But we're trying to get everything else.
Mr. LAHOOD. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Chairman. First of all, I need to say I want to echo something that Mr. Stenholm said just a few minutes ago. I think we have to realize that we have a tendency to, I guess for a lack of a better term, bash Canada sometimes about trade agreements between us and Canada. If you go up and talk to producers in Canada, they sometimes think the trade agreements are unfavorable to them, and they complain about them also.
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I think we have to realize that Canada is, in fact, one of the most important countries that we deal with. It's an important neighbor both in terms of economic ties and other ties that we have with Canada. I hate to see these differences and differences of opinion in trade and so forth destroy a relationship between a very close country; I think one that's closer to us than any other country in the world. And I don't want to destroy that relationship where unfair trade practices exist between us and Canada. And it's true there are probably some on both sides that will sit down and talk to Canadian producers and American producers and we need to work together with Canada and try to work out some of these differences and make sure that we can trade between one another.
And I don't know yet I'm not smart enough to figure out how you deal with the difference in exchange rates and what that means and so forth. That's a very difficult problem. And I wish Alan Greenspan was here to explain it to us and tell us what we can do about it, but obviously he's not. But I just wanted to state that when we sometimes seem we're Canada-bashing, I don't think Canadians think we are.
June, I appreciate your testimony. It was very good. It seems like we have a nutty policy when you can take perfectly good onions and dump them on the ground and can't buy better than that in the store. When you go to the store and you can't onions as good, that seems nuts. I get fed up when I go to Washington, when I go to try to buy potatoes and then you realize what they have labeled as potatoes. They don't look like potatoes. They look like small grapefruits that are kind of weird and they feel mushy like that too. I've been trying to get Idaho potatoes back there for such a long time and can't do it.
Mr. HASTINGS. Can you gentleman yield for a moment?
Mr. SIMPSON. Yes.
Mr. HASTINGS. I want to emphasize this point because really it is a compliment I think to potatoes grown in both Washington and Idaho and probably Oregon, for that matter. The fact of the matter is that this area processes about 75 to 80 percent of the processed potatoes in the country.
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To reemphasize the point, when I was in this grocery store—I might add just as an aside, I do think there are people that shop there that think that food only comes out of grocery stores, which is a disconnect that we have also. But they said Idaho potatoes and they looked very good, and I was very willing to buy Idaho potatoes.
It's just that those potatoes came from Quincy, WA. They are very tasty. And I'm sure had they come from this area, they would have been equally as tasty. Obviously the yield would have been greater in Washington—I'm going too deep here. Thank you for agreeing to bring me back into this again.
Mr. SIMPSON. I know that Washington does produce good potatoes. In fact, I had some people say potatoes are like the fine wine. And a great connoisseur of wine can tell you which side of the mountain the vines were grown on and the region in France they came from. I had some people convinced that I could tell them which fields in Idaho the potatoes came out of because of the quality, whether it was volcanic soil or clay soil or whatever. I had them going for a while over there. You've got to be a fine connoisseur of potatoes to do that. But anyway, I do appreciate your testimony.
Country of origin label. We've been going around about that for, I guess, a year since I've been in Congress, year and a half since I've been in Congress. In fact, Congressman Walden and I met with some people from the Food Marketing Institute and tried to encourage the Food Marketing Institute and the cattlemen to get together to see if there was some way you could resolve your differences and come up with some type of voluntary program of meat labeling. Because I think anytime you can do it voluntarily rather than government-imposed, you avoid a lot of the problems that government regulation often imposes.
Any idea where those talks are? Where they're coming from? If there is any movement toward one another, trying to resolve this problem?
Mr. GARATEA. I myself am not sure where they are right now unless John has heard something through the National Cattlemen's Association. In that regard, I'm not sure exactly where they're at.
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Mr. HAYS. No, I haven't really heard too much. They're in the process right now.
Mr. SIMPSON. Well, I would encourage you to make sure your associations stay engaged. And I will try to do what I can to make sure the Food Marketing Institute and those people stay engaged so hopefully we can come to some resolution of this. Because I think you can develop product that is labeled and will be beneficial to you. If it's done voluntarily, I think you avoid a lot of the problems that you may have.
Mr. HAYS. You'd be surprised what's going on right now. We're starting to get into the business of meat processing. You go into anyplace right now, they're all bar coded right now. We're not that far away from—I was asking a gentleman out—that had Tri-City Meats in Clackamas, OR. We went in there and was looking at his plant. And I said they're talking about so much money to label the product. And he says, ''What are you talking about? Look at the monitor right there. And see that bar code at the left shows Washington beef, where it came from, what time, the temperature when it arrived, what the truck temperature was.'' It's there. It's just all on the bar code.
Mr. SIMPSON. I think technology is going to allow us to do a lot of things in the future in terms of labeling that we haven't been able to do in the past.
One last thing, I want to talk about. You mentioned the fires that you started and Helen commented on those also. I will tell you that if you go talk to most of the forest supervisors and stuff, they will tell you that grazing is an important part of range management and forest management. As you know, we have in Idaho now a real attempt to try to get all grazing off of all public lands. At this hearing in the Pacific Northwest where States up there are substantially dependent upon public lands for a lot that we do, maybe more so than any other hearing that we have had in any other part of the region, how public lands or management of public lands affects us in our ability to produce cattle, sheep, whatever is going to be very important.
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And just yesterday, you mentioned CARA, I want you to know that the House of Representatives, contrary to I think everybody's opinion on this platform, passed CARA. And we don't know where it will go from here, but I know Greg Walden and I offered an amendment to try to protect public lands in Idaho. I know that Helen offered several amendments to try to address some of the problems, as did Congressman Ose, Congressman Hastings. We spent two days on it, and yet it passed.
And it could potentially have a significant impact in these States where a bunch more public lands could be bought. So I have some real concerns about that, and the impacts that it is going to have in States like Idaho. I don't know how Texas, and maybe the chairman can explain it, I don't know how Texas came into this union without having three-quarters of it declared public lands, but they did a better job of it than we did. And I wish you would have explained it to us before we came in.
But anyway, I appreciate all of your testimony here today and I look forward to working with you to try to address some of these problems.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Thank you. I appreciate the testimony of the panel. I apologize for eating in front of you. I violated an admonition of my mother's for eating in front of anyone, but I wanted to hear your testimony. I normally would not eat a sandwich with a knife and fork, but it seemed more polite, at least less messy.
Just a couple of things and a couple of questions. I appreciate Mr. Garatea talking about public lands and CARA and certainly about the use by the private sector of those public lands. Kansas is one of those States; I think we have the lowest amount of public lands than any State in the Nation. It's interesting to listen to you-all talk about forests. I can tell you where I come from, we admire trees one at a time.
In large part, at least a significant part of my decision to vote against CARA yesterday was related to our inability to care for the public lands we have. And we seem to be headed toward a direction of acquiring additional public lands. And I wondered, just for my own sense of correctness, if you could give me an example that I could tell my constituents where we fail in Idaho or Washington or Montana or Oregon to adequately care for the public lands that we already have. I assume this is a softball and easy question. Is there a good story for me to tell Kansans about how we fail to care for what we already have? Mr. Hays?
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Mr. HAYS. It used to be in 20, 25 years, and I know Brad said the same thing, but it used to be real nice to work with everybody in this kind of situation. But now we're at a point where everything directed with the BLM and Forest Service comes directly from U.S. Fish and Wildlife. Why have all three of them? Now we've got three people to fight. If you are going to allow the U.S. Fish and Wildlife to run the whole show, get rid of the BLM and Forest Service. Because we've tried.
And Mr. Little here went above and beyond the call of duty and worked for about 2 years to try to get an outfit together to where we could work, combine ourselves with the public lands and stuff. It was all right until it come down to Dale and he threw it completely out. And he knows what he's doing. But people don't want to hear—and these road closures, I can see it coming. You'd see them go through there. They were closing our roads. They were going out to what I'll call tape traps, where roads are county roads through there. And you go out in there and you see that started a little bit, and now as the road's not used, it becomes a wilderness area. So it doesn't take long before you are clear out of the business.
It used to be that the forest ranger, the BLM ranger was the pillar of your community when I was growing up. They were the most respected person in the world. And now it turned over because of the percentage that you had to hire to come out and take over these jobs. I understand they had to hire them, I'm not saying this about women, but there are so many women and minorities that had to be hired out here in the area that they would lose their budgets if it was not coming through. And that's told to me from a person from the U.S. Fish and Wildlife just last January. And it's documented. He was the head of it.
Mr. MORAN. Mr. Hays, I also wanted to comment on your suggestion that it's no fun to farm and ranch anymore. That certainly hits home. Kansas farmers face incredible obstacles, that the joy, perhaps, of what they do has been diminished. And we see this, particularly in the failure of the next generation to either want or be able to remain or come back to the family farm.
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I spoke to a civic club in one of my communities about a month ago and was taken to task by a local retired attorney. This is a town of 1,500 people and certainly agriculture is a predominant economic force within that community. And I was taken to task for being so interested in trying to provide income to farmers. And his point was all the farmers I know, they drive Cadillacs. And he was disappointed that this was such a focus with me. And my response to that—I don't know whether farmers drive Cadillacs or not, but my response—if they do, I would guess they are not very new ones.
I asked in that community, a population of 1,500 people, how many young men or women have returned to the family farm in your community in the last year? And his response after some thought and perhaps a smile on his face was, ''I can't think of any.'' ''Well, how about the last 2 years?'' ''No.'' ''How about in the entire county?'' And we kind of went through this process and concluded that there's no new members of the next generation who are able or willing to return to the family farm, which, to me, highlights what I think I'm all about.
My goal as a Member of Congress is to make it possible for my 9-year-old daughter and my 12-year-old daughter to return to rural America if they want to. And farming has been the opportunity that we have had in rural America to have that happen and it has almost entirely disappeared. And I have a goal as a Member of Congress that those kids, mine and others have the opportunity to grow up the way that we did and in the way that we're trying to raise our kids, and that we can pass this on. This is an issue to me of more than just economics. It is about a way of life and it's about a way that we transfer values from one generation to the next.
There is no place in America where children have the opportunity to work side by side with their mothers and fathers and grandparents than there is on the family farm, however we define that family farm. And that's our last opportunity for us to have the goodness of the character and the values of the American people transferred from one generation to the next.
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And what this committee is about and what we in agriculture are about is something more than just dollars in our pockets. It goes beyond that. And America is about to lose something awfully important as a result of the desperate economic times we see in production agriculture.
I had actually some questions instead of comments and I've run out of time. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you. Mr. Walden.
Mr. WALDEN. Thank you, Mr. Chairman. I just want to thank my colleague from Kansas for his eloquent remarks about value in growing up on a farm, and its importance to our culture and our future. I was also going to point out, too, I assume your mother also would have told you to finish your salad.
Mr. MORAN. There are no lettuce growers in the audience.
Mr. WALDEN. He's a senior member. I'm going to pay for this dearly.
Mr. MORAN. One of my predecessors in Congress always said that if we didn't eat the bread, at least to wad up the roll. And I've done that today.
Mr. WALDEN. I appreciate the testimony of all of you on all of these panels. It's very helpful. I, too, I think it was on this panel a while back, though, somebody finally mentioned repeal the death tax, which is so important. And we're trying so hard to get that done. And 100 percent deducibility for health insurance. My corporation in the radio business, we get that because we're a C corp, but individuals don't. We need to do that with the crisis in health care that's out there, to make that more affordable. And the idea of a full deductible in expenses for farm equipment and other equipment would probably be a great spur to the economy as well as a help for agriculture. So I'm interested in that.
And the bonding requirements, I'm intrigued by that as well and understand where you're coming from. I want to make sure we didn't set them so high so they pay you even less, but I think you make a really, really valid point.
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Helen, I was going to point out, the last time we were together in this region on this committee was looking at mismanagement of Federal lands, on the summit fire there where the lands weren't well cared for. They were disease ridden, a wildfire came through there and destroyed tens of thousands of acres. The Forest Service took more than 3 years working through various litigation and analyses and all and finally up for sale the timber which had been burnt. And the pine by that time had begun to rot and turn blue. And its value, which is value to the taxpayers, went somewhere from $30 million to $1 million with that that was left to be harvested. Incredible tragedy.
And I've served on a couple of corporate boards, and I always feel like in this job like I have a fiduciary responsibility to the taxpayers. And in a sense, that fiduciary responsibility is broken in the delay by losing that $29 million in value of the timbermen jobs. And we would have healthier forests if we were more engaged.
But my point of that hearing was, the last time we were together, remember they were blowing stumps down in Lake County and started a fire, and today they were doing a prescribed burn in a national monument in New Mexico and it got out of hand. We've have to stop getting together, I guess.
I hear a lot of the Canadian exchange rate, 40 percent? How do we handle that? I mean, we can't go there and pop up their currency or whatever. But what is it? Are there some ways out there to deal with that inequity wherein currencies differ in other countries, not just Canada? Are you familiar with any that are there? Because that is where they're right on our border, that is a huge problem for us. Let me throw that one out, as well as any information you've got to buttress our efforts to continue to have predator control funding come through. It's a fight every year with Congress. I helped lead it last time, because I recognize it's important. It will be back. My colleague from the fourth district in Oregon, Peter DeFazio, is a champion to try to get rid of the predator control funding. I'm on the opposite side of that, so let me throw out those two for sure. What do we do about exchange rates? And what can you do to help us maintain the predator control funds?
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Mr. LITTLE. Congressman, the exchange rates was one of the issues in our 201 trade case that was very successful. That's just on lamb. Of course, that's only a 3-year stopgap issue, but it was one of the issues that we went to the table with about how the imported lamb went from about 8 percent to 30 percent in just 3 years, and a lot of it was predicated on—and there is not much money in the sheep industry. That was a bargain basement. Most of the other industries, when they looked at our 201(k)s, thought that we'd never come up with the revenues to get it done because we had to finance the lawsuit ourselves. But that's one avenue to address it.
Mr. WALDEN. So using the section 201?
Mr. LITTLE. Yes.
Mr. WALDEN. Anybody else have suggestions?
Mr. GOERTZ. On the predator control, predators have practically eliminated the sheep industry in Wyoming. Of course, price had a big factor in it. But I've talked to some sheep producers that said the predators just got to heave and they had to just quit raising sheep.
Mr. LITTLE. Congressman, the problem is a perception issue on predator control. They think the case of the Wildlife Service, that ''The only good predator is a dead predator,'' and they want to make all the predators good; they don't realize how expensive it is to do it. The guard dog technology that we've got now, I buy 20,000 pounds of dog food a year just for guard dogs, and that's all. When President Nixon eliminated 1080, our canine-specific predator control, and Congress and the administration said, ''We're going to take care of you guys in the interim while we're doing this, while we're eliminating this tool that you've got.'' Well, then everybody starts getting into the Wildlife Service's budget. And it's not that much different on public land as it is in private land. The Chairman and Congressman Stenholm's district, there is an enormous amount of predator problems down there.
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But I don't know how you address the fact that we're not trying to eliminate all the predators. Those pictures say a thousand words when they show those pictures of those poor dead coyotes. We don't like dead coyotes. It's not that we like dead coyotes, it's we don't like dead lambs and dead calves. It's a perception issue, which you and Congress know more about than anybody. I don't know how you address the perception issue.
Mr. HAYS. It's the same thing. As you notice, you see the defenders of wildlife, the people that come up, you look at the woods and say ''Well, what are they feeding them?'' ''Oh, they're eating elk and deer.'' Maybe they'll take a few coyotes out.
Well, the coyote population has been so strong in our country you would not believe it since we got it passed that you couldn't hunt with a dog. That's the only way you can catch coyotes. Well, it's gone to now—in Wallowa County they gave out 5,000 elk tags, that was 5 years ago. Last year they gave out 850 elk tags. Now they're looking at what the average is out of a hundred cows, there are about five calves that are surviving. So it's everything. You are killing your own. But they handpick and choose and pick what they want. I've got some facts and figures to look into the animal rights issues—which is very, very alarming—that I received this week that would open your eyes.
Mr. WALDEN. Did you mean coyotes or cougars?
Mr. HAYS. Coyotes and cougars, both.
Mr. WALDEN. Both. Because I want to make sure we've got the cougars on the record.
Mr. GOERTZ. Congressman Walden, I'd like to reiterate what John said. Predator control is not just for domestic livestock, but it also reaches over to endangered species, as John alluded to.
Mr. WITTMAN. I'd like to go back to your comment on currency. Too often we farmers get accused of whining, and we don't give recognition of things that are working. We have a classic example where open trade really does work. Where we're able to grow canola in this country, direct ship it to Canada, come out better than shipping it to places in our own company.
