SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOC
REVIEW OF FEDERAL FARM POLICY
MONDAY, MAY 1, 2000
House of Representatives,
Committee on Agriculture,
Woodland, CA.
The committee met, pursuant to call, at 8:30 a.m., Heidrick Agriculture History Center, Woodland, CA, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Pombo, Moran, Thune, Gutknecht, Simpson, Ose, Stenholm, Condit, and Thompson of California.
Staff present: William E. O'Conner, Jr., staff director; Lynn Gallagher, senior professional staff; Wanda Worsham, clerk; Keith Williams, Jason Vaillancourt, Brent Gattis, Danelle Farmer, and Anne Simmons.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. Good morning and welcome to this seventh of 10 field hearings that the House Agriculture Committee is holding in different regions of the country. I want to thank everyone here for coming to this important event.
As you may know, we started this series of hearings in Lubbock, TX, in March; continued to Memphis, TN; Auburn, AL; Raleigh, NC; Westchester, OH; and Kutztown, PA.
At those six hearings, more than 100 witnesses presented testimony and well over 1,500 people listened in, both in the audience and through the Internet. And I would remind our audience today that all of the hearings that we conduct are available, real time, through our Internet Web site.
Page 2 PREV PAGE TOP OF DOC
I think the time that we have spent on this endeavor has been profitable, both for members of the committee and for those in the audience. We are pleased to be here in Woodland today, and I think that our time will be well spent.
I have the pleasure this morning of introducing the Members who are with us or who will be joining us. I am Larry Combest, I represent the High Plains of Texas; on my right is my good friend and neighbor, Charles Stenholm, who is also from west Texas; Richard Pombo represents San Joaquin County and part of Sacramento County; Gary Condit will be joining us, from Central Valley of California; Jerry Moran represents the western two-thirds of Kansas; John Thune represents South Dakota; Gil Gutknecht represents southeast Minnesota; Mike Simpson is from eastern Idaho; Doug Ose is from this area and is our host today; and Mike Thompson, who we spent some time with yesterday, is from Napa Valley.
Today, we will hear from 19 people who have built their lives and careers around agriculture. In selecting this panel of witnesses, we sought to bring together folks here in Woodland that represent different types of agriculture found in this region who could bring a variety of thoughts on the issues facing agriculture today.
It is my hope that everyone in this room can identify with at least one of our witnesses; and I would certainly encourage anyone who would wish to, to submit written testimony and that testimony will certainly be made a part of the record and will be weighed as heavily as any of the individuals who are verbally testifying.
I don't want to speak long because we are here to listen to you; but I do want to say that I think that the members of this committee and the members, certainly, 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.
So the question we want to answer is, how do we best accomplish that goal? We want to find out what real producers think is working, and we want to find out what is not working with current Federal farm policy.
Page 3 PREV PAGE TOP OF DOC
We will be going, as we complete the remaining three hearings following today, and covered all regions of the country and asking the same questions to the producers that we visit with in those regions, hoping that we might find a consensus among producers about farm policy changes that need to be kept, that need to be changed.
Again, I would like to thank all of you who have traveled and made your time available today to come and visit with us. I would like to introduce the Members further and have them make any comments that they might wish to make.
Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.
No statement this morning except to say that we are very glad to be here, look forward to hearing from the witnesses, and, hopefully, in the question and answer period, picking up a few points that we might be able to use for the year 2000 and then for the 2002 year when the current Farm Program and policy is scheduled to expire.
With that, Mr. Chairman, I look forward to hearing from the witnesses.
The CHAIRMAN. Mr. Pombo.
Mr. POMBO. I have no opening statement, Mr. Chairman, I just want to thank you and the rest of the members of the committee for coming out to California, for all the work that is gone into the series of field hearings; and thank you very much.
The CHAIRMAN. Mr. Thompson.
Mr. THOMPSON of California. Thank you, Mr. Chairman, I have no statement other than to say thank you for being in California and thank you yesterday for being over in the Napa Valley. I look forward to hearing what the folks have to say.
The CHAIRMAN. Mr. Ose.
OPENING STATEMENT OF HON. DOUG OSE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Page 4 PREV PAGE TOP OF DOC
Mr. OSE. Mr. Chairman, thank you.
First of all, let me apologize for the less than stellar weather out here; we are not used to this kind of weather in May, it is kind of windy, a little cold, a little overcast. And we will try and do better if you come back.
I am grateful that you are holding this committee hearing here in California's Third Congressional District. I appreciate your leadership in organizing these hearings across the country and your interest in listening to the concerns of agricultural producers.
I want to welcome each of the Members joining us here today; their participation reflects their desire that the needs and concerns of California's farmers and ranchers are addressed in Washington.
Again, I thank you all for coming. Thank you.
California is one of the richest and most diverse States in the Nation. We have fabulous natural resources, golden beaches, beautiful forests, scenic mountains, and picturesque deserts. Most importantly, the Golden State has abundant prime agricultural soil.
For over 50 years, we have been the home to the largest food and agriculture economy in the Nation, generating more than $26 billion a year in agricultural production. Over 350 crops are grown here, including more than half of the Nation's fruits, nuts, and vegetables.
There is a joke in there somewhere.
California also leads the Nation in dairy production and is the second largest cotton producer. In the third district, agriculture is clearly a top contributor to the economy. Roughly 90 percent of the State's rice is produced here and about half of the State's seed supply and prune supply comes from this district.
Page 5 PREV PAGE TOP OF DOC
In addition, the University of California at Davis campus is considered one of the top research universities for agriculture in the country. California's growers and researchers attribute their remarkable production levels to innovative and forward-thinking practices.
The farmers and growers in my district face many challenges and have remained in the forefront on many issues including water supply and use, efficient use of inputs, international trade practices, seasonal labor supply, crop insurance, the Endangered Species Act, and the Food Quality Protection Act, to name a few.
We are all aware of the consequences of poor market conditions and over-regulation by the Federal and State governments. We see the ripple effects on our rural communities and our families and friends every day.
My goal here today is to hear directly from farmers and their business partners on how to assure that we produce the safest and most nutritious food supply and, at the same time, allow growers to be economically viable.
Again, I want to thank the Members who joined us, and I want to thank the panelists who have taken time out of their schedules to be with us; we know this is a busy time of year for everybody. I look forward to hearing your testimony and responses.
And finally, Mr. Chairman, I want to take a moment to thank the great city of Woodland and the Heidrick Ag Center for their courtesies in hosting this event and allowing us to use this unique facility.
Thank you.
The CHAIRMAN. Mr. Thune.
Mr. THUNE. No statement, Mr. Chairman.
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. I'll yield to the witnesses.
Page 6 PREV PAGE TOP OF DOC
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 the opportunity of being here and I'm only able to do that because you have given us the opportunity to hear from farmers across the country.
And this is certainly my first time in this part of California. I have a probably standardized picture of what agriculture is, wheat, cattle, and corn, back in Kansas, and it's been a great opportunity for me to learn more about how diverse agriculture is, although our problems seem to very similar.
I also want to thank Mr. Ose for allowing us to be in his district and for the leadership that he's provided and the House Agriculture Committee as we've tried to figure out how to keep farmers farming and the next generation of farmers alive and well in American agriculture.
So, Mr. Chairman, thank you for this opportunity and I look forward to hearing from those who are going to testify today.
The CHAIRMAN. Mr. Simpson.
OPENING STATEMENT OF MICHAEL K. SIMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
Mr. SIMPSON. Mr. Chairman, I just want to thank you also for holding this hearing and look forward to listening to the witnesses testify today. It is amazing, as Mr. Ose said, that the diversity that is within this district and within the State of California. When I look at the people that are going to testify today and the different subjects and crops we are going to hear about, not a lot of these are growing in southern Idaho; I don't see anything about potatoes but I look forward to hearing the testimony from all of these different producers and the types of crops they raise and learning more about it.
Page 7 PREV PAGE TOP OF DOC
So, thank you, Mr. Chairman.
The CHAIRMAN. I'll just say, having seen this area for the last 24 hours, if they decide they want to grow potatoes down here, Mr. Simpson, they're going to grow potatoes down here.
Mr. SIMPSON. Mr. Chairman, that is a concern of mine.
The CHAIRMAN. Some of you may have noticed, in our opening statements, that Mr. Stenholm talks a little differently than some of you do out here; and I talk like Mr. Stenholm does. So, I want to apologize initially before we start if I mispronounce any of your names or mispronounce the names of some of the communities that you're from. I think I understand how to say ''Stockton;'' but I will apologize up front. This is kind of the way we would pronounce it down in Texas. And, as long as you know who you are, that's going to be the main thing.
We would, with that, call our first panel of witnesses to the table. Mr. Jeff Colombini, who is a tree fruit grower from Stockton, CA; Mr. Michael George, who is a fruit and vegetable producer from Exeter, CA; Mr. John Giovannetti, who is a fruit and vegetable producer from Yolo, CA; Mr. Dana Merrill, who is a grape grower from Paso Robles, CA; and Mr. David Weiss, who is a pear and wine grape producer from Kelseyville, California.
Gentlemen, thank you very much for attending today. We will take your testimony in the order of the way that you were introduced.
Mr. Colombini, please proceed.
STATEMENT OF JEFF COLOMBINI, TREE FRUIT GROWER, STOCKTON, CA
Mr. COLOMBINI. Thank you, Mr. Chairman.
Dear Mr. Chairman, members of the committee, my name is Jeff Colombini and I am a tree fruit grower in Congressman Pombo's district.
Page 8 PREV PAGE TOP OF DOC
In addition to farming cherries, apples, walnuts, and wine grapes, I also serve as chairman of the California Cherry Advisory Board.
As a private grower and through my work with the Advisory Board, I have worked to help the industry open new export markets for our products.
I know first hand that the fiscal health of the California cherry industry depends upon a viable open food system. From 1992 to 1999, on average, 53 percent of California's cherry production was exported. The value of our 1999 export crop was $43 million. Of that which was exported, 20 percent went to Japan, our largest export market in 1999. Other important export markets include Taiwan, Hong Kong, Canada, and the United Kingdom.
Because of the assistance we have received from the U.S. Department of Agriculture and the U.S. Trade Representative's office, in recent years we have also been able to begin developing markets in Mexico, China, and Australia.
If the committee remembers only one message from my testimony here today, it is that trade is not a luxury for the California cherry industry, it is not a bonus that helps us be a little more profitable. The California cherry industry is integrated into the world food system and we need the support of our Congressional representatives and the U.S. administration to ensure that the global food system remains open.
In addition to this general message, in the short time we have, I would like to make six quick points. The first is that funding for the Animal Plant Health Inspection Service's international programs and export trade support teams need to be sufficient to ensure that we have, one, an adequate number of negotiators; two, that these negotiators have the administrative and scientific support that they need to eliminate foreign trade barriers; and three, funding for travel and proficient translators.
While there have been improvements in recent years, APHIS, with the exception of its overseas international services staff, still has only about nine or 10 people assigned to cover all quarantine trade issues worldwide. For the most part, the world is divided into three parts and two people are assigned to each part. This means that two APHIS negotiators are responsible for plant quarantine talks and negotiations in Asia. In some cases, they return from talks with one country with barely enough time to prepare for talks at the next; and then, with their absence while traveling, some works have not received appropriate attention.
Page 9 PREV PAGE TOP OF DOC
As I mentioned, staffing levels have increased in recent years but this is an area where minimal investment could yield significant and real returns to U.S. agricultural exporters. A strong APHIS is critical to U.S. agricultural exports, especially when so many of our agricultural trade barriers are non-tariff based. The agency must be adequately funded, preferably by mandatory, as opposed to discretionary, funds.
Second, it is very important that this committee ensure that the U.S. Congress and administration avoid any action that could jeopardize the integrity of the WTO's Sanitary and Phytosanitary Agreement. This means that the United States should ensure that its import policies be based only on sufficient and sound science and not allow protectionist pressures to abuse our phytosanitary policies. It also means that the United States should resist any attempts by the European Union and other countries to revisit this agreement in the upcoming WTO talks.
The California cherry industry has already benefited from this agreement. Because of a WTO case, new varieties of California cherries will be more easily shipped to Japan; and other countries that have restricted the entry of California cherries, such as Korea, are now reconsidering their positions given their new multilateral obligations.
Third, the United States needs to ensure it is providing adequate support for the Codex Alimentarius and other international standards-setting organizations. It is useless for the United States to encourage its trading partners to defer to these international standards if the organizations do not have the resources necessary to develop standards for many of the new products and technologies that are becoming available to growers.
Developing a sound-based international standard for new inputs and technologies is far preferable to having each country setting its own standard and ending up with a disconnected system that unintentionally inhibits the open and free movement of food. For this reason, it is important that the United States ensure that these standards-setting bodies have the funds they need to conduct the research, evaluations, and risk assessments needed to recommend international standards for emerging agricultural inputs and technologies.
Page 10 PREV PAGE TOP OF DOC
Fourth, in the course of the WTO talks, we need to ensure that European production and export and subsidies are eliminated, not only because they inhibit our ability to export to Europe, but because they provide the Europeans with an unfair competitive advantage in third markets such as the Middle East, India, and other parts of Asia.
Fifth, I would encourage the committee to maintain strong support for the agricultural research and other green box activities such as the Market Access Program. As I mentioned in my opening remarks, recently, because of support received from the U.S. Department of Agriculture and the U.S. Trade Representative's office, the California cherry industry was successful in opening new markets in Mexico, Australia, and China. The opening of these markets was made possible because of agricultural research and these new markets are being developed with MAP funding for generic marketing efforts. Combining research with policy-level attention allows markets to open; and following a market opening with strong generic marketing program allows new export markets to be created. This provides for increased U.S. exports. That, Mr. Chairman, should be our primary goal.
On a related note, for several years, the horticultural sector has been requesting an increase in USDA's Market Access Program budget from its current level of $90 million. A recent proposal by the administration would utilize at least part of the unused $500 million in Export Enhancement Program budget, slated for wheat and barley subsidies, to be used to increase the MAP budget.
I respectfully ask the committee to support this important green box request as it will help U.S. growers compete more effectively in international markets.
Finally, a quick word on the China permanent normal trade relations vote. I cannot stress enough the importance of passing PNTR for China to U.S. agriculture. China's market potential for U.S. agricultural commodities is enormous. In our industry, as a relatively new market, we shipped 10,000 18-pound boxes of cherries between 1998 and 1999, but that number is expected to jump significantly once the current 30-percent tariff falls.
Page 11 PREV PAGE TOP OF DOC
In the November WTO agreement, China agreed to lower the tariff to 10 percent by 2004 once it joins the WTO. This significant reduction will eventually mean millions of dollars in revenue for California cherries. Unfortunately, the tariff concessions to which China agreed will be lost if PNTR is not passed. China is too important a market, not only for cherries but for all of U.S. agriculture, to let this opportunity slip away.
I encourage you and members of this committee to consider the issues I have mentioned today when you are developing our Nation's agricultural policy.
Thank you.
[The prepared statement of Mr. Colombini appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. George.
STATEMENT OF MICHAEL D. GEORGE, FRUIT AND VEGETABLE PRODUCER, EXETER, CA
Mr. GEORGE. Thank you, Mr. Chairman. Good morning ladies and gentlemen.
My name is Mike George; I'm a 40-acre citrus producer from Lindsay, CA. In addition to my own ranch, I'm general manager for Griffith Farms and provide oversight to 2,400 acres of citrus and other permanent crops. I serve as a director for California Citrus Mutual, a citrus producers' trade organization; this year, I serve as vice chair.
The first issue I wish to touch upon is trade. Fair trade is the issue and the subsequent societal impacts resulting from a phytosanitary program in dire need of improvement. It's real easy to talk about fair trade because everybody is for it. But, do we walk the talk or turn a cheek to satisfy the State Department or the business concerns of other countries?
Page 12 PREV PAGE TOP OF DOC
Let's be specific. Since the Uruguay Round of Trade Talks, a significant increase in the amount of subsidies paid to European Union member producers has occurred. According to the WTO for the marketing year 1996–97, the European citrus industry received in excess of $1.2 billion to assist in the production and marketing of oranges, lemons, and other citrus varieties.
These figures were derived from EU member countries and I have to believe the actual dollar assistance is greater. We're powerless to do anything about it since this administration agreed to a ''peace clause'' which prevents our Government from filing a complaint against these alleged domestic subsidies. Ever since I've been in the citrus industry, I've been told that we don't export to Europe because we can't compete. I would submit that we can't penetrate that market because my personal checking account can't compete with $1.2 billion in subsidies.
Furthermore, that type of assistance enables the EU citrus industry to be a more formidable competitor in other foreign markets. From my perspective, that is not fair trade.
How does our administration respond to this concern? The stock answer is that these are domestic programs and are not subject to Uruguay Round proceedings. I would argue that this distinction is simply a verbal tap-dance to satisfy the U.S. Trade Representative and the State Department. This distinction does not exist in the marketplace.
The EU assistance programs keeps me from competing in Europe and allows their industry to be more formidable competition in the United States and other ports of call.
A second component of concern related to trade is the tremendous strain from the influx of imports and increased consumer travel is placing on our borders and our pest and disease defenses. This Nation is being overrun by exotic-sounding problems, karnel bunt, medfly, PlumCot, canker, fire ants, Chinese long-horned beetles, Pierce's disease, and the list goes on. These are costing individuals and communities losses in terms of dollars, while creating environmental impacts because of eradication programs.
Page 13 PREV PAGE TOP OF DOC
We are being penny-wise and pound-foolish. Give USDA/APHIS/PPQ the tools to do a more efficient job. There is a reason why the President issued the Invasive Species Executive Order last year. It is because the impacts of these infestations are too huge to ignore.
In the upcoming farm bill, Congress will discuss a renewal of a clause that allocates user fees to USDA/APHIS.
Historically, Congress has appropriated less than collected and pigeonholed the remaining dollars for purposes unrelated to pest prevention. Remove that archaic compromise and allow APHIS to use those dollars for which they were intended, pest and disease prevention. This does not impact the general fund and it allows the user fees to be directed towards their intended purpose.
My written testimony offers comments on the crop insurance program. In the interest of time, I'm omitting them; however, I hope that you will take the time to read them.
Finally, I would like to ask this committee to go back to the Plant Quarantine Act of 1912 and use it for the future. In 1912, Congress determined that USDA shall protect domestic agriculture. We believe there has been an erosion of that mission.
The Department has also become a facilitator for petitioning countries to bring product into the United States. If this country wishes to remain the world's provider of fresh fruits and vegetables, the role of APHIS, as it has evolved, has to be re-examined. The P-H in APHIS stands for ''Plant Health.'' Unfortunately, these letters have become a lower-case operation within USDA.
For example, how can USDA propose a new rule with a risk assessment when last fall they freely admitted a process needs to be developed to determine what constitutes a scientifically valid risk assessment? How can USDA propose to adopt a systems approach for disease mitigation purposes when the world community can't agree if a systems approach for disease is viable, let alone what the components should be? Why do we have to be the guinea pigs in the name of leadership?
Page 14 PREV PAGE TOP OF DOC
It's we, the producers of a commodity, that suffer the consequences if you, the policymakers, don't get it right, I'm not an isolationist, nor one afraid of competition; I'll take my chances and probably beat most of my competitors in a fair, open market. But let's remember that the Department of Agriculture has a mission to work with and for the producer. The Department must remain the protector of domestic agriculture.
We can't dilute the mission or sacrifice certain aspects of that mission to facilitate another Government agency's agenda.
Members of the committee, that concludes my oral statement. Thank you for your time and attention. We at California Citrus Mutual and the citrus industry look forward to working with you on these and other issues for the balance of this Congress and next year.
[The prepared statement of Mr. George appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you.
Mr. Giovannetti.
STATEMENT OF JOHN GIOVANNETTI, YOLO, CA
Mr. GIOVANNETTI. Thank you, Mr. Chairman.
I can see there's going to be quite a few redundancies in this testimony. I hope it points up the importance of the issues to all of us.
I'm John Giovannetti, a grower and shipper of fresh fruits and vegetables, based in Yolo, CA. I am testifying today on behalf of Western Growers' Association which represents 3,300 members who grow, pack, and ship more than half of the Nation's fresh fruits, vegetables, and nuts probably the same joke there.
Mr. Chairman and members of the committee, the fresh produce growers in California believe that a sound Federal farm policy must be built on strong import and export policies. In addition, I will mention a number of other issues of great importance to the California fresh produce industry.
Page 15 PREV PAGE TOP OF DOC
In the interest of time, my comments are very brief; my written testimony is quite a bit longer than what I'll present orally here. But I urge you to review my written statement for further discussion of these issues.
With U.S. tariffs on imports being among the lowest in the world, our market is open to fresh fruits and vegetables from other nations. When trade negotiators raise the issue of reducing domestic and export subsidies, there is nothing to debate with regard to the U.S. fruit and vegetable industry since we receive no trade distorting subsidies. We receive no trade distorting subsidies.
Let's compare this situation with the fruit and vegetable industry in Europe. Taking a look at the most recent data available, we find that the EU's aggregate measure of support exceeded $17 billion. Let me reiterate, the European industry received $17 billion in subsidies for one marketing year, compared to zero for the United States.
Attached to my testimony is a chart showing import and export figures over the past 5 years. The chart shows a large increase in the imports from the EU, over 141 percent in quantity, while there has been a 12 percent decrease in U.S. exports to the EU. This disturbing imbalance of trade is due primarily to inadequate attention to the U.S. fruit and vegetable sector in Uruguay Round of Trade. WGA has established specific criteria, outlined in my written statement, which any new trade agreement must meet if the U.S. fruit and vegetable sector is to benefit.
When developing the trade title of any future farm bill considering other aspects of agriculture policy, WGA urges Congress to carefully scrutinize the impact of our trade actions on all sectors of U.S. agriculture.
WGA strongly supports legislation current pending before this committee to expand the market access program. As you know, MAP has proven to be successful in promoting the expansion of U.S. agricultural exports. Passage of the legislation would expand agricultural exports and also would strengthen the U.S. negotiating position in new trade negotiations.
Page 16 PREV PAGE TOP OF DOC
The Perishable Agriculture Commodities Act, which is administered by USDA to regulate trade in fresh produce but which is fully funded by the industry, plays a critical role in ensuring an abundant supply of fresh produce. Last year, it was learned that USDA inspectors and wholesalers at the Hunts Point Terminal Market in New York City entered into a massive kick-back scheme to defraud growers and shippers by falsifying inspections of fresh produce over nearly a two-decade period. WGA is concerned that growers and shippers will have great difficulty in recovering financial losses suffered due to this criminal activity.
While the PACA process permits defrauded shippers to file grievances against the wholesalers, in order to recoup losses suffered as a result of criminal activity, the burden of proof rests solely with the shippers. Some accommodations must be made to relieve the shippers' burden of proof requirement or it will be virtually impossible to recover any of the losses caused by this criminal activity.
In addition to the burden of proof, the industry has the burden of investigating all the inspectors at the AMS inspectors who have pleaded guilty. It is the contention of WGA that all of these inspections are suspected of being part of the same kick-back scheme and, therefore, need to be fully investigated by the Federal Government, not the industry.
The statute of limitations will expire on July 27, 2000, yet the evidence needed to go forward in the PACA proceedings has not yet been made available by USDA. It is appropriate for Congress to either extend the statute of limitations or make it clear that the USDA Inspector General's office should do everything possible to make this evidence available to shippers.
During the last decade, the trading of perishable fruits and vegetables has changed substantially. However, USDA's Fresh Products Branch operates just as it did many decades ago and is in serious need of modernization. WGA urges the committee to support improvements to the Fresh Products Branch Inspection Program, including the strengthening of ethics training for inspectors and badly needed capital improvements.
Page 17 PREV PAGE TOP OF DOC
I go on another page and I see the red light, so I'd just like to touch on two more subjects and conclude my remarks.
WGA strongly supports section 118 of the 1996 farm bill which prohibits growers participating in Federal subsidy programs from growing fresh fruit, vegetables, and nuts on acreage enrolled in these programs. This is necessary to ensure that producers of fruits and vegetables who do not receive subsidies are not put at a competitive disadvantage against subsidized growers.
WQA thanks the members of this committee for their support of section 118 and strongly urges the committee to reject any proposals which would change this policy.
And, lastly, a plug for Mr. Pombo's legislation, WGA strongly supports legislation to reform the H–2A agricultural guest worker program. An effective guest worker program is needed to ensure that legal workers are available to harvest perishable crops when there are not enough domestic workers for this purpose.
As our industry continues to experience labor shortages throughout California and Arizona, the need for reformed program to avert further shortages continues to grow.
And, with that, I will conclude my remarks and thank you very much for being here.
[The prepared statement of Mr. Giovannetti appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you.
I want to make for certain that all of our witnesses understand that their testimony, in its entirety, will all be a part of the record.
Mr. Merrill.
STATEMENT OF DANA MERRILL, CHAIRMAN OF THE BOARD, CALIFORNIA ASSOCIATION OF WINEGRAPE GROWERS, PASO ROBLES, CA
Page 18 PREV PAGE TOP OF DOC
Mr. MERRILL. Good morning, Mr. Chairman and committee members. My name is Dana Merrill and I'm a seventh-generation California farmer. My ancestors actually came with Father Serra to California.
I've farmed various field crops since my college days and even before. I've managed winegrape vineyards since 1981 and currently operate two farm management companies who own or manage 11,500 acres in Santa Barbara, San Luis, and Monterey Counties. And I might point out, none of that is from the original family holding, since we lost that over the years; I started over again.
I'm currently chairman of the California Association of winegrape Growers, which is an organization representing more than 60 percent of the State's annual tonnage of grapes, crushed for wine and concentrate.
I'm also president of the Central Coast Vineyard Team, an organization promoting sustainable agriculture using a unique vineyard rating system that's used in Monterey, San Luis, and Santa Barbara Counties, as well.
Winegrapes are a valuable crop to California due their value-added nature. Our industry was recently valued at $33 billion in an MKF research study, which surprised, quite frankly, even the industry. The crop generates tourism activity; jobs; taxes; exports; and, of course, outstanding wines. Our operation, alone, employs almost a thousand workers; with their families, you can extend that to over 5,000 people depending on our wages, health insurance, and various other benefits.
California winegrapes are an advantage for us because of the fact they are able to grow on poor soils; they've been helpful in preserving agriculture along the Central Coast, which is under heavy urban pressure; and are relatively easy on irrigation and pesticide requirements.
Page 19 PREV PAGE TOP OF DOC
Threats to our future include Pierce's disease, which has gotten a lot of notoriety lately; and, even though we've made progress, we are still under threat due to the spread of the glassy-winged sharpshooter and the fact that we need to develop a permanent solution to the xylella bacteria that causes Pierce's disease. It's caused serious economic losses in Temecula and in the North Coast regions.
Another threat to our continued prosperity is the Endangered Species Act. There are other regulations that give us problems but, to give you the current example, in Santa Barbara County, there's an emergency listing of the California Tiger Salamander which threatens loss of vineyard and vegetable land that has been farmed, in some cases, over 100 years. Little scientific evidence supports the Department of Fish and Wildlife action which ironically makes it tough to refute.
There are several keys to success for winegrapes in California, as well. First on the list, I would say, would be research to assist our innovative growers that produce wines of quality while competing internationally in the face of stiff competition; public/private partnerships have been successful and they should be promoted further; the Viticulture Consortium effectively utilizes grant funds of $1.1 million from the Cooperative State Research Education Extension Service; and, further, assistance to Cooperative Extension in the Farm Advisors will enable that arm to continue to play an important role in our industry. We need additional support there, especially to help us develop sustainable farming methods as we move away from conventional pesticides.
Additionally, our industry has led the way with industry-matched funding through the American Vineyard Foundation. For example, we raised over $3 million from the industry in 1999 and most of that came through AVF.
Fair trade, echoing the sentiment of some of the previous speakers, our industry has also been hit hard by EU trade barriers such as tariffs and subsidies. It continued, despite commitments made by those countries in the Uruguay Round. We've been hurt, overall, in the last multilateral trade negotiations; we're hopeful that free trade with China could be approved because it's quite important, we believe, for winegrapes and wine to be in on the ground floor in being given the opportunity to access that important new market.
Page 20 PREV PAGE TOP OF DOC
Marketing promotion, we strongly support the Market Access Program; it's been successful and it does provide, again, matching funds for U.S. companies to develop markets abroad.
We, too, need more protection from invasive pests and diseases. We have, right behind the sharpshooter, we have another series of pests that threaten in our country and hit our industry; and the more free trade we have, the more we're going to be under this threat. We, too, echo the sentiments that APHIS funding should be increased and staffing should be also raised.
Crop insurance has proven to be an important tool for winegrapes, especially as the program has been developed. We urge the retention of the Catastrophic Crop Insurance Program, CAT, and we ask that flexibility be retained to enhance the program further.
We need, also, to think about accelerated registration for new soft-management pest tools. Grape growers are quite progressive and we really want to move into the area of using softer pesticides but we're going to need help. And we're also going to need some help where implementation of the Food Quality Protection Act means that certain chemicals that we may need to get to the future are going to have to be kept a bit longer than maybe is desired by some.
We need estate tax relief. The current Tax Code makes it awfully tough to pass on any farm properties to the next generation. And I'm a good example of that.
To conclude, our grape industry dates back to the Mission days and, quite frankly, we can be competitive in the future. We are quite willing to partner with Government for those challenges that are too large for us to meet alone. We can use help from the Government and I think, if we partner together, we can have a bright future for California viticulture and the wine business in California.
I would also like to say I very much appreciate your folks taking the time to come here to California and I appreciate being given the opportunity to share my thoughts with you this morning.
Page 21 PREV PAGE TOP OF DOC
[The prepared statement of Mr. Merrill appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you.
Mr. Weiss.
STATEMENT OF DAVID C. WEISS, PEAR AND WINEGRAPE PRODUCER, REPRESENTING CALIFORNIA PEAR GROWERS ASSOCIATION, KELSEYVILLE, CA
Mr. WEISS. Good morning, Mr. Chairman, and members of the committee. My name is David Weiss, and I reside and farm in Lake County, California in the First Congressional District where I'm proud to say we are very well represented by Congressman Mike Thompson.
As a producer, I manage an agricultural operation comprised of 320 acres of Bartlett pears, 55 acres of winegrapes and a commercial packing operation. Also, I'm a partner in an additional 93 acres of pears and 108 acres of winegrapes.
I appear today as a grower on behalf of the California Pear Growers Association specifically, and on behalf of the California pear industry in general. For your information, California Pear Growers is a bargaining cooperative whose main purpose is to negotiate commercial cannery prices for Bartlett pears grown in California.
While there are many issues of concern to the California pear industry that deserve to be heard by policy makers, I have chosen to elaborate on the following four points for your consideration today. They are: Maintaining an adequate and affordable supply of farm labor; leveling the playing field with regard to foreign trade; revamping the Federal Crop Insurance Program for pears and winegrapes, and continued support for IPM research and implementation for pears and grapes.
Page 22 PREV PAGE TOP OF DOC
The crops I grow are among the most labor-intensive of any in modern agriculture. Planting, pruning, training, and harvesting are all done with manual labor in pears. Unfortunately, most of this type of work does not appeal to the majority of Americans, regardless of the national unemployment rate. Growers must, therefore, look to Mexico for the workers we need to complete these tasks. Suffice it to say that, were it not for our Mexican neighbors, pears and many other tree fruits would not be viable crops in California.
I am troubled, however, by the declining trend in available labor from Mexico. The general sense among pear and grape growers in our part of the State is that there simply are not enough workers available during our most labor-intensive season, harvest. To be sure, we take great pains to ensure that the workers we hire are legally documented.
However, in light of the current tight labor market, it is conceivable that we may some day be confronted with the dilemma of knowingly hiring undocumented workers or not harvesting our crops. Unfortunately, the current system encourages a black market in smuggling of people and in counterfeiting of documents. I have heard stories about illegal immigrants paying $1,000 to $2,000 to be smuggled across the border, often at great physical risk of injury or even death from the journey they must take.
The irony of this system is that the only thing these people want to do is work in the fields and packing sheds, receive a fair wage, and return to Mexico for the winter season when the work is done. We need a simple system that provides farmers with a stable legal work force; provides farm workers with a means by which they can be protected under U.S. labor laws, earn the right to legal status, and avoid the risks of undocumented status; and maintains immigration control.
Therefore, we support the efforts of the National Council of Ag Employers in their efforts to reform the so-called H–2A guest worker legislation to make it more responsive, affordable, and fair to both the industry and the workers, but free of unreasonably burdensome regulations and stifling reporting requirements.
Page 23 PREV PAGE TOP OF DOC
It is common knowledge that the world is becoming a smaller place by the day. As technological advances continually improve our ability to communicate, to teach and learn, to keep abreast of and evaluate dynamic circumstances the world over, we find that we are increasingly functioning on a global stage with international sources of both supply and demand.
Global competition is becoming a way of life for us all and it offers most sectors enormous opportunities. But, for agriculture in general and pear growers specifically, it is difficult to foresee a viable, let alone profitable, future under this new world economy.
In the context of competing in global markets, U.S. farm policy must take into account the notion set forth very eloquently by Steven Blank in his recently published book The End of Agriculture in the American Portfolio which concludes, among other things, that, in agricultural economics, prices are global but costs are local.
Simply, our cost structures are much higher than those of our foreign competitors because of local economics, regulations, and politics.
It is widely recognized that U.S. farmers are held to much higher standards than our foreign competitors in areas such as crop protection alternatives, including pesticides; worker protection standards; food safety issues; and worker wage rates. However, our markets, and, hence, the prices we receive for our products, are driven by global factors that usually do not reward us for the added costs we incur in meeting these standards. In this way, I foresee a great and unfortunate irony on the horizon.
The world's most efficient producers of the world's safest supply of food cannot afford to compete in a global market that finds itself with food surpluses in one corner of the world and, simultaneously, famine in another. Incidentally, I do not believe the end is near for American agriculture because, in the final analysis, a safe, reliable food supply is in the best interest of our national security.
As a grower, I do not advocate lowering our standards to those of the competition, nor do I believe we should attempt the impossible by requiring our competitors to implement all the regulations with which we are confronted. Nor do I hope for Government handouts and price supports to make ends meet down on the farm. Rather, I believe that our policy should strive for fair trade, not free trade.
Page 24 PREV PAGE TOP OF DOC
If the so-called playing field were a level one, American farmers would thrive and successfully and profitably feed Americans, as well as people in other countries.
I am very frustrated by the Federal Crop Insurance Program as it pertains to pears and grapes, especially pears. This frustration arose from personal experience I gained while willfully participating in the program from 1994 through 1998. During that period, the operations I manage purchased crop insurance under one or more of the various buy-up programs and our premiums averaged between $20,000 and $25,000 per year. As you will recall, 1998 brought us the weather phenomenon known as El Nino which resulted in heavier than normal rainfall and other difficult conditions during the spring and early summer of that year. Not only did our yields suffer, but the quality of the crop was severely impacted, as well.
Also, we were required to make more than twice the applications of fungicide and antibiotic sprays in order to save the crop and prevent long-term damage to the trees. These circumstances manifested themselves into the poorest-quality, highest-cultural-cost, below-average- yield pear crop in 20 years, all of which, together, caused our worst financial year ever.
To add insult to injury, in early 1999, I attended a meeting hosted by the local Farm Service Agency office to learn about possible Federal assistance for pear growers. The news was very disappointing for me; while our yields had been significantly below average, they were not sufficiently low to qualify us for any benefits under the crop insurance policies for which we had paid so dearly. Moreover, despite the previous statements from the Congress about abandoning the disaster payment system, the U.S. Congress had approved a multibillion program to bail out the farm sector. Worse still, disaster payments would be paid with parity to anyone qualifying without regard to whether or not the qualifying farmer bought crop insurance. As you might imagine, we have not purchased crop insurance for pears since.
The point of this anecdote is that, from my perspective, the crop insurance program needs to be completely revamped. It must provide for the special needs of specialty crops, like pears and grapes, which needs are very different from those of corn, wheat, soybeans, and cotton. For example, cultural and harvest costs for pears are typically $3,500 per acre annually and in excess of $3,000 per acre for winegrapes. These figures are higher than the cost of agriculture land in most of the United States. In other words, it costs us a lot more to roll the dice each year than it does for most other crops; and the crop insurance program needs to reflect this fact in order to be a useful risk management tool for pear growers.
Page 25 PREV PAGE TOP OF DOC
The pear industry in California has been a widely recognized leader in developing alternative pest control programs, specifically integrated pest management, or IPM, has been a priority for our industry for more than 25 years. Since 1990, pear growers have funded more than $2.5 million in research; $1.8 million, or 72 percent, of which has been directed specifically to IPM research and implementation of reduced-risk practices.
Significantly, the pear industry began focusing its resources on developing soft technologies for its pest management needs long before the Food Quality Protection Act mandated such reforms.
Regardless of the crop, the single most important critical success factor of any IPM program is the ability to draw on a broad array of pest management tools. Pure reliance on any particular technology, hard or soft, eventually leads to tolerance, and ultimately resistance, by the target pest, even in the face of increased application rates. However, an integrated approach provides for managing the pest from different points of vulnerability, thereby allowing growers to reduce the overall use of toxins and rely on them when the softer approaches weaken. It is absolutely essential that all tools be kept available, however, or we jeopardize the long-term effectiveness of the IPM programs.
In this regard, on behalf of the pear industry and the apple industry in California, Oregon, and Washington, I urge you to support continued funding of section 406 of the Agricultural Research Extension and Education Reform Act of 1998 for 2000 and beyond as we strive to finalize, and then implement, our ''Transition Strategy for the Western U.S. Apple and Pear Production Region.''.
Also, we request your support of the Regulatory Fairness and Openness Act of 1999 which seeks to require the implementation and administration of the FQPA by relying on science and scientific methods rather than assumptions and emotions.
In closing, I would like you to understand that I am very proud of what I do for a living. In the context of over-hyped dot-coms and instant billionaires being created regularly and made on Wall Street and in Silicon Valley, I take comfort in the fact that my business is real, not virtual, and that the products I grow are essential to human life, not fanciful trends of the internetters.
