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REVIEW OF FEDERAL FARM POLICY
SATURDAY, MAY 13, 2000
House of Representatives,
Committee on Agriculture,
Peoria, IL.
The committee met, pursuant to call, at 8:30 a.m., in the Peoria Civic Center, Peoria, IL, Hon. Larry Combest, (chairman of the committee) presiding.
Present: Representatives Ewing, LaHood, Simpson, Stenholm, Boswell and Phelps.
Also present: Representative Buyer.
Staff present: Tom Sell, deputy staff director; Pete Thomson, senior professional staff; David Tenny, Christopher Matthews, Jason Vaillancourt, Pam Scott, and Andy Johnson.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. Good morning, and welcome to the tenth field hearing that the House Committee on Agriculture has held across the country. You may be aware that we started this effort in Lubbock, TX in March. We continued to Memphis, TN; Auburn, AL; Raleigh, NC; West Chester, OH; Kutztown, PA; Woodland, CA; Sioux Falls, SD and yesterday we were in Boise, ID. At those nine hearings, 161 witnesses have presented testimony and well over 2,200 people have listened in, both in the audience and through the Internet.
I would tell you today that channel 47, local public broadcasting channel is running this hearing live. We are, as well, carrying this hearing live, as we do all of our hearings, over the Internet, and wanted to make for certain that you were aware that that was, in fact, occurring.
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We think that the time that the members have spent, as well as the witnesses and the participants in the audience has been well spent in looking at a problem that we all recognize exists, and that we are all very concerned about.
I have the pleasure of introducing the Members of Congress who are on this panel this morning. I am Larry Combest, I represent the High Plains of Texas. This is my good friend on my left, Charlie Stenholm, who is also from west Texas; Tom Ewing is from east central Illinois; Ray LaHood, who is our host today, I am sure most of you know, makes his home in Peoria. Mike Simpson is from eastern Idaho, Leonard Boswell represents south central Iowa, David Phelps is from southeastern Illinois, and joining our committee is Congressman Steve Buyer who is from north central Indiana.
We will hear from 21 people today who have built their lives and their careers around agriculture. In selecting this panel of witnesses, we have sought to bring folks to Peoria that represent different types of agriculture found in this entire region who could bring a variety of thoughts and concerns and interests about what it is that is facing the industry today.
We hope that everyone in the room will be able to relate with at least one of these witnesses, and we do encourage, as we have in every stop, any individual who wishes to, to submit testimony for the record, and I assure that that testimony will be weighed as heavily as any individual who orally testifies.
I do not want to speak long because we are here to listen to you. But I do want to emphasize to you that every member on this panel understands that we have difficulties in agriculture. We also all agree that it is extremely important, from a national security standpoint and from what is fundamentally correct, that we maintain and keep a strong agricultural sector in the United States. Basically what our question is: How do we do that? We want to find out what real producers think is working and we want to find out what they think is not working with current farm policy. And as I mentioned, we have been all over the country searching for this help, this input and this answer, in every area that we have been to.
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I would like now to recognize our members of the panel for any comments that they might wish to make, starting with 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 am delighted to be here this morning. I look forward to hearing from these witnesses from a different region of the United States. I have been privileged to be at all of the previous nine hearings, and there is a thread of unanimity among all of the witnesses we have had thus far regarding our current farm situation.
As the chairman mentioned, we have encouraged everyone not to spend a lot of time telling us how bad it is. We know that. What we are looking for is solutions, and one of the solutions, I believe, is going to come in a very simple form, it is called cooperation. It is something that I have spent my life in in agriculture, but we are going to have to learn to cooperate and work together as individual producers like we have never, ever done before if we are truly going to solve our price problems.
And I wanted to take this opportunity to say that I represent not just the cotton patch in Texas, but also the Oil Patch. And a year and a half ago, we had a depression in the Oil Patch, and not a single person in this room was worried about it, as even the majority of the people in my district were enjoying 79-cent gasoline and 50-cent diesel. And then all of a sudden the price changed, because some folks who were producing oil began to cooperate. And as they cooperated, the price of gasoline in my district went to a buck and a half, and then was heading for what we thought was $2 and then everybody was complaining.
But one of the things that we started doing at that time back home is beginning to look at the independent oil and gas industry and recognize, as I have for many, many years, there is a lot of similarities between oil and gas and agriculture. We have the same environmental problems, we have the same international market problems, we are the same basic business men and women.
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And it has caused me, as we started looking at ways to cooperate, to recognize that you cannot produce food and fiber without oil and gas, you cannot produce oil and gas without food and fiber, and therefore we probably should be thinking in terms of getting two minority voices to work together a little better. And in so doing, I switched my position on something that I suspect is near and dear to a few of your hearts, I know it is to your representatives, my colleagues that I have the privilege of sharing the podium with—ethanol, bio-diesel. Year and a half ago I opposed it because it was very difficult for my independent oil and gas producers to have it explained to them why we should subsidize their competition when they were having to go out of business based on the market price.
But now we have begun a new endeavor, and this is what I close on. It is called cooperation, and it is called recognizing that we need a national energy policy. And in that national energy policy, there has to be room for ethanol, biodiesel and other means of producing energy in the United States as a national security problem. And therefore, I hope, as we listen to the testimony today, and as we look at the solutions over the next year or two, I hope that we will be able to find ways to cooperate together and work together in order that both of our industries might provide for the United States what all citizens of America need, and that is, a sustainable food supply and a sustainable energy supply. Both, I believe, have a common thread of affecting our national security.
Thank you, Mr. Chairman, I look forward to hearing from the witnesses this morning.
The CHAIRMAN. Mr. Ewing.
OPENING STATEMENT OF HON. THOMAS W. EWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. EWING. Thank you, Mr. Chairman. And before I make a few comments, I think we should recognize Joe Hampton, the Illinois State director of agriculture. Joe, stand up. Everybody knows you, but welcome. [Applause.]
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Ray and I have worked together to bring this hearing to central Illinois because agriculture is so important in this State and in our districts. And I want to welcome all my colleagues to Ray's district, but many of you had to drive through mine to get here, and we are pleased to have you.
Mr. Chairman, you said you have held 10 hearings. I have not been to all those hearings with you, but I have been to number of them. And I think you and the ranking member, Charlie Stenholm, should be congratulated. That may sound like just 10 little trips, but this is a very big country and you both have busy schedules. And to work in 10 field hearings around the country was a major commitment of your time and shows how much you both care about agriculture. And I congratulate you for that.
We have had some very good ideas come up at these hearings. Someone asked me in the other room, have you had any new ideas or do you expect any new ideas today? I do not know that we will have new ideas here today because this is the last hearing. We saved the best for the last. So we came to Illinois for the last hearing. But what we can, and what we hope you people that testify and leave your testimony will do is reiterate what you think are some of the solutions out there for agriculture. That is what we are hunting for, solutions; new ideas, new innovations to make American agriculture profitable. I am sure that we will get some of that information today.
I want to welcome all of you and I want to thank all of you for taking the time to come here during the very busy spring planting season, and I want to thank God for giving us a little rain yesterday so you could get out of the field and come. Thank you all.
The CHAIRMAN. Mr. Boswell.
OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA
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Mr. BOSWELL. Thank you, Mr. Chairman. It is good to be here at this final hearing. I have been to some of the others and it has been good to have the opportunity to sit and listen to people that do what we do. I am a member that lives on the farm and come from there here to this meeting. And I appreciate it very much.
I would first like to say, really to our Illinois delegation, Messrs. Ewing and LaHood and Phelps here on the panel with us. Mr. Ewing and Mr. LaHood have been great neighbors to me. My district, Mr. Chairman, actually comes clear over to the Mississippi. I live, you are correct, the south central, about 70 miles south of Des Moines, but I have got one of those sprawling districts. And so I also have southeast Iowa and I also have southwest Iowa. And so it is a ways across there. But I live about 250 miles west of here, almost on this line, and so I understand what you are going through. I appreciate the fact that you have shown up here in a large number, that tells me that you are concerned. We want to hear those concerns, and we are just glad to be here.
So again, I appreciate the warm hand of friendship that Mr. Ewing and Mr. LaHood extended to me when I first came into Congress. And then since then Mr. Phelps has come and so I have tried to do the same thing in return to him. And so I think you have got an outstanding delegation, and it is just my good pleasure to serve with these good people, and I am looking forward to hearing what you have to say here today.
The CHAIRMAN. Mr. LaHood.
OPENING STATEMENT OF HON. RAY LAHOOD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. LAHOOD. Thank you, Mr. Chairman. I have a statement that I would like to put in the record. And I am not going to read it all, but I would like to say to you and to all the members of the committee, welcome to Peoria. When Tom Ewing and I were persuading the chairman that he should bring one of the hearings to central Illinois, we knew that we had had a hearing earlier on, a couple of years ago in Bloomington, and so Tom was good enough to say why do we not put a plug in for Peoria. So we are delighted that all of you are here.
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This is a big day in Peoria. For those of you who do not know it, there are thousands of women who are trekking across North University and points north of here in the largest women-only Race for the Cure in the entire country, and I was just out there earlier this morning and said a few words to all of them and wished them well. But for Peoria, this is an important day, not only for all of you that are gathered, and for those of us on the committee, but for those people who are trying to save lives by raising money for women with serious breast cancer. And so that is an important part of our community today.
I also want to welcome our committee members to ethanol country. I am very proud of the fact that I think my district is perhaps the largest ethanol producing district in the country. We have four ethanol producing plants, part of which is in David's—one of David Phelps', ADM. But at ADM in Decatur, they produce ethanol and use 500,000 bushels of corn a day to do that. In Peoria at the ADM plant, they use 250,000 bushels of corn a day. And then we have two other plants in Pekin. Pekin Energy, which is owned by Williams Company and also Mid-West Grain.
We also have one of the four agricultural labs, research labs right here in Peoria which does marvelous research. Penicillin was actually developed there, Otrim was developed there. We are very proud of the work that goes on at the Ag Research Lab here in Peoria, and the very highly professional people that work there and do such good work.
The importance of trade I think cannot be overlooked by the fact that Caterpillar is the largest employer in our community with many plants spread all over central Illinois and employing upwards of 20,000 people in our community. And 50 percent of what is manufactured in this community goes somewhere else in the world. And that is why permanent trade status for China is so important and that is why lifting sanctions against some of the countries that we have is so important. And I know we will get into some of these matters. But these are all issues that affect the livelihood of people in central Illinois.
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And finally, the most important thing that I have done on the Agriculture Committee, in the 6 years I have been on it, is to vote for Freedom to Farm. And I know that in the there hearings that I have been at it has been an issue that has been discussed. And I think this hearing today can finally put the—the tenth hearing, an opportunity for people to sound off on that, because a year from now, we will have a new administration in Washington, DC. A year from now, we will have a new Congress and a new Secretary of Agriculture, and we will be beginning the process of writing new farm policies. So the input that we receive here today from all of you is so important.
And again, Chairman Combest, thanks so much for bringing the committee right smack dab in the middle of central Illinois and we are grateful to all of the members that took time to come today.
The CHAIRMAN. Well, thank you, Ray, for you and the people's here hospitality.
Mr. Phelps.
OPENING STATEMENT OF HON. DAVID D. PHELPS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. PHELPS. Thank you, Mr. Chairman.
Good morning, ladies and gentlemen, it is, too, a privilege and delight to be here in northern central Illinois—northern to me, but I know it is central to most. [Laughter.]
When I first arrived at the State legislature, I told my many Chicago legislative colleagues that I could be to the capital of Tennessee 20 minutes quicker than I could Springfield, Illinois, and they said, well, you are from Mississippi the way you talk anyway. So we are pretty far down there. We appreciate you bringing it to central Illinois.
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And I just first want to acknowledge the courtesy and extreme apparent cooperation that this chairman has given our committee. I have been so impressed as a new member. I know Congressman Simpson and I are probably the newest members here. But I just appreciate the kind of mentorship that my ranking member, Congressman Stenholm, has offered, and my friend Leonard Boswell, and especially Ray LaHood and his courtesies, and Tom Ewing, whom I served with in the Illinois House for several years. So it is quite a humbling responsibility, as well as experience to serve with such professionals and giants in agricultural, because I may be—I do not know about everyone else—I may be the only one that is not a farmer on this panel, or at least has some affiliation with farms. So I may have a lot more to learn than most of them. So it has been quite an experience.
So I do want to recognize—being from southern Illinois, if I may be a little personal, the State FSA Director, my friend, Steve Skates. Steve, stand, you are here, everybody needs to see who you are. [Applause.]
He is from Gallatin County, the popcorn capital of the world, we call it, down in that area. His lovely wife, Keppie Skates is a staff assistant for Senator Durbin, is also here. Keppie, would you stand? We want to see you, the prettiest part of the Skates.
Just real quickly. I am here to listen to your concerns and lean on the advice of those that are much more senior members, and hopefully in due time I can have a better grasp. But I know that my priority, not only in the State legislature as well as Congress, so far, is to try to respond to your needs in the way that we have through appropriations help, and we know that many of you would rather do it independently, and there are ways that we hope that we can help do that, provide you with those tools. But ethanol is the No. 1 priority to me, as far as the development, what it can mean to our markets, not only here in Illinois, and ADM in Decatur, but also the nation, and maybe provide national security and some independent domestic dependence on our energy policy.
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Thank you very much, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. Phelps.
Mr. Simpson.
OPENING STATEMENT OF HON. MICHAEL K. SIMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
Mr. SIMPSON. Mr. Chairman, I will enter my opening statement in the record, but let me just say, I am very pleased to be here in Illinois. If in fact we did save the best for last, yesterday we were in Boise, so we must have saved the next-to-best for the next-to-last. I am not sure what that means, I do not thing it is any reflection that we started in the chairman's district in Texas.
But I would also like to say that you are not the only one, Mr. Phelps, that is not a farmer on this panel. I am a dentist and my grain farmers just drill for different things in Idaho than what I am used to. Laughter.]
Mr. But I have enjoyed these hearings as we have gone around the country. I had, before I got elected to Congress, actually never been east of the Mississippi. I went to school in St. Louis. And so these hearings have given me the opportunity to go around the country and find out different things in different parts of the country. And I had never known anything about cotton before I started these hearings, other than what cotton t-shirts were about. So they have been very informational to me. But I think these hearings have been very important, and I compliment the chairman and the ranking member for holding these hearings. And as Mr. Ewing said, it is a larger task than most people realize to put on 10 hearings around the country.
And I do want to thank Mr. LaHood and the rest of the Illinois delegation. They have been tremendous supporters of agricultural on the Agricultural Committee, and I have enjoyed my association with them, and I look forward to hearing the witnesses today.
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The CHAIRMAN. Mr. Buyer.
STATEMENT OF HON. STEVE BUYER, A REPRESENTATIVE OF CONGRESS FROM THE STATE OF ILLINOIS
Mr. BUYER. Thank you, Mr. Chairman.
First of all, let me thank you for permitting me to sit with your committee since I sit on the House Armed Services Committee. I also want to thank you for being here in Ray LaHood's district. I just want all of you to know, Ray LaHood is a well-respected member of Congress. You often see him on TV presiding over the House. He does that because he is so admired and respected by his peers.
My neighbors of Illinois in the House are Jerry Weller and Tom Ewing. I represent 20 counties of northern Indiana that stretch across between South Bend and Indianapolis, almost all the way to Ohio. It is a strong agriculture district. So normally, Mr. Chairman, I would always submit a statement for the record but since I got up at 4:45 this morning to fly in this tiny little private plane to come here, I have to also bring with me the voice of Indiana agriculture. And so I would ask my committee members to indulge me, because I have conducted my own hearings with my own district with my own advisory committee, and I think the voice of Indiana agriculture, I am sure, would be similar to Illinois agriculture. But please permit me to read this.
The CHAIRMAN. Certainly.
Mr. BUYER. Of the 20 counties of north central Indiana that contain, I believe, some of the most productive farm land in the nation, in my district of Carroll County, there is the largest producer of hogs in the State. Jasper County is the largest producer of corn. Newton County led the State in yields last year. Indiana is America's No. 1 producer of ducks, and No. 2 in popcorn. We rank fourth in soybean production and No. 5 in corn.
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I have spoken to the farmers across the Hoosier agricultural heartland and am pleased to report that the spirit of the hard work, innovation and entrepreneurship is alive and well. But despite this abundance, however, I must report to the committee that the productivity has not resulted in sustainable profits for many of the farming families. Purdue University reported last year that even record yields would lead an average farmer to lose $26 per acre, despite the availability of market-assistant loan payments. This year, the prospect of continued drought conditions has raised troubling questions about yields and can further worsen the situation if market prices remain the same.
Although pork prices have recovered, the painful memory of $10 hogs are fresh in the producers' minds. While the American economy is soaring, the American farmers in Indiana are hurting. These tough economic times and other pressures on farming have contributed to a loss of 1.2 million acres of Indiana farmland between 1978 and 1992. At the same time, the average age of an Indiana farmer has risen to 52 years of age.
As our farms disappear and the farming populations grow older, rural areas face an unprecedented threat to their economic vitality. Although many complex issues face today's farmers, they can be narrowed down to a basic input upon revenues and the cost of doing business. The damaging combination of low prices, unfair trade barriers, high taxes and the burdensome regulations have placed the future of the farming family in doubt in my district.
Recognizing that traditional command and control Government farm policies were contributing to the economic hardships faced by American farmers, I believe this committee and Congress was wise when it enacted the Freedom to Farm legislation aimed at allowing farmers to plant for the market and not for the Government. It was their theme for decades, and finally that voice was heard.
Over the past year, the success of this legislation has been questioned, due to the persistent low prices farmers have faced in the marketplace. To investigate the impact of Government policies upon Hoosier farmers, these series of forums that I conducted with agricultural interests and my own advisory committee resulted from discussions also reached conclusions that I want to share with the committee.
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First of all, we must recognize that free-market philosophies encourage gains in productivity and innovation. Government policies should focus on encouraging fair competition, reducing regulatory costs and helping manage the risk. Farmers recognize the importance of transitioning to a free-market economy and they recognize that Freedom to Farm was not meant to respond to global economic events, like the Asian economic crisis. I strongly believe that a return to command and control agricultural policy will hurt the farm economy.
As a player in increasingly competitive world markets, limiting farmers' ability to plant for the marketplace and restricting acreage would simply create an opportunity for international competitors to step into the breach. For example, in 1982 to 1988, U.S. farmers harvested 12 million fewer acres of soybeans. During the same period, Brazil and Argentina increased their production by 14 million acres. Where we falter, others step in to take the place. Our productivity is our strength, and we should not be restrained by Government policies.
The proper role of government is to help manage the risk. The reform and expansion of Crop Insurance Programs is a strong step in the right direction, and I applaud the Agriculture Committee. By granting farmers maximum choice in the flexibility in marketing strategies, crop insurance helps farmers to respond to these forces beyond their control, while encouraging farm competition and adequate safety net. In addition to safeguarding the means of production, though, crop insurance and marketing assistant loans must also examine factors affecting the marketing end of the farm economy. It is one thing to ask a farmer to farm for the marketplace, but then if we do not permit those market commodities to be covered by the crop insurance, how are we helping?
Since 1950, American farmers have increased their production levels by 250 percent. They also have the cutting edge of technical, embracing GPS-based precision farming techniques, the Internet and benefits in biotechnology. They have been compensated for stagnant prices by continuing to increase their productivity and efficiency, and they have done so in an atmosphere of increasingly complex regulatory burdens. The American farmers are unquestionably the most innovative and productive in the world, but they are not being allowed to compete on a level playing field in all economies.
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In addition to international trade barriers, farmers face barriers of competition here at home. In the transportation sector, American farmers have faced pressures brought about by rail consolidations and a chronic shortage of rail cars. While Brazilian soybeans are traveling to market via a more efficient rail system, backed by a 1.3 billion U.S. investment, which has cut Brazil's production costs in half. The Surface Transportation Board recently sanctioned a pipeline company for overcharges on the cost of anhydrous ammonia transportation, and the concerns exist about the adequacy of our inland waterway systems. The increasing lack of competition and aging of our transportation infrastructure, I believe, also adds to the pain to America's farmers and their ability to compete.
Farmers are also, in Indiana, deeply concerned about the market concentration and the vertical integration which threatens competition in the grain and livestock sectors. Since the late 1980's, the number of U.S. farms that raised hogs has declined by two-thirds, while the average number of hogs raised by each farm has tripled. Many family farms have been forced to get bigger and get out of business. Contract production without accurate price reporting is detrimental to the free marketplace, and the failure of consumer prices to reflect the prices received by farm producers disrupts the traditional price impacts of supply and demand.
While increased efficiency is commendable, the concentration and integration of producers and packers raises troubling questions about the future of the free market and competition.
The same type pressures are facing the grain market. I recently received reports in my district of producers refusing to accept grain from local cooperative elevators and also limiting purchases to farmers. Moreover, large grain and fertilizer conglomerates have been accused of anti-competitive agreements which link grain sellers to selling fertilizers at cost to local farmers in what appears to be an attempt to force local competitors out of business. Over the long-term, these practices hurt competition.
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Another hindrance to competition is the burden imposed by the Government in the form of taxes and environmental regulations. Unequal business environments in competing nations are placing the American farmers at a disadvantage in the global marketplace.
Farmers are environmentally—and also with regard to the environment, I believe that farmers are environmentally-friendly stewards of the land who have proven themselves to be proactive in preserving the environment, when given the right information and support. Farmers have eagerly, in Indiana, embraced the cooperative measures to protect the environment, including wetlands reserve programs, the conservation reserve program and EQIP program.
Farmers have recognized that sustainable agriculture equals the environmental awareness and concerns. However, environmental compliance measures should focus more attention and resources on shared initiatives and incentives rather than on punitive measures which overstep the bounds of the law and regulatory authority.
The most recent example of inappropriate regulation was heightened by the United States District Court decision which found that the EPA had overstepped its authority in an attempt to regulate non-point source discharges. I agree with the Court's findings and support further efforts to require an independent review of EPA's TMDL rule proposals by the National Academy of Sciences.
Through common-sense environmental efforts, I believe the farmers have reduced the soil erosion dramatically, have improved water quality and have reduced chemical and fertilizer inputs. The successful model for future environmental protection must be based on the understanding and the needs of agriculture and the programs based on incentives rather than punitive measures.
We must also recognize that the Government played a vital role in funding of point-source pollution reduction efforts. We must be prepared to share the financial burdens with the agricultural community in reducing the non-point source discharges.
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With regard to the Federal tax and spending policies and its impact upon agriculture, I believe it is important to recognize the benefits that we receive from balancing the budget, starting to pay down the national debt, the reduction in interest rates which followed these efforts played a significant role in reducing the operating costs of the farm community. I believe it is important we build on these efforts by eliminating the estate tax, allowing the full deductibility of the health care expenses and reducing the capital gains.
And finally, with regard to Mr. LaHood's comments on the expansion of our markets, expanding of those free markets through fair trade and developing new uses through the support of also research and development in issues is vital to the future of agriculture. But I also must say that enforcement issues and negotiation of our trade agreements, which placed restrictions on America's farmers that are not imposed on direct competitors in developing nations, is wrong. Our policy is not delivered on the promises of leveling the playing field with nations around the world. The GAO has recommended that a strategy be developed between the United States trade representative, commerce and USDA to manage its trade agreement enforcement and the monitoring of the workload. And I strongly agree with its conclusion.
To support greater demand for agriculture products, I believe we must continue to support research efforts to develop new uses and new markets for our product. I am encouraged by the recent efforts to further investigate the use of the ETBE made from ethanol as a substitute, or the MTBE to meet the requirements of this program. As the EPA looks at restrictions on diesel emissions, I am hopeful that they will give careful considerations to the potential biodiesel blends as an environmentally friendly alternative. Further development of agricultural-based products holds great promise for increasing farm prices and improving the quality of life for American families through low-cost, environmentally-friendly products based on domestically-produced raw materials.
And last, I believe the future of American agriculture relies upon our efforts as legislators to encourage free market competition, innovation and productivity. I believe that American agriculture can compete as the world's low-cost, high-quality producer, if we unleash their potential rather than restrict it through the high taxes, unnecessary regulation and unfair trading practices. I look forward to working with its members as you look forward, and to seek shared solutions to preserve and enhance the heritage of America's farmers.
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Mr. Chairman, I appreciate your indulgence to allow me to speak on behalf of Indiana agriculture.
The CHAIRMAN. I would like to call our first witness panel to the table. I will apologize ahead of time if I mispronounce anyone's name or the name of the town were you are from. And would also remind our witnesses that the lighting system on the desk, on the witness panels, if you would, please try to adhere to that as closely as possible. All of the statements in their entirety will be made a part of the record. It gives a maximum amount of time for exchange between the members and the panelists.
The first panel today, Mr. Eugene Barkley is a corn and soybean producer from Paris, IL; Mr. Leon Corzine, a corn and soybean producer from Assumption, IL; Mr. Ted Harding, a corn and soybean producer from Trivoli, IL; Mr. David Hastings, corn and soybean producer from Paxton, IL; Mr. Joe Heinrich, soybean and alfalfa producer from Maquoketa, IA. Mr. Eric Hiscock, a corn and soybean producer from Climax, Michigan.
We appreciate your attendance today. We will start in the order of the way you were introduced, and please proceed.
STATEMENT OF O. EUGENE BARKLEY, CORN, SOYBEAN PRODUCER, PARIS, IL
Mr. BARKLEY. Thank you, Mr. Chairman. I am Eugene Barkley. I farm in east central Illinois with my brother on a 1,350 acre grain farm raising corn and soybeans. In addition, I operate a small custom spraying business. Also located on our farm is my nephew's retail/wholesale perennial nursery.
First I wish to express my appreciation for the opportunity to appear before your committee this morning. I would say yours is an impossible task because of the diversity of commodity production within the United States being phenomenal. Ultimately, I need only to center upon my own county, up and down my own road at home, to prove my point.
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So much of the popular discussion is based upon the family farm. I am a part of a family farm, and proud of it. All of my neighbors are family farmers and I defy anyone to fit them into a mold. Within my own neighborhood, there is one couple who farms and owns 100 acres. Their one tractor is at least 30 years old, their planter, a used 6-row, and their combine, an older small model. That operation compares to another neighbor who farms with his brother, a son, a retired father and seven employees. They operate in excess of 8,000 acres and have three 16-row planters, several 4-wheel drive tractors and three new large combines. Now define family farm and find one answer that fits all for addressing the needs of these agricultural operations.
This is my point. The answer is not to define a family farm by targeting programs, but rather to allow us the opportunity to do what we do best. Namely, produce an abundant, safe product and have the ability to earn a reasonable profit in the process.
In my opinion, a number of correct principles are a part of the current Freedom to Farm legislation, however, only a part of the package was ever adopted. Flexibility was the initial cornerstone, providing the ability to choose what and when and where to raise the commodity of choice driven by market signals.
Second, we do compete in a global market. Much of our global competition exists today because we indirectly subsidize their production development by idling acres, thus giving them our markets. It is true that agriculture has always been competitive, but the scope of that competition has changed. When my competitor in South America has access to crop inputs at a fraction of my cost and open markets without barriers that I do not, this U.S. farmer suffers. I would suggest leveling the playing field. The need to adopt permanent normal trading relations with China is a case in point.
Next, excessive regulations limit my competitiveness. I have very little opportunity to absorb and virtually no way to pass on those costs.
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The fourth principle of the 1996 farm bill was to develop a reasonable risk management feature. This is one area where I have seen progress, as some of the newer revenue products seem to be moving in the right direction, and I thank you for your efforts. Looking at the larger picture, however, I would suggest that the agriculture economy is not healthy. Illinois Farm Business farm management records for 1999 reveal a concerning fact. For central Illinois grain farmers, we had excellent yields. The average net farm income was $49,000. However, the rest of the story is that, for the same group, the average FSA payments were 56,000. Therefore the net income, less the FSA payments, were a negative $6,900. The FSA payments have been critical to our survival. I would suggest without them, our industry today would be in chaos. Again, I emphasize that I do not believe it is because of the 1996 farm bill's direction, but rather it is because of our failure to implement the total package.
The general consensus of producers is that we are literally at the bottom of the food chain. We are being told that the value of our corn for corn flakes and wheat for bread and pork for chops is not very important. When you consider, at my local IGA, 24 ounces of corn flakes sell for $3.53, while 24 ounces of my corn sells for 6 cents. I have a problem. Our pricing system does not truly reflect the value of my product. The market sets the price, but what is the value of a box of corn flakes without the corn.
Many efforts are under way to encourage vertical integration wherein producers invest their knowledge and resources into ownership of more than just producing a raw, basic commodity. And I endorse that effort. We are affirming that the future of the farmer may be more tied to the value of the product that is marketed than the value of the commodity that he produces.
In conclusion, my suggestion is for Congress to complete the effort begun in 1996, open world markets, level the playing field, limit regulations and improve the safety nets. Allow farmers to do what it is that we do best; produce an abundant, safe food supply and earn a reasonable profit in the process.
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Thank you.
[The prepared statement of Mr. Barkley appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Corzine.
STATEMENT OF LEON CORZINE, CORN, SOYBEAN PRODUCER, ASSUMPTION, IL
Mr. CORZINE. He made the green light, I hope I do, too.
Mr. Chairman, members of the committee, my name is Leon Corzine. My wife, my son and I grow corn, soybeans and a few cows on our family farm at Assumption, IL. My son, Craig, is the 5th generation on our farm. I am currently serving as president of the Illinois Corn Growers Association. I want to thank you for the opportunity to testify before the committee. I appreciate this chance to have input into the next farm bill early in the developmental process.
There is no doubt the American agricultural economy has not participated in the economic growth and prosperity the rest of the United States has enjoyed. We provide the safest, most economic food supply the world has ever seen. And yet, those of us actually responsible for the foundation of our existence, food to eat, are far removed from this economic prosperity.
The ICGA remains committed to designing and implementing a market-oriented farm bill that is simple, flexible, income-based and responds to farmers' and society's needs, long term. We made some positive changes in farm policy under Freedom to Farm, however there are several commitments that remained unfulfilled by Congress and the administration. We must address these issues. I support Freedom to Farm, with the understanding that we will use all available tools to assist farmers in making the transition to a more market-oriented approach. By this I mean aggressive support of market expansion programs. I mean forging a national energy policy that is pro-ethanol. I am talking about committing ourselves to maintaining a viable river transportation system, removing trade barriers and providing realistic risk management tools.
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As I sit here today, we continue to debate the fate of ethanol, the vote on permanent normal trade relations in China is too close to call, and we refuse to do business with Cuba, a potential customer that is only 90 miles from the United States. If you are looking for an agenda for Congress, this encompasses my priority list. Let us remove these roadblocks, trade in our Band-Aid approach to low farm prices, and develop a long-term game plan that will save farmers and save taxpayers money.
First, under ethanol. We could easily double the current ethanol market of more than 600 million bushels of corn if we make some key decisions that signal a national commitment to this domestic renewable fuel source. Let us retain the oxygen requirement in the RFG program, because it works. Peoria, as was mentioned, sits in the heart of ethanol country. There are three major ethanol plants within 10 miles of downtown Peoria. They create an enormous demand for corn, using more than 427,000 bushels of corn each day in this area.
The second one, under trade, as we enter a new century, the need for open and fair trade has never been greater. We cannot let our trade partners and competitors set the agenda. The same holds true for vocal minorities that want to use trade as a vehicle to reach personal, financial or ideological goals that have nothing to do with trade or the best interests of this entire country. Their approval by Congress of the North American Free Trade Agreement is a victory of engagement and competition over withdrawal and complacency. The evidence of success is undeniable. Prior to NAFTA, Mexico ranked as our 9th largest corn customer. Today they are our third largest customer and gaining ground. Similar opportunities abound if we do the right thing.
A House panel voted recently to lift sanctions on sales of food and medicine to Cuba. This is a positive step, and let us build on this. We also have an opportunity to begin unprecedented trade with China. Are there things about China's policies and actions we do not like? Of course there are. The question is, what is the best way to spur this positive change? Another issue, we can, and we should pass fast-track authority. That is hurting us in our trading negotiations.
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The third area I would like to talk about is transportation. As new markets are established, we must get our products to market in a competitive fashion. We support authorization and funding for the needed improvements on the aging lock and dam system on the Illinois and upper Mississippi. This system supports more than 400,000 jobs and is the avenue for 300 million tons of cargo. Much of this is Illinois corn and soybeans, as we export 43 percent of our corn and over 50 percent of our soybeans.
I hope while you are in Peoria you will get a chance to take a look at the locks two miles down the road, I believe it is, that was completed in 1938. It was designed to last 50 years, so it is 12 years beyond its expected life span. We are moving 36 barge loads or 2 million bushels of corn and beans every day through locks that are on borrowed time.
The fourth area is risk management. An aggressive approach to marketing and trade does not preclude the need for some kind of safety net. Since we are in production agriculture, we must work with something none of us can completely control, the weather, as well as markets. We do need the help of risk management. With a viable, affordable management plan, we can help ourselves rather than having to rely on disaster relief packages. Premium scales should be restructured to encourage participation at higher levels. And we also need to take a look at a new thing called the farm accounts. One year income may be up and the next year down. We can put that money into a savings account that is set aside so that we can draw on that in years when income is down. It is sort of a self-insured plan, and we keep the savings to ourselves.
The House Agriculture Committee can and should take the lead in moving forward with this agenda to fulfill the Federal Government's part in Freedom to Farm. This not only will bolster the agriculture economy in the short term, but it will also allow us to build for our future. Let us work toward an environment which allows farmers to make a profit, and tell the world U.S. agriculture is serious about being the supplier of the safest and highest-quality food supply anywhere.
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Thank you.
[The prepared statement of Mr. Corzine appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Harding.
STATEMENT OF TED HARDING, CORN, SOYBEAN PRODUCER, TRIVOLI, IL
Mr. HARDING. Thank you, Mr. Chairman and members of the committee. I will keep my comments brief because I thought it was very interesting, Mr. Buyer, at the start of the presentation here, really, I think, has expressed what a lot of us feel in this panel and a lot of us feel in the country out here in the agricultural community. But I will say that I am a strong supporter of Freedom to Farm, and I will read a brief statement that I had pertaining to that.
It says, freedom to farm or freedom to fail? This has been a label often given to the present farm bill. Do they both fit at this time or is this not the case?
The first 2 years of the present program, we were blessed with relatively good commodity prices. Then Freedom to Farm looked pretty good. Then 1998 came along with lower commodity prices, with some being record lows. 1999 did not prove to be much better than 1998. So you might say we have had 2 years of freedom to farm and 2 years of freedom to fail.
Is the present farm bill totally to blame for the present situation in agriculture? It is not a perfect bill and must share some of the blame, but not all. At the time this bill was introduced, the feeling in agriculture by far and large was to get the Government out of our business as much as possible. Let farmers do the farming and Government do the governing. It sounded like a pretty good solution at the time, but this bill depended on the Government to maintain and eventually increase our export share in the marketplace.
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The Government has been very generous with financial aid to agriculture in the last 2 years, but it has not come to grips with some of the issues concerning foreign trade, such as fast track, trade with China, trade sanctions and the list goes on. The point being, before we completely abandon Freedom to Farm, let us address these issues and see if they accomplish what was intended.
Another area that needs to be emphasized is research and development of farm commodities. Also a clearer picture of support for ethanol and other industrial uses of farm products. I am sure that your committee has heard this over and over again, but these really are the fundamentals that were to give Freedom to Farm a chance to accomplish the goal of removing dependence of agriculture on the Government. So as I said before, let us not abandon the concept behind the present farm bill.
I would like to possibly add a few more comments to this, if I possibly may, that is not in the written statement. I know the issue for—the trade issue with China is coming up at the end of this month, and there seems to be a lot of division as far as how we should support this. There is a lot of opposition.
One of the things that has been brought up, as far as human concerns, as far as the way they treat their people in China, I think the problem I have with that, I looked at some of my grandson's toys at Christmastime, and looked at how many of those products came from China. So it looks to me like, at this point in time, we are doing an awful lot of trade with China in other areas, and I think it is about time maybe that we try to counteract that. Obviously we are doing some trade with China at this point in time, but I think it is time to open up the field and do as much as we can.
The other issue on ethanol, I think that is another very important issue that has been brought up by the other two panel members already, and Mr. Buyer, and I think we are on the right direction. But it would sure be nice to have some more assurances that it is a solid program that we have with ethanol, rather than the uncertainty that still seems to be out there shrouding this particular segment of our business.
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I have got some other issues that I would like to expand on, but I do not think I had better take time at this point in time, so I thank you for your time, and I appreciate the opportunity to speak before you.
Thank you.
[The prepared statement of Mr. Harding appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Hastings.
STATEMENT OF DAVID L. HASTINGS, CORN, SOYBEAN PRODUCER, PAXTON, IL
Mr. HASTINGS. Mr. Chairman and members of the committee, my name is Dave Hastings and I am the general manager at Ludlow Co-op in Ludlow, IL in the east central part of the State. Our farmer-owned cooperative consists of six facilities for the combined storage of 11 million bushels, and we handle primarily corn and soybeans. Most of our grain is sold for exports to the Gulf markets or to poultry feeders in the mid-south region.
I am an active partner in an 800-acre corn and soybean farm in east central Illinois, and currently serve as the first vice-president of the Grain and Feed Association of Illinois, on whose behalf I testify today. The Grain and Feed Association is a voluntary, not-for-profit trade association comprised of approximately 1,000 competing grain elevators and feed mills working together as an industry to solve its problems, promote its progress and enhance its service.
We appreciate the opportunity and commend the House Agriculture Committee for conducting this series of field hearings to hear directly from those involved in production agriculture, and from those of us whose businesses are dedicated to serving our farmer customers. The current period of low grain prices and oilseed prices have caused all of us to focus renewed attention on Federal policies that can most effectively contribute to the growing U.S. agriculture and improving farm income.
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The causes of current low prices are well known. In the past 4 years, weather conditions have been exceptionally favorable in major world-producing regions, leading to high yields of most grain crops. There has also been a decline in imports from the Pacific Rim countries, in the aftermath of the economic recession. But those markets are starting now to come back.
During this challenging period, our assessment is that the 1996 farm law has worked well to keep U.S. agriculture competitive in world markets, while providing our farmer customers with a meaningful income safety net. U.S. producers have used planting flexibility provided by the FAIR Act to reduce plantings of crops in response to declining prices and switch to crops that offer higher net income return. In the last 3 years, soybeans and minor oilseed plantings have increased by 9.6 million and 1.4 million acres, respectively. And importantly, we have seen foreign farmers reduce plantings by 25 million acres from 1996 to 1999 in direct response to the United States no longer being willing to bear the brunt of supply adjustments through Government-mandated acreage idling programs. These are positive aspects of the 1996 farm law, which we believe should be maintained.
It is important, as Congress looks for policy prescriptions that avoid the policy mistakes of the past that limited the ability of our farmer customers and agriculture businesses to grow and compete. In that regard, we strongly urge Congress not to resurrect Government acreage idling programs or change the focus for the Conservation Reserve Program, to supply management, and away from its laudable conservation, environmental and water quality objectives. The CRP that is too large or that idles productive farmland hurts tenant farmers who must bid against the government's rental rates for the right to farm. It hurts local economies and communities and provides further incentives to Canadian and other foreign farmers to replace the plantings we otherwise would grow on productive farmland.
