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REVIEW OF FEDERAL FARM POLICY

MONDAY, MARCH 27, 2000
House of Representatives,
Committee on Agriculture,
Raleigh, NC

    The committee met, pursuant to call, at 10:05 a.m., in the McKimmon Center Area 1, North Carolina State University, Raleigh, NC, Hon. Larry Combest (chairman of the committee) presiding.
    Present: Representatives Combest, Boehner, LaHood, Jenkins, Hayes, Stenholm, Clayton, McIntyre and Etheridge.
    Also present: Representative Price.
    Staff present: William E. O'Conner, Jr., staff director; Christopher D'Arcy, staff director, Subcommittee on Livestock and Horticulture; Christopher Matthews, press secretary; Hunter Moorhead, legislative assistant; Christy Cromley, legislative assistant; and Howard Conley, minority economist.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

    The CHAIRMAN. Good morning and welcome to this, the fourth of 10 field hearings that the House Committee on Agriculture is holding in different regions of the country. I want to thank everyone here for coming to this important event.
    As you may know, we started this series of hearings in Lubbock, TX on March 7, continued to Memphis, TN and Auburn, AL last week. At those three hearings, 56 witnesses presented testimony and well over 1,000 people have listened in, both in the audience and through the internet. I think the time that we have spent on this endeavor has been very profitable for the members of the committee and for those in the audience, and we are pleased to be here in Raleigh today.
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    I would mention to you that this hearing, as others have and as the hearings in the Committee on Agriculture, are being carried live over our internet site and this hearing will be as well.
    I have the pleasure this morning of introducing the Members who are with us. I am Larry Combest, I represent the High Plains of Texas. On my right is my good friend and neighbor, Charlie Stenholm, who is also from west Texas. Congressman John Boehner represents western Ohio; Eva Clayton is from eastern North Carolina; Ray LaHood is from central Illinois; Mike McIntyre is from southeast North Carolina; Bill Jenkins is from the mountains of east Tennessee; Bob Etheridge represents an area around Raleigh; Robin Hayes represents south central North Carolina; and joining us, we are very proud to have a non-member of our committee, but one that we are encouraging all Members in the region to attend—David Price, who also represents Raleigh.
    Today, we will hear from 16 people who have built their lives and careers around agriculture. In selecting this panel of witnesses, we sought to bring folks together here in Raleigh that represent the different types of agriculture found in this region, who could bring a variety of thought on the issues facing our industry. It is my hope that everyone in this room can identify with at least one of these witnesses today, and I would encourage anyone who would wish to make submitted additional testimony, to do so and it will be made an official part of the record of this hearing.
    I do not want to speak long because I want to emphasize that this hearing is for us to listen. I do want to say that I think all of the Members at this table know we have a problem and we are fundamentally believing that it is in the best interest of this Nation to maintain and foster a diverse and strong agricultural sector. So the question we want answered today is how do we best accomplish that goal. We want to find out what real producers think is working and not working in our Federal farm policy.
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    We will be going to all regions of the country asking the same questions with the hope that we can find consensus among producers for farm policy changes that are needed.
    Again, I would like to thank everyone who has taken their time to be here today and I would like to recognize Mr. Stenholm for any comments that he might like to make.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

    Mr. STENHOLM. Thank you, Mr. Chairman. I am delighted to be here with my colleagues today for purposes of listening. And I would encourage all of our witnesses, since 5 minutes is not a long time, to concentrate on those suggestions for solutions. As the chairman has said, we understand how bad it is, we have our problems in production agriculture. What we are looking for are solutions, both short-term and long-term and having read some of your testimony already, I know we are going to have some of those today, and we appreciate that very much.
    It is always good for me to be in the home State of the big Jim Graham. Thank you.
    The CHAIRMAN. Mr. Boehner.
    Mr. BOEHNER. I have nothing, Mr. Chairman.
    The CHAIRMAN. Mrs. Clayton.
OPENING STATEMENT OF HON. EVA M. CLAYTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mrs. CLAYTON. Mr. Chairman, I want to thank you and the Ranking Member Stenholm for agreeing to hold these series of hearings throughout the country. I think you have committed to 10, and I am very pleased that we have come to North Carolina. I want to welcome all of the Members who have come, and I too look forward to listening to the members from the agriculture community who have come to share not only their pain but also some resolutions and how we can resolve it.
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    Thank you.
    [The prepared statement of Mrs. Clayton follows:]
PREPARED STATEMENT OF HON. EVA M. CLAYTON
    Mr. Chairman, I commend you and Ranking Member Charlie Stenholm for your commitment to hold a series of 10 comprehensive field hearings to review Federal farm policy. I am delighted that you chose to come to North Carolina for one of these hearings and I want to extend a warm welcome to you and all of the committee members present.
    For some Americans these are the best of times. The United States is now enjoying the longest sustained period of economic growth in the history of our Nation. For 7 years, we have seen more people enter the workforce, higher wages, and lower unemployment. Many people have prospered in this unprecedented, affluent, expanding economy.
However, for too many of our farmers, ranchers and rural communities, due to no fault of their own, these times have not been very special.
    Indeed, given the volatile nature of the agricultural economy and the crisis facing farmers, ranchers and rural communities, for too many these are the worst of times. The current farm recession, now in its third straight year, is equal to the Great Depression as one of the five worst since 1915.
    It is most appropriate that we hear directly from our Nation's farmers and ranchers about the Federal farm policy, what works and what does not work, what we should adjust, what we should change.
    Like farmers, ranchers and producers, throughout the country, North Carolina farmers are struggling to survive because of depressed commodity prices, plummeting export markets, increased debt load, and increased operating expenses.
    Additionally, as you are aware, in the past year North Carolina's agricultural economy has been severely impacted by the effects of drought and historic levels of flooding. Flue-cured tobacco farmers have suffered three consecutive reductions in quota for a total loss of 49 percent of their quota.
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    Speaking from personal experience in North Carolina, we can tell you that a Federal farm policy that establishes a firm financial foundation for agriculture would drastically reduced the need for emergency assistance. We can vouch for the need to enact legislation to create a USDA Natural Disaster Program, that is in place and ready to respond when Mother Nature wrecks havoc on a community, county, State, or region of the country. Such a program would eliminate the need for Congress to cobble together emergency legislation to respond to the agricultural needs inflicted by each natural disaster.
    Current disaster programs are inadequate and disaster loan programs are ineffective. Small and medium farmers are going out of business at a rapid rate. North Carolina is made up of small family centered farms. Agriculture remains North Carolina's top industry, contributing more than $46 billion annually to the State's thriving economy and employing 22 percent of the workforce. Statistics show that the farm dollar turns over an average of at least ten times before it leaves the local community. This trickle down effect, coupled with the uncertainty of the current agricultural economy, has a devastating impact on agribusinesses and other sectors of the local economy, particularly in rural communities, throughout North Carolina and the Nation.
    I regret to say many Americans do not recognize how important rural communities and agriculture are to life itself or that farmers produce all the food they buy at the grocery store.
    Mr. Chairman, again, I commend you for holding these hearings. I look forward to the testimony of each of our witnesses and to working with you and other members of the committee to craft a better Federal farm policy which provides the permanent safety net that our farmers need to successfully compete in a global market.

    The CHAIRMAN. I might mention that with the exception of California, there are more North Carolinians on the House Agriculture Committee than any other State. Charlie, I do not know how we let that happen, but we need to rethink that.
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    Mrs. CLAYTON. We note the Chair and the Vice Chair happen to be from Texas. [Laughter.]
    The CHAIRMAN. Mr. LaHood.
    Mr. LAHOOD. I pass.
    The CHAIRMAN. Mr. McIntyre.
OPENING STATEMENT OF HON. MIKE MCINTYRE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. MCINTYRE. Thank you very much, Mr. Chairman. Just briefly let me say welcome and we are so happy that this did work out for the House Agriculture Committee to come to our home State. And we are especially eager to hear from the farmers today and your suggestions, so that what we are doing will make a real difference in your lives.
    As I said earlier this morning to some other farmers, this has been anything but free trade and Freedom to Farm has been anything but free, it has been very costly unfortunately to many farmers and producers. So we want to go back with solutions that will make a difference and we welcome your input today.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Jenkins.
OPENING STATEMENT OF HON. WILLIAM L. JENKINS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE

    Mr. JENKINS. Well, thank you, Mr. Chairman. Let me again thank you for holding these hearings and for coming. Although we are not in east Tennessee, we are very close and this is the first hearing we have had where we are going to be hearing from tobacco producers. I suspect the Carolina producers are probably going to be Flue-cured, but we have three witnesses here from east Tennessee who are Burley tobacco producers and also beef cattle producers. And I look forward to hearing from them, and I appreciate very much their willingness to come over here and testify. I hope by the end of the day that we can gather some information that we can take back that will demonstrate just how deep the plight of the Burley tobacco farmer is with the cuts of last year and the cuts of this year, and all the difficulties that we face in that particular realm of agriculture.
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    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Etheridge.
OPENING STATEMENT OF HON. BOB ETHERIDGE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. ETHERIDGE. Thank you, Mr. Chairman. And let me also thank the Ranking Member and my other distinguished colleagues for being here for this hearing. I think it is so important.
    But as important as it is today on agriculture, I would be remiss in not recognizing that basketball is the fever right now in this country and you are on the campus of the next NIT champion and I will let Congressman Price—I will yield to him in a minute to talk about the next NCAA champion.
    But we are glad to have you here and I want to thank you, Mr. Chairman, for coming to hear about the state of agriculture—and you know what it is. Mr. Chairman, I think this is the right way to begin writing a farm bill. It is the right time to begin fixing it, because we do have problems in America, as you know. I grew up on a tobacco farm about 20 miles east of here. It has changed a great deal since I was a youngster, but I have been involved in one way or another in agriculture all my life. It is just plain tough being a farmer right now.
    Over the past 5 years in North Carolina, it has gone from—our gross product in this State has gone from representing 25 percent of our gross State product to 20 percent. Now that is a substantial drop in just 5 years. In the past decade, more than half of our dairy farmers have gone out of business. We are producing only half the tobacco that was being grown here just 3 years ago. Pork, small grains, corn, soybean farmers, all of them are facing all across the country, it is a crisis in America. Almost every major recession we have had in America was preceded by a crisis in the farm economy. We now have an opportunity to correct that before the crisis gets worse.
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    So it is so important to our farmers, and again, Mr. Chairman, I thank you for holding this hearing here in North Carolina today and specifically on the campus of N.C. State University.
    I would be remiss if I did not say as I close, a few months ago, the people of this State were quite upset because we had a fellow announce his retirement who had been commissioner of agriculture for over 30 years, the dean of agriculture commissioners in this country. He is affectionately known in North Carolina as the Sod Father, Commissioner Jim Graham. I think he is here if he has not already left.
    The CHAIRMAN. The commissioner is here, we saw him earlier.
    Mr. ETHERIDGE. Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you, Mr. Etheridge. I am sorry that you brought this up, but I would be remiss if I did not say that in Texas we play basketball too, there is a university down in Lubbock that I represent, Mr. Stenholm is a graduate of, that women are playing tonight against Tennessee. So you are the one that brought it up.
    Mr. ETHERIDGE. We wish you luck Mr. Chairman, since we are out. [Laughter.]
    The CHAIRMAN. We will go to Mr Price and let him go ahead and get in his jabs now. Thank you for joining us, David.
OPENING STATEMENT OF HON. DAVID E. PRICE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. PRICE. Thank you, Mr. Chairman. We really do appreciate your being here, you and Mr. Stenholm and this fine group of Members. This is unusual to have this many Members come out for a field hearing—maybe not for this committee, but I think for most committees. We are honored that you are all here and we look forward to a good discussion today about our situation in agriculture in the southeastern part of our country.
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    North Carolina is fortunate to have four Representatives on this Agriculture Committee—Mr. Hayes, Mrs. Clayton, Mr. McIntyre, Mr. Etheridge. And they daily bring the needs and experiences of North Carolina farmers to the table. And it is to this committee's great credit that it is here today to personally listen to the testimony of our growers from North Carolina.
    I appreciate the generous invitation to let me sit in as a representative of a neighboring district, and I pledge to work with you, Mr. Chairman and others on this committee, from the Appropriations Committee, as we address the challenges you are going to hear about today.
    We have an ongoing challenge of disaster relief in North Carolina. There are major agricultural pieces in that, assistance to the marketing cooperatives dealing with the damaged crops, direct assistance for equipment and structural losses in agriculture, some rural housing assistance. This is in the current supplemental appropriations bill before the Congress as we speak. Then in the regular appropriations cycle, of course, we will have agricultural research and many other challenges and the need for a new basic farm bill will be discussed here today. And that, of course, has serious financial implications as well.
    So I appreciate the chance to sit in and to learn from these hearings. We are grateful for you being here and we know that this day will be a good one contributing to the national deliberations on agriculture policy.
    The CHAIRMAN. And Mr. Hayes, who will end up chairing this before the day is over, as some of us have to catch planes. Mr. Hayes, I recognize you at this time.
OPENING STATEMENT OF HON. ROBIN HAYES, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA
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    Mr. HAYES. Thank you, Mr. Chairman. Just a few brief comments. First, those of you who are not fellow North Carolinians, welcome to North Carolina, we are really glad to have you here.
    Folks, I want to take you back for just a little bit. Many of you suffered through a tremendous amount of snow in North Carolina and interestingly we had our agriculture retreat over in Wye, MD and we had one of the most interesting bus rides I have ever seen as we went to that hearing. It was very, very helpful as we try and meet the needs of farmers across this country.
    We owe a special debt of gratitude to Chairman Combest and Ranking Member Stenholm because, as they pointed out during that get-together, we have got a wonderful country, but it is a huge country and there are many agricultural interests from east to west coast and north to south. And I also remember their willingness to take their time—it is a great sacrifice from their families to travel all over the country to do what they do and to do what our committee does, and we thank you.
    But I also want to thank Ray LaHood, who was sitting on one side of the room as the discussion about where we were going to go, said the Southeast is so important to agriculture in this country, why do we not think about North Carolina as well as we looked at some other things. So Ray, especially thank you for your help in getting this hearing here in Raleigh, NC.
    And thanks to our farmers. Ronnie, I have never seen you in a suit looking so good before, but you all got up early and I hope you have got somebody at home on a tractor as you are here testifying. You can turn on the television, the radio, pick up a newspaper and you can hear people in elected office talk any time. That is why we are here, to listen to you, that is the purpose of the hearing. And thank you, Mr. Chairman, but thanks more especially to those men and women in the audience who are willing to come and share their time. The problems, you have the solutions, so your participation is much appreciated and greatly needed as we go about our tasks.
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    Thank you again, Mr. Chairman.
    The CHAIRMAN. Thank you, Mr. Hayes.
    I will call our first panel. We will do this in the order—well we can just do it the way you are sitting down there, but the first panel is Mr. Roy Baxley, a cotton producer from Dillon, SC; Mr. Elton Braswell is a corn, soybean, wheat producer from Monroe, NC; Mr. Ronnie Burleson, who is a cotton producer from Richfield, NC; Mr. Earl Hendrix, who is a soybean, cotton, corn producer from Raeford, NC; Mr. William Johnston, a soybean and cotton producer from Jackson, NC and Mr. Zeno Ratcliff, III, who is a corn and wheat producer from Pantego, NC.
    Let me see, we will just start with Mr. Baxley down here with you and move down the table in that fashion. So please proceed at your discretion.
STATEMENT OF ROY BAXLEY, COTTON PRODUCER, DILLON, SC

    Mr. BAXLEY. Good morning. My name is Roy Baxley, I am a cotton, grain and soybean farmer from Dillon, SC. Thank you for the opportunity to share my views with the panel today.
    Let me begin by saying the unprecedented support provided by Congress over the past 2 years was desperately needed and greatly appreciated. In addition to the direct income support, the funding for cotton's Step 2 program was essential to help us export our crop and support our domestic consumption.
    It is regretful to report that once again this year, planting time prices for cotton and the other major row crops produced in my area are well below the cost of production. It appears we will again need some special assistance from the Federal Government to avoid catastrophic financial problems. I was pleased to learn that the current budget resolution proposed by the House of Representatives includes additional funding for direct income support. It is also encouraging that the administration has included additional funding in its budget proposal.
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    While all southeastern cotton producers appreciate the timeliness of the past supplemental income payments through the AMTA provisions, I must point out that the emergency package provided less help for the Southeast than for any other production region. Because of the disparity in the Southeast between cotton acreage and program acreage, program benefits are distributed unequally across the regions of the cotton belt. Also, because emergency relief benefits were distributed on the basis of PFC acreage and yields, we also got a smaller share of those benefits.
    In many areas of the Southeast, cotton production exceeds program payment pounds by as much as 40 percent. Our producers would benefit more if the assistance were somehow tied to actual production. We know this is a difficult issue to resolve and we hope to be able to bring you a consensus recommendation for adjustments that will remove the inequities without imposing penalties on other production regions.
    Regarding future farm policy, the overriding decision that first must be made by Congress is whether it will provide adequate budget authority to develop any farm policy. Without a substantial increase in baseline spending authority, any policy developments are in vain.
    Generally speaking cotton farmers in the Southeast like many of the policy principles contained in the FAIR Act, including planting flexibility as well as the marketing loan provisions keyed to the world price for cotton. Cotton producers do support the lifting of the cap on loan rates. We also like the three-step competitiveness program that has helped to keep U.S. cotton price-competitive to our customers while underpinning the price received by growers.
    The most glaring weakness for the FAIR Act is its inability to provide adequate income protection when prices are very low. We knew when the act was passed that the safety net was inadequate, but Congress was driven by budget pressures and farmers simply hoped that when low prices developed Congress would be forthcoming with some kind of help, and that, of course, is what has happened.
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    As we begin the process of developing new farm policy, it is essential that this flaw be corrected. Producers and their bankers cannot afford to count on emergency assistance every year in which we experience low prices. Some type of counter-cyclical payment tied to production is needed to add stability to our farm policy.
    Cotton farmers, along with many others, are greatly concerned about the recent trend toward targeting of benefits. This is surely one of the most ill-conceived provisions of U.S. farm policy. Payment limitations are counter-productive for American agriculture and for every American citizen. The concept that a family farm is a small operation is a myth. Most of the commercially viable farming operations I know are family-based. Unless the United States is willing to sacrifice its agricultural production base to foreign subsidies, we must have farm programs that enable commercial-sized farming operations to enjoy a reasonable partnership with our government.
    My fellow producers were heartened to see some progress in this area by Congress, as you doubled the marketing loan game and LDP limits for 1999 and authorized the use of certificates for loan redemption. Certificate loan redemption prevented the forfeiture of about a million bales of cotton to the CCC. At the same time, Congress appears to have a better appreciation on non-competitive aspects of payment limits. We were discouraged to learn of the severe targeting of benefits in the administration's recent proposal.
    While our industry is still developing our recommendations on future farm policy, it is our early consensus that we do not support a return to mandatory supply management provisions.
    Our industry does generally favor reasonable conservation and wetlands reserve programs that help to generate optimum results from marginal lands while providing significant environmental benefits.
    As our industry continues its discussions, we have several important issues to resolve. We will continue to discuss coupled versus decoupled payments. We have preliminarily discussed an approach that would continue the decoupled AMTA payment concept with the addition of a coupled counter-cyclical payment in times of low prices. We will also continue to evaluate the updating of bases and yields for cotton producers.
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    Mr. Chairman, cotton producers appreciate your leadership in developing and passing through the House a very meaningful crop insurance reform bill which has our full support. We are also pleased to see movement in the Senate and are hopeful that an expedited conference can quickly resolve differences and result in quick implementation. We will continue to work with FCIC on rating reform, an area we have already enjoyed some success in the cotton belt.
    Mr. Chairman, as critical as we see the need for a viable crop insurance program, we do not support crop insurance as a delivery mechanism for farm program benefits. Our industry maintains that a good insurance program is needed to address production losses.
    In summary, Mr. Chairman, as we continue to develop our overall farm policy, there are several adjustments we agree need to be addressed: We need a better safety net to protect farm income when prices are low; we need to de-emphasize benefit targeting and we would like to see some changes in the delivery system for both emergency and economic assistance and regular farm program benefits in order to get the Southeast on an even footing with other regions.
    Again, thank you for this opportunity to share these views with you today.
    [The prepared statement of Mr. Baxley appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you. Mr. Braswell.
STATEMENT OF ELTON BRASWELL, CORN, SOYBEAN, WHEAT PRODUCER, MONROE, NC

    Mr. BRASWELL. Mr. Chairman, members of the committee, I am Elton Braswell from Union County, southern Piedmont region of North Carolina. My brother and I operate a grain, corn, soybean, small grains and a 100-registered Guernsey herd. Thank you for coming to North Carolina to hear our input.
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    Certainly these are not the best times for agriculture. We in North Carolina are faced with not only low prices for most commodities, but also weather-related problems in several areas of the State. But the House Agriculture Committee has made significant short-term progress, challenges still remain regarding U.S. farm policy. The best economic projections for farm prices are grim creating greater potential for additional market loss assistance in crop year 2000.
    North Carolina farmers need a safety net as a supplement to the Agricultural Market Transition Act payments; so as to address sharp declines in prices without relying on large financial assistance packages from Congress.
    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. We are pleased with the flexibility to adjust crop acreage in response to both economic and agronomic factors. The market provides producers with pricing opportunities while AMTA payments and loan rates are providing a partial safety net. Congress must avoid abandoning the market-based policies of the FAIR Act, including increasing loan rates.
    I urge you to consider adopting a counter-cyclical payment measure as a supplement to the AMTA payments. Congress should avoid increasing marketing loan rate and stay the course on the marketing aspects of the FAIR Act.
    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.
    North Carolina cash receipts in 1999 have decreased substantially from recent years, and forecasts for 2000 do not look favorable. The 1996 congressional agenda is woefully incomplete, Congress must focus on the immediate remedies to redress producers. Given the magnitude of the agricultural economic problem, emergency supplemental funding at a level at least equal to last year's assistance package is necessary.
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    Increased agricultural exports is 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.
    As you consider your vote on a permanent normal trade relations to China, I ask that China would allow the importation of all agricultural commodities, including tobacco. Trade sanctions must be lifted. Sanctions do not work. They only hurt us as we surrender yet another market to competitors who are only too happy to sell in our absence. We cannot export our social reforms or impose labor or environmental standards.
    Food aid programs and concessional sales are an important tool. I support enhanced funding for the Public Law 480 program. Enormous opportunity exists for humanitarian and public relations benefits in addition to an opportunity to impact market prices. These markets must be supported as they are future long-term customers for U.S. products. 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 these funds.
    I strongly support extending the Dairy Price Support Program at the current level for 2 more years. This is the one area of Federal dairy policy that all regions of the country agree. Our dairy industry has operated in a relatively market-oriented environment with the Dairy Price Support Program providing a safety net at a price level that has not stimulated excess milk production. The price support program is one of the best tools available to U.S. dairy farmers to cope with cyclical changes in prices.
    The Northeast Dairy Compact has proven to be an effective tool for producers in that area of the country to gain more income from the market. It is estimated that the compact has returned over $40 million to producers from the market in that region. Twenty-five States have passed legislation authorizing regional compacts. I support legislation that would extend the current Northeast Dairy Compact to include Maryland, New Jersey, New York, Delaware and Pennsylvania. I support the authorization of a Southeast Dairy Compact. I encourage you to continue to allow producers and industry to work together through efforts such as the Northeast and Southeast Dairy Compacts to stabilize producer income.
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    Thank you for coming to North Carolina.
    [The prepared statement of Mr. Braswell appears at the conclusion of the hearing.]
    The CHAIRMAN. Mr. Burleson.
STATEMENT OF RONNIE BURLESON, COTTON, CORN AND SOYBEAN PRODUCER, RICHFIELD, NC

    Mr. BURLESON. Mr. Chairman, members of the committee, I am Ronnie Burleson, a cotton, corn and soybean farmer in partnership with my brother, and I hope to include my son in the future.
    Recent challenges to farmers, such as low prices and increased operating costs have already forced inefficient farmers from farming. I consider myself to be an efficient farmer, but I am also struggling with these low prices and environmental regulations that are destroying my profit potential in farming. I need an efficient farm program that will help me through these low prices and weather events. I am faced with a number of challenges and my survival depends on farm programs that provide long term, stable and sensible solutions that will allow me to continue farming and for my son to be able to farm in the future.
    The farm bill should include mechanisms that encourage and enable young farmers to get started in farming, in agriculture. For example, new enterprise development, elimination of the inheritance tax for farm transfer within a family, tax incentives, grants and low-interest loans; and the need to access Federal programs that are based on the reality of modern farming operations. For example, payment and income caps must be more realistic and the farm bill should use net income versus gross revenue.
    We need to recognize the value and the size of family farms, including cooperatives, in transitioning from small operations to larger farms. For example, they need to remain eligible for benefits of farm programs.
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    The regulatory cost of operating my farm is being absorbed by me entirely and I cannot pass those costs along. I have been told that regulatory cost to farmers was almost $22 billion in 1999. A new farm bill needs to provide some relief in the regulatory cost to me. I support a safe food policy and also a healthy farming environment. But I cannot continue to absorb all of these regulatory costs to my bottom line when they mutually benefit the entire public. We need to fund and encourage non-regulatory, incentive based, BMPs. For example, making available cost-share money to allow farmers to implement conservation programs.
    Any new farm bill needs to adequately fund research through land grant universities and to continue the technology development through public domain. A farm bill needs to address the issues concerning genetically enhanced products, such as to who owns those patents and associated technology, and ways for the farmer to capture the value-added costs associated with crops produced through biotechnology, allowing cooperatives to have access to those federally funded research and product patents.
    My final concern is that in trying to expand my operation and bring my son into farming, I try to acquire another farm and find that this farm has not been participating in the farm program and therefore is ineligible for current farm program benefits. Even if I combine it with my current farming operation, it remains ineligible for program benefits, other than planting it to a specific crop such as soybeans. All commodities grown or raised by a farmer, regardless of where they live in the United States, needs to be included in the next farm bill. I just want a farm bill that is comprehensive, that will provide a reasonable risk management program and a reasonable and adequate safety net to protect me from weather and other perils, that will allow me and my family to continue farming. Thank you.
    [The prepared statement of Mr. Burleson appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you Mr. Burleson. Mr. Hendrix.
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STATEMENT OF EARL HENDRIX, SOYBEAN, COTTON AND CORN PRODUCER, RAEFORD, NC

    Mr. HENDRIX. Mr. Chairman and members of the committee, I am Earl Hendrix, a multi-crop farmer in partnership with my son, from Hoke County in North Carolina's eighth district. Our farming enterprise consists of tobacco, cotton, corn, small grains, soybeans and a contract swine unit. In addition to my affiliation with other farm organizations and groups, I currently serve as one of two members from North Carolina on the United Soybean Board as a charter member. Hence, I am here today as a bona fide farmer, as well as a farm organization leader, in addressing what I perceive to be some of the problems and some possible opportunities for soybean farmers here and across our Nation, as you go about enacting constructive changes to the 1996 farm bill.
    I see agriculture's position in our national economy today somewhat like Charles Dickens described economic conditions in his mid–18th century novel, ''A Tale of Two Cities,'' which opened with the classical quotation, ''It was the best of times, it was the worst of times.'' As you know, he was comparing the economic conditions prevailing in London, England and Paris, France for that period. Today, as we speak, it is generally the best of times in the non-agricultural sector of our economy, but approaches the worst of times for farmers since the great depression of the early 1930's, especially here in the Southeast.
    So what can I say in 5 minutes that will add some light to your path in terms of a congressional fix for our many problems?
    First, you already know about the very low commodity prices that seem universal throughout most sectors of agriculture. Farmers need some type of an effective, workable program to help ensure stability through such price dips and severe weather-related production problems as we have experienced here in North Carolina over the past 4 years. Congress needs to provide a meaningful safety net less the freedom-to-farm philosophy destroys much of the asset value of our Nation's farm families. While I continue to support the general principles of the 1996 farm bill, Congress should complete its commitments under the act which included increased funding to expand agriculture export opportunities for our basic commodities and an effective safety net to give farmers economic stability during times of low prices, weather-related disasters, or a combination of both, as we have experienced here in the Southeast.
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    One thing farmers in this part of the Nation repeatedly focus upon is the relatively ineffective Federal Crop Insurance Program which, for all practical purposes, is nearly useless in this part of the country. A former OMB Director, Bert Lance of Georgia, also made an immortal statement—''If it ain't broke, don't fix it.'' I would submit, however, that our Crop Insurance Program as currently exists is broken and is in desperate need of fixing. Yes, there is room enough all around to point fingers about the insurance program, including fraudulent claims and administration which I am sure you have heard repeatedly. I am here to tell you that the current program is basically of little help to farmers in our area, and probably everywhere, and is a prime target for meaningful and affordable correction.
    As chairman of the United Soybean Board's Production Committee over the past 5 years, I would be remiss if I did not make a strong plea for increased Federal research funding for agricultural production and product development. Research has been key to the United States maintaining its lead position in world exports of agricultural food and fiber products. If we are to maintain this front-runner position, we must increase Federal funding for research efforts through USDA's basic Agricultural Research and Forestry Research Services programs and through competitive grant efforts. Failure to support world-class agricultural research will contribute to loss of markets and balance-of-trade benefits as we see our agricultural production opportunities shift to other countries.
    Finally, I would like to re-emphasize the need of enhancing export opportunities for U.S. agriculture through Federal policy. Congress and the administration should redouble efforts to open export market possibilities with such nations as China by expeditiously extending normalized trade status and allowing China to become a member of the World Trade Organization.
    Mr. Chairman, there are many other issues which could be discussed here today if time were available. I am sure you will get some wonderful ideas from other scheduled speakers. I thank you on behalf of all of our farmers, here and across the country, for holding these hearings to focus on a very important sector of our economy that is not sharing equitably in our Nation's prosperity. Thank you.
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    [The prepared statement of Mr. Hendrix appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you. Mr. Johnston.
STATEMENT OF WILLIAM R. JOHNSTON, SOYBEAN AND COTTON PRODUCER, JACKSON, NC

    Mr. JOHNSTON. I am Bill Johnston, a crop farmer from Northampton County in the First Congressional District of North Carolina that is represented by Congresswoman Eva Clayton. My farming enterprises consist of cotton, corn, small grains, peanuts, soybeans and cattle. I am currently vice-president and a member of the Board of Directors of the North Carolina Soybean Producers Association. I am going to be echoing, I feel, a lot of the things that have already been said here.
    Following are some of the many areas of concern from my neighbors and myself:
    We need a level playing field for U.S. farmers who are in world competition for export markets. Too often, our rules, regulations and constraints tie our hands and raise our cost of production relative to our world competition. The immediate crop season has a dismal outlook for us. We already face rising costs for fuel, labor and interest, while commodity prices are projected to be lower or at best flat. Congress needs to develop some type of safety net for us, especially here in the Southeast, if we are to remain in production and to bring new farmers into the area.
    Something needs to be done and done quickly to resolve the concerns of consumers around the world over the biotechnology issue. It is an insult that we, the U.S. growers, are paying high technology fees and patent royalties on seeds and products to multi-national companies in our country while those same organizations often allow their products to be used abroad at nearly no added cost. Our overseas competition's cost for such products is less than half of what we have to pay.
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    We are concerned about the rapid consolidation of agricultural companies. These consolidations are creating less competition for farm input needs and markets for our commodities; thus, putting greater economic pressures on farmers from all sides. Congress should enact legislation to ensure that farmers are not involuntarily put out of business from monopolistic practices.
    The so-called Freedom to Farm bill has turned into a nightmare for many of the Nation's farmers who have faced weather-related problems of unimaginable proportions, especially here in the Southeast where drought, multiple hurricanes have drastically reduced yields, all at a time of the lowest commodity prices we have seen in decades. The current commodity LDP program seems to us to be turned upside down by heaping extra rewards on farmers who have good yields while denying any significant benefits to those of us who are highly impacted by the adverse weather conditions. However, I must thank you; the LDP has been a lifeline that has kept many of our local farmers in business and we are thankful to you for this program. I have personally thought that Congress might also tie some type payment enhancement to farmers who voluntarily participate in marketing training, inasmuch as we, as a general rule, are very poor marketers.
    The disaster insurance program for farmers in this part of the country is nearly meaningless. We need a meaningful program that is affordable and can help our good farmers to overcome adverse weather or market conditions beyond their control. The program should be designed to eliminate potential for fraud or mismanagement.
    Congress needs to complete its commitment to expand world market opportunities for U.S. agricultural commodities through vigorous programs that get our products into world markets. And Congress and the administration should work to establish normal trade relations with such nations as China, whereby we can sell our way out of the current low price situation facing us.
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    Many of our local Farm Service Agency offices are overloaded and it seems that staff is continually working in a crisis mode shuffling paper that only gives minimal assistance to farmers. Office staffing should be based on documentation load, not on acres of crops in the office's jurisdiction.
    Finally, Congress must increase funding for research, not just for soybeans but for all of our agricultural needs.
    Mr. Chairman, there are many other issues that my neighbors and I have discussed, but time constraints will not allow me to discuss them here today.
    Thank you for bringing this field hearing to our State and thank you for permitting me this opportunity to talk.
    [The prepared statement of Mr. Johnston appears at the conclusion of the hearing.]
    The CHAIRMAN. Mr. Ratcliff.