Page 26 PREV PAGE TOP OF DOC
I ask you not for handouts nor for any other means of artificially propping up me and my fellow pear growers; rather, I hope you will consider the issues I have raised and support them in our behalf.
Thank you for your time and consideration.
[The prepared statement of Mr. Weiss appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you.
Before we go to questions, I would recognize Mr. Condit, if he has any opening comments he would like to make.
Mr. CONDIT. Mr. Chairman, thank you very much. I'm delighted to be in Woodland today and I do apologize for being late; I miscalculated the traffic on the way up from Ceres. So I apologize for that.
The CHAIRMAN. I appreciate your joining us.
I have just a question I would like to ask all of you to respond as briefly as you would like.
Several of you mentioned the significance and importance of trade. I would ask you, if we cannot begin, at least, negotiations in the next WTO round of negotiating the potential of elimination of export subsidies, if you would support the United States becoming much more heavily involved in subsidizing U.S. exports into other countries?
Mr. COLOMBINI. Well, to be honest with you, I'm not a big supporter of subsidies, per se. Certainly, I'd like to continue to proceed to make the playing field level any which way we can. I'm not sure that giving us subsidies because we can't negotiate away subsidies from other countries is the way to go.
The CHAIRMAN. Before you get away, the question was premised on the fact that, if we cannot begin the negotiations of ending subsidies, would you support our raising our export subsidy level? You said we should try to level that playing field. If we cannot get them to reduce theirs, should we try to level it by increasing our level?
Page 27 PREV PAGE TOP OF DOC
Mr. COLOMBINI. I would certainly consider that at that point; yes, I would.
The CHAIRMAN. OK.
Mr. GEORGE. I don't think two wrongs make a right; that's what my mom and dad taught me so, ultimately, I understand your premise that you're asking the question based on if we can't change them, but I think there must be other things that we can do, continue to try to change those, so
The CHAIRMAN. I would be open to any suggestions that you would wish to make.
These are sort of just the cold, hard facts. We have to decide. Granted, in the purest form out there, there's a lot of things we'd like to see occur. But, if we cannot see the elimination, should we continue on the course we're on and keep ours at the level we are, even though increasing it would be wrong? Should we continue to let them outbid us?
Mr. GEORGE. I still think you've got to do what's right. And, in that particular case, then I guess we'll have to find another way to compete. I personally could not, no.
Mr. GIOVANETTI. Mr. Combest, I have a tendency to agree with Mr. George. I've never felt that throwing money at a problem ever solved it although I do not have an answer to that question. We, in the fresh fruit and vegetable business, cannot condone a desire we already have the ability to over-produce and it just seems to me that subsidies on exports would just enhance that overproduction. There's a trade-off, you get a little bit of money from the Government but you lose it in the marketplace. We'd rather take our chances in the marketplace.
The CHAIRMAN. OK.
We'd like to start chipping away on those if if we can't eliminate them completely, we'd like to chip away at them, at least reduce them. We've been able to survive to this point; I think we can do it in the future. And we'll make inroads one way or another, probably through quality.
Page 28 PREV PAGE TOP OF DOC
Mr. MERRILL. I, too, agree that I don't think we should I tell you one thing that might be a good solution, at least in the interim, would be to support even more strongly the Market Access Program concept; that way we could strengthen our hand that way without putting subsidies in place that later on, once they're both in place, no one's going to remember who put the first one in. So, if we could maybe bias our support toward that approach, I think we would build some long-term customers without the problems associated with subsidies.
The CHAIRMAN. So you wouldn't consider money that's put into the Market Access Program a subsidy?
Mr. MERRILL. Well, it's the lesser of evils and it because the industry matches funds, I think we're doing more to develop markets that, at some point, perhaps you wouldn't even have to do that, as opposed to an outright subsidy, which tends to I think it accentuates the problems a pure subsidy, I think, accentuates the problems of overproduction and people begin to farm just for the subsidy. The Market Access Program, hopefully, would develop long-term customers who begin to develop an affinity for our product, which tends to be the case, perhaps more with wine than with some other products, but there's a certain we have a certain amount of customer loyalty in this customer and I think that could extend to foreign countries, as well.
The CHAIRMAN. Thank you.
Mr. WEISS. I would agree with Mr. Merrill's comments. I think the Market Access Program is a way of helping those who are helping themselves. And it goes against my grain, and I think this is echoing what has been said before me, that we receive subsidies or artificial means of being able to compete. I think, to the extent possible, if the Government supports the efforts that we are taking as individuals and as industry groups, that stands a better chance of being politically correct for the long term and also has a better chance of success.
Page 29 PREV PAGE TOP OF DOC
The CHAIRMAN. Thank you.
Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.
Two quick questions that you can answer yes or no. If you have a qualification, I would welcome that.
Do you believe that the United States should immediately lift all unilaterally-imposed sanctions on other countries regarding food? Yes or no? You can shake your head and I'll put it in the record that way.
Mr. COLOMBINI. I don't believe so and so the answer is no. And there's a lot of issues involved why I say no.
Eliminating those sanctions would actually make the playing field more unlevel in a lot of cases and that's why I'm saying no.
Mr. GEORGE. I would also give a qualified no. I think there's a lot of issues that are important to consider. Here we're talking about agriculture; and we certainly need to expand our markets but I realize it's a complicated issue and important. So it's kind of a hard question to answer; it's pretty broad. But my answer would be no to your question.
Mr. GIOVANETTI. My answer would also be a qualified no. Although my degree is in political science, I don't know all the ramifications of some of the sanctions that are imposed on other countries. And, as was stated here, and I thought it was put very well, free trade doesn't always mean fair trade; and I'm a fair trader, not necessarily a free trader.
Mr. MERRILL. Well, I'll have to say the concept is kind of intriguing. I don't know enough about trade, to be quite frank, to be qualified to give you an answer. As I said, it's intriguing, but I'd have to know more about the specifics; I don't know whether that would be a great idea or not.
Page 30 PREV PAGE TOP OF DOC
I will say that sometimes, in the absence of progress over 20, 30 years on some issues, one does sometimes come to the conclusion, how could anything be any worse? So, from that standpoint, it's intriguing.
Mr. WEISS. I have nothing further to add.
Mr. STENHOLM. Next question. I would gather by that I know I'm going to get a different answer, this is a much different answer that we've gotten anywhere else that we've been and I want to see a show of hands in the audience on this first question.
To be sure everybody understands, unilateral means when the United States imposes a sanction that we will not sell to other countries and all of our friends, you mentioned the Europeans, each of you mentioned the concerns you're having I quite frankly do not understand your answer; but I respect your answer.
But, when we unilaterally decide not to sell to other countries and then we let our friends take the market, it is working contrary to our best interest, if it's unilaterally. If it's a multilateral, then I would certainly be in favor of it because then we can't.
But a show of hands in the audience, how many of you agree with the panel's answers; a show of hands?
One, two ten. How many disagree with the panel?
Now the audience is in conformance with the rest of the country; you, panel
I say that respectfully
Another question. I hope we will get a little more into this later in this but I want to see again, if you can answer quickly, do you believe the Congress should vote to pass permanent normal trade relations with China during the week of May 22?
You can shake your heads yes or you can respond or no. One, two shaking yes, three, four, five, six; OK. So the panel agrees that we should vote to pass permanent normal trade relations with China.
Page 31 PREV PAGE TOP OF DOC
Let me see a show of hands in the audience of those that disagree? One, two, three, four, five; OK, thank you.
One other question. I totally agree with you regarding your comments on APHIS funding and I'm sad to say we will not fund APHIS again this year; the budget that is now considered will not include the amount of increased monies and it is absolutely killing us. And we have to find a way to put more money into APHIS, into Food Quality Protection, to meat and poultry inspection, into vegetables, all of these things, both import and export.
We are not doing this. The Congress is not doing it, the USDA, the administration, we are not. And I totally agree and I appreciate your emphasis on that.
One thing, my time has expired but I, personally, am very interested in insuring cultural cost. What you're telling the insurance program. I totally agree, the current program needs to be revamped.
A simple question that I want you to think about answering. If we, in recognizing that 3,000 and 3,500 is the cultural cost, what it actually cost you to put in many of your specialty crops, what would be a dollar per hundred cost that you and your banker would agree would be a fair cost of providing that kind of insurance on a per-hundred basis, as we deal with home insurance, automobile, et cetera?
Any numbers come to mind quickly of a cost per hundred?
Mr. COLOMBINI. I can answer that; I'd say somewhere probably the $5 to $6 range. But the problems tends to be not so much what the premium is, but the coverage and how the coverage is determined and what constitutes coverage and what doesn't constitute coverage.
Mr. STENHOLM. My question I am assuming and I will follow up on this but I'm assuming that that would be we have no quarrels about in your home, if an earthquake hits, if a hurricane hits, if a tornado hits, we have no quarrel on determining that in home insurance, in automobile insurance, and in other policies. I would have to assume that we've got to answer that question satisfactorily, also, what the cost and the $5–6 per hundred cost, and then have a policy that would be commensurate with that type of an approach.
Page 32 PREV PAGE TOP OF DOC
That's something I'm very interested in working with you in the specialty area on this because we clearly we've got a lot of improvement to do in the current crop insurance.
Thank you very much; and I'll follow up later individually with you.
The CHAIRMAN. MR. POMBO.
Mr. POMBO. Thank you, Mr. Chairman.
I'd have to agree with the comments Mr. Stenholm made about APHIS. I don't think that Congress or the administration fully appreciates the severity of the problem we're dealing with right now. And it's going to take a lot of education and a lot of work for us to get to the point where we really need to be.
There was something in Mr. Weiss's testimony that I think sums up a lot of the problems that we in California have in agriculture; and he was talking about a book, The End of Agriculture in the American Portfolio.
And one of the statements here is ''because of local economics regulations and politics'' in terms of competing in the world market, the international. And I'd like to have the panel comment on that because all of you talk about trade, free trade, fair trade. I think most people in California agriculture realize that that is where our future is, is in trading in that world market whether we want to or not. It's a reality; it's on top of us. And we have to compete in that world market, in that international economy in agricultural products.
But, at the same time, it does come down to the cost of production and how that's driving our ability to compete in that world market.
Mr. Colombini, do you have any comment on that in terms of the regulatory cost, the political cost, of producing in California right now?
Mr. COLOMBINI. Yes, I do. The regulatory cost of producing agricultural commodities in California is significantly higher than other countries in the world. And that's clearly evidenced by I'm an apple grower that's evidenced by our inability to compete in most foreign markets because our cost of production is significantly higher than other countries.
Page 33 PREV PAGE TOP OF DOC
And a significant portion of that cost is just regulation, complying with regulation and, alternatively, competing with countries that have minimal regulation. Minimal regulation, specifically when it comes to pesticide use. And, when you're dealing with a crop that has high labor requirements and high chemical requirements, like apples, it puts us at a huge disadvantage worldwide.
Mr. POMBO. Mr. George?
Mr. GEORGE. I would agree that the cost is not just only in the field, although that's where it primarily is, but just our cost of keeping track; our office staff continues to grow. And one of the biggest factors there is just the paperwork that we have to keep track of to monitor compliance with all these things. So that's another factor, as well.
Mr. POMBO. Mr. Giovannetti?
Mr. GIOVANETTI. I have nothing
Mr. MERRILL. Well, I included in my opening remarks, we're having an awfully difficult time and, again, at the top of the list, Fish and Wildlife in Santa Barbara County. We've got 100,000 acres that was put on the California tiger salamander ''likely territory'' and what they say is it's, ''where the salamander is'' or ''where the salamander could be'' or some of them, ''where I think it wants to be.'' And the bottom line is, we've got some people that have been farming beans there since the 1890's and, around these vernal pools the vernal pool isn't the question, they want to take a mile and a half around the pool because they're not sure whether maybe the salamander lives in a gopher hole.
And the problem with the whole thing is that they'll freely admit that the salamander seems to be doing very well so, whatever the bean farmers have been doing for 90 years, maybe they ought to study that and then learn something from that and then apply it to the future.
But quite often we don't know what the rules are; and that's as big a problem as anything. You have to hire consultants to try to deal with various land use issues and the Federal bureaucrats, quite frankly, can't tell you what you're even supposed to do.
Page 34 PREV PAGE TOP OF DOC
I'll wrap this up. On one 60-acre, we had a piece that had a vernal pool on it and we were going to plant grapes and we got all clearances from every agency to go ahead and then, once we were in the whole thing, we ended up giving up 16 acres of a hundred-acre block, we spent $100,000 on studies, thought we were through the whole thing and now we just got the thing from Fish and Wildlife that says, ''Well, maybe everything you did isn't good enough for us and we'll get back to you.''.
And that seems to be getting worse and worse, whether it's trying to re-establish trout in streams that perhaps they never lived in in the first place, or whatever.
Every single day that goes by, it gets worse and worse and worse and worse and to the point where we could probably put an environmental consultant on our payroll full time and the person would be quite busy. I'm not sure what they would accomplish productively, but they would earn a living.
Mr. POMBO. Mr. Merrill, just to follow up on that, you said that you wanted to plant grapes on a piece of property and you had all of the agencies that you checked with in order to get permission to do that. Can you share with the committee what you mean by you ''checked with all the agencies'' before you got permission to plant a crop?
Mr. MERRILL. Well, yes. In Santa Barbara County, we're a very environmentally conscious county and that's not all bad. I mean, one of the reasons we live there is it's a beautiful place to live but so you start with Santa Barbara County Planning and Development; there's Fish and Wildlife, Federal Fish and Wildlife; there's the Department of Fish and Game; there's the Corps of Engineers. And, quite frankly, of all of the groups we worked with, Corps of Engineers was the most organized, the most cooperative, and told us what we needed to do and we did it. They took the lead.
Fish and Wildlife were the last people at the table; it took them 2 years to figure out whether they wanted to be involved or not and then, all of a sudden, they came across with this emergency listing and covered 100,000 acres in the whole county, during which, in a 242-day period, they're going to figure out whether it will be a full-blown listing permanent, which I'm informed 99 percent of the time it ends up being a permanent listing.
Page 35 PREV PAGE TOP OF DOC
So Fish and Wildlife, the Corps of Engineers, Santa Barbara County, I think NRCS was involved, too.
Mr. POMBO. And this was to plant a crop?
Mr. MERRILL. Right, this is to plant a winegrape vineyard on land that had been farmed off and on for the last 100 years.
Mr. POMBO. Thank you.
The CHAIRMAN. Mr. Condit.
Mr. CONDIT. Thank you, Mr. Chairman.
I apologize to the panel that I did not get to hear the first four members of the panel but I did hear Mr. Weiss and I think Mr. Weiss did an excellent job, I think, sort of lining out some of the concerns and problems that we face in California.
I would only like to draw the panel's attention, and the members of the audience, on the crop insurance issue, don't tarry too long if you have constructive suggestions on how we approach crop insurance because we're in Conference Committee right now. And the staffs in Washington, DC are putting together whatever compromise that is worked out on crop insurance in section 109.
So, for those of you who are interested, pro or con, it is important that we don't wait too long. And we will take, certainly, your advice and your comments today in consideration as we meet in the Conference Committee.
The other thing that I would like to I heard Mr. Merrill's answer to Mr. Stenholm as it relates to Market Access and some of the costs were mentioned in terms of price supports or us subsidizing products. You mentioned that possibly we could use Market Access as an alternative approach.
Mr. Stenholm and most of this panel up here understands that, when Market Access comes up, that we have to fight like heck to make sure that we have a modest amount of Market Access money in the budget. Those people who come from different areas of the country may not appreciate Market Access.
Page 36 PREV PAGE TOP OF DOC
But I would like for you, if you could, as it relates to Market Access, is your approach to Market Access you said ''let's put more money in it,'' that might be part of the solution because you believe the trade policy has not been what it should be in terms of making a fair deal for those of us, particularly in the West, and this is a way to sort of even the playing field? Is that the reason you're suggesting, Mr. Merrill, to use Market Access?
Mr. MERRILL. Yes. I mean, I think it's an alternative to develop customers and it's sort of along the lines of you can give a man a fish or you can teach him how to fish. And one way you feed him one time you gave him the fish and the other way you teach him to feed himself the rest of his life.
And so, I think what we're looking for is long-term customers and I think, by and large, the world likes to buy American products and they can rely on the quality and the safety and they like to buy American if they're given the opportunity to do so.
Mr. CONDIT. What I'm looking for, though, is, if you had a fair trade policy in this country that you were comfortable with, and people in California and the West were comfortable with, would we need Market Access?
Mr. MERRILL. Well, it probably wouldn't be as important as it is at the current time where we don't have very many aces in our hand. I mean, that's the thing, I think
Mr. CONDIT. You have all these, you have the Europeans, you have these foreign countries subsidized in agriculture and this is our way of actually being sort of more competitive.
Is there anyone else that would like to take a crack at that? You know what I'm looking for
Mr. COLOMBINI. Yes, I'd like to respond because there's two commodities that I raise that have benefited very much so from the Market Access Program, originally the TEA and then the MPP, now MAP.
Page 37 PREV PAGE TOP OF DOC
In 1985, the Japanese didn't really know what a walnut was and the MAP program came out with the walnut industry was the beneficiary of some of those funds and began promoting walnuts in Japan. Japan is now the largest importer of shelled California walnuts in the world.
A similar story with cherries. Before we participated in the program, we exported very few cherries outside of our country except to Canada. Canada was probably the only country we exported cherries to. Once we started participating in the program, as I mentioned in my testimony, from 1992 to 1999, we've exported on average 53 percent of our crop to export markets, Japan being the largest.
Mr. CONDIT. Anyone else want to comment to that?
Mr. WEISS. I think that MAP funding is essential as part of a fair trade program.
Mr. CONDIT. OK.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Ose.
Mr. OSE. Thank you, Mr. Chairman.
I didn't hear any of you talk about methyl bromide and whether or not it's affecting your various operations, especially given the treating intention in the United States to phase that out here in short order. I'd appreciate any comments any of you might wish to make on the availability of methyl bromide, whether or not there are cost-effective substitutes, and how it affects your individual operations.
Mr. GEORGE. In the citrus industry, there used to be quite a bit of methyl bromide used where we went into replant situation. We do have some other substitutes in the field for that. Where it would probably affect the citrus industry the most is in the nursery industry where we produce most of the trees are produced in the ground and there's a limit on how many times you can go back into that ground and grow a nursery tree without fumigating. So it would be an issue there.
Page 38 PREV PAGE TOP OF DOC
Mr. MERRILL. My belief is that I'm not in the nursery business but, for the nurseries, it remains a very grapevine nurseries, it remains an important tool.
For us, re-planting vineyards, even though it is far and away the best material, in my experience, for using before planting, and actually reduces a lot of use of herbicides and the nematicides that you have to put through the drip if you're trying to plant into a nematode-infested block. The practicality is that the cost has soared; it's gone up probably $200 an acre to us just in the last for sure, the last 24 months and possibly the last year.
The restrictions also are such now that one can only do a 20- or 30-acre block and so, in other words, if we're planting a 150-acre vineyard, we have to get the applicator to come back five times to do the block.
And it's just what I'm getting at is there is a de facto ban of it right now; it gets harder and harder to use because of restrictions, cost, local restrictions, and so on to the point that we are now using other products.
Now what we don't know with these vineyards is how well they're going to work; so we're suffering. But, at some point, farmers have to figure some way to go on and move on to the next best method and hope to heck it works.
Mr. OSE. Did I understand you to say that we agreed to phase methyl bromide without having any available cost-effective substitutes?
Mr. MERRILL. That's exactly what you heard; yes.
Mr. OSE. Anybody else?
Mr. COLOMBINI. I'd like to comment on that because it would be devastating to our industry. As a cherry grower, the Japanese require fumigation of cherries into the country by methyl bromide; that's what they require for phytosanitary reasons. Which means, if we didn't have methyl bromide, instantly, over 20 percent of our crop would not have a home.
Page 39 PREV PAGE TOP OF DOC
Also, with walnuts, walnuts need to be fumigated against insect infestation and, because of the nature of the walnut, the unsaturated nature of the fat in the walnut, other fumigants are will not work. Methyl bromide is the only one that works on walnuts. So there's no available substitute there right now.
Mr. OSE. John?
Mr. GIOVANETTI. The answer that you stated is exactly the point of this question. Without an acceptable alternative, it puts us at a competitive disadvantage with other countries and, in a lot of cases, other commodities in our own country. The key is to have an effective alternative to methyl bromide at this point.
Mr. OSE. If I may, Mr. Chairman, I'd like to go to my second question and that is, at least in my district, there is a considerable amount of concern having to do with land acquisition by various branches of the Federal; State; and in some cases, private non-governmental organization arms of our society. I'd be curious if any of you have any observations you would care to offer about land acquisition in particular.
Mr. MERRILL. I have a comment. We have not, on the Coast, seen those acquisitions yet. We heard talk about not farming or not developing; but, so far, no group's stepped forward to buy anything, they just want to restrict your ability to farm.
I would be concerned about, if they did get the money together, we would lose a lot of land for productive agriculture. And, with enough of that going on, I think we would begin to see an effect on the economy of agriculturals.
Mr. OSE. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Thompson.
Mr. THOMPSON of California. Thank you, Mr. Chairman, I just have one point I'd like to make and get some reaction from the grape folks who are the witness table.
Page 40 PREV PAGE TOP OF DOC
Everyone mentioned the importance of permanent normal trade relations with China but, if I can take a very parochial view of that for a moment, in my district the agricultural component that stands to gain the most is those who produce wine. But, at the same time, a couple folks mentioned of the increase in insects and pests, and specifically the glassy-winged sharpshooter and the fact that it's spreading Pierce's disease, and a different type of Pierce's disease, at a very alarming rate.
It's my understanding that if we don't get ahold of this particular problem and figure out how to get rid of the glassy-winged sharpshooter, there's not going to be any wine in California to send any place, China or anywhere else. And I don't know that that point was made.
If you look down in Temecula, where that insect has absolutely wiped out a very significant part of winegrapes in that area, and some folks who haven't been decimated by the glassy-winged sharpshooter are bringing in consultants to look at converting their vineyards to golf courses. And, if this insect is not stopped and stopped quickly, California is going to be devastated because wine is such a big part of our local economy.
I mean, I'd just like to just hear some comments from the wine folks or the grape folks on that.
Mr. MERRILL. I guess I'm the grape folks.
Yes, I would say Mr. Thompson is exactly right. The fact is this sharpshooter and Pierce's disease epidemic we have is the biggest threat we've ever had to our industry; and that's talking about prohibition or anything. The main reason is that there is no cure for it presently. If your vineyard becomes infested with Pierce's disease, basically the ballgame is over; it doesn't do you any good to replant vines because there's no resistant rootstock, there's no resistant sasine (phonetic) wood or anything else. Besides the effect of, ''It's too bad we don't have wine here,'' people say, ''Well, just buy a bottle of wine from somewhere else.'' But the fact of the matter is that we have a $33 billion industry in California; it has become critical toward maintaining agriculture, especially in my area in the Central Coast, there are no alternative crops.
Page 41 PREV PAGE TOP OF DOC
It's not an accident that I wound up in the winegrape business; it wasn't because I made too much money in the other crops, I can assure you that. I've tried just about every legal one there is, from sheep to walnuts to barley to tomatoes, I've done them all. And I was saying, we were in Washington, DC a month ago with COG and the Wine Growers of America and, at the same time, there were lots of folks from the Midwest there protesting low prices and so on. I tell you, I could as one famous fellow says, ''I could feel their pain.'' because I used to raise those crops and I gave up on them 20 years ago.
So I really feel that, since we have a profitable commodity such as winegrapes, we have a very heavy responsibility, I think, to try to maintain that crop as a viable product. And Pierce's disease could wipe this thing out. And so stopping the sharpshooter is critical.
And, while we're not there and we need more help, we do appreciate the help we have gotten from USDA; ARS has been terrific, they've been very responsive and so it's not just sitting here and telling you everything's terrible and nobody helps us with anything. That's not true; we've been very happy with the support we've gotten thus far, it's just we have a long way to go and it's a very, very formidable foe.
Mr. WEISS. I would say also that absence of this subject from my particular address in no way reflects the lack of importance of it. I chose to speak about these issues, one, because I'm here representing pear growers but, two, because this particular issue has received a tremendous amount of attention already, I think all of which is very-well warranted.
I am from an area that's north of one of the northern-most areas for grape production in California and I guess, technically, that means that we are the farthest from the problem geographically. However, we still feel very much a threat on the horizon and this problem is potentially much greater than the actual problem has been all of which we have suffered already.
Page 42 PREV PAGE TOP OF DOC
And so I would like to underscore the importance of it and request any support that can be forthcoming from the committee in this regard.
Mr. GIOVANETTI. Mr. Thompson, I would like to speak to this issue from the table grape standpoint.
If we are to continue to supply the world with the most consistent, the highest quality, and the safest food to be put on the table, this issue needs to be addressed very heavily and, although I'm not an advocate of throwing money at a problem, it takes a certain amount of money to get to the root of the problem and have it solved.
Mr. COLOMBINI. I'd like to can I have time to respond? Because I'm also a winegrape grower and it's already been said how devastating it would be to the winegrape industry but it also affects a lot of other commodities, cherries, apples, almonds, peaches; I mean, the list goes on and on and on.
And this State produces 50 percent of the fruits and vegetables that are consumed in this country. Now, if you have a pest like that, it's going to require more applications of insecticides; and that concerns me because that goes to the food safety issue.
And another point is, because the glassy-winged sharpshooter is native to the southeast of the United States, it doesn't exist in many other parts of the world. And I'm afraid that this could be used as a phytosanitary restriction for importing cherries, apples, or whatever the commodity is, to other countries.
Mr. THOMPSON of California. Thank you very much.
Mr. Chairman, just a footnote; when Mr. Pombo had his hearing on this, we learned that a very aggressive and extremely successful integrated pest management program may be able to alleviate 85 percent of this pest. The other 15 percent, it's expected, would wipe out in its entirety the California grape industry. So this is very serious and we really need some help on this.
Page 43 PREV PAGE TOP OF DOC
The CHAIRMAN. Mr. Thune.
Mr. THUNE. Thank you, Mr. Chairman; and, panelists, thank you. It's great to learn a little bit more about agriculture in this region of California. In South Dakota, agriculture is our number one industry and, just to get the dimensions of rural areas, I think that the town I grew up in, there are probably almost as many people in this room as the town I grew up in. So we are very rural, very agriculture, and very different in many respects from what we're hearing about today, obviously, in terms of the crops that are grown.
But we were admiring last night as we were driving in, my colleague from Kansas, Mr. Moran, what we thought was a wonderful looking Sierra beet field and then we were informed it was a rice field. So there is a difference.
And I should say to Mr. Condit, in South Dakota, we won't have to worry about traffic when we get in there tomorrow. And we still talk in terms of miles and not minutes. When we do talk in terms of minutes, it's usually because we can go farther in miles than in minutes.
But I would just say that we rely a lot on Chairman Pombo and Mr. Ose and Mr. Thompson and Mr. Condit to understand the unique needs of this area of the country in terms of agriculture. And I appreciate the insights that they provide.
There were a couple things that you mentioned, one was crop insurance, which is something that we are very much interested in trying to make workable as a risk management tool. I realize it's very important to those who produce all different forms of crops to make sure that that program works. And so I would echo what Mr. Condit said about, if you have ideas that would make that work for you, please get them to us soon because that is in the final stages of being drafted.
But I was just curious one question I had and that is, in our part of the world, there are a lot of things going on in the area of genetics and Round-Up-ready soybeans, Bt corn, and I'm just wondering to what degree biotech is an issue in your industry. We have a lot of problems right now in penetrating markets, trade in other areas of the world, Europe, Japan, for example, with products that we grow in our region because of the barriers that are being imposed. Is that an issue and to what level? I'm just curious as to what your thoughts might be on that.
Page 44 PREV PAGE TOP OF DOC
Mr. GIOVANETTI. There are a lot cute phrases that are attributed to biotechnology, of ''Frankenfood'' and all these other scare tactics that we believe are attributed to biotechnology. But, as I see it, it's not particularly true to fresh fruits and vegetables immediately. But, in a lot of cases, people talk about the use of biotechnology and the issue of food safety. But, in a lot of cases, food safety is the issue with biotechnology because we cut down on the use of herbicides and pesticides when something has been engineered to avoid multiple uses when the concentration of whatever is in the plant is already there to deal with the problem.
Mr. MERRILL. I think that there is a lot of hype with this and a lot of fear; and I think that we need to move cautiously, we need to evaluate what the real risks are and then we need to think about, undoubtedly, how to handle it, I guess, in a public relations fashion. I don't know if that's the exact word, but to deal with people's fears.
I would be hesitant to throw anything out of the toolbox right now. I don't think that, if we're going to get away from relying on conventional fertilizers and pesticides which allowed us to get to the point where one farmer feeds 135 people now, I don't think the public is going to stand for going back to one farmer feeds 10 people. I mean, I don't see that happening. People are at some point, the public will be outraged.
Now, maybe it's going to take food in the grocery store being 10 times what it is now, but the fact of the matter is that cheap food subsidizes our way of life. And, up to now, comparatively cheap oil, I guess, too.
But the two of them together and I think if we want to continue to have these kind of the production where one farmer is going to feed 135 or more, it's going to have to be better than that in the future. It's hard to envision just discarding genetic engineering altogether, that it won't play some kind of a role.
But, at the same time, we do have to be aware of the fact that we can get ahead of ourselves, sometimes, with technology and then we end up losing something because of fear.
Page 45 PREV PAGE TOP OF DOC
Mr. THUNE. Do you have any thoughts?
Mr. COLOMBINI. Yes, I know, in a lot of instances, it's people think genetically altered foods or modified foods are unsafe. But I contend that it would actually make our good supply safer. As an example, there's a genetically-altered bacteria that could be sprayed on crops that would make it resistant to fungicides. And, in California, with the crops that we grow, fungicides is one of the major pesticides that we use and that would eliminate the need for that. And that's the type of science that agriculture needs.
Mr. THUNE. Thank you.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. Thank you, Mr. Chairman.
It's been said that, when I hear, I forget; when I see, I remember; and, when I do, I understand. Notwithstanding the terrific effort the delegation from this part of California does, I want to thank the chairman and all of you for being terrific hosts yesterday and today because I think I have a better understanding of agriculture here in this part of the world. It is very much different than agriculture in southeastern Minnesota. So we're delighted to be here.
One of the issues and most of the questions I was going to ask have been asked so I don't want to take too much time. But one of the questions that we in Minnesota have marveled at is the difference between the fact that we have a lot of water and water is a problem for California.
Can any of you talk a little bit about now, is water a problem in this part of California or is that farther south?
Apparently it is, then? Tell me where you go from here in terms of water supplies and how does Federal policy affect your water problem?
Page 46 PREV PAGE TOP OF DOC
Mr. GIOVANETTI. Funny you should bring that up.
The problem I have, I farm not only does my family have a base here in Yolo County, but we have a farm that I operate in Fresno and Kings Counties. And a lot of the problem that we have is dealing with the conflict between agencies, as it was brought up earlier based on the answer to a question from one of the other Congressmen.
You have a situation where, in California, I firmly believe that we have plenty of water, it's just that there are conflicting pieces of legislation and conflicting agencies that tear at each other to confuse the issue.
I don't mind playing the game as long as I know what the rules are; but, when the rules constantly change, it's really tough to make a living.
For example, the Endangered Species Act has to do with protection of fisheries in the Sacramento-San Joaquin Delta waterway and river system. You have, on the one hand, species that are listed as either threatened or endangered by one agency of the Federal Government, and the State government is extending the sport fishing season by 60 days on each of those two species. What's wrong with this picture? Is this one of those, Mr. Chairman or Mr. Speaker, beam-me-up things I have to talk about?
We have many species what is it many species that we feel are abundant, as are evidenced by this kind of conflict. In terms of relief, I personally would like to see the Federal Government out of California water. I don't see any reason for the Federal Government to be in intrastate water. I'm kind of a States-rights kind of guy and, if you guys could do anything to or you Congressmen could do anything to implement that, I think that our present Governor would like to work with the Federal Government on that basis.
In the meantime, if it's going to be a joint effort, we would espouse the philosophy of having additional storage in any kind of future legislation and some kind of a cross-delta facility that would get more water from the north to the south, not at the detriment of either of the two areas.
Page 47 PREV PAGE TOP OF DOC
We think that, if the kind of thing can be justified, we don't mind sharing the water but we should would like a lot of science that proves that that water is needed. And I don't think that has been done adequately. We just end up fighting amongst ourselves over a resource that's both renewable and adequate.
Mr. GUTKNECHT. Anybody else?
Mr. GEORGE. That was well put. I think, for permanent tree crops, one of the issues that just to expand a bit on that is that the rules have changed and do change and continue to change and probably will continue to change. And, when you've got thousands of dollars an acre invested in an orange grove, you're counting on the rules that were in place when you planted that.
It becomes very difficult to look down the road and say what's going to happen, how do we keep going? So I think staying with something that we can live with and something that we're used to, as we have to solve these other problems. We have to take into account that there is a tremendous amount of money invested in these groves under a certain set of rules.
Mr. COLOMBINI. I agree with what's been said and I wanted to provide a real-life example. Our water district, which provides water to the farmers and the city of Stockton constructed a $65 million canal to get water from New Melones Dam, which is a Federal project, and had a contract with the Federal Government to receive so many acre feet per year. And, just as the canal pipeline was finished, the Federal Government reneged on the contract and decided that that water was needed downstream in the Delta for fish habitat or wildlife or what have you.
Mr. GUTKNECHT. When you say the Federal Government, can you be more specific? Which agency?
Mr. COLOMBINI. Well, you're starting to get over my head now but I'm not quite sure.
Page 48 PREV PAGE TOP OF DOC
Mr. STENHOLM. Fish and Wildlife?
Mr. COLOMBINI. Fish and Wildlife; OK.
Mr. GUTKNECHT. Thank you.
Mr. COLOMBINI. All I know is it put a severe financial impact on our water district after spending $65 million and then not being able to use it. I mean, we use it a little bit now, I think we've got 5,000 acre feet and, of course, Congressman Pombo it's in his district and he knows a lot about it. But it's things like that, when you're operating under a set of rules and you spend an exorbitant amount of money and then the rules change; and now what do you do?
Mr. GUTKNECHT. Thank you very much.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you.
Panel, could you describe to me how important exports are to your livelihood and, in particular, what percentage of your industries' products are sold and consumed abroad versus domestically?
Mr. COLOMBINI. I mentioned in my testimony that over 50 percent of our cherry crop are exported. We also grow apples and, of that, about 50 percent is also exported primarily to the Asian markets; Taiwan is the predominant purchaser of our apples. A certain variety that we grow, the Fuji apple, they actually purchase over 65 percent of that crop. They also purchase Gala apples to a lesser degree.
Walnuts, as I mentioned to you earlier, we export a lot to Japan, also Europe is a big consumer of our walnuts. I don't know the exact statistic but it's somewhere in the 40-percent range of that crop is exported.
So, it's a significant portion of our commodities.
Mr. MORAN. And then table grapes and wine?
Page 49 PREV PAGE TOP OF DOC
Mr. MERRILL. I have to apologize, I cannot tell you the exact value. I don't know, from the winegrape standpoint that, while it is probably still would appear relatively small compared to our overall sales, it's a growing segment of our sales. I know that from the wineries that are buying our grapes. They're dealing with us and, in terms of what chemicals we can use and so on. In other words, they want to make sure that they that we don't apply anything that might be forbidden for whatever reason by any by foreign countries.
So I do know that it's expanding considerably and I do know that it's important for a number of reason, if for nothing if for no other reason than to offset the imports that come in because we are the United States is seen as a huge export market for countries like Australia, Chile, and obviously France and Italy. But Australian wines typically go to the UK or to the United States and, therefore, exports become important to us if for no other reason than to offset the imports that come in.
And I can get I promise, I'll follow up with you and we'll get you that number because probably everyone else in my association knows it but me.
Mr. MORAN. Thank you, Mr. Merrill.
Mr. GEORGE. With citrus, it's very significant. Our navels, probably about 20 percent of the crop is exported, with Valencias over 50 percent and I'm not sure with lemons. It's significant because, with retail consolidation and some of the things that are going on domestically, it's getting more and more difficult to make a nickel in the United States and the export markets, unfortunately but quite frankly, are the only place where we can make any money.
Mr. MORAN. Well, I was surprise by each member of the panel's response to Chairman Combest's question about, if we cannot negotiate a reduction in export subsidies by other countries, should we, therefore, increase our export subsidies to try to combat and it does seem to me that we've got to do something to get the European community and others' attention.
Page 50 PREV PAGE TOP OF DOC
I attended WTO talks in Seattle. Our overall goal as an agricultural community was to reach an agreement simply to agree that agriculture subsidies, export subsidies were going to be reduced over time. We were unsuccessful in reaching that conclusion. I'm certainly not willing to give up; I think we need to continue that fight.
But I also find it very difficult to expect the Europeans just simply to walk away from where they are today without some kind of change in our policy and some type of very aggressive actions on behalf of American producers by the Department of Agriculture, the State Department, and ultimately by Congress and our President.
I was particularly interested, Mr. George, if you would expand, describe to me this peace clause that you mentioned and its particular application to problem that we face.
Mr. GEORGE. Well, it's my understanding that, in those negotiations, that domestic subsidies were excluded from the conversations. And so whether there are domestic subsidies in Europe or not, it underwrites their ability to farm and their cost to farm.
We, quite frankly, for the most part, the California citrus industry wrote off sending a lot of product to Europe a long time ago. And it probably has become an issue for us in the last couple of years because of Spanish clementines that have been coming in to the east coast particularly; it's taken away quite a bit of our market early in the season and they're very, very inexpensive.
So whether they are a domestic subsidy or some other kind of a subsidy, it doesn't really make any difference to us, it's still helping them produce a crop more inexpensively and they're bringing it here very inexpensively and it's very difficult to compete with.
Mr. GIOVANETTI. Mr. Moran, my understanding of the peace clause was that we gave up the ability to sue in any conflict between imports and exports between us, at least, as my testimony indicates, that between us and Europe, anyway. And that's a 375-million-European-person market that we have given up based on this. And I certainly don't think that safeguards for them and prohibitions for us are the answer to this. We need to get in.
