SPEAKERS CONTENTS INSERTS
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REVIEW OF FEDERAL FARM POLICY
SATURDAY, APRIL 1, 2000
House of Representatives,
Committee on Agriculture,
West Chester, OH.
The committee met, pursuant to call, at 10:08 a.m., in the Lakota East High School, West Chester, OH, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Boehner, Ewing, Smith, Moran, Thune, Fletcher, Stenholm, Lucas of Kentucky, and Hill.
Staff present: William E. O'Conner, Jr., staff director; Dave Ebersole, senior professional staff; Keith Williams, communications director; Ryan Weston, staff director, Subcommittee on Risk Management, Research, and Specialty Crops; Hunter Moorhead, legislative assistant; Christy Cromley, legislative assistant; and Quinton Robinson, minority consultant.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. Good morning. The hearing will come to order. Welcome to this, the fifth of 10 field hearings that the House Agriculture Committee is holding in different regions of the country. I want to thank every one of you for coming to this important event.
As you may know, we started this series of hearings in Lubbock, Texas on March 6. We continued to Memphis, TN; Auburn, AL and Raleigh, NC. At those four hearings, 72 witnesses presented testimony, well over 1,000 people have listened in, both in the audience and through the Internet. And I would remind our witnesses and our audience that all of our hearings in the field as well as our hearings in the committee in Washington are carried live over the House Agriculture Committee's Internet site.
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I think the time that we have spent on this endeavor has been profitable, both for members and the committee and for those who have been in attendance in the audience. We are pleased to be here today in West Chester and I think that our time will be well-spent here.
I have the pleasure this morning of introducing the members who are with us. There is one member who is not with us but will be joining us.
I am Larry Combest, I represent the High Plains of Texas. On my right is my good friend and neighbor, Charlie Stenholm who also is from west Texas. Next, we have John Boehner, I am sure many of you know, who is our host, representing West Chester and southwestern Ohio. Tom Ewing is from central Illinois; Nick Smith is from central Michigan; Jerry Moran represents the western two-thirds of the State of Kansas; John Thune represents the entire State of South Dakota; Baron Hill, who will be joining us, represents the southeast corner of Indiana; Ernie Fletcher is from central Kentucky; and Ken Lucas is from north central Kentucky.
Today, we will hear from 17 people who have built their lives and careers around agriculture. In selecting this panel of witnesses, we sought to bring folks together here in West Chester 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 our witnesses today, and I would certainly encourage anyone who would wish to submit additional written testimony to do so, and that will be made a part of the official record and it will be certainly weighed as heavily as those people who orally testify.
I do not want to speak long because I want to emphasize that we are here to listen. I do want to say that I think all of the members at this table know that we have a problem in agriculture. What is more, we all fundamentally believe that it is in the best interest of this Nation to maintain and foster a diverse and strong agricultural sector. And so the question we want answered today is how do we best accomplish that goal.
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We want to find out what the real producers think is working and what is not working in Federal farm policy. We will be going to all regions of the country asking the same question, with the hope that we can find consensus among producers of farm policy changes that you need.
Again, I would like to thank everyone. I would like to thank the school for allowing us to use this wonderful facility and would call upon my colleague and friend, Mr. Stenholm, for any comments he might wish to make.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. STENHOLM. Thank you, Mr. Chairman, it is good to be here with you today.
You will hear, as we have heard in the four previous hearings, there is a general recognition that in spite of the fact that in the United States, we are now in the longest sustained peace time economic expansion in the history of our country, that we have more people doing well, more businesses, more investment in private enterprise, agriculture and rural America are not sharing in that economic expansion. And the question that we are looking for is why; both short-term, what we need to do this year in the year 2000, and also beginning to prepare for the next farm bill, that comes after the current farm bill—what is working and what is not. And as the chairman has said, we believe the best way to start this procedure is to come out and talk to farmers and let farmers talk to us.
So with those comments, I am happy to be here and look forward to hearing from the witnesses.
The CHAIRMAN. Mr. Boehner.
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OPENING STATEMENT OF HON. JOHN A. BOEHNER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO
Mr. BOEHNER. Mr. Chairman, thank you for bringing the House Agriculture Committee to southern Ohio so that we can hear from tri-state farmers and I want to thank all of the members who have come to participate in this hearing. I also want to thank the school for allowing us the use of these facilities here. I think it is a perfect setting and certainly has been convenient for people from the tri-state area.
As the chairman and the ranking member have mentioned, we certainly have had problems over the last several years in agriculture—nothing that could not be fixed as long as we had higher commodity prices. But we do not have higher commodity prices and we do not really see any significant improvement on the horizon. That certainly has put a great deal of stress on agriculture and many of us on the committee, both sides of the aisle, really do believe that it is our responsibility to go out and to talk to farmers around the country. And that is why I am proud of the chairman and the ranking member for scheduling these 10 hearings around the country.
We have heard a lot of testimony and I think we are going to hear a lot more and I am looking forward to the witnesses that we have today sharing with us specific solutions that they think will help us. It is easy for a lot of us to talk about what the problems are, but most of us in the audience and up here have a pretty clear idea of what the problems are. It is finding the solutions that we are most interested in, that can be helpful to us as we begin our deliberations.
And with that, Mr. Chairman, again I want to thank you for coming and yield back.
The CHAIRMAN. Mr. Lucas.
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OPENING STATEMENT OF HON. KEN LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KENTUCKY
Mr. LUCAS of Kentucky. Thank you, Mr. Chairman. It is indeed an honor for me—I am a freshman in Congress—to serve on the Agriculture Committee. I represent 22 counties just on the south side of the Ohio River going almost to Louisville and clear over to West Virginia and I live over in Boone County myself.
I grew up on a tobacco and dairy farm out in Grant County, KY and of course the big issue with folks on our side of the river in the agriculture community is what is going to happen to the Tobacco Program. We have so many people who it has been a tradition where family farms have been handed down for generations and they were dependent on tobacco. I know full well how important that is. I worked my way through college, University of Kentucky, and tobacco helped put me through college and I know it is the livelihood of a lot of folks, and there is a real dilemma as to what we will do and which direction we are going to go.
So we appreciate the opportunity to participate in this hearing and I want to particularly thank Bill Courts, who is from Grant County, KY and a tobacco farmer and a vo-ag—retired from vo-ag teaching, to be here and it is a pleasure for me to be here, Mr. Chairman.
The CHAIRMAN. Mr. Ewing.
OPENING STATEMENT OF HON. THOMAS W. EWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. EWING. Thank you, Mr. Chairman. I appreciate having the opportunity to be here in Ohio. We have many of the similar problems that affect farmers in this region in our part of Illinois. And so it will be very interesting this first hearing in the midwest, to hear from those in the corn and soybean industry. I look forward to their testimony, I look forward to participating with them and I thank you for your efforts in this regard.
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The CHAIRMAN. Mr. Smith.
OPENING STATEMENT OF HON. NICK SMITH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
Mr. SMITH. Thank you, Mr. Chairman. Thank everybody for being here.
I am a dairy and crop farmer from southern Michigan. I think agriculture is approaching an important decision, almost a crossroads—100 years ago, about 1 in 4 people of this country worked on the farm; today it is about 1 in 100, the political clout is less. The American people are going to have to decide whether they want to make the effort and pay the price to continue our agricultural industry in the United States. If they do not, then that means that we are going to be more and more dependent on other countries to send us the food and fiber that we need. I think that is a challenge. I think what could happen in agriculture is what happened in OPEC, those other countries then decide what they are going to charge and the quality of the goods they are going to send us.
All farmers would like to receive their rewards across the counter at the marketplace. That gives problems now simply because in a rural trade situation where Europe is subsidizing five times as much as the United States, they tend to put their excess production into what would otherwise be our markets. Huge challenge, look for your advice.
The CHAIRMAN. Mr. Moran.
OPENING STATEMENT OF HON. JERRY MORAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS
Mr. MORAN. Mr. Chairman, thank you. I appreciate you and Mr. Stenholm holding these series of hearings across the country. I am delighted to be in Mr. Boehner's district, area of this State, appreciate his leadership on our committee, as one of our senior members, and was glad to be with Mr. Fletcher yesterday in Lexington, learning for the first time about the issues that tobacco farmers face.
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I am a Member of Congress who represents most of the geography of Kansas, where we produce significant amounts of wheat, cattle and corn, and look forward to learning about the agriculture circumstances and potential solutions to our problems.
We have been successful as a Agriculture Committee an agricultural group within Congress as far as disaster assistance in the last couple of years, but that is not what my farmers, and I assume that is not what the farmers of this part of the country want. They want a price for their commodity and I am hopeful that we will hear solutions to that issue to raise farm income. Economic development in a place like Kansas and most rural places across the country is whether or not our farmers are making a living. And I am hopeful that I will be able to take back to Washington, DC solutions from this area of the country to find that solution.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Thune.
OPENING STATEMENT OF HON. JOHN R. THUNE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH DAKOTA
Mr. THUNE. Thank you, Mr. Chairman. Let me also say that it is great to be here. I represent the State of South Dakota and agriculture is our No. 1 industry. And so we are very, very interested in what the future holds for agriculture. Right now, chronic state of low prices is crushing our rural economy. That has a dramatic impact on every small town, every main street across my State and I would hope that the result of these hearings is to bring some focus to the question of how do we go about structuring our agriculture policies in such a way that we can level the playing field with our foreign competitors, because I think that right now, all our producers are asking for is an opportunity and a level playing field on which to play. And unfortunately right now that is not there.
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And so I am anxious to hear from the producers in this three-State area. I am sure there are a lot of similarities between the things that you do here and the crops that we grow in my State of South Dakota, but we are very anxious to hear about solutions that we can work toward in a constructive way that will improve the outlook for agriculture as we head into the future.
Thank you.
The CHAIRMAN. Mr. Fletcher.
OPENING STATEMENT OF HON. ERNIE FLETCHER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KY
Mr. FLETCHER. Thank you, Mr. Chairman. I certainly appreciate you bringing this committee hearing hearing here, and Mr. Boehner for hosting this. We certainly appreciate that.
We had a subcommittee hearing yesterday in Kentucky and we heard a lot about the problems that our tobacco farmers are facing and I certainly am very glad to have Mr. Mahan here that will be speaking from my district on this issue.
As we face decreasing quotas and cross-county leasing, direct contracting and the question of imports and exports and other issues in tobacco farming, it is very important that we have these, that we can hear from the folks and we take it back. We have seen tobacco not a politically correct product, and as the political environment has changed with the administration, I think there is a lot lacking that has not been done to really help our farmers. So I look forward to hearing on this issue as well as the other commodities that affect my district in central Kentucky also.
Thank you, Mr. Chairman.
The CHAIRMAN. I want to be sure and mention so everyone knows, the coffee and doughnuts provided are courtesy of our host Congressman, Congressman Boehner. I am sure everyone appreciates that very much, John.
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I would like to call our first group of witnesses to the table. Mr. Dale Brown is a corn, soybean producer from Shoals, IN; Mr. Wayne Kilpatrick is a corn, soybean and wheat producer from Frazeysburg, OH; Mr. Thomas Spellmire is a corn, wheat, soybean producer from Lebanon, OH and Mr. Joe Steiner is a corn, soybean producer from Mason, OH.
We want to mention for all of our witnesses that the testimony in its entirety will be made a part of the record and once again reiterate that anyone wishing to submit written testimony to the committee is not only welcomed, but encouraged to do so.
Mr. Brown, we will start with you and go in the order of introductions. Please proceed at your will, sir.
STATEMENT OF DALE BROWN, POULTRY PRODUCER, SHOALS, IN
Mr. BROWN. Mr. Chairman, members of the committee, I am Dale Brown and my wife and I operate a small farm in southern Indiana, we have 80 acres in crops and a 76,000 layer egg operation. Thank you so much for allowing me to testify and address to you today.
There are a number of problems facing everyone in agriculture today—low commodity prices, warnings of a drought in the Southwest and the Midwest, fuel prices, possible shortage of fuel and probably more regulations.
I would like at this time to thank the House Agriculture Committee for securing the $9 billion-plus in emergency funding for 1999. Even though we only farm 80 acres, the funds did help us. As you already figured out, we do not make a living off the crops, but from our poultry operation, which keeps us very busy every day of the year. We have some part-time employees, but my wife, who could not come with me today, and I, supply most of this labor.
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One issue I would like to address today is health insurance for those who are self-employed. As we all know, health insurance is very costly, which means we self-employed usually do not have the best plan, we have a high deductible and a very low-quality health plan. I strongly ask for your support for full tax deductibility for health insurance premiums paid by the self-employed—not in 3 years, not in 4 years, I would like to have it next year or maybe this year myself, because it is very expensive.
Farm fuel costs are estimated to rise by $1 billion this year because of the hike in international crude oil prices. And one thing I have never been able to figure out is why the fuel prices go up so fast, but it takes so long for them to come back down. This is really going to put a hurt on the farmers this spring planting season. But from what I have read in the last couple of days, the problem is really going to be supply. Price we might get by with, but supply could hurt. We have had this problem before and we have talked about renewable energy sources for years. I feel that now is the time to increase funding for the development of these sources such as ethanol and soy diesel. We have been dependent on OPEC oil for too many years.
In March 1999, the EPA and the Department of Agriculture issued a strategy to expand EPA's regulatory and voluntary efforts related to animal feeding operations and concentrated animal feeding operations. This included regulation of land application of manure and additional data collection on animal feeding operations. I really feel strongly about this, that it should be the responsibility of the States to pass these legislations and regulations and that sound scientific information, local input, should drive them in these decisions. We just do not need another—any more one-size-fits-all Federal regulations. The States' environmental agencies, being closer to home, are the best choice for deciding what regulations are appropriate considering my soil, my drainage and my climate conditions.
China is now one of our largest trading partners and could be a great market for American agricultural products. I really feel that Congress must pass permanent normal trade relations status for China. Sanctions do not work, they only hurt us, we lose markets to another source. This has been proven time and again.
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Therefore, I would ask for your support of PNTR for China.
In conclusion, my family and I have been poultry producers for 20 years; been on contract with the same company for 20 years and when we first started, a handshake took care of the contract, we did not have to have it written, their words were good. Now we do have because the bankers and lawyers requested it and we have to have it. Contract production has been very good to my family and I will continue with it. I know times change, companies are bought up, ownership changes and I have heard from hog producers that the contracts coming out, there might be some problems there. But if Congress or USDA or some other Federal department wants to look at this; if Congress does, please take into consideration what contract farming has been like in the past and look at those points, because it has been good to those that can live with it and we have lived with it.
In closing, it is difficult to be a farmer these days when all we hear about is how well the economy is doing. I can tell you, and everybody in the audience knows, the agriculture economy has been left out of this boom. In fact, the agriculture economy is in a downward cycle. I appreciate the chairman and members of the committee being sensitive to the needs of agriculture and want to thank you for this opportunity to testify. Thank you.
[The prepared statement of Mr. Brown appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Kilpatrick.
STATEMENT OF WAYNE KILPATRICK, CORN, SOYBEAN AND WHEAT PRODUCER, FRAZEYSBURG, OH
Mr. KILPATRICK. Mr. Chairman, thank you for this opportunity to address this august body and provide my modest input on such an important topic as the future of agriculture and the Federal farm programs.
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This agricultural industry will face many challenges in the next 10 to 15 years that will undoubtedly change the industry at its very roots. What action Congress takes in the next 2 years will not only determine if family farmers such as myself will still be involved in production agriculture, but if the domestic food supply will be a viable industry in the United States.
Quickly, I would like to briefly outline my farming operation and involvement in the Federal farm programs. My brother and I currently farm over 1,900 acres of corn, wheat, soybeans, hay and pasture. We manage a modest beef cow and sheep flock and recently went out of the feeder pig business. I have been elected to the second term of the Farm Service Agency County Committee where I represent over 1,000 farmers. I participate in many of the farm programs and I am currently a borrower in the farm loan programs of the FSA office.
My experiences in the Federal farm programs as both a participant and an administrator have led me to several truths, as I perceive them.
In regard to production adjustment programs, the Freedom to Farm Program, as a utopian ideal, is what should drive programs in the future. However, Freedom to Farm cannot be obtained while the farm programs are designed to provide low-cost food for the American consumer. It is clear that Government intervention in agriculture is needed for the sake of the Nation's economy, especially when one considers that low food costs drive the rest of the economy. It is equally clear if there will continue to be a low-cost food policy, that farming will have to be subsidized to the extent that we can maintain family farming viability. In most of Ohio, the loss of farmland dramatically highlights our inability to compete with non-farm sectors for the purchase of cropland. This can only be addressed in the long term by making farming more profitable so we are more competitive with non-farm interests.
Market-driven farm programs can be effective; however, I encourage the decoupling of the AMTA contract with the Loan Deficiency Program payments. Non-participating farms must be planted to soybeans instead of corn because of the LDP benefits. Thus, I have been forced to change my farming operation because of the farm program. If I could participate in the LDP with corn grown on non-participating AMTA farms, I would truly be farming based on the market. I recognize that the Government has to be considered as part of the marketplace.
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Without falling into the traps once set by the idling or set-aside programs, production adjustment programs must be driven by commodity target prices that are higher than the production costs. Domestic production of food and fiber is a national security issue as well as an economic well-being issue. It is to the advantage of the Nation to keep the agriculture sectors strong.
Recently at a public meeting, refreshments were served and many comments were made about the wonderful delivery system we enjoy in the United States that allows for citrus and other fruits to be readily available at any time of the year. However, most did not consider the delivery system now enabled us to obtain food that was fertilized with human waste and sprayed with DDT, and picked by laborers that received a month's wages that I am forced to pay my employees each hour. This highlights a primary issue that society will soon need to address. Is the American consumer ready to accept our food being produced in countries where our health and environment standards are not accepted or practiced?
Recent weather conditions over the last 2 years have made it essential for our county to be approved as disaster areas. The disaster legislation that allocates a fixed amount of funds for the disaster and then factors program benefits when requests exceed the funds allocated does not adequately respond to the disaster. The Livestock Assistance Program, commonly called LAP, is a great example of the shortcomings of this type of program funding. The Livestock Assistance Program was designed to provide for producers to purchase feed for livestock as winter feed stocks were fed during the summer because of drought conditions. After the factor was applied, the participants in the program received only 23 percent of the loss. The payments, although welcome, came months after they were promised and only a fraction of what was expected. One reason the payments were factored so drastically was additional disaster areas were added after the $190 million were allocated. The program allocation was not adjusted to reflect additional producers. The sign-up period was extended three times to ensure the new areas were able to enroll and also allow sufficient time for USDA to calculate the factor. What was left was too little too late.
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In the future, disaster programs should be written so that producers can receive funds at or soon after sign-up. Funds could be allocated after the need was established, not prior to.
I strongly support recent legislation that proposes to change the Non-insured Acreage Program, called NAP. This change could provide a more secure program for crops that are not currently covered under the Crop Insurance Program and will offset governmental costs by requiring producers to pay for the program coverage.
The upcoming Facility Loan Program is a welcome program and an example of a farmer-friendly program that is also taxpayer-friendly. The low interest program ensures that funds paid out are repaid at the same rate the Government borrows those funds.
If I may, the Facility Loan Program should extended to cover all commodities. This is especially true if the program is designed to give producers the opportunity to better market their agriculture commodities.
Hay producers would greatly benefit from a program that provides low interest funds for facilities that would make hay more marketable and would be an important economic development tool in the Appalachian region. A facility for fruit and vegetables would also make those crops more marketable for the producer. A Facility Loan Program should not only benefit grain producers, but also provide better marketing tools to all agricultural producers.
At no net cost, the Government could help all the agriculture sectors compete and yet not significantly add to the cost of the farm programs.
Even though I believe that crop insurance is one piece of the puzzle to solve the woes of the agricultural sector, the current system is not working. If the current program were effective, disaster legislation would not be needed. Throwing more money to encourage more participation is evidence that the program does not have the support of the very people that it is supposed to protect.
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I suggest that crop insurance be brought back under the auspices of the Farm Service Agency office. It has been proven that less fraud occurs when USDA has direct oversight of the Crop Insurance Program. Crop insurance should cover more crops at levels that adequately reflect the risk the farmer accepts.
In closing, I would like to give my support to the Farm Service Agency's farmer-elected County Committee structure. As an elected County Committee person, it is important for me to strongly encourage the retention and strengthening of the Farm Service Agency County Committee system.
Recently, the Secretary of Agriculture has indicated the farmer-elected committee system was to blame for the consent decree judgment in connection with the black farmers' lawsuit. The Secretary has stated on numerous occasions that the County Committees are not Federal employees and do not answer to him and they are to blame for the bulk of the 19,500 claims of discrimination leveled against the agency.
In fact, only 3.5 percent of the claims can be attributed to the programs that are overseen by the farmer elected county committee system. According to my calculation, that represents only 683 of the total cases. The Secretary has stated that making the Farm Service Agency staff true Federal employees and thereby eliminating the farmer elected county committee system is the answer to the discrimination problem in USDA. The facts scream that this thinking is flawed. The facts show that the county committee system works well and is much more responsive than when Federal employees do have local oversight. It also shows that too many of the decisions within USDA have more to do with politics and less to do with what is best for agriculture or for farmers.
Thank you once again for allowing me the opportunity to discuss my ideas with you. Thank you very much.
[The prepared statement of Mr. Kilpatrick appears at the conclusion of the hearing.]
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The CHAIRMAN. Mr. Spellmire.
STATEMENT OF THOMAS C. SPELLMIRE, CORN, WHEAT AND SOYBEAN PRODUCER, LEBANON, OH
Mr. SPELLMIRE. Mr. Chairman, members of the committee, my name is Tom Spellmire, I am a farmer by occupation from the State of Ohio. I would like to start by saying thank you to Chairman Combest and members of the committee for holding these hearings.
The question is what should the profile of the American farmer be in the year 2020? I believe this should be a person who is well-educated, has good values, is economically stable and is someone who demonstrates a conservation ethic. With that in mind, I would like to briefly discuss trade, risk management, Freedom to Farm, ethanol, the IRS tax code and farmland ownership.
Trade. Should we trade with China? I would say yes, it is a market that has potential. However, as a farmer, I have heard this all before. I have heard how if we could only open up some new market somewhere, someplace, commodity prices would rise and everything would be just fine. The lack of a trading agreement with China is no excuse for the lack of an aggressive export program. Congress appropriated funds for the Export Enhancement Program to be spent at the Secretary's discretion. For various reasons, this has not happened. If Congress is serious about trying to encourage exports, they need to create a structure that counter-balances the discretion they have allowed the Secretary.
Risk management. Crop insurance is a risk management tool that has done a lot of good, but also has the potential to have a major credibility problem. In my opinion, any system that relies on neighbor turning in neighbor as the primary means of detecting fraud, is a program that is not structured correctly. Possibly Government programs should be more intertwined. By utilizing accounting procedures, documentation could be cross-checked so that fraud is much less likely. The interesting aspect of crop insurance is that it is a concept that Members of Congress understand and are willing to fund. One element that I believe is missing from crop insurance is the recognition that sound conservation practices are utilized as a risk management tool by some producers.
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The State of Ohio gives away what they call Century Farm Awards as recognition for families that have sustained ownership of their farmland for a century or more. Recipients of that award have cited sound conservation practices as one of the tools they used to achieve that accomplishment. If families that have managed to retain ownership of land for at least a century say they utilize good conservation practices, in effect as a risk management tool, why are sound conservation practices not a major component of risk management programs today?
The current Freedom to Farm bill. The current Freedom to Farm program had great intentions of encouraging farmers to individually re-evaluate their farming operations, to make changes that would allow them to decrease their dependence on Government payments. This program was designed to infuse capital into farming operations so they could vertically or horizontally integrate or even diversify to new enterprises. A great concept. But I would say I am more dependent now on Government subsidies than I was in 1996 when the program first started.
The agricultural economy has not shared in the current economic boom, and because of this the Market Transition Payments of the Freedom to Farm Act are in effect deficiency payments, not transition payments.
I tend to look at the lack of exports and the lack of the desire to promote exports as the deciding factor on this situation. If export enhancement programs were administered by non-political private entities, I believe the program could achieve the objectives Congress had in mind. All the major grain companies are no longer dependent on exports for their economic survival.
Why do we not have an energy policy that promotes ethanol? This would surely create a domestic market for corn and environmentally would help clean up the air as well. Ethanol is safe and effective on all counts.
I mentioned earlier the current economic boom that the other sectors of the economy are enjoying. I bring this up again because I think one reason the general public has been so tolerant of the additional cash infusions into the agricultural sector in the form of emergency appropriations, is because the general public is doing so well economically. I think agricultural policy should utilize programs the general public understands, not programs they just tolerate. The general public understands the concept of insurance. It is for this reason that crop insurance is able to achieve its increases in funding. So while I may not like the structure of crop insurance and I think it needs to be reformed, I am fully aware you go after funding for programs that the general public understands.
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It is for this very same reason that I believe a higher priority should be given to conservation programs. The general public understands the concept of conservation. Using conservation as one of the cornerstones of agricultural policy would create a more sustainable atmosphere in which to operate. In the same way you go after crop insurance funding because you can, you should go after conservation funding because you can. It has become, in my opinion, politically safe to do so.
On the issue of taxes, I think the Committee on Agriculture and the Committee on Ways and Means need to sit down and have a serious discussion on the IRS tax code and its impact on agriculture. The IRS tax code has a major impact on the whole issue of farmland ownership. Why not utilize the tax code to promote conservation? We are in times of budget surpluses and trying to operate under budget caps. Why not use the tax code as a means of increasing the effectiveness of some programs and operate within budgets.
On the issue of farmland ownership. For those who know me, they know I have spent a lot of time and effort on the issue of farmland preservation. The reason I have is that I believe the current trend of less and less land being owned by the farmer who farms the land in this country is not a good trend and should be reversed. This country could increase the employment opportunities in agriculture if we had policies that encouraged farmland ownership by the farmer who operates the land. Farmland ownership by farmers promotes stability of food production and good land stewardship.
Again, I want to thank you for giving me this opportunity.
[The prepared statement of Mr. Spellmire appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Steiner.
STATEMENT OF JOE STEINER, CORN AND SOYBEAN PRODUCER, MASON, OH
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Mr. STEINER. Hello. My name is Joe Steiner and I reside in Warren County where I raise corn, soybeans, wheat and hay. I serve as vice-president of communications for the Ohio Soybean Association. I want to thank you for this opportunity to express some of my views on current agriculture policy.
U.S. soybean producers depend on enhancing market demand and increasing global competitiveness. We historically look to the marketplace rather than the Federal Government as our source of income. This is underscored by our dependence on exports, which nearly 50 percent of each year's production of soybeans and related products are exported.
During the Uruguay Round of negotiations, we supported the elimination of import tariffs and export subsidies to create a level playing field for oilseeds and our products.
We continue to strongly support the FAIR Act with its planting flexibility and marketing loan which is consistent with our orientation toward domestic and foreign markets.
Accordingly, Congress and the administration made a number of commitments at the time to policies and programs that would help make the FAIR Act work. More than 3 years after the FAIR Act was enacted, few of these commitments have been honored:
The agreement on China's ascension to the WTO is nearly lost and now China's permanent normal trade relations is held hostage to politics.
Legislation to repeal existing sanctions on agricultural products was left out of the fiscal year 2000 agriculture appropriations bill.
Cuts in funding to the Public Law 480 program continue to be proposed and approved.
Crop insurance reform is still an ongoing issue.
The FARRM accounts have been vetoed.
Estate tax laws continue to hurt agricultural producers.
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And the regulatory environment for agriculture has deteriorated significantly since 1996.
Another issue that only began to emerge in 1996 is the erosion in U.S. agricultural exports caused by a failure to address regulatory decisions on biotech crops.
Limited progress on these commitments and the prospect of record soybean plantings suggests a return to historic loads with this new crop.
We believe the best response to the continuing crisis in the U.S. farm economy is for Congress and the administration to address and complete the unfinished agenda of policies and programs they agreed to undertake in 1996. However, we will not support the following:
A return to the old farm program.
Set-asides or other supply management programs.
A reserve for soybeans.
Or increasing acreage in the Conservation Reserve Program for supply control purposes, particularly a short-term CRP.
We will work with Congress in examining any income support proposals. Any income support program must be equitable with regard to the size of a producer's operation and we will insist that soybeans be treated fairly in any program.
We are very interested in developing a farm program that would provide additional income support to producers who voluntarily implement appropriate conservation practices. We believe that pursuing the public policy goals of protecting the environment while supporting farm income through sensible voluntary measures is a concept that farm groups, environmental groups and the Congress should further explore.
ASA supports a supplemental AMTA payment to offset the continuing low prices and depressed farm income. For the same reason, we also support another economic loss payment to oilseed producers this year. We appreciate the fact that Congress recommended the situation last year and provided $475 million in payments. We do not believe this program was unfairly designed or administered and we again will support targeting these payments to producers experiencing low prices for the 2000 crop based on historical rather than actual production data, to prevent the program from distorting future production. In the event Congress decides to increase the amount of any supplemental AMTA payment over last year's level, we support a proportionate increase in the oilseed payment.
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Another issue of critical importance to soybean producers is the marketing loan. With U.S. and world oilseed prices well below loan level for the past 2 years, this program has been essential in providing an income safety net as well as keeping our products competitive in foreign markets.
Concerns have been expressed that the soybean loan does not reflect the historical price relationship with the loan rate and that the disparity is increasing production of soybeans at the expense of corn and other crops. We do not necessarily believe this to be the case.
There may be a continued expansion of soybean acres in the year 2000. The solution is not to reduce the soybean loan and the safety net, but rather fulfill the commitments made when we passed the FAIR Act. Soybean farmers are very appreciative of Secretary Glickman's decision not to use his authority to lower this year's loan rate. If Congress considers to make changes in the Marketing Loan Program, we will support making the current $5.26 level a statutory minimum rather than a cap. We are also concerned with supporting and maintaining the post-accounting price and repayment rates at terminal markets rather than changing to a national LDP program.
Thank you again for listening to my comments.
[The prepared statement of Mr. Steiner appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you all very much for your testimony.
Today marks the halfway point through these field hearings and it is beginning to become obvious to me that there is good news and bad news. The good news is that we are hearing a lot of the same things, so you are not in this boat by yourself. You have got a lot of other people in it. The bad news is we still do not know what to do about it and that is what we are looking for.
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I have got a couple of specific questions and I have some general comments that I wanted to just make in response to some of your testimony.
Mr. Brown, you had mentioned—and others of you had mentioned as well—regulations and particularly environmental regulations. I think it is unfortunate and I think it also misses the point somewhat that environmentalists, if we can call them that, or whatever, seems to be at odds with agriculture and yet the greatest conservationist and environmentalist that I know are people involved in agriculture. And I think that there are a lot more similarities there. It is the over-zealous environmental regulations that are based on policy rather than good science that I think concern most people. And we need to make for certain that all of those are scientific-based. And I think then that gives us an opportunity in agriculture to deal with them and to recognize what we can do to work within them and to live with them.
There is a lot of similarity between what is happening in agriculture and what has happened in energy. I happen to represent an extremely large agrarian district and I also happen to represent an extremely large oil and gas producing area. And they were going through the same kind of economic conditions when the price of oil was in single digits that agriculture is going through. They were losing workers and they were losing their jobs. You cannot produce more when you are losing money on every barrel that is produced.
Now that has changed obviously, as things are somewhat better for them, but it still is not causing an ability to recover. The point to me in all of this is that we have not had—and this goes back for many administrations—a positive energy policy that looks for domestic production, that looks for alternative sources and that hopefully removes us from the dependency that we have for almost 60 percent of our daily use of energy from abroad.
We do not need to get into the same shape in agriculture in having an inadequate agricultural policy that allows foreign producers to supply our food.
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We also are seeing, and it was mentioned here, we are very well aware of the increased cost of producing in a year when market prices are still extremely low in agriculture with the increase in the price of oil, and consequently, the price of gasoline, diesel and the other fuels that are used in agriculture production.
And you look at airlines that have gone up on tickets because of the higher price of energy, you look at the economic pages or financial pages of virtually every newspaper in this country and it talks about the negative impact that higher energy prices have on the whole economy. Even though in a box of Wheaties the box costs more than the farmer received for the wheat; a $60 cotton shirt has got a few cents worth of cotton in it; cornflakes—you just go down the line. How much does it cost to produce hogs versus how much you pay for that ham when you buy it in a market, or a steak or whatever the case may be.
And even though the actual producer only receives a small, small portion, I can only imagine what would be the outcry if we go to that point where the farmer gets their entire amount of income from the marketplace and you see a huge escalation in the price of food. And I think it would be similar to the economic conditions that are felt today around the country when you see a huge increase in the price of energy.
And stability is what people want, the stability to know that when you plant the seed, what the market is going to be when you harvest it and what is going to be the price to the consumer. So I think that goes back to—I have always felt that farmers do not receive a subsidy, the American consumer receives a subsidy because we have developed a cheap food policy and it is pay me now or pay me later and, unfortunately, you have not been paid later either.
Mr. Kilpatrick, you mentioned something that a number of people are mentioning, and I wanted to ask you specifically what you mean by this because we are going to have to look at this on crop insurance.
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As you know, this committee responded to the recognition that there was an inadequate Crop Insurance Program and we passed last year a bill, finally the Senate has acted, we will be going to conference, actually conference has started with the Senate on some discussion levels and I am hopeful in the next few weeks that bill is out signed into law and is available for the next crop season.
But a lot of people are talking—and I used to be an old ASCS employee before it was the Farm Service Agency, so I have a strong support also for the county committee system and the way that that works, particularly in the knowledge that those committeemen and committeewomen have on the operations that go on with the county, and it leads to the fraud issue and compliance issue and a number of other issues. But you had talked about the role of FSA. Tell me exactly what you mean by that. Do you mean that the FSA takes over the Crop Insurance Program from the Government standpoint, or are you saying that they take it over from the private sector that is providing the insurance policies today, and totally run the program?