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They send trucks with meal down to this country to benefit our cattle producers and our same trucks haul ours up. These are free and open relationships where you need to understand currency and value and all the exchange rates. And yet the bulk of this—I get a lot of emotion out—but look at real value and buying power on both sides of the border. And we need to look more at those relationships that benefit us both and don't generalize sometimes that it's bad when things go across that border.
Mr. HAYS. We need to set up more co-ops, is what we need, and be funded to help do things like that.
Mr. WALDEN. That's the main thing that really helps out. The co-ops are where people, like Mr. Stenholm was talking about where we take care of ourselves. They put $130 million in this year and that's to start the projects of our own. And that's what we're going to have to do. And we are doing it. We're starting out and it's going to go. It jumps into the feed and it jumps into—Mrs. Hartley can't sell her onions. Maybe she'll grow corn and barley here to feed the cattle. We can get our own feedlots again and sell our own product locally. We need to sell locally and quit worrying about globally.
Mrs. CHENOWETH-HAGE. Mr. Chairman, I wonder if you could give me just one more minute?
Mr. WALDEN. My time is expired and I'd be happy to.
The CHAIRMAN. Yes.
Mrs. CHENOWETH-HAGE. I did have one question, or two more questions of Mr. Hays. With regard to the country of origin meat label, isn't it true that Canada already has country of origin meat labeling?
Mr. HAYS. Yes.
Mrs. CHENOWETH-HAGE. Isn't it true that Mexico already has country of origin meat labeling?
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Mr. HAYS. Yes, they do.
Mrs. CHENOWETH-HAGE. And it's true that America doesn't have country of origin meat labeling?
Mr. HAYS. That's very right.
Mrs. CHENOWETH-HAGE. Isn't it true now there is already existing in America under USDA—one of the programs under USDA, a voluntary program for country of origin meat labeling?
Mr. HAYS. That was passed the last time, yes.
Mrs. CHENOWETH-HAGE. Isn't it true, Mr. Hays, that about 18 to 20 percent of the American meat market is being taken up with foreign meat?
Mr. HAYS. I think that's very liberal. I think it's more than that.
Mrs. CHENOWETH-HAGE. We've heard testimony today that we are now exporting more meat than we ever have before. But if the American producer could sell to the American market again, we wouldn't need to export to other markets as much as we are now; right?
Mr. HAYS. Definitely. When you look at some of the markets that are out, you get your money that comes in. Like I said, you put a couple million dollars or billion dollars to buy hamburger for the schools, you should thank New Zealand and Australia, which most of them send in the hamburger. Nothing filters down to the cow/calf operator or the lamb operator. The whole commodity, we don't get anything. It goes to the big packers and it goes to the commodities. It's retail. You'd be surprised at the ratio of what the cow/calf operators say lost $50 last year. The processor made $600, and the retailer made $1,200. That's why we got interested in starting our own label.
Mrs. CHENOWETH-HAGE. And Mr. Hays, you are a member of the board of NCBA, aren't you?
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Mr. HAYS. Yes. That's kind of in question right now. We're questioning some of their authority.
Mrs. CHENOWETH-HAGE. I want to thank NCBA and the American Farm Bureau, the Idaho Farm Bureau, Idaho Cattle Association for their support in opposition of CARA.
Mr. HAYS. Thank you.
Mrs. CHENOWETH-HAGE. Mr. Chairman, I also want to recognize in the back of the room our distinguished secretary of state, Pete Cenarrusa, came in, and I wanted to recognize him.
The CHAIRMAN. Appreciate you being here. Thank you very much. This panel will be excused. The next panel make their way to the witness table and we'll again take a short recess.
[Recess.]
The CHAIRMAN. The committee will resume. We will have our next panel take their seats at the table. John Carter, a lentil, wheat, barley producer from Tensed, ID; Ron de Yong, wheat, peppermint oil, alfalfa producer from Kalispell, MT; Perry L. Dozier, a wheat producer from Waitsburg, WA; Evan Hayes, a barley producer from American Falls, ID; Heidi Linehan, a wheat, peas, lentils producer from Genesee, ID; Steven D. Young, a potato, wheat, sugar beet producer from Rupert, ID, and Mr. Kenneth Macy, a wheat, barley, corn producer from Pine Bluffs, WY.
We'll take the witnesses in that order. Mr. Carter.
STATEMENT OF JOHN F. CARTER, LENTIL, WHEAT, BARLEY PRODUCER, TENSED, ID
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Mr. CARTER. Let me be the first to say good afternoon. Welcome Chairman Combest and distinguished committee members. My name is John Carter. I'm a dryland cereal, grass seed, and pulse producer in northern Idaho. I come before this committee representing the dry pea, lentil, and chickpea producers of the United States. Our membership includes farmers, processors, and exporters in Washington, Idaho, Oregon, Montana, North and South Dakota.
The basic tenets of the 1996 FAIR Act were supported by our industry. However, there are several improvements that need to be made in the next farm bill. The USA Dry Pea and Lentil Council is seeking the following changes: One, market loss payment for peas, lentils, and chickpeas. U.S. pea and lentil growers face restrictions or sanctions against Cuba, Iran, Iraq, Libya, North Korea, and Sudan. Last year Cuba imported over 171,000 metric tons of peas, and 8,000 metric tons of lentils. We applaud and support congressional initiatives to pass sanctions relief on agricultural products.
However, the damage has been done and it will take years to regain a foothold in these sanctioned markets. Trade sanctions cost U.S. pulse growers over $4 per hundred pounds last year for a total of almost $32 million. We propose market loss transitional payments for peas, lentils, and chickpeas in the next farm bill that would be spread over a 6-year period. These payments would compensate U.S. pulse growers for lost market income. The transition period would allow our industry to penetrate these markets, if these sanctions are lifted.
Two, chickpea eligibility. The FAIR Act of 1996 included dry peas and lentils eligible under the farm program. However, chickpeas were classified as a vegetable crop and cannot be planted on Farm Service Agency contract acres without losing program payments. The USADPLC strongly supports chickpeas as eligible crops under the Federal farm program rules.
Three, Pea and Lentil Marketing Loan Program. Due to low prices in every commodity, farmers in my neighborhood are shifting to wheat, barley, or oilseeds because each offers a loan deficiency payment. The USADPLC supports the creation of a pea and lentil LDP marketing loan program in the 2002 farm bill to encourage farmers to maintain good crop rotation, and to assist growers in times of low prices.
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Four, research funding. Federal and State support for U.S. pea and lentil research has declined in the past 7 years. In contrast, our major competitors, Canada, Australia, and France, have dramatically increased their legume research funding since 1992. Our competitors are investing heavily in research to keep their growers competitive into the next century. In the United States, growers face stagnant declining research programming. This trend must be reversed if we expect to remain a competitive world supplier of legumes in the future. The 2002 farm bill must make a strong commitment to increase funding for research in production agriculture to meet the competition.
Five, Market Development Programs. The Market Access Program, the Foreign Market Development Program and Emerging Markets Program have been valuable tools to open and maintain markets for our corps. We face a competitive and highly subsidized marketplace. The next farm bill must increase funding for the MAP program to $200 million and the FMD program to $40 million. The U.S. Government must make good on their promise from the last farm bill debate to aggressively market U.S. products around the world.
Six, export credit programs. The 2002 farm bill must improve export credit guarantee programs for specialty crops like peas, lentils, and chickpeas. Canadian exporters are moving huge quantities into markets that our exporters are reluctant to trade in, because of too uncertain financial conditions. Canadian pea and lentil exporters are able to deal in these markets because of an aggressive government export credit program that ensures 90 percent of the transaction and provides assistance in collection by the Canadian Government.
Seven, Food aid. The USADPLC supports increased funding of the P.L. 480 and other food aid programs. Dry pea and lentil stocks are at 5-year highs, and marketing peas and lentils is increasingly difficult due to the U.S. strong dollar and subsidized European exporters. The next farm bill should make it easier for smaller commodities to qualify for the section 416 (b) program. The transportation cap in the Food for Progress Program should be lifted. Unused Export Enhancement Program funding should be shifted to food aid purchases or market development programs. In addition, we believe that Congress should reevaluate the increased use of monetization in food aid programs.
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In summary, the USA Dry Pea and Lentil Council believes the 2002 farm bill should include market loss transition payments, a new marketing loan program for pulses, and more risk protection for pea, lentil and chickpea growers during periods of low prices. Increased research and market development funding is the key to our future competitiveness as well as increased use of food aid programs and developing more attractive tools to help export our commodities.
I would like to thank the committee for the opportunity to speak with you today. Thank you very much.
[The prepared statement of Mr. Carter appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. De Yong.
STATEMENT OF RON DE YONG, WHEAT, PEPPERMINT OIL, ALFALFA PRODUCER, KALISPELL, MT
Mr. DE YONG. Good afternoon, Mr. Chairman and members of the committee. My name is Ron de Yong. I own and operate a family farm in Kalispell, MT. Our main crops are Hard Red Spring wheat, peppermint, and alfalfa. There is a consensus among farmers that I talked to that feel we really need a fair price for what we produce. Historically, the governmental action that has the most influence on stabilizing agriculture prices is the loan rate. We have loan rates now, as you know, but they are capped and they are far too low to provide any relief in the present farm crisis.
We farmers are at the greatest disadvantage since loan rates on wheat are capped at 56 percent of the cost of production, while corn is capped at 66 percent and soybeans at 88 percent. Many of us believe that loan rates should be set at 100 percent of USDA's full cost of production. However, if we set loan rates at USDA's full cost of production and make those higher loan rates available on all U.S. production, some significant problems occur which need to be addressed.
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No. 1, overproduction will take place driving market prices down and Government loan deficiency payments up. If we eliminate loan deficiency payments, then Government storage increases dramatically.
No. 2, other countries will view this overproduction as trade distorting, which will cause Europe to even more adamantly defend their trade distorting export subsidies.
No. 3, very large farms will receive the bulk of the payments and will get even larger. Not only is this detrimental to family farms, but it is a huge public relations disaster.
No. 4, loan rates at 100 percent of USDA's full cost of production on the entire crop will impair normal supply and demand relationships. Because of these problems, some have suggested that we use insurance rather than the loan rate to support prices. But if we are allowed to ensure our production at the price that is needed, which is 100 percent of cost of production, then everyone would increase production to achieve insurance dollars. Again, we would have overproduction and all the related problems, plus, we have to come up with additional dollars for the insurance company's share.
Adequate insurance is needed, but it will not solve the present agricultural crisis and the need for a safety net. To overcome the problems of overproduction, it has been suggested that supply be reduced in the United States. However, if the United States unilaterally reduces supply, then our share of the global market will be reduced as other countries increase production.
We have currently taken over 35 million acres out of production with the conservation reserve program. This has resulted in the United States reducing their share of the world market by 7 percent in wheat and 22 percent in core experience, while all of our competitors increase their share, some by as much as 44 and 46 percent. After removing over 35 million acres, we are still experiencing prices at 20-year lows. If you adjust for inflation, these are the lowest prices since the Depression of the 1930's, indicating that if any management is going to work, it must be agreed upon internationally.
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So how do we design a farm program with an adequate safety net that overcomes these problems? The consensus evolving from that that would allow family farmers a fair price for their product without overproduction has two parts.
Part one involves setting a safety net on the production used domestically. This could be done by raising the loan rate to the USDA's full cost of production on the portion that we consume domestically. LDP payments and market gains from loans would be targeted to family farmers on this portion. For instance, each week farmers would be allowed the same number of bushels for a loan calculated so the total equals U.S. production used domestically.
Part two of the program allows prices on export production to be market driven, allowing supply and demand to be effective, which fits within the parameters of the WTO. International negotiation should then take place to implement an international supply management system on the portion that is exported to enhance overall price. This could take longer to implement than the domestic program, especially since the international agreement should also move everyone toward the U.S. level in regard to labor and also market and environmental standards.
A major advantage to having a separate policy for production used domestically and a separate policy for export policy are: No. 1, family farmers will be adequately compensated with loan rates at USDA's calculated full cost of production on the portion of the total crop used domestically.
Two, targeting loans and payments to family farmers will result in a good public relations image.
Three, the portion that is exported is market-driven in price which allows supply and demand to work.
Four, this policy does not distort international trade. Consequently, the United States can provide pressure on Europe to replace their trade distorting export subsidies with a similar internal program.
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Five, similar programs using the same concept could be developed for other commodities where a loan rate is currently not established. This approach provides the framework for a consistent long-term agriculture policy adaptable to many commodities. It also fits within WTO parameters allowing international negotiations to take place.
Targeting the program, the family farmer is not based upon some arbitrary limit which other countries may view as trade distortion, but is determined by a production used domestically which does not distort trade. Loan rates are not determined by some arbitrary number that are set at USDA's full cost of production on the portion of the crop used domestically. These loan rates, in targeting payments to family farmers should be well received by the consumer and the taxpayers. Thank you. I'm looking forward to the questions.
[The prepared statement of Mr. de Yong appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Dozier.
STATEMENT OF PERRY DOZIER, WHEAT PRODUCER, WAITSBURG, WA
Mr. DOZIER. Good afternoon. My name is Perry Dozier. I am the current vice-president of the Washington Association of Wheat Growers. I am also a grower in southeast Washington State raising wheat, barley, and peas. I want to thank the members of the House Agriculture Committee for the opportunity for growers to express their views and concerns on the current state of the agriculture economy, and to review the agricultural policy. In light of the downturn and stagnant economy of the agricultural sector of the United States, I would like to offer some points to consider for the remainder of the 1996 farm bill, Freedom to Farm.
With the passage of the bill, we the farmers felt that with less Government regulations, we could prosper in an open and free market environment. The optimism of late 1995 and early 1996 prices made freedom to farm look promising. The quick and continued downturn in prices caught most of us by surprise and has had devastating effects on our financial positions, not to mention the ripple effects we now see on the rural economies.
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As we all are aware, prices for commodities are driven by supply and demand. The agriculture statistics reports at the inception of the 1996 farm bill showed drastically low levels of surplus grain stocks. Fear was that worldwide consumption would outgrow production, driving strategic stocks lower. This assumption in turn fueled the escalation of price beyond our wildest dreams. Prior to the report on grain stocks, wheat and barley prices in southeastern Washington would hover around $3.25 a bushel for wheat and $85 a ton for barley. November and December of 1995 closed with wheat at $4.95 a bushel and barley at $137 a ton, a 52 percent increase in wheat prices and a 61 percent increase in barley. Prices held steady until early May 1996. Then wheat and barley both increased to highs of $5.50 and $141, respectively, by the end of the month.
As in the fairy tale Cinderella, this is where the clock struck midnight. Within 6 months, the price had fallen to $3.53 wheat, a 36 percent decrease, and barley $94, a 33 percent decrease. This put us back in the range of the pre-Freedom to Farm Bill pricing. Still decent returns, yet there was speculation that prices would rebound.
By late April 1997, wheat climbed back to $4.21. This was the last peak and the beginning of the continued slide. September 1998 was agriculture's Black Tuesday as wheat was $2.12 a bushel and barley $47 a ton, a decrease from the highs in 1996, 61 percent for wheat and 67 percent for barley, still lower than the pre–1996 farm bill inception.
The 1996 farm bill has many good components, but it does lack an adequate safety net for low prices. The emergency payments these past 2 years has kept many of us from total bankruptcy. We thank Congress for their concern. Some factors and potential solutions are as follows:
Looking at the time period between 1995 and 1999, harvested acreage has fallen for the United States while the competitors' acreage has risen. The EU and Australia has risen the most.
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Exports have fallen for the United States by approximately 5 million metric tons over the period. Argentina, Australia, the EU, and Canada, have increased exports collectively to nearly 18 million metric tons during this same time period. U.S. exports are 28.5 million metric tons, the increase in exports made up by our competitors' accounts for nearly 63 percent of the total exports of the United States. The U.S. market share of world exports was over 40 percent in the 1970's and early 1980's. Today we are just 23 percent.
The Pacific Northwest has been hit the hardest by this loss as 85 to 90 percent of our wheat is exported. And of these exports, 85 percent goes to Asia. U.S. white wheat exports have fallen from 238 million bushels in 1995 to an estimated 160 million bushels in 1999–2000, the lowest in 15 years, and the second lowest in 25. Worldwide wheat consumption has increased, and the U.S. market share has not. USDA continues to point out that the U.S. market share is not declining, however, the United States remains in a flat-line scenario.
Sanctions. Though none have been imposed during this farm bill period, they continue to haunt the Pacific Northwest exports. Iran was a very important customer for the PNW as the imported 1.3 million metric tons in 1981 and the United States had 53 percent of this market. This was the year we placed unilateral sanctions against them. Today, Iran imports approximately seven million metric tons per year. The loss to the U.S. grower, if market share remained constant at 53 percent, is over three million metric tons to Iran alone. Iraq, Libya, and Cuba have all increased imports since sanctions have been in place and our competitors have filled their needs. The bottom line is sanctions do not work. They only hurt the U.S. farmer.