Page 51 PREV PAGE TOP OF DOC
And, in answer to your other question, there's a table on the back of my testimony showing the amount in dollars and tonnage of imports and exports going back and forth between us and Europe, showing us as decreasing by 12 percent and them as increasing by 141 percent.
Mr. MORAN. I appreciate your comments.
My time has expired. The idea that a subsidy is a subsidy, I think, is a good one to make.
The other thing, particularly the last comment, we often get bogged down on whether or not we ought to be negotiating. It seems to me, the and whether or not agreements that we've entered into in the past are advisable.
It seems to me, the question is not whether we ought not be trying to reach agreements, it's what agreements we reach. And it does seem that we've made a number of errors and we've traded one crop against another, one country for another and my complaint is not that we're not negotiating, it's that we don't negotiate the proper agreement and then we're not prepared to enforce the agreement once it's in place.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Chairman, and I appreciate the testimony relative to the Endangered Species Act and the impacts that it's having and the increased costs that it's imposing on production.
Coming from Idaho, we deal with those same things to a significant extent. In fact, I just returned from a hearing on salmon where we've got a federally-protected fish, the young of which are being eaten by a federally-protected bird on a federally-created island and we're being asked to surrender irrigated farm land in southern Idaho in order to flush water down to make sure we get these terns out or these salmon out for this deli that we've created for the Caspian terns. But that's another hearing at another time.
Page 52 PREV PAGE TOP OF DOC
I appreciate the fact and sympathize with the fact that you're going through the same problems that we are and, in fact, much of the rest of the country is; and it's something that we have to educate the rest of the country, too.
One of the things, though, that you all have mentioned is that you think permanent normal trade relations with China is an important thing. And it's something I've supported. One of the arguments against it that people opposed to it raised is that past agreements, as Mr. Moran has just mentioned, have not been enforced and that agreements like NAFTA has significantly harmed particularly the fresh fruit and vegetable industry in California. We hear that when we're in Idaho.
Is that a legitimate argument? Is it true? Has NAFTA hurt agriculture in California in the fresh fruit and vegetable area?
Apparently not.
Mr. COLOMBINI. There are certainly examples of where NAFTA has hurt. I'm not a grower of asparagus. My father- in-law is a grower of asparagus and that's a commodity that NAFTA has significantly impacted that crop because we are importing a lot of Mexican asparagus now. And our area is the largest asparagus grower in area in the United States, so it's really significantly impacting that.
As far as trade, I did want to say one thing. And earlier Mr. Stenholm asked about eliminating unilateral trade sanctions, and I answered that they should not be eliminated. I think I may have misunderstood what he was asking, and I wanted to talk about this.
I was approaching it from the context, as an apple grower, when China started dumping apple concentrate in the United States markets, our price for processed apples went from $80 a ton to $10 a ton and it cost $20 a ton just to pick them. And so a 91 percent tariff was slapped on China for anti-dumping and that's what I was referring to; that's when I answered the question saying, ''yes, I'm in favor of unilateral trade sanctions.'' I don't want them eliminated for purposes like that. And that's where I was coming from.
Page 53 PREV PAGE TOP OF DOC
And I would like to see permanent normal trade relations established with China but, certainly, there's got to be these issues addressed such as dumping and there's a whole slew of other issues. But I am in favor of that.
Mr. SIMPSON. Anyone else?
Mr. GIOVANETTI. Mr. Simpson, it doesn't matter whether it's NAFTA or GATT or any other pact or negotiation that we enter into, we definitely have the potential to be damaged by any of these if our trade negotiation policy doesn't change. We need to go in there with a plan. Obviously, you gentlemen are collecting the information that it takes to go in with the right kind of plan but we need to get tougher on all of these issues that have been discussed here today.
There is no reason for us to enter negotiations with the attitude that we need to compromise our place at the table. We go into these things with a compromise attitude and we end up going from the middle in the other direction, rather from our position to the middle.
Examples are avocados, asparagus, and tomatoes, all that have been damaged by some of our trade agreements.
So I think we need an attitude adjustment to begin with and go into these negotiations and enter them from a bargaining position of a much higher level than we have in the past.
Mr. SIMPSON. I appreciate that and, as Mr. Moran suggested, I think we have to have agreements if we're going to trade. But those agreements, as you've mentioned, have to be fair and that means we have to have a tougher negotiating position. And I suggested at the WTO that we hire the European negotiators because they seem to do a better than ours have done in the past.
But we want to make sure and I think this committee has tried to make sure that, when we negotiate these agreements, as an example, on export subsidies, that we didn't go in with percentage reductions as we've done in the past and say, ''We're going to have a 10 percent reduction in export subsidies'' between the Europeans and us because, when they go from 50 to 45 and we go from 10 to nine, we're still left with a huge disadvantage. And I think those are some of the things and the reason an agreement was not reached in Seattle.
Page 54 PREV PAGE TOP OF DOC
But, to me, I don't think Seattle was a failure; I actually think Seattle was a step in establishing us and putting down the marker by which we were going to negotiate. To me, as I tell the individuals in my area, I just look at that as, we thought it was going to take a day to paint our house and it's going to take a couple days, or maybe three or four. We continue negotiating and continue meeting with these people and, hopefully, we will be able to reach some agreement on what is fair and negotiate from that perspective rather than just reaching an agreement for having the sake of reaching an agreement.
I appreciate your testimony and it is important that we get around because, regardless of where we come from, the concerns and issues are different in every area of this country and I'm interested to learn about the glassy- winged sharpshooter; it sounds like a fighting combat unit from Vietnam. I didn't know a lot about that but I'm going to learn a lot more about it, I'm sure, from Mr. Ose relatively soon.
Mr. MERRILL. The other aspect when you're dealing with trade agreements is also talk talking about the sharpshooter, is pest exclusion.
When we were back in Washington and met with USDA and officials, one of their concerns was not to pick on one country, but Argentina was one that was getting ready to export, as I recall, citrus to the United States. And one of the fellows at USDA characterized our country as the Jurassic Park of exotic diseases ready to come here.
And we said, ''Why would we have to worry about that right now when we're having all this trouble with pest exclusion?'' He said, ''Well, it seems that they've sent some troops to Kosovo and now we have to thank them and that means we've got to bring the citrus in.'' and I don't know if that's literally the case, but I do think it points up the fact that when there's a lot more than just who gets to sell what, where. We get hitchhikers such as pests come in here at the very time we don't have enough money to fund APHIS where we should. We make the job even tougher by allowing pests to come in and attack our number one industry in this country. And I think we have to think about it.
Page 55 PREV PAGE TOP OF DOC
One last thing. We also heard that it was mentioned by one of the speakers that we're contemplating moving to a systems approach of determining pest exclusion risk, which means, I guess, you sit down and mathematically figure out with some real smart people what the chances are of the bug coming in without actually having much experience with it. And then we just all see how it comes out when we're all done as to whether we were right or not.
And I would say that we need to stick with good science and good exclusion techniques and let the experts in pest exclusion do the job that they can do if they have enough funding and enough staffing and not get carried away with too much, virtual solutions that we think might work and then we find we have a lot more than just the sharpshooter, lots of new words to learn to pronounce along the way. And big threats that, frankly, there's no answer to.
The CHAIRMAN. Mr. Stenholm has a follow-up question.
Mr. STENHOLM. Mr. Colombini, I thank you for your clarification because I do believe that you did misunderstand what I was asking. And I certainly agree you're talking about reciprocity and that's what all of you have said. If we treat countries a certain way, we expect to be treated the same way. If not, then we have every ample reason to do what the Chairman was asking you to seriously think about.
We can't just always be the good guy in trade; you've got to deal as I'll put it differently, I think our Government has to stand shoulder to shoulder with our producers in that marketplace. Otherwise, we're going to continue to lose. And what we're looking for is better ways for us to stand shoulder to shoulder. And that's when we have unilaterally imposed sanctions.
When we say we don't like country eggs but all our ''friends'' continue to sell to them, who does it hurt? The producers in America and the people in the other country.
That was the gist of it and thank you for clarifying your answer.
The CHAIRMAN. Thank you, panel, very much.
Page 56 PREV PAGE TOP OF DOC
The reason I get paid so much more than all of my colleagues is I have to be the bad guy.
We are way over time on the first panel. I would ask all of our witnesses to hold their comments within 5 minutes. I know you don't think we're going to read this testimony. You will be pleasantly surprised that every word of the testimony is being read.
I will also ask my colleagues if they would please help to move the questioning along. We don't, unfortunately, have the luxury of being able to spend the afternoon in beautiful California, we have to fly to beautiful South Dakota for a hearing there. And so we are well beyond where we should be after the first panel.
Thank you very much for your time.
I will call the second panel to the witness table now: Mr. Thomas Ellis, rice, wheat, and alfalfa producer from Grimes, CA; Mr. Daniel and I'm going to really mess this one up but, if you know who you are, please come forward Errotabere, cotton, wheat, garlic, tomato producer from Riverdale, CA; Mr. Bruce Heiden, a cotton producer from Buckeye, AZ; Mr. Wally Murphy, a barley, cotton, and wheat producer from Tucson, AZ; and Mr. Steve Rystrom, a rice producer from Chico, CA.
And if you would all please sit; we're going backwards this time from where we did before, but that keeps us all alert.
Mr. Ellis, we could start with you and please proceed. And, if you would, watch the green and red lights.
Thank you.
STATEMENT OF THOMAS W. ELLIS, RICE, WHEAT, AND ALFALFA PRODUCER, GRIMES, CA
MR. ELLIS. Thank you, Mr. Chairman.
Page 57 PREV PAGE TOP OF DOC
I'm Tom Ellis and I farm about 1,000 acres in southern Colusa County and northern Yolo County on the west side of the Sacramento River; it's about a 30-minute drive north of this hearing room.
I'm very pleased to have this opportunity to talk with you and sincerely appreciate your committee coming to Woodland today. I also want to emphasize that I am speaking only for myself as an individual farmer. And, since everybody else has touted their Assemblyman or their Congressman a little bit, I have to talk about Doug Ose.
Doug, I want your colleagues to know that you make a real effort to understand what we need in agriculture; and I appreciate that and I admire your enthusiasm, your energy, and your dedication.
On my operation, I grow wheat, rice, and alfalfa. Since alfalfa is my main crop on 700 acres of my farm, my comments today will be addressed towards issues affecting that crop. In addition to my acreage, I handle alfalfa for some of my neighbors and, combined, we normally produce about 8,000 tons of alfalfa cubes and some baled hay each year.
About 60 percent of our cube production was sold to Japan, a market we enjoyed for over 20 years, until 1998, when sales dropped from 5,000 ton a year to 900 tons due to the drastic economic problems experienced in that country. That hurt, as you can well imagine.
In 1999, we hope for some recovery but shipped tonnage was about the same as 1998 as we experienced continued downward pressure on price and volume.
Japanese buyers were very price-conscious and looked north to Canadian producers who seemed willing to sell for less. Part of the reason, I suspect, is the Canadian transportation subsidy which helps offset the cost of shipping alfalfa and grain products to western Canadian ports. The result is a significant price advantage for Canadian producers.
I realize Midwest interests don't want Canadian grain delivered into the middle of the United States, so they see the transportation subsidy as a benefit. But how about alfalfa and forage products? Could we ask the Canadian Government to end the transportation subsidy to these products?
Page 58 PREV PAGE TOP OF DOC
I have found out, since I have prepared this testimony, that this subsidy to hay products was supposed to be eliminated in 1996 during the round of negotiations. However, I suspect these are still in effect in some form or another. In the past, it has amounted to about $20 per ton making it impossible for western U.S. hay producers to compete. Therefore, I respectfully request our Government to look into this situation.
Another area of real concern to me is risk management. I am in full support of H.R. 957, the Farm and Ranch Risk Management Act of 1999 which would create FARRM accounts. Current crop insurance and recent disaster payment programs have not been very successful in addressing the needs of hay and forage producers. I think the idea of pre-tax savings accounts, which is my understanding of how H.R. 957 works, represents sound fiscal policy, it is easy to understand, it would be easy to administer, it would be fair to all producers, and would encourage savings while providing farmers with added income stability.
I talked with my lender about the idea and I used the Farm Credit System and he was very supportive of the program. I think lenders would welcome the measure as an additional tool available to farmers to help them through tough years. And, best of all, the savings account is under the control of growers themselves.
I feel such a program would lessen the need for disaster assistance which is difficult to pass, difficult to implement, never entirely fair, and seems that someone is always left out. The latter category is where hay and forage producers usually find themselves.
This is a slight deviation from what I presented. At the request of the California Association of Wheat Growers who were unable to get a spot on the agenda today, I am conveying the message that they are submitting written testimony regarding a Market Access issue with Mexico. It involves Mexico's refusal to take any wheat from California because of karnel bunt, even though only a small area of our State is regulated for the karnel bunt disease. So that testimony will be forwarded to you.
Page 59 PREV PAGE TOP OF DOC
Your consideration of these ideas would be appreciated and I sincerely thank you for coming to Woodland today. If you haven't toured this museum, be sure to do so and make sure you see the Harris Harvester display. These machines were the backbone of the Central Valley grain industry from the mid-teens to the forties and the fifties. It's the big machine on the south end of the display and I compliment the Heidricks for doing that.
And, Doug, I'm going to have a quiz for you on that machine when I see you next.
And thank you very much for your coming to Woodland today.
[The prepared statement of Mr. Ellis appears at the conclusion of the hearing.]
STATEMENT OF DANIEL ERROTABERE, COTTON, WHEAT, GARLIC, AND TOMATO PRODUCER, RIVERDALE, CA
Mr. ERROTABERE. Good morning, Mr. Chairman, and members of the House Agriculture Committee.
My name is Dan Errotabere and I'd like to thank you, Mr. Chairman and the members of the committee, for having this hearing and I appreciate the opportunity to participate.
My family has been involved in farming in the San Joaquin Valley of California since the late forties. Today, my farming operation with my two brothers includes growing upland and pima cottons; wheat; processing garlic, cannery tomatoes, lettuce, and almonds. Among my many activities and involvement in the industry, I'm currently the first vice chairman of the California Cotton Growers Association whose membership today represents over 99 percent of California's total cotton production.
I, like most cotton farmers in California, have suffered from the recent depressed economic conditions, not only in the cotton industry, but in most all of agriculture. The general consensus among those that I consult with today don't see a substantial turnaround in the immediate future which means that, in all likelihood, the Federal Government will once again be called upon to provide special assistance to help farms to continue, not only to compete, but to survive.
Page 60 PREV PAGE TOP OF DOC
The current farm bill was structured with good intentions, but it did not and could not predict the unusual set of circumstances in this country as well as in the world that caused such a collapse throughout most agriculture. Many blamed the current farm bill, but I don't. For the most part, I support most of the farm bill's provisions such as, the planting flexibility, the marketing loan provisions, and cotton's three-step competitiveness provisions. But, after our 1999 experience, I think we can all agree that the current farm bill falls woefully short in providing adequate downside price protection.
The culmination of this farm bill's marketing system loan levels and the fixed-rate provisions establishes a safety net well below the cost of production. Even though I would support the current farm bill for the most part through its 2002 term, if any part could be adjusted in mid-stream, it would be the raising of the safety net to help us survive the continuing depressed prices in the marketplace which remains low today and below our cost of production.
Again, without some adjustments in the current safety net levels and the current price predictions not favorable at this time, the Government assistance outside the current farm bill will once again be needed to survive in the cotton business. Certainly, the 1999 assistance package was helpful and appreciated.
And I want to especially recognize and thank all of you for your efforts for getting the use of certificates approved for redeeming cotton from the Government loan program. This was extremely beneficial for California cotton growers. I would hope that, if the assistance is needed again, we can count on at least the same levels of help.
Doubling the payment limits was of significant help to us here in California where payment limitation has long penalized us for being more productive while at the same time being forced to become larger to compete and survive.
We could not, and should not, let the debate over the size of farms and who can participate and who cannot interfere with the development of good and effective long-term farm policy.
Page 61 PREV PAGE TOP OF DOC
Relying on the small family farm concept is now outdated. For California farmers to compete and remain efficient and economically viable, they must become larger. Penalizing the producers of lower-margin crops just because of their size is wrong. Products grown on these size operations are what supplies the bulk of the raw products that fuels the economy in this State and across America.
Preserving more productive and efficient farming operations in this country should be our focus if the long-term viability of agriculture is to be maintained. I believe, as I think most of you do, that the marketing loan provisions in the current farm bill is a good, workable, and sensible concept. The payment limitation is counterproductive to that sensible concept. If one bale is determined to be eligible for payment, why shouldn't it be the same for all bales that meet the same eligibility requirements? Why should some bales of cotton get help and some not based on who produced them or what size the farming operation they come from? They both compete in the same marketplace, they both provide the same fuel to drive our economy, and they both provide the same input to our balance of trade in the export market where the bulk of California cotton goes.
I've heard the Secretary recently expressed the importance of maintaining the family farm and the importance of the family farm to rural America. Rural America is only going to survive if we can develop an agriculture policy that gives farmers some hope for the future. Most of the rural towns in my area, in the San Joaquin Valley, are supported by all-sized farms and, quite frankly, if you took away those large farms, most of these communities would not be sustainable. The policy makers need to understand this.
Finally, crop insurance reform. California has not been a large participant in crop insurance programs over the years. Our consistency in production and the cost and inadequacy of the insurance product available to us just didn't make sense. With less than good crops of cotton in a few of the last several years, coupled with the serious economic downturn in our business has caused many of us to look for more risk management tools.
Page 62 PREV PAGE TOP OF DOC
We've looked at crop insurance but, for the most part, have found it to be costly and seriously deficient in giving the farmer and/or his bankers an acceptable level of comfort or coverage. With our normally good yields and high costs of production and low margins, a downturn of 10 to 15 percent in yields can be a financial disaster. I don't think there is any insurance product out there today that provides coverage in these areas.
I know that the buy-up coverages have been upped somewhat this year but, again, they're sort of band-aids for most California cotton growers because, besides being costly, even after the Government premium subsidies, they leave too much exposure for the typical cotton grower.
I hear talk about the farm revenue guarantee type policy and, from what I've heard, this approach seems to have more merit for the California producer than the traditional type coverage. I understand that the Government has committed billions of dollars to crop insurance reform and I ask for your help in making sure that California gets its fair share in this reform in the form of a policy that makes sense in helping California cotton growers manage our risks, as well.
Again, I thank you for this opportunity and thank you for the attention to my remarks and the concerns for the American farm policy.
Thank you.
[The prepared statement of Mr. Errotabere appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Heiden.
STATEMENT OF W. BRUCE HEIDEN, COTTON, GRAIN, AND ALFALFA PRODUCER, BUCKEYE, AZ
Page 63 PREV PAGE TOP OF DOC
Mr. HEIDEN. Mr. Chairman and committee members, thank you for the opportunity to testify before your panel.
My name is Bruce Heiden. I'm a cotton, Durham wheat, barley, and alfalfa farmer from Buckeye, AZ; and my family also has a cattle feeding operation in that same location. I'm currently serving as a chairman of the board of Calcot Limited, a cotton and almond marketing cooperative with some 1,800 grower-members in Arizona and California.
In that capacity, I have occasion to travel to grower meetings throughout those two States and have a great opportunity to visit with our membership. I know that you have probably heard this before in the hearings that you have already concluded, but I want you to hear it again with certainty. And that is that agriculture has not participated in the robust and expanding economy that the rest of the United States has had the last several years.
Unfortunately, instead of export markets for the U.S. agriculture products continuing to increase following the passage of the Freedom to Farm Act, they decreased big time. The culprit was the severe downturn in the economies of Russia, Brazil, and the economic crisis in Asia. The loss of the export markets left too much production with no buyer and prices tumbled down, down, and down.
The situation has just overwhelmed the Freedom to Farm Act that was based upon increasing export markets, not shrinking cotton markets. The only reason many growers are still in business is because of the emergency relief provided by Congress over the past 2 years. That relief has been a lifesaver and, for that, we applaud and thank you.
Specifically, I'm speaking of your passage of the emergency agriculture assistance legislation which added supplemental AMTA payments. Doubled LDP limitations of payments, and renews Step 2 funding. Secretary Glickman's decision to issue generic certificates also was crucial.
Now these have all helped cotton growers survive through a very difficult time, a time that we're still trying to work our way out of.
Page 64 PREV PAGE TOP OF DOC
The renewal of Step 2 funding and the generic certificates will continue for the life of the current farm bill. Both of these items not only helped cotton growers directly, but they are important in determining the level of the futures market and the basis for cotton.
Prices for agriculture commodities in general, and cotton in particular, are still poor and it does appear that growers will again need supplemental assistance from the Federal Government in order to prevent a wholesale financial disaster. At the time I prepared these remarks, December cotton futures had closed at 59.54 cents per pound. Now, depending on the area, yields, and other factors, it is going to require a great deal of LDP and AMTA assistance for growers to continue to obtain production financing.
Now this would be one thing if cotton were the only commodity in this trouble. If it were, then a grower could switch to an alternative crop. But, right now, the alternative crop prices are as poor or worse than cotton. The situation just doesn't leave growers with an acceptable alternative.
Economic analysis suggests that agricultural prices will remain below production costs on many farms again this season barring extreme drought or other problems on a worldwide basis. So I strongly believe that emergency assistance will be needed again this year.
What are our recommendations for the remainder of the FAIR Act? In general, cotton growers in Arizona and California want to keep most of the principles contained in the FAIR Act. We like the three-step competitiveness program; it has helped keep U.S. cotton competitive to our customers and has kept cotton moving to the marketplace rather than building up in the loan.
We do like the planting flexibility that is permitted by the FAIR Act and the marketing-loan provisions. The supplemental AMTA payments need to be retained for the life of the present act or as long as agricultural commodity prices remain depressed.
Page 65 PREV PAGE TOP OF DOC
The above should be kept in the program to help agriculture and growers survive the current agriculture depression.
Now, what would we like to see changed? We oppose targeting agricultural assistance to producers in farm programs because it is counterproductive to commercial agriculture surviving in the current difficult times. In the West, we have to strive for maximum yields to have a chance to cover our high input costs. The high yields eat through payment limits on a relatively small amount of acreage.
Everyone else in the U.S. economy is allowed and encouraged to expand to get more efficient, as well as having more marketing clout. Yet we are told we cannot receive the same AMTA payment or Loan Deficiency Payment as other growers. So, instead of being able to compete more effectively, we find we cannot compete at all.
Now, quite frankly, for many commercial-size growers, the payment limitation doesn't just put them at a disadvantage, rather, it could be the difference between bankruptcy and staying in business.
On the positive side, we very much do favor the administration proposal for adding acres to the conservation reserve. This could have good effect both for the environment and for taking some marginal acreage out of production, thus potentially tightening up supply and demand.
Mr. Chairman, to sum up, our recommendations are to support the current legislation until its expiration in 2002, maintain the current mechanism for delivering agricultural assistance to producers, oppose targeting agriculture assistance to producers in farm programs because it is counterproductive to commercial agriculture surviving in the current difficult times, and also to support the administration proposal for adding acres to the conservation reserve.
Mr. Chairman and committee members, thank you for the opportunity to share these views.
Page 66 PREV PAGE TOP OF DOC
[The prepared statement of Mr. Heiden appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Murphy.
STATEMENT OF WILEY MURPHY, BARLEY, COTTON, AND WHEAT PRODUCER, TUCSON, AZ
Mr. MURPHY. Good morning, Mr. Chairman and members of the committee. My name is Wiley Murphy and I grow cotton and grain in Marana, AZ, which is rapidly becoming a suburb of Tucson. I also serve as president of the Arizona Cotton Growers Association, which represents nearly 1,000 cotton growers statewide.
All of us in the West appreciate the opportunity to discuss how important farm programs are and how they work in the West.
Before I begin my discussion of farm policy, I did want to thank you and your colleagues for your assistance over the past 2 years. Let me tell you that your support made a major difference in whether or not we would have a viable cotton industry in Arizona.
Unfortunately, we still need your help. Your recognition of that fact in the 2001 budget is greatly appreciated.
Arizona has a very fragile cotton industry and the assistance packages approved by Congress and created by Congress were both well-designed and effective. By ''fragile,'' Mr. Chairman, I mean our production costs are the highest in the Belt and when prices drop in Arizona we suffer.
Again, we appreciate your understanding of our plight and your response to our needs. The economic conditions and needs of this industry are plainly unique compared to other American industries. Clearly, America cannot do without agriculture and its many contributions to our way of life. Your continued recognition of our place in America is most gratifying. I don't envy your tasks in trying to assess the Freedom to Farm Act. I am sure there are voices counseling you to stick with the plan to end Federal farm subsidies, if not all farm program benefits.
Page 67 PREV PAGE TOP OF DOC
There are others who believe that the economic crisis facing the farm country is proof that the economic assumptions of the Freedom to Farm Act have been proved wrong by the results of the last 3 years and two major economic assistance packages. Clearly, your task is not an easy one in terms of choosing a total free market as, some would want, or a partnership with the Federal Government.
I hope that my comments here will be helpful in guiding you to that decision.
When the Freedom to Farm Act was enacted in 1986, I think all of us had high hopes for its objectives, and even for its economic assumptions of steady but growing prices and expanding markets. We also had high hopes for the promises made to us by enacting better trade policies, deregulation of onerous policies such as FQPA, tax relief, and crop insurance reform.
We believed that such a package of reforms might give us the opportunity to move forward without large Federal subsidies, although we were skeptical whether they would work. Nonetheless, American agriculture stepped off in a new direction.
While we still sing the praises of flexibility that has been created under the Freedom to Farm Act, the rosy economic scenarios painted by the advocates of the Freedom to Farm Act just didn't fit reality. Even though we experienced higher prices for the first 2 years of the act, the bottom fell out, requiring additional economic assistance. In addition, the Congress has failed to keep its commitment to pass effective trade legislation, that is trade policies that will permit us to be competitive and will expand our trading opportunities.
Any policy that proposes to phase out Federal farm support without addressing trade issues, regulatory reform, tax relief, and crop insurance will hardly help us to overcome economic disaster when it occurs. Whatever you decide to do, I hope you will keep in mind that a Federal farm policy is not just about direct economic assistance; it is also about a whole range of policies that affect us.
Page 68 PREV PAGE TOP OF DOC
Now let me turn to the economic crisis in Arizona, which is rather easy to describe, low prices, lower prices, and even lower prices. For those who suggest that we rely on market prices alone, 44-cent cotton, like it was at some times last year, does not help an environment when it costs nearly 70 cents a pound to produce it.
Arizona has the highest cost of production per acre in the cotton belt. Irrigation and pest control have always placed Arizona growers at the margin of profitability.
Mr. Chairman, Arizona farmers are doing their part to reduce these costs. We eradicated the boll weevil in 1990, we eliminated the white fly as a primary economic pest but not before it devastated us in 1992, we are using Bt cotton to reduce the cost of fighting pink bollworm, Arizona's most persistent pest; and we are on the verge of removing aflatoxin from our cottonseed to increase our seed profits.
We have done much of this on our own using our own funds with the exception of a boll weevil eradication program which the Federal Government contributed 30 percent of the cost.
If we are to survive, however, Federal farm policy should promote profitability. In this connection, those of us in the West are very dependent on sound trade policies, since nearly 90 percent of Arizona's cotton crop is exported to the Far East. When trade stumbles, the effect is felt at home. Relative exchange rates also put us at a severe disadvantage when trying to sell cotton to our overseas customers.
Finally, Mr. Chairman, let me discuss one of the most serious problems that we face in the West in the current farm policy, as well as previous farm programs, namely, payment limitations. Most farms in the West are large and getting larger simply because of the economics involved. Because of the high costs associated with cotton production, you need commercial-size operations.
Let us not be confused by the term ''corporate farms.'' Some of our farms in Arizona are large but the vast majority are family operations. The current payment limits bears little or no relationship to the economics of western cotton production. Western cotton is high yielding and, because payments are made on the basis of yield, we hit the limits very quickly.
Page 69 PREV PAGE TOP OF DOC
Mr. Chairman, I would like to conclude my testimony by discussing what changes should be made in the current farm bill and what we should do at the expiration of the Freedom to Farm Act.
First, we want to recommend that, for the balance of the farm program, that you maintain the existing structure, the flexibility, AMTA payments delivery system we see no point in substantially changing the Freedom to Farm Act at this point when the end is so near.
Although you are making progress on some trade issues such as CBI initiative and making progress on crop insurance reform, we still need legislation to adjust Food Quality Protection Act; substantial tax relief, such as estate taxes; health care costs; and FARRM risk management accounts.
As for the future, I believe that the Federal partnership with American agriculture is essential to America and its ongoing prosperity. The concept of a cheap and safe food supply has given America its best days, its prosperity, and hope of even better days ahead. To squander this contribution to American agriculture for the notion of deregulating farm policy is not good.
Therefore, I think that Congress should undertake to create a new farm program with the expiration of the Freedom to Farm Act, which should include the following: One, continuation of the AMTA type payment; two, a counter-cyclical payment when necessary; three, continued flexibility; four, the cotton competitiveness provisions; five, elimination of the payment limitation provisions; and six, continue to develop effective and affordable crop insurance.
Mr. Chairman and members of the committee, thank you for the opportunity to speak.
[The prepared statement of Mr. Murphy appears at the conclusion of the hearing.]
Page 70 PREV PAGE TOP OF DOC
The CHAIRMAN. Mr. Rystrom.
STATEMENT OF STEVE RYSTROM, REPRESENTING U.S.A. RICE PRODUCERS' GROUP
Mr. RYSTROM. Mr. Chairman, members of the committee, thank you for this opportunity to speak with you this morning.
I speak primarily as a producer, although I'm also on the boards of the California Rice Commission, as well as the U.S.A. Rice Federation; and I hope to reflect their views, also.
I live just south of Chico and farm rice in the Richvale area in Butte County, about 70 miles north of here where my family's farmed since 1912. My family is here with me today, sitting in the back. We took our four kids out of school today so they could experience something of how our Government works. We, together with my brother-in-law and sister's family, and my father, farm approximately 1,500 acres of rice. We're a family farm, as are virtually all of our neighbors. In fact, I can't think of a rice farm in California that would bear any similarities to the vast faceless corporate farm so often portrayed.
Over the past two crop years, rice prices have been depressed, especially for our fellow rice producers in the southern States. As I understand the situation, were it not for the emergency AMTA payments of the past 2 years, it is likely many of them would be out of business.
Although prices weren't as depressed for many California growers, we experienced weather problems which negatively affected yields, drastically, in some cases.
The AMTA payment structure has proved to be an efficient delivery system allowing funds to be put to use when needed. Thank you for your response in this situation.
Page 71 PREV PAGE TOP OF DOC
The farm safety net is an important feature of our farm policy. It can strengthen and stabilize rural America, contribute to a consistent and self-sufficient food supply, and keep food prices affordable. The stability provided for the California rice industry, specifically, has also allowed for many environmental benefits. For instance, by flooding fields after harvest, growers create nearly 200,000 acres of waterfowl habitat, increasing the Federal refuge system's land mass in the Sacramento Valley by some 600 percent. I would encourage you to continue to analyze the effectiveness of the safety net.
The farm safety net, in some form, is most likely a feature that will remain a necessity. There are many variables we cannot control. However, there are ways we can capture higher returns from the marketplace. I'm not an economist, but from what I understand, we, in the California rice industry, as well as the rice industry as a whole, would do quite well on the international scene if markets worldwide were open to us. I would encourage you continually to pursue free and open trade.
The fact that California has experienced relatively better market prices than the southern rice States over the past 2 years can be tied to the Uruguay Round Trade Agreement, allowing some limited access into Japan. However, we still have a long way to go.
High priority should be placed on efforts to reduce tariffs on rice imports and achieving fair access to important markets such as Japan and the European Union.
The upcoming WTO meetings could have a major positive impact on the rice industry. We need the opportunity to compete fairly in markets that are closed or very restricted. I feel fast-track legislation is an absolute necessity for, without it, other countries will not negotiate with us in good faith. We must also place great emphasis on the methods of enforcement of the negotiated agreements.
Along those same lines, I would encourage your support of legislation that would exempt food and medicine from unilaterally-imposed trade sanctions. And that was already in my speech before the last panel, by the way.
Page 72 PREV PAGE TOP OF DOC
There appears to be little evidence that trade sanctions on food have contributed significantly toward meeting U.S. foreign policy goals. Instead, sanctions have forced customers in some of our best past markets, Iran, Iraq, and Cuba, to turn to other suppliers for their rice.
Finally, I'd like to make an observation regarding the development of new provisions within the U.S. farm policy. The majority of rice farms have attempted to achieve the most efficient size possible, striving to reach the necessary economies of scale. Earlier this year, the administration proposed an adjustment of the FAIR Act which would incorporate parts of Congressman Stenholm's SIP program and I want to make clear, Congressman, that this is not a criticism of your ideas at all.
According to their proposal, though, if market prices were low enough, supplemental payments would be made to those whose AMTA payments had not exceeded $30,000. From my perspective, the majority of those who have benefited from this program would have been the ones who farmed only as a sidelight, not the family farmers. This plan, as proposed by the administration, would have done very little to address the needs or promote the stability of our industry as a whole.
As discussions take place regarding current and future farm programs, I would urge great caution in the areas of targeting payments and means testing.
In conclusion, many of the concepts contained in the Freedom to Farm Act are as valid today as they were in 1996. A vigorous agriculture economy is vital to our national security; my preference is to achieve this through a fair and open market. I would encourage the committee to pursue this goal at every turn. At the same time, the farm safety net should continue to be a tool used wisely to sustain agriculture and the rural economy in times of need.
Thank you, Mr. Chairman, for this opportunity.
[The prepared statement of Mr. Rystrom appears at the conclusion of the hearing.]
Page 73 PREV PAGE TOP OF DOC
The CHAIRMAN. Thank you.
Mr. STENHOLM. I thank the panel for some very excellent testimony today. And let me say, Mr. Rystrom, I take criticism just as good as I give it, at any time; and that's why we're here, is to encourage each of your associations and others in the audience to look at the various proposals and to make comments on it.
And, regarding the price, whether we have a double AMTA right now, the committee has received three suggestions: One is double AMTA, just like last year, and recognizing as all of you and others in your crop areas have recognized, we do need supplemental income or we will suffer tremendously at the bank, to be real blunt about it.
So the SIP, Supplemental Income Plan, was an idea that we came up with last year in the belief that we ought to have the payments ought to be associated with production, not with historical what you were doing prior to the current farm bill, which was designed to be the end of all farm programs. SIP is phasing out; that's what this is all about. And, in about 2002, we ought to be doing as one witness out of 120 has suggested to this committee, one has said, ''The biggest mistake Government, Congress, made is when you proposed additional revenue; you should have let Freedom to Farm as was intended.''
Most bankers have said there would be about a third of us less out there today, but there was one that honestly said that; and I respected his opinion on that, he believes that's the best way for us to go.
And the third suggestion we're having is an increase of the market loan and have it work just like we have it right now except put the money into a market loan, which is a third way to put money into farmers' pockets spend the same amount of money in each of those, that's what we have heard thus far.
I'm not going to ask for an answer to a question on but one, but I wanted to make some comments for you to think about and then, perhaps, to get back to your members of the committee, et cetera, and that is, again, in dealing with crop insurance.
Page 74 PREV PAGE TOP OF DOC
There has been a proposal made to us and there's going to be recommendation for additional study that would address what the previous panel, a couple of them, have suggested, and you have mentioned in your testimony the same, and that is to insure cost of borrowed input, cost of production, something that deals with the high cost areas, but you would collect only 90 percent of what you spend. And this recognizes one of the problems with the current insurance system is that we're trying to insure a price and yield with the same policy and that's where we're running into big problems with that.
You've got to separate price and income from yield or disaster, et cetera; and the proposal that we are going to take a good look at over the next year is a way to ensure just that.
And so everybody understands, again, what I'm saying is, think in terms of your home. When you go to the bank or you go to the savings and loan and you borrow money, what does your banker require? Your banker requires to insure the cost of the money he's about to lend you.
Does anyone complain that that's mandatory? I have not heard it. Oh, I'm sure some of us do but you've got a choice, you can borrow the money or you can put up your own money. If you put up your own money, you don't have to insure. But that concept, again, is going to be put out so that, if you borrow $3,000 an acre to make your crop, you would insure for $3,000. And, if you only bring in $2,700, that's your tough luck. But, if you only bring in $500, then you're going to collect on that. And it's a way to keep to tide you over through bad years, from an insurance perspective.
Now, from the price, it's supplemental income, AMTA, market loans, cooperative effort like we've never seen it before in this area. But I ask you to think about that and look at we're going to be this committee will be hopefully, this Wednesday we'll be now dealing member to member with some of these ideas for the future, as well as for this year.
Page 75 PREV PAGE TOP OF DOC
The question I want to ask you is the obvious one, how many of you as Mr. Rystrom put in his statement, so I know his answer believe that we, the United States and the Congress, should, hopefully soon, vote to lift all unilaterally-imposed sanctions on other countries as pertain to food and medicine?
Mr. Murphy.
Mr. MURPHY. Yes.
Mr. STENHOLM. If you say ''yes'' I'll let the record show your head was nodding yes; if it says ''no'' I'll let it show as no. And I'm not going to ask the audience again because they've already said.
Mr. ELLIS. Yes, with a qualifier.
Mr. STENHOLM. All right, yes, but a qualifier. What's the qualifier?
Mr. ELLIS. From time to time we've been sacrificed for some political purposes, used sanctions to avoid to correct some political problem. And they've used sanctions for agricultural products as the leverage; and I didn't appreciate that.
Mr. STENHOLM. That's why I'm asking the question. Then I find what you that's exactly what I personally feel we ought to stop doing. When we unilaterally do it, it only hurts our producers and I have yet to see any evidence that it's ever helped America accomplish the goals when we do it on food and medicine.
If we do it multilaterally, if the whole free world, for example, would decide to do it, then you can have effect. That's why I asked the question.
So I'm a little puzzled as to your qualifier. Because I agree with your qualifier.