Mr. KILPATRICK. It was my feeling that when FSA had crop insurance, that it was like a one-stop shop, you go in, you sign up for your commodities; if you had a disaster, they had all the information right in the office there that you needed. Now as it stands, these independent insurers, the first year that they had the program, they increased the rates on insurance, on the policies. I just think it is so much better with the Government having the insurance right in the office, overseeing the policies. It seemed like when we had it in the offices there, we were taken much better care of than going out and fighting with these independent agents, trying to show them our production history and it just seems like a chisel, chisel, chisel down what we should be getting.
When there is a disaster out there, they are saying, they are chiseling it down and we are not getting what we are supposed to. In my opinion, they are not giving us what we are supposed to be getting for the amount of premiums we are paying them. And when it was in the hands of the Farm Service Agency, I felt like I was being taken care of through the office. I was really pleased with the way things were. And now that it is out of our office, we go to the office, we get our production history, we go sit down with our independent insurance agents and we go through the rigmarole of showing our production and they—well you are only entitled to this, but the cost of this insurance is so much greater now with what—and especially with buyup, it is so much greater than it was when it was handled with the Farm Service Agency. And I would like to see it back in the office and working with the people that handle these programs. I just felt so much more comfortable when it was there.
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The CHAIRMAN. Well, my time has expired but let me just briefly sum up with this point. Fraud is mentioned by almost everyone. You mentioned it, Mr. Spellmire, as one of the concerns, and eliminating fraud is a concern to us.
I think that there is an expanded role. I do not know exactly what that role is yet or should be with Farm Service Agency, but we have got to make for sure that we have got very stringent compliance. If we make a program better, we do not want that to become more susceptible to a person taking advantage of that program or committing fraudulent activity within it. And we have got to ensure the taxpayer that is helping to fund this program, that in fact we are not going to tolerate fraud. And I do think there is a role. We are still searching for exactly what that role should be, but you are not alone in your suggestions that FSA expand substantially the role that is being played in crop insurance.
Mr. Stenholm.
Mr. STENHOLM. I want to follow upon the chairman's questioning and ask the other three panelists, do you fundamentally agree with Mr. Kilpatrick, or do you disagree? If you agree, just say yes; if you disagree, say no and if you have got some other comment, briefly mention it.
Mr. STEINER. I would say no, I disagree.
Mr. STENHOLM. No.
Mr. BROWN. No.
Mr. SPELLMIRE. I guess I would say no, I disagree. I can see some—what I meant by an interaction here between FSA and crop insurance was that what I think is lacking here is as a producer, if I could go in and report—if the APH yields that the AMTA payments are based on, if those were based on my actual crop history, my actual production, and then my crop insurance claim is based on the same thing. That way you cannot go in and claim a high yield, get paid on a high yield that you are not actually producing. So you have this cross-check where you could go in and claim a high and a low and you would end up with the exact right data in that process.
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So there has to be an interaction between FSA and crop insurance, but should crop insurance be taken over by FSA? No, I do not think so.
Mr. STENHOLM. Mr. Brown. You can say I do not know or undecided is a perfectly acceptable answer.
Mr. BROWN. I have some ideas on it, but being such a small operator, I really do not use the crop insurance and I would rather not comment.
Mr. STENHOLM. Another question, and in some cases, I am going to ask for a little audience participation, so each of you out there if you will quickly hold up your hand for the committee's benefit, we would appreciate it. I am going to ask each of the witnesses do you believe that we should lift all unilaterally imposed sanctions on other countries that deny them the opportunity to purchase food from the United States? Yes or no. Mr. Brown. Unilateral, in which we decide that we will not sell agricultural commodities to other countries because we disapprove of some of their actions. For example, Iraq, Cuba.
Mr. BROWN. No.
Mr. STENHOLM. We should not lift the sanctions?
Mr. BROWN. We should. I am sorry.
Mr. STENHOLM. We should lift the sanctions.
Mr. BROWN. Yes, sanctions, I just do not feel always work.
Mr. KILPATRICK. I agree, I think the sanctions should be lifted. I do not understand why using food as a tool to bargain with—it seems like it is hurting the farming economy, which I know other countries——
Mr. STENHOLM. I would appreciate just a very brief answer. All I am looking for is generally—you have testified to this, what I want to see is some general reactions—yes, no, or if you are undecided, then offer some editorial comments.
Mr. KILPATRICK. OK. Yes.
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Mr. STENHOLM. Thank you.
Mr. SPELLMIRE. I would say yes.
Mr. STEINER. Yes, also.
Mr. STENHOLM. Anybody in the audience disagree?
[Show of hands.]
Mr. STENHOLM. I see three hands in the audience of approximately 250 people, that believe that sanctions should continue to be unilaterally imposed under some conditions. And I would assume that would be very limited.
Next question is to the witnesses, do you support the Congress passing permanent normal trade relations with China soon?
Mr. BROWN. Yes.
Mr. KILPATRICK. Yes, I do.
Mr. SPELLMIRE. Yes.
Mr. STEINER. Yes.
Mr. STENHOLM. Audience. Anyone disagree, hold up your hands if you think we should not.
[Show of hands.]
Mr. STENHOLM. We see 1, 2, 3, 4, 5 hands that disagree.
Next question. One of the things we are looking at now, and you have mentioned this, is insofar as recognizing one of the failures of Freedom to Farm has been the collapse of prices and the inadequacy of the AMTA payments to replace what used to be target price payments. They are not adequate and therefore Congress has recognized that and, as several of you mentioned, has appropriated considerable additional dollars over the last 2 years, which without them, we would have had an absolute disaster in rural America, period. But with them, we have been able to tide most farmers over.
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Now the question is do we continue this and currently in the pending budget on the House, there is an additional AMTA payment that will be—is being suggested to be paid for this year. There are two other ideas floating around other than double AMTA or paying AMTA again with the oilseed provision in it. A proposal that I have made, which is called a supplemental income plan, and that differs with AMTA in one major aspect, and that is that the payments go to the production, the production actual this year, not a historical average of what you happened to be farming in early 1980's, but that you actually put the payment on the bushels, pounds or hundredweight of the crop being produced this year. And then the third proposal is increasing the market loan rate.
Do you support increasing the market loan rate for the commodities that have the loan rate?
Mr. BROWN. No.
Mr. KILPATRICK. No.
Mr. SPELLMIRE. I would say no as a general rule.
Mr. KILPATRICK. I would like to see the market loan rate increased.
Mr. STEINER. No.
Mr. STENHOLM. Audience, anyone that believes the market loan rate ought to be increased?
[Show of hands.]
Mr. STENHOLM. We have got quite a few more. Looks like we have got about 40 percent of the audience disagrees with three-quarters of the panel. So that is predictable and that is the challenge that this committee has got as we look at trying to work through this. Increasing the market loan rate could be very costly, but on the other hand, it can be something that is doable. And again, I hope everybody understands when we say increasing the market loan, we continue to have the LDPs and we would continue to sell our product at whatever it takes to stay market competitive. And I will have a little more to ask about that.
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My time has expired on this round of questions, but I would say that your answers regarding sanctions and PNTR square with the previous four hearings. About 90 percent of producers believe that we ought to approve the permanent normal trade relations with China and a little more than that believe that we ought to lift sanctions, unilaterally imposed. If we are going to have sanctions imposed on other countries, it must be multilateral, because it is foolish for the United States to unilaterally impose sanctions and then let our friends in Europe and elsewhere take the markets away from us because we are trying to do something that is not supportable by our allies.
Thank you for your responses.
Mr. BOEHNER [presiding]. Thank you, Mr. Stenholm.
Let me first thank the panelists for their testimony. It has been helpful for myself to hear from farmers first-hand over the course of these hearings and I think we have another example of this first panel, very good testimony that helps us understand your specific circumstances.
Let me go back and get into the issue of crop insurance again. And my questions are trying to get a feel for just how many people in this region of the country truly do participate in the Crop Insurance Program. And if the four of you could just tell me quickly whether you participate or not, and if you do not, why not? Mr. Brown.
Mr. BROWN. No, I do not.
Mr. KILPATRICK. Yes, I participate.
Mr. SPELLMIRE. We have not. This is the first year that we have. We signed up for the CRC program just because it gives us more marketing flexibility. I doubt that I will ever collect on true crop insurance payments though.
Mr. STEINER. Yes, I also participate.
Mr. BOEHNER. Mr. Steiner, how long has your operation been signed up in the Crop Insurance Program?
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Mr. STEINER. Since—in various forms, from the very beginning, in probably 1984, after the 1983 drought.
Mr. BOEHNER. Mr. Spellmire, why have you not participated in the program up until this year?
Mr. SPELLMIRE. Up until now? Basically we felt we were able to maintain a yield production at a level that disqualified us from ever what we call collecting on crop insurance, just because of our cropping management practices
Mr. BOEHNER. Mr. Brown, is there some reason why you have never chosen to participate?
Mr. BROWN. All my acres I farm in river bottoms and sometimes I do not even get to farm them because it is so wet, so it is not feasible to do that.
Mr. BOEHNER. As you have watched the crop insurance reform bill move through the House, the Senate has moved a similar bill, not exactly the same, but do you think the changes that we are making in the Crop Insurance Program will encourage more farmers and ranchers to participate? Anyone?
Mr. STEINER. Yes, I do. I think maybe the best part would be the pilot programs. I think if we allow the private industry sector to develop new programs for risk management, it will help all of us producers. If we have more options—the more options that we have the better fit we are going to have with the different producers. So some of us might be just interested in protecting just our equity, some of us might be looking for a plan that will mold in with our marketing plan as well, and if we can have different options—the more options we have to choose from, like any insurance programs, the more options you have, the more likely you will find a fit amongst more producers.
Mr. SPELLMIRE. I think that changes are good in that they open up new avenues of risk management. I guess personally what I would like to see is some credit or some recognition for the conservation practices that I do in our farming operation. And the reason I mention that is because if I have been able to survive economically all these years without crop insurance and the only reason I am buying it now is because it gives me marketing flexibility, crop insurance as a company I would say needs my money, because I would be paying premiums and rarely collecting. So anybody that is in the insurance business, that is the customer that you want. And I do not think crop insurance is attracting that customer and therefore, I think you need to give some recognition for that.
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Mr. BOEHNER. Let me switch away from crop insurance. Mr. Spellmire, in your testimony, you mentioned your concern about farmland ownership and the need for the farmers themselves to own the land that they farm and this increasing trend that we are seeing away from that.
I guess my question is how or what ideas do you have about how we change this trend.
Mr. SPELLMIRE. Well, a couple of things——
Mr. BOEHNER. Other than have higher prices.
Mr. SPELLMIRE. Well, yes, that would be nice, to make farming more profitable. But one of the things that I did last September, one of your counterparts on the House Ways and Means Committee asked me to give testimony as to the implications of the IRS tax code and one of the things that I found interesting was that just in the—the IRS tax code gives the advantage currently to a person who sells a farm for development and wants to go buy another piece of property. The IRS tax code gives an advantage so that land is being increasingly owned by people who are willing to convert it to another use other than agriculture. And the person who is competing against that person to buy the property, the IRS tax code basically penalizes the person who is getting his income strictly from agriculture. And that is one of the areas that I believe would make a tremendous difference.
Mr. BOEHNER. Do you think that if we eliminated death taxes and reduced capital gains taxes, there might be more land on the market available for production farmers to actually purchase?
Mr. SPELLMIRE. There probably would be. I guess what I find the people that are investing in land, a lot of times the investment in agricultural property is triggered by the tax consequences, it is not triggered by that is a good investment. What they are trying to do is avoid paying taxes. So it is either—I guess one of the proposals I had was maybe not eliminating capital gains but giving another option there, so that if you sell a piece of property, you could deposit all that money into a retirement fund and not be subject to capital gains until after you die. And that way, you could live off the total amount of your capital.
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So I think there are various ways you could address that through the IRS tax code.
Mr. BOEHNER. Mr. Lucas.
Mr. LUCAS of Kentucky. I will pass.
Mr. BOEHNER. Mr. Ewing.
Mr. EWING. Thank you, gentlemen, for your testimony and you insight.
One question on crop insurance which has been an issue I have worked quite a bit on. And I think it was you, Mr. Spellmire, that said you just started buying crop insurance?
Mr. SPELLMIRE. Correct.
Mr. EWING. Do you like the option with the CRC of being able to more or less, not just insure your production, but also lock in a price? Do you find that attractive?
Mr. SPELLMIRE. Well, what I find attractive about it is that the price actually fluctuates with the market as well. So it is another marketing tool so that—and basically what it does is allows me—like if this drought would materialize that everybody is talking about right now, and commodity prices would peak out sometime here in the spring, it allows me to forward contract knowing that that production is covered. So with that in mind, yes, I would agree.
Mr. EWING. To any of the rest of you, do you like that option of not just protecting yourself against a drought or a flood, some natural disaster, but also trying to protect yourself from income level, guarantee a certain level of income?
Mr. STEINER. Yes, for the same reasons that Mr. Spellmire gave.
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Mr. KILPATRICK. I agree with it also.
Mr. EWING. Mr. Brown, what could we do to attract you to the Crop Insurance Program?
Mr. BROWN. Well, I need to be farming more acres, I would say. [Laughter.]
My main income does come from the poultry. To attract me to it, make it cheap enough and—I like the income part of it better than on the production part.
Mr. EWING. Well, I am sure you all know the level the last 2 years of participation by the Government in paying part of that premium has gone up considerably. Will, if we have our way, stay up and hopefully make it more attractive.
I want to go to an area that we have not talked about and that is genetically modified seeds. Would any of you like to tell me whether you are using them, have used them, are not going to use them and what your feelings are in regarding to this growing issue? Start with you, Mr. Steiner.
Mr. STEINER. I have used them.
Mr. EWING. You do use them?
Mr. STEINER. I do use them, mostly the soybean more so than the corn. In our area of the country, we do not have the corn borer concerns, so it is not as beneficial for us to use that product. With the soybeans, there are certain situations—I have gone from anywhere from 25 percent to 100 percent of my acreage, this year I will probably be about 50 percent of my bean acreage will be in the GMOs. It is a tool that we do not have other options for certain weeds and certain things just from a production standpoint—very aware of the export concerns, we are very unhappy with Monsanto at this time, particularly with disparaging the price between South America and ourselves, but I think Monsanto has made their case, they have done everything they can. We are not happy, they say they are not happy, so I think we are just going to have to, as producers, decide whether we are going to support Monsanto with the decisions they have made and we just have to make our own decisions on our own farm.
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Mr. SPELLMIRE. We do use them, not so much in corn, but in soybeans. I guess my take on the whole GMO thing is that there seems to be a direct correlation between GMOs coming on the market and commodity prices becoming extremely depressed. And I do not know if there is any—I cannot say if there is or is not, but it just seems to be that way.
But my comment is I think from a European standpoint of view, I think the European Union, after they signed all the GATT agreements and everything, they were looking for ways to create trade tariffs without actually creating trade tariffs. And I believe their farm organizations kind of put out like a press memo that says that the United States is going to import genetically modified organisms and these may—they did not say they were, they said they may not be healthy for you. Well, I mean, unbeknownst to them, they had this huge public outcry, which they have been able to feed on that and basically it has created a tariff for our products going into that market. And I guess with saying all that, I wish that our USDA had negotiated and eliminated that possibility before GMOs ever came on the market or were available for me to plant.
Thank you.
Mr. KILPATRICK. I also use GMO beans. I have not yet got into that with the corn. I do believe it is more cost-efficient for my farming operation, chemical-wise, a lot less input into the ground. I guess that is all I have on that.
Mr. BROWN. I have used it in soybeans in the last 2 years. I just think education is the biggest part of all this. Somewhere, somebody got something started that it was really bad for us and we really do not know yet if it is bad for us or not.
Mr. EWING. Thank you, gentlemen.
Mr. Chairman, my time is up but I have to ask Mr. Steiner just one follow-up question. Why do you not have any corn borers in your area? [Laughter.]
The CHAIRMAN [presiding]. Do you want some?
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Mr. EWING. No, I am going to give him some, I am going to send him some. [Laughter.]
What do you know that we do not know in Illinois? You can answer that after the meeting.
The CHAIRMAN. Your time is definitely up. [Laughter.]
It is going to take a long time for him to answer that question. If I might just take a priority for a minute just to mention to you, we are going to have hearings, we do not have them scheduled yet because we have got a fairly large platter, but we are going to have hearings on the whole GMO question and we are going to have hearings on the price disparity issue which is causing a lot of concern around the country.
Mr. Smith.
Mr. SMITH. Thank you.
GMOs are ultimately going to come because it is such a great benefit to consumers in those parts of the world that need the ability to have the kind of increased nutrition that can be produced with this new genetic modification. They might have slowed us down in the short run, but not in the long run. I have held three hearings in our Basic Research Subcommittee, Mr. Chairman, on GMOs and that is the conclusion, exactly what you suggest, it is political, it is not scientific.
Let me ask you a question to follow up on the GMO though. Have you looked at your reduced cost or increased yield using the Roundup Ready soybeans? We know there is an increase there, but has anybody calculated just how significant it is on your own particular farm operations?
Mr. SPELLMIRE. Do you mean actual numbers, actual dollars of expense?
Mr. SMITH. Yes.
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Mr. SPELLMIRE. How much money is saved?
Mr. SMITH. How much can you reduce cost of herbicides by having Roundup Ready or how much increased production can you get by controlling weeds?
Mr. SPELLMIRE. One of the big advantages to the Roundup Ready technology was that if you have weeds come up that were kind of like surprises, a lot of times in soybean production, it is the weeds that you did not count on that become a major problem. And if that is your situation, if that is what happens, that can become very expensive if you are not using Roundup Ready.
Mr. SMITH. But you have not exactly calculated——
Mr. SPELLMIRE. Well, no, under those circumstances, I would say it saves us somewhere around 20 bucks an acre.
Mr. SMITH. Do you use both Roundup Ready and conventional cross-bred soybeans? Do you all here or are some of you using Total?
Mr. SPELLMIRE. Ours is Total.
Mr. SMITH. So in the partial—Mr. Kilpatrick, are you partially? If you knew you were required to segregate, would you back off the Roundup Ready?
Mr. KILPATRICK. No, I would not. In fact, last year we were both Roundup Ready and this year we are going total Roundup Ready beans, just for the fact of the savings on the chemicals that we use.
Mr. SMITH. But you are not segregating?
Mr. KILPATRICK. No.
Mr. SMITH. Mr. Steiner.
Mr. STEINER. When you say we are required to segregate——
Mr. SMITH. If you were required to segregate by whoever you sell your beans to.
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Mr. STEINER [continuing.] As farmers, if you are going to pay us to do that, we will find a way to do it for you. If the premiums are high enough, I will abandon the Roundup—I would like to be able to abandon the Roundup beans if I can find better options and beans that will make me as much or more money.
Mr. SMITH. Let me ask you about the—I mean profit comes from what you get minus what you spend. How about your cost of inputs and do you have any particular concerns about the concentration, the near monopolies, the joining of the seed companies and the chemical companies that probably result in some higher cost of inputs? Any comments from any of you on that?
Mr. STEINER. I think we are absolutely concerned. I do not know if we can quantify how much it is costing us by that.
Mr. SMITH. I am not talking about GMOs any more, I am talking generally about the more concentration and the less competition there is in the marketplace, whether it is machinery or seeds or chemicals.
Mr. STEINER. Well, the concentrations, the chemical companies buying up the seed business has gone on longer than the GMOs were available. Maybe they saw it in their game plan ahead of what we saw, but I think they also lost, in the early 1980's there was a lot of that and they were not happy with the returns from the seed industry and they started to divest themselves from the companies when the GMOs came on line and that was their outlet to hang onto their patent rights and market that product. So they are back in the game and back owning them again. But yes, we certainly have a concern. I think the Monsanto situation in South America is a prime example of our concerns and what we are afraid might happen over——
Mr. SMITH. Any other comments from any of the other gentlemen?
Mr. SPELLMIRE. Well, I would just say that I strongly believe in the whole concept of competition and the fewer and fewer companies that you have, the less and less there is likely to be competition amongst them. So I believe that the more entities you can have out there, the more stable a lot of things are.
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Mr. SMITH. How many of you market through co-ops, farmer-owned co-ops?
Mr. BROWN. [Raises hand.]
Mr. SPELLMIRE. Part of it is.
Mr. SMITH. Let me ask you the question that concerns a lot of people and that is the fact that farm size is growing a lot bigger and a lot of concentration in production too. We set limits on farm program payments that in the case of LDPs does not become a limit if it is a program crop simply because you can put everything else under loan. Should the Federal Government continue to limit payments tending to give less of the available money to the huge operations?
Mr. STEINER. No, I do not think so, I think that the move to expand the payment limitations last year was wise.
Mr. SPELLMIRE. I guess I think they should limit the payments because one of the problems with crop insurance and this whole thing of payments is that you are basically almost guaranteeing a certain level of profitability per acre. But that profitability level is at such a point that if I were farming 10,000 or 15,000 acres, I could make a lot of money, but I cannot make a lot of money at it if I am only farming 2,000 acres. And I still think the United States is much better off having 2,000-acre farmers than they are 15,000-acre, when it comes to corn and soybeans and wheat—or corn and soybeans anyway.
Mr. KILPATRICK. I also believe that keeping the payments down, limitations and looking more out for the family farm is a wise move.
Mr. BROWN. I agree with that, I personally think they should be limited.
Mr. SMITH. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Moran.
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Mr. MORAN. Mr. Chairman, thank you. Thanks to our witnesses today. I appreciate learning a lot about farming operations and your thoughts about improving circumstances that farmers face.
Mr. Kilpatrick, in your testimony something that stood out in my mind was the issue of decoupling AMTA payments. And I think that is interesting. We presumably have a farm program that is designed to give farmers full flexibility to farm the markets and yet we have an impediment toward making market-based decisions. Any additional thoughts other than what you previously said that would be of help to us in understanding that issue, how it works and what the problem is?
Mr. KILPATRICK. Somewhere along the lines here, this Freedom to Farm, farmers are going out and just planting, planting, planting, trying to put more acres out to make more money.
Somewhere along the line, we are going to need to cut back production somehow, some way. I mean if everything goes—this year in the United States, if we have a decent year, we are going to see less than $4 beans, we are going to see $1.75 wheat. You are going to see farmers across the Nation going out of business just hand over fist. We cannot stand these low commodity prices much longer. They say there is going to be a dry spell across the Nation, but it is my opinion, with the facility loan, these big elevators are already full of grain and this is just a way to store the grain on the farm a little longer to keep it off the market and there is just way too much production out there and we are just going to see such low prices at the end of this year without some major disaster across the country, it is going to be unreal.
Mr. MORAN. In that regard, how important, how significant was the disaster payment, the enhanced increased AMTA payment over the last 2 years to each of you in the viability of your farming operation?
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Mr. KILPATRICK. Oh, it probably kept our farming operation in business for another year.
Mr. MORAN. My guess is that is true of all of you.
Mr. Spellmire, you indicate in your testimony, you say something that I think is very important about the Export Enhancement Program. I do not understand why we are not more serious about agricultural exports and clearly costs matter to the farm, whether there is anything left at the end of the year, but also markets matter in that commodity price and it does seem to me that we have a program that does not at all come close to combatting the European community and others in regard to their assistance in exports, 80 plus percent of all the export subsidies in the world are generated at the European community, ours is 2.5 percent and what tools we have, we do not seem to use and we probably do not have all the tools necessary. At some point in the near future—in fact several years ago, we should have decided whether or not we were going to care about trying to combat this problem, because I do not see the Europeans changing unless we do something in response to the way they assist agriculture through subsidies of production as well as subsidies of exports.
And so I am interested in what you have to say about that topic and I do hope that there is a way that we can better respond.
Mr. Steiner, your comments about the LDP payment and its national rate, I think are on target. I did want you to at least tell us for the record why it matters that you have a payment, repayment rate based upon terminal markets as compared to a national rate.
Mr. STEINER. Particularly in the eastern Corn Belt, we will be penalized severely by going to a national rate as far as what our local LDP rate would be. When the marketing loan program was set up, it was set up to be based on—it was the protection between the loan rate and the market price. Well, across this country, the market price probably varies by $1 and if you go to a national price, it limits our protection, particularly on the eastern Corn Belt.
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Mr. MORAN. It is certainly true in my home State of Kansas and in part it is related to the cost of transportation. We are very transportation-deficient, it is expensive to move our commodities to market and I am very concerned with the USDA's—if they continue the thought process toward a national LDP rate. Several members of this panel have asked about biotechnology. I was in the grocery store the other night, certainly not in Kansas, but in Virginia and I just happened to pick up a letter at the checkout and the letter—and always before I thought a lot of the concerns about biotechnology and GMOs were based upon a desire by the European community to limit imports, a different kind of trade barrier. But this letter was interesting to me, and there was a stack of them, I suppose for customers of the grocery store to pick up. And the first sentence of the letter,
I am very concerned that I am eating genetically-engineered foods without being told of that fact. Studies show that crops modified by genetic engineering may contain increased levels of natural toxins and lower levels of valuable nutrients. Genetically-engineered crops often contain proteins that have never been before consumed by humans as food. Serious questions about the environmental safety of these crops. I do not want to eat genetically-engineered foods, nor do I want to eat Roundup Ready soybeans.
So it is interesting, this really caught my attention as perhaps an eye-opening piece of information about even some of our own consumers, American consumers, who are picking up upon the fears that have been expressed in Europe. We talked about education and I would be happy for any of your responses.
Mr. STEINER. I would like to comment on that. As much as we in agriculture like to complain about the EPA and the FDA as far as the regulations on ourselves, you do not have to go very far out of this country to see and be thankful that we have those kind of groups watching over what goes on in this country, to understand what a wonderful place we have to live.
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As far as any of those comments in that letter, the GMO products that have been released are the most widely tested by FDA, USDA and EPA. And it is easy to stir up the emotion and say we do not know what is going on. Well, you are never going to be able to prove a negative. If we have a 100-year study, they will want a 500-year study.
So far the science is backing us that it is safe and if it was not safe, we would not be doing it on our own farm. We have got families, we would take the precautions to not be exposed to it. We have every confidence in the technology and I think, as was alluded to earlier, if we get past the point where we just have the production advantages and get to the point where we are going to be producing enhancements that the consumer will be able to feel and touch, whether it be the vitamin A components or hepatitis vaccine and oral hepatitis vaccine, I think then we are going to get over this hump and be headed in the right direction.
Mr. SPELLMIRE. I guess my comment to that is a little bit different, but I think you have to go back to the old adage, the consumer is always right. It does not really matter if they make sense or not, but if they are willing to pay more for it—the problem that I see is we cannot market our stuff so that we can get the premiums, because of our traditional grain-handling facilities and everything, it is very hard to get grain coming out of our traditional grain-handling facilities that is 99 percent pure. I mean 92–95 is about the best they can get, and that is not what the market wants. The market says they want 99 percent. So my comment would have been I guess it would have been nice had all these issues been kind of researched and figured out how to handle them before the GMO technology came on the market.
Mr. MORAN. I thank the panel. Mr. Chairman, thank you for the time.
The CHAIRMAN. Mr. Thune.
Mr. THUNE. Thank you, Mr. Chairman.
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As I indicated earlier, where I come from in South Dakota, if our farmers do not prosper, no one prospers. And it seems like the operative rule in agriculture these days, at least in the last couple of years, is we lose a little bit on each sale but we make up for it in volume. And you just cannot continue down that track for very long. I think that the fight to save rural America is a fight that is worth having. In my area of the country, we have a lot of small towns who are very dependent upon agriculture and the quality of health care and education and everything else in rural areas of this country is at stake if we do not have a prosperous agricultural economy.
And of course, there are certain circumstances that are beyond our control. There are things we cannot control, like the Asian economy and exchange rates, the weather obviously. But our challenge is to try and address the things that we do have some control over. We want to improve Federal farm policy. This last year we did reform crop insurance, that is in conference, that is a significant step in the right direction. We were able to pass mandatory price reporting legislation for our livestock producers, which is something—a piece of legislation that I had introduced in the House last year. But I think the question that is before us now is what can we do. And how do we shape policy as we move into the future.
Mr. Stenholm raised some questions, addressed some issues that I care about as well—open markets, trade, China obviously, sanctions. Those are things that are important. The marketing loan question I think is interesting and it was interesting to see the audience's reaction to that. But there are a couple of other things that I would like to get your reaction to, a couple of other issues.
I appreciate Chairman Combest's approach to this, in trying to make this process a bottom up process, rather than having Washington top down dictate what our farm policy ought to be, that we hear from producers and allow you to give us the direction about what we ought to be doing. But in that vein, there are a couple of suggestions that have been raised out there and again, in the area of trying to stay constructive as to what solutions we might possibly want to adopt or employ, I would like to get your reaction to. And what I would like to do, just to keep it as brief as possible, is ask you on a scale of 1 to 10, with 10 being a home run, a wonderful policy for agriculture and 1 being the worst, where you would see some of these things falling.
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It has been mentioned in some of the testimony, reviewing it here too, a program called flexible fallow, which essentially increases the marketing loan rate proportionate to the amount of acreage that a producer would take out of production. It is designed to try and idle acreage and hopefully thereby increase the price and in essence exchanges a higher loan rate for a decrease in production.
I am just curious, on a scale of 1 to 10, how you might rank that sort of an idea.
Mr. STEINER. I would give it a 1.
Mr. SPELLMIRE. I guess I would give it a 4.
Mr. KILPATRICK. I would also give it about a 4.
Mr. BROWN. I will give it a 5. [Laughter.]
Mr. THUNE. We have got one generous grader here today.
Another thing that has been suggested, which I am interested in as well, and actually have co-sponsored legislation that would raise the cap on the CRP program acreage. Currently it is 36 million acres or thereabouts and it would raise it to 45 million acres, or something that would provide a financial incentive for conservation. But again, on a scale of 1 to 10, in terms of a policy that might be helpful to agriculture as we try and compete in the world marketplace, putting more acreage or allowing more acreage to be put in the CRP program, on a scale of 1 to 10, how would you score that?
Mr. STEINER. Could I ask under the existing CRP rules? I would give that an 8.
Mr. SPELLMIRE. I would give that probably a 9.
Mr. KILPATRICK. I would also give it about an 8.
Mr. BROWN. I like that, I would give it a 9, this is the first year I am participating in it.
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Mr. THUNE. OK. One other issue—and I appreciate your response on that. One other issue that I am also interested in. I am a big believer in ethanol and also a big believer in value-added agriculture, probably some of it has to do with the fact that where I come from, we are very far from terminal markets and so anything we can do to add value at the point of production is useful. But recently, I have introduced, along with another Member of Congress from Missouri, Jim Talent, a couple of pieces of legislation to further promote value-added agriculture. One side of it dealing with the technical assistance, the legal, the engineering, the planning, providing assistance there. The other side dealing with financial incentives to get producers to buy into value-added operations, and that being a tax credit for any investment that they would make.
And I am just curious again, on a scale of 1 to 10, on the whole issue of value-added and how that figures into the whole picture where agriculture is concerned, how you would rank that.
Mr. STEINER. About a 9.
Mr. SPELLMIRE. A 9.
Mr. KILPATRICK. I would also give it a 9.
Mr. BROWN. I will give you a 10, I like that. [Laughter.]
Mr. THUNE. I appreciate that.
I see my time—just one last question. And again, this is in response to what I hear a lot in my part of the country. There is a strong and deep concern about this whole issue of concentration, which Nick Smith referenced earlier. And I would be curious to know your thoughts as to whether or not we have strong enough laws on the books to prevent concentration that would be anti-competitive, or do we in fact need legislation. And again, I am in the final stages of drafting something that would deal with the whole issue of concentration, but I think it is an issue in response to the people that I serve in South Dakota, I am curious to know whether you think the current laws are sufficient or whether we need to strengthen the laws that we have.
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Mr. STEINER. I have always thought we had sufficient laws, I have just always wondered why maybe they are not enforced the way I thought what the laws said. But since they are not enforced, there must be someone that thinks that they are not strong enough. So maybe that needs to be looked at. I am not an attorney, so I cannot speak clearly on what the law actually is, but I think there is plenty there to work with right now, if it would be enforced.
Mr. THUNE. Other comments?
Mr. SPELLMIRE. I think you need to do some new laws or something. Personally, I think what happened to the hog producers—I mean, we do not raise hogs or swine, but personally, what happened to the swine producers in the last couple of years has been borderline criminal. So I just think you need to address that whole issue.
Mr. KILPATRICK. Yes, I think also the laws should be looked at also. I am in agreement with Thomas here. What happened to hog producers a year and a half ago is just downright criminal with the markets not bringing their prices down in the store at all. I mean that was just amazing.
Mr. BROWN. I have to agree with Mr. Steiner, I thought we had some laws on the book that took care of this because I see Ma Bell was broke up and a lot of others in the past, but it needs to be looked at. If they need new laws, yes, we need new laws. But I thought we had some laws in there already to take care of this.
Mr. THUNE. I would be interested just in what the people sitting in the audience might think about that too. Could I see a show of hands of those who think that we have sufficient laws on the book today that deal with concentration.
[Show of hands.]
Mr. THUNE. How many think we need to strengthen them?
[Show of hands.]
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Mr. THUNE. I would say most of you agree with the people of South Dakota, based on that response.
I thank you, Mr. Chairman, and yield back whatever time I may have.
The CHAIRMAN. Mr. Fletcher.
Mr. FLETCHER. Thank you, Mr. Chairman, and I again appreciate this hearing and certainly the witnesses today.
It certainly brings to mind the diversity of agriculture and it is a very steep learning curve that I am on as we look at a lot of things that are going on across the country. It kind of reminds me of the guy from Texas and Kentucky that were talking and the guy from Kentucky said I have got 180 acres and 30 good in good bottom land that is tillable. The guy from Texas, when he asked him, he said well I can get in my pickup truck early in the morning, drive all day long and not get to the other side of my ranch. The guy from Kentucky replied that I had a pickup like that once. [Laughter.]