If Congress determines that additional income supports for producers are needed, we believe there is a right and wrong way to do it. Our preference would be that such assistance be designed in a way that helps our farmer customers better manage year-to-year variations in revenue, and not be linked to certain price levels that are dependent upon a producer growing a specific crop. Respectfully, one of the problems we see with the counter-cyclical support program that is linked to prices for specific crops is that it could encourage over-production of crops that are already in excess supply, simply out of a desire to maximize Government payments. That is why we believe it is unwise to attempt to increase income supports by increasing marketing loan rates.
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The Grain and Feed Association believes there are policies that the Federal Government should encourage to help U.S. agriculture grow and become more profitable. First, it is imperative that Congress and the Federal Government continue to work forcefully to open world markets and create an environment that promotes exports of grain, grain products and value-added products such as meats. In the last decade, exports have represented 32 percent of the growth in U.S. corn utilization, 51 percent of the growth in U.S. soybean consumption and 29 to 33 percent of the growth in the meat and poultry sectors. Had the Pacific Rim countries not experienced an economic contraction and, instead, continued to grow their meat and poultry imports at the double-digit rates of the early 1990's, exports could have easily accounted for more than 50 percent of the market growth in the U.S. grain and meat sector in the decade of the 1990's.
That is why a favorable vote on the China trade bill later this month in the House is so critical for all of us in U.S. agriculture. Mr. Chairman, we commend you, Mr. Stenholm, and other members of the committee who have taken a leadership role in encouraging your colleagues to vote yes on this important bill.
Second, our ability to export is highly dependent upon having an adequate transportation infrastructure. It is because of our production and market infrastructure efficiency that the United States is among the low-cost suppliers of agriculture products to world markets. Here in Illinois, in particular, we are highly dependent upon having an efficient inland waterway system, and a competitive rail network. Right now the inland waterway system is in a state of disrepair and obsolescence. We need to replace and increase the size of the locks in the upper Mississippi and the Illinois River systems. Most of those locks were built from 1930 to 1963, and are only 600-feet long. That is half the length required to handle the modern 15-barge tows used to transport grain and other bulk products.
Third, we believe Congress can provide much-needed assistance to our farmer customers by enhancing self-help risk management that would complement Federal crop insurance. As a producer, I believe that better use could be made of available Federal dollars to improve farmer understanding and use of risk management tools. In this regard, I am concerned that the heavy spending Congress is authorizing for crop insurance subsidies will encourage plantings of commodities that already are in surplus just to capture disaster payments.
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It has already had the unintended and unwelcome side effect of inciting producers to look solely to crop insurance to manage marketplace risk rather than one of a basket of risk management tools that should be considered.
I appreciate the opportunity to make these comments. Thank you very much.
[The prepared statement of Mr. Hastings appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Heinrich.
STATEMENT OF JOE HEINRICH, CORN, ALFALFA PRODUCER, MAQUOKETA, IA
Mr. HEINRICH. Good morning. My name is Joe Heinrich, and I am a farmer from Maquoketa, IA. My wife, Shelley, and I, along with our two daughters, Amber, age 10, and Jill, age 8, raise corn, soybeans, alfalfa and livestock on an 850-acre farm. I have been farming since 1982. I appreciate the opportunity to present my thoughts to the committee on the future of the farm programs.
One day last summer, my 10-year-old daughter, Amber, wanted to help me for the afternoon. We had several projects to do, including treating a few sick calves, fixing some fence, working on a tractor and, of course, milking the cows. When we got home, Amber had a smile on her face. She said, dad, we sure got a lot done today, did we not? We sure did, I commented. And is that not a great feeling? It really is, dad. Then she looked at me and said, dad, do I get paid for this?
Farmers are now facing their third year of low prices for nearly every commodity. Barring a major disaster such as a drought that is possible in the upper midwest, projections are for prices to continue at all-time lows. What we in agriculture want is the opportunity to be profitable. The question is, what type of program is needed to help farmers weather the down years while giving them the opportunity in the up years. I believe Congress made the right decision to eliminate the old supply management programs and replace it with Freedom to Farm. We wanted flexibility. We wanted the freedom to make our own decisions.
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The Iowa Farm Bureau gathered input from over 200 farmers across the State during the month of February. We conducted 20 regional farm bill study team meetings where participants were asked to answer two basic questions. What should the goal of the Federal farm program be, and what mechanism should we use to accomplish those goals? These farmers, myself included, spent about three hours brainstorming ideas to include in Farm Bureau's policy development process for the next farm bill. I have included these thoughts in my written statement for the record.
Consensus will not be easy to reach on the next farm program. That was very clear at our regional meetings. Dependent on your individual situation, and on what you produce, you have different goals for a farm program. However, some consensus did emerge across the State. I offer these thoughts to help in the development of a new farm policy.
Honor the promises of the 1996 farm bill. Congress and the administration promised regulatory relief, tax relief and expanded markets when it passed Freedom to Farm legislation. The failure to provide these has accentuated, and in some cases contributed to the economic problems facing farmers today. Trade with Asia has declined 17 percent in 1998 and an estimated 23 percent in 1999. With 42 percent of our agriculture exports going to that region, it is no wonder that our agriculture economy is in trouble.
The 200-plus participants at the regional meetings were unanimous in their belief that the Government, both the administration and Congress, have not held up their end of the bargain. Do not return to the past. The last 20 years offer us a valuable lesson in the impact of different supply management programs on the agriculture economy. Set-asides, grain reserves and higher loan rates are not the answer. Set-asides may have provided temporary price boosts, but we are in a world-wide market.
Other countries, particularly those in South America, simply filled the void. We lost market share, did not get the long-term price response we wanted, and had to spread our fixed costs over fewer production acres. Whether we like it or not, we operate in a global economy, and cannot take unilateral actions to control production. We want to keep the flexibility in the current program to plant for the market, not a Government payment.
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I also believe we should expand the program to include total crop acres, not just the traditional program crops. The focus on program crops is stifling diversity in production and penalizes producers who have ventured beyond the traditional row crops to improve their profitability. Do not eliminate all the risk and guarantee a profit. Our goal should be to manage risk and create profitable opportunities for farmers. Farming is a risky business, but the appropriate role of government is to help develop the tools that we can use to deal with price and weather risk.
Crop insurance has come a long way, but more work should be done to make policies more flexible, improve farmers' choices on type of insurance coverage. The crop insurance reform packages currently in conference will help. Reducing the cost of buy-up coverage is a wise use of Federal funds. The more farmers that have adequate crop insurance coverage, the less pressure there will be on Congress to provide disaster assistance. We need to develop a farm policy that recognizes the impact of other Government policies on agriculture's profitability.
As farmers across Iowa brainstormed ideas to improve profitability, it became clear that many of the ideas were outside the scope of the farm program. For instance, concentration and consolidation in the agribusiness sector is a major issue in Iowa. Infrastructure development, such as the expansion of the Mississippi locks and dams system is essential to keep us competitive in a world market.
Federal monetary policy also drives agriculture's profitability. If we develop a new farm program without consideration for the impact of these other governmental policies, I believe we will not solve the issue of profitability, and only put continued pressure on Congress to provide economic bail-outs.
We need to encourage end-reward conservation practices. The previous farm programs established policies to improve stewardship of our natural resources. We need to strengthen these programs by rewarding good practices. Payment should be made available to all producers for existing conservation practices. Today, the program is structured in such a way that a farmer has to plow up land that is in waterways or buffer strips in order to enroll it in the Conservation Reserve Program. This is ridiculous, and it undoes any positive gains that we have made in preserving our natural resources.
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Additional financial resources are also crucial. Congress has been quick to adopt new voluntary programs to improve conservation, but equally as quick to reduce Federal funding for the National Resources Conservation Service and the Environmental Quality Incentive Program.
We cannot take an isolated look at Federal farm programs. Our success or failure on the farm is dependent on many factors, including the export market, Federal monetary policy, corporate mergers and acquisitions, tax and regulatory policy, transportation, just to name a few. I urge you to look at the broad spectrum of policy issues that impact agriculture as you design a recommendation for the next farm program.
In conclusion, we as farmers look forward to working with you as we develop a new Federal farm program. I urge you to look at the future and not to the past. Supply management is not the answer, neither is a completely decoupled program like Freedom to Farm. Somewhere in between is a program the provides the necessary risk management tools to help farmers manage a combination of price and production risks to ensure their economic prosperity. I hope that 10 to 15 years from now, if one of my daughters wants to get into this rewarding business, I can tell them that the opportunity is there, and they do get paid for it.
Thank you.
[The prepared statement of Mr. Heinrich appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Hiscock.
STATEMENT OF ERIC HISCOCK, CORN, SOYBEAN PRODUCER, CLIMAX, MI
Mr. HISCOCK. Good morning, Mr. Chairman, members of the committee, I am Eric Hiscock, owner and operator of a corn, soybean and popcorn farm. And I would like to thank you for this opportunity to address you today concerning Federal agricultural policy.
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Clearly these are not the best times for agriculture. We are faced with not only low prices for most commodities, but also weather-related problems in several areas of the country. A sober reminder to me is a conversation I had last year with a member of a quality family hog farm, when he told me they had lost 10 years of savings in less than a year.
In 1999, the House Agriculture Committee took strong steps in securing $9.3 billion in emergency funds due to the second consecutive year of unprecedented weather losses and lost value of crops and livestock sold at market. They also are working on reforming crop insurance by committing $6 billion for the reform and reducing the need for Congress to resort to ad hoc disaster assistance. These were significant for short-term progress, but challenges still remain regarding U.S. farm policy.
The FAIR Act is continuing to work as designed. Producers are reallocating their resources in a more efficient manner than the Government could ever dictate. I am pleased with the flexibility to adjust crop acreage in response to both economic and agronomic factors. The market provides producers with pricing opportunities with AMTA payments and loan rates providing a partial safety net. Congress must avoid abandoning the market-based policies of the FAIR Act, including increasing loan rates. Actions such as increasing loan rates will reflect the steps taken in the early 1980's that caused U.S. grain and oilseeds to become non-competitively priced in the world markets. The loan program was intended to be a method to lessen pressure to sell at harvest time, and to spread sales throughout the marketing year. It is a marketing tool for producers, not an income support program.
The loan program is not the only safety net. Farmers also receive AMTA payments. Farmers and the Government entered into 7-year contracts in 1996. And those contracts should be carried out to their full term of 2002. However, I urge you to consider adopting a counter-cyclical payment measure for the remaining years of the FAIR Act as a supplement to the AMTA payments. Congress should avoid increasing marketing loan rates and stay the course on marketing aspects of the FAIR Act.
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Congress gave farmers their word regarding access to additional foreign markets through trade policy reforms, relief from over-burdensome regulations, additional and improved risk management tools and tax reforms for their support of the FAIR Act in 1996. Now facing the third consecutive year of all-time low commodity prices, farmers continue to hold up their end of the bargain. It is time for Congress to do the same with the following opportunities:
Additional farm assistance. Increase agricultural exports are not the only solution to improving net farm income. However, since we export about one-third of our production, improving trade is a high priority for farmers. Without strong exports, we will be forced to significantly reduce the number of farms, or in my case, I would have to eliminate the one full-time employee that I have and need. The administration must live up to its commitment to use the Export Enhancement Program to secure foreign markets for U.S. farmers. The FAIR Act provided $1.5 billion for the program, but the administration has used little of those funds.
Permanent normal trade relations for China. China is now our fourth largest trading partner and is the most important growth market for U.S. agricultural exports. China could be worth over $3 billion for our farmers and ranchers. If permanent normal trade relation status is not granted, China will still become a member of the WTO and other competing agricultural exporting countries will realize those gains. Congress must grant permanent normal trade relation status for China.
Sanctions reform. Trade sanctions must be lifted. We impose trade sanctions on nations who do not live up to our concept of where they should be or who are not doing what we think they should be doing. Sanctions do not work. They only hurt us as we surrender yet another market to competitors who are ready and willing to oblige. We cannot export our social reforms or enforce labor or environmental standards.
Risk management. A significant amount of work has been done to develop a more comprehensive Crop Insurance Program that would allow farmers to better protect against yield and price variations. With the increased number of producers relying on crop insurance as their primary risk management tool, Congress must complete the task begun over a year ago and utilize the $6 billion set aside for the program at last year's budget resolution. Reform crop insurance so premiums will reflect the actual risk for each region of the U.S. For my farm, by using all the production risk management tools available, the cost of crop insurance is too high, and not relative to the risk posed by the diversity of my operation.
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In closing, I ask that you provide me with the freedom, flexibility, time and market access needed to operate my farm. I will adapt and make changes necessary to continue to be successful in producing an environmentally safe food supply for the U.S. and the world. Thank you.
[The prepared statement of Mr. Hiscock appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Ewing.
Mr. EWING. Thank you, Mr. Chairman, and again, thank you to all of you on the panel.
Mr. Hastings, you are from the district I represent. You are not on the river, right?
Mr. HASTINGS. Right.
Mr. EWING. How far are you from the Illinois River System?
Mr. HASTINGS. One-hundred miles.
Mr. EWING. That system is very important to you then for transportation of grain from Ford County and that part of the State?
Mr. HASTINGS. Not necessarily directly. But it provides a liquidity in the market that we trade in, and from that standpoint, very important in our economic benefit.
Mr. EWING. Well, maybe you could expand on that just a minute, about the importance of the river markets and the advantage that it really gives to central Illinois farmers?
Mr. HASTINGS. Aside from carrying an awful lot of grain to Gulf export markets, our facilities that are located on the far east side of the state trade in those Gulf markets because of train loading operations that we maintain to export grain as well. Without the liquidity of that market and the liquidity of the supplies available to world markets, we would not have an ongoing trade with the rest of the world. So we need to maintain a standard that there are grain supplies available through the Gulf at all times, and a supply available that is there when they need it.
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Mr. EWING. To each member of the panel who wishes to respond, what would you consider to be the most important change that should be made when we do the next farm bill?
We will start with you, Mr. Hiscock.
Mr. HISCOCK. Well, I would again reiterate, I would keep in mind keeping the flexibility, the freedom to plant the crops that the market dictates, staying away from supply management conditions.
Mr. EWING. So you would not change the direction of the current bill?
Mr. HISCOCK. No.
Mr. HEINRICH. I guess it kind of ties two together, I would agree with Mr. Hiscock that we need to keep the flexibility to be able to be profitable, and we also need that opportunity. I think that ties in with the crop insurance part. I think we have to have the tools to be profitable, and I think that would be very important, you guys are working on it right now.
Mr. EWING. Just go on down.
Mr. HASTINGS. There was an Option Pilot Program that was made available to farmers in our area some years back that gave farmers an opportunity to assess the value of using options in their marketing operation. That was one of the opening best things, I would think, that was made available to farmers in that area, was to control their own marketing destiny, to have some input to adjust their own prices in a risk management format. It made them responsible and yet aware of the opportunities that the market gave them.
Mr. HARDING. I guess at this point in time, I would definitely like to see the direction of our present farm program continued. Obviously it has not solved all the problems or we would not be confronted with the commodity prices we are today. But I still think we should be given the opportunity, and I think the export area probably could help the most. Not that that is going to be a cure-all. And I agree with the statements that were made earlier, as far as the insurance, I think we should be encouraged to give opportunities for insurance that would help us over the times that bother from that aspect.
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Mr. CORZINE. Congressman Ewing, if I could back up just a minute for your first question, maybe help you on the transportation question? At Assumption, IL, I am 30 miles from Decatur and most of my corn goes into the Decatur market. But to show the importance of the river system to me, and the competition, when there was a river problem or a lock and dam problem on the Mississippi up somewhere near Iowa, my bid in Decatur, IL immediately went down 8 cents. So that shows you how all of this is interrelated and why the lock and dam system really is important to all of us.
Now to your question at the moment, I would say, we really do not need to change the Freedom to Farm Act a lot. I would not look for that direction to change, because we are in a world market. What we really need help with is the promise of the market development type things that we have shown that we need. You can started, like I mentioned earlier, the ethanol market, that expansion. We can provide the grain, we need that. We also need the market development in areas as far as world market development. The promise of that was there and it has not been followed up on, and that is what we really need the help with. We can produce the grain and we want to do that. And what we really need help with is showing the world that we can supply them, and I think we can affect the whole world and do the human rights things by working within these countries to help them with that. And it all starts by doing business with them and trading with them.
Mr. EWING. Gene.
Mr. BARKLEY. Yes, Congressman. I would agree. I think the direction is headed in the right way, and actually I would not say changing the course but I would say more of trying to accomplish the things that we set out to accomplish and fulfill the promises that were part of that package that are necessary to make it happen. A lot of us viewed Freedom to Farm as really a transition, getting more to the free market. Unfortunately, as I look at it, we have gone not very far down that road in making the transition. And one of the concerns that raises for me is, as we look at the safety net aspect, the revenue programs that are showing promise, and I could even see that if we were operating a ways down the road in the transition, that that is really where we need to be, where we can handle the risk, address the issues at hand that we, as a producer, have, and then compete in the world market.
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My concern is those other parts of the package are not in place, they are not going to happen overnight, and if we move totally to just using some kind of a safety net approach as what the answer for agriculture is, I think we are sort of left hanging out there, because as was suggested earlier, some of the options that have been available through Federal crop, as example, in the past, really have not made any sense for many of us that produce in particular regions of the country. Some of the new programs are beginning to get to the point where they are a reasonable risk management choice to buy into, but my concern is we are not there yet.
Mr. EWING. Thank you all.
Mr. Boswell.
Mr. BOSWELL. Just a brief point or two. I appreciate some of the global vision we have heard here this morning, and I think that we have to think in those terms. It was quite an education for some of us here, several from the panel, when we went to Seattle and talked to the European Parliamentarians of the New European Union, and so on. We got in some lively conversations about GAO or some of those type things—genetically modified, GMO. I am getting them mixed up there a little bit. But I think you know what I mean.
But we are in a new era, and I think you recognize it. I was not in Congress when this last farm bill was passed, I am quite sure I would have supported if I had been there, from what I knew at the time, at least. I find it interesting the comments about not getting the trade. There has been a world-wide overproduction unprecedented in the last 4 years, and I have talked to some of the trade representatives, and I said, what do you do when you get Europe or the Pacific Rim and you want to sell, and they welcome you into their meeting room and they say, well, excuse me, we want to sell to you folks because we have got overproduction.
The point of it is, we have got a whole new situation, and we are going to have to plow some new ground to figure how we can do this, because of this overproduction that is going on around the world. And normally, usually, most of the time, drought or flood or something interferes with that. But it is an unprecedented overproduction for 4 years, so we are told, by the Department of Agriculture. I presume that is correct. So that is a new challenge. I appreciate that.
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Most of you made comment that you want to stay with the program, and some of you have said do not raise the loan rate, and some have made comment about on-farm storage. Do any of you have any recommendation to give any consideration to raise the loan rate?
I do not see any. Let me ask the audience, let me give the audience a chance to participate a little bit. Does anybody in the audience, farmers that would want to look at raising the loan rate? Just show your hands. Put your hands up if you are interested.
[Show of hands.]
Mr. BOSWELL. OK. There is not too many.
How about on-farm storage?
[Show of hands.]
Mr. BOSWELL. About the same ones.
The reason I raise that question is, I go across my district, which is a very, very agricultural rural district, and I get this brought up to me on a continual basis.
Just the last comment, Mr. Chairman is, I would hope that and I know that all of us here support ethanol, thank you, Mr. Stenholm. In fairness to Mr. Stenholm from the Oil Patch, I was in his district last year. And he arranged, quite wisely I think, for me to go out and visit some of his farmers who are also independent oil men. Small wells, trying to get in the independent market, been shut out by the big guys and so on. And I realized then that his statement about us cooperating together has a lot of significance. Some of us raise corn, some of us raise soybeans, some of us raise other crops, some of us are in livestock, kind of diversified. Well, his farmers down there are kind of diversified. They have got some of these—what do you call those wells, Charlie?
Mr. STENHOLM. Stripper wells.
Mr. BOSWELL. Stripper wells, that is part of their cropping, it is part of their farming. And they were totally unprofitable. They were shutting down all over the place, apparently, a lot of them. Caused them terrible pressure.
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It occurred to me that we in agriculture have never done the best job of cooperating and working together. So I think of that, I got to thinking about this whole global situation, where we have got this overproduction—we are in a world economy. I support the fast track, I support the permanent trade relations with China. I think we have got to go that way, we have got to be engaged, we have got to be at the table, but I think also we have got to figure out some new methods of communication. Because I cannot give my man from Maquoketa those prices for that daughter if we cannot work this out. We have got a big challenge.
I just wanted to make those comments. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. Boswell. Mr. LaHood.
Mr. LAHOOD. Ted Harding, I know that you are one of sort of, I guess a dying breed. You are a family farmer, I know your farm has been in your family for over 100 years, your father and now your son and yourself and others are—if you could offer this committee some suggestions on how do we preserve the family farm and what are the biggest inhibitors to preserving the family farm, I think it would be interesting. Because I think all of us on the committee, and we are a committee of 53, and even though we have just a little under 10 percent of our membership here today, I think we are all interested in preserving the family farm, and I think your family is a classic example of a family farm right here in central Illinois that has survived. But I wonder if you would offer some comments about the importance of the family farm, how to preserve it and what are some things that inhibit you from doing that?
Mr. HARDING. Probably, as much as anything, Mr. LaHood, is the fact that some of the tax consequences we have have probably as much impact—quite frankly, even more so than commodity prices, on preserving the family farm.
I think the only problem I have there, too, is the fact that was brought out earlier in our discussion, what constitutes a family farm? Because quite frankly, in our area we get accused of the corporate farm operations taking over the family farm. Really, in this locality, that is not the case. It is basically the family farm becoming larger. But in the consequence of doing that, some family farms go out of business.
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I wish I had a good solution to answer that question. I think probably in the end result, there are going to be family farms survive, and there are going to be family farms that are not going to survive. And I am not sure there is a great deal we can do about that at this point in time. I wish there was.
I mean, I hope our family farm can continue. I do not know whether my grandchildren will want to farm, at this point in time or not. They are not old enough at this point to make that assessment. But I will be honest with you, at this point, if they wanted the opportunity, I would not discourage them, as I know a lot of farm families are discouraging their family members to stay on the farm. I do not feel at that point that I would do that. But I think probably the next 5 to 10 years is going to determine a lot about how the family farm is going to survive.
Mr. LAHOOD. Do you think that one of the key contributors to extending the opportunity, if your grandchildren do want to participate, one of the most important things we could do would be eliminate the estate—just totally eliminate the so-called death taxes?
Mr. HARDING. It would sure be a big step forward. That is not going to be the only thing that is going to make the family farm survive, but it would be one opportunity that could sure help. No question about that.
Obviously if we could make commodity prices better and we can make the atmosphere, the economic atmosphere in agriculture better, that will help, too. But it is a combination of things, I think, that is going to actually help, to whether the family farm survives or not.
Mr. LAHOOD. I do think there are a lot of family farms still in central Illinois. I regret very much that people that, at one time, were in hog production have left that, simply because of the problems with pricing the last year or so. I am glad the prices are up where they are today, because I think it has been helpful. I do not know if your family was ever in hog production or not, or are today, but I know that you do have a significant farm, but I think the point about the estate, the elimination of the inheritance taxes is so critical, too.
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And if any of the rest of you want to make a comment on the importance of the family farm, and—Ted, did you want to say something else?
Mr. HARDING. Yes, the only comment I would make along there, Ray, is the fact that I agree that you are right. There are a lot of the hog operations in our area in the last 5 years—not even just in the last 2 years, when the low commodity prices forced many of those out of business. There were several went out of business prior to that. And I think that is a concern. We are strictly a grain operation at this point in time, and I forgot to mention that in my opening statements. We are a corn and soybean operation. And I think that is a concern among the grain operations, is this a trend, will we be in that situation 5, 10 years down the road? I do not think we can stand here and say for sure that that could not happen down the road. It has not yet, I do not feel at this point in time. But to say it could not—and probably the way we address taxes, the way we address the farm program will have influence on how that plays out.
Mr. LAHOOD. I do not know if anybody else wants to comment on that? Sure, please, go ahead.
Mr. CORZINE. Congressman LaHood, I would agree with the estate tax problem that we have. And anything we can do there will help a great deal. I think the other thing I would add is that, we need to help the family farm make this transition. We are not only a family farm, as my son is the fifth generation on our farm. We are looking at long-term things, and what we need help from the Government are these long-term solutions. And I will go back to the market development things we have already talked about. And also help in helping the family farmer realize this is a business, and helping them work through some of the business-type solutions so they can help themselves survive. Because I think that is what we all want to do.
A good example is in the risk management area, the crop insurance area is a program that we use. We use CRC, crop revenue coverage, but it is really tough. I mean, I have trouble finding insurance agents that can really explain it to me. And that is just one example that we need help, not only with the current programs, but maybe some of the innovative things, like using puts and calls in the Chicago Board of Trade for market protection, to help us market our grain. But those type of long-term things are what we need real help with, as far as the family farm.
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Mr. LAHOOD. And was there one—yes, sir.
Mr. HISCOCK. Yes, I would strongly agree with what you said about eliminating the death tax. I think that would be important, especially for me in my area. I am purchasing from my parents a farm that has been in the same family for over 150 years. Some of the farms that I do operate are retired farmers, and obviously none of their sons or daughters chose to continue farming.
And with some of these farmers, the estates are not large enough that they can afford the estate taxes when it comes time to pass the farms along to the kids as heirs. Many of the sons and daughters are almost forced, or are forced to go right back and resell it. And many of them without strong ties to farming look for the highest price. And in my area, developers are the highest price. And it is very hard to compete with that. And I think that would help a lot.
Mr. LAHOOD. I will tell you about a woman who came to my office in Springfield, a year or so ago, and she is a schoolteacher, and teaches school in Springfield and inherited her parents' farm and was faced with over $100,000 in inheritance taxes, and actually sold the property in order to pay the tax. Now that is not exactly the American dream, and that is one of a number of sad stories about people trying to leave their family business or their family farm.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you. Mr. Phelps.
Mr. PHELPS. Thank you, Mr. Chairman. I too agree, elimination of the estate tax would be a big help.
Real quickly, the flexibility, a common element that you have mentioned, do you have an agreement on what would be the top priority within that flexibility would be that we would preserve? Would it be being able to make the decision to plant what you want to? Of course, flexibility maybe takes in a lot of different things that you are talking about. But is there one particular one thing you all would agree on to be the top within the flexibility? To allow the flexibility would be to plant what you want? Would that be what I hear you say?
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Mr. Hastings.
Mr. HASTINGS. I think planting flexibility would mean whatever the market wanted to buy. We would like to raise the crop that the market is the most interested to purchase at a dollar that will generate income for all of us. And in that behalf farming and farmers are very good at the production side. This marketing issue has become a tough issue. The puts and calls and knowing how to use those has kept a lot of farmers from making good money. The GMO issue has become a big issue in not supporting grain prices.
The market will determine what we need to raise, but that flexibility, we need to be able to respond as best we can, to raise the crop that the market would demand.
Mr. PHELPS. So the market that would have an influence on what you think would priority to raise, it is not the other way around, what you raise does not influence the market?
Mr. HASTINGS. It certainly does. But I think we need to be very sensitive to what the market wants to buy. Those are the people that we need to serve. We need to serve what the people have interest in purchasing.
Mr. PHELPS. Is it that hard to predict what that would be? Or is that we come into help, to be able to allow some predictions of what those market desires are, to help you project and plant?
Mr. HASTINGS. The ability to respond to it.
Mr. PHELPS. Anybody else have a comment?
Mr. BARKLEY. I guess the only comment I would make, in terms of flexibility, I guess I have only thought of that in terms of planting flexibility. I am not real sure what else you would be suggesting.
Just as an aside, I would point out that in the particular area of the country I come from, our planting flexibility is really pretty limited because we are blessed with the fact that we need to be raising corn and soybeans where I farm. But I still buy into the concept of the flexibility. I mean, it has some minor—it certainly benefits over the controlled management where I was limited and had to chop up fields and do things. I can get my rotation established, I can raise on what fields I want to—that type of thing.
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But the real importance of planting flexibility for me, even where I am going to primarily be half corn and half soybean rotation is what it does for the rest of the producers. If they are raising soybeans or corn or cotton or popcorn or whatever else, because the market tells them that is where the market is, I am a lot better off, because then that avoids some of the overproduction.
In terms of knowing what the market is telling us, I think we are just really learning that, but it is really difficult. We have to be in a world market, but just as was suggested, it is a new ballgame. We have not really learned how to do that real well yet. But when we keep throwing up barriers and artificial blocks in the way, such as we experience from time to time, and when we have the unfair trade disadvantages that are a part of what we have to confront, that makes that process even more difficult.
So I think it is a learning process, as we go down the road, to decide, what is the market telling us we need. But in the big picture, in what we have done in the past, I do believe that that is an important piece that needs to be maintained, to allow the producer to raise whatever crop that they perceive the market is telling them, not based on what some support program is going to do.
Mr. PHELPS. So flexibility to you is planting flexibility?
Mr. BARKLEY. Yes, choice of crop production.
Mr. CORZINE. One twist, Congressman Phelps, I might add to that is, I agree the planting flexibility, because I also am in corn, soybean country. But we have another thing here called value added. And I think we are going to see more than just commodity corn and commodity soybeans, and that is another aspect. We need the marketing flexibility because there are other places in the world. And just like in my area, we send tofu soybeans to Japan. A little ways away from me there is corn that most of the guys grow that are high oil that goes into the Mexican market.
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So we are going to have those kind of things, and it is going to be not just a United States issue but a worldwide issue. So we need that marketing flexibility so that then we can respond. And it is going to continue to be a moving target, I believe, because we are learning in the early stages what a country or what one customer needs one year in, say, a high-oil corn. Next year, maybe they do not need as much, and so you move to a hard Endo-sperm corn or a high lysine or a high starch corn. So those kind of things are what flexibility mean to me also.
Mr. PHELPS. Thank you.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Chairman.
Let me first ask each of you, several of you mentioned fast-track authority. Do all of you believe that Congress ought to grant fast track trading or negotiating authority to the administration?
[Affirmative nods.]
Mr. SIMPSON. All of you believe that? OK.
The second question I want to ask, I like to use these hearings as an opportunity to try to educate myself on some issues in different regions of the country. I sit on the Transportation Committee, as does Representative LaHood. And several of you mentioned barging and transportation system and so forth, and needs to improve it. Educate me as to the importance of the barging system, what some of the problems are, what we need to do. And also, are there organizations, groups that are opposed to improving the barging system, that are fighting you on improving it and so forth? The reason I ask that is because, in my district in Idaho, in Lewiston, we have an inland port, which is the furthest inland port on the Pacific coast. And there are numbers of groups that want to take out the dams and the locks and so forth, and eliminate barging on the Columbia River, or at least it would eliminate it into Idaho. Is the pressure on you from organizations that are opposed to the amount of barging that goes on on the Illinois River and the Mississippi River? Educate me on this, if you will. I will ask anyone. Mr. Hastings, you talked about it in your comments.
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Mr. HASTINGS. Obviously it is a big money issue. There is going to be a lot of cost requirements to upgrade the river system, and environmental issues.
Mr. SIMPSON. How are those costs paid, if I might ask? Where do the costs come from to improve that?
Mr. HASTINGS. Some of the fuel tax goes back to pay that. But mostly the farmer pays it through lower price. If that river system is not upgraded, it becomes less efficient and the farmer pays through a lower price mechanism. That lower price then does not flow back to the river system, it just becomes a profitability issue.
Environmentally, there are a lot of groups who would not support changing that lock and dam system because of the environmental issues, but again, world trade depends on a free and constant supply of grain to go into the marketplace. We showed in years that we put embargoes on that when we lost markets, we lose them for a substantial length of time. Market and market exports rely on a consistent supply of that grain going to into the market channels.
Mr. SIMPSON. How are the costs for improving the locks and so forth on these rivers paid for here? How much does the Federal Government put into that? Does anybody know?
Mr. CORZINE. I am a little fuzzy on the figures, but I think a lot of that money, I think approximately a half—and do not hold me to that—could come from that barge tax fund, fuel tax fund, and the rest would have to come from the Federal Government.
Also on the environmental part, a thing that is not considered, I think some of the environmental concerns are really misguided because we are talking about an antiquated lock and dam system, and when you renew, you extend the locks, you become more modern, you become more environmentally friendly, just in the process of, rather than barges sitting there having to wait to move through and the propellers have to churn, and those kind of things, you move them on through. And the other thing, if we do not move with the barge system, or with the river system, a real easy question is, which is more environmentally friendly or disrupts the environment less? One tow or, it would take about 600 trucks, I believe, or maybe more, operating on the roads. And then you get into safety issues and how much fuel they use, and those kind of things.
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Mr. HARDING. The only other comment I would make, Mr. Simpson, along that line is agriculture products are the main commodity that is moved on the river, but there are other commodities that are moved there. There are a lot of petroleum products, coal is moved, rock, things of this nature. So we are not the only industry that is concerned about this.
Mr. HEINRICH. I would like just to touch on a couple of things that have already been said. I am not by any means an expert with the lock and dam system. I am only about 30 miles from the Mississippi River, and I know in our area, tourism is a big thing. So obviously there is a lot of concern there.
But a couple of points that have already been said that I just want to kind of touch on, and that is the transportation. You have got product going up and down the Mississippi, both, and you think of the transportation over the road, environmentally, it seems to me the lock and dam system would be more environmentally friendly, like it was stated.
I know one comment was made earlier as far as the price of the products we get. When the river closes down for the winter or if it is too low, we see the basis bids just drop instantly. And it is very costly, and costs for the products that would normally be coming up the river go up also. And I think we have to take a serious look.
As Congressman Stenholm said, cooperation, I think that both sides need to start working and figuring out a system, because I think there does need to be improvement. But we need to make sure it is environmentally friendly as we do it.
Mr. SIMPSON. Thank you.
The CHAIRMAN. Thank you. Mr. Buyer.
Mr. BUYER. I guess not being with the Agriculture Committee, I am going to share a little different perspective, and then I have a question.
So I am not lost in the high weeds, I want to take a step back here. I have been a good listener to the panel and make this comment. Since I do not buy into this that we are in the new millennium, let me comment upon this century that we are still in. This century—oh, I have got one supporter. Two people in the room can do math. [Laughter.]
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This past century, there have been a lot of different command and control functions that Government has had upon different sectors of the economies. And it has been through cross-parties. They started this century by breaking up trusts and monopolies. And then as we came out of the Depression, we ended up with different policies and agriculture policies. And even Richard Nixon tried price controls for inflation in the early 1970's.
Then Ronald Reagan came to office in the early 1980's and said we are going to start changing, we are going to deregulate. The first thing that happened were the airlines. Then in 1995, when Republicans took control of Congress, then what happened? Well, we decided we would go after telecommunications. So we did telecommunications. We did agriculture. We just completed banking insurance and securities. Next are utilities.
That does not mean, though, that government should not be good stewards of the economy. I am surprised that none of you have really talked about the vertical integration that is happening in the agriculture sector, because I am stunned at the level that is occurring within my district, we call it the heartland of America, in our pride, but I am sure it has got to be happening in Illinois and in Michigan and Iowa, and other places. So I am curious and appreciate your comment on that.
The reason I think that government does have a role, and that we need to be the good steward is that I support the small business man and woman, which means that they have to have—the level playing field seems to be the cliche of today, that we have an open, fair competitive marketplace, which means stewardship.
It is fair, and I accept criticism that you chastise Congress by saying, you asked for support for Freedom to Farm, in exchange you would do these things for us. We said, well, we would expand trade. Well, yes, we passed NAFTA, we created the GATT and the World Trade Organization. Fast track, it did not happen. I supported NAFTA, GATT and WTO, but I did not support fast track. I did not support fast track because, in December 1995, the President violated a side agreement with NAFTA, he breached the fidelity of that agreement, and I will not sit down at the table with someone who breaches the fidelity of an agreement between nations.
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When it came to China, I am not going to support PNTR with China. Now that may shock and surprise you, someone coming from an agricultural district. Ladies and gentlemen, if you want to negotiate a bilateral trade agreement with China and have it reviewed on an annual basis, I will support that. This over-emphasis that, the sky will fall if we do not have PNTR is false. What the President will do will go to the non-application clause, revert to the 1979 agreement, whoever is the next president is not going to permit the European Union and others to gain access to the market, we will move to a new bilateral trade agreement, and it will be done on an annual basis.
With regard to reduction of taxes, we passed a $790 billion tax reduction bill that was vetoed by the President. With regard to reducing burdensome regulations, there has been a stand-off between the Congress and the administration. The best thing from that, perhaps, is a breath, that you get an opportunity to catch your breath. That is the best thing I can say.
With regard to crop insurance, here is the question I have, the second question I have for you. If we ask you to farm for the market, and some of you are grain producers, the market is demanding and makes requests for certain specialty crops, different types of corn specialties, you want to do that, but in that help of risk management, it is not covered by crop insurance, and then you have got loans out there who banks will not give those if you do not have the crop insurance, and you are kind of caught. Market demands something, yet you are not able to plant it because of high risk.
Are any of you experiencing those issues?
[No response.]
Mr. BUYER. No? Well, I had better go back across the line to Indiana.
VOICE. We all wondered why you came.
Mr. BUYER. Well, thank you.
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You are not planting those types of specialty crops?
Mr. HASTINGS. The specialty crops that are grown in our area are still based on commodity prices, and then pay a premium for specific traits in those crops. Most of the specialty crops in our area are still corn and soybean commodities with specialty traits that the market commands. So I mean, the marketing of those crops is still based in commodity prices and options and the risk management insurance policies that we have still support those.
Mr. BUYER. All right.
Mr. CORZINE. Maybe I would attempt to answer that. I would agree with that, everything being based still with a CBOT base. You can use the current Crop Insurance Program, still qualify what we are growing in my area, as far as—one thing is GMO-free is kind of a specialty, and so are the high-oil corns. And so they still qualify under the crop insurances. But also, we are taking a look at using the Chicago Board of Trade to protect ourselves with puts and calls and other type things. Sometimes they work, and sometimes they do not, quite frankly.
On your question of integration, what we are seeing more in our area, and what we are trying to do as our Illinois Corn Growers Association, is to get farmers involved in some integration themselves, with things like—we just had some help from the Ryan administration in the Illinois legislature to help with some money for a farmer-owned ethanol plant, to develop that, so that the farmers can participate in the added value. And that is just one example. They also helped with—there is going to be a pork production or pork processing facility in south central Illinois that Illinois is helping with also.
So those are the type of things we are working on in the value added area, for example, to retain value on the farm. And so we are kind of integrating ourselves somewhat. And I think we are going to have to do that, part of this whole value added thing that we are working into.
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Mr. BUYER. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.
Now having sat through over 50 hours of hearings this year, I am often reminded of what was a quote of Will Rogers when he said, ''It ain't people's ignorance that bothers me so much, it's them knowing so much that ain't so, is the problem.'' And I think that is a challenge we have, and I say that very respectfully and it is aimed at me as much as anyone, is figuring out what is so.