Mr. ELLIS. OK. Well that's the only reason I would
Mr. STENHOLM. Final question real quickly, then, is do you believe that we ought to pass permanent normal trade relations with China?
Page 76 PREV PAGE TOP OF DOC
Mr. ELLIS. Yes.
Mr. ERROTABERE. Yes.
Mr. HEIDEN. Unequivocally, yes.
Mr. MURPHY. Yes.
Mr. RYSTROM. Yes.
Mr. STENHOLM. The record shows yes.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Pombo.
Mr. POMBO. Thank you, Mr. Chairman. I have no questions of the panel. I just want to thank them for their testimony.
The CHAIRMAN. Mr. Condit.
Mr. CONDIT. Mr. Chairman, I'll be brief. I have one question and then, basically, a comment.
But I do want to thank the panel; you did an excellent job.
The two gentlemen from Arizona, earlier Mr. Weiss made a reference about agriculture labor, H–2A reform, and that whole thing. You're the only two people from Arizona it may not be of interest to you, or maybe not something that you're familiar with. But can you respond to the subject of H–2A reform and agriculture labor as it relates to Arizona? We kind of got it in California, I just I want to get an idea what's going on there.
Mr. HEIDEN. As far as the cotton industry is concerned, certainly that program, I think, would be beneficial to us. Probably to the extent what it would do to the fruit and vegetable industry? Probably not the same, but certainly we'd look at it.
Mr. CONDIT. Mr. Murphy, anything different?
Mr. MURPHY. I agree. Basically, it's not as important to us as cotton producers at it would be
Page 77 PREV PAGE TOP OF DOC
Mr. CONDIT. Sure.
And I understood. We've been meeting with some people Mr. Pombo and I have been working on this, and we understand there is a little different view of this in Arizona; and we'd kind of like to figure out what's going on there with agricultural labor and H–2A.
Let me just make a general comment and I'll be real brief. And this is on my time.
It's in reference to Mr. Gutknecht's comment to the first panel about the question about water. So that I want to make sure that this panel understands clearly that water is the crucial issue that makes this whole industry that we're talking about today operate. Without a reliable source of water, the people in this building today and throughout the Central Valley and other parts of the State where we produce crops, water is the lifeline for us.
And so it is essential that we have a reliable source of water that we can count on. If we can do that, these folks in this room and other parts of the State that practice agriculture, we can compete with anybody in the world.
So I the silence of the water issue is only because I think a lot of people thought we were talking about something else today; but I want to tell you, that's the undercurrent to everything that we do. And anything that the members on this panel can do to assist and help resolve the water problem and making sure that we have a water plan for California that meets all the needs of all the regions in the State, anything that the Federal Government can do to make that happen, we would ask that you help us.
And one of the things that we can do, and I think one of the panelists on this panel and the earlier panel suggested that a lot of the regulatory stuff that we do, whether it's endangered species or what have you, ought to be based on good science, on sound science.
And, if we could even grip on that and make that happen, we think that would go a long way in creating a situation where we can have a reliable source of water for agriculture in other parts of the State.
Page 78 PREV PAGE TOP OF DOC
But that's on my own time, and I'm not asking for a comment. But I want Mr. Gutknecht, who comes from Minnesota, who probably does not well, I know he doesn't have that water problem that we have, but I want to make sure that he understands that that is an issue for us that is on our mind every day and we're working very hard to see if we can come up with a solution.
Mr. Chairman, thank you for indulging me.
The CHAIRMAN. Mr. Ose.
Mr. OSE. I want to with the remarks of Mr. Condit. It is an over-arching issue shared both north and south of the Delta and I'm pleased, in particular, to have our friends from Arizona join us today because, interestingly enough, the Central Arizona Project is a piece of the solution. And whether we take it privately or otherwise, I want to make sure you understand we're trying to get well together. I mean, that's really what we're after.
So I appreciate you guys being here, and I do want to echo Congressman Condit's remarks.
Mr. Rystrom, every year we have this issue on what do we do with our rice straw, year after year after year. We used to burn it and the air quality concerns we have in this State have moved us to the point where we are phasing out of the burn situation.
How can the Federal Government help growers clean their fields of straw while protecting the air quality? And I'm not I have no limits on this question.
Mr. RYSTROM. As you mentioned, burning is in the process of being phased out; we're currently on a hold pattern at this point. There is some sentiment that we should continue on that.
In terms of the alternatives, however, farmers have attempted to incorporate rice straw, as I mentioned in my discussion. As part of that incorporation, we flood the fields. That has been successful to some degree; it certainly has been successful for wildfowl purposes. And the more birds we get into our field, the better the straw decomposes. That is one side of it.
Page 79 PREV PAGE TOP OF DOC
The other side is trying to lift rice straw out of the fields and use it for some type of energy production; ethanol has been an idea that has been around for a while. But it appears that there could be some real success there.
In terms of what the Federal Government could do, I would say cooperating with California on any research issues that could be taken up, as well as, if ethanol is a way to go, to provide a stable need for that so that, as business started to develop ethanol plants, we would know that we had a market for that in the long run.
Mr. OSE. All right. Now there is a proposal to create we're building the Gridley rice straw ethanol plant up out of Oroville. That's the Federal Government at work.
Do you have any input on that particular proposal in which we would take at least a portion of the rice straw that's harvested, use it to or combine it with technology that's basically been created in Louisiana and create ethanol, hopefully to replace MTBE here in the State?
Mr. RYSTROM. I mean, it seems to be a natural solution. I understand there's some concern about ethanol and if we're getting into a new set of problems there. And that's what I mean about expand research into those issues so that we see if that is a way we can go. I think it's a great way for rice straw to be eliminated.
Mr. OSE. Mr. Ellis, I know you grow rice. How big of a problem is your rice straw for you?
Mr. ELLIS. Well, it's a big problem. And I've often wondered if a real total analysis was done of this rice disposal program. We were doing a lot of groundwork to incorporate stubble into the ground. I wonder if it was ever considered how much fuel is used, how much resources are tied up in that effort. And this has been a basic question I've had for years.
Page 80 PREV PAGE TOP OF DOC
I think the smaller grower, of which I am a larger grower who has a lot of land and can rotate it properly, I think it works much better for them. But for the smaller growers, this inability to burn your rice stubble has been a real problem.
Mr. OSE. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Thompson.
Mr. THOMPSON of California. Thank you, Mr. Chairman.
I'd like to pick up on that because the reality is there's going to continue to be more difficult times in regard to burning rice in California for a number of reasons, probably the biggest of which is, there's more votes in urban areas than there are in rural areas.
And our air basin happens to be at least contiguous with that of the big city of Sacramento. So we're going to continue to be hurt by that.
I was very pleased to hear the reference to the flooding of the rice fields and the impact that that's had on wetland habitat. I think everybody knows we've lost about 98 percent of our historic wetland habitat, and this really filled that gap. And it has another consequence that I think is important to note and that is the improvement it's brought to the Pacific flyway, which brings a lot of money into the area from sportsmen and sportswomen who use our area. I think that's very important.
And here comes my question. When we talk about permanent normal trade relations with China, I see the projected numbers out of the Department of Agriculture, specifically the increase in what they expect cotton demand to be. And with the increased regulations in the Sacramento Valley on burning and the like, there are already rice guys who are replanting their fields to cotton.
And I'm worried that that may have an unintended consequence to both the flyway and to rice production in this area. And I'm wondering if you see that as a threat, as well, and, if so, are there some specific conservation efforts we should be making in order to ensure that we keep rice in production in the upper Sacramento Valley?
Page 81 PREV PAGE TOP OF DOC
Mr. ELLIS. Please, take that first; I'm a very small rice grower.
Mr. THOMPSON of California. There's nothing wrong with small rice growers.
Mr. RYSTROM. I'm only medium, so I wish I was more of an expert on those matters. I'm not. I don't really know what China's potential is; maybe none of us do.
In terms of trying to give specifics as to what could be done in California, is that your question?
Mr. THOMPSON of California. Well, more in the critical wetlands area where we've already seen rice taking, or cotton, taking the place of rice in some of the counties in the Sacramento Valley.
Mr. RYSTROM. I see. OK. The shift to cotton is what you're asking?
Mr. THOMPSON of California. Yes.
Mr. RYSTROM. Well, there are some again, I don't know the numbers on this, but I know at least some people who have started to shift to cotton and have decided not to shift any further.
I guess I really don't know the answer to that. I don't know what impact there will be.
Mr. ELLIS. Well, I'd like to comment that it's difficult to get rice growers and cotton growers to coexist together without some problems, as you probably well realize. But I think there's some validity to your concerns. I might comment that this flooding, all of the winter flooding, sometimes it runs into real problems because we have all this ground flooded, and then we get a big rainstorm and all the drains and all this ground is flooded, and we have problems because what normally used to absorb that rainfall is already flooded.
Page 82 PREV PAGE TOP OF DOC
But the ducks and the geese love it, I must admit.
And I would hate to see that change.
Mr. THOMPSON of California. Let me just ask one other follow-up question to that. Over the last week, I've had the opportunity to be up in the Sacramento Valley, and I've seen ground being prepared for rice right now. In my entire lifetime, I've never seen rice grow in that ground.
Are there any projections on increased plantings and what that's going to do to the rice market in California?
Mr. RYSTROM. I believe the projections are for a slight increase, but I don't think it's going to be a major one. I know, in our case, we try to leave some ground out every year. Many of our neighbors do the same thing. And I the best projections I've heard don't anticipate any big increases.
Mr. ELLIS. And I was with our irrigation district manager just recently, and he said the rice acreage in our irrigation district is almost going to be identical to last year.
Mr. THOMPSON of California. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Thune.
Mr. THUNE. Mr. Chairman, let me just say, if there ever is a water pipeline from Mr. Gutknecht's 10,000 lakes to the Sacramento Valley, we'd like to tap into it in South Dakota on the way. We're a very dry climate, too; in fact, out there, we can name most of our trees.
I just have one question for the panel first one quick question and a follow-up to that. But are all of you do you characterize yourselves as family farmers, family farms, operations?
Mr. ELLIS. Yes.
Page 83 PREV PAGE TOP OF DOC
Mr. ERROTABERE. Yes.
Mr. HEIDEN. Yes.
Mr. MURPHY. Yes.
Mr. RYSTROM. Yes.
Mr. THUNE. I noticed that in a lot of your testimony, you were proposing lifting the payment limitation. And I guess I'd be curious as to how you would respond to those who argue that the payment limitation the pressure we're getting from my part of the country is to put it back lower. We raised on the LDP from $75,000 to $150,000; the argument being that it's enriching those big operations at the expense of the truly small family farm operation. And I'm just curious how you might respond to that because this is a point of debate that we will have, I think, in terms of the distribution of benefits, whether or not the payment limitations, the caps, ought to be there, and how that really impacts across the board producers from your very small producers to your very large producers.
Mr. MURPHY. Let me try to answer that. I guess I'd be characterized as at least below average size farmer in terms of acreage. I grow 600 acres of cotton; I produce about 1,500 bales on that, give or take.
So, at what the LDP payment was last year, I would hit the limit, the $75,000, at about half my production, about 750 bales. So half of my production and I'm not considered a big farmer. But I would so half of my production would be not protected by that.
So I don't know if that helps answer your question, but you can figure that out very quickly for most farms. You'd have to be real small to not hit that. And I don't know of anybody that I know that wouldn't hit the payment limitation.
Mr. THUNE. In cotton.
Mr. MURPHY. In cotton in Arizona.
Mr. ELLIS. I'd like to also comment. The main focus of the pay limitation just squares up against the kinds of scale of trying to survive in these kinds of marketplaces where we deal with depressing markets. And it just seems to me that it's contrary to punish or penalize those who have expanded to accommodate those pressures.
Page 84 PREV PAGE TOP OF DOC
And that's kind of how I see these payment limitations; they really don't focus, and particularly I know in California where production is higher, the threshold is real quick. And I'm not really sure we need any.
I think that we shouldn't be pitting smaller farmers against bigger farmers in these debates.
The CHAIRMAN. Thank you.
Mr. THUNE. Thank you, Mr. Chairman.
Mr. RYSTROM. If I could respond to that also, I would appreciate that.
I agree with the idea that wherever the bale of cotton or wherever the sack of rice comes from, that that should be handled equally and evenly. Because of that, I and the U.S.A. Rice Federations' policy also states this, that they feel the $75,000 LDP or marketing loan payment should be eliminated or at least raised.
However, the payment limitation on AMTA right now at 40,000, from what I understood, there's very little chance that a payment limitation on AMTA would go away.
But I do see reasons to raise that, as Mr. Murphy mentioned, for economies of scale. I think most California rice farms have tried to reach a level of efficiency, and that probably necessitates them being larger than would stay under that limit.
However, in the past I've seen some real good things come out of the AMTA payment limitations, in my case, as well as some of my generation's cases. If it wouldn't have been for a payment limitation, they probably wouldn't be farming right now. So I think it's allowed some younger farmers to be able to break into the business.
And I see that as a positive. I'm not sure how far I'd carry that logic or where the exact payment limitation should be, but I do see pressure to raise it, but maybe not eliminate the equivalent of an AMTA payment limitation.
Page 85 PREV PAGE TOP OF DOC
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. Thank you, Mr. Chairman. No questions. Thank you.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, no questions. I thank the panel for their testimony.
The CHAIRMAN Mr. Simpson.
Mr. SIMPSON. Mr. Chairman, just one question.
One of you mentioned the CRP program; I can't remember which one it was.
Mr. HEIDEN. I did.
Mr. SIMPSON. As I understand it, that was established for a couple of reasons: one, to take marginal land out of production and put it back into the environment and for habitat or whatever. The other was to limit production.
Do you think that the CRP program is an effective way of limiting production, now that you're in a global economy, or do you think other countries will just fill up that production if we limit it to the CRP program?
Mr. HEIDEN. In Arizona, there is very little of the CRP program. To answer your first question, environmentally, I think it is an excellent program.
To answer your second question, there probably is some doubt as to how much we're going to reduce production in light of the fact that we're working in a world market, so to speak. But every little bit helps; and, if you can take an acre that needs to go out of production for environmental purposes and reduce production at the same time doing it, then I think it's a program that the administration has proposed and one that we would certainly support.
Mr. SIMPSON. Thank you.
Thank you, Mr. Chairman.
Page 86 PREV PAGE TOP OF DOC
The CHAIRMAN. Thank you.
And I thank the panel and, Mr. Rystrom, took his children out of school in order to come see how Government works. I hope today was a pleasant experience for them.
Mr. RYSTROM. Thank you.
The CHAIRMAN. Thank you very much.
I would invite our third panel to the witness table. Mr. Kevin Fondse is an almond producer from Stockton, CA; Mr. John Giusti is a brussels sprout producer from Half Moon Bay, CA; Mr. Richard Hamilton is a sheep producer from Rio Vista, CA; Mr. Ronald Martella is a walnut, peach, and almond grower from Hughson, CA; and Mr. William Zech is an asparagus producer from Holt, CA.
We will take the testimony in the order of the witnesses' introduction.
Mr. Fondse, please proceed.
STATEMENT OF KEVIN B. FONDSE, ALMOND PRODUCER, RIPON, CA
Mr. FONDSE. Good morning, Mr. Chairman, and members of the committee. I'm Kevin Fondse, first vice-president of the San Joaquin Farm Bureau Federation. I am here today to talk to you as a third-generation almond producer from Ripon, CA. Thank you for the opportunity to address you today concerning Federal agricultural policy.
Federal agricultural policy has traditionally focused on farm program crops. However, as you are aware, California produces more than 250 commodities. My home county of San Joaquin produces more than $1.3 billion worth of farm-valued commodities and consistently is one of the top eight agricultural counties in the Nation.
There will be damaging repercussions to California agriculture if future farm policies do not continue to prohibit the planting of certain crops on flexible acreage, as is the case now. In particular, if fruits and vegetables are allowed to be planted on flex acres, it will have a detrimental effect on traditional producers of those commodities.
Page 87 PREV PAGE TOP OF DOC
It is important to note that farmers and the Government entered into 7-year contracts in 1996 and that those contracts should be carried out to their full term in 2002. Congress gave farmers their word regarding access to additional foreign markets through trade policy reforms, relief from overburdensome regulations, additional and improved risk management tools, and tax reforms for their support of the FAIR Act in 1996. Congress has several opportunities to improve farm income this year.
Support for permanent trade relations with China.
This agreement is critically important for the California almond industry. The California almond industry must expand export markets. China presents a perfect opportunity to increase sales. I strongly urge you to vote for California agriculture and vote for permanent normal trading relations status for China.
If permanent normal trade relations status is not granted, China will still become a member of the WTO, and other competing agriculture exporting countries will realize those gains.
Crop insurance risk management.
The Federal Crop Insurance Program does not work. It is broken and must be fixed. Specialty crops have been forgotten and mostly ignored. Crop insurance fails in the following areas: unless a total crop failure is reported, crop insurance will not provide relief; paperwork requirements are overburdensome; crop insurance is overpriced for the product; unreliability and lack of credibility. The Government mandated that producers purchase crop insurance in order to qualify for disaster payments; however, when the Government distributed disaster payments, it did not follow through on that commitment.
Relief from estate taxes. Farm Bureau policy on estate taxes is clear, eliminate it.
Farm Bureau members nationwide have rallied to the charge of ''Kill the Death Tax.'' With Farm Bureau's leadership, Congress passed and the President signed the Taxpayer Relief Act of 1997, which brought a small measure of relief from estate taxes for the first time in more than a decade.
Page 88 PREV PAGE TOP OF DOC
Death taxes can destroy family-owned farms and ranches when the tax, which can be as high as 55 percent, forces farmers and ranchers to sell land, buildings, and/or equipment, a highly punitive tax to Uncle Sam for a lifetime of hard work and savings.
When farms and ranches go out of business, the rural communities and businesses they support are negatively impacted. Farm land located close to urban centers is often lost forever to development when the death tax has forced family farms out of business.
While estate planning is sometimes effective in protecting farm business from overburdensome estate taxes, estate planning tools are costly and require resources that could be better used by farmers and ranchers to upgrade and expand their operations.
Death taxes are real and they affect my operation. Now is the time for action; kill the death tax.
And this isn't in my comments, but Congressman Condit brought up the water issue. The water is the big issue in California; it's a big issue in my area. There's a lot of disagreement, but the demand is going to take over the supply. Just look at the population growth in California; it's going to something has to be done. There has to be more storage facilities built.
Once again, thank you for the opportunity to address the committee.
[The prepared statement of Mr. Fondse appears at the conclusion of the hearing.]
STATEMENT OF JOHN GIUSTI, BRUSSELS SPROUT AND ARTICHOKE PRODUCER, HALF MOON BAY, CA
Mr. GIUSTI. Good morning, Mr. Chairman and committee members. My name is John Giusti; I'm a third generation farm from Half Moon Bay, CA. My family has grown brussels sprouts and artichokes in this area since the early 1920's. I'm here today with several of my fellow brussels sprout and artichoke growers to express our concerns regarding the declining production of brussels sprouts and artichokes on the Central Coast of California.
Page 89 PREV PAGE TOP OF DOC
The Central Coast of California is by far the leading production region for brussels sprouts with 96 percent of the planted acreage, and artichokes with 73 percent of the planted acreage.
The climate of the Central Coast is ideally suited for brussels sprout and artichoke production. Cool, damp summers restrict the types of crops that can be grown here, making growing other crops economically challenging.
Over the past 15 years, we've seen artichoke acreage be reduced by 30 percent. Of the remaining artichoke acreage, about a quarter of it goes to the processing industry, which consists of canning and freezers. Imports from Spain, which are greatly subsidized, have damaged this market significantly. European Union price supports for artichokes equaled almost $240 million for the year 1996–97. This amount is roughly five times the entire amount of our domestic production.
Over the past 35-plus years, we've also seen acreage planted in brussels sprouts drop from a high of 5,344 to 3,200 acres; from 63 farms to 25 farms. There are currently 51 million pounds of brussels sprouts produced for domestic consumption. Of this, approximately 60 percent goes to the frozen or process market and the remaining 40 percent goes on the fresh market.
In March of this year, the major brussels sprout processors informed their growers that production contracts would be cut in half from the previous year. In looking into this situation, we have found that imports from Belgium have increased from 140,800 pounds in 1995 to over 4 million pounds in 1998. The three congressional representatives from our region have asked Secretary Glickman to investigate this situation.
Frozen brussels sprouts from Belgium are known to be selling for 49 cents a pound, while our same domestic product sells for 69 cents a pound. This 20-cent-per-pound price disparity seems unrealistically low, not to mention the added cost of shipping their product from afar.
Page 90 PREV PAGE TOP OF DOC
We have documentation that artichoke production is heavily subsidized in Europe. We do not have similar documentation for brussels sprout production at this time; however, this does give us reason to believe that this industry is subsidized, as well.
We know fair trade is good for all and trade must be fair and we must be able to compete on a level playing field. These two crops are essential to the economy of our Central Coast. Over 400 families depend on these crops for their livelihood. We need the help of our Government to ensure that we will not become a casualty of trade battles or have no input or consideration.
The brussels sprout and artichoke industries are too small to pursue costly antidumping actions. Countervailing duties may be an option to resolve inequities created by subsidized European products. A further measure of protection would be clear country-of-origin labeling. I feel the consumers should have the right to know where their food is coming from that they put in front of their families at night.
California agriculture has faced many challenges. Despite this, we have led the Nation in agriculture production for over 70 years; and we'd like to see this trend continue. We need your support to ensure the future stability of our industry.
Thank you.
[The prepared statement of Mr. Giusti appears at the conclusion of the hearing.]
STATEMENT OF RICHARD HAMILTON, PRESIDENT, CALIFORNIA WOOL GROWERS ASSOCIATION, SHEEP PRODUCER, RIO VISTA, CA
Mr. HAMILTON. Good morning, Mr. Chairman, members of the Agriculture Committee. On behalf of the California Wool Growers Association, thank you for making the time to listen to our concerns.
Page 91 PREV PAGE TOP OF DOC
My name is Richard Hamilton; I'm a fourth-generation farmer and rancher from Rio Vista in Solano County.
As president of the California Wool Growers Association, I represent a diverse group of producers ranging from seedstock producers to lamb feeders. It's my pleasure to address you today about sheep production in California and the concerns and problems we currently face which will have a dramatic effect on our future survival.
The California sheep producers appreciate the help of the members of the House Agriculture Committee in achieving limited protection under the 201 Trade Action. It is essential that the committee understands that the sheep producer fully appreciates the necessity to organize in order to achieve higher degrees of efficiency in production, marketing, and to protect ourselves in a global market.
In a demonstration of self-help, the California sheep producers organized and overwhelmingly passed a State Marketing Commission to fund ongoing research and promotion to help our future survival as an industry. With the assistance of the Stanford University Alumni Consulting Team, the California Wool Growers Association made changes to its organizational structure to be more responsive to the ever-changing environment of the producer.
Also, there are several examples of producer creativity in marketing and production to help themselves survive. This self-help will have little impact on the majority of producers unless new markets can be expanded, overall production efficiency improved, and the persistent threats to industry mitigated.
As much as we try to be innovative in dealing with predator problems ourselves, we are very limited in our resources. Sheep producers can't keep up with the predation problems created by urban sprawl and the public buy-up of private lands.
Your support for increased funding of USDA, APHIS, and Wildlife Services program is necessary, both to protect the public and to ensure depredation laws don't further increase already existing pricing conditions in the livestock industry.
Page 92 PREV PAGE TOP OF DOC
The utilization of public lands and private lands for grazing is a necessity for the sheep producers. The availability of this land is threatened due to many factors such as the lack of understanding of grazing livestock, water quality restriction, noxious weeds, and the Endangered Species Act, where social and economic impacts are not addressed and reform is needed.
We urge this committee to ensure the continuance of livestock for the positive benefits it produces for natural vegetation, fire suppression in the overall balance of nature. Although we truly have some temporary protection from excess lamb imports, sheep producers still suffer serious financial problems with wool prices at historical lows and these low prices don't cover the cost of shearing.
We respect that the wool incentive program will not be reinstated; however, we would like to offer a different approach that would help to protect the sheep industries similarly to the protection offered to other fiber crops like cotton, The establishment of a wool market loss assistance program that would authorize support payments when revenues for wool fall below certain levels.
Our understanding of our current market situation in lamb rises from three major causes: one, the downward shift in currency exchange rates with our major trading partners, which occurred during the collapse of many of the Pacific Rim economies; two, the continuing problems of market concentration; and, three, the quotas placed on Australian and New Zealand lamb by the European Common Market.
All this has made the U.S. market, with their strong dollar and healthy economy, the most attractive of global markets. Granted, the 201 Trade Action give us temporary relief, but a long-term solution to this problem is to develop a system of automatic price adjustment when international pricing systems lead to unfair competition.
Packer concentration continues to be a serious problem facing the survival of the U.S. sheep industry. Over 75 percent of the domestic lamb processed is controlled by four firms. And two of the biggest firms are also multinational corporations with lamb-packing plants in Australia. These multinational corporations can market their products under their corporate labels, which do not distinguish country of origin. Also, there's a major concern that these corporations are controlling supply with foreign product to help control pricing of lamb to the domestic producer.
Page 93 PREV PAGE TOP OF DOC
We offer three solutions to help the U.S. sheep industry in lamb marketing. They include, one, a country of origin law which requires clear labeling of all food products' origin; two, an incentive or price support payment program funded on tariffs imposed automatically when pricing systems become unstable; and, three, a limitation should be placed on the amount of imported product domestic firms can process if they also process domestic product.
Chairman Combest and committee members, I thank you for allowing the California Wool Growers Association to present our concerns and possible solutions as they relate to sheep production in California, as well as the United States. Our future as an industry must evolve to meet the changing demands of wool markets; and as producers, we are willing to meet and tackle these challenges as long as we see that our effort will be rewarded in the marketplace.
[The prepared statement of Mr. Hamilton appears at the conclusion of the hearing.]
STATEMENT OF RONALD M. MARTELLA, WALNUT, PEACH, AND ALMOND PRODUCER, HUGHSON, CA
Mr. MARTELLA. Good morning. I am Ron Martella, a peach, walnut, and almond grower from Hughson, CA, located in Congressman Gary Condit's 18th Congressional District. I'm also chairman of the board of the California Canning Peach Association, which is the oldest active bargaining farmer cooperative in America.
Currently, we represent 75 percent of the growers who produce cling peaches, one of many California crops that fall into the overall category of specialty crops. With all due respect, we feel that many times this committee spends much time on the program crops, and sometimes we do feel like the lost step-children that are forgotten.
But we have to remember that these specialty crops in California alone produce in excess of $16 billion in farm gate value and contribute strongly to our balance of trade. Many are marketed as value added, especially the product I produce the most of, cling peaches for canning.
Page 94 PREV PAGE TOP OF DOC
The gross crop value for cling peaches in 1999 was approximately $115 million. This tonnage produced was 17.5 million cases of clings and 13 million cases of fruit cocktail, resulting in $490 million in the processors warehouse.
This value includes labor, transportation, cans, sugar, and processing plants. This industry is major to the Central Valley of California. The University of California, utilizing their multiplier, projects this industry generates $942.8 million to sales in the economy, $404 million in personal income, $435.7 million to the gross domestic product, and 6,500 additional jobs outside the farming and canning industry.
Congressmen Ose, Pombo, Condit, and Dooley all have fruit canneries in their districts which benefit from our industry.
There are six areas that I would like to ask your help on. first, farm labor; unfair trade practices; the school lunch program; crop insurance; research; and I'd like to speak briefly on the NFACT.
First on farm labor.
Cling peaches are a labor-intensive crop; and even though 15 to 20 percent is mechanized, the pruning, thinning, and major portion of the harvesting is done by hand. Sixty-eight percent of our costs go to labor and, with minimum-wage increases, our costs have increased and will be continually increasing. It has always been necessary for peaches and many other specialty crops to use migrant labor.
We urge you, as United States Representatives, to influence Congressmen from other areas, especially the likes of Congressman Lamar Smith of Texas, to let the proposed farm labor legislation that has been introduced in the Senate and the legislation that Congressman Pombo is introducing to go forward in the House of Representatives.
Unfair trade practices. Our industry has fought long and hard and has solicited the help of many of our California Congressmen in contacting Ambassador Barshefsky and Secretary Glickman regarding action against the European Union so that subsidizing the Greek canning industry will stop. Our industry cannot compete with Government subsidies. We export less than 5 percent of our production. The foreign markets we once had, whether it is in Europe, Japan, Mexico, or Canada, are going or is going or is gone to the Greeks. We were supplying peaches to a cannery in Tecate, Mexico, up until 1999; but they closed their doors because they could purchase Greek peaches at a lesser price and were given 90 days before any payment had to be made, totally because of the EU subsidies to the Greeks.
Page 95 PREV PAGE TOP OF DOC
There is currently a conference committee on the African bill which includes ''carousel legislation.'' We believe this legislation would help our industry, as canned peaches could be substituted on the beef hormone retaliation list of products against the EU. We were on that list when it first came out. However, it is our understanding that the prime minister of Greece weighed in with our Vice President and we were taken off. We need your help in passing this carousel legislation.
On school lunch, this is a win-win program for many California crops that do find themselves in a surplus position from time to time. Through the help of many of you, we were able to pass Buy American 2 years ago, So school districts and State governments would purchase U.S.-produced products. It is essential that we find a way to make sure we have compliance, especially on the Eastern Seaboard.
We are farmers who pay taxes and grow crops in America and, if the U.S. Government is going to provide funding for the food programs of the States, then we believe that it is not wrong to ask the States to purchase products produced by the American farmers. Your help is needed to make sure this law is being enforced.
On crop insurance, the present Federal Crop Insurance Program for cling peaches is not properly designed to attract growers with average yields in California. The Federal Crop Insurance Corporation actuaries and underwriters need to completely re-examine the present program's structure, or we need to implement a completely new cling peach crop insurance program which will appeal to mainstream cling peach growers and will have loss payment provisions which are more accurately balanced against premiums paid by growers.
On research. I mention research to emphasize that, through research and development work at our Land Grant colleges, we, as producers, need new varieties, along with new and better inputs in order to remain competitive with foreign producers. We need to maintain our Extension Service as a means of taking research from the lab to the field in reducing water usage, increasing productivity, reducing the use of pesticides, and new means of mechanization, all of which are important to our survival as small specialty crop farmers.
Page 96 PREV PAGE TOP OF DOC
Again, we ask you to make sure funds are appropriated for research in agriculture and the maintenance of our Extension program.
Because of what we have all been talking about today at these hearings, and because Federal money spent on concerns of specialty crops are a fraction of what is spent on program crops, my good friend, Bill Lyons, Jr., California's present secretary of agriculture, had the foresight to put together a coalition of States called NFACT, which I'm sure you're most all acquainted with.
It means New Mexico, Florida, Arizona, California, and Texas. It deals with the wide range of common interests of all these States, many of the same issues we talked about.
Interesting enough, NFACT represents 25 percent of the total U.S. agricultural cash receipts, as well as 25 percent of the entire congressional delegation. The goal of NFACT is to bring all these concerns mentioned today to Federal farm policy decision-makers' attention and encourage bipartisan and multistate agreements to assist all American agriculture.
And we would hope that this committee would support the same goals.
And I thank you for giving me this opportunity to present my views to you and thank you for coming to California.
[The prepared statement of Mr. Martella appears at the conclusion of the hearing.]
STATEMENT OF WILLIAM ZECH, CHAIRMAN, CALIFORNIA ASPARAGUS COMMISSION AND ASPARAGUS GROWER, HOLT, CA
Mr. ZECH. Thank you, Mr. Chairman.
It's a pleasure to be here today to talk about our U.S. agriculture policy. My name is Bill Zech, and I'm an asparagus grower from Stockton, CA, and I'm here representing the California Asparagus Commission.
Page 97 PREV PAGE TOP OF DOC
A little background information: California is the No. 1 producing asparagus State in the Nation with over 37,000 acres harvested this year. However, we are not the only region with substantial production acreage. Our neighbors to the south, Mexico and Peru, have significantly increased their imports to the United States over the last few years. From 1994 to 1998, imports into the United States have increased by 42 percent.
In contrast, our export sales have decreased by 30 percent during the same period. And this decline in export sales has come about despite our best efforts to expand our export sales.
The California Asparagus Commission partners with commodity organizations in other production areas to participate in the Federal Market Access Program. Through a national marketing organization, known as Asparagus USA, we have participated in MAP since 1996. In general, we've experienced tremendous success in our target markets, specifically Japan and Switzerland, and believe the program is essential to our continued efforts to combat the unfair trade practices of our trading partners.
The program becomes more important as producers in other countries begin to compete head to head with U.S. producers in those markets that we have developed with MAP funds.
The California asparagus industry also faces a number of trade barriers which we hope will be a topic of consideration for this committee as part of any future farm bill and other legislation which comes before you. First, the California asparagus industry has encountered a number of phytosanitary barriers in our efforts to expand our export sales. For example, the government of Taiwan prohibited all California all U.S. asparagus from being shipped into their country. Their excuse was that they were concerned about a burrowing nematode; and so for years we could not export to Taiwan.
We could never find the burrowing nematode, and we worked with APHIS and Congressman Pombo's office and were able to basically through sound science, we're now able to export to Taiwan; and we've been exporting steadily this past season. This is the first time we've been able to do it.
Page 98 PREV PAGE TOP OF DOC
That makes a big difference for us because, if we can expand the foreign markets, then that's less available in the United States and we get better returns, because we're really very close to being put out of business by Mexico and Peru.
We are very pleased with the work of APHIS, particularly in light of our understanding that the agency is underfunded and understaffed; and we trust that the committee, as it looks at our future agriculture policy, will continue to support the activities of APHIS which is so critical to the future health of our export sales.
The California asparagus industry also has concerns with several aspects of the European asparagus market. The EU has allowed the formation of producer organizations through which fruits and vegetables are marketed. It is unclear how the specific benefits of these organizations, which we understand have received over $1.8 billion last year, are passed along to European growers. Vegetable growers in the EU also receive export refunds; and we were advised that, in 1997, they received approximately $76 million in such refunds.
Additionally, the EU approves proposals from time to time that provide specific funds to certain crops. For example, we have heard that the Spanish asparagus industry has received funding in the amount of approximately $125 per acre. Spanish asparagus has become a strong competitor in the Swiss market, which historically has been our second largest export market. And we suspect that the recent EU subsidies were designed to make the Spanish asparagus industry more competitive with our own exports.
I bring this information to your attention to point out that the U.S. asparagus industry continues to be confronted with European subsidies, which undercut our efforts in the EU marketplace. Our industry asks that, as you consult with administration trade officials, you support a negotiating stance that will result in substantial reductions in EU subsidies. This is critical if U.S. asparagus growers are to be given the opportunity to compete fairly in international markets.
Page 99 PREV PAGE TOP OF DOC
In closing, I would like to ask for your continued support of MAP, APHIS, and our trade negotiators' efforts to develop some more transparency in our trade agreements.
Thank you very much for giving me the opportunity to be here today.
[The prepared statement of Mr. Zech appears at the conclusion of the hearing.]
The CHAIRMAN. I thank all of the panel.
Most times, people come up to us and they say, I've got a stupid question. And my response is, There are no stupid questions; there's only stupid answers. So I hope you'll give me that same prerogative today.
That's one of the fun things about coming out here. I mean, if we were driving over here, I could talk to you a little bit about cotton or feed grain or feeding cattle or corn or soybeans or peanuts or something of that sort; but, obviously, this is an area that grows a whole lot more than we do and learning about these crops, some of the problems that you've mentioned.
So much of this has been mentioned before here today, so much of the attention from the committee goes to the general program crops, which have always come under it. Obviously, to a State like California, those other specialty crops are critical because they are so much a strong part of your economy. So I'm going to ask some questions that will probably seem extremely elementary to you and try not to laugh too much, or giggle, and bear with me.
But I'm presuming that asparagus, artichokes, brussels sprouts are those highly intensive labor crops, or is there a lot of mechanization in the production?
Mr. ZECH. On asparagus, it's incredibly labor-intensive. Our average price, just to give you an idea, is about $25 a unit.
The CHAIRMAN. A unit is what?
Mr. ZECH. A unit is a 27-pound box.
Page 100 PREV PAGE TOP OF DOC
The CHAIRMAN. OK.
Mr. ZECH. Which is what we ship all over the United States through chain stores. I'm sure you can get it in Washington at Lions.
The CHAIRMAN. I'm sure you can.
Mr. ZECH. But we have approximately—$24 is the average price, historically, at the farm gate. Twelve dollars is labor to harvest and pack; 50 percent of our gross is labor. There's absolutely nothing we can do to mechanize it in the field, nothing.
The CHAIRMAN. It has to all be hand harvested?
Mr. ZECH. Oh, it's all hand harvested. And we'll go through the same field 40 times during a 90-day period.
The CHAIRMAN. Forty times.
Mr. ZECH. The same field 40 times.
The CHAIRMAN. Just harvesting that which is ripe?
Mr. ZECH. Correct. It's not where you go in once with a machine and harvest
The CHAIRMAN. Right. And does it grow year-round?
Mr. ZECH. No. Actually, we're in the middle of our harvest season now, and this is the first Monday I haven't been at our ranch. So I need to get out of here pretty soon.
The CHAIRMAN. And then you would have to go back and replant?
Mr. ZECH. Yes. It lasts for about 10 years.
The CHAIRMAN. OK.
Mr. ZECH. It's an annual crop I mean a perennial, excuse me.
Mr. GIUSTI. And I could say artichokes and brussels sprouts are almost the same. About 50 percent of our total production cost goes to labor. So I guess you would say they are very labor-intensive.
Page 101 PREV PAGE TOP OF DOC
The CHAIRMAN. Is that mostly in the harvest of the crops or is it a highly-intensive labor in planting or———
Mr. GIUSTI. Artichokes are completely done by hand labor. There's no mechanization of the harvest of artichokes.
The CHAIRMAN. All by hand.
Mr. GIUSTI. There is a semi-mechanical process that we use to harvest brussels sprouts; but it does require a lot of hand labor in that harvesting of brussels sprouts, as well.