Let me say a few things. I may come from a different angle, and certainly I surely agree with what we have heard about improving our corn markets, promoting the Export Enhancement Program, which has I do not think adequately been done or embraced by the USDA, I think that is very important.
We have made some improvement in crop insurance and from what I am hearing from our farmers and from you all, that is going to be helpful, maybe other tweaking or improvements on that can be done.
Regulatory relief, especially basing it on sound science, and some of you mentioned about bringing it back a little more local control, State, certainly not one-size-fits-all, which does not work. So I am encouraged by that.
Let me ask you, we have talked a lot about increase in consolidation, the need—and one of you, I believe it was Mr. Spellmire, mentioned vertical, horizontal integration. Let me ask you about vertical integration because I have seen, whether it is commodity prices or pork or beef prices or whatever, go very low and yet when we walk into the grocery store and pick the products off the shelf, really I do not see a change there. And maybe it is because of certainly the low portion that a farmer gets out of that, may not affect that price substantially. But it is bound to increase the profits of someone when we see that.
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What can be done, and what inhibits vertical integration for farmers having a part of that so that when the prices go low, they may lose it on one side but make it up on the other. I would ask the panel in general.
Mr. SPELLMIRE. I guess first of all, my comment about what the price of food is in the store right now. I think all the companies all the grocery stores, they do not market their food based on what the price of the commodity is, they market it on what the consumer will pay for a certain food item. So there is a disconnect between what commodity prices are and what the price of food is, because it is pretty irrelevant, it does not come into the equation any more, I do not think, unless commodity prices go extremely high. But it does not seem that is very likely.
I guess one thing that has not happened is I thought the whole concept of co-ops might be able to play into that whole role where we could actually profit from some vertical integration in there, but that really has not panned out very well. And maybe there should be some more tax incentives for co-ops to operate under that realm there, where we as producers could actually share in that.
More down on the farm per se. If I knew that I could get premiums for my grain if it was all segregated into GMO and non-GMO, that made it worthwhile for me to do that—because I believe the market is out there, then I could afford to make that investment on my own, if those markets were pretty well protected out there.
Mr. STEINER. I think the biggest detriment is the farmers—we have been fiercely independent, and been brought up that way for generations, and I think as this farm economy rolls along, we are going to have to swallow some of that and get together. There are not too many producers of the size that could run a value-added program of any scale, with 1,000 or 2,000 or 3,000 acres of row crop production. As we need to find margins elsewhere, if not in the flat commodity prices, we will have to look that direction and we are at the low end of that learning curve yet as well.
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Mr. FLETCHER. Let me ask you one more thing. Freedom to Farm was passed and looking more toward a market-driven system. Let me ask you about the commodities market. Does that provide any help in risk management? How many people utilize that and would it be a good tool to utilize to help in some way?
Mr. SPELLMIRE. You mean the Chicago Board of Trade commodities market?
Mr. FLETCHER. Yes.
Mr. SPELLMIRE. Oh, yes. And that is why I like the CRC Crop Insurance Program because it allows me as a producer to actually utilize that tool, coupled with this Crop Insurance Program, and the two compliment each other. I like initiatives by government that incorporate existing tools that are already out there and them compliments them and makes them actually do what I thought they were supposed to do originally.
So I think yes, the Chicago Board of Trade is a great tool that can be utilized.
Mr. STEINER. I was quite surprised to learn that the private crop insurance companies do not offset their risk in the Chicago Board of Trade under the CRC program. It was explained to me, well, if the Government is going to cover it, it is certainly less costly to go to the Government and get the backing for that than it is to go to the Chicago Board of Trade. I think it is an invaluable tool. I would think there would be a way to incorporate that into a program where as they are setting a price under the revenue program, they could protect themselves under price movements on the Chicago Board of Trade, as opposed to in Washington.
Mr. FLETCHER. Anyone else? I think my time has expired and thank you, Mr. Chairman.
The CHAIRMAN. Mr. Stenholm had a follow-up comment.
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Mr. STENHOLM. I just wanted to commend the panel. I think you have had some excellent testimony, your thought processes are very, very good.
I do, though, think that all of us who are concerned about the producing end need to start looking at the world as it is a lot more than as we wish it were. Mr. Steiner, you point out all of the things that have not come about as a result of Freedom to Farm, and we stand a very good chance that permanent normal trade relations with China will not pass and that we will unilaterally sanction our ability to sell to that market, and that we will not lift the sanctions.
We already see in the budget that has just passed that we will not increase Public Law 480, and therefore, I think when we say then that we oppose supply management, I like to call it inventory management, I do not know of another business in the world that does not practice inventory management in order to stay in business. And yet we, all of us—this is not meant to be critical as it is meant to be stating what I think is a fact—we have to learn to manage our inventory in order to get the price. And we have got to look at what is wrong with our co-ops and why it is not happening there. And we have also got to reach out to corporate America and corporate America has got to learn to be just as willing to increase the producer price and pass it on to the consumer as they are willing to increase their marketing and advertising cost and pass that on to the consumer. Somehow, some way in our conversations, this has got to happen because price is everything. As you have all stated and every witness that we have heard on the producing level states we cannot survive at prices at which they are today. We are at the lowest in the history of our country when you take inflation out. And therefore, we have to look at ways in which we can get price—and that means we. Producers are going to have to start looking at some of the solutions.
And I very much appreciate Mr. Thune's line of questioning, and it is very interesting, on flexible fallow, you do not like it too much, but conservation you like it. What is the difference? What is the difference in the real world? Think about it. You do not have to answer right now, because flexible fallow in which we are not producing fence-row to fence-row, in which we might be able to, as a result of incentives, not produce as much in one year in order to conserve and to build back and to do things that we otherwise would do. But yet we react differently because we have this negative connotation that we have that supply management is a four-letter word, it is to me too, but inventory management is not and it is something we have got to keep looking at.
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And as we keep looking for solutions of how we are going to get price up, we had better recognize one thing, and this is fascinating to me, and I ask each of you through your associations and others to do as we are asking all economists now, to answer what looks to be right now—in the last 25 years, we have not increased the volume of exports, bulk, of soybeans, of wheat, or corn, of cotton. Rice is the only small exception on exports. So no matter what our price policy, no matter what our export enhancement program, no matter what—and this goes for 25 years we have not increased. Therefore, one of the things that we are interested in looking at, what do we need to change in order that we might regain market share or take market share in the world? How can we get our Government to stand with us? If we cannot find the answer to that, then under the pure concept of Freedom to Farm, it is going to be nothing but a disaster for us. And you all have stated that and I thank you for your testimony. [Applause.]
The CHAIRMAN. We appreciate very much this panel and the information you provided.
We would now invite our second panel to the witness table. Mr. William Fulton is a grain, fruit and vegetable producer from Troy, OH; Mr. Floyd Geeding, who is a grain producer from Eaton, OH; Mr. Steven Pitts, a corn, soybean and hay producer from Milan, IN; Mrs. Jeannine Wiley, a corn, soybean and wheat producer from Marysville, IN; Mr. Fred Yoder, a corn producer from Plain City, OH and Mr. Thomas Yuhasz, a corn, soybean producer from Orwell, OH.
Mr. Fulton, we will start with you and go down the table in the order you were introduced. Please proceed.
STATEMENT OF WILLIAM FULTON, GRAIN, FRUIT, VEGETABLE PRODUCER, TROY, OH
Mr. FULTON. Thank you, Mr. Chairman, members of the committee, I do appreciate that you have these meetings out in the States. It is difficult this time of year for a lot of us to get to Washington to testify.
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Our farm is located about 50 miles north of here, we are in the northern end of Mr. Boehner's territory. I give him a lot of credit, he has spent time on our farm and very helpful to us. And I suppose being on this panel is kind of a payback I suppose.
We farm about 1,600 acres, half of it in small fruits and vegetables and the other half in soybeans, specialty corn crops. Some of those specialty crops are contract crops, so we are familiar with that. There are four families of my own descendants who are involved in the operation and we have, on the fruit and vegetable end of it, we do wholesale crops, we also have some pick your own and we have a retail market. My wife is with me today and she manages the market. I would say that our market is one thing that has really helped us survive through the 1980's depression and this current problem we are going through. We have four other full time employees and we have about 100 part time workers including 20 to 25 migrant workers and I now have six grandchildren who are all of school age, but are involved in the operation. Hopefully we can keep a few of them in the operation when they get beyond school age.
Our acreage is all irrigated and that is rather important on the grain part of it because we mainly use the grain as a rotation crop. Since our whole farm is irrigated, we are able to get good yields even in years like last year when we had a drought.
I have several items I want to bring up, most of them—since I think I am the only fruit and vegetable producer that is here, most of my talk will be concerning the problems of the fruit and vegetable industry as related to what farm policy is.
I, like most farmers, would prefer to be able to farm without depending on Government payments to survive and be profitable. Emphasis needs to be put on programs that encourage adequate prices.
I had high hopes for the Freedom to Farm Act, that it would finally get Government out of farming. Mr. Chairman, you made a reference to what happens if prices rebound here. There is a direct relationship between grain prices and contract prices, like seed corn, or we raise some specialty corn for the food industry. But there is also an indirect effect of low grain prices on fruit and vegetable crops. I think a lot of people do not realize that. There are a couple of reasons for that and part of it I will explain later.
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I am concerned if prices go up on commodities, all the money that is now being put in to subsidize agriculture, is that going to then be used as an excuse to establish some kind of price controls?
My next is on alternate crops. Back in the 1980's, that was the rallying cry of how to solve a lot of people's farm problems, alternate crops. Unfortunately, when too many people get into alternate crops, the price goes down and this usually means low prices for all crops. This is why many of these endeavors in the 1980's failed. I can remember we bought equipment out of an Iowa co-op, who had decided to go into peppers and broccoli and tomatoes and lasted one year, and we purchased their equipment out of there.
Shortage of fruit and vegetable crops. The only time you hear about fruit and vegetable crops is when the media picks up that there is a shortage of a crop. This happened last year in pumpkins because there was a drought. There was a lot of reference that pumpkins were going to be in short supply, quality was going to be down. Well, that did not really come out. We had to convince some of our buyers—and pumpkins is one of our major crops, pumpkins and sweet corn are our two major wholesale crops. The rest of the crops we raise are mainly for our farm market or pick your own. So we had to convince them that pumpkins was not in short supply.
I would think almost all fruit and vegetable crops, there is more than an adequate acreage planted, the only time you get a shortage is if somebody has a disaster area. We have kind of a rule of thumb in the vegetable industry if the production increases 5 percent, prices go down 20 percent, and if production decreases 5 percent, prices go up 20 percent. So it is very sensitive.
Also in the 1980's, there was a lot of programs by State-run agricultural research stations, to have programs for alternate crops. And many times those led to an over-production.
Crop insurance, there has been a lot of discussion on crop insurance. We basically very few years have got in the insurance because we can irrigate and we can usually, even in bad years, even on our grain crops, produce good crops. And then on many of the fruit and vegetable crops, there are just not insurance programs available.
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By nature, specialty crops are a high risk crop and I think this also leads to the potential of good income, because they are high risk crops. The existing crop insurance programs for non-insurable crops are of little value. I am not familiar with the new programs but what I have read about them, a lot of them are geared toward pilot programs and quite a bit of money has been going into those programs. So I really do not know whether they would be of much benefit. In specialty crops, if you cover too much of the risk, it will lead to over-production and this is exactly what happened in some of the disaster programs that we had in the late 1980's and early 1990's.
Government regulations. There is supposed to be an effort to reduce Government regulations. I think this is part of the 1996 farm bill. I do not see this. Government regulations, especially in the fruit and vegetable crops is almost overwhelming. By rights, we should have a full time person handling just this problem, but we cannot economically afford this. We struggle along as best we can. We now deal with about 30 different Government agencies and I have included a list, but I will not read them. Some of them to us are very beneficial and very helpful, such as the Agricultural Research Service, Extension Service and the Soil Conservation Service. We have a very good agriculture agency in our county and very easy people to work with.
On migrant labor. We depend on migrant labor, we have been very fortunate in that we are very diversified, even the fruits and vegetables that we have, we work from about the 1st of April to the 1st of November. So our migrants can come in, they have got steady work for 7 months. If they want to, they can work as high as 50–60 and sometimes even work 70 hours a week. It is getting much more difficult to get workers. A lot of them now have left agriculture and got into other industries. I had one of my supervisors last year stayed up here and went into construction. He is such a good worker, the guy did not want to get rid of him, so there is no way I can compete with what he had there. We need to have a good foreign workers program. I know there have been some proposals for it. I need to emphasize that the vegetable and fruit industry feels these programs need to be run by the Agriculture Department. Some of the existing ones, which we have not participated in, have been run by the U.S. Labor Department and they are not very responsive to growers' needs.
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Thank you again for this opportunity to speak.
[The prepared statement of Mr. Fulton appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Geeding.
STATEMENT OF FLOYD GEEDING, GRAIN PRODUCER, EATON, OH
Mr. GEEDING. Chairman Combest, thank you and your committee for the invitation to discuss the current agriculture policy. There is not one person here today that production agriculture does not affect. We all must have food to survive, no matter what our society or geographic location may be in the world. Food is a staple of life, as the struggle to obtain it can be viewed on the nightly news around the world.
I ask you the question, ''Is it the responsibility of the American farmer to feed the world?'' What would happen if we said no, and only took care of our own needs? Would the President or the Congress invoke the Taft-Hartley law? We all know ''it just don't work that way.''
I feel that American farmers take great pride in producing food in the world. It appears that our Government wants an open and free market for this food, yet in the past, this same government has viewed our production as a tool to influence other countries. In order to control these countries, grain was supplied or withheld, and the U.S. farmer found himself the pawn, left to deal with the effects of these policies.
The Freedom to Farm Act at its inception appeared to be a very good bill and a great way to get the Government out of the production of food. Supply and demand has to work, and I feel it will still work if we, the Government, do not interfere in this process. If our Government programs regulate agricultural production, then, gentlemen, please tell me what will keep South America and other countries from bulldozing more land for production?
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At the present time, the Loan Deficiency Payment is given to the rich and taken away from the poor. And I am not referring to the financial condition of the farmer, but rather how the LDP program benefits are paid. The farmer that received rain and had a 150-bushel per acre corn crop benefitted to a greater extent than the farmer that received little or no rain and had a 50-bushel per acre corn crop. You can understand that with 100 bushels per acre yield less, these farmers received an LDP payment of a lot less. And in my example of using 30 cents as the LDP payment or $30 per acre. Both farmers started the season with the same expectations. However, because of an act of God, the farmer who received less yield due to inadequate rainfall and consequently a lower gross income, received a lower payment with which to meet his obligations.
The same scenario is true for the Oilseed Program Payment that concluded yesterday. The producer could have accepted the county average or provided documentation of their proven yield for either 1997 or 1998. Here again, the program rewards those who had good weather. Ladies and gentlemen of the committee, you cannot legislate equality based on yield any more than you can legislate the weather.
A solution to the above-mentioned problems would be to enhance the national Crop Insurance Program, in lieu of the current programs, to cover the disasters that I have just talked about. National, State and local committees to determine losses would regulate this insurance. A general coverage by national regulations will have to address the details of each commodity, from the rice farmer in Texas to the corn farmer in Ohio, with each specific to the region grown. The basic actuary charts are already established. I am sure it would be very cost-effective compared to the present program we now have in effect. This same type of insurance could also be adapted to include the livestock farmer.
Increasing EPA restrictions placed on American companies, while beneficial, greatly increase our production costs. Yet these same companies are able to sell their products to other countries at about 50 percent of the price we currently pay. These countries in turn export to the same markets to which our products are exported. The same is true of the European Common Market. They subsidize the value of their grain in order to compete with the United States in the global market.
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Many of my fellow farmers and I have worked our entire lives to gain financial security with our land. Today we face the estate tax problem, as do other business owners. Also, the removal of the investment tax credit program inhibits new purchases of equipment.
Caution should be exercised concerning the genetically modified organisms issue because at the present time there is not adequate research to justify that any harm is done.
These problems are paramount to the next generation of farmers. And any and all solutions must ensure their future and the generations to follow.
What I do suggest—and I have pondered this question for several days, talked to many of my fellow farmers in Preble County, and have come to the conclusion that there is no answer today that will solve the problem. But I know we have to preserve the American farmer or food will increase in price. Why? Because no other farmer in the world can produce it as effectively as we can in America.
No, I have not solved the current farm problem. I trust that I have explained in layman terms some of the problems we, as U.S. farmers, face. I do feel with less Government involvement in the supply of food produced in America, money now spent to subsidize farmers would yield a 70 times 7 increase in export sales to world countries.
Yes, I am very proud to say I am a farmer, but I feel great sadness for the future of the next generation of farmers. Will they be corporate workers or will we, the Government, still allow for free enterprise?
Mr. Chairman, thank you for allowing me to express my thoughts. I trust that I have given you more insight into this American problem and would be honored to answer your questions. Thank you.
[The prepared statement of Mr. Geeding appears at the conclusion of the hearing.
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The CHAIRMAN. Thank you. Mr. Pitts.
STATEMENT OF STEVEN E. PITTS, CORN, SOYBEAN, HAY PRODUCER, MILAN, IN
Mr. PITTS. Mr. Chairman, members of the committee, I am Steve Pitts, operator of a diversified crop and beef cattle operation in southeastern Indiana, near Milan, IN. Our first generation farming operation consists of 150 acres each of corn, soybeans and hay, 20 acres of wheat, a 15-cow registered Angus herd and backgrounding of 110 feeder calves from April to October.
Farmers throughout the Nation are suffering low commodity prices, agribusiness consolidation and weather difficulties in several regions of the country. We have encountered 4 difficult years on our farm with weather-related problems. Last year we suffered a drought which reduced our harvest by 50 percent. In 1996 through 1998, we suffered extremely wet springs with decreased yields due to late plantings. Through the safety net of Federal crop insurance, Government payments and crop diversification, our family farm has survived. Can our family farm and thousands of other family farms continue to survive this turbulent and consolidating agriculture economy? U.S. agricultural policy and antitrust rulings will determine the outcome.
The Freedom to Farm Act has benefitted our farming operation in several positive ways. We have rotated crops which lowers our production cost and allows us to no-till more of our cropping acres. Greater use of no-till farming practices has benefitted our farm economically as well as environmentally. We have diversified our operations by growing and marketing over 150 acres of hay.
The Freedom to Farm Act eliminated production control tools such as set-aside programs. Productions may have short-term price benefits; however, I believe they would have disastrous consequences long term, moving more production to South America and other regions of the world. We must compete with sound economic principles if U.S. agricultural production is to lead the world.
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Some areas of the Freedom to Farm Act could be improved. The largest inequity in the Freedom to Farm Act is the loan deficiency payment. This payment is based on actual production reported by the farmer. A producer who has a high yield per acre receives more money than a producer who may have suffered weather-related problems and has lower yields per acre. There is also the difficulty of verifying yields and the possibility of fraudulent claims.
I would like to see the following changes to place equity and integrity in the LDP program:
One, payments should be based on a county average yield.
Two, farmers would be aided based on planted acreage.
Three, LDP payment rate would be determined by averaging price over a marketing period.
Congress has assisted the American farmer with AMTA, LDP and disaster payments during the current and previous low price periods. However, it has failed us in opening trade with other nations. Congress must help facilitate trade with other nations by:
One, giving the President fast track authority, so foreign countries would invest the time and resources to develop trade agreements. Currently, it is easier for those countries to trade with South America and other regions of the world.
Two, trade sanctions must be lifted to enable access to large segments of the world's population. Sanctions only hurt our economy and producers, allowing our competitors new market opportunities.
Three, permanent normal trade relations for China, the fourth largest trading partner with great potential for continued growth. China represents a great opportunity for U.S. agriculture. Critics should realize the best hope to reform China is through open trade and cultural exchange.
Four, increases to food aid and concessional sales should be made. These programs can benefit developing Third World countries while positively impacting market prices in the United States.
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Five, Congress should continue to support and reform crop insurance. Government support of crop insurance has allowed farmers to purchase greater yield and price protection. Crop insurance has saved many farms in southeastern Indiana from financial ruin due to the combination of weather problems and low prices.
I am concerned about impropriety in reporting and verification of yields to insurance adjusters who work for the same company as the agents who sell the crop insurance. I believe yields should be verified by an agent of USDA or third party not involved with selling insurance.
I am very concerned about consolidation in the agricultural business market. A few large multi-billion dollar corporations are controlling agriculture inputs such as chemicals as well as outputs found on grocery shelves. These companies have integrated agriculture and further squeezed the American farmer. There are companies offering farmers payment if they utilize the company's production inputs, cropping methods and give up control of the commodity. The Government should monitor more closely the mergers and consolidations of corporations in agriculture and investigate antitrust allegations.
The lack of public research through land grant universities has contributed to consolidation in agriculture. A break-through technological advance by one individual company can propel it to dominance and doom its competitors. Public research can make technology available to a larger number of companies and ensure a competitive market.
Farmers cannot overcome consolidation in agriculture by uniting to level the playing field between processor and producer. Congress can assist agriculture producers in forming large commodity alliances or cooperatives, by enacting a comprehensive Federal marketing and bargaining act. The act should establish procedures for:
One, defining bargaining units.
Two, accrediting the associations to bargain as exclusive agents for all producer members of the bargaining units.
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Three, good faith bargaining between accredited associations, handlers and processors.
Four, establish minimum requirements and rights in the operation of accredited associations.
Five, resolve bargaining impasses by mediation and arbitration by a joint settlement committee utilizing the principles of final offer selection.
In conclusion, Congress has and should continue to aid the American farmer through difficult financial times. Freedom to Farm should stay the course and any thoughts of production controls should be quickly dismissed. Congress should work to improve marketing opportunities for American farmers. The American farm family can survive if Congress allows farmers freer bargaining powers, and access to global markets.
Thank you.
The CHAIRMAN. Thank you. Mrs. Wiley.
STATEMENT OF JEANNINE WILEY, CORN, SOYBEAN, WHEAT PRODUCER, MARYSVILLE, IN
Mrs. WILEY. Thank you, Chairman, members of the committee, ladies and gentlemen.
I appreciate the opportunity to testify at this hearing. I hope that through listening to my and other farmers' ideas, you can help us to have a better future for farming in this country.
As you stated, my name is Jeannine Wiley, and my husband Edward and I are farmers in southern Indiana. I wish I could say we were full time farmers, but for the time being, my husband has to go elsewhere to find additional income off the farm. We farm about 600 to 700 acres with no outside help. We raise corn, soybeans, wheat, hay and livestock.
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Besides my husband and daughter, my second love is raising hogs from farrow to finish. But with the prices being below our break-even point for 2 years, we were forced to get rid of our hogs. One of the saddest days of my life was when I had to sell my sows September 26. At this time, there is no safety net for livestock farmers, but there should be. There needs to be more of a check and balance system on buyers of our products. And for example, when we are at a break-even point selling our hogs, why is pork still so high for the consumer in the grocery store? Someone should be accountable for seeing that everyone gets their fair share in this global marketplace.
We are the only industry that cannot price our product based on what we need to make a profit. We have to sell our product for what they will give us. We are at the mercy of livestock and grain buyers.
Another thing we think is unfair is how we can be penalized for what another producer has done before we take over new ground. For instance, when we rented a new farm last year, we were not able to take advantage of the LDP payments for corn because the previous renter had not participated in the USDA corn program and had not established a corn base on the land. If the Government is going to help farmers, it should help all farmers on all land, regardless of past history of the land and its participation in previous programs. This is especially important to small farmers like us who can only survive by renting land in addition to farming our own.
I read recently where it cost a small- to mid-size farmer more to produce the same crop than it does for a larger corporate size producer in this country. And on top of that, the larger farmers get a lot more money from the Government. This is one reason why the small family farm is becoming extinct in this country. Maybe we should be put on the endangered species list, then we might get some protection.
At the same time, my husband and I take care of cropland for over 15 landlords. Although right now we are happy to receive Government assistance from the current farm programs, it is a nightmare just keeping our landlords informed and seeing that everybody gets their fair share of the pie. We would just as soon not have to participate in any Government programs to survive. We would much rather get a fair price for our product and be able to farm our land the best way we know how and not worry about Government programs. The Freedom to Farm Act is fine, but the freedom to go bankrupt is not. We need a good market for our product, and we need your help to see that we have a good market.
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One type of Government assistance that we do believe is important is more help with the conservation on our land. Without good soil productivity and land to farm, our future in farming is doomed. As they say, ''they aren't making any more ground,'' and ''they aren't making clean water.'' If we do not take care of our natural resources that we cannot reproduce, then we are doomed for the future and also for our daughter's future. Our concern for taking care of the land is not only from agriculture use, it is also because of seeing so much land that is being developed into subdivisions.
I have read what the USDA has proposed for a new Conservation Security Program, and I agree that we should be paid for practicing good land stewardship. We have always tried to take good care of the land we farm, and it is not always easy or cheap. We need all the financial and technical help we can get to do our part to keep water clean and soil productive.
In closing, I would like to thank you for the opportunity to speak for ourselves and for agriculture. I know there is no easy solution to this crisis that we all face in agriculture today. But hopefully, by working with farmers, ranchers across the country, we can come up with solutions to get us through to a brighter day, so that we and our children can have a future in farming and continue to do our part for the future of this country.
Thank you all very much.
[The prepared statement of Mrs. Wiley appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Yoder.
STATEMENT OF FRED YODER, CORN PRODUCER, PLAIN CITY, OH
Mr. YODER. Mr. Chairman, members of the committee, my name is Fred Yoder. My family and I grow corn, soybeans and wheat in Plain City, OH. I currently farm 1,000 acres and manage a seed retail business.
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Thank you for the opportunity to testify before this committee today. I applaud the committee's efforts in reaching out to growers and others who do not have the opportunity to visit Washington, DC where most policy discussions take place.
According to USDA, the projected price of corn for this marketing year will be between $1.75 and $2.15 a bushel. That is down over $2 from the average price we received for our crop in 1995. That same trend seems to be going in nearly every other commodity as well. It is no secret that many growers are struggling in today's agricultural economy.
In assessing today's situation, many have chosen to take the easy way out. It has been very popular to pin all our problems on the Freedom to Farm provision of the 1996 farm bill. However, I am continuing to give my support for the 1996 measure which allows me to make production decisions based on my individual farm operation's needs. I fought hard for the underlying market-oriented approach of the bill. I like the planting flexibility, the elimination of mandatory set-asides and Congress' recognition of the importance of producer-based decisionmaking.
If you have ever had any experience with livestock, let me try to make the following analogy. The Federal farm policy is like a big Hereford bull, the Freedom to Farm bill is its torso. It is ready to charge, ready to make little calves. However, without its legs, which are market access, risk management, market development and infrastructure, and its horns which we will call tax and regulatory reform, that bull is going nowhere fast. We all know that a bull that does not have strong legs is only good for about one thing and that is meat for hamburger.
The 1996 farm bill was designed to work in conjunction with these very important aspects as well as others. Specifically, growers need a commitment in research to keep us competitive in the future by unlocking new uses, maximizing production levels and preventing major disease problems.
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We need affordable, effective crop insurance tools to help us manage the risks inherent in an industry dependent upon weather.
We need a strong global economy and access to markets around the world, and that would include lifting trade sanctions and also normal trade relations with China.
We need viable, efficient transportation systems to best serve our customers at home and abroad.
We need continued help in the ethanol industry and we need to make sure that we get our ethanol to be used with the reformulated gasoline.
We also have an opportunity to support H.R. 4011, which we feel would take care of a lot of these problems.
We need a tax system that allows us to keep a reasonable portion of what we own.
We need a regulatory structure that is not unduly burdensome.
Because Congress has failed to give growers their legs, America's farmers find ourselves in a very difficult position today.
The current price situation underscores the fact that regardless of how good a farm program is, there is always room to tweak it to ensure growers across the country are seeing benefits.
Two other issues I would like to be considered and acted upon by Congress are storage and the Marketing Assistance Loan Program.
First, about storage, I urge Congress to support restoration of a storage facility loan program. Also enact an orderly market program to provide short-term storage assistance without encouraging grain stockpiling. All corn would be eligible for the program, which would provide participating farmers with a sliding scale payment of 3 cents for each bushel stored for the first 2 months, 2 cents per bushel for the third and fourth months and 1 cent per bushel for the fifth and sixth months, or a maximum of 12 cents per bushel over 6 months.
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And then the marketing assistance loan program. It is imperative that Congress oppose any decrease in the loan rate. Also, support efforts to improve the calculation for loan deficiency payments or LDP by, first, urging USDA to give producers the choice of having their LDPs set in their county in which the corn is grown or in the county in which it is marketed; and secondly, urging USDA to set the posted county price as the average of the two adjusted terminal prices for that county.
I know that the committee is looking for policy suggestions that may work in harmony with the current law. Alternative voluntary programs such as the Flexible Fallow Program, Counter-Cyclical Program options and green payments may have merit as enhancements of the FAIR Act. But let me state emphatically that I am not currently endorsing these programs. However, I believe Congress has the resources to thoroughly analyze these concepts to determine their value and their consistency with the FAIR Act's principles. And I believe Congress should do so in preparation for the upcoming farm bill discussions.
Again, I would like to thank the committee for the opportunity to speak today and I wish you luck in your unenviable position in investigating options and setting policies which have a tremendous impact on so many in rural America.
Thank you very much.
[The prepared statement of Mr. Yoder appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Yuhasz.
STATEMENT OF THOMAS YUHASZ, CORN, SOYBEAN PRODUCER, ORWELL, OH
Mr. YUHASZ. First, I would like to thank the Agriculture Committee for selecting real farmers like us to speak about the problems facing American family farmers. We feel honored to be selected for this very important field hearing.
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Our main goal is to keep our family and our neighbors working by way of farming. Our country elevator is a convenient spot for local farmers to come in and talk about the crisis that they are facing.
One problem that we all discuss deals with the Freedom to Farm bill of 1996. There is such controversy over the subject that some of us are saying keep the farm bill for those farmers who support it. Let them continue to receive the advantages that they support. In other words, if you like it, stick with it; if not, let us try something else, but make it voluntary. Or—I am going to deviate from my letter here a little bit—I would like to say make it to the point where you would have the ability to sign into a different program.
In our area, the Freedom to Farm bill is really failing. We have had guys with low yields due to the dry weather and just poor local prices for corn. I have had the ability to talk to other elevators and they are all overflowing, they are calling my elevator asking us if we have a place to move grain and we do not have room, we cannot move wheat. And they talk about sticking to this Freedom to Farm. If the Government wants to continue paying for all the grain in the form of LDPs, I can see us going down that road because eventually if someone in the world does need to import grain, there is a big problem.
I will continue reading, sorry about getting off like that.
The Flexible Fallow Program in our area seems to be mentioned by Texas farmers at the recent Rally for Rural America. Analysis by the Food and Agriculture Policy Research Institute describes flexible fallow as a program that gives the producers an option to voluntarily set aside a portion of their acreage, up to 30 percent, in exchange for higher loan rates on the remaining amount.
This program figures to increase farmers' income because a reduction in planting leads to stronger crop prices. If it ends up that we cannot get the farm bill opened, if nothing else is changed, farmers need an increase in established yields that were set by the USDA long ago. The antiquated established yields should be increased by 30 percent using up-to-date farm yields. This should be provided in addition to the current Freedom to Farm bill payments. This would help enable farmers to manage their farms effectively.
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Of great concern to farmers is the growing number of factory farms. Our experience has been that if one has more of a commodity to sell, one will receive a higher price for that commodity. This puts the small farmer at a disadvantage in obtaining fair market prices. Can these factory farms deliver a high quality product as the small farmer who desires to achieve perfection in their fields and in their milking parlors or the farm family who takes pride in raising their market animals or crops and wishes the next generation to carry on those traditions? We believe the American public is being fooled into thinking that it will not matter. However, it will matter, and in time they will realize the mistake and lament the long forgotten family farm.
A third area of concern is for dairy farms. We should establish national dairy policy to ensure a farmer's cost of production plus a return on investment. The farmers that we know say a good starting point would be a $15.50 price support.
Finally, we feel that the Farm Service Agency needs additional money for permanent help in their offices and for the services essential to administrative purposes. The employees require additional assistance so they are better able to serve the farmers as their name indicates. Through an updated farm bill, the Farm Service Agency should be able to provide us with stabilization between the consumer's food prices and the farmer's production costs. Without this, we have to ask ourselves who is controlling production. It will not be government supervising production and it will not be the farmers. Production will be firmly planted in the hands of big agribusiness, because they will be able to set their own prices for the goods they desire. Let us provide a stable agriculture for consumers and farmers.
Thank you for taking the time to consider the concerns facing today's farmers and the young people, like my sons, who want to farm in the future.
Thank you.
[The prepared statement of Mr. Yuhasz appears at the conclusion of the hearing.]
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The CHAIRMAN. Thank you.
Mrs. Wiley, you mentioned livestock risk management. One of the things that the House passed crop insurance bill has over a period of 4 years is $145 million to explore how we can do risk management, I guess it is not crop insurance, but risk management for livestock. The industries are widely split, producers are widely split, but it is something that we continually hear discussed and we are aware of that problem and are—the Senate bill has money as well, so we are looking at that, trying to come up with a program that might do that.
And as well, we are also providing a monetary reward for new programs of crop insurance, to look at specialty crops and those areas that currently are not covered, and try to provide a menu of items that a farmer could look at to determine what best suits their operation.
I do not mean to be getting personal, if you do not want to answer this question, Mrs. Wiley, please do not, but you mentioned that the price of your hogs was below break-even point. What is break-even point for you in your operation?
Mrs. WILEY. When we got out, our break-even point was up to 38 cents.