U.S. economy. A strong U.S. economy is polar to the agriculture economy today. With the strengthening of the dollar against foreign currencies, our buyers have a more difficult time buying from the United States. The Asian financial crisis took a devastating toll on exports from the United States as our rise in the dollar against the fall of their currency widened the gap. The Soft White wheat importers' currencies fell by as much as 50 percent. The loss in Soft White wheat exports from Washington State fell during the first year of the collapse by 24.5 million bushels or lost sales of $96 million on average Portland price. The direct impact on Washington State was felt as a ripple effect as each bushel of wheat sold generates $9 in business activity. This translates into $220.5 million lost in business activity for Washington State, in addition to the $96 million lost in sales to growers.
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Our foreign competitors' currencies did not experience a strengthening, so the gap did not pose the problems. What we see is that it takes more of our buyers' currency to get the same amount of product. The lost sales to Pakistan in 1999–2000 has crippled the Pacific Northwest. Pakistan has been the top market for Soft White wheat 8 out of the last 10 years.
In 1997, Pakistan bought over 2 million metric tons of Soft White wheat and was paying an additional 149 rupees per metric ton more to buy from the United States than Australia. In January 2000, Pakistan had to pay 325 rupees per metric ton more compared to Australia's Soft White wheat to purchase from the United States. They chose Australia. The U.S. share was 87 percent in 1995. In 1998–99, it fell to 29 percent and most likely lower in 1990–2000.
Federal Reserve. Through the efforts of the Federal Reserve Board Chairman Alan Greenspan to keep the U.S. economy in check, his raising of interest rates have also hurt the agriculture economy. Though these rates are far from the high interest rates of the 1980's, they have a more pronounced effect on the agriculture sector today. With cash flows tight and high debt among farmers, the effect of a one-percent increase in interest rates translates into a 6 to 8 percent decrease in net farm income.
How do we address the crippled agriculture economy for the remainder of the farm bill? The U.S. needs to get more aggressive to reduce surplus and regain market share. The EU will not address their use of export subsidy. If they do not reduce or end, the United States should reinstate the export enhancement program. According to the USDA, EEP has long been the cause of high U.S. domestic price and enticing Canadian grain into the U.S. market. You need to recall that the United States has not used EEP since July of 1995. And the U.S. market share has dropped every year since the decision to end.
In reality, the United States is a target of the Canadian Wheat Board. Since 1995, the United States was the No. 6 target for the Canadian Wheat Board, increasing every year until 1998 when it was the No. 1 market. It's hard to believe with wheat stocks of 934 million bushels that the United States is fast approaching the top 10 of world wheat importers. USDA listed the United States as the eleventh largest importer in March of 2000.
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Freight costs are approximately $7 per metric ton higher for U.S. wheat over Australia to Asia. Why not offset freight costs with EEP to help move our commodity? We also need to continue the food aid program and the GSM present programs to reduce surplus. Sanctions need to be dropped and markets reopened. We need PNTR for China, as they represent nearly 20 percent of all agriculture exports. Don't lose a potential market as we have done with sanctions.
Lastly, we ask that Congress keep in place the emergency market loss payment for the remainder of the farm bill. We would like to see this written into the budget so there is certainty for our bankers as they prepare our operating lines. This payment, when combined with the AMTA payment, should be equal to the total dollar amount received in 1999. This, we feel, will keep us from losing financial ground as the AMTA declines over the remainder of the farm bill.
U.S. farmers don't want a handout. We just want a helping hand to recover from the lost markets and financial crisis that have plagued American agriculture, and in return, the farm families, who are the heart and soul of America, will continue to produce food to feed the world. Thank you.
[The prepared statement of Mr. Dozier appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Hayes.
STATEMENT OF EVAN HAYES, BARLEY PRODUCER, AMERICAN FALLS, ID
Mr. HAYES. Thank you, Mr. Chairman, members of the House Agriculture Committee. My name is Evan Hayes. I farm in southeastern Idaho. I'm a barley producer. I raise about 1,000 acres of malting barley at an elevation of about 6,000 feet. When I left my tractor yesterday, I left because of the fact that the ground was white. It was snowing. I got 5 hours yesterday on the tractor.
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I want to especially give you-all a welcome to Idaho. I think I can do that, because I represent the grain industry of Idaho. And from the last discussion of private versus public lands, to me there is no question who owns the State of Idaho, and it's the farmers of Idaho. We farm about 13.5 million acres of the State of Idaho. The rest of it is nontaxable land.
As the policy development organization of the Idaho grain industry, we work closely with the Idaho Wheat Commission, the Idaho Barley Commission, and our national associations, which are the National Association of Wheat Growers and National Barley Growers' Association. Each of these organizations has submitted testimony. And our membership wants you to know that we concur with their statements. We jointly support a countercyclical price support program, expanded trade programs, sanctions reforms, additional FMD funding, PNTR for China, increased emphasis on research, new tools for risk management, competitive rail access and pesticide harmonization.
The Idaho grain producer supports the 1996 farm bill and the flexibility it provides. My intention today is to provide you with some issues that Idaho feels are needed to improve the 1996 farm bill. We never want to go back to control or production control, supply management, storage incentives, and the failed policies of past farm programs. We simply want to make current farm policy better.
First item I'd like to visit with you a little bit about is transportation. Transportation is a very important issue to Idaho producers. It is our opinion that no matter how well constructed a trade agreement is, if you can't transport your product to the market efficiently at a reasonable and competitive cost, no trade agreement in the world will benefit you in agriculture.
For example, in southern Idaho, transportation costs consume as much as 25 to 30 percent of our input costs. While transportation issues are not germane to your committee, we desperately need your help elevating the issue to find ways to help ensure that we can move our product to market economically and efficiently.
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Next item would be rail competition. Idaho and many other States are captive to one railroad. In addition to rail captivities, the Cascadian producer pays less for rail transportation due to rate caps than Idaho growers do, giving them an added advantage, as you will see in the rate chart I have provided. We need help from Congress to join to reestablish competition on captive rail lines. We need your help nullifying the unfair advantages that Canadian rail systems provide.
Another issue that is very important to Idaho is truck weight uniformity. Agriculture needs the opportunity to maximize our competitiveness with truck transportation. Uniform truck weights would be very helpful. Currently almost every State has a different weight schedule.
If all States could be given a voluntary opportunity to utilize maximum truck weights according to Federal Bridge Formula B, that would be an immediate benefit to agriculture. Our suggestion to you would be to develop legislation now and in the next farm bill authorize private projects that would address these transportation issues. Every dollar saved in transportation costs is an additional dollar back to the hands of the growers.
I'd like to shift to farm policy now, if I could. And I know a lot of people already talked about this, but, as farmers, we do not like coming to Washington, DC, with our hand out. But to survive the farm another day, the IGPA recommends that Congress make available as soon as possible a supplemental AMTA payment that, when added to the 2000 AMTA contract payment, will equal or exceed what growers received in the combination payment of 1999. We would also encourage you to ensure that the supplemental payment is included in the agriculture budget baseline.
Loan deficiency payments. Idaho would recommend that you evaluate the current Loan Deficiency Payment program. We have two basic concerns that relate to the LDPs and posted county prices. One concern relates to grain facilities that should have the same transportation basis to market, but because the county line runs between them, they have a different county posted price. That situation results in one facility having a much better LDP than the other, and creates an unfair advantage to one of the facilities.
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Another concern relates to the method of determining the posted county price. In the case of Caribou County, my home county, in 1999 the cash price for barley for the months of June through December never changed, but the LDP fluctuated 20 cents. The LDP program is a positive program, but it must be administered equally for everyone.
The barley loan rate. Idaho is a major barley-producing State and we need your help restoring U.S. barley competitiveness. I want to emphasize some alarming trends in the U.S. barley industry that concern Idaho producers. U.S. barley production declined last year to a 25-year low of 281 million bushels. Barley acreage in 1999 reached the lowest level since 1900. In the past 10 years, U.S. barley production has declined nearly 40 percent in the United States and about 11 percent in Idaho.
One of the primary reasons for this sharp decline is the economic incentive built into the current Federal farm program that encourages producers to shift acreage from barley to crops like soybeans and corn in the Midwest and spring wheat in the West because of a potentially higher loan deficiency payment. We believe that wide disparity and loan rates between barley, wheat, or corn needs to be addressed by Congress and the administration immediately or we will continue to see a steady erosion in U.S. barley plantings, loss in barley processing infrastructure and additional barley imports from Canada to fill the demand.
An equally damaging factor is an increase in barley plantings and export subsidies provided by the European Union. Specifically the EU's barley export subsidies have grown from 1.5 million metric tons in 1998 to an estimated 9 million metric tons this year. Last year the EU produced just under 40 percent of the world's barley. But through the combined use of export subsidies and blue box domestic support payments, this production is totally isolated from world supply and demand fundamentals and market signals. As a consequence, the EU is expected to control more than 56 percent of the world barley trade this year.
As a solution to this concern, we support the immediate actions by the U.S. administration to adjust barley loan rates to better reflect barley's true feeding and malting value. If barley loan rates were calculated using the same 5-year Olympic average formula as corn and wheat, the rate would be set at $4.06 per bushel. However, the actual barley loan rate is only $1.62 per bushel. The rate is set administratively by the U.S. Secretary of Agriculture, who is mandated under the FAIR Act to base loan rates for barley and other feed grains on the ''feed value relationship to corn.'' As mentioned above, the wide disparity in loan rates has led to a sharp decline in U.S. barley plantings since the passage of the 1996 farm bill.
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We support immediate congressional action directing the Secretary of Agriculture to include in the determination of barley loan rates for the 2000 through 2002 crops actual U.S. barley prices for the previous 5 years. This action could add at least 40 cents per bushel to the barley loan rate.
In the long term, we support basing the barley loan rate on the same formula used for other crops, that is, 85 percent of the Olympic average price during the previous 5 years.
Thank you for the opportunity to visit with you. I'll stand for questions when you are ready.
[The prepared statement of Mr. Hayes appears at the conclusion of the hearing.]
The CHAIRMAN. Ms. Linehan.
STATEMENT OF HEIDI C. LINEHAN, WHEAT, PEAS, LENTILS PRODUCER, GENESEE, ID
Ms. LINEHAN. Chairman Combest, Ranking Member Stenholm and members of the committee, my name is Heidi Linehan. Thank you for the opportunity to testify before you today. And to Congresswoman Chenoweth-Hage and to Congressman Simpson, welcome home and thank you for your support of Idaho agriculture.
I commend the members of the House Agriculture Committee for what you have been able to accomplish for the American wheat producer. Freedom to Farm gives the flexibility to grow for the market while conserving our natural resource base.
As an international business, Linehan Ranch produces and markets a variety of foods on 2,000 dryland acres near Genesee in northern Idaho. Over 90 percent of that food is exported to countries in the Pacific Rim, southeast Asia, South America, the Middle East, and the Mediterranean area. My husband Greg and I are directly impacted by all Government policies. U.S. foreign trading practices, environmental regulations, and the sanctioning of nations limit what we can do beyond standard business practices.
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In spite of the production benefits brought about by Freedom to Farm, the U.S. wheat share of world trade continues to decrease. On the last page of my testimony, you will find a graph showing our decline in market share from nearly 40 percent of wheat trade to below 25 percent. The U.S. share of the world wheat market is decreasing, not because we are overproducing, but because we're underselling.
There are many ways to increase sales. Two ways that you can increase our competitiveness are to enforce destination quality improvement and implement biomass utilization.
Idaho wheat producers have invested over $3 million in the past 5 years to improve wheat quality, and it worked. Still, our customers complain about the quality they receive. A recent wire commentary reported that Russian millers are ready to pay higher prices for high quality wheat. They can then compensate themselves by purchasing inexpensive lower grades delivered within the U.S. aid package.
We have from heard similar stories from many of our overseas concessional/donation recipients. If the Government is going to spend taxpayer dollars on sales, why not spend enough to be sure delivery of a quality food? This gives the United States a much needed quality image for future commercial sales.
We have also heard from our cash customers that the Federal Grain Inspection Service methods for grading export wheat are confusing and inconsistent. Increased funding of FGIS is needed to develop and implement a seamless system that passes the value of the food from the producer to the end user and dollars back to the producer.
Another way to increase market share is through innovative use of the Export Enhancement Program. With over $500 million available each year, the USDA has been unwilling to spend it for fear of further driving down the world wheat price. As an alternative, you could allocate $5 to $10 million of wheat funds through competitive grants to do market research on destination quality. The Wheat Marketing Center in Portland, OR, would be an excellent facility for such a project.
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Agriculture is more than food. This plant, which is a lamburg wheat (phonetic) is—my husband and I invest our inputs of seed, fertilizer, machinery, labor, into the growth of this plant, and yet we only use the top portion. We are only able to market the top. Agriculture is the foundation of manufacture and commerce. Crops like wheat can be used as replacement for food and petroleum products. Biomass has great potential to help sustain our national resources and lessen our dependence on foreign oil. I cannot imagine the United States relying on another country for our defense. I also find it difficult to believe that the American people are willing to be held captive by other countries for supplies like petroleum and food.
Envision a world where liquid fuels, chemicals, lubricants, plastics, and building materials become 100 percent bio-based. Why not step into space on the right foot, using biodegradable products? A few bio-based products are already available; wheatboard, packing peanuts, ethanol, and eating utensils.
Continued growth, however, will depend on the development of cost-competitive technologies that convert biomass. You can implement policies that encourage the transition to bio-based industrial products. Federal support of public/private partnerships in different parts of the country would like local crop residues which vary greatly from State to State.
Focus must be on the conversion process so different kinds of biomass can be used in industry. Government can also help by making it mandatory to use a certain amount of bio-based products in Government purchases. It is important to make it mandatory. Remember the Metric Conversion Act of 1975? How effective has that voluntary program been nearly a quarter of a century later?
Mr. Chairman and members of the committee, the wheat producers of Idaho have a sample of wheatboard for each of you as a reminder that funding bio-based research and utilization benefits us all.
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In closing, I want to leave you with a few words of wisdom spoken by China's ambassador to the United States, Ambassador Li. We were at the Port of Lewiston last April, watching a load of wheat being loaded into a barge. He took me by the arm and he said, ''Farmers are the only in indispensable people on this planet.'' Thank you.
[The prepared statement of Mrs. Linehan appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Macy.
STATEMENT OF KENNETH MACY, WHEAT, BARLEY, CORN PRODUCER, PINE BLUFFS, WY
Mr. MACY. Thank you, Mr. Chairman and distinguished members of the committee, for this opportunity to testify. I would like to note that I—you have my written testimony and I will probably, too, in the essence of time, highlight some areas in the verbal testimony and add a couple at the end.
I am a diversified farmer in Pine Bluffs, Wyoming, wheat, cattle, sheep—we did used to do swine, but they are gone—feed grains and hay. I serve on the Wyoming Board of Agriculture in an advisory capacity to the state Department of Agriculture. And in that capacity, I also serve on the Independent Damage Management Board, which is Wyoming's attempt to address the predator issue also.
I would like to start with the discussion of price and policies. We know the prices are bad. We must have some kind of a safety net come forward, something countercyclical, or agriculture can't keep going. The short term? My suggestion that I want to bring to the table in that regard—and this is only a part of the answer, but the multiple flexible but short-term land restoration program, land rest program, whatever you want to call that. It would involve producers choosing the level of that flexible choice in response for a higher loan rate to afford to be able to set that aside. The advantage of doing this over past set-asides or past diversions is that with the flexibility, a person who needs all his production to feed his dairy cows can still choose full production and zero on the flex.
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Someone who is in poorer land and in grain alone and needs a better price and needs to be able to rest some land can certainly choose the other, which helps to balance the supply. And other people with different operations can choose some level in between there with the choices being from zero to 30 percent. The amount of increased loan to payment, loan level to offset, that is in proportion to what needs to be set aside.
The real advantage to that in the longer picture is that farmers themselves are the best to respond to the constant change out there in the market. As the price begins to go up and the demand goes up, they'll automatically quickly reduce that set-aside on their own, rather than waiting for some administration to figure that out and do it for them. But I think if you are going to look at any set-aside pictures at all, this would be a good way to go at that. It would also help to address the issue of supply.
I am going to speak only briefly on the strategic reserve. And I bring it up because as a livestock feeder, I remember that we used strategic reserve in 1993. We used a bunch of it up in 1995 to keep our livestock industries up to full throttle. That's twice in the last decade. It doesn't seem possible with the piles that we seem to have on hand now that that could have been that short a time ago. But it could happen again.