The CHAIRMAN. If I understood your testimony correctly, and correct me if I'm wrong here, actually the average size of a brussels sprout production farm is larger than I would have anticipated it.
Mr. GIUSTI. I would say an average size farm, prior to this year, was probably about 130 to 150 acres.
The CHAIRMAN. And this year it will be?
Mr. GIUSTI. This year here, because we did have a substantial cut-back from our main buyer, most all of us are going to have to cut back at least 30 percent.
The CHAIRMAN. What about for asparagus? Are they small farm operations?
Mr. ZECH. Yes, primarily small farms. But it's usually 250 to 300 acres because you have to be able to support a packing facility; there's no field packing.
The CHAIRMAN. Are most asparagus growers will a family, for example a family farm, make a living just growing asparagus, or will this be a part of a variety of crops they will probably have? As an average.
Mr. ZECH. Well, I can speak for my family. It's 78 percent of what we do.
Page 102 PREV PAGE TOP OF DOC
The CHAIRMAN. Is asparagus?
Mr. ZECH. Seventy percent of our gross is asparagus. We make it or don't make it on asparagus.
The CHAIRMAN. OK. One quick other question. Do you have to in these highly labor-intensive crops, I presume you use migrant labor?
Mr. ZECH. For harvest, yes. Our harvest labor is virtually all migrant; our packing labor is local.
Mr. GIUSTI. And I would say that's the same for my industry.
The CHAIRMAN. What about shearing sheep?
Mr. HAMILTON. In our situation, we use shearers that come in through we use a contractor out of Idaho who brings them in through Idaho State has something like an H–2 program and our shearers come from Australia, New Zealand. You see a lot there's still a lot of shearers coming up from Mexico.
The CHAIRMAN. Thank you.
Mr. Stenholm.
Mr. STENHOLM. And one of the values of the hearings is what we hear and the written testimony and then what you hear from the committee and then the end result becomes legislation.
And, to that I happened to be in one part of the mens' room when you were discussing me and the others a moment ago. Let me help you understand my question.
To those having a difficult time with my question, and it seems like that, if you only answer yes, that you make me happy, and if you answer no, why you're irritating me. You're not well, you are, kind of.
But, to me, the question I've been asking is fairly simple. We are in the international marketplace, as every witness here today has talked about either the problems of unfair imports or the exports. That is a problem that somehow, some way, we, as a country, are going to have to develop.
Page 103 PREV PAGE TOP OF DOC
A little background to this. I also represent the Oil Patch; my district is very rural and, about a year and a half ago, no one was complaining about $10 oil and we put a whole bunch of independent oil producers out of business with imports that most Americans did not consider unfair competition; we were enjoying the price of gasoline. And you all pay considerably more out here than we do in Texas; that's your choice, as a result of that.
But the bottom line was, it's not good policy for our Nation to become as dependent upon foreign sources for energy as we have and, therefore, the question on rice a moment ago, on how to avoid some of the burning problems, et cetera, is something we ought to be spending some research dollars, perhaps, and/or thinking policy-wise of how we could do a better job of providing energy.
And regarding my question on unilateral sanctions, let me be as clear as I can so that those of you having a difficult time understanding this, if we, the United States, decide we are not going to sell any of the products that we've had, when we put unilateral sanctions on agriculture products being sold, that means you can't sell to the market; it's illegal to sell to the market.
But the same market that the current farm bill is saying that we've got to participate in the international marketplace.
So my problem with that is, it doesn't make sense to me and to 90 percent of the witnesses thus far and 90 percent of the audiences that we continue to have unilateral sanctions. Unilateral means we're the only ones that do it; it means that we do that, and then we allow all the competitors of you to go ahead and sell to that market, and somehow, some way, that's good for us and good for accomplishing our policy.
Now, I can't get any more clearer than that and I hope that helps those two of you that were having a difficult time with my question a moment ago
If not yes, we will we don't have to go to the bathroom, we can just step outside here and we'll talk about it a little bit.
Page 104 PREV PAGE TOP OF DOC
Yes, sir, Mr. Martella?
Mr. MARTELLA. I was fortunate enough to be in Peoria, IL, in the early 1980's and we were visiting the Caterpillar plant and it was about that time when the U.S. Government sanctioned Russia on pipeline equipment. But we saw tens, twenties, thirties of acres of just tractors stacked up on top of each other. And the next year, we were able we were fortunate enough to go to the Soviet Union, the same organization, and we saw Komatsu all over the place.
So your points are definitely well taken.
Mr. STENHOLM. Thank you.
And I hope I've helped those others. But now I want to ask you the question; you can do it with a head shake.
Do you believe that we should ''we'' meaning the U.S. Congress should adopt or eliminate all unilaterally imposed sanctions on food and medicine?
Mr. FONDSE. I'd say yes.
Mr. MARTELLA. Yes.
Mr. STENHOLM. If you've got a qualification all of the panel is shaking their heads ''yes.''.
Now, do you believe that we ought to vote for permanent normal trade relations with China?
Mr. FONDSE. Yes.
Mr. GIUSTI. Yes.
Mr. HAMILTON. If they play the game correctly, yes.
Mr. MARTELLA. Yes.
Mr. ZECH. Yes.
Mr. STENHOLM. That is the qualification, if they play the games fairly. Now that's a separate question.
Page 105 PREV PAGE TOP OF DOC
And I agree with you. I totally agree with you that all of us in the world and that's what WTO is supposed to address and that's some of the other questions that need to be addressed, that everybody plays by the same rules.
That was the chairman's original question to the first panel this morning, is, if they don't play by the rules, do we just say, ''That's OK,'' which is basically what America does in trade that's just OK and just keep on plugging, or do we start looking at other ways to deal with this very unfair trading balance that we've got with Europe, et cetera.
I happen to agree with the chairman, but that's a separate question and that's why I have a little difficult time with some that say, ''Yes, I'm for lifting unilateral sanctions but I'm not in favor of passing normal trade relations with China.'' .
There is an inconsistency there on my point because, if we don't pass normal trade relations with China, we, the United States, will be unilaterally sanctioning China and saying, ''The rest of the world, if there is any market there in a country that has 20 percent of the consumers of the world, you all go ahead and get it; we're not interested.'' That's what we're saying, for some good and valid reasons.
I'll say there are all kinds of views, and I respect all of them. But whether we have differences of opinions is what makes this country work great.
And, Mr. Hamilton, on the sheep and goat industry which you talked about the sheep industry today, your industry knows what happens when we take away the support, which we did, and what has happened to the industry. And, yes, the 201 is giving you a chance, one more chance to compete in that market.
But when you have a situation in which the Australian dollar can be reduced by 25 percent and then you don't have any way of having a supplemental income, an AMTA payment or what have you, it makes it very difficult.
Thank you very much.
Page 106 PREV PAGE TOP OF DOC
The CHAIRMAN. Mr. Pombo.
Mr. POMBO. Thank you, Mr. Chairman.
I wanted to get back to the labor question, if I could for a minute, Mr. Zech.
And I don't want to ask you about your operation, specifically, but generally, in terms of the labor-intensive crops, what would you estimate is the number of people that are legal that are working within agriculture versus those that are not? I know that we've heard this figure that half of the farm labor pool in California is an illegal farm labor pool.
Mr. ZECH. It really varies by what you're doing. I really think we're—you're talking about the very labor-intensive harvest? I think it's more than 50 percent; I think it's closer to 70 or 80 percent would not be legal. I think they just produce false documents and they're here illegally.
We cannot get Americans to harvest our crops.
Mr. POMBO. What would happen if you didn't have that labor pool?
Mr. ZECH. We'd be out of business. There's no alternative.
Mr. POMBO. Mr. Martella?
Mr. MARTELLA. Yes, we're the same way. I was going to incorporate that in one of my speeches one time and somebody said, ''Take that thing out of there because nobody wants to hear how many illegals we have.''.
But I would estimate probably close to 50 percent during the harvest periods.
Mr. POMBO. Mr. Giusti?
Mr. GIUSTI. Yes, I would fully agree that there is a need for redoing the system we currently have because I think it is definitely flawed and there is a large number of falsified documents that we see.
Page 107 PREV PAGE TOP OF DOC
PANELIST. Mine are all legal.
Mr. FONDSE. I'd say probably the same as them, 50 percent. But sometimes it's hard to your hands are tied. If you're taking down the documentation and you know they have the wrong documentation, you can get in trouble for not for asking them for the right documentation because you've got to take what they have. So that's a problem, too.
Mr. POMBO. As an editorial comment, I really don't care if they ever pick any brussels sprouts. But some of the other things I'd never miss them.
Mr. GIUSTI. Watch out; I've got a pretty big army with me today.
Mr. POMBO. Artichokes, I like; brussels sprouts, I don't care for.
But this is one of those issues that this committee has been struggling with for a number of years and we had an amendment that came, was it 4 years ago, on a bill that was moving through and we got killed on it. And we are in the midst of trying to work this issue through again and I believe that we're fairly close to having agreement in the House with the chairman of the committee, Lamar Smith, and being able to move forward with legislation. But it's an extremely controversial to move that.
Fortunately, when we talk about high-tech workers coming in, everybody seems to line up on that one, and that's a great idea. But, when you're talking about farm workers coming in, it's all of a sudden, it becomes very controversial. And it's proven to be very difficult to do.
One question I would like to ask the panel is, in terms of the regulatory environment that we have created in this country, all of you have faced foreign competition, whether it's in our market or whether it's in the international market, and I'd like to know, in terms of suggestions, as to how we would change the regulatory environment that you're operating in, whether that would be labor issues, environmental issues, we hear the Endangered Species Act come up repeatedly. And I know my time has expired, so I'm not going to ask you to answer that because I'll get in trouble.
Page 108 PREV PAGE TOP OF DOC
But just in terms of, if you could provide for the committee a possible list of changes that we need to make in terms of the regulatory environment that you all have to operate in, I would appreciate that.
Thank you.
The CHAIRMAN. Mr. Condit.
Mr. CONDIT. Mr. Chairman. I thank the panel for being here today.
I'd like to ask Mr. Zech if he could just maybe expand upon your statement, maybe give us some reasons why you think this is occurring. You said that Mexico and Peru have almost eliminated the asparagus by the way, the Asparagus Festival was great
Mr. ZECH. Thank you.
Mr. Condit. We enjoyed it very much.
Mr. ZECH. That was my asparagus, by the way.
Mr. CONDIT. Very, very good. Should have had these guys at the Asparagus Festival.
If you could just expand on that?
Mr. ZECH. I would like to clarify one thing with the percentage that I said, 78 percent. That's harvest, that's not our regular operations. Our regular operations, I believe, would be 90 percent legal.
I mean, I can run my farm for 9 months a year with legal labor; it's just the harvest time. I just want to make that distinction.
On terms of Mexico and Peru, what's happened in Mexico and Peru?
Mr. CONDIT. Yes, your comment was that they've almost wiped you out; I'd just like to get some idea
Mr. ZECH. OK. I think the potential is there because we really deal with and part of this is in answer to Mr. Pombo is that we really deal with two different we deal with two entirely different sets of regulations. We deal with different labor regulations; and our cost of labor is approximately eight times what it is in Mexico. The number I get bantered about is that, what we pay in one hour is what the Mexicans pay in a day. OK? And I believe the numbers are somewhat similar in Peru.
Page 109 PREV PAGE TOP OF DOC
Sanitation issues, I don't believe they're very highly regulated pesticides I mean, I can go down the whole list. And I guess for the frustration for me as a producer is that we are held to much higher standards yet we continue to allow these imports to come in.
And our industry would very much like country of origin labeling laws on all fresh produce because we think that the American consumer wants to know that. And I know there's a big split in agriculture on that issue. We'd love to see that.
Mr. CONDIT. Did NAFTA try to deal with any of your issues?
Mr. ZECH. Not specifically. I mean, NAFTA basically eliminated the tariffs over time; and that's one of the reasons why we're seeing so much more product come in. And these guys the Mexicans can go with much lower prices now because they're not paying the tariff.
Mr. CONDIT. Thank you.
Let me, if I may, just to get a consensus you're absolutely correct, right on, with the country of origin, there is a split in agriculture.
But, does everyone at this table agree with Mr. Fondse that we ought to have and Mr. Zech?
Ron?
Mr. MARTELLA. As far as?
Mr. Condit. Should we have the labeling of———
Mr. MARTELLA. We support the country of origin; yes.
Mr. HAMILTON. In my testimony, we support it. I mean, it's real crucial right now in the sheep industry.
Mr. Condit. Mr. Giusti?
Mr. GIUSTI. Yes, I think I said that in my testimony, as well, that we support that.
Page 110 PREV PAGE TOP OF DOC
Mr. Condit. And I heard from Mr. Fondse; OK. That's fine, Mr. Chairman, that's all I have.
Thank you.
The CHAIRMAN. Mr. Ose.
Mr. OSE. Thank you, Mr. Chairman.
I have a couple of questions.
Mr. Martella, you are a peach grower, if I understand from your testimony, and I want to specifically understand whether or not there has been any recent change in the difficulty you're having relative to what used to be a pretty good market in Mexico but it's now been lost to Greek imports.
Mr. MARTELLA. Yes, and like I've tried to state, is that we've completely lost our market to Mexico. We were able from 1999 earlier, we were delivering about 10,000 approximately 10,000 tons of raw product down there to a cannery that canned the fruit, which they needed because they couldn't obtain it down in Mexico, which made jobs for the Mexicans. And they were able to sell it in Mexico.
Well, the Greeks, unfortunately for us, had a huge crop in 1999 so they went to Mexico and pretty much cut our prices drastically and gave them great terms of sale so that cannery reluctantly had to shut their doors and bought they bought Greek peaches.
Mr. OSE. Give me and the other members of this committee some sense of the market dynamic that was there. For instance, the Greek peaches that the Mexicans ended up buying, what were the Mexicans paying for those, how much of that was market generated, how much of that was Greek Government subsidy, the terms of the sale, all that sort of thing.
Mr. MARTELLA. We were told that by our processor, that they could buy the peaches for approximately $12, $12.50 a case; our costs are about $14.50, $15 a case, as I understand. So that was part of the impact.
Page 111 PREV PAGE TOP OF DOC
And we have to believe that they can't we believe we are as efficient as anybody producing cling peaches and packing them. And we have to believe that price differential had to be due to the East European Union subsidies.
Mr. OSE. OK.
Mr. Hamilton, in your testimony, you talk about the predator problem affecting the flocks that you have. Give us some sense, if you will, of the degree to which that particular issue is addressed with Federal funding versus State funding versus grower funding.
Mr. HAMILTON. OK. In California, for example, we do have in Solano County, we have a Fish and a Wildlife Service employee; and there's a matching fund, Federal, with State and county. And that is and what the producers kick in on that is through the organizations helping with financing of materials he can't provide, like, for example, predator dogs. Now these trappers are using dogs and stuff.
One of the problems, like in Solano County, we face like urban sprawl. You look at you go down the I–80 corridor; as the Bay Area grows into the hills up towards Sacramento, you're seeing a bigger increase in predation in the cities. And one of the problems that the county was in our county, for example, was how are we to get these cities to pay their fair share because there's almost as much problems with coyotes in cities as there are on ranch lands.
But there's never been a formula. But the industry, as a whole, we besides other our own means of protecting ourselves through electric fence and guard dogs and stuff like that, we, in some places in the United States, they do have assessments for predation, checkoffs. I think Colorado has one. In California right now, we're fortunate we don't have because we've been able to have enough funding to avoid going to a producer check-off.
Mr. OSE. Would it be your suggestion to this committee that the current year's the deliberations on fiscal year 2001's appropriations include the historical funding for predator programs?
Page 112 PREV PAGE TOP OF DOC
Mr. HAMILTON. Yes, and actually increase, because especially California. As you look at which is getting to be a real problem in California especially, with the buy-up of lands for environmental easements and stuff, we are creating havens. Even though a piece of property is bought to protect a duck, there's nothing demanding these properties to maintaining predator loss, even to the wildlife it's trying to protect.
And the burdens of using taxpayer dollars to fund that ground, there should be some compensation to being a good neighbor. And I think it's very important, is we're impacting a lot of I mean, I look around the Delta, now with drip lines and stuff and orchards and stuff, the predation from like—there's the Consumnes Reserve, you've increased that. And the more coyotes and predators you have around, the bigger impact on more people besides just the sheep industry. And there has to be compensation for that.
Mr. OSE. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Thune?
Mr. THUNE. No questions, Mr. Chairman.
And I do believe I will steer clear of the mens' room.
The CHAIRMAN. Mr. Gutknecht?
Mr. GUTKNECHT. No questions, Mr. Chairman.
The CHAIRMAN. Mr. Moran?
Mr. MORAN. Mr. Chairman, thank you.
And just a couple of observations, I think. I knew, when our panel started you all have seen how persuasive Mr. Stenholm is I knew, by the time we got at least to our last panel, that he'd have them all in agreement with him. Had we been in a court, we would have had an objection for leading the witnesses a long time ago.
I was particularly interested, Mr. Hamilton we raise sheep in Kansas, although I have to admit that I rarely hear from my wool producers and I was interested in your testimony. And the wool loss market program, as you described it, is something similar to what occurs in the cotton program, I think has merit in a number of areas as far as trying to compete with the subsidization around the world by our competitors.
Page 113 PREV PAGE TOP OF DOC
And so I appreciate you bringing that to my attention.
And I have no questions of this panel, Mr. Chairman; thank you.
The CHAIRMAN. I want to thank the panel very much for and your putting up with us and we appreciate your time.
I will call our fourth panel now; Mr. Frank Endres, a wheat, barley, safflower producer from Corning, CA; Mr. Alan Kennett, a sugar producer from Kaumakani, HI, welcome; Mr. James Nilsson, a sugar beet, tomato, and winegrape producer from Stockton, CA; and Mr. Ted Sheely, a cotton and tomato producer from Lemoore, CA.
Mr. Endres, we'll begin with you and go in the order of introduction; thank you.
STATEMENT OF FRANK J. ENDRES, REPRESENTING THE NATIONAL FARMERS ORGANIZATION, WHEAT, BARLEY, SAFFLOWER PRODUCER, CORNING, CA
Mr. ENDRES. Thank you.
My name is Frank Endres, I am a farmer/cattleman from the west side of the Sacramento Valley near Corning, CA. I am also representing the National Farmers Organization which represents independent producers in bargaining for contracts on sales of their commodities in dairy, grain, and livestock.
It is our basic premise that, an agriculture consisting of independent producers is not only desirable, but essential, for maintaining our nation's food production, rural businesses and communities, as well as infrastructure.
The main reason I have asked to testify here today is that I was shocked to see that farm income in 2000 is forecast by USDA to be 20 percent below 1999 and the lowest since 1986. USDA's most recent 10-year baseline farm income projection for 2000 and beyond indicates that farm income will continue to decline sharply into 2001, buoyed only by massive infusions of Government payments to farmers.
Page 114 PREV PAGE TOP OF DOC
Price projections from the March 22, 2000 USDA Agricultural Outlook indicate the lowest prices for all major commodities in the past 10 to 20 years. However, this is still not the true picture because the farmer's input costs, as well as household expenses such as health care, continue to escalate. Whether the market is up or down compared to what it was 10 to 20 years ago has little relevance. It's what those dollars will buy that is important.
You have to use the ratio of a farmer's input cost compared to his selling price, or parity, in order to properly gauge what his price needs to be. When you take today's input costs into consideration, most of the major crops are in the high 30 percentages or 40 percentages of parity. In the heart of the Great Depression in 1932, the all commodity average index was in the 60 percent of parity range.
So where do we go from here? We must change the direction of farm programs. A farm program should be designed to operate in a supportive fashion while producers seek to balance production with market requirements and bargain collectively for profitable prices. It should not be an income relief proposition forcing producers to depend upon checks from the U.S. Treasury.
We have seen farm program costs, the part actually paid to farmers, as a subsidy, go from an average of $5 to $6 billion to the point to where, in calendar year 2000, Government payments will likely exceed $17 billion, the second highest ever.
I would also like to report on how the NAFTA Agreement has affected farmers in our area. Since NAFTA was put into place, there has been a steady stream of Canadian grain cars coming into our major grain mills in central and northern California. This has made local farmers into residual suppliers, and buyers try to discount our grain below the grain price paid for imported grain. This is why we have included, as one of our agriculture policy proposals, the establishment of an International Conservation Diversion Program. The Canadian farmers are suffering under low prices just like we are. It is only because of a favorable exchange rate that their grain can be brought into our market at a price advantage.
Page 115 PREV PAGE TOP OF DOC
The National Farmers Organization believes the following agricultural policies will be needed in the 21st century.
Number one, cooperative efforts need to be made to establish an International Conservation Diversion Program when the stocks-to-use ratio becomes excessive.
Number two, maximize the highly successful Conservation Reserve Program and enact legislation to use short term Soil Bank program as needed; expand the CRP program from the current 36.4 million acres to between 45 to 50 million acres.
Number three, reinstatement of the Farmer-Owned Reserve program. The program would extend the time period grain and oilseeds could be kept under loan to 24 months plus provide storage payments of 25 cents a bushel annually.
Number four, reestablishment of the On-Farm Storage Facility Loan Program. This would allow producers to borrow at low interest rates and extended terms in order to finance and build on-farm storage grain bins. Secretary Glickman is to be complimented for considering this proposal already.
Number five, crop loan rates need to be increased. This would bolster commodity loans and would help encourage price increases and immediate relief that is urgently needed.
Number six, we are asking support for the Farmers and Ranchers Fair Competition Act. This will give funding for low capital value-added demonstration and research projects.
Number seven, enactment of the Flexible Fallow Program. This will give producers the option to voluntarily idle a portion of their acreage in exchange for higher loan rates on the remaining production.
Number eight, packers and stockyards and antitrust enforcement activities to better farmers' position in the marketplace.
Page 116 PREV PAGE TOP OF DOC
Number nine, label all food products that contain genetically-modified organisms and all imported meats, showing country of origin and entry date.
Number 10, enact legislation proposed by the Secretary of Agriculture's Research and Promotion Task Force that a referendum on checkoffs be held every 5 years with the first producer vote to be taken within 1 year or sooner following passage of enabling legislation.
These are some of the major farm policy changes and concerns that would affect me and other farmers in the area. And I appreciate your attention.
[The prepared statement of Mr. Endres appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Kennett.
STATEMENT OF E. ALAN KENNETT, PRESIDENT AND GENERAL MANAGER, GAY & ROBINSON, KAUMAKANI, HI
Mr. KENNETT. Good morning, Chairman Combest and members of the committee. Thank you for bringing your committee to California and inviting me to testify. I appreciate the opportunity to explain to you and the committee the climate of the U.S. sugar industry currently.
My name is Alan Kennett; I am the president and general manager of Gay & Robinson. G&R is a family-owned farming operation employing 270 people in the production of sugar and raising cattle.
I have been involved in the sugar industry for 35 years, beginning my sugar career in England. I have worked in Africa, the Caribbean, and now, fortunately, in Hawaii. Today I speak for the sugar farmers of Hawaii.
The Hawaiian sugar industry began commercial operations 165 years ago on the island of Kauai. G&R began sugar operations in 1897, over 100 years ago. For many years, beginning in the 1950's up through 1986, Hawaii's annual production exceeded 1 million tons of sugar. It was after the 1985 farm bill that Hawaii sugar production began a dramatic fall. And today, Hawaii produces only 350,000 tons of sugar annually from four operating factories.
Page 117 PREV PAGE TOP OF DOC
In 1986, there were 13 operating factories and sugar was grown on all of the four major islands, Hawaii, Maui, Oahu, and Kauai. Today, sugar is grown only on Maui and Kauai. The island of Hawaii, the big island, was by far the largest sugar producing island. Unfortunately, since the demise of sugar on that island, nothing has replaced sugar as a viable agricultural crop and the former cane lands remain idle, overgrown with weeds.
Unemployment is high and the drug problem has increased, as have the social problems of dealing with these issues. There is a great deal of concern that both Maui and Kauai will see the same occurrence should we lose our sugar industry.
We, in Hawaii, like all fellow American sugar producers, are extremely concerned at the misrepresentation often directed at us by the opponents of U.S. sugar policy. Clearly, Hawaii has not received the congressionally-approved returns from the sugar program, nor have many U.S. sugar farmers whose livelihoods are being threatened by the dramatic fall in prices over the past 7 months.
In fact, because of Hawaii's isolation relative to our market, the mainland U.S.A., Hawaii produces at high freight costs which puts us at a disadvantage relative to other U.S. shipper producing areas.
American sugar farmers are efficient by world standards. Two-thirds of the world's sugar is produced at a higher cost than the United States. However, American sugar farmers, like many other farmers around the country who grow other crops, are struggling this year. Oversupply and loss of market confidence in the ability of the USDA to maintain a viable program have resulted in severely depressed producer prices for raw and refined sugar.
The U.S. raw sugar price has plummeted about 25 percent since July 1999. Raw cane sugar prices have fallen from about 22 and a half cents per pound to a low recently of 17 cents, the lowest level in 18 years. Given current production estimates, this represents a $400 million drop in the value of the domestic cane sugar crop.
Page 118 PREV PAGE TOP OF DOC
As of April 26 this year, the Commodity Credit Corporation has a substantial amount of sugar on the loans, 848,000 tons of cane sugar and 771,000 tons of beet sugar with a value of about $656 million. Massive forfeitures are a certainty unless some action is taken immediately to salvage prices.
Market prices are several cents below forfeiture levels in every region of the country. Producers are placing additional sugar under loan as they continue to harvest, and forfeitures could be even higher.
Aggressive action now to remove and dispose of sugar from the domestic marketplace would relieve the economic hardship on U.S. sugar farmers, diminish the threat of sugar-loan forfeitures, and save the Government money relative to the cost of accepting and storing larger volumes of forfeited sugar.
Government action to address this problem is appropriate because so many of the factors leading to the price drop are more closely related to Government action and inaction than to producer decisions. Furthermore, the Government has responded to similar price drops for other program crops by providing tens of billions of dollars in assistance over the past several years. While these expenditures on other crops are appropriate, they have had the unintended effect of lessening the beet and cane sugar price crisis, as this financial relief enables many farmers to invest in new or additional beet and cane sugar production.
Furthermore, sugar has been overlooked in Government market loss assistance efforts during the farm crisis of the past several years. Net CCC outlays for other program crops exceeded $10 billion in fiscal 1998 and $19 million last year. Yet sugar revenues total $30 million in 1998 and $51 million last year. Nearly $30 billion is budgeted for other program crops this year. Sugar farmers are hurting, too, and should be included.
Short-term solutions: For prices to recover this year, removal of significant quantities of sugar from the market must occur immediately. This would involve purchasing sugar for sale or donation abroad or for non- food or non-sucrose use.
Page 119 PREV PAGE TOP OF DOC
Long-term solutions: The U.S. Government should negotiate with Mexico to reduce the threat of Mexico sugar destroying the U.S. market. The U.S. Government should seek a legislative remedy to address sugar syrups, commonly known as ''stuffed molasses'' that is circumventing the tariff code. Congress should abolish the 1-cent forfeiture penalty on sugar, should eliminate the debt reduction provision for sugar, should make all sugar loans non-recourse loans, and through a technical correction measure, should reinstate the no-cost provision that was eliminated in the drafting of the 1996 farm bill.
I would like to thank you, Mr. Chairman and members of the committee for allowing me to testify before you today. Sugar farmers want what all other program crops want, a fair opportunity to farm and make a reasonable living.
American sugar producers' competitiveness and their disastrously low prices parallel the plights of other American farms but, because of sugar's unique characteristics, policy solutions may have to be different from those for other commodities. Sugar farmers do not want to be treated more favorably than other farmers are, just equally.
Thank you.
[The prepared statement of Mr. Kennett appears at the conclusion of the hearing.]
STATEMENT OF JAMES NILSSON, PRESIDENT OF CALIFORNIA BEET GROWERS ASSOCIATION, SUGAR BEET, TOMATO, AND WINEGRAPE PRODUCER, STOCKTON, CA
Mr. NILSSON. Thank you. My name is Jim Nilsson; I'm currently serving as president of the California Beet Growers Association and I'm here representing over 500 farm families that grow approximately 110,000 acres of sugar beets in the State of California.
Page 120 PREV PAGE TOP OF DOC
My farming operation is east of Stockton, where I live, and I'm a diversified farmer. I also grow tomatoes, winegrapes, walnuts, cabbage, some bell peppers, and whatever else I think that I can make money on. Each one of my crops is being squeezed by a poor farm economy. I am amazed each day, as the California and U.S. economies are booming but agriculture is being bypassed in these good times.
The beet sugar industry in California at this time is in a major crisis. Since 1993, four of the eight sugar beet processing plants in California have closed. This year, Imperial Sugar Company announced that the Woodland and Tracy factories will be permanently closed this fall unless sugar beet growers purchase these plants. With market prices as such low levels, there's not enough revenue to sustain the growers and processor as two separate and independent entities. Our association has been checking every avenue to see if there is a way for growers to own and operate these two facilities.
Sugar beets are the primary crop for many growers and they will be hurt by the closures. Because of low sugar prices, we are having problems figuring a way to purchase the plants and operate them successfully. The association estimates that there are nearly 600 direct jobs at these two plants with a payroll of over $17 million. These two plants contract a total of over 60,000 acres. The value of these beets is nearly $80 million. Without sugar beets, growers will be planting other crops, most of which are already in oversupply and the local economies will suffer. Since last Christmas, sugar prices in California have declined by nearly 15 percent. This is the reason that the closure of these plants was announced. The reason for the sugar price decline is several fold.
First of all, there is a tariff schedule loophole that allows a product called stuffed molasses to circumvent the sugar import quota of the United States. It is estimated at well over 125,000 tons of this stuff enters the country annually under this loophole.
The second problem is that, when the North American Free Trade Agreement was negotiated, the Mexican sugar industry did not produce sufficient sugar for its own country's use. The Mexican industry has been privatized and, today, they are a net export country to the United States. About 50 percent of the sugar production facilities in Mexico are inefficient and of high cost. In order for the Mexican Government to recover their costs in the switch-over to privatization, they subsidize these inefficient plants. The U.S. sugar industry will suffer until our Government takes action to protect its producers.
Page 121 PREV PAGE TOP OF DOC
Finally, the Freedom to Farm Program removed our Government's ability to manage domestic sugar production and gave growers of our commodities the ability to receive payments on some crops and the flexibility to grow alternative commodities like sugar beets and sugarcane. With the sustained collapse of other commodity prices, farmers across the country turned to sugar production because of its history of stability. The combination of tariff, tariff circumvention, a bad NAFTA agreement, and the depression in commodity prices now forces the Government to take immediate and essential measures to help our industry survive this crisis.
We have a fourfold action plan we would like the committee to consider.
First, is to support legislation to stop stuffed molasses and like products designed to circumvent the sugar quota from entering our country. The legislative fix is a part of the sub-Saharan/CBI Parity bill now in conference committee, and this committee's support would be helpful.
Second, the U.S. Government must negotiate a comprehensive agreement with Mexico to reduce the threat of Mexican sugar access to the United States. The administration, with the support of this committee, must use all available authorities to resolve this problem.
Third, we urge the Government to purchase excess supplies of sugar for non-use domestically or removal from our borders. This action would avoid much more costly sugar loan forfeitures and protect the incomes of our family farmers. Farmers should not have to bear the economic burden of the mistakes made in our trade policy.
Finally, in previous farm programs, there have been bankruptcy provisions that protected growers in the event of a processor's failure or other insolvency. Since sugar prices have dropped to disastrously low levels, this policy should be made applicable to the current farm bill so that growers can be assured of receiving at least the minimum benefits intended under current sugar policy.
I want to thank you, Mr. Chairman, for this opportunity to express our concerns and we look forward to working with you on these immediate issues and designing long-term sugar policy in the next farm bill.
Page 122 PREV PAGE TOP OF DOC
Thank you.
[The prepared statement of Mr. Nilsson appears at the conclusion of the hearing.]
STATEMENT OF TED D. SHEELY, ASPARAGUS PRODUCER, LEMOORE, CA
Mr. SHEELY. Mr. Chairman, my name is Ted Sheely; I've farmed on the west side of the San Joaquin Valley for the past 25 years. I grow cotton, tomatoes, garlic, pistachios, and chick-peas.
I appreciate the opportunity to communicate my view on the future of American agriculture with this committee. As you know, the primary task of the farmer today is to manage effectively two principal business risks, commodity price risk and production risk.
I wish to focus today's testimony on the Government's role in assisting farmers to reduce production risk by fostering the adoption of new technologies, the reduced input costs, and boost yields. These new technologies have the promise to spread farm income net margins, making growers more self-sufficient and profitable. With the availability of remote sensing and other technologies, precision agriculture holds a promise of correctly measuring inputs to needs. It enables farmers to adapt production methods in order to enhance the capability of the plant to grow and to get the most out of available inputs. In short, precision agriculture is economic efficiency and conservation. We need a lot of both of these in U.S. agriculture today.
We need efficiency to enhance our competitiveness and we need conservation in order to protect our environment and extend the capacities of our scarce resources.
Mr. Chairman, I'm not a lazy man, but I don't like doing things I don't need to do. With variable-rate applications and with variable-rate application technology along with remote sensing, I'll no longer fertilize land that doesn't need it. Using spray and no-spray zones within fields, I will not have to treat an entire field when a limited, targeted application is really all that I need.
Page 123 PREV PAGE TOP OF DOC
Some demonstration projects have shown a potential for a 30 to 40 percent reduction in the use of crop protection products through the application of precision agriculture. Precision agriculture enables me to enhance water utilization efficiency through the use of remote sensing technology, verified by in-field use of pressure bombs, we can discover leaf water potentials. This capability will help me know where moisture deficiencies are and make it possible to concentrate resources where they are needed the most.
Technology is commercially available today that can optimize equipment loads to tractor horsepower, therefore, conserving fuel, reducing emissions, and significantly improving tractor use. New guidance systems such as the Beeline Navigator, which I'll be using on my ranch, make it possible for me to perform critical operations day or night. This will reduce the number of tractors and implements I need to farm the same acreage simply because now I can work an extra 12 to 14 hours a day. The same technology enables tractor wheels to use the same path each time through the field. By establishing permanent traffic paths, we can eliminate soil compaction where the plants are being grown.
It is compelling that, by simply automating the steering of the tractor to drive a straight line, I can reduce the cost and improve yields while, at the same time, reducing the load my farm places on the environment.
Congress needs to get behind these new technologies and help ensure that farmers are able to utilize precision agriculture and the foundation technology. Some suggestions would include tax incentives for the implementation of these technologies, accelerated depreciation schedules for investing in precision agricultural equipment, and additional incentives to reduce the financial risks associated with moving small-scale tests from experiment stations to large-scale testing on individual farms.
I've noticed that Congress is working on legislation making loans available to provide local TV broadcast signals via satellite to rural areas. I would encourage you to consider whether similar Federal assistance could be explored to help rural areas install the necessary satellite reception facilities for remote sensing and machine guidance capabilities. This assistance will provide real bottom-line return to agriculture and the taxpayer.
Page 124 PREV PAGE TOP OF DOC
Specifically, Mr. Chairman, the Ag20/20 program is a powerful new concept that teams researchers with growers to address specific needs. In this process, we get more for every research dollar. I strongly urge the committee to do all that it can in supporting and developing the Ag20/20 program. This important ground-breaking enterprise, established as a result of cooperation between major commodity groups, the Department of Agriculture, and NASA, can help take precision agriculture off the drawing board and into the field.
These two agencies are establishing the framework to combine expertise from many sources, enabling this technology to make huge strides forward. Ag20/20 needs a broader base of funding in order to significantly impact U.S. agricultural production. Under the auspices of the Ag20/20 program, I hosted 30 researchers and agency administrators from the USDA, NASA, Cotton Incorporated, National Cotton Council, the University of California, and private agronomists at my farm March 1st of this year. We brainstormed ways of using these new technologies to address the needs on my farm and, in particular, my desire to reduce input costs. Though funds are very limited, this group will provide me with the opportunity to implement precision agriculture on my farm. Ultimately, I will benefit from understanding my soil spatially and by being able to apply water, nutrients, growth regulators, and plant protection products in precise amounts when and where needed.
Without a doubt, I know these technologies work and are going to work better. Technology will redefine the debate over agriculture and its impact on the environment and natural resources. This technology will help U.S. farmers continue to produce competitively, enable us to get more productivity from each acre.
Mr. Chairman, precision agriculture is real and it can work. Using the California cotton industry as an example, widespread adoption of these new technologies could see farm chemical savings of between $60 and $80 million each and every year. If we put a dollar figure on the environmental benefits of such a reduction, the payback for nurturing this technology is clearly evident.
Page 125 PREV PAGE TOP OF DOC
I can vouch for the fact that some Federal agencies can work together well. The Ag20/20 program is just one way this committee can help sustain the progress that we have made. I urge your support for the program and other agricultural research programs that will further our ability to make widespread use of precision agriculture.
Thank you and, being the last, I want to thank all of you from the committee for coming to California and we appreciate it.
[The prepared statement of Mr. Sheely appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you very much.
Right now, Mr. Condit, who is about to have some appointments backed up against each other.
Mr. CONDIT. Thank you, Mr. Chairman.
I would echo what Mr. Sheely said; I would like to thank you and the full committee for being here. And I wanted to stay until the panel had finished its testimony but I do have a commitment that I made in the State capital to talk about water. And so I'm running just a little bit late, Mr. Chairman, but I do appreciate you being here and the committee being here today.
The CHAIRMAN. Mr. Pombo.
Mr. POMBO. I have no questions of the panel, Mr. Chairman, I'd just like to join my fellow California colleagues in thanking you and the other Members for coming to California.
The CHAIRMAN. Mr. Stenholm.
Mr. STENHOLM. I want to ask each of you the same question regarding the—yes, get this one right, Mr. Pombo says you can answer any way you want to. We're trying to do a little survey but, do you believe that we ought to lift all unilaterally-imposed sanctions?
Page 126 PREV PAGE TOP OF DOC
Mr. ENDRES. Yes, sir.
Mr. SHEELY. Yes.
Mr. NILSSON. Yes.