The CHAIRMAN. Thirty-eight cents?
Mrs. WILEY. For a hog.
The CHAIRMAN. In your operation, did you have a opportunity in the normal course of an operation to contract those hogs?
Mrs. WILEY. No, sir, we were never big enough like the corporate farms and stuff. At one time, my husband and I took care of 60 sows, just me and him, and then we cut it back when I had my daughter. And then as the prices started falling, you just kept seeing your money go out the door.
The CHAIRMAN. So you just took them to market?
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Mrs. WILEY. Yes. It is like we bought a boar for $300 and when I sold him 2 years later, I got $42 for him. Something is wrong there.
The CHAIRMAN. Mr. Yoder, what is H.R. 4011? You mentioned that. I do not recognize it by the bill number.
Mr. YODER. I believe it was sponsored by Mr. Ganske, it is a bill that was introduced that concerns the——
The CHAIRMAN. Ethanol?
Mr. YODER. Yes, to ban the MTBE.
The CHAIRMAN. Thank you.
Mr. Yuhasz, let me ask you a question. You had mentioned flexible fallow, you had also mentioned in your testimony the potential of giving a farmer the option of deciding. What you are suggesting, if a farmer went to flexible fallow, then they would not be eligible for the normal AMTA or transition payments?
Mr. YUHASZ. From what I understand of the bill, I understand it to be similar to the LDP payments, because there is a lot of fear about——
The CHAIRMAN. Well it is based on LDP, that is right.
Mr. YUHASZ. Yes, it is—I believe it is. But the thing about it is, we have got so much production, I do not know where——
The CHAIRMAN. Right. Well, I understand that, but you said give farmers an option.
Mr. YUHASZ. Yes.
The CHAIRMAN. And if you opt out of Freedom to Farm, then you do not have AMTA payments. We would strictly go to—if you opted out—and that is what I am trying to get to, because you said give them an option. One of the options might be flexible fallow, and if you went that option and you opted out of Freedom to Farm, then—or the farm bill as it currently is, then there would be no AMTA payment. It would just come through an increased LDP payment.
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Mr. YUHASZ. Yes.
The CHAIRMAN. And so, you would not have any AMTA payment.
Mr. YUHASZ. Yes.
The CHAIRMAN. Correct?
Mr. YUHASZ. Correct.
The CHAIRMAN. Let me just ask you, what happens on your farm if you lose your crop to bad weather and you cannot take advantage of a higher LDP?
Mr. YUHASZ. Crop insurance.
The CHAIRMAN. Crop insurance?
Mr. YUHASZ. Crop insurance.
The CHAIRMAN. So you would have to have—a farmer would have to have crop insurance to cover their loss——
Mr. YUHASZ. Exactly.
The CHAIRMAN [continuing]. And then they would—OK. This is one of the challenges that we have tried to have in coming up with what kind of assistance packages we are going to be providing. One of the things that we have heard consistently and constantly throughout the hearings that we have had up to this point, a lot of people are farming today by the money that Congress did put in the last 2 years in additional payments. But there are several balancing things that we are having to look at with this. One is, we do not want to transfer—simply transfer the pain to some other segment of the economy, those people producing hogs or cattle or whatever. If you artificially raise the price of their input costs, then obviously they are suffering.
The second is, how do you come up with a program that—if you are totally basing it on production, then what do you do to those people out there who do not have any production? If you have got an extremely high loan rate, and you have no production, it does not matter what the loan rate is, or it does not matter what the market place rate is.
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And third is in the timely delivery. Do you take a system that is already in place, provide assistance that is across the board, even though with some deficiencies and some fallacies and get it out the them in a timely fashion, or do you devise a new program that everyone has to go back and refigure what their yields and payments may have been, and it may take months later before those payments can be made. That is some of the balance and some of the debate and some of the discussions we have gone through. And trying to find a mechanism by which you can help a depressed agricultural economy, and do all of those things, does sometimes become a challenge and that is sort of the direction that we had gone.
The reason I had specifically asked you, Mr. Yuhasz about your opting out of AMTA payments was that a lot of people that were discussing flexible fallow are not talking about opting out of AMTA. They are talking about staying in the program, but do a flexible fallow, and then increase on that amount of acreage flexed, an increase in the LDP of a certain percentage. I just wanted to make for sure that I had understood your testimony correctly.
Mr. Stenholm.
Mr. STENHOLM. I think one of the weaknesses of our current crop insurance system is that we are trying to insure both price and yield with the same product, and that leads to the problems that we are all experiencing. I think in following up with the chairman's line of questioning here, I do think that an insurance program that insures against, for lack of a better word, cost of production, what it costs to make the crop, not what you expect to receive out of it, i.e., the market loan, et cetera. We need to separate those two, and that is something that we are going to be looking at. What happens if you do not make a crop? You collect insurance. If you do make the crop, then you theoretically have to get a price. We want it through the marketplace, but if you cannot get it through the marketplace, then you get it through the market loan, which is theoretically supposed to be the marketplace. That is why we continue to have the choice.
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I think there is perhaps a second alternative on this choice for the flexible fallow, and that is not to opt out of the current AMTA, but the additional AMTA, of looking at this double AMTA or whatever we call it, which we had last year. In lieu of the double AMTA, take an increase in your market loan rate. That would be one of your options. The other continues to be the supplemental income plan.
I want to ask each of you, though, the questions, do you believe that our Government should lift all unilaterally imposed sanctions, yes or no, and if it is something else, you can make editorial comment.
Mr. FULTON. Yes, I do, but there is disagreement within our family. [Laughter.]
Mr. STENHOLM. What was that?
Mr. FULTON. I said there is disagreement within our family. I think we should, but there is disagreement. [Laughter.]
Mr. STENHOLM. OK.
Mr. GEEDING. Yes, I do, as long as we are not used as the pawn—the farmer is used as a pawn.
Mr. PITTS. Yes, I do.
Ms. WILEY. Yes, I do.
Mr. YODER. Yes, I do. I think everybody should have access to food and medicine regardless.
Mr. YUHASZ. Yes, I do, also.
Mr. STENHOLM. Then do you support the permanent normal trade relations with China that we will soon vote on?
Mr. FULTON. Yes, sir.
Mr. GEEDING. Only if we are—everyone is considered in the same consideration and it is not used as a situation for the benefit of one and not for all.
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Mr. PITTS. Yes, I do.
Ms. WILEY. I am undecided.
Mr. YODER. Yes, sir.
Mr. YUHASZ. I am undecided.
Mr. STENHOLM. And the question regarding the increasing of market loan rates for all of the commodities, yes, no or undecided.
Mr. FULTON. I do not think I am qualified to answer that.
Mr. GEEDING. Yes and no. [Laughter]
I would use the scenario that yes, the increase definitely——
Mr. STENHOLM. Undecided.
Mr. GEEDING [continuing]. But it could be the other way, too.
Mr. STENHOLM. I got you.
Mr. PITTS. I think we have to leave them where they currently are.
Ms. WILEY. Keep them like they are.
Mr. YODER. That would be a no.
Mr. YUHASZ. Increase.
Mr. STENHOLM. Herein lies some of our challenges that we have in setting policy which you, as other panelists before you, have—but I would call your attention to one thing. On the permitting normal trade relations with China, I hope that every farmer will read the actual agreement and see it for what it is, not for all of the other things that are being read into it. To me it is pretty simple. I know that probably means I am wrong. But this particular agreement basically just says that we will have the opportunity to sell to the Chinese market. If we vote no, then we are saying we will not take that opportunity and all of our competitors will. I find, in all due respect, a little bit of inconsistency in those who say yes, we want to lift all sanctions, but in the same breath say we want to vote sanctions on China, a 1.2 billion-person market. I like to use the example, for those that believe that sanctions work, and that by somehow, someway, by us denying food or denying our producers an opportunity to participate in a market, that we do cause the Government to change. I just point out the tremendous success story we have had with a little island off the tip of Florida for the last 40 years, in which we, by sanctioning Cuba, have literally brought Fidel Castro to his knees. [Laughter.]
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And if we can do such a wonderful job on Cuba, can you imagine what we will do pursuing the same line of thought. I say that kind of humorously because it is not totally funny. But it is something for each of us to think about as we make up our minds about what policy you want your congressman or woman to be supporting and how. Obviously we have to make changes. Obviously we do not like the way that the Chinese Government—the current government is operating and what they are doing and not doing. The bottom line is, they are selling us over $1 billion a week right now and American consumers are buying it, and somehow, someway, we have got to get in that market. And if we do not—this goes for the rest of the world, too. If it is only going to be a one-way street, which it has been because we are such a strong nation and we have got such a strong economy, it cannot be that way forever. At some point in time, we all agree—you all agree, and you have testified to this in your testimony today, we have got to find somebody to buy our product. That is the challenge. How do we do that? And our current policy is not working, it is not working. So we have got to find a different one.
I thank you for your testimony.
Mr. BOEHNER [presiding]. Thank you, Mr. Stenholm.
If the members would indulge Mr. Ewing and Mr. Moran, who have to leave shortly to catch a plane, what I would like to do is to go to them.
Mr. Ewing.
Mr. Ewing. Thank you, Mr. Boehner, and thank you to this fine panel for your insight and for your very good statements.
I would like to ask any of you this question. Do you feel that the consolidation in agribusinesses enterprises is adversely affecting your operation? Can you specifically give an example? You do not have to give that example, but have you had some kind of feelings that what is going on in the consolidation of the agribusiness world is indeed putting you in an adverse spot?
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Mr. GEEDING. I would address that, Mr. Ewing, that I too was a hog farmer all of my life until 2 years ago, and due to Economics 101, it became not conducive for me to continue that operation. I also found at that time that the players in the field were controlling how I marketed my animals, whether I had hogs to sell at this particular date, whether there was a market for those animals. That, too, controlled it. That is my worry, as I testified to, right now. Is the next issue grain? That if I want to sell my grain, and I sell my grain to the Ohio River and it goes on down and departs to the world from there. But am I going to be chastised if I do not join the group that is buying my grain, or will I still have that free enterprise, such as the Cargill's, the ADM's? I can name them and go right on. Will they cause the corporate farming and take it out of my hands? I feel very strongly that that is what happened in the broiler business, in the turkey business and now in the hog business, which I said could never happen in 18 months. I was wrong after 40-plus years of farming. I worry about it, not only for myself, but for that next generation.
Mr. EWING. Others, do you feel you have been impacted adversely by consolidation of big agribusiness?
Mr. PITTS. We have seen consolidation already in the livestock business with so few packers and most of them in the West. One area that concerns me greatly is with the consolidation in the cropping systems, that a lot of companies have merged and, of course, they say that in the short term will be savings and things like that, and as they gain control, we see some dangerous things. A farmer I know, and I think a trend coming from the western United States, out in Iowa and Illinois and places like that, companies actually want to control production and provide a farmer with the seed and the fertilizer, all the inputs and pay a per-acre fee to till, to plant and to harvest. They want to control that grain and own that grain to the delivery point. And, of course, some of the Government programs and things like that is what keeps that from happening. But that is a trend——
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Mr. EWING. Does that worry you?
Mr. PITTS. That scares me greatly as far as the farmer having freedom and decision making potential and a business instead of just working for a large agribusiness conglomerate.
Mr. EWING. Many farmers have contracted, though, to grow seed for a number of years to their economic advantage. How do you differentiate between the two?
Mr. PITTS. That is a very good question and a legitimate question. Obviously those have been done very successfully and is a thing that is necessary. On this other scale where large tracts of production could go to this, I do not know what the answer is and how you differentiate those, but if they are not differentiated I think it is going to be to the detriment of the family farms in this country.
Mr. EWING. Yes, sir.
Mr. YUHASZ. I can testify that there's a lot of seed producers that have grown a lot of seed over the years to produce an economically priced seed, soybean seed or oats or wheat. Monsanto has devastated that business, as far as I can tell. I do not know how they are going to continue to compete. I think Monsanto is now probably going to take over the lion's share of the market with their technology.
Mr. EWING. Mr. Fulton, do you have any comments on that on the specialty crops?
Mr. FULTON. Well there is—there has been a decrease in the number of people that we can supply for wholesale fruits and vegetables, but they are very, very competitive with each other. So I cannot say that we have run into a problem, at least at this time.
Mr. EWING. I guess I have had the example in central Illinois where Frito Lay contracts for certain corn that they want for their snack foods. Farmers will stand in line to get those contracts. They are very good contracts. I guess it is how do we control corporate America taking over farmers—independent farmers, and how do we also allow those who want to make those contracts do it. It is a problem and I think all of you recognize that. I was just curious about whether you have a concern about it.
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Mr. YODER. Can I say one thing?
Mr. EWING. Yes.
Mr. YODER. There is one incident where I can think of a positive effect, and that is, regardless of what you think of Monsanto and all of their biotech technology, one think it has done is, it has brought other life science companies with their products down to where even if you do not want to use the biotech technology at all, you have been able to buy inputs at a cheaper price because of competition. That is one time when competition was helpful to the farmer.
Mr. EWING. Thank you. My time is up.
Mr. BOEHNER. Mr. Moran.
Mr. MORAN. Thank you, Mr. Boehner, and I thank my colleagues for allowing me to speak out of turn. I apologize for having to leave before I have the opportunity to hear the third panel. I appreciate the testimony of the first two. I live in the middle of Kansas, halfway between Kansas City and Denver and it is a flight to Kansas City then a 5-hour drive if I am going to see my daughters this weekend.
Mr. Geeding, you talk about in your—on the last page of your testimony about the dollars available and—if I understand your testimony, if we would shift the dollars from the farm subsidy side to the export side, that the benefits to the farmers may be greater and we would have greater freedom and opportunity for those farmers. Is there anything you would like to elaborate on? Am I understanding your comments correctly?
Mr. GEEDING. Yes, you are. I would also say that the idea that—I think the vice chairman stated that we do not spend any money on selling our product, meaning our Government. Here it is. You want it, fine, but we will use it. What I am saying is, if we took all the subsidy, or a percentage of that subsidy that is today used, and use that to promote what we have as a No. 1 product—the best product, I feel, in America, I just wonder what that might conclude to the rest of the world. I would go even one step further, with the GMO situation that we have today, how much research has our Government really given—or the USDA or the FDA given to know that we have a product that has not been proved to be harmful to human living? We listen to—and excuse me, but to our news media and to the minority and the majority yet has not been proven that.
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Mr. MORAN. When you talk about shifting these dollars, does that—and then you mention promotion, is it more promotion or is it export subsidies, shifting the subsidy from a subsidy to the farmer to a subsidy for increasing exports?
Mr. GEEDING. Both. And we look at the European situation with that, the common market.
Mr. MORAN. The Department of Agriculture continually argues with those of us who think we need to respond to the European community and their subsidization of exports that we do not have the resources to do that. That it is a war we cannot win; therefore, we should not wage. I think we ought to put the resources into wage the war, otherwise the European community and others will never change the way they conduct business and we will always be on the short end.
Mr. GEEDING. My comment to that is, we were behind when we put a man on the moon. Who got there?
Mr. MORAN. Who got there.
Secretary Glickman and the administration recently announced—suggested that—and I have never had the opportunity to question folks who raise fruit and vegetables. But the opportunity to expand farm programs to cover all crops. In other words, to make certain that anyone who is involved in production agriculture rather than just the crops that are traditionally covered should now be covered. Any response or comments in that regard?
Mr. FULTON. One of the problems with fruit and vegetables is that the input costs are so high. You may have a crop that is worth $2,000 an acre at harvest, but it might have cost you $1,500 an acre to raise it. So it is hard to have an insurance program that is going to cover input costs. The cost is just prohibitive unless the Government has got a function in it, and there we go again.
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Mr. MORAN. Anyone else?
[No response.]
Mr. MORAN. Mr. Yuhasz, you talk about it is good to hear from normal everyday farmers, that is how you opened your testimony, and I agree with that. I appreciate our chairman and our ranking member having these hearings across the country. Do any of you have the sense that the farm organizations and the commodity groups that we hear from regularly in Washington, DC are or are not representing your interests? Anyone.
[No response.]
Mr. MORAN. Do you have any impression as to whether or not Members of Congress hear what they need to hear when we listen to farm organizations that represent—at least purport to represent farmers across the country?
Mr. YODER. I think there has been a great deal of effort to get the farmers' perspective, to get those representatives well versed on what they feel when they do go to Washington. I know in Ohio there has been lots of efforts to get their feedback. I mean, after all, they need to be representing the people and I feel they do a pretty good job of that.
Mr. GEEDING. Mr. Moran.
Mr. MORAN. Yes, sir.
Mr. GEEDING. I would comment to the fact that I have been a member of the National Pork Producers, I have been a member of the Corn and Soybean Association, but it is awfully hard to have a half-cent deducted from my pay when we see $2 corn or $5 beans or less and still that promotion. I wonder whether it is being done correctly. [Applause.]
Mr. MORAN. My time has expired. I appreciate the opportunity of being with you. I spoke to a civic club in my home district a couple of weeks ago and I was taken to task by a professional in the community for the efforts that we have placed on agriculture and trying to keep our farmers in business. His comment was, I do not know why you spend so much time—and this is a town of a couple of thousand people in a very rural and agriculturally oriented area. I do not know why you do that. All the farmers I know drive Cadillacs. I do not know whether any of you drive Cadillacs or not, but my question to this gentleman was, how many young farmers have returned to this community in the last year, the last 2 years, the last 5 years? We could not come up with any. And so, any suggestion that things are OK on the farm, it seems to me that we ought to at least have the goal of having our high school graduates be able to return, if they so choose.
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I appreciate the opportunity of discussing these issues. I think it is very useful and it is a noble goal that we try to preserve this opportunity for the next generation. I think you.
Mr. BOEHNER. Mr. Lucas.
Mr. LUCAS of Kentucky. Thank you.
I noted with some interest here, Mr. Geeding, that you are an independent appraiser so I would imagine you have some first-hand knowledge of folks who probably had to sell their farms or put loans on them for estate tax purposes and things like that. In my former life, I was in the financial planning and banking business, so I have seen that a lot first-hand.
The other comment that I might make is that you are the only person on the panel I think that has gotten applause, and then you answered Mr. Stenholm's question well it is either yes or no, and I thought there is a great place for you in politics, maybe in Congress. [Laughter.]
It is not too late. You are younger than me and I am in my freshman year. I want you to know that.
Mr. BOEHNER. If the gentleman will yield? I do not think you need to entertain more people in running against me this year. [Laughter.]
Mr. LUCAS of Kentucky. Sorry, John. [Laughter.]
This is a general question that I would ask every one on the panel there. There is talk of tax relief, and we will have some tax relief in this Congress, and there is debate as to how much that should be, but there will certainly be a substantial amount in any case. What—if you could pick one item that would be most beneficial to you as farmers or active in agriculture, if you could just pick one, I would ask each person to say what that would be. What is the most important tax relief that you could have, starting with Mr. Fulton?
Mr. FULTON. Estate taxes.
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Mr. GEEDING. Estate.
Mr. PITTS. Ours would be property taxes.
Ms. WILEY. Health insurance.
Mr. YODER. Capital gains.
Mr. YUHASZ. Estate.
Mr. LUCAS of Kentucky. Estate, OK. So that is a pretty predominant—the other thing I would ask in a very general sense—and this is an opportunity for everyone to editorialize maybe for 30 seconds. If you could wave the wand and think outside the box—and I would ask you to keep your comments within reason—what do you feel would be the greatest—I do not know if gift is the right word—but the greatest thing we could do as Members of Congress to help the farm community? What would be the highest priority? Something that is reasonably specific in 30 seconds or less.
Mr. Fulton, do you want to start?
Mr. FULTON. That is a good question. I do not know if I can answer it. I think even in our business, specialty crops, that these low grain prices have really depressed the business that I am in. So I think if you have got programs that can get prices up, it would greatly benefit us, too.
Mr. LUCAS of Kentucky. Mr. Geeding.
Mr. GEEDING. I would suggest to you as the leaders of our country, and your fellow compatriots at the other side of the House, that it is also your responsibility to educate the American people as to what you as the Agriculture Committee are trying to do to solve the American problem. I feel that it is of great essence that those that do not sit on the Agriculture Committee, who may come from the inner-city understand the problem, and only you gentlemen can solve that problem.
Mr. PITTS. Certainly that is a very difficult question. The one that comes to mind for me maybe is to open up the trade and the things that we can do, which would be numerous, in order to enable farmers to sell abroad.
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Ms. WILEY. I would say educate the consumer on our plight, that we are having to struggle with the prices and everything. The inner-city people, they think that they will go into the grocery store and there will always be milk and there will always be meat and there will always be something, but if they keep pushing the family farm out and it comes down to the corporate boys, they are going to be able to set their prices to where right now we are not able to. So I would say educating the consumer.
Mr. YODER. I think along with what Mr. Pitts said. I think the greatest thing that you could do for us is give us market access. I think American agriculture has proven that they can step up to the plate and they can produce. We can produce like nobody else, all we need is that access. Let us move this crop out, let us get it sold. The more access we have, the less we need to rely on those AMTA payments and those LDPs. I am thankful that they are here now to help us through. That was the only profitability I showed last year. But we need market access. That is the best thing you could do for us.
Mr. YUHASZ. I think about market access and I understand. I was in the meeting for rural America in Washington and everybody I talked to—I talked to some British people, and I talked to some Japanese people and Australians, and it is just not only in America that we are having trouble with prices and production. I really—maybe the leaders could go throughout the whole United States—or the whole world and see what we can do to really make everybody able to live together.
Mr. LUCAS of Kentucky. Thank you. Those were most constructive and very helpful.
I yield back.
The CHAIRMAN [presiding]. Mr. Boehner.
Mr. BOEHNER. Thank you, Mr. Chairman.
Let me welcome my two constituents that are on the panel, Mr. Fulton and Mr. Geeding, two farmers in my district who I have spent a great deal of time with over the years. And two well respected members of their communities.
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I like to always keep my eye on the forest, and sometimes in this job we tend to get our noses up against the trees. I am going to give you all a little time to think about an answer to this question. What should the role of our Government be when it comes to agricultural policy? I say the question first so you will have some time to think about it. Bear with me for a moment, and some of my colleagues here on the panel have heard me before. For 60 years, since the days of the Dust Bowl and the Great Depression, the Federal Government has gotten involved in trying to set an agricultural policy and for 60 years we engaged ourselves in a system of trying—the Government trying to determine what is the demand and what should be the supply and how many acres of this commodity or that commodity that farmers ought to grow. And to make it all work, we would come along with a marketing loan and now we have got an LDP payment. We had so many acres we were going to set aside. Guess what, every 5 years the farm bill would come around and we would have to tinker with it again to try to make it work. I think a lot of us that are on this committee, and a lot of farmers around the country, believed that the Federal Government was engaged in trying to maintain a cheap food policy for our consumers. I think the result of what we did may have turned out to deliver cheaper food prices to our consumers at the expense of farmers, but I do not think that was the purpose of it. And so here we are once again.
We get to 1996 and we decide well let us go down a new path. Let us give farmers more freedom, more flexibility to make market decisions on their own. Our responsibility, at least in my view, was to open up markets, reduce taxes on farmers, reduce Government regulations and to help farmers with better risk management tools. It worked for a couple of years, now all of a sudden, because we have had low prices as a result of economic crises in other parts of the world, maybe some over-production on the part of our farmers. We are going through this set of hearings trying to figure out how do we tinker with it again. Which begs me, in my mind, the question of stepping back and taking a look at the forest.
What should our policy be? What is the role of the Federal Government when it comes to agricultural policy? Now I just want to get a feel from each of the six of you, if you can do it briefly.
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Mr. FULTON. Well I think the goals should still be what you had in the 1996 farm bill, and that is, eventually, as far as possible, get government out of agriculture.
Mr. GEEDING. A question that I feel that I addressed in my testimony, that Government cannot regulate food production. We, as a producer of that, has to do that. I do feel though very strongly that the Government, as powerful as the U.S. Government is in the world, plays a great part in how that production of its commodities, whether it be rice, or whether it be cotton or whether it be corn, is contributed to the rest of the world, but allow us—and I would say this tongue in cheek, we are the experts when it comes to production, and I speak of the U.S. farmer, as opposed to any other people in the world. Because what have we done, we have given our technology to the rest of the world to become our No. 1 problem that faces production. They now are our competitor, not our helper, and we as a government have done that. Yes, I say we take government out of it, but let the government then produce—or let the government then show the world what we have and we go with it from there.
Mr. BOEHNER. Mr. Pitts.
Mr. PITTS. Certainly we have a great agricultural potential here in America. I think that is what separates our country from some other countries of the world. One think I think that policy has as a responsibility to our citizens is that there is a competitive and a fair playing field. And I think one of the roles of the Government is to open up trade and to make sure this agribusiness consolidation is fair. If you look at other aspects of our economy, we say that they are thriving, but if you look at individual and small business people, in a lot of cases they—I have an aunt and uncle that have a hardware store, and it is increasingly difficult for them to compete with the large corporate companies. I think we have to be careful. We all want more freedom, and I think we applaud the freedom of the 1996 bill, but we still have to be cautious. I think the role of government is to protect businesses, especially family farms, because I think that has been a great value both economically and environmentally in this country.
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Ms. WILEY. I believe that we need to get government out of farming. I do like the fact that we have the Freedom to Farm, but in this global marketplace that we have now, we have Canada, we have Europe, we have all these other countries being subsidized by their countries—these farmers are being subsidized—and here the American farmers are sitting here and finally we are getting a little subsidy. We really do not want it, but that is the only way we can survive until export is opened up to where we can sell more of our grain and compete in that marketplace. Like this gentleman says, we have gone and taught these other countries how to grow what we grow and now they are our main competitors and their governments are subsidizing them, and our Government is just now starting to help us. Personally, I would like to see you out of lives and everything be rosy and perfect, but it is not going to happen.
Mr. YODER. I think we just need to go back and understand that this business is a business and what we need from the Government, as I see it, is opportunity. Provide opportunity, whether it is through our Government regulatory agencies giving us new products with biotech, or whether it is new products, for insecticide or seed or anything else. And then also, give us an opportunity to sell our ethanol in a viable way through an oxygenate requirement or through exports. I think the Government should be there to provide opportunity and not so much—too many times when we let the Government do too much, they keep us just hanging on the edge so we can go for next year. I think there comes a point in time where we have to take the ball and go with it ourself. And if those opportunities are laid out, then we can go with it. I think that is the main point that I think Government should be doing.
Mr. YUHASZ. I guess I still want to see Government as active as they possibly can be. No applause?
[Laughter and applause.]
Thank you. First of all, I am confused. When you agriculture and you have no one controlling it, it is like a bunch of farmers in a bus to see who can produce the most the fastest and get it to the market, but when you get to the market there is nobody there. So I get real confused, if the Government is not there and there is nobody there to buy it, I guess we have got to get back on that bus with no driver. It is just continual over-production, not enough markets. I think the Government needs to be in there and stabilize production however they see fit and stabilize food prices for the consumer. I am all for that.
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Mr. BOEHNER. Thank you all for your thoughtful answers. But as you can see, as we go down the panel, it gives you some idea of what we, as Members of Congress, have to deal with, because farmers in all different parts of the country certainly have different ideas about what our role should be and how we should do it. I do appreciate your answers. Thank you.
The CHAIRMAN. Mr. Hill.
Mr. HILL. Thank you, Mr. Chairman. Let me compliment the chairman and Mr. Stenholm for holding these hearings. I think they are very useful to us as committee members. Let me also compliment the panel for some very thoughtful comments that you have made.
I would like to continue along the lines of what Congressman Boehner has been talking about. I remember I was in Oldenburg, Indiana about a year ago and I ran into a farmer at a festival there and he gave me the riot act and told me that Government needs to get out of the farming business completely, leave us alone, let us grow what we want, however much we want to grow and just stay out of it completely. He pointed his finger at me and let me know what he thought. Then in the same breath, and he did not skip a beat, he said, by the way, ConAgra is driving the price of corn down and the Government needs to do something about it. [Laughter.]
True story.
So let me ask you this: How many of you could have survived without Government assistance in the last 3 years?
Mr. FULTON. We could only survive because we were able to pay some debts down in the early part of the 1990's. I mean, we would not have been profitable.
Mr. GEEDING. The profit margin would have been zero, but I would have survived.
Mr. HILL. OK.
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Mr. PITTS. Our farm, being a first-generation farm, would not have survived.
Ms. WILEY. We probably could have survived. The Government payments helped us an awful lot. But instead of just my husband going off the farm to work, I would probably have had to have been right out there joining him. I would say we would have been probably at a break-even situation without it.
Mr. YODER. We probably would have survived, but in the meantime, I am going to use up all the equity I have accumulated. So, I just keep digging out of that hole. So that was the only profitability I had.
Mr. YUHASZ. Well 30 percent of our income was through Government subsidies.
Mr. HILL. Mr. Pitts and Ms. Wiley are both constituents of mine back in my district. Mr. Pitts, I am particularly interested in your story because you have only been farming since what, 1993?
Mr. PITTS. Yes.
Mr. HILL. Why did you decide to get into the risky business of farming in the first place?
Mr. PITTS. Well in hindsight it probably was not the best business decision a person could have made. [Laughter.]
But however, coming from a person who as a young person worked on farms and loved agriculture and went on to Purdue to study agriculture, it has been a goal of mine and something that I always wanted to do. Just like I hear farmers who demand or wish that their children come back, I think that is sad because maybe they want to do something else. I wanted to become a farmer. I think it is sad that there are not other young people, because right now, I do not think I would have that as an option in today's environment with escalating land prices due to development and other things in southeastern Indiana and throughout the country and with these very low prices. So, that is obviously something for me that is a concern. I see a lot of long-term operations, a lot of large family operations, multi-generation, that cannot compete in this environment. Certainly it is not inducive for new farmers or young people to come into this business.
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Mr. HILL. Do you think you are going to be in the farming business for a long time in the future?
Mr. PITTS. I hope so. I think certainly the opportunity is there for me because a lot of—as some of the congressmen indicated, throughout I think the whole country, no matter if you are in Ohio, Indiana or Kansas, there are not a lot of young people wanting to enter this business for obvious reasons. And so the opportunity will be there for those who survive, if we can make it profitable and keep the farmers that are there willing to take a risk.
Mr. HILL. OK. I thought Congressman Lucas asked a very good question when he asked what is the No. 1 thing that Congress can do to help a family farmer. It was interesting to me that nobody mentioned the fact that Washington or our Government should be looking at consolidation through the Justice Department. So I will ask. How important do you think this whole consolidation issue is in terms of the Federal Government investigating whether or not there is too much consolidation?
Mr. GEEDING. Consolidation as to corporate and the mega——
Mr. HILL. Yes, and the mergers that are going on.
Mr. GEEDING. In my own State, and in many States, State legislation has stifled the corporate situation and allowed the family farm or the sole proprietor, whatever business that may be. I do feel very strongly that if you, the Government, does not curtail and watch this, that before we can blink the eye into the next decade or thereafter, we may have this and we did not know we had it until it is here. So yes, I would be very concerned that a watch-eye from you people concerning who is the money behind the corporate. Is it another world, another country or another corporation? It does concern me.
Mr. YODER. I just want to comment on like mergers for suppliers and things like that. We have seen a huge number of firms getting swallowed up, not only just in the agriculture business but in all corporate business. But there comes a point in time where you have so few players that it does get worrisome, but on the other hand, it is hard to put a one-size-fits-all on this. I think each and every individual merger—I heard somebody shout before, well, just ban all mergers. I think each and every individual merger needs to be looked at because there are special circumstances and I think you need to be prudent in your judgement in that way. But there comes a point in time where you have so few players that it could impact our prices and monopolize what we have to live with.
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Mr. HILL. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. Hill. Mr. Smith.
Mr. SMITH. I was interested in sort of the yeas and nays on the LDP payment. It seems to me that ever since we started programs with killing baby pigs back in 1932, that most of our farm programs have tended to give a greater advantage to the larger farmer. So the more acreage you had, the more subsidy payments you got. And what happened—what evolved over those 60 years or so is probably the smaller farmer was forced out. The middle sized farmer trying to lower his unit cost went out and bought the smaller farmer out and farms tended to bet bigger. I wonder if our farm programs today do not have some of the same disadvantages in terms of the so called factory farms. If you have an LDP payment that encourages production over and above-sometimes below the cost of production, but because corn can be purchased below the cost of production, but because of the LDP or the commodity loan rate, we end up producing that commodity. So therefore, especially in the animal units, the dairy farms, the beef and the poultry, the hogs, they can now be bigger and simply buy that corn for less than they can raise it for. So it gives that larger farm operation really an advantage and it discourages the traditional family farm that grows the crop to feed to the livestock, et cetera. [Applause.]
Let us hear it, yeah.
So here again, it is, trying to do good and seemingly do good, because the advantage of the LDP, of course, is that it clears the market. It gets that produce sold. It is, in a sense, sort of an export subsidy, because we are going to say look, we are going to export a little of our topsoil and have taxpayers pay the other way around. It seems to me that unless production agriculture can eventually be part of the—take part of the profits of the final sale, whether it is those retail sales or whether it is the ADMs of the world. Until agriculture can have part of that profit, maybe it is co-ops, maybe it is looking at some kind of laws that give exceptional advantage to co-ops, but I am wondering, just to get your reaction, can farmer co-ops ever compete with the huge giants that are now consolidating and tend to be purchasing most of our products? Are we capable of having a co-op that is efficient enough to add that competition and somehow allowing the production agriculture to share in the sort of locked in profits, as Ms. Wiley suggests, sort of that end seller? Any thoughts, ideas?
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Ms. WILEY. You talk about co-ops, our co-op down there in Clark County was bought out by another county, Jackson-Jennings, and then lo and behold, here come Land O'Lakes, a big corporate. They bought up our co-op. We are no longer a small farmer-owned co-op, we are a corporate-owned co-op. And they have not only— they have took over the fertilizer. There is only about one or two places there in Clark County that you can buy fertilizer unless you go up towards Elrod or something and get hold of an independent place and they set their prices. I knock on wood because my husband owns his own semi, and we have our own trailer, and he can go down here to the river and pick up his own fertilizer and bring it in. That is only because we deal with an independent fertilizer company.