And we need to know what we're going to tell our livestock industry if we have a major drought, where do we go with that? The other side of the coin, as you all know, is if you have it, you have to have it locked up until it's actually needed. And that's the most difficult thing to do there.
Moving on to the world market issue, we talk about the fact that we are in a world market. The problem is farmers themselves, most of us as producers market to our local elevators, to cattle, ConAgra, and tobacco plants, or Cargill's elevators. We are the direct recipient directly of that world market. Because we have so much concentration in the marketplace, we have a serious problem with many of the world market benefits coming through.
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And I would suggest to you in the livestock business that the Senate is looking at a bill, Johnson, Grassley and Thomas and Kerrey, on packer ownership. I would suggest that you look strongly at passing that. I think that would be an approach to that end of the problem.
I would point out to you in the farm bills prior to Freedom to Farm, the old loan program worked as sort of a monopoly regulatory because when concentrated companies could use their power in the marketplace to go only so far down in price until the loan floor became sort of a regulatory restriction on that. They also had a restriction on the imports of grains that were under subsidy under the old farm bill. I think that's an area that we need to worry about, is how to deal with concentration, in conjunction with Freedom to Farm, although we all like the flexibility of Freedom to Farm.
One other area I wanted to take time to address is the issue of multifunctionality. In Wyoming, our producers are expected to provide all kinds of things for society. I don't think there is hardly an operation that's not affected by the Endangered Species Act, either by a listed candidate or endangered species. Almost everybody has something at this point in time, along with the water issues and all the other things. In my particular operation, water quality means: Is there any water there?
But we've reached a point as a modern and mature society, our American society is becoming are more like Europe. We want those things to be out there, but unlike Europe, we haven't subsidized farmers who probably have been doing it, would be willing to do it, but they are no longer going to be able to afford to do it when their only income comes in a world market in which half of that world works not on that kind of mature society, doesn't do those things in South America.
If South America and Australia and New Zealand and all those people were also that mature and their farmers were having to do those same things, this would look a little different. But at the present time, if we're going to provide those things from our American producers, we need to be somehow compensated for them. And I don't have the formulas forthcoming for you on how to do that, but I believe Dr. Womack indicated they are beginning to put together some models to begin to do that. I don't know how far along they are. This isn't something you are going to jump out and do tomorrow, but I think you need to go forward with this concept in that area.
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The insurance issue has been discussed greatly today, at least the fact that we need risk insurance at least for disaster coverage.
And the statements—I want to quickly address the need for funding for wildlife services and the predator thing. And I want to close with saying to you that the safety net is a must-do for the survival of many of our farmers in the very short term. And in the longer term, we must be able to work our way through how we market through these concentrated problems. Thank you for your opportunity.
[The prepared statement of Mr. Macy appears at the conclusion of the hearing.]
The CHAIRMAN. Mrs. Chenoweth-Hage.
Mrs. CHENOWETH-HAGE. Thank you, Mr. Chairman. I appreciate the good testimony from this panel, very informative.
Earlier we had a discussion about the family farm. Out here in the West, Mr. Chairman, as in your State of Texas, but especially in this high-desert area, the family farm is not contained on a few hundred acres, usually. The family farm or the family ranch, especially in this country that we call 20-mile-an-hour cow country, where a cow has to graze going 20 miles an hour all day to get enough to eat, our ranches can be quite large. And those in the East simply don't understand that. They believe that largeness represents vast wealth. And that is a fallacy that we have to labor under out here.
I don't even know where to begin, but I think I'll begin with Heidi Linehan. I want to let you know that I went through a straw house the other day, a house that was made out of the compressed straw, and it amazed me. Being chairman of the Forestry Committee, I've always leaned towards wood structures, but this was quite amazing. And my hat is off to the wheat growers and their associations to looking to innovative ways to use straw. I was quite enthusiastic. And I believe that it's meeting with a fair amount of success. And I hope that you have a lot more success.
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Ms. LINEHAN. Thank you.
Mrs. CHENOWETH-HAGE. I was also very interested in your comments about the potential of this country, how we look at America maybe 10 years from now, the fact that our national security is even in peril when we become independent—and when we become dependent on other countries to supply our food, resources, as well as our other natural resources. This is something that I've really voiced myself loud and clear back there in Washington, DC about.
But you have also had some very interesting things to say about the EEP. And I want to give you this chance to expand further on your concerns with the EEP.
Ms. LINEHAN. Well, I guess my concerns also are a form of a question in that I don't understand why $500 million is available and not spent. It's similar to the United States being the—has in reserve or storing 20 percent of the world's supply of wheat—stocks of wheat as of May 31. We store EEP and we store EEP, and I'm not real sure why that is, I guess.
And since I didn't understand why we are storing or not utilizing EEP, we came up with an alternative, perhaps it might be more palatable for those who are not in support of utilizing EEP. And the idea of using the Wheat Marketing Center in Portland or a similar facility in other parts of the State for pilot projects where we can study the qualities, characters of wheat when it's used such as [unintelligble] bread in China, for instance. We need to be sending the best wheat for the product for which it is destined. And that is one say way to do that is to do research on quality characteristics for wheat for its intended use.
Mrs. CHENOWETH-HAGE. Thank you for expanding on your thoughts there. I know that the chairman and this committee is very concerned about that and we have held hearings on that. And I just wanted on the record what your concerns are, which are the concerns voiced everywhere I go in my communities in my district, and even throughout the West. So I just wanted to get that on the record. And I thank you very much. And I yield back the balance of my time.
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The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Chairman. First, let me comment on a couple things. One is Mr. Macy brought up the multifunctionality, which was first talked about—first time I heard about it was when we went to Seattle. And the European Union, of course, brought that up as something they wanted to talk about in trade negotiations. But as I sat down and talked with the Europeans and what exactly they meant by it, I don't disagree with them. And as I understood it, what they were trying to say is that agriculture is more than just the crops to a community.
Mr. MACY. Yes.
Mr. SIMPSON. And if you lose your family farms and ranches and so forth, you've lost more than just the ability to produce crops, you've lost culture, the way a society lives. I still haven't figured out yet how you negotiate that into trade agreements, which they obviously are interested in doing as a means of—that's why they protect their small family farms and so forth. So it is an interesting concept, one I agreed with them on the idea of what a farm is about, why it's important to society. But it's still a concept we need to still talk to them about and talk to ourselves about.
But you also mentioned set-asides and increased marketing loan levels for farmers as a potential obviously of reducing production and increasing price. You said that farmers are the best able to respond to the market and market prices and consequently will, when prices are low, reduce their production and so forth, which is what Freedom to Farm was about.
In the world market that we're in today, if farmers set aside so much of their production, wouldn't we lose that to other parts of the world that would then just increase their production and ultimately lose a market because we would reduce production? This is a debate we've been having, whether the conservation reserve program, besides the fact that it's a conservation program, as a means of increasing price really doesn't, where other countries can just fill in that production. What are your thoughts on that?
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Mr. MACY. The conservation reserve program doesn't do that very well because it's not flexible in the first place. And that's always a concern. I guess my thoughts are American farmers are probably competitive enough in that they will probably start to cut off the set-aside and go back to full bore before the price gets large enough to keep drawing a great deal of competition into the market, that isn't already there, that is. I'm not sure that all of our losses in the world market are directly related to price. I don't know if you can price the sale to a buyer that doesn't need it. But that's one of the problems.
Mr. SIMPSON. I understand what you are saying. We see increased production around the world, even though prices are at a—some stay even level. But it's an interesting discussion we're having as that idea has come about over the last few months as we've held these farm hearings around here.
Mr. MACY. I guess the point that I want to stress is I think the farmer himself is the best chooser of the level of set-aside rather than anything we used to do in that area. Because what we used to do was really criticized for that and fell badly into that because you set up for next year and you didn't wait for the spring sign-up and the conditions changed in the world in a much shorter term than that. I realize they can still turn even within the growing year, but I think if we're going to look at it, the farmer is the right person to chose that level of set-aside, even though it may make it more awkward in terms of a true supply management. This would be something less than a true supply management because you are not going to be able to determine a level of total supply you are looking at there.
But it becomes a tool—the farmer that has the more marginal land that needs a higher price in order to survive can do his own trade-offs and in some ways reduce his own costs. Because on some of these rested lands, he may be putting out less than he puts in and some of those things.
Mr. SIMPSON. Evan, you mentioned barley loan rates. That's something that the administration secretary can do unilaterally himself, can't he, without Congress's approval? He has he been looking at that, do you know?
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Mr. HAYES. We spent a lot of time talking to him. We really don't seem to be able to come up with any answers. But yes, in Freedom to Farm he had that opportunity.
Mr. SIMPSON. You would like us as an Agriculture Committee and as Congress to direct him to look at that and to do it?
Mr. HAYES. Without a doubt.
Mr. SIMPSON. OK. You mentioned also a little bit that we are a captive shipper in terms of rail and so forth. Concerns from the industry about consolidation of railroads and mergers of railroads and so forth making them less competitive. Do you have access to enough railcars and so forth? Is that a problem?
Mr. HAYES. In you look at the chart, I think it's pretty self-explanatory. And what brought this all on, I was in Washington, DC and had the privilege to visit with a Chinese barley broker who wanted to acquire barley out of—and to grow malted barley outside eastern Idaho which is our No. 1 mainstay. So we did some comparison to the Canadian market as to whether we could get to Portland as economically sound as the Canadian farmer could to Vancouver. And we found we couldn't. We could not be competitive, simply because of the fact that we are captive to one rail shipping route in southeastern Idaho.
We are regulated by our truck weights here in Idaho. We cannot compete with the truck weights in Idaho. And some of you folks from some of the other States will think we're outlandish. We are allowed to haul 105,000 pounds on it, on a truck if it has the right axle configuration here in Idaho. The Canadians can haul 143,000 pounds. So obviously they are able to deliver their product to the railhead considerably cheaper, and then Canadian grain is capped. And so therefore, we have a monopoly as far as our railroads are concerned, and therefore we cannot be competitive at the marketplace. And that's what so important to us. This Congress needs to take care of this.
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Mr. SIMPSON. Plus our barging system would also make us less competitive.
Mr. HAYES. Absolutely. There is no question about that. If we were to lose our barging system, northern Idaho would be lost. It would come as a surprise. And you, of course, know this, that there is a tremendous amount of southeastern grains that travel down the river.
Mr. SIMPSON. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. LaHood.
Mr. LAHOOD. I wanted to make note of the fact I was out of the room for some of it, but I believe you were the only one that mentioned ethanol. I like that. I have four ethanol-producing plants in my district. And when these guys show up in Peoria tomorrow morning, they are going to hear a lot about ethanol because it's a big, big, huge industry in my district.
ADM has a plant in my hometown in Peoria, also in Decatur, IL. And I have two plants in Pekin, IL. So it's very important. And so I was glad to hear somebody at least say a word about it. Those biodegradable products you have there, a couple of those were actually made in Peoria. That's right, you can eat those. We have a research lab in Peoria that's 50 years old. In case you didn't see it, she ate one of those little Styrofoam things.
Ms. LINEHAN. Wheatstarch.
Mr. LAHOOD. Right. Some of that was really actually developed at the agriculture lab in Peoria. And they have a collaboration between the private businesses—McDonald's Corporation actually uses a lot of the things that are biodegradable in packaging of the products that they sell. So I'm so happy to see that you brought those products here. And if you want to say another word or two about ethanol, I'd be happy to hear from you.
Ms. LINEHAN. I would like to say that I hope we don't just stop at ethanol production and we do include our crop residues from some of the other crops. The world is wide open for this technology and we must focus on the process, not on the particular product crop.
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Mr. LAHOOD. Right. Well, I will tell you in ADM in Decatur, they use 500,000 bushels of corn a day. At a plant that they have in Peoria, they use 250,000 bushels of corn a day to produce ethanol. It's a huge, huge industry. And I visited ADM in Decatur recently. They had a brand new building there with an ''E'' on it and I said to them, ''What is that?'' They said are now making vitamin E, taking the extract from soybeans at the very end of the process and making vitamin E. And it's a huge building. That's all they do in that building. They are going to do the same thing with vitamin C. So there are a lot of wonderful things going on, marvelous things that are going on as a result of our agricultural research facilities, and then with the help of many people who are in agriculture.
So in any event, I'm delighted that you're—and we've also worked very hard on wheat gluten too, which is an important product, and tried to raise it to a level of awareness also.
The other thing I would say, which I could have said to any of the panels, is my wife and I come out here to Sun Valley every summer for a golf outing, and we fly into Boise and drive to Sun Valley. So we've driven across a lot of the areas that are used by the ranchers and farmers in this area. And we are always struck by the huge amount of land mass that there is that's used for farming. In our area where we grow a lot of corn and beans and raise livestock, our farmers don't have nearly as much of a huge land mass. But it's probably one of the most beautiful parts of the country. And I applaud all of you for hanging in there and doing what you're doing.
And I thank you, Mr. Chairman.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Thank you. I thank the panel. The folks today I think have been very specific in their recommendations. That has been very helpful. We often get the opportunity to hear problems and the solutions seem to be left with folks in Washington, DC, which is a terrible mistake. I'm delighted that you-all were willing to find some specificity.
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Mr. de Yong, I, in particular, noticed your testimony about LDP rates. And others, someone else mentioned the disparity particularly on soybeans. That's certainly a problem we see the market-distorting fact that Kansas farmers face. We're planting soybeans in large part because of that LDP rate.
I also wanted to ask you about your suggestion in your testimony about a loan rate based upon full cost of production for domestically consumed product. What percentage is domestically consumed? And is that what you would do is take that percentage of the farmer's production and apply that higher loan rate to that portion of the crop? Is that the suggestion of your testimony? Again, I'd ask if you'd explain it to me.
Mr. DE YONG. What we're trying to do right now, when we did Freedom to Farm, we decided since we were in a global community, we were going to focus on the export market. So we don't have any safety net or anything. Now that we decided we are going to have to have a safety net, we find that the two are kind of at odds. As soon as we raise the safety net high enough for farmers, we're going to get a lot of flak from everybody else in the global community that we're distorting trade and we're not going to have effective international negotiations.
So we're going to have to separate the two so that we're not at—they're not at odds with each other. We're not going to physically separate the crops. We're just going to say OK, take wheat, for instance. We raise approximately two billion bushels. Do we export a billion bushels? It's about 50/50 roughly.
So if we took a billion bushels a week, which is what we consume domestically and we decided OK, everybody who raises over a hundred acres of wheat is a wheat farmer, and we take the number of wheat farmers and we divide it into the billion bushels of wheat and we allowed everybody the same number of bushels, say that was 20,000 bushels, we'd say OK, you can get a loan and LDPs and market gains on that loan up to this 20,000 bushel limit. After that, you're not eligible for the loans anymore.
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Mr. MORAN. Take the total number of farms and attribute the 50 percent to the farm, the amount of wheat farms, you take 50 percent of what's raised on that farm would qualify for a higher LDP rate?
Mr. DE YONG. You could do it more proportionately like that percentwise, but if you did, if you said, OK, everybody would be eligible for 50 percent of the production at that loan rate, you are going to force a lot of family farmers out of business because their production is small enough that 50 percent is not going to allow them to survive, whereas in a large farm it would. So instead of going proportional, I'd rather use a different mechanism.
Mr. MORAN. I understand the distinction. Thank you very much.
One of the suggestions that has been made to me as a result of this hearing process was we try to create a better countercyclical safety net by having the loan deficiency payment be paid on either the actual production or upon the established countywide average or some kind of historical yield.
Do any of you have any kind of response to changing the LDP in that matter? Does that make sense to you? One, I guess, if you understand what I'm asking, and two, if you do, is that a policy change that makes any sense to you?
Mr. DE YONG. We've had a lot of panelists that have pointed out the discrepancies in LDPs and loan rates across the country. I served on the State committee for the Farm Service Agency in Montana. And like Mr. Hayes pointed out, two elevators right next to each other and one is competitive and one is totally uncompetitive just because of LDP rates. We don't have any flexibility built into the system to adjust for that. Somehow we've got to come up with some flexibility so they can adjust for that. And they've told us on the State committee that if we wanted to make any adjustments in Montana, well, if we wanted to raise somebody else up, somebody else is going to have to come down. We're going to catch too much flak for that, so the system is totally inflexible. We really need some flexibility to adjust for that.
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Mr. MORAN. I've raised these issues with USDA and Secretary Glickman, and unfortunately the end result of all of us complaining about the LDP rate was a suggestion that we have a national rate, which I think would be a terrible problem, particularly for those of us who live in areas where transportation costs are very high.