STATEMENT OF ZENO RATCLIFF, III, CORN AND WHEAT PRODUCER, PANTEGO, NC

    Mr. RATCLIFF. Thank you. I would like to express my appreciation to the chairman, Honorable Larry Combest and ranking member, the Honorable Charlie Stenholm, and the other members of the House Agriculture Committee for conducting this very important field hearing and for allowing me the opportunity to give testimony today. Your interest in our ideas gives us a great deal of hope that you will work with us to improve the poor state of the farm economy.
    For the past 20 years, I have helped my family to produce corn, wheat and soybeans on our farm in the Terra Ceia community in Beaufort County. I am currently serving as president of the North Carolina Small Grain Growers Association. I also sit on the Board of Directors of the National Association of Wheat Growers and of U.S. Wheat Associates.
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    Agricultural producers throughout North Carolina have experienced difficult times for several years. In early August 1999, many of us were hoping to limp through the year by relying first on revenue from grain that was forward priced before prices hit bottom, and second, on the Loan Deficiency Program which would help make up the shortfall on the unpriced production. The reality on our farm and many others in North Carolina was far worse than expected. Production was cut by hot, dry weather in the summer. The fall brought two hurricanes that destroyed crops with massive flooding.
    We found ourselves with not quite enough damage to collect Federal disaster money, but enough damage to dramatically reduce our anticipated Loan Deficiency Payment. The multi-peril crop insurance policy we bought did not entitle us to make a claim either. In short, during one of the most depressed periods for the farm economy in recent memory, our family farm and many others in North Carolina find themselves with only limited access to government support in a time of great need. Many farmers suffers a huge loss of equity in their businesses.
    To help lift American agriculture from its present depressed state, I would like to suggest some ideas for your consideration:
    The success of U.S. agriculture is heavily dependent on being able to export. Congress has already laid an excellent foundation for an export-oriented agriculture by adopting the Freedom to Farm concept, and it should be kept as the basis for the government farm program. The principal flaw to the Freedom to Farm bill is its lack of an adequate safety net. To remedy this, I would suggest that Congress consider doubling the AMTA payment at the 1999 level each year for the remainder of the farm bill. This would improve the USDA farm program budget baseline and provide farmers with a more reliable, predictable means of government support. I also think that Congress should consider adding a provision for a counter-cyclical payment to be made during periods of low commodity prices.
    Crop insurance also needs some strengthening. Currently, the buy-up coverage levels, which would have provided help last year, are too expensive to purchase on a yearly basis. Increased Federal assistance with crop insurance premiums would make the program more accessible to farmers. As you know, last year, there were $6 billion allocated to reforming crop insurance. I am hopeful that a plan similar to the bill authored by the chairman will pass before the budgetary deadline is reached.
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    As I mentioned earlier, American agriculture must be able to export its commodities if it is to prosper and compete in a global marketplace. The growth in demand for agricultural products in the coming years will arise principally from other countries, particularly China. Our highest trade priority must be to grant permanent normal trade relation status to China. Doing so guarantees American producers the ability to sell their commodities to the largest agricultural market in the world. Current estimates suggest that China could import as much as 8 to 10 million metric tons of wheat each year, which would make them the largest buyer of U.S. wheat. In some cases, shipping certain types of wheat from the Pacific Northwest and the Gulf would provide a freight advantage, which would make the United States very competitive against our foreign competitors. If we fail to pass permanent normal trade relations for China, U.S. producers will miss out on the largest trade opportunity in the world, and once again our foreign competitors will rush in to take our place and our share of the market.
    Another big obstacle to American agriculture is our extensive use of unilateral trade sanctions to achieve foreign policy goals. Unilateral sanctions are not effective foreign policy tools; yet, in the last 5 years, the United States has imposed 60 sanctions which cost U.S. agriculture billions of dollars in lost sales. In the case of wheat, these 60 sanctioned countries represent over 10 percent of the world market. The Freedom to Farm bill was in part predicated on the assumption that farmers would have unrestricted access to foreign markets. To help realize the promise of Freedom to Farm, I suggest that Congress should do everything within its power to stop the use of unilateral trade sanctions on food and medicine.
    The United States continues to face unfair competition from abroad. Canada and Australia use State Trading Enterprises which can selectively undercut offering prices of U.S. grain. The European Union subsidizes its producers with the highest levels of domestic support and then uses export subsidies to move surplus grain abroad. Many of the world's nations use high protective tariffs to keep our commodities out. To counter these trade distorting practices, I would like Congress to consider funding existing export programs to the fullest extent authorized by the 1996 farm bill. Adequate funding should also be provided for discretionary export programs such as Public Law 480, title 1 and 416(b). Aggressive use of the GSM 102–103 programs would also provide significant help.
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    Over 1,700 members of the North Carolina Small Grain Growers Association and 23 member States of the National Association of Wheat Growers support the positions I have outlined for you. Our members believe that their adoption will benefit our industry tremendously and provide strength and stability for a farm economy that is in great peril. The future of all U.S. agriculture depends on your decisions regarding these matters. Thank you for your time and your consideration.
    [The prepared statement of Mr. Ratcliff appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you. Several of you mentioned crop insurance. Let me tell you where that is.
    As you know, this committee, I think, acted very responsibly last year in recognizing that there is a huge deficiency in the current crop insurance program and early on last year passed I think the most extensive reform that I have seen in the time that I have been in the Congress. The Senate finally has acted as of last week, we will hopefully be able to, maybe as early as tomorrow, request a conference. So we think we are in a time frame we can get that bill enacted into place hopefully for the upcoming crop season.
    One of the dilemmas, and some of you spoke about it very directly, and some of you spoke about it less directly, but I think it has a big impact; and that is the family farm. You had initially mentioned that. A lot of people use the idea of saving the family farm as sort of a goal. Well, I agree, that is a goal, but the people that usually do that, cannot define what a family farm is. I do not know what a family farm is. That is kind of like what is a small business.
    But I think the concept that a lot of people have in their mind is probably not applicable today, due to the fact of economic condition changes in agriculture and what it takes in order to survive. And I do not know what a definition of a family farm is, but it varies depending on where you are. I know generally, in a lot of parts of the south, and that is pretty much where we have had hearings so far—we will be moving into the midwest and then all the way to the west coast over the next few weeks with these hearings—but it takes more to farm and support a family in Texas than it does in some parts of the country, depending on what it is also that you grow.
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    I do not know what that definition ought to be, but I wish that you all would think about that and maybe some of you have a definition. I do not know how we define it, maybe it is something that requires—is it the amount of acres required in order to support a family of four—I do not know what it is. But that will vary substantially, and so many times conceptually—and throughout the south, we are finding a lot of concern about payment limitations as well—that is the way in which a farm is used to define, and it is based on payment limitations and if you only give X amount, then that causes the family farm to survive. And I do not know what that ought to be, but I think it is important for us to change maybe the way that Washington thinks about what the family farm—it is not 160 acres any more out there with mom and pop and two kids running it, it just will not work.
    We have to put into context and into definition what is a family farm. What is it that we want to try to see survive. And then discussions of corporate farming. Well, many times, a corporate farm is not quite as bad as some people want to think that it may be and how the consolidations go and how they work and how they look.
    I want to make just a couple more comments. I do not think I have got anything specific, unless somebody has got that definition of what is a family farm.
    Yes, sir.
    Mr. HENDRIX. My definition of a family farm is my son and I, both of us have got to make a living off of it. That is my definition of a family farm and that is what it is.
    The CHAIRMAN. Well, maybe you can tell us how much that is, how much that requires—does it require for you and your son to support your families.
    Mr. HENDRIX. Of course, he is a lot younger than I am and it requires a right much more for him than it does for me because the old house that I live in, I put up myself out of a couple thousand cinder blocks and lived in it for the last 50 years. He had to have a new house. Like the other kids that go to town, him and his wife and kids, when they go to school, they are expected to look like the rest of the kids in school and so his income has to be higher than mine.
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    The CHAIRMAN. You have not helped us much. [Laughter.]
    It still is kind of an escaping area.
    One of the things that I think we all recognize—exports, the importance of exports and obviously we are very concerned about how our export markets or the inability to have those export markets affect American farmers and we have real concerns on this committee and it has been mentioned in a lot of places about the fact that the same chemicals that you—or the same products that you buy here may be sold by the same companies that manufacturing them in the United States abroad for a lot less. I think we will probably be looking into that even though we have limited jurisdiction on a lot of that, as far as this committee goes.
    But 21 members of our committee went to Seattle to the World Trade Organization talks up there, because of agricultural interest. There was an effort there made, and I continue to commend Ambassador Barshefsky for her tenaciousness in trying to push forward in behalf of the American farmer—there was an effort made just to begin to negotiate the elimination of export subsidies which other countries, particularly the European Union, do at a much higher level than we do. And in that we could not even reach that, I made a statement as I left there, and I firmly believe it, and some of that is what we are doing here, that we have got to look at our entire export subsidy question. And while I think it would be a mistake for us to enter into a world trade war to where we end up trying to outbid the other, I do not intend for the American farmer to be left without a whole lot to bid, if in fact that is the only option we have remaining. And I think we have to look at every export enhancement program we have on the books today and see how creative we can be about developing new ones because if the other countries in the world are not willing to take a look at what they are doing in terms of subsidizing their farmers' exports and that is the game we are going to play, then I think we had better enter the game in a big way, because we simply cannot afford to leave our farmers out there competing with other countries. Our farmers can compete with other farmers, but it is not fair for them to have to compete with other countries. I think we have to take a whole new approach and view of where we are in export subsidies and what it is that we may or may not have to do in the future if other countries are not willing to at least begin to negotiate the potential end to those subsidies.
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    Mr. Stenholm.
    Mr. STENHOLM. Thank you, Mr. Chairman.
    I want to ask each of the panelists a series of questions, and would appreciate a yes, no, or an undecided. And if it is undecided, time permitting in a second round perhaps we can get into some of the reasons why.
    Do you believe that the United States ought to lift all unilaterally imposed sanctions that pertain to food and medicine to other countries? Mr. Ratcliff.
    Mr. RATCLIFF. Yes, we do.
    Mr. STENHOLM. Mr. Johnston.
    Mr. JOHNSTON. Yes.
    Mr. HENDRIX. Yes.
    Mr. BURLESON. Yes, sir.
    Mr. BRASWELL. Yes, sir.
    Mr. BAXLEY. Yes.
    Mr. STENHOLM. All sanctions.
    Is there anyone in the audience that differs from the answer that the panelists have given? If you do, hold up your hand.
    I see one hand up.
    Next question. Several of you have mentioned this in your testimony. Do you believe that Congress should approve permanent normal trade relations with China this year?
    Mr. RATCLIFF. Yes.
    Mr. JOHNSTON. Yes, sir.
    Mr. HENDRIX. Yes.
    Mr. BURLESON. Yes.
    Mr. BRASWELL. Yes, sir.
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    Mr. BAXLEY. Yes.
    Mr. STENHOLM. All right, the panelists are unanimous in saying yes.
    Are there those in the audience that differ from this conclusion? If you do and say no, please raise your hand.
    Three hands have gone up. Thank you very much.
    The next question I want to ask, and several of you have testified today in saying that the current market loans should not be raised. Those of you who have already stated that, again my question will be do you believe that the current market loans should be raised. Yes or no.
    Mr. RATCLIFF. We have not discussed that extensively. I will say undecided.
    Mr. JOHNSTON. I am kind of on the undecided side too.
    Mr. HENDRIX. No.
    Mr. BURLESON. Undecided.
    Mr. BRASWELL. No, sir.
    Mr. BAXLEY. I believe they should be raised.
    Mr. STENHOLM. All right, I would like to see a show of hands in the audience as to how many farmers believe that the current market loans should be raised. Stick them up where we can kind of get a good idea.
    [Show of hands.]
    Mr. STENHOLM. All right, how many believe they should not.
    [Show of hands.]
    Mr. STENHOLM. A bunch of you are undecided, makes you fit right with Members of Congress right now I guess.
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    I am curious. Mr. Johnston, you mentioned the current problems of staffing FSA offices, One of the frustrations that I have right now is that here we are 4 or 5 years into USDA reorganization and we still do not have Team USDA one-stop shopping. Part of the reason has been is that most everyone in this audience I assume is like most every other State, you have not wanted to see offices closed or consolidated in your home town or community, is part of the problem. But this is one area that we really have got to look at from the grassroots up and the question—and time will not permit an answer right now, but a question that I like to ask is what is it that you, as farmers, want USDA to do for you, with you and to you. And then how can we most efficiently deliver that service.
    And the vision we had when we passed the legislation in 1994 was that we would have Team USDA in which we would have FSA, NRCS, Rural Development, Rural Credit, FCIC, Risk Management, all operating as a team, efficiently using our very talented manpower in order to deliver the services. That has not happened, but I am hopeful that in some hearings that we will be conducting very soon in Washington regarding why it has not happened and what can we do in order to make our delivery system of whatever farm program or programs that we have work more efficiently. But it has got to start at the grassroots level. If it does not start there, the political pressure builds so heavily that we cannot ever make the kind of decisions that need to be made.
    I appreciate you for mentioning that.
    Mr. JOHNSTON. Could I make one comment to you?
    Mr. STENHOLM. Yes.
    Mr. JOHNSTON. For instance, the program that you have a direct deposit of a check, I see paperwork coming to me of 2 or 3 pages now for each check that you make a direct deposit on. I just think some of that could be cut out. Please right now, I know especially in eastern North Carolina, they are helping the State with a bunch of work and they worked hard for that. Our staffs have done a wonderful job up there, but they are overworked in helping the State also, in doing some disaster relief projects.
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    Mr. STENHOLM. My time has expired.
    The CHAIRMAN. Mr. LaHood.
    Mr. LAHOOD. I notice that North Carolina is very, very big in hog production and maybe other panels are going to discuss that. In our State, we have these mega-hog operations which have caused a great deal of anxiety and heartburn. And I wonder if any of you are involved in hog production or would make any comments about the fact that North Carolina is one of the largest hog producers and what problems may be attendant to that.
    Mr. HENDRIX. Yes, sir. Of course, we used to be an independent and some of the guys out in Iowa that I know the same way, we used to be an independent but we lost market access. When the mega people came in and they started building their operations together it cut our marketplace out. We were having to go as far as Pennsylvania to sell hogs. And so by having to go into could not sell or sell low days, you could not pick your markets out and do any marketing and so that is why we had to go to contract production, because it was strictly market access.
    Mr. LAHOOD. Are there any so-called family hog producers in North Carolina any longer or have they all gone out of business?
    Mr. HENDRIX. There are very, very few. Most of them did the same thing we had to do.
    Mr. LAHOOD. Thank you, Mr. Chairman.
    The CHAIRMAN. Mrs. Clayton.
    Mrs. CLAYTON. Many of you spoke about the—in addition to what all farmers are experiencing in terms of modest prices and access to the markets, and you spoke about the experience unique to North Carolina, obviously that has been not only the drought but the flooding as well. So our disaster payments which you have said have helped but they have not been as helpful as they should and I think, Mr. Baxley, you mentioned that. You said there was some discrepancy in how it was crafted and we needed to craft it another way. Could you help us understand how you felt that it would be more fairly structured, that all farmers across the board would——
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    Mr. BAXLEY. The relief last year, as in the year before, came in the form of an additional AMTA payment. Because of the way the base acres were calculated for the 1996 FAIR Act, which we are operating under now, the Southeast receives a disproportionate share of those funds. An example, in my State of South Carolina last year, we planted 330,000 acres of cotton and we received AMTA payments on 211,000 acres. In your State of North Carolina, the figure was like 850,000 acres of cotton and the payments that you received were about 440,000 acres.
    So as I pointed out, the assistance was greatly appreciated and it helped, but it could have been much more helpful had we been on a more equal footing with other regions of the country. And that holds true for the life of this farm bill up until now. Through the AMTA payments, we have received less proportionately.
    Mrs. CLAYTON. Well, the AMTA program was not designed as a disaster program, it was designed as a way of getting out of formal safety net or a formal way of subsidizing on a continuous basis. And it was already there, so putting it in place seemed like a mechanism to get it to you early.
    However, Mr. Ratcliff feels that we ought to continue our AMTA program and I gather it depends on whose ox is being gored. Mr. Baxley has a problem with it, but——
    Mr. RATCLIFF. One of the difficulties that we had in the eastern part of the State was we were expecting to get a substantial amount of help from the LDP payment based on the production we were going to get. And of course when we had water standing in our fields for 15 to 20 days, it destroyed a good bit of our production and it took away a good bit of the LDP payment. I think for a lot of people, the LDP payment that we would have gotten on the crops we would have produced, had there not been a hurricane, would have put us at about a break-even level. And we were essentially deprived, through weather, of something that we thought we were going to get. And the LDP sort of let us down because it was tied to production. And I think maybe there is some need there for some type of a different disaster payment that will help us in that type of situation.
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    Mrs. CLAYTON. Well, we are trying to get a handle on what kind of disaster program that you feel that, given the structures we now have not being originally designed for disaster, we need a disaster program that is more reflective to the needs rather than to put together at the last minute, a hodge podge, thinking it will work. So you have to use, sometimes, a mechanism already in place. So if either of you—yes, Mr. Burleson.
    Mr. BURLESON. I think one thing that I would like to see in a disaster type program is a FEMA style program that is funded ahead of time, already set up, and then it could be more efficiently accessed.
    Mrs. CLAYTON. What would be the characteristics of that? Would it be based on production? Would it be based on actual loss or would it be based on last year's production? What would be the characteristics that would be fair that we could establish a program ahead of time, that you would know with some certainty—because one of you mentioned that we cannot depend on this going to the bank saying you are going to get emergency funds. And I can tell you, the emergency funding has been very expensive and has not been based on any logical way other than a sincere desire to help. So what would be a fair program based on some characteristics that could be defensible?
    Mr. BURLESON. I think it should be based more on cost of production standpoint, based on the crops you actually produce in that particular year. The flexibility part of this act that we are under now is a good part that we do like, the flexibility to switch acres and that is one of the complications of not being able to participate on ineligible crops based on history of what was produced on that land prior to this farm bill.
    Mrs. CLAYTON. I want to keep to my time and my time is up.
    Mr. BURLESON. If I may, Mr. Combest asked about the family farm situation. I did propose something about family farms. I am not really one to say that we ought to save every 25-acre farm by any means. I farm a couple thousand acres with my brother and you talk about a gross revenue of $1 million and the next thing you know, payment limitations are a problem and I need to have access to those eligible farm programs just as well as the next person to be competitive. The big thing to me is to bring my son into the operation. I live in an urbanization area where it is becoming more and more infiltrated by urban sprawl and the value of my property is beginning to be enormous. And how am I going to be able to maintain that farm without some tax incentives, some inheritance tax relief in order to pass those assets so that he can maintain farming.
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    Mrs. CLAYTON. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Jenkins.
    Mr. JENKINS. Thank you, Mr. Chairman.
    Mr. Chairman, Mr. Stenholm probably would not admit to it, but he would make a pretty good lawyer, he asks some good bottom line questions. It precludes a lot of the questioning that we have from time to time.
    But I would like to amplify a little bit with Mr. Ratcliff one question he asked. Mr. Ratcliff, you seem to put the highest priority on permanent normal trade relations with China. I am relatively new to the Congress and as we advocate free trade, it seems to me that we are lacking a little bit in stressing fair trade at the same time. Now examples are I read an article in USA Today about beef exports from this country. Japan was the leader of imports from this country in beef by far. The European nations were barely on the scale. They say that our standards, inspection standards, are not sufficient. Now the entirety of the U.S. Department of Agriculture denies that, but I would caution all of us as we advocate free trade, to also be thinking about fair trade. I was raised in the hills of east Tennessee, we cannot even turn your tractors, Mr. Burleson, over there in our small fields. [Laughter.]
    So we have had to concentrate on fair trade as well as free trade. But to what extent are we taking in as an agricultural community now and to what extent is that in your mind that we should stress fair trade to the same extent that we are stressing free trade?
    Mr. RATCLIFF. Well, I certainly agree with you that fair trade is also important, and our thinking is that if we get China into the WTO and grant them permanent normal trade relation status, they will be bound by the same rules that the other 135 member countries in the WTO are, and apparently—or I strongly believe that the trade enforcement rules of the WTO will be superior to the current methods of resolving trade disputes say between United States and China. We have had some difficulty in getting them in the past to honor the trade agreements that they have made, but we believe that we will gain greater access to their market and they will also be held more strongly to their agreements, because it will not simply be the United States negotiating with China, it will be the WTO enforcement mechanism that they will have to contend with and apparently the punishment is pretty severe.
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    Mr. JENKINS. Well, they have refused, along that line, for instance, to import a lot of our tobacco because they say that it has got blue mold. Now our folks say that there is no danger from cured tobacco as far as blue mold is concerned.
    You are confident in your mind that the World Trade Organization, the organization and the regulatory powers are strong enough to protect us once we confer that lofty pinnacle upon them?
    Mr. RATCLIFF. Well, I feel like they are superior to what we have now and there could be some improvements made and my understanding is that efforts are being made to improve the enforcement powers of the WTO, but I believe that what they currently have would be better than a bilateral negotiation between say the United States and China.
    Mr. JENKINS. Mr. Burleson, you spoke about environmental regulations and the corresponding regulatory costs that are a threat to farming. And we hear that everywhere we go, and I hear it at home constantly.
    You did not give us any specifics on that. Is there anything—any 1, 2 or 3 things that you could point to that we could take back that are of most concern to you along those lines?
    Mr. BURLESON. I think some of the simple things would be—and I live 100 miles west of here toward Charlotte and it is closer to the mountains and I do farm rolling hills, not big fields, average size of less than 10 acres. But we rent some 40 farms, 40 estates divided up, chopped up pieces here, there and yonder, and travel up and down the road a lot in order to put together that much acreage. But a lot of the regulations are that, especially in our territory, are conservation related. We have to take actual fields that have slopes and we have to put border strips and we have to put waterways and we have to put other conservation practices in effect. It is effectively taking acres out of production that I still have to maintain and have to put all those costs of regulation in place, but I receive nothing for it. Yes, there is possible some cost-share money available at times, almost never enough cost-share money to go around, so it is sort of allocated. Those kind of things I was talking about.
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    Mr. JENKINS. Thank you, sir.
    The CHAIRMAN. Mr. McIntyre.
    Mr. MCINTYRE. Thank you, Mr. Chairman.
    Mr. Johnston, you particularly mentioned in your testimony about biotechnology and that something needs to be done and needs to be done immediately because, as you say, it is an insult that U.S. growers are paying high technology fees and patent royalties while those same organizations often allow their products to be used abroad at nearly no added cost.
    Can you suggest to us today, if something needs to be done immediately, what you think the remedy might be that we could help in this situation?
    Mr. JOHNSTON. That is something that is hard to do because these multi-national companies are doing this and mainly it is happening in Argentina. We have heard that the prices of both the chemicals and the seed are so low. I would just like for—I do not know how to say it—but like for them to lower—I think if they are not going to charge technology fee to the Argentines, they should not charge it to us here. I do not know whether there could be any law enacted that would prevent this or not. This is what I am speaking about and it is a question that—well, the chemicals down there are much lower, but I understand that their EPA requirements there are must less rigorous than they are here in the United States too, for a lot of the chemicals and it costs them less to make the chemical there.
    Mr. MCINTYRE. And I would like to ask Mr. Hendrix a question. You speak, as many of your fellow panelists have, very strongly about the normal trade relations with China.
    On your form that you filled out today you mentioned that you are here speaking also as president of the Hoke County Farm Bureau, is that correct?
    Mr. HENDRIX. That is correct, yes.
    Mr. MCINTYRE. And as a State Director of the North Carolina Farm Bureau?
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    Mr. HENDRIX. That is correct, yes.
    Mr. MCINTYRE. It is my understanding though, I have been told there is a concern by the State Farm Bureau about supporting normalized trade relations unless the tobacco issue is clarified. Now I want to know if there is an exception or if you are saying to wholeheartedly support this regardless of the tobacco trade issue and the blue mold issue that has been mentioned earlier.
    Mr. HENDRIX. Well, there is no question about it when I say we have got to support the WTO. We have got to do something. As he says about the blue mold, this is just an excuse. How do we get past the excuse? This is what Farm Bureau is saying, we have got to clarify as all these agreements are being made all over everywhere, somehow or another how do we get to a fair thing instead of somebody looking for an excuse. If you want to find an excuse for anything, you can just about do it and this is exactly what is happening there. That is a way they have got of protecting their market.
    Mr. MCINTYRE. But my question is is North Carolina Farm Bureau's support for this contingent upon that being resolved or are you saying that the Farm Bureau wants support for this no matter what?
    Mr. HENDRIX. Well, I cannot answer that for Farm Bureau.
    Mr. MCINTYRE. OK. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Hayes.
    Mr. HAYES. Thank you, Mr. Chairman.
    Elton and Earl, I failed to call attention, you all are turned out nicely too, I do not want to overlook anybody.
    Talk about EPA regulations, Elton. Are your cows wearing diapers yet?
    Mr. BRASWELL. No, sir, but if we get a violation on odor or something, we have to answer to that, sir.
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    Mr. HAYES. Ronnie, again more specifics on environmental regulations, another Federal unfunded mandate to the farmer; again, point out, highlight those that we need to really go after because my experience is farmers care as much about clean air and clean water as anybody.
    Mr. BURLESON. Point out specifics? Can I think about it a minute?
    Mr. HAYES. Pass it over to Earl and then come back.
    Mr. BURLESON. I am about talked out.
    Mr. HENDRIX. Ask the question again.
    Mr. HAYES. Specific items, EPA unfunded mandates to the farmers that you want us to go back and try to change.
    Mr. HENDRIX. As Elton mentioned down here, one of them is odor. How do you control odor, what is odor? There is another one that is coming down, some of the air regulations that are coming down. What about dust? Does this mean disking a tractor out there with the dust flying up, circling here in the field? Is that part of an EPA regulation? How do we control that?
    These are some of the things that they are trying to put in the regulations that we are not talking about doing away with the field descriptive; if we need to protect the water, we are going to do that. But there are some things such as odors that as the wind changes, the odor changes. And the things like dust from tractors or the lights at night. We may have to harvest all night and if you are close to one of these subdivisions where he is talking about you are starting to get into noise levels. These type of regulations that they are trying to put on us, Congressman.
    Mr. RATCLIFF. Congressman Hayes, there are a couple we are concerned about with respect to EPA. One is the way that they are implementing the Food Quality Protection Act. We rely pretty heavily on crop protection materials to produce our crops and of course all these things are extensively tested by the EPA and other regulatory agencies and we feel like they are safe. I certainly feel confident and comfortable using these things, but I am afraid that they are using faulty data sometimes as far as the amount of material used when they are making determinations about whether to retain registration for these products. We are particularly concerned that we not be deprived of crop protection materials before good alternatives are developed. And we are also concerned about the EPA's proposal to try to expand the Clean Water Act by requiring total maximum daily loads for all waterways. I think that would be pretty burdensome to agriculture. And as I said earlier at the press conference, I feel like agriculture really takes its environmental responsibility seriously. We have certainly tried to make use of all the cost-share money that we can get to put in water control structures and we are currently using nutrient management plans in order to mitigate nitrogen moving off in the groundwater, so we really take these things seriously, but one of the concerns that agriculture has is that there is no linkage in participation with these programs in getting cost-share money.
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    We were at an advantage because we got in on the EQIP program at a fairly early stage when not too many people were interested in that and there was not a tremendous demand for it, so we got our structures, or two of them, put in with cost-share money. And I am interested in putting more of those in and I have made a couple of applications for more cost-share money, but I cannot get it now because I assume the money is short.
    So some of these nutrient management plans that are—I am sorry, not nutrient management plans but strategies to control nutrient loading in the waterways are proposing to make these buffer strips and water control structures mandatory, and I certainly do not have any objection to doing what I can reasonably to help control nitrogen loading of the rivers, but there is no assurance that you are going to get any help with these things, no assurance that you will get cost share help, and they are pretty expensive to agriculture and we cannot pass those costs on in the sale cost of our commodity, so that is a big source of concern for us.
    Mr. HAYES. I think I heard you say that you would rather see the FDA spend their time and money researching and declaring safe when appropriate certain chemicals and practices that are necessary for farming instead of regulating tobacco as a drug. Is that what I heard you say? [Laughter.]
    I thought so.
    Mr. RATCLIFF. You are correct there.
    Mr. HAYES. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Etheridge.
    Mr. ETHERIDGE. Thank you, Mr. Chairman.
    Almost all of you have touched in one way or another this whole issue on inheritance tax, passing on land and equipment, and of course it is specifically important to agriculture but small businesses face some of the same challenges. So let me ask the question a different way and each one of you can comment on it very briefly, if you feel comfortable doing it.
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    If you live in Pantego, the cost of land is a certain amount, you do not have the urban encroachment as much as you would if you are in Wake County or in Union County or some other counties. We set our inheritance limits by dollar amount and then we set our farm programs based on an acreage amount, it varies. So what we really have is an inheritance tax structure that if you live in Wake County and it is being urbanized, the cost of your land is substantially higher even though we have a land use value tax that deducts it. But for the farmer, it does not make any difference when he dies, you are going to pay based on what the value of that property is.
    Would you comment on that as it relates to agricultural policy, if you feel comfortable? Because I think there are some real contrasts there. And maybe also comment on the need of how we deal with this whole inheritance tax piece because I think we do need to raise it to at least $4 million, but depending on where you are, that may not work.
    Mr. BRASWELL. Elton Braswell from Union County. I live within the vicinity of Charlotte and our land value has increased drastically. If we pass that on to our children, they sometimes have to sell that farm to pay the tax. That inheritance tax needs to be done away with completely. To keep young people on the farm though, you need some tax incentives such as grants and other low interest loans also to continue for the young guys.
    Mr. BURLESON. I will address this issue. Four million dollars at this point in time would be a big help. I am close to Charlotte as well as Elton, I am in the next county, a little different direction but it is still being encroached by Charlotte, 4-lane highways being proposed, being built through the county both sides. I know one farm in particular is only 100 acres, it brought $1 million. If I owned 400 acres, there is my $4 million, if that was the case. And 400 acres is not a profitable farm. So acre-wise or some other provision might be even better.
    Mr. ETHERIDGE. Somebody else want to comment on that? Mr. Baxley.
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    Mr. BAXLEY. I think it is the ultimate insult when someone passes away and their property is passed on to their heirs and then most people are forced to liquidate all or a portion of the property just to pay the taxes on it. And in the case that these gentlemen have described, the urban sprawl is what drove the price of the property up to begin with, it was not anything that they did to it. So I refer to it as a death tax and I consider it the ultimate insult.
    Mr. RATCLIFF. I think you can safely say that inheritance taxes are a big problem for farmers, whether you are on the outskirts of Charlotte or whether you are in the eastern part of the State where I am in Pantego. One idea that some of the producers in our group had advanced was that there be an exemption for inheritance taxes for farms that are passed on to heirs that continue the farming operation for 5 years. I certainly cannot say I do not worry about inheritance taxes being a big problem for me some day, even though we are not subject to be acquired for development.
    Mr. ETHERIDGE. Thank you.
    Mr. HENDRIX. I think this is some of the questions he asked awhile ago about a family farm. This is part of the family farm issue. Some places where land values are cheap, it does not take that much; other places—but that is part of the family farm.
    Mr. ETHERIDGE. Before my time runs out, let me just ask a show of the audience because this is an issue I would like to know how the audience feels. Is that something that is a concern to all of you? Because we have got a lot of farmers here who farm and others who are tied to the agricultural base in this State—that that is an issue that ought to be addressed as we are dealing with the——
    [Show of hands.]
    Mr. ETHERIDGE. That is a pretty good indication. Thank you. I raise that issue because I think it gets to the issue when you have cheap commodity prices, the price of the land may not necessarily come back and it is not reflective of the farm the farmer or the farm family gets from the commodities they are growing, be it livestock or otherwise, and yet it is really tied more to the commercial interests that that land could be used for in many case. So it creates some real problems I think for the future of this country as we are looking way down the road 50 or 100 years from now when we want to continue to provide a quality, safe food supply for all Americans.
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    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Price.
    Mr. PRICE. Thank you, Mr. Chairman.
    Almost every one of you in some general way mentioned the importance of this country's commitment to agricultural research. I wonder if you would care to elaborate as to the specific importance of that in your own line of farming, brief examples of funds you think were particularly well spent and any conclusion you would help us draw as to what the priorities ought to be, assuming we cannot fund everything—what should the priorities be in agricultural research?
    Mr. JOHNSTON. Mr. Price, we talked to you a little bit about this the other day in your office. Soybeans have a wonderful research lab here at N.C. State, and we certainly want the funding for this to continue. We need this genomic research to continue because there are so many things that are coming along that you are going to be able to grow different vaccines in crops that are very helpful and we need to continue this research. We need to continue research to maximize the yields of many of these crops.
    I think Earl can probably—he has been on the USB Production Committee and I think he could probably comment real well on some of these issues.
    Mr. HENDRIX. Well, when you go back and take a look, Congressman, think about what the research budget was in the U.S. Congress in 1970 and think about what it is today. It is practically the same dollar. Inflation has not entered into it. Think about what a dollar was worth in 1970, and I do not really have the figures in the top of my hat right now, but it is a long way from where it was then and we have not increased our budget. We have got to have some increase to the budget.
    Think about down in the future of your generations of your grandchildren, my grandchildren. If we go the way we are going now with the multi-nationals doing what they are doing, these big business, what they are going to do in R&D, they are going to do it for a 2-year payoff, they are going to have to have money back in 2 to 3 years. If they do not, their stocks drop out of line and they cannot do anything.
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    So we have got to have in the public sector trained people what to do down the road 10 to 15 years for our grandchildren. As he says, for varieties or for whatever it may be. This is why we have to have that research money.
    Mr. PRICE. Any other examples, particularly questions of basic research, various applied areas of research that you can testify as to the importance? Mr. Baxley.
    Mr. BAXLEY. I think a good example would be the seed breeding programs at USDA stations. There is one near me in Florence, they are located in different areas, but in cotton production at the moment, we are in an area of what we would call a slight yield decline. For the past 3 or 4 years, we have been on a plateau with our yields and most recently we have actually gone into an area of decline. And I think it is very important, especially now, that we bring new germ plasm onto the scene that will hopefully help us create better yielding varieties, and in the past USDA has done an excellent job in helping us do that.
    Mr. PRICE. Any particular thoughts on how our research agenda can help us through some of the problems now with biotechnology and bio-engineering?
    Mr. HENDRIX. If we do not do some biotech in the public sector, as Bill was quoting about what is happening down in Argentina with all the patents and this type thing, that is this whole question of patents that is in Argentina; if we do not have some of this work done in the public sector, are we going to be able to farm?
    Mr. PRICE. Thank you. Yes, Mr. Ratcliff.
    Mr. RATCLIFF. There is maybe one issue that might be of some importance. A lot of people in North Carolina are already using GMO crops as being a great benefit to producers but in Europe there is a terrific concern about the safety of these things. Apparently they are generally accepted in the United States, but that concern seems to be spreading from Europe to this country. I wonder if it might not be appropriate to have some research directed into proving, as conclusively as possible, that these crops are safe.
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     I certainly believe that they are personally, and I think one of the challenges agriculture is going to face in the coming years is how to continue to produce enough food for the world on a declining number of acres, because a number of people have already talked about how farm land is being lost to concrete. And once it is concreted over, it is pretty much gone.
     So our farm land is decreasing in size and the population continues to grow. So I think we are going to have to use technologies like GMO crops and other things like that and we need to be able to have a good consumer acceptance of these things.
    Mr. PRICE. Thank you. Thank you, Mr. Chairman.
    Mr. BURLESON. One of my concerns about the research funding is that so much of the research, even at a land grant university, is being privately funded rather than federally funded or State funded or even farmer funded. The problem with private funding often sometimes is if they develop a new product, and, yes, it may make us more crops per acre, but they also then have a contract that says we only can sell it back to them. So we have limited our access to markets and if we do not have some continued public domain funding and using biotech and availability to cooperatives and other markets, then we are going to back ourselves into a corner.
    Mr. PRICE. Thank you.
    The CHAIRMAN. I just had one follow-up thought and one follow-up question.
    Mr. Ratcliff, I think the companies that are in development of genetically modified organisms have failed miserably in their proactive role in getting information out to the public about how beneficial GMOs are. And I am hopeful that that is in the process of changing, but I think they have failed miserably in doing that.
    Mr. Burleson, was it not you that was having the discussion with Mrs. Clayton on disaster and you suggested a FEMA type?
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    Mr. BURLESON. Yes, sir.
    The CHAIRMAN. Would that be able to—conceptually, would that be able to operate through Federal crop?
    Mr. BURLESON. I do not have a lot of experience with Federal crop because it has been so poorly—I really do not have a good answer.
    The CHAIRMAN. Well, let me ask you this, if you had an adequate Federal crop—and the reason you did not is because, as you said, that is the reason a lot of people do not have a very good taste in their mouth for crop insurance, but we are in the process of trying to change that. We have done sort of what I hope is phase 1 and we go on to phase two later on a little bigger.
    But if you had a program that was substantially different, not based upon what you know about it today, but if you had a crop program that was based on cost of production, if you had one based upon the productive capability of the farmer rather than some antiquated historical yield of the farm or whatever, but you had one that was based on realism that you could have that protection on your farm in your county and not have to anticipate or expect that the entire county was wiped out or the entire State was wiped out or an entire region of the country was wiped out before you could receive any benefit from it.
     We are trying to look at substantially improving the federally crop insurance program and one of the things that we want to do is to have that in place for that farm that does in fact suffer a natural disaster. And disaster programs generally are directed to entire regions. You are hurt just as bad if you are the only farmer in a county that is wiped out versus if it is the entire State. That is why we are trying to look at how do we do this. And even FEMA's involvement, as you know, takes place whenever there is a major disaster, so think about that. You may not have an answer for me, think about that. If we can dramatically improve the product of crop insurance, if what you are trying to get as is not maybe where we are trying to also get at. And that is making your protection so that when you are financing your crop or when you are looking at what you anticipate for the year, your cash flow and all of those things, that you can have some kind of expectations about what you can actually purchase that might repay.
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    Mr. Stenholm had an additional comment or question.
    Mr. STENHOLM. Yes, several comments and I hope that everybody understands that these 10 hearings that we are conducting, we are hearing from witnesses but we are also getting a lot of excellent testimony being submitted in writing to the committee for purposes of our consideration. And we continue to encourage all farmers and rural America interests to think outside the box, as the new term is. To think in terms of solutions.
    And as the chairman started his comments today in talking about the trade issue, we cannot keep going on like we are doing. To those concerned about China, the panel discussion today or the show of hands today through the first three panels, overwhelming support for permanent normal trade relations with China, but the very significant opposition. A minority voice, in some cases majority voice, in some regions of the country. And we understand that.
    The thing that Mr. Jenkins mentioned awhile ago is something that bears repeating, and that is there is no such thing as free world trade—never has been, is not today and probably will not be in our lifetime. But fair trade and fair is in the eye of the beholder, and as we look at the Europeans and what they are doing and interpreting to us and as we look at what China is doing today, sending us over $52 billion a year in their merchandise but buying less than $10 billion from us. Now that is not acceptable behavior in the definition of world trade and that is why some of us feel it is so important, warts and all, for the Chinese to be admitted into the World Trade Organization because I happen to agree with Mr. Ratcliff's comments, that I do believe that will cause their behavior to change. If not, we deal with it as it is.
    In regard to insurance, Mr. Baxley, you made a statement that I totally concur with in your printed text—the difficulty of insuring price and yield with the same policy. That is one of the problems we are having with crop insurance, we are trying to insure price and yield with the same instrument and it is very difficult and very expensive to do and it is not working, it is not working. And therefore, Mr. Burleson, you made the comment of cost of production insurance, something I am personally very interested in. And we have some folks in Farm Credit and in several of our state departments of agriculture that are now looking at how we can develop a cost of production type, in which you insure your cost of borrowed inputs or you insure what you actually spend to make your crop. There are several proposals along that line that perhaps we will not be able to deal with on the conference on crop insurance that will comes up in the next week or two on the short term, but when we start looking at the long term, I think this is something that we have to look at and we are going to continue to look at any and all proposals.
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    Final comment, the double AMTA, I happen to have believed last year and believe again this year that doubling AMTA is not the best way to deal with the price problem, because you are paying AMTA payments to people that are no longer farming the crop, and as you mentioned here, the differences in state to state in which you have got this live and living color. That is why we proposed the supplemental income plan, which was designed, if there are going to be payments, to get the payments to the people that are actually producing the crop of which the payments are designed to go to, based on an income. The administration has recommended a similar called a SIAP plan, a distant second cousin I guess or first cousin to this, but this is something we are going to look at. And again, different views will be had.
    Mr. BAXLEY. I would like to make note that the plan that the administration has on the table, we are very encouraged by it, but because of the way it targets the benefits to us, many of us would be knocked out of it and it would be of no use to us.
    Mr. STENHOLM. That is a very valid criticism which is not unanimously agreed to, but seriously agreed to by many. But it still—one thing that was very positive of this, and let me see, you—one of you mentioned the baseline and the importance of a baseline. We have a tremendous weakness in the agricultural budget right now that was not addressed last week, of dealing with the long term baseline needs of the proposals that we have heard today from. And hopefully before this year is out, we will correct that, because if we do not, we have literally got one or two hands tied behind our backs as we look at long term solutions.
    Mr. JOHNSTON. Sir, could I make one more comment on this? Could it possibly be patterned like hail insurance is, I buy hail insurance on cotton and for a price and it is, on a per-field basis. Like this year, I had the CAT insurance and I had a field of cotton that went under water in the floods and I harvested nothing from it, but I could not collect insurance on it.
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    Mr. BOEHNER [presiding]. I want to thank all of our witnesses for their excellent testimony and again, reiterate the remarks of the chairman, that anyone who has additional comments, whether you are testifying today or not, they are certainly welcome. And with that, we want to thank the witnesses for their testimony.
    And we will get ready for the second panel. On the second panel we have Mr. Jeff Aiken, who raises tobacco, a cattle producer from Telford, TN; Mr. John Ashe, Jr., a tobacco producer from Reidsville, NC; Mr Wayne Brown grows tobacco, a cattle producer also from Greeneville, TN; Mr. James Pate grows tobacco and small grains from Rowland, NC; Mr. Pender Sharp raises tobacco, a cotton producer, corn producer from Sims, NC and Mr. Joe Thomas, III, raises tobacco, a cattle producer from Bristol, TN.
    With that, Mr. Aiken, if you would like to begin and we will move right down the panel.
STATEMENT OF JEFF AIKEN, TOBACCO, CATTLE PRODUCER, TELFORD, TN
    Mr. AIKEN. Mr. Chairman, members of the committee, I appreciate the opportunity to address you and fill the role of a farmer who believes agriculture is not dying in our country, just ailing. I am Jeff Aiken, a tobacco, dairy and livestock producer from Washington County in upper east Tennessee.
    I am committed to agriculture, as is the rest of my family. My father was a farmer all of his life until his death in 1997. Today, we are still a family operation with my mother, two brothers, myself and our wives all involved. A life of farming has instilled the traits of hard work, honesty, family closeness and a firm belief in God in all of us. These assets make farming profitable, regardless of commodity prices. Historically, farming has been a risky business and most likely will continue to be, but through cooperative efforts and with your support and guidance, I believe we can absolutely improve the odds. Without some improvements, I fear that my 6-year-old nephew will never have the opportunity to obtain the traits from farm living that his ancestors have.
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    I believe we have done a lot of things right in agriculture, especially as we look at our current farm policy. We have adopted best management practices that have benefitted both production and the environment. We have continually increased our efficiency to produce for this country the safest, most abundant food supply in the world. In a way, we may have been too efficient, relieving the American consumer's concern for food and fiber to the point of complacency.
    Current high fuel prices came upon us suddenly without warning. This should serve as a constant reminder as to what can happen when we become dependent upon foreign sources for life essentials such as energy and food. If we ever allow our Nation to become dependent upon foreign sources for food, we will face not only shortages of foodstuffs, but also food grown under unregulated and even undesirable conditions. For these reasons, I think it is equally as important to keep our agricultural industry strong as it is to maintain a strong military.
    The recent fuel price rise allows me to make another point regarding the plight of agriculture. According to the USDA, with fuel at current prices, U.S. farmers may pay an extra $3 billion for fuel to operate their tractors and other machinery this year than last year. This would be a 40 percent increase in input costs for energy and does not include the indirect cost increases of inputs such as fertilizer. Again, according to the USDA, if oil prices do not drop, transportation costs for grain could increase as much as 12 cents per bushel. At a time when many farmers would welcome a mere 12-cent profit per bushel, it is apparent that we are in a crisis situation. We have no way to pass on that added production cost to our buyers like the retailer passes increases to the consumer.
    The bottom line drives business to pay the least possible and operate at a profit. Agriculture has a bottom line that is taking many producers out of business. I realize we should not keep everyone in farming just because they want to farm, but we have to recognize the unique aspects of agriculture and provide adequate safeguards to shield the production sector from unmanageable risk.
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    As I mentioned earlier, our operation includes a dairy. Last month, milk that we produced sold for $14.25 per hundred pounds, compared to $19.26 only 12 months earlier. That relates to an income reduction on my farm of $150 per day, $4,500 per month or $54,000 per year. While our milk prices were tumbling, our input costs such as electricity, veterinarian supplies, cleaning solutions, feed and labor have either increased or at best remained steady. The 12-hour work days have not gotten any shorter or easier. The management decisions require much more thought and time than before and yet our gross income for the dairy has decreased by over 25 percent in the last year. I believe if any other sector of the American workforce were facing a similar scenario, there would be a public outcry for a swift and definite solution.
    When you consider what has happened to dairy prices and add to that recent quota cuts in Burley tobacco, added regulatory burden for farmers, loss of safe effective chemicals to control diseases and pests, lack of a workable crop insurance program for all commodities and international trade disputes, it would be easy to become negative and depressed. However, I believe that Americans are survivors and that tough times bring forth strength. Congress has the opportunity to make a lasting impact for agriculture in our country as a whole by structuring a farm policy that ensures that our agriculture remains strong.
    In 1999, I participated in the H–2A program in order to have enough labor to grow and harvest our 70 acres of tobacco. Although this is a good program for farmers, it is weighted with extensive rules and regulations to protect and fairly compensate the farm workers. I believe the time has come to do the same for the American farmer.
    I would like to propose the following actions that I believe would contribute positively toward a stronger American agriculture for the new century:
    We must develop an agriculturally knowledgeable, stern negotiator in the office of the U.S. Trade Representative. China is a good example of the positive impact that can be realized from trade. Tennessee's tobacco exports worldwide were estimated at $86 million in 1998. China accounts for one-third of the world's tobacco consumption. Its accession to the World Trade Organization would allow for freer tobacco trade, providing opportunities for U.S. tobacco farmers. China has committed to cut import tariffs from 40 percent to 10 percent. If China accedes to the WTO, it would be subject to specific WTO rules prohibiting current unjustified phytosanitary measures, and disputes could be addressed under the WTO dispute settlement process.
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    We must encourage Congress to follow up on the work that has already been done to develop a more comprehensive crop insurance program, for both crop and livestock farmers that would provide protection against extreme yield and price variations. With an increasing number of producers relying on crop insurance as their primary revenue management tool, Congress must complete the task that began over a year ago and utilize the $6 billion set aside in last year's budget resolution, to provide premium reductions to farmers.
    USDA must continue the process of implementing the price reporting law and must have the resources necessary to do all of the work associated with mandatory price reporting. The implementation of this law is very important in the development of true price discovery from the livestock market.
    We must find ways to resolve the misunderstanding and emotional reaction of the misinformed to the use of genetically enhanced products. Sound scientific data must become our benchmarks as we proceed with the scientific advances that allow us greater efficiency in production and higher quality products for the consumer.
    Gentlemen, I thank you for the opportunity to participate in this hearing and please understand farmers want to work with you to maintain the strength of agriculture and its ability to feed and clothe this country and others around the world.
    [The prepared statement of Mr. Aiken appears at the conclusion of the hearing.]
    The CHAIRMAN [presiding]. Mr. Ashe.
STATEMENT OF JOHN E. ASHE, JR., TOBACCO PRODUCER, REIDSVILLE, NC