Every time I hear the word free market, I have to say, that is just not so. There is no such thing as a world free market. And that has been one of the weaknesses of our farm policy. Because as much as we would like to see it, as much as I would like to see it, it is not that way, and I do not think it is going to be that way in my lifetime. And I worry a little bit about that because I have a son who is fourth generation carrying on our farm. And I find myself, and your daughter, Amber, having a similar problem. Because when I go home and try to help him for a few hours or a few days, as I would look forward to doing over the Memorial Day break, that is the question I ask him. Am I going to get paid? The answer is usually, no, I do not.
This year we will not even start our combine. We are in the worst drought since the 1950's right now. And if we do not get some rain, our primary cash crop, is cotton, we will not be—well, we have to plant it. You cannot collect the insurance unless you plant it. So we are going to be doing everything we can to make a crop. But it is difficult right now.
One of the things—you all have mentioned this, and I have got two questions I will ask you at the end of some overall statements. The question rural America has got to ask, along with the family farm question, what do we want our rural communities to look like 5 or 10 years from now, and if we continue on the same trend, what it is going to look like, and what can we do to change that trend? Because it is not just a family farm problem, it is a rural America problem. Whether it is rural health or hospitals, or schools, et cetera. That is a question. And so it is a little more complicated that just farm policy, if you are concerned about rural America, and you are, as we are, as everyone on this panel is.
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Mr. Hastings, you made the comment that 25 millions have been taken out of production in the world over the last 3 or 4 years. That kind of bothers me a little because I, just as this morning, I watched television, I see starving children all over the world, and the farm policy that we are advocating is lowering the price, and we are going to put folks out of business. And that is happening in the world. I am not sure that is a good international policy for us to follow—I do not think you do either.
It is a question of, then what do we do differently about that, because just as in the last week, I have heard complaints of Mexican corn farmers complaining about the Midwest, and the fact that the efficiency and the cheapness of the corn that we are selling to Mexico in record amounts is putting them out of business. Just yesterday when we were in Idaho, I heard Idaho sugar producers complaining about Mexican sugar putting them out of business. And we have got a little controversy there.
I mention some of these things to show some of the complexities. Here I would ask again—and time would not permit asking all the questions I would like to ask of you today, but when we talk about that set-asides, grain reserves and higher loan rates are not the answer, they are for corporate America. I do not know a corporation in the world or a small business in the world that does not practice inventory management, but yet somehow we have a difficult time, because of the independence and the different regions in the country and how we look at things.
But I think, again, cooperation and having cooperation from corporate America in ways we have never been willing to do is going to be the answer—one of the answers, I should say. Because if we cannot find a way to manage inventory, you are never going to get price. And when you start talking about——
[Applause.]
Mr. STENHOLM. Wait, I would appreciate no applause. These hearings are not meant for expressions of that except when we are asked of this.
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When we ask the question, you can respond at that point, but I do not want to get into that area.
But inventory management has got to be a part of this. And in doing that—and I would remind you again of the oil industry. OPEC managed their inventory and the price went from $10 to $30 a barrel, and it put my independent oil producers back in business, and it gave us an opportunity to develop the ethanol business, because you cannot develop alternative sources of energy competing with $10 oil, but you can at $30 oil. And that is why this cooperation thing is more than just a political slogan for me. Because it is something that I think is absolutely important to us, and it is why I have done a 180 regarding ethanol and biodiesel and these other things, because I think there is room for this to be beneficial to all of us.
Let me conclude by asking the question of you that I have asked everyone in all of the previous hearings now, and I will ask the audience, also, the question. And most of you have already testified to this so it should be very easy to get the panel.
Do you believe that we should lift all unilaterally imposed sanctions on food and medicine that we have currently in place? Yes, or no?
Let the record show, the heads are shaking yes. If there is a no, I will let you respond for it.
Mr. BUYER. Mr. Stenholm, would you include the country of Iraq in your question?
Mr. STENHOLM. Every one. I said all. All unilaterally imposed sanctions do not provide for an exclusion in this. So we provide for all unilaterally imposed sanction. And the reason I ask this question is because, I do not see how it benefits us or accomplishes the goal when we unilaterally—even on Iraq—when we unilaterally refuse to sell food and medicine when our ''friends'' sell it. That is the problem that we have unilateral—I would love to see multilateral sanctions on Iraq to bring Saddam Hussein to his knees. The same could be said for Cuba, but it is not working, and when it does not work, it is foolish for us, in my opinion—and you have shared this, and I want to see how many in the audience disagree with the panel?
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Well, Yes, either way, if you differ—well, how many of you believe we ought to lift all unilaterally imposed sanctions on food and medicine? Show your hand?
[Show of hands.]
Mr. STENHOLM. How many disagree?
[Show of hands.]
Mr. STENHOLM. Let the record show it is about 95 percent, which is exactly the percentage we have had in the previous 2,200 people we have asked this, and also the panels.
Next question, final question. How many of you believe that Congress should vote to grant permanent normal trade relations with China during the week of May 22? If you answer yes, you can show by a show of hands, or by shaking your head, at the panel. You have always mentioned this in your——
[Affirmative nods.]
Mr. STENHOLM. How many in your audience differ with the panelists?
[Show of hands.]
Mr. STENHOLM. Let me ask this because this is my question. The panelists agree. How many disagree with the panelists that we should not—in other words, if you believe we should not vote for permanent normal trade relations with China, a show of hands.
[Show of hands.]
Mr. STENHOLM. Approximately 10 percent is exactly the response that we have gotten in all previous questions at these hearings.
Thank you very much.
The CHAIRMAN. I appreciate the panel's indulgence and their assistance on this. The panel will be dismissed. I will ask the next panel to come to the witness table.
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Mr. Paul Appell is a pork, grain producer from Altona, IL; Mr. Kendall Cole, corn, soybean, livestock producer from Virden, IL; Mr. William Graff, corn beef, pork producer from Middletown, IL; Mr. Glen Keppy, pork, corn, soybean producer from Davenport, Iowa; Mr. Darrell Lasswell, livestock, grain producer from Washburn, IL; Mr. Sam Latchford, corn, soybean, pork producer, Shelbina, Missouri; Mr. Lowell Schachtsiek, a corn, soybean, pork producer from Palmyra, Missouri.
If the panel would sit, please and we will take the testimony in the order of the way of the introductions. Mr. Appell, please.
STATEMENT OF PAUL APPELL, PORK, GRAIN PRODUCER, ALTONA, IL
Mr. APPELL. I am Paul Appell, a pork producer and grain farmer from Knox County, about 45 miles northwest of here. I would like to thank the committee for allowing me to express my views on the farm program, and would like to thank you for your part in helping us down at the farm level.
As a active participant in the farm programs and the Conservation Reserve Program in particular, I would like to comment on the environmental and wildlife aspects of the farm program. First, however, I would like to make a general comment that pertains to the overall farm program.
To the outside public, I and many other farmers might be viewed as very wealthy individuals when you look at our fixed assets of land and equipment. These assets are called fixed for a reason. I cease to be a farmer if I use these assets for other uses. Many farmers from me walk on the financial edge. Every year we get loans to obtain the money to buy seed, fertilizer and other inputs to plant the crops. We then hope for good yields and prices so that we can pay the loans off in the fall. As a result, I can do nothing on the farm that is not financially sound, or I will soon be an ex-farmer.
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The impact of this on the farm program is that I am very easy to control. If you give me a program that is to my financial benefit and say jump, I respond with, how high? There has been a lot of talk about controlling sediment, fertilizer and chemicals in the Illinois River in the Peoria area. You do not have to have a doctorate in economics to realize that if the rental rates for filter strips in the CRP were higher than that of raising corn, then farmers like me would soon put in filter strips.
In my view, USDA's best program over the last few decades has been the Conservation Reserve Program. It benefits not only the farm but also society in general through environmental and wildlife benefits. Except for the multi-national grain merchandisers, most midwesterners seem happy with the program. Illinois State and county governments think enough of the CRP to reduce the property tax on filter strips to one-sixth of what the land would otherwise be taxed.
A couple years ago when I received the outstanding conservation farmer award from my local Soil and Conservation District, I reflected back on why I would have been chosen for this. There were some farming practices, such as no-till and nutrient management in our hog operation that were done without Government assistance. The other conversation practices on the farm, the 60 acres of prairie grasses, the 40,000 shrubs and trees planted and the two wetlands would not have existed without financial help from the CRP.
The USDA has done a good job of tailoring the CRP over the last few years to target critical areas. However, the funds are way short of what farmers and wildlife habitat people would like to see. Something seems out of order to me when more is spent on one B–2 bomber than is spent annually on CRP. Military security may be important, but food security, the environment and wildlife deserve a bigger share of our tax dollars.
In addition to the farm program, what I would like to see is compensation for carbon credits. It only seems fair to have those who are releasing carbon dioxide into the air by burning fossil fuels to compensation those who remove and store carbon from the air in plant material. Paying farmers to store carbon through no-till farming not only helps prevent global warming but it increases the organic level of the soil to raise yields. The soil humus improvement program, as proposed by Jim Concilla, with help from the USDA scientists, makes logical and fair sense to me. It would seem that the cost of encouraging no-till farming would be more economical than the other methods of carbon sequestration being looked into by the Energy Department.
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In closing, I would like to say that I love being a farmer. I love doing good things for the environment. I love helping wildlife. The reality, however, is that finances, not desires, control what I do on the farm. I would like to think of myself as more than just a serf, I do realize that I am only a caretaker of the land for a very short time. With help from money allocated to conservation programs, I can leave the land in a better condition than I received it.
Thank you.
[The prepared statement of Mr. Appell appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Cole.
STATEMENT OF KENDALL COLE, CORN, SOYBEAN, LIVESTOCK PRODUCER, VIRDEN, IL
Mr. COLE. Chairman Combest, members of the committee, I am Kendall Cole from Virden, IL. My wife and I operate a 1,200-acre corn and soybean farm with a small livestock operation. We do that in conjunction with our oldest son who is 35, has a 700-acre operation along with his wife and four children, make their living from that.
I am chairman of Congressman John Shimkus' agriculture advisory committee, and he sends his greetings to you today.
My comments are coming from me as an individual farmer, and I ask you to listen to the end of the testimony before you jump to conclusions, and I would ask the audience to do the same, because the proposal that I lay out is somewhat different, and I have a long history in farm organization work and it probably is going to shock a lot of my colleagues from those efforts, too.
I am proposing that we at least discuss with other grain producing countries the necessity for a global set-aside program. In times of overwhelming surplus, when is enough? Is it 15 percent, 25 percent, with the technology and breeding advances that we have been able to make over the past many years, I can foresee that, if we continue on the current path, we could, indeed, really overwhelm this country, this world, with grain production.
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We need to be able to sustain profits in farming, not just in the U.S. but in the world. I have visited with farmers from Germany on our farm, I have been in Argentina, visited with farmers there. We are really much the same, we enjoy production agriculture and we want to be able to do that. But we have got to be able to do it profitably. Some ask me, will our foreign competitors sit down at the table and discuss global set-asides? I think they will. They should because they have got to earn profits just like those of us here in the U.S. do.
The South American farmer's variable inputs are his big costs. Land costs are relatively low. If he sets aside land, he is probably going to be in a better position than we in the U.S. where we have a high fixed cost. European farmers, of course, would be very similar to the U.S. in that regard.
Congressmen Stenholm and Boswell struck a responsive chord with me when they talk about cooperation, and what the OPEC nations have been able to do through cooperation. Now my proposal is not to make food or feed a scarcity. Trigger levels can be set at high enough levels that this does not become a problem, and we have many other facets that can avoid a scarcity problem. The marketing and storage channels are tremendous. We could choose to divert grains from industrial use if we ever got to the point that food or feed became a scarcity. I have some points along that line that I would like to talk about later, that we can play food security and energy security on the same piano.
We also have the advantage now of having large production in not only the northern hemisphere but the southern hemisphere, which gives us some hedging on that part of production. In my opinion, a bigger threat to food security, energy security is a lack of profitability.
With regard to the Freedom to Farm program, I would be remiss to not thank Congress for that program. The transition payments, the LDP payments that many of us have received, and also for additional market loss payments. We have had to swallow a lot of pride, but quite honestly, many of us could not continue on without some type of assistance in this regard. The vagaries of nature and the marketplace make it a very difficult game to balance. So it is with the typical optimistic attitude, the idealism that a farmer seems to be able to carry on, even in tough times, that I ask you to consider participating in discussions with farmers, and with our foreign production competitors, the idea of a global set-aside.
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This is not just the idea of one farmer, this idea was submitted to the Illinois Farm Bureau annual meeting just this past December. And I read from their Resolution No. 772. They adopted language to, ''actively encourage and pursue opportunities in conjunction with the American Farm Bureau Federation and other State farm bureaus to improve informational, organizational and marketing linkages between North and South American producers. Such pursuits should include discussion of the potential benefits of a global set-aside plan in times of overwhelming grain and oilseed carryovers.''
I know farmers from two other States that have made similar proposals. It is time to start thinking outside the box, recognize that it is a global agricultural economy that is crying for a global agricultural policy.
Thank you.
[The prepared statement of Mr. Cole appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Graff.
STATEMENT OF WILLIAM J. GRAFF, CORN, BEEF, PORK PRODUCER, MIDDLETOWN, IL
Mr. GRAFF. Thank you for letting me testify here today. My name is William Graff and I am a farmer. My wife and myself farm 1,288 acres and feed a few head of cattle. My comments here are my own.
I think we have to look back to be able to look forward when it comes to farm policy. In 1995, when Freedom to Farm was passed, we were also promised many things, very few of which have come true. I also believe there are five different groups of people or economic events that can share in the blame of the present troubles in agriculture.
The Clinton administration and Secretary Glickman's administration and the USDA, this administration has done very little but blame Freedom to Farm. The ethanol and MTB controversy, U.S. EPA, real sanctions relief so we can sell our products around the world should have been done years ago, why there was no roll-back or regulatory rules. The oilseed payment, how long can it take to get done. The oilseed program rules for sign-up were a lawyer's dream and a farmer's nightmare.
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I would also like to mention how our local FSA office's staffs have been burdened with an increased workload, while at the same time they have been suffering staffing cutbacks.
The storage loan program. When the Secretary had the ability to do this, why it was not done in 1998 when we knew we had a big crop coming on and Southeast Asia was suffering an economic meltdown. Also in December 1998, when hogs were selling for $8 a hundredweight and U.S. EPA would not let a packing plant operate in North Carolina for a temporary time to avert a crisis. They also need to stop wasting money on more environmental studies and fix the locks and dams on the Illinois and Mississippi Rivers now.
The second group that I will say contributed to the problems of Freedom to Farm is Congress. Again, after its passage, farmers were promised many things to improve trade, lessen the regulatory burden, open up foreign markets, tax relief, transportation improvements. Why has this not happened?
I also do not understand why Democrats from farm country do not join with Republicans from farm country and stand up to the Marxism, Socialist, whacko environmentalists who are against private property rights and threaten to turn much of our farm and ranch country into a private reserve for the ruling elitists and funded with our own tax money.
Every farm committee member should also be for the immediate elimination of the inheritance tax, I think, this period.
And farmers, at times we are our own worst enemies. Last fall, when the supplemental farm payments were mailed out, a few farmers in my neighborhood rented out farms from under other farmers by using the money they got with the new blue checks to raise the cash rent amount paid to get the other farm. Cash rent options and privilege fees to farm managers did not exist in the 1930's, 1940's and 1950's when the basis for much of our farm programs was formulated. Farmers farming 60,000 acres of corn and soybean land in Illinois, where they go out and rent the land with a plat book and a soils map is probably not where we want to go in the next farm bill.
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Ag business, farm managers and local governments, and many more too numerous to mention I think are bleeding way too much money out of the farm economy. Round-up Ready soybeans sold to Argentinean farmers at one-third the price that Monsanto charges American farmers, local governmental bodies who do not control their spending, so they raise property taxes to a point where it is very excessive on farmers. This is especially true of the education establishment. Environmentalists who are against biotech problems which help farmers to reduce our pesticide purchases and be better stewards of our environment.
Economic factors have also contributed to the financial hardship in rural America. Just when exports to Southeast Asia were really helping farmers, the currencies of those foreign countries just fell out of bed. Whether this was bound to happen or the giant hedge funds in the United States sold into these foreign currencies to drive them down, I do not understand why our monetary people just stood aside and let the dollar go way up in value, effectively causing a recession in agriculture.
I believe that, to keep inflation down in this country, we have an unwritten policy of a highly-valued dollar that has made imports cheap, which has put pressure on American companies to keep inflation in line. This also has the effect of keeping bulk commodities under-valued in dollars, but not in cheap foreign currency, which allows processing companies to have cheap inputs, which in turn keeps profit levels for large corporations up. This in turn keeps the stock market up in value, which brings in foreign currency and keeps the dollar high and bulk commodities low in price. Works great for Wall Street, but it does not work good for anyone producing bulk commodities that is dependent on exports for profit margins. This is how I, myself, justify large payments to farmers.
Now that I have offended everybody in the room, I will go on to say what I think we need to do. I will state that I think the worst time to write a farm bill is at low prices. The second worst time to write a farm bill is at high prices, and that leaves very little time to write a good farm bill, so do not be too hard on yourselves.
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When this farm bill was written, we had prices that were relatively good and everybody was trying to balance the budget. Now we have a lots of money in Washington and prices are low. So the question is, where do we go from here?
I think we need maintain the market orientation in the current farm bill, give us the risk management tools we need to help lessen the risk we face in farming. Risk management beyond crop insurance is needed. Do not turn the Crop Insurance Program into another Government farm program for distributing money to farmers because farmers will just figure out a way to farm.
We need tax-free savings account to put money away in good years and have it to get through bad years. Please do not come up with some type of green or social payments. Farmers need to be good stewards of our resources on our own.
Ethanol needs to be encouraged, use needs to be encouraged and expanded. We need to fix and upgrade those locks and dams, again. We need to give farmers some real sanctions relief. We need regulatory relief.
Finally, in the next farm bill, and this is what I think is most important, I would see a good portion of our farm payments go to farmer-owned value-added projects. You can also offer grants and low-interest or no-interest loans for these value-added projects. The big multi-national companies are in the process of buying both the input and output end of the production agriculture. Farmers are stuck in the middle with a dwindling future. Not only would this help farmers who currently get farm program payments but also the large amount of farmers outside the traditional farm areas who do not currently get any Federal help.
In summary, I am asking you to help us help ourselves and invest in our future. Help us manage our risks, not only with another farm income transfer payment, but tax relief, tax-free savings accounts, actuarially-sound crop insurance. Other tools that are out there that maybe we need to develop. Sanctions relief where maybe agriculture gets a seat at the State Department's meetings at their table. Regulatory relief, monetary policy that does not benefit the economy at farmers' expense, expanded use of ethanol, upgrading our transportation opportunities, and please eliminate the inheritance tax. Finally, put money in farmer-owned value-added projects so we will have a greater share of the food dollar and be able to weather the next downturn in commodity prices.
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[The prepared statement of Mr. Graff appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Keppy.
STATEMENT OF GLEN L. KEPPY, PORK, CORN, SOYBEAN PRODUCER, DAVENPORT, IOWA
Mr. KEPPY. Thank you for the opportunity to share my views with you today. My name is Glen Keppy, my wife and I are a third generation farm consisting of a farrow-to-finish hog operation and 1,000 acres or corn, soybeans, oats and alfalfa near Davenport, IA.
I have served on the boards of the Iowa and the National Pork Producer Association, and have traveled to Des Moines and Washington, DC to share our story and concerns with key decision-makers. I appreciate that you come out to the country for us today so that we can share with you our thoughts.
I come before you today as an active agriculture producer and a board member of one of the Nation's leading producer-owned cooperatives, Cenex Harvest States, based in St. Paul, MN and serving producers in 18 States with joint ventures, with Farmland and Land O' Lakes.
We have four children. Twin boys that came home last semester from college with an animal science B.S., so it is very important to us, as they begin their agriculture career, that we have a level playing field. This has been one of the most challenging years I have experienced in my years of farming. Low commodity prices and adverse weather conditions have led to continued economic stress for producers in many parts of the country. I realize that we cannot do much about the weather, but we need to find an answer for the low commodity prices.
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As a producer, it is difficult to accept that you are operating as efficiently as possible, raising high-quality products and yet making very little on what you raise. The marketplace is more complex than ever before. There are more players, increased competition, changing technology and an evolving global economy. We need to take steps to put U.S. agriculture back on the road to success.
The FAIR Act was a step in the right direction, allowing farmers flexibility and choice when it comes to planting and marketing options and allowing supply and demand to determine market prices. But in a struggling farm economy, it has not been enough. We need to take what works within FAIR and address the challenges facing farmers both short and long-term.
As producers, we are increasingly dependent upon access to foreign markets and our competitive ability in the international trade. We need policies that open and expand market access, ensure fair competition and provide a level international playing field. We need to ensure that producers can sell our products worldwide. This means foregoing sanctions and embargoes that close the market to U.S. producers.
I support the PNTR for China, and this would be a very positive impact on U.S. export. As has been talked about, it may account for up to 35 percent of the future growth of agriculture exports in the 21st century. And as a pork producer, will clearly add $5 to my hogs, per hog.
Producers also need fast-track authority to allow U.S. trade negotiators to achieve a level playing field on the international trade, provide expanded market opportunities and ensure timely Congressional review and action. It has been talked about, but transportation is also a factor of producer success. The nation must have a cost-effective transportation system that support increased farm income, enhance agricultural exports and promoting rural development. We must invest in the future of our transportation system, including the waterways, highways, rail systems, locks and dams on the Illinois, Mississippi, Columbia and Snake.
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I would not trade my Brazilian counterparts, but they have invested heavily in their transportation system and that is one of the reasons that they are able to be more competitive than we are in the world market with their soybean products.
Mr. Chairman, I know that the House and Senate conference committee is currently meeting to try and come up with an agreement on reforming our Nation's Crop Insurance Program. First, I want to thank the members of this committee for including Livestock Pilot Program in the bill. And second, I want to urge you to insist that the environmental risk management component of this livestock pilot bill be maintained in the final bill as well.
As members of this committee know, more than market conditions and weather can affect a producer's ability to succeed. Natural and environmental impacts, as well as increasing bonding and surety requirements beyond the typical producer's control can have a huge impact on the producer's bottom line. The Environmental Risk Management Pilot Program, which is very limited and financially capped, makes these kinds of situations legitimate candidates for insurance coverage under the Livestock Pilot Program.
Keeping it in the bill would enable the USDA to provide risk management tools to help keep producers on the farm, while providing incentives for farmers and ranchers to enhance environmental stewardship.
Cooperatives play an increasing vital role in the success of U.S. agriculture. I purchase my input needs and market my grain through local co-ops to hopefully remain more competitive. My boys and I are joining the newly-formed National and Iowa Pork Co-ops. Producers would like to have a fair share of the consumer dollars. And Cenex Harvest States, we have a challenge that we run every decision past. From the back 40 to aisle 40 is extremely important. Co-ops enable producers to operate more efficiently in the marketplace, receive greater returns for what they raise, and maintain unity of purpose. I would encourage support of farm policy that would support cooperative growth and development.
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American agriculture producers need an overall farm policy with sound, long-term risk management programs at its foundation to position us competitively in the global marketplace. Thank you very much for your time and eager to visit with you at the end. Thank you.
[The prepared statement of Mr. Keppy appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Lasswell.
STATEMENT OF DARRELL LASSWELL, LIVESTOCK, GRAIN PRODUCER, WASHBURN, IL
Mr. LASSWELL. My name is Darrell Lasswell. I am a retired livestock and grain farmer from Washburn, IL.
Mr. Chairman, committee members, thank you for the opportunity to testify before you today. And there is four points that I would like to testify on. The main point that I am here today for is to express to you my deep concern I have for the rapid trend of big capital to be getting into production agriculture and consolidations of companies that sell to and buy from farmers.
One case in point is the vertically-integrated, large-capital pork producing company, Smithfield Food that has, within the last several months, acquired Murphy Farms and attempted to acquire the pork-producing part of Tyson Foods. It is my understanding that the Packers and Stockyards Act of the 1920's has not been upheld, and as a result, Smithfield Foods is the dominant player in the pork chain of our nation, from consumer to producer, acquiring a large enough portion of this industry to have a controlling influence in the production of pork in our country.
Another example is the Continental-Cargill merger that has taken place within the last year. Cargill has operations in 70 countries, and the controlling effect that this could have, not just on our nation but on the world food supply is scary. The organizational structure of the national global food system is dynamic. New firm names emerge, often the result of new joint ventures, and old names disappear. But underlying these changes is a continuing concentration of ownership and control of the food system.
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These structural changes are so strong that they often undermine the desired and expected outcome of much of the agricultural policy developed over the past couple of decades. These structural changes often referred to as the industrialization of agriculture have progressed to the point that some agriculture economists now refer to the agriculture stage of the food system as food manufacturing.
One often hears the statement that agriculture is changing and that we must adapt to the changes. Few persons who repeat the statement really understand the magnitude of the changes and the implications of them for agriculture, and the long-term sustainability of the food system. The changes are the result of notoriously short sighted market forces, and not the result of public dialogue, the foundation of a democracy.
Point No. 2—switch gears just a little bit—I want to bring up is why are producer-owned State inspected scale receipts not acceptable as production evidence at the local FSA office for LDP programs, and as I understand it, other programs? They were accepted prior to the 1999 crop season. Now you can use your neighbor's scales but not your own. This is an awkward procedure at harvest time, and makes another hardship to operate under. In this case, newer rules is not better rules. The old was much more farmer and FSA office friendly.
Point No. 3. We as family farmers very badly need our commodity organizations, such as county, State and national organizations of corn, soybean, wheat, cotton, beef, pork and others. These farmer-controlled commodity groups need funds to carry out their programs, and it certainly seems that a check-off at the marketplace, whereby all producers share in the funding, as well as have the opportunity to be elected to the farmer boards that control the use of these funds is a very democratic way of managing the commodity organizations. These groups need stability and long-term funding of well-planned promotion, research and producer education and consumer information programs.
The recent decision of Secretary of Agriculture Glickman to call for a vote on the Nation's pork check-off, after opponents of the program fell 2,600 votes short of the necessary 15 percent of the pork producers to request a vote is upsetting. There were irregularities in the pork petitions requesting a vote, and mistakes were made in validating these signatures, as acknowledged by Secretary Glickman. Secretary Glickman's irresponsible decision to call for a vote has sent shock waves through other commodity organizations, wondering who is next on the USDA's hit list. Producer organizations need stability and the support of the USDA.
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Point No. 4. I started farming in 1958 using a Farmer's Home Administration loan. And this was a 1st-generation farm at that time, and now second generation as my son took over management of the farming operations in 1999. Production agriculture has truly outgrown FHA and what it can provide and the quality of services at best is a detriment to production agriculture in central Illinois. Illinois would be better served, and the Government, and the taxpayers would save money if these offices were closed.
Thank you.
[The prepared statement of Mr. Lasswell appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Latchford.
STATEMENT OF SAM LATCHFORD, CORN, SOYBEAN, PORK PRODUCER, SHELBINA, MO
Mr. LATCHFORD. Members of House Agriculture Committee and guests, it is truly a pleasure to be able to speak to you today. My name is Sam Latchford. I am an independent family farmer from northeast Missouri, and I want to remain an independent family farmer.
Our family raises grain crops that we value add to our hogs in a farrow-to-finish operation. I have come before you with one agenda, and that is to keep my family living and working profitably on our family farm. My solutions may seem radical and different. I do not believe that we can compete with other countries in regard to costs of production. The only chance for survival for family farmers for this country is to give up the myth about free trade. We cannot let the growing of food go the way of the shoe business. I do not want my family's food coming from a third-world country. I believe that, at any cost, we must preserve and enhance our rural way of life in our small communities.
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My first proposed solution would be a ban on packer ownership of livestock. For every job created by a factory hog farm, 2.94 independent hog farmers are displaced. There is no question that, as independents, we can and do raise equal or better quality, more humanely treated and more environmentally-friendly livestock. The only thing we lack is competitive markets and a fair price.
Our hog manure is not considered waste to us, but as fertilizer to our growing crops. The number of hogs per acre is only a small percentage, when compared to the vertical integrators. We will always be caring and loving with the animals that serve as our livelihood, and we choose to pay our children and/or employees fairly, rather than the unjust compensation that is prevalent in other countries in the world.
Yet, with such a ban, the integrators will look outside of this country to produce the livestock and thus import it back to this country. This brings me to my next solution. Country of origin labeling. Why should it be that I go down the aisle of a Wal-Mart and buy my grandson a pair of socks, I know from what country they came? If I continue down the same aisle to buy him a package of hot dogs, I am not given the privilege of knowing where that food came from. [Applause.]
Mr. LATCHFORD. Now I ask, which is more important to my grandson? A pair of socks or the food he eats? Country of origin labeling is important and consumers are asking for it. We have the safest meat supply in the world so why contaminate it with imported meat? We can help save rural America by banning the importation of all meat items. Under the present system, packers are blending beef from five different countries into a pound of hamburger that you and your kids will eat. Under the present system, a USDA label is placed on imported meat products. Does this mean it is U.S.A. produced? The answer is, no.
Without a doubt, we have the safest and highest quality meat produced in any country. We have environmental laws, human rights issues and restrictions from the Food and Drug Administration to consider in the production of all meat consumed in this country. These quality standards lead to higher costs of production for U.S. farmers, so let us not dupe our consumers and disadvantage our products by importing meat.
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My solution to our over-supply of grain is to look within our own country. I believe we need to find more uses for the grain the U.S.A. produces. And with the above-mentioned ban on importation of meat, we just met one large need. Let us mandate the use of our grain into our fuel needs. Why should we let the oil cartels and the grain cartels eliminate the farmers from our nation? Place a requirement for a percentage of ethanol and soy diesel to be in every gallon of fuel used. Many people in the Corn Belt heat their homes with shell corn. Why can there not be a huge increase in the use of grain as an alternative energy source?
Another solution, it seems obvious to me, is to stop the daily convoy of trucks bringing Canadian grain into this country. A farmer from Minnesota told me recently that these trucks go past his farm day and night. Why can we not get tough and protect our own American family farm? I believe farmers do not make surplus, imports make surplus.
My next solution is regarding farmer-owned cooperatives. They were established to provide the American farmer low-input cost, not to become his competitor in production agriculture. Today, a farmer member must die to gain his equity from these cooperatives. We need legislation passed that allows a farmer member to pull his equity out of these cooperatives, and place it in a value-added cooperative over a five-year period. I am proud of the way my State of Missouri is helping me and leading the way in developing value-added cooperatives. Please give us incentives and help on the Federal level to develop and build more of this type of cooperative.
Another step towards the solution is to put a stop to the consolidation mergers that have resulted in a loss of markets. Why could we not begin by saying no to the Cargill-Continental merger? Consolidated markets result in higher prices to buyers and lower prices to sellers than what occur in less concentrated markets. Three years ago on our farm, we could make four phone calls to sell our hogs. Today we make one phone call. I consider that we are only one phone call from being out of business.
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We have three places to sell our soybeans. ADM, ADM or ADM. [Laughter.]
These mega-consolidated companies that now offer multiple-crop inputs are crippling many independent family farmers. From these companies, the lowest price for crop inputs requires purchase of certain quantities of their seed corn, their seed beans treated with their chemicals. This requirement rids us of our decision-making ability. Where is the competition? The latest merger that I have objection to is the meat and poultry's Big Six. A new alliance of packers to sell meat on the Internet. And I ask you, when the grocer calls up for a competitive bid on a truckload of product, where is the competition? How do we, as producers and consumers, benefit from such a monopoly?
I will compare my cost of production with any of the cartels or integrators in this country. But no matter how low my costs are, if not given a fair and competitive market, my family is out of business. Please give us the protection we demand against the cartels that are out to eliminate the family farmer. Let us get radical and protect the American family farmer who is, without a doubt, the best steward in the world for our land and animals.
My father and granddad were driven by a common goal, that of passing their land to the next generation, in better condition than when they took possession. I did not believe that their goal was any different than any other family farmer. In discussing family issues recently with a farmer who turned 96 on the millennium, he said, and I quote, ''There is nothing in this world like an American farmer. The trans-national corporations, they don't want to own our farms but instead want to own our farmers.''
My wife, Barbara, and I have been blessed with two great children. Jill is married to Brian, he was born and raised on a small farm, and I am proud to say he is a member of our farming operation. They have blessed us with our first grandchild, Jake. And Billy is our son who will graduate from the University of Missouri with 3 1/2 years of study, and that includes the weekends he would come home and work and spend on the tractor and on the power washer.
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Our kids were not allowed to use the word ''can't,'' so I ask now you to help me so I do not have to sit at that kitchen table and tell Billy, Brian and Jake that I ''can't'' afford to let them live and work on our farm.
Thank you.
[The prepared statement of Mr. Latchford appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Latchford.
STATEMENT OF LOWELL SCHACHTSIEK, CORN, SOYBEAN, PORK PRODUCER, PALMYRA, MO
Mr. SCHACHTSIEK. Mr. Chairman, and members of the House Agriculture Committee, many of the things I have heard so far today, I agree with certain parts of about all testimony. And I kind of wanted to bring up a few things, but I want to go through this as fast as I can, because just like in a church service you would probably rather have a pastor have a short sermon and say something than maybe a long one that goes on and on. And some of the things I say do cover some of the things that we are talking about.
Basically we have lost a lot of farmers, which you all know that. One thing it always brings to my mind is, basically I have been farming since 1965. And in the 1970's, when the farmers in D.C. could buy a tractor, a 1086 for around $24,000, we bought a couple of them. Of course, the trouble is, we are still farming with them. But for about $24,000, today it would probably take $10,000 to buy a tractor comparable to that, and some people say it is higher, but I am trying to be on the conservative side. So, the people that I have a lot of respect for, all people in agriculture have different thoughts that they have to survive, because people that have survived up to this point are the most efficient producers.
I think one of the problems that happened with the hog deal is, actually, maybe some of the larger operations are having more trouble than the small ones in the sense that their risk is so great because of the small amount of their margins that, basically, a little bit of profit is a lot and a little bit of loss is a lot. And I think Wendell Murphy found that out, and basically in the hog industry, he is no longer producing hogs anymore. But in our area, we lost a lot of people.
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Sam is basically a neighbor of mine. We both got chosen, I do not know how, but he lives probably 20 miles from me. Sam is an example of a young person who probably would not have even come to one of these meetings 5 years ago. I have been involved since 1985 and the 1985 farm bill, and one thing and another. But there is a lot of young people out in our area that are getting involved in this type of thinking and they are really thinking about economics, not just production. And that is something I see that has changed.
We went through, after the 1985 farm bill, most of us pretty well just gave up and we just kind of floated along. But we were raising hogs and we were making money. Any crop farmer that was raising hogs made money. Now the crop farmers, I think they have always kind of suffered along, especially in Missouri. Now in Illinois and Iowa, I do not know, they can raise corn for $2, but we cannot basically in Missouri. But $50 hogs, we can get along. And I mentioned, a business, to succeed, needs to reward capital labor and management. But agriculture, probably if we can reward labor, we are doing pretty good, and that was with the hogs.
And I might go on to the last there. And Sam dealt with the moratorium, I think that is a common-sense type deal with the concentration that is going on. As I said, the hogs had provided the income to the family farmers, more or less. But I agree with the man over here, which he brought up. And all these ideas really are not mine. They are only a collection of things that people have told me that I have put together.
I think we do need to work with other countries. And if you want to develop a set-aside or something like that, to cut down on total stocks. I think there needs to be—I know there is a lot of opposition to a farmer-owned reserve, and I can somewhat see where these people are coming from. But I think we need to have something more than that, especially a security of food reserve. And that grain would not come out of that thing, except under dire circumstances. Ten dollar corn and $20 beans would not bring it out, it is only if it is needed to keep people alive. It would not come out to feed livestock.
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In the 1980's, when the corn came out—1983, I think, it came out of security, I mean, corn was around $3 a bushel, and it basically came out to feed livestock. And I felt at the time, what is the good of having a reserve if you are bringing it out to feed livestock. It needs to be kept in there. That is my feeling. Now I do agree also with the farmer-owned reserve. I think we need that also.
And I think, if you took people's views, probably most of the farmers—I do not know—agree with Freedom to Farm. To me, I see no difference with a whole lot than any other farm program that basically works on the world market. It has not worked, I do not think it will ever work completely without some other things. I have nothing against trade with China, but as far as basing all of our hopes and that on that, I cannot see that that is really going to happen.
OK. If you take States like Missouri that do not have the corn producing capacity of Illinois, Illinois can raise corn for $2 a bushel, they are doing it. Maybe Illinois can raise corn for—well, basically it is not going to be less than that because that is the loan rate. But Missouri really cannot.
On our farm, we do some irrigation and we can raise some pretty good corn. We have got some ground that probably should not be farmed, it could be better in set-aside. That is why I like the flex fallow. It gives people freedom, like Freedom to Farm. But flex fallow would say, OK, for us farmers like ourselves, and we cannot compete in the world market, I cannot produce soybeans for $3 1/2, $4 a bushel. Granted, the loan was $5. I will admit that. I do not think most U.S. farmers can over an extended period of time. I have been told South American can expand at $5 a bushel, and they are going to keep doing it. That is what I have been told, and basically they are raising.
But what I am saying for us that decide, OK, we do not want to participate in the free market system, we would just as soon set aside some, we will take the higher loan rates, and we will voluntarily set aside. Those farmers that do not wish to do that, they do not have to do that. They can go ahead and produce fence row to fence row. So I think, to a certain extent, that would be with the spirit of Freedom to Farm. Let us choose to opt out and let other people that feel they can compete, let them compete.
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One other thing and I am going to close here. I do not know if you have ever heard about it, but in the past it was brought up. It was called a parity giving bill. And under that—and I think it has a lot of potential to move commodities to the poor people. Under that, I do not care who would give it, be it business or farm or anybody, somebody could buy grain, they could donate that grain or a animal, or whatever, a raw agriculture product to share agencies and then they could write that gift off on their income tax as a parity price level. Basically, on wheat right now, if they bought wheat for $2 a bushel, they could write it off for $7 or $8 a bushel. And I think you would move a lot of grain right there, and it would go the right direction. And I think it would move the market without really interfering with the free market system.
So I thank you for your time.
[The prepared statement of Mr. Schachtsiek appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, sir.
Mr. Graff, I cannot speak for everybody in the room, but you have got to get up pretty early in the morning to offend us. We have been attacked by the best of them.
Mr. BOSWELL. He did not do bad.
Mr. GRAFF. I can do better if you guys want me to. I mean, I can start in.
The CHAIRMAN. Well, Leonard is a pretty sensitive kind of guy.
Mr. Cole, I do not know if this is good news or bad news, but your concept of a global farm policy is something that has been talked about a lot. And a lot of people are looking at, as of the concept and how it might work. And so it is certainly not something that has gone unnoticed before, and I think we will continue to look at it because there is no question, we are part of the global economy. And my colleague from Texas talks about it a lot. We are both from heavy oil and gas-producing areas, and we have certainly seen what an international cartel does for prices, and we think that there is some opportunities there. And agriculture has been mentioned.
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Someone said earlier, a bad time to deal with farm policy is when prices are down and the second bad time is when they are high. But you begin to get some focus on some things when the price of oil has gotten where it has, about the deficiencies of a program that creates any kind of stability. And so maybe there are some lessons for us to learn there.