I appreciate this panel. And in my last chance to speak, I want to say I appreciate the hospitality of the people of Idaho and what I guess you-all call P & W. It's been a delight for me to be here and learn a little bit about what you do. And I'll try to do my job better to take care of farmers and ranchers in this part of the country. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Walden.
Mr. WALDEN. I join the gentleman from Kansas saying the testimony of the specifics from which he summarized was very helpful. And there is a thread of implication of ideas and thoughts across the United States and that's helpful because that's what it takes to get policy changes written. The last on the LDPs, the only thing we'll ever do is raise everybody up to a quote, unquote, workable level and then reduce it again, to get within the budget.
There was a comment a moment ago that the Secretary, I believe, Mike, you said the Secretary has the authority to do that, with one little problem, OMB won't let him. And that's why those of you who mentioned the baseline, it's something we'd better always talk about because the current baseline for agriculture is a disaster in 2002. Let us not forget the current farm program was written with one idea and one philosophical thought, and this was to be the last farm program. And therefore we're on a path to a disaster unless we change the baseline, which we were not able to do this year. And until and unless we can do that, we're in for some real troubles down the line that need to be taken into consideration. I know all of you have.
Ms. Linehan, 15 months ago, 18 months ago, I was opposed to ethanol, not because I disagreed with it, but because I represented the oil patch. And my independent oil and gas producers did not think too much of us subsidizing their competition when they were having to shut down rigs and eliminate production because nobody can produce oil for $10 a barrel. But one of things we started then was this cooperation I mentioned before, and recognizing that if you take a minority, in this case it was the oil industry, that's a smaller minority than we agriculture producers are, and you realize the basic truth that you cannot produce food and fiber without oil and gas and you cannot produce oil and gas without food and fiber.
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Our environmental problems are the same, the international market implications are the same, and therefore, why not put two small minorities to make a bigger minority? And we're working on that. And we're beginning to see some results now, which is going to contribute to the fact that I will be a little more welcome in Illinois tomorrow than I would have been 15 months ago. But I've done a 180. I'm changing my mind. I am for ethanol. I am for biodiesel. I am for the bio-based material. It just makes good sense.
Ms. LINEHAN. It certainly does.
Mr. WALDEN. And it's time for more of us to begin changing our minds on some of the philosophical things, in Congress as well as everywhere else. It just makes good sense. We need a national energy policy, we need a national food policy. We have to recognize that the competition of world governments is there. And unless we can bring ourselves philosophically to do that, we're going to continue to have some real problems.
Last, I've got to ask you all the same question, some of you already testified to it. On the lifting of all unilaterally imposed sanctions on food and fiber, how many of you believe we should lift it? Yes, yes, yes, yes, yes, yes, the record is unanimous on that. That's six.
And then PNTR, how many of you believe that Congress should vote for PNTR on China? Yes, yes, yes, yes, yes, yes. Unanimous there too. That makes you all in the overwhelming majority. We have asked now over 2,000 of the audience members. And we have asked over 180 witnesses. 95 percent say that. I have to remind us again, though, we are having a difficult time getting a majority of the House Agriculture Committee even though our producers by and large are saying we ought to seriously do it. So I hope you can help us with that over the next few days. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you. And I want to thank this panel and all of our panels today. I just want to end this hearing with this: It's been mentioned today, and I'll make certain people understand, we serve on this committee because we want to, because we have an interest in agriculture.
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We don't look at this as just another business that's in trouble. We look at this as a way of life. We all understand the emotion involved in farming and the pride involved in farming and raising your family on a farm, and the ability, as stated earlier by Mr. Moran, to make for certain that continues to be an option. So we don't just look at it from the cold, hard facts. We also look at it with a lot of compassion and concern. And that's the reason we're here, we'll be stopping and talking to people and seeing what they have to say.
And we do appreciate very much your input. It is very helpful. As we compile this information from this series as we complete these hearings tomorrow, I think there will be a tremendous amount of help that it gives us to—if we don't do the things that people out there make their living every morning going to the farm want us to do, then we're not going to be successful and that's what our goal is, even as pretentious sometimes as farm policy is. But I do appreciate your taking your time coming out here and the hospitality of Congresswoman Chenoweth-Hage and that of Congressman Simpson. And thank you very much.
Without objection, the record of today's hearing will remain open for 30 days to receive additional material and supplementary written responses from witnesses and any questions posed by members of the panel. This hearing is adjourned.
[Whereupon, at 1:49 p.m., the committee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows.]
Testimony of Dick Wittman
My name is Dick Wittman. I am one of four family partners in a diverse farm, cattle and timber operation in northern Idaho. I am speaking on behalf of the USA Dry Pea and Lentil Council and the Pacific Northwest Direct Seed Association.
I will cover three issues—Education and Stewardship, the Family Farm, and Federal Crop Insurance Reform. A theme I will emphasize throughout these issues is: ''It takes a team effort.''
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I. ENVIRONMENTAL EDUCATION & STEWARDSHIP
The Ag Earth Partnership recently selected our farm for the Millenium Farm/Family Award. This award recognizes stewardship practices and efforts in promoting natural resource education. We can take little individual credit for this award. This award is simply proof that partnerships and collaboration work.
Partnerships with NRCS made it possible to design and implement stewardship practices like sediment ponds, terraces, stream bank restoration, direct seeding and reforestation
The Camp Wittman Natural Resource Camp allows hundreds of youth and teachers annually to connect with nature and learn firsthand what multiple-use really means. This program is operated in partnership with a local Boys and Girls Club. It succeeds because of a collaborative approach that has agriculture, forestry, wildlife, and recreation entities working together with educational and youth organizations.
The recently formed Pacific Northwest Direct Seed Association has set a goal to triple Northwest no-tilled acreage to 2,000,000 acres in the next 5 years. We will pursue many types of partnerships to achieve this goal. The Congressional proposal to pay farmers for practices that store carbon is a prime example of partnership approaches that can encourage adoption of more environmentally sustainable practices.
We are approaching chaos in trying to set policies and regulations relating to natural resource management. We are in constant gridlock over issues like: biotechnology, GMOs, WTOs, dam breaching, roadless moratoriums, etc. Resource providers try to solve these problems by throwing massive lobbying efforts at local, state and Federal policymakers. Lobbying efforts treat the symptoms, not the cause of the problem.
The Problem is: society is ill-informed about our environment and how food and fiber is produced. Our agricultural image is distorted by media and special interest groups whose agenda is to lock up our resource base and stop research and innovation. Schools are not equipping students with a well-rounded education about how society can use and conserve vital natural resource components. Some teachers do a great job. But more often, environmental education is hit and miss. A teacher may do a class on wildlife habitat and think the obligation for Environmental Education is fulfilled. Commodity groups exhaust most of their energies on research, market development and lobbying, leaving only token resources to commit to education and advocacy
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RECOMMENDATIONS
Promote the definition of a clear vision of what environmental and natural resource education should encompass. It will take a team approach to do this. Team players should include: land grants universities, state boards of education overseeing curriculum, resource providers from all resource areas and environmental groups.
Provide more leadership and financial support for delivering environmental education from kindergarten through graduate school. Farm Legislation needs to follow through on past promises to commit more resources to education and public relations in farm programs.
Re-visit the national stewardship board that was to focus on education (This was part of a previous farm bill that never got implemented.)
Promote more teacher exposure to curriculum tools. The tools are there (i.e. Ag In The Classroom, Project Learning Tree, Project Wild, Project WET, The Food, Land and People Program). The FLP program in California is a great model that works across multiple resource disciplines. FLP is forming coalitions with many other states in the U.S. We need to get more teachers exposed to strategies for incorporating these tools in the classroom.
II. WHAT IS A FAMILY FARM BUSINESS?
An issue at the center of our farm policy debate is ''What is a family farm?'' Which one of these pictures best depicts your image of the family farm?
Is it ''Ma and Pa Kettle'' holding on to the way things were 100 years ago—or is it a large Corporate Monster Farm? It is neither, in my opinion.
A Family Farm is a team of business professionals that possess all the skills it takes to be successful in business—production, marketing, finance, and personnel management. I farm in partnership with a brother and two cousins. Each partner has unique talents and responsibilities in production, marketing, finance and personnel. Our wives all work at jobs in town and still find time to support the farm and raise families. Sons and daughters, nieces and nephews, and aunts and uncles provide most of our labor. We are a business as well as a family and a way of life.
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A Family Farm must be large enough to achieve the efficiency necessary to provide reasonably priced food and compete in a global world of food and fiber suppliers.
A Family Farm is constantly looking at practices that promote cleaner air and water, as well as providing a quality source of affordable food. We are implementing new systems, like direct seeding (or no till) that reduce erosion and improve soil health. (Last year we didn't plow a single acre on the farm).
A Family Farm is High tech. We use computers, GPS, variable rate technology, and other tools to farm precisely. Technology and research help us to raise specialized crops that require less chemicals and provide specific health enhancement traits for consumers.
As policymakers you should be asking, ''How many farmers can live up to these definitions?'' I believe you will agree with me that the answer is, ''Not enough.'' I have provided private consulting to family farm businesses for over 20 years and can relate countless opportunities where farmers can be more viable. As an industry we have barely scratched the surface in mastering skills in marketing, finance, and personnel management. Professional business management systems are foreign to many family farm businesses
As policymakers you should not fall into the trap of trying to define a family farm with size, diversity of crops or gross income. Nor should you get caught up in the myth that our food supply is threatened by corporate ownership or excess concentration. Statistics do not support this concern. According to a recent study by Sparks Commodities, *only 0.4% of all farms are owned by non-family corporations. More than 90% of the farms are too small to be commercial* they are retirement or other rural residences, or are operations that depend primarily on non-farm incomes*the 157,000 commercial operations with gross sales over $250,000 represent highly efficient, generally modest-sized businesses*their cost to operate ranges from 73-83 cents/dollar of sales**
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The recent Administration proposal to target ''family-size operators with smaller incomes'' is unworkable. I consider our operation a ''family-size operation with a small (net) income,'' but we would not qualify for Government assistance.
Senator Lugar pushed a concept called the ''Choice Plan'' during the crop insurance debate. I did not feel FCI Reform was the place to push this initiative. But, I support his concept of encouraging farm adoption of more risk averse management practices. There are a few more items that should be added to the list. Congress should consider tying the next round of special Market Loss Payments to adoption of some of these practices.
In pursuing a policy course, your primary consideration should be: ''What can Government do to assure farmers can function as a sustainable business?'' Your role should concentrate on two areas: (1) What can we do to encourage farmers to improve their own viability, and (2) what aid can the Government provide to foster a more successful business operating climate.
RECOMMENDATIONS:
1. Tie special farm relief payments to adoption of proven farm management practices that reduce risk and enhance farm management viability (see attached list).
2. Deliver the promises made with Freedom to Farm: open up world markets, expand research support, streamline regulatory processes, and improve risk management tools.
III. FEDERAL CROP INSURANCE REFORM
Reforming FCI was one of the four main promises made with Freedom to Farm. This program is one of the most complex messes ever to be dumped on Congress for repair! I commend each of you for the efforts made to date to improve this program '' but your work has only begun.
Again, I repeat: ''Team Approaches Work!'' This past year I chaired the Northwest Steering Group on Federal Crop Reform—this was a three state effort that brought wheat, feedgrains, peas & lentils and oilseeds interests together. The Task Force included farmers, commodity leaders, insurance agents and RMA staff. We isolated problems into legislative, regulatory, and procedural issues and systematically worked with the appropriate entities to design solutions.
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A lot of the problems with the reform process stem from taking a piecemeal rather than a team approach to problem solving. Congress was barraged by one commodity group after another each bidding for change that fixed one problem only to create a problem for somebody else. The team approach allowed our working group to get beyond criticism and move into solutions.
For many grain producers FCI has a built in bias that rewards below average producers and strategies that maintain the status quo. The program discourages transitions to farming strategies that are innovative and improve stewardship. To be good stewards, farmers are being encouraged to look at alternate crops, stretch out rotations, and implement better tillage systems such as direct seeding or no-till. Present procedures covering APH histories, T-Yields, and risk rating systems render the current FCI program an unusable tool for many progessive farmers. APH = Actual Production History, T-Yield = County Transition Yield used in lieu of 4 years of history.
We need an insurance product that encourages adoption of cropping systems that are economically and environmentally sustainable. We don't just grow wheat or barley or peas or canola—we engage in a system of crop production that is hopefully profitable and sustainable long term. I have high hopes that the dollars budgeted in the reform package for alternate crops and research and development will look at systems—not just single crops.
A concern shared in Washington this winter was: ''How do we fix the APH when growers have disaster years in their history?'' Too much emphasis in the reform package is being placed on ''buying down'' the cost of FCI, and not enough emphasis is being placed on fixing the disaster years problem in the APH. Two months ago there was broad consensus to spend nearly 5 out of the $7 Bil allocated for reform on buying down the cost. But policymakers were not comfortable spending even $1 Bil to fix the disaster yield problem. If you don't fix the disaster year problem, all you will have is a cheaper version of a product that doesn't work or pay.
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RECOMMENDATIONS:
Stand firm on preserving reform provisions that encourage new product development for alternate crops and systems approaches to risk management
Don't sign off on conference legislation until there is a workable solution for allowing producers to remove the influence of disaster years from their yield histories (APH). Allowing elimination of 1–2 years in a 10-yr history is a preferred solution.
In summary, farm policymakers can enhance the viability of agriculture by working collaboratively to:
Define our vision of and delivery approach to environmental education,
Re-define what a sustainable family farm business is and provide incentives for producers to move toward that definition, and
Pass and implement a workable Crop Insurance Reform package
Promote the team approach whenever possible:
It takes a team—to educate the public and our youth
It takes a team—to run a successful family farm business
It takes a team—to solve complex problems like Federal crop insurance
I thank the ag committee for the exhaustive efforts you are putting forth to gather our views and ideas. I will gladly answer any questions you have.
List of Farm Management Strategies to Reduce Risk and Improve Farm Viability
''Give a man a fish and he eats for a day'' teach a man how to fish, and he is fed for life.''
Congress has sought on several occasions to promote adoption by farmers of more risk averse management practices that will enhance the family farm's long term viability. Senator Lugar's Choice Bill proposed during the Federal Crop Insurance Reform debate touched on several management practices that could stand more farmer adoption:
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Purchase Crop Insurance: either Federal or private crop hail and fire
Marketing: enter in futures/option contracts; hedge 10 percent of a commodity with an Agr Trade Option; forward contract 20 percent of a crop; market 25 percent of a crop through a coop
Financial: Deposit 25 percent of a Risk Management payment to a FARRM account; attend an Ag Marketing or Risk Management Education course; reduce or develop a Business Plan; diversify by adding at least one new commodity
Farm Resources: implement an alternative conservation practice (i.e., buffer strips, notill); develop a conservation management plan; invest in a farm improvement that raises productivity (i.e. irrigation, tree planting)
The underlying philosophy in advancing these practices is that: ''Good processes generally bring good results.'' Farmers could DO everything in the above list and still go out of business if they poorly execute these strategies.
If Congress is going to get in the business of promoting better farm management strategies, the list should be more comprehensive. Virtually all the decisions and strategies a farm has to address can fall into the following categories:
Production; Marketing; Financial Management; Capital Management; Personnel Management and Administration
Some additional strategies that need better understanding and adoption nationally include:
Production: pursue a value added strategy to enhance revenue in select enterprises; extend the marketing chain through vertical integration (i.e. flour mill coops, retained ownership cattle feeding)
Marketing: develop professional marketing plans that project crops to market, breakeven selling points, and marketing targets
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Financial: develop at least annually: cost and market value balance sheets; tax and accrual based income statements; analysis of farm business performance by enterprise or cost centers; cashflow budgets; and performance ratios
Personnel: implement professional management systems and strategic plans including: mission and vision statements; long and short range goals; division of responsibility/job descriptions; written policies and procedures; management information and control systems including personnel evaluation systems.
Capital Management: pursue joint ventures (joint ownership of equipment, work swapping, etc.) to reduce capital investment requirements; do analyses of lease vs. purchase breakeven thresholds before investing in major capital purchases (combines, tractors, drills).
One of the best things Congress can do for agriculture is to send the message that farmers must take individual responsibility for developing proficiencies in basic management function beyond producing as a basic criteria for being allowed to farm. No other small business in America is exempt from this responsibility. Everything Congress can do to promote education and adoption of better farm management proficiency will enhance the American farmer's capacity to survive and flourish. Perhaps future farm policy should develop a scorecard and advance emergency funds only after proof farmers are implementing a significant number of these proven management practices.
Testimony of Perry Meuleman
My name is Perry Meuleman. I am a third-generation Idaho farmer and operate our family farm which was homesteaded in 1904. I farm 560 acres of irrigated land on which I grow sugarbeets, alfalfa, seed barley and malt barley. I presently serve as President of the Idaho Sugarbeet Growers Association and Treasurer of the American Sugarbeet Growers Association.