You talk co-ops. They talked a lot, when hog prices fell down, about local farmers getting together and starting their own co-op and buying their own hogs. But when you started looking at the big picture, the insurance, the regulations and all the other stuff that comes with it, it scares the small farmers to death and we do not want no part of it. We want to just try to survive.
Mr. SMITH. Yes, I think that is a good point.
Let me sort of, before my red light goes on, skip to another question that sort of impacts a little bit on the small farm/large farm, and that is, can any of you give me your thoughts—right now, we have payment limits. For example, we have LDP payment limits, but we also have a loan program for program crops that is unlimited, so you can go after that loan. How would you feel about also limiting the amount of acres of a particular crop that could go under loan that is—in a sense, it sort of short circuits the limitation of payments? Maybe that is too brief a question. But right now, you have an LDP, of course, that is limited and so a person can only receive 75,000, I think, or whatever the limit is. But then after they reach the maximum on the LDP, then they can put that crop under a non-recourse loan and have unlimited access to that non-recourse loan that sort of reduces the significance of the limitation. Does anybody have any feelings?
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Mr. GEEDING. Congressman Smith, I would, in a round about way, address that situation as an appraiser of agricultural land. In our area, the LDP payment, and those payments from the Government, is the one who has maintained the price, or driven the price of cash rent or maintained or increased the value of land. It is not outside money in our area. It is those farmers who do have equity in their own land and are being subsidized by those payments if they had a good crop year.
One thing that has not been addressed here yet is that the LDP payment is so unfair to those people who really need it, who had a drought last year or who had a drought this year, or will have a drought this coming year. They are the ones that receive less payment and they are the ones that need it. It allows those areas where the good Lord has given them the opportunity, if they were the managers, to farm their land, it has given them more. That is what the problem is, as far as it is now. It rewards those who had no control over it, either negative or plus.
Mr. SMITH. Mr. Chairman, thank you. I am also going to have to excuse myself to meet my schedule. But just outstanding, I think, testimony and thinking. So my compliments to the first and the second and I'm sure to the third panel. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Fletcher.
Mr. FLETCHER. Thank you, Mr. Chairman. Again, I really appreciate this hearing and all of you on the panel for all the testimony. As good farmers, you have produced more than I can consume at this time.
I see the role of Government as—certainly it is important. If we look historically at what farming has meant to this country from the very beginning and what happened in the 1930's, where many of the farm programs begin because of the problems with a totally laissez-faire market, if you will. So Government certainly has a role, and I think it is to produce a free and fair market, which you have talked about. And with the consolidations, I think there is real concern with looking at trade, international trade, and making sure that, as some of you mentioned, the subsidies that exist in other countries, us trying to compete with that, that we need to make sure that our trade agreements do not allow that. So that we do level the playing field and give—I believe you, which are the most efficient and certainly the most technologically advanced producers in the world—the opportunity to compete on a level playing field. So I think we have an important role to do that and I hope that we can do certainly some of those things as we look at China and increasing our opportunities in that market.
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Taxes, I agree with many of you. We have certainly made some moves toward estate taxes. We would like to see some capital gains reduction. Certainly it would be nice if there were investment tax credits as once were available for you. We have worked toward many of those things.
One of the areas that seems to be still very difficult to figure out how to approach, and that is, we look—and I think, Ms. Wiley, you mentioned this. You had to get rid of your hogs because the price that you could sell them for at that time was well below your break even price, so you were going to lose substantially. And you said that while pork is still high for the consumer in the grocery. And then your last statement regarding that was someone should be accountable for seeing that everyone gets their fair share in this global marketplace. What are some principles or some things that we could look at in this accountability that you talk about? How would you go about doing that?
Ms. WILEY. Wow, if I knew there was going to be a quiz, I would have studied. [Laughter.]
I guess when it comes to the swine area, or hogs area, I guess I look at the point where when hogs were down to 8 and 9 cents, and I believe—I do not know which government area come in and told the packers that they were going to start checking every day the prices of what they paid producers, and within 2 days that price went up to 20 and 22 cents. As soon as somebody stepped in and said we are going to start checking and see what is going on prices come up. Not where they needed to be, but they come up. And I sit here and I tell you that I do not want you in my life, but in a lot of ways we need each other. We need to work together like you all are going around the country and talking with ranchers and farmers. But to basically pinpoint accountability, I would just say that you need to sit down and—my blond hair is coming out on me now. Sit down and do like you did when hog prices went down, and have them check—come in and start checking their books and stuff like that.
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Mr. FLETCHER. So more oversight and looking and making sure the market is fair.
Does anyone else have any ideas on that particular issue?
Mr. YODER. What would have happened during that time if the media would have really got hold of it and showed where farmers were getting 9 cents a pound and then interview a consumer, how do you feel about getting ripped off in your local grocery store when they have the prices up? Make the consumer more informed and let them know that there is a disparity there and then maybe—and that would not hardly cost anything. That would just make sure the people are communicated the facts. And a lot of that stuff is going—in the same way with—we are getting ragged on now about the biotech issues. That is because the whole thing was handled poorly. A lot of it has to do with communication. I think we just need—I think government could be there to help communicate—I hate the word educate because—I had rather say informed, because some people think that they do not need educated, but inform people of what is really happening.
Mr. FLETCHER. Mr. Geeding.
Mr. GEEDING. Congressman Fletcher, I feel that it is the responsibility of the government to inform the people of the correct answers and have you, and me too, because I am part of that government, too, and I am very proud of that. But it is your responsibility, and our responsibility, to inform the consumer and the news media and the world of what is the correct answer instead of sitting back, oh, it will go by or it is gone. Gentlemen, that is no April fool, that is the truth.
Mr. FLETCHER. Thank you all very much. My time is expired. Certainly if you look, I think direct oversight, and not only that, but informing consumers and the market in general of what is going on. So, thank you, Mr. Chairman.
The CHAIRMAN. Thank you.
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Let me make just a couple of comments, if I could. The role that I hope this committee can play, as I said when I became chairman of this committee, it can be an advocate for American agriculture. I do not know that there is always a voice out there, as we would like to see, on behalf of American agriculture. We hope that we can, because we all serve on this committee because we want to and because we do have an interest in agriculture and that is the reason we are here today.
A lot of discussions—I usually save this for the end, but a lot of discussions have been today about trade, and trade is important. It is a long-term situation, which we obviously think is critical; however, long-term trade policy does not get us out of the problem we are in today. So it is two fold. We have got to deal with the problem we have now and we have to also do everything we can to ensure that there are still farmers around someday when we do begin to be able to take advantage of our trading situation.
Twenty-one members of this committee, which was a large number—we have 51 members on a committee—went to Seattle in December for the WTO discussions. We were there on behalf of American agriculture. And we were there to try to follow very closely, which we did, and had many, many discussions with our trading counter parts. One of the issues that—and I have commended Charlene Barshefsky, our Trade Ambassador, on numerous occasions. I think she has done a phenomenal job.
One of the positions Americans had going into those trade talks was that we would at least begin to have discussions about the elimination of export subsidies, which would help us tremendously, because we are on the very low low end of that when you start looking at what other countries do. There could not even be agreement reached at that time that we would begin to discuss the elimination. We left there—I put out a statement, and I am very serious about it, that if we cannot begin to look at at least discussing the elimination, then what we have to do, I think, as a Congress and as a country, is to look at our entire export subsidy picture. Look at every tool that we potentially have on the books today and any we can figure out, that it would be a travesty for us to enter into a world trading war, or a world bidding war, but if that is the only option we have, I want to make sure the American farmer has got a lot to bid with. I believe that if we cannot begin to get them to move away from their export subsidization, then we need to look very seriously at seeing what we can do to substantially increase ours because we need a level playing field. Our farmers can compete with other farmers but our farmers cannot compete with other governments. And if they are going to have theirs on their side, I intend for ours to be on our side. [Applause.]
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The CHAIRMAN. Mr. Stenholm.
Mr. STENHOLM. I associate myself with the chairman's remarks. I assume that all of my colleagues and all of our witnesses sincerely believe that which you state. That is something I have always done. When we have differences of opinion, I assume that you are as sincere in your belief as I am in mine. I kind of cringe a little bit, and I preface this by saying there is two old sayings. One is select carefully your words today for tomorrow you may eat them. And when you do this publicly, and as we are doing—not live in living color, but it will be seen—you had better be careful because you will be reminded of what you have said. And be careful what you ask for, lest you might get it.
When I hear people sincerely talk about let us get government out of agriculture, I cringe, because if that really were—that was the whole idea behind Freedom to Farm, folks. And if I could have come up with a constructive alternative, I would never have voted for it, but we could not find a constructive alternative to get 218 votes. But the theory behind Freedom to Farm was to get government out of our business and let us farm for the market, and where would we have been for the last 2 years if government had not have stepped back in, which each of you in your own way have said so? But we keep wanting this thing and we all want it so sincerely. We would like to produce for the market. I ask you to think seriously if whether what I am about to say is not the truth. There is no such thing as a free world market by the definition that we put on it. [Applause.]
There never has been. I hesitate to say there never will be because I cannot predict the future. But at least in the life span of those of us on this committee as we struggle with these answers, we are going to have to deal with the world as it is. That is why I totally agree with the chairman's last statement as to how we have to look at what we are doing, because a lot of what we are doing obviously is not working. That is why we are out here looking, looking for other things to do, because what we are doing is not working. So then you have to look. And then coming up with a solution is a little more difficult.
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Here is a question on another related subject I wanted to ask you, though. It is both unrelated, but it is related. In 1994, we passed the USDA Reorganization Act, and the theory behind that—and I know a little bit about it because I was chairman of the subcommittee that did the legislative work on this. And that was the theory that—well, as I asked all farmers today, what is it that we want USDA to do for us, with us and to us? And then how can we most efficiently deliver that service to us? And the theory behind this was to create Team USDA in which FSA, NRCS, Rural Development, old Farmers Home Administration, the Federal Crop Insurance Corporation, FCIC, and all others who work with us on a daily basis, how we might more efficiently deliver those services, by that, do a better job with less money.
And something else we continue to hear is elimination of paperwork. The frustration, the number of visits you have to make. That is one of the strengths of the Freedom to Farm, or at least it was until we had 22 more programs developed trying to get us through this.
I do not quite know how to ask this question. So maybe you want to—this is one of those that we do not get an answer for today. But in your respective areas, your States and your areas, how is the Team USDA approach? Have we had the consolidation—are we willing as farmers to say we do not need an FSA office in every county? It is not necessary. Have we reached the point with technology, of which those who have Internet capabilities, can we now do our business from our own office or home or from our grain elevator, et cetera in the way in which everybody else is doing it technology wise? Have we reached the point in which computers can talk to each other? Do we have NRCS, FSA—and, of course, obviously FCIC, the answer is no because in the wisdom of Congress, we took FCIC out of FSA. I think that was a terrible mistake, but that is what we did, and we have heard testimony after testimony of some of the problems associated there. But in your areas, do we really have the Team USDA approach or have we got a little way or a long way to go?
Mr. FULTON. Well I think we are fortunate in our county that the Soil Conservation Service and the ASC office were in the same building. I think they still operate as a separate units, even though they are called one. I think they were within 10 minutes driving time—of my time, so it is very efficient. Sometimes when I go in and talk to them, I know they are almost overwhelmed by the amount of work they have got to do every time a new program comes out. But I am really impressed with our office.
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As far as the merger together, I do not think it has happened there. Although when you call in, you get one phone number, but then push 1 for one and 2 for the other. But they have been in the same building for quite a few years.
Mr. GEEDING. My thoughts on that would be—and I am not sure that any of us would complain about our local offices because they are our people, our fellow people, either some of our spouses or our neighbors or our friends. I highly respect their responsibility, and sometimes the plight that they have to put up with with some of the programs that come down and trying to explain them to us. But yet on the other hand, I am also a businessman. I highly feel that the new technology, if we do not take advantage of that, then we are losing what is there to offer us. The Internet is a great tool to use. The computer is a great tool to use if it is used correctly. We can use it if you will allow us to use it. I do not think that there is anybody that would not want to get on board and save money and have a program that would work to where we could get direct access into it.
Mr. PITTS. I think our local county has done an absolutely wonderful job of making payments on a quick and timely basis. The FSA office in Ripley County, Indiana, from what I hear from other farmers and know of other counties, could be a model for what cooperation is supposed to work through FSA offices and has done an outstanding job.
Mr. YODER. One of the problems we have with this issue is when Freedom to Farm was passed, or the 1996 farm bill, things were kind of ratcheted down and they were a lot of layoffs and a lot of tightening up, and then all of a sudden in the last couple of years, we have had this flurry of activity and they were caught shorthanded. I think the world of our FSA people. I mean, they work very, very hard and they do a lot with very little. If there would be some way to let them hire some temps to where they can get through this workload, and possibly get really streamlined when the load goes off. Hopefully we are not going to be in this dilemma forever. Hopefully low prices will cure low prices and the market will take over again, hopefully.
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Mr. YUHASZ. Well, I am very supportive of the FSA office. I think they really do an honorable job. There are a lot of grumpy farmers going in there and they are somebody that we can complain to. They do hear a lot of complaints.
Getting to this computer business. I do not know if I am all for that, because I have been put on this direct deposit with the banking and now I do not know if my check is there or not and I am waiting on the mail. So there is a lot of confusion there. So I kind of like to go in and talk to somebody because it is real import to us what happens with Government programs.
The CHAIRMAN. Did we scare you off, Ms. Wiley?
Ms. WILEY. No.
The CHAIRMAN. I thank this panel very much. I think the questions and the discussion have shown how much we appreciate and look for your help and your answers. Thank you for your time.
I would call our third panel to the witness table. Mr. Billy Courts, a tobacco, cattle and sheep producer from Dry Ridge, KY; Mr. Nick Forrest, a sheep producer from Oxford, OH; Mr. Robert Gibbs, a pork producer from Lakeville, OH; Mr. Jim Mahan, a tobacco and cattle producer from Lexington, KY; Mr. Roger Voge, a grain and cattle producer from West Alexandria, OH and Mr. Gary Wilson who is a cow/calf operator from New Concord, OH.
We will just go down the table as you were introduced.
STATEMENT OF BILLY E. COURTS, TOBACCO, CATTLE AND SHEEP PRODUCER, DRY RIDGE, KY
Mr. COURTS. Thank you, Mr. Chairman, and members of the committee. I appreciate the opportunity to come before you today to testify.
For almost 60 years we have had a tobacco program that has worked successfully for the tobacco farmers. This program has leveled the playing field between the large growers and the small growers and acted as somewhat of a shield between the small growers and major corporations. The very existence of our program is threatened right now. I think our legs have been somewhat cut out from under us through the quota cuts, and now contracting is about to finish us off. Crop year 1999 has been a tough year because of the drought and the 45 percent cut in quota in production for a lot of farmers. The drought caused a lot of suffering for tobacco farmers as well as other people in the agriculture community. Fortunately we were able to get some Master Settlement money, phase I and phase II, and the direct payments from phase II has been a big help to our farmers. Most of them got their checks back in January. Along with that, we are getting some Federal disaster money probably within the next month, and those funds here in Kentucky will be divided up among the farmers the same way phase II money was. In fact, we used the same application. That money is going to come at a very, very critical time for our farmers. Because of the quota cuts, this may not be enough to save many of our small farmers. I want to personally thank all of our people that has worked on this program, from the Congressmen to the Senators, and will tell you that it is coming at a time when the tobacco farmer needs operating money. So it is going to be a big help. Again, I thank you.
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We have gotten through 1999 and have gotten another crop raised. Quite a bit of that crop, 230 million pounds, came to the cooperative and went under loan to the Burley Tobacco Growers Co-op. A lot of people stand and scratch their heads and wonder why and how this has happened. I think overall it was part of the strategy of one of the major cigarette manufacturers to not buy tobacco, but to somewhat overload our pool in the Burley co-op and force us into contracting that they have wanted for a long time. It has been a tough year. We have had some things that helped us, but now we are in a situation with our backs to the wall again and we are having to fight for our livelihood. Philip Morris has recently started contracting, that is, signing agreements with growers to grow tobacco directly for them and therefore going around, or at least not going through the auction system. The Burley co-op has sponsored the contracting—has opposed the contracting and worked on legislation in Frankfort to not stop contracting, but to create a system where the farmer will know that somebody is at least looking over his contract and putting him in a better negotiating position. On the national level, Congresswoman Marcy Kaptur has proposed similar legislation that we, the Burley co-op, has strongly endorsed.
Most of us have tried contracting in some form or another, but never in tobacco, but we have some in vegetables and a lot of people have tried it in poultry and swine, and the fact is, it has not worked. When all is said and done, there is that one farmer pitted against major manufacturers who has a checkbook. Remember the cliche, it is the Golden Rule. The one with the gold makes the rule. That is the way it will be with tobacco contracting.
If 100 million pounds, almost one-third of our tobacco does not go through the auction system, and the type and quality of tobacco that the other manufacturers desire will not be there for them, then just to survive, they will be forced to do the same thing as Philip Morris, start contracting. So eventually what we are looking at is that no tobacco will be going through the auction system unless it is somebody that has messed up or that the company did not really need tobacco after all. But there will be no auction system.
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One of the biggest things that is going to happen to us is the fact that this contracting will cause the USDA grading service to cut back so drastically on its employees that they will not be able to cover all of the markets and eventually not be able to collect enough money to even pay their employees. So I expect in 2 years your USDA grading service will be gone and you cannot have—or we have not been able to have at this point a tobacco program without the grading service. Overall the scheme seems to be that the manufacturers wanted tobacco cheaper. Well one of the things that will keep this from happening is for us to keep the program. Unlike the grain farmers across this country, the tobacco farmer has had a program that prevents them from starving the small farmer off the farm. You need to do everything possible to save and protect a successful program that can serve as a model for other farmers across this country.
To protect the program, tobacco that is contracted should also be paying a grading fee. The farmer that is not paying a grading fee still has the same opportunity to return to the auction system where he knows he can get his tobacco sold. He has not contributed anything, but he has the luxury of doing that. Meanwhile another farmer stays with the program, and he is paying his fee every year. I think it should be required that all tobacco pays a grading fee, and if the grower chooses to have his tobacco graded by one of the USDA graders that would be fine. The choice would be up to the farmer and all tobacco pays a grading fee. Our concern overall is that we are not sure our farmers know what they are getting into and that they are going down this road by themselves. Again, the contracts could look attractive the first year or two, but once the program is gone and the contract is thrown on the breakfast table and you are told, you take it or leave it, and suddenly you do not have a program to fall back on.
We are really concerned about contracting. We have offered to do some things within our program to avoid this contracting, but to this point it has not been well received by the companies. We will continue to push for farmers being protected. The best protection they have is the program. It is the only protection they have. Our farmers are depending on the program. To have that program, we must depend on you. Keep our program in place. And if we can weather this storm and this attack from contracting, we possibly can get through. There is a lot of exciting things coming down the road for tobacco, the nitrosamine issue will make a safer cigarette, and a lot of things are going on that could help us increase our production. However, for us to be around to do that, we have to have our program. Please help us keep it in place. For this I think you and the opportunity to testify today.
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[The prepared statement of Mr. Courts appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Forrest.
STATEMENT OF NICK FORREST, SHEEP PRODUCER, OXFORD, OH
Mr. FORREST. Good afternoon. My name is Nick Forrest. My family operates a small sheep operation in the neighboring community of Oxford, OH. We have been in the livestock business for 25 years raising sheep, cattle and horses. Our family annually markets several hundred lambs and goats to the Muslim community. In addition, I am employed by the largest supermarket chain as a department head where daily I witness agriculture's impact on the lives of the American consumer.
First, I would like to thank you for coming to Butler County to hear our concerns and suggested solutions to some of our problems.
International monetary events have had a great effect on the U.S. sheep industry. The wool price is currently at a historic low. Sheep producers are lucky to receive 5 cents per pound for their wool. Many simply choose to discard it. This renewable resource is now taking up space in our landfills. The situation is made worse to the producer to pay $2.50 or more to have their sheep sheared. This situation is due to many reasons:
The high value of the U.S. dollar makes our products expensive relative to our competitors.
Australia has a tremendous stockpile of wool, which greatly influences the cash market.
Pacific Rim and former USSR nations that have been major players in the textile market have experienced a severe financial crisis.
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Many of our domestic textile processors are closing or moving overseas to countries with lower operating costs. As we lose our domestic processing base, we will have to depend heavily on our overseas market.
The lamb meat industry has also struggled. For the past 4 years, the high U.S. exchange rate has allowed domestic importers to purchase cheap lamb overseas and flood the U.S. market with imported product. Prices are often 40 percent lower than the cost of domestic product. The importers were buying half again as much products for the same amount of money.
The sheep industry is making a committed effort to increase our competitiveness in the marketplace. Ohio is the home of Mid States Wool Growers Cooperative. This farmer-owned wool warehouse employs state of the art technology to handle, grade and sort wool. This allows for the marketing of a uniform quality product.
The sheep and goat industry is in the process of forming an alliance to process and market lamb and goat meat to the diverse ethnic community. This alliance is joined by lamb producer-owned cooperatives that will provide us with a uniform, year round supply of lamb.
These two examples of marketing programs indicate that the American sheep industry is working to solve its own problems. The assistance provided to help us attain the section 201 trade restrictions on imported lamb has been invaluable to our industry. Our markets have positively responded to these measures. Industry leaders are working with USDA on a lamb promotion program. In combination, these should help the price of domestic lamb.
One of the things that would help the wool industry would be a non-resource marketing loan program with a deficiency payment similar to what the cotton industry now has. It is no secret that we operate in a global economy. Such a program would help us market our products in a competitive manner while providing a safety net. The safety net is important as we deal with changing currency values and economic decisions directed by foreign governments.
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The cotton loan program has evolved over several years. Hopefully, we can learn from the cotton program and implement a similar basic loan that would accomplish the same basic principles for wool.
It is important that any loan program that is established must encourage the quality fiber production. Farmers who implement quality assurance programs should be rewarded. We realize that we must improve the quality of our product if we are to regain and maintain competitiveness in the global market.
The National Sheep Industry Improvement Center was established as part of the 1996 farm bill to aid the ailing sheep and goat industries. A major goal of the sheep center is to improve the infrastructure of the industry. This will also add to the competitiveness of the domestic industry. A total of $50 million was authorized. Several roadblocks from the Office of Management and Budget have prevented sheep producers from accessing the full funding for this important program. We request that the balance of $30 million be appropriated to fully implement the center to allow them to begin making loans and grants to improve the industry.
The assistance provided by USDA Wildlife Services has been invaluable. The committee's continued leadership and strong support is vital in the passage of the USDA Wildlife Services program in the year 2001 appropriations. Loss to predators remains a tremendous burden to sheep producers. This loss is second only to the cost of feedstuffs when determining the cost of lamb production. If the forces that want to reduce or eliminate funding for Wildlife Services are successful, the livestock industry is doomed.
We are certain that a program must be developed for lamb meat. At this time, we are uncertain as to what type of program would be most beneficial. Something must be done to alleviate the huge swings in the market. This is especially true for smaller family farms like those located in Ohio. Changes in currency values, foreign government agricultural policies and subsidies, and trade regulations have a great effect on my sheep producing neighbors. If we could somehow develop a formula or an indexing system that would be implemented to put various currencies on a level playing field for all products.
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We hope to have the opportunity to continue a dialog with you, Mr. Chairman, and the members of the committee as our industry works on these issues.
The industry is grateful for the section 201 decision and tariffs that have been put in place. I am concerned about what is going to happen when the 3-year tariff phase-out is complete. I know our lamb is better, we are making an effort to control our own destiny, but we will still be faced with foreign competition with much lower costs of production.
In closing, the sheep industry stands ready to assist you in any way possible to implement these suggestions. Thank you for coming to Ohio and listening to a family farmer.
[The prepared statement of Mr. Forrest appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Gibbs.
STATEMENT OF ROBERT GIBBS, PORK PRODUCER, LAKEVILLE, OH
Mr. GIBBS. Mr. Chairman, members of the committee, I am Bob Gibbs, a pork producer from Holmes County and president of the Ohio Farm Bureau. I want to thank you for the opportunity to address you today.
I am an independent hog producer, have been raising hogs for almost 25 years. Over this time, my operation has grown and changed to adopt the new technologies and gain efficiencies to be competitive.
I think it is important also to mention that my swine operation is utilizing multi-site production to achieve maximum animal performance and be friendly to the environment. In doing this, it is important to recognize that I am working with other family farm operations that depend on me for pigs and risk management. Therefore, we have one farm operation that is interconnected and dependent with several other operations.
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Of course, the last 2 years in pork production has been very challenging and the erosion of equity has been large. And I think in the committee here, I am the only one still in the hog business that has testified so far today.
Regarding the Sharp 1 and 2 payments, my operation did not qualify because we were too large. What I think was ironic about that policy is that hopefully my operation was large enough to be competitive in the industry and also be a full time swine operation. Also, producers that are not under contract should be eligible for any type of payments that are made, all producers should be eligible.
The industry has undergone tremendous consolidation and restructuring. Consolidation and the subsequent concentration within U.S. agricultural sector is having adverse economic impacts on U.S. family farmers. Congress should review the existing statutes, develop legislation where necessary and strengthen enforcement activities. USDA should be empowered to investigate mergers, consolidation of agricultural input suppliers and processors for antitrust and anti-competitive activities. Congress should examine the grain inspection, packers and stockyards administration, packers and stockyards program to determine if they are capable of enforcing the 1921 Packers and Stockyards Act.
Initiative and incentives should be started to encourage interdependent production systems so producers can gain value in the marketplace. Coordination throughout the food chain should be encouraged.
Mandatory livestock price reporting will enhance price discovery and transparency. The pork sector has suffered extremely low prices along with most other commodities. World demand has been off due to economic problems in the Pacific Rim countries and Russia and a very strong U.S. dollar.
World production of grains has increased dramatically due to several years of above normal yields and acres harvested.
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While AMTA payments have been of assistance in addressing the short-term problems, challenges still remain regarding U.S. farm policy. Projections for farm prices this year are grim, barring any weather disaster, creating a need for additional market loss assistance.
This past year delegates to the American Farm Bureau Federation's annual meeting adopted a resolution supporting the implementation of a counter-cyclical safety net as a supplement to the AMTA payments. This action was taken believing that such a policy could address sharp declines in prices without relying on large financial assistance packages from Congress.
We cannot afford to let our agricultural infrastructure deteriorate, thus ultimately relying on offshore food production in the future.
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. Actions such as increasing loan rates would be very reminiscent of steps taken in the early 1980's that caused U.S. grain and oilseeds to become non-competitively priced in the world markets. The FAIR Act is working. Our competitors around the world are feeling the economic pressures from the marketplace also. The U.S. is not supporting the world price to the benefit of our competitors by idling acres here at home.
Remember, the loan program is a marketing tool for producers. The intent is to lessen pressure to sell at harvest time and to spread sales throughout the year.
Finally, I would reiterate that farmers and the Government entered into a 7-year contract in 1996 and that those contracts should be carried out for their full term to 2002. However, we urge you to consider adopting a counter-cyclical payment measure for 2001 and 2002 as a supplement to the AMTA payments.
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Congress should avoid increasing marketing loan rates and stay the course on the marketing aspects of the FAIR Act. Congress gave farmers its word regarding access to additional foreign markets through trade policy reforms, release from burdensome regulations, additional improved risk management tools and tax reforms for their support of the FAIR Act in 1996. Now facing the third consecutive year of an all-time low commodity prices, farmers continue to hold up their end of the bargain.
Congress has several opportunities to improve farm prices this year. These opportunities include emergency supplemental funding package, granting China permanent normal trading relations, sanctions reform, food aid programs and concessional sales, regulatory reforms, conservation cost-share initiatives, risk management and adequate funding for research.
Enclosed in my written report is a more detailed explanation of these initiatives and we at the Ohio Farm Bureau look forward to working with you.
Thank you.
Mr. BOEHNER [presiding]. Mr. Mahan.
STATEMENT OF JIM MAHAN, TOBACCO, CATTLE PRODUCER, LEXINGTON, KY
Mr. MAHAN. Mr. Chairman, Congressman Fletcher and distinguished members of the Agriculture Committee, I certainly want to thank you for allowing me this opportunity to visit with you. But more importantly, let me thank you for that that you have done and are going to do for us, such as social security reform, the TLAP money which was very important to us as we started our new crop year. TLAP is Tobacco Loss Assistance Payment. I believe this is the first time tobacco has been included in the disaster relief. Congressman Fletcher, I thank you and others in your hard work on making this possible. And I hope it continues if quotas and markets are cut.
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Good afternoon, I am Jim Mahan, a 5th generation farmer, along with my two sons who also work full time on the family farm in central Kentucky. Our lives are totally centered around tobacco, horses, cattle, corn, beans, wheat, hay and our church. Much to the anguish of my wife, our 17-month-old grandson could say John Deere before he could say Grandma.
High quality Kentucky Burley tobacco, Kentucky bourbon and Kentucky thoroughbred horses have long been the mainstay of my State and farming gets a little nerve-wracking when each of the three have become so politically incorrect. And now the mention of industrial hemp and everyone gets nervous. [Laughter.]
I do not need to remind you of our plight of low prices and high input costs which we cannot pass on, not to mention the drought the past 2 years. I am sure you have heard many times all the problems I could list, including farmers going broke. But let me spend just a moment on some solutions.
1. Allow me to sell on the world markets. When you punish Pakistan with sanctions, you really are punishing the American farmer. Iran, Libya, Sudan, China and the list goes on and on. And China will eat and smoke. All these folks will get their food somewhere else and in the meantime, I am left out. So I would urge you to eliminate sanctions, or at least the food and medicine in them, and increase U.S. producer access to international markets or at least continue market loss assistance payments. Maybe we could get rid of some of the red tape of the Treasury Department licenses and allow USDA exports credits. I do not want to go back to supply management; however, I remind you that Freedom to Farm included opening up markets.
2. It is my opinion that fast track authority for the President would help agriculture. In farmer talk, it is strike while the iron is hot or make hay while the sun shines.
3 Farm labor continues to be a problem, and I applaud you in your efforts on H–2A reform. I only mention this to say it would be impossible for me to farm without migrant workers. There are times I wish I could not spell INS.
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4. The further I go, the less I understand about crop insurance. However, if changes are made in the program, I hope Kentucky products are included and maybe also develop a plan which includes livestock, cattle in particular.
5. From a very personal and selfish standpoint, I beg you to allow my two sons to be able to keep our family farm by eliminating estate and capital gains taxes. And I know you are trying.
6. Concerning tobacco, I urge you to protect the Tobacco Program, to oppose any increase in the excise tax on tobacco and to ban the sale of contraband or untaxed cigarettes. In addition, I agree with the recent Supreme Court decision that the FDA should not regulate tobacco. I hope you agree.
7. I feel all farmers want and need clean air and water; however—there is always a however—some regulations have lost sight of common sense and certainly make it tough to farm. I do not want to have to worry about my tractor tire running over an endangered insect. [Laughter.]
8. On a less urgent note, I want to thank you for recent FSA programs, although timing is so important. Most of us in my area had already cleaned out our dried up ponds before that program started—they get nothing. And just recently, the seeding practice was too late for normal seeding in my area. Again as I say, in farming, timing is everything.
During the Depression, the farmers were able to soften the blow by listening to that great American, Will Rogers. I think I am getting to the point of needing a Will Rogers.
In closing, let me say that I know I will be more comfortable going home and getting my jeans and boots on, knowing that you have heard my problems and that I have gotten this off my chest. I trust you will continue to work for the American farmer.
I thank you very much.
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[The prepared statement of Mr. Mahan appears at the conclusion of the hearing.]
The CHAIRMAN [presiding]. Thank you very much, Mr. Mahan. Mr. Voge.
STATEMENT OF ROGER VOGE, GRAIN, CATTLE PRODUCER, WEST ALEXANDRIA, OH
Mr. VOGE. Mr. Chairman, members of the committee, thank you for this opportunity.
My name is Roger Voge, I am from Preble County, OH. My wife Rebekah and I own and operate a diversified family grain and cattle feeding farm. Each year we feed out approximately 1,000 head of cattle and farm approximately 500 acres of corn, soybeans, wheat and hay. I feed out cattle independently. I have left contract hog production.
The 1996 farm bill is a good piece of legislation. It allows farmers to determine for themselves what to produce based on the markets and prices. These market-based policies are sound. The 7-year contracts between producers and the Federal Government should be upheld until the termination date of 2002. I appreciate how the House Agriculture Committee responded to the low commodity prices and drought in this past year with $9.3 billion in emergency funds. This was a real lifesaver for me personally. However, there are several areas that need improving.
Enforce antitrust laws. The agriculture industry has seen huge numbers of company buyouts and mergers which have caused lower competition in the marketplace. When the largest packing plants also are the largest livestock feeders, they have very little need for my cattle. These packers can offer take-it-or-leave-it prices, which are designed to squeeze out family farmers out of business. This lack of competition hurts my bottom line. I do not want to see cattle production become vertically integrated like the hog and poultry industries. You must watch these mergers and buyouts to keep agricultural monopolies from squeezing out fair competition. The Justice Department must enforce the antitrust laws if there is to be a future for independent farmers.
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Increase world trade markets. The promise to increasing world markets is one part of the 1996 farm which has not happened. World markets can be increased this way:
Normalize trade relations with China. If the United States is not allowed to trade with China, other countries will fill their agricultural market need. The U.S. will miss out on this huge trading opportunity.
Implement fast track legislation so that when U.S. negotiators reach a trade agreement, it can be implemented right away instead of being hashed out in Congress and maybe lost to a faster supplier.