Mr. KENNETT. Being the last panelist, you are very persuasive because I had the benefit of all the other three panelists because I went from a ''no'' to a ''don't know'' to a ''maybe'' to a resounding ''yes.''.
Mr. STENHOLM. If I could only do so well with my colleagues now in the House.
Mr. NILSSON. Mr. Chairman, does that mean when Elian goes home back to Cuba, we're going to be taking sugar from there?
Mr. STENHOLM. Therein is a separate question.
Mr. NILSSON. OK.
Mr. STENHOLM. The whole question of Cuba, that's a unilaterally imposed sanction of which I haven't seen any place in which that is, in fact, benefiting producers in the United States. The question of where we import our sugar, how much sugar we import, how fairly we treat it is a separate question. And, if sugar from Cuba, which they have very little, if any, to export today today, the problem is Mexican sugar, as you were saying, and some of the readings of the NAFTA, the interpretation of NAFTA is something that we both, policy-wise as well as legislation-wise, must continue to address.
All right, PNTR question: Do you believe that we ought to vote permanent normal trade relations with China?
Mr. Endres.
Mr. ENDRES. I'll give that a qualified yes. The qualification is that I don't believe in giving them a blank check and I think that we need to look into all the aspects of what this trade will mean.
Page 127 PREV PAGE TOP OF DOC
A lot of agricultural producers have been misled into thinking that opening the gates of these wonderful exports, that it's going to mean prosperity for them. And I think what we need to do is I think it's about time to have an investigation into the net effects that these trade agreements have had and the impact its had on agriculture in this country.
Also, we need to look into what importing cheap labor into this country that's basically what we're doing with trade relations with these other foreign countries. We need to look at the impact that it has on agriculture here because, when we take our biggest and best consumers in this country are suffering under low wages and reduced wages because of these trade agreements, it directly affects the agriculture and the amount of food that we supply to our biggest customer, and that is the domestic market. That's the biggest market we have, not the exports.
Mr. KENNETT. Yes, Mr. Stenholm, I believe that we need to liberalize our trade laws because it's the only way that we can get countries who are not playing by the rules to play fair.
Mr. NILSSON. I will just answer a simple yes.
Mr. SHEELY. Yes, I think that you should, even though that I am a garlic grower and they are taking my market away from me at the current time.
Mr. STENHOLM. When you said liberalize our trade laws, we've got among the most liberal trade laws in the world. There are some that, perhaps, do better, but not very many, and certainly not with a market as significant as the United States market is.
And, Mr. Endres, I couldn't agree more with your qualifications; that's something that I totally agree with on the manner in which China is now selling us a billion dollars a week, it's time for them to buy; and that's why I look at what we've negotiated now, it's a pretty darn good contract for them to start buying.
If they don't, then obviously we are going to, at some point in time when our economy is not booming in every place other than agriculture, we are going to have to take a look at our own policies and it's not too soon to begin.
Page 128 PREV PAGE TOP OF DOC
Mr. Sheely, are you any kin to Joe Sheely?
Mr. SHEELY. Yes, I am; I'm his son.
Mr. STENHOLM. I thought maybe I served with your dad on the Cotton, Inc. board back in the mid–1960's and I think that's the first time we met; you were a little shorter at that time.
Mr. SHEELY. I was an illegal bartender at the functions.
The CHAIRMAN. Mr. Ose.
Mr. OSE. Mr. Chairman, I may defer to Mr. Thune. If you would come back to me in a moment, please?
The CHAIRMAN. Mr. Thune.
Mr. THUNE. I'll defer to Mr. Gutknecht.
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. Well, Mr. Chairman, the only thing I would say is thank you to all the people who have appeared today. These hearings, I think, have been very helpful to me, at least, because you begin to get a completely different flavor of what is happening around the country and the various problems you have to deal with.
I would say this about trade and this is why it's so important to me I would say two things.
First of all, I would hope that and we in Congress really can't do this, this is really going to be up to whoever the next President is, but I would like to see us pursue a world food treaty whereby all the countries of the world would agree to never use food as a political weapon. And I think that would benefit people all over the world. I think that's a good idea.
The second thing, in terms of trade, and there's no question, in some areas we win, in some areas we lose, and that's the way markets work. But I think, on a net-net basis, I think American agriculture is better served by having more open markets around the world than the other way around.
Page 129 PREV PAGE TOP OF DOC
We grow an awful lot of soybeans up in my part of the country and about half of what we grow ultimately winds up in some kind of an export market. So, if we do anything which precludes their ability to sell in foreign markets, it dramatically limits their ability to earn a living.
So, Mr. Chairman, I really have no questions. I thank you so much; I think, to have somebody from Hawaii and talk about sugar, and people from Arizona talking about cotton, I mean, these are commodities we grow sugar beets up in Minnesota in the Red River Valley.
But these have been great hearings and I appreciate, Mr. Chairman.
The CHAIRMAN. Mr. Ose.
Mr. OSE. Mr. Nilsson, I especially appreciate you being here as the president of the California Beet Growers Association. I noticed in your testimony a brief discussion about the challenge we have right here in Woodland, but we also have other processing plants that are closing. And I wasn't quite sure whether or not there was an adequate discussion of impact, if you will, around here for the closure.
I know that a lot of growers right now, because they have no place to place their beets upon harvest, are, in effect, saying, ''I'm not going to plant them.'' But there are ripple effects to that such as, if you're going to plant something else, maybe you need different equipment, you have different horticultural practices, different water requirement. Could you give us some sense of the ripple effect of that?
Mr. NILSSON. Well, I think it's still hitting us. This is kind to new to us; about the first of February, we were notified about the problems with the factory here in Woodland and the one in Tracy. The current owner needs to raise some money and he feels that, being close to the city here, being close to the city in Tracy, he can generate some revenue. And the sugar thing isn't very good.
The ripple effect that you're talking about, yes, I'm faced with it right now. I'm in Stockton I should be planting my spring beets right now. I had ground leased, I have land bedded up for beets, and now I don't have a contract. It's, what do I plant there?
Page 130 PREV PAGE TOP OF DOC
The talk at the coffee shop in the morning is it started out as, ''Well, what can we grow that we can make some money on?'' Now it's, ''What can we grow that we can minimize our losses with?''.
Mr. OSE. Mr. Chairman, I also I have one observation. I have to say, this is the first committee hearing where we've been able to persuade somebody from Hawaii to come to us instead of the other way around. I have to marvel at your ability
The CHAIRMAN. If the gentlemen will yield, there have been a lot of suggestions for a Hawaii hearing.
Mr. KENNETT. We would love to have you come over and visit us.
Mr. OSE. Finally, if I may, Mr. Endres, I want to come to a comment you made on the CRP. You talked about increasing the amount of acreage in the CRP from the 36-odd million acres to 45 to 50. I'm trying to figure out how you came to that number. Why is it 45 to 50 million acres instead of, say, 55 to 60 or what have you?
Mr. ENDRES. I think what they're taking a look at in this proposal is the amount of land that would need to be idled in order to bring the grain in storage right now down to a more manageable level in this country.
Mr. OSE. An earlier witness was asked what I thought was a very interesting question; and that is, how do we, as policy-makers, if we were to adopt that idea, avoid the situation where one of our trading partners would then increase the amount of acreage they commit to growing something?
In other words, all we do is close down ours in favor of somebody else growing.
Mr. ENDRES. Well, the idea is, is to raise the price and that's the basic idea of this whole land reduction. And, by raising the price and bringing the price up in this country, I think it will help the producer here.
Page 131 PREV PAGE TOP OF DOC
But I think we also have to look at the fact that they're not going to increase production in foreign countries because they're selling at a loss, too. These prices that we are suffering with in this country is not exclusive to this country, it's happening all over the world. And why would they want to go ahead and expand their production if they're going to do it at a loss?
Did that answer your question?
Mr. OSE. Well, I'm not sure; I still have to think this through. I mean, I can it's not so long ago I was in business and, if I saw one of my competitors reducing their ability to produce and I thought I could make money at it, I would at least look at it. I have to work this through in my own head.
Mr. ENDRES. Well, the thing to keep remembering is, they're producing it at a loss, just like we are.
Mr. OSE. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Stenholm has a comment.
Mr. STENHOLM. Yes, a comment on that.
Mr. Endres is right on target. We had another hearing in Washington a couple of weeks ago in which we were told that now 35 million acres have been taken out of production in the rest of the world. So, therefore, you're entirely correct; there are very few people making any money. In fact, there are tremendous losses occurring at the current price levels.
And, Mr. Nilsson, my son's answer to your question 2 years ago was, ''Dad, why am I out here planting wheat when we're going to lose $20,000? I can go on the board and buy it and lose less.'' He did; and we did.
The CHAIRMAN. I want to thank the witnesses and I want to certainly thank for the utilization of this facility it's a great facility for a hearing and for the people of California for their hospitality over the past 24 hours, for the Members for attending, taking their time away from their districts and their families to be here out of an interest in American agriculture.
Page 132 PREV PAGE TOP OF DOC
I would ask, without objection, that the record of today's hearing will be remain open for 30 days to receive additional material and supplementary written reports from witnesses to any questions posed by members of this panel and would, once again, encourage any individuals who would wish, to submit testimony to the committee on behalf of themselves or organizations in regards to today's agriculture conditions, that they please feel free to do so. We would encourage that.
This hearing of the House Agriculture Committee is adjourned.
[Whereupon, at 1:09 p.m., the committee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows.]
Testimony of Jeff Colombini
Dear Mr. Chairman, members of the committee, my name is Jeff Colombini, and I am a tree fruit grower in Congressman Pombo's district.
In addition to farming cherries, apples, walnuts, and wine grapes, I also serve as Chairman of the California Cherry Advisory Board.
As a private grower and through my work with the Advisory Board, I have worked to help the industry open new export markets for our products.
I know first-hand that the fiscal health of the California cherry industry depends upon a viable open food system. From 1992 to 1999, on average, 53 percent of California's cherry production was exported. The value of our 1999 export crop was $43 million. Of that which was exported, 20 percent went to Japan, our largest export market in 1999. Other important export markets include Taiwan, Hong Kong, Canada, and the United Kingdom. Because of the assistance we have received from the U.S. Department of Agriculture and the U.S. Trade Representative's office, in recent years we have also been able to begin developing markets in Mexico, China, and Australia.
Page 133 PREV PAGE TOP OF DOC
If the Committee remembers only one message from my testimony here today, it is that trade is not a luxury for the California cherry industry. It is not a bonus that helps us be a little more profitable. The California cherry industry is integrated into the world food system, and we need the support of our Congressional representatives and the U.S. administration to ensure that the global food system remains open.
In addition to this general message, in the short time we have I would like to make six quick points.
The first is that funding for the Animal Plant Health Inspection Service's international programs and export trade support teams needs to be sufficient to ensure that we have:
an adequate number of negotiators,
that these negotiators have the administrative and scientific support they need to eliminate foreign trade barriers, and
funding for travel and proficient translators.
while there have been improvements in recent years, APHIS, with the exception of its overseas international services staff, still only has only about nine or 10 people assigned to cover all quarantine trade issues world-wide. For the most part the world is divided into three parts, and two people are assigned to each part. This means that two APHIS negotiators are responsible for all plant quarantine talks and negotiations in Asia. In some cases they return from talks with one country with barely enough time to prepare for talks with the next, and in their absence while travelling, some works have not received appropriate attention. As I mentioned, staffing levels have increased in recent years, but this is an area where minimal investment could yield significant and real returns to U.S. agricultural exporters. A strong APHIS is critical to U.S. agricultural exports, especially when so many of our agricultural trade barriers are non-tariff based. The agency must be adequately funded, preferably by mandatory as opposed to discretionary funds.
Page 134 PREV PAGE TOP OF DOC
Second, it is very important this committee ensure that the U.S. Congress and administration avoid any action that could jeopardize the integrity of the WTO's Sanitary and Phytosanitary Agreement. This means that the U.S. should ensure that its import policies be based only on sufficient and sound science and not allow protectionist pressures to abuse our phytosanitary policies. It also means that the U.S. should resist any attempts by the European Union and other countries to revisit this agreement in the upcoming WTO talks.
The California cherry industry has already benefited from this agreement. Because of a WTO case, new varieties of California cherries will more easily be shipped to Japan, and other countries that have restricted the entry of California cherries, such as Korea, are now reconsidering their positions given their new multilateral obligations.
Third, the U.S. needs to ensure it is providing adequate support for the Codex Alimentarius and other international standards setting organizations. It is useless for the U.S. to encourage its trading partners to defer to these international standards, if the organizations do not have the resources necessary to develop standards for many of the new products and technologies that are becoming available to growers.
Developing a science-based international standard for new inputs and technologies is far preferable to having each country setting its own standard and ending up with a disconnected system that unintentionally inhibits the open and free movement of food. For this reason, it is important the U.S. ensure that these standards setting bodies have the funds they need to conduct the research, evaluations and risk assessments needed to recommend international standards for emerging agricultural inputs and technologies.
Fourth, in the course of the WTO talks, we need to ensure that European production and export subsidies are eliminated. Not only because they inhibit our ability to export to Europe, but because they provide the Europeans with an unfair competitive advantage in third markets such as the Middle East, India, and other parts of Asia.
Page 135 PREV PAGE TOP OF DOC
Fifth, I would encourage the Committee to maintain strong support for agricultural research and other green box activities such as the Market Access Program (MAP). As I mentioned in my opening remarks, recently, because of support received from the U.S. Department of Agriculture and the U.S. Trade Representative's office, the California cherry industry was successful in opening new markets in Mexico, Australia, and China. The opening of these markets was made possible because of agricultural research, and these new markets are being developed with MAP funding for generic marketing efforts. Combining research with policy level attention allows markets to open, and following a market opening with a strong generic marketing program, allows new export markets to be created. That provides for increased U.S. exports. That, Mr. Chairman, should be our primary goal.
On a related note, for several years the horticultural sector has been requesting an increase in the USDA's Market Access Program budget from its current level of $90 million. A recent proposal by the Administration would utilize at least part of the unused $500 in Export Enhancement Program budget, slated for wheat and barley subsidies, to be used to increase the MAP budget. I respectfully ask the Committee to support this important green box request, as it will help U.S. growers compete more effectively in international markets.
Finally, a quick word on the China permanent normal trade relations vote. I cannot stress enough the importance of passing PNTR for China to U.S. agriculture. China's market potential for U.S. agricultural commodities is enormous. In our industry, as a relatively new market, we shipped 10,000 18-lb. boxes of cherries between 1998–99, but that number is expected to jump significantly once the current 30 percent tariff falls. In the November WTO agreement, China agreed to lower the tariff to 10 percent by 2004 once it joins the WTO. This significant reduction will eventually mean millions of dollars in revenue for California cherries. Unfortunately, the tariff concessions to which China agreed to will be lost if PNTR is not passed. China is too important a market not only for cherries but for all of U.S. agriculture to let this opportunity slip away.
Page 136 PREV PAGE TOP OF DOC
I encourage you and members of this Committee to consider the issues I have mentioned today, when you are developing our Nation's agricultural policy. Thank you.
Statement of Ted D. Sheely
Mr. Chairman, my name is Ted Sheely and I have farmed on the west side of the San Joaquin Valley for the last 25 years. I grow cotton, tomatoes, garlic, pistachios, and chick peas (garbanzo beans).
I appreciate the opportunity to communicate my view on the future of American agriculture with this committee.
As you know, the primary task of a farmer today is to manage effectively two principle business risks:
COMMODITY PRICE RISK AND PRODUCTION RISK
I wish to focus today's testimony on the government's role in assisting farmers to reduce production risk by fostering the adoption of new technologies that reduce input costs and boost yields. These new technologies have the promise to spread farm net margins making growers more self-sufficient and profitable.
With the availability of remote sensing and other technologies, precision agriculture holds the promise of correctly measuring inputs to needs. It enables farmers to adapt production methods in order to enhance the capability of the plant to grow and get the most out of available inputs. In short, precision agriculture is economic efficiency and conservation. We need a lot of both today in U.S. agriculture.
We need efficiency to enhance our competitiveness.
We need conservation in order to protect our environment and extend the capacity of our scarce resources
Mr. Chairman, I am not a lazy man, but I don't like doing what I don't need to do. With variable rate application technology, along with remote sensing capabilities, I will no longer fertilize land that does not need it.
Page 137 PREV PAGE TOP OF DOC
Using spray and no-spray zones within fields I will not have to treat an entire field when a limited, targeted application is really all I need. Some demonstration projects have shown the potential for a 30–40 percent reduction in the use of crop protection products through the application of precision agriculture.
Precision agriculture enables me to enhance water utilization efficiency. Through the use of remote sensing technology, verified by infield use of pressure bombs, we can discover leaf water potential. This capability will help me know where moisture deficiencies are, and make it possible to concentrate resources where they are needed most.
Technology is commercially available today that can optimize implement loads to tractor horsepower, thereby conserving fuel, reducing emissions and significantly improving tractor use. New guidance systems, such as the Beeline Navigator, which I will be utilizing on my ranch, make it possible for me to perform critical operations day and night. This will reduce the number of tractors and implements I need to farm the same acreage simply because I can now work an extra 12 to 14 hours a day. The same technology enables the tractor wheels to use the same path each time through the field. By establishing permanent traffic paths we can eliminate soil compaction where plants are being grown. It is compelling that by simply automating the steering of my tractor to drive a straight line I can reduce costs and improve yields, while at the same time, reducing the load my farm places on the environment.
Congress needs to get behind these new technologies and help ensure that farmers are able to utilize precision agriculture and its foundation technology.
Some suggestions include:
tax incentives for the implementation of this technology;
accelerated depreciation schedules for investing in precision agriculture equipment; and
additional incentives to reduce the financial risk associated with moving small-scale tests from experiment stations to large scale testing on individual farms.
Page 138 PREV PAGE TOP OF DOC
I have noticed that Congress is working on legislation making loans available for providing local TV broadcast signals via satellite to rural areas. I would encourage you to consider whether similar Federal assistance should be explored to help rural areas install the necessary satellite reception facilities for remote sensing and machine guidance capabilities. This assistance will provide a real bottom-line return to agriculture and the taxpayer.
Specifically, Mr. Chairman, the Ag20/20 program is a powerful new concept that teams researchers with growers to address specific needs. In this process we get more for every research dollar. I strongly urge this Committee to do all it can to support the developing Ag20/20 program.
This important, groundbreaking enterprise, established as a result of cooperation between major commodity groups, the Department of Agriculture and NASA, can help take precision agriculture off the drawing board and into the field. These two agencies are establishing the framework to combine expertise from many sources, enabling this technology to make huge strides forward. Ag20/20 needs a broader base of funding in order to impact significantly U.S. agricultural production.
Under the auspices of the Ag20/20 program, I hosted thirty researchers and agency administrators from USDA, NASA, Cotton Incorporated, the National Cotton Council, the University of California, and private agronomists at my farm on March 1 of this year. We brainstormed ways of using new technologies to address needs on my farm, particularly my desire to reduce input costs.
The group formed teams across state and Federal agencies and disciplines that are committed to using existing research dollars to address these priorities on my farm in the 2000 growing season.
Though funds are very limited, these teams will use several methods to analyze soil profiles and variability. For example, land-based instruments will be used to compare spectral information of soils with remotely sensed-data collected from NASA high altitude flights (AVIRIS). Other remotely gathered information covering a wide range of electromagnetic, infrared and thermal data will be used to determine which methods offer the best promise of practical applications on the farm. These data will be shared so that all team members get the most from their research dollars.
Page 139 PREV PAGE TOP OF DOC
This group will provide me the opportunity to implement precision agriculture effectively on my farm.
Ultimately, I will benefit from understanding my soils spatially and by being able to apply water, nutrients, growth regulators and plant protection products in precise amounts when and where needed. Water management is a crucial component of profitable production in the west. NASA flight data will be compared with my field records of irrigation timing and amounts, as well as plant water status measurements. This data will enable me to better understand how my fields respond to irrigation.
Without a doubt, I know these technologies work and are going to work better. This technology will redefine the debate over agriculture and its impact on our environment and natural resources. This technology will help U.S. farmers continue to produce competitively and will enable us to get more productivity from each acre.
Mr. Chairman, precision agriculture is real and it can work. Using the California cotton industry as an example, widespread adoption of new technology would see farm chemical savings of between $60 –80 million each and every year. If we put a dollar figure on the environmental benefits of such a reduction, the payback for nurturing this technology is clearly evident.
I can vouch for the fact that some Federal agencies CAN work together and work together well. The Ag20/20 program is just one way this Committee can help sustain the progress we have made. I urge your support for that program and other agricultural research programs that will further our ability to make widespread use of precision agriculture.
Mr. Chairman, less than 100 miles to the south we have the world's greatest concentration of technology in the Silicon Valley. The future of American agriculture will be judged on our ability to leverage this country's intellectual horsepower to enable farmers to produce more for less cost to both the grower and the environment. Technology is this country's competitive advantage in agriculture, and it is imperative we take and maintain world leader status for farm production technology. At a national policy level, I believe production support must be given at least an equal weighting as price support if we are to navigate the turbulence of global competition.
Page 140 PREV PAGE TOP OF DOC
Statement of John Giusti
Good morning and thank you for the chance to come before you today to discuss issues facing the brussels sprouts and artichoke industries here in California. I am John Giusti, a third generation vegetable grower, residing and farming in Half Moon Bay, California. My family has grown brussels sprouts and artichokes on the central coast of California for over 70 years.
Brussels sprouts and artichokes grow best in climates that provide cool weather during maturation. The soils need to be well-drained, fertile and free of salt and alkali. The coastal area of California between Half Moon Bay and Castroville (see attachment No. 1) ideally provides these conditions and historically has been the leading producing region in the United States. (Brussels sprouts 96 percent of U.S. production, Artichokes 73 percent of U.S. production, attachment No. 2) The damp cool summers greatly restrict the types and numbers of crops that can be grown in this area. Farmers in this region are prevented from entering markets due to the extended amount of time need for crops to mature and be ready for harvest. Many other crops will grow in this area, but the longer growing time makes them economically non-viable.
Brussels sprouts have faced a protracted reduction over the last 60 years. In 1940 there were 133 farms totaling 3,082 acres. By 1964 that had changed to 63 farms totaling 5,344 acres. In 1999 that number has been reduced 25 farms totaling 3,200 acres. (See attachment No. 3a and b) This acreage produces fifty one million pounds per year for domestic consumption. Approximately sixty percent of production goes to the processed market, and forty percent is sold to the fresh market.
Artichokes have faced a similar reduction over the last 15 years. Area planted has been reduced by 30 percent. Production has remained flat during that time, but planted acres have been reduced due to increased foreign competition. (See attachment No. 4)
Page 141 PREV PAGE TOP OF DOC
Both of these crops are split between a fresh and a processed market. Artichokes are available in the fresh market during the entire year, and have no real competition in that market. Twenty five percent of artichoke production goes to the cannery for processing. This market has been greatly damaged by imports from Spain. The Spanish product has come in to the United States markets with subsidies equal to five times the value of our entire domestic production (attachment No. 5). This has created a great drop in cannery production and value of our domestic crop.
In the brussels sprouts industry, sixty percent goes to the processed market and forty percent are sold in the fresh market. Brussels sprouts face foreign competition in both the fresh and processed market. Prices in the United States plummeted in January 1996, when Mexico shipped over eight thousand cartons into the U.S. in a single day. This forced prices to extreme low levels with twenty percent of our crop still in the field. This was a disaster for producers in both countries. However, Mexican producers saw the error of this over lap and have delayed their introduction into our country. (See attachment No. 6) This has helped to stabilize supply and keep the pricing at a more stable level.
In March of 2000, the major processors in California informed the brussels sprout growers that their production contracts would be cut by fifty percent. The growers began looking at what could be the cause of this reduction. It was soon discovered that imports from Belgium had increased from a low of 68,000 lbs to a high of 4,000,000 lbs in 1998. Over all imports of frozen product increased from 6,300,000 lbs in 1996 to 10,900,000 lbs in 1998. (See attachment No. 6) This effect was further demonstrated last week, when one of the California produce distributors was told that product from California was selling for 69 cents in New York, while product from Belgium was selling for 49 cents. If our brussels sprout growers can not retain their markets, ninety percent of them will be going out of business. This prompted action by the three Congressional Representatives for the region. They requested that Secretary Glickman investigate the situation. (See attachment No. 7)
Page 142 PREV PAGE TOP OF DOC
It is hard to understand how the Belgium producers can provide their product to our country for such a low price. We know that the artichoke production is heavily subsidized, but we have not been able to ascertain if this exists in their brussels sprout production. (See attachment No. 8) Even with NAFTA, our growers can not get their brussels sprouts into Canada until they finish their production. Fair trade is good for all parties involved, but the trade must be fair and all sides must compete on an equal playing field.
These two crops are essential to the economy of the central coast of California. They employ well over four hundred families that depend on this for their livelihood. These are crops that exist at the ag-urban interface and provide much of the wonderful landscape we have come to enjoy here in California. We need the help of our government to ensure that we will not be a casualty of trade battles or plans in which we have no input or consideration. We have included many charts and materials for your review and consideration.
This is not a simple issue. Both of these industries are to small and do not have the resources to pursue an anti-dumping action. They need the help of our government to carry that action, or to provide other means to resolve these imbalances. Countervailing duties may be a way to resolve the inequities created by the subsidies provided by our European competitors. An action of this nature will have to come from Congress. We hope you will give us your support to resolve these issues, and secure the future of family farms. With your help and guidance, there are no issues that we can not resolve.
A further measure to assist our domestic growers could possibly be country of origin labeling. American producer's work hard to guarantee the quality and safety of the products they produce. The American public has the right to know where their food has come from. Surveys have shown that the public would use country of origin when deciding what to buy. This requirement of processors would probably help to provide an additional means to solidify the well being of our producers.
Page 143 PREV PAGE TOP OF DOC
California agriculture has faced many challenges, we hope that the issues we have put in front of you today are just a small bump in the road to a strong and prosperous future. Our State has lead the Nation in agricultural production for over 40 years. It is our hope that we will continue to do so for the 50 or more. Thank you for your support of California agriculture, and the opportunity to share our concerns. We growers look forward to your continued partnership on issues of concern to our industry.
Testimony of Richard Hamilton
Mr. Chairman and members of the Committee, on behalf of the California Wool Growers Association we thank you for making the time to visit the great State of California. Your willingness to bring this committee out in the field demonstrates the leadership and respect you have for California's agriculture future.
My name is Richard Hamilton; I am a 4th generation farmer and rancher from Rio Vista, in Solano County. My family operates a diversified farming and ranching operation, including dry land grains, dry land oil crops, orchards, row crops, commercial cattle, in addition to commercial and purebred Suffolk sheep. As a partner in my family's business, I oversee the sheep and cattle operations as well as the dry land grain operation. Over the years my family has tried to be progressive in our production practices and creative in the marketing of our products (lamb and wool).
Currently, I am serving as the president of the California Wool Growers Association (CWGA), which is the oldest agriculture organization in the State. The CWGA represents 700 sheep producers in California, producers ranging from seedstock to lamb feeders. It is my pleasure to address you today about lamb and wool production in California. Like farming and ranching throughout the country, California lamb and wool producers have endured an ongoing crisis in rising costs and declining income. Individually and in groups, sheep producers in California have battled valiantly to maintain the integrity of their industry during an extremely difficult period. It is my task today to describe to you the problems we face and how we look to you to help develop a vibrant and fair economy for us all in the future.
Page 144 PREV PAGE TOP OF DOC
I will outline several different challenges facing the California sheep industry as well as offer solutions to these situations.
The 201 Trade Action. First let me express our deep gratitude to those members of the U.S. House Committee on Agriculture who signed a letter to the President early last year to endorse the imposition of temporary tariffs and quotas on imported lamb. After a careful study of the problem, the U.S. Trade Commission found that a rising flood of cheap imported lamb from overseas threatened American lamb producers. The commission recommended that the United States, under existing trade protocols, should impose necessary tariffs and quotas to protect our threatened domestic industry. A strong bi-partisan effort by members from both the House and the Senate signed letters from their respective houses to the President urging his implementation of the Trade Commission recommendations. The President agreed, with some modifications. We now extend our deep gratitude to Richard Pombo, Gary A. Condit, Mike Thompson and all California members of the House Agriculture Committee, who took the step to help us achieve some measure of much needed protection.
We are grateful for your help in achieving limited protection for a limited time under the 201 trade action, it is essential that the Committee understand that California lamb and wool producers fully appreciate the necessity to organize in order to achieve higher degrees of efficiency in production and marketing to protect ourselves in the competitive international marketplace. To that end, even before the Administration signed into action the 201 trade protections, California lamb and wool producers were organizing to establish a State marketing order to fund ongoing research and promotion. California lamb and wool producers overwhelmingly supported a statewide producer referendum to levy an assessment on wool production to establish the California Sheep Commission to carry out activities essential to our future survival and prosperity. The Commission has been established and operations began less than a year after the 201 trade action was implemented. As producers we are willing to make the effort to help our industry succeed and flourish. [During this time, with the assistance of the Stanford University Alumni Consulting Team, the California Wool Growers Association has also embarked on an ambitious program to provide support and assistance to growers as they come to terms with new production conditions.]
Page 145 PREV PAGE TOP OF DOC
At the individual level growers like Bruce Campbell in Sonoma County, and Jeannie McCormack in Solano County have led the way in establishing new, high quality domestic markets for their lamb. Elsewhere in the State, new markets are developing to take advantage of the environmental benefits offered by sheep. Grazing sheep are increasingly a part of strategies to mitigate fire dangers and enhance native habitat. As promising as these new individual approaches appear, they will have little impact on the majority of producers unless new markets can be expanded, overall production efficiency improved (with high levels of quality control) and persistent threats to the industry are mitigated. The New California Sheep Commission and the California Wool Growers will work to achieve those goals.
In order to succeed however, we will need the help of a national legislature and an administration that appreciates our situation and takes the steps necessary to ensure fair and open markets and conditions that allow sheep producers to operate safely and efficiently.
Wildlife Services: California sheep graze on both public and private lands where, under proper management, they serve to maintain native habitat, decrease fire dangers, and produce important food and fiber. They also are vulnerable to serious threats from both wild and domestic predators. Historically, our government has provided funding for local protection and that funding is crucial. The predators that threaten our sheep and lambs are by no means threatened or endangered and are in fact expanding their populations to dangerous levels in both rural and urban settings. With urban sprawl increasingly consuming on fertile agriculture lands, the open space occupied by domestic livestock and wildlife, including predators such as coyotes and mountain lions, is being threatened at an alarming rate. In other words, as agricultural lands are lost to subdivisions, the predators are being thrust upon production agriculture, resulting in tremendous death loses due to predation At the same time, these displaced predators are increasingly clashing with people and their domestic animals in the residential and highly populated areas of California.
Page 146 PREV PAGE TOP OF DOC
An additional concern relating to wildlife services is the continual buy up of wetlands and other protected environments for wildlife, predators and non-predators. This open land is often next to production agriculture lands utilized by farmers and ranchers; the problem arises when predators can not be controlled in those areas. The predators thrive, destroying the wildlife originally being protected, then are forced to travel onto private land in search for food supply. The inability to trap and remove the predators creates an even larger problem.
California lamb and wool producers continue to be innovative with guard animals, electric fencing, and various other technologies to protect their animals and their livelihoods. However, their resources are continually under attack, and all of these strategies are limited. Your support for increased funding for the USDA, APHIS, Wildlife Services program is necessary both to protect the public and to ensure depredation losses do not further exacerbate already existing crisis conditions in the livestock industries. The recovery of the lamb and wool industry in California requires continuing and expanded funding for Wildlife Services.
Grazing on Public and Private Land. The utilization of both public and private land for grazing is a necessity for California sheep producers, small and large alike. Many of the commercial operations, which are also family run businesses, work with the United State Forest Service (USFS), Bureau of Land Management (BLM) and U.S. Fish and Wildlife Services in managing grazing lands. The availability of this land is threatened due to many factors such as the lack of understanding of grazing livestock, water quality restrictions, noxious weeds and endangered species. All of these factors are being used against producers to limit the number of days to graze as well as limiting the number of animals allowed on the allotments. In California the single largest limiting factor is that of the bighorn sheep, currently a listed specie. The Endangered Species Act does not address social and economic impacts on property owners and public land permittees, reform is badly needed.
Page 147 PREV PAGE TOP OF DOC
Grazing livestock is often blamed for decreased populations of bighorn sheep due to competition for vegetation as well as disease transmission. However, historically when bighorn sheep numbers were greater so were the number of sheep and cattle grazing those same regions. The current bighorn sheep populations, which were introduced or relocated, are most severely affected by predators and improper management. Therefore, blaming domestic sheep for a decline in bighorn populations is an unfair attack and an unproven science. We urge this Committee to ensure the continuance of livestock grazing for the positive benefits it produces for natural vegetation, fire suppression, and the overall balance of nature.
Availability and Feasibility of Pharmaceutical Products. Another important cost measure, especially in the emerging international market is the relative unavailability of important livestock medicines that are readily available to our major trading partners. For example, a deworming product is available in Australia for $0.23 per dose and that same exact product is available in the United States for $0.80-$1.00 per dose. This single example demonstrates the difference in production costs for American producers of lamb. Substantial benefits in animal care are readily available and widely used in Australia and New Zealand and are used in the treatment of animals exported to the United States in competition with the domestic industry.
The easing of restrictions on the use of medicines for animal care, particularly when there are few demonstrable risks (as shown by their use by our trading partners) would ease the burden of producers striving to achieve efficiency at the same time as maintaining good animal husbandry practices. It is important for the FDA and USDA to establish protocols in which products can become available while also meeting the standards of food safety, efficacy and economics. Quality assurance is an important factor in American lamb production and we pride ourselves in providing the best quality product available, however we are very limited in comparison with our trading partners.
Page 148 PREV PAGE TOP OF DOC
Emergency Safety Net. Although we currently have some temporary protection from excessive imports, lamb and wool producers share with the broader agricultural community serious financial problems as part of the national farm crisis. Lamb prices have recovered somewhat, but still do not meet historic levels when discounted for inflation. Wool prices remain at historic lows. For many growers, the price of the wool produced from their animals does not cover the cost of shearing them, resulting in a net loss in overall production.
We understand that both the House and Senate are considering means to support farmers from the widespread catastrophic decline in prices across commodities. It is only appropriate that wool, as a fiber crop, similar to cotton, be included any relief programs.
In considering a relief package, we look back at the historical perspective of the wool incentive program first implemented at the end of World War II, which ended in 1995. We thank the leadership for instating such a program that was implemented to protect American producers from the unfair advantages enjoyed by producers from other countries, as the United States took the lead in providing assistance to restore the economies of allies. The program, totally funded by levies on imported wool products served to maintain our domestic industry through times of economic crisis. The removal of the program in 1995 and subsequent events in the farm economy since then demonstrate the lack of wisdom of removing a program that had no direct costs to the American public, but did a yeoman's job in supporting our domestic industry.
We respect that the wool incentive program will not be reinstated, however we would like to offer a different approach which would help to protect the sheep and wool industries similarly to the protection offered other fiber crops such as cotton. The establishment of a wool market loss assistance program would offer the type of reassurances needed in the industry. This program was included in the disaster legislation last fall for extra payments to the commodity program crops (wheat, corn etc). Inclusion of wool in a counter-cyclical support program offers solutions. The concept of this program is to authorize support payments when revenue for a commodity falls below a certain level or average income/price. Please see the attached example of how the program would work, attachment A.
Page 149 PREV PAGE TOP OF DOC
Global Crisis in Free Trade. The 201 trade action enacted on our behalf has provided temporary relief for problems during a period of great difficulty. These problems will not disappear with the distribution of necessary emergency assistance. Rather this committee and its counterpart in the Senate must begin the process of evaluating the origins of our current and long-term farm crisis.
Our understanding of our current market situation in lamb arises from two major causes. The first is the dramatic shifts in currency exchange rates with our major trading partners, which occurred, between 1996 and 1998, during the collapse of many Pacific Rim economies. The second is the continuing problem of market concentration, which we will describe later.
It is widely understood that the Pacific Rim collapse reduced demand for many products exported by the United States to our trading partners. What is not as well recognized is the impact of the Pacific Rim economic crisis on domestic prices. We are an example of that problem which has generated such an unfair advantage to importers that it was necessary to impose the 201 action.
California lamb producers export little of our product overseas. Rather we supply our domestic demand and historically have relied on imports to supplement that supply, particularly over the winter months. If our demand has not changed dramatically over the past few years, how is it that we faced a dramatic decline in prices to record lows?
Our assessment is that the in the international system the problem derives from factors other than supply and demand in the lamb market. Primary among these are the effects of the Pacific Rim economic crisis on the currency of major importers of competing products. It is not widely recognized that the exchange rates of the currencies of Australia and New Zealand dramatically fell in value, coincident with the problems encountered by the economies of Japan, Indonesia, Korea, and other countries in the region. Between January 1, and December 31, 1997 the value of the Australian dollar fell from about 80 cents U.S. to 65 cents U.S. By the beginning of 1999 the Australian dollar was at 61 cents U.S. Current exchange rates are at 59 cents U.S. This dramatic 25 percent decline in currency value has meant that Australians and New Zealanders benefit from a large automatic price break in the international markets. Suddenly, U.S. producers were faced with competition that could sell its product 25 percent cheaper, without increases in production efficiencies or changes in supply and demand relationships. A flood of imports began to threaten to drown our already financially stressed industry. It was under these conditions that the American producers filed for and were granted 201 protections.
Page 150 PREV PAGE TOP OF DOC
The moral of this story is that we, lamb and wool producers (and by extension many other producers of agricultural goods), are suffering the consequences of problems in the international capital marketplace and not from overproduction inefficiencies. This is not to deny that unfair subsidies or overproduction might not also be a problem for some products, but in the case of lamb, and we are sure many others, the problem is really one of the problems brought about by an inability to recognize and mitigate the disastrous effects of the collapse of Pacific Rim economies on American producers.
An obvious solution to this problem is to develop a system of automatic price adjustments when international pricing systems lead to unfair competition. The wool market loss assistance program is one such model that could also be applied to domestic production of lamb and other commodities.