Today I am representing the 1,260 farm families who raise 252,100 acres of sugarbeets in Idaho, Oregon and Washington. These growers have a direct investment in our cooperatively-owned sugar companies of over $350 million. In addition, all of the sugarbeet seed for the entire U.S. industry is produced in Oregon's Willamette Valley. Almost $1.3 billion are generated each year in the three states by the sugar and corn sweetener industries.
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Our sugarbeet growers understand that changing markets, farm policies and trade agreements are inevitable and that we also must adjust to respond to new circumstances. Taking proactive action to secure the future of the sugarbeet industry in the Northwest, in 1994 local sugarbeet growers decided to form a cooperative and pursue the purchase of the sugarbeet processing company. It took nearly 3 years to successfully complete this transaction.
One of the biggest challenges was securing the financing while the terms of the farm bill were being debated in Congress. Bankers wanted to know that a Federal sugar policy would be in place that would bring stability to an otherwise volatile market, and provide a price safety net to farmers. Once the 1996 farm bill was passed, we were able to secure financing and assume control of our processing company on December 31, 1996.
Our farmers made major capital outlays to purchase their stock in the cooperative. Many mortgaged their land to secure these funds. These family farms are not the large sugar plantations that some envision. The average farm in Idaho is about 500 acres. These are family-run operations that are the backbone of our rural communities. Since our financial commitments extend into the next decade, local farmers and bankers have a vital interest in the long-term viability of the sugar industry. Today's prices put us in serious jeopardy.
I am here to tell you today that individual farmers—family farmers—are U.S. agriculture, and we are in a financial crisis! Since the 1996 farm bill, we have suffered a 25 percent drop in our price, and are threatened with the closure of three processing facilities in our region—Moses Lake in Washington and Tracy and Woodland in California. Other processors and cane refiners are in a situation—for the first time in 16 years—where they are seriously considering forfeitures of sugar to the Government at the end of July, because our price has been below forfeiture levels. (See the attached price chart)
There are a number of causes for this crisis. Admittedly, domestic production of sugar was up last year. With depressed commodity prices in most other commodities, many farmers saw the traditionally stable sugar prices as a life raft to which they could flee. When too many farmers struggling to survive board the same life raft, they can threaten its ability to stay afloat.
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The more significant forces at work, however, are very much beyond the farmers' control. The first is a quota circumvention scheme that brings a blended product called ''stuffed Molasses'' into the U.S. from Canada. It is a blend of water and molasses, with sugar added. It has no commercial use in its imported form, but when in the U.S., the sugar is removed and sold into our market, and the water and molasses is returned to Canada to be mixed again with sugar. This blatant maneuver, unless stopped now, will add 125,000 tons to our domestic sugar market this year—an amount that our market cannot bear. This product, and others designed solely for circumvention, must be stopped legislatively. We are working with your colleagues in Congress to do so.
The second factor is the overhang of anticipated Mexican sugar that will have access to our market on October 1. Under the NAFTA provisions, Mexico's tariff-free import quota into our market will increase ten-fold to 250,000 tons. The anticipation of this supply is also driving our price down.
We also have a WTO access commitment to other foreign sugar producers that we must maintain, regardless of our domestic consumption needs. This import commitment cannot be reduced to compensate for increased Mexican access.
Finally, the Government delayed its announcement of the FY2000 tariff rate quota by nearly two months, causing the price to drop due to the uncertainty in the trade of the Government's ability to maintain an orderly market. The Government then magnified the price drop by granting a waiver to a cane refiner for the import of 100,000 tons when it claimed injury by the delay. This additional sugar will overhang the market for at least this marketing year.
POSSIBLE SOLUTIONS AND OPTIONS
The sugar industry has characteristics that make it unique among other commodities, and so solutions such as AMPTA and loan deficiency payments would not be effective or appropriate. The industry is import, not export, sensitive. By law, it must provide a guaranteed level of access to our market to foreign producers, regardless of domestic consumption needs. It is also subject to the volatility of a world dump market.
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There is interdependence between sugar grower and processor. Production cannot be halted when supplies are high and then restarted when supplies return to balance. A continuous level of production and throughput is necessary for efficiency, or the processor will be forced to shut down and the sugar acres will permanently go into other crops.
Sugar growers can neither market, nor hedge, their crops. Thus, they lack risk management tools available to growers of some other crops. Sugar is a multi-year investment and a high-value product, with total economic costs much higher than most other field crops.
OPTIONS AND SOLUTIONS
Short Term: To restore order and balance to the market, removal of excess sugar supplies must occur immediately. This requires a Government purchase of at least 370,000 tons, perhaps in increments, for non-food use domestically (for example, ethanol) or removal from within our borders. This would avoid costly forfeitures later and thus minimize economic costs to the Government, and protect sugar producers' incomes and investments.
Stuffed molasses and like products designed to circumvent the sugar import 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 circumvention.
LONG TERM:
1. The U.S. Government must negotiate with Mexico to reduce the threat of Mexican sugar access at levels that can destroy the balance in the U.S. market for both U.S. and Mexican sugar producers.
2. In any future farm legislation, Congress should, through a technical correction measure, reinstate the no-cost provision that was eliminated in the drafting of the 1996 farm bill. This provision was added to the 1985 farm bill when mismanagement of the program occurred by the Administration. Over the life of the 1985 and 1990 farm bills, it assured that the program was properly administered. It was inadvertently omitted from the 1996 language due to an oversight and it has not been reinstated through a technical correction process. The intent of Congress is that the policy operates at no cost, and any policy language should state that intent.
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3. Congress should abolish the 1-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 sugar farmers.
4. The bankruptcy provision, which protected growers in the event of a processor bankruptcy or other insolvency, was made inapplicable to the 1996–2002 crops in the 1996 farm bill. The language should be reinstated so that growers can be assured of receiving the minimum benefits intended under the sugar policy.
Thank you for your time and the opportunity to express our concerns. I'd be happy to stand for any questions.
Statement of Brad Little
My family has operated a sheep ranch here in the Boise Valley since the late 1800's. We are a traditional range operation. We trail our sheep from the Oregon line to central Idaho, a trek that covers well over 100 miles. We consider ourselves to be very efficient. We use a minimum of fossil fuels by trailing our sheep to utilize forage unusable to any other user. Today, just a few miles from here, our sheep are grazing on lands managed by the Idaho Fish and Game Department. Our sheep are used as a tool to manage wildlife habitat and the critical Boise watershed.
As much of agriculture today is in a very serious economic situation, so is the nation's sheep industry. The wool market worldwide is severely depressed. International surpluses created by failed foreign government programs and collapsing world markets are to blame. In our case the check we received for the wool paid only one-half of the shearing cost. This is a sad scenario when I know that my grandfather built our ranch on wool production. Our family is fortunate because we are now mainly in the lamb business and the wool is a secondary source of income. For other producers in other areas the impact has been catastrophic.
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Increasing regulations on public lands are a constant source of added expense. Just this week in the Craters of the Moon area, Interior Secretary Babbit is about to miraculously transform multiple use grazing lands into super protected lands. Wolves, Grizzly Bears, and a myriad of minor endangered species, such as ground squirrels, onions, and snails add significant costs or eliminate sheep grazing all together.
I appreciate the agriculture leadership of Congress conducting this hearing to discuss our nation's farm policy with producers such as myself. The sheep industry is proof of what happens to an entire business when a safety net is totally eliminated. With the elimination of the National Wool Act, there has been no price support whatsoever for the sheep industry since the 1995 wool clip. We have operated our family business without any price support for 4 years and survived. Over 25 percent of the U.S. sheep farms have gone out of business in the last few years. We have lost industry infrastructure from trucking companies, to shearing crews, to lamb processing companies and wool warehouses. In the last year we have lost two-thirds of the U.S. capacity to process American wool. We are on the verge of loosing our ''critical mass.'' We depend on these segments of our industry to produce and market our sheep production and as they also leave the business, it brings further hardship to continue our family farms and ranches.
Another point I wish to make today is that farmers and ranchers individually and even collectively have no control over international currency exchange rates, trade policies and agriculture support program of foreign nations. These issues severely impact the sheep industry in the U.S. The U.S. is the market of choice for lamb and wool exporters from around the world. The European Union continues to provide over $ 2 billion in Government support to their sheep producers. The European Union maintains permanent quotas on lamb imports to their member countries. Sheep inventories in Europe have not experienced the severe decline in numbers that we have in the U.S. Mr. Chairman and members of the Committee, if we cannot change the sheep support programs of Europe and level the playing field then we really need to consider providing equitable programs for U.S. producers.
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Only the most efficient and toughest sheep ranchers have survived. We are committed to investing in our business, and are utilizing every tool we can find including cooperatives, processing ventures, quality improvement programs, and marketing and promotion support. We are committed to changing our industry as demonstrated by the industry adjustment plan approved by the sheep industry this past year. Idaho is unique in that we are one of the only states to have increased our sheep numbers in the past year. However, our efforts depend on sufficient revenue from lamb and wool sales to make these investments.
I do want to thank the Committee for its support of the American Sheep Industry Association's successful section 201 case regarding the flood of lamb imports from Australia and New Zealand. The Committee is to be commended for helping ensure the U.S. strictly enforces our trade agreements. The current strength in the lamb market is a result of stabilized imports. The trade relief implemented in July of 1999 is for 3 years, a temporary measure to help my industry improve our competitive situation for lamb. The assistance portion of the 201 package has yet to be implemented though and I ask for your continued efforts in this area.
I also ask for your continued leadership and strong support for the USDA Wildlife Services program a temporary measure in the FY 2001 appropriations. As the Committee is aware, predator control across the country is one of the most costly expenses in the sheep industry. In Idaho, 30 percent of our losses or about 13000 head of sheep were lost to predators. The predator problem is exacerbated by the 65 percent of our state that is federally managed. Control costs are much higher here. The Federal program for professional management of wildlife damage is a key partner with the county, state and our individual contributions. Mr. Chairman, if the animal rights groups that push the elimination of wildlife services program are successful in the U.S. House of Representatives, livestock industry in Idaho is in jeopardy. This would be at a time when wolf recovery is significantly adding to our costs. We risk the loss of our state and industry funded predator control programs if the Federal match is lost.
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Understand that Idaho, much like your home states has two economies. The bustling hi-tech urban economy and the rural agrarian based economy that is on very shaky ground. A sound Federal policy that buffers the agricultural economy from international duress will not only be in the best interest of American agriculture but will also support the rural landscape that all Americans value.
Statement of John Payne
First, I want to thank all of you for taking your time to meet with us today. My name is John Payne and I am a wheat and barley grower in Washington State. I have represented agricultural in various ways in the past and still have an active interest in agricultural policy at the Federal level.
A couple of months ago, a few of us farmers got together to talk about what was right with the present farm bill, what was wrong with it and what The Problem was. It was generally agreed the freedom to farm was working in many ways. The freedom to plant what we want is good although, but we still need to be able to plant the hundred plus crops we still aren't able to. The marketing loan is a good approach but we need to address the level of the loan and the inequity of the loan level for barley specifically. It was also agreed that these were problems and they need to be fixed but they weren't The Problem. Well then, the real problem must be low prices. Prices that are at historical lows surly must be The Problem. But, if you look at the situation objectively you have to admit the prices are symptom rather than the actual disease.
This is the problem! 934 million bushels of wheat! That is the extra production we have for this year. It is called the carryover. It is the single biggest reason for our low prices. It is the 500 pound gorilla in the corner for the wheat farmer. It is the main indicator that determines price. This figure is used world wide to project price trends and as long as it stays high we will have to continue to have meetings to try to solve the problems of agriculture. It is said, the hardest part of finding solutions is identifying the problem. So, if indeed, we have done this, the rest must be easy. Well, I'm not so sure. Why do we have such a high level of carryover. The answer is simple and complex at the same time. The simple part is: The farmer hasn't sold the wheat. The complex part is why?
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There were those, including me, who thought that having a marketing loan would be enough incentive for the farmer to sell in the year of production and thereby not have big carryovers and maybe, for the first time in history, the United States would not be the residual supplier for the world. We could then be like all the other exporters of grains. We would be telling the buyers of our commodities to stock up, because we won't have any extra when the marketing year ends. No such luck! There are many theories of why we won't sell our crops but it seems to boil down to the fact that there aren't enough incentives to sell to out weigh the incentives to hold it. So, what to do?
I think two things might help. First, if you take out a loan or take a LDP on your crop, the clock starts ticking. From that date you have nine? months to market your crop. The loan is recourse and the same rules apply as far as timing if you take a loan deficiency payment. This puts the world on notice that this crop is coming to market and we are going to get rid of it. This is the stick part of the plan but we need a carrot also.
The carrot is a Marketing Incentive Plan. The MIP would be a payment of, say, 30 cents a bushel to a grower who sells his crop within 30 days of harvest. If he sells in 60 days he gets 25 cents a bushel and so on. This would allow a person to sell the cash crop and pocket the money, if he wants to, or if he wants to take advantage of the possibility of a rising market he or she could buy calls in the options market with the payment. Of course, he could buy puts if he thinks this plan will depress prices further. This removes many of the excuses we all use to hold on to our crop.
The Pro Farmer magazine, in there April 8 edition, made some projections for the coming year with respect to prices. With a carryover of 982 million bushels, for the next year, they project a price of $2.50 per bushel for the marketing year of 2000–2001. If they bring the carryover down to 691 million bushels they see a price of $3.10. That's a 60 cent increase in price with a reduction of less than 300 million bushels. So, with a stated goal of doing everything we can to keep this figure at the lowest possible amount, the better we are able to achieve a long term solution for American agriculture. With this approach to reducing carryovers I think we take a big step towards solving The Problem.
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MY AGRICULTURE EXPERIENCE AND FARMING OPERATION
I have owned and operated a family farm in Kalispell, Montana since 1975. When I purchased the farm from my parents, I installed an irrigation system on most of the land. We produce hard red spring wheat, peppermint oil, alfalfa, barley, lentils and peas. We have also raised cattle, sheep and hogs but no longer do so.
My bachelor degrees are in agriculture science and philosophy. In 1994 I went back to college, while I continued farming, and received a masters degree In economics. My graduate thesis was on agriculture policy.
My wife Dee and I studied and participated in marketing and hedging seminars many years ago. However, it is difficult to substantially increase your income if you are hedging in an environment where prices are below cost of production for over 2 years. Most peppermint growers in my area have been without contracts for over 2 years; our contracts terminated last year. Like wheat, peppermint prices are also substantially below cost of production.
I participate in a farm organization and actively pursue changes in agriculture policy. I attended a meeting of the International Federation of Agricultural Producers in Regina, Canada this past summer and also the World Trade Organization (WTO) meeting in Seattle. I would very much like to testify before the House Agriculture Committee in Boise, Idaho. I have included for your consideration a summary on specific agriculture policy changes that I believe need to be addressed.
Ron deYong (?)
Proposed Farm Policy Changes
There is a consensus in rural America that what farmers really need is a fair price for the products they produce. Historically the governmental action that has the most influence on stabilizing agriculture prices is the loan rate. We have loan rates now but they are capped and are far too low to provide any relief in the present farm crisis. Wheat farmers are at the greatest disadvantage since loan rates on wheat are set at only 56 percent of cost of production, while corn is at 66 percent and soybeans are set at 88 percent. Many believe loan rates should be set at 100 percent of USDA's calculated full cost of production. However, if we set loan rates at USDA's full cost of production and make those higher loan rates available on all U.S. production some significant problems occur:
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1. Overproduction will take place driving market prices down and
Government loan deficiency payments (LDPs) up.
2. Other countries will view this overproduction as trade distorting, which will cause Europe to even more adamantly defend their trade distorting export subsidies.
3. Large farms will receive very large Government payments and will continue to get even larger. Not only is this detrimental to family farmers but it is a huge public relations disaster.
4. Land values will inflate, negating part of the gain in prices for beginning farmers.
5. Price enhancement on the entire crop through the use of loan rates at 100 percent of USDA calculated full cost of production will impair normal supply and demand relationships.
The suggestion that we use insurance rather than the loan rate to support prices has the same disadvantages. If we are allowed to insure our production at the price that is needed which is 100 percent of USDA's full cost of production then everyone would increase their production to receive insurance dollars. Again we would have overproduction and all the above related problems, plus we would have to come up with additional dollars for the insurance companies' share.
To overcome the above listed disadvantages it has been suggested that supply be reduced in the U.S. However, if the U.S. unilaterally reduces supply, then their share of the global market will be reduced as other countries increase production. We have currently taken over 35 million acres out of production with the Conservation Reserve Program (CRP) and still are experiencing prices at 20 year lows. If you adjust for inflation these are the lowest prices since the depression of the 1930's, indicating that if supply management is going to work it must be agreed upon internationally.