    Mr. ASHE. Mr. Chairman and members of the committee, my name is John Ashe. I am a small family farmer from Rockingham County. I mainly raise tobacco, but I also grow some wheat and soybeans. I have been engaged in farming all my adulthood life and hope to continue to do so for many years to come.
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    Let me express my appreciation for you holding this hearing in our great State of North Carolina, one of the most diversified agricultural economies in the Nation. A large part of our State is dependent upon agriculture and we are proud of our rich heritage of producing food and fiber for consumers in this country and around the world.
    As you know, North Carolina ranks first in the United States for the production of Flue-cured tobacco. The quota assigned to Flue-cured farms has decreased dramatically over the past 3 years, a total of 53 percent since 1997. These cuts obviously indicate a decrease in the market for U.S. grown tobacco, but it means a very substantial decrease in my cash flow on my farm, and thousands of others like me. How many businesses could sustain a 53 percent decrease in their gross sales in 3 years and still be profitable? As you might imagine, these are extraordinary stressful times for most farm families.
    Take my own situation for example. In 1997, the Flue-cured tobacco on my farm was 50 acres. This year, I will only be allowed to plant 27.9 acres of tobacco. With the best management and most strenuous belt-tightening, I will not be able to make up for this cash flow—this shortfall in my cash flow.
    One of our primary challenges is to provide stability in the Tobacco Program, to reduce inventories currently held by our tobacco cooperatives. Legislation to provide these incentives to companies to purchase these stocks is urgently needed.
    Moving this stored tobacco out in the trade is the first step, but clearly in order to ensure the survival of many of our family farmers, we must increase the market for our tobacco crop. Since domestic cigarette sales are declining, exports represent the best potential for the growth of tobacco in the industry. In 1997, U.S. exports of unmanufactured tobacco products were valued at $6.5 billion. And the tobacco and tobacco products made a positive contribution to the national trade balance of $4.9 billion. But more can be done and more must be done to increase our markets for this valuable commodity. Additional export promotion programs by the Government could have a dramatic potential impact on the future of our industry.
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    Although American tobacco is receiving increased competition from offshore producers, particularly China, Brazil, India, Turkey and Zimbabwe, there is no doubt that we maintain a significant advantage in quality. Our tobacco is viewed, without question, as being the best in the world and we must make every effort to ensure the reputation is protected. There is no question that for every pound of tobacco our American farmers do not produce, other foreign countries will assume that share of the world market.
    One issue that must be addressed is how to remove certain identified toxins in tobacco products. Recent research indicates that ''tobacco specific nitrosamines'' are a contributing factor in the risks associated with smoking and the use of tobacco. Tobacco that is low in nitrosamines is virtually indistinguishable from tobacco that is cured traditionally. Therefore, an effort is underway to convert the burners in existing bulk barns with new heat exchangers to lower nitrosamines. It will cost approximately $5,000 per barn to make these necessary changes and even more for some of those producers who are in my part of the State, who are still curing in traditional stick barns—and there are some still. At present, cigarette manufacturers believe there will be a shortage of these improved heat exchangers to meet the demand. We salute the assistance of the tobacco companies and the Flue-cured Tobacco Stabilization Cooperative for providing funds to defray the expense of converting barns.
    However, more can be done, especially with government funded research into this and other tobacco related issues to ensure our family farms will continue to produce the best quality tobacco in the world.
    And one more item is FSA. In North Carolina—I am not sure how it is considered in other parts of the Nation, but FSA in North Carolina, that is our link to you, the people in Washington helping to make these things possible, to bring programs to us. That is where we go to for our service. And being a tobacco farmer, we make a trip to FSA 15 times in a season, and with other crops, and we being such a diversified state, they are a very important part of our farming economy. Thank you.
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    [The prepared statement of Mr. Ashe appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you. Mr. Ashe, I apologize for mispronouncing your name—and Mr Braswell from the earlier panel. The tendency is to pronounce those the same way we would with somebody that spells them the same, but I found out in Georgia recently that Houston is House-ton. And I also found out that some places of the country, Arkansas is pronounced Ar-Kansas. So Mr. Ashe, I apologize.
    Mr. Brown—I think I got that one right.

STATEMENT OF WAYNE BROWN, TOBACCO AND CATTLE PRODUCER, GREENEVILLE, TN
    Mr. BROWN. I appreciate the opportunity to share my comments with you today and express concerns that east Tennessee farmers and I have with the current situation in agriculture. We are facing some unique times on the farm today and your concern for and support of agriculture is genuinely appreciated.
    Agriculture is very important in Greene County where I operate a diversified farm operation consisting primarily of corn, tobacco, soybeans and wheat production.
    I believe that maintaining a strong agriculture is critical in the United States. Agriculture contributes tremendously to my community and my county and my country. I also believe that we are in a time of great risk. Actually, the family farm should be on the endangered species list. In my part of the country, farmers are dependent on income from small Burley tobacco farms. For generations, these farmers have been able to utilize family land and labor to support their families, educate their children and accumulate assets. The conditions that I am facing today, though similar, may differ dramatically from those producers of other tobacco types and producers in other parts of the country. Tobacco quota cuts are hurting all of us, but unique geographical and demand differences make these cuts extremely damaging to my neighbors and me. We are operating our Burley tobacco production units within program parameters that need modification to fit the changing environment of our industry.
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    One issue we face is the rising cost of quota leases. I believe that the transfer of Burley quota to those farmers who choose to produce tobacco is essential. However, I realize that this process presents a complex dilemma. Permanent transfer is currently limited to county boundaries and in these times of continuous quota cuts, value determination of quota is nearly impossible to establish.
     Quota owners who wish to sell their quota are unable to realize a fair price for the quota they have maintained, and growers cannot purchase quota that may be taken away through quota reduction. Therefore, quota owners are losing a property value and growers are faced with fluctuating production costs and reduced quota availability. Permanent transfer should be administered equal to leasing, allowing the quota to be transferred in a more orderly fashion to the producer while maintaining a means for the quota owner to curtail losses.
    Historically, the quota system has allowed us to receive a fair return for our labor, but the present system experiences problems largely due to the current formula. I believe we need modifications to the 3-component formula that would be composed of company buying intentions, 3-year export average and pool stocks.
    The first component of buying intentions allows too much control of quota calculations in the hands of the buying segment. Our future quotas and markets will be diminished as tobacco imports increase and penalties for under-purchases are avoided under current regulations. Failure to purchase the stated buying intentions at a minimum of 90 percent should carry a true penalty equal to the one I suffer as a grower for over-production.
    I am acutely aware of the magnitude of what a penalty can cost. In 1999, I raised 14,000 pounds of experimental tobacco for a leading tobacco company. This tobacco did not go through the auction market, but had to go through a tobacco warehouse and be removed from my marketing card. The warehouse did the necessary paperwork, but failed to remove the pounds from my marketing card. This resulted in my over-marketing on a card. Through no fault of my own, I am now facing an approximate $21,000 penalty for over-marketing. If I am held to such accountability, then so should the buying segment.
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    The export component of the formula is slow to respond to market conditions. A shorter time period other than the 3-year average should be examined to make this component more influential.
    The pool stocks adjustment to the formula currently provides for a 50 percent weight. Burley pool stocks should affect the quota calculations on a pound-for-pound basis as they do in the Flue-cured tobacco.
    I support the Tobacco Program and believe it should be continued. However, I do believe there are necessary changes that need to be made from time to time to protect the integrity and effectiveness of the program. I believe changes in the program could be handled much more efficiently if referendum procedures allowed for program approval versus the congressional action requirement. Obviously some parameters would need to be established.
    Tobacco farmers are currently being faced with a new marketing proposal commonly referred to as contracting. Despite efforts by individuals and organizations to obtain a clear understanding of this marketing proposal, much too little is known about the effects of this procedure on our traditional markets. The integrity of market conditions of quality and price appear to be at jeopardy. Grading standards and the ability of the USDA/AMS to efficiently carry out their responsibilities will be affected immediately as portions of the crop are removed from the auction market system. All tobacco marketed, whether under company contracts or the auction market, should be inspected by and reported to USDA. Today's dilemma finds farmers facing difficult decisions without full knowledge of long-term consequences.
    There are many other issues that face me as a tobacco producer that I could mention, but in the interest of time, I would simply say that the regulatory reform must become a major issue for Congress. We are being buried under mountains of regulations. Continued increase in regulatory activity and the cost of dealing with those regulations is a burden we as producers cannot share with the consumer. This is true of all areas of agriculture.
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    Agriculture in Tennessee and across the country has experienced a very trying time during the past 12 months with extreme adverse weather conditions reducing yields, low prices for those commodities produced, and reduced access to potential markets abroad. We want to continue the planting flexibility afforded us in the 1996 FAIR Act; however, farmers need help in opening markets for our products.
    I thank you for listening to my comments today. I solicit your understanding of the critical environment for agriculture as we continue in trade negotiations with established and potential new markets and as we evaluate current and future farm policies. Thank you.
    [The prepared statement of Mr. Brown appears at the conclusion of the hearing.]
    The CHAIRMAN. Mr. Pate.
STATEMENT OF JAMES C. PATE, TOBACCO, SMALL GRAIN PRODUCER, ROWLAND, NC

    Mr. PATE. I am Jimmy Pate from Rowland, NC, I am a farmer and I produce tobacco, cotton, corn, soybeans and wheat. Mr. Chairman, ladies and gentlemen of the committee, we welcome you to Raleigh, and we thank you for your support of agriculture in North Carolina. We have experienced 3 consecutive years of summer droughts and fall hurricanes which, along with cheap commodity prices have been devastating to the agricultural economy in this State. Without the doubling of the Freedom to Farm payments and the Federal disaster programs, we would not have survived. We are not in good financial condition, but at least we are in a position to try again and hope for a better year.
    This morning, I would like to address an area of significant importance to North Carolina, the production of Flue-cured tobacco. North Carolina produces approximately two-thirds of the Flue-cured tobacco grown in the United States and it is all grown under a Federal Tobacco Program. The Federal Tobacco Program was established in 1938 and without question has been the most successful farm program in the history of this Nation. It has worked and worked well for over 60 years. It has been a no-net cost to the Federal Government since 1982, with the exception of administrative costs of the program and the Federal Crop Insurance subsidy. As with any program, as time passes, changes need to be made to keep the program viable. We realize that now may not be the most opportune time to try to make the needed changes due to the climate in Washington regarding tobacco; but if the program is to survive, we will have to address the changes in the near future.
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    There is one problem that needs and deserves our immediate attention. That being our foreign trade policies regarding tobacco. For several years, the U.S. Congress and the administration have taken a dim view of U.S. tobacco producers' participation in international trade. Tobacco's exclusion from trade enhancement programs such as GSM 102 and 103, and the lack of interest in general of any trade issues regarding tobacco have seriously injured our balance of trade and more importantly, the rural economy of tobacco-producing States. There is a wide and prevalent misconception in both Congress and in the current administration that the correct course of action is to take every measure possible not to export tobacco. This is a misguided notion and has no sound basis in reality.
    Government officials should take a more practical approach to tobacco issues. People worldwide will continue to use tobacco products for decades to come and it makes sense for our tobacco producers to participate in trade, utilizing the same assistance that producers of other commodities enjoy. Our Congress and administration should recognize that tobacco produced in the United States is produced under the most rigorous standards in the world. For instance, agricultural chemicals used in the United States to produce tobacco undergo closer scrutiny than chemicals used to produce food for our tables. The Federal Tobacco Program incorporates the proper use of these chemicals into the tobacco producer's eligibility to participate in these programs.
     The result is that no other tobacco producing country in the world can or will meet the same standards. The reality is that current U.S. tobacco trade policy causes far more harmful tobacco to be exported by our international tobacco producing competitors. This ill-forged policy has serious consequences for U.S. producers and potentially devastating consequences for the U.S. consumer of tobacco products due to a flawed imported tobacco policy.
    USDA's Agricultural Marketing Service samples and tests imported tobacco for about 20 chemicals banned for use in tobacco production in the United States. There are literally dozens of other chemicals used worldwide in the production of tobacco for which USDA does not test. These chemicals are not approved for use on tobacco produced in the United States. United States trade policy toward tobacco could remedy this situation. Imported tobacco needs to meet the same standards as U.S. produced tobacco. We are in a situation in which we allow tobacco to be imported from countries that restrict the importation of U.S. produced tobacco and at the same time, these very countries do not even come close to meeting our standards for agricultural chemical use. Our trade negotiators have misguided priorities with regard to the entire range of tobacco trade issues. Congress should take the opportunity to rectify some of these wrongs.
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    In the near future, tariff-rate quotas for imported tobacco will be renegotiated. The U.S. Congress and our trade negotiators should take two positive actions. The first action should be to make all imported tobacco follow the same exacting standards by which U.S. tobacco is produced. This is not just a trade issue, but an issue of protecting the U.S. consumers of tobacco products. Second, tariff-rated quotas were designed to protect U.S. producers from competitive disadvantages of offshore producers. Competitive disadvantages result from our international competitors using cheap labor in ways that would be considered illegal in the United States and the implementation of production short cuts such as the use of inexpensive chemicals not approved by our EPA.
    On September 13, 1995, President Clinton announced tobacco tariff-rate quotas to replace the GATT illegal domestic content law that was enacted by Congress in the fall of 1993. Originally, total tobacco imports from countries with a tariff-rate quota were approximately 27 percent of the total U.S. Flue-cured and Burley basic quotas. Even though total imports have exceeded the tariff-rate quota from the onset, there is no penalty applied because these excess imports were being manufactured into cigarettes for export and thus eligible for the duty drawback provision. Now that cigarette exports have greatly decreased due to U.S. cigarette manufacturers moving that component of their production offshore, general tobacco imports have not decreased proportionately. With U.S. Flue-cured and Burley tobacco quotas reduced from the effects of the recent Master Settlement Agreement, the ratio of tobacco imported into the United States under tariff-rate quotas is somewhere between 36 and 50 percent of the total U.S. Flue-cured and Burley basic quotas. I think this shows a clear intent for U.S. manufacturers to take advantage of that increased ratio of foreign-grown tobacco to domestically grown tobacco in order to help absorb the costs of the Master Settlement Agreement on the backs of the U.S. tobacco producers. This is devastating for our tobacco producers and is bad for our consumers. When these tariff-rate quotas are renegotiated, we should reduce the amount that is allowed into the United States until they approximate the same ratios as when tariff-rate quotas were originally implemented.
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    In closing, the People's Republic of China exports tobacco to the United States. In fact, they are now the fourth largest importer of tobacco into the United States. However, for many years the Chinese have used an artificial trade barrier to prohibit the importation of U.S. produced tobacco. At issue is a plant disease called blue mold that occurs in the United States and many other parts of the world. United States and Chinese scientists have collaborated for several years now to resolve the issue. In essence, the Chinese have insisted on a protocol that demands we prove a negative. This is an obvious stalling tactic. In the meantime, other bogus phytosanitary issues with the Chinese have been resolved due to the current administration's strong support. Again, tobacco was sold short. We now have an opportunity to finally eliminate this artificial trade barrier. Last fall, U.S. tobacco farmer representatives proposed to our negotiators that we offer a face-saving compromise to the Chinese. We have asked the Chinese to accept U.S. tobacco upon inspection certifying that U.S. tobacco is free from blue mold oospores. The Chinese already use this inspection method in other countries where they purchase tobacco, and there is a presence of blue mold. I am told that there is a good chance the Chinese will accept this. A letter of understanding between the United States and the People's Republic of China is now being reviewed at USDA. I would ask that our Members of Congress use all the influence they can to speed this process along, and if the Chinese use further delaying tactics in reaching this accord, then use the blue mold issue as a barrier to the U.S. approval of China's accession into the World Trade Organization. In addition, in the most recent bilateral talks with China, the issue of dissolving their tobacco monopoly, as other participants in the WTO have been forced to do, was not pressed. Before China is allowed into the World Trade Organization, this issue also needs to be addressed. An open and free trade with China would give a needed shot in the arm to the U.S. tobacco producer.
    Thank you, Mr. Chairman, ladies and gentlemen of the committee for allowing me to speak today.
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    [The prepared statement of Mr. Pate appears at the conclusion of the hearing.]
    The CHAIRMAN. Mr. Sharp.