Mr. Keppy, you are obviously involved in a large cooperative effort. We are always looking at, in agriculture, wanting to look at maximizing the farmer's ability to market a product, obviously at a profitable level. And there is a variety of ways one can do that, and this may not be a question you can ask. But are you aware of ever a comparison that might have been done because of the cooperative in which you can buy your input costs—I mean buy your supplies and things through as well as using a cooperative for as a marketing tool, of running a comparison on what that would mean on the bottom line to a farmer that belongs versus one that does not?
Mr. KEPPY. I am sorry, I do not have a direct dollar figure to give you on that. Although more than cost sometimes is the service that goes along with working with a co-op. And many times, I realize that maybe I pay a penny more or something for some service, but that service is worth more than a penny to me. So we as farmers, or at least on our family farm, it is not always exactly the bottom line that we are interested in. It is the co-op that provides the full service.
And on the other end of the spectrum, I think everybody in this room knows how important value-added agriculture is, what it does to the jobs and taxes for our local communities, and we have got to find ways, and it may be some strange bedfellows at times, but we have got to find ways to work together and add value to our product and get it to the final consumer, and keep more of them dollars in the rural area. And that is the goal of the new port co-ops, and I think the co-op concept in general.
The CHAIRMAN. You market through your co-op?
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Mr. KEPPY. The hogs, I do not, no. The livestock.
The CHAIRMAN. You do not.
Mr. KEPPY. No. At this point, my goal is that someday, yes, I will. Now my sons are starting a niche marketing where they are niche marketing a certain type of pork that will go overseas to Japan, and that is going through a group of producers that are raising that specific kind of pork.
The CHAIRMAN. Mr. Stenholm.
Mr. STENHOLM. Mr. Latchford, you were rather critical of your cooperatives, in your views, and I hear this quite often, and again, this is not meant as criticism, as I respect everybody's views. But are your cooperatives different from mine back home, in which the majority of the members might change the manner in which their cooperative is operating at any annual meeting? Do you all do it differently in your region than what we do in our region?
Mr. LATCHFORD. The co-op I am going to speak to is the one that my granddad sat on the board and my dad sat on the board at times, and it does not bother me to name names. I suppose they will put me on a black list, and maybe I am already on there. But MFA in Missouri was a co-op that was to give producers low-input costs into their production. And just a few short years ago, they decided—this was a board decision, supposedly, they tell me, that the State board decided to get into production agriculture. So they own 10,000 sows now, and a lot of those are in my county. And those people that are producing those pigs was not people that went into that co-op and done a lot of their business over the years, and their families did not sit on the boards, and now they are in competition against us. And I do not think that is right. I do not think those co-ops were set up that way, and I——
Mr. STENHOLM. But if you—my question——
Mr. LATCHFORD. And I would just like—if they want to continue doing that, that is fine, but I would like to be able to get my equity out.
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Mr. STENHOLM. I guess but my question is, my understanding of all the co-ops that I am aware of, at any time a majority of the members of the co-op, if they agree with you, that can happen at the next annual meeting. If they agree with you. But if they do not agree with you, they it is——
Mr. LATCHFORD. I do not think we are allowed to pull our equity out.
Mr. STENHOLM. No, you can change the direction of your co-op.
Let me ask you another question, though, this is one that really troubles me, because you said we ought to stop all imports of meat, correct?
Mr. LATCHFORD. Yes.
Mr. STENHOLM. As of the year 2000, the year in which we are in, we are going to be exporting $9.1 billion of meat and we are going to be importing $4 billion. Why in the world would you believe that it is in our best interest to stop imports when we are exporting twice as much, and you cannot have it both ways. We cannot just sell without buying.
Mr. LATCHFORD. We are buying now. If we buy—how do you figure we are not—China is allowed to bring in much more than we are allowed to send out.
Mr. STENHOLM. Again, I am talking totals, because as a farmer in Texas and which I share a lot of the sentiments, by the way, I am not picking on you for your ideas, except this one, and this is one that gets into the China trade and gets into all the other. We have to sell. That is all this is about. We have to sell, if we are going to produce. And right now, with meats, this year we will sell to foreigners over twice as much as we buy from them. That is a fact.
Mr. LATCHFORD. Do you think that would change?
Mr. STENHOLM. No, I am saying we have got to continue. We are seeing tremendous progress. Our value-added cooperatives—in fact, the only evidence that we have today, so far, provided to this committee and to those of us who research this on a daily basis, the only evidence that we have that our export policies are working are in the value added. We have had information provided to this committee that I have asked economists all over the country to challenge this now, and they will. This is not the last hearing, by the way, as to why you can take the last 25 years and you will see that we are not exporting any more corn, wheat, soybeans, cotton, little more rice than we were 25 years ago in bulk commodity. But when you look at the domestic consumption, we are. And the reason we are is because somebody is doing a pretty good job of taking our grain and converting it to meat and selling it into the world market.
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I just asked you to look at that because it is troubling to me when I hear this from all witnesses in which they say, we have got to stop all imports. When you are 4 percent of the world's population, our future as producers is not domestic. Our future has got to be the other 96 percent of the world.
Mr. LATCHFORD. My contention is, though, sir, is that I do not think we can compete with those other countries on cost of production. They have a lower cost of production. They are not environmentally friendly. I am not opposed to the rules and regulations because I breathe the same water and the same air as everybody else. My contention is that I do not want our agriculture to go the way of the shoe and the textile business.
Mr. STENHOLM. No, that is a separate question of which—and I am in agreement with you and we are looking at policies of how we can avoid that. But it just does not square when you say stopping all imports, when we are selling twice as much today and we have got a wonderful opportunity to sell more.
And Mr. Cole, by the way, thank you for thinking outside the box, and you are not the first one that has talked about this, and the chairman has responded to this, and therefore to deal with Mr. Latchford's problem—which I gather everyone, if you are a producer, are concerned about pricing and competition and fairness. And just like the question that I asked, and I am going to have to hurry and ask you the same question, and with all due respect to those that got awfully upset at the way I asked the question, it is pretty simple to me because I have got two choices. I can vote yes or no.
Now to those that said, what about those that are undecided? I can put myself in that. Do I actually absolutely believe that PNTR for China is going to be the silver bullet that is going to make us well? Absolutely not. No one can say that. But do I believe that it is helpful to try to sell to China? Absolutely, yes. Do I believe that it would be wrong for us to unilaterally disarm our farmers in the chance of going into that market and let our European competitors have the market? Absolutely. But do I believe that I am 100 percent right? I do not know that. All I can do is give you my opinion and I am asking you yours.
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Again, how many of you believe that we ought to lift all unilaterally-imposed sanctions on food and medicine? If you answer yes, let the record show 5 yes and 2 no.
And then on PNTR, how many believe that we ought to have permanent normal trade relations with China voted? Five yes and 2 no.
And to the audience, the same. You responded once before, and again, I will ask the audience. How many agree with the 5 that we ought to lift all unilateral sanctions? No, sanctions first.
[Show of hands.]
Mr. STENHOLM. And then how many disagree that we ought to lift?
[Show of hands.]
Mr. STENHOLM. About the same percentage, about 90 and 10. And if you are undecided, fine. I am counting the ones that vote.
Now on PNTR, how many in the audience believe that we ought to vote to have permanent normal trade relations with China? Show of hands, please.
[Show of hands.]
Mr. STENHOLM. How many disagree, that we ought to vote no?
[Show of hands.]
Mr. STENHOLM. Same answer as before. And I apologize to those that have a different opinion, but that is all we can do, and all.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Ewing.
Mr. EWING. Thank you, Mr. Chairman.
This has been an enlightening and interesting panel. And I think it is very healthy to discuss—if everybody came to the table and said, oh Freedom to Farm is great, and just the mainstream ideas, we do not get very far. So we need to look at other ideas.
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Mr. Latchford, I think you were very outspoken in a very good way, and those are things we ought to think about. I would ask you to think about something in regard to closing our borders to import of agricultural products. Mr. Stenholm made the point that we sell more than we take in in agriculture, and that would probably hurt us, not help us. But all of us at this table represent, maybe primarily agriculture, but we all represent other segments of our economy. And if we quit letting others trade with us on beef or corn, they may not buy Caterpillar tractors, and then we get thousands of people unemployed, then we have a recession, then we have, all the way down the hill. So it is not simple to say, we are just going to keep you out and only do business with our American farmers. It would be nice, sometimes we would all like to go to that simple world that is gone.
But I would ask you a question. I deal with a couple of different elevators when I sell my grain. And I got a price and it was about the same in four different spots. And I talked to the fifth elevator and he was 15 cents below. And I said, are you sure? He said, yes. And then he gave me some rhetoric about why he was not going to play the same game those other elevators were playing. And the price was 15 cents less. And I said, you are in business, and I am in business, and I am not selling, and you do not have to buy. And I said, thank you, and hung up. And I called another elevator and got the 15 cents.
The point I am making is, what if I had had only one choice? And my question is, how serious is the agribusiness consolidation, in your opinion, and can it get to the point where, really, the American farmers are at the mercy of those that are consolidated?
Mr. APPELL. Yes, I think it is a serious problem, we do not have that concern yet so much on the selling end. But on the buying end we have got, for example, herbicides, it is pretty common knowledge the set the price on herbicide not by how much it costs to produce the herbicide but what the farmer will pay for it. And the example was Monsanto, selling cheaper is a good example.
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Mr. EWING. So you consider it a serious problem?
Mr. APPELL. Yes.
Mr. EWING. Mr. Cole?
Mr. COLE. Yes, it is a very serious problem, as was alluded to earlier, how the large agribusiness companies are beginning to pull in all ends of the spectrum that we are involved with, not only the selling side but the buying side, to try to get us locked into a situation where we not only market through them but we are buying inputs from that company.
And there are some opportunities in value added that we need to be concerned about, too. There is a group of us in southwestern Illinois that have taken a serious look at industrial hemp production. A lot of hurdles to clear yet, but there has been some goals set in Washington that we build cars from renewable resources. That is going to happen. It is already happening. But if farmers are not in a position to capture some of the processing profits from that type of situation with industrial hemp fibers and soybean resin to make car body parts, we are going to be right back in the same boat and continue along the same path. So it is serious, I am glad to see that the Congress is bringing more concern in the anti-trust division to specialize in agriculture.
Mr. EWING. My time is about out, so to get to all of you, you are going to have to move quickly.
Mr. GRAFF. Yes, Congressman, I am afraid that what we see in the cattle market with captive supplies is going to come down with the grain market, with some of the new contracts you have got with the grain market.
Mr. KEPPY. Naturally, I do not farm the same way that my father did or my grandfather, and we have had to change. I think with challenges comes opportunities, and we have just got to find other ways to get the market that you are talking about. And it potentially is going to be a problem, yes.
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Mr. LASSWELL. Ag concentration and vertical integration on the part of big capital is a big problem. A big problem.
Mr. LATCHFORD. I think it was pretty plain what I thought about it.
Mr. EWING. I would have been surprised had you changed your opinion. You are absolutely right. Thank you.
Mr. SCHACHTSIEK. We have always felt in this country that, if you are a good, efficient producer, then you should be able to stay in business and inefficient ones should go out. The problem with concentration is it does not happen this way. About 10 years ago in Missouri, Premium Standard Farms came in there, kind of the dark of night, so to speak, was given some exemptions. They expanded. Then they went bankrupt. But they are still producing hogs. And then they have been bought out by Continental Grain, and they are still producing hogs. You cannot kill them, like a three-headed snake. They cannot be killed.
And I think that is a problem. If Premium Standard could compete and produce, that would not be a problem.
I mentioned Wendall Murphy, I think he has done all right, but basically it proved he could not produce. Now Iowa has, what, a suit, Smithfield bought it, they tried to sell it to one of their employees, and I think they are having some problems there. That is the problem, when these things are so large, then only another large operation can buy them. And a smaller producer cannot really get into that circle.
Mr. EWING. My time is up, but your answer is, it is a problem?
Mr. SCHACHTSIEK. It is a tremendous problem, especially in pork.
Mr. EWING. And you all would recommend that the Congress look at that and try and keep a handle on it?
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Mr. SCHACHTSIEK. Absolutely.
Mr. EWING [presiding]. Mr. Boswell.
Mr. BOSWELL. Thank you, Mr. Chairman.
I agree with them, it is a problem.
It worries me a lot and when you cannot find more than one market, it is tough.
I appreciate several things that have been said here this morning, even some of the things Mr. Graff said.
Well, he ought to read Will Rogers, as somebody mentioned, because if he had done his homework, he——
Mr. EWING. Leonard, do you know he is from my home county?
Mr. BOSWELL. He is?
Mr. EWING. Be nice to him.
Mr. BOSWELL. Well, I am going to—I will be sympathetic.
Mr. GRAFF. Congressman Ewing is a good guy.
Mr. BOSWELL. He really is. I follow after him.
I think I am going to recommend Will Rogers to you, in this good fun, because if you had done your homework, you would have found out that three D's up here are supporting the same things this guy is. So just to make that point, some of us understand that.
Mr. Keppy, your comments about value added I think are very, very germane to our situation. We have got to do better, and that may be the way to do it. I just know that one of my last actions in the Legislature, before I went to Congress 4 or 5 years ago was in the co-op system, some value added opportunities, and I need to go back and follow up and see what is happening there. But we have got to get that changed. And I appreciate that you know that.
Mr. Cole, Thank you. The reason I say this is that Senator Grassley over in Iowa, a friend of mine, invited me to help him host ambassadors that come to our State, he brings them out every other year. And I was riding with one of the ambassadors going out to the State fairgrounds some months ago and we got to talking about some of these things. And I said we are going to have to communicate. We have got to communicate different than we have ever done. I said, we have an example, not too many years ago we got into a cold war arms race, two superpowers had finally broke one of them and put a tremendous load on us, but we are going to survive that, we are going to get it paid off.
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I said, would it not be something, shame on all of us, if we would do the same thing with food and fiber, that we get treasury against treasury, country against country, to see who could break the other. I said, if we go on a pure competitive situation, how are we going to keep that from happening? And boy, I could see his eyes almost spin, because he was thinking about it. He was probably thinking, this particular country—and I will not name it—but he was thinking, going up against the U.S. Treasury was not something he wanted to do. So I said, why do we not go the other way and start talking, and we are going to have to develop some new policy. And we are going to have to start—it may not be easy to do, we may have to do some trial and error.
So I do not know if your model is the right model or not, but I think—and as our chairman has said—our chairman has had quite an interesting time, Mr. Ewing, this is a very interesting time because it is such a challenge. Things just are not like they were. It is a new world we are living in. It is the same size around equator, but with fast communication and transportation, it has changed so much. And just let something happen to the Pacific Rim or the European market, and see what happens in New York or Chicago the next morning. So I think you are on to something there, and I want to thank you for bringing that up.
And Mr. Lasswell, on the pork check-off thing, I feel the same sentiments. Some of us are sending a letter right now and saying that, at this stage, this point, we can criticize, we are at this point. But if you want to vote in this next referendum, if you are going to vote it, you have at least got to show evidence you have marketed a couple hogs, OK? And that is pretty minimal. But that is just exactly what we have done, some of us. So we hope to make some progress. So I just want, in the interest of time, to thank the panel. You have been interesting and I think you have highlighted again, we have got a big challenge.
Thank you, Mr. Chairman.
Mr. EWING. Mr. LaHood.
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Mr. LAHOOD. Well, I think for those of you who are watching this on television, those in the audience, this panel is sort of a reflection of what it is like to be in Congress. Many different points of view, many different opinions about very, very important issues, about people's livelihoods. When you sit on the Agriculture Committee with 53 members, you find out that people come from different parts of the country with different points of view and different approaches to how we deal with these challenges that we have. And the candor with which you have expressed yourself today is, I think, well received, because we were hoping that people would not come here and just mouth what perhaps they thought that the members of the committee would like to hear.
You have offered, I think, some very, very strong opinions on some of the real challenges that we have, as members of the committee, particularly in the short term, as we look at whether we grant China permanent trade status, and in the long term, what do we do with new farm policy, with a new administration, a new Congress, a new Secretary of Agriculture, which a year from right now we will have in Washington, DC.
Let me just ask a couple questions. I know that Mr. Appell, you are in the hog business, right?
Mr. APPELL. Yes.
Mr. LAHOOD. How many hogs do you raise?
Mr. APPELL. We sell about 7,000 head a year.
Mr. LAHOOD. Tell me what your feelings are, or what you believe, what is your opinion about why we have lost so many people that were in your business 2 years ago are not in the business? Just give me, if you have got two or three or five reasons
Mr. APPELL. Sure. In fact, six people have left that are either good friends or acquaintances, that have left the hog industry within the last year, most of them by almost any standards would have been considered small farmers. And you talk to them and, of course, there is the financial thing, almost all of them realize—they have been in the business—that it is a cyclical thing.
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And I think the real—and you realize, the area I am from, it is a real hot bed of controversy, in terms of the mega hog farm thing. But the real kicker on most of them, why they decided to get out, is that they looked at the regulations coming down, and they realized on their farm, long-term, they would have to do some new construction, and it was that additional cost. But the real kicker was that, to do any new construction in my area, you had damn well better be prepared to put your family through living hell, because there is various groups out there that supposedly say they are for the family farm, whose mode of supposedly helping the family farm is to attack anyone they consider to be large. And by penalizing and making life very uncomfortable for them, they think they are helping the small farmer.
And I guess I would have to say, in my small sphere of experience, that is just the opposite of what has happened.
Mr. LAHOOD. Mr. Latchford, I am going to vote for permanent trade status for China. In the community that I represent, one of the communities is Peoria, which is my home town. Caterpillar is the largest employer. Fifty percent of what they manufacture right here in Peoria goes somewhere else in the world.
So if we build a wall around the United States, and build a wall around China, and we say that is not going to happen, you know what happens in Peoria? A lot of people lose their jobs. Caterpillar employs 20,000 people in Peoria. So when we say we are not going to trade with China, we are going to build a wall around the United States, we are going to build a wall around our relationships, a lot of people lose jobs, and a lot of these people make good money. The annualized salary of a UAW worker who makes tractors in Peoria, East Peoria, Morton, Mossville, wherever they do it, is about $40,000. And 50 percent of what is grown in central Illinois, which is primarily corn and beans, not much livestock anymore, for the reasons that this gentleman just said, a lot of pork producers have gone out of business. Even though pork prices have gone up, thank God for that, a lot of them are not in business anymore. And there is a lot of reasons for that. Fifty percent of what is grown here, corn and beans, goes somewhere else in the world.
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So I say to you, we are the greatest producer in this community of corn and beans and tractors. And my question to you is, how can we not say that we want to open up the largest, by population, growing country in the world, when we have what they want, which is food and tractors?
Mr. LATCHFORD. I agree with you wholeheartedly.
Mr. LAHOOD. Use the mic, would you, sir? Thank you.
Mr. LATCHFORD. I agree with you wholeheartedly. There is nobody here would rather send a load of hogs to China than I would. My question is, how much are they going to buy? And doing research for this, and getting ready for this and looking at the China deal, I have got a stack of papers on my desk, tall, a whole folder. Somewhere in that first paragraph with China, there is always the word hope. Hope that they are going to buy this.
I am scared to death of what there are going to be is become an exporter of food over there. They will be shipping cheaper food over here because we cannot compete with their price. It is not that I do not want to sell them, man, I want to send it down there, I want to send it all over there. But I am questioning you, is what are they going to buy? They already a net exporter of corn, they have more pigs than we do, they have labor over there that gets paid nothing. I keep asking the question, what are they going buy? I am not——
Mr. LAHOOD. Tractors.
Mr. LATCHFORD. I am not seeing any——
Mr. LAHOOD. They are building one of the largest dam projects in the world, three gorges. Do you know what they are building them with? Caterpillar tractors.
Mr. LATCHFORD. Then they already got a market to take them there then, correct?
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Mr. LAHOOD. It is an expanding market. It is a huge market. You and I do not agree on this, but I want to make my point, because you made your point.
Mr. Lasswell and Mr. Graff, let me just ask you, because my time is up, what I asked some of the other people. And if any of you are in the family farm, tell me what you think are the one or two or three things we can do. Obviously, Mr. Lasswell, your farm has been in your family a long time, and I think yours has—how do you pass it on? I mean, what do we really—do we do anything in Washington or what can we do or what needs to happen to preserve it?
Mr. GRAFF. I think the best thing, Congressman, you can do is partner with farmers in the States. My family came in this country in 1824 and in 1827, they had a wheat mill. We got out of the general store business back 50 years ago and all we did was farm. We probably should have stayed in the processing business and probably let somebody else do the farming.
I think if we as farmers and State governments and Federal Governments invest in the ability to us to make value added products, it is jobs, it is economic development, it is property taxes, it is higher prices for farmers. I may be wrong in this, but I really believe, Congressman, that we need to have a push that way to process some of these commodities. We are still going to sell corn and beans bulk commodities overseas. I haul a lot of stuff to a man in your district. I mean, I live in your district. It is interesting, but my opinion, that is one of the ways, I think, we have to go.
Mr. LASSWELL. This tax is a big burden. And you are out of time.
Mr. LAHOOD. Thank you.
The CHAIRMAN [presiding]. Mr. Phelps.
Mr. PHELPS. Thank you, Mr. Chairman.
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I do not know if you all realize it or not, but what you touched upon, from Mr. Appell, all the way down to this gentleman, is probably a cross section of the dilemma of problems and possible solutions, or at least thinking solutions, that should address the dilemma in agriculture. And it is a reflection, like Mr. LaHood said, of what we deal with in Congress. A difference of opinions. And I, for one, certainly appreciate your candidness and your honesty to come forward.
Also in our process, as we are public officials, we get frustrated like you do, because there does not seem to be concrete, tangible answers that we can go back like we can to fix something else that seemingly has been brought to our attention. And we possibly can, if it is short-term or long-term coordination efforts.
The consolidation element concerns me very much also, and I think we need to take action, at least challenge the trust situation, it is getting out of hand, evidently. That could hurt a lot of us in ways that we do not even right now anticipate. But also the job losses that Mr. LaHood was talking about with Caterpillar production, and what he wants to protect. But let me just deal with some frustrations or contradictions that we see that government plays a role in trying to do just that, and in addressing the environment, and why you have a lot of merit, considering foreign countries that are not on the same playing field with environmental concerns and wages and all that.
I come from the southernmost 10 counties that pretty much is high-sulfur coal deposits. Not just there, but it is coal and agriculture is king in southern Illinois. And this was not foreign government, but Federal Clean Air Act policy which may need to happen in some regard—we can debate that all day—actually closed the high-sulfur coal mines in the name of environment. Now they did not directly say that was what was going to happen, but in effect, two things need to happen. You either scrub the sulfur out of the coal, or else you ship low-sulfur coal in somewhere, if the utility coal-burning operations do not want to put the capital, very expensive capital investment scrubbers on, then we had to scrub or ship low-sulfur coal. And so that is the effect it has had.
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Now some of those coal miners making $22, $25 an hour with benefits not only cannot find a competitive job even near that that are still dislocated workers for almost 5, 6, 7 years, but have gone from southern Illinois to other States, other parts of Illinois. That is why I have to have 27 counties to have 600,000 people to represent, partly. OK? So we have job losses.
Now whose fault was that? That is Government policy that the majority of the people said needed to happen because clean air is important. But the contradictions that we face within our own Government policy is this: Now we have clean water problem, pointed out MTBE. But government has not responded, and some of the same personalities and leadership, in my party, as well as both parties, do not seem to be acting as quickly when a problem is pointed out like it has in California, getting in the quality of water, which could help farmers, help jobs and help the whole spectrum of monitoring right on down.
The consolidation has the effect of control that is beyond all of us, how we could think it could happen. But I know that when we have job losses, whether it is coal or farmers, we try to come to the aid, to benefit of providing those transitional adjustment payments that we had for dislocated workers. That is the taxpayers, also.
And finally, let me just tell you one last frustration. When we are dealing with job losses, and we are dealing with policy that contradicts clean air versus clean water, at the same time, within the Clean Air Bill, guess who are the biggest contributors of the sulfur dioxides and nitrates in the environment, in the air? The oil refineries. They are not even mentioned in the bill for Clean Air Act. Why do you think that is? And why do you think we are moving so slow on MTBE? Why do you think that is? So it gets back to, they are a consolidated industry that has a big thumb on domestic oil versus foreign importation.
No, I am thinking and I am throwing a lot of things out to you, but as farmers, whether you come from a very small farm or from the 8,000 acres that is a small farm, however you want to expand that definition or narrow it, we better start thinking as a group of citizens, in your industry, how to protect ourselves, if it is such a fear, how we protect ourselves from the conglomerates that drive policy in Washington, and in your State capitals. It is a design. It is not an accident. And I am not trying to promote paranoia, just look at the results.
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Let me give you one last thought. No one made policy that was not policy 15, 20 years ago, maybe 30—I am losing track of time as I get older—that we would say the small mom and pop store downtown Main Street, McComb, El Dorado, Verdin, wherever you want to name, there was no Government policy that said, that mom and pop store cannot make it. I worked my way through college changing tires and batteries in Western Auto, working in the Ben Franklin store in my hometown. Guess what? None of those stores are there. Why? There was not forced Government policy. An entrepreneur in our country, Sam Walton—among many others, I will just use an example—and I respect him, did not require anything either, through it all, did not ask for anything. He just changed the thinking of the American citizen.
So you want to get rid of those parking meters you have to pay in front of that little Western Auto store or mom and pop store in your town, that aggravated us all back in the 1960's and 1970's and 1980's? You want to put all those stores under one roof where I can provide air conditioning, free parking and even the men that hate to shop can sit down and have coffee and tell stories while their women do the shopping. It is all under one roof. We voluntarily said, that is the way we want to go. And when we did that, the only reason we went there, because they can sell the product cheaper because they buy it by volumes.
So we are talking about consolidation, it all transfers in the best deal is by volume buying. It does not take a genius to understand that. That drives policy. So now we are putting our brakes on. But what I pose to you, the dilemma is that you cannot put one brakes on one side of the equation, after we let everything else happen. And that is when everybody says, it is a global world and it has changed. Yes, it has, and guess who made it change? We are all right here sharing the responsible.
Thank you for all your input.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Chairman.
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I truly do appreciate the testimony of this panel, diverse as it was. I try to keep an open mind to all the ideas that come forward that might help us address the problems that we face in agriculture, and obviously there are some differences of opinions that exist, between the panel and some of the panel members and so forth. But I think that is good, because I think out of that discussion, hopefully we will revise the policy that will be beneficial to agriculture in the long run.
Freedom to Farm was really the enactment of a philosophy, and I think it is appropriate to review that, as time goes on, to see how that has worked, and how it has not worked, and what we might need to do to improve it, and that is really what all these hearings are about, is to try to get ideas of what we might do to improve it or change it as necessary. But I do appreciate the testimony that this panel has given.
Mr. Cole, your idea of global set-asides, or something like that, inventory control, globally, is interesting, and as I look at trying to control the over-supply in some commodities, I do not know how else you would do it, except through some type of global inventorying, or something like that. The problem I have is, in southeastern Idaho where I come from, the largest potato producing area in the world, farmers there produce potatoes either by contract, or for the market. When they contract them with processors, sometimes those contract prices are not high enough to cover the costs. And so I have talked to a lot of the farmers who produce potatoes and say, why do you guys not get together and negotiate with your processors, and I mean, you guys control the product that they need. And they all agree with that, and they say we have tried to do that in the past, then they kind of giggle and say, the problem is is that we are all just too damned independent. And you cannot get them together to do this in one area in southeast Idaho, I am wondering how you do it across the country, let alone globally. And I see a real problem with that. But I understand what you are saying, if you would like to respond to that.
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Mr. COLE. Yes, I will try to keep it brief.
I think farmers worldwide are hurting enough now that they are much more willing to listen, and there are some alternatives to global set-aside. I hope we never have to read that point. But I strongly oppose unilateral set-asides.
The farmers recently visited in Brazil, and the largest producer in the world, asked them when they were going to start the set-aside program again in the U.S. because that is when he makes the most profit from clearing more land. So it is obvious that is not a good way to go.
We have an ability to produce energy from farm crops, and I would propose, in times of overwhelming surplus, that we divert these crops into ethanol production, things of that type. The concern there becomes, well, what about food scarcity? Well, if you shut down these additional plants that we might build to create ethanol, you could divert that back to food or feed. If the U.S. taxpayer, as he has been in the past very interested in food security and energy security, is willing to pay for that shut-down time, I think some of these things can be accomplished. We can build an energy reserve, not only with petroleum, but we can also build it with ethanol, biodiesel, products like this. Shut down the plants to go to food or feed, maybe you need more energy, then you can pull your reserves down.
So let us do not be afraid to talk about these issues, because oftentimes you come up with some other solutions when you are talking. I think Congress needs to work hand-in-hand with farmers as we talk with farmers from other nations, and they are willing to listen.
Mr. SIMPSON. I agree with that, and I appreciate that and that is why I appreciate your comments. It is ideas like that, out of them might come the germs of something that sprout into something we can do to help agriculture.
I want you all to know that in southeast Idaho, as I talk to farmers across the board, they are also very concerned about market consolidation and the lack of processes that can buy their food and compete. They do not have the market to actively compete for those commodities that they grow, and they have a great deal of concern about that. The lack of people to buy grain and potatoes and other things. So I think that is across the country.
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I do have to say that I do have some concerns and maybe, Mr. Latchford, you can tell me where I am wrong on this, but I have always been told that we produce something like 40 percent more in this country than we can consume. And if that is the case, it seems like we have one of two options, we either sell it or we reduce production by 40 percent. And I do now know who is willing to reduce production by 40 percent, so you have got to have trade agreements with foreign countries and sell our products abroad.
My problem has been that I do not think our trade agreements with foreign countries have always been fair to agriculture. In fact, I would say they have been unfair in many instances, and I do not think we have been very active in enforcing those trade agreements, and we need to make sure that we have better negotiators or do a better job at negotiating those trade agreements in the future. I suggested that we hire the European negotiators in Seattle, they seemed to do a better job.
But it seems to me like we have to make sure that the trade agreements that we do have are fair, and fair to American agriculture.
Mr. LATCHFORD. Yes, I agree with fair trade, I just do not know how you define it. And I keep thinking we have still got to export, I want to export whatever I can produce, but it looks like, like Mr. LaHood said, with the exporting of selling those tractors, what I am scared about is Caterpillar will not only sell those tractors, they will take their factories over there and they can build them cheaper, that is what has happened in our other industries. We have exported our jobs to where—that is what I am scared of, is that China will become an importer of food, it will become a large, large, export. We give them the technology, they will buy our technology, and for a while, in 3 or 4 years from now we will talking about, well, what are we going to do about this importation of food from China?
Mr. SIMPSON. Let me give you an example of how that works in one industry that is my district, in the high-tech industry. Hewlett Packard has a large plant that they built in China where they produce computers and chips and so forth. All of the research that is done is done in the United States, a lot of it in Boise, ID. And the job employment has expanded dramatically in that area, because they do all the research on future development and so forth in the United States. Yes, they do have plants over there where they actually build the physical computers and stuff, but it has actually expanded employment in their industry in the Boise Valley.
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I mean, trade is a two-way street, and it is hard to quantify things like services and intellectual property and the research that is done here. It is different than trying to measure the price of the commodities that move back and forth when you are talking about things like intellectual property and that type of stuff. So trade is a difficult issue to deal with, I agree, and it is difficult to negotiate with. And I sympathize with our trade negotiator, with Charlene, and the others, that it is a tough issue to deal with. But I have always felt that, in this country, we seem to have always negotiated manufactured products and other things in these trade negotiations, and the caboose has always been agriculture. And we have always been willing, it seems to me, to sacrifice agriculture in our negotiations in other to get what we want in some other areas.
Mr. LATCHFORD. I agree with you. We talk about, when we get the price of loan rates too high, the Brazilian production will increase. I think that is going to happen, irregardless. I know two farmers in my county have been to Brazil looking for opportunities there. I think that is going to happen.
Mr. SIMPSON. And that gets back to something else that was mentioned earlier about unilateral set-asides, and I guess that is kind of one of the problems I have had, as I have looked at the program that was being proposed, the Flexible Fallow Program.
If we take acres out of production, what is the suggestion that it is not going to be picked up in Brazil or Argentina or somewhere else? Sure?
Mr. SCHACHTSIEK. It will be. I agree 100 percent it will be. But I think we are in a different global situation now than what we were 15 years ago, and I do not think that the alternate is any better. I mean, Yes, definitely, it will be. It is not like we can produce cheaper than they can, we cannot. But that is the reality. And those that live in areas such as we do that cannot afford to produce soybeans for $5 a bushel or less, we are willing to have the choice of accepting the flex to fallow. I do not know if any farmer in Illinois will even set aside. May not even go into it. I guarantee you a lot of farmers in Missouri and Oklahoma and the fringe areas will go in it and it will benefit us because basically we will get higher prices.
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And we are not saying that the Indiana, the Ohio, the Iowa farmer has to do that. They are free to produce at whatever price the world market says they want to, whether it is 50 cents a bushel, 25 cents, 70 cents, $2, $3, that is the risk they are going to take. And I am just saying, some of us wish to opt out of that. We know the sentiment of the Congress is to move to more of a free market system, and that is a political reality. That is not going to change. That happened from 1980 on.
And probably, the Freedom to Farm, the president of Cargill told us in Kansas City, they want somebody to work for, to basically—this is the way things should be. There should be not any Government subsidies whatsoever, period. I guess there should not even be ag—I mean, just let the market forces take care of it. And they will, it works. The market forces will take care of it.
But for those of us that wish to stay in business, be a part of the political system, I think we have the right to say what we wish, as whether—I am saying. Now I might not be right, but I do know, too, that I have not bought a new tractor, and we bought a used one 10 years ago. And basically International, we run all Internationals, they do not make the International tractors in—well, did they make them in Illinois? They made them in Moline. That would be Illinois. Yes. So they do not make them there anymore. And there is very few—now I do know a neighbor has bought a new Cat tractor, and I think, to me, thing is that the domestic market is far greater than the other market, if the worker is making a fair wage and can buy the food. I mean, I do not know why we need to pursue a market by somebody that is—well, at this meeting in Kansas City, they told us, the American people are 12 percent too fat, and the people in the rest of the world are too thin. And we need to take 12 percent off them fat Americans, and we are going to starve them 12 percent, but we are going to give it to the other ones.
Mr. SIMPSON. Well, I appreciate that response, and I would just say to the president of Cargill, that there are some corporate subsidies that go on also in this world.
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Mr. SCHACHTSIEK. I do not know, I mean, that is what he told us. He said itt would take 10 years before the deal with China may show any results, but we need to head in that direction.
Mr. SIMPSON. Thank you, Mr. Chairman.
The CHAIRMAN. Thank this panel very much.
We will call our next panel of witnesses. Mr. Terry Ferguson, corn, soybean producer from Clinton, IL; Mr. Paul Jeschke, corn, soybean producer from Mazon, IL; Mr. William Olthoff, corn, soybean, vegetable producer from Bourbonnais, IL; Mr. Paul Taylor, corn, soybean, lima bean producer from Esmond, IL; Mr. Thomas Wallace, a soybean producer from Cameron, IL; Mr. Ronald Warfield, corn, soybean producer, from Gibson City, IL; and Douglas Wilson, corn, soybean producer, from Gridley, IL.
Mr. Ferguson, we will begin with you. Could we ask the noise level decrease slightly, please. Thank you.
Mr. Ferguson, yes, and all of you, if you would get as close to the mic as possible.
STATEMENT OF TERRY FERGUSON, CORN, SOYBEAN PRODUCER, CLINTON, IL
Mr. FERGUSON. I want to thank the chairman and the committee for the opportunity to participate in this hearing.
I am Terry Ferguson, a family farmer. I happen to be the president of our county Farm Bureau in Clinton, IL. I farm 800 acres with my wife Catherine and our four children.
And I guess what has been said so far—I wanted to say everything Bill Graff said, but I cannot talk that fast, so I have got a shorter presentation.
As you know, production agriculture has not benefitted from the economic boom that has brought our economy to record prosperity. Freedom to Farm has allowed us to respond to market signals rather than produce for historic crop acre allocations. However, this has not been to the full benefit of corn belt corn and bean farmers. The higher loan rate ratio for soybeans has caused acreage to be shifted from wheat and cotton to soybeans. During this time, the price of beans has been depressed as producers have relied upon the loan deficiency program to provide a price.
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We should re-examine the loan rates, taking historic ratios into account, and consider adjusting the other commodities upwards in relationship to soybeans.
Many promises were made when the 1996 farm legislation was passed. Promises of expanded market promotion, reduced regulation, reduced taxes and improved crop insurance. The same bipartisan majority that passed the FAIR Act made these promises. We must assume that inaction on many of these issues demonstrates that they were probably only lip service. There is not much yet that has happened to improve our economic conditions. You can greatly improve the long-range future success of the U.S. agriculture by acting upon the promised legislation without having to revisit the FAIR Act.
Crop insurance seems to be progressing towards improvement, but as a central Illinois producer that has never even collected on a hail insurance policy, I hope a reasonable solution can be found that will not encourage fringe areas of crop production to farm the Federal Crop Insurance Program. Some areas of our country have had more disaster years than they have normal years. It is not fair for the producers in central Illinois to subsidize increasing acreage of corn and soybeans through the use of the insurance programs. It may be a fact of life that some areas of our country are not suited to crop production, and insurance programs should not be used to expand these productions.
In the last several years, I have lost several acres of rented land that was sold upon the death of the owners. Investors have purchased much of this land. This last year, the farm adjoining our family's land was sold, and a new tenant paid $185 an acre cash rent. This does not seem to pencil out well, in these times of increased fuel costs and depressed crop prices. This brings me to my thoughts concerning farm program payments. It is getting harder for the public to justify the levels of these farm payments. It may be time to evaluate the purpose of these extra payments made to offset the low prices.
By increasing the payment limits, I wonder if we have done anything to save the family farm. We may have just given extra cash to the mega farms so that they can use these funds not needed for family living expenses to bid up cash rents and put the mid-size farmer out of business. I ask, should Federal farm programs be used to speed up the process of farm consolidation, or should they be used to help preserve the social and economic basis of our rural communities?
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The success of U.S. agriculture relies upon the increased utilization of our domestic supplies. One important part of this process is to provide for the expansion of our ethanol fuel production. By keeping the oxygenate requirement in the Clean Air Act, and replacing MTBE with ethanol made from corn or other biomasses, we will add value to our crops and provide for improvements in our rural economies with improved job opportunities for our youth. Congress must act upon this issue and keep ethanol as a growth market.
Export markets must be aggressively expanded. We should be fully utilizing all of our export enhancement programs. It is imperative that PNTR be granted to China, as we cannot be on the outside looking in at this future growth market. The world has areas of extreme famine, where food is desperately needed. We also have large Public Law 480 funds that could be used to send some of our surpluses to these starving people.
Our current domestic shipping rules make it cheaper to store soybeans in the southeast from Brazil rather than from the Midwest. These rules are outdated and should be changed. We must also invest in improving our river transportation system, we must have the modern locks and dams to stay competitive in the export markets.
In conclusion, I guess all you in Congress really need to do to deliver on the promises of 1996, is to provide fair crop insurance, expand our market opportunities by granting PNTR to China, aggressively provide for the expansion of ethanol fuels, modernize our river transportation system and keep the structure of our rural economies in mind as you consider future farm programs.