We need to protect our American producers when international capital markets generate unfair relationships. Guarantee us a fair pricing system free from random extreme fluctuations and then let us compete on the playing field of efficient production. We will do well for a very long time.
Packer Concentration in the International Market Place. When the U.S. House Agriculture Subcommittee on Livestock and Horticulture last visited this area in1999, Florence Cubiburu, the past president of the California Wool Growers explained to the committee that packer concentration was the most serious problem facing the survival of our industry. It remains so today along with the disastrous effects of unmitigated currency exchange rate fluctuations.
We would like to report to you today that the in the United States four firms process 75 percent or more of all the lamb processed in this country. It is extremely important to realize that several of these firms are also multi-national corporations with lamb packing plants in Australia. An important part of the current problem of market concentration for the lamb industry is the fact that lamb processors now own and operate lamb packing houses and processing plants in Australia. Processors are not only local operators, but also importers of competing products. Because of new technologies of processing and transportation, these processors now in essence control captive supplies overseas outside the regulatory environment of the United States. By owning supply overseas, especially when overseas prices drop by 25 percent because of inefficiencies in capital markets it allows processors to drive down prices to domestic producers and while increasing or maintaining their own profit margins. Increasing concentration in retail outlets also tends to increase pressures on processors to maintain artificially low wholesale prices exacerbates the problem.
Page 151 PREV PAGE TOP OF DOC
Packer concentration is not a new problem in American agriculture. Early in the past century, Congress passed the Packers and Stockyards Act to address problems associated with excessive market dominance by a few processors. The USDA has the authority to intervene to insure fair competition, but has consistently refused to take action. Only now in recent months has the USDA begun the process of ensuring public access to pricing information, but there is much more that can be done.
A major problem posed by concentrated market systems, or oligopolies as they are formally called when the purchasing agents are concentrated, is the control of supply. It is possible, and frequently the case, that large firms without sufficient competition and under unregulated conditions own sufficient amounts of product in reserve in order to hold prices down by relying on their own reserves when prices begin to rise. This is called captive supply and is regulated under the Packers and Stockyards Act.
Captive supply is a particularly insidious problem with many agricultural commodities like livestock. Producers must sell within certain time frames or their products degrade. Processors can hold off purchases forcing prices down. Furthermore, the price discovery system is undermined because of large-scale processors who are not willing to report prices paid. Because agricultural producers are in a precarious position as price takers and concentrated systems significantly and unfairly reduce grower bargaining power, Congress in the past deemed it reasonable to offer some protections to livestock producers through the Packers and Stockyards Act. But these protections don't work when the administration is unwilling to enforce them.
The 201 trade action has temporarily addressed the problem of currency exchange rates, but it has not addressed the problem of unfair pricing resulting from concentrated marketing systems. As we proceed headlong into a changing world economy and new markets are created throughout the world, we must establish mechanisms to protect local producers from unfair markets that result from inefficiencies in capital markets or political problems.
Page 152 PREV PAGE TOP OF DOC
Three proposed solutions include, a country of origin law which would require clear labeling to allow consumers to know the origin of their food, an incentive payment program based on tariffs imposed automatically when pricing systems become unstable. Limitations should also be imposed on the amount of imported products domestic firms can process if they also process domestic products. USDA must forcefully implement the Packers and Stockyards Act.
The International Politics and Wool Market
The collapse of the wool market dates back to the collapse of the economy of the former Soviet Union and to trade sanctions imposed on China after Tieneman Square. China and Russia are the two leading importers of wool products. With the two events described above, Australia, the leading wool producer in the world, was left with the equivalent of approximately 20 years of the annual American wool-clip in storage. The sudden onset of oversupply and the dramatic change in currency exchange rates over the past several years has created conditions where the price of wool no longer even covers the cost of shearing.
Our understanding is that Australia will finally reduce its wool reserve to pre-crisis levels by 2005. If congress can speed regular trade relations with China and work to help Russia to stabilize its economy and provide protection and wool producers are offered the protections of a reinstated wool incentives act, we can expect a resurgence of a healthy wool market in the near future.
In conclusion, Chairman Combest and Committee Members we thank you for allowing the California Wool Growers Association to present our concerns and solutions as they relate to lamb and wool production in California as well as the United States. Our future as an industry must evolve to meet the changing demands of the world market, and we are willing to make those changes as long as we can see that our efforts will be rewarded in the market place.
Page 153 PREV PAGE TOP OF DOC
Testimony of Daniel Errotabere
Good morning Mr. Chairman and members of the House Agriculture Committee. My name is Dan Errotabere and I'd like to thank you, Mr. Chairman, and all the committee members for having this hearing and I appreciate the opportunity to participate.
My family has been involved in farming in the San Joaquin Valley of California since the late 1940's. Today, my farming operation includes my two brothers and we grow upland and pima cotton, wheat, processing garlic, cannery tomatoes, lettuce and almonds. Among my many other activities and involvement in the industry, I am currently 1st vice chairman of the California Cotton Growers Association whose membership today represents over 99 percent of California's total cotton production.
I, like most cotton farmers in California, have suffered from the recent depressed economic conditions, not only in the cotton industry, but in most all of agriculture. I don't have a crystal ball, but the general consensus among most that I consult with today, don't see a substantial turn around in the immediate future, which means that in all likelihood, the Federal Government will once again be called upon to provide special assistance to help farmers continue to not only compete, but survive.
The current farm bill was structured with good intentions, but did not and could not predict the unusual set of circumstances in this country as well as in the world that caused such a collapse throughout most all of agriculture. Many blame the current farm bill, but I don't. For the most part, I support most of the bill's provisions such as, the planting flexibility, marketing loan provisions and cotton's 3 step competitiveness provisions, but after our 1999 experience, I think we all can agree that the current farm bill falls woefully short in providing adequate downside price protection. The combination of this farm bill's marketing assistance loan level and the fixed rate provisions establishes a safety net well below the costs of production. Even though I would support the current farm bill for the most part through its 2002 term, if any part could be adjusted in mid-stream it should be raising the safety net to help us survive the continuing depressed prices in the marketplace which remain today, far below the cost of production. Again, without some adjustment in the current safety net level and with current price predictions not favorable for a significant turnaround soon, government assistance outside the current farm bill will once again be needed to survive in the cotton business. Certainly the 1999 assistance package was helpful and appreciated. I want to especially recognize and thank all of you for your efforts in getting the use of certificates approved for redeeming cotton from the government loan. This was extremely beneficial to California cotton growers. I would hope that if assistance is needed again that we can count on at least the same levels of help. Doubling the payment limits was of significant help to us here in California where payment limitations have long penalized us for being more productive while at the same time being forced to become larger to compete and survive. We cannot and should not let the debate over the size of farms and who can participate and who cannot, interfere with the development of a good and effective long-term farm policy. The small family farm concept is outdated. We still have small farms in California, but most are involved in high income specialty crops that provide a wonderful and highly successful way of life for the small, so called family farmer. This is not the case for the cotton grower. Although many who can, continue to diversify into the higher income crops, many and especially the larger farmers for the most part, are located in areas with soil types not conducive to production of permanent crops like trees and vines or the high income crops like vegetables. Consequently, they continue to grow the lower income crops like cotton, grains and alfalfa. To compete and remain efficient and economically viable, they must become larger. Penalizing the producers of the low margin crops just because of their size is wrong. Products grown on these size operations are what supplies the bulk of the raw products that fuels the economy of this State and I'm sure, probably this is the case across America.
Page 154 PREV PAGE TOP OF DOC
Preserving the more productive and more efficient farming operations in this country should be our focus if the long term viability of agriculture is to be maintained. I believe, as I think most of you do, that the marketing loan provisions in the current farm bill is a good, workable and sensible concept, but payment limitations are counter productive to this logical concept. If one bale is determined to be eligible for payment, why shouldn't it be the same for all bales that meet the same eligibility requirements. Why should some bales get help and some bales not, based on who produced them or what size farming operation they came from? They both must compete in the same marketplace. They both provide the same fuel to drive our economy and they both provide the same input to our balance of trade in the export market where the bulk of California cotton goes. I heard the Secretary recently expressing the importance of maintaining the family farms and the importance of family farms to rural America. Rural America is only going to survive if we can develop an agriculture policy in this country that gives farmers some hope for a future. No young person in his right mind today wants to get into growing cotton or farming in general. Most of the rural towns in my area of the San Joaquin Valley are supported by all sized farms and quite frankly, if you took away the so called large family and/or corporate farmers, these towns would dry up and blow away in no time. Policy makers must understand this.
Finally, crop insurance reform. California has not been a large participant in crop insurance programs over the years. Our consistency in production and the cost and inadequacy of the insurance products available to us just didn't make sense. With less than good crops of cotton in a few of the last several years, coupled with the serious economic downturn in our business has caused many of us to look for more risk management tools. We've looked at crop insurance, but for the most part have found it to be costly and seriously deficient in giving the farmer and/or his banker any acceptable level of coverage or comfort. With our normally good yields, high costs of production and low margins, a downturn of 10 to 15 percent in yields can be a financial disaster. I don't think there is any insurance product out there today that provides coverage in these areas. I know that buy-up coverages have been upped somewhat this year, but again, they're sort of band aids for most California cotton growers because they, besides being costly, even after government premium subsidy, leave too much exposure for the typical California cotton grower and what would be our more typical loss levels when they occur. I hear talk about a farm revenue guarantee type policy, and from what I've heard, this approach would seem to have more merit for California producers than the traditional type coverages, that most agree, doesn't fit California's needs. I understand that the government has committed billions of dollars to crop insurance reform. I ask for your help in making sure that California gets its fair share of this reform in the form of a policy that makes sense in helping the California cotton grower manage our risks also. One shoe will not fit all, but if there's only one pot, it should serve all.
Page 155 PREV PAGE TOP OF DOC
Again, thank you for this opportunity and thank you for your attention to my remarks and my concerns for the future of American Farm Policy.
Statement of Kevin B. Fondse
Good morning Mr. Chairman, members of the Committee, I am Kevin B. Fondse, first vice-president of the San Joaquin Farm Bureau Federation. I am here today as to talk to you as a third generation almond producer from Ripon, California. Thank you for the opportunity to address you today concerning Federal agricultural policy.
Federal agricultural policy has traditionally focused on farm program crops. However, as you are aware, California produces more than 250 commodities. My home county of San Joaquin, produces more than 1.3 billion dollars worth of farm valued commodities and consistently is one of the top 8 agricultural counties in the nation. There will be damaging repercussions to California agriculture if future farm policies do not continue to prohibit the planting of certain crops on flexible acreage, as is the case now. In particular, if fruits and vegetables are allowed to be planted on flex acres, it will have a detrimental effect on traditional producers of those commodities.
With respect to farm program crops, delegates to the American Farm Bureau Federation's annual meeting earlier this year adopted a resolution supporting implementation of a countercyclical safety net as a supplement to the Agricultural Market Transition Act (AMTA) payments. Members took this action believing such a policy could address sharp declines in prices without relying on large financial assistance packages from Congress.
The FAIR Act is continuing to work as designed, producers are reallocating their resources in a more efficient manner than the government could ever dictate. We are pleased with the flexibility to adjust crop acreage in response to both economic and agronomic factors. The market provides producers with pricing opportunities while AMTA payments and loan rates are providing a partial ''safety net.'' Congress must avoid abandoning the market-based policies of the FAIR Act.
Page 156 PREV PAGE TOP OF DOC
It is important to note that farmers and the government entered into 7-year contracts in 1996 and that those contracts should be carried out their full term to 2002. Congress gave farmers their word regarding access to additional foreign markets through trade policy reforms, relief from over burdensome regulations, additional and improved risk management tools, and tax reforms for their support of the FAIR Act in 1996. Now, facing the third consecutive year of all-time low commodity prices, farmers continue to hold up their end of the bargain. Congress has several opportunities to improve farm income this year.
Support for Permanent Normal Trade Relations with China
This agreement is critically important for the California almond industry. The California almond industry must expand export markets. China presents a perfect opportunity to increase sales. I strongly urge you to vote for California agriculture and vote for Permanent Normal Trading Relations (PNTR) status for China.
If permanent normal trade relation's status is not granted, China will still become a member of the WTO and other competing agricultural exporting countries will realize those gains.
The tariff and non-tariff concessions that U.S. negotiators reached with China represent a true market opening for California agricultural exports and will have a positive effect on California farm income.
We must have fair access to global markets and to make attempts at a level playing field. This can only be accomplished if the agreement negotiated with China for its accession into the World Trade Organization is implemented. China is recognized as the most important growth market for California agricultural exports. It is projected by the USDA Foreign Agricultural Service that by the year 2004, under its WTO accession agreement, China's tariffs will drop up to 60 percent on vegetables, 70 percent on fresh citrus, and up to 71 percent on key tree nuts.
Page 157 PREV PAGE TOP OF DOC
Sanctions Reform. Trade sanctions must be lifted. We impose trade sanctions on nations who don't live up to our concept of where they should be, or are not doing what we think they should be doing. Sanctions don't work. They only hurt us, as we surrender yet another market to competitors who are only too happy to sell in our absence. We cannot export our social reforms or impose labor or environmental standards.
Food Aid Programs and Concessional Sales. Several foreign economies are near economic and political collapse. Now is an excellent time for the U.S. to donate products to these countries. We support enhanced funding for the PL 480 program. Enormous opportunity exists for humanitarian and public relations benefits, in addition to an opportunity to impact market prices. It is important to provide relief to our long-term customers who are at risk of liquidating their livestock sectors. These markets must be supported, as they are future long-term customers for U.S. products. The PL 480 program should not only be used to help move products to traditional customers, but also be expanded to include customers who may not currently quality for GSM credit.
The administration must live up to its commitment to use the Export Enhancement Program (EEP) to secure foreign markets for U.S. farmers. The FAIR Act provided $1.5 billion for the program, but the administration has used little of those funds.
Congress must fully fund the Market Access Program and provide necessary funding for the Foreign Market Development Program. These programs need the expertise provided by a fully supported Foreign Agricultural Service that is expanded to cover all existing and potential market posts.
Crop Insurance/Risk Management. The Federal Crop Insurance Program does not work. It is broken and must be fixed. Specialty crops have been forgotten and mostly ignored. Crop insurance fails in the following areas:
Unless a total crop failure is reported, crop insurance will not provide relief.
Page 158 PREV PAGE TOP OF DOC
Paperwork requirements are over burdensome.
Crop Insurance is overpriced for the product.
Unreliability and lack of credibility. The government mandated that producers purchase crop insurance in order to qualify for disaster payments, however, when the government distributed disaster payments it did not follow through on that commitment.
Relief from Estate Taxes. Farm Bureau policy on estate taxes is clear—eliminate it.
Farm Bureau members nationwide have rallied to the charge of ''Kill the Death Tax.'' With Farm Bureau's leadership, Congress passed and the president signed the Taxpayer Relief Act of 1997, which brought a small measure of relief from estate taxes for the first time in more than a decade. That legislation from the 105th Congress provides for a phase-up of the estate tax exemption so that it will reach $1 million by 2006. An additional tax relief exemption was provided to certain qualified family farms and ranches so that when combined with the regular exemption, totals $1.3 million.
Death taxes can destroy family owned farms and ranches when the tax, which can be as high as 55 percent, forces farmers and ranchers to sell land, buildings and/or equipment—a highly punitive tax to Uncle Sam for a lifetime of hard work and savings. When farms and ranches go out of business, the rural communities and businesses they support are negatively impacted. Farmland located close to urban centers is often lost forever to development when death taxes force farm families out of business.
Individuals, family partnerships or family corporations own ninety-nine percent of U.S. farms. Estate taxes threaten the continuation of these family-owned agricultural operations.
While estate planning is sometimes effective in protecting farm businesses from over-burdensome estate taxes, estate planning tools are costly and require resources that could be better used by farmers and ranchers to upgrade and expand their operations.
Page 159 PREV PAGE TOP OF DOC
Death taxes are real and they effect my operation. Now is the time for action ''Kill the Death Tax.''
Once again, thank you for opportunity to address the committee.
Statement of Frank J. Endres
My name is Frank Endres. I am a farmer/cattleman from the west side of the Sacramento Valley near Corning, California, and I have been farming continuously for over 42 years. I am presently in partners with my son and his family who have indicated a desire to take over the family farm and continue its operation into the next generation.
I am also here representing the National Farmers Organization which represents independent producers in bargaining for contracts on sales of their commodities in dairy, grain and livestock in order to extract the dollars they need to pay their expenses and earn a living from what they produce and sell. We define an independent producer as one who with his or her family resides on their farm, provides day to day management and decision making, controls the marketing of the production, whose own capital is at risk, and owns or wants to own that business.
Our basic promise is that an agriculture consisting of independent producers is not only desirable but essential for maintaining our Nation's food production, rural businesses and communities as well as infrastructure.
The main reason that I have asked to testify here today is that I was shocked to see that farm income in 2000 is forecast by USDA to be 20 percent below l999 and the lowest since l986.
USDA's most recent 10-year baseline farm income projection for 2000 and beyond indicates that farm income will continue to decline sharply into 200l, buoyed only by massive infusions of government payments to farmers. It will be late in the decade 2008 and beyond before farm income even equals the peaks of the late l990's.
Page 160 PREV PAGE TOP OF DOC
Price projections from the March 22, 2000 USDA Agricultural Outlook are the prices for soybeans in the l999/2000 marketing year are expected to be the lowest since l972/73; cotton, lowest since 1974/75; corn and wheat expected to be lowest since l986/87; milk the lowest since l990/91; and rice the lowest since 1992/93. However, this is still not the true picture because the farmer's input costs as well as household expenses such as health care continue to escalate. Whether the market is up or down compared to what it was 10 or 20 years ago has little relevance. It's what those dollars will buy that is important. You have to use the ratio of a farmer's input costs compared to his selling price, or parity, in order to properly gauge what his price needs to be.
When you take today's input costs into consideration most of the major crops are in the high 30 percentages or 40 percentage of parity. In the heart of the great depression in l932, the all commodity average index was in the 60 percent of parity range.
So, where do we go from here? We must change the direction of farm programs. A farm program should be designed to operate in a supportive fashion, while producers seek to balance production with market requirements and bargain collectively for profitable prices. An acceptable farm program would be one designed primarily to stabilize prices at a reasonable level and assure an adequate supply of food. It should not be an income relief proposition, forcing producers to depend upon checks from the U.S. Treasury.
We have seen farm program costs—the part actually paid to farmers as a subsidy—go from an average of $5 to $6 billion to the point where in calendar year 2000 government payments will likely exceed $l7 billion, the second highest ever! (USDA Outlook, March 22, 2000)
I would also like to report on how the NAFTA Agreement has affected farmers in our area. Since NAFTA was put into place, there has been a steady stream of Canadian grain cars coming into the major grain mills in central and northern California. This has made local farmers into residual suppliers and buyers try to discount our grain below the price paid for the imported grain. This is why we have included as one of our Ag Policy proposals the establishment of an International Conservation Diversion Program. The Canadian farmers are suffering under low prices just like we are. It is only because of a favorable exchange rate that their grain can be brought into our market at a price advantage.
Page 161 PREV PAGE TOP OF DOC
The National Farmers Organization believes the following agricultural policies will be needed in the 21st Century:
(1) Cooperative efforts need to be made to establish an International Conservation Diversion Program when the stocks-to-use ratio becomes excessive.
Trade negotiations should advance international cooperation, not division, to enhance independent farm and rancher econ9omic stability. Efforts to coordinate and expand humanitarian assistance to reduce global nutritional deficits and enhance economic development are critical. We should not encourage a race to the lowest common denominator in commodity prices or labor or environmental standards with our trade negotiations.
(2) Maximize the highly successful Conservation Reserve Program and enact legislation to allow use of a short term Soil Bank program as needed.
Expand the CRP program from the current 36.4 million acres to between 45 and 50 million acres, utilizing a continuous sign-up procedure so county offices do not suffer burdensome work loads, and land owners are not pushed to meet artificial deadlines. In addition we should have available the use of a short term Soil Bank Program to allow the markets to adjust. The use of a Soil Bank program should target each farm's most environmentally sensitive cropland. A Soil Bank would bring environmental and financial benefits to all 50 States.
(3) Re-instatement of the Farmer-Owned Reserve program
This would allow producers, not shippers, to benefit from rising markets. The program would extend the time period grain and oil seeds could be kept under loan to 24 months plus provide storage payments of 25 cents per bushel annually. University of Tennessee-Knoxville agricultural economist Daryll Ray suggests that reintroducing the Farmer-Owned-Reserve and encouraging the use of non-recourse loans in place of the marketing loan would be helpful to farmers immediately.
(4) Re-establishment of the On-Farm Storage Facility Loan Program
Page 162 PREV PAGE TOP OF DOC
Through the Commodity Credit Corporation, this would allow producers to borrow at low interest rates and extended terms in order to finance and build on-farm grain bins, and assist them to better manage and market their production.
Secretary Glickman is to be complimented for considering this proposal already.
(5) Crop Loan rates need to be increased
Weather and international market conditions are placing tremendous economic pressure on farmers. In both the short- and long-term, Congress must find solutions to help farmers. Bolstering commodity loans will encourage price increases and immediate relief that is urgently needed.
(6) We are asking support for the Farmers and Ranchers Fair Competition Act.
This will give funding for low capital value-added demonstration and research projects.
Farmers need to be able to capture more of the value of what they produce out of the market channel. Funding is needed for projects that enable farmers to capture more value out of the marketplace that require low farmer capital investment. Many of the proposals and much of the funding today focuses on projects such as processing facilities that require a high investment of farmer capital in those ventures that are often high risk. What is really needed is funding for projects that are low cost, return more value to producers and minimal off-farm capital investment.
(7) Enactment of Flexible Fallow Program
The basic premise of flexible fallow is to give producers the option to voluntarily idle a portion of their acreage in exchange for higher loan rates on their remaining production. Set-aside rates under the program are calculated as a percent of the planted acreage of that crop. Producers can choose to participate at any level between 0 percent and 30 percent. The Food and Agricultural Policy Research Institute (FAPRI) projects producer participation to be high in this type of program and could potentially increase net farm income by $4.8 billion.
Page 163 PREV PAGE TOP OF DOC
Packers and Stockyards and Antitrust enforcement activities to better farmers position in the marketplace need to center on three major areas.
Enactment of necessary funding for legal and research staffing of both the Packers and Stockyards Administration (GIPSSA) and the Justice Department's Antitrust Division for agricultural issues.
Establishment of a Packers and Stockyards Administration/Justice Department producer advisory board to advise on the concerns and needs of independent producers. A majority of the board should be independent producers.
The Secretary of Agriculture and Attorney General should take the necessary steps to ENFORCE the provisions of the Packers and Stockyards Act and antitrust laws to ensure that pries are determined in open, fair and competitive markets. There needs to be control over acquisitions and mergers that negatively impact competition. A great deal of the lack of endorsement of laws to enforce competition in the marketplace, such as antitrust laws and Packers and Stockyards Act, stems from the attitude of regulators and their interpretation of the law.
The Packers and Stockyards Act needs to be amended, to assure that poultry growers have the same protections against unfair and deceptive trade practices as do the producers of red meat. According to GIPSA, the agency that enforces the packers and Stockyards Act, the number of complaints from poultry growers is increasing, and their authority to address these concerns is minimal. There is no justification to deny poultry growers these basic protections.
Label all food products that contain ''genetically modified organisms'' and all imported meats showing country of origin and entry date in the interest of consumers' right to know.
Enact legislation proposed by the Secretary of Agriculture's Research and Promotion Task Force that a referendum on check-offs be held every 5 years with the first producer vote to be taken within 1 year or sooner following passage of enabling legislation.
Page 164 PREV PAGE TOP OF DOC
These are some of the major farm policy changes and concerns that would affect me and other farmers in the area.
I appreciate your attention.
Statement of Mike George
Good morning ladies and gentlemen. My name is Mike George and I am a 40-acre citrus producer from Lindsay, California. Besides my own ranch I am general manager for Griffith Farms and provide oversight to 2,400 acres of citrus and other permanent crops. I serve as a director for California Citrus Mutual, a citrus producers' trade organization This year I serve as vice chair.
In this capacity as a farmer, manager and participant in CCM, and other industry organizations, I hope to bring a perspective that represents concern and advocacy for California's citrus industry.
The first issue I wish to touch upon is trade. Fair trade is the issue and the subsequent societal impacts resulting from a phyto-sanitary program in dire need of improvement. It's really easy to talk about fair trade. Everybody is for it. However, do we walk the talk or turn a cheek to satisfy the State Department or the business concerns of others? Let's be specific. Since the Uruguay Round of Trade Talks a signficant increase in the amount of subsidies paid to EU member producers has occurred. According to the World Trade Organization, for the marketing year 1996–97 the European citrus industry received in excess of $1.2B to help in the production and marketing of oranges, lemons and other citrus varieties.
These figures were derived from EU member countries. I have to believe the actual dollar assistance is greater. Yet we're powerless to do anything about it since this administration agreed to a ''peace clause'' which prevents our government from filing a complaint against these alleged domestic subsidies. Ever since I've been in the citrus industry I've been told that we don't export to Europe because we can't compete. Transportation costs are too high or the competition is too great.
Page 165 PREV PAGE TOP OF DOC
All that may be true but I would submit that we can't penetrate that market because my personal checking account can't compete with $1.2B in subsidies! Furthermore, that type of assistance enables the EU citrus industry to be a more formidable competitor in other foreign markets. From my perspective that is not fair trade.
Finally, WTO figures clearly show that the amount of assistance has increased dramatically since this administration signed the Uruguay Round Agreement and replaced GATT with WTO.
The trend lines are not positive. So how does our administration respond to this concern? Their stock answer is that these domestic programs are not subject to Uruguay Round proceedings. I would argue that this distinction is simply a verbal tap dance to satisfy USTR and the State Department. This distinction does not exist in the marketplace.
The EU assistance programs keeps' me from competing in Europe and allows their industry to be more formidable competition in the U.S. and other ports of call.
A second component of concern related to trade is the tremendous strain the influx of imports and increased consumer travels is placing on our borders and our pest and disease defenses. This Nation is being overrun by exotic sounding problems that are creating havoc in the suburbs, urban and rural areas. New York, Chicago, the Southeast, East and West all have signficant infestations that are costing us trees, plants and crops. Karnel Bunt, Medfly, PlumCot, Canker, Fire Ants, Chinese Long Horned Beetles, Pierces Disease, and hundreds of others; are costing individuals and communities huge dollar losses in terms while creating environmental impacts because of eradication programs.
We are being penny wise and pound foolish. Give USDA/APHIS/PPQ the tools to do a more efficient job. There's a reason why the President issued the Invasive Species Executive Order last year. It's because the impacts of infestations are too huge to ignore. In the upcoming farm bill Congress will discuss a renewal of a clause that allocates user fees to USDA/APHIS.
Page 166 PREV PAGE TOP OF DOC
Historically Congress has appropriated less than collected and pigeonholed the remaining dollars for purposes unrelated to pest prevention. Remove that archaic compromise and allow APHIS to use those dollars for which they intended them, pest and disease prevention. Then hold USDA accountable for using those dollars in line positions or points of entry activities. This does not impact the general fund and it allows the user fees to be directed toward their intended purpose.
Two freezes during the decade of the 90's has required all citrus producers to become students of the crop insurance program. It took us 9 years to convince USDA that a dollar-based program to cover cultural costs is the tool of choice. The CAT program has been outstanding and our industries' participation rate in the crop insurance program has increased dramatically during that decade.
We do not believe that government should have a role insuring against projected revenues. From our perspective crop insurance should be available to all commodities and it should cover cultural costs only! Second, it should include the peril of a quarantine. Through no fault of his own a producer can become part of a quarantined area and lose his ability to market products.
Congress should require the Risk Management Agency within USDA to develop a pilot program and determine the efficacy of this approach.
We believe it is viable but we understand the trepidation in the Agency. Again, the inclusion of this peril is to cover costs only. This program should not be used to farm the government.
Finally I would like to ask this committee to go back to the Plant Quarantine Act of 1912 and use it for the future. In 1912 Congress determined that USDA shall protect domestic agriculture. We believe there has been an erosion of that mission. Witness what was once a producer oriented agency. It has now become more consumer focused and subsequently engaged in consumer assistance programs.
Page 167 PREV PAGE TOP OF DOC
The Department has also become a facilitator for petitioning countries to bring product into the United States. If this country wishes to remain the world's provider of fresh fruits and vegetables the role of APHIS, as it has evolved has to be reexamined. The PH in APHIS stands for plant health. Unfortunately those letters have become a lowercase operation within USDA. It's time that the Department revisits its role for the producers; not just Mid West producers, but those of us in the perishable industry as well.
For example how can USDA propose a new rule with a risk assessment when last Fall they freely admitted a process need be developed to determine what constitutes a scientifically valid risk assessment. How can USDA propose to adopt a systems approach for disease mitigation purposes when the world community can't agree if a systems approach for disease is viable, let alone what the components should be? Why do we have to be the guinea pigs in the name of leadership?
It's we, the producers of a commodity that suffer the consequences if you, the policy makers don't get it right. I'm not an isolationist nor one afraid of competition. I'll take my chances and probably beat most of my competitors in a fair open market. However, let's remember that the Department of Agriculture has a mission to work with and for the producer. That mission can evolve and adapt over time but the fundamental tenet must remain place. Together the Department, with the parameters and policies you put in place must, remain the protector of domestic agriculture. We can't dilute the mission or sacrifice certain aspects of that mission to facilitate another government agency's agenda.
Members of the committee that concludes my oral statement. Thank you for your time and attention. We at CCM and the citrus industry look forward to working with you on these and other issues for the balance of this Congress and next year.
Statement of Bruce Heiden
Page 168 PREV PAGE TOP OF DOC
Mr. Chairman and committee members: thank you for the opportunity to testify before your panel.
My name is Bruce Heiden and I'm a cotton, grain and alfalfa farmer from Buckeye, Arizona. I also serve as chairman of the board of Calcot, Ltd., a cotton and almond marketing cooperative with some 1,800 grower-members in Arizona and California.
In that capacity I have occasion to travel to grower meetings throughout those two States and have a great opportunity to visit with our membership. I know that you have probably heard this before in the hearings you have already concluded but I want you to hear it again with certainty. And that is that agriculture has not participated in the robust and expanding economy that the rest of the United States has had the last several years.
Unfortunately, instead of export markets for U.S. agricultural products continuing to increase following the passage of The Freedom to Farm Act, they decreased big time. The culprit was the severe downturn in the economies of Russia, Brazil, and the economic crisis in Asia. The loss of the export markets left too much production with no buyer, and prices tumbled down, down, and down. The situation has just overwhelmed The Freedom To Farm Act that was based upon increasing export markets, not shrinking cotton markets. The only reason many growers are still in business is because of the emergency relief provided by Congress over the past 2 years. That relief has been a lifesaver and for that we applaud and thank-you!
Specifically I'm speaking of your passage of the emergency agricultural assistance legislation which added supplemental AMTA payments, doubled LDP limitations of payments and renewed Step 2 funding. Secretary Glickman's decision to issue generic certificates also was crucial.
These have all helped cotton growers survive through a very difficult time a time that we're still trying to work our way out of.
The renewal of Step 2 funding and the generic certificates will continue for the life of the current farm bill. Both of these items not only helped cotton growers directly but they are important in determining the level of the futures market and the basis for cotton.
Page 169 PREV PAGE TOP OF DOC
Prices for agricultural commodities in general and cotton in particular are still poor and it does appear that growers will again need supplemental assistance from the Federal Government in order to prevent wholesale financial disaster. At the time I prepared these remarks, December cotton futures had closed at 59.54 cents per pound. Depending on the area, yields, and other factors, it is going to require a great deal of LDP and AMTA assistance for growers to continue to obtain production financing.
Now this would be one thing if cotton were the only commodity in this trouble. If it were, then a grower could switch to an alternative crop. But right now the alternative crop prices are as poor or worse than cotton. The situation just doesn't leave growers with an acceptable alternative.
Economic analysis suggests that agricultural prices will remain below production costs on many farms again this season—barring extreme drought or other problems on a worldwide basis. So I strongly believe that emergency assistance will be needed again this year.
What are our recommendations for the remainder of the FAIR Act? In general, cotton growers in Arizona and California want to keep most of the principles contained in the FAIR Act. We like the three-step competitiveness program. It has helped keep U.S. cotton competitive to our customers and has kept cotton moving to the marketplace rather than building up in the loan.
We do like the planting flexibility that is permitted by the FAIR Act and the marketing-loan provisions. The supplemental AMTA payments need to be retained for the life of the present farm act, or as long as agricultural commodity prices remain depressed.
The above should be kept in the program to help agriculture and growers survive the current agricultural depression.
Now what would we like to see changed? We oppose targeting agricultural assistance to producers in farm programs, because it is counter-productive to commercial agriculture surviving in the current difficult times. In the West, we have to strive for maximum yields to have a chance to cover our high input costs. The high yields eat through payment limits on a relatively small amount of acreage. Everyone else in the U.S. economy is allowed and encouraged to expand to get more efficient, as well as having more marketing clout. Yet, we are told we cannot receive the same AMTA or Loan Deficiency Payment as other growers. So instead of being able to compete more effectively, we find we cannot compete at all.
Page 170 PREV PAGE TOP OF DOC
Quite frankly, for many commercial size growers, the payment limitation doesn't just put them at a disadvantage—rather it could be the difference between bankruptcy and staying in business.
On the positive side, we very much do favor the administration proposal for adding acres to the conservation reserve. This could have good effect both for the environment, and for taking some marginal acreage out of production thus potentially tightening up supply and demand.
Mr. Chairman, to sum up our recommendations are to:
Support the current legislation until its expiration in 2002.
Maintain the current mechanism for delivering agricultural assistance to producers.
Oppose targeting agricultural assistance to producers in farm programs because it is counter-productive to commercial agriculture surviving in the current difficult times.
Support the administration proposal for adding acres to the conservation reserve.
Thank-you for the opportunity to share these views.
Testimony of Jim Nilsson
Mr. Chairman, my name is Jim Nilsson. I am president of the California Beet Growers Association, and am here representing the over 500 farm families that grow approximately 110,000 acres of sugar beets in the State of California. My farming operation is east of Stockton, in the Collegeville area, where I am a diversified grower. In addition to sugar beets, on my farm I produce alfalfa, beans, bell peppers, cabbage, wine grapes, tomatoes, and walnuts.
Page 171 PREV PAGE TOP OF DOC
As diversified as I am, each one of these crops is being squeezed by a poor farm economy. I am amazed each day as I pick up the paper and read how well the U.S. and California economies are doing and then look at my bottom line and recognize how agriculture is being bypassed in these good times.
The beet sugar industry in California is in a crisis. Since 1993, four of the eight sugar beet processing plants in California have closed. Right after the first of this year, Imperial Sugar Company, which operates the plant just north of here in Woodland, announced that this plant and the one in Tracy will be permanently closed this fall unless sugar beet growers purchase them. It is not that the plants are inefficient or that our growers cannot compete. With market prices at such low levels, there is not enough revenue to sustain the growers and processor as two separate and independent entities. The only option available is for grower ownership or exit the business.
Since the announcement, our Association has been checking every avenue to see if there is a way for growers to own and operate these two facilities. The closure of these plants represents a real loss to growers in the area since, for many growers, sugar beets are a primary crop in their farming operations. Because of low sugar prices, we are having problems figuring a way to purchase the plants and operate them successfully.
The Association estimates that there are nearly 600 direct jobs at these two plants, with a payroll of over $17 million. Each year, these two plants contract a total of over 60,000 acres. The value of these beets is nearly $80 million. The real problem is that, without sugar beets, growers will be planting other crops, most of which are already in oversupply, and the local economies will suffer.
Since last Christmas, sugar prices in California have declined by nearly $4.00 per cwt., a 15 percent reduction. This is the real reason that our sugar company announced the closure of these plants. The last couple of years, our processor's parent has embarked on a plan for economy of scale. The market turned against them, and now they must shed assets to reduce their debt.
Page 172 PREV PAGE TOP OF DOC
The reason for the sugar price decline is severalfold. First of all, the Customs Department tried to correct a loophole that allowed a product with no commercial use, except to circumvent the sugar import quota of the U.S., to enter the U.S. That effort was rebuffed by the U.S. Court of International Trade. The produce is called stuffed molasses, or high test molasses, and it is estimated that well over 125,000 tons of this stuff enters the country annually under this loophole.
The second problem is that when the North American Free Trade Agreement was negotiated, the Mexican sugar industry did not produce sufficient sugar for that country's use. However, that industry, formerly owned by the Mexican government, was privatized, and today, they are a net exporting country, their major export market being the United States. Although Mexican production has expanded substantially, about 50 percent of the sugar production facilities in Mexico are inefficient and high-cost. In order for the Mexican government to recover their costs in the switch-over to privatization, they subsidize these inefficient plants. If this continues, the U.S. sugar industry will suffer unless our government takes action to protect its producers.
Finally, the Freedom to Farm program removed our government's ability to manage domestic sugar production and gave growers of other commodities the ability to receive payments on some crops and the flexibility to grow alternative commodities like sugar beets and sugar cane. With the sustained collapse of other commodity prices, farmers across the country, in their desperation to survive, turned to sugar production because of its history of stability. They have increased production since 1997/98 by over one million tons of sugar, while during this time, consumption has only increased by about 500,000 tons.
The combination of tariff circumvention, a bad NAFTA agreement, and the depression in commodity prices now forces the government to take immediate and essential measures to help our industry survive this crisis as it has assisted producers of other commodities.
Page 173 PREV PAGE TOP OF DOC
We have a fourfold action plan we would like the committee to consider. The first is to support legislation to stop stuffed molasses and like products designed to circumvent the sugar quota from entering our country. This can be done legislatively. The U.S. Customs Department has determined that these products have no commercial sweetener use and are considered a circumvention to the quota program. The legislative fix can be part of the Sub-Saharan/CBI Parity bill now in conference committee, and this committee's support would be helpful.