STATEMENT OF PENDER SHARP, TOBACCO, COTTON AND CORN PRODUCER, SIMS, NC

    Mr. SHARP. Mr. Chairman, my name is Pender Sharp. I am a farmer from the coastal plains of North Carolina. More specifically, my community is Rock Ridge, an unincorporated neighborhood that is home to the best tobacco and sweet potato land in the world. It is also the home of North Carolina's great Governor Jim Hunt. We are a fine community, boasting of some of the best farmers anywhere in the Nation. And more recently, we have become the destination of choice for drought, heat, hurricanes, floods and now snowstorms. I have advice for John Hope, the weatherman, on the Weather Channel; when hurricanes brew up in the Caribbean, do not tell me where it is headed—I know it is coming to Rock Ridge—just tell me when it is coming.
    I farm with my father and my brother in a 5-generation family farming corporation. My two sons, both North Carolina State graduates, are also actively involved in our business. We farm 1,500 acres of crops, including tobacco, sweet potatoes, cotton, cucumbers, corn, wheat, soybeans, cantaloupes and strawberries. We also have a 2,000-head swine operation. Including all of this, tobacco continues to be 35 percent of our net income.
    Record low commodity prices and recent disasters, bring to the forefront the many shortcomings of our current Freedom to Farm agricultural policy. As we address all of these most important issues, we must also reform the Federal Crop Insurance Program, which I have chosen to speak to you about today.
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    Problem: Crop insurance today offers minimum protection on some crops at rates that are too high for the coverage received.
    Solution: Lower cost to the taxpayer and the farmer by eliminating all opportunities for fraud. Insure crops by enterprise units instead of farm serial numbers. Use producer proven yields instead of allowing producers that never make a crop to use a county yield that is higher than their historical production. All crop insurance should be revenue based. It is immaterial whether I produce 20 bushels of soybeans because of bad weather or 40 bushels of soybeans because of good weather. What is extremely important to myself and my banker is that I gross $180 for those soybeans.
    Problem: Fraud is prevalent in the system. Insuring crops by farm serial numbers opens opportunities for the unscrupulous to transfer production from one farm to another. In this government/private sector partnership, the government basically shares a greater portion of the risk than do the insurance companies. There are even stories about insurance agents showing farmers how to beat the system and receive payments, suggesting that as long as profit is the motive for delivery, moral risk will continue to exist.
    Solution: Some things can be more efficiently operated by the private sector. Crop insurance is not one of those things. A strong relationship between Risk Management and the Farm Service Agency is the best way to administer crop insurance. Producers need a risk management advisor who is not profit driven, to assist them in evaluating and planning their risk management strategy. The Farm Service Agency's data collection, along with its compliance division, working with a strengthened Risk Management enforcement division, could best provide crop insurance credibility. Under enterprise unit protection, FSA could help identify various entities that may have been created to avoid payment limitations. They need identifying so as to determine the entire production of an individual's crop.
    Problem: Not many crops that are currently grown in the Southeast are covered by crop insurance. NAP, the Non-insured Assistance Program, is a poor excuse for providing a safety net of protection for farmers growing non-insured crops.
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    Solution: Crop insurance should be provided for all crops. The Farm Service Agency is called upon nearly every year to establish historical yields and reasonable price levels for all crops under various disaster programs. This same data and procedure could be used to establish a crop insurance program for all of these non-insured crops.
    In addition to securing a safety net that provides income to allow farm families to survive in times of need either from low prices or natural disasters, crop insurance must be reformed in order to ensure that it is affordable and includes all crops. This would allow for financial stability in the agricultural community and accountability to the taxpayers.
    There are many concerns within the agricultural community. We must address all of these issues immediately. A financially healthy rural America is in the best interest of all of our society. It will cost taxpayers less to do it right than to continue to do it wrong.
    I have two more comments I would like to make outside of my area I was addressing.
    Farm Service Agency is swamped with work. They have done a tremendous job in program delivery, things that you guys have provided to assist farmers. In North Carolina, one-third of our work force is temporary. We are losing 260 employees in the Farm Service Agency next week because of funding for temporary employees. So we are losing one-third of our workforce during a period of time that they have got more to do than they can do. Please address this issue.
    Another issue is China and the World Trade Agreement. China definitely needs to be a part of that. We can control what they are doing, the United States will fare better than it is now. But please, as our last speaker mentioned, look into the false science that China is using on blue mold on tobacco, look into their tobacco monopoly. Can they agree to do one thing and then the tobacco monopoly in that country later agree not to? If you use tobacco as an issue to hold as a bargaining chip against China, China will come in as they should come in and be a good trading partner.
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    Thank you for your time.
    [The prepared statement of Mr. Sharp appears at the conclusion of the hearing.]
    The CHAIRMAN. Mr. Thomas.
STATEMENT OF JOE K. THOMAS, III, TOBACCO AND CATTLE PRODUCER, BRISTOL, TN