Thank you for your time.
[The prepared statement of Mr. Ferguson appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Jeschke.
STATEMENT OF PAUL JESCHKE, CORN, SOYBEAN PRODUCE, MAZON, IL
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Mr. JESCHKE. Mr. Chairman, members of the committee, I am Paul Jeschke, owner and operator of a family farm in Mazon, IL, located in Grundy County. Thank you for this opportunity to testify before you today.
Our farm raises predominantly the traditional corn and soybeans, although over the last 25 years we have had experience growing specialty crops such as white corn, waxy corn, seed corn and seed beans. If there is a market that provides a specific profitable return on a given crop, we will consider growing it.
I have been very fortunate to have regular involvement in farm policy discussions and have recently traveled to Brazil to visit with agricultural acquaintances there. My experiences there have opened my mind to more of a world-focused approach to agricultural policy. There is no question that we have serious competitors in the world market. We must be diligent in our efforts to make sure that United States farm policy enhances the American farmers' competitiveness with those in other countries. All the dedicated farmers that I know want to receive their income from the marketplace, not from the Government.
The 1996 farm bill pointed us in a market-oriented direction, and I feel we should continue on that course. The bonus Government payments that you have given to us this past year and that are rumored are going to come again this year, while greatly appreciated, are very short-term solutions to much longer-term problems. Natural economic forces are going to change the face of agriculture as we know it today, just as it has for all of time. It is true, not everyone will like those changes, but all we have to do is to look to Europe to see an agricultural model that has failed because of continued subsidies and a lack of letting economic forces take their toll.
But are there long-term actions that the Government can do to help agriculture? I say, yes. We need to put in place many of the reforms that were touted in the 1996 farm bill as it was being developed. We need to end the outdated sanctions on agriculture products. We need to reduce the Government's tax burden on small businesses in the States, specifically the death tax. We need to improve trade relations with other countries, many of which truly need our food to improve their people's diets and quality of life.
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We need to continue to explore actuarially sound risk management tools. Risk management programs, as Terry said, should not serve as business tools that protect—or should only serve as business tools that protect against natural and economic disasters, but they should not be tools that encourage production in marginal areas.
Another area where Government involvement is needed is that of exports. Negotiating trade agreement with other nations that increase our exports is vitally important to our profitability. As was mentioned before, nearly half of the production that we have in Illinois is exported, and we should strive to forge new relationships with foreign nations and end the outdated sanctions that have lost their effectiveness over time.
As my final point, the time has come for an earnest effort to upgrade our river system. Extending the locks on the Mississippi and the Illinois Rivers is something that only the Government can do. The importance of a good infrastructure was a point driven home to me as I traveled through Brazil. They have great farmland, very low labor cost and a great national pride in their agriculture. Many told me that, one day, we will be No. 1 in agriculture in the world, and they meant it. They are fierce competitors with us now in the world market, but it is very clear to me that we presently have a great infrastructure advantage over them. However, our advantage is shrinking fast. They are developing their river system, and starting out with a larger network. Overall, it may be more difficult for them to work with it, but technology is allowing them to do more and more shipping on the river with each passing day.
We must not forfeit our current river system advantages that we enjoy. Statistics show that 60 percent of all U.S. grain exports move down the Mississippi River system. Studies also show that, for every dollar we invest in the river system, we receive about 6 in return. Upgrading our locks is a long-term Government project that we should begin as soon as possible.
Thank you for this opportunity.
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[The prepared statement of Mr. Jeschke appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Olthoff.
STATEMENT OF WILLIAM H. OLTHOFF, CORN, SOYBEAN, VEGETABLE PRODUCER, BOURBONNAIS, IL
Mr. OLTHOFF. Mr. Chairman and members of the committee, I am Bill Olthoff, owner and operator of Olthoff Farms located in Kankakee County, IL, near Bourbonnais. Thank you for this opportunity to address you today concerning Federal agricultural policy.
We have a diverse farm operation compared to the common Illinois farm. Our farm produces white, high oil, seed and commercial corn. We also produce food-grade soybeans for the Japanese tofu market and a variety of vegetable crops for both the fresh and processing markets. We have dry land and irrigated ground. Our farm uses a seasonal work force to assist with labor-intensive crops.
My perspective of farm policy comes from a crop background that has program and non-program crops. Experience with both types of production provides me with the clear understanding that markets should send signals to producers and we need the production flexibility to meet the demands of the market.
In 1996, we began the transition to a market-oriented farm policy. In the long run, that course is correct and best for agriculture and our country. We will need to continue to move toward market orientation. That means, any farm bills should include the provisions that will make a market-oriented farm policy work. New markets, relief from regulations, tax reforms and improved programs that will manage the risk farmers face with crop production are necessary components of overall farm policy.
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New farm policy in 2002 should not expand the type of crops that are known under the existing farm bill as program crops. I am a vegetable producer, and while all producers of agricultural products need better ways to manage risk, we do not need Government involvement with vegetable crop production. Two issues very close to me are increased market opportunities and regulation. While neither are a direct component of a farm bill, they are crucial to making a market-oriented farm bill work. Market development in the United States, and particularly trade through our export markets ranks very high on my list of needed improvements to agricultural policy.
Sanctions reform and trade with China are two issues that need Congressional action now. We have been locked out of potential markets for too long. Illinois ranks third out of all 50 States for agricultural exports at nearly $3.1 billion for all products. About one-third of our corn production and about 40 percent of our soybean production is exported. Illinois and the U.S. farmers continue to increase their reliance on trade. We need access to all world markets. The bottom line is, we need trade.
Everyone knows this is a global market, and our policies need to be updated to accommodate it. What happens to a business that does not adjust to the market? It becomes obsolete. U.S. policies that have not allowed farmers to have access to most of the markets we sanction are obsolete. Policies that limit U.S. exports of food and medicines as a political tool damage our competitive ability more than they hurt intended targets.
There is also a humanitarian side of the food export equation. There continues to be hunger and a need for food in many of the nations around the world. We have the food to export, and the programs that can get food to the hungry. I believe U.S. food aid programs should be used to their maximum potential. The past few years, we have seen money appropriated for food aid go unused. Yet we have abundant supplies and low prices. We have the opportunity to share a safe, abundant food supply to many nations around the world. Let us take action. To whom much is given, much is required.
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Trade is very important to me, however with the remaining time, I would like to address the regulations and their impact on a farmer. Compliance with regulations occupies a great deal of my farm management time. I understand the need for a certain amount of regulations with any sector of the economy. There should also be an understanding from the regulatory community that a farm owner/operator is the accountant, mechanic, merchandiser, salesman, quality control and compliance division of a business, all in one. We need streamlined regulations and regulatory reform.
Seasonal labor is a necessity for many vegetable crop producers throughout the United States. We need improved labor laws that will allow an adequate seasonal work force to be accessible to all sizes of farm operations. Legislation like the agriculture jobs bill in the House will be a good effort in that direction.
Another area of regulation that seems to grow each year is land use regulations. Land owners use voluntary, educational, incentive-based programs to continue to improve conservation practices. Education, not regulation, is the most productive way to change land use practices. Funding for incentives and assistance from professionals in the USDA are important to continue our positive conservation trends. An example of this would be the overwhelming change that is taking place in agriculture, to no-till and minimum-till systems, which enhances soil conservation dramatically.
I would like to compliment the committee for taking time to go into the field listening to farm constituents' views on policy issues. Thank you for providing the opportunity for farmers to offer ideas and suggestions for ways to improve our Nation's farm policy. I believe that by listening to each other, we can work toward positive changes that will benefit all of agriculture. Thank you.
[The prepared statement of Mr. Olthoff appears at the conclusion of the hearing.]
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The CHAIRMAN. Mr. Taylor.
STATEMENT OF PAUL W. TAYLOR, CORN, SOYBEAN, LIMA BEAN PRODUCER, ESMOND, IL
Mr. TAYLOR. Mr. Chairman, thank you for this opportunity. I appreciate not only the fact that I can come here, but the fact that you have come out to visit with us, and I think that is a great thing.
I come today not representing any farm organization, even though I have got experience with a number, but I think representing a profile of American farmers that America is going to need to supply a food supply into the future. From northern Illinois, not only do I grow corn, soybeans and winter wheat for grain, but I also produce specialty crops such seed soybeans, food-grade beans for export, variety-specific corn, vegetable crops, sweet corn, lima beans and green peas. I quit producing farrow-to-finish hogs, but now contract finish those facilities which generates about 2,500 pigs per year.
I have been farming for about 30 years, but one of my biggest concerns today is how to structure my business and prepare for growth for the next 20 years. I have two sons, one of whom has expressed some interest in participating in the family business, in spite of the uncertainty that still exists there. I am trying to do more partnering with a neighbor with a similar-size farm. We are sharing labor and equipment, and that seems to be working out really well for us.
I would like to share a few observations and anecdotes about my observations of farm policy and how the personal impact has been on me. Thank God for all of us, I do not have time to go into very much detail on all that I have listed here, but I would like to talk about who ultimately ends up with the income from the farm bill, the safety net, acreage set-asides, cropping flexibilities and calculating income, both on cost and income perspective.
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It goes without question that farm income payments have been significant in the last few years for midwestern producers. For many it has been the life raft that keeps their farm afloat. Thank you for that support for me and my family. Thank you also for the emergency supplemental income support that came last year.
One of the questions I would raise however is how the system is paid, based on acreage basis. I believe that this system may be antiquated and outdated. An important negative impact that comes from this situation is the predictability of annual payments, and the effect of that predictability on the amount of Federal money that ends up in the hands of actual farmers. Because Federal farm payments are fixed for each year, rather than as before 1996, which was based on fluctuating market prices.
Farm managers and the landlords can factor with near certainty the amount of income support payments for farmers into their calculations to estimate future farmland returns. For example, a common procedure is to calculate gross farm income based on estimated yield times estimated price, plus the known value of the farm income supports for that farm. From this value, estimated variable and fixed costs are subtracted. This value then represents return to the operator's labor and management, plus a residual to the land. I have seen farm managers make the assumption that a value of $50 is adequate for the operator, therefore, when you do the math, the rest of it accrues to the farmland owner, and that is where it should be.
You may have caught from this simple calculation that these income supports, the income went in at the beginning of the calculation, not at the end as a residual for the operator. While farm managers will not demand these payments as rent, they are calculated into the equation. In fact, I have seen a spreadsheet used by a farm manager that lists the annual support payments for the life of the 1995 farm bill. These are included as a basic income factor in the projected cash flow rentals for land for the term of the legislation.
Off the records, some farm managers believe the land owner is entitled to half of the farm income support payments. Others, more cavalierly respond, farmers are just plain foolish enough to bid away whatever percentage they are willing to give away. Either way, I am not sure that is exactly what Congress or your committee had intended.
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Of the income supports distributed to farmers, too large of a percentage ends up in the hands of landowners. Many folks assume that the land is run by the farmers that own it, but what difference would it make? Well, that is not true. Recently I saw a statistic that said non-farmers own about 70 percent of Illinois farmland, and that is up from 30 percent in just over 3 decades. Consequently, a large percentage of the farm income support payments from that farmland end up paid as rent. Farmers no longer retain the income for expansions, family support, tuition and medical expenses and retirement. So long as this system is based on some sort of acreage base, call it what you will, it will not accrue fully to the farmers who it is intended to help.
Farm safety net issues include commodity loan rates, Crop Insurance Programs and subsidies and use of marketing alternatives, such as futures options and cash flow sales. The LDP has been very good for me over the past 2 years. I have, however, missed opportunities. I even got greedy a time or two and lost some profit potential. That is a euphemism for speculation and a loss. [Laughter.]
The use of LDPs allows net farm income to remain relatively strong without distorting world market prices. Thanks for taking that step of allowing the LDPs to be in place. It is an improvement over the old deficiency payments of past farm bills. Today farmers are making more of their own cropping decisions and farming less for the farm program.
Regarding set-asides, I would just like to say that unilaterally, they have been talked about here a number of times. I think they are a failure, I do not understand that. Regarding the use of market risk shifting/transferring programs, my experience is that the outcomes have been mixed. It is yet to be clear in the country who will provide some of these services in the future. Anything that the Congress can do to allow our own grain merchandisers to offer more of these services will benefit producers.
And I am not sure, one more thing, and I would like to open up a can of worms very briefly here in conclusion, and that is, I am not sure how many farmers we need. I think it is your committee and the U.S. Congress and the people in general need to decide what they want agriculture to look like. I am convinced however that we have too many farmers today. Too many for the income available, too many to match the efficiency of getting the work done today and for the ability to compete on a least-cost basis. In my home county, I believe that there would be more net farm income if there were half the number of farmers that there are producing today. Cost savings could be gained by spreading fixed costs over more production units. Newer, high-capital technologies will save inputs, track operations and increase profits, and they could be more easily adapted, just as the situation with set-asides.
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I am happy with the provisions of most of the current farm legislation. Providing some sort of farm safety net is very wise and a timely policy. A shift to a payment system that would keep more income in producers' hands would be beneficial. Policy changes that will aid in the transition of the next generation into agriculture are important also.
Again, thank you for coming today.
[The prepared statement of Mr. Taylor appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Wallace.
STATEMENT OF THOMAS R. WALLACE, SOYBEAN PRODUCER, CAMERON, IL
Mr. WALLACE. I am Tom Wallace, a soybean and corn producer from Cameron, IL, and currently the president of the Illinois Soybean Association. I am pleased to be here today and commend the House Agriculture Committee for holding this hearing on farm policy.
Illinois soybean producers know that profitability depends on enhancing market demand and increasing global competitiveness. We have historically looked to the marketplace rather than the Federal Government as our source of income. This is underscored by our dependence on exports. Nearly half of each production year of soybeans is sold abroad.
The Illinois Soybean Association, ISA, and our national organization, the American Soybean Association, ASA, have consistently represented these interests in its positions on international trade and domestic farm policy in the 1990's. In a debate on the FAIR Act, ISA and ASA endorsed Freedom to Farm, once it was made clear that soybeans would be treated equitably with other crops. Both our State and national organizations continue to strongly support the FAIR Act. Unrestricted planting flexibility enables producers to optimize crop selection and reduce operating costs, maximizing their profitability.
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Combined with the marketing loan program, this approach is highly consistent with orientation toward domestic and foreign markets. When it was developed, it was recognized by Congressional supporters that Freedom to Farm would make U.S. agriculture more dependent on the marketplace, requiring greater access to foreign market. It was also recognized that decreasing dependence on Government support would require less interference in production agriculture and more effective risk management tools.
Accordingly, Congress and the administration made a number of commitments at the time to policies and programs that would help make the FAIR Act work. More than 3 years after the FAIR Act was enacted, few of these commitments have been honored. The limited progress made in such areas as trade sanction reform, increased funding for research, increased humanitarian food aid program, to name a few, meant there were no new sources of demand or protection against losses when supplies rose and prices fell in 1998 and 1999.
The Illinois Soybean Association believes the best response to the continuing erosion in the U.S. farm economy is for the administration and Congress to address and complete the unfinished agenda, policy and programs that they agreed to undertake back in 1996.
We do not support going back to the old farm program, and oppose making set-asides or other supply management programs and eligibility requirement for any soybean benefit. Both the ASA and the ISA will work with Congress in examining any income support proposals. A guiding principle we will insist upon is that soybeans be treated equitably in any program.
Concerns have been expressed that the soybean loan rate of $5.26 per bushel does not reflect the historical price relationship with the corn loan rate of $1.89 per bushel, and that the disparity is increasing production of soybeans at the expense of corn and other crops. The ISA does not believe this is the case.
The prospect of receiving higher marketing loan gain or LDP may have been a small factor in the increase in soybean plantings in 1999. The solution, however, is not to reduce the soybean loan and safety net. The solution is to enhance demand through greater trade expansion, export promotion, food aid, biodiesel use and reform of unilateral U.S. economic sanctions and other steps that will drive prices above the loan rate. Whenever Congress considers changes in the marketing loan program, the ISA will support making the current $5.26 level a statutory minimum rather than a cap.
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Another area we hope to work with legislators to improve upon is to increase funding for basic research. As you know, we continuously work with the USDA/ARS lab here in Peoria to develop new agriculture products that add to the total disappearance of U.S. soybeans. In the upcoming year, the ISA and ASA hope to not only work to once again maintain the funding level for this institution, but to increase it. As you know, each year funds for soybean research at Federal labs, regional labs and our land grant institutions fall under budgetary scrutiny and must be worked back into the budget.
Research, both basic and applied, plays a critical role in the long-term sustainability of soybeans and all of agriculture. Current Federal investment in soybean research totals 25 million, less than some other commodities and significantly less than other areas of science. This year, to bring equitability to soybeans, the ISA and ASA recommended a 38 percent increase in Federal funding, from $25 million to $34.5 million for soybean research.
As we look at the dawn of the new age of biotechnology and all its applications, we hope to continue working with you and others in Washington to leverage Federal, State, public and private dollars to ensure the viability, efficiency and productive outcomes of a collective public soybean research program. Moving into a new century and the challenges we face keeping up with world food demand, it is a tragic irony that we see market-depressing surpluses that are being held because of a political climate that does not work towards opening the greatest world market potential our country has seen in its 224 year history.
If given a chance, Freedom to Farm is a policy that embraces the independent spirit of the Illinois and American soybean farmer. Without true market access, Freedom to Farm is not only failing, so is our ability to be the most reliable producers of food in the world.
Thank you for the chance to begin the dialogue on the first farm policy of this century.
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[The prepared statement of Mr. Wallace appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Warfield.
STATEMENT OF RONALD R. WARFIELD, CORN, SOYBEAN PRODUCER, GIBSON CITY, IL
Mr. WARFIELD. Thank you, Mr. Chairman, members of the committee. I am Ron Warfield, and Melanie and I, my wife and I farm near Gibson City, IL, we are a corn and soybean farmer. And up until about 6 years ago we were a cattle feeder as well. I am also president of Illinois Farm Bureau, and we welcome you to Illinois and appreciate you holding this hearing on agriculture policy here in Illinois.
Since many of the comments I have in my written have been stated, I am going to summarize and say some things orally that basically give a summary of what I have in the written comments.
First of all, we wholeheartedly adopt and endorse the market-oriented policy of Freedom to Farm. As I looked at those policies, they send the signals that we need to have to adjust to the global economy that we live in today. As we looked at those times, though, we have gone through low times and high times together, low commodity prices and low incomes as well as high prices and high income. And as you look at those two factors, one of the limiting factors that we have seen in this bill is the fact of one that we anticipated, we said we need risk management tools, and I applaud the efforts that the committee is working on presently, but obviously we did not have them in place when we started this bill in 1995 and 1996.
In addition to that, I think it is useful to say, in this kind of volatility, how we can look at counter-cyclical measures that may be institutionalize some of the efforts we need in tremendously down years like we have had in the last 2 or 3.
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Having said that, when we entered into this agreement back in 1995, 1996, our effort was to grow the marketplace. We looked optimistically at a growing, thriving agricultural industry, and we said, what can we do together—and I say to Congressman Stenholm, what can we do together, cooperate, to say, how can grow this marketplace? And certainly the trade area is the area of, 40 to 45 percent of what we produce in Illinois goes to that export market.
We have to expand access to those markets. We must expand access to 20 percent of the world's population that resides in China today, and they provide us with an opportunity by unilaterally bringing down trade barriers to 20 percent of the world mouths that we want to feed. We must move and open markets, increase market access, expand markets, if we are going to be consistent with the philosophy we started with Freedom to Farm in 1995 and 1996.
In addition to that, we talked about trade sanctions, and I appreciate the poll that was taken earlier. Another word for trade sanctions is an embargo. When it is a unilateral trade sanction, it is nothing more than an embargo and farmers in this room know very well what happens when we use embargoes. They do not work, they do not accomplish their objectives, we must end unilateral trade sanctions on all countries that we have them on, including Cuba, as we deliberate that this year. Expand the market is the theme.
I again appreciate the consistency and say how we can expand the ethanol market. We have an opportunity in the next 5 years to double agricultural use in a renewable fuel in the ethanol market. Oxygenates work. The debate about cleaning up the air in California or Chicago or Denver is not about whether oxygenates work. For the last, since 1999, we have prove they work. The problem is that one of those oxygenates happens to pollute water also. So if we clean up the air, continue the oxygenate requirement, we can dramatically expand the market we are producing for.
As we look for that in saying we are for a market-oriented policy, we also must say, markets must work. They must work effectively, efficiently and the consumer and producer must have confidence that we do have price discovery and that concentration mergers and acquisitions do not interfere for that good price discovery to take place. We look at that, we must have confidence that there is not too much concentration existing, adequate competition.
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What I am saying, we are not against mergers and acquisitions, what we are for is competition and confidence that there is adequate price discovery and competition in the marketplace so that the market does work. And we must have that confidence, and we must look at the current statutes that we are looking at to ensure that that works and operates.
We must have research. In 1995 and 1996, we said we were going to expand research, but here we are 5 years later, and the actual Federal funding for agricultural research has declined in real terms. If we are going to talk about how we can produce environmentally more soundly than we even do today, and we are doing an excellent job today, particularly looking at it on a global basis. If we are going to say how we can produce food more safely, we must have the research to do it.
And in addition to that, if we are going to add value to what we produce and find a way that producers can expand that dollar as it goes back to their pocketbook, through that value-added mechanism, we must have the research to say how we can bring that about and make that happen.
And lastly, many have talked about regulation and taxes. We must have a regulatory base that is based on cost benefit analysis and proper risk assessment, and not the kind that we are doing with FQPA today, in which there is not proper risk assessment, and their cost benefit analysis is not being done appropriately. You get the burdens off our backs, produce for an expanding market, a market that we cooperatively expand, we can succeed under Freedom to Farm. But we have got to work together to make that happen. Thank you.
[The prepared statement of Mr. Warfield appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Wilson.
STATEMENT OF DOUGLAS A WILSON, CORN, SOYBEAN PRODUCER, GRIDLEY, IL
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Mr. WILSON. Thank you, Mr. Chairman, members of the committee. My name is Doug Wilson, and I am a farmer from north central Illinois. I am one of the farmers that, when I leave the driveway, if the planter or the combine or the main tool in use, that piece of equipment does stop, so I am an entity farmer, a sole entity farmer, and I am a fourth generation farmer in Illinois and actually can trace my roots back to the Shenandoah Valley in the 1700's. I want to thank you for the opportunity to testify before the committee today. I also want to thank you for convening these hearings in the areas where the producers are. It is very positive and gives us a direct link to being able to talk with you all.
I am left with the problem of being the last witness on the docket today, and what has not been said? Probably more has been said than has been able to be absorbed, but I also will not be so bold as to say that I will have the final word, because I know from our distinguished panel up there, I will not have the opportunity for the final word, there will be folks that will be following up.
Since enactment of the 1996 farm programs, many changes have occurred within agriculture. Some parts of the current farm program need revision, but overall, I do feel the program has served its purpose. Safety nets which are to act as a clearing mechanism for grain stocks, while maintaining producer price supports have been successful. In my opinion, Freedom to Farm should not be criticized for the shortcomings of the program. But problems have occurred because Congress and the administration have not taken responsibility for providing expanded trade opportunities, and research support to build and create new markets for U.S. products.
This along with an over-zealous regulatory system and 4 years of above-average yields has created undue hardships on farmers, both economically and emotionally. The failures of Congress and the administration on trade issues like fast track, and potentially PNTR, and a lack of research commitment have greatly contributed to the problems of the 1996 farm program.
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Let me start by telling you what I do not want to see changed. I do not want to return to a set-aside program to control production acres. I am in favor of use of the Conservation Reserve Program, which is a long-term commitment to acreage and its use. And I would like to see the 36.4 million acres filled before we add additional acres to the program. I do not feel that the Secretary of Agriculture has been the best steward in utilizing the acres available, and I think there are some things within the current program that could be improved, and I would like to see that number completed before we start expanding more acreage that potentially will not be filled.
During the time of set-asides in the 1980's, while we laid out 37 million acres of cropland, non-U.S. acres grew by 41 million acres. As it stands today, Brazil and Argentina have literally millions of acres that could be brought into production if the U.S. goes back to an acreage control policy.
I do not want to see a return to the farmer-owned reserve. The market clearing ability of the current farm program through loan deficiency payments have kept Federal grain reserves from hanging over the market. And I do mean hanging. Historically, farmer-owned reserves have not proven to be a long-term solution for production variables. In fact, during the mid-1980's when the FOR reached one of its highest points of enrollment, corn prices crashed to the low point of $1.50 in the marketing year of 1986 and 1987, even when we had set-asides. Short-term solutions are not always the key, we need to work at other things.
I also do not want to see the loan rate raised for corn. Anything that contributes to artificially raising world grain prices only brings more non-U.S. acres into production, and ends up supporting agriculture expansion of other countries, rather than helping U.S. agriculture gain the tools we need to work and compete in the world markets.
Now what do I need to see changed? First, we need more market orientation from Washington, not more rhetoric. That means passing permanent normal trade relations for China, working to include China in the WTO, granting Cuba trade status for food and medical supplies, and getting fast track back on course as soon as possible. We need to stop apologizing for being a creative and productive nation at the WTO. We need to show the world that we are serious about being a reliable trading partner, and not a spoiled child who wants to take his or her ball and go home if everyone does not bow to our every whim.
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Moving the FMD funding to the CCC has created more red tape and has limited the program's ability to be effective. One other problem that I see with that is, when you moved it to CCC control, FMD has lost Congressional oversight, and I think that it is important to have oversight, from your point of view.
Reforming programs like FMD and MAP while providing better funding will build better relationships with our world customers. In spite of pledges for more regulatory reform, we now face more regulations than we have in the past. Many new regulations have evolved, more from speculation or from out-of-balance computer models than from solid scientific fact. Issues like GMOs have been cash cows for some groups and very costly to producers and consumers, while the real answers have moved slowly forward.
Regulatory reform that reflects reality is needed. We also need a commitment to improve our waterway transportation system. This must happen very soon. Every year that we delay, our most dangerous competitor—and I am speaking of South America—moves farther and farther forward, and there has been plenty said about that.
Ethanol? As long as I have been involved in being an advocate for agriculture, ethanol has been on our plate. And every time we think we are moving forward, something new arises. Ethanol, again, is an unknown market for farmers and for the industry. While we hear that more needs to be done to create clean-burning, renewable sources of fuel, farmers continue to swing in the breeze awaiting proper action from either the administration or Congress to determine ethanol's future. Legislation like H.R. 4011, introduced by Representatives Ganske and Shimkus, and H.R. 4303, introduced by Congressman Ewing address the issues that we need to address. Issues with MTB, maintaining our clean air standards and creating an expanded role for ethanol. This must move forward quickly. I realize that we are running out of days that you will be in session this year, but this is something that I feel is very important to us. There is so much potential there.
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Now much of what I have suggested likely does not need to be part of the farm bill. What it does demand is action from those of you who represent us in Washington. For too many years, I have come away with the same issues coming back to me again and again and while I have watched my neighbors and myself lose more and more economic potential. The rest of the country has prospered, and we have suffered.
And I guess, finally, a few comments along the way here, much has been said about China and PNTR, and potential there. We see shortfalls in trade policy. This is just the current issue that we have. We have had issues on fast track, we have had the embarrassments we have had at the WTO when our negotiator, Ms. Barshefsky, had her legs cut out under her by the administration, and I really believe that this is a defining time of whether or not the United States will be a player in world markets.
So for any of the Representatives here today, and I know that most of you are supportive—I use the word most, and particularly for those of you that are from Illinois, if you do not choose to vote to pass PNTR, you might as well stab me in the heart right now. Because a lack of a clear and solid trade policy only means a slow death for my farm and my family's farm, a time that goes from the 1700's through today. I may be the last generation to farm.
I thank you for your time.
[The prepared statement of Mr. Wilson appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. LaHood has an introduction he wants to make.
Mr. LAHOOD. Mr. Chairman, I want to introduce the director of the Agriculture Research Lab here in Peoria, a good friend to many of us here, and for the great work that he does and all of his colleagues do. Please stand up, Dr. Peter Johnson, the director of the Agriculture Research Center. Thank you, Peter, for being here. [Applause.]
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The CHAIRMAN. I will take a minute to summarize for you, as this is the concluding panel of 10 wonderful hearings that we have had across the country. We have been into 10 regions. As in every region, we have seen differences of opinion about what should be done. I think hopefully what it does to you is it points out to you why our job is so much fun as coming up with a solution to the problem, when there is difference. Very legitimate, people have differences that they strongly believe, and I think have to be considered.
I want to be a little bit more specific about that, and this is not—maybe this is playing the devil's advocate somewhat. But to show you, highlight that difference that people have in parts of the country and why it does make it so difficult, but where I think pointing out, I guess, the end result of this being maybe where the solution is.
Mr. Ferguson, in your testimony on the first page, where you get into the idea of risk management, and you talk about the fact, it says, ''It may be a fact of life that some areas of the country are not suited for crop production.'' There are some people in some parts of this country that have tremendously productive agriculture that have phenomenal weather conditions, they have virtually no risk, that feel the same way, and they are irrigating those crops out of water systems that billions of dollars have been spent on. And if it had not been for those water systems, there would be deserts where they are.
Mr. Jeschke mentioned in his testimony, ''And my final point is, the time has come for an earnest effort to upgrade our river system, extending the locks on the Mississippi and Illinois River is something that only the Government can do.'' There are people in some parts of this country that would say, well, maybe you all should not be farming up here because they are close to the ports and they can get theirs out, so they will not have to spend those billions of dollars.
Now I happen to agree with both you and with them. And in those people that are in high-risk areas, I tell them, and they agree, you should not be subsidizing the high risk they have. I always say, if I built a house on any of the coasts that have hurricanes, I could expect my homeowners insurance for hurricanes to be a little bit higher than it is going to be in Lubbock, Texas, where we have a little wind, but not quite hurricane strength.
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The point in all this is this: All of you have got legitimate concerns. All of them have legitimate concerns. What we have to recognize is that, so Brazil does not become the No. 1 producer in the world, we are going to have to have production from all of these areas. Each of them raise different kinds of crops. We have heard about crops on—I thought I knew something about agriculture. We have heard about crops on these hearings that I had no earthly idea how they grow them or what they do. But there are problems that each have that your solution, because of one positive that you may have, or several positives you may have in farming in this part of the country, are problems that other people—that is their problem. But what your solution is something that they do not have a problem with.
So what we have to do is to try to look at this in total, and recognize that we cannot develop a farm program or Government programs in a vacuum. We have to develop Government programs for Americans from coast to coast and border to border. Each of those has the same dedication, the same emotion, the same love for agriculture as one other area of the country.
What we have to do is to recognize how important it is for those of us who do not have river problems. We do not have river problems because we did not wish for them, we just do not have river problems because we do not have much water down there. We get about 18 inches a year, and sometimes it comes on Wednesday.
And recognize to the significance of the economy of Ray LaHood and of David Phelps and of Tom Ewing's district and Leonard Boswell's district, that these—as we were coming in yesterday, Ray was pointing out to us the rivers and how those things work, and how they flow, and you all have all talked about that. Nearly everyone has talked about that today. Well, that is significant. I mean, that is not a part of the farm program, but that is as important to you in seeing your crop delivered as it is that—to some other problem that we may have that we are trying to deal with in Texas or along the coast, or wherever else we may be.
And someone summed it up, I think maybe Mr. Wilson, it was you that said not all of the problems that are facing agriculture—in fact, many of them do not even come under our jurisdiction. They are environmental, they are regulatory, they are clean air, they are clean water, they are whatever they may be, and those maybe have as much of an impact on you and your ability, so that you are not the last generation on your farm to farm. That we have—while we do not have jurisdiction over those, we think we have a role, and we think we play it pretty verbally, of how significant all that is to the thing that is of concern to us, which is American production agriculture.
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And that is why we are going out. If we did not care, we would not be here, we would not have been in those nine other places—well, I would have been in one of them, because I happen to live there. But the thing that we need, that helps us a great deal is that, when we were in California and those Californians point out to us, as we are back in Washington, working on legislation, a specific water system that is out there that keeps Sacramento from flooding, that has a lot more importance to me now than it did, because I know what it has done. I know what it has done in the past and what it is going to do in the future. When Ray LaHood talks about the need for transportation up and down Illinois River and the Mississippi River, and how all those connect, that all has a difference now than it did before.
So what we want to try to do is, then in helping one other part of the country, we do not want to hurt another area, and because we have an interest in one area of the country does not mean we do not have an interest somewhere else. All of this all ties together. And that is what it is, the challenge that we have got, is to see what we can do without—so to not pass the problem to someone else to make them bear a problem they do not have today, but in order to help you. And that is why it is challenging, but that is also why it is fun, but that is why we are here. And I appreciate very much the time and thought that has gone into your participation in this.
Mr. Ewing.
Mr. EWING. Thank you, Mr. Chairman, and thank you to this panel, and to particularly the three constituents I have on this panel for coming and doing a good job.
I just kind of want to sum up something here. We find lots of reasons why things are not good in agriculture—inheritance tax, regulation, the bad economic conditions in the Orient and on, and on, and on. All of those are true. But sometimes I scratch my head and I think if we did not have an inheritance tax, if we did not have to put up with regulators, if we did not have all the things we have talked about, would agriculture be able to really move with the world market?
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The problems we are having today, in low commodity prices, really are not the fault of a lot of things we blame. Now we think they would be better if they were, but we have a surplus production in this world right now. We have not had a good drought for 4 years. A good drought is in some other part of the world, not here. [Laughter.]
Those are the good droughts, and then the bad droughts are the ones that affect you.
But the point is, we have had over-production more than the world demand, and I just ask the question, can we make Freedom to Farm in the free market operate, and what do we do to be sure our farmers survive? If we are going to do that, we are going to have cycles, and we are going to have $4 corn and then we are going to have $2 corn. How do we prepare, what do we do at the Federal level to be sure we can handle that? Any of you?
Mr. WARFIELD. As we look at those, and certainly as we put together Freedom to Farm in 1995, 1996, as I sat around the table with some of you, it was said, we will have these kinds of ups and downs. It should come as no surprise to anyone who was sitting at the table in 1995 and 1996 that we have had these dramatic cycles. They might have been more extreme than anybody anticipated, but one of the things we said is, it is going to be more volatile as we enter this global marketplace.
I guess that is where I would come back to say, I think the two things that were talked about then was, can we put together the kinds of risk management tools to help us deal with that? That is one thing that I think we can do policy-wise, to help do it. And quite frankly, if we had had some of the things we are talking about today in place in 1995, 1996, I think that we would have had—do not get me wrong, not everybody will succeed and profit and stay, but the fact that we would minimize the extent of the down-put.
The other side of that is one that I mentioned, is some kind of counter-cyclical payment. And in 1995, 1996, because of budgetary considerations, the AMTA payments were put on a declining scale, not because, in my opinion, because we thought that was the best way those ought to be scaled out, but because of budgetary considerations, there was no way of guaranteeing that those payments would come when they were needed. And quite frankly, there was a lot of people at that time said, the best way to do this, and the cost of the program would have been less over this period of time if, in the early years, when things were good, we really should not have gotten AMTA payments. And we talked about that, but there was no way within the budgetary process to do that.
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As we look at counter-cyclical payments, moving ahead, I think we have to find a way of doing that. And the fact is is that, because we got those in the early years, it has exaggerated what has happened in the later years. Because we, one, spent money that we really did not need to have out there, it increased land values and capital expenditures at a time when we really should not have, because we were spending—I mean, we had high prices and big AMTA payments.
And so I think the two things that I would point to that says how we deal with that would be risk management tools we put in place, and there is a number of things that we are moving in that direction, but I think we need to do more. And the second is, look at the counter-cyclical payments, and certainly in good times, we would get payments under this scenario. Not in—and I want to emphasize, the people sitting around the table were aware of that at the time, they just could not find the mechanism to make it work in the budgetary process.
Mr. EWING. My time is running out. But does anybody else want to add anything to that? Because I have one other question I would like to ask this panel.
[No response.]
Mr. EWING. It is a good answer.
How many of you on this panel believe that we need to pursue the new genetically-modified crops and inputs that we are using? Are all of you supportive of that and supportive of our efforts to get that accepted around the world?
You get to talk if you are not for it. [Laughter.]
Mr. OLTHOFF. Well, I personally am not growing any genetically modified crops right now because of the market situation. But I believe we are making a big mistake in not pursuing them. I do not believe there is any scientific evidence to prove there is anything wrong with them. I believe the research has been done, is continuing to be done. There are more and more companies coming out supporting them now, as before we had leaving them.
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But I am concerned what this is going to do to research, agricultural research in this country. I think back when Rachel Carson wrote her book, ''Silent Spring,'' she said she looked forward to the day when we could genetically modify crops so that we would not have to use pesticides, and we are there. And yet the groups that support her are against it.
So it is a Catch–22. And I hope that down through the years, we will have the research to say that it is good and that we will continue to research and produce these kinds of crops. Seedless grapes, we all enjoy those. There is a number of crops that we are using that have been genetically modified and are good for us. And so is the grain, but we have a crying wolf here that is not making a lot of sense. And I think through research, through the universities, scientific research on it, that we can overcome this, and prove it to the world.
Mr. EWING. Mr. Taylor, do you have a different take on that?
Mr. TAYLOR. Well, I think, as my cynical nature, that I think there is an incredible amount of good that can come out of the potential with genetically modified organisms. What my concern is, that while we are understanding at this point there is no risk, or very little risk, most folks say no risk, these have all been relatively short-term questions, and I am not sure that the breadths of the questions have been addressed. I think that if we look at human exposure to radiation in the 1940's that the military and the Government, in fact, sanctioned, that is a bad example, or use of DDT, it took 2 or 3 decades before we realized what some of the real implications were.
And I think that we are in a situation where we have talked about it time and time and time again this morning, about the surpluses worldwide. We do not need more soybeans right now. We do not need more corn right now. But the most important thing is, who, in fact, is going to control the assets and the resources? If you talk to people in the herbicide industry, that has shifted incredibly from who does the custom application, who are the significant players? Monsanto in St. Louis has become a king, if you will, a very significant player in all that. And I think, quite honestly, we have just touched, we have just touched where this transition is going to go with GMOs. And I think the thing to say is one is liquid fertilizer, it is dry fertilizer, it is ying, it is yang, that is not true. We are at a very critical juncture in production agriculture worldwide with the GMOs.
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Mr. EWING. Thank you.
The CHAIRMAN. Mr. Phelps.
Mr. PHELPS. That is one thing about these hearings throughout this country, and I am sorry I could not attend all of them. But thank you for coming to Illinois, and a beautiful part of Illinois, and a productive part of Illinois. But I just want to thank all the panelists here, and Mr. Warfield for his leadership.
And for those of you that expressed your different opinions for different issues today out there, in the words of Mr. Wilson, believe me, when you serve in our position, you make a list of one through 10 of where we can help, and you may be happy with us on seven or eight of them, and not one of them, I hope that one does not truly cause that knife to go to the heart. Thank you.
The CHAIRMAN. Mr. LaHood.