Lift trade sanctions. If the United States places trade sanctions or embargoes on another country, their demand for farm products is quickly filled by competing countries.
An embargoed country views the United States as an unreliable source for agricultural products, so that even when sanctions are lifted, they do not want to trade with the United States for fear it will happen again. It takes years to regain markets lost to embargoes or trade sanctions. This practice must stop.
Reduce regulations. Increasing regulations on the family farmer will put him out of business faster than any other market force. Every regulation the Government places on farmers comes with a price tag, whether it is requiring farmers to buy permits and licenses to run their farms or burying them in paperwork. The huge agricultural business companies can afford to absorb thousands of dollars of regulation costs, but the same cost will put the family farm out of business. You must reduce regulations.
Improve risk management tools. Broaden crop insurance and revenue insurance coverage and lower the premiums. Crop insurance is one of our best tools for reducing our risk. You must encourage more farmers to buy crop insurance or revenue insurance by making it more affordable. I would like to see revenue insurance broadened to cover livestock as well.
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Reform tax codes. Reinstate income averaging. Because farm profits are very uneven year to year—one year you may have a very profitable year and the next year may show a loss. Many farmers count on the good years to help them ride out the poor years. It does not make sense to give the farmer aid in a poor year just to take it back in the next good year through taxes. It makes more sense to allow him to average his income for tax purposes.
Increase agricultural research. Quality research is extremely important to help us discover better ways to farm, whether this is better hybrid seeds, GMOs or better methods of farming and managing land and resources. Also, we must educate the people about the benefits of this research; that we are looking for more efficient ways to run farms, create seeds that grow healthier plants and more nutritious food. Explain the sound science to the people, so that they can overcome their fears of GMOs.
The current 1996 farm bill addresses some of the problems facing agriculture. However, you must tackle the concerns I have explained. This will help solve the problems of the family farm for the long term. We have seen that foreign control of the oil supply has raised the price of fuels and has made us beggars to OPEC. Surely we do not want to turn over control of our food supply to foreign suppliers. I am afraid this will happen if the family farm is allowed to disappear. I am afraid that agribusiness will take over for awhile, as long as it is profitable for them. And my worst fear is that if agriculture becomes unprofitable for the large agribusiness, they will simply shut down. By that time, family farms will be a thing of the past, so we will have to resort to importing our food. We do not want to become beggars to the world when, God forbid, the next dust bowl or war comes.
Please consider my recommendations. Thank you for your time and attention on these important problems.
[The prepared statement of Mr. Voge appears at the conclusion of the hearing.]
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The CHAIRMAN. Mr. Wilson.
STATEMENT OF GARY W. WILSON, COW/CALF OPERATION, NEW CONCORD, OH
Mr. WILSON. Thank you, Mr. Chairman and members of the committee and welcome to Ohio, and thank you for the opportunity to speak about agricultural policy today.
I am a beef cattle, cow/calf, seed stock producer from Muskingum County, southeastern Ohio. I also currently serve as president of the Ohio Cattlemen's Association.
I have long believed that market forces should determine the price and value of beef cattle. Federal farm programs that subsidize agriculture through direct payments distort supply/demand signals to producers, which in turn send confusing signals that can negatively impact the demand and price of all commodities.
Regarding crop/disaster insurance, I support Government programs that assist producers when Mother Nature hits a particular region with drought, flood, blizzard, hurricane or other natural disasters. However, payments made to producers simply due to low market prices, either through direct payment or insurance programs, should be avoided.
International trade. I strongly support Government programs and regulatory actions that expand access to foreign markets, address unfair trade practices and barriers, or provide humanitarian assistance to those less fortunate than us.
The trade agreement that the United States reached last year with China could benefit the entire agriculture community by significantly lowering tariffs on commodities. The agreement also eliminates China's state trading entities, which means U.S. business and industry can deal directly with companies instead of government middlemen. China's 200 million middle class people alone represent a vast market for U.S. agriculture products. Congress will hopefully vote this year on permanent normal trade relations for China. A yes vote is important because it will pave the way for China's entry into the WTO, which in turn provides leverage to ensure China holds up its end of trade agreements.
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Enforcement of trade pacts is of great concern. Passage of Carousel Retaliation will give the U.S. Trade Representative more tools to enforce trade agreements. For example, Carousel will allow the USTR to rotate products on a retaliation list so that all European exporters will bear the burden for Europe's non-compliance with the agreements that they have already signed.
Market regulation/packer concentration. I support government's role in ensuring and protecting fairness and competition in the marketplace. However, I oppose Federal legislation that would eliminate packer ownership or control of livestock. Such legislation would stop value-based marketing opportunities, limit risk management options and significantly reduce the number of buyers of cattle in the United States.
Regarding the 1996 farm bill, Congress fundamentally changed our Nation's agriculture system 4 years ago when it passed the Federal Agriculture Improvement and Reform Act. I believe in the original intent of the 1996 farm bill to make farm programs more market-oriented by cutting the link between government payments and the command and control actions of USDA. Consequently, the role of government in commodity pricing should continue to diminish, providing producers more choices in marketing decisions.
I hope the next phase of Federal farm programs will continue to support the open marketplace.
Country-of-origin labeling and protecting brand equity. I support mandatory country-of-origin labeling for all imported beef. I also strongly support legislative and regulatory action that would rescind the use of USDA quality trades on imported carcasses and on cattle imported for immediate slaughter.
Interstate shipment of State-inspected meat. I support legislation that would allow meat inspected by state departments of agriculture to be shipped and sold across State lines. This would create additional competition in the packing sector and create marketing opportunities for family-owned packing companies and producers who are currently limited to simply marketing in-state.
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Ohio's beef producers that supported the NAFTA agreement find it extremely ironic that Mexican and Canadian packers can sell beef products in Indiana, Kentucky, West Virginia, Pennsylvania and Michigan and Ohio's State-inspected meat packers cannot.
Thank you again for the opportunity to share my opinions on these issues and thank you for the work you are doing on our behalf as members of the Committee on Agriculture.
[The prepared statement of Mr. Wilson appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Wilson, and again to all of our panel.
Mr. Mahan, you mentioned that it seemed like a lot of things had lost sight of common sense. I say to people a lot of times that there is no stupid test before Congress or Washington takes an action. If there was a stupid test, there are a lot of things on the books today that probably would not be there otherwise.
Some of you in the livestock area particularly had mentioned the mandatory price reporting and some other things, and crop insurance. I had mentioned earlier, we have got a pilot program to look at providing some kind of risk management for livestock. We do not know what shape or form that will take.
And Mr. Wilson, you had mentioned enforcement of trade agreements. I have felt for some time that we have got to have as much tenacity in ensuring that our trade agreements are adhered to as we do in the efforts that go into trying to get them in the first place, because if they do become in fact an agreement, but people do not have the confidence that those agreements are going to be adhered to, then we are going to lose the support of the people that we have out there supporting trade today, if they do not have that confidence. Obviously, the cattle industry, with the hormone issue has been one that has probably been affected as much as any other, and we have got to make for certain that once we have the opportunity to renegotiate or to look at the entire next round of WTO discussions and negotiations, that we recognize the fallacies in current agreements in the timeliness of the conclusion of disputes and the opportunities to take to make for certain that there is a real reason for people to adhere to disputed agreements once the conclusion has been reached. Today, there was really nothing there other than some retaliation efforts which have been taken. Mr. Stenholm and I and many of our colleagues were the authors of the Carousel legislation and so obviously we strongly support that.
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The dilemma—and it is always interesting, I guess the more we do these hearings, the more it points out how diverse agriculture is and how one size does not fit all. And I had mentioned earlier when we were trying to figure out ways to deliver assistance to agriculture, that we have to be careful not to pass the pain to another segment of the agricultural economy, artificially raising the price of commodities or whatever. But letting the programs work sometimes does not always accomplish the same goal either. I was not an advocate of the current farm program when it was being considered. However, during the first year of the program, we had virtually record-setting high prices in virtually every commodity being produced, which is a long way from where we are today, but it happened then. So I began to think well, I was probably wrong on that too.
But we had a lot of people in the livestock business come to us and say golly, corn is so expensive, you all have got to do something to get down the price. I said wait, we have been trying to get the price of corn up, the market is working.
So it always is a dilemma in trying to make for certain that we have—the long-range wisdom is a little difficult.
I do not have any specific questions for any of you and I am going to pass it to Mr. Stenholm, but I am just going to end with this—one of the hearings we had last year was on the state of agriculture and one of the commodity groups that was in testifying before us, after they gave their policy statement, said that they thought in all fairness, they ought to tell us that was the third policy statement that they had had that year. And my comment to him was ''and you expect us to make agriculture policy based on what it is that you all want.'' It is sometimes a little difficult.
Mr. Stenholm.
Mr. STENHOLM. Mr. Forrest, your testimony regarding the sheep industry is one that I hope that might also be applicable to the tobacco problem, Mr. Courts, that you are talking about today and also the beef and other areas. Cooperative effort is one of the tools that I think is going to be absolutely essential in solving the market situation that we find ourselves in. And it is being looked at now whether it is the larger feed lots in Texas or the smaller feed lots in the Midwest, whether it is, in this case, the lamb and wool industry looking at creation of market, and you were successful—we were successful, I should say, with the 201, giving us 3 years in the lamb and wool business to kind of work ourselves into a more profitable situation. And that is what we have, is 3 years now.
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To those that keep talking about getting government out, just talk to the lamb and wool and mohair business, what happened when we lost the wool and mohair program. That is why I say where you have got foreign competition, we had better figure out ways to stand shoulder-to-shoulder with our producers or we are going to lose, I do not care who you are, what you are or how independent you think you are going to be.
But I am pleased to see that you are working cooperatively in the area of wool in market development. We have a very successful lamb processing cooperative processing plant that has just gotten started in Texas, it is one of the most, if not the most, modern lamb processing plant in the world. We borrowed from the New Zealanders and the Australians. And that is good, they are very successful in doing what they do. They produce a very competitive product. And ultimately, I think one of the solutions to our own industry is going to be a little more cooperative effort with New Zealand and Australia in order to build market share. I think that is where our future for us is going to be, but that is a little more difficult to get. They are our competitor too.
But building market share, you are right in talking about the sheep industry improvement center, you are right to continue to ask for and I hope we will provide the other $30 million of funds that will allow the industry to try some innovative ways at market development. That is exactly what we need to be doing.
As far as the interstate shipment of meat, you make a very good point, and I would love to be pushing that legislation. I hope we still might pass it this year, but as usual in legislation, it is hard to get everybody dotting the I and crossing the T exactly the same way. And I hope that the beef industry will look at this now and see if the proposed compromise is acceptable and if it should become so, to all of our parties, I would be very interested in pushing it. But as of now, there is still a lot of nervousness about it. I do not know if we are going to get to that point or not.
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Before my time expires, I think I already know the answer to this because you testified, but I want to ask regarding the sanctions question. I take it that everyone at this table does support the lifting of all unilaterally imposed sanctions on our ability to compete in the international marketplace.
Let the record show that there are six heads nodding affirmatively. That takes care of that.
And regarding permanent normal trade relations with China; again, I think we can do this with a head shake because you have all said this in your testimony.
Let the record show that all six heads are nodding affirmatively, that Congress should vote to grant permanent normal trade relations with China.
I believe I will pass on additional questions. I have one other but I will find it, and I will yield for right now.
The CHAIRMAN. Mr. Fletcher.
Mr. FLETCHER. Thank you, Mr. Chairman. Certainly appreciate all the comments and testimony of the panel and certainly welcome Mr. Mahan from my district and as a constituent. Thank you too for your testimony.
We are all concerned, and let me say from the area I come from, probably cattle and tobacco are the two most important agricultural products there that affect our industry tremendously, and I think all of you have said some very good things that relate to one or the other there as far as livestock or tobacco.
We are all concerned too about youth access to tobacco, we understand the health ramifications of it. I think we also understand the impact that policies of the administration of the farmer back home. Now we are facing a total over the last 2 years of about a 65 percent decrease in quota. This means over the last 2 years, the average farmer in central Kentucky has realized a 65 percent decrease in their income. And I think any of you, having that kind of impact on your income, would realize that something needs to be done, that with that type of impact on any industry without really any substantial safety net there, we have got a substantial problem that needs to be addressed.
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I think there is—one problem we have, and I have even spoken to the Members of Congress, a lot of folks feel that the tobacco program is a Government subsidy. And when you really look at that program, it is not a Government subsidy. Let me say that it is a program that is funded by farmers with fees from when they sell the tobacco, the pool and no-net cost is paid by the farmers. There is a small administrative fee that the Government picks up and it is just a very, very small amount of money compared to the expenditures in agriculture.
But let me ask you all, Mr. Courts and Mr. Mahan, you all have testified specifically on tobacco, if there is one thing that we could do this year in Congress—and I see that we have short-term concerns, in other words problems that are immediate with this 65 percent total or 45 percent reduction in quota this year—and then we have some long-term concerns about stabilizing the program as we see decreased domestic production, increased imports. So if there is one thing that we could do that would help the farmers back home, what would that be?
Mr. COURTS. In my opinion—we talked this over at the co-op—if there was some way possible that we could take the 230 million pounds of tobacco that we have got in this 1999 crop, if we could set it aside for 2 years, at least 2 years, and take it out of the formula that we have to calculate our quota cuts, if there was some way we just could set it aside and work it through the market—if the China market opens up, that is another outlet for us to have for tobacco to go to. So we as a co-op feel like if we could just take this tobacco from the 1999 crop and set it aside and take it out of formula, it could help us out somewhat in reducing this quota cut for us.
Mr. FLETCHER. OK. Mr. Mahan.
Mr. MAHAN. I agree, but if I could give maybe a two-part answer. I agree that our pool stocks are way too full and that that needs to be reduced. But second, I think that there is something wrong when we are importing a lot more African and South American tobacco and exporting less each year. Now that is a trend that has been going on the last several years and that does not make sense, that is wrong. I am competing against Africa and these other countries that are probably paying as much for a week's work as what I am having to pay a guy to work for an hour. So it is not a level playing field.
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Mr. FLETCHER. There has been—I know there was a steering committee and it was made up of representatives from the Burley co-op, the council as well as Farm Bureau and farmers, that did recommend, as you have said, Mr. Courts, something to where we take this 1999 crop that clearly as a result of the drought, at least 50 percent of what the pool has would be considered as poor quality tobacco compared to the Burley that is normally grown throughout the Burley Belt in the United States. If we could somehow set that aside and that loan forgiveness—if there was a loan forgiveness, what would that do to change the quota? It is reduced by about 45 percent now, what would that do? Because the farmers I talked to, last year, we were able to give the $328 million help, those payments that are going to be distributed shortly. But most of the farmers I talked to say really we want to go out, we want to work, we want to grow our crop and we would like to do something to get that quota up and to stabilize the program. What would that do to help that?
Mr. COURTS. I think it would bring the tobacco quota back to where it should be.
Mr. MAHAN. That is exactly right and very important. And it would be great to see that quota back.
Mr. FLETCHER. Do you think that is probably the one most important thing we can do to stabilize the program and to really provide it so that it could even begin to work, as we look at imports?
Mr. MAHAN. It would be most helpful, exactly.
Mr. FLETCHER. Thank you all very much.
Mr. COURTS. I want to follow up and comment to Mr. Mahan. Also, the imports is of great concern to the co-op. If there is something we can do to offset that. Back in 1985, we negotiated with the companies and with the Federal Government on fine-tuning our program. And in that program, we came up with if we roll back the price of our tobacco, we roll back from $1.90 support price to about $1.70 and the companies agreed to a 75/25 percent ratio on imports. And that went along for about 3 years, and then along came GATT and they overrode us and threw it out. And so we need something like that put back in so we can at least combat the imports coming into this country.
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Mr. FLETCHER. Thank you. My time has expired, Mr. Chairman.
The CHAIRMAN. Mr. Lucas.
Mr. LUCAS of Kentucky. The hour is getting late, so I will be brief, but again, when I got to Congress last year, one of my main interests was getting on the Agriculture Committee because I wanted to have a seat in the front row to help protect our farming families.
In particular, we have talked about livestock and grain and soybeans and other commodities, but, my particular interest here is tobacco. And I guess what I would ask is that I would hope that other people in the agriculture community would have some empathy for the tobacco farmer because certainly the tobacco farme is narrow in scope when it comes to agriculture in this country, but everybody has their own problems in agriculture and I would just hope that the rest of the farming communities across this Nation would have empathy with the tobacco farmer and help us in our plight.
I guess that would be the one thing I would say. We know that tobacco is politically incorrect, but in the words of the country singer, ''I was singing country when country wasn't cool.'' And it is not good to talk about tobacco because it is not politically correct. We all know the inherent problems with helping and all that with tobacco.
We have got a lot of good, hard-working families in the Burley Belt in Kentucky that that is their livelihood and that is all they know and understand.
We talked about tobacco, like a lot of these other products, only a few cents that goes into a pack of cigarettes, of the cost of tobacco, yet they are going outside the country where tobacco is roughly half the cost. I have heard some talk about tariffs, but we are headed in the other direction as a country, we are heading away from tariffs, and not that way.
Again, I appreciate Mr. Mahan and Mr. Courts being here. Mr. Courts is from my old home county in Grant. We talked a little bit, Mr. Courts, you have great concerns about the contract grower, Philip Morris in particular and you gave me a copy of their contract that I had not seen before. And you also indicated that Marcy Kaptur had some legislation. Do you feel that that legislation is enough to protect you with the contract folks? How do you feel about that?
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Mr. COURTS. We feel like it is a step in the right direction. When you pass laws, you do not know how far it is going to go to help you, but you have got to take that first step. We definitely need that first step to protect us against contracting.
Mr. LUCAS of Kentucky. The other thing the administration is proposing an excise tax on cigarettes, because I think that is something that can be sold pretty easily, and I guess what I would hope—I am going to fight that, as I know other folks in tobacco producing areas are going to fight, and I would hope that we could get some support from the rest of the agriculture communities across the country to help us fight that. Because they have unprecedented prosperity, I do not think we need to balance the budget on the backs of our tobacco farmers.
One other thing and then I will close, and I asked the other panel this. If each of you could state in 20 seconds or less what is the greatest thing we could do as Members of Congress to help you, something that is in fact do-able, what would be the one thing that each of you might say in 20 seconds or less?
Mr. COURTS. In the tobacco industry, if we could have some help on the quota reduction this year. We have until April 7 to do some action. Any way that you all could work something out to help us out, even to set aside this 230 million pounds of tobacco we have, it would greatly help us.
Mr. FORREST. I believe in the sheep industry, with the 201, it has helped us tremendously and I think with the imports coming in at a cheaper price, I think we need to look so we are all on the same field, we would be even and that way we would know and work together.
Mr. GIBBS. The obvious one, as I said in my testimony, is level the playing field to trade, open up the market, give us agricultural producers the opportunity to sell our product. The one thing that really frustrates me when I meet with Members of Congress is how they sometimes have a tendency to pass the buck, especially in the area of regulation. Wwe have got Government agencies that have kind of gone beyond what the intent of Congress was and I get frustrated when I do not see Congress stand up and put that agency in place.
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Mr. MAHAN. Monday morning I would go up there and I would take food out of sanctions and I would open up about 50 or so brand new markets all in a 24-hour period. [Laughter.]
Mr. VOGE. I think opening up new markets would be one of the best things you could do for us, because if we do not have the markets, we do not have the income. That would be my suggestion.
Mr. WILSON. We talk about foreign markets, but I know in the beef industry, foreign exports—and we have probably had as much a success story to tell on foreign exports as anyone, but foreign exports still only represent 7 percent of our market. We still have 93 percent of our market is domestic. And I think some of the things you could do that could impact across the board on all commodities is helping us work out value-added products and initiatives and programs that would help us bring about alternative uses for products. An example I will use real quick, I know somebody got applause on a negative comment toward the corn checkoff board, but the checkoff that was paid by corn producers went into research to identify ways of using the pulp and extract that came out of ethanol plants and vegetable oil plants, how can we use that product. And it came up that it makes an excellent cattle feed. A year, 2 years ago, I bought one 50,000 pound load, last year I bought two, this year I will buy four. I do not raise corn, I do not pay corn checkoff, but I think those that are involved in these checkoff programs know that those dollars are being spent very wisely and I think what we can do, government's role, help us identify ways of adding value to our products, alternative uses. I would love to see more ethanol produced in this country because I remember the gas lines of the 1970's and OPEC, and I hate paying $1.56 or $1.66 a gallon going to OPEC. I would rather be paying it to the corn producers in this country and having more use for ethanol and other value-added products.
The CHAIRMAN. Mr. Boehner.
Mr. BOEHNER. Mr. Chairman, thank you and let me welcome Mr. Forrest and Mr. Voge, who are my constituents here in the southern part of my district.
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Mr. Mahan, I want to thank you for bringing some levity to the meeting this afternoon. It has been quite a long day with all of us sitting here and it was nice that you brightened up the mood.
And I am going to give you all a big break by not asking any questions. I will yield back, Mr. Chairman.
The CHAIRMAN. That is a break, because he usually asks real hard questions.
Mr. Hill.
Mr. HILL. Thank you, Mr. Chairman. I do not have any questions either, but I am impressed by the unanimity on China and I would like to make a comment about it.
I plan myself on voting for the piece of legislation that would normalize trade relations with China, but I will have to tell you something, there is an extreme amount of pressure on Members of Congress, including this Congressman, to vote against that. And I hear every day from somebody who is opposed to this. I have had over 30 meetings with groups and organizations that are opposed to this deal. I have probably heard from two organizations that are for this. And I literally get no phone calls at all in support of this deal.
My advice to the farming community, not only the panel here, but also to those in the audience, that you have to do a better job of expressing your support for this deal, because as you know, a couple of years ago fast track was defeated and there has been some mention of fast track. And every day that goes by in Congress, I think we are losing members who want to vote for this trade deal. And so it is very important for the farming community to get really energized to shore up the support for this piece of legislation, because it is critically important. [Applause.]
The CHAIRMAN. I could not agree more with Mr. Hill's comments that he has made. This is something that Mr. Stenholm and I and many others on this committee are trying to help organize the agricultural community in behalf of normal trade relations. And that is one of the first messages that I give them, is that we—people hear a lot from the opposition, but there is almost an assumption that a member is going to do the right thing, but there is just not a showing by the proponents. I think we may be going to see that and I guess the message is here that the proponents of the normal trade relations, let us light up Mr. Hill's phone and show some support out there for it.
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I did think of one more thing I wanted to ask you, Mr. Wilson, if I may, from your testimony, because this is an area we are debating. It is the first area of hearings that this committee had in this Congress, and that was on consolidation and livestock pricing.
One of the discussions that came from that was what eventually became the mandatory livestock reporting, which Congress has passed and we are still waiting for the implementation of that.
The other area that is discussed a great deal is the area of—which you had mentioned that the Ohio cattlemen support—country-of-origin labeling. Where we have had an opportunity to have that discussion before, I have asked people at what point does an imported animal not have to have a label. We have heard anything from 10 days to it had to be born here. But in order to arrive at what it is that people are after—if I buy cattle from Mexico and I bring them in as yearlings or younger and I put them on feed and I feed them out completely side-by-side with one born in Lubbock, would that animal require imported—in your opinion, with what you are requesting, would that animal require an imported label?
Mr. WILSON. This far from the Texas border, yes.
The CHAIRMAN. So it has to be born here? You would suggest that an animal has to be born here?
Mr. WILSON. And I say it for this reason, not only because of the marketing aspect but also the initiatives taken by the beef industry to improve the product line in this country. We have a consistency problem and a tenderness problem, and if we can identify the genetics in this country, we want to market that and the value-added products we talked about earlier, we want to make that fit. When cattle come from other countries and we have no history, it is hart to make those cattle fit.
The CHAIRMAN. I appreciate your answer, I just was wondering what the position is of this group because, again, we have heard it vary from if it has been here 10 days it does not have to, to it has to be born here.
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Mr. WILSON. And that is the gray area and I know my friends in Texas will want——
The CHAIRMAN. Well, I mean it is really not really gray, it is pretty black and white. At some point the law, if that in fact passes, is going to have to say what it is, so that is going to have to be defined at some point.
Mr. WILSON. And that will probably be an internal debate within the cattle industry itself.
The CHAIRMAN. Oh, I am sure it is going to.
Any other comments or questions?
Mr. Stenholm.
Mr. STENHOLM. Mr. Wilson, I appreciate you bringing up the positive nature of the corn checkoff and again, the negative reaction we had before, and it is something that is very alarming to me in all of our checkoffs now in which we have a growing number of producers who seemingly feel like this is no longer a good investment, and for a very good reason. When you are losing your shirt with your prices, it is difficult to come up with a rationale for continuing to support your commodity. But it bothers me because one of the few tools that those of us who represent rural areas and agricultural interests have to use with our more urban Congressmen is what we are doing to help ourselves. And if we begin to say we do not wish to help ourselves, and you point out a very good positive aspect of the corn checkoff and I can do the same in cotton and all of the other, the beef checkoff, all are coming up with some tremendously positive investment ideas for us in this area.
But it goes back to the comments earlier to the need of education. We have got to continue to education, not just the consumer, but in this case, we have got to keep educating ourselves as to the positive nature. Not trying to say it is perfect, because we have had our problems with our checkoffs and it is a tremendous responsibility on the part of those who serve on the boards of directors, to do their job and for their industry, et cetera, and mistakes are made.
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The ethanol comment, again I want you all to know that I have done a 180. I have drug my feet on support of ethanol over the years because I too, as the chairman mentioned in his opening comments, I represent the oil patch, and with the little sympathy that we get, have gotten in the past from low oil prices, it has been very difficult to support subsidization of competition when you are going broke and shutting down wells.
But now we are finding as a result of the plight of 14 months ago, when we had the lowest oil prices in the history of our country—at no time have they ever been as low in constant dollars as they were, we are finding now that there is a growing sense in the oil industry for a little cooperation, recognizing—as I tend to put it, you cannot produce oil and gas without food and fiber; you cannot produce food and fiber without oil and gas. We both have our environmental problems, we both have our international competitive problems and therefore, maybe we ought to take two minority voices and make one little bitty bigger minority voice and maybe we could work together in that area. [Applause.]
And therefore, I have resolved now that I want to be part of the positive force of developing alternative fuels, of using the research in the corn industry and having my independent oil industry, which is contrary to the big oil interests on this, quite frankly, but here again, we have got to bring big oil around to understanding. This is a national security problem for us in energy, and there are some things that we can offer throughout our various industries.
One final comment on the beef question, the last one, and NAFTA. I gave about all the hide I could give for my country in support of NAFTA in 1992. We had a little 800-pound gorilla running for President about that time, his name was Ross Perot, and he carried two of my counties and came in second five times, three times to Bush and twice to Clinton, back then. And there was a strong anti-NAFTA belief and there are still some supportable reasons. I mean trade is not a win-win for everybody, there are going to be some short-term losers and that is what we have to constantly and consistently try to work through to help those who are short-term losing, transition into something else where they can be more competitive.
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But in beef, this one is tough for me because I still have some beef producers in Texas that think NAFTA was bad for us. But when you look at the fact, comparing 5 years pre-vote on NAFTA with 5 years after, we are now selling $100 million more beef into Mexico than we were before NAFTA, and we are buying $80 million less from them. And yet some beef producers continue to say NAFTA was bad for us. How can that be?
Mr. WILSON. I hope that you have not, and I hope that the audience does not misinterpret my comment on NAFTA. We strongly support NAFTA and we have the results just as you have stated. We have benefitted tremendously as a beef industry in getting products into particularly Mexico.
Mr. STENHOLM. No, I did not misinterpret, there was nothing in what you were saying——
Mr. WILSON. But the interstate shipment issue, quite frankly, has been an ongoing issue for years even prior to NAFTA. The NAFTA agreement just helped bring home the point. How is it that USDA—and I am not blaming NAFTA or the trade organizations, I am not blaming Congress, I am blaming USDA—how can USDA allow a meat inspection system that evaluates state inspection systems twice a year for equivalency. USDA goes to Mexico, they go to Canada, they review those packing plants on an annual basis for consistency, or equality of inspection systems. How can USDA, apparently without legislation, adopt this well we cannot ship State-inspected meat across borders. But NAFTA helped change the rule. USDA can gladly allow now Mexican packers and Canadian packers to ship beef to our neighboring States but they still sit on this issue of Ohio cannot ship product into the neighboring States. I think it is wrong, I think it is a moral issue, I think it is a fairness issue. And on this particular one, we are very disappointed in USDA's position on it.
Mr. STENHOLM. Well, it is not just USDA's position, it is the big-four packers' position that is creating as much problem as anything.
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Mr. WILSON. Right.
Mr. STENHOLM. And therefore, I am glad that you so eloquently explained it because I think that is exactly a question that a lot of folks who are opposing it—we really need to come to an agreement to where we can have State-inspected meat traveling anywhere in the United States under a system of inspection that is as good as you will find anywhere in the world.
Mr. WILSON. And we spend a lot of time talking about trying to preserve the family farm, and I tie this issue right to it. The small packing plants in Ohio and 18 other States in this country—it is not just an Ohio issue—the small packing plants buy their product local, they buy most of their cattle local. Those cattlemen buy their corn and grains and so forth local, if they do not raise it themselves. Yet, under USDA, we little guys have to compete with Mexico and Canadian producers on a simple stupid issue of not allowing us to sell our products across State lines.
If you want to talk about saving the family farm, I do not care if you are a grain producer or if you are a cattle producer, here is another little example of the type things that we get into as producers that the Government will not allow us to develop markets because well, in this rule it says we are not allowed to ship inspected meat across State lines, even though it is equivalent. We cannot let you do it. It is confusing and very frustrating.
Mr. GIBBS. I would like to add to that a little bit. If it came up that if an out-of-state packer has a contract to supply meat to a grocery store chain in this State and for some reason he runs short filling it, timing or something happens, he cannot go to a local State-inspected packer here and fill that contract. So it is even incredible when you think about it.
The CHAIRMAN. I want to thank all of our witnesses, I want to thank all the members who have attended the hearing. They have been away from their homes and their districts and their families. I want to thank all of those who came and attended this hearing.
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Without objection, the record of today's hearing will remain open for 30 days to receive additional material and supplementary written responses from witnesses to any question posed by members of the panel.
This hearing is adjourned.
[Whereupon, at 3:06 p.m., the committee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Testimony William Fulton
Fulton farms is located at Troy, OH, 20 miles north of Dayton. We are a family owned and operated business. My family has raised fruits and vegetables in western Ohio for six generations. Our present operation consist of 1,600 acres: 800 acres of small fruits and vegetables and 800 acres soybeans and speciality corn. Our labor force consists of five family members, four full time employees and around one hundred part time workers, including 20 to 25 migrant workers, and six grandchildren during school break. Fruit and vegetable production is both wholesale and retail including pick your own and a large farm market. We are capable of irrigating all of our acerage.
The following are my major concerns of agricultural policy.
Farm Programs: I, like most farmers, would prefer to beable to farm without depending on Government payments to survive and be profitable. emphasis need to be on programs that encourage adequate prices. I had high hopes for the Freedom to Farm Act, in that it would finally get government out of farming. I am concerned with the amount of money the Federal Government is now using to assist farm income. Will this in the future be an excuse for price control, if prices raise to a level that is profitable to growers, but consumers considers that food prices are excessive.
Alternate crops: Most farmers get into alternate drops when grain prices are low. With a direct price relationship between grain and alternate crops this usually means low prices for all crops. This is why many of these endeavors fail.
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Shortage of fruit and vegetable crops: There is a lot of media attention if some crops are in short supply. Any shortage is short lived and usually caused by adverse weather in part of the production area. Existing growers have the ability to convert acerage to a crop that maybe of short supply. Federal and state programs that encourage alternate crop production usually create an over supply of that commodity and resulting low prices. This happened in the 1980's.
Crop insurance on speciality crops: Speciality crops by nature are high risk crops. Growers who minimize risks are generally successful, (example would be adequate irrigation). Existing crop insurance programs for non-insurable crops are of little value. I am not familiar with the new programs for speciality crops, and of what value they may be. Programs that cover to much of the risk for speciality crops, will lead to overproduction and lower prices. Growers may farm for the government payment. This happened on some disaster programs in the past.
Food Quality Protection Act: It appears many useful chemicals we now depend on, will be eliminated without adequate reason.
Government regulations: There is suppose to be an effort to reduce government regulations. I do not see this. Government regulations especially in fruit and vegetable crops is almost overwhelming. By rights we should have a full time person handling just this problem, but we can not economically afford this. We struggle along as best we can. We now deal with about 30 diferent government agencies, (list enclosed). Some are very beneficial to us. Example Agricultural Research Service, Extension Service, and Soil Conservation Service. Others provide a real burden.
Migrant supply: We have been fortunate to have good migrant workers. The main reason is good housing and being able to work seven months straight with 50 to 60 hours per week available. It is getting more difficult to get workers, many have left agricultural to got into other industries, this especially with the current labor shortage. We need to have a good foreign workers program, preferably run by the Agriculture Department.
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Statement of Billy E. Courts
For almost 60 years we have had a tobacco program that has worked successfully for the tobacco farmer. This program has leveled the playing field between the large growers and the small growers and acted as somewhat of a shield between the small growers and major corporations. The very existence of our program is threatened right now. I think our legs have somewhat been cut out from under us through quota cuts and now contracting is about to finish us off. Crop year 1999 has been a tough year because of the drought and the 45 percent quota cut in production for a lot of farmers. The drought caused a lot of suffering for tobacco farmers as well as other people in the agricultural community. Fortunately, we were able to get some Master Settlement money, phase I and phase II, and the direct payments from phase II has been a big help to our farmers. Most of them got their checks back in January. Along with that, we are getting some Federal disaster funds, probably within the next month. And those funds here in Kentucky will be divided up among the farmers the same way phase II money was divided up. In fact they will use the same application. That money is going to come at a very, very critical time for our farmers. Because of the quota cut, this may not be enough to save many of our small farmers. I want to personally thank all of our people that worked on it from Congressman to Senators. I will tell you that it is coming at a time when the tobacco farmer needs operating money and so its going to be a big help. Again I thank you!