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The consensus evolving that would allow family farmers a fair price for their products without the above disadvantages has two parts. Part one involves setting a safety net on the production used domestically. This could be done by raising the loan rate to USDA's full cost of production on the portion we consume domestically. The LDP payments and market gains from loans would be targeted to family farmers. For instance, each wheat farmer would be allowed the same number of bushels for a loan, calculated so the total equals U.S. production used domestically.
Part two of the program allows prices on export market production to be market driven allowing supply and demand to be effective, which fits within the parameters of the World Trade Organization (WTO). International negotiations should take place to implement an international supply management system on the portion that is exported to enhance overall price. Negotiations should also implement international agreements to move everyone towards the U.S. level in regards to labor, health, safety and environmental standards.
Advantages of a step one policy on domestic production and a step two policy for exported production are as follows:
1. Family farmers will be adequately compensated with loan rates at USDA's calculated full cost of production on the portion of the total crop used domestically.
2. Targeting loans and payments to family farms will result in a good public relations image.
3. The portion of the crop that is exported is market driven in price which allows supply and demand to work.
4. This policy does not distort international trade, consequently the U.S. can apply pressure on Europe to replace their export subsidies with a similar internal program.
5. A safety net can be implemented and family farmers can be protected on the portion of the crop used domestically while international supply
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management agreements are being negotiated on the portion that is exported. Completion of those agreements will further enhance overall market price, reducing Government expenses on LDPs.
6. Similar programs using the same concept could be developed for other commodities where a loan rate is not currently established.
This approach provides the framework for a consistent long term agriculture policy adaptable to many commodities. It also fits within WTO parameters allowing productive international negotiations to take place. Targeting the program to family farmers is not based upon some arbitrary limit, which other countries may view as trade distorting, but is determined by production used domestically which does not distort trade. Loan rates are not determined by some arbitrary number but are set at USDA's full cost of production on the portion of the crop used domestically. These loan rates and targeting to family farmers should be well received by the consumer and taxpayer.
Testimony of Heidi C. Linehan
Chairman Combest, Ranking Member Stenholm and members of the committee, my name is Heidi Linehan. Thank you for the opportunity to testify before you today. To Congressman Chenoweth-Hage and Congressman Simpson, ''welcome home'' and ''thank you'' for your support of Idaho Agriculture.
I commend the members of the House Agriculture Committee for what you have been able to accomplish for the American wheat producer. Freedom to Farm gives us the flexibility to grow for the market, while conserving our natural resource base.
UNDERSELLING—NOT OVERPRODUCING
As an international business, Linehan Ranch produces and markets a variety of foods on 2000 dryland acres near Genesee, in Northern Idaho. Over 90 percent of that food is exported to countries in the Pacific Rim, Southeast Asia, South America, the Middle East and the Mediterranean. My husband, Greg, and I are directly impacted by all Government policies. U.S. foreign trading practices, environmental regulations, and the sanctioning of nations limit what we can do beyond standard business practices.
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In spite of the production benefits brought about by Freedom to Farm, the U.S. wheat share of world trade continues to decrease. On the last page of my testimony you'll find a graph showing our decline in market share from nearly 40 percent of world trade to below 25 percent. The U.S. share of the world wheat market is decreasing, not because we're over producing, but because we're underselling. There are many ways to increase sales.
Two ways that you can increase our competitiveness are to enforce improved destination quality and implement biomass utilization.
DESTINATION QUALITY
Idaho wheat producers have invested over $3 million in the past 5 years to improve wheat quality, and it worked. Still, our customers complain about the quality they receive. A recent wire commentary reported that Russian millers are ready to pay higher prices for ''high quality'' wheat. They can then compensate themselves by purchasing inexpensive lower grades delivered within the U.S. aid package.
We have heard similar stories from many of our overseas concessional/donation recipients. If the Government is going to spend tax-payer dollars on sales, why not spend enough to ensure delivery of a quality food. This gives the United States a good quality image for future commercial sales.
We have also heard from our cash customers that the Federal Grain Inspection Service methods for grading export wheat are confusing and inconsistent. Increased funding of FGIS is needed to develop and implement a seamless system that passes the value of the food from the producer to the end user and dollars back to the producer.
Another way to increase market share is through innovative use of the Export Enhancement Program (EEP). With over $500 million available each year, the USDA has been unwilling to spend it for fear of further driving down the world wheat price.
As an alternative, you could allocate $5-$10 million of EEP funds through competitive grants to do market research on destination quality. The Wheat Marketing Center in Portland, Oregon, would be one excellent facility for such a pilot project.
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FUNDING BIOMASS
Agriculture is more than food. The USDA motto states ''Agriculture is the Foundation of Manufacture and Commerce.'' Crops like wheat can be used as replacements for wood and petroleum products. Biomass has great potential to help sustain our natural resources and lessen our dependence on foreign oil. I cannot imagine the United States relying on another country for our defense. I also find it difficult to believe that the American people are willing to be held captive by other countries for supplies of petroleum and food.
Envision a world where liquid-fuels, chemicals, lubricants, plastics and building materials become 100 percent bio-based. Why not step into space on the right foot using biodegradable products. A few bio-based products are already available: packing peanuts, wheat board, ethanol, and eating utensils.
Continued growth will depend on the development of cost competitive technologies that convert biomass. You can implement policies that encourage the transition to bio-based industrial products. Federal support for public/private partnerships in different parts of the country would use local crop residue which varies greatly from state to state. Focus must be on the conversion processes so different kinds of biomass can be used in industry. Government can also help by making it mandatory to use a certain amount of biobased products in Government purchases. It is important to make it mandatory. Remember the Metric Conversion Act of 1975. How effective has that voluntary program been nearly a quarter of a century later.
Mr. Chairman and members of the committee, the wheat producers of Idaho have a sample of wheatboard for each of you, as a reminder that funding bio-based research and utilization benefits us all.
I want to leave you today with words of wisdom spoken by China's Ambassador to the United States, Ambassador Li. We were at the Port of Lewiston last April, watching wheat being loaded into a barge. He took me by the arm and said, ''You know, farmers are the only indispensable people on this planet.''
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Testimony of Sherman J. Reese
Thank you, Mr. Chairman.
My name is Sherman Reese, and I farm in the semiarid Columbia Plateau of northeastern Oregon. Our operation is a single-family farm, run with the able assistance of my wife, four daughters, my father, and seasonal hired help. We raise multiple classes of wheat and some barley on irrigated and dryland ground in a 10-inch rainfall zone, in Umatilla County, Oregon's #1 wheat-producing county and a perennial top–5 state finisher in state agricultural production every year.
I am also the current President of the Oregon Wheat Growers League, and Chairman of the Domestic Policy Committee for the National Association of Wheat Growers.
Mr. Chairman, let me thank you and Mr. Stenholm for the cooperative, results-driven, bipartisan way the Committee is handling agricultural policy. Rather than get caught up in political posturing in an election year, the Committee is coming to the country to hear the input of individual farmers. We're also very appreciative of the work of Greg Walden and his cooperation with his PNW neighbors to secure this hearing. The leadership all of you demonstrate is commendable, and should serve as an object lesson for others in Washington.
Today I wish to emphasize the following point: the 1996 farm bill is not broken; but it is incomplete.
The fundamental principles of the bill remain sound today, despite the depressed nature of commodity markets. US policy should let the market rather than the Government give market signals, which determine production. Farmers should be free to plant what makes the most economic and agronomic sense to their individual operations. Subsidies to farmers should be constructed to comply with trade agreements, linking to general support or conservation incentives instead of production or price. Supply management and large grain reserves are failed policies that belong buried in the past. All of these points are positive contributions of the bill.
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Where Freedom to Farm has fallen short are in the areas that were supposed to be completed along with the payment change, and in fact were promised by Congress in exchange for our support of the bill. Those included the broad categories of regulatory relief, aggressive trade negotiation, and research investments. Three years of experience with the lowest real commodity prices since the Depression have also convinced us that the bill lacks an effective safety net; were it not for the emergency payments authorized by Congress the last 2 years, many farmers would have been forced out of business and the crisis would have been even worse.
TRADE NEGOTIATION AND PNTR
The US Government has made some definite progress in the realm of trade negotiations, despite the global WTO embarrassment in Seattle. We are hopeful that the WTO round can be salvaged after the demonstrations and missteps, and that progress can be made in the next round. While there are legitimate concerns with state trading enterprises in Canada, Australia, and elsewhere, European subsidies are the primary issue that need to be addressed in the WTO. Europe accounts for 85 percent of all export subsidies paid in the world, according to our Trade Representative.
Paramount in trade negotiations is the urgent need to pass Permanent Normal Trading Relations for China, and aid the accession to the WTO. China is an immense potential market for us, and the proposal on the table for granting them PNTR costs us nothing; but it raises the Tariff-Rate Quota (TRQ) on wheat imports to 7.3 million tons immediately and raises it further to 9.3 million by 2004. And it maintains the tariff rate at only 1 percent, which is lower than many other Asian nations provide. It also provides that China will eliminate export subsidies upon accession to the WTO. And, after a nearly 30-year struggle, it replaces the zero-tolerance on TCK with a science-based and achievable standard. The TCK victory is of particular interest to our producers, as it finally establishes trade based on scientific protocols and makes the vast China market accessible to our wheat.
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But beyond the benefits to us, a vote against PNTR will actually compromise the interests the opponents are trying to protect. Denying PNTR will cause the companies who have located in China, and who are raising the standard for employee compensation and treatment, to relocate to other countries which do have Normal Trading Relations. Chinese workers will lose their jobs, our American companies which are setting new standards will depart, and the plight of ordinary Chinese will worsen, not improve. Denying PNTR to China will cause our competitors to create long-term trade relationships with China. Denying PNTR would succeed in an isolation policy, but that isolated country would be the United States, not China.
REGULATORY REFORM
The blanket of Federal regulations on our farms continues to grow, and it imposes an enormous cost on raising food for the nation. Let me highlight a few examples.
The Clean Water Act has launched a series of basin planning efforts to manage and improve water quality. In our state, agriculture is responding proactively to the challenge; but the very real possibility of heavy-handed enforcement by EPA lurks in the not-too-distant shadows. If their TMDL rule proposal is any example, such a result would have disastrous and counterproductive consequences.
The Endangered Species Act is being used by environmental groups and activist agencies to redraw the landscape in the west. ESA listings and Clean Water Act designations are used as the basis for trying to breach dams, take irrigation water rights, restrict land use, prescribe mandated farming and timber practices, stop timber harvest, and impose other heavy-handed, top-down regulation.
The Food Quality Protection Act is far more effective at removing crop protection products from the market than at labeling new ones. We learned this March that even in the reregistration process, EPA will tell a registrant that they need to give up some of their labeled uses in order to get their label renewed. EPA calls this a ''voluntary negotiation''; Webster would call it ''extortion.''
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We need Congress to fulfill its promise of regulatory reform.
RESEARCH FUNDING
We fight an annual battle to ensure that research programs, and the right research programs, are funded. The Administration removes projects each year, and we must come to you to ask that they be restored. This year was a little easier on that score; perhaps after several successive years of addbacks, the message about the importance of these projects has been delivered. However, continued attention to aggressive investments in agricultural research must be maintained. The challenges in the area of water quality management, end-use quality, niche marketing of specific quality characteristics, production efficiencies, carbon sequestration, air quality, soil erosion, weed management, diseases, and other areas become more daunting each year.
PROVIDING AN ADEQUATE SAFETY NET
NAWG and its state associations are working to develop a proposal for a countercyclical safety net to be incorporated into the 1996 farm bill. As this will take some time to develop, debate, and enact, we strongly recommend that additional assistance be authorized for the remainder of the 1996 bill at the level of the 1999 AMTA payment. In essence, total AMTA payments for 2000, 2001, and 2002 would be made at double the 1999 level, with a corresponding change in the payment limitation.
Two straight years of emergency assistance highlight the fact that the safety net is inadequate; it's time to provide a predictable, budgetable safety net that my banker will count on the revenue side of my budget.
In the longer term, we believe that a countercyclical structure in place of the emergency assistance will be effective for agriculture and palatable to the public. A countercyclical mechanism would only trigger in depressed agricultural economies, so large payments would not be issued in times of good market conditions. But in times of economic hardship, they would augment the general AMTA support and help family farms such as mine stay in business. The decoupled payment scheme established in 1996 will continue to be necessary for the forseeable future, given its exempt treatment by the WTO, given foreign subsidization with which we must compete, and given ever-growing regulatory compliance costs we must pay. It will be important to craft this proposal to comply with WTO provisions, and be ready to defend it.
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Thank you again for coming to the northwest, and for holding these bipartisan hearings around the country. I look forward to working with you, both through NAWG and the Oregon Wheat League, as we work to develop a safety net addition to our existing farm law.
Statement of Klaren Koompin
Mr. Chairman and Members of the House Committee on Agriculture:
Thank you for giving Idaho and the Northwest this audience on the 2002 farm bill.
There are several issues which I believe need to be addressed in the 2002 farm bill.
1. First and foremost, please, at the Government's earliest convenience, give me the Government definition of a family farm, for without the definition, I am at a severe disadvantage in the domestic and international markets. For in order for us, (my brother and I) to stay in business we must remain in the Government program, but if the Government uses gross dollars income to define a family farm—then as a potato, wheat, and canola producer we're out of the parameters as dictated by Washington. For 400 acres of potatoes, itself will gross $500,000. Now, if you were talking Net Income well I think we could live with the $500,000, please no more payment limitations.
It might be easier to define what a non-family farm is and a definition might read: any farm that is either owned, operated or joint-ventured by a publicly traded or multi-national person or company.
2. Multi-peril Insurance'Full Coverage All-Crop Production Only Insurance, will work in the U.S. if it is required for all producers to take and administered by the F.S.A. offices. As long as actual production is required every year and used to figure historical averages, and with the premium adjusted accordingly. Then this 5 out of 10 year disaster payment will come to a stop. But we do believe that the Government should provide a farmer caught in theses areas an option to CRP this ground or retrain him into some other vocation.
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You may wonder why we are not in favor of revenue insurance. I believe that any type of revenue insurance, whether Government sponsored or privately sponsored is ripe for fraud, and furthermore there are plenty of tools available currently for us to market our crop, including but not limited to forward contracts, futures, options, L.D.P.s, and Government guaranteed payments.
3. Can the Government get out of farming? Unfortunately, NO. The world free market is somewhat like trying to define the family farm. It may look good on paper, but very seldom works in reality.
I believe the USDA needs to get more involved in research funding, i.e. new uses for existing crops, new crops, enhanced environmental production possibilities, international market access, and all phases of transportation efficiencies, both domestic and international. With the support of the basic commodities—wheat, feed grains, soybeans, cotton, and rice. These things if done by the USDA then will insure that agriculture will have a dynamic and prosperous future—an industry that I still believe would make Thomas Jefferson proud; and an industry that still is the foundation and driving force of all others and one I hope my children choose. For agriculture is too big of a consumer in the American economy to be left unattended and is one of only a handful of industries in the world that takes a renewable free resource (i.e. sunlight) and turns it into a brand new dollar.
Sirs, one last point I would like to make is the importance of agriculture to the American and world economy. We have 2 cents worth of wheat at the farm gate that generates a $1.35 loaf of bread. We have $1,500.00 per acre potatoes that turns into $48,000.00 an acre at the average fast food restaurant.
Thank you. Klaren Koompin
Statement of
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Congressman Simpson, distinguished members of the committee and ladies and gentlemen. I testify before you as a farm wife, proud of my heritage and proud of the great industry of which I have been part. My husband and I, together with our two sons and their families own and operate Hartley Farms and Oregon Trail Produce of Nyssa Oregon. We are representative of many family farms, their owners and operators.
I am dressed in black today because I am in mourning. I mourn the eminent death of this great American institution , the family farm. The period of mourning is almost over. I plead with those in authority to act before it is too late.
Several weeks ago my husband Mark and I were having breakfast. Mark commented on some canned grapefruit which I had served. The fruit was tasty, but smaller than usual, and he asked me where it was canned. We were surprised to learn that it was grown and canned in Israel. We then checked the oatmeal which I had cooked. Grown and processed in Ireland! The orange juice was our next target., Reconstituted from oranges grown in Brazil! When I checked the bacon package, and learned that the bacon came from cattle fed and processed in Canada, we both came unglued! Our entire breakfast came from foreign soil!