    Mr. THOMAS. Mr. Chairman and members of the committee, it is a privilege for me to be here today. I am not just a real strong politician I guess but I want to make a statement. The last time I appeared before the House Agriculture Committee, then-Senator Gore asked me to speak on behalf of tobacco because I was on one of his tobacco advisory committees. So it has been awhile since I have had opportunity to appear before the committee, but I appreciate a chance to be back here today.
    I am Joe Thomas from Bristol, TN and I appreciate this chance to address you today and to present some of my concerns about agriculture and its future in this country. My farming operation consists of 6 acres of tobacco, 12 acres of corn and 180 head of beef cows.
    Tobacco has been an integral part of the foundation that this country has been built on and I am proud of my heritage as a tobacco producer and I want to continue to be a farmer.
    In Tennessee, tobacco has traditionally been grown on family farms dispersed across more than two-thirds of the counties of the State. The average farm produces an annual tobacco crop between 5 and 10 acres. Our farmers, although small, are like tobacco farmers throughout the Southeast in that they rely upon income generated from tobacco sales to make farm payments and to support their families. In Tennessee the tobacco crop generates in excess of $200 million annually in farm income that helps support local merchants, schools and churches. This is farm income only and this number does not take into account the billions of dollars generated as government revenue by tobacco taxes.
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    The columnist George Will once stated, ''It's summertime, and living is supposed to be easy, but events are winding the springs of tension.'' I submit to you today that events are definitely winding tight the springs of tension. Uncertainties within the tobacco industry have grown to the magnitude that many of us may not be farming next year. The demise of the family tobacco farm could be on the horizon.
    Outlandish lawsuits have driven the domestic cigarette manufacturers to the brink of bankruptcy. High-paid tobacco zealots have an agenda that includes destroying the tobacco family worldwide. There is no other industry or commodity in the world that has faced such adverse conditions—a worldwide oversupply of tobacco, increased U.S. imports and economic disruption within the Asian countries have all contributed to a dramatic decrease in the demand for our domestically grown tobacco.
    These conditions contributed to a 28 percent reduction in our production quotas in 1999 and now we face, in the Burley side, an additional 45 percent reduction in the year 2000. Cuts of this magnitude soon make it impractical for many farmers to continue production. This will force a lot of farmers out of business, including a lot of young farmers that have planned their farming programs around a base of tobacco production. The economic impact of this lost production and subsequent sales will have a devastating impact on the economies of many small towns and rural counties across this tobacco region.
    Second, another issue I would like to address is concerning the future of the conservation programs in our country. We have heard several speakers earlier today mention the FSA side and I happen to be a member of our local conservation board and have served there not only at the county but also at the State level. I consider myself a true environmentalist, just about like most all other farmers across this country do. I have a deep love for the land and a deep desire to preserve and improve that small portion of this earth that I am entrusted during my lifetime. My goal is that I may pass it along to our children, who happen to be the 8th generation on our family farm, in a better state than it was when I started farming.
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    From my vantage point as a member of the local conservation board, Soil and Water District Conservation Board, I see a great need to increase the effort through voluntary incentive-based programs to enable the farmers to participate in more conservation projects on their farms that will be beneficial both to the farmers and to the environment of the community.
    I am deeply concerned when I see a large decline in the number of conservation programs on farms during the past 4 years. In 1992, there were 4,686 Tennessee farmers that successfully completed approved conservation projects on their farms. These projects were cost-shared through the Agriculture Conservation Program of the previous farm bill. In 1999, only 409 contracts, less than 10 percent of that previous number, were approved across the entire State under the current EQIP programs. Put rather simply, EQIP funds are not adequately getting the job done. On the national level, I understand that the number of farmers applying for EQIP cost-sharing has dropped some 23 percent in the last 3 years. I think this is an extremely dangerous trend that neither farmers nor non-farmers should allow to continue. We are simply putting off until tomorrow what should be addressed today by allowing these environmental problems to go unfixed.
    People, businesses and the economy and all the associated land uses are continuously changing. Past conservation work must be maintained and updated. As our understanding of the environment and its needs grows and changes, we must have strong, locally led conservation delivery systems ready and able to help. One of the most important ways of ensuring that locally led conservation efforts do succeed is to assure that adequate Federal funding for the NRCS's Conservation Technical Assistance Program is made available. Specifically, I would ask that based on the NRCS's recent workload analysis, that we need $330 million in additional technical assistance for the NRCS program for their conservation CO–1 operations. Incidentally, if this $330 million came about or when it comes about hopefully, that would get the Federal input into the conservation delivery system about to where the State and local governments are now putting in. So the feds are a little bit behind on their part now, since we have got so much help now coming from the States, which I think is good that everybody is sharing in that.
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    Again, let me thank you for the opportunity to address you during this hearing today and we have many issues in agriculture which need the attention of Congress and farmers and I appreciate this opportunity. Thank you.
    [The prepared statement of Mr. Thomas appears at the conclusion of the hearing.]
    The CHAIRMAN. I thank the panel for the testimony and the information. One of the fun things about this job is a chance to travel around the country and learn more about crops and agriculture that we are not familiar with. Obviously we do not have all the answers and know everything. If we did, we would not be here today asking for your help.
    But tobacco is a crop that I honestly do not know a great deal about, but I am trying to learn about. We do not grow any of it out where I am from.
    I was recently in Georgia looking at a tobacco field and the farmers were harvesting and they were putting tobacco in the barns and they put the temperature—you all have a terminology for that. But one of the things that struck me particularly was talking to the people that had tobacco allotments and quotas and how their children had gone to school or gone to college—the things in their lives that had been—these were just farmers, things in their lives that would not have been available or happened if it had not been for that. And obviously there is a high emotion that runs and I think we have got to always remember in agriculture that agriculture is emotional because it is a way of life with people, and the ending of that way of life puts out some real scary thoughts about what happens next. And it is one of the things I like to try to keep in mind.
    If I remember correctly, the individual who owned this farm on which they were harvesting tobacco, said that there is about $60,000 an acre in taxes that is paid. Is that somewhere in the ballpark?
    Mr. SHARP. I will give you an example, one tobacco plant——
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    The CHAIRMAN. Eight dollars is what they told me.
    Mr. SHARP [continuing]. Is worth about 60 cents to me in gross revenue and it is worth about $20 in taxes.
    The CHAIRMAN. Twenty? I was thinking that they were telling me one stalk or one plant was like $8 or something and I counted the number of leaves on there, and that is about a dollar a leaf or something. It just astounded me the amount of taxes that came off of that farm.
    As the conditions have changed in tobacco farming or raising tobacco, those taxes have not gone down any, have they?
    Mr. SHARP. They have gone up.
    The CHAIRMAN. In Texas, that would have meant they went up, but we are not there. [Laughter.]
    What did you say the average size tobacco farm in Tennessee was?
    Mr. THOMAS. My notes say 5 to 10 acres. In my county, 5 years ago, there were about 3,000 tobacco quota holders within the county, 3,000 tracts of land that had quota, the average quota per farm was less than half an acre.
    The CHAIRMAN. Less than a half acre?
    Mr. THOMAS. Yes, sir, in my county. Now due to the fact that a lot of people do not think there is that much fun in growing tobacco, they have chose to lease their tobacco pounds to a grower like me, so that would—my farm is larger than some of the others.
    The CHAIRMAN. You can lease their quota, is the price of that lease set by the owner of the quota?
    Mr. THOMAS. Yes, sir, it is.
    The CHAIRMAN. Is tobacco quota sellable?
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    Mr. THOMAS. Yes, sir, it is, within the county.
    The CHAIRMAN. Is that true everywhere, in every State, that it is only within the county?
    Mr. THOMAS. I believe that is true in the Burley Belt, across the belt.
    Mr. SHARP. Is it true for the Flue-cured in North Carolina too.
    Mr. JENKINS. Mr. Chairman, it is sold beyond the county lines in part of the Burley Belt and I understand that Kentucky just had a referendum and that they approved sales beyond the county lines. Is that right?
    Mr. THOMAS. Mr. Jenkins, that had to do with a lease and transfer for an annual lease, I believe, rather than a sale. I might stand to be corrected, but the Kentucky issue was dealing with——
    The CHAIRMAN. But is that up to the grower to make that decision?
    Mr. THOMAS. Yes, sir, that is his option, whatever he wants to do with it.
    The CHAIRMAN. No, no, but is it up to the grower if you decide to change the way that a lease or sale within or without a county lines, is that a decision the growers can make and change that?
    Mr. THOMAS. USDA has allowed referendums that would address that issue.
    The CHAIRMAN. That if the growers agree.
    Mr. THOMAS. Yes, sir.
    The CHAIRMAN. Because the Peanut Program has some similarities in terms of quota.
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    Mr. THOMAS. Right.
    The CHAIRMAN. But the determining factor of whether or not a quota can be sold or leased or where it can be sold or leased is in the law.
    Mr. THOMAS. That is correct, and that would be in Federal law.
    The CHAIRMAN. Mr. Brown, I believe it was in your testimony you were talking about moving toward a new contract or contractual arrangement, that there was a lot unknown. Do you know enough about that to explain to me what that is they are looking at?
    Mr. BROWN. No, sir, I do not. Now the only thing that is out there that I am really aware of, one of the large tobacco companies is offering to contract tobacco, it will not go through the auction sales, the details of which I have not been able to find out. I do not know what guarantees, that we can sell what or anything.
    The CHAIRMAN. But they would come in and contract with a grower to produce tobacco for so much a pound?
    Mr. BROWN. Exactly, yes.
    The CHAIRMAN. Mr. Stenholm.
    Mr. STENHOLM. I want to ask each of you the same question I have asked the others. Yes or no, do you believe that it should be the policy of the United States that we stop all unilateral sanctions on other countries because we happen to disagree with what they are doing or not doing?
    Mr. THOMAS. I guess all covers a whole lot of it. I would say yes, generally.
    Mr. SHARP. Remove the sanctions.
    Mr. PATE. I would say yes, but there are always some tough exceptions, but I guess in general, I would say yes.
    Mr. BROWN. Generally, yes.
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    Mr. ASHE. Generally, yes.
    Mr. AIKEN. Yes, sir.
    Mr. STENHOLM. Next question. Do you believe that the United States should grant permanent normal trade relations with China?
    Mr. THOMAS. Yes, sir.
    Mr. SHARP. Absolutely, once the negotiations are finished and the details are worked out.
    Mr. PATE. If these issues can be resolved with China, such as their monopolies that they have in their country. All other countries just like Japan were required to dissolve their tobacco monopolies when they came into the WTO. China needs to do the same, dissolve that government-owned tobacco monopoly and also the blue mold issue needs to be resolved before they are allowed.
    Mr. BROWN. Yes, sir.
    Mr. ASHE. Yes, sir.
    Mr. AIKEN. Yes.
    Mr. STENHOLM. Comment, Mr. Sharp, Mr. Thomas; you both spoke of the needs of FSA and the temporary employment layoffs that are occurring all over the United States now. Mr. Thomas, you talked about the need of $330 million to provide the technical assistance. I have to point out one of the reasons why we are coming up short has been the absolute refusal from the local level up and from the top down to put together Team USDA to where we might more efficiently deal with the delivery of services. And I am not saying it is your fault or anybody else's fault, but it is somebody's fault because we have not put together the kind of delivery system that our producers want and need and you would like to see.
    We just had a recent—well, I do not have time to get into that right now except to just continue to make that point. And we will be holding hearings very, very soon regarding the internal management from the top, but it has also got to start at the bottom and come up. And a lot of us ask things of the local folks that they cannot deliver right now. We have some of the most dedicated employees working in our FSA offices that you could possibly have right now, but they do not have the resources to do it. We have asked them to deliver 22 new programs over the last year, but we have not given the resources. And one of the reasons the resources do not come is that we have not put together the kind of organized effort that would make the efficient delivery that each of you on your farms and your neighbors have had to do. And we have got to start addressing that.
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    Yes?
    Mr. THOMAS. Yes, sir. I guess one of the main problems I have run into, and it turns out our county got to keep the office, but the fact that we have got the local Soil and Water Conservation Districts, which of course are subunits of State government, which are county-based in most cases, at least in Tennessee and in a lot of States of the country. I know Texas has got 160 or 190, whatever districts down there. But the fact that the NRCS historically has been in the Conservation District office because that is where those programs come from. And the FSA, when they come up with a program or Congress comes up with a program, FSA brings it down, NRCS has to approve the farm plan so the farmers can participate in these programs. The problem has been, to a large degree, that through the consolidation of county offices, at least the ones I am aware of, that the Conservation District has been left out here on its own. So the USDA has had to pay for office space in a lot of cases that they had not had to pay for previously, and the fact that they consolidated counties together has ended up costing more now, even consolidation within the counties is costing USDA quite a bit more now than it used to cost when they were not collocated.
    I personally like the collocation concept because they are right there together and if we need the FSA programs, then we can come to NRCS and get the plans done through the Conservation District. So I do not think the problem is quite—at the local level, it is not quite the problem maybe that you perceive it to be. Some of the problem has to do when it gets to the State level and also to the Federal level, with upper level management and those type things.
    But we need the local offices to be able to service the programs that USDA has mandated.
    Mr. STENHOLM. See, I do not understand why you could not collocate in a free office. I mean, I do not understand if somebody is willing to provide free office space, I do not understand why we would not accept that and collocate in those areas. But that is a decision that has got to be made from top, up and down, and we are going to be talking more about that in the days ahead. But there are all kinds of decisions that can be made. You said it, there is enough fault, there are enough reasons at the top and the middle and at the bottom, but somehow we have got to find a way to deal with it.
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    And you mentioned the Conservation Districts I think it is time for all of our States—and I will only speak of Texas, they do not like to hear me say it either—but I will put on my farmer hat and say I think it is time to take a look at some of these structures, see whether they are serving us adequately due to what each of you have testified needs to be done in the area of conservation. But just because we have done it that way for 50 years does not mean it is the best way to deal with EQIP and with Food Quality Protection Act concerns and with environmental concerns. In fact, I will tell you, I do not think it is. But that is not my business, my business is Federal, this business is State and local.
    Last question just briefly, and you do not have to answer this, Mr. Aiken, but you mentioned the cost of energy. I wonder if your neighbors were complaining about the cheapness of fuel 14 months ago when fuel was the cheapest it had been in the history of our country. Were your friends and neighbors complaining about that then? Mine were not, and I happen to represent the oil patch as well as the cotton patch, and my folks are complaining rightfully about the increased cost that is occurring now in the area of energy. But I doubt seriously anybody was too worried about what was happening to the independent oil producer as they were going the route of the tobacco farmer and others with what was happening 14 months ago.
    We are trying to put this together now. You cannot produce energy without food and fiber; you cannot produce food and fiber without energy. And therefore, we ought to be working together, we have got the same problems, international, environmental, et cetera, and we are trying to put together some coalitions along that line.
    The CHAIRMAN. Mr. Boehner.
    Mr. BOEHNER. Thank you, Mr. Chairman. I have tried to spend most of my time this morning listening to what our producers have to say, and I have to say that the chairman and the ranking member of the committee made a great decision in scheduling these 10 hearings around the country so that we can listen to those in agriculture tell us in very clear terms what the problems are and what the solutions are.
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    And Mr. Sharp, I want to congratulate you, that of all the witnesses in the hearings that I have attended thus far, you have been very clear about what the problem was in your opinion, and what the solution is. We all know what the problems are but finding the solutions is what we are hoping to find out as we do these hearings around the country.
    And Mr. Thomas, I would love to know more about your relationship with that champion of tobacco, Mr. Gore, but I do not think this would be the appropriate place to do it. [Laughter.]
    Speaking of tobacco, although we sit on the Agriculture Committee and we have the interest of agriculture in mind, we are also Members of Congress and every day we have to vote on thousands of issues that come before the Congress. And when it comes to the issue of tobacco and smoking, clearly we have got a rather divided effort underway in Washington. We have an administration that has done everything they can to make cigarettes illegal, tax them to death, and I know myself, as a smoker, I resent paying the taxes that I have got to pay so that I can smoke these. But what I resent even more over the last several years is the amount that I have to pay when I buy a pack of cigarettes to the lawyers who, under our system, have brought all these suits on the behalf of who knows who—I think on behalf of the lawyers, quite frankly—and so we have got prices going up for those who smoke, while at the same time we are decreasing demand for tobacco use, which most people in the country would say that is a good thing.
    What are we going to do about tobacco producers? What is the solution? When we have got tobacco usage going down in the country, we have got no choice but the program, the companies have no choice but to decrease their buying commitments.
    I will let you start, Mr. Ashe. What do you think the answer is?
    Mr. ASHE. Like I said earlier, I really feel that we need to be able to go overseas and have fair competition with that. I know it is not liked in all sections but we are having it shipped in here.
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    Mr. BOEHNER. Well I do agree that we have got the best tobacco in the world, but at the quota price where the Government has set it, it may not be as competitive on the world market as it could be. Do you think there will be a tradeoff for tobacco that we export, or do you think we should reduce the quota price in order to increase the market share that the U.S. producers have?
    Mr. ASHE. I think we need promotions. If the government could subsidize somewhat, some way for us to be on a level playing field. We are not that far away from foreign countries from what I have been told.
    Mr. BOEHNER. But you do not seriously believe that the Federal Government is going to subsidize the export of tobacco leaf?
    Mr. ASHE. No, I do not, but it would be nice.
    Mr. BOEHNER. Oh, I am sure it would be nice, but I can assure you that not even I could get that passed. Mr. Sharp?
    Mr. SHARP. Sometimes we do not identify the problem. Let me borrow just a minute of your time. This lady had this bulldog that was super aggressive, but she loved her dog. She carried him to the vet and had him castrated. She thought that would make him a little more docile. She brings him home and the first day he is laying on the porch bandaged up, about to die, in bad shape until the mailman steps upon the porch. Then the dog is like a young puppy, he just attacks the mailman. The lady comes out and apologizes to the mailman profusely. Do not make me put my dog to sleep, I love him to death. I have carried him to the vet and I have had him castrated. The mailman says lady, you need to carry him to the dentist and have his teeth pulled. I could tell when he come off that porch he did not want to make love. [Laughter.]
    Sometimes we identify one problem and we address another. [Laughter.]
    Let me give you a good example. In the last 3 years domestic consumption in the United States has declined 4 percent. My quota has declined 50 percent. To put it very bluntly, what you guys in Washington are doing is not worth a damn. It is not lowering consumption of cigarettes, but my quota is being shifted to Juan Valdez in South America and I am getting no compensation for it. We are putting so many restrictions on the tobacco industry that our quota is being replaced in other parts of the world and that tobacco is being grown——
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    Mr. BOEHNER. Is that because it is cheaper?
    Mr. SHARP. Yes, because it is cheaper. It is being grown and shipped right into ports in North Carolina, going right into the plants and making cigarettes out of it, and in 3 years we have dropped consumption in this country 4 percent. You are putting tobacco farmers out of business.
    Mr. BOEHNER. So what do you think the solution is?
    Mr. SHARP. Well there are a number of solutions. No. 1—and many times we have had free trade, not fair trade. My eyes are failing me, but I think the pack of cigarettes you pulled out of your pocket is a generic brand that is made of foreign tobacco.
    Mr. BOEHNER. Oh, no, these are not. These were produced in Macon, GA by Brown & Williamson Tobacco.
    Mr. SHARP. OK, very good. That is what I smoke, too. [Laughter.]
    So many people are going——
    Mr. BOEHNER. I would not smoke any that were made with foreign tobacco. [Laughter.]
    Mr. SHARP. So many people are going to generic brands that are loaded with foreign tobacco, that there are no restrictions whatever. They are still using DDT and toxiphene and things like that in other parts of the world. We do not know what is on that tobacco when it comes in here. That is fair trade, if we require our trading partners to use the same type practices that we use. We can have sale and lease and transfer of tobacco across county lines. We need to maintain our program, but we can do all sorts of things to lower our cost. Under our current system, our price support is too high. Do not shoot me, Mrs. Clayton, but our price support is probably too high. We need to address some issues that would allow us to lower our price support and be more competitive. But just remember, all the efforts are only lowering consumption in this country about 4 percent, but you are putting tobacco farmers out of business in transferring the production of that quota to South America.
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    Mr. BOEHNER. I would love to carry this on a little longer but I am sure the chairman and my colleagues would probably not appreciate it. Good luck.
    The CHAIRMAN. Mrs. Clayton.
    Mrs. CLAYTON. I want to be able to depend on Mr. Boehner to help us when we have an issue before this committee. I hope I got him on the record saying he would help, but not too much help, is that the way it is?
    Mr. BOEHNER. Mrs. Clayton, I would be happy to help with any issue that you have got in a bipartisan way.
    Mrs. CLAYTON. Thank you.
    Well, I think why Mr. Sharp was looking at me a little cross eyed was because I had said I did not think there was a political climate in Congress to do much change with the Tobacco Program. So I want to find out how we protect what we have, not undo what we have, and I hope that we can strengthen it. So I guess I would want to ask each of you—and I know it needs to be strengthened, and I know there are areas where indeed it is not as supportive for all farmers. But would you recommend that we put this up before Congress to change the program? Anyone who wants to start. I mean, if you do not want to—do you all think the Tobacco Program needs to be changed or needs to be revised?
    Mr. PATE. The big problem we have in the tobacco family is—I am sure most of you all know, is that the tobacco family cannot come to a consensus on what it wants.
    Mrs. CLAYTON. Yes, that is it.
    Mr.PATE. Until that day comes, my answer will be no. When things get bad enough—when they really get bad enough, we will all come together. Hopefully that day is not too far away, because if changes are not made before too long, we are probably going to lose it.
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    Mrs. CLAYTON. Well the issue of the quota and the transfer—I am going to revisit what the chairman said. My understanding is, you cannot really arbitrarily move the quota from county—over county lines unless there is a referendum within the given state saying that they would that. Do I understand that to be correct?
    Mr. THOMAS. Yes, ma'am. I cannot speak for the Flue-cured side, but on the Burley side, the farmers had a referendum in Tennessee and Kentucky that approved the lease of quota across county lines. So the farmers have that option now.
    Mrs. CLAYTON. Mr. Sharp, is that true in Flue-cured?
    Mr. SHARP. It is my understanding that Congress may have given the administration an opportunity to call for a referendum if the tobacco family asked for a referendum.
    Mrs. CLAYTON. Right.
    Mr. SHARP. There is a possibility we could have a referendum on the lease and transfer across county lines, but it is my understanding that sales are still married to the county.
    Mrs. CLAYTON. There were one or two suggestions on—Mr. Ashe, I want you to talk a little more about what you thought was an opportunity to enhance the marketability of tobacco by—not only by Federal support, which Mr. Boehner I think is correct in saying there probably is very limited opportunity for getting that, but I recognize that would be enhanced if we could. But there is one way—you suggest removing the toxin in tobacco. Could you speak to that? Is there something underway, research, where we could promote that, therefore the kind of inherent disadvantage of most consumers in America that is where the drop is going, because the toxin they feel is harmful to them.
    Mr. ASHE. Well, the thing of it is is nitrosamines. There is nitrosamines in vegetables, in every growing product—most every growing product. Nitrosamines is something that researchers have found out is something they can take out of tobacco by changing burners. Now our bulk barn consists of an open flame, and we are going to change that and put in a heat exchanger and that will drop nitrosamines. It has been—92 percent. The United States, we are basically the only country that uses an open flame. Other countries use wood, coal, and they have already used a combustion chamber-type furnace.
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    Mrs. CLAYTON. Would it be helpful if we had more research in that so that people have an option?
    Mr. ASHE. Yeah, because now we are sort of shooting in the wind. We know the combustion chamber will work, but we only have a few companies now still producing tobacco barns to have this research. We just need some kind of federally—USDA—a system that could help look into these programs. We are taxpayers also and we feel that we should have the same opportunities to have our government help us just as the man down in the road living in his home.
    Mrs. CLAYTON. Well, we want to look at that.
    May I ask fora few more minutes?
    The CHAIRMAN. Please.
    Mrs. CLAYTON. This panel is very indigenous to my State but not many of them are in my district—only Mr. Sharp is from my district—it is not loaded with my constituents. I want you to know that.
    The CHAIRMAN. You should have.
    Mrs. CLAYTON. I should have. I tried. I tried, I want you all to know. [Laughter.]
    Tobacco is big in our district. In fact, we have the largest Flue-cured producing district in the country. So it is such a fundamental basis for that. So the tobacco issue is very big.
    Are the other issues you think that you want this committee to think about, other than legislation, maybe through referendum, that could enhance the Tobacco Program in both being secured, but also in the political arena that will give you some additional life to make—and I am not talking about these knotty issues, but I am thinking about issues that could enhance their knowledge and your stability of farming that tobacco for a longer period of time. Where you have now 53 percent of your commodities—I mean your quota support reduced in 3 years, mathematically in 2 or 3 more years, without some adjustment we are going to have real problems.
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    Mr. SHARP. Mrs. Clayton, I understand what we were talking about earlier, the problems with using export enhancement funds on tobacco. But there is still a legitimate argument to be made for an agricultural commodity to be a part of export enhancement or export credit, or all of the various means of exporting a commodity, when the only reason you are doing it with any commodity is to add to the local economy where that product comes from. We are not making moral issues or health issues or judgemental issues. That is the only reason you are getting rid of the commodity. You are enhancing it through some sort of supplement. You can make the same argument for tobacco and it is a legitimate argument. If you look at what it does to the economy of eastern North Carolina, what it does to the economy of Tennessee, what it does to the economy in some respect to about 19 States, it is the same legitimate reason for tobacco being involved in all the available export enhancement and credit programs.
    Mr. BOEHNER. Will the gentlelady yield?
    Mrs. CLAYTON. Yes, I will.
    Mr. BOEHNER. I can just assure you that the anti-smoking zealots that we work with in Washington, DC are never going to allow this to happen. I hate to be blunt, but I will take Mrs. Clayton off the hook.
    Mrs. CLAYTON. I think I yield back my time. [Laughter.]
    The CHAIRMAN. Mr. LaHood.
    Mr. LAHOOD. In deference to our regional members here, I will pass, Mr. Chairman, so they will have a chance to ask questions.
    The CHAIRMAN. Mr. Jenkins.
    Mr. JENKINS. Thank you, Mr. Chairman.
    Let me say thanks to this panel. I believe if everybody on this panel, and everybody in the Congress had spent as much time in tobacco patches and in tobacco barns as I have, there would be some realization that they have made some very pointed, realistic suggestions about how to resolve the problem. There are so many avenues of this that I wish we had a lot of time to stroll down. Let me go to—let me go to Mr. Ashe just a minute. We would call you Mr. Ashe over in east Tennessee, Mr. Ashe.
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    One statement he made about there being no substitute for tobacco, now it is really hard to fathom that on the farm. The problems out there are not of the producer's making now. But to go to that one point for a minute. There is a little difference in Flue-cured. It is not as high priced as Burley. Let me go to one of these Burley producers. I will start with Mr. Aiken and go in alphabetical order, Mr. Thomas. But it is not unreasonable for a producer to make about 2,500 pounds to the acre of Burley tobacco. I do not know what you are doing. You may be doing more. There are a lot of variations.
    Mr. AIKEN. In my particular area there is a lot of tobacco that will yield more than 2,500 pounds per acre.
    Mr. JENKINS. Ours too.
    Mr. AIKEN. On my particular farm, I shoot for 2,000 pounds.
    Mr. JENKINS. But just take an example, 2,500 pounds is not unreasonable. It is not unreasonable, when you pay the bill at the warehouse, to come home with $1.90 a pound or something like that.
    Mr. AIKEN. That is the average.
    Mr. JENKINS. Now when you go—do you say that is reasonable?
    Mr. AIKEN. Yes.
    Mr. JENKINS. When you go to production cost, you have been buying quota—do you buy quota in your operation?
    Mr. AIKEN. The biggest majority of it.
    Mr. JENKINS. You have been buying it probably for about 10 cents a pound?
    Mr. AIKEN. Five to 10 cents.
    Mr. JENKINS. And now after this 45 percent cut, you and everybody who deals in this is looking at probably 40 to 50 cents per pound to get your allotment for this year?
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    Mr. AIKEN. That is correct.
    Mr. JENKINS. So if you have made 2,000 pounds, you have increased your production cost immediately by $800, if you pay 40 cents. So that is a tremendous amount out of your net income. Now you are probably going to have about $200 worth of plants and plant material in putting out this acre of tobacco, is that pretty close?
    Mr. AIKEN. That is close.
    Mr. JENKINS. You are probably going to have $400 to $500 in fertilizer by the time you get it properly fertilized, probably another $250 in the chemicals that it takes to control suckers, somewhere thereabouts.
    Mr. AIKEN. Right.
    Mr. JENKINS. Labor, depending on what your family situation is, some of you probably work out there to the point where you do not use much labor, and some of you probably use a lot of labor, but if you are using a lot of labor, you are probably going to get up to $600 or $700 per acre on labor cost.
    Mr. AIKEN. Congressman, I think it would be closer to $1,200 or $1,500.
    Mr. JENKINS. OK. Well, I am of the old school. We still did it mostly ourselves. But I know people who are getting by with less than that, but that is probably reasonable. Go to $1,000.
    But then you have got your fuel costs that are increasing and you have got your other costs, but still there is the prospect to take home $2,500 per acre from that Burley tobacco crop and put it in your pocket and use it send your kids to school or buy an automobile or whatever. You can get close to that.
    Mr. AIKEN. Right.
    Mr. JENKINS. Now the point Mr. Ashe makes is, there is no substitute, and this is the first thing that always comes up when there is a discussion of tobacco. Well just let them grow something else. Now we cannot grow soybeans in, for instance, East Tennessee because we do not have a market for them. People tell me that they have 50 cents a bushel in transportation cost to get them to market. Is that correct?
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    Mr. BROWN. That is correct.
    Mr. JENKINS. Mr. Brown. We cannot grow wheat, we cannot grow corn, we cannot compete. To put it in nutshell and ask a pointed question like Mr. Stenholm does, is there a substitute crop for tobacco in east Tennessee, Mr. Ashe or, Mr. Aiken?
    Mr. AIKEN. I have not found it. If there is, I would like to know it.
    Mr. JENKINS. In Flue-cured, Mr. Ashe, is there a substitute crop?
    Mr. ASHE. No, sir.
    Mr. JENKINS. Is there anything that even comes close to it?
    Mr. ASHE. None that I know of.
    Mr. JENKINS. Mr. Brown?
    Mr. BROWN. None.
    Mr. JENKINS. Mr. Pate?
    Mr. PATE. In my area, what some of the producers—tobacco producers tried was going into the hog business, which was mainly contractor growing, and you can imagine the problems that has occurred. So no, there is not any good solution. There has been some they have tried but they have not worked out.
    Mr. JENKINS. Mr. Sharp?
    Mr. SHARP. Not even close.
    Mr. JENKINS. Mr. Thomas?
    Mr. THOMAS. No, sir.
    Mr. JENKINS. I think Mr. Ashe made a very good point and I do not think the Congress always recognizes that. I certainly do not believe that the administration does, and I do not believe Americans generally understand that. But we are talking about a situation where it is to do back what Mr. Ashe says and immediately to get these stocks out of these pools and get these allotments back up there where people can live with it. There was a 29 percent reduction the year before. Am I right about that? And a 45 percent reduction this year. Nobody can live with a 75 percent reduction in their business in 2 years.
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    Thank you, Mr. Chairman.
    Mrs. CLAYTON. Mr. Chairman, can I just ask Mr. Jenkins a question?
    The CHAIRMAN. Go ahead.
    Mrs. CLAYTON. Mr. Jenkins, one of the problems—well in response to the question that the chairman asked, one of the problems of maintaining small farmers, when you remove tobacco, you have removed the prop that is keeping small farmers. So with that kind of return, that is the only way a 15-acre tobacco farmer with 100 acres of corn and others can survive. So if you remove that cash—Mr. Chairman, that is why you have much smaller farmers in North Carolina than you would have in Texas, because that cash return allows them to survive.
    The CHAIRMAN. Mr. McIntyre.
    Mr. MCINTYRE. Thank you. I would echo what Mrs. Clayton just said. A lot of our colleagues in Washington say well let them grow something else, and they think—they do not realize how small the farms are and that there is no more land available that could anywhere near compensate the acreage it would take for another crop to be grown.
    Mr. Pate, thank you for drawing attention to the question asked of the first panel today that I had some others ask me about at intermission. I think you have clarified that, the position that I have also heard from other members of the North Carolina Farm Bureau, that China should not be allowed to use the Blue Mold or its tobacco monopoly as an issue. And that now is the time to deal with those issues and to decide whether or not that they should in fact be a barrier to keep China from being admitted, because if we do not deal with it now, we are going to lose that window of opportunity. This is an issue that—for those that are here today, I would like you to know that we are trying to address in Washington. At the last meeting that I and my colleagues had with U.S. Trade Representative Barshefsky and Secretary of Agriculture Glickman, I asked that very question and we did not get a satisfactory answer, and I am waiting to get that answer from USDA. I think it is an important issue and I appreciate you directly bringing that up on point.
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    I want to ask you about one other issue. Mr. Pate, you addressed the issue about duty drawbacks. Would you explain what you believe we can do to improve the situation involving duty drawbacks that would be the quickest and most efficient solution.
    Mr. PATE. Congressman McIntyre, I can only find two agricultural commodities that qualify for duty drawback, and that is tobacco and coffee. Under the duty drawback, a domestic company can import tobacco into this country, then export either manufactured cigarettes with a blend of foreign tobacco and exported tobacco or straight U.S. tobacco, or they could export unprocessed tobacco, and it comes off that tariff rate quota. Therefore, it gives a false reading on how much tobacco is actually imported into this country. That is the reason they never have to pay any tariff rate quotas or have to pay any penalties because of this duty drawback.
    Three things that we think need to be done is that the TRQs need to be reduced to at least the same level of domestic quota as they were when they were originally negotiated. And we feel like that the duty drawback provision needs to be done away with. When it first was established, it may have helped us because at that time the domestic companies were manufacturing a lot of cigarettes in this country and exporting them. Now they have moved these facilities to Mexico after the NAFTA agreement and to Brazil and they are producing a lot of the foreign—U.S. company manufactured cigarettes are produced overseas and not produced in the United States. So we think really the duty draw-back provision needs to be done away with.
    The third thing we think needs to be changed is that the use of TRQs for imported tobacco by the domestic manufacturers needs to be on a—now it is on a first-come-first-serve basis. Whichever company uses those TRQs first are the ones that gets to use them. We think they need to be allocated by percentage of market share. If the domestic company has a 25 percent market share, they need the rights to 25 percent of those TRQs.
    Mr. MCINTYRE. Thank you, sir.
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    One other question that is very simple, but I ask the entire panel. Mr. Sharp and Mr. Pate have made the point that crop insurance should be administered by the FSA. Do each of you agree with that statement? Mr. Thomas.
    Mr. THOMAS. I have not been able to participate in the crop insurance programs, so I am afraid I could not speak to that. What has been available for me has not been any use, so I have not used it.
    Mr. MCINTYRE. All right, thank you.
    Mr. SHARP. Absolutely, it should be.
    Mr. MCINTYRE. Thank you.
    Mr. PATE. Yes, sir, I think it should.
    Mr. BROWN. Yes, sir, I think it should.
    Mr. ASHE. Absolutely, it should be.
    Mr. AIKEN. Yes.
    Mr. MCINTYRE. Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you.
    Mr. Hayes.
    Mr. HAYES. Thank you, Mr. Chairman. Since Congressman Jenkins is gone, he told me that you all had come up with a novel way of liquefying corn in east Tennessee. We do that in Wilkes County too, is that an alternative? [Laughter.]
    Back to the subject. Explain to our good friends from Texas—I will focus this question to you, Mr. Pate, and anybody else who wants to talk about it. The historical role of tobacco quota on a small farmer in North Carolina, and Tennessee could be the same, in terms of this being a valuable piece of property, it is just like a blue chip stock. It is something that could be passed on as an asset. Talk about the value and the need for that value for a tobacco quota in a small family farm.
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    Mr. PATE. OK. Thank you, Congressman Hayes. As I said earlier, the program was originally formed in 1938 and then was voted out in 1939 by the farmers. They said that year that they voted it out tobacco went to less than a nickle a pound, so in 1940 they voted the program back in and it has been in existence every since. Originally the quota was established by—they got 3 acres for each tobacco barn that they had on the farm and that is the way the original quota was established. Of course now the quota has changed hands a lot by us being able to buy quota from another producer. It is really funny, if you get into Robeson County, for example, where I am from, if you really want to make one these little widows mad, you make her think she is going to lose her little bit of tobacco quota on that farm and she will fight you. A 100-acre farm in some areas may have 10 acres of tobacco quota, and at a 2,500 yield—and it may have a value—it may sell for $2 a pound, or they may be able to rent it for 40 cents a pound per year. They actually get more rent out of the tobacco quota than they do out of the land. I mean, there are a lot of farms down there that the land rent will absolutely not pay the tax value—the tax on it, and they depend on this tobacco quota to help keep that land in the family to pay the taxes.
    Mr. HAYES. In other words, we have cut people's inheritance by policies in many instances in Washington by continuing to cut those quotas?
    Mr. PATE. Well, I have heard a lot of elderly farmers make the statement that their IRA and their SEP plan was the tobacco quota that they bought over the years thinking when they quit farming that they would be able to rent this quota out like they had always rented quota over the years, and now their IRA has been cut in half.
    Mr. HAYES. Mr. Sharp, you did a great job of promoting our friend Jim Hunt here. I assume you did not vote for me in 1996 [Laughter.]
    Mr. SHARP. Just for the record, Mr. Hayes, I did not. [Laughter.]
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    Mr. HAYES. Probably the bulldog did not either. [Laughter.]
    Just kidding.
    Mr. Ashe, do you think—and this is getting a little bit outside the box as Congressman Stenholm suggested. In politics, sometimes folks will go negative with their ads. Do you think as a part of our agriculture promotion, the U.S. Government should make people aware, and in a sense go negative and talk about the health problems, the problems that imported tobacco and other commodities have that do not go through the stringent safety regulations that we have? Is that something that we could do in government that would help our farmers?
    Mr. ASHE. I feel that—with tobacco—we are a commodity out there just like wheat, corn and soybeans. We are a commodity. We are a legal commodity and I feel to make that product as safe as our product here, there should be some kind of way we can go and inspect and let them be—foreign countries I am saying, let them be as responsible as we are for making our product.
    Mr. HAYES. I think I heard you agree with me. We have an educational opportunity. Again, as government, we are warning people about hazards of domestically produced products. Is it a role that we could warn our own citizens about the hazards of imported products? So that is something that you might like to see us at least look at.
    There was another question about regulatory reform. Mr. Brown, you are talking about the possibility of—you have got a purchase penalty that you have proposed, because if you over produce you are going to get a production penalty. How would you suggest we do that? I will stop with that.
    Mr. BROWN. I think Mr. Pate alluded to the fact of how to help solve the problem on—but the way the export component is right now, that penalty, it is not enforceable the way this thing is set up.
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    Mr. HAYES. Anyone on the panel have a suggestion as to how we might do that in terms of putting some incentive out there for companies to buy specified amounts so that you do not get the rug cut out from under you? My time has expired.
    Mr. PATE. I think if the changes are made that we suggested regarding the GATT legislation, that will help a lot, and require that that tobacco meet the same standards as our tobacco meets. I think that will do a lot of good. What we need to look at long term is—and to realize everybody is not going to stop smoking. What we need to work toward is developing a safer cigarette. Now, not a cigarette that is nicotine free, that is not—I mean, that is not the answer. The reason I smoke is because the cigarette has nicotine in it. The reason I drink a Coca Cola is because it has caffeine in it. But there are ways to make safer cigarettes. And the good thing about it is, I benefit on both ends. I am a tobacco producer and I am also a smoker. So health wise the safer cigarette is better for me, but yet, as you develop a safer cigarette, you are going to wind up using more U.S. grown Flue-cured tobacco.
    Mr. HAYES. Thank you, sir.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Etheridge.
    Mr. ETHERIDGE. Thank you, Mr. Chairman.
    Mr. Chairman, if you will indulge me for a minute, I am going to try to get a few things on the record that I think some would like to have. For my colleagues here in front of us, they know—I think my district is probably the second largest tobacco producing district in North Carolina, certainly Flue-cured tobacco. And anyone of you who wants to answer this, because I think this is a critical piece to some of the questions from our colleagues who are visiting. If you are going to buy a farm adjacent to you and it has no tobacco allotment, or you have the option to buy one on the other side of you that has let us say 10,000 pounds of tobacco allotment. I recognize you will buy the one with the tobacco because you are a farmer. Give me some idea of the difference in the price of that land as it relates to that tobacco, Pender.
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    Mr. SHARP. The tobacco allotment itself is probably worth about $4 a pound, and then the land value, if it is suitable for——
    Mr. ETHERIDGE. For the record, what is the average pounds per acre, Flue-cured, in your area?
    Mr. SHARP. About 2,300.
    Mr. ETHERIDGE. OK. Thank you.
    I thought that would be important for people visiting because when you think of—when you talk about, Mr. Chairman, small farms, that is why North Carolina—someone said earlier, that is why there were so many small farms. You can take a small patch of land—I grew up on a small tobacco farm. Now there were five children, and if it had not have been for that tobacco, I would not have been there and my family would not have. It is hard work. You work in the heat of the summer and it is not easy.
    Let me touch one other area that many folks—and it has been touched on here, and talk about substitutes. I think if you look at pounds—the average farm, as I remember now, in North Carolina, if you take an average across the State—currently the average tobacco allotment is something like 4 or 5 acres now. It used to be about 6 or 8. It is probably about 4 or 5 now. Is that about right, on average, somewhere close to that. So you get some sense of why so many people have gotten out and you wind up consolidating and leasing it.
    One other point, Mr. Chairman, I think I would like for somebody to touch on. I do not remember who it was, maybe it was Mr. Pate who talked about the people who were using that as part of their 401(k) as a retirement, and that is still true. Would any of you want to comment on the cost of rent this year versus last year with the allotments being cut over the last 3 years, how much it has gone up, if it has, in your community because of the decreasing supply of tobacco versus those who have gotten out also? Have you seen the rent per pound go up?
    Mr. THOMAS. In the Burley area, at least in the eastern part of Tennessee, we have been getting the quota for 5 to 10 cents a pound for the last several years, and Congressman Jenkins and some of the others referred to maybe it is going to be up in the 30- and 40-cent range. I hope it is not over a quarter. If it is over that, it is probably going to determine how much I grow this year.
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    Mr. ETHERIDGE. Most of the Flue-cured I think is somewhere between 40 and 50 cents. Are any of you paying any more than that?
    [No response.]
    Mr. SHARP. It varies by community. What you have got is the same number of people chasing a whole lot fewer pounds. So it is strictly a supply and demand situation, and there are probably rental instances in some cases that might be up to 60 cents a pound.
    Mr. ETHERIDGE. OK.
    Mr. BROWN. And I might point out that this quota cut hurts producers rather than the quota holder. If it was worth 10 cents a pound last year and it is worth 30 cents a pound this year, even though they got a 50 percent cut in quota, they are still getting the same amount of money. The producer is the one who is suffering.
    Mr. ETHERIDGE. Sure.
    Let me go to one other point then very quickly for those who are not from the tobacco producing areas, especially for those in Flue-cured. The issue that Mr. Ashe raised on nitrosamines and the switch over for barns, the requirement apparently seems to be that every barn has to be converted by July 1 of next year, preferably by this year, and after July 1 of next year, if you have not been converted you cannot sell it. And the numbers look like they are somewhere in the range of $5,000 per barn, and depending on how many barns a farmer has, you are talking about a substantial sum of money, right?
    Mr. ASHE. Without a doubt. I generally account for about 7 acres going in the barn. If I've got 28 acres, that is four barns, that is $20,000.
    Mr. PATE. Congressman Etheridge, I would just like to mention that this is another example of what we are trying to do in the tobacco industry. It was determined that this tobacco-specific nitrosamine was present in the tobacco leaf. It is a natural occurring bacteria. It also occurs in meats. Well what they found by research was the fact, when it is cured in a barn with an open flame, using LP gas, that the nitric oxides caused this tobacco-specific nitrosamine to accelerate and grow at a rapid rate, and it has been linked—there is a possibility of it being a carcinogenic. So the tobacco family is making this move to convert to heat exchangers and an enclosed curing system. We are going to spend in excess of $100 million in the next 2 years to make this conversion so we will have a safer tobacco, so that it will make a safer cigarette.
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    Several years ago, we went through the same thing on barn-foam insulation. Some of the barns were insulated with a barn foam very similar to the styrofoam insulation that we put food in coolers and everything in. They were afraid that the flaking of this could possibly get in the tobacco, and some of the chemicals used in styrofoam had been traced to a carcinogenic. So we went through a process where all—it either had to be removed out of the barns, or it had to be covered up so it would not be exposed to the tobacco. Now in that process they had to certify to get Federal price support. The same thing will apply on this nitrosamine barn conversion. They will have to qualify to get price support under the Federal Tobacco Program.
    I just want to mention that I think that is one prime example of why we need to keep a Federal Tobacco Program. It gives us a mechanism to make sure that we produce the safest tobacco in the world.
    Mr. ETHERIDGE. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Thomas, I think, had a comment he wanted to make.
    Mr. ETHERIDGE. OK.
    Mr. THOMAS. Mr. Etheridge, there is another issue that was brought up earlier dealing with the insurance program or the disaster payments, I guess. On my particular farm, I average about 3,000 pounds to the acre, the historical average on the tobacco farm that I have. In 1998, my yield, due to drought, was down in the neighborhood of 1,900 pounds to an acre, which was a little over a third cut in yield. When I went to the FSA office to apply for the disaster payment, I did not qualify because the county average yield is somewhere around 2,200 pounds and the county yield that year was 1,700 pounds, so I was 200 pounds over the county average. Even though I had over a 33 percent reduction in my yield, I could not qualify for disaster payments because of the way the system is set up. That is one complaint I have got. I do not know how that needs to be addressed. I do not even know whose department that comes under. But I did not like it.
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    One other issue that I used to like, and I would like to have it back. You were talking about how to assist the family farm. We used to have a program under the—an ASCS program called the SL2, which was renovation, maintenance of pasture, open land. That program was cut out because there was not, apparently, enough proof that it was reducing soil erosion and enhancing water quality enough on that given year to do it. The problem is, I have not been able to fertilize and lime and reseed several of my pasture fields—which I have about 300 acres of pasture—because of the cattle prices and reduction in tobacco quota. But that is a program that I think that Congress needs to consider bringing back, because now my farm is getting into a more erodible State because I have not been able to maintain this lime and fertilizing program that I used to be able to do. I realize that is a direct grant, but as one guy I heard say, he preferred grants over loans any time. [Laughter.]
    But I think that is a program that—particularly Congressman Jenkins, in our area was a real benefit to the environment, but it has been cut out due to the fact that they could not show immediate returns to the environment.
    Mr. LAHOOD. Can I ask a quick question?
    The CHAIRMAN. Sure. Mr. LaHood.
    Mr. LAHOOD. Could I ask how many people in this room farm or are any way involved in tobacco farming? Could you raise your hand.
    [Show of hands.]
    Mr. LAHOOD. Thank you very much.
    The CHAIRMAN. Any other members have any follow-up questions?
    [No response.]
    The CHAIRMAN. I want to thank this panel again for your time and testimony and information.
    I want to take care of a couple of house cleaning duties. First of all, I do not want to be remiss in not thanking North Carolina State University for the use of this facility. Also, I need to mention that in about 15 minutes a number of us are going to have to go to the airport. That does not mean that we will not read with interest your testimony. It is just obviously some scheduling problems. I have a feeling a lot of North Carolinians are going to stay around here, though. So with that in mind, what I will do is, I will go ahead and start this panel and Mr. Hayes will assume the chair.
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    In the meantime, I will be inviting up Mr. John Adams, a pork producer, Snow Hill, NC; Mr. Cecil Byrum, a cotton, peanut and row crop producer from Windsor, Virginia; Mr. Jeff Smith, a peanut, cotton and corn producer from Edenton, NC and Mr. Robert Spiers, a tobacco, peanut and cotton producer from Stoney Creek, VA.
    Mr. HAYES [presiding]. Mr. Adams, we will begin with you, sir.
STATEMENT OF JOHN ADAMS, PORK PRODUCER, SNOW HILL, NC

    Mr. ADAMS. Thank you, Mr. Hayes and members of the committee. Welcome to North Carolina.
    I produce crops and livestock in the little town of Snow Hill, Green County, NC, the most tobacco-dependent county in North Carolina. As a matter of fact, in the Nation. It is about 75 miles east of here.
    I would like to begin and probably you have read these remarks, you have got them in front of you. I want to bring forward the thoughts that America and North Carolina are prospering. That means boom times. The problem here is, the folks in this room, the people with the dirt on their feet and the dust in their hair are being left out of these prosperous times. For members of the House Agriculture Committee, I have got several thoughts. It appears to me half of agriculture is row crop farming. You are keeping those people in business through emergency supplementation and income stabilization projects, but the other half, primarily maybe livestock production has fallen through the cracks here.
    I would like to start some of my remarks on—focus maybe on this Hurricane Floyd event that I was so involved in. In my backyard we had more than 40 inches of rain. Mr. Stenholm, that is a lot of water. In 3 weeks, a lot of water. I want to thank you for your efforts you have done up to this point to help us recover from Hurricane Floyd. Future efforts probably need to be more timely and appropriate. I live in a community where waterfront property took on a whole new meaning. I have got neighbors who 7 months after this event have not received any substantial recovery assistance. That makes bankers nervous. And in agriculture, if you take the credit out of agriculture, we are in deep trouble.
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    You helped the contract producers in livestock production, but you shorted the independents. You need to look at your caps. It is very strange to me, a fellow that lost 300 cows or a couple of thousand head of livestock, $200,000 or $300,000 worth of livestock, you have got a limitation of how much you can recover. That probably drastically affects his ability to continue raising livestock. You need to look at the limitations of gross farm income of $2 million. You can gross $2 million on income and qualify for food stamps. I think you need to look at some of the values of this livestock that was lost. Mr. Stenholm, down there in cattle country, I recognize that cattle are worth $400, $500 or $600 on the open market, but for USDA to tell us these cows are only worth $75, $100 to $125, something is not right with true, realistic values. Pigs that will bring $50 on the open market and you are saying they are worth $3. We need to get some of your programs in line with what modern production agriculture is all about.
    Several people have already talked about the area of regulation this morning. I can just echo what they have said. Agriculture is becoming increasingly more regulated, whether it is tobacco, GMOs, the environment. We all have our challenges here. We currently in agriculture spend on regulations, all kinds of regulations, what we spend on fuel, seed and fertilizer. We want to do the right thing here in North Carolina. We embrace the opportunity to remain responsible environmental stewards, but we need—when these regulations come down, we need the technical assistance, as well as the other resources to help us comply. Help us stay competitive in the world market, do not drive agriculture off shore.
    I want to focus most of my remarks in the area of markets. In the big picture, Mr. LaHood, what can we do to drive agriculture prices higher and what can we do to put most of that money in the farmers' pockets? You have discussed this China thing several times this morning but it has a huge impact on the livestock industry, and in particular the pork industry. So I will not spend a whole lot of time on that. But you need to, in my mind, make sure some of these independent pork producers get a share of this consumer dollar whether that consumer is in China or Chicago. We do not ask to be protected, we do not want to. We want the fair option to be competitive.
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    We have talked about free trade, you have talked about fair trade. We live in the free enterprise system, but it is not quite fair out there at times.
    We would hope in your future programs that you look more at programs that allow the farmers to compete with these other interests that are out there. We hope you would support these cooperative efforts to help the independent livestock producers. I know Mr. Etheridge—I visited with him last fall asking for his support for some of these cooperative livestock functions that we need to compete in the open market with. He said let us do the research, let us find out what the needs are. What we found out was, the livestock processing facilities out there, they are old, they are outdated, they are going to close. We looked at one in Dubuque, IA, Mr. LaHood. There is people looking at it, and it will no longer buy live hogs. It will be turned into a processing facility. We looked at one in Louisville, KY. The city is growing up around it, and a livestock facility in the middle of downtown will not work. So we need some new tools out there, and we think farmers out to own these tools.
    You mentioned the independent live stock producers. There are probably 2,500 to 3,000 pig producers in North Carolina. I venture to say—and it is an educated guess since I do not have numbers in front of me—that a fourth to a third of them are independent producers. North Carolina exports approximately, oh, pushing 5 million hogs to other States. That costs us money in freight. That makes the truckers happy, but it takes money out of our pockets. It makes us not competitive. In the last 2 or 3 years we have sold our animals on a per-head basis for $10 to $15 less per head than people in Iowa and Illinois. That is all right if you are from Iowa and Illinois, but it takes money out of my pocket and it takes away my ability to compete.
    In closing, I would say, do not give me a fish, teach me how to fish, but do not send me out in a leaky boat. Thank you.
    [The prepared statement of Mr. Adams appears at the conclusion of the hearing.]
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    Mr. HAYES. Thank you. Mr. Byrum.
STATEMENT OF CECIL BYRUM, COTTON, PEANUT AND ROW CROP PRODUCER, WINDSOR, VA