Second, the U.S. Government must negotiate a comprehensive agreement with Mexico to reduce the threat of Mexican sugar access to the U.S. that can further destroy the U.S. market. The Administration, with the support of this committee, must use all available authorities to resolve this problem.
Third, we believe that until stuffed molasses and the Mexican import problem are fixed, the government has an obligation to purchase excess supplies of sugar for non-food use domestically or removal from our borders. This action would avoid much more costly sugar loan forfeitures in the future and protect the incomes of our family farmers. Farmers should not have to bear the sole economic burden of the mistakes made in our trade policy. This purchase is critical to regaining confidence by farmers in support of our government's desire to move forward in any future trade negotiations. We had better fix what we have before moving forward on any new agreements.
Finally, in previous farm programs there have been bankruptcy provisions that protected growers in the event of a processor's failure or other insolvency. Since sugar prices have dropped to disastrously low levels, this policy should be made applicable to the 1996–2002 Crops in the current farm bill so that growers can be assured of receiving at least the minimum benefits intended under current sugar policy.
Thank you, Mr. Chairman, for this opportunity to express our concerns, and we look forward to working with you on these immediate issues and designing long-term sugar policy in the next farm bill.
Page 174 PREV PAGE TOP OF DOC
Testimony of E. Alan Kennett
Good morning Chairman Combest and members of the committee. Thank you for bringing your committee to California and inviting me to testify today. I appreciate the opportunity to explain to you and the committee the climate of the U.S. sugar industry today.
My name is Alan Kennett. I am the President and General Manager of Gay & Robinson (G&R). G&R is a family operated sugarcane farmer and mill and cattle ranch.
I have been involved in the sugar industry for 35 years beginning my sugar career in England. I have worked in Africa, the Caribbean and now fortunately, in Hawaii. Today I speak for the sugar farmers of Hawaii.
The Hawaiian sugar industry began commercial operations 165 years ago on the island of Kauai. Gay & Robinson began sugar operations in 1897 over 100 years ago. For many years, beginning in the 1950's up through 1986, Hawaii's annual production exceeded 1 million tons sugar. It was after the 1985 farm bill that Hawaii's sugar production began a dramatic fall and today Hawaii produces only 350,000 tons sugar annually from 4 operating factories. In 1986, there were 13 operating factories. Sugar was grown on all of the four major islands: Hawaii, Maui, Oahu and Kauai. Today sugar is grown only on Maui and Kauai. The island of Hawaii was by far the largest sugar producing island. Unfortunately since the demise of sugar on that island nothing has replaced sugar as a viable agricultural crop and the former cane lands remain idle, overgrown with weeds. Unemployment is high and drug usage, marijuana growing and drug trafficking have increased dramatically as have the social problems that are created by high unemployment and drug usage.
There is a great deal of concern that both Maui and Kauai will see the same occurrence should we lose our sugar industry.
Gay & Robinson is a small, family owned farming operation employing 270 people. We also provide housing for 350 families of both current and former employees. Because of Hawaii's isolation relative to our market, mainland U.S.A., Hawaii producers incur high freight costs which puts us at a disadvantage relative to other U.S. sugar producing areas. We in Hawaii like our fellow American sugar producers are extremely concerned at the misrepresentation often directed at us by the opponents of U.S. sugar policy. Clearly, Hawaii has not received the Congressional approved returns from the sugar program, nor have many other U.S. sugar farmers whose livelihoods are being threatened by the dramatic fall in prices over these past seven months.
Page 175 PREV PAGE TOP OF DOC
American sugar farmers are efficient farmers by world standards; two-thirds of the world's sugar is produced at a higher cost than the United States. However, American sugar farmers, like many other farmers around the country who grow other crops, are as I mentioned, struggling this year.
The problem. Oversupply and loss of market confidence in the ability of USDA to maintain a viable program have resulted in severely depressed producer prices for raw and refined sugar. The U.S. raw sugar price has plummeted about 25 percent since July 1999. Raw cane sugar prices have fallen from about 22.5 cents per pound to 17 cents, the lowest level in 18 years. Given current production estimates, this represents a $400 million drop in the value of the domestic cane sugar crop.
A recent sharp drop in refined beet sugar prices, down 6–7 cents since July 1999, could cause losses to beet producers exceeding $600 million. Total potential losses to the sugar industry are over $1 billion on the value of the 1999/00 sugar crop. According to USDA, raw cane forfeiture levels range from 19.22 to 20.76 cents; refined beet sugar from 22.71 to 26.49 cents.
As of April 20 of this year, the Commodity Credit Corporation has over 1.3 million tons of sugar under CCC loans (848,000 tons of cane sugar and 696,000 tons of beet sugar—valued at $622 million). Massive forfeitures are a certainty unless some action is taken immediately to salvage prices. Market prices are several cents below forfeiture levels in every region of the country. Producers are placing additional sugar under loan as they continue the harvest and forfeitures could be even higher.
Aggressive action now to remove and dispose of sugar from the domestic marketplace would relieve the economic hardship on U.S. sugar farmers, diminish the threat of sugar loan forfeitures and save the government money relative to the cost of accepting, and storing, larger volumes of forfeited sugar.
Page 176 PREV PAGE TOP OF DOC
Government action to address this problem is appropriate because so many of the factors leading to the price drop are more closely related to government action and inaction, than to producer decisions. Furthermore, the government has responded to similar price drops for other program crops by providing tens of billions of dollars in assistance over the past several years. While these expenditures on other crops are appropriate, they have had the unintended effect of worsening the beet and cane sugar price crisis, as this financial relief enables many farmers to invest in new or additional beet and cane sugar production.
Sources of Problem. Producer prices for sugar had been essentially flat since 1985, with two results:
1. Marginal producers dropped out;
2. Efficient producers invested to become more efficient by improving field and factory yields and by maximizing utilization of plant and equipment. Many expanded beet and cane acreage to improve efficiencies of scale. In some areas, acreage expansion was magnified by the catastrophic drop in competing crop prices during the past several years.
Furthermore, the following government actions and inactions have contributed to the price collapse:
1.In the Uruguay Round of the GATT, the government bound U.S. sugar imports at no less than 1.256 million short tons, about 12 percent of consumption, regardless of whether the U.S. market requires the sugar or not. The WTO import requirement is NOT based upon the demand or needs of the market; it makes us residual suppliers to our own market.
2.In the NAFTA, the Government:
a. Agreed to import additional quantities of sugar from Mexico, whether the U.S. market needs the sugar or not
b.Reduced the second-tier tariff on imports from Mexico to the extent that second-tier sugar began to enter the U.S. market and unpredictable additional imports are possible, whether the market needs it or not.
Page 177 PREV PAGE TOP OF DOC
3. The 1996 Farm Bill:
The bill froze the U.S. sugar support price at the 1985 level, and caused the market price for other crops to drop so low that many producers had both the need and the ability to switch to sugarbeets and sugarcane because of the aid of AMTA, loan deficiency, and other disaster payments.
The farm bill also singled out sugar as the only program crop without the guarantee of non-recourse loans and a minimum price safety net.
The government has permitted rampant quota circumvention by failing to prevent a product created from world dump market sugar solely for that purpose, stuffed molasses, from entering the U.S. outside the import quota. Unlimited quantities are entering our market.
The government delayed the announcement of the 1999/00 sugar import quota (TRQ) nearly two months past the normal announcement time, and more than one month into the actual quota year, which is unprecedented. During this period of uncertainty, the trade lost confidence in the government's ability to maintain an orderly market, and prices fell calamitously.
The government exacerbated the price drop by permitting one refiner to import 100,000 tons of dump market sugar under the re-export program and extending the maximum period for re-export of the sugar from 90 days to 5 years. Though USDA has shortened the re-export period to 210 days, pending appeal, this additional 100,000 tons will overhang the market for at least this marketing year.
Furthermore, sugar has been overlooked in government market loss assistance efforts during the farm crisis of the past several years. Net CCC outlays for other program crops exceeded $10 billion in fiscal 1998 and $19 billion last year; sugar revenues totaled $30 million in 1998 and $51 million last year. Nearly $30 billion is budgeted for other program crops this year. Sugar farmers are hurting too and should be included.
And, as mentioned earlier, the failure of the Freedom to Farm bill put enormous pressure on the U.S. sugar market. With historically low crop prices, billions of dollars in aid for other program crops have not only helped keep those producers viable, but have provided to many the means to purchase cooperative shares or acquire equipment to move into, or increase, sugarbeet and cane acreage. Farmers are investing in their farms to become more efficient.
Page 178 PREV PAGE TOP OF DOC
OPTIONS
Short term solutions: For prices to recover this year, before the next crop this coming fall, removal of significant quantities of sugar from the market must occur immediately. This would involve purchasing sugar for sale or donation abroad, or for non-food or non-sucrose use.
Sugar purchases may be made with three justifications: 1) to protect sugar producers incomes; 2) to avoid sugar loan forfeitures to the government; and 3) to minimize economic costs to the government.
Restructuring programs like the Federal Crop Insurance Program will not work for sugar farmers. As the program currently exists, crop insurance is not an attractive or beneficial program for sugarcane producers in South Texas; the coverage is low and the premiums are high.
Long term solutions:The U.S. Government should negotiate with Mexico to reduce the threat of Mexican sugar destroying the U.S. Market for both the U.S. and Mexican producers.
The U.S. Government should seek a legislative remedy to address sugar syrups, commonly known as stuffed molasses, that is circumventing the tariff code.
Congress should abolish the one-cent forfeiture penalty on sugar. The 96 farm bill imposed a one-cent per pound penalty on any producer who forfeits on a government Commodity Credit Corporation loan when non-recourse loans are in effect. While aimed at a continued no-cost sugar policy by discouraging forfeitures, the penalty substantially reduces the income of sugar producers.
Congress should eliminate the debt reduction provision for sugar. A marketing tax paid by sugar producers to help eliminate the Federal budget deficit was increased by 25 percent in the 1996 farm bill. Since there is no longer a Federal budget deficit, sugar producers would like to keep this $40 million they pay annually.
Page 179 PREV PAGE TOP OF DOC
Congress should make all sugar loans non-recourse loans. Though most farm programs retained marketing loan and non-recourse loan programs, traditional non-recourse loans are no longer assured for America's sugar producers. Sugar producers have access only to recourse loans in years that imports fail to exceed 1.5 million tons—a level of imports fully 20 percent above the Uruguay Round—mandated minimum. In years when loans are recourse, there will be no limit on how low producer prices for sugar can fall. Under a recourse arrangement, USDA Commodity Credit Corporation loans cannot be repaid by forfeiting a commodity put up as collateral. Sugar farmers must risk their farm equity as well.
Congress, through a technical correction measure, should re-instate no-cost provision that was eliminated in the drafting of the 1996 farm bill. The no-cost provision was added to the 1985 farm bill when mismanagement of the program occurred by officials in the Administration. On several occasions over the years, it has helped to assure that the program was properly administered. In the 1996 farm bill, it was inadvertently removed. We have been reassured that this oversight would be corrected at the first opportunity to make technical corrections to the bill. The intent of Congress was no cost. There was never any congressional intent or debate to take it out, the disconnect was an oversight in the bill drafting.
Thank you Mr. Chairman and Members of the Agriculture Committee for allowing me this opportunity to testify before you today. Please remember than sugar farmers want what all other program crops want, a fair opportunity to farm and make a reasonable living. American sugar producers' competitiveness and their disastrously low prices parallel the plight of other American farms. But, because of sugar's unique characteristics, policy solutions may have to be different from those for other commodities. Sugar farmers do not want to be treated more favorably than other farmers are, just equally.
Statement of Dana Merrill
Page 180 PREV PAGE TOP OF DOC
Thank you for this opportunity to share my thoughts on farm policy for the future of America. My name is Dana Merrill. As a seventh-generation Californian I started farming vegetable and row crops in Santa Barbara county prior to graduating from college. For the past 19 years I have managed vineyards and today own Mesa Vineyard and Coastal Valley Management, companies that own and/or manage approximately 11,500 acres in Santa Barbara, San Luis Obispo and Monterey counties.
Currently, I am chairman of the board of the California Association of Winegrape Growers (CAWG) which represents the growers of more than 60 percent of the State's annual tonnage of grapes crushed for wine and concentrate. CAWG was created in 1974 to be an advocate for California winegrape growers on State, national and international issues. I am also Chairman of the Central Coast Vineyard Team, an organization promoting sustainable agriculture using a vineyard management rating system in Monterey, Santa Barbara and San Luis Obispo counties.
INDUSTRY
Winegrapes are the ultimate value-added agricultural crop. According to a report commissioned earlier this year by Wine Institute and CAWG, wine is California's number one finished agricultural product. The report by MKF Research established the full economic impact of the wine industry on the State of California at a total of $33 billion, including direct, indirect, and induced economic benefits. The winegrape and wine industry contributes to the California economy in diverse ways. It generates jobs, exports, tax revenues, tourism and, of course, outstanding wines!
According to the report, 847 wineries and 4,400 grape growers create 145,000 full-time equivalent jobs for $4.3 billion in wages. The retail value of California wine is $12.3 billion. Tourism expenditures are $1.2 billion with 10.7 million visitors. In California, the wine community pays $1 billion in taxes and makes charitable contributions estimated at $62 million annually.
Page 181 PREV PAGE TOP OF DOC
California enjoys an environment ideally suited for the production of high quality grapes in terms of climate, soil and weather. Vineyards represent a long-term commitment with a significant statewide investment by families and family-owned corporations. Growers and wineries invested $1.89 billion in vineyard development in 1997–98. In the last 10 years grape acreage has increased by 32 percent, from 324,054 acres to 427,283 acres. Strong consumer demand for California wine at home and abroad has driven the recent acreage growth. Winegrapes are a particularly important tool for California's coastal growing regions as they promote the retention of agricultural operations vs. the conversion to more urban land uses. Given the lower fertility of the soils in this region, there are few profitable agricultural crops.
While the future for growth and profitability is bright, we are facing a serious problem caused by the glassy-winged sharpshooter which vectors the vine-killing Pierce's disease. Personally, I have recently had farming operations in Santa Barbara county dramatically affected by the Endangered Species Act. An Emergency Listing of the California Tiger Salamander at the urging of the Department of Fish and Wildlife was carried out in a rapid and arguably secretive manner. We, and a number of our fellow growers raising crops ranging from dry beans and vegetables to winegrapes, now find ourselves in possible violation of the law. This is on land which has been farmed in some cases dating back 100 years. Little detailed information has been forthcoming from the Department and questionable scientific methodology appears to support the listing. As a founding member of the Central Coast Vineyard Team which seeks to promote voluntary sustainable efforts, including the protection of habitat and species, I can tell you this action has set back our efforts to get more growers involved. It has also spurred resentment of the Act itself, which is disappointing.
The wine community is also the center of intense global competition that may seriously affect the benefits generated by our industry. Our future success will hinge on public and private policies that facilitate rather than impede responses to new competitive conditions.
Page 182 PREV PAGE TOP OF DOC
As the representative of a crop that traditionally has not been part of farm bill discussions, I welcome the chance to present our view of what this country's farm policy should address. The future of agriculture, like every other element of American business, will be shaped by globalization and with it the integration of capital, technology and information across national borders. In his book, The Lexus and the Olive Tree, Thomas Friedman explains the new globalization system and its conflict with the forces of culture, geography, tradition and community. The challenge is to find the balance of preserving our sense of identity and doing what it takes to survive within the new system.
California's high-value, permanent specialty crops, like grapes, have tremendous potential for keeping land in agricultural production, making agriculture an attractive career choice for future generations and being the global market leader in quality, value and customer choice. It is the position of the California Association of Winegrape Growers that now is the time to invest in the fundamentals and partner with government to protect and enhance all of agriculture's ability to compete in the global market.
KEYS TO SUCCESS
Research. California winegrape growers are innovative, adaptive and willing to meet new challenges. To prosper in the face of strong international competition, the California wine and grape growing community must lead in the production of wines with superior quality, excellence and value. Such a formidable task is extremely research intensive. To remain competitive with foreign producers, significant additional research investment must be made. Currently, our research investment and results are not keeping pace with our competitors. Research is the critical key to maintaining the competitive edge. Funding for research at the State and Federal levels should be increased and private/public partnerships should make the most efficient use of limited research dollars. The research community should take care to avoid duplication of efforts while ensuring that critical needs are met.
Page 183 PREV PAGE TOP OF DOC
The grape and wine industry initiated the Viticulture Consortium in 1996. It currently receives a Cooperative State Research Education Extension Service (CSREES) special grant of $1.1 million. Administered by the University of California and Cornell University, the Consortium has begun to address the unmet research needs important to our industry. The Consortium is an active partnership of Federal, State, and industry resources which enhances research coordination, and collaboration, improves efficiency and eliminates duplication of effort. It has catalyzed and is bolstered by explicit matching funds from both industry and State sources which have increased dramatically in response to Federal support. Research proposals have been received from nearly 20 States, including Pennsylvania, Missouri, Virginia, New York, Ohio, Michigan, Oregon and Washington and are funded on a competitive basis. Research priorities are developed by a national network of key industry, research and extension representatives known as AVERN (American Viticulture and Enology Research Network). We believe the Viticulture Consortium provides a model for other commodities to develop a national partnership.
Research is a basic part of the infrastructure on which agriculture can build its future. Whether it's to focus on health and nutrition, improving quality and taste, increasing efficiencies and lowering costs of production, or improving our ability to farm in harmony with nature we need to make up for those years when basic agricultural research has not been funded adequately. At the same time we must also increase support for Cooperative Extension Service. Our farm advisors are the transfer agents from lab to vineyard. Grower outreach, demonstration and education of research findings is critical to making the research investment an effective tool for the end users.
California winegrape growers are especially interested in seeing investment in the Agricultural Research Service and Cooperative Extension for the development of sustainable vineyard practices. Our growers are leaders in developing alternative pest management systems and adopting irrigation practices that significantly conserve water. However, we are facing numerous challenges regarding environmental issues on which we want to create solutions and maintain our reputation as ''good neighbors.'' We need technical support to help develop biologically and environmentally sound practices for grape growing so that we continue to be economically viable.
Page 184 PREV PAGE TOP OF DOC
Fair trade. The industry can compete when competition is fair, but there is no way for private enterprise to compete against foreign subsidies, inequitable tariffs or untruthful labeling.
The EU program to subsidize its wine industry undermines the commitments it made during the Uruguay Round to eliminate its subsidies that provide an unfair market advantage for its producers.
The last several multi-lateral trade negotiations have hurt this industry. The U.S. was the only country to make significant cuts in duties in the Uruguay Round. Tariffs faced by U.S. wines throughout the world act as a barrier to trade.
CAWG does, however, support permanent normal trade relations with China because China has agreed to reduce both tariff and non-tariff barriers to farm products. The agreement also contains strong provisions to address import surges and unfair trading practices. Not only does China represent a huge potential for American wines, but this agreement provides the chance to enter a tremendous market with a relatively level playing field. In most third-market countries, American wineries must fight to overcome the domination of major European producers. This agreement with China places everyone at the same starting point.
Other types of regulations that restrict or prohibit the sale of U.S. wine range from labeling regulations to winemaking regulations to sanitary barriers. Additionally, U.S. growers are put at a competitive disadvantage if there is not a system in place to prevent mislabeling and consumer fraud. Labels on imported wine may not always accurately reflect the contents with regard to the variety or origin (appellation) and it is not always possible to verify this information if the country does not have a system similar to the regulations administered by the BATF. Many developing wine-producing countries have very limited official oversight of those industries and are not able to protect U.S. consumers from fraud. The fact that a foreign producer may be able to label any wine with any varietal of appellation and export it to the U.S. provides an unfair competitive advantage for the foreign producer over the U.S. producer.
Page 185 PREV PAGE TOP OF DOC
Investment in marketing and promotion. The industry must continue its investment in market development. CAWG strongly supports the Market Access Program (MAP) which provides funding for USDA matching grants to help the industry develop new markets. In a competitive world market, where governments provide strong support to their nation's winegrape growers and exporters, the United States cannot afford to lag behind.
Competition from wine-producing countries in Europe, as well as Australia, Chile and Argentina continues to intensify. We are feeling that competition not only in this country but in other markets. European wine producers, mainly France, Italy, Germany, Spain and Portugal, have lost share in the past several years but are very interested in getting it back.
Despite the fact that EU wine production is stronger than ever, the EU Commission continues to provide support for domestic wine production and export promotion. In addition, individual member States, specifically France, Italy, and Spain continue to provide millions of dollars more for their individual wine industries. The continued high level of subsidization for the EU wine industry remains an obstacle to the development of new markets for U.S. wine. Although the U.S. is the fourth largest wine producer in the world, U.S. wine represents just a fraction of the world total. The 15-member nations of the EU make up over 60 percent of world production, while the U.S. represents about 6 percent of production.
California has the water, the soils and the climate to produce a broad range of wine styles to please any preference. We can compete but we need continued Congressional support for the matching funds provided through MAP to help us break into heavily subsidized markets.
Protection from invasive pests and diseases. In a world with free and easy movement of people, products and plant materials, we increase the chances of exotic pest and disease infestations that could potentially devastate our agriculture and environment. In a borderless global economy, there has been a measurable increase in new intrusive pests entering the U.S. and California.
Page 186 PREV PAGE TOP OF DOC
The constant threat of the introduction of invasive pests demands that we be prepared to respond immediately to new infestations and, more importantly, be proactive with research and planning to detect and prevent new infestations. Exotic pests and disease have been an important concern for California because of its natural resources and multi-billion dollar agriculture industry, but the problem is more urgent and complex than ever before. Since 1992, according to the California Department of Food and Agriculture (CDFA), 67 new pest invaders have become established in this State. Eradication and ongoing suppression programs are expensive.
APHIS must be fully funded to protect agriculture and its export markets. Through port inspections, quarantine treatments, detection surveys and eradication efforts we can prevent the introduction of new invasive species and the spread of existing ones. It is critical that our nation's agriculture be protected from foreign countries' pests, even though we favor free trade. We need State and Federal Governments working closely together to eliminate conflicting actions and to assure a rapid response when new pests are introduced.
We also need to invest in research and technology to establish basic scientific knowledge about invasive pests and our ecosystems. With the requirement of the WTO system for all member countries to treat all trading partners equally and the same as domestic producers, it is critical that we develop state-of-the-art science to apply to pest risk assessments and analyses in order to comply with international standards and still protect our agriculture and natural resources.
Other tools—crop insurance. Competitive global markets, falling commodity prices and higher U.S. production costs are driving changes in the rural landscape. More and more States are looking to high-value specialty crops to keep ag land in production. Federal crop insurance that provides adequate coverage for permanent, high-value vineyards is becoming an important risk-management tool for winegrape growers. Here in California we are fortunate to have a program that is working fairly well for winegrapes and we appreciate the leadership of the West Coast Director for the Risk Management Agency in helping to make the winegrape program an effective one.
Page 187 PREV PAGE TOP OF DOC
However, the program needs flexibility to respond more quickly to changes that occur. After the floods in the winter of 1996, CAWG pursued a change in the program to close the gap of coverage between the end of harvest and the beginning of the policy year. It makes no sense to force permanent, high-value crops to be uncovered for a portion of the calendar year. We finally were able to get the change through the regulatory process so that it will take effect for the 2000 policy year.
Catastrophic (CAT) crop insurance coverage to protect farmers against a crop disaster must be maintained. CAWG has aggressively promoted participation in the program as a critical element in growers' risk management plans. In the 3 years that we've been educating our membership about the availability of CAT, covered acreage has increased from 15 percent to over 65 percent of the State's grape acres. The program is providing about $100 million in liability protection to California's grape growers. Entering the program at the CAT level is the first step towards a better understanding of crop insurance and subsequent investments in additional or more adequate levels of coverage above the CAT level.
Our association has been watching the development of crop insurance reform very closely. Both the Senate and House versions have several elements we support, including expansion of pilot programs to help specialty agriculture, a structure in place for premium payments and incentives to purchase more adequate coverage at higher levels and premium discounts for good performance. We support efforts to make the program more market-oriented and incentives for the development of new products by private industry.
Other tools—accelerated registration of new, soft pest management tools. As the U.S. EPA continues implementation of the Food Quality Protection Act (FQPA) it is important that decisions are based upon sound science and actual use information. The California winegrape industry has just completed a comprehensive crop pest management profile to provide the agency and USDA with actual use information. The profile has also helped us assess the impact of the FQPA review and potential restrictions on winegrape pest management tools. Fortunately the California winegrape industry does not heavily rely upon any single pesticide that is potentially vulnerable under FQPA. However, the continued ability to have these pest management tools available so that they may be used for control of periodic or sporadic outbreaks could be crucial to the industry. U.S. EPA must have the resources available to accelerate the registration of new, softer products to replace chemicals that may be eliminated because of FQPA. The registration of alternatives is critical for California's specialty crops like winegrapes.
Page 188 PREV PAGE TOP OF DOC
Other tools—estate tax relief. CAWG strongly supports efforts to enact further estate tax relief as a tool to keep family farms and businesses in the family. Current estate tax laws are extremely complicated and place in jeopardy many family owned vineyards and wineries by requiring huge cash payments when that business must be passed to the next generation. Due to the asset intensive nature of the wine industry, estate taxes derived from winery and vineyard owners are significant. According to industry analysts, the asset base of the wine industry could be three times greater than other industries. As a result, estate taxes generated can be significant. We need further improvement of the laws to facilitate opportunities for succeeding generations to preserve and grow the equity in these farms and family businesses.
California has a rich history of winegrape production, dating back to 1778 with the Spanish Missions. Despite the challenges we face today I believe the future of our industry is full of promise. We have enjoyed a steady growth rate, higher profit margins than many other agricultural products and an increasing demand in the premium wine category. A study by Information Resources shows wine ranked among the five fastest growing supermarket categories. Every wine producing country wants a piece of that market. In the new globalization system, we must be fully prepared to compete at home and abroad. Our chance to compete successfully will be greatly enhanced working in partnership with government on those tasks we cannot do alone—research, invasive pest exclusion and suppression, development of new export markets in the face of subsidized competition and the negotiation of fair trade agreements.
Your support for the wine and winegrape community is appreciated and I thank you for this opportunity to comment.
Statement of Ron Martella
Page 189 PREV PAGE TOP OF DOC
I am Ron Martella, a peach, walnut and almond grower from Hughson, California located in Congressman Condit's 18th Congressional District. I am also Chairman of the Board of the California Canning Peach Association which is the oldest active bargaining farmer cooperative in America. We were established in 1922 and reorganized in 1937 and have been active these 78 years representing cling peach farmers. Currently, we represent 75 percent of the growers who produce cling peaches, one of many California crops that fall in the overall category of specialty crops. We feel that many times this committee spends so much time on ''program'' crops that the many farmers in this country that grow specialty crops from artichokes to zucchini are forgotten. These specialty crops in California alone produce in excess of $16 billion in farm gate value and contribute strongly to our balance of trade. Many are marketed as value added, especially, the product I produce the most of—cling peaches for canning. The gross crop value for cling peaches in 1999 was approximately $115,000,000. This tonnage produced 17.5 million basic cases of clings and 13 million cases of fruit cocktail resulting in $490 million in the processors' warehouse.
This value includes labor, transportation, cans, sugar and processing plants. This industry is major to the Central Valley of California. The University of California utilizing their multiplier—projects this industry generates $942.8 million to sales in the economy, $404.1 million in personal income, $435.7 million to the gross domestic product and 6500 additional jobs outside the farming and canning industry. Congressmen Ose, Pombo, Condit and Dooley all have fruit canneries in their districts which benefit from our industry.
There are five areas that I would like to ask your help on. They are: (1) farm labor; (2) unfair trade practices; (3) school lunch; (4) crop insurance; (6) research
Farm Labor: Cling peaches are a labor intensive crop and even though 15–20 percent is mechanized, the pruning, thinning and the major portion of harvesting is done by hand. 68 percent of our costs go to labor and with minimum wage increases our costs have increased. We can accept that providing we have labor available. With current unemployment figures, it is necessary for peaches and many other specialty crops to use migrant labor. We urge you as United States Representatives to influence Congressmen from other areas, especially, the likes of Congressman Lamar Smith of Texas, to let the proposed farm labor legislation that has been introduced in the Senate and the legislation that Congressman Pombo is introducing to go forward in the House of Representatives.
Page 190 PREV PAGE TOP OF DOC
Unfair Trade Practices: Our industry has fought long and hard and have solicited the help of many of our California Congressmen in contacting Ambassador Barshefsky and Secretary Glickman regarding action against the European Union so that subsidizing the Greek canning industry will stop. Our industry cannot compete with government subsidies. We export less than 5 percent of our production. The foreign markets we once had, whether it is Europe, Japan, Mexico or Canada, are going to the Greeks. We were supplying peaches to a cannery in Tecate, Mexico up until 1999 but they closed their doors because they could purchase Greek peaches at a lesser price and were given 90 days before any payment had to be made.
There is currently a Conference Committee on the African Bill, which includes ''Carousel Legislation.'' We believe this legislation would help our industry as canned peaches could be substituted on the Beef Hormone retaliation list of products against the E.U. We were on that list when it first came out, however, it is our understanding that the Prime Minister of Greece weighed in with our Vice President and we were taken off. We need your help in passing this legislation.
School Lunch: This is a win-win program for many California crops that do find themselves in a surplus position from time to time. Through the help of many of you, we were able to pass ''Buy American'' 2 years ago so school districts and State governments would purchase U.S. produced products. It is essential that we find a way to make sure we have compliance, especially, on the eastern seaboard. We are farmers who pay taxes and grow crops in America and if the U.S. Government is going to provide funding for food programs to the States then we believe that it is not wrong to ask the States to purchase products produced by American farmers. Your help is needed to make sure this law is being enforced.
Crop Insurance: The present Federal Crop Insurance Program for cling peaches is not properly designed to attract growers with average yields in California. I believe the current program's rating structure for all cling peach classifications has premium rates that are too high and do not reflect the true loss-risk ratios. In California, while individual growers have experienced severe crop losses for a variety of reasons, the industry average yields have fallen more than 10 percent below the 10 year average industry yield only 3 times since 1940. The Federal Crop Insurance Corporation actuaries and underwriters need to completely re-examine the present program's structure or we need to implement a completely new cling peach crop insurance program which will appeal to mainstream cling peach growers and will have loss payment provisions which are more accurately balanced against premiums paid by growers.
Page 191 PREV PAGE TOP OF DOC
Research: I mention research to emphasize that through research and development work at our land grant colleges, we as producers need new varieties, along with new and better inputs in order to remain competitive with foreign producers. We need to maintain our Extension Service as a means of taking research from the lab to the field in reducing water usage, increasing productivity, reducing the use of pesticides, new means of mechanization, all of which are important to our survival as small specialty crop producers. Again, we ask that you make sure funds are appropriated for research in agriculture and the maintenance of our extension program.
I thank you for giving me this opportunity to present some of the views of cling peach growers.
We thank you for coming to California and for those of you from other States, we hope you will return and spend some time to see our productive state. Please remember California is the No. 1 agriculture State in the Union.
Testimony of Steve Rystrom
My name is Steve Rystrom. My father, brother-in-law and I operate a 1,500-acre family rice farm in Butte County. I am a member of the Board of Directors of the USA Rice Federation and am chairman of the California contingent of the U.S.
Rice Producers' Group. Our group is affiliated with the California Rice Commission of which I also serve on the board of directors.
The USA Rice Federation is the nation's largest rice organization, representing all segments of the U.S. rice industry. The Federation's charter members are the USA Rice Council, U.S. Rice Producers' Group and the Rice Millers' Association. Through these organizations, Federation membership encompasses U.S. rice producers who grow 80 percent of America's rice crop; farmer-owned cooperatives and privately owned mills comprising virtually all of the U.S. rice milling industry, with members in Arkansas, California, Florida, Louisiana, Mississippi, Missouri, and Texas; and a wide range of allied businesses in these and other States. The diversity and scope of this association permits it to provide a view common to all aspects of the industry, and to the vast majority of its participants.
Page 192 PREV PAGE TOP OF DOC
BACKGROUND
Mr. Chairman, and members of the committee, I would like to preface my remarks by a few words regarding rice production and use. U.S. rice production provides a versatile, nutritious food product for people here in the United States and around the world. Rice is used in everything from baby formulas to the wide variety of ethnic cuisines enjoyed by many populations.
Rice byproducts are becoming important new sources of energy, livestock feed and erosion control. In California, for instance, rice hulls are being used to generate electricity in nearby Williams and we are actively seeking new uses for rice straw in ethanol, building products, animal feeds and erosion control materials.
From an environmental perspective, rice fields provide important habitats for wetlands dependent wildlife. Sacramento Valley rice fields are key winter staging areas for geese, ducks and water birds of the Pacific Flyway migration. In addition, rice fields provide important habitat for a number of special status species, some of which are rare, threatened or endangered. Recent efforts by California rice producers to flood fields after fall harvest have increased the waterfowl habitat carrying capacity of the Sacramento Valley by 150,000 acres annually.
Rice is primarily produced in six States—Arkansas, California, Louisiana, Mississippi, Missouri, and Texas. Almost 40 percent of the rice grown in the United States comes from Arkansas. About 20 percent of the total rice is grown in California, which represents approximately 90 percent of the medium grain that is grown in the United States.
Rice is an especially expensive crop to grow in California due to high land rents, crop protection materials costs and application charges and water delivery rates. According to a study by UC Davis, the per acre production costs for rice in California are in the $800 range. During a normal marketing year, with normal weather and an average scheduled AMTA payment, a grower could expect a net return of approximately $100 per acre. With market or weather problems, it can quickly fall—even into a net loss situation.
Page 193 PREV PAGE TOP OF DOC
Nationwide, since the marketing year 1993/94, production has varied from a low of 172 million-hundredweight (cwt.) to a high of 211 million hundredweight for the current marketing year of 1999/2000. Approximately 60 percent of total supply is used domestically and the balance is exported. The United States is currently the third largest exporter of rice in the world.
Most of global rice production is consumed in the country where it is produced. At present, global rice trade is estimated at almost 21 million tons. The major exporter of rice is Thailand. Other major exporting countries include Pakistan, India, and Vietnam. The United States is in competition with those countries and others in the world market, and the price for rice traded on the world market, unlike the price for U.S. produced wheat and feed grains, is determined in large part by the Asian competitors.
REVIEW OF CURRENT LEGISLATION
As you know, in 1996, major changes were made in farm program legislation, which became effective for the 1996 through the 2002 crops of the commodity. Under this legislation, farm program payments (familiarly called AMTA payments) are made to producers of the major crops based upon a producers' contract acres which is the crop acreage base established under prior legislation. The amount of the fixed payment was established so as to be gradually reduced during the 7-year period 1996–2002. This is supplemented, in the case of rice, by non-recourse marketing loans at an average rate of $6.50 per cwt., which is below the variable cost of production for most rice producers. An important element of this law is the flexibility granted the producer to plant any crop on the contract acres or to leave the contract acres in conservation uses without jeopardizing the AMTA payment.
Mr. Chairman, at this time, prices throughout much of the rice industry are depressed. The industry needs help and the situation today demonstrates that while there are provisions in current legislation that we deem beneficial, there are immediate changes that need to be made if the present structure is to remain. We fully understand that we will probably be criticized for advocating additional subsidies for U.S. agriculture; we strongly believe that additional financial help for U.S. farmers is entirely justified when considered against the backdrop of the longstanding U.S. policy for low cost food and the fact that our access to global markets is substantially denied due to trade sanctions and other barriers.
Page 194 PREV PAGE TOP OF DOC
The farm economy problem that has affected many segments of American agriculture has had an equal and perhaps a more devastating impact on rice producers of this nation. This year we have harvested an unprecedented rice crop. According to USDA's most recent World Agriculture Supply and Demand Estimates (WASDE), the crop has reached almost 211 million-hundredweight (cwt.) as contrasted with 188 million hundredweight in the 1998/1999 marketing year and 183 million hundredweight in the 1997/98 marketing year. At the same time, the WASDE report estimates that there will be only a very small increase in rice exports. The net result is that there will be an increasing build-up of carry-over stocks to depress prices. 1999/2000 ending stocks are currently projected to grow by 79 percent over the last year.
The WASDE report projects prices for the 1999/2000 marketing year as low as $5.80 per hundredweight. This price projection is $3 per hundredweight less than the price for the 1998/99 marketing year and $4 per hundredweight less than the average price for the 1997/98 marketing year. At the same time, over-all costs continue to rise.
Rice is one of the most costly crops to produce, especially in California. Land, water, energy and labor costs in California are among the highest in the nation. If the current situation is permitted to continue without government assistance, we will find more and more producers abandoning farming, an occupation in which their families have been engaged for many generations.
As important is the rural infrastructure that has evolved to support the rice industry. It too could suffer without a strong safety net. Consider the impacts to equipment dealers, crop protection and nutrition companies, trucking firms, processors and longshoremen at the Ports of Sacramento and Oakland. In the Sacramento Valley, the rice industry creates $750 million in economic activity annually. USDA programs are the underpinnings for much of that allied business.
RECOMMENDATIONS
We appreciate the Chairman's efforts to gain input from rice producers through these field hearings in preparation for the 2002 farm bill debate. We also appreciate the opportunity to comment on the impact of Freedom to Farm on the rice industry and to recommend specific changes that will allow our industry to obtain the highest level of income for a given level of government spending. It is with this objective in mind that we make the following recommendations:
Page 195 PREV PAGE TOP OF DOC
Farm Program Measures: The objective, both today and in the long term must be to significantly strengthen the farm safety net. At this time, based on our experience under the 1996 farm bill, it is imperative that we do not wait until the year 2002 before acting. Immediate changes must be made to protect farm income during the final three crop years covered by the legislation. In the last 2 years, Congress provided much appreciated supplemental income assistance to help farmers through a period of low prices and declining income. Rather than having to enact emergency assistance each year, we would recommend that the law be changed so that AMTA payments and corresponding payment limitations are increased for crop years 2000 through 2002. However, it is important that certain features of current legislation be maintained. Increased planting flexibility that producers have without jeopardizing their payments, and also the ability of producers to produce for the market are extremely important to the U.S. rice industry. However, we understand there has been some discussion regarding