We've gotten through 1999 and have gotten another crop raised. Quite a bit of that crop, 230 million pounds, came to the cooperative and went under loan to the Burley Tobacco Growers Co-op. A lot of people stand and scratch their head and wonder why and how that happened, and I think overall it was part of a strategy of one of the major cigarette manufacturing companies to not buy the tobacco, to somewhat overload our pool in the Burley co-op and force us into contracting that they have wanted for a long time. Its been a tough year, we've had some things that helped us, but now we're in a situation with our backs to the wall again and we're having to fight for our livelihood. Philip Morris has recently started contracting, that is signing agreements with growers to grow the tobacco directly for them and therefore going around, or at least not going through the auction system. The Burley Co-op has opposed the contracting and worked on legislation in Frankfort to not stop contracting but to create a system where the farmer will know that somebody is at least looking over his contract and putting him in a better negotiating position. On a national level Congresswoman Marcy Kaptur has proposed similar legislation that we, the Burley co-op, has strongly endorsed.
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Most of us have tried contracting in some form or another, never in tobacco, but we have in some vegetable crops, a lot of people have tried it in poultry, swine, and the fact is, it hasn't worked. When all is said and done there's that one farmer pitted against a major manufacturer who has the checkbook. Remember the cliche: ''its the Golden Rule, the one with the Gold makes the rule.'' Well, that's the way it will be with tobacco contracting.
If 100 million pounds, almost one-third of our tobacco does not go through the auction system, the type and quality of tobacco that the other manufacturers desire will not be there for them. Just to survive they will be forced to do the same thing as Philip Morris-start contracting. So eventually what we are looking at is that no tobacco will be going through the auction system unless its somebody who has messed up or that the company didn't need their tobacco after all. But there will be no auction system. One of the biggest things that is going to happen to us is the fact that this contracting will cause the USDA Grading Service to cut back so drastically on its employees that they will not be able to cover all the markets and eventually not be able to collect enough money to even pay their employees. So I expect in 2 years your USDA Grading Service will be gone and you can't have, or we have not been able to have up to this point, a tobacco program without the grading service. Over all the scheme seems to be that the manufacturers want our tobacco cheaper. Well, one of the things that will keep this from happening is for us to keep the program. Unlike the Grain farmers across this country, the tobacco farmer has a program that prevents them from starving the small farmer off the farm. You need to do everything possible to save and protect a successful program that can serve as a model for other farmers across this country.
To protect the program, tobacco that is contracted it should also pay a grading fee. The farmer that is not paying the grading fee still has the opportunity to return to the auction system where he knows he can get his tobacco sold. Yet he has not contributed anything, but he does have the luxury of doing that. Meanwhile another farmer stays within the program and he is paying his fees every year. I think it should be required that all tobacco pay a grading fee and if the grower chooses to have his tobacco graded by one of the USDA graders that would be fine, the choice would be up to the farmer, and all tobacco pays a grading fee. Our concern overall, is that we are not sure our farmers know what they are getting into, and that they are going down this road by themselves. Again the contracts could look attractive this first year or two, but once the program is gone, then the contract is thrown onto the breakfast table and you're told, ''there it is, take it or leave it.'' Suddenly you don't have a program to fall back on then.
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We are really concerned about contracting, we have offered to do some things within our program to avoid the contracting, but to this point it has not been well received by the companies. We will continue to push for farmers being protected. The best protection they have is the program. It is the only protection they have. Our farmers are depending on the program. To have that program we must depend on you. Keep our program in place. And if we can weather this storm and this attack from contracting, we possibly can get through. There is a lot of exciting things coming down the road for tobacco, the nitrosamine issue that would make a cigarette safer, a lot of things going on that could cause us to increase our production, however, for us to be around to do it, we have to have our program. Please help us keep it in place. For this I thank you.
Statement of Steve Pitts
Mr. Chairman, members of the committee, I am Steve Pitts, operator of a diversified crop and beef cattle operation in southeastern Indiana near Milan, IN. Our first generation farming operation consists of 150 acres each of corn, soybeans and hay; 20 acres of wheat; a 15 cow registered Angus herd; and backgrounding of 110 feeder calves from April to October.
Farmers throughout the Nation are suffering low commodity prices, agribusiness consolidation and weather difficulties in several regions of the country. We have encountered 4 difficult years on our farm with weather related problems. Last year we suffered a drought which reduced our harvest by 50 percent. In 1996–98 we suffered extremely wet springs with decreased yields due to late plantings.
Through the safety net of Federal Crop Insurance, government payments and crop diversification our family farm has survived. Can our family farm and thousands of other family farms continue to survive this turbulent and consolidating ag economy? U.S. agricultural policy and anti-trust rulings will determine the outcome.
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The Freedom to Farm Act has benefited our farming operation in several positive ways. We have rotated crops which lowers our production costs (i.e. less insecticides) and allows us to no-till more of our cropping acres. Greater use of no-till farming practices has benefited our farm economically and environmentally. We have diversified our operation by growing and marketing over 150 acres of hay.
The Freedom to Farm Act eliminated production control tools such as set-aside programs. Production controls may have short term price benefits, however, I believe they would have disastrous consequences long term moving more agricultural production to South America and other regions of the world. We must compete with sound economic principles if U.S. agriculture production is to lead the world.
Some areas of the Freedom to Farm Act could be improved. The largest inequity in the Freedom to Farm Act is the Loan Deficiency Payment. This payment is based on actual production reported by the farmer. A producer who has a high yield per acre receives more money than a producer who may have suffered weather related problems and has a lower yield per acre. There is also the difficulty of verifying yields and the possibility of fraudulent claims. I would like to see the following changes to place equity and integrity into the LDP program:
1. Payments should be based on a County Average Yield.
2. Farmers would be paid based on planted acreage.
3. LDP payment rate would be determined by averaging a price over a Marketing Period (i.e. October 1 to March 31).
Congress has assisted the American farmers with AMTA, LDP and disaster monies during current and previous low price periods, however, it has failed us on opening trade with other nations. Congress must help facilitate trade with other nations by:
1. Giving the president Fast Track Authority so foreign countries would invest the time and resources to develop trade agreements. Currently it is easier for these countries to trade with South America and other regions of the world.
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2. Trade sanctions must be lifted to enable access to large segments of the world's population (market). Sanctions only hurt our economy and producers allowing our competitors new market opportunities.
3. Permanent Normal Trade Relations for China. The fourth largest trading partner with great potential for continued growth, China represents a great opportunity for U.S. agriculture. Critics should realize the best hope for a reformed China is through open trade and cultural exchange.
4. Increases to Food Aid and concessional sales should be made. These programs can benefit developing and third world countries while positively impacting market prices in the U.S.
Congress should continue to support and reform crop insurance. Government support of crop insurance has allowed farmers to purchase greater yield and price protection. Crop insurance has saved many farms in southeastern Indiana from financial ruin due to the combination of weather problems and low prices. I am concerned about impropriety in reporting and verification of yields to insurance adjusters who work for the same company as the agents who sell crop insurance. I believe yields should be verified by an agent of USDA or a third party not involved in selling crop insurance.
I am very concerned about consolidation in the agricultural business market. A few large multi-billion dollar corporations are controlling agriculture inputs such as chemicals as well as outputs found on grocery shelves. These companies have integrated agriculture and further squeezed the American farmer. There are companies offering farmers payment if they utilize the company's production inputs, cropping methods and give up control of the commodity. The government should monitor more closely the mergers and consolidation of corporations in agriculture and investigate anti-trust allegations.
The lack of public research through land grant universities has contributed to the consolidation in agriculture. A breakthrough technological advance by one individual company can propel it to dominance and doom its competitors. Public research can make technology available to a larger number of companies and insure a competitive market.
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Farmers can overcome the consolidation in agriculture by uniting to level the playing field between processor and producer. Congress can assist agricultural producers in forming large commodity alliances or cooperatives by enacting a comprehensive Federal marketing and bargaining act. The act should establish procedures for:
1. Defining bargaining units.
2. Accrediting associations to bargain as exclusive agents for all producer-members of the bargaining units.
3. Good faith bargaining between accredited associations, handlers and processors.
4. Establishing minimum requirements and rights in the operation of accredited associations.
5. Resolving bargaining impasses by mediation and arbitration by a joint settlement committee utilizing the principle of final offer selection.
In conclusion, Congress has and should continue to aid the American Farmer through difficult financial times. Freedom to Farm should stay the course and any thoughts of production controls should be quickly dismissed. Congress should work to improve marketing opportunities for American Farmers. The American Farm Family can survive if Congress allows farmers fair bargaining powers and access to global markets.
Statement of Nick Forrest
My name is Nick Forrest. My family operates a small sheep operation in the neighboring community of Oxford, OH. We have been in the livestock business for 25 years raising sheep, cattle and horses. Our family annually markets several hundred lambs and goats to the Muslim community. In addition, I am employed by the largest supermarket chain as a department head where daily; I witness agriculture's impact on the lives of the American consumer.
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First, I would like to thank you for coming to Butler County to hear our concerns and suggested solutions to some of our problems.
INDUSTRY BACKGROUND
International monetary events have had a great effect on the U.S. sheep industry. The wool price is currently at a historic low. Sheep producers are lucky to receive five cents per pound. Many simply choose to discard the wool. This renewable resource is now taking up space in our landfills. The situation is made worse in that producers pay $2.50 or more per head for shearing. This situation is due to many reasons:
The high value of the U.S. dollar makes our products expensive relative to our competitors.
Australia has a tremendous stockpile of wool, which greatly influences the cash market.
Pacific Rim and former USSR nations that have become players in the textile market have experienced a severe financial crisis.
Many of our domestic textile processors are closing or moving operations overseas to countries with lower operating costs. As we lose our domestic processing base, we will have to depend heavily on overseas markets.
The lamb meat industry has also struggled. For the past 4 years, the high U.S. exchange rate has allowed domestic importers to purchase cheap lamb overseas and flood the U.S. market with imported product. Prices are often 40 percent below the cost of domestic products. The importers were buying half again as much product for the same amount of money.
The sheep industry is making a committed effort to increase our competitiveness in the market place. Ohio is the home of Mid States Wool Growers Cooperative. This farmer owned wool warehouse employs state-of-the-art technology to handle, grade and sort wool. This allows for the marketing of a uniform, quality product.
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The sheep and goat industry is in the process of forming an alliance to process and market lamb and goat meat to the diverse ethnic community. This alliance is joined by lamb producer-owned cooperatives that will provide for a uniform, year round supply of lamb.
These two examples of marketing programs indicate that the American sheep industry is working to solve its own problems. The assistance provided to help us attain the section 201 trade restrictions on imported lamb has been invaluable to the industry. Our markets have positively responded to these measures. Industry leaders are working with USDA on a lamb promotion program. In combination, these should help the price of domestic lamb.
INDUSTRY NEEDS
One of the things that would help the wool industry would be a non-recourse marketing loan program with a deficiency payment similar to what the cotton industry now has. It is no secret that we operate in a global economy. Such a program would help us market our products in a competitive manner while providing a safety net. The safety net is important as we deal with changing currency values and economic decisions directed by foreign governments.
The cotton loan program has evolved over several years. Hopefully, we can learn from the cotton program and implement a similar basic loan that would accomplish the same basic principals for wool.
It is important that any loan program that is established must encourage the quality fiber production. Farmers who implement quality assurance programs should be rewarded. We realize that we must improve the quality of our product if we are to regain and maintain competitiveness in the global market.
The National Sheep Industry Improvement Center was established as part of the 1996 farm bill to aid the ailing sheep and goat industries. A major goal of the Sheep Center is to improve the infrastructure of the industry. This will also add to the competitiveness of the domestic industry. A total of $50 million was authorized. Several roadblocks from the Office of Management and Budget have prevented sheep producers from accessing the full funding for this important program. We request that the balance of $30 million be appropriated to fully implement the center to allow them to begin making loans and grants to improve the industry.
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The assistance provided by USDA Wildlife Services has been invaluable. The committee's continued leadership and strong support is vital in the passage of the USDA Wildlife Services program in the fiscal year 2001 appropriations. Loss to predators remains a tremendous burden to sheep producers. This loss is second only to the cost of feedstuffs when determining the cost of lamb production. If the forces that want to reduce or eliminate funding for Wildlife Services are successful, the livestock industry is doomed.
We are certain that a program must be developed for lamb meat. At this time we are uncertain as to what type of program would be most beneficial. Something must be done to alleviate the huge swings in the market. This is especially true, for smaller, family farms like those located in Ohio. Changes in currency values, foreign government agriculture policy and subsidies, and trade regulations have a great effect on my sheep producing neighbors. If we could somehow develop a formula or indexing system that would be implemented to put various currencies on a level playing field for all products.
We hope to have the opportunity to continue a dialog with you, Mr. Chairman, and the members of the committee as our industry works on this issue.
The industry is grateful for the section–201 decision and tariffs that have been put in place. I am concerned about what is going to happen when the 3-year tariff phase-out is complete. I know our lamb is better, and we are making an effort to control our own destiny, but we will still be faced with foreign competition with much lower costs of production.
In closing, the sheep industry stands ready to assist you in any way possible to implement these suggestions. Thank you for coming to Ohio and listening to a family farmer.
Statement of Fred Yoder
Mr. Chairman, members of the committee, my name is Fred Yoder. My family and I grow corn, soybeans, and wheat in Plain City, OH. I am currently President of the Ohio Corn Growers Association and am on the Board of Directors of the National Corn Growers Association.
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Thank you for the opportunity to testify before the committee today. I applaud the committee's efforts in reaching out to growers and others who do not have the luxury of being able to visit Washington, DC for most farm policy discussions.
According to USDA, the projected price of corn for this marketing year will be between $1.75 and $2.15 per bushel. That's down over two dollars from the average price we received for our crop in 1995. That same trend can be seen in nearly every other commodity as well. It's no secret that many growers are struggling in today's agricultural economy.
Lately, it's been popular to pin all of our problems on the Freedom to Farm provisions of the 1996 farm bill. But Freedom to Farm did NOT cause the current economic crisis in agriculture and abandoning it is not the answer. The Nation's corn growers continue to support a market-oriented approach to farm policy—an approach that allows farmers to make the production decisions for their operations and focuses on building demand for corn both in the United States and abroad.
But if Freedom to Farm is going to live up to its potential, Congress must act upon the issues that are supposed to be in place today to work in coordination with the 1996 Act. We need a commitment to research to keep us competitive in the future by unlocking new uses, maximizing production levels and preventing major disease problems. We need affordable, effective crop insurance tools to help us manage the risk inherent in an industry dependent on weather. We need a strong global economy and access to markets around the world. We need a tax system that allows us to keep a reasonable portion of what we own. We need viable, efficient transportation systems to best serve our customers at home and abroad. And because those things are not fully in place, America's farmers find ourselves in a very difficult position today.
Although I understand the committee wanted to hear producer options on how to tweak the farm bill, I feel I would be remiss if I did not remind Congress of the commitments it made in 1996:
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Risk Management. Pass crop insurance reform legislation that increases affordable risk management options for all producers.
Trade. Help build export markets by supporting China's admission into the World Trade Organization and permanent normal trade relations with China, as well as reform of U.S. sanctions policies and further reform of agricultural trade policies in the WTO.
Transportation. Support authorization and funding for needed improvements to the aging lock and dam system in order to help farmers ship their grain more efficiently and cost-effectively.
Ethanol Market Development. Support efforts to increase the use of clean-burning ethanol in reformulated gasoline, a move that could add 20–50 cents to the value of every bushel of corn grown in the United States.
Taxes. Support efforts for a more fair and equitable tax structure including; further capitol gains tax relief, repeal of the Federal estate tax, and immediate full deductibility of healthinsurance premiums.
That said, there are a few things that would make the 1996 farm bill benefits more equally shared among all producers today:
Storage. Support restoration of a storage facility loan program. Also, enact an Orderly Marketing Program to provide short-term storage assistance without encouraging grain stockpiling. All corn would be eligible for the program, which would provide participating farmers with a sliding-scale payment of three cents for each bushel stored for the first two months, two cents per bushel for the third and fourth months, and one cent per bushel for the fifth and sixth months—or a maximum of 12 cents per bushel over 6 months.
Marketing Assistance Loan Program. Oppose any decrease in the corn loan rate. Also, support efforts to improve the calculation for loan deficiency payments (LDPs) by: a) urging USDA to give producers the choice of having their LDPs set in the county in which the corn is grown or the county in which it is marketed; and b) urging USDA to set the posted county price as the average of the two adjusted terminal prices for that county.
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In the process of these hearings, the committee will learn of other policy suggestions that may work in harmony with current law. Alternative voluntary programs such as the Flexible Fallow Program, counter-cyclical program options, and green payments may have merit as enhancements to the FAIR Act. Let me state emphatically that I am not currently endorsing these programs, however, I believe Congress has the resources to thoroughly analyze these concepts to determine their value and their consistency with the FAIR Act's principles. And, I believe Congress should do so in preparation for the coming farm bill discussions.
Again, I'd like to thank the committee for the opportunity to speak today. I wish you luck in your unenviable position in investigating options and setting policies which have a tremendous impact on so many in rural America.
Testimony of Gary Wilson
Thank you for the opportunity to speak to your committee today regarding agriculture policy. I am a beef producer from Muskingum County, in southeastern Ohio. I am also currently serving as president of the Ohio Cattlemen's Association.
We have long believed that market forces should determine the price and value of beef cattle. Federal farm programs that subsidize agriculture through direct payments can distort supply/demand signals to producers, which in turn sends confusing signals that can negatively impact the demand and price of all commodities.
In regard to the issue of Crop/Disaster Insurance
Our members support government programs that assist producers when Mother Nature hits a particular region with drought, flood, blizzard, hurricane or other natural emergency situation. Payments made to producers due to low prices, either through direct payments or insurance programs, should be avoided.
International Trade Continues to be an important issue for all beef producers no matter the size of their operation.
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We strongly support government programs and regulatory actions that expand foreign market access, address unfair international trade barriers and/or provide humanitarian assistance to those less fortunate than ourselves.
The trade agreement that the United States reached last year with China could benefit the entire agriculture community by significantly lowering tariffs on commodities. The agreement also eliminates China's state trading entities, which means U.S. business and industry can deal directly with companies instead of government middlemen. With 200 million middle-class consumers, China represents a vast, mainly untapped market for the bounty produced by America's farmers. Congress will vote this year on permanent normal trade relations (PNTR) for China. A ''yes'' vote is important because it would pave the way for China's entry into the WTO, which in turn provides the U.S. Government strong leverage to ensure China honors its end of the bargain. The deal negotiated with China requires China to make all the concessions. In exchange for the broad benefits of this agreement, the U.S. simply has to extend to China the same trade status that China has held for over 20 years.
Enforcement of trade pacts is of great concern. Support and passage of Carousel Retaliation will give the United States Trade Representative more tools to enforce trade agreements. Carousel will allow the USTR to rotate products on a retaliation list so that all European exporters at some point will bear the burden for Europe's non-compliance with the agreements they have signed.
In the area of Market Regulation/Packer Concentration
The Ohio Cattlemen's Association also supports the critical role of government in ensuring a competitive market through strong oversight. This includes the government's role in taking the necessary enforcement actions when situations involving collusion, anti-trust, price-fixing, etc., unfairly and illegally impact markets.
Our bottom line on government intervention is that it must be sufficient to ensure and protect fairness and competition in the market place without inhibiting producers' ability to take advantage of new marketing opportunities and strategies geared toward capturing a larger share of consumers' spending for food. In short, the government's role should be to ensure that private enterprise in marketing and risk management determine a producer's sustainability and survival.
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We would oppose Federal legislation which would eliminate packer ownership or control of livestock because the legislation would eliminate value based pricing, reduces risk management options and/or eliminates a significant number of buyers of cattle in the United States.
We would support changes to the current marketing system that improves the value discovery process and supports a free market system. Our members do not recommend the limitation of any method of marketing fed cattle. We would encourage individual producers to study all live cattle marketing opportunities available to them and choose those best suited to their individual needs.
In regard to the 1996 Farm Bill
Congress fundamentally changed our Nation's agriculture system nearly 4 years ago when it passed the Federal Agriculture Improvement and Reform Act of 1996, more widely known as Freedom to Farm. During Freedom to Farm deliberations, different ag groups lobbied for what they felt was best for their specific commodity.
We are all aware of past situations where assistance for one commodity sector has adversely impacted another. While we also understand these adverse impacts were unintentional, it highlights the importance to our members that we maintain strong vigilance on farm program debate and development. When proposals are considered that can potentially conflict with the economic viability of beef cattle producers, we will work to protect the interests of cattlemen and women.
Ohio Cattlemen's Association members believe the 1996 farm bill is working to make farm programs more market-oriented by cutting the link between government payments and the command and control actions of USDA. Consequently, the role of government in commodity pricing is diminishing and producers have more choice in marketing decisions.
As you gather input for the next phase of Federal farm programs we will be working to ensure that Federal farm policies continue to support an open marketplace.
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Country-of-Origin Labeling will help preserve the brand equity developed by U.S. beef producers.
Our members strongly support legislative and regulatory action that would rescind the use of USDA quality grades on imported carcasses and on cattle imported for immediate slaughter.
Ohio Cattlemen's Association policy supports mandatory country of origin labeling for all imported beef.
We also strongly support Interstate Shipment of State-Inspected Meat
Our association supports legislation that would allow meat inspected by state departments of agriculture to be shipped across state lines. This would create additional competition in the packing sector and create marketing opportunities for family-owned packing companies who are currently limited to simply marketing in-state.
We also support the creation of a ''Dealer Trust'' to protect the financial stability of cattle producers when the buyers who purchase livestock file bankruptcy. This legislation would create a trust to provide payment to the sellers of cattle if the buyer becomes unable to pay due to bankruptcy or other impediment to payment.
Once again, thank you for the opportunity to share our opinions on those issues relative to your committee's work. We appreciate discussing these important issues that impact all of agriculture. I would be available for any questions your group might have at this time. Thank you.
OTHER ISSUES IMPORTANT TO THE BEEF INDUSTRY AGRICULTURE BUT WITH JURISDICTION IN OTHER COMMITTEES
The Agriculture Committee's leadership on issues affecting agriculture that are considered under the jurisdiction of other committees in the U.S House of Representatives has been much appreciated by U.S. cattle producers. We encourage the committee to continue efforts to seek regulatory relief on issues from taxes to the environment that impose economic hardships on producers while providing minimal public benefit.
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Property Rights. Regulatory agencies continue to test the limits of their authority to regulate and have no real incentive to be sensitive to Constitutional requirements. The result is that landowners must rely on the courts for satisfaction of takings claims. However, pitting individual landowners against the government in court is extremely costly and lengthy, so most landowners find that litigation is not an option they can pursue. The average landowner essentially has no protection at all from overzealous regulators. The NCBA will continue to work with Congress to pass legislation that requires Federal agencies to prepare taking impact assessments prior to taking action; provides litigation relief for landowners; and provides for compensation for property that has been taken for a public purpose.
Taxes. NCBA supports: Repeal of the Death Tax; Repeal of the Alternative Minimum Tax; Reduction in Capital Gains Taxes; 100 percent deductibility of health insurance premiums for the self-employed
Environment. NCBA wants strict oversight on EPA concerning the agencies proposed rule on Total Maximum Daily Loads (TMDL). This rule exceeds the EPA statutory authority and would drive farmers, ranchers and other business into the red by requiring massive investment and major capital intensive interventions, and changes in production practices—all without legal authority and without clear evidence that these actions would improve the environment. Strong oversight and congressional action is required or this issue will end up in a long court battle.
Testimony of Thomas C. Spellmire
Mr. Chairman, Members of the committee, my name is Tom Spellmire. I am a farmer by occupation from the State of Ohio.
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I would like to start by saying thank you to Chairman Combest and members of the House Agriculture Committee for holding these field hearings. I hope you are finding them worthwhile.
This is an opportunity for me to both critique and make suggestions regarding United States Agricultural Policy. The question is what should the profile of the American farmer be in the year 2020? I believe this should be a person who is well educated, has good values, is economically stable and is someone who demonstrates a conservation ethic. With that in mind, I would like to briefly discuss Trade, Risk Management, Freedom to Farm, Ethanol, the IRS Tax Code and Farmland Ownership.
Trade. Should we trade with China? I would answer yes, it is a market that has potential. However, as a farmer I have heard this all before. I have heard how, if only we could open up some new market somewhere someplace, commodity prices would rise and everything would be fine. The lack of a trading agreement with China is no excuse for the lack of an aggressive export program. There are plenty of other countries that we could be exporting to. Commodity prices are very dependent on exports. It is my belief that one way to improve this situation would be to in effect privatize the Export Enhancement Program. Congress appropriated funds for this program to be spent at the Secretary's discretion and for various reasons this has not happened. In my opinion, if this program, or a portion of it, were turned over to the private sector it would actually achieve its objective of increasing exports and raising commodity prices. If Congress is serious about trying to encourage exports, they need to create a structure that counter balances the discretion they have allowed the Secretary of Agriculture.
Risk Management. Crop Insurance is a risk management tool that has done a lot of good but also has the potential to have a major credibility problem. In my opinion, any system that relies on neighbor turning in neighbor as the primary means of detecting fraud, is a program that is not structured correctly. Possibly government programs should be more intertwined. By utilizing accounting procedures, documentation could be cross-checked so that fraud is much less likely. The interesting aspect of crop insurance is that it is a concept that members of Congress understand and are willing to fund. One element that I believe is missing from crop insurance is the recognition that sound conservation practices are utilized as a risk management tool by some producers. Producers should be given credit for incorporating good conservation practices as part of their risk management strategies. The State of Ohio gives out what they call Century Farm Awards as recognition for families that have sustained ownership of their farmland for a century or more. Recipients of that award have cited sound conservation practices as one of the tools they used to achieve that accomplishment. If families that have managed to retain ownership of land for at least a century say they utilized good conservation practices, in effect as a risk management tool, why are sound conservation practices not a major component of risk management programs today?
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Freedom to Farm. This current farm program had great intentions of encouraging farmers to individually re-evaluate their farming operations to make changes that would allow them to decrease their dependence on government payments. One of the reasons this program received general public support was because it had an ending date. This program was designed to infuse capital into farming operations so that they could vertically or horizontally integrate or even diversify to new enterprises that would increase the profitability of the individual enterprises. A great concept, but I would say that I am more dependent on government subsidies now than I was in 1996 when the program first started. The agricultural economy has not shared in the current economic boom and because of this the Market Transition Payments of the Freedom to Farm Act are in effect deficiency payments, not transition payments. I tend to look at the lack of exports and the lack of the desire to promote exports as the deciding factor in this situation. If export enhancement programs were administered by non-political private entities, I believe the program could achieve the objectives Congress had in mind when it created the program. All the major grain export companies are no longer dependent on exports for their economic survival.
Why is it then that agriculture is so dependent on exports? Why don't we have an energy policy that promotes ethanol? This would surely create a domestic market for corn and environmentally it would help clean up the air as well. The petroleum based MTBE has been found to be more of an environmental hazard to water quality than it was a benefit to clean air. Ethanol is safe and effective on all counts.
I mentioned earlier the current economic boom that the other sectors of the economy are enjoying. I bring this up again because I think one reason the general public has been so tolerant of all the additional cash infusions into the agricultural sector in the form of emergency appropriations is because the general public is doing so well economically. I think agricultural policy should utilize programs the general public understands and not programs they will just tolerate because of good economic times. The general public understands the concept of insurance and it is for this reason that crop insurance is able to achieve increases in funding. So, while I may not like the structure of crop insurance and I think it needs to be reformed, I am fully aware that you go after funding for programs that the general public understands. It is for this very same reason that I believe a higher priority should be given to conservation programs. The general public understands the concept of conservation. They understand that conservation gives immediate results as well creates a more sustainable future. They understand that soil and water conservation benefits both agriculture and the general public as well. Using conservation as one of the cornerstones of Agricultural Policy would create a much more sustainable atmosphere in which to operate. I personally would like to be compensated for my conservation practices as the bases for any economic safety net program. In the same way that you go after crop insurance funding because you can, you should go after conservation funding because you can. It has become politically safe.
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Taxes. I think the Committee on Agriculture and the Committee on Ways and Means need to sit down and have a serious discussion on the IRS tax code and its impact on agriculture. The IRS tax code has a major impact on the whole issue of farmland ownership. Why not utilize the tax code to promote conservation? We are in times of budget surpluses and trying to operate under budget caps. Why not use the tax code as a means of increasing the effectiveness of some programs and operate within budgets?
Farmland ownership. For those who know me, they know that I have spent a lot of time and effort on the issue of Farmland Preservation. The reason I have, is that I believe, the current trend of less and less land being owned by the farmer who farms the land in this country is not a good trend and should be reversed. This country could increase employment opportunities in agriculture if we had policies that encourage farmland ownership by the farmer who operates the land. Farmland ownership by farmers promotes stability of food production and good land stewardship.
Again, thank you, for giving me this opportunity.
Statement of Thomas & Stacy Yuhasz
First, we would like to thank the Agriculture Committee for selecting real farmers, like us; to speak about the problems facing America's farming families. We feel honored to be selected for this very important field hearing. Our main goal is keeping our family and our neighbors working by way of farming. Our country elevator is a convenient spot for local farmers to come in and talk about the crisis they are facing. One problem that we all discuss deals with the Freedom to Farm bill of 1996. There is such controversy over the subject that some of us are saying keep the Freedom to Farm bill for all the farmers who support it. Let them continue to receive the advantages that they support. In other words, if you like it, stick with it, if not, let's try something else, but make it voluntary. The farmers that we know who do not support the Freedom to Farm bill wish to implement a Flexible Fallow program mentioned by a Texas farmer at the recent Rally for Rural America. Analysis by the Food & Agriculture Policy Research Institute describes flexible fallow as a program that gives producers the option to voluntarily set aside a portion of their acreage, up to 30 percent, in exchange for higher loan rates on the remaining amount. This program figures to increase farm income because a reduction in planting leads to stronger crop prices. If it ends up that we can't get the farm bill opened, if nothing else is changed, farmers need an increase in established yields that were set by the USDA long ago. The antiquated established yields should be increased by 30 percent using an up-to-date average yield. This should be provided in addition to the current Freedom to Farm bill payments. This would help enable farmers to manage their farms effectively.
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Of great concern to the farmer is the growing number of factory farms. Our experience has been that if one has more of a commodity to sell, one will receive a higher price for that commodity. This puts the small farmer at a distinct disadvantage in obtaining fair market prices. Can these factory farms deliver a high quality product as the small farmer who desires to achieve perfection in their fields and in their milking parlors or the farm family who takes pride in raising their market animals or crops and wishes the next generation to carry on those traditions? We believe the American public is being fooled into thinking that it will not matter. However, it will matter and in time they will realize the mistake and lament the long forgotten family farm.
A third area of concern is for the dairy farmer. We should establish national dairy policy to ensure a farmer's cost of production plus a return on investment. The farmer's that we know say a good starting point would be a $15.50 price support level.
Finally, we feel the Farm Service Agency needs additional money for permanent help in their offices and for services essential to administrative purposes. The employees require additional assistance so they are better able to serve the farmers as their new name indicates. Through an updated farm bill, the Farm Service Agency should be able to provide us stabilization between the consumer's food prices and the farmer's production costs. Without this, we have to ask ourselves, Who's controlling production?'' It will not be government supervising production and it will not be the farmers. Production will be firmly planted in the hands of big agribusiness, because they will be able to set their own prices for the goods they desire. Let's provide a stable agriculture for consumers and farmers. Thank you for taking the time to consider the concerns facing today's farmer and the young people, like our sons, who want to farm in the future.
Statement of Roger Voge
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My wife Rebekah and I own and operate a diversified family grain and cattle feeding farm. Each year we feed out approximately 1000 head of cattle, and farm approximately 500 acres of corn, soybeans, wheat, and hay. I feed out cattle independently. I have left contract hog production.
Position: The 1996 farm bill is a good piece of legislation. It allows farmers to determine for themselves what to produce based on the markets and prices. These market-based policies are sound. The 7-year contracts between producers and the Federal Government should be upheld until the termination date of 2002. I appreciate how the House Agriculture Committee responded to the low commodity prices and drought in this past year with the $9.3 billion in emergency funds. It was a real life-saver for me, personally. However, there are several areas that need improving.
IMPROVEMENT POINTS
Enforce Anti-Trust Laws: The agriculture industry has seen huge numbers of company buy-outs and mergers which have caused lower competition in the market place. When the largest packing plants are also the largest livestock feeders, they have very little need for my cattle. These packing plants can offer take-it-or-leave-it prices, which are designed to squeeze family farmers out of business. This lack of competition hurts my bottom line. I do not want to see cattle production become vertically integrated like the hog and poultry industries. You must watch these mergers and buy-outs to keep agricultural monopolies from squeezing out fair competition. The Justice Department must enforce the Anti-Trust laws if there is to be a future for independent farmers.
Increase World Markets: The promise to increasing world markets is one part of the 1996 farm bill which hasn't happened. World Markets can be increased this way:
Normalize Trade Relations with China. If the U.S. is not allowed to trade with China, other countries will fill their agricultural market need. The U.S. will miss out on this huge trading opportunity.
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Implement fast-track legislation: So that when U.S. negotiators reach a trade agreement, it can be implemented right away instead of being hashed out in Congress and maybe lost to a faster supplier.
Lift Trade Sanctions. If the U.S. places trade sanctions or embargoes on another country their demand for farm products is quickly filled by competing countries.