    Mr. BYRUM. Mr. Chairman and members of the committee, my name is Cecil Byrum. I raise cotton, peanuts, soybeans and wheat on our family operations in Isle of Wight County, VA located in the southeastern part of the State.
    I appreciate the opportunity to appear before you today and I applaud your efforts to reach out to producers through this series of field hearings you are holding throughout the country.
    You understand that agriculture in the United States is at a crossroads. Farming, as we know it, is undergoing profound changes in areas—in both the areas of production and marketing. Technology, consolidation and global markets are having a profound impact on the way we do business.
    As a cotton producer, I must say that over the past 2 years Congress has worked hard to help us through what have been challenging and often difficult times. You and your colleagues have enacted emergency spending to help offset low prices and weather related disasters. Additional funding was made available for the Step 2 program, payment limitations were doubled and the use of commodity marketing certificates were recently approved. We thank you for your efforts.
    However, I think the focus of these field hearings is an attempt to gather ideas on the long term role of our Government in sustaining an efficient and productive agricultural sector. It goes beyond our individual farms and encompasses the health of our entire communities, the critical role agriculture plays in protecting our environment and the needs to maintain the infrastructure that so effectively moves and processes our products.
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    I believe the will, resources and tools are there to help develop sound, long-term agricultural policy. Yes, we need to think outside the box. At the same time, I am not sure we need to totally reinvent farm policy.
    In this regard, some key elements I believe we need to focus on as we look to reshape farm policy are as follows:
    All production sectors must be offered a chance to participate in this process. I commend this format for that.
    Crop insurance must be refined and tinkered with until we have an actuarially sound and credible program. I hope that we are heading in that direction.
    We must have a level playing field in our global markets.
    In the area of crop protectorants and identity preserved products, science and common sense must rule in decisions you make in Washington.
    Tax reform, especially in the area of estate taxes, must continue.
    We need farm policy structure with a sense of continuity and consistency year to year, ideally based on market conditions. Disaster programs do not accomplish this.
    We must have access to reliable and equitable lending opportunities.
    Finally, risk management tools must play a larger role in the production sector. Many of these tools already exist but are not always used to their full potential. Often they are very complex. They require considerable time and expertise to use day in and day out, and delivery methods are often not readily available to all producers. I believe there is ample opportunity for the public and private sector to work together in getting these products more widely used.
    Farmers are by nature resourceful and independent. We need to remind ourselves that the story of the success of American agriculture is a story of individuals. It is critical that this element not disappear from our farm production landscape.
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    The complexities involved in our feeding and clothing over 270 million people, along with many more millions overseas, will always require you and our elected representatives to be involved in our business to some degree. A government disengaged in agriculture is a government unwilling or unable to ensure the ability of a nation to feed and clothe itself in good times or in bad.
    Farming is a challenging business and we all understand this. At the same time, I believe the future holds great promise for American agriculture. Let's all work together, harder than ever before, to ensure that as farmers our needs are considered and our voices are heard.
    Once again, Mr. Chairman, and members of this committee, I thank you for the opportunity to share my thoughts.
    [The prepared statement of Mr. Byrum appears at the conclusion of the hearing.]
    Mr. HAYES. Thank you, Mr. Byrum. Mr. Smith.
STATEMENT OF JEFF SMITH, PEANUT, COTTON AND CORN PRODUCER, EDENTON, NC

    Mr. SMITH. Mr. Chairman, members of the committee, I am Jeff Smith, a peanut farmer from Chowan County, NC and president of the North Carolina Peanut Growers Association. In addition to peanuts, my brothers and I grow corn, cotton, sage, soybeans, watermelons, cucumbers, wheat, pumpkins, grain sorghum, hogs and cattle. The farmers of North Carolina would like to thank you and the committee for coming to our State and conducting this hearing.
    The past year has been very devastating for most farmers in North Carolina and Virginia. Hurricanes Dennis, Floyd and Irene flooded thousands of acres of crop land. The effects of these disasters will be felt for years to come.
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    In addition to nature's fury, peanut farmers have had to endure the effects of NAFTA and GATT. I am very concerned that as WTO and the Seattle round talks continue, the Peanut Program and peanut farmers will be the losers. I had the opportunity to attend the WTO talks in Seattle. I know some of you had the same pleasure. If you could ignore the demonstrations and the riots, it was obvious that the agriculture community is very diverse when it comes to trade policy. I was able to talk to representatives from Japan and Europe, which gave me a clearer understanding of the importance they place on the economic health of their farmers. Some would call their policies toward agriculture protectionist, I would call them compassionate.
    As a result of the 1999 crop year disasters and low prices, Congress certainly fits into the disaster—into the compassionate category. We are most appreciative of the financial assistance we have received. That assistance has made it possible for many farmers to stay in business.
    What I am most concerned about is my ability to continue to farm when faced with foreign competition and low prices which are the result of subsidized commodities being dumped on the world market. All of us have pulled up a gas station recently and complained about the price, a price that is out of our control because we have become increasingly dependent on foreign oil. The family farm is in danger of disappearing. Food production is different from other sectors such as textiles and manufacturing. The free trade advocates have been successful in moving a large portion of the U.S. textile industry to other countries that have lower wages, labor standards and environmental standards. To do that with agriculture would be a mistake. We must keep the family farm in business in the United States, not just for the sake of the farmer, but for the sake of the American consumer.
    I am proud to be a farmer and to have a part in providing the American consumer with the safest, most abundant and reasonably priced food supply in the world. However, it is becoming increasingly difficult to remain on the farm. The Peanut Program is a life line to many producers. The program ensures an adequate supply of peanuts at a stable price. The American consumer has benefitted from the program.
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    I know that the purpose of these hearings is to gather information and suggestions on how to fix some of the problems that exist in U.S. agriculture. I am here today to discuss peanuts. As a matter of background, let me briefly describe the marketing of peanuts in the Virginia/Carolina area.
    The national poundage quota for peanuts is set nationally to equal the domestic demand for peanuts without regard to type. There are three major types of peanuts grown in the United States; runners, Spanish and Virginia type. North Carolina and Virginia grow mainly Virginias. The current Peanut Program allows anyone to grow peanuts and to market peanuts. If these peanuts are produced under a quota, then they can be marked directly into the domestic market. If grown without a quota, they must go through the producer owned co-op before they can go into the domestic market. This process is called buy back. This process can also be called a safety valve because in years of short production in one area, excess or additional production in another area can get into the domestic market. The buy back is a fundamental and necessary part of the Peanut Program.
    As I stated earlier, the national quota is set without regard to type. Historically, the demand for peanuts produced in the Virginia/Carolina region has been greater than the V/C quota established. During the past 10 years, the average buy back in the V/C area has been 15,800 tons per year. The availability of these peanuts has given stability to the market for the Virginia-type peanuts. It has protected the consumer from price fluctuation. These buy back pounds have not displaced quota; however, in years where losses have occurred in other areas, the V/C co-op has sent our profits to cover their losses.
    The success of the current program has come with cost to the farmers. As a result of the 1995 farm bill, the support price for quota peanuts was reduced from $678 to $610 per ton. The support price was frozen at the 1996 level for the life of the farm bill. There is not a single item I buy on the farm that is the same price it was in 1996. The consumer price index has increased 9.2 percent since 1996, which has resulted in the erosion of the farmers' buying power.
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    As I stated earlier, NAFTA and GATT have negatively impacted the peanut farmer. This impact could be lessened if trade agreements were strictly enforced. United States peanuts must meet the quality standards of Marketing Agreement 146, which has proven very effective in ensuring that U.S. peanuts are of the highest quality. Imported peanuts must meet the same standards. These standards should be strictly enforced by customs. Any effort to change or eliminate these standards should be resisted.
    The Peanut Program is the only agricultural program that provides a stable marketing environment to the farmer at no cost to the taxpayer, and this is done while giving the opportunity to anyone to grow peanuts. The Peanut Program could be a model for other commodities. I ask that the committee support the continuation of the current Peanut Program through the remainder of the current farm bill and be open to improvements in the next farm bill.
    As a member of the National Growers Group, the North Carolina and Virginia Grower Associations are working on ways to improve the current program and will be making recommendations to the committee as we approach the 2002 farm bill recommendations.
    I thank you again for the opportunity to speak to you today.
    [The prepared statement of Mr. Smith appears at the conclusion of the hearing.]
    Mr. HAYES. Thank you, Mr. Smith. Mr. Spiers.
STATEMENT OF ROBERT SPIERS, TOBACCO, PEANUT AND COTTON PRODUCER, STONEY CREEK, VA

    Mr. SPIERS. Thank you, Mr. Chairman, members of the committee and madam. Thank you for this opportunity to present my views of Federal farm policy as it relates to peanuts.
    My name is Robert Spiers and my son and I own a peanut farm in Dinwiddie County, VA that has been in our family for over 130 years. We also raise cotton, soybeans and Flue-cured tobacco. I know first hand the economic importance of the Peanut Program to my family, my neighbors and my State. The Peanut Program continues to provide farmers a stable pricing opportunity for their crop while marketing instability seems to have plagued nearly all of the other commodity sectors.
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    The Peanut Program is very important to the economic existence of communities in peanut country. Farm supply stores, local banks, small country stores and many other service businesses are supported by our ability to make purchases. Likewise, local shellers, warehouses, food processors are a part of this economy. In order for all of us to survive in Virginia and other peanut areas, the continuation of a viable Peanut Program is a necessity.
    It seems that a considerable amount of farm policy discussion has focused on the need to save the small family farm. The National Commission on Small Farms suggest that a small family farm was one whose sales totaled $250,000 or less per year. I would note that fewer than 10 percent of Virginia peanut farms generated enough peanut sales to exceed the Commission's small family farm threshold. Therefore, 90 percent of Virginia peanut farms would fit in this small farm definition based on peanut sales. The Peanut Program is a wonderful tool to ensure survival of these farms. It provides a safety net upon which our family farms are able to market their crop effectively to what has become a few multi-billion dollar international corporations that purchase over 80 percent of the U.S. production. A small farmer would have very limited opportunities to negotiate a price with these huge companies if it were not for the Peanut Program's stability and the support price.
    The Peanut Program has been modified in every farm bill since 1977 in order to maintain our price competitiveness in the world market price and eliminate costs to the Federal Government. We have many distractors and we have had to make compromises to continue our program.
    The 1996 farm bill cut the support price for peanuts, as was mentioned earlier, and transferred costs of operating the program to producers in order that the Peanut Program would continue at no-net cost to the Federal Government. Frankly, these changes were very difficult to accept and removed most of the profit from peanut production.
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    The Peanut Program's current support price level is nearly less than our total cost of production when you assume average production and really during times of drought, it is below our cost of production. In response, peanut producers approved a referendum establishing the National Peanut Promotion Research and Information Order to increase demand for peanuts and increase production research that can help farmers lower cost. This Order is also paid for by peanut producers. In other words, we are trying to develop our own market since we have lost the support of some of the Federal funds.
    In marketing, we are able to utilize the program's buyback provision which acts as a safety valve to allow additional peanuts to be purchased for domestic use to supplement quota purchases if needed. Without buybacks, additional peanuts could only be sold in the export market and probably at a financial loss. The buyback provision is extremely important because it allows the program and the producers to respond to changing supply and demand conditions. This is a fairly technical point, but it is very, very important and if there are any questions, please refer to the grower groups for a complete explanation of the important part that the additionals and the buybacks does play.
    With respect to any future trade agreements, it is essential that the amount of peanuts and peanut products imported not exceed existing levels. These levels were liberally dealt with recently under both GATT and NAFTA, as was mentioned earlier. Peanut producers have not fared very well under GATT and NAFTA.
    Also, since peanuts are a perishable commodity used primarily for human consumption, it is essential that imported peanuts and products be provided adequate inspection and monitoring to assure that they meet strict U.S. quality standards. This was also mentioned earlier and it is very, very important.
    My comment today has focused on peanuts. In the interest of keeping my comments to 5 minutes, I have attached for a written record, several other issues that are important to me and I feel very strongly about.
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    In closing, I would like to say that I have a vision of agriculture in the future. I see many new products that consumers will want and need, such as fuel from plants and medicine from plants and animals. I ask that you work toward developing policies that will help us as individuals and family farmers to remain competitive in what is now a global marketplace, so that we can be a part of this new agriculture.
    Again, I appreciate the opportunity to appear before the committee and the time that you have given me. Thank you.
    [The prepared statement of Mr. Spiers appears at the conclusion of the hearing.]
    Mr. HAYES. Thank you, Mr. Spiers, and I apologize for mispronouncing your name.
    Mr. SPIERS. Quite all right.
    Mr. HAYES. The peanut farmers—now, that is about the only meal that some airlines serve these days and the Federal Government is trying to put us out of that business.
    Mr. SPIERS. There was quite a bit of problem about the allergies and the peanut industry is working very diligently to combat the allergy problem that people have taken—to keep peanuts being used so much.
    Mr. HAYES. Somebody brought us some peanuts today and I thank you. I am not allergic to them.
    A couple of quick things and then I will move on to our other panel members here.
    Hurricane Floyd has been mentioned a number of times today, a terrible tragedy for North Carolina. Another tragedy is the way the press reported what was done as it relates to Hurricane Floyd in the political arena. Sitting on my right, Congresswoman Clayton, I remember very early after all this happened, she called a meeting in Raleigh and FEMA folks gathered, were very, very responsive, but this is a story that our folks need to hear. Your delegation, no partisan ideas at all, got together and went to work immediately for North Carolina's farm families and others that were hurt by the flood. We worked with the Governor, we worked with the State legislature, the private sector. This was something that even though this project is not over yet, all our folks worked together to help our folks at home and I wanted to call attention to everyone here—Representative Clayton, of course Representative Etheridge is still here, but this was a team effort. This is the way you have told us that you want us to conduct our business and I am proud of the things that have happened, and it is an ongoing effort.
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    Another thing, economic impact of agriculture on our economy. They take you all for granted, I know you know this. They kind of forecast on an economic model of 2 percent increase in cost every year, no inflation, no problem. I have asked some of the agricultural economists to provide me with some information, if there was a spike up in prices of 10 percent in 1 year, what would that do to inflation in the economy. We need to make folks more aware of how important agriculture is.
    Another issue, alternate use. Everyone has been unanimous in that we have gone about as far as we can go in asking the farmer to grow alternate crops. We need to put more help into figuring out through research alternate uses of products that you grow. So that is something that I hope we will continue to do.
    We are going to have hearings in our district very soon about this total maximum daily load issue, more regulation from us with no way to compensate you for your time or energy. It is kind of like sending OSHA into your home. It is time we turned that whole boat around.
    But again, we thank you all for being here. We appreciate your efforts and I will turn it over to Congresswoman Clayton.
    Mrs. CLAYTON. Thank you.
    One of the things I would like to ask all the peanut growers, do you want us to modify the current program? I was not sure. I heard, Mr. Smith, you said it had been reduced from I think $680 to $610 and I did not like the reduction but I thought it was a compromise we kind of worked on. And then you went from those kind of two tier, from the high and the low, to we were trying to buy some votes, trying to work the situation out. And I was wondering, is that so unmanageable that you think you want to modify that or you want us to protect what you have under that and try to enhance it without revisiting the whole process?
    Mr. SMITH. Certainly like every other person in the country I guess, we would like to have a raise.
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    Mrs. CLAYTON. I think you are entitled to it obviously.
    Mr. SMITH. But we would like to see it, rather than trying to change peanut policy for the duration of the farm bill we have now, we would like to see this be negotiated and maybe escalated into the next farm bill.
    Mrs. CLAYTON. Price support was what, to year 2002?
    Mr. SMITH. 2002; yes, ma'am.
    Mrs. CLAYTON. OK. So we can think about—are you locked into the lower price as to volume? I thought—you would not have accepted a lower price unless you had some flexibility in terms of quantity. Help me understand.
    Mr. SMITH. I do not understand your question.
    Mr. SPIERS. As I understand what you are talking about is the additional price. We have $600 for the quota and the additional price is basically about $140 or $160. We try to keep from raising as many of the lower priced peanuts by controlling our acreage, but because peanuts are very difficult to really know what the yield is, if we have a good year, sometimes we will produce over our quota and we would have to sell them. We also have the ability to——
    Mrs. CLAYTON. So when you over-sell, that is a lower level?
    Mr. SPIERS. Yes, ma'am, you would end up with a blended price.
    Mrs. CLAYTON. Right.
    Mr. SPIERS. You would kind of average. The only comment that I would make about the Peanut Program in particular, when you describe it to your colleagues. Many people do not like the quota system. Many peanut farmers do not have as much AMTA crops; in other words, the corn, wheat, that they get the AMTA payment. So really, our safety net is the Peanut Program. We do not get AMTA payments for peanuts. So the Peanut Program is our safety net and without that and not having these other crops, we would not be getting hardly any AMTA payments.
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    Mrs. CLAYTON. Let me ask you—I have not forgotten you, Mr. Adams. But let me ask you about trade. I heard carefully crafted words there and obviously you have not fared as you had expected and as was promised under NAFTA and I know a few of the issues, not all of them, and you feel that some of the issues to make you GATT eligible have taken away some of your opportunities.
    Does that suggest that we ought to be careful as we go to China in terms of what we negotiate? I did not see your three hands go up when you say you were against. So what are the things you want us to look at as we look at making sure that we do not repeat some of the mistakes we made when we negotiated the NAFTA and the GATT?
    Mr. SMITH. In talking about China, my hand did not go up. It wanted to, but it did not.
    Mrs. CLAYTON. I hear you.
    Mr. SMITH. We want to just be sure if we do make—enter China into the WTO, that we realize that the door is going to swing both ways. We want to be sure that we are not opening up for their stuff to come here and then our stuff not to come there. Peanuts—China is the world's largest producer of peanuts. We are not going to export a whole lot of peanuts to China. And we do not want them being able to flood our markets so much with their peanuts.
    Mrs. CLAYTON. Well, I hope you all are thinking about what kinds of things you want so you can share with us. I think that would be helpful to us because we invite you to—we do not know all the little nuances, but obviously we cannot put trade barriers there, but we want you to think about that.
    I am just going to take one more moment to talk to Mr. Adams, who I know has been struggling as an independent producer in pork and has raised in his testimony the whole issue of not being provided the same kind of protection as the larger producers, particularly in livestock. What would you have wanted us—what could we do that would have allowed your particular situation to have been addressed? In your testimony, you said that as an independent farmer you lost—or if you were not speaking for yourself, generically, independent producers did not get the same kind of assistance from the Federal Government as others did.
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    Mr. ADAMS. In the Floyd situation?
    Mrs. CLAYTON. In the Floyd situation.
    Mr. ADAMS. You are absolutely correct. You compensated the contract growers for their losses of income.
    Mrs. CLAYTON. What about the contract that enabled them to get and you who lost birds or pork or whatever, as an independent you were not able to get it. What is in the law that gives——
    Mr. ADAMS. In other words, they were able to recoup their income, we lost the animals, we lost our income and we cannot even get our animals compensated for, in an actual market value situation.
    Mrs. CLAYTON. I need to look that up and I guess I will ask our attorney, who is here, just to note that we just need to find what that was.
    Mr. ADAMS. You used a tough word a couple minutes ago, protect us. I tried to relate earlier that it is a free enterprise system we live in and some producers in North Carolina, because back in the late 1980's, there was shots fired across the bow at tobacco, they wanted to diversify their income and they certainly became involved in swine production or poultry production. So I am not blaming the pig problems on the tobacco farmers, but there is a way to look at it that way.
    But as independent producers, we have been denied market access, as the markets have come down fewer and fewer, and it has really impacted our ability to look to the future. We would like to drive these prices higher but put more of that money in our pocket. We need some market access here in North Carolina and in all the east coast. My friends in Virginia and South Carolina also.
    Mrs. CLAYTON. You mean in terms of independent pork producers, you need access.
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    Mr. ADAMS. Yes, ma'am, we are the ones that own the animals.
    Mrs. CLAYTON. Yes?
    Mr. SPIERS. I was just going to piggyback. I think the point that he was also making is that the contractor gets paid per head for growing them. In other words, he got so much per head that were lost. So he got most of his income that he was going to receive. Where the independent producer owned the animal also and the payments were on the order of $5 per head. So he lost the animal. In other words, the company—we will not name particular companies—they, the large companies owned the animals, they were more able to absorb the losses of the animal than an independent producer. They were not compensated for it either, no one was compensated for the animal, but the multi-million dollar corporation, theoretically was able to absorb the loss of the animal more than the independent producer.
    Mr. ADAMS. But back to your word protect, I think as independent producers, be it peanuts or soybeans, wheat or pigs, we would like the opportunity to compete. In other words, we want the options that allow us as farmers to compete on down the value chain to get closer to the consumer. Where our problems are today is the consumer dollar is growing more and more and more and we are not being able to participate and sharing in that consumer dollar.
    Mrs. CLAYTON. I will yield back and if I can get another round, I would appreciate it, Mr. Chairman.
    Mr. HAYES. That will be fine. Congressman Etheridge.
    Mr. ETHERIDGE. Thank you, Mr. Chairman.
    Very quick let me follow-up with Mr. Adams because I read where you talk about the multi-State cooperative effort in terms of the independent. And I think it does not have to be pork, it could be any number of things.
    Mr. ADAMS. Anything.
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    Mr. ETHERIDGE. But let us stick with that specifically because you are talking about currently a $10 to $15 advantage. But it could be different when you are talking about—the real effort comes back to slaughter time.
    Mr. ADAMS. That is correct.
    Mr. ETHERIDGE. It is really diminished in its capacity. That is really what we are talking about, because the integrator has the opportunity from the slaughterhouse to determine who the contractors are who are going to wind up moving their animals, if that be the case. And it could be true of anything else.
    And if you determine who gets access, you can put an independent at a very big disadvantage because you cannot bring your animal at the optimum time, which means you put more feed in your animal and the quality of that animal goes down when it comes to market.
    Mr. ADAMS. We have a very narrow window when we can ship these animals and we are being forced to ship them to other States such as Pennsylvania and Mississippi and Ohio and Kentucky.
    Mr. ETHERIDGE. One follow-up on that and then I want to ask a peanut-related question.
    And that is the fact that if there were opportunities for developing cooperatives who could provide for that, even cooperative slaughtering, if that be the case, with a vehicle not unlike what we do with any other commodities. I mean that is the competition you are talking about.
    Mr. ADAMS. That is correct.
    Mr. ETHERIDGE. We do it with produce, we do it with peanuts, we do it with a number of other things.
    Mr. ADAMS. And normally that cooperative approach is what I am advocating here, this value-added cooperatives and normally we would fund that out of our own pockets, you can probably ask most of these bankers in the crowd here behind me, they will say them pig farmers are about broke. So we may need a little hand up here. We do not want a hand out, we just want a leg up here.
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    Mr. ETHERIDGE. I know exactly what you are talking about. OK, that was what I wanted to get a matter of record because I think that is important because there are places where through type structures and government efforts that has been done.
    Let me ask another question along that line, because you mentioned the negotiation on WTA, but what you are really talking about is permanent NTR with China.
    Mr. ADAMS. Yes, sir.
    Mr. ETHERIDGE. Tariffs to be dropped. Because I think from your testimony you indicated our markets are already open, as it relates to peanuts, to tobacco and to all those other issues. And I think you are right, they are the largest producer, not only of peanuts, but of tobacco also. So our market is already open.
    Mr. ADAMS. Yes, sir.
    Mr. ETHERIDGE. The problem is their market is not open.
    Mr ADAMS. I am hoping you are going to address that.
    Mr. ETHERIDGE. Well, that comes with this. I think that is what your testimony says, that the tariffs then have to come down over 3 to 5 years.
    Mr. ADAMS. That is correct.
    Mr. ETHERIDGE. Which then would make ours competitive; hopefully more competitive because their cost of production is higher.
    Mr. ADAMS. We can compete with the world.
    Mr. ETHERIDGE. OK, that was the point I wanted to make.
    Let me ask my friends here from the peanut area, I think you have made a good case here and I was reading, the issue of—really, Mr. Byrum, I liked the way you put this, you said our farmers are by nature resourceful and independent. I agree with that.
    Mr. BYRUM. Thank you, sir.
    Mr. ETHERIDGE. And you also talk about the need to continue to feed 270 million people. I think that is what agriculture policy ought to be about, we ought to be able to compete for the world market but we ought not to put our farmers in a situation where they are out of business so that we have to import our food and fiber. And I think that would be a great injustice.
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    You also said farming is a challenging business. One of the few businesses where other people set all your prices, what you buy and what you sell. That is unique and I think it is true.
    The question I have as it relates to this, as it relates specifically to peanuts, because peanuts is one of probably two programs that we still have left, tobacco and peanuts, and you alluded to it earlier I think in your testimony about small farms, and all of us have—I grew up on one so I still have sentimental feelings about it, and I agree the definition has changed dramatically but the truth is we still live to some extent with that and a lot of folks still own small plots, even though they may be leased.
    Let me ask each of you, I expect each of you lease some peanut allotment?
    Mr. BYRUM. That is correct.
    Mr. ETHERIDGE. You own all of yours?
    Mr. SMITH. Yes.
    Mr. ETHERIDGE. You are unique. Mr. Chairman, if I may finish this line before I stop.
    Mr. HAYES. You may.
    Mr. ETHERIDGE. As we talk about this issue though, would you agree with the statement were it not for the Peanut Program—and I do not think any of you have tobacco, but you are aware if it were not for those two programs, we would have fewer farmers certainly in the southeastern part of the United States.
    Mr. SMITH. Yes, sir.
    Mr. BYRUM. Yes, sir.
    Mr. ETHERIDGE. And the ones we have would be a lot poorer.
    Mr. SMITH. Yes, sir.
    Mr. BYRUM. Yes, sir.
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    Mr. ETHERIDGE. I remember growing up there was a definition between being poor and broke. We always thought of ourselves as being broke, that is a temporary state of affairs; poor is something permanent, it sort of sticks to you. A lot of farmers talk about being broke, you know there is going to be another pay day and you are going to sell some stuff.
    But that was my point, the allotments have really helped make a difference. It may have had some effect on production, I am not so sure—it has kept the price up, but it gives some stability.
    My point is this now, as relates to all the other commodities we see doing this spiking up and down with the costs going up, can any of you, for other than the major commodity that you produce, whether it is peanuts or maybe even pork, can say that those other commodities are from year to year really making any money, and if it was not for the allotment product, that you would have to stop growing those other commodities?
    Mr. ADAMS. Yes, sir.
    Mr. BYRUM. I can say in my own case there has been many years when peanuts have been the crutch that carried the rest of the operation, but I am sure if peanuts did not exist, we would have to grow something, even trees, something would be grown on the land.
    Mr. ETHERIDGE. Sure.
    Mr. BYRUM. But peanuts have served as a crutch, not only to the farmers but to the infrastructure, the businesses and everything.
    Mr. ETHERIDGE. Sure, and all those other people that depend on it. I think we forget sometimes across this country, it is not just the farmer on the farm, that is the first line, there are all those others.
    Mr. BYRUM. It contributes quite a great deal to the local tax base also, the value, as you all alluded to in the Tobacco Program.
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    Mr. SPIERS. I would just echo that the peanut price support allows you to schedule your imports. You can invest in equipment, you can almost figure out whether to spend input on the crop. In other words, you know that if you get the yield of the correct quality, that you will have a market for it. And many of the other commodities, they just do not have that stability. And I know people do not like supply management but if you can make it flexible enough, we have the 2-price system and that type of thing. You have to determine the number of acres, I mean if you go out and plant too many peanuts, you are going to be broke because your blend price will be too low and all of those things. But you know that you can spend inputs on that crop because you know that if you produce them, you have got a market for them.
    Mr. ETHERIDGE. Thank you.
    Mr. HAYES. Mrs. Clayton, we will do one more round. Do you want to pass some peanuts down to Congressman Etheridge?
    Mrs. CLAYTON. Are these North Carolina peanuts?
    Mr. HAYES. I hope so, or Virginia anyway.
    A couple of quick things here. And thank you all in the audience who have endured a rather long day sitting on these chairs. There is a question I get asked and it is a good question. How about some sort of proposal for income averaging that would be a tax—well, not an advantage, just give some tax help to farmers to help balance out the cyclical nature. Anybody got any thought on that?
    Mr. SPIERS. Are you asking the committee or everyone here?
    Mr. HAYES. Anybody that has got the answer, we will be glad to take it.
    Mr. SPIERS. Well, I do not have an answer, but I have got a thought. The income averaging does help because many years because of commodity prices up and down, you do pay more one year than the next and you run into when to sell a commodity because of taxes, but some of the proposals about I think they call it a farm account, and Cecil and I rode down together and we talked about this today. If we had a way that we could self-insure ourselves to some extent by putting money aside for a rainy day that we did not have to pay taxes on until we drew it out, it would be extraordinarily helpful. That would be something I think would be very helpful. I know we have tried to simplify the tax code but when we cannot really—we do not know our income from one year to the other, it would really be helpful.
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    Mr. HAYES. Congressman Stenholm asked a series of questions across the board, and sometimes a yes or no will not quite answer it. We sort of dissolved into name calling earlier. Congressman Jenkins called Congressman Stenholm a lawyer. I hope you will not hold that against either one. I think we had several recovering lawyers up here, did we not? [Laughter.]
    The question was about PNTR for China. We have talked about it several different ways. Now are you aware that it is not necessary for us to grant PNTR for China to join the WTO? Is that pretty well known? I heard some folks that were not aware of that.
    Now back to his question. It is my opinion that before we grant concessions to China across the board, they should grant some substantive concessions to our agriculture community, our textile community and others. Are there qualifications in your mind on this granting of additional concessions to China in order to draw them into the WTO, or just let them in?
    Mr. SPIERS. Which end do you want to start at?
    Mr. ADAMS. Representative Hayes, I really think this needs to be a negotiated process, but begin with the end in mind of what you want in the final analysis. It is going to take several years to get there and some hard nosed——
    Mr. HAYES. What I am getting at—and somebody earlier referred to it. They are exporting 80-some billion dollars a year to us and last year we exported $14 billion to them. Something somehow needs to address that. Their doors need to be open before we, in my opinion, grant additional concessions to them.
    Anybody else? Mr. Byrum.
    Mr. BYRUM. I would like to say the answer would be a guarded yes, not an unconditional yes.
    Mr. HAYES. OK. No compelling legal authority, right?
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    Mr. SMITH. And I would like to agree with that because, as I said before, we need to be sure that the—that we are playing together. We do not just open up our markets to them and let them send everything over here without thinking about what it is going to do to our farmers here.
    Mr. HAYES. I think we are on the same page.
    Mr. Spiers.
    Mr. SPIERS. It was interesting—since Mr. Stenholm has left, he told us that peanuts were not going to fare well under NAFTA and GATT. I mean, he forewarned us. We knew that. We were a section 22 commodity. We were somewhat protected from foreign competition and NAFTA and GATT has opened it up, but it has been very difficult to transition to world market price with the price structure that we have to face in the United States and the regulations that we have to face. Again, we would hope that they would negotiate some manner that we will not be swept away while we are trying to get our costs more in line with the other foreign competition.
    Mr. HAYES. Congresswoman Clayton, I will yield to you for additional questions or closing statements.
    Mrs. CLAYTON. Well I do have additional questions. I just want to go around. I felt I did not ask the questions on the FSA staffing because there were so many other things and I wanted to make sure of all of them.
    North Carolina has experienced not only the traditional programs that everyone else has because of the emergency programs, price control—I mean, the price reduction where you have increased the AMTA payments, now we have the series of a disaster system that Congressman Hayes talked about, and there will be more because we have just an emergency program. And the Farm Service Agency obviously is the only structure we have to get it out there, and we have not passed the last supplement. We know that all of the temporary help, at least in North Carolina, maybe in other areas. What is your experience in your individual areas of the staff being overworked and needing support? I just want to get that on the record, if you have anything you want to say.
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    Mr. SPIERS. FSA in Virginia, I think, does a wonderful job overall. In my experience, they have tried to combine some of the offices and we are getting some more together. They have mentioned some of the problems that would relate to Virginia, also. Soil conservation districts and NRCS do not always overlap exactly. They do not fit exactly right. Unusual occurrences come up and they are not staffed for those—the things of disaster, and we need to try to get more disaster loans.
    One of the small items that came up was on the tobacco payments. FSA was not exactly involved in it, but they had all of the information, so all of the tobacco farmers flooded into ask them questions. The FSA is a central point in all of the areas and they are a very important infrastructure in agriculture. And when something unusual like that comes down the line, they are not staffed for it. It looks like they are always almost staffed at bare minimum, so they draw more criticism when something unusual comes up. Like you say, they do a lot of things and they are always called upon by farmers and things to do. I was on an FSA committee for 11 years. I know they come out and do time and motion studies and all those type of things. And some of those things that they do for farmers are just not in—and many times they are understaffed in my opinion.
    Mr. SMITH. I think some of the things—if you look at the workload that the FSA office has as a yearly workload, there may be times during that year when they are not real busy, then if you divide how much they have done by how many hours they have worked. But then there is the time—like, I know this fall, the LDP payments on cotton, everybody wanted to do it at one time and it was all throwed in there and it was just—I remember going into the FSA office and there was a stack like this, and they were just taking one off the bottom and doing them as quick as they can. Not that the people in there are not working, or not working real hard, but the farmer outside, he is looking for his money and he wants to know how come I have already done my stuff and I cannot get my money. So it is a two-way street.
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    Mrs. CLAYTON. Well part of the—and I do not want my questions to suggest that I think they are not doing a yeoman's job. I think they are. I think part of the problem we have now responding to the farmers' crisis, we have given demands and raised expectations for farmers to flood the office. I know here in North Carolina, not only the double AMTA payment, the Emergency Program, I am on the Tobacco Relief Program, all of that comes through the Farm Service Administration office and they are providing their tradition of work, the emergency funds and the outside work. And so, I think part of the responsibility with us, if you have a capacity you know is loaded to do a certain amount of work and you double it, and then the clients come in and say I cannot get it because everybody is standing in line. Well, I think we are part of the responsibility as well.
    Now it was a separate question about the overlapping. I think that is true. We need to find how that works out. I do not think it is limited to the State doing it, I just think we need to work with how we configure that. Each county want to keep an office. I can tell you about the politics of that. I think what Mr. Stenholm was making the plea about was, you cannot have your cake and eat it, too. You cannot have every office, in every county and then expect to have enough money to pay the staff. So I think that is what he was making the point. That is a different question from recognizing that farmers are in a crisis mode and therefore, if you have a crisis mode, you give more resources. As you give new dollars, you have to have a way of getting it out there. And so, I want to put it on the record and I want you to give your own experience if there was a need for that, because I have been trying to make that case in Washington. So that helps.
    Mr. ADAMS. I can echo your thoughts there in Green County, which you are very familiar with. I tried—oh, it has been a month ago now—just to walk in for about a 10-minute discovery process on an item. I could not get an answer then. They only schedule appointments and it is 2 to 3 weeks before you can get an appointment. That crowd is stretched, they need some more help. I mean, they are just shutting the door on Wednesday afternoon and cutting off the phone lines so they can attend to paperwork. They have been overburdened between the traditional work, as well as the tobacco work and the emergency work. So I can echo your concerns completely.
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    Mrs. CLAYTON. Mr. Byrum.
    Mr. BYRUM. The particular FSA offices I deal with has not been a problem. The adjoining county, it is a problem. They have their brown days, the days that they close to the public, where they work—so they do not have to answer the telephone or go to the counter. I do not know what the answer is. I would like to say that we are asking a lot—Mrs. Clayton, when you made your statement, I did not have anything to say after that. We are asking these people to implement double programs, an incredible amount of work with the same staff. The offices are not necessarily under staffed with a normal workload. We just keep asking more out of these people, and I wonder how some of them get along as good as they have.
    Mrs. CLAYTON. Mr. Chairman, I yield back my time.
    Mr. HAYES. Congressman Etheridge.
    Mr. ETHERIDGE. Thank you.
    Let me ask each one of you very quickly—I am going to try to use my time as efficiently as I can. That is hard to do in 5 minutes. Be thinking how many times you visit the FSA offices in your county. I have got an idea in tobacco producing areas, because they have got to have precompliance and they have got to have compliance and then they have got to go and get their sales card, et cetera. But as it relates to the peanut areas, how many times do you go to the FSA office with various commodities each year, roughly?
    Mr. BYRUM. Probably half a dozen times a month.
    Mr. ETHERIDGE. About the same?
    Mr. SMITH. About 10.
    Mr. SPIERS. Quite often during the growing season. Five or six times a month.
    Mr. ADAMS. I can echo the six. Half a dozen times a year.
    Mr. ETHERIDGE. See, I raised that to get it on the record simply because if you are in the Midwest and you grow one commodity and you do not have it, then you do not need to go. So I think this is the kind of thing that we need people in Washington to understand, there is a difference in each region of the country, especially when you have a product that has an allotment and control. Plus, you have got all the other variety of crops we have in North Carolina and certainly in the Southeast, Virginia, Tennessee and others.
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    The other point deals with workload of staff. The workload of staff was set in a bill—in the last farm bill, 1994–95, when they were phasing out programs and going freedom to farm and ultimately were not going to have all these things we have had. We have disasters, as Representative Clayton has talked about, and somebody has got to administer them. So ultimately what has happened, the staff has been reduced but the workload has gone up. By and large, that is what has happened. And it is nice to have computers, and they are great tools, they just need someone to operate them. And even in our case, where you get a day as a farmer, you are supposed to go ahead and do your stuff, and you cannot always do that. There are times when you cannot make it, and so all of a sudden you get the whole system messed up. So we have to work through that.
    Let me touch one other point and then I will yield back and try to give some of that time back. And this deals with—I was listening and reading the testimony earlier as we were talking about PNTR with China because that has come up several times. It relates to the opening of markets, an opportunity for—market access, I guess I should say, for 1.2 billion people. And tobacco folks are interested, peanuts, everyone else is for that matter, because there are more people in China that smoke than we have people in the United States. Even though they are the largest tobacco producer, the issue still is, our market is open now. From what I have been reading, we are already open. The question is, in this dialogue, the negotiation has been done. I think I am correct in this. The only thing that has to be negotiated now is what Europe is negotiating as it relates to the protocols, the tariff barriers, and anything anyone else gets is lower. But my understanding for agricultural products is how quick they lowered their barriers for our commodities to get into China. And if we hope to reduce the balance of payments with our products, we will reduce that balance of payment by lowering those tariff barriers over there, ours are already down. So from what I read and understand in the material I have got here, this is one of those few things that we get all the benefit, supposedly. We have to market it, but we do get the benefit, because we do not have to give up any market access. They have to give up market access. Is that your understanding of it? From everything I have read, that is my understanding.
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     Whether or not this is as good a deal as we can get, I do not know. It is just what we have negotiated. There might could always be a better deal, but that is what we have negotiated. So, I think the issue is, do we—do we now—and I think most folks agree—do we now move forward with an issue that hopefully can help our agricultural community. I do not believe that this will be the answer to all of our problems. I think we need to understand that. It maybe will give us access to a market, but we have got a lot of other things we have got to do.
    Thank you for coming, thank you for your testimony. Hopefully this, along with all we have heard and will hear over the next few months, we can try to write a farm bill that will fair not only to people who produce, but also our consumers, and we can allow our producing community in this country not just to survive. I think it is not fair just to survive. They need to thrive like people on Wall Street. It is about time they have a chance to make a good living.
    Thank you, Mr. Chairman. I yield back.
    Mr. HAYES. Congresswoman Clayton, do you have anything else?
    Mrs. CLAYTON. I think the record will show that there is a reason why we are protecting the farmers, to use the word. I should just say give you a competitor. We are protecting our own self interest, not only because of food and fiber, which is basic to life, but when we try to protect the place of agribusiness in North Carolina, we recognize that this is an economy of some $43 billion, representing 22 percent of the work force. So this is not an insignificant industry you have great reason to protect, because the rural communities are dependant upon a stable and viable—not just surviving, but viable economy.
    Second, agriculture turns over many, many times. The dollars from agriculture is reported to turn over—some say 8 to 10 times. Well if you cut that dollar off, no more peanuts. Well, it is not just the peanut farmer, but it is also is the supplier. The person that sells appliances, also the banker. It is the school board that depends on the tax value. So there are a lot of reasons why we want to protect this industry, and it is not limited just to the farmers. It is a significant integrated economy and it is certainly significant in the State of North Carolina, Mr. Chairman. So we are talking about essentially a substantial part—not only traditional, but of a future and current. So we want to protect our opportunity in the future not only for these farmers to produce, but for others to produce, because we want to maintain our rightful place as a viable agriculture community.
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    Mr. HAYES. Thank you, Congresswoman Clayton. Congressman Etheridge. I think we have all said we are encouraging our farmers in order to protect our country.
    I want to thank all of you once again. I particularly want to thank our staff on the Agriculture Committee for being here early, setting up, and being here after we are gone in order to take down. Just so that you know, there was a threat of an airline strike when the committee was trying to set its schedule. So that is why some of the members had to leave a little earlier, because of airline commitments, with that cloud hanging over our head.
    With all of that having been said, this completes the witnesses' testimony for today's hearing. The period in which the record will remain open for additional written testimony is another 20 days. If you have written testimony you want to submit because of things you have heard, ideas you have gotten today, or you are just a little bit behind, the period will stay open for 20 days for additional written testimony. And with all of that, the hearing of the Committee on Agriculture is adjourned.
    [Whereupon, at 2:42 p.m., the committee was adjourned, subject to the call of the Chair.]
    [Material submitted for inclusion in the record follows:]
Statement of William R. Johnston
    Mr. Chairman and members of the committee:
    I am Bill Johnston, a multi-crop farmer from Northampton County in the First Congressional District of North Carolina that is represented by Congresswoman Eva Clayton. My farming enterprises consist of cotton, corn, small grains, peanuts, soybeans and cattle. In addition to my affiliation with other farm organizations and groups, I am currently vice president and member of the Board of Directors of the North Carolina Soybean Producers Association. I am here today as a bona-fide farmer as well as a representative of one of the State's commodity organizations addressing what I and my neighbors feel are some of the problems and some possible opportunities for soybean farmers here and across the Nation as you address some of the problems of the 1996 farm bill.
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    Following are some of the many areas of concern from my neighbors and myself:
     We need a level playing field for U.S. farmers who are in world competition for export markets. Too often our rules, regulations and constraints tie our hands and raise our cost of production relative to our world competition. The immediate crop season has a dismal outlook for us as we already face rising costs for fuel, labor and interest on borrowed funds to operate, while commodity prices are projected to be lower or, at best, flat. Congress needs to develop some kind of safety net if farmers, especially here in the Southeast, are to remain in production. This could include, but not be limited to, higher loan rates, direct payments, or a counter-cyclical income support program with no payment cap.
     Something needs to be done, and done quickly, to resolve concerns of consumers around the world over the bio-technology issue. And further, it is an insult that U.S. growers are paying high technology fees and patent royalties on seeds and products to multi-national companies in our country while those same organizations often allow their products to be used abroad at nearly no added costs, thus reducing our overseas competition costs for such products to less than half what we have to pay!
     We are concerned about the rapid consolidation of agricultural suppliers, handlers and manufacturers of agricultural commodities which is pushing farmers inexorably toward vertical integration, contract farming and loss of open market access.
    In addition, consolidations create less competition for such farm input needs and markets for our commodities, thus putting greater economic pressures on farmers from all sides. Congress should appropriate funds and enact legislation to ensure that farmers are not involuntarily put out of business from monopolistic practices.
     The current farm bill has many problems. The so-called Freedom-to-Farm has turned into a nightmare for many of the nation's farmers who have faced weather-related problems of unimaginable proportions, especially here in the southeast where drought and multiple hurricanes have drastically reduced yields, all at a time of lowest commodity prices we've seen in decades. The current commodity LDP program seems to us to be turned upside down by heaping extra rewards on farmers who have extra good yields, and denying any significant benefits to those of us whose crops were highly impacted by adverse weather. However, the LDP has been a lifeline that has kept many of our local farmers in business and we are thankful to Congress for the program. I have personally thought that Congress might also tie some type payment enhancement to farmers who voluntarily participate in marketing training, inasmuch as all too many of us are poor marketers.
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     The crop disaster insurance program for farmers in this part of the country is nearly meaningless. We need a meaningful program that is affordable and can help our good farmers to overcome adverse weather or market conditions beyond their control. The program should be designed to eliminate potential for fraud or mismanagement.
     Congress needs to complete its commitment to expand world market opportunities for U.S. agricultural commodities through vigorous programs that get our products into the world markets. And Congress and the Administration should work to establish normal trade relations with such nations as China, whereby we can sell our way out of the current low price situation facing farmers.
     Many of our local Farm Service Agency offices are overloaded, and it seems that staff is continually working in a crisis mode shuffling paper that only gives minimal assistance to farmers. Office staffing should be based on documentation load, not on acres of crops in the office's jurisdiction.
     Finally, Congress must increase funding for research, not just for soybeans but for all agricultural needs.
    Mr. Chairman, there are other issues that my neighbors and I have discussed, but your time constraints won't allow me to discuss them today.
    Thank you for bringing this field hearing to our State and thank you for permitting me this opportunity to speak.
     