Mr. LAHOOD. Thanks to all the people that stuck around here today and endured all of this. And I hope you have a better feel for what we do and some of the decisions that we have to make. And I thank all the panelists in this particular panel, and again my thanks to Chairman Combest and to Mr. Stenholm for choosing Peoria. It means a lot to our community that you were able to be here. And that is it.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Mr. Chairman, I do not have any questions. I just want to thank Mr. LaHood for inviting us into his district. The people of Illinois have been very gracious hosts to us and we appreciate the opportunity to be here.
Our job now is, I have 10 books like this at home. And then you take the submitted testimony and add that on to it, and my—I should say my staff's job, maybe. No, my job is to actually go through it now, and distill everything that we have heard, and the themes that we have heard that are in common about things that we can look at to do, and some of the other ideas that may have merit. And try to distill those down into some thoughts that we can work on as we look at the next agricultural policy.
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So I appreciate your input, and your participation in this. This really has been an educational and beneficial experience, I think, for all the members of the Agriculture Committee that have been able to attend most of the hearings. So I appreciate it, thank you.
The CHAIRMAN. Thank you. Mr. Stenholm.
Mr. STENHOLM. Thank you. I think from your testimony, you have already answered the question, but I want to ask the same question again. How many of you believe that we ought to immediately lift all unilaterally-imposed sanctions? Yes?
[Affirmative nods.]
Mr. STENHOLM. All seven? Same as on PNTR?
[Affirmative nods.]
Mr. STENHOLM. Mr. Olthoff, thank you for mentioning world hunger and responsibilities. And Mr. Taylor, sleep on your answer you gave on GMOs just a little bit, and rethink, from the standpoint, when you say we do not need any more soybeans, there is hundreds of millions of people out there that would welcome some of your soybeans right now, converted into the food that they need, and otherwise they would be starving to death.
What we have got to look at in this overall farm policy is how we deal with those folks who have not yet had the opportunity to develop their country and their agriculture as we have. And I share that, that is a responsibility that I do not take lightly either, even though it is so complex, because that is foreign aid, and most farmers oppose foreign aid, at least we say so so often. But we have to think about that because that is a responsibility that we were put on this earth to think about and take care of. So sleep on that one a little bit, and I know what you are going to say right now, and you and I are going to agree more than we disagree on that.
Mr. TAYLOR. That is a political issue. Our food situation is a political issue, not a production issue.
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Mr. STENHOLM. Absolutely. But also research and development, had we not always had the kind of research and technology that we recognized the gentleman for here just a moment ago, one of the tremendous advantages that we have always had is the wisdom and foresight of spending money to answer problems before that occur. And that always gets us into being criticized.
Counter-cyclical, I love to hear that word, because I think that is exactly where we need to be going. Because just like this year, we are already—we are going to have a vote to perhaps have another double AMTA. And that is, in fact, going to send money to some folks that do not deserve, and others that need more of it. And we do not have the perfect policy yet, but that, again, short-term, we cannot do much about that. Long-term, we have got to think in terms of how we make our policy work better.
But this being the tenth hearing that I have had the privilege of being at, and it has been very educational, even to someone as I who have spent my entire life in agriculture and agriculture policy, both in Congress and before Congress. And to those who have not gotten to testify but have submitted your testimony, we will be considering it. We will seriously be considering it, because we know we have got a challenge ahead of us. We know what the problems are. What we do not yet have a consensus on is what the solution is, but we have more of a consensus than I think most people in agriculture would think.
And cooperation, you see a little bit of it in this committee. You do not see very much partisan bickering among us. You will not, have not and will not, because those of us who have the privilege of serving on the Agriculture Committee from both sides of the aisle realized partisanship does not solve problems all of the time. It picks and chooses whom would be chairman, and I make no secret about it, I would rather be chairman than my good friend and neighbor from Texas.
But that was not to be right now. And I would say that whether he is here or not, but I would prefer to say it when he is not here.
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The CHAIRMAN. Well, Mr. Stenholm, you lost 3 to 2 on the vote we just had.
Mr. STENHOLM. Thank you, Mr. Chairman.
Mr. EWING [presiding]. I want to, for Chairman Combest, say again thanks to Peoria, and to Ray LaHood for being our host here, for all of you for attending, and with unanimous consent, the record will stay open for 30 days for anyone who wishes to submit written testimony or exhibits as part of this hearing. And with that consent, we will discharge this panel and this hearing is adjourned.
[Whereupon, at 1:10 p.m., the committee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Testimony of Paul W. Taylor
My name is Paul Taylor. I am a third generation farmer on the land where I live near Esmond in northern Illinois. On my farm I grow corn, soybeans and winter wheat for grain. I also produce specialty crops such as seed soybeans; food grade soybeans for direct export markets, variety specific corn for export, and vegetable crops such as sweet corn, lima beans, and green peas for the Del Monte Corporation. From about 1960 until this past year, we had produced seed or foundation corn, but our community has lost those high value contracts to irrigated producers. We have stopped producing farrow-to-finish hogs on the farm, but contract finish about 2,500 pigs annually for a group of local investors.
I have been farming for about 30 years. I started with my father and a brother, both of whom are gone now. One of my biggest concerns today is how to structure my business and prepare for growth for the next 20 years. I have two sons, one who has expressed interest in participating in the family business. In spite of uncertainty in that direction, I am doing more partnering with a neighbor. We are sharing labor and equipment for our similar farms. This has been good for us both.
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Background: Farm policy choices have shaped the face of rural communities and production units for decades. Whether by Jefferson's vision of a nation of yeoman farmers or Lincoln's land-grant system with homestead land available, direct or indirect farm policy has shaped what we have become. This process continues today. Farmers must adapt to changes that come from beyond their control to produce and survive. Each piece of farm legislation this century has molded production agriculture into the base from which we are discussing future directions here in Peoria today.
I would like to share a few observations and anecdotes regarding current farm policy in the United States and its impact on me. I'll offer my perspectives and hope these may be helpful in your task of reviewing Federal farm legislation.
Items I shall address include: income supports from the current farm bill and who ultimately ends up with the money; farm income safety net; acreage set-asides; cropping flexibility; income from a price and cost basis; and the question of whether farm organizations represent the farmer profile that will survive into the coming decades.
Farm Support Payments: It goes without question that farm income payments have been a significant portion of net farm income for many producers in the Midwest these past couple years. For many, it has been the life raft that keeps their farms afloat. Thank you for the support. From my family and neighbors, thank you also for the emergency supplemental income assistance last year.
I would raise the issue regarding how using the current system of payment acres has been a convenient method of getting supplemental farm support income into producer's hands. However, it has significant downside impacts. First there is the issue of a system making payments on an outdated crop history. Cropping patterns have changed a lot in m y area since 1995.
An important negative impact in my operation is the predictability of annual payments and the effect of that predictability on the amount of Federal money that ends up in the hands of the actual farmers. Because Federal farm payments are fixed for each year, rather than—as before 1996—being based on fluctuating market prices. Farm managers and landlords can factor with near certainty the amount of income support payments for farmers into their calculations to estimate future farmland returns. For example, a common procedure is to calculate gross farm income based on estimated yield times estimated price, plus the known value of farm income supports for a farm. From this value, estimated variable and fixed production costs are subtracted. This value represents return to an operator's labor and management, plus the residual return to the land. I have seen farm managers make the assumption that a value of $50 per acre is adequate for operator net return, which is subtracted from this. This final value represents expected landlord returns, a value close to the asking price for farmland cash rent in our area.
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You may have caught that the farm income support payments went into this calculation at the beginning, not as a residual for the operator. While farm managers will not demand these payments as rent, they are calculated into the equation. In fact, I have seen a spreadsheet used by a farm manager that lists the annual support payments for the life of the 1995 farm bill. These are included as a basic income factor in the projected cash-flow rental values for the term of this legislation. Off the record, some farm managers believe the landowner is entitled to one half of farm income support payments. Others philosophize that ''Farmers are foolish enough to bid the percentage they are willing to give away.'' Either way, I'm not sure this is accomplishing what Congress intended.
Of the income support distributed to farmers, too large of a portion ends up in the hands of the landowners. Many folks assume that farmers own the land, so what difference does it make? They get it anyway, right? Well, I just recently saw a statistic that non-farmers own about 70 percent of Illinois farmland. That is down over 30 percent in just three decades. Consequently, a large portion of the farm income supports payments on those farmland ends up paid as rent. Farmers no longer retain the income for expenses such as family support, tuition, medical expenses, and retirement savings.
So long as this system of income support is based on some sort of acreage base, call it what you will, it will not accrue fully to the farmers it was intended to help.
The use of some type of payment based on something other than crop bases seems more equitable. A type of counter-cyclical income support program shows merit because it supports farmers when needed.
Farm Income Safety Net: Farm safety net issues include commodity loan rates, Crop Insurance Programs and subsidies, and use of marketing alternatives such as futures, options, and cash-forward sales.
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The Loan Deficiency Payments (LDPs) have been very good to me over the past 2 years. I have missed opportunities. I even got greedy a time or two and lost some profit potential. (That's a euphemism for market exposure and a loss.) The use of LDPs allows net farm income to remain relatively strong without distorting world market prices. Many argue, ''The LDPs are a tool of the devil. Higher loan rates are a better answer. LDPs only support the big international grain trading companies with higher volumes of grain.'' I had advocated the decoupling of farm payments in the mid–1980's. Thanks for taking that step. It is an improvement over the old deficiency payments of past farm bills. Today, farmers are making more of our own cropping decisions and farming less for the farm program.
Regarding the debate over the relative values of the soybean and other crop loan rates, I believe the soybean loan rates are too high in comparison. I see these loan rates as a safety net, not as a guarantee of a profit. Many might wish for that. Profit should come from marketing done well and good production with low costs. Where one's grandfather settled is pretty important for profitability too.
One situation when LDPs are not a helpful program is when a producer has low yields. Dealing with the double calamity of low yields and low prices is tough to protect against without crop insurance.
Federal crop insurance has gotten a nice boost in participation this year with the drought scares that started before we even planted. Even I insured my crop this year. Prior to this year, I only took the catastrophic coverage (CAT) on my corn and soybeans for grain. Seed corn, vegetables and winter wheat have been insured with Multi-Peril Crop Insurance. Our yields have been quite stable over time. I chose a combination of policies based on crop and farm-unit yield histories for the grain crops.
I would expect that like the farm support payments based on base acres, if the insurance is subsidized over time, this too will be bid into rental rates paid.
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Regarding the use of market risk shifting/transferring programs, my experience has been that the outcomes have been mixed. It has yet to be clear in the country who will provide some of these services for farmers. Will brokers, grain market advisors, or grain elevators themselves be the key players in this realm? Regulations to allow grain merchandisers to offer more of these services will benefit producers
Planting Flexibility and Set-asides: These changes have been winners for most producers. On a macro level, significant shifts have occurred in crop production around the country because of the flexibility to plant different crops. This flexibility has added a lot of soybean acres to expanded production areas outside the Midwest and South. Closer to home, it has been a great tool to shift acreage to different crops, such as more vegetables, more soybeans and a shift to organic production for a few. I can now plant all, part, or none of a farm to a particular crop and not be out of compliance with the USDA farm programs. This has lead to much more efficient production and ease of management. My crop mix has more diversity since the 1995 farm bill. Many of my neighbors have added different crops also.
The end of set-asides has been a boon to farmers in the Midwest. I could never understand why prime farmland was required to be taken out of production by set-aside schemes, when marginal acres in less productive areas were left in production. The CRP programs from the mid–1980 helped rectify that. Most farmers however, have pretty well figured out how to use end rows, wet holes and the poorest portion of a farm as set-aside acres anyway. Even at the farm level, it has not been very effective at curbing production.
I am convinced that supply management by unilateral national set-aside programs will not work. While we attempted to control supply by limiting production here in the United States, millions of acres have been brought into productions worldwide. This is especially true for Latin America. Many millions of acres remain to be developed in Brazil; set-asides here will only expedite that process.
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In my own operation, it has been a great aid to shift acres of specific crops from farm to farm. This has been especially true when producing some of the specialty crops.
Set-asides have raised our cost structure by causing higher fixed costs per acre farmed. We needed to remain equipped and mechanized to farm full acreage, not knowing from year to year what portion of our land we would be farming. This raised our cost on the remaining acres, making us competitive in a global marketplace. Please, no more set-aside programs!
Another indirect impact of the set-asides was to free up labor and equipment. This in effect subsidized some operators to expand without actually operating any more cropland or increasing workload.
One anecdotal comment about acreage flexibility. I recommend the FSA rule be retained that does not allow vegetables to be produced on payment acres without a reduction in benefits. Few farms are all payment acres. Most have a portion that can be cropped to vegetables without a penalty. The few farms that are all payment acres have been well paid from farm programs in the past. This is one issue I do feel strongly about. There are plenty of nonpayment acres for vegetable production without opening these payment acres up for production without a change in the payment methods.
Farm Income Considerations: One of the ambiguous facets of the past farm programs has been the conflicting nature by which it encouraged farms to expand, especially with guaranteed payments, while subsidizing farmers to continue to farm who might to better off if helped to transition out of agriculture. Most of the farm families that I know that left production agriculture since the crisis of the 1980's are better off today because of that transition. Many struggled hard to remain in farming, but now concede their families are better off today because they left.
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The farm income pie is finite and becomes quite small when divided smaller and smaller. The motives of Monsanto and its global cronies to control agriculture from dirt to the dinner plate, or whatever their slogans are, is not a philosophy I subscribe to. If the trend continues toward concentration with entry effectively restricted for new economic participants, agriculture producers will resemble a global serfdom dominated by a few agribusiness players. An even smaller share of the income pie will remain in the hands of the operator and primary risk bearer. My opinion is that the Federal Government should do less to subsidize inefficient farmers, but also to not encourage domination of production agriculture by large corporations.
I'm not sure how many farmers we need. I am convinced however, we have too many today: for the income available, for the efficiency of getting the work done, and for the ability to compete on a least cost basis. In my home county, I believe there would be more net farm income if there were half the number of farmers as produce today. Costs savings could be gained by spreading fixed costs over more production units. Newer, high capital technologies that save inputs, track operations and increase farm profits could more readily be adapted.
The transition of the next generation of young farmers into farming doesn't present a very promising outlook today. Perhaps it hasn't for a long time. Unless the environment becomes more conducive for independent young men and women to enter production agriculture, in 25 years, a hearing like this may well be asking, ''Where did we go wrong in not supporting farmers that could make it?''
Farm Organization Input: It is obvious that farm organizations speak for farmers. What is not so obvious is for exactly whom they carry their message. Even general farm organizations, such as those represented today, carry the message of their members. Please listen carefully to the messages they carry. However, it may be a message that is not in the best interest of farmers in production agriculture.
Case in point. There exists a farm organization in our county with about 6,000 members. Of those, about two thousand are considered ''active farm members'' not bad for a county with about eight hundred farmers. In that list are included folks like my mother, an 83-year old landowner. Her needs from a farm organization are certainly quite different from my own. Do you know whom they speak for when they speak? The producing farmer in the field or the retired landowner? I believe it makes a difference. Of course, over time, if organizations representing their members miss doing the good of the few, new organizations will form to meet those needs.
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Other Factors: Other items are important to consider. These include better access to international trade, including PNTR with the People's Republic of China, continued support of ethanol, more publicly funded basic research, and market infrastructure enhancement, particularly America's inland waterways.
The farmer's voice will represent fewer Americans in the future. As the Congress becomes more urban and suburban, we in agriculture must be prepared to bargain with the larger constituency in terms of agricultural policy making. What we as a nation want our farm landscape to look like can be a public policy decision. However, farm policy must be an economically viable plan.
What'll I give for it? I'm mostly happy with the provisions of the current farm legislation. Providing some sort of safety net is very wise and timely policy. A shift to a payment system that could keep more income in producer's hands would be beneficial. Policy changes that will aid in the transition of the next generation into agriculture are important to consider.
As a farmer, I understand that agriculture needs urban support to flourish. Part of the dialogue with them will ask what am I willing to give for Federal assistance in the agricultural. The best we can say today is to have a more green orientation.
Personally I am concerned that we be good stewards of our farms. Water quality has improved enormously in the past three decades, but we must be vigilant every day. CRP has helped. Conservation tillage has helped too. Voluntary programs are a great benefit to those so inclined. Nitrogen and phosphorous efficiencies and losses must be better understood. Agriculture's role in carbon storage could become a great benefit to farmers via residue management.
I thank you for your time in soliciting information at this field hearing. I hope my comments have conveyed to you a few thoughts from a producer that is very interested in continuing to grow and produce food for our world. If I can do that it with of my family, I will be humbled and blessed.
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Statement of William Olthoff
Mr. Chairman and members of the committee, I am Bill Olthoff, owner and operator of Olthoff Farms located Kankakee County, IL near Bourbonnais. Thank you for this opportunity to address you today concerning Federal agricultural policy.
We have a diverse farm operation compared to the common Illinois farm. Our farm produces white, high oil, seed, and commercial corn. We also produce food grade soybeans and a variety of vegetable crops for both the fresh and processing markets. We have dryland and irrigated ground. Our farm uses a seasonal workforce to assist with the labor-intensive crops.
My perspective of farm policy comes from a crop background that has program and non-program crops. Experience with both types of production provides me with the clear understanding that the market should send signals to producers and we need the production flexibility to meet the demands of the market.
In 1996 we began the transition to a market oriented farm policy. In the long run that course is correct and best for agriculture and our country. We will need to continue to move toward market orientation. That means any farm bill should include the provisions that will make a market oriented policy work. New markets, relief from regulations, tax reforms and improved programs that will manage the risk farmers face with crop production are necessary components of overall farm policy.
New farm policy in 2002 should not expand the types of crops that are known under the existing farm bill as program crops. I am a vegetable producer and while all producers of agricultural products need better ways to manage risk, we do not need Government involvement with vegetable crop production.
Two issues very close to me are increased market opportunities and regulation. While neither are a direct component of a farm bill, they are crucial to making a market-oriented farm bill work. Market development in the United States and particularly trade through our export markets ranks very high on my list of needed improvements to agriculture policy.
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Sanctions reform and trade with China are two issues that need Congressional action now. We have been locked out of potential markets for too long. Illinois ranks third out of all 50 States for agricultural exports at nearly $3.1 billion for all products. About one-third of our corn production and about 40 percent of our soybean production is exported. Illinois and U.S farmers continue to increase their reliance on trade. We need access to all the world markets.
The bottom line is we need trade. Everyone knows this is a global market and our policies need to be updated to accommodate it. What happens to a business that does not adjust to the market? It becomes obsolete. U.S. policies that have not allowed farmers to have access to most of the markets we sanction are obsolete. Policies that limit U.S. exports of food and medicines as a political tool damage our competitive ability more than they hurt intended targets.
There is also a humanitarian side of the food and export equation. There continues to be hunger and the need for food in many of the nations around the world. We have the food to export and the programs that can get food to the hungry. I believe U.S. food aid programs should be used to their maximum potential. The past few years we have seen money appropriated for food aid go unused. Yet we have abundant supplies and low prices. We have the opportunity to share a safe, abundant food supply to many nations around the world. Let's take action, to whom much is given, much is required.
Trade is very important to me. However, with the remaining time I would like to address regulations and their impact on a farmer. Compliance with regulations occupies a great deal of my farm management time. I understand the need for a certain amount of regulation with any sector of the economy. There should also be an understanding from the regulatory community that a farm owner/operator is the accountant, mechanic, merchandiser, salesman, quality control and compliance division of a business all in one. We need streamlined regulations and regulatory reform.
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Seasonal labor is a necessity for many vegetable crop producers throughout the United States. We need improved labor laws that will allow an adequate seasonal workforce to be accessible to all sizes of farm operations. Legislation like the Ag Jobs bill in the House would be a good effort in that direction.
Another area of regulation that seems to grow each year is land use regulations. Landowners use voluntary, educational, incentive-based programs to continue to improve conservation practices. Education, not regulation, is the most productive way to change land use practices. Funding for incentives and assistance from professionals in the USDA are important to continue our positive conservation trends. An example of this would be the overwhelming change that is taking place in agriculture to no till and minimum till systems which enhances soil conservation dramatically.
I would like to compliment the committee for taking the time to go into the field listening to farm constituents' views on policy issues. Thank you for providing the opportunity for farmers to offer ideas and suggestions for ways to improve our Nation's farm policy. I believe that by listening to each other, we can work toward positive changes that will benefit all of agriculture.
Statement of Tom Wallace
I am Tom Wallace, a soybean and corn producer from Cameron, IL, and president of the Illinois Soybean Association.
I am pleased to be here today and commend the House Agriculture Committee for holding this hearing on farm policy, and Congressman Ewing and Congressman LaHood for their efforts to hear farmers' thoughts on what is meaningful in a farm policy discussion. Illinois soybean producers know that profitability depends on enhancing market demand and increasing global competitiveness. We have historically looked to the marketplace rather than the Federal Government as our source of income. This orientation is underscored by our dependence on exports—nearly half of each year's production of soybeans, soybean meal and soybean oil is sold abroad. Currently, the U.S. soybean crop provides our leading agricultural export value, both for Illinois and the U.S, the total worth of soybeans being approximately $2.1 billion in Illinois and $12.4 billion to the U.S. economy, according to the National Agriculture Statistics Service. The export of this single crop, then, contributes over a billion dollars to our State, and approximately $7 billion nationwide. Additionally, the soybean meal fed to poultry and pork products exported worldwide is a significant portion of the half that stays in the U.S. According to the U.S.A. Poultry & Egg Export Council, the poultry industry, leading user of U.S. soybean meal, calculates the value of U.S. meal used for poultry exports to be $749.4 million. The U.S. Meat Export Federation projects an additional value of $105 million in pork exports.
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The Illinois Soybean Association (ISA), and our national organization, the American Soybean Association (ASA) have consistently represented these interests in its positions on international trade and domestic farm policy in the 1990's. During the Uruguay Round negotiations, we supported eliminating all import tariffs and export subsidies to create a Level Playing Field for oilseeds and oilseed products. In the debate on the FAIR Act, ISA and ASA endorsed Freedom to Farm once it was made clear that soybeans would be treated equitably with other crops.
Both our State and national organizations continue to strongly support the FAIR Act. Unrestricted planting flexibility enables producers to optimize crop selection and reduce operating costs, maximizing their profitability. Combined with the marketing loan program, this approach is highly consistent with orientation toward domestic and foreign markets.
It was recognized by Congressional supporters that Freedom to Farm would make U.S. agriculture more dependent on the marketplace, requiring greater access to foreign markets. It was also recognized that decreasing dependence on Government support would require less interference in production agriculture, and more effective risk management tools.
Accordingly, Congress and the administration made a number of commitments at the time to policies and programs that would help make the FAIR Act work. The list includes:
Trade policies that reflect the importance of foreign markets and competitiveness to U.S. Agriculture;
Elimination of unilateral economic sanctions;
Aggressive use of export assistance and promotion programs;
Increased Humanitarian food aid programming;
Reform of the Crop Insurance Program and development of new risk management tools;
Increased funding for agricultural research;
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Relief for farm families in the Tax Code;
Reform of regulatory burdens on agriculture.
More than 3 years after the FAIR Act was enacted, few of these commitments have been honored:
The effort to pass Trade Negotiating Authority, formerly referred to as fast track, was first derailed, then defeated;
The agreement on China's accession to the WTO was nearly lost, and is now hostage to politics surrounding the pending vote on China PNTR;
Legislation to repeal existing sanctions on agricultural and medical products was unceremoniously torn out of the fiscal year 2000 agriculture appropriations bill last year;
funds authorized for the Export Enhancement Program continue to be unused, either for EEP or for other export assistance and promotion programs;
The funding source for the Foreign Market Development Cooperator) program was transferred from appropriations to the CCC, but no minimum funding level has been authorized;
Cuts in funding for P.L. 480 continue to be proposed and approved;
A crop insurance reform bill has finally been completed, but the number of producers using the program will not increase substantially;
FARRM accounts were included in last year's tax bill, but it was vetoed;
Funds were provided for the $120 million Agricultural Research Initiative, but reductions continue to be proposed in the ARS budget;
Progress was made in restoring income averaging as a means of evening out taxes, but estate tax laws continue to hurt agricultural producers;
The regulatory environment for agriculture has deteriorated significantly since 1996.
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Another issue that only began to emerge in 1996 is the erosion in U.S. agricultural exports caused by failure to develop a workable process to address science-based regulatory decisions on biotechnology-derived crops.
The limited progress made on all of the aforementioned commitments meant there were no new sources of demand or protection against losses when supplies rose and prices fell in 1998 and 1999. Today, prospects for record soybean plantings on over 75 million acres suggest a return to historic low prices and soybean producer income with this fall's harvest.
The Illinois Soybean Association believes the best response to the continuing erosion in the U.S. farm economy is for the administration and Congress to address and complete the unfinished agenda of policies and programs they agreed to undertake back in 1996. We do not support going back to the old farm program, and oppose making set-asides or other supply management programs an eligibility requirement for any soybean benefit. We also oppose establishing a reserve for soybeans, increasing acreage in the Conservation Reserve Program for supply control purposes, or using environmental objectives to justify establishing an acreage reduction or set-aside program in the form of a short-term CRP.
ISA supports examining safety net concepts that would provide increased support when prices or revenue decline. However, there are many unanswered questions and issues about the effects and implications of such counter-cyclical income support proposals. Both the Supplemental Income Program advanced by Representative Stenholm last year and the administration's proposed Income Assistance Program base payments to producers on a percentage of the difference in revenue for a crop between the current year and the Olympic average during the previous 5 years. This approach would provide a greater degree of protection in years following a period of relatively high prices and revenues, such as 1998, 1999 or even 2000. However, the revenue base will decline sharply as the lower prices for these years are included in the 5-year average.
A further major problem with the administration's proposal is that it subjects payments to the AMTA cap of $40,000 per producer. This limitation would effectively means-test a program that is intended to compensate producers for economic loss, based on a farmer's actual production, and preclude participation by growers representing a substantial percentage of U.S. production. Any income support program must be equitable with regard to the size of a producer's operation.
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Both the ASA and the ISA will work with Congress in examining any income support proposals. A guiding principle we will insist upon is that soybeans be treated equitably in any program.
As we move forward to determine how to provide income in the next generation of farm programs, it is critical that the relationship between our domestic farm programs and U.S. obligations under the Uruguay Round Agreement and the current WTO negotiations be fully considered. In the Uruguay Round, the U.S. and other countries agreed to cap and reduce the amount of assistance provided under programs that distort production and trade. These so-called amber box programs include marketing loan gains and LDPs, input subsidies, and direct payments linked to production. Unless provided through green box programs that are exempt from reduction, future income support will likely be subject to discipline. The expectation of further reductions in amber box outlays in the next WTO round makes attention to this relationship even more important.
With commodity prices continuing near record lows and with many issues yet to be resolved on counter-cyclical proposals, ISA supports providing a supplemental AMTA payment to offset continuing low crop prices and depressed farm income. For the same reason, ISA also supports another economic loss payment to oilseed producers this year. Soybeans and other oilseeds are not part of the production base and formula for AMTA payments. We appreciate the fact that Congress recognized this situation last year by providing $475 million in payments to producers of 1999 crop oilseeds. Faced with continuing low prices for the 2000 soybean crop, we ask that our producers be treated equitably. In the event Congress decides to increase the amount of any supplemental AMTA payment over last year's level, ISA supports a proportionate increase in the oilseed payment.
Another issue of critical importance to soybean producers is the marketing loan program. With U.S. and world oilseed prices well below loan level for the past 2 years, this program has been essential in providing an income safety net as well as keeping our products competitive in foreign markets.
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Concerns have been expressed that the soybean loan rate of $5.26 per bushel does not reflect the historical price relationship with the corn loan rate of $1.89 per bushel, and that the disparity is increasing production of soybeans at the expense of corn and other crops. The ISA does not believe this is the case. If the 1999 soybean loan rate were out of alignment with the corn loan rate, one would expect to see more land devoted to soybeans than corn in major corn/soybean producing States. However, just the opposite is true. In 1999, the area devoted to corn production exceeded the area devoted to soybean production by 1.4 million acres in Iowa, 100,000 acres in Indiana, 100,000 acres in Minnesota, and 4.3 million acres in Nebraska. In Illinois and South Dakota, the amount of land devoted to corn and soybean production in 1999 was equal. Additionally, the 1999 corn area actually expanded in key corn and soybean producing States, including Illinois and Indiana.
The prospect of receiving a higher marketing loan gain or LDP may have been a small factor in the 1.5 million acre increase in soybean plantings in 1999, and may be again if we see the additional 1.5 million acre expansion forecast by USDA for 2000. The solution, however, is not to reduce the soybean loan and safety net. The solution is to enhance demand through greater trade expansion, export promotion, food aid, biodiesel use, reform of unilateral U.S. economic sanctions, and other step that will drive prices above the loan rate. ISA very much appreciated Secretary Glickman's decision to not use his authority to lower this year's loan rate to $5.13 per bushel. Whenever Congress considers changes in the marketing loan program, the ISA will support making the current $5.26 level a statutory minimum rather than a cap.
With regard to administration of the marketing loan program, ISA believes that many of the questions and concerns raised in 1998 were resolved through adjustments in how FAS calculates Posted County Prices and Loan Repayment Rates. As a result, very few complaints were received on administration of the 1999 loan program. The ISA continues to support maintaining the existing system, basing PCP's and repayment rates on terminal markets rather than changing to a national LDP program.
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I would again like to thank each of you for allowing me the opportunity to speak on behalf of our State's and our country's soybean farmers. We also thank you both for your willingness to work with our organization to define what is in the best interest of Illinois soybean farmers. Congressman Ewing, on behalf of the Illinois Soybean Association, I want to commend you for your many years of hard work and service to our industry. It has truly been a pleasure and an honor working with you and with your staff. We wish you all the best in your future endeavors.
Mr. LaHood, we also thank you for your past accomplishments and for your ongoing efforts and service to shape the policy debate in a way that enables soybean farmers to remain profitable. As you know, we continuously work with Dr. Peter Johnsen and the USDA ARS lab in Peoria, in your home district, to develop new agricultural products that add to the total disappearance of U.S. soybeans. In the upcoming year, the ISA and ASA hope to not only work to once again maintain the funding level for this institution, but to increase it. As you know, each year, funds for soybean research at Federal labs, regional labs and land grant institutions fall under budgetary scrutiny and must be worked back into the budget. Research, both basic and applied, plays a critical role in the long-term sustainability of soybeans, and all of agriculture. Current Federal investment in soybean research totals $25 million, less than some other commodities and significantly less than other areas of science. Our industry's evaluation of ARS investments in soybean research nationwide identified areas where partnerships could be established and research dollars leveraged: genomics, genetic resources, germplasm, animal nutrition and plant disease. This year, to bring equitability to soybeans, the ISA and ASA recommended a 38 percent increase in Federal funding from $25 million to $34.5 million for soybean research. As we look at the dawn of the new age of biotechnology and all its applications, we hope to continue working with you and others in Washington to leverage Federal, State, public and private dollars to ensure the viability, efficiency and productive outcomes of a collective public soybean research program.
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Moving into a new century, and the challenges we face keeping up with world food demand, it is a tragic irony that we see market-depressing surpluses that are being held because of a political climate that does not work toward opening the greatest world market potential our country has seen in its 224 year history. If given a chance, Freedom to Farm is a policy that embraces the independent and entrepreneurial spirit of the Illinois and American soybean farmer. Without true market access, Freedom to Farm is not only failing, so is our ability to be the most reliable producer of food in the world.
Thank you for your time.
Statement of Gene Barkley
My name is Gene Barkley. I farm near Paris, located in east central Illinois, with my brother on a 1,350 acre grain farm raising corn and soybeans. In addition, I operate a small custom spraying operation. Also located on our farm is my nephew's retail-wholesale perennial nursery business.
First I wish to express my appreciation for the opportunity to appear before your committee this morning to share a few of my views regarding the future of agriculture as related to current and future farm legislation. In a nutshell I would say—yours is an impossible task. Yet, as is the case with so much in life, our challenge is often to find the answer anyway.
Why is the task impossible? Because the truth is, the diversity in commodity production within the United States is phenomenal, as I have learned from becoming acquainted with producers around the Nation. Even focusing upon what I know the best—corn and soybeans—the variability still stretches the imagination. Ultimately, I need only to center upon my own county—up and down my own road at home to prove my point. I question how we can find a ''one fits all'' answer to creating and maintaining a healthy agriculture.
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So much of the popular discussion is focused upon the ''family farm.'' I am a part of a family farm and proud of it. But even that concept is difficult to grasp. All my neighbors are family farmers and I defy anyone to fit them into a mold.
Within my own neighborhood, there is one couple who owns and farms 100 acres. Their one tractor is at least 30 years old, their planter a used 6-row, and their combine a small older model. That operation compares to another neighbor who farms with his brother, a son, a retired father and seven employees. They operate in excess of 8,000 acres, have three 16-row planters, several 4-wheel drive tractors, and three new large combines.
Now, define ''family farm'' and find a ''one answer fits all'' for addressing the needs of these agricultural operations. Should either extreme be the norm? Or is it somewhere in the middle, where I am, that should be the norm?
This is my point. The answer is not to define a family farm by targeting programs, but rather to allow us the opportunity to do what we do best— namely, produce an abundant safe product and have the ability to earn a reasonable profit in the process.
In my opinion, a number of correct principles are a part of the current Freedom to Farm legislation; however, only a part of the package was ever adopted. Those principles are flexibility, global markets, regulatory relief, and reasonable risk-management choices, usually referred to as a safety net.
Flexibility was the initial cornerstone, providing the ability to choose what and where and when to raise the commodity of choice driven by market signals. While I certainly support flexibility and choice, I personally am very limited. While always looking for alternative crops, east central Illinois has the soil and climate where corn and soybeans should be raised.
Nonetheless, other areas of the country do have choices, and if they make those choices based on the market, it certainly does impact my operation.
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Second, we do compete in a global market. While some look back to production control programs with favor, the results are very clear. Much of our global competition exists today because we indirectly subsidized their production development by idling acres, thus giving them our markets. As inviting as that option may seem on the surface, the long-term result will be more of what we see today—low prices and the need for major Government support.
It is true that agriculture has always been competitive. But the scope of that competition has changed. I am willing to compete with my neighbor because we are working within certain parameters of fairness. However, when my competitor lives in South America and he has access to crop inputs at a faction of my cost and open markets without barriers that I do not, this U.S. farmer suffers. I would suggest leveling the playing field. I am willing to do my best and compete for efficiency in production, but that concept only works when tariffs and artificial barriers are removed.
Adopting Permanent Normal Trading Relations with China is a case in point. This choice is critical to my future if I hope to be profitable. Congress must seize this opportunity and pass the PNTR with China.
Next, excessive regulations limit my competitiveness. While I recognize we live in a more complex world today and that regulations are a part of doing business, it is important to understand that there is a cost to farm production. As a small independent businessman, I have very little opportunity to absorb and virtually no way to pass on those costs. In fact, I am most often the recipient of costs passed to me by other businesses.
The fourth principle of the 1996 farm bill was to develop a reasonable risk management feature to address the periods of low prices or crop failures. This is one area where I have seen progress, and thank you for addressing. We needed to move beyond crop insurance. In my experience Federal crop insurance has been viewed less as a risk management tool, but more as a system to reward the marginal high-risk areas of production. The risk/benefit considerations just kept it from being a reasonable investment for my operation.
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Some of the newer revenue products seem to be moving in the right direction. The opportunity to invest in a product to cover my true risks, not just production, but also the grain price component, has merit. One word of caution, however. It must be reasonable cost for reasonable protection, or it doesn't make economic sense and the producer is left without any choices to handle risk.
Several have been critical of Freedom to Farm, calling it the ''freedom to fail.'' While my heart might be supportive of that comment, in fact, I can only be successful if failure is a possibility. Our economy and our system have built into them the possibility to fail. If that reality is altered some are going to reap unfair benefits while others are shut out.
I would like to share another insight about the health of agricultural production in the United States today. I would suggest that the ag economy is not healthy. One economist recently indicated that the agriculture economy is recovering and doing fine. He cited projected income levels as compared to former years. I disagree.
I subscribe to the Farm Business Farm Management (FBFM) service in order to gain a comparative analysis of how I am doing compared to similar operators within my area and my State. In fact, 1999 was a very good year for me because I experienced a near record year in crop production. That helped overcome the record low commodity prices. The result was a significant increase in my net farm income.
But here is the flag of caution I would raise. Those same FBFM records for 1999 reveal a concerning fact. For central Illinois grain farmers, where we had excellent yields, the average net farm income was $49,211, by most measures a very positive number. However, the rest of the story is that for the same group of central Illinois grain farmers the average FSA payments were $56,198. Therefore, the net income less the FSA payments was a negative $6,986.
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This suggests that LDP's, the AMTA payments, and the supplemental Market Loss Assistance Payment have been critical to our survival. I would suggest without them our industry today would be in chaos. Again, I emphasize that I do not believe it is because of the 1996 farm bill's direction; rather, it is because of our failure to implement the total package. Freedom to Farm was termed a transition, I would suggest we still have that transition to accomplish.
The general consensus of producers is that we are literally at the bottom of the food chain. What we are being told is that the value of our corn for corn flakes, or wheat for bread, or pork for chops is not very important. When you consider that at my local IGA, 24 ounces of corn flakes sell for $ 3.53 while 24 ounces of my corn sells for 6 cents, we have a problem. Our pricing system does not truly reflect the value of my product. The market sets the price, but what is the value of the box of corn flakes without the corn?
Many efforts are underway to encourage producers to become a part of the process to add value to the crops we produce. The goal is to encourage vertical integration, wherein producers invest their knowledge and resources into ownership of more than just producing a basic raw commodity.
I endorse that effort. In fact, I have invested in an alliance of producers to work toward that end. It is important to understand what farmers are saying with these efforts. In essence, we may be saying that being ''just '' a farmer as in the past may not be adequate to survive. We are affirming that the future of the farmer may be more tied to the value of the product that is marketed than to the value of the commodity he produces.
In conclusion, my suggestion is for Congress to complete the effort begun in 1996—open world markets, level the playing field, limit regulations, and improve the safety nets. Allow farmers to do what it is that we do best—produce an abundant, safe food supply.
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Farmers are a resourceful group—but when the bin is empty, the banker is calling, costs go up, prices go down, the well runs dry, the regulators are looking, interest rates go up (again), and the rootworm is eating your roots—it is difficult to maintain that always positive attitude. But that is American agriculture.
Testimony of Glen Keppy
Mr. Chairman and members of the committee:
My name is Glen Keppy. I operate a third-generation family farm consisting of a farrow-to-finish operation, while farming 1,000 acres of corn, soybeans, oats and alfalfa. As an active agricultural producer and a representative of one of the Nation's leading producer-owned cooperatives, I am grateful for this opportunity to submit testimony on farm policy and share my day-to-day experiences of what works and what could work better.
As a producer, this past year has been one of the most challenging times I've experienced in many years. Low commodity prices and adverse weather conditions have led to continued economic stress for producers in many parts of the country. And while agriculture has always experienced economic cycles, it's clear we're experiencing more than just an economic downturn. It's especially difficult as we operate in a U.S. economy where virtually every other sector is robust and flourishing at near record levels. As a producer, it's hard to accept that you are operating as efficiently as possible, raising high quality products, and yet are making little or nothing on what you raise.