An embargoed country views the U.S. as an unreliable source for agricultural products, so that even when sanctions are lifted, they don't want to trade with the US, for fear it will happen again. It takes years to regain markets lost to embargoes or trade sanctions. This practice must stop.
Reduce Regulation: Increasing regulations on the family farmer will put him out of business faster than any market force. Every regulation the government places on farmers comes with a price tag, whether it's requiring farmers to buy permits and licenses to run their farms or burying them in paperwork. The huge agribusiness companies can afford to absorb thousands of dollars of regulation costs, but the same cost will put the family farm out of business. You must reduce regulation.
Improve Risk Management Tools: Broaden crop insurance and revenue insurance coverage and lower the premiums. Crop insurance is one of our best tools for reducing our risk. You must encourage more farmers to buy crop insurance or revenue insurance by making it more affordable. I would like to see revenue insurance broadened to cover livestock as well.
Reform Tax Codes: Reinstate Income Averaging. Because farm profits are very uneven year to year: one year may be very profitable, the next year may show a loss. Many farmers count on the good years to help them ride out a poor year. It does not make sense to give the farmer aid in a poor year just to take it back in the next good year through taxes. It makes more sense to allow him to average his income for tax purposes
Increase Agriculture Research: Quality research is extremely important to help us discover better ways to farm, whether this is better hybrid seeds, GMOs, or better methods of farming and managing land and resources. Also, we must educate Americans about the benefits of this research: that we are looking for more efficient ways to run farms, creating seeds that grow healthier plants and more nutritious food. Explain the sound science to people, so that they can overcome their fear of GMOs.
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Summary: The current 1996 farm bill addresses some of the problems facing agriculture. However, you must tackle the concerns I have explained. This will help solve the problems of the family farm for the long term. We have seen that foreign control of the oil supply has raised the price of fuels and has made us beggars to OPEC. Surely we don't want to turn over control of our food supply to foreign suppliers. I am afraid this will happen if the family farm is allowed to disappear. I am afraid that agribusiness will take over for a while. As long as it's profitable for them. And my worst fear is that if agriculture becomes unprofitable for large agribusiness, they will simply shut down. By that time family farms will be a thing of the past, so that we will have to resort to importing our food. We do not want to become beggars to the world when, God forbid, the next Dust Bowl or war comes.
Please consider my recommendations. Thank you for your time and attention to these important problems.
Statement of Joe Steiner
My name is Joe Steiner and I farm in Warren County where I raise corn, soybeans, wheat and hay. I am a member of the Ohio Soybean Association Board of Trustees where I serve as vice-president-producer education and communications. Thank you for the opportunity to express my views on current Agriculture Policy.
U.S. soybean producers know that profitability depends on enhancing market demand and increasing global competitiveness. We have historically looked to the marketplace rather than the Federal Government as our source of income. This orientation is underscored by our dependence on exports—nearly half of each year's production of soybeans, soybean meal and soybean oil is sold abroad.
ASA has consistently represented these interests in its positions on international trade and domestic farm policy in the 1990's. During the Uruguay Round negotiations, we supported eliminating all import tariffs and export subsidies to create a Level Playing Field for oilseeds and oilseed products. In the debate on the FAIR Act, ASA endorsed Freedom to Farm once it was made clear that soybeans would be treated equitably with other crops.
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ASA continues to strongly support the FAIR Act. Unrestricted planting flexibility enables producers to optimize crop selection and reduce operating costs, maximizing their profitability. Combined with the marketing loan program, this approach is highly consistent with orientation toward domestic and foreign markets.
It was recognized by Congressional supporters that Freedom to Farm would make U.S. agriculture more dependent on the marketplace, requiring greater access to foreign markets. It was also recognized that decreasing dependence on government support would require less interference in production agriculture, and more effective risk management tools.
Accordingly, Congress and the Administration made a number of commitments at the time to policies and programs that would help make the FAIR Act work. The list includes:
Trade policies that reflect the importance of foreign markets and competitiveness to U.S. agriculture;
Elimination of unilateral economic sanctions;
Aggressive use of export assistance and promotion programs;
Increased humanitarian food aid programming;
Reform of the crop insurance program and development of new risk management tools;
Increased funding for agricultural research;
Relief for farm families in the tax code;
Reform of regulatory burdens on agriculture.
More than 3 years after the FAIR Act was enacted, few of these commitments have been honored:
The effort to pass Trade Negotiating Authority, formerly referred to as fast track, was first derailed, then defeated.
The agreement on China's accession to the WTO was nearly lost, and is now hostage to politics surrounding the pending vote on China PNTR.
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Legislation to repeal existing sanctions on agricultural and medical products was unceremoniously torn out of the fiscal year 2000 agriculture appropriations bill last year;
Funds authorized for the Export Enhancement Program continue to be unused, either for EEP or for other export assistance and promotion programs;
The funding source for the Foreign Market Development (Cooperator) program was transferred from appropriations to the CCC, but no minimum funding level has been authorized;
Cuts in funding for P.L. 480 continue to be proposed and approved;
A crop insurance reform bill has finally been completed, but the number of producers using the program will not increase substantially; FARRM accounts were included in last year's tax bill, but it was vetoed; Funds were provided for the $120 million Agricultural Research Initiative, but reductions continue to be proposed in the ARS budget;
Progress was made in restoring income averaging as a means of evening out taxes, but estate tax laws continue to hurt agricultural producers;
The regulatory environment for agriculture has deteriorated significantly since 1996.
Another issue that only began to emerge in 1996 is the erosion in U.S. agricultural exports caused by failure to develop a workable process to address science-based regulatory decisions on biotechnology-derived crops.
The limited progress made on all of the aforementioned commitments meant there were no new sources of demand or protection against losses when supplies rose and prices fell in 1998 and 1999. Today, prospects for record soybean plantings on over 75 million acres suggest a return to historic low prices and soybean producer income with this Fall's harvest.
ASA believes the best response to the continuing crisis in the U.S. farm economy is for the Administration and Congress to address and complete the unfinished agenda of policies and programs they agreed to undertake back in 1996. We do not support going back to the old farm program, and oppose making set-asides or other supply management programs an eligibility requirement for any soybean benefit. We also oppose establishing a reserve for soybeans, increasing acreage in the Conservation Reserve Program for supply control purposes, or using environmental objectives to justify establishing an acreage reduction or set-aside program in the form of a short-term CRP.
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ASA supports examining income safety net concepts that would provide increased support when prices or revenue decline. However, there are many unanswered questions and issues about the effects and implications of such counter-cyclical income support proposals. Both the Supplemental Income Program advanced by Representative Stenholm last year and the Administration's proposed Income Assistance Program base payments to producers on a percentage of the difference in revenue for a crop between the current year and the Olympic average during the previous 5 years. This approach would provide a greater degree of protection in years following a period of relatively high prices and revenues, such as 1998, 1999 or even 2000. However, the revenue base will decline sharply as the lower prices for these years are included in the five-year average.
A further major problem with the Administration's proposal is that it subjects payments to the AMTA cap of $40,000 per producer. This limitation would effectively means-test a program that is intended to compensate producers for economic loss, based on a farmer's actual production, and preclude participation by growers representing a substantial percentage of U.S. production. Any income support program must be equitable with regard to the size of a producer's operation.
ASA will work with Congress in examining any income support proposals. A guiding principle we will insist upon is that soybeans be treated equitably in any program.
ASA is very interested in developing a farm program that would provide additional income support to producers who voluntarily implement appropriate conservation practices. We believe that pursuing the public policy goals of protecting the environment while supporting farm income through sensible, voluntary measures is a concept that farm groups, environmental groups, and the Congress should further explore. In this regard, ASA has taken a first step by establishing a Conservation and Income Support Program Task Force, which will be exploring alternative approaches for developing this concept over the coming year.
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As we move forward to determine how to provide income in the next generation of farm programs, it is critical that the relationship between our domestic farm programs and U.S. obligations under the Uruguay Round Agreement and the next WTO negotiations be fully considered. In the Uruguay Round, the U.S. and other countries agreed to cap and reduce the amount of assistance provided under programs that distort production and trade. These so-called amber box programs include marketing loan gains and LDPs, input subsidies, and direct payments linked to production. Unless provided through green box programs that are exempt from reduction, including AMTA-type or conservation stewardship payments, future income support will likely be subject to discipline. The expectation of further reductions in amber box outlays in the next WTO round makes attention to this relationship even more important.
With commodity prices continuing near record lows and with many issues yet to be resolved on counter-cyclical proposals, ASA supports providing a supplemental AMTA
payment to offset continuing low crop prices and depressed farm income. For the same reason, ASA also supports another economic loss payment to oilseed producers this year. Soybeans and other oilseeds are not part of the production base and formula for AMTA payments. We appreciate the fact that Congress recognized this situation last year by providing $475 million in payments to producers of 1999 crop oilseeds. Faced with continuing low prices for the 2000 soybean crop, we ask that our producers be treated equitably. In the event Congress decides to increase the amount of any supplemental AMTA payment over last year's level, ASA supports a proportionate increase in the oilseed payment.
Another issue of critical importance to soybean producers is the marketing loan program. With U.S. and world oilseed prices well below loan level for the past 2 years, this program has been essential in providing an income safety net as well as keeping our products competitive in foreign markets.
Concerns have been expressed that the soybean loan rate of $5.26 per bushel does not reflect the historical price relationship with the corn loan rate of $1.89 per bushel, and that the disparity is increasing production of soybeans at the expense of corn and other crops. ASA does not believe this is the case, and would offer the following evidence:
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Since 1995, the area planted to soybeans has increased by 11.5 million acres. Almost 10 million acres of this expansion occurred in 1996, 1997, and 1998, when market prices were above the loan rate. This increase in soybean acres was driven by: (a) the production flexibility offered to farmers under the 1996 FAIR Act; (b) market returns; and (c) the interest of farmers in major corn/soy regions to move toward a more sustainable 50/50 corn and soybean rotation.
While the area planted to soybeans in 1999 did increase by 2.4 percent over the 1998 area, most of this increase can be attributed to: (a) continued movement by farmers to establish a 50/50 corn/soy rotation; (b) new soybean crushing plants operating in the western soybean belt; and (c) research that has produced soybean varieties that are better adapted to northern and western climates and conditions. Almost 80 percent of the 1999 increase in soybean acres occurred in Iowa, Nebraska, and South Dakota, where three new soybean processing plants have recently been built, and where research has developed higher yielding soybean varieties that are better suited to western corn belt conditions.
Tightness of available credit also may have played a role in causing some farmers to plant soybeans rather than other crops, even though total returns may have indicated otherwise. Many agricultural lenders reduced the size of production loans to farmers in 1999 as overall commodity prices fell. Faced with reduced loans but with the same (or more) land to farm, some producers may have opted to plant slightly more soybeans than other crops because the variable costs of production for soybeans are lower than similar costs for corn, wheat, and cotton. According to the most recent USDA data, average per-acre operating costs were $79.32 for soybeans, $91.33 for wheat, $154.31 for corn, and $243.83 for cotton. Thus, some farmers' planting decisions were influenced more by the tightness of agricultural credit than by relative commodity loan rates or prices.
If the 1999 soybean loan rate were out of alignment with the corn loan rate, one would expect to see more land devoted to soybeans than corn in major corn/soybean producing states. However, just the opposite is true. In 1999, the area devoted to corn production exceeded the area devoted to soybean production by 1.4 million acres in Iowa, 100,000 acres in Indiana, 100,000 acres in Minnesota, and 4.3 million acres in Nebraska. In Illinois and South Dakota, the amount of land devoted to corn and soybean production in 1999 was equal. Additionally, 1999 corn area actually expanded in key corn and soybean producing states, including Illinois and Indiana.
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The prospect of receiving a higher marketing loan gain or LDP may have been a small factor in the 1.5 million acre increase in soybean plantings in 1999, and may be again if we see the additional 1.5 million acre expansion forecast by USDA for 2000. The solution, however, is not to reduce the soybean loan and safety net. The solution is to enhance demand through greater trade expansion, export promotion, food aid, biodiesel use, reform of unilateral U.S. economic sanctions, and other steps that will drive prices above the loan rate. ASA very much appreciated Secretary Glickman's decision to not use his authority to lower this year's loan rate to $5.13 per bushel. Whenever Congress considers changes in the marketing loan program, ASA will support making the current $5.26 level a statutory minimum rather than a cap.
With regard to administration of the marketing loan program, ASA believes that many of the questions and concerns raised in 1998 were resolved through adjustments in how FAS calculates Posted County Prices and Loan Repayment Rates. As a result, very few complaints were received on administration of the 1999 loan program. ASA continues to support maintaining the existing system, basing PCPs and repayment rates on terminal markets rather than changing to a national LDP program.
As with any new program, there have been questions about how the criteria for eligibility and the amount of oilseed payments were determined. In the FY–2000 agriculture appropriations bill, Congress provided that only producers who experienced low oilseed prices on 1999 crop oilseeds were to be eligible for payments. Congress further provided that payments would be based on the higher of 1997 or 1998 certified acreage planted to an oilseed, and the higher of a producer's proven yield in 1997 or 1998 or the county average yield. However, since the purpose of the program was to compensate producers of 1999 crops, first time producers of an oilseed were allowed to use their 1999 production data.
ASA supported using historical data rather than basing payments on actual production because we did not want the program to provide an incentive to increase soybean production in future years. If payments were based on 1999 production, farmers would factor expectation of another payment into their planting decisions. ASA did not want encourage producers to plant for the program instead of the market.
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Another concern is that basing payments on actual production would be extremely trade-distorting, and would raise strong objections in the WTO. The U.S. is already defending several programs, including supplemental AMTAs, marketing loans, and export credits, against charges of reneging on our commitments in the Uruguay Round. Adding a new program that clearly distorts production and trade would encourage our competitors to follow suit.
ASA appreciates the concerns of producers who were ineligible for payments because, while they grew soybeans in 1997 or 1998, they did not or may not have been able to plant soybeans last year. However, we do not believe the program was unfairly designed or administered, and we will again support targeting payments to producers experiencing low prices for the 2000 crop based on historical rather than actual production data. ASA supports updating the historical years used for determining the oilseed payment to include the 1998 and 1999 crops.
Statement of Floyd C. Geeding
Thank you and your committee for the invitation to discuss the current Agriculture Policy. There is not one person here today that production agriculture doesn't affect. We all must have food to survive no matter what our society or geographic location may be in the world. Food is a stable of life, as the struggle to obtain it can be viewed on the nightly news around the world.
I ask the question: Is it the responsibility of the American Farmer to feed the World? What would happen if we said no and only took care of our own needs? Would the President or Congress invoke the Taft Hartley law? We all know ''it just don't work that way.''
I feel that American farmers take great pride in producing food for the world. It appears that our government wants an open and free market for this food, yet in the past this same government has viewed our production as a tool to influence other countries. In order to control these countries, grain was supplied or withheld, and the US farmer found himself the pawn left to deal with the effects of these policies.
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The Freedom to Farm Act at its inception appeared to be a very good bill, and a great way to get the government out of the production of food. Supply and demand has to work, and I feel will still work, if we, the government, don't interfere in this process. If our government programs regulate agricultural production, then please tell me what will keep South America and other countries from bulldozing more land for production?
At the present time the Loan Deficiency Payments program (LDP) is giving to the rich and taking away from the poor. I'm not referring to the financial condition of the farmer, but rather how the LDP program benefits are paid. The farmer that received rain and had a 150-bushel per acre corn crop benefited to a greater extent than the farmer that received little or no rain and had a 50-bushel per acre corn crop. You can understand that with 100 bushels per acre less yield, these farmers received an LDP payment of a lot less. (Example: 150 bpa x .30 cent LDP payment = $45.00 per acre payment. 50 bpa x .30 cent LDP payment = $15.00 per acre payment. $30.00 less per acre payment.) Both farmers started the season with the same expectations. However, because of an act of God, the farmer who received less yield due to inadequate rainfall, and consequently a lower gross income, received a lower payment with which to meet his obligations.
The same scenario is true for the Oilseed Program Payment that concluded its sign-up yesterday (March 31, 2000). The producer could have accepted the county average or provided documentation of their proven yield for 1997 or 1998. Here again, the program rewards those who had good weather. Ladies and Gentlemen of the committee; you can't legislate equality based on yield anymore than we can legislate the weather.
A solution to the above mentioned problems would be to enhance the national crop insurance program, in lieu of the current programs, to cover disasters. National, state and local committees to determine losses would regulate this insurance. A general coverage by national regulations will have to address the details of each commodity, from the rice farmer in Texas to the corn farmer in Ohio, with each specific to the region grown. The basic actuary charts are already established. I'm sure it would be very cost effective compared to the present programs. This same type of insurance could be adapted to include the livestock farmer.
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Increasing EPA restrictions placed on American companies, while beneficial, greatly increase our production costs. Yet these same companies are able to sell their products in other countries at about 50 percent of the price we currently pay. These countries in turn export to the same markets to which our products are exported. The same is true for the European Common Market. They subsidize the value of their grain in order to compete with the US in the global market.
Many of my fellow farmers and I have worked our entire lives to gain financial security with our land. Today, we face the Estate Tax problem as do other business owners. Also the removal of the Investment Tax Credit program (ITC) inhibits new purchases of equipment. Caution should be exercised concerning the Genetically Modified Organisms (GMO) issue because there is not adequate research at this time to justify that any harm is done. These problems are paramount to the next generation of farmers. Any and all solutions must insure their future and the generations to follow.
What do I suggest? I have pondered this question for several days, talked to many of my fellow farmers in Preble County, and have come to the conclusion that there is no answer today that will solve the problem. BUT: I know we have to preserve the American Farmer or food will be increasing in price. Why?, Because no other farmer in the world can produce food as efficiently as we can in America.
No, I haven't solved the current farm problem. I trust that I have explained in layman terms some of the problems we, as US farmers, face. I do feel with less government involvement in the supply of food produced in America, money now spent to subsidize farmers would yield a seven times seventy increase in export sales to world countries.
Yes, I'm very proud to say I'm a farmer, but I feel great sadness for the future of the next generation of farmers; will they be corporate workers or will we, the Government, still allow for free enterprise.
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Mr. Chairman, thank you again for allowing me to express my thoughts, I trust that I have given you more insight to this American problem and I would be honored to answer your questions.
Statement of Dana Coots
I'm Dana Coots, and I farm about 1,050 acres of land in southern Indiana. I am one of a few full-time farmers left in Clark County. Together with my son, Tim, we raise corn, soybeans, wheat, and hay. We also finish feeder cattle. Our community is located directly across the Ohio River from Louisville, Kentucky. I appreciate the chance to talk to you about agriculture and offer my ideas for improving our future.
Freedom to Farm is not working. Planting fencerow to fencerow is one of the reasons we're in the shape we're in now. We need to cut the supply to increase prices. Do we really have to worry about other countries producing more if we decide to go back to supply controls? Has foreign trade changed so much that we can't go back to a set-aside program to help with supplies? What about new markets, or a new way of marketing our grain.
There is no other industry in America that cannot pass its costs of production on to consumers. Agriculture is in a league of its own. Whoever heard of a business that charges less and less for its product, when costs of production keep going up? And with today's market, farmers in this country can't compete with foreign trade because of high input costs and regulations that we have to put up with.
The LDP payments were not designed to provide a safety net consistently across the country. During drought years or on marginal land when yields are low, then LDP payments are low too. If a producer makes top yields, then that producer will receive the most payments. This does not seem fair because the farmer trying to produce crops during poor weather or other conditions is the one that needs help the most. If we are to rely on traditional crop insurance for help, then it needs to have more coverage for the amount of premium paid.
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We need a REAL safety net that is based more on something like the county average yield something that can provide help equally for all farmers.
The question is, what can we do to improve farm programs? Today there are a lot of farm programs that cost a lot to administer. The programs are confusing and complicated, and do not treat all farmers equally. One way to solve the problem is to develop one simple government insurance-type program that could be used consistently across the board, with low costs that would serve all producers.
This would be an affordable insurance policy that would guarantee the income from the crop (or the land). There should be controls to be sure that folks are using good farming practices and taking care of the land. The same formula for payment from the insurance policy could be used across the board, and all producers would qualify for payment. This type of a program could take the place of existing disaster programs on all crops (including specialty crops) and price support programs. It should be available for livestock producers in addition to crop farmers. Livestock producers should have comparable programs that would help them, just like to grain farmers do.
To help make this type of program really work, then we would need a set aside program or other controls or marketing strategy to improve the market. A set aside program related to application of conservation systems on land, that provides direct payments to producers for using practices like conservation buffers and other good land practices. A program like the program that USDA is proposing that gives farmers annual payments for applying good land conservation practices is a step in the right direction for this. It is time that the American people start paying their share of the cost of improving water quality and the environment.
I have been a district supervisor for the Clark County Soil and Water Conservation District for over 15 years. In that time, we have seen pressure on our land and water increasing due to agriculture, urban, industry and other land uses. At the same time the financial and technical assistance available from USDA has been decreasing. We need to increase, not decrease this assistance.
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Farmland preservation and water quality are very important issues in my community at this time.
In the past, agriculture and the family farm have been the most important industry, really the backbone of this country. It's a sad but true statement that today it has changed into an industry that isn't even considered a necessity. We need to make sure that the average American knows how important agriculture is to their everyday life.
If farmers could realize a decent income, then maybe we wouldn't have to sell our land for development. We could help preserve farmland, and provide a good future for young farmers. My son could look forward to making a living from the land if that's what he wants to do.
Again, thank you for this chance to speak and good luck with this important effort to help agriculture.
Statement of Jim Mahan
Mr. Chairman, Congressman Fletcher, and distinguished members of the House Agriculture Commmittee, thank you for allowing me this opportunity to visit with you. More importantly, thank you for all you have done and are doing for Agriculture, such as Social Security reform. I don't know any farmers who retire at the age of 65! Also the TLAP (Tobacco Loss Assistance Payment) money is very important to us as we start a new crop year. I believe this is the first time tobacco has been included in disaster relief. Congressman Fletcher, I thank you and others in working so hard on this. I hope it continues as quotas and markets are cut.
I am a fifth generation farmer along with my two sons who also work full time on the family farm in Central Kentucky. Our lives are totally centered around tobacco, horses, cattle, corn, beans, wheat and a lot of hay. Our 17 month old grandson could say John Deere before he could say Grandma.
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High quality Burley Tobacco, Bourbon, and Thoroughbred Horses have long been the mainstay of my State and farming gets a little nerve racking when each of the 3 have become so politically incorrect. The mention of going back to producing industrial Hemp really makes people nervous. I don't need to remind you of our plight of low prices and high imput costs which we cannot pass on, not to mention the drought for the past 2 years. I'm sure you've heard many times all the problems I could list, including farmers going broke, but let me spend a moment on some solutions.
1. Allow me to sell on the World Markets. When you punish Pakistan with sanctions, you really are punishing the American Farmer. Iran, Lybia, Sudan, China and the list goes on and on. China will eat. All these folks will get their food somewhere else and I'm left out. So I would urge you to eliminate sanctions and increase U.S. producer access to international markets or at least continue market loss Assistance Payments. Maybe we could get rid of some of the red tape of Treasury Department licenses and allow USDA Exports credits. I don't want to go back to supply management, however I remind you that Freedom to Farm included opening up markets.
2. It's my opinion that fast-track authority for the President would help agriculture.
3. Farm labor continues to be a problem, and I applaud you in your efforts in H–2A reform. I only mention this to say it would be impossible for me to farm without migrant workers.
4. The further I go the less I understand about crop insurance, however if changes are made in the program, I hope Kentucky products are included and also develop a plan which includes livestock. 5. From a very personal and selfish standpoint, I beg you to allow my two sons to be able to keep our family farm by eliminating estate and capital gains taxes. (I know you are trying). 6. Concerning tobacco, I urge you to protect the tobacco program and oppose any increase in the excise tax on tobacco and to ban the sale of contraband (untaxed ) cigarettes. In addition, I agree with the Supreme Court that the FDA should not regulate tobacco. I hope you agree.
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7. I feel all farmers want and need clean air and water, however some regulations have lost sight of common sense and certainly make it tough to farm. I don't want to worry about whether my tractor tire is running over an endangered insect.
8. On a less urgent note, I want to thank you for recent FSA programs although timing is so important. Most of us in my area had already cleaned out dried up ponds before that program started and just recently the seeding practice was too late for normal seeding in my area. In farming, timing is ever
In closing, let me say that I know I'll be more comfortable getting home , putting on my jeans and boots knowing that you've heard my problems.I trust you'll continue to work for the American Farmer.
Statement of Wayne Kilpatrick
Thank you for this opportunity to address this august body and provide my modest input on such an important topic as the future of Agriculture and Federal Farm Programs.
The agricultural industry will face many challenges in the next 10 to 15 years that will undoubtedly change the industry at its very roots. What action Congress takes in the next 2 years will not only determine if family farmers such as myself will still be involved in production agriculture but if domestic food supply will be a viable industry in the United States.
Quickly, I'll briefly outline my farming operation and involvement in the Federal Farm Programs. My brother and I currently farm over 1900 acres of corn, wheat, soybeans, hay and pasture. We manage a modest beef cow and sheep flock and recently went out of the feeder pig business. I have been elected to my second term to the Farm Service Agency's County Committee where I represent over 1000 farmers. I participate in many of the farm programs and I am currently a borrower in the Farm Loan Programs of the FSA Office.
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My experiences in the Federal Farm Programs as both a participant and an administrator have led me to several truths, as I perceive them.
In regards to Production Adjustment Programs the Freedom to Farm program, as a utopian ideal, is what should drive programs in the future. However, freedom to farm cannot be obtained while the farm programs are designed to provide low cost food for the American Consumer. It is clear that Government intervention in agriculture is needed for the sake of the Nation's economy. Especially when one considers that low food costs drive the rest of the economy. It is equally clear; if there will continue to be a low cost food policy, that farming will have to be subsidized to the extent that we can maintain farming's viability. In most of Ohio, the loss of farmland dramatically highlights our inability to compete with non-farm sectors for the purchase of cropland. This can only be addressed in the long term by making farming more profitable so we are more competitive with non-farm interests.
Market driven farm programs can be effective; however, I encourage the decoupling of the AMTA contract with the Loan Deficiency Program payments. Non-participating farms must be planted to soybeans, instead of corn because of the LDP benefits. Thus, I have been forced to change my farming operation because of the farm program. If I could participate in the LDP with corn grown on a non-participating AMTA farm I would truly be farming based on the market. I recognize that the Government has to be considered as part of the market place.
Without falling into the traps once set by the idling or set-aside programs, production adjustment programs must be driven by commodity target prices that are higher than the production costs. Domestic production of food and fiber is a national security issue as well as an economic well being issue. It is to the advantage of the Nation to keep the agriculture sectors strong.
Recently at a public meeting, refreshments were served and many comments were made about the wonderful delivery system we enjoy in the U.S. that allows for citrus and other fruits to be readily available at any time of the year. However, most did not consider that the delivery system now enabled us to obtain food that was fertilized with human waste and sprayed with DDT, and picked by laborers that received a month's wages that I am forced to pay my employees each hour. This highlights a primary issue that society will soon need to address. Is the American consumer ready to accept our food being produced in countries where our health and environmental standards are not accepted or practiced?
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Recent weather conditions over the last 2 years have made it essential for our county to be approved as disaster areas. The disaster legislation that allocates a fixed amount of funds for the disaster and then factors program benefits when requests exceed the funds allocated does not adequately respond to the disaster. The Livestock Assistance Program commonly called LAP is a great example of the shortcomings of this type of program funding. The Livestock Assistance Program was designed to provide funding for producers to purchase feed for livestock as winter feed stocks were fed during the summer because of drought conditions. After the factor was applied, the participants in the program received only 23 percent of the loss. The payments although welcome, came a month after they were promised and only a fraction of what was expected. One reason the payments were factored so drastically was additional disaster areas were added after the 190 million dollars were allocated. The program allocation was not adjusted to reflect the additional producers. The sign-up period was extended three times to ensure the new areas were able to enroll and also to allow sufficient time for USDA to calculate the factor. What was left was too little too late.
In the future, disaster programs should be written so that producers can receive funds at, or soon after, sign-up. Funds could be allocated after the need was established not prior to.
I strongly support recent legislation that proposes to change the Non-insured Acreage Program, called NAP. This change would provide a more secure program for crops that are not currently covered under the crop insurance program and will offset Governmental costs by requiring producers to pay for the program coverage.
The upcoming facility loan program is a welcome program and is an example of a farmer friendly program that is also taxpayer friendly. The low interest program ensures that funds paid out are repaid at the same rate the Government borrows those funds.
If I may, the Facility Loan Program should be expanded to cover all commodities. This is especially true if the program is designed to give producers the opportunity to better market their agricultural commodities.
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Hay producers would greatly benefit from a program that provides low interest funds for facilities that would make hay more marketable and would be an important economic development tool for the Appalachian region. A facility for fruits and vegetables would also make those crops more marketable for the producers. A Facility Loan Program should not only benefit grain producers, but also provide better marketing tools to all agricultural producers.
At no net cost, the Government could help all the Ag sectors compete and yet not significantly add to the cost of farm programs.
Even though, I believe that crop insurance is one piece of the puzzle to solve the woes of the agricultural sector, the current system is not working. If the current program were effective, disaster legislation would not be needed. Throwing more money to encourage more participation is evidence that the program does not have the support of the very people that it is supposed to protect.
I suggest that crop insurance be brought back under the auspices of the Farm Service Agency Office. It has been proven that less fraud occurs when USDA has direct oversight of the Crop Insurance Program. Crop insurance should cover more crops and at levels that adequately reflect the risk the farmer excepts.
In closing I would like to give my support to the Farm Service Agency's farmer elected County Committee Structure. As an elected County Committee person, it is important for me to strongly encourage the retention and strengthening of the Farm Service Agency's County Committee system.
Recently, the Secretary of Agriculture has indicated the farmer elected committee system was to blame for the Consent Decree judgement in connection with the black farmer's lawsuit. The Secretary has stated on numerous occasions that the County Committee's are not Federal Employees and do not answer to him and are to blame for the bulk of the 19,500 claims of discrimination leveled against the agency.
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In fact, only 3.5 percent of the claims can be attributed to the programs that are overseen by the farmer elected County Committee system. According to my calculation that represents only 683 of the total cases. The Secretary has stated that making the Farm Service Agency staff true Federal Employees and thereby eliminating the farmer elected County Committee system, is the answer to the discrimination problem in USDA. The facts scream that this thinking is flawed. The facts show that the County Committee system works well and is much more responsive than when Federal Employees do not have local oversight. It also shows that too many of the decisions within USDA have more to do with politics and less to do with what is best for agriculture or farmers.
Thank you once again for allowing me this opportunity to discuss my ideas with you.
Statement of Jeannine Wiley
I appreciate the opportunity to testify at this hearing. I hope that through listening to my and other farmers' ideas, you can help us to have a better future for farming in this country.
My name is Jeannine Wiley, and my husband Edward and I are farmers in southern Indiana. I wish I could say that we are full-time farmers, but for the time being my husband has to also work off the farm for additional income. We farm about 6–700 acres, with no outside help. We raise corn, soybeans, wheat, hay and livestock.
Besides my husband, my second love is raising hogs from farrow to finish. But with prices being below our break-even point for 2 years, we were forced to get rid of our hogs. One of the saddest days of my life was when I had to sell our sows on September 26, 1999. At this time, there is no good safety net for livestock farmers, but there should be. There needs to be more of a check and balance system on buyers of our products. And for example, when we are at a break-even point selling our hogs, why is pork still so high for the consumer in the grocery store? Someone should be accountable for seeing that everyone gets their fair share in this global marketplace.
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We are the only industry that cannot price our product based on what we need to make a profit. We have to sell our product for whatever they will give us for it. We are at the mercy of livestock and grain buyers.
Another thing we think is unfair is how we can be penalized for what another producer has done before we take over new ground. For instance, when we rented a new farm last year, we were not able to take advantage of the LDP payments for corn, because the previous renter had not participated in the USDA corn program and had not established a corn base on the land. If the government is going to help farmers, it should help ALL the farmers on ALL land, regardless of past history of the land and its participation in previous programs. This is especially important to small farmers like us who can only survive by renting land in addition to farming our own.
I read recently where it costs a small to mid-size farmer more to produce the same crop than it does for a large or corporate size producer in this country. And on top of that, the large farmers get a lot more money from the government. This is one reason why the small family farm is becoming extinct in this country—maybe we should be put on the endangered species list, then we might get some protection.
At the current time, we take care of the cropland for 15 different landlords. Although right now we are happy to receive government assistance from the current farm programs, it is a nightmare just keeping our landlords informed and seeing that everybody gets their fair share of the pie. We would just as soon not have to participate in government programs to survive. We would much rather get a fair price for our product and be able to farm our land the best way we know how, and not worry about government programs. The Freedom to Farm Act is fine, but the freedom to go bankrupt is not. We need a good market for our product, and we need your help to see that we have a good market.
One type of government assistance that we DO believe is important is more help with conservation on our land. Without good soil productivity and land to farm, our future in farming is doomed. As they say, they aren't making any more ground, and they aren't making clean water. If we don't take care of our natural resources that we cannot reproduce, then we are doomed for the future and also for our daughter's future. Our concern for taking care of the land is not only from agriculture use, it is also because of seeing so much land that is being developed into subdivisions.
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I've read what the USDA has proposed for the new Conservation Security Program, and I agree that we should be paid for practicing good land stewardship. We have always tried to take good care of the land we farm, and it isn't always easy or cheap. We need all the financial and technical help we can get to do our part to keep water clean and soil productive.
In closing, I would like to thank you for the opportunity to speak for ourselves and for agriculture. I know there are no easy solutions to this crisis that we all face in agriculture today. But hopefully, by working with farmers and ranchers across the country we can come up with solutions to get us through to a brighter day—so that we and our children can have a future in farming and continue to do our part for the future of this country.