Statement of Earl Hendrix
    Mr. Chairman and members of the committee:
    I am Earl Hendrix, a multi-crop farmer in partnership with my son, from Hoke County in North Carolina's eighth district. Our farming enterprises consist of tobacco, cotton, corn, small grains, soybeans and a contract swine unit. In addition to my affiliation with other farm organizations and groups, I currently serve as one of two members from North Carolina on the United Soybean Board as a charter member. Hence, I am here today as a bona-fide farmer as well as a farm organization leader in addressing what I perceive to be some of the problems and some possible opportunities for soybean farmers here and across our nation as you go about enacting constructive changes to the 1996 farm bill.
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    I see agriculture's position in our national economy today somewhat like Charles Dickens described economic conditions in his mid-eighteenth century novel ''A Tale of Two Cities'' which opened with the classical quotation, ''It was the best of times, it was the worst of times.'' As you know, he was comparing the economic conditions prevailing in London, England and Paris, France for that period. Today, as we speak, it is generally the best of times in the non-agricultural sector of our economy, but approaches the worst of times for farmers since the great depression of the early thirties, especially here in the Southeast.
    So what can I say in 5 minutes that will add some light to your path in terms of a Congressional ''fix'' for our many problems?
    First, you already know about the very low commodity prices that seem universal throughout most sectors of agriculture. Farmers need some type of an effective, workable program to help ensure stability through such price dips and severe weather-related production problems as we have experienced here in North Carolina over the past four years! Congress needs to provide a meaningful ''safety net'' lest the Freedom-to-Farm philosophy destroys much of the asset value of our nation's farm families. While I continue to support the general principles of the 1996 farm bill, Congress should complete its commitments under the Act which included increased funding to expand ag export opportunities for our basic commodities and an effective ''safety net'' to give farmers economic stability during times of low prices, weather-related disasters, or a combination of both as we have experienced here in the Southeast.
    One thing farmers in this part of the Nation repeatedly focus upon is the relatively ineffective Federal Crop Insurance Program which, for all practical purposes, is nearly useless in this part of the country. A former OMB Director, Bert Lance of Georgia, also made an immortal statement: ''If it ain't broke, don't fix it!'' I would submit, however, that our crop insurance program, as currently exists, is broken and is in desperate need of fixing. Yes, there is room enough all around to point fingers about the insurance program including fraudulent claims and administration which I am sure you have heard repeatedly. I am just here to tell you that the current program is basically of little help to farmers in our area, and probably everywhere, and is a prime target for meaningful and affordable correction.
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    As chairman of the United Soybean Board's Production (Research) Committee over the past five years, I would be remiss if I did not make a strong plea for increased Federal research funding for agricultural production and product development. Research has been key to the United States maintaining its leading position in world exports of agricultural food and fiber products. If we are to maintain this front-runner position, we must increase Federal funding for research efforts through USDA's basic Agricultural Research and Forestry Research Services programs and through competitive grants efforts. Failure to support world-class agricultural research will contribute to loss of markets and balance-of-trade benefits as we see our agricultural production opportunities shift to other countries.
    Finally, I would like to reemphasize the need for enhancing export opportunities for U.S. Agriculture through Federal policy. Congress and the Administration should redouble efforts to open export market possibilities with such nations as China by expeditiously extending Normalized Trade status and allowing China to become a member of the World Trade Organization (WTO).
    Mr. Chairman, there are many other issues which could be discussed here today if time were available. I'm sure you will get some wonderful ideas from other scheduled speakers. I thank you , on behalf of all our farmers, here and across the country, for holding these hearings to focus on a very important sector of our economy that is not sharing equitably in our nation's unprecedented prosperity!
    Thank you.
     
Statement of Ronnie Burleson
    Mr. Chairman, members of the committee, I am Ronnie Burleson, a cotton, corn and soybean farmer in partnership with my brother and I hope to include my son at some time in the future. Thank you for this opportunity to address you today concerning Federal agricultural policy.
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    Recent challenges to farmers such as low commodity prices and increased operating costs have already forced inefficient farmers from farming. I consider myself to be an efficient farmer, but I also am struggling with low commodity prices, and environmental regulations that are destroying my profit potential in farming. I need an efficient farm program that will help me through low prices and weather events. I am faced with a number of challenges and my survival depends on farm programs that provide long term, stable and sensible solutions that will allow me to continue farming and for my son to be able to farm after me.
    The farm bill should include mechanisms that encourage and enable young farmers to get started in agriculture, (for example new enterprise development, elimination of inheritance tax for farm transfer within a family, tax incentives, grants and low interest loan programs); and the need to access Federal programs that are based on the reality of modern farming operations. For example, payment and income caps must be more realistic and the farm bill should use net income versus gross revenue.
    We need to recognize the value/size of family farms (including cooperatives) in transitioning from small operations to larger farms. For example, they need to remain eligible for benefits of the farm program.
    The regulatory cost of operating my farm is being absorbed by me entirely and I can't pass it along. I have been told that regulatory costs to farmers was almost $22 billion in 1999. A new farm bill needs to provide some relief in the regulatory cost to me. I support a safe food supply and also a healthy farming environment in this country. But I can't continue to absorb all of these regulatory costs to my bottom line when they mutually benefit the entire public. We need to fund and encourage non regulatory (incentive based) BMP's (for example making available cost share money to allow farmers to implement conservation practices).
    Any new farm bill needs to adequately fund research through land grant universities to continue technology development through public domain. A farm bill needs to address the issues concerning genetically enhanced products such as to who owns patents and associated technology, and ways for the farmer to capture the value added costs associated with crops produced through biotechnology (i.e., cooperatives having access to federally funded research and product patents).
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    My final concern is that in trying to expand my operation and bring my son into farming, I try to acquire another farm and find that this farm has not been participating in the farm program and therefore is ineligible for current farm program benefits. Even if I combine it with my current farming operation, it remains ineligible for any program benefits, other than planting it to a particular commodity. All commodities grown or raised by a farmer, regardless of where they live in the United States, need to be included in the next farm bill. I just want a farm bill that is comprehensive, that will provide a reasonable risk management program with a reasonable and adequate safety net to protect me from weather and other perils and that will allow my family to stay in farming.
     
Statement of Cecil Byrum
    Chairman Combest, members of the committee, my name is Cecil Byrum. I raise cotton, peanuts and soybeans on our family farming operation in Isle of Wight County located in the southeastern part of Virginia. I appreciate the opportunity to appear before you today and applaud your efforts to reach out to producers through these series of field hearings you are holding throughout the country.
    You understand that agriculture in the United States is at a crossroads. Farming as we know it is undergoing profound changes, in both the areas of production and marketing. Technology, consolidation and global markets are having a profound impact on the way we do business.
    As a cotton producer, I must say that over the past 2 years Congress has worked hard to help us through what have been challenging and often difficult times. You and your colleagues have enacted emergency spending to help offset low prices and weather related disasters, additional funding was made available for the Step 2 program, payment limitations were doubled and the use of commodity marketing certificates was recently approved. Thank you for your efforts.
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    However, I think the focus of these field hearings is an attempt to gather ideas on the long term role of our government in sustaining an efficient and productive agricultural sector. It goes beyond our individual farms and encompasses the economic health of entire communities, the critical role agriculture plays in protecting our environment, and the needs to maintain the infrastructure that so effectively moves and processes our products.
    I believe the will, resources, and tools are there to develop sound, long-term agricultural policy. Yes, we need to ''think outside the box.'' At the same time I am not sure we need to totally reinvent farm policy.
    In this regard, some key elements I believe we need to focus on as we look to reshape future farm policy are as follow:
     All production sectors must be offered the chance to participate in this process.
     Crop insurance must be refined and tinkered with until we have an actuarially sound and credible program; I hope we are heading in that direction.
     We must have a level playing field in the global marketplace.
     In the area of crop protectorants and identity preserved products, science and common sense must rule in decisions you make in Washington.
     Tax reform, especially in the area of estate taxes, must continue.
     We need a farm policy structure with a sense of continuity and consistency, year to year, ideally based on market conditions; disaster programs do not accomplish this.
     We must have access to reliable and equitable lending opportunities.
     Finally, risk management tools must play a larger role in the production sector. Many of these tools already exist but are not always used to their full potential. Often they are very complex; they can require considerable time and expertise to use, day in and day out; and delivery methods are often not readily available to all. I believe there is ample opportunity for the public and private sector to work together in getting these products more widely used.
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    Farmers are by nature resourceful and independent; we need to remind ourselves that the story of the success of American agriculture is a story of individuals. It is critical that this element not disappear from our farm production landscape.
    The complexities involved in our feeding and clothing over 270 million people, along with many more millions overseas, will always require you, our elected representatives, to be involved in our business to some degree. A government disengaged in agriculture is a government unwilling or unable to ensure the ability of a nation to feed and clothe itself, in good times and in bad.
    Farming is a challenging business; we all understand this. At the same time, I believe the future holds great promise for American agriculture. Lets all work together, harder than ever before, to ensure that as farmers our needs are considered and our voices heard.
    Once again thank you Mr. Chairman and members of the committee for this opportunity to share some of my thoughts and concerns.
     
Statement of Pender Sharp
    My name is Pender Sharp. I am a farmer from the coastal plains of North Carolina. More specifically, my community is Rock Ridge, an unincorporated neighborhood that is home to the best tobacco and sweet potato land in the world. It is also the home of North Carolina's great Governor, Jim Hunt. We are a fine community, boasting of the best farmers anywhere in the nation. And, more recently we have become the destination of choice for drought, heat, hurricanes, floods, and now snow storms. I have advice for John Hope on the Weather Channel; when hurricanes brew up in the Caribbean, don't tell me where it's headed (I already know it is on its way to Rock Ridge), just tell me when it's coming!
    I farm with my father and brother in a 5-generation family farming corporation. My two sons, both North Carolina State University graduates, are also actively involved in our business. We farm 1,500 acres of crops including tobacco, sweet potatoes, cotton, cucumbers, corn, wheat, soybeans, cantaloupes, and strawberries. We also have a 2,000 head swine operation. Tobacco continues to be our primary cash crop accounting for nearly 35 percent of our net income.
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    Record low commodity prices and recent disasters, bring to the forefront the many shortcomings of our current Freedom to Farm agriculture policy. As we address all of these most important issues, we must also reform the Federal Crop Insurance Program.
    Problem: Crop insurance today offers minimum protection on some crops at rates that are too high for the coverage received.
    Solution: Lower cost to the taxpayer and the farmer by eliminating all opportunities for fraud. Insure crops by Enterprise Units instead of farm serial numbers. Use producer proven yields instead of allowing producers that never make a crop to use a county yield that is higher than their historical production. All crop insurance should be Revenue Based. It is immaterial whether I produce 20 bushels of soybeans per acre because of bad weather, or 40 bushels per acre because of good weather. What is extremely important to my banker and myself is that I receive $180 per acre in gross revenue for my soybeans.
    Problem: Fraud is prevalent in the system. Insuring crops by FSNs opens opportunities for the unscrupulous to transfer production from one farm to another. In this government/private sector partnership, the government basically shares a greater portion of the risk than the insurance companies. There are even stories about insurance agents showing farmers how to beat the system and receive payments, suggesting that as long as profit is the motive for delivery, moral risks will continue to exist.
    Solution: Some things can be more efficiently operated by the private sector. Crop insurance is not one of those things. A strong relationship between Risk Management and the Farm Service Agency is the best way to administer crop insurance. Producers need a risk management advisor who is not profit driven, to assist them in evaluating and planning their risk management strategy. FSA data collection, along with its compliance division, working with a strengthened Risk Management enforcement division, could best provide crop insurance credibility. Under enterprise unit protection, FSA could help identify various entities that may have been created to avoid payment limitations. They need identifying so as to determine the entire production of an individual farmer's crop.
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    Problem: Not many crops that are currently grown in the Southeast are covered by crop insurance. NAP (Non-insured Assistance Program) is a poor excuse for providing a safety net of protection for farmers growing non-insured crops.
    Solution: Crop insurance should be provided for all crops. FSA is called upon nearly every year to establish historical yields and reasonable price levels for all crops under various disaster programs. This same data and procedure could be used to establish a crop insurance program for all of these non-insured crops.
    In addition to securing a safety net that provides income to allow farm families to survive in times of need, either from low prices or natural disasters, crop insurance must be reformed in order to ensure that it is affordable and includes all crops. This would allow for financial stability in the agricultural community and accountability to the taxpayers.
    There are many concerns within the agricultural community. We must address all of these issues immediately. A financially healthy rural America is in the best interest of all our society. It will cost taxpayers less to do it right than to continue to do it wrong.
    Thank You
     
Statement of John Ashe
    Mr. Chairman and members of the committee,
    My name is John Ashe. I am a small family farmer from Rockingham County—the northern Piedmont region of our State. I raise mainly tobacco, but also grow wheat and soybeans. I have been engaged in farming as my livelihood for my entire adult life and hope to continue to do so for many years.
    Let me start by expressing my appreciation for your holding this hearing in our great State and for your attendance. North Carolina has one of the most diversified agricultural economies in the Nation. A large part of our State is dependent upon agriculture and we're proud of our rich heritage of producing food and fiber for consumers in this country and around the world.
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    As you know, North Carolina ranks first in the United States in the production of tobacco. Gross marketings of Flue-cured tobacco in the U.S. in 1997 totaled 1.1 billion pounds for a market average of $172.43 per 100 pounds. The gross value of this crop totaled nearly $2 billion—$1.27 billion in North Carolina alone. The average dollar paid to the tobacco farmer changes hands within their communities at least four times; therefore, Flue-cured tobacco farmers generated over $7.6 billion in goods and services throughout the southeast.
    Very frankly, there is no substitute for tobacco production in the small family farms throughout the southeast. Income from tobacco pays for the large diversification of crops and livestock on many small farms throughout our State. To be perfectly candid, without tobacco, most of these farmers would be out of business.
    As you know, the quota assigned to Flue-cured tobacco farms has decreased dramatically over the past 3 years—a total of 53 percent since 1997. These cuts obviously indicate a decrease in the market for U.S. grown tobacco, but it means a very substantial decrease in the cash flow of my farm and thousands like me. How many businesses could sustain a 53 percent decrease in our gross sales in three years and still be profitable? As you might image, this is a time of extraordinary stress for most farm families.
    Take my own situation for example: in 1997 the Flue-cured tobacco allotment was 50 acres and 125,000 pounds. This year, I will be allowed to plant only 27.9 acres of Flue-cured tobacco and market 69,775 pounds. The best management and the most strenuous belt tightening will not be able to make up for this shortfall in my cash flow.
    One of our primary challenges to provide stability in the Tobacco Program is to reduce the inventories currently held by our tobacco cooperative. Legislation to provide incentives to tobacco companies to purchase these stocks is urgently needed.
    Moving this stored tobacco into the trade is the first step, but, clearly, in order to ensure the survival of many of our family farmers, we must increase the market for our tobacco crop. Since domestic cigarette sales are declining, exports represent the best potential for growth in the tobacco industry. In 1997, U.S. exports of unmanufactured tobacco products were valued at $6.5 billion and tobacco and tobacco products made a positive contribution to the nation's trade balance of $4.9 billion. But more can and must be done to increase our markets for this valuable commodity. Additional export promotion programs by the government could have a dramatic potential impact on the future of our industry.
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    Although American tobacco is receiving increased competition from off shore producers, particularly China, Brazil, India, Turkey and Zimbabwe, there is no doubt that we maintain a significant advantage in quality. Our tobacco is viewed, without question, as the best in the world and we need to make every effort to ensure that this reputation is perpetuated. There should be no question that for every pound of tobacco our American farmers don't produce one of these foreign counties will assume that share of the world market. We must maintain our competitive edge as we attempt to do for all other exports.
    One issue that must be addressed is how to remove certain identified toxins in tobacco products. Recent research indicates that Tobacco Specific Nitrosamines are a contributing factor in the risks associated with smoking and the use of tobacco. Tobacco that is low in nitrosamines is visually indistinguishable from tobacco that is cured traditionally. Therefore, an effort is underway to convert the burners in existing bulk barns with new heat exchangers to lower the nitrosamines. It will cost approximately $5,000 per barn to make this necessary change and even more for those producers, many who farm in my part of the State, who still use the traditional stick barn method of curing. At present, cigarette manufacturers believe there will be a shortage of these improved exchangers to meet the demand. We salute the assistance of the tobacco companies and the Flu-Cured Tobacco Stabilization Cooperative for providing funds to defray the expense of converting the barns.
    However, more can be done, especially with government-funded research into this and other tobacco related issues to ensure that our farmers continue to produce the best quality tobacco in the world.
    In closing, let me share with you the impact that tobacco has on the economy of the United States. Total employment from tobacco and related businesses is over 1.8 million persons. The compensation paid to these workers exceeds $54 billion and the tax revenues generated at all levels of government are almost $36 billion.
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    I trust you share my concern for the future of this important industry and will continue to work for our family farmers as we struggle with the unique demands of our livelihood.
     
Statement of James Pate
    Mr. Chairman, ladies and gentlemen of the committee, we welcome you to North Carolina. We thank you for your support of agriculture in North Carolina. We have experienced three consecutive years of summer droughts and fall hurricanes, which along with cheap commodity prices have been devastating to the agricultural economy in this State. Without the doubling of the Freedom To Farm payments and the Federal Disaster Programs we would not have survived. We aren't in good financial condition, but at least we are in a position to try again and hope for a better year.
    This morning I would like to address an area of significant importance to North Carolina, the production of Flue-cured tobacco. North Carolina produces approximately two thirds of the Flue-cured tobacco grown in the United States, and it is all grown under a Federal Tobacco Program. The Federal Tobacco Program was established in 1938 and without question has been the most successful farm program in the history of this nation. It has worked and worked well for over sixty years. It has been a non-net cost to the Federal Government since 1982, with the exception of the administrative costs of the program and the Federal Crop Insurance subsidy. As with any program, as time passes, changes need to be made to keep the program viable. We realize that now may not be the most opportune time to try to make the needed changes due to the climate in Washington regarding tobacco, but if the program is to survive we will have to address these changes in the near future.
    There is one problem that needs and deserves our immediate attention, that being our foreign trade policies regarding tobacco. For several years the U.S. Congress and the Administration have taken a dim view of U.S. tobacco producers' participation in international trade. Tobacco's exclusion from trade enhancement programs such as GSM 102 and 103, and the lack of interest, in general, of any trade issues regarding tobacco have seriously injured our balance of trade and more importantly, the rural economy of tobacco producing States. There is a wide and prevalent misconception in both Congress and in the current Administration that the correct course of action is to take every measure possible not to export tobacco. This is a misguided notion and has no sound basis in reality!
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    Government officials should take a more practical approach to tobacco issues. People worldwide will continue to use tobacco products for decades to come, and it makes sense for our tobacco producers to participate in trade, utilizing the same assistance that producers of other commodities enjoy. Our Congress and Administration should recognize that tobacco produced in the United States is produced under the most rigorous standards in the world. For instance, agricultural chemicals used in the U.S. to produce tobacco undergo closer scrutiny than chemicals used to produce food for our tables. The Federal Tobacco Program incorporates the proper use of these chemicals into the tobacco producer's eligibility to participate in these programs. The result is that no other tobacco producing country in the world can or will meet the same standards. The reality is that current U.S. tobacco trade policy causes far more harmful tobacco to be exported by our international tobacco producing competitors. This ill-forged policy has serious consequences for U.S. tobacco producers and potentially devastating consequences for the U.S. consumer of tobacco products due to a flawed imported tobacco policy.
    U.S.D.A.'s Agricultural Marketing Service samples and tests imported tobacco for about twenty chemicals banned for use in tobacco production in the United States. There are literally dozens of other chemicals used world-wide in the production of tobacco for which U.S.D.A. does not test. These chemicals are not approved for use on tobacco produced in the United States. U.S. trade policy toward tobacco could remedy this situation. Imported tobacco needs to meet the same standards as U.S. produced tobacco. We are in a situation in which we allow tobacco to be imported from countries that restrict the importation of U.S. produced tobacco and at the same time, these very countries don't even come close to meeting our standards for agricultural chemical use. Our trade negotiators have misguided priorities with regard to the entire range of tobacco trade issues. Congress should take the opportunity to rectify some of these wrongs.
    In the near future, tariff-rate quotas for imported tobacco will be re-negotiated. The U.S. Congress and our trade negotiators should take two positive actions. The first action should be to make all imported tobacco follow the same exacting standards by which U.S. tobacco is produced. This is not just a trade issue, but an issue of protecting U.S. consumers of tobacco products. Secondly, tariff-rate quotas were designed to protect U.S. producers from competitive advantages of offshore producers. Competitive disadvantages result from our international competitors using cheap labor in ways that would be considered illegal in the U.S. and the implementation of production short cuts such as the use of inexpensive chemicals not approved by our E.P.A.
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    On September 13, 1995, President Clinton announced Tobacco Tariff-Rate Quotas to replace the GATT illegal Domestic Content Law that was enacted by Congress in the fall of 1993. Originally, total tobacco imports from countries with a tariff-rate quota were approximately 27 percent of the total U.S. Flue-cured and Burley basic quotas. Even though total imports have exceeded the tariff-rate quota from the on-set, there is no penalty applied because these excess imports were being manufactured into cigarettes for export and thus eligible for the duty-draw-back provision. Now that cigarette exports have greatly decreased due to U.S. cigarette manufacturers moving that component of their production off shore, general tobacco imports have not decreased proportionately. With U.S. Flue-cured and Burley tobacco quotas reduced from the effects of the recent Master Settlement Agreement, the ratio of tobacco imported into the U.S. under tariff-rate quotas is somewhere between 36 and 50 percent of the total of U.S. Flue-cured and Burley basic quotas. I think this shows a clear intent for U.S. cigarette manufacturers to take advantage of that increased ratio of foreign grown tobacco to domestically grown tobacco in order to help absorb the costs of the Master Settlement Agreement on the backs of U.S. tobacco producers. This is devastating for our tobacco producers and it's bad for our consumers. When these tariff quotas are re-negotiated, we should reduce the amount that is allowed into the U.S. until they approximate the same ratios as when tariff quotas were originally implemented.
    In closing, the People's Republic of China exports tobacco to the U.S. In fact they are now the fourth largest importers of tobacco into the U.S. However, for many years China has used an artificial trade barrier to prohibit the importation of U.S. produced tobacco. At issue is a plant disease called Blue Mold that occurs in the U.S. and many other parts of the world. U.S. and Chinese scientists have collaborated for several years now to resolve the issue. In essence, the Chinese have insisted on a protocol that demanded that we prove a negative. This is an obvious stalling tactic. In the meantime, other bogus phytosanitary issues with the Chinese have been resolved due to the current Administration's strong support. Again, tobacco was sold short. We now have an opportunity to finally eliminate this artificial trade barrier. Last fall U.S. tobacco farmer representatives proposed to our negotiators that we offer a face saving compromise to the Chinese. We have asked the Chinese to accept U.S. tobacco upon inspection certifying that U.S. tobacco is free from Blue Mold oospores. The Chinese already use this inspection method in other countries where they purchase tobacco, and there is a presence of Blue Mold. I am told that there is a good chance the Chinese will accept this. A letter of understanding between the U.S. and the Peoples Republic of China is now being reviewed at the USDA. I would ask that our Members of Congress use all the influence they can to speed this process along and if the Chinese use further delaying tactics in reaching this accord, then use the Blue Mold issue as a barrier to the U.S. approval of China's accession to the World Trade Organization. In addition, in the most recent bi-lateral talks with China, the issue of disolving their tobacco monopoly, as other participants in the WTO have been forced to do, was not pressed. Before China is allowed into the World Trade Organization this issue also needs to be addressed. An open and free trade with China would give a needed shot in the arm to the U.S. tobacco producers.
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    Thank you Mr. Chairman and ladies and gentlemen of the Committee for allowing me to speak today. If you have any questions, I'll be glad to try to answer them.
     
Statement of John Adams
    Mr. Chairman and members of the committee:
    Good Morning and welcome to North Carolina. My name is John Adams. I produce crops and livestock in eastern NC.
    America and North Carolina are prospering as they have at no other time in history. I am proud that our nation's farmers have provided the fuel for this great economic era by producing the world's safest, most abundant and inexpensive food. Ironically, while our fellow citizens bask in prosperity and all it allows, America's farmers find it increasingly difficult to make a decent living on the land.
     America and NC are prospering.
     Agriculture has laid the foundation for these boom times
     agriculture is being left off the prosperity train due to
    Low commodity prices, weather events, export barriers, consolidation, concentration and costly regulations are just some factors that have made it increasingly difficult for many of North Carolina's family farmers to compete in the quickly changing global marketplace. Congress has the opportunity to positively impact several issues and help farmers—especially pork producers—remain a vital contributor to our national economy.
    Disaster Assistance. Just this past fall, Hurricane Floyd turned my inland home into waterfront property. We appreciate your efforts to help North Carolina recover from that natural disaster. However, many needs were excluded from the Federal funding. As you know, 30,000 hogs were lost in the floodwaters, 2.1 million poultry and thousands of cattle and sheep. Most livestock producers were unable to qualify for Federal assistance. Congress provided $10 million in funding to livestock producers who lost animals they were raising under contract, yet provided minimal assistance to independent producers with huge animal losses. Disaster assistance should be available to all producers based on need, regardless of their market arrangements.
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    Floyd was bad; thank you for your efforts; effort needs to be timely and appropriate; time, 7 months; helped the contract producers, shorted the independents that owned the animals; cap, gross farm income and values; FEMA
    Modern agricultural advances have made the current income cap levels and assistance limitations antiquated. Congress should look at ways to remove or adjust current caps and limitations so they reflect today's farm values. No farmer should unfairly be denied benefits when their future is threatened.
    A simplified broad access and adequately funded FEMA style weather related disaster program is needed to assist farmers' recovery from a natural disaster. I would further request that future disaster assistance be made in the form of grants instead of loans.
    Regulation. EPA's new rule on Total Maximum Daily Loads displays a new and disturbing trend of environmental overreach. EPA clearly wants to treat farmers as point sources. This is beyond their authority under the Clean Water Act. We are concerned about EPA's recent acts to try and regulate farming practices through the Clean Air Act.
    The U.S. Environmental Protection Agency and the U.S. Department of Agriculture are currently working on AFO/CAFO regulations and Effluent Limitations Guidelines that will ultimately increase the level of regulation on livestock producers. North Carolina's current regulations on pork production are equivalent to the Federal NPDES permits.
    North Carolina's producers have long been innovative leaders in environmental management and adoption of practices that protect our State's natural resources. We embrace the challenge to remain environmentally responsible stewards of the land.
    Agriculture is becoming increasingly more regulated; regulations equal to what we spend on fuel, fertilizer and seed; we want to do the right thing, help us to meet your regs with tech and other assistance
    The president has proposed a healthy increase in conservation funding, which we applaud. However, conservation measures often come in the form of regulation with little or no assistance for compliance. Please make sure the budget of the Natural Resources Conservation Service is adequate to help farmers meet new environmental requirements.
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MARKETS
    The committee should focus on efforts to ensure that America's farmers remain competitive in the global marketplace. To that end, we urge Congress to grant China pass permanent normal trade relations (PNTR) status.
    This is a one-way trade agreement; the U.S. benefits significantly because China's previously closed market now opens. China's degree of access to the U.S. market remains the same. Unlike NAFTA and the Uruguay Round, the United States makes no concessions. Additionally, entry into the WTO forces China to abide by an international system of international trade rules. For the first time, there will be options available if China fails to honor its agreements.
    When WTO negotiations began, tariffs on imported pork in China were as high as 43 percent. After a 4-year phase in period, they will be between 12 and 20 percent, depending on the type of pork.
    Closer to home, Congress should work to improve the Federal farm programs so that government dependence can be reduced while providing a fair and competitive marketplace so all pork producers can find an avenue to maximize their share of the consumer dollar.
    I was asked and wanted to speak about markets and market access
    What can congress do to drive prices higher?
    This opening of the china market has huge potential to help all of agriculture, but especially pork producers
    Make sure the independent pork producers get a share of the consumer dollar, whether that consumer is in China or Chicago.
    We do not ask to be protected, but we do ask that we be allowed to compete.
    Support cooperarive efforts to help the independents.
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    Etherridge, Dubuque, Louisville, $15, 5 million.
    Give us the tools, fish, boat, at least $200 million for our efforts.
    I encourage the committee to continue efforts to provide support for independent producer owned and controlled systems. North Carolina's producers ship nearly 5 million pigs out of State because of limited processing capacity. While many producers have chosen to align themselves within an integrated system, independent producers are currently limited in their options. Historic low prices and a loss in equity have made it difficult for pork producers of all sizes, but it has been especially difficult for those independent producers who have been unable to capture a larger share of the consumer dollar. A regional, multi-State cooperative effort could give many independent pork producers the opportunity to compete fairly in an open market and overcome our current $10 to $15 disadvantage.
    The President's budget includes $130 million for a grant program aimed at providing producer cooperatives with seed money to be used in a variety of ways, including the possible construction of processing facilities. I encourage the Committee to support and expand such a program.
    I would like to personally thank the members and staff for taking time to hold these field hearings and attempt to discover what is happening in the real world of modern production agriculture in North Carolina.
     
Statement of Jeff Smith
    Mr. Chairman, members of the committee, I am Jeff Smith, a peanut farmer from Chowan County, North Carolina and president of the North Carolina Peanut Growers Association. In addition to peanuts, my brothers and I grow cotton, sage, soybeans, watermelons, cukes, wheat, pumpkins, grain sorghum, hogs, and cattle. The farmers of North Carolina would like to thank you and the Committee for coming to our State and conducting this hearing.
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    The past year has been devastating for most farmers in North Carolina and Virginia. Hurricanes Dennis, Floyd and Irene flooded thousands of acres of crop land. The effects of those disasters will be felt for years to come.
    In addition to nature's fury, peanut farmers have had to endure the effects of NAFTA and GATT. I am very concerned that as WTO and Seattle round talks continue, the Peanut Program and peanut farmers will be the losers. I had the opportunity to attend the WTO talks in Seattle. I know that some of you had the same pleasure. If you could ignore the demonstrations and riots, it was obvious that the agricultural community is very diverse when it comes to trade policy. I was able to talk to representatives from Japan and Europe, which gave me a clearer understanding of the importance they place on the economic health of their farmers. Some would call their policies toward agriculture protectionist, I would call them compassionate.
    As a result of the 1999 crop year disasters and low prices, Congress certainly fits into the compassionate category. We are most appreciative of the financial assistance we have received. That assistance made it possible for many farmers to stay in business.
    What I am most concerned about is my ability to continue to farm when faced with foreign competition and low prices which are the result of subsidized commodities being dumped on the world market. All of us have pulled up to a gas station recently and complained about the price. A price that is out of our control because we have become increasingly dependent on foreign oil. The family farm is in danger of disappearing. Food production is different from other sectors such as textiles and manufacturing. The free trade advocates have been successful in moving a large portion of the U.S. textile industry to other countries that have lower wages, labor standards and environmental standards. To do that with agriculture would be a mistake. We must keep the family farm in business in the U.S., not just for the sake of the farmer, but for the American consumer.
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    I am proud to be a farmer and to have a part in providing the American consumer with the safest, most abundant and reasonably priced food supply in the world. However, it is becoming increasingly difficult to remain on the farm. The Peanut Program is a life line to many producers. The program ensures an adequate supply of peanuts at a stable price. The American consumer has benefitted from the program.
    I know that the purpose of these hearings is to gather information and suggestions on how to fix some of the problems that exist in U.S. agriculture. I am here today to discuss peanuts. As a matter of background, let me briefly describe the marketing of peanuts in the Virginia/Carolina area.
    The National Poundage Quota for Peanuts is set nationally to equal the domestic demand for peanuts without regard to type. There are three major types of peanuts grown in the U.S.; runners, spanish and Virginia-type. North Carolina and Virginia grow mainly Virginia's. The current Peanut Program allows anyone to grow and to market peanuts. If the peanuts are produced under a quota, then they can be marketed directly into the domestic market. If grown without a quota, they must go through the producer owned co-op before they can go into the domestic market. This process is called buy back. This process can also be called a safety valve because in years of short production in one area, excess or additional production in other areas can get into the domestic market. The buy back is a fundamental and necessary part of the Peanut Program.
    As I stated earlier, the National Quota is set without regard to type. Historically, the demand for peanuts produced in the Virginia-Carolina region has been greater than the V/C quota established. During the past 10 years, the average buy back in the V/C area has been 15,800 tons per year. The availability of these peanuts has given stability to the market for Virginia-type peanuts. It has protected the consumer from price fluctuation.
    These buy back pounds have not displaced quota, however in years where losses have occurred in others areas, the V/C co-op has sent profits to cover the losses.
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    The success of the current program has come with costs to the farmer. As a result of the 1995 farm bill, the support price for quota peanuts was reduced from $678 to $610 per ton. The support price was frozen at the 1996 level for the life of the farm bill. There is not a single item I buy on the farm that is the same price it was in 1996. The consumer price index has increased 9.2 percent since 1996, which has resulted in an erosion of the farmers' buying power.
    As I stated earlier, NAFTA and GATT have negatively impacted the American peanut farmer. This impact could be lessened if the trade agreements are strictly enforced. U.S. peanuts must meet the quality standards of Marketing Agreement 146, which has proven very effective in ensuring that U.S. peanuts are of the highest quality. Imported peanuts must meet the same standards as U.S. peanuts. These standards should be strictly enforced by customs. Any effort to change or eliminate these standards should be resisted.
    We now have a customs code for imported confectionary items containing peanuts. These peanuts should be counted and included in the import quotas under GATT and NAFTA. Before any further reduction in Tariff Rate Quotas occur, production costs in the U.S. should be considered. Wages, worker protection laws and related regulatory costs, which are beyond the farmers' control, should be considered when placing a value on imported peanuts. This concept is called an equalization rate, which would help level the playing field for the American peanut farmer.
    The Peanut Program is the only agricultural program that provides a stable marketing environment to the farmer at no cost to the taxpayer, and this is done while giving the opportunity to anyone to grow peanuts. The Peanut Program could be a model for other commodities. I ask that the Committee support the continuation of the current program through the remainder of the current farm bill and be open to improvements in the next farm bill.
    As a member of the National Peanut Growers Group, the North Carolina and Virginia Grower Associations are working on ways to improve the current program and will be making recommendations to the Committee as we approach the 2002 farm bill discussions.
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    I thank you again for the opportunity to speak to you today.
     
Statement of Robert Hall Spiers
    Mr. Chairman, members of the committee, thank you for this opportunity to present my views on Federal farm policy as it relates to peanuts.
    I am Robert Spiers. My son and I own and operate a peanut farm in Dinwiddie County, Virginia that has been in our family for over 130 years. We also raise cotton, soybeans and flue-cured tobacco.
    I know first hand the economic importance of the Peanut Program to my family, my neighbors and my State. The Peanut Program continues to provide farmers stable pricing opportunities for their crop while market instability seems to plague nearly all other commodity sectors.
    The Peanut Program is very important to the economic existence of communities in peanut country. Farm supply stores, local banks, small country stores and many other service businesses are supported by our ability to make purchases. Likewise, local shellers, warehouses and food processors are part of this economy. In order for all of us to survive in Virginia, the continuation of a viable Peanut Program is a necessity.
    It seems that a considerable amount of farm policy discussion has focused on the need to save the small family farm. The National Commission on Small Farms suggested that a small family farm was one whose sales totaled $250,000 per year or less. I would note that fewer than 10 percent of Virginia peanut farms generate enough peanut sales to exceed the Commission's small family farm threshold. Therefore 90 percent of Virginia peanut farms would fit in the Small Farm definition based on peanut sales. The Peanut Program is a wonderful tool to ensure the survival of these farms. It provides the safety net upon which our family farms are able to market their crop effectively to what has become a few multi-billion dollar international corporations that purchase over 80 percent of the US production.
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    The Peanut Program has been modified in every farm bill since 1977 in order to maintain our price competitiveness to world market price and eliminate cost to the Federal Government. The 1996 farm bill cut the support price for peanuts and transferred costs of operating the program to the producer in order that the Peanut Program could continue at no net cost to the Federal Government. Frankly, these changes were very difficult to accept and removed most of the profit from peanut production. The Peanut Program's current support price level is less than our total cost of production. In response, peanut producers approved a referendum establishing the National Peanut Promotion, Research and Information Order to increase demand for peanuts and increase production research that can help farmers lower costs. This order is also paid for by peanut producers.
    In marketing, we are able to utilize the program's buy back provision which acts as a safety valve to allow ''additional'' peanuts to be purchased for domestic use to supplement quota purchases if needed. Without buy backs, ''additional'' peanuts could only be sold in the export markets and probably at a financial loss. The buy back provision is extremely important, because it allows the program and the producer to respond to changing supply and demand conditions.
    With respect to any future trade agreements, it is essential that the amount of peanut and peanut product imports not exceed existing levels. These levels were liberally dealt with recently under both GATT and NAFTA.
    Also, since peanuts are a perishable commodity used primarily for human consumption, it is essential that imported peanuts and product be provided adequate inspection and monitoring to ensure that they meet U.S. quality standards.
    My comments today have focused on peanuts. In the interests of keeping my comments to 5 minutes I am attaching for the written record several other issues that are important to me and that I feel very strongly about.
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    In closing, I would like to say that I have a vision of agriculture in the future. I see many new products that consumers will want and need such as fuel from plants and medicine from plants and animals. I ask that you work towards developing policy that will help us, as individual and family farmers, remain competitive in what is now a global marketplace so that we can be a part of this new agriculture.
    Again, I appreciate the opportunity to appear before the Committee and the time you have given me. Thank you Mr. Chairman and members of the committee.
ATTACHMENT TO STATEMENT OF ROBERT HALL SPIERS
    The Peanut Program is very important to me. However, there are many other issues relative to all of agriculture about which I feel very strongly. These include:
     We must work to find solutions that will help remedy problems associated with meeting labor needs and the shortage of affordable and dependable workers. Our income vs. production costs makes it difficult to compete with other businesses, especially in the area of benefits. This is especially critical to those of us who depend on hand harvesting and hand labor in our operations.
     Crop insurance has to be developed into a product that meets its stated goals of providing a credible risk management tool that is actuarially sound and that works well for farmers who want to use as any insurance product should be used, with honesty and integrity and faith in the product.
     Farm policy needs to be refined and developed in such a way that benefits go where they are most needed; that being to the producers of the actual crop, the ones who are taking the risk in growing and raising commodities.
     As consolidation continues to reshape our entire business landscape, not only in agriculture but also in areas such transportation and the grocery sector, it is critical we develop strategies regarding market access for farmers and work to develop and refine vehicles whereby farmers can come together and remain competitive in this rapidly changing marketplace.
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     In the area of crop protectorants and genetically modified organisms, sound science and factual data must have the final say in this debate. This is critical in that so much of the opposition to the use of these products is baseless and without credible evidence to support claims that these products are dangerous.
     Finally, contract production is becoming a driving force in American agriculture. Future farm policy must take this into account and ensure that programs and benefits are structured to be delivered to us, the producers and farmers who will always bear a large proportion of production risk, even in contractual situations and arrangements.
     
Testimony of Zeno (Sandy) Ratcliff, III
    I would like to express my appreciation to the chairman, the Honorable Larry Combest, the ranking member, the Honorable Charlie Stenholm, and the other members of the House Agriculture Committee for conducting this very important field hearing and for allowing me the opportunity to give testimony today. Your interest in our ideas gives much hope that you will work with us to improve the poor state of the farm economy.
    For the past 20 years I have helped my family to produce corn, wheat and soybeans on our farm in the Terra Ceia community in Beaufort County. I am currently serving as President of the North Carolina Small Grain Growers Association. I also sit on the Board of Directors of the National Association of Wheat Growers and U.S. Wheat Associates.
    Agricultural producers throughout North Carolina have experienced difficult times for several years. In early August of 1999 many of us were hoping to limp through the year by relying first on revenue from grain that was forward priced before prices hit bottom, and second on the Loan Deficiency Program (LDP) which would help make up the shortfall on the unpriced production. The reality on our farm, and many others in North Carolina was far worse than expected. Production was cut by hot, dry weather in the summer. The fall brought 2 hurricanes that destroyed crops with massive flooding.
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    We found ourselves with not quite enough damage to collect Federal disaster money, but enough damage to dramatically reduce our anticipated Loan Deficiency Payment. The Multiperil Crop Insurance policy we bought did not entitle us to make a claim. In short, during one of the most depressed periods for the farm economy in recent memory, our family farm and many others in North Carolina found themselves with only a minimal level of government support in a time of great need. Many farmers suffered a huge loss of equity in their businesses.
    To help lift American agriculture from its present depressed state I would like to suggest some ideas for your consideration:
     The success of U.S. agriculture is heavily dependent on being able to export. Congress has already laid an excellent foundation for an export-oriented agriculture by adopting the Freedom to Farm concept, and it should be kept as the basis for the government farm program. The principle flaw to the Freedom to Farm bill is its lack of an adequate safety net. To remedy this I would suggest that Congress consider doubling the AMTA payment at the 1999 level each year, for the remainder of the farm bill. This would improve the USDA farm program baseline and provide farmers with a more reliable, predictable means of government support. I also think that Congress should consider adding a provision for a counter-cyclical payment to be made during periods of low commodity prices.
     Crop insurance also needs some strengthening. Currently the buy-up coverage levels, which would have provided help last year, are too expensive to purchase on a yearly basis. Increased Federal assistance with crop insurance premiums would make the program more accessible to farmers. As you know last year there was $6 billion allocated to reforming crop insurance, I am hopeful that a plan similar to the bill authored by the Chairman will pass before the budgetary deadline is reached.
     As I mentioned earlier, American agriculture must be able to export its commodities if it is to prosper and compete in a global market place. The growth in demand for agriculture products in the coming years will arise principally from other countries, particularly China. Our highest trade priority must be to grant Permanent Normal Trade (PNTR) Relation status to China. Doing so guarantees American producers the ability to sell their commodities to the largest agricultural market in the world. Current estimates suggest that China could import as much as 8 to 10 million metric tons of wheat each year, which would make them the largest buyer of U.S. wheat. In some cases shipping certain types of wheat from the Pacific Northwest and the gulf would provide a freight advantage, which would make the U.S. very competitive against our foreign competitors. If we fail to pass PNTR for China, U.S. producers will miss out on the largest trade opportunity in the world, and once again our foreign competitors will rush in to take our place and our share of the market.
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     Another big obstacle to American agriculture is our extensive use of unilateral trade sanctions to achieve foreign policy goals, more commonly referred to as using food as a weapon. Unilateral sanctions are not effective foreign policy tools, yet in the last 5 years the United States has imposed 60 sanctions which cost U.S. agriculture billions of dollars in lost sales. In the case of wheat, these 60 sanctioned countries represent over ten percent of the world market. The Freedom to Farm bill was in part predicated on the assumption that farmers would have unrestricted access to foreign markets. To help realize the promise of Freedom to Farm, I suggest that Congress should do everything within its power to stop the use of unilateral trade sanctions on food and medicine.
     The United States continues to face unfair competition from abroad. Canada and Australia use State Trading Enterprises which can selectively undercut offering prices of U.S. grain. The European Union subsidizes its producers with the highest levels of domestic support and then uses export subsidies to move surplus grain abroad. Many of the worlds nations use high protective tariffs to keep our commodities out. To counter these trade-distorting practices, I would like Congress to consider funding existing export programs to the fullest extent authorized by the 1996 farm bill. Adequate funding should also be provided for discretionary export programs such as P.L. 480 Title I and 416 (b). Aggressive use of the GSM 102/103 programs would also provide significant help.
    The crisis in American agriculture is very real. Producers can not continue to lose money year in and year out. Producers must receive a fair price for their commodity and must be provided all the tools to compete in a global market place. Continuing down the current road will destroy the American producer, his family, his way of life and the community he comes from, and will forever change the fabric of rural America.
    Over 1,700 members of the North Carolina Small Grain Growers Association and 23 member States of the National Association of Wheat Growers, support the positions I have outlined for you. Our members believe that their adoption will benefit our industry tremendously and provide strength and stability for a farm economy that is in great peril. The future of all U.S. agriculture depends on your decisions regarding these matters. Thank you for your time and consideration.
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Statement of Elton Braswell
    Mr. Chairman, members of the committee, I am Elton Braswell from Union County, southern Piedmont region of North Carolina. My brother and I operate a grain, corn, soybeans, small grains (wheat & barley) hay and pasture for a 90–100 registered Guernsey cow dairy. Thank you for coming to North Carolina so as to hear our input on Federal agricultural policy.
    Certainly, these are not the best times for agriculture. We in North Carolina are faced with not only low prices for most commodities, but also weather related problems in several areas of the State. But the House Agriculture Committee has made significant short-term progress, challenges still remain regarding U.S. farm policy. The best economic projections for farm prices are grim creating greater potential for additional market loss assistance in crop year 2000.
    North Carolina farmers need a safety net as a supplement to the Agricultural Market Transition Act (AMTA) payments; so as to address sharp declines in prices without relying on large financial assistance packages from Congress.
    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. We are pleased with the flexibility to adjust crop acreage in response to both economic and agronomic factors. The market provides producers with pricing opportunities while AMTA payments and loan rates are providing a partial safety test. Congresses must avoid abandoning the market-based policies of the FAIR Act, including increasing loan rates.
    I urge you to consider adopting a countercyclical payment measure as a supplement to the AMTA payments. Congress should avoid increasing marketing loan rate and stay the course on the 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.
    North Carolina cash receipts in 1999 have decreased substantially from recent years, and forecasts for 2000 do not look favorable. The 1996 congressional agenda is woefully incomplete, Congress must focus on immediate remedies to redress producers. Given the magnitude of the agricultural economic problem, emergency supplemental funding at a level at least equal to last years assistance package is necessary.
    Increased agricultural exports is 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. The following chart, based on USDA data, shows a remarkable similarity in the historical trends between agricultural exports and gross farm income.
    As you consider your vote on permanent normal trade relations to China, I ask that China would allow the importation of all agricultural commodities, including tobacco. Trade sanctions must be lifted. Sanctions don't work. They only hurt us, as we surrender yet another market to competitors who are only too happy to sell in our absence. We cannot export our social reforms or impose labor or environmental standards.
    Food aid programs and concessional sales are an important tool. I support enhanced funding for the PL 480 program. Enormous opportunity exists for humanitarian and public relations benefits, in addition to an opportunity to impact market prices. These markets must be supported as they are future long-term customers for U.S. products. The administration must live up to its commitment to use the Export Enhancement Program (EEP) 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.
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    I strongly support extending the dairy price support program at the current level of $9.90 per hundredweight for 2 more years. This is the one area of Federal dairy policy that all regions of the country agree. Our dairy industry has operated in a relatively market-oriented environment with the dairy price support program providing a safety net at a price level that has not stimulated excess milk production. The price support program is one of the best tools available to U.S. dairy farmers to cope with cyclical changes in prices.
    The Northeast Dairy Compact has proven to be an effective tool for producers in that area of the country to gain more income from the market. It is estimated that the compact has returned over $40 million to producers from the market in that region. Twenty-five States have passed legislation authorizing regional compacts. We support legislation that would extend the current Northeast Dairy Compact to include Maryland, New Jersey, New York, Delaware and Pennsylvania. I support the authorization of a Southeast Dairy Compact. I encourage you to continue to allow producers and the industry to work together through efforts such as the Northeast and Southeast Dairy compacts to stabilize producer income.
    I would like to thank you for coming to North Carolina to receive our input.
     
    "The Official Committee record contains additional material here."