In a complex global marketplace, where there are more players, increased competition, changing technology and an evolving global economy, we need to take steps now to put U.S. agriculture back on the road to success.
The 1996 Federal Agriculture Improvement and Reform (FAIR) Act has supported farm income while allowing domestic and supply adjustments to occur. It removed the global price umbrella protecting all U.S. competitors, forcing foreign producers to adjust excess supplies. FAIR also enhanced the competitiveness and profitability of U.S. agriculture by permitting flexibility and choice. The Act has enabled producers to decide which crops to plant, how much to produce, and to try alternative commodities. Low commodity prices are a result of unusually favorable worldwide weather in the past 4 years, resulting in growing stocks of commodities and bumper crops coinciding with a slump in Asian demand following the region's economic crisis. Still, the safety net guaranteed by FAIR is not assured unless the crop is successful, and then, net revenue must go to pay land rent, taxes and other items before profitability can be calculated.
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While FAIR has worked in promoting flexible planting policies where the farmer can decide how much to grow, as well as an income structure that allows supply and demand to determine market prices, there are elements of it that could work better, particularly when the farm economy is struggling. No Government program can replace a farmer's ingenuity, resourcefulness and knowledge of his or her own situation, but FAIR did not foresee the current hard times farmers are experiencing. As it stands today, FAIR is not an adequate national farm policy. Still, we applaud your efforts to approve much needed economic and disaster assistance in response to the challenges producers are facing, and your efforts to craft new farm policies. We urge you to take further action to support sustained economic recovery, improved farm income and risk management, and increased market opportunities and growth in exports for U.S. agriculture long term. American agricultural producers need an overall farm policy with a sound long-term risk management program at its foundation to position them competitively in the global marketplace.
AGRICULTURAL TRADE
In a complex global economy, producers are increasingly dependent on access to foreign markets and exports, and competitive ability in international trade. Foreign markets and exports account for as much as one-third of domestic production and more for some commodities. Since 1996, U.S. agriculture exports have fallen nearly 20 percent to $49 billion in 1999, and without some aggressive action are projected to remain under $50 billion in 2000.
Producers need policies that open and expand market access, that ensure fair competition and provide a level international playing field for U.S. producers.
One key issue that would have a dramatic impact on the future ability to U.S. producers to compete in the export arena is support of Permanent Normal Trade Relations for China.
The United States and China reached an agreement last November defining the terms of China's entry into the World Trade Organization (WTO). The agreement reduces China's tariffs and provides unprecedented market access for U.S. agricultural products to China. Under the agreement, China will be subject to the rules and disciplines of the WTO upon completion of the accession process. However, in order for U.S. agriculture to benefit from China's entry into the WTO, Congress must grant China permanent normal trade relations (PNTR) and China must reach WTO accession agreements with some other countries, including the European Union.
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The agreement with China is critically important for U.S. agriculture. It will significantly improve market access for a variety of American food and agricultural products. For example, tariffs on beef, cheese, and citrus products (currently 20 percent to 50 percent) would drop to 12 percent. Overall, the average tariff for agricultural products will be 17 percent and for U.S. priority products 14.5 percent. For pork producers, the reduced tariffs and increased demand is good news after suffering historically low prices in the late 1990's. Economists have estimated that the demand for pork by 1.2 billion Chinese consumers could easily boost the value of hogs by $5 per head without raising the domestic prices for the American consumer. The agreement also will obligate China to reform its monopoly State purchasing agencies and will require China to stop the subsidization of exports.
A nation with over 1 billion people, China represents a significant and potentially increasing market for U.S. agriculture. U.S. agricultural exports to China in 1998 amounted to $3.1 billion—making it our 6th largest export market. According to recent estimates, China may account for as much as 35 percent of future growth in agricultural exports into the 21st century. It is vital that U.S. agriculture be able to participate in this potentially huge market and that China be required to play by the same international trade rules that apply to the U.S. and other members of the WTO.
Producers need significant short-term and long-term changes including:
Developing a comprehensive trade agenda aimed at boosting U.S. agricultural exports.
Approving legislation providing for fast track trade negotiating authority, thus creating more markets, more opportunities and more income for U.S. producers, and ensuring timely congressional review and action.
Eliminating future bi-lateral or multi-lateral trade agreements including any remaining tariff and non-tariff trade barriers that adversely impact U.S. agriculture.
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Reforming legislation that calls for unilateral trade sanctions and embargoes. As evidenced by the 1980's-U.S. imposed grain embargo on the then Soviet Union, unilateral sanctions rarely achieve their intended effect. U.S. wheat farmers are currently unable to participate in more than 10 percent of the world's wheat market due to U.S.-imposed sanctions. Unilateral trade sanctions and embargoes serve to in effect close part of the world market to U.S. producers and prevents them from taking advantage of marketing opportunities.
Increasing action and funding for export programs, such as the USDA's Market Access Program (MAP) and the Foreign Development (FMD) Cooperator Program and the Foreign Agricultural Service (FAS), to help maintain and expand U.S. agricultural exports, countering subsidized foreign competition, protecting American jobs and strengthening farm income. Ensure these programs are fully and aggressively utilized. A USDA study indicates foreign countries are spending more than $100 million just to promote sales of their products in the United States. They spend more to promote their products in the U.S. than the United States spends ($90 million) to promote American agricultural exports worldwide. Promoting and increasing exports worldwide would be aided by support for legislation (H.R. 3593) introduced by Reps. Doc Hastings (R-WA) and Allen Boyd (D-FL) that would provide up to $200 million for USDA's MAP. The legislation would also establish a minimum of $35 million for the FMD Cooperator Program and allow up to 50 percent of available Export Enhancement Program to be utilized for market development and promotion with the goal of increasing U.S. ag exports.
Granting China permanent normal trade relations (PNTR) status, thereby enabling U.S. agriculture to benefit from China's entry into the World Trade Organization. The agreement with China would significantly improve market access for a variety of American food and agricultural products. For example, tariffs on beef, cheese and citrus products (currently 20 to 50 percent) would drop to 12 percent. As a nation with more than 1 billion people, China represents a significant and potentially increasing market for U.S. agriculture. According to recent estimates, China may account for as much as 35 percent of future growth in agricultural exports in the 21st century. It is vital that U.S. agriculture be able to participate in this potentially huge market and that China be required to play by the same international trade rules that apply to the United States and other members of the World Trade Organization.
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INFRASTRUCTURE
A cost-effective transportation system is vital to U.S. agricultural producers' competitive edge and to ensure that American farms stay profitable. And while U.S. agriculture has enjoyed a solid transportation infrastructure, the infrastructure is gradually becoming less efficient. This loss of efficiency will add significantly to costs, taking away from the bottom line return to farmers.
Foreign competitors are making huge investments in transportation infrastructures, making foreign growers competitive in the global marketplace. The Midwest Area River Coalition reports that American soybean growers lost six months of their market in the last 2 years due to reduced competitiveness that stemmed in a large part from higher transportation costs. In the interior of Brazil, inland waterways are being developed to accommodate the largest cargo carriers, thereby greatly decreasing the cost of transportation and making Brazilian-grown soybeans even more competitive on the world market.
In a nation with the geographic and economic scope of the U.S., we must have adequate physical infrastructure to support agriculture. Our Nation must have cost-effective transportation systems that support increased farm income, enhance agricultural exports and promote rural development. Farm policy must allow for investments in the future of our transportation system including waterways, highways, rail systems, and locks and dams. Agriculture views transportation from an inter-modal perspective. Truck, rail, waterways and pipelines all are major parts of the transportation equation for agriculture.
Policy must address significant short- and long-term issues including:
Providing maintenance and modernization support for the transportation infrastructure. The more than 60-year-old lock and dam system on the Upper Mississippi and Illinois Rivers are approaching or past obsolescence. Most of the 600-foot chambers cannot handle the current 15-barge tows. Tows must double-lock to move through, increasing locking time nearly three times and increasing shipping costs. Replacement of antiquated locks and dams and increasing lock sizes to 1,200 feet would enable producers to take advantage of cost savings, giving them a competitive advantage.
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Finding ways to work with, and reach a compromise with, environmental and other concerned groups campaigning to halt modernization work on the waterways system, or in the case of the Snake River in the Pacific Northwest, remove the infrastructure all together. With the campaigns to breach the four dams on the Lower Snake River, producers in the PNW are facing a threat to the river system that connects them with customers in the United States and around the globe. While there is no doubt that the environmental issues pertaining to these rivers must be addressed, the campaigns by certain groups to reduce or even eliminate commercial use of the waterways would be detrimental to the Nation's economic health.
For producers in the PNW, breaching of the four lower dams and call to cease navigation on the Snake River would mean an end to their way of life. In its draft feasibility study, the Corps of Engineers says that breaching the dams would have far reaching costs and consequences. Among them decreased farm income, the loss of more farms and producers, decreased land values and a loss of tax revenues. Other, less tangible costs would come from safety and congestion problems on area roads. One estimate says that it would take almost 750,000 more truck miles to deliver basin products to market if the dams were taken out.
The river systems facilitate more than a trillion dollars of the Nation's commerce every year. River transportation is the most environmentally friendly form of shipping commodities that exists today. According to the EPA, towboats emit 35 to 60 percent fewer pollutants than locomotives or trucks. Each barge diverted off the river requires 58 more semi trucks on our highways to move the same amount of goods. Each barge tow made of 15 barges requires 870 more trucks on the road. If producers who currently use the waterways to ship their commodities were forced to switch to alternative modes of transportation, the increased rail and truck traffic would lead to a substantial increase in emissions, noise pollution, road wear and congestion.
Ensuring access to a competitive and efficient rail and highway system that provides a cost-effective and reliable source of transportation when commodities cannot be moved via the Nation's waterways.
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RISK MANAGEMENT TOOLS
Recent changes in farm policy have provided farmers and ranchers with increased flexibility to respond to changing market conditions. At the same time, these changes have led to increased risk and uncertainty regarding commodity prices and farm income.
Producers need market-based, revenue-oriented tools that encourage producer involvement to successfully manage risk and remain economically viable for the short and long term. A long-term risk management program must be developed that creates incentives for producers and Federal and State governments to partner efficiently in meeting producers' needs.
To enable producers to take advantage of increased flexibility and opportunities in the market, risk management policies should:
Encourage producers to utilize risk management tools ranging from insurance and banking products, to futures or cash management items and educational programs that support use.
Provide access to and promote available market tools that allow individual producers to make decisions based upon market signals and information, thereby encouraging farmers to safeguard their operations and future through better marketing. This would encourage producers to shift from the historical price-taking role to one of a price-making.
Develop a risk management program that efficiently and effectively uses incentives to encourage producer participation through shared long-term investment in the agricultural value-added system. (A modification of the proposed Farm and Risk Management Act.)
Develop market-oriented farm programs that use incentives to increase opportunity for profits and reduced risk.
Provide farmers the opportunity to join through their associations and cooperatives to purchase or obtain crop insurance. In particular, Congressional support for the provisions contained in section 109 of the House-passed bill (H.R. 2559) as part of any final conference agreement. This would enable producers to better manage the risks associated with production agriculture, provide improved access to needed insurance coverage on a competitive basis, and encourage development of new and improved insurance products.
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Increase participation by making higher level crop insurance coverage more affordable and effective.
Develop comprehensive policies that cover multi-year as well as single-year losses.
Raise the floor on catastrophic coverage and the non-insured assistance program.
Expand the range of crops that can be covered.
Authorize a pilot program for livestock.
Create flexibility with the use of pilot programs.
Expand opportunities for production agriculture to participate in value-added cooperatives through loan guarantee programs that enable diversity of investments in the food chain.
TAX AND FINANCE ISSUES
Review and restructure of certain tax and finance issues are vital to producer success, particularly as producers look to pass farm land and farming operations on to younger generations and/or look to retire. Proposals for the development of a farm income savings plan and the acceleration of the deductibility of health insurance premiums should also be considered in developing farm policy. A modification of current tax laws could enhance producer profitability.
Producers need significant short- and long-term changes in addressing financial issues including:
Modification of the capital gains tax regulations. A one-time exemption on capital gains tax could remedy the all-to-familiar situation of producers being faced with tax bills that are more than twice the real, inflation-adjusted capital gain on their land when they chose to sell their farms. This would mirror the one-time provision on the sale of a home.
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Modification of the estate tax. Federal estate taxes not only cause economic stress on individual producers to pay high taxes of fixed assets, but on rural communities whose small businesses, including farming, must pay these high taxes.
Development of a farm income savings plan. Creation of a tax-deferred savings plan would allow farmers to average their income tax liabilities between low- and high-revenue years with lower tax implications and fewer restrictions.
Accelerate implementation of the health insurance premium deductibility enacted by Congress. While Congress adoption of 100 percent health insurance deductibility program is a step in the right direction, the phase-in of this program should be sped up from the current 65 percent rate.
REGULATORY BURDEN
Farmers are dependent on the land for the crops grown and livestock raised. More than the place we call home, our farmland is our resource base and our livelihood. We are stewards of the land and are committed to protecting the land and its future productivity. Considering farmers dependence on the land, plans to keep production agriculture productive and viable should include a thorough review of the current regulatory burden faced by farmers.
Producers have taken an active and responsible approach to protecting our soil, water and air, and are prepared to meet environmental requirements that are science-based, achievable and affordable.
One instance where we see a disturbing trend in environmental action is in the Environmental Protection Agency's (EPA) new rule on Total Maximum Daily Loads (TMDLs). The TMDL program was designed to identify sources of water pollution and allocate control responsibilities to reduce pollutant loads in places where water quality standards are still not being achieved, even after point sources have installed pollution control technology.
In a case where sound science has not indicated a need for program expansion, the EPA wants to expand the TMDL program to address certain agriculture and forestry practices that were not included in the initial TMDL program. The proposal has been criticized as unworkable, costly and beyond the EPA's regulatory authority by agriculture, State and local officials.
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Producers need significant short- and long-term changes in reducing the overall regulatory burden including:
Emphasis on voluntary, incentive-based partnerships involving farmers, their cooperatives, and State, local and Federal officials.
Increased funding to provide technical and cost-sharing assistance to help farmers meet important environmental and related goals.
Peer-reviewed sound science on environmental issues to help prevent situations where regulations are driven by haste, counterfeit science, assumptions and/or emotional arguments.
COOPERATIVES
Cooperatives play an increasingly vital role in the success of U.S. agriculture. Through cooperatives, producers can operate more effectively in the marketplace, receive greater returns on what they raise, and maintain unity of purpose.
Farmers and ranchers have joined together in cooperative efforts to improve their income, manage inherent production agriculture risks, participate in value-added production and processing beyond the field, and compete more effectively in a rapidly changing global economy.
Cooperatives also make important contributions to the rural areas of which they are part by providing jobs, contributing to the tax base, and in other ways helping to foster economic growth and development. Cooperatives often serve as a means for farmers to effectively transfer their expertise and knowledge to other rural business opportunities. Farmer cooperatives provide important benefits not only to their farmer and rancher owners, but also to consumers and the Nation's economy by strengthening farm income, providing an efficient and abundant supply of food and fiber, and promoting competition and economic growth.
Because of the important role cooperatives play in the agribusiness industry, farm policy must include elements that support the continuance and growth of these producer-based organizations. Actions should include:
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Maintaining support for the Capper-Volstead Act, thereby promoting collective activity by farmer cooperatives. The ability of farmers and ranchers to act together in processing, preparing for market, handling and marketing their products is essential to maintaining a strong agricultural economy.
Continuing the right of cooperative associations to act for, and on behalf of, their members.
Strengthening the ability of cooperatives to provide services to farmers and their organizations.
Improving the effectiveness of the Farm Credit System, thereby enhancing the ability of the system to maintain the flow of needed capital to rural areas and to provide the financial services essential for marketing agricultural products in the global marketplace.
Maintaining the current tax policy applying to cooperative income.
Providing guarantees on loans used by farmers for investments in value-added cooperatives—loans that enable producers to diversify their interests in the food chain.
Providing adequate tax incentives to encourage investment, attract capital, and strengthen efforts by farmers and their cooperatives to become more involved in value-added production and processing, capitalize on new market opportunities, and meet global competition.
Statement of Paul Appell
I'm Paul Appell, a pork producer and grain farmer from Knox County about 45 miles northwest of here. I would like to thank the committee for allowing me to express my views on the farm program and would like to thank you for your part in helping us down at the farm level. As an active participant in farm programs and the Conservation Reserve Program in particular, I would like to comment on the environmental and wildlife aspects of the farm program.
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First, however, I'd like to make a general comment that pertains to the overall farm program. To the outside public, I and many other farmers might be viewed as very wealthy individuals when you look at our fixed assets of land and equipment. These assets are called fixed for a reason. I cease to be a farmer if I use these assets for other uses. Many farmers like me walk on the financial edge. Every year we get loans to obtain the money to buy seed, fertilizer, and other inputs to plant the crops. We then hope for good yields and prices so that we can pay the loans off in the fall. As a result, I can do nothing on the farm that is not financially sound or I will soon be an ex farmer. The impact of this on the farm program is that I am very easy to control. If you give me a program that is to my financial benefit and say jump, I respond with how high. There has been a lot of talk about controlling sediment, fertilizer, and chemicals in the Illinois River in the Peoria area. You do not have to have a doctorate in economics to realize that if the rental rates for filter strips in the CRP were higher than that of raising corn, then farmers like me would soon put in filter strips.
In my view, USDA's best program over the last few decades has been the Conservation Reserve Program. It benefits not only the farmer, but also society in general through environmental and wildlife benefits. Except for the multinational grain merchandisers, most midwesterners seem happy with the program. Illinois State and county governments think enough of the CRP to reduce the property tax on the filter strips to one-sixth of what the land would otherwise be taxed.
A couple years ago when I received the outstanding conservation farmer award from my local soil and water conservation district, I reflected back on why I would have been chosen for this. There were some farming practices such as no till and nutrient management in our hog operation that were done without Government assistance. The other conservation practices on the farm-the 60 acres of prairie grasses, the 40,000 shrubs and trees planted, and the two wetlands would not have existed without the financial help from the CRP.
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The USDA has done good job of tailoring the CRP over the last few years to target critical areas. However, the funds are way short of what farmers and wildlife habitat people would like to see. Something seems out of order to me when more is spent on one B–2 bomber than is spent annually on CRP. Military security may be important, but food security, the environment and wildlife deserve a bigger share of our tax dollars.
An addition to the farm program that I would like to see is compensation for carbon credits. It only seems fair to have those who are releasing carbon dioxide into the air by burning fossil fuels to compensate those who remove and store the carbon from the air in plant material. Paying farmers to store carbon through no till farming not only helps prevent global warming but increases the organic level of the soil to raise yields. The Soil Humus Improvement Program as proposed by Jim Kinsella with help from USDA scientists makes logic and fair sense to me. It would seem that the cost of encouraging no till farming would be more economical than the other methods of carbon sequestration being looked into by the Energy Department.
In closing, I would like to say that I love being a farmer. I love doing good things for the environment. I love helping wildlife. The reality, however, is that finances not desires control what I do on the farm. I would like to think of myself as more than just a serf, but I do realize that I am only a caretaker of the land for a very short time. With help from money allocated to conservation programs, I can leave the land in a better condition than I received it.
Statement of Terry Ferguson
I am Terry Ferguson, family farmer and President of the DeWitt County Farm Bureau in Clinton, IL. I farm 800 acres with my wife Katherine and four children. I would like to thank you for the opportunity to testify before this hearing.
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As you know, production agriculture has not benefited from the economic boom that has brought our economy to record prosperity. Freedom to Farm has allowed us to respond to market signals rather than produce for historic crop acre allocations. However this has not been to the full benefit of cornbelt corn and bean farmers. The higher loan rate ratio for soybeans has caused acreage to be shifted from wheat and cotton to soybeans. During this time, the price of beans has been depressed as producers rely upon the loan deficiency program to provide a price. We should re-examine the loan rates to look at historic ratios and consider adjusting the other commodities upward in relationship to soybeans.
Many promises were made when the 1996 farm legislation was passed. Promises of expanded market promotion, reduced regulation, reduced taxes, and improved crop insurance. Many of these promises seem to have been only lip service, as not much has happened to improve our economic condition. You can greatly improve the long-range future success of U.S. agriculture by acting upon the promised legislation without having to re open the FAIR Act.
Crop insurance seems to be progressing toward improvement, but as a central Illinois producer that has never even collected on a hail insurance policy, I hope that a reasonable solution can be found that will not encourage fringe areas of crop production to farm the Federal Crop Insurance Program. Some areas of our country have more disaster years than normal years. It is not fair for the producers in central Illinois to subsidize increasing the acreage of corn and soybeans through the insurance programs. It may be a fact of life that some areas of our country are not suited for crop production and insurance programs should not be used to expand production.
In the last several years, I have lost several acres of rented land that was sold upon the death the owners. Investors purchased much of this land. This last year a farm adjoining our family land was sold and the new tenant paid $185 per acre rent. This does not seem to pencil out in these times of increased fuel costs and depressed crop prices. This brings me to my thoughts concerning farm program payments. It is getting harder for the public to justify these levels of farm payments. It may be time to evaluate the purpose of these extra payments made to offset the low prices. By increasing the payment limits, I wonder if we have saved the family farm or have we given extra cash to the mega-farms so that they can use funds not needed for family living expenses to bid up cash rents and force mid-sized farm out of business. Should Federal farm programs be used to speed up the process of farm consolidation, or should they be used to help preserve the social and economic base of our rural communities?
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The future of the success of U.S. agriculture relies upon the increase utilization of our domestic supplies. One important part of this process is to provide for the expansion of our ethanol fuel production. By replacing MTBE with ethanol made from corn or other bio-masses, we will add value to our crops and provide for improvements in our rural economy with improved job opportunities for our youth. Congress must act on this issue and keep ethanol as a growth market.
Export markets must be aggressively expanded. We should be fully utilizing all of our export enhancement programs. It is imperative that PNTR be granted to China, as we can not be on the outside looking in at this future growth market. The world has areas of extreme famine where our food is desperately needed; we have PL480 funds that could send some of our surplus commodities to these starving people.
Our current domestic shipping rule make it cheaper to source soybeans in the south east from Brazil rather than the Midwest. These rules are outdated and should be changed. We also must invest in improving our river transportation system. We must have modern locks and dams to stay competitive in the export markets.
In conclusion, I guess all you in Congress need to do is deliver on the promises of 1996, provide fair crop insurance, expand our market opportunities by granting PNTR to China, aggressively provide for the expansion of ethanol fuels, modernize our river transportation system, and keep the structure of our rural economies in mind as you consider future farm programs.
Thank you for your time and consideration.
Statement of William Graff
Thank you for letting me testify here today. My name is William J. Graff and I am a farmer. My wife and myself farm 1,280 acres, feed a few head of cattle, and work a couple of part time jobs. I am the Logan County Farm Bureau president, Corwin Township Supervisor, and on the Illinois State Fair Advisory Board. My comments here are my own and do not reflect on any of the above mentioned offices or positions.
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I think we have to look back to be able to look forward when it comes to farm policy. In 1995 when freedom to farm was passed we were also promised many things, very few which have come true. I also believe that there are five different groups of people/ or events that can share in the blame of the present troubles in agriculture.
First I will start with the Clinton administration and Secretary Glickman's administration of USDA. I believe that to score political points in the upper Midwest they have done many things to keep prices low or to even lower them. Why the Export Enhancement Program was ever stopped is beyond me. Wheat prices have been like an anchor on the whole grain complex and the administration has done very little, but blame freedom to farm. It would be very hard now to start EEP again, but why was it stopped in the first place? Ethanol and MTBE- why we are even letting the oil companies put poisons in our ground water, when we have an environmentally friendly product is another political move by this administration to help Al Gore in California and in the Northeast. Real Sanctions relief so we can sell our products around the world should have been done years ago. Why there is no rollback of regulatory rules that put small farmers under tremendous paperwork burdens that also do not make common sense and worse yet work against the common good are more reasons for farmers to be upset with Washington. Two recent examples of the incompetence of the current USDA administration is the oilseed payment and how long can it take to get done and the storage loan program. The oilseed program rules for signup were a lawyer's dream and a farmer's nightmare. I would also like to mention how our local FSA staffs have been burdened with an increased workload while at the same time they have suffered staffing cutbacks. How many USDA jobs have been cut back in Washington, DC and how many good hard working local staffers have been lost in the same period? I also find it somewhat interesting right before an election we have a storage loan program when if the Secretary had the ability to do this why it was not done in 1998 when we knew we had a big crop coming on and Southeast Asia was suffering an economic meltdown. Also this program needs to be retroactive to last fall, because bin companies offer winter purchase programs and if you think you can buy a bin after July first and have it built by September you do not have any idea what it takes to run a farming operation these days. Also in December 1998 when hogs were selling for $8 a hundred weight and the U.S. EPA would not let a packing plant operate in North Carolina for a temporary time to avert a crisis either means they don't care or maybe a large corporate hog operation from Arkansas made the right campaign donations. I also believe if the U.S. would have told Canada that no more hogs come across the border until they get their labor problems solved and open back up their slaughter plants then the total price collapse would have been lessened, but I forgot that the Clinton administration would never do that. They also need to stop wasting money on more environmental studies and fix the locks and dams on the Illinois and upper Mississippi rivers now!
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The second group I will say that contributed to the problems with freedom to farm is Congress. Again after its passage farmers were promised many things to improve trade, lessen the regulatory burden, open up foreign markets, tax relief, transportation improvements. Why has it not happened? Also many of the things the Clinton administration did not do were never forced by Congress. When the Clinton administration is not doing everything to enroll the maximum acres in the CRP program because they are saving acres for their own pet project areas along rivers in a time of overproduction, why doesn't Congress just pass a law saying enroll the maximum. If Clinton then vetoes it he can be accused of being against farmers and the environment. I also do not understand why Democrats from farm country do not join with Republicans from farm country and stand up to the Marxist, socialist, wacko environmentalists who are against private property rights and threaten to turn much of farm and ranch country into a private reserve for the ruling elitists and funded with our own tax money? Congress also needs to look into the Justice Department and see if it is just poor administration of anti-trust laws or if the laws need to be changed or new laws need to be passed to break the virtual monopolies in certain sectors of agriculture these days. I am also disappointed with a Congress that would pass a dairy compact that lets farmers in one region of the country profit at the expense of farmers in another part of the country. This I contend is almost criminal. Lastly, every farm committee member should be for the immediate elimination of the inheritance tax, period.
The next group I will say that has had a hand in the demise in the future of farming is farmers ourselves. We are our own worst enemy at times. It is very hard for farm membership group leaders to say this because they depend on dues to finance their organizations. Last fall when the supplemental farm payments were mailed out a few farms were rented out from under farmers by other farmers who used the money to raise the cash rent amount paid for that farm and just contribute to the cycle of dependency. A lot of the money you send us just passes from tenant farmers to landlords and farm managers in higher cash rents and privilege fees. Cash rent auctions and privilege fees to farm managers did not exist in the 1930's and 1940's and 1950's when the basis for much of our farm programs was formulated. Farmers farming 60,000 acres of corn and soybean land in Illinois where they go out and rent land with a plat book and a soils map is probably not where we want to go in the next farm bill. A few years ago corn was $5 and wheat went up in price and soybeans went to $9 did farmers use the money to pay off debt, or did they say we are never going to see low prices again and purchased things with debt betting on the come? The problem is once one idiot pays $240 acre cash rent every landlord wants more too, even if the economics are not there. I could mention more examples, but many of the farmers here in attendance know what I am saying.
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Ag business, farm managers, local governments and many more too numerous to mention are bleeding way too much money out of the farm economy and also some either do not care or they want the American farmer to fail. Roundup Ready soybeans sold to Argentina farmers at one-third the price Monsanto charges American farmers. ADM is now Brazil's largest soy processor. This from the same people who were convicted of price fixing, by overcharging farmers for livestock feed. Cargill exports grains from many countries other than the United States. How much help does the Federal, State and Local Governments give these corporations in the name of economic development so they can help other farmers around the world compete with us. Local governmental bodies who can not control their spending so they raise property taxes to a point where it is very excessive on farmers. This is especially true of the education establishment. Environmentalists who are against biotech products which help farmers to reduce our pesticide purchases and be better stewards of the environment. At times the only thing I think farmers have going for them is the good will we have built up with the general public.
Economic factors have also contributed to the financial hardship in rural America. Just when exports to Southeast Asia were really helping farmers their currencies fell out of bed. Whether this was bound to happen or giant hedge funds in the United States sold into these foreign currencies, why did our monetary policy people just stand aside and let our dollar go way up in value effectively causing a recession in Agricultural. I believe that to keep inflation down in this country we have had an unwritten policy of a high valued dollar that has made imports cheap which has put pressure on American companies to keep inflation in line. This also has the effect of keeping bulk commodities under valued in dollars, but not in cheap foreign currency which allows processing companies to have cheap inputs which in turn keeps profit levels for the large corporations up. This in turn keeps the stock market up in value, which brings in foreign currency and keeps the dollar high and bulk commodities low in price. Works great for Wall Street, but not very good for anyone producing bulk commodities that is dependent on exports for profit margins. This is how I justify large payments to farmers. How long can this go on? It is already starting to correct itself. The best cure for low prices is low prices. I also worry that some that make agricultural policy want to put a floor under prices. The problem with this is that floors often become ceilings. Supplies are coming more in line with a growing demand base. Crop problems not only here, but also in China, India, Pakistan and other South Asian countries could change our outlook overnight.
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Now that I have offended everyone in the room I will state that the worst time to write a farm bill is when you have low prices. The second worst time is when prices are high. That leaves very little time to get a good farm bill written so do not be too hard on yourselves. When this farm bill was written prices were relatively good and everybody was trying to balance the budget. Now we have lots of money and everybody thinks it will stay that way. I am here to tell you 5 years down the road the position you are in will change and so will mine. So the question is where do we go from here?
Maintain the market orientation of the current farm bill. Give us the risk management tools we need to help lessen the risk we face in farming. Risk management beyond crop insurance is needed. Do not turn the Crop Insurance Program into another Government farm program for distributing money to farmers. Farmers learn how to farm the program and if crop insurance is just an income transfer program this is not good for farming. We need a tax-free savings account to put money away in the good years and have it to get through the bad years. Please do not come up with some type of green or social payments. Farmers need to be good stewards of our resources on our own. An expansion of current soil and water cost share payments and higher cost share percentages on CRP ground would be good. Ethanol use needs to be encouraged and expanded. I would like to see the day when ten percent of all fuel sold in the United States is ethanol. This has many benefits beyond helping farm income. Fix and upgrade the locks and dams on the Illinois and upper Mississippi rivers. Give farmers some real sanctions relief. Regulatory relief from mindless and no common sense rules and regulations that really do not do the intended good. Finally in the next farm bill I would like to see a good portion of our farm payments go to farmer owned value-added projects. This money that we would spend on these projects would be matched by Government funds. With the Justice Department's non-enforcement of many anti-trust laws we need the ability to compete with multi-national corporations that do not always have our best interests at heart. You could also offer grants and low or no interest loans for value-added projects. I would also allow farmers to invest a portion of their own check-off dollars in value-added ventures. Value-added contracts are not any better than growing regular crops. The premiums always start out high, but come down to offer just enough to get a very small increase over regular crops to get the required acres. In the long run it is not worth the trouble. The big multi-national companies are now in the process of buying both the input and output end of production agricultural. Farmers are stuck in the middle with a dwindling future. We need to own at least one end of the food chain. Not only would this help farmers who currently get farm programs payments, but also the large amount of farmers outside the traditional farm areas who do not currently get any Federal help.
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In summary I am asking you to help us help ourselves and invest in our future. Help us manage our risk, not with another farm income transfer payment, but tax relief, tax free saving accounts, actuarially sound crop insurance, and other tools that are already out there, or maybe need to be developed. Sanctions relief where agricultural gets a seat at the table on State Department meetings. Regulatory relief so we as farmers can get back to work and out of mindless paperwork requirements. Monetary policy that does not benefit the economy at farmers expense. Expanded use of Ethanol, expanding our transportation opportunities, and please eliminate the inheritance tax. Finally put money in farmer owned value-added projects so we will have a greater share of the food dollar and be able to weather the next downturn in commodity prices.
Thank you for having this hearing here today and giving me the opportunity to testify at it.
Statement of Darrell Lasswell
Mr. Chairman, committee members, thank you for the opportunity to testify before you. Four points that I would like to testify on:
The main point that I am here today for is to express to you the deep concern I have for the rapid trend for big capital to be getting into production agriculture and consolidation of companies that sell to and buy from family farmers.
One case in point is the vertically integrated large capital pork producing company Smithfield Food that has within the last several months acquired Murphy Farms and attempted to require the pork producing part of Tyson Foods.
It is my understanding that the Packers and Stockyard act of the 1920's has not been upheld and as a result Smithfield Foods is a dominate player in the pork chain of our Nation from consumer to producer. Acquiring a large enough portion of this industry to have a controlling influence in the production of pork in our country.
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Another example is the Continental-Cargill merger that has taken place within the last year. Cargill has operations in 70 countries and the controlling effect this could have not just on our Nation, but the world food supply is scary.
The organizational structure of the nation/global food system is dynamic. New firm names emerge, often the result of new joint ventures, and old names disappear. But underlying these changes is a continuing concentration of ownership and control of the food system. These structural changes are so strong that they often undermine the desired and expected outcomes of much of the agricultural policy developed over the past couple of decades. These structural changes, often referred to as the industrialization of agriculture, have progressed to the point that some agricultural economists now refer to the agricultural stage of the food system as ''food manufacturing.''
One often hears the statement that agriculture is changing and we must adapt to the changes. Few persons who repeat the statement really understand the magnitude of the changes and the implications of them for agriculture and for the long-term sustainability of the food system. The changes are the result of notoriously short sighted market forces and not the result of public dialogue, the foundation of a democracy.
Point 2: I want to bring up is why producer owned State inspected scale receipts is not accepted as production evidence at our local FSA office for LDP programs and as I understand it other programs also. They were accepted prior to the 1999 crop season. Now you can use your neighbors scales but not your own. This is awkward procedure at harvest time and makes another hardship to operate under. In this case newer rules is not better rules. The old was much more farmer and FSA office friendly.
Point 3: We as family farmers very badly need our commodity organizations such as county, State and national organizations of corn, soybean, wheat, cotton, beef, pork and others. These farmer controlled commodity groups need funds to carry out their programs and it certainly seems that a check-off at the market place where by all producers share in the funding as well as have the opportunity to be elected to the farmer boards, that control the use of these funds is a democratic way of managing the commodity organizations.
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These groups need stability in long term funding of well-planned promotion, research, producer education, and consumer information programs.
The recent decision of Secretary of Agriculture, Glickman to call for a vote on the Nation's pork check-off, after opponents of the program fell 2,600 votes short of the necessary 15 percent of the Pork Producers, to request a vote is upsetting.
There were irregularities in the pork petitions requesting a vote and mistakes were made in validating those signatures as acknowledged by Secretary Glickman. Secretary Glickman's irresponsible decision to call for a vote has sent shock waves through other commodity organizations wondering who is next on USDA's hit list. Producer's organizations need stability and the support of the USDA.
Point 4: I started farming in 1958 using Farmers Home Administration financing. This was a first generation farm at that time and now second as my son just took over management of the farming operation in 1999. Production Agriculture in Illinois has truly outgrown what FHA can provide and the quality of its services at best is a detriment to production agriculture. Illinois would be better served and the Government, and taxpayers would save money if these offices were closed.
Statement of Lowell Schachtsiek
Mr. Chairman and Members of the House of Agriculture Committee:
I want to thank you for the opportunity to testify before your committee. We have lost a large percentage of our farmers in the last 20 years, and are now endanger of losing many more if commodity prices don't increase substantially.
Are we, as a country better off because of fewer farmers, and does the consumer pay Less for Food?
In the late seventies, when farmers were protesting low prices in Washington DC, soybeans were $6 per bushel, and four thousand bushels would buy a 130 horse power tractor. Today it would take over 10,000 bushels to buy the same tractor.
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In American agriculture there seems to be two different belief systems. One system feels that the American farmers should receive prices comparable to at least the cost of production. This system would ensure an adequate domestic food supply, maintain a family farm system of production. I feel that the majority of farmers and most consumers support this view.
In the other system people believe that the American farmer is the most efficient and low cost producers in the world. They feel that Government has no function in agriculture except to promote export markets and do research. They believe in the survival of the fittest and see nothing wrong with corporations controlling production of grain and livestock. They believe that free trade will solve all of Americans problems. It would seem that our current farm bill is a product of this thinking.
The current farm legislation, or Fair Act, assumes that the American farmer is the most efficient low cost producer in the world and at present, this simply is not true. South America can and will produce soybeans for $5 or less and even bring more land into production. China, we are told upon adapting new technology, could easily become an exporter of grain rather than an importer. The American farmer needs at least $6 with adequate yields and we will still continue to lose producers.
I was told that the designers of the Fair Act felt that states like Iowa and Illinois could produce corn for less than $2 a bushel. That would force peripheral areas to other types of production, such as livestock. The problem is that those areas of the country still produce at least one-fourth of the crop and at least part of that production is needed.
Quoting from Gerald McCathern's book, ''To Kill the Goose,'' when President Calvin Coolidge was confronted with the farm problem during his administration he made this statement, ''I am convinced that there is no farm problem as long as farmers continue to produce.'' This analogy is still being used today by people who support the wishes of those who profit from cheap and abundant agriculture commodities. Looking at it realistically, it is hard to argue that point, since it would appear that if farmers were actually losing money producing, they would stop producing! But it doesn't work that way. The more money farmers lose, the more they try to produce—believing that increased volume will make up for the decreased price and so they produce themselves out of business—and a neighbor picks up their land and continues to farm it even harder, believing that the increased volume will keep him in business another year.
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We have produced to the point that many of our friends and neighbors are no longer in production agriculture. Three years ago we had four dairy farmers in our community, now we have only one.
For a business to succeed it must reward capital, labor, and management. At present, most farms can only reward one and some can't reward any.
It seems that American agriculture is at a turning point and the consumer needs to decide who it wants to produce the food, where it is to be produced and under what conditions. If the consumers say that it makes no difference then present policy is adequate.
If the American people feel that the food that we eat needs to be produced domestically by family farmers, then we need to change policy quickly, and develop short and long-term goals to reward independent producers, especially young and small farmers.
I am enclosing an article in the October 1999 issuer of ''Successful Farming'' by Dave Mowitz, entitled, ''Agriculture Continues to Roar Down the Road without Direction.'' I quote from the last paragraph of the article, ''Time to Get Our Act Together.'' So what of future? Folks, I haven't a clue. I feel the same way most of you do right now-stunned like a jacklighted deer on a summer night. But, I am convinced we've got to take along, hard look at the structure of our industry, ponder the future of farming, and create a plan for long-term prosperity. And I'm convinced many of the answers to our problems lie in Bob Bergland's noble effort of the late 1970's.
I agree with and add to Dave Mowitz's long term solutions, but in the short run there needs to be an adequate infusion of cash to stabilize producers. Legislation would need to be passed, such as Flexible Fallow, which would allow producer to set aside part of their production for higher loan rates. The current 1999 farm program costs the Government approximately $23.8 billion and according to the January 2000 Baseline report from FAPRI (Food and Agriculture Policy Research Institute) the Flexible Fallow program would only costs $2 to $3 billion above the average $10 billion baseline. The farmer owned reserve would need to be reestablished. A moratorium would need to be placed on large agricultural mergers, and the packer feeding of livestock would need to be frozen at no more than current levels.
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In the long-term, we need to do some deep thinking, then admit that we do not live in a free and perfect world, if we did then free trade might work. We also need to realize that we are not the world's least cost producer and the world has more capacity to produce at present than there is demand for production.
This country would need to establish a food security reserve equal to one-half years supply of grain. This would be different from the farmer owned reserve, in that grain would not come out of this reserve regardless of price. It would only be used in the case of a disaster of severe magnitude. We would need to work with other countries to stabilize world grain prices.
The Federal Tax Code would need to be amended so that individuals or businesses could donate agricultural commodities such as grains or livestock to charitable agencies for feeding hungry people. The gift could then be written off at the USDA calculated parity price level. For corn it would be $6.64 for February 2000.
These long and short-term measures will work if congress has the will to act. I would support your efforts and I know the American people would, because they do not want an America without family farmers.
Statement of Sam Latchford
Members of the House Agriculture Committee and guests it is truly a pleasure to be able to speak to you today. My name is Sam Latchford and I am an independent family farmer from northeast Missouri and I want to remain an independent family farmer. Our family raises grain crops that we value add to our hogs in a farrow-to-finish operation. I have come before you with one agenda and that is to keep my family living and working on our family farm.
My solutions may seem radical and different. I do not believe that we can compete with other countries in regard to cost of production. The only chance for survival for family farmers is for this country to give up the myth about free trade. We cannot let the growing of food go the way of the shoe business. I do not want my family's food coming from a third world country. I believe that at any cost we must preserve and enhance our rural way of life in our small communities.
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My first proposed solution would be a ban on packer ownership of livestock. For every job created by factory hog farms, 2.94 independent hog farmers are displaced. There is no question that we as independents can and do raise equal or better quality, more humanely treated, and more environmentally friendly livestock. The only thing we lack is competitive markets and a fair price. Our hog manure is not considered waste to us but is fertilizer to our growing crops. The number of hogs per acre is only a small percentage when compared to the vertical integrator's hogs per acre. We will always be caring and loving with the animals that serve as our livelihood. We choose to pay our children and/or employees fairly rather than the unjust compensation that is prevalent in other countries of the world.
Yet with such a ban the integrators will look outside of this country to produce the livestock and thus import it back to this country. This brings me to my next solution, country of origin labeling. Why should it be that if I go down the aisle of a Wal-Mart and buy my grandson a pair of socks I know from what country they came? If I continue down the same aisle to buy a package of hot dogs I am not given the privilege of knowing its country of origin. Now, I ask which is more important to my grandson, a pair of socks or the food he eats? Country of origin labeling is important and consumers are asking for it. We have the safest meat supply in the world, so why contaminate it with imported meat? We can help save Rural America by banning the importation of all meat items. Under the present system packers are blending beef from five different countries into the pound of hamburger that you and your kids will eat. Under the present system a USDA label is placed on imported meat products. Does this mean it is U.S.A. produced? The answer is no. Without a doubt we have the safest and highest quality meat produced in any country. We have environmental laws, human rights issues, and restrictions from the Food and Drug Administration to consider in the production of all meat consumed in this country. These quality standards lead to higher costs of production for U.S. farmers so let's not dupe our consumers and disadvantage our products by importing meat.
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My solution to our over supply of grain is to look within our own country. I believe we need to find more uses for the grain the U.S.A. produces, and with the above-mentioned ban on importation of meat one very large need has been created. Lets mandate the use of our grain into our fuel needs. Why should we let the oil cartels and grain cartels eliminate the farmers from our Nation? Place a requirement for a percentage of ethanol and soy diesel to be added to every gallon of fuel used in the United States. Many people in the Corn Belt heat their homes with shelled corn. Why can't there be a huge increase in the use of grain as an alternative energy source? Another solution that seems obvious to me is to stop the daily convoy of trucks bringing Canadian grain into this country. A farmer from Minnesota told me recently that these trucks go past his farm day and night. Why can't we get tough and protect our own, the American Family Farmer. I believe farmers don't make surplus, imports make surplus.
My next solution is regarding farmer owned cooperatives. They were established to provide the American Farmer low input costs, not to become his competitor in production agriculture. Today a farmer member must die to gain his equity from these cooperatives. We need legislation passed that allows a farmer member to pull his equity out of these cooperatives and place it in a Value Added Cooperative within a 5-year period. I am proud of the way my State, Missouri, is helping me and leading the way in developing value added cooperatives. Please give us incentives and help on the Federal level to develop and build more of this type of cooperative.
Another step towards a solution is to put a stop to the consolidation and mergers that have resulted in the loss of our markets. Let's begin by saying no to the Cargill-Continental Merger. Consolidated markets result in higher prices to buyers and lower prices to sellers than would occur in less concentrated markets. Three years ago on our farm we could make four phone calls to sell our hogs. Today we have only one phone call we can make. In other words, I believe that I am only one phone call from being out of business. We have three places to sell our soybeans ADM, ADM, or ADM. These mega-consolidated companies that now offer multiple crop inputs are crippling many independent family farmers. From these companies, the lowest price for crop inputs requires purchase of certain quantities of their seed corn, their seed beans, treated with their chemicals. This requirement rids us of our decision-making ability. Where is the competition? The latest merger that I have objection to is the meat and poultry's Big Six, a new alliance of packers to sell meat on the Internet. Now I ask you when the grocer calls up for a competitive bid on a truckload of product where's the competition? How do we as producers and consumers benefit from such a monopoly? I will compare my cost of production with any of the cartels or integrators, but no matter how low my costs are, if not given a fair and competitive market, my family is out of business.
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Please give us the protection we demand against the cartels that are out to eliminate the family farmer. Lets get radical and protect the American Family Farmer who is without a doubt the best steward in the world for our land and animals. My Father and my Granddad were driven by a common goal; that of passing their land to the next generation in better condition than it was when they took possession. I do not believe that their goal was different from any other family farmer. In discussing farm issues recently with a farmer who turned 96 on the millennium he said and I quote ''There is nothing in this world like an American Farmer.'' The transnational corporations do not want to own our farms but instead they want to own our farmers.
My wife Barbara and I have been blessed with two great children. Jill is married to Brian who was born and raised on a small farm and I am proud to say is a member of our farming operation. They have blessed us with our first grandchild Jake. Billy our son will graduate with honors from the University of Missouri with only 3 1/2 years of study. Yes this includes the weekends and summers spent on our farm on a tractor, and at the end of a power washer. Our kids were not allowed to use the word can't in our home. So now I ask you to help me so that I do not have to sit at that kitchen table and tell Billy, Brian, and Jake that I can't afford to let them work and live on our family farm.
Statement of Ronald R. Warfield
Mr. Chairman and members of the committee, I am Ron Warfield, owner and operator of a farm in Ford County near Gibson City, IL. I am also president of the Illinois Farm Bureau. Welcome to Illinois and thank you for this opportunity to provide thoughts on agricultural policy to the House Agriculture Committee.
Illinois farmers raise a variety of crops, from the typical corn/soybean/wheat rotation in some parts of the State, to specialty crops and diversified grain and livestock operations. I, along with my wife Melanie, raise corn and soybeans on our farm. We also have had over 25 years experience feeding cattle.
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When I think of farm policy, many times I think of the impact on my individual farm, and that is important. However, it is equally important to foster a perspective of what is the best farm policy for our Nation.
We have experience with the first several years of implementation of the 1996 FAIR Act. This legislation successfully provided flexibility to plant the crops demanded by domestic and foreign consumers. Farmers like that flexibility and want it to continue.
We have experienced the highs and the lows of commodity prices and farm income since 1996. The Government has stepped in three times (counting this year) with ad hoc financial assistance.
To deal with this increased volatility, I believe there should be two specific adjustments to the current program. First, as promised with the implementation of the FAIR Act, there must be adequate risk management tools made available to farmers. Second, there needs to be a counter cyclical safety net adopted to address the sharp crop price declines.
U.S. farm policy most certainly will impact my individual farm, and the farms of my neighbors. But we would be naive to believe that the impact stops at the borders of Illinois or the U.S. In today's global economy, American agricultural policy will impact farmers and policies in other nations around the world.
With that in mind, I believe new agricultural policy should continue our course toward depending on the market, not the Government, for generating farm income. I find it difficult to suggest new programs to help guide future farm policy when I believe we haven't fully implemented programs and policies at our disposal.
First, we need access to new and expanding markets. Forty to 45 percent of Illinois gross production is exported, and 57,000 Illinois jobs are directly related to agricultural exports.
Yet, farmers don't have full access to China's burgeoning market, nor do we have access to Cuba's market that's just 90 miles off the coast of Florida. We urge you to give farmers access to China—the world's most populous nation—by granting Permanent Normal Trade Relations. We also urge you to evaluate whether the economic sanctions in place against Cuba, and a number of other countries, are accomplishing what they were intended to accomplish.
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These two markets alone could significantly boost income for Illinois farmers by expanding markets for Illinois grain and livestock products. But we must open world markets to U.S. farmers.
There is another side of trade, and that is humanitarian needs we see around the world. The U.S. should use its food aid programs to donate surplus commodities to needy countries overseas. Additionally, export enhancement programs, market access programs, and Public Law 480 programs are useful and should be fully funded and utilized.
These actions that spur enhanced and expanded trade translate into higher demand for commodities. That higher demand translates into higher prices for my crops as well.
We also need to expand domestic markets through products like ethanol. The last 10 years have proven that oxygenates work to improve air quality and add value to corn, through market expansion.
Second, we need more funding for agricultural research. Research has always been central to the competitiveness of the American farmer. Research also assists in value-added initiatives, scientifically addressing environmental and food safety issues, and dealing with structural changes in our industry. However, Government funding for agricultural research has been stagnant. It is an appropriate time to increase the public sector funding of agricultural research to develop new uses and new products for our commodities, as well as to address the list of other concerns shared by producers and consumers.
Third, competition in the marketplace is one of the more talked about issues in farm communities. Consolidation and concentration within the agriculture sector is having an economic impact on farmers. I would urge Congress to review existing statutes, develop legislation where necessary and strengthen enforcement activities when evaluating agribusiness mergers, acquisitions and joint ventures.
Fourth, regulatory issues must be addressed by cost-benefit analysis and proper risk assessment so that the U.S. food and ag industry can grow.
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We urge you to fully implement these actions in order to create an environment where agriculture can grow and prosper.
Thank you for the opportunity to address specific policy issues, as well as provide suggestions on programs to address our needs. We pledge our full support and cooperation in crafting the next set of farm policies that will take us successfully into the new millennium.
Statement of Douglas Wilson
Mr. Chairman, members of the committee, my name is Doug Wilson and I am a farmer from north central Illinois. I am a fourth generation farmer in Illinois and my family can trace our farming heritage back to the Shenandoah Valley in Virginia in the early 1700's.
Thank you for the opportunity to testify today before the committee. I also want to thank you for convening these field hearings to allow producers a direct link to the committee as you work to improve agricultural policy.
Since the enactment of the 1996 farm program, many changes have occurred within agriculture. Some parts of the current farm program need revision but overall I feel that the program has served its purpose. Safety nets, which are to act as a clearing mechanism for grain stocks while maintaining producer price supports, have been successful. In my opinion, Freedom to Farm should not be criticized because of shortcomings of the program but problems have occurred because Congress and the administration have not taken responsibility for providing expanded trade opportunities and research support to create new markets for U.S. agricultural products. This along with an overzealous regulatory system and 4 years of above average yields has created undo hardships for farmers both economically and emotionally. The failures of Congress and the administration on trade issues, like Fast Track and potentially PNTR, and a lack of research commitment have greatly contributed to the problems of the 1996 farm program.
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Let me start by telling you want I do not want to see changed.
I do not want to return to a set-aside program to control production acres. I am in favor of use of the Conservation Reserve Program (CRP) and would like to see the 36.4 million acres filled before we add addition acres to the program. During the time of set-asides in the 1980's while we laid out 37 million acres of cropland, non-U.S. acres grew by 41 million acres. As it stands today, Brazil and Argentina have literally millions of acres that could be brought into production if the U.S. goes back to an acreage control policy.
I do not want to see a return to a Farmer Owned Reserve. The market clearing ability of the current farm program through Loan Deficiency Payments have kept Federal Grain Reserves from hanging over the market. Historically, Farmer Owned Reserves have not proven to be a long-term solution for production variables. In fact, during the mid 1980's when the FOR reached one of it's highest points of enrollment, corn prices crashed to a low point of $1.50 in the 1986/87 marketing year even with set-asides.
I do not want to see any changes to the loan rate for corn. Anything that contributes to artificially higher world grain prices only brings more non-U.S. acres into production and ends up supporting agricultural expansion of other countries rather than helping U.S. agriculture gain the tools needed to compete in world markets.
Now, what I do want to see changed?
First, we need more market orientation from Washington not more rhetoric. That means passing Permanent Normal Trade Relations with China (PNTR), working to include China in the WTO, granting Cuba trade status for food and medical supplies, and getting fast track back on course as soon as possible. We need to stop apologizing for being a creative and productive nation at the WTO. We need to show the world that we are serious about being a reliable trading partner and not a spoiled child who wants to take his or her ball and go home if everyone doesn't bow to our every whim.
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Moving FMD funding to the CCC has created more red tape and limited the program's ability to be effective. One other problem with CCC control of FMD is that Congress has lost direct oversight of this program. Reforming programs like FMD and MAP while providing better funding will build better relationships with our world customers.
In spite of pledges of regulatory reform, we now face more regulations than we ever have in the past. Many new regulations have evolved more from speculation and out of balance computer models than from solid scientific fact. Issues like GMOs have been cash cows for some groups and very costly to producers and consumers while the real answers slowly move forward. Regulatory reform that properly reflects reality is needed.
A commitment to improve our waterway transportation system must happen. Every year that we delay lock and dam improvements not only costs us more money but allows our most dangerous competitors to move ahead. I am not afraid to compete on the world market if my hands are not tied behind my back.
Ethanol remains an unknown market for farmers and industry. While we hear that more needs to be done to create clean burning renewable sources of energy, farmers continue to swing in the breeze awaiting proper action from either the administration or Congress to determine ethanol's future. Legislation like H.R. 4011 introduced by Representatives Ganske and Shimkus and H.R. 4303 introduced by Representative Ewing address issues with MTBE, maintain clean air standards, and create an expanded role for ethanol and must move forward quickly.
Much of what I have suggested likely does not need to be part of the farm bill. What it does demand is action from those of you who represent us in Washington. For too many years I have had the same issues come back again and again without action while I have seen my neighbors and myself lose more and more economic potential. While the rest of the country has prospered we have suffered. For any of the Representatives here today and particularly for those from Illinois, if you do not vote to pass PNTR then you might as well stab me in the heart right now and be done with it because a lack of solid trade policy only means a slow death for my farm and my neighbor's farms. I will be the last generation of my family to farm.
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Statement of Ted Harding
Freedom to Farm or freedom to fail—this has been the label often given to the present farm bill. So they both fit at this time or is this not the case?
The first 2 years of the present program we were blessed with relatively good commodity prices. Then Freedom to Farm looked pretty good. Then 1998 came along with lower commodity prices—some being record lows. 1999 did not prove to be much better than 1998. So you might say, we have had 2 years of freedom to farm and 2 years of freedom to fail.
Is the present farm bill totally to blame for the present situation in agriculture? It is not a perfect bill and must share some of the blame, but not all.
At the time this bill was introduced the feeling in agriculture, by far and large, was to get Government out of our business as much as possible. Let farmers do the farming and Government do the governing. It sounded like a pretty good solution at the time, but this bill depended on the Government to maintain and eventually increase our export share in the market place.
The Government has been very generous with financial aid to agriculture in the last 2 years, but it has not come to grips with some of the issues concerning foreign trade such as fast track, trade with China, trade sanctions, and the list goes on. The point being, before we completely abandon Freedom to Farm, let us address these issues and see if they accomplish what was intended.
Another area that needs to be emphasized is research and development of farm commodities. Also, a clearer picture of support for ethanol and other industrial uses of farm products.
I am sure that your committee has heard this over and over again, but these really are the fundamentals that were to give Freedom to Farm a chance to accomplish the goal of removing the dependence of agriculture on the Government. So, as I said before, let's not abandon the concept behind the present farm bill.
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Testimony of David Hastings
Mr. Chairman and members of the committee, I am David Hastings, general manager of the Ludlow Cooperative Elevator Company in Ludlow, IL. Our farmer-owned cooperative consists of six facilities with a combined storage capacity of 11 million bushels. We handle primarily corn and soybeans, and most of our grain is sold for export through the Gulf or to poultry feeders in the mid-south region of the United States.
I am an active partner in an 800-acre corn and soybean farm in east central Illinois, and I currently serve as first vice-president of the Grain and Feed Association of Illinois, on whose behalf I testify today. The Grain and Feed Association of Illinois is a voluntary, not-for-profit trade association comprised of approximately 1,000 competing grain elevators and feed mills working together as an industry to solve its problems, promote its progress and enhance its service.
We appreciate this opportunity and commend the House Agriculture Committee for conducting this series of field hearings to hear directly from those involved in production agriculture and from those of us whose businesses are dedicated to serving our farmer-customers. The current period of low grain and oilseed prices have caused all of us to focus renewed attention on Federal policies that can most effectively contribute to growing U.S. agriculture and improving farm income.
The causes of current low prices are well known. For the past 4 years, weather conditions have been exceptionally favorable in major world producing regions, leading to high yields of most major grain crops. There's also been a decline in imports from Pacific Rim countries in the aftermath of their economic recession, but those markets are starting to come back.
During this challenging period, our assessment is that the 1996 farm law has worked fairly well to keep U.S. agriculture competitive in world markets while providing our farmer-customers with a meaningful income safety net. U.S. producers have used the planting flexibility provided by the FAIR Act to reduce plantings of crops in response to declining prices and switch to crops that offer a higher net market return. In the last 3 years, soybean and minor oilseed plantings have increased by 9.6 million and 1.4 million acres, respectively. And importantly, we've seen foreign farmers reduce plantings by 25 million acres from 1996–99—a direct response to the United States no longer being willing to bear the brunt of supply adjustments through Government-mandated acreage idling programs.
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These are positive aspects of the 1996 farm law that we believe should be maintained. It is important as Congress looks for policy prescriptions, that it avoid the policy mistakes of the past that limited the ability of our farmer-customers and our agri-businesses to grow and compete. In that regard, we strongly urge Congress not to resurrect Government acreage idling programs or change the focus of the Conservation Reserve Program to supply management and away from its laudable conservation, environmental and water-quality objectives. A CRP that is too large or that idles productive farmland hurts tenant farmers who must bid against the Government's rental rates for the right to farm. It hurts local economies and communities. And it provides further incentives to Canadian and other foreign farmers to replace the plantings we otherwise would grow on productive farmland.
If Congress determines that additional income supports for producers are needed, we believe there is a right and a wrong way to do it. Our preference would be that such assistance be designed in a way that helps our farmer-customers better manage year-to-year variations in revenue, and not be linked to certain price levels that are dependent upon a producer growing a specific crop. Respectfully, one of the problems we see with a counter-cyclical support program that is linked to prices for specific crops is that it could encourage overproduction of crops that are already in excess supply, simply out of a desire to maximize Government payments. That's also why we believe it is unwise to attempt to increase income supports by increasing marketing loan rates.
The Grain and Feed Association of Illinois believes there are other policies that the Federal Government should encourage to help U.S. agriculture grow and become more profitable. Let me briefly highlight several:
First, it is imperative that Congress and the Federal Government continue to work forcefully to open world markets and create an environment that promotes exports of grain, grain products and value-added products, such as meats. In the last decade, exports have represented 32 percent of the growth in U.S. corn utilization; 51 percent of the growth in U.S. soybean consumption; and 29–33 percent of the growth in the meat and poultry sectors. Had the Pacific Rim countries not experienced an economic contraction and instead continued to grow their meat and poultry imports at the double-digit rates of the early 1990's, exports easily could have accounted for more than 50 percent of the market growth in the U.S. grain-meat sector in the decade of the 1990's. That is why a favorable vote on the China trade bill later this month in the House is so critical for all of us in U.S. agriculture. Mr. Chairman, we commend you, Mr. Stenholm and other members of this committee who have taken a leadership role in encouraging your colleagues to vote yes on this important bill.
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Second, our ability to export is highly dependent upon having an adequate transportation infrastructure. It is because of our production and marketing infrastructure efficiency that the United States is among the low-cost suppliers of agricultural products to world markets. Here in Illinois, in particular, we are highly dependent upon having an efficient inland waterways system and a competitive rail network. Right now, the inland waterways system is in a state of disrepair and obsolescence. We need to replace and increase the size of the locks on the Upper Mississippi and Illinois River Systems. Most of those locks were built from 1930 to 1963, and are only 600 feet long. That's half the length required to handle the modern 15-barge tows used to transport grain and other bulk products.
Inland waterway improvements are financed through a 50/50 cost-sharing arrangement between barge users (through a trust fund comprised of accumulated barge fuel tax payments) and the Federal Government. The problem is that Congress has not authorized appropriations in recent years to finance the 50 percent Federal Government share, which has brought these improvements to a standstill. We encourage you to weigh in with your colleagues on the House Transportation and Infrastructure Committee and House Appropriations Committee to secure both the authorizations and the appropriations needed to start these much-needed improvements. We also believe that 100 percent of the 24.3-cents-per-gallon barge fuel tax should go toward inland waterway construction and renovation; currently 4.3-cents-per-gallon is diverted to general deficit reduction. Time is of the essence. We already know that Brazil, in particular, is planning major improvements to its inland waterways system to make it a more competitive exporter, which we believe is at least in part a response to our Government's failure to make needed investments in our own inland waterways system.
Third, we believe Congress can provide much-needed assistance to our farmer-customers by enhancing self-help risk-management that would complement Federal crop insurance. As a producer, I believe better use could be made of available Federal dollars to improve farmers' understanding and use of risk-management tools. In this regard, I'm concerned that the heavy spending Congress is authorizing for crop insurance subsidies will encourage plantings of commodities that already are in surplus, just to capture disaster payments. It also may have the unintended—and unwelcome—side effect of enticing producers to look solely to crop insurance to manage marketplace risk, rather than as one of a basket of risk-management tools that should be considered.
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I'm also concerned about USDA's announcement this week that it plans to spend $350 million this fiscal year—and an additional $150 million next year—on the old farm storage facility loan program. In reality, experience has shown that building of farm bins under this program in the past provided a Government-induced economic incentive to encourage producers to hold larger quantities of stocks in storage from one year to the next, which only increases carry-over stocks and prolongs the pain of low prices. In effect, farmers view this as a stocks-holding program, not a marketing program. It also in the past has encouraged construction of out-of-position storage that made little economic sense.
Mr. Chairman, again I extend my thanks for the opportunity to express these views. I'd be pleased to respond to any questions you or other members of the committee may have.
Statement of Leon Corzine
Mr. Chairman, members of the committee, my name is Leon Corzine. My wife, my son and I grow corn, soybeans, and a few cows on our family farm at Assumption, IL. My son, Craig, is the fifth generation on our farm. I am currently president of the Illinois Corn Growers Association. Thank you for the opportunity to testify before the committee. I appreciate this chance to have input into the next farm bill early in the developmental process.
There is no doubt the agricultural economy has not participated in the economic growth and prosperity the rest of the United States has enjoyed. We provide the safest, most economic food supply the world has ever seen and yet those of us actually responsible for the foundation of our existence, food to eat, are far removed from this economic prosperity.
Despite these trying times, ICGA remains committed to designing and implementing a market oriented farm bill that is simple, flexible, income-based and responds to farmers and society's needs long term. We made some positive changes in farm policy under Freedom to Farm,
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however, there are several commitments that remain unfulfilled by Congress and the administration. We must address these issues if we are to continue this direction in farm policy.
I support Freedom to Farm, but with the understanding we will use all available tools to assist farmers in making the transition to a more market oriented approach. By this I mean aggressive support of market expansion programs like the Market Access Program and the Foreign Market Development program. I mean forging a national energy policy that is pro-ethanol. I am talking about committing ourselves to maintaining a viable river transportation system, removing trades barriers and providing realistic risk management tools.
As I sit here today we continue to debate the fate of ethanol. The vote on Permanent Normal Trade Relations with China is to close to call and we refuse to do business with Cuba, a potential customer that is only 90 miles from the U.S. If you are looking for an agenda for Congress, this encompasses my priority list. Let's remove these roadblocks, trade in our band aid approach to low farm prices and develop a long term game plan that will save farmers and save tax payer's money.
ETHANOL
We face a watershed moment for ethanol. We could easily double the current ethanol market of more than 600 million bushels of corn if we make some key decisions that signal a national commitment to this domestic fuel source. Let's retain the oxygen requirement in the RFG
program because it works. Peoria sits in the heart of ethanol country. There are three major ethanol plants within 10 miles of downtown Peoria. Williams Bio-Energy, Midwest Grain Products, and Archer Daniels Midland create an enormous demand for corn, using more than 427,000 bushels of corn each day. This is reliable and growing demand that is unaffected by the whims of world markets.
TRADE
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As we enter a new century the need for open and fair trade has never been greater. If our economy is to remain strong we must compete in the global economy and we can not let our trade partners set the agenda. The same holds true for vocal minorities that want to use tradeas a vehicle to reach personal, financial or ideological goals that have nothing to do with trade or the best interests of the entire country.
The approval by the Congress of the North American Free Trade Agreement (NAFTA) is a victory of engagement and competition over withdrawal and complacency. The trade pact, which will eliminate tariffs on goods and services between the United States, Canada, and Mexico over a 15-year time span, is creating the world's largest market: some 360 million people, with an economic output of more than $6 trillion a year.
The evidence of success is undeniable. Prior to NAFTA Mexico ranked as our ninth largest corn customer. They are our third largest customer today and gaining ground rapidly.
Similar opportunities abound, if we do the right thing A House panel voted recently to lift sanctions on sales of food and medicine to Cuba. The measure also would prohibit the president from including food and medicine in future embargoes of other countries without congressional approval. This is a positive step. Let's build on this.
We have an opportunity to begin unprecedented trade with China. Are there things about China's policies and actions we don't like, such as poor treatment of minorities and religions? Of course! The question is...What is the best way to spur positive change?
We also missed a great opportunity to pass Fast Track trade negotiating authority and send a clear signal to the world that we are serious about trade. We are losing millions of bushels in corn sales to South American countries because they are dealing with each other through MERCOSUR. They lack confidence in us because of our inability to empower our trade negotiators. It is not too late. We can and should pass Fast Track immediately..
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TRANSPORTATION
As new markets are established we must get products to market in competitive fashion. That's why ICGA supports authorization and funding for needed improvements to the aging lock and dam system on the Illinois and Upper Mississippi River. This system supports more than 400,000 jobs and is the avenue for 300 million tons of cargo.
Much of this is Illinois corn and soybeans since we export 43 percent of our corn and more than 50 percent of our beans. I hope while you are in Peoria you take note of the barge traffic on the Illinois River. The Peoria lock, about 2 miles south of where we sit today, is one of the structures which would be upgraded under the proposed plan. The lock was completed in 1938 and was designed to last 50 years. So it is 12 years beyond its planned life span. We are moving 36 barge loads or two million bushels of corn and beans every day through locks that are on borrowed time.
Upgrading the system will result in a stronger regional economy, a good return on tax investment, less environmental impact, safer highways and continued competitiveness of U.S. agriculture in world markets.
RISK MANAGEMENT
However, an aggressive approach to marketing and trade does not preclude the need for some kind of a safety net. Since we in production agriculture must work with something none of us can control, the weather, as well as markets, we do need help with risk management. With a viable, affordable risk management program we can protect ourselves and our investment without relying solely on disaster relief packages. Premium scales should be structured to encourage participation at higher levels to give meaningful protection. Innovative programs such as using puts and calls on the Chicago Board of Trade should continue to be examined.
And we need to give the concept of Farm and Ranch Risk Management Accounts (FARRM) thorough consideration. One year our income may be up, the next year it may be down, depending on the markets and Mother Nature's cooperation. These savings accounts would allow farmers deposit a portion of their yearly income into special savings accounts, with the funds reserved for use in times of decreased farm income. In essence it provides a kind of self insurance, where all the benefits go to the producer rather than accruing to an insurance company. Farming and ranching is a cyclical business.
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The House Agriculture Committee can and should take the lead in moving foreword with this agenda to fulfill the Federal Government's part in Freedom to Farm. This will not only bolster the agriculture economy in the short term but will also allow us to build for our future. Let's work toward an environment which allows farmers to make a profit; and tell the world U.S. agriculture is serious about being the supplier of the safest and highest quality food supply anywhere.
Testimony of Joe Heinrich
Good morning. My name is Joe Heinrich and I am a farmer from Maquoketa, Iowa. My wife Shelley and I, along with our two daughters, Amber, age 10, and Jill, age 8, raise corn, soybeans, livestock and alfalfa on an 850-acre farm. I have been farming for nearly 20 years. I appreciate the opportunity to present my thoughts to the committee on the future of farm programs.
One day last summer my 10-year old daughter, Amber, wanted to help me for the afternoon. We had several projects to do including treating a few sick calves, fixing some fence, working on a tractor, and of course, milking the cows. When we got home, Amber had a smile on her face. She said, ''Dad, we sure got a lot done today, didn't we?'' ''We sure did!'' I commented, ''And isn't that a great feeling!?'' ''It really is Dad!'' she replied. She then asked, ''Dad'' with a question in her voice. ''Do I get paid for this?!''
Farmers are now facing their third year of low prices for nearly every commodity. Barring a major disaster such as the drought that is possible in the upper Midwest, projections are for prices to continue at all-time lows. What we in agriculture want is the opportunity to be profitable.
The question is what type of program is needed to help farmers weather the down years while giving them opportunity in the up years. I believe Congress made the right decision to eliminate the old supply management programs and replace it with Freedom to Farm. At that time, the Federal budget was a political issue and many in agriculture didn't want the same program with additional cost savings like payments on fewer acres. We wanted flexibility. We wanted the freedom to make our own decisions.
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I believe the current criticisms of Freedom to Farm are unwarranted. Under Freedom to Farm, the safety net provides a projected $16.6 billion in money to farmers through the transition payments and the loan deficiency payment program. Many other factors have impacted the agricultural economy, none of which are directly related to Freedom to Farm. We have had bumper crops around the world, a strong U.S. dollar hurts our ag exports, and problems in the worldwide economy and a lackluster trade policy have caused exports to decline. There have been few large-scale disasters and most farmers have profited from good weather and prices. We cannot control this and must instead search for a way to help farmers deal with the global realities of agriculture.
The Iowa Farm Bureau gathered input from over 200 farmers across the State during the month of February. We conducted 20 regional farm bill study team meetings where participants were asked to answer two basic questions: what should the goal of the Federal farm program be and what mechanisms should we use to accomplish those goals. These farmers, myself included, spent about three hours brainstorming ideas to include in Farm Bureau's policy development process for the next farm bill. I have included these thoughts in my written statement for the record.
The next step in the process was to elect two representatives from each of these meetings to participate in a State-wide meeting in Des Moines. At that meeting, the 40 individuals attempted to reach consensus on the issues that should be debated in the next farm bill. From this information, the Iowa Farm Bureau will ask questions of all its members this summer to determine what policy direction the organization will take. Having participated in the regional meeting in my area, I can honestly say that the discussion was open and honest and the policy options suggested by the participants ranged from supply management to no program at all.
Consensus will not be easy to reach on the next farm program. That was very clear at our regional meetings. Depending on your individual situation, you have different needs and thoughts about what will help make you profitable. Depending on what you produce, you have different goals for a farm program. However, some consensus did emerge across the State.
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I offer these thoughts to help in the development of new farm policy:
Honor the promises of the 1996 farm bill. Congress and the administration promised regulatory relief, tax relief and expanded markets when it passed the Freedom to Farm legislation. The failure to provide these has accentuated and in some cases, contributed to the economic problems facing farmers today. Trade with Asia has declined 17 percent in 1998 and an estimated 23 percent in 1999. With 42 percent of our ag exports going to that region, it's no wonder that our ag economy is in trouble. The 200 plus participants at the regional meetings were nearly unanimous in their belief that Government—both the administration and Congress—have not held up their end of the bargain.
Congress has an opportunity this year to honor the promise of increased exports in the next couple of weeks when it votes on permanent normal trade relations with China. This is one of the most important votes for agriculture this year. Failure to pass unilateral NTR amounts to a defacto trade sanction on our farmers. We all agree that unilateral trade sanctions do not work and serve only to economically hinder our producers. Yet, the debate on approving permanent NTR ignores this. If Congress does not approve permanent NTR and implement the market access agreement, farmers like me will lose a valuable market opportunity for years to come. Make no mistake about it, someone will trade with the Chinese; it just won't be American farmers.
Don't return to the past. The last 20 years offer us a valuable lesson in the impact of different supply management programs on the ag economy. Set asides, grain reserves and higher loan rates are not the answer. Set asides may have provided temporary price boosts but we are in a worldwide market. Other countries, particularly those in South America, simply filled the void. We lost market share, didn't get the long-term price response we wanted and had to spread our fixed costs over fewer production acres. Whether we like it or not, we operate in a global economy and we cannot take unilateral actions to control production. I hear a common theme among farmers that we shouldn't return to the failed policies of the past but look forward toward a market-oriented farm program. We want to keep the flexibility in the current program to plant for the market, not a Government payment. I also believe we should expand the program to include total crop acres, not just the traditional program crops. The focus on program crops is stifling diversity in production and penalizes producers who have ventured beyond the traditional row crops to improve their profitability.
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Don't eliminate all risk and guarantee a profit. Our goal should be to manage risk and create profitable opportunities for farmers. Farming is a risky business but the appropriate role of Government is to help develop the tools that we can use to deal with price and weather risks. Crop insurance has come a long way but more work should be done to make policies more flexible and to improve farmers' choices on types of insurance coverage. The crop insurance reform package that is currently in conference will help. Reducing the cost of purchasing buy-up coverage is a wise use of Federal funds. We must expand crop insurance to include more crops and livestock.
And, the program can be improved by allowing the actual production history to stay with the land. Under the current system, the APH is not attached to the land. As land changes hands and farmers are encouraged to diversify under the 1996 FAIR Act, they also incur greater risk because the land does not have an APH. This requires the producer to purchase a meaningless crop insurance policy based on the county average yield until he or she can prove up his actual yield. Many producers would rather self-insure then endure the cost of buying an insurance policy that provides minimal, if any, protection. The more farmers that have adequate crop insurance coverage, the less pressure there will be on Congress to provide disaster assistance.
We urge Congress to quickly complete its task in reforming the crop insurance system and utilizing the $6 billion allocated in last year's budget resolution.
Develop a farm policy that recognizes the impact of other government polices on agriculture's profitability. As farmers across Iowa brainstormed ideas to improve profitability, it became clear that many of the ideas were outside the scope of a farm program. For instance, concentration and consolidation in the agribusiness sector is a major issue in Iowa. Our members have consistently raised concerns about the negative impact agribusiness mergers have on their profitability. It is clear that Congress must take action to address these concerns.
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We believe that additional protections are needed for family farmers and independent producers as the agribusiness industry continues to consolidate. It is imperative that Congress take action as soon as possible to expand the role of USDA and strengthen the ability of the Justice Department and USDA to enforce anti-trust statutes.
Infrastructure development such as expansion of the Mississippi locks and dam system is essential to keep us competitive in the world market.
Expansion of world markets and enforcement of existing trade agreements is also critical. Not only must we embrace China into the WTO but we must continue to reform the process by which the WTO operates. We cannot wait 12 years to resolve a trade dispute, as we have in the European Union hormone case. We must continue to push for full elimination of trade-distorting policies such as export subsidies, state trading enterprises and other domestic policy actions that affect production.
Federal monetary policy also drives agriculture's profitability. A strong U.S. dollar has hurt U.S. agricultural exports. Rising interest rates will increase my cost of production. Agriculture is a capital-intensive industry. We must have access to capital to finance our operational costs each year.
If we develop a new farm program in a vacuum, without consideration for the impact of these and many other governmental policies, I believe we will not solve the issue of profitability and only put continued pressure on Congress to provide economic bail-outs.
Encourage and reward conservation practices. The previous farm programs have established programs to improve stewardship of our natural resources. We need to strengthen these programs by rewarding good practices. Payments should be made available to all producers for existing conservation practices. Today, the program is structured in such a way that farmers plow up land that is in waterways or buffer strips in order to enroll it in the Conservation Reserve Program (CRP). This is ridiculous and undoes much of the positive gains we have made in preserving our natural resources.
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Additional financial resources are also critical. Congress has been quick to adopt new voluntary programs to improve conservation but equally as quick to reduce Federal funding for the Natural Resources Conservation Service (NRCS) and the Environmental Quality Incentive Program (EQIP). Voluntary, incentive-based programs cover millions of acres of farmland across this country and are producing results. The Iowa model for addressing environmental issues, voluntary education and demonstration, has proven to be successful. The Natural Resources Conservation Service (NRCS), the Iowa Department of Natural Resources, ISU Extension and commodity, farm and agribusiness groups are committed to the Iowa model but additional funding is needed to ensure its success.
In addition, we cannot take an isolated look at Federal farm programs. Our success, or failure, on the farm is dependent on many factors including the export market, Federal monetary policy, corporate mergers and acquisitions, tax and regulatory policy, transportation to name a few. I urge you to look at the broad spectrum of policy issues that impact agriculture as you design a recommendation for the next farm program.
In conclusion, farmers look forward to working with you as we develop a new Federal farm program. I urge you to look to the future and not the past. Supply management is not the answer. Neither is a completely decoupled program like Freedom to Farm. Somewhere in between is a program that provides the necessary risk management tools to help farmers manage a combination of price and production risks and ensure their economic prosperity.
I hope that 10 to 15 years form now if one of my daughters wants to get into this rewarding business, I can tell them that the opportunity is there and they do ''Get paid for it''
Thank you.
Suggestions for Farm Bill Policy Development
WHAT SHOULD THE GOAL(S) OF FEDERAL FARM PROGRAMS BE?
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Based on per acre, corn suitability rating, and whole base farm program:
Government helps promote not restrict trade
a. Expand domestic and international use
Broad based revenue coverage (insurance)
Preserve rural life—multifunctionality—keep individuals in farming
Get Government completely out—no more payments
Establish minimum prices
Safety net
Counter cyclical
Reward farmers for doing a good job protecting the environment
Allow opportunity for profitability
Create infrastructure to foster development by farmers of value-added ventures and new markets
Includes value-added
Planting flexibility
WHAT MECHANISMS SHOULD BE USED TO ACHIEVE THESE GOALS?
Remove food from unilateral trade sanctions
a. Better job at trade negotiations
Revenue coverage insurance (all commodities)
Payment limitation to cost of living
Continue F to F for 2 more years, then no Government payments
Value-added enterprises—farmer-owned coops
a. Economic development programs for rural—grants, tax incentives, buy-down, guaranteed loans
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Establish grain reserve
Payments for existing conservation practices
Tie payments to farms not yields
Payments based on productivity
Equalize and/or raise loan rates . . . \for all products