This was the week that we and our neighbors were beginning to dump our number 1. colossal onions because there was no market. So I decided to check out the grocery stores and see what was happening there. Without exception the onions offered for sale were of inferior quality, and unmarked as to origin. With great determination I questioned the produce managers. When I finally got them to check the bags and boxes in the back room, I found the point of origin to be Mexico and Peru. I am certain that the majority of produce had similar histories. Is the American consumer aware that this produce is grown without regulations as to herbicides and insecticide, quite possibly treated with human fertilizer, and processed in plants using cheap labor under unregulated conditions?
For this problem is not unique with onions. Most farm products are below production cost. Wheat ,corn, potatoes, barley, onions. beans are all priced lower than 25 years ago when the minimum wage was $2.75 an hour. Equipment prices have skyrocketed.
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Committee members! Consumers! Politicians! Look at it this way. You have the American farmer in a strangle hold, but soon foreign producers will soon have us all in the same hold. If we think Opec has hurt us with their control of the oil industry, if we think that $2 a gallon for gas hurts the pocket book, wait until we lose total control of the food supply of the world. And if we continue with our present trade policies, this will become a reality.
Lowering and dropping tariffs on products that come into our country while continuing to accept duties and tariffs on American products has amounted to a sell out of the American Producer. The foreign countries continue to protect their farmer, while ours has been sacrificed. Could it be that they know something we as a country don't know.
that a country is only as strong as its bread basket......that even national security is at risk here?. Napoleon stated an army marches its stomach.....and what will happen to us as a nation if that stomach becomes empty, squeezed to death by ''free trade'' policies?
Foreign countries continue to boycott our food. For example, see the attached exhibit that tells how Mexican Government has recently placed a duty on our meat imports.
President Clinton in his letter of January 24, 2000 to Congress stated that the tariffs that are now at the 31' percent level will be reduced to 14 percent by 2004. By 2004 it will probably be too late. Farmers are bring forced to sell through bankruptcy and inability to get finance. And 14 percent tariffs will still be too much! This is still greater than our margin of profit. But think of it in todays terms. An average of 34 percent tariff on our exports to other countries. Is this acceptable? And consider this....do we really think that the Chinese peasant who earns 13 cents an hour is a great potential costumer? Do we really think that the Mexican father who has no pesos to buy shoes for his children is the answer to our future economy?
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Our dollar value is so strong that foreign nations really want and need a share of it. These nations grant export subsidies to their farmers. This allows them to profit even though the goods that flow into our country are of inferior quality and are below even their production costs. Mint oil is brought in at the $5 to $6. level, and mixed with our domestic oil which costs more than $14. a pound to produce. The picture is not pretty, and this is only one example of the unfair practices that effect our market.
Our production costs continue to increase. In 1973 wheat sold a $7.25 a cwt, a 100 horse tractor cost $16,000, and the minimum wage was $2.75 Today's wheat market is $3.60 cwt, the 100 horse tractor costs $75,000, the minimum wage is $6.50. and with the addition of taxes and fees that $6.50 costs the farmer $9.50.
Depreciation tax schedules put farmers a a definite disadvantage. Tractors and farm machinery are depreciated over a 7 year period. It would be a great help to the agricultural community if we could deduct the cost of our machinery as a one time business expense, as suggested by primary Presidential Candidate Steve Forbes. Income averaging has helped but needs to be made permanent and inclusive.
Realtors tell me that farm prices are down 18 to 22 percent and most of the sales are to people who are just looking for a way of life. and not to farm. I have news for them. They will not be able to afford the property taxes on land that is not farmed. And if the inexperienced try to farm, they will be in worse shape than those who were forced to sell out.
Bankruptcy laws and regulations need to be looked at, as well as the bonding requirements of farm related industry. This past 2 years farmers have be severely hurt by businesses going bankrupt, and not paying for produce they have purchased.These unpaid for products are considered the property of the failing business in the bankruptcy proceedings, and the farmer receives no return for his crop. One of the problems is that the bonding requirements are so low that there is no way these businesses can meet their obligations to the farmer.
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I have much more to say. Five minutes isn't long to express the frustrations,feelings and fears of my family and my neighbors. But I will close with these words that are written on the walls of the U.S. Capital building: ''When tillage begins, the other arts follow . . . the American farmers then are the founders of human civilization.'' Daniel Webster wrote these words in 1840. We are now at a cross road of that civilization.
My fellow Americans, will we continue to sacrifice the American farmer, the American laborer, the American citizen on the altar of free trade? American consumers, will you continue to be a part of this stupidity? Rise up and say enough! Let us use some wisdom in our negotiations. Let us put our country first, and let us name the United States of American the most favored nation. Only by doing this will we save destiny of our land.
I thank the following people for their interviews and information gather in conjunction with this testimony: Mark Hartley, diversified row crop farmer and onion shipper; Lynn Jensen, Malheur County extension service; Paul Skeen, diversified row crop farmer; Craig Froerer, mint farmer, diversified row crop; Pat Phillips, realtor; Brian Cleaver, manager, Farmers Feed and Seed; Bill Holmes, diversified row crop
Statement of John V. Hays
Chairman Combest and members of the committee, I thank you for the opportunity to testify before you today on behalf of myself and many thousands of ranchers who will not be heard by you.
My name is John Hays. I live at Unity, Oregon, and I am the President of the Oregon Cattlemen's Association. I am a fifth generation cattle rancher with 23,000 acres of deeded land, and 116,000 acres of pasture on Forest Service and BLM managed lands.
I understand the United States Constitution directs Congress (Article I, Section 8) to ''provide for the common defense and general welfare of the United States.'' There cannot be any greater need than FOOD security for either our defense or our general welfare. We cannot ever allow this nation to become reliant on foreign nations for our food for our citizens. America's ranchers and farmers produce the safest, healthiest and most affordable food in the world—- a record we have proudly maintained throughout history. While most thinking Americans appreciate the value and importance of U.S. grown food, our Government is unwilling to acknowledge this and inform American consumers what they are eating or even from what country it originated. This makes no sense.
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Government agencies do little to enhance our ability to produce, but rather choose to restrict our activities with a constant stream of new, overburdensome regulations. I consider myself and my neighbors to be excellent stewards of the land and water, yet Federal agencies treat those of us at the beginning of the ''food chain'' as if we are environmental criminals of the worst kind.
Let's not forget, it was the Federal Government that encouraged pioneers to settle the West and produce food and wealth for this country (which by the way—food & fiber production is still providing the only major ''new'' wealth enjoyed by this country). Many promises were made to our pioneers about the cheap land and water. Contracts were drawn up to protect our settlers—enticements were offered to help endure the hardships of the new, unconquered lands. States were to have authority over the waters of their respective territory.
Now, a new corrupt industry has been formed to control and eliminate cattle production on federally managed lands by filing frivolous lawsuits that ranchers must financially defend. This ''conflict industry'' makes big profits and solely exist to create continuous restrictions on the lands and waters of producers. What makes matters worst—several Federal agencies either ''seem'' to go along with the conflict industry or have their own agenda that causes just as much havoc.
I used to wake up in the morning and look forward to the challenges of food production. Of course, nature and society offered many like diseases, catastrophic droughts, floods or fires and a crash in the market place, but we expected those kinds of things and managed to cope. We accepted this way of life—actually, not much different than my great grandfather endured. We wanted to improve our cattle heard and create projects to improve the environment. But now, I wake up facing one meeting after another simply to protect my rights to an existence.
Ranching and farming isn't fun anymore. Actually, it's a nightmare! Young people are leaving in droves and not coming back—often witnessing the escalation of losing battles that their parents have endured at the hands of government bureaucracies—a government they believed was designed to protect them, not destroy them.
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What can the Government do to help? Don't let regulations like the Endangered Species Act, Clean Water Act, Antiquities Act, along with run-a-muck Federal agencies dominate our land and livelihoods. Our Government should be fighting for us; let those of us that are skilled and trained in this area provide the food security for this Nation—not bureaucrats and eco-terrorists who are preying on our lives and livelihoods. Food security is the first line of defense for this country. We producers start the food chain. Let it be a U.S.A. food chain. Be proud of our U.S. producers by labeling our food products, and label those from other nations, too. We will successfully compete with global food production if it is done fairly.
In the U.S. Marine Corp we had a saying: ''Either lead, follow or get the hell out of the way.'' The U.S. Government must do no less. When we producers are actually enhancing the environment—don't come after us with a shotgun of heavy-handed enforcement. When we need help with fair trade issues with other nations— support us and then come out with guns-a-blazing as fast as possible. When we producers have demonstrated the ability to produce with abundance , while protecting and enhancing the environment—be willing to learn from us, use our expertise and follow our lead.
The new farm bill will probably need to have a safety net for some commodities, but do not let your guard down. We cannot let what happened with the last farm bill happen again. Example: There was to have been a comprehensive committee to study the state of agricultural as the ''Freedom To Farm''—previous farm bill, process played out, but the committee was formed too late to prevent the disastrous state of agriculture today.
We producers are not a bunch of dummies that simply whine about Government and do nothing to help ourselves. As the President of the Oregon Cattlemen's Association, I have been developing a branded beef product called Oregon Trail Beef. Oregon Trail Beef is designed to guarantee quality and safety, and most importantly be locally grown. The objective is to provide a little profit back to the local ranchers and the rural agricultural committees.
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As you know, Mr. Chairman and Members of the Committee, only those things you extract or produce from this earth provide new wealth for this country, our state and our local communities. Rural counties across this state have an economic crisis with high unemployment and having to shut down nursing homes and hospitals, cut back on school programs like vocational ag. and FFA programs, minimize road maintenance departments and reduce staffing for other county services.
One would think that rural areas would be the most affluent, since that is where the food chain begins. It should be. There should be a clamoring of young people wanting to get into agriculture, but they are not. Far too often laws, rules and regulations are created to cause problems. Something is desperately wrong. Help us fix what is wrong and defend what is right.
ADDITIONAL COMMENTS (NOT PRESENTED IN ORAL TESTIMONY)
Items for the 2002 Farm Bill Reflecting Oregon Interests
Marketing:
Goal: Build demand growth through marketing, not supply control:
Fund and direct the Secretary of Agriculture to use the full amount of Export Enhancement Program (EEP) funds and Foreign Market Development (FMD) program allowed by WTO until such time as the EC reduces its export subsidies.
Repeal of unilateral export embargoes of food and other agricultural commodities.
Fully investigate concentration effects of meat packing and grain handling industries to determine impacts on market access and monopolistic price controls. Enact protections for producers in contract agreements and other interactions with large companies.
Better enforcement (and more funding) for import inspections of products that are grown in foreign countries with pesticides that are not registered for use in the U.S.
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Labelling for country of origin is supported by most U.S. ranchers.
Production Safety Net:
Goal: Provide some price stability for producers without distorting the market.
Crop insurance reform must include (some of this is being addressed in pending legislation before Congress):
Coverage for livestock operations.
Coverage for more ''minor'' crops.
Higher subsidy must be on the top end of coverage to encourage more participation at higher coverage levels to make it worthwhile to producers. (Recent progress has been made by USDA in this direction).
Losses from hail, drought, or other disasters over multiple years must not be averaged to compute APH yield levels lest the incentive to purchase insurance completely disappears.
Target signup dates appropriate to production area, crop or commodity.]
Tenant operators should be able to purchase insurance coverage for the crops they grow on rented land.
Class-specific coverage levels are necessary for wheat and some other products to enable producers of higher-value classes to insure at higher levels tied to real-world markets.
Coverage against grasshopper outbreaks. Grasshoppers are a ''natural disaster'' similar to floods, hail, fire, tornadoes, etc. When an outbreak does occur, the insured farmers/ranchers would not spray their crops/rangeland and would instead collect insurance money.
Adequate Supply of Legal Labor Force:
Goal: Ensure adequate, legal workforce for agriculture needs.
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Enact guestworker program that ensures legally authorized workers, while providing adequate protections for fair treatment, adequate housing, and amnesty.
Infrastructure:
Goal: Maintain an economically viable transportation system to move product from farm to market.
River Transportation—The National Association of State Departments of Agriculture (NASDA) supports efforts to fund lock and dam maintenance and improvement programs necessary for the continued operation for safe and efficient commercial navigation on the US rivers and lakes.
Environmental Issues:
Goal: To maintain and enhance natural resources while ensuring economic viability of agriculture.
Working Cooperatively with Farmers and Ranchers -Maintain emphasis in environmental programs and efforts that enlist the voluntary support and participation of farmers and ranchers. In specific areas, these many need to be backed up by regulatory enforcement if voluntary approaches are not achieving participation.
The correct mix of incentives and assistance is essential to making a voluntary approach successful. Incentives and assistance start from a foundation of good science and technical excellence, which must be derived from a well-funded Federal and state research program. This constantly evolving base of knowledge can then be used to provide educational and technical assistance to producers.
Coordinate and Simplify Programs—To the fullest extent possible and practical, Federal agencies must eliminate duplication through the coordination of programs and policies, and delegate to or coordinate efforts with state agencies whenever possible.
Monitoring—An effective and cost-efficient response to water quality problems requires accurate and reliable information on the source, extent and impact of nonpoint source (NPS) pollution, as well as the effectiveness, utility and economic feasibility of conservation measures and voluntary best management practices. When implementing a research or monitoring project, state and Federal protocols should be selected based on sound science, the watershed objectives, the budget of the project, all with state and local input.
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Timely Review of Permits—Federal grazing permit renewals, and all other permits required by Federal agencies, must be completed through a timely response to avoid creating economic hardship for producers and interrupting production decisions.
Noxious weed & invasive species management:
Goal: Protect native habitat and maintain profitability of the agricultural industry.
The Federal Noxious Weed Act (FNWA) (P.L. 93–629), should be amended to consider the value of both the agricultural industry and our natural ecosystems. Amendments to the legislation must:
improve the exclusion, eradication, and control of foreign noxious weeds in the United States through the regulation of their movement in foreign and interstate commerce;
provide USDA and each state with increased authority to protect the U.S. from foreign noxious weeds;
direct the Secretary of Agriculture to develop an integrated management plan for foreign noxious weeds introduced into the U.S. for the geographic region or ecological range where the weeds are currently found in the U.S.;
determine whether exotic plants are potential weeds. Some models to predict weediness have been developed in recent years. Proposed new introductions should be run through something like these models and if they have a high potential to become weeds, they should not be allowed into the country.
expand the scope of the FNWA to include exotic invasive plants that threaten to interfere with native ecosystems or agro-ecosystems;
give the Secretary of Agriculture the ability to prevent, at ports of entry, the admittance of any foreign weed species that are not on the Federal noxious weed list;
clearly prohibit the movement of federally-restricted and foreign noxious weeds except under permit issued by the Secretary of Agriculture; and
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provide adequate funds for weed management and research.
Education / Research / Extension:
Goal: Maintain competitive stance of U.S. agriculture and adequate food supply for a growing population.
Ensure adequate funding and oversight for review of pesticide tolerances, providing adequate lead time for development of new and effective products if present tolerances are canceled. Provide adequate funding into research and development of products for minor use crops.
Develop clear policy directives on genetic engineering and who owns the findings/developments from publicly funded gene research.
The policy of the Food and Drug Administration states that foods produced through modern biotechnology should be labeled as such only if the foods differ from similar foods in ways that are significant and relevant to the issues of safety, efficacy, and purity. Suggestions that biotech foods be labeled as such without regard to data demonstrating their substantial equivalence to other, unlabeled foods are unsupportable.
Establish agricultural research, extension and teaching as core components of the United States' long-term agricultural policy.
Maintain and strengthen base program funding through the Hatch, Smith-Lever and other formula-based funding authorities.
Increase Federal funding of competitive agricultural research and education grant programs.
Enhance stakeholder-driven priority setting processes stressing grassroots input at the local and state levels.
Ensure coordination and collaboration between the Agricultural Research Service and the Land Grant Universities.
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Clarify the Cooperative Extension Service as the primary outreach and education agency within the U.S. Department of Agriculture for serving agriculture.
Increase the overall investment in agricultural research, extension and teaching.
Implementation:
Vast improvements can be made in the implementation of USDA programs. For many years there have been various USDA agencies providing ''service'' to farmers, ranchers and others in rural America, e.g. ASCS, FmHA, Rural Development and SCS. There have been name changes and some rearranging of responsibilities among these various agencies, e.g. FSA (ASCS & FmHA), Rural Development and NRCS (SCS), however there is still not a true ''one stop'' USDA agency for farmers and ranchers. This causes confusion and lack of trust among farmers and ranchers which cause a reluctance of participation. Computers and administration of these agencies are not compatible and ''turf battles'' still exist. USDA (state) offices are being asked to move into the bigger cities (Oregon, Texas, and 23 others) that are not conducive to the farmers being served.
Service can be vastly improved while producing a huge Federal savings if USDA will get serious about this issue. The Oregon Cattlemen's Association would appreciate being asked for recommendations on necessary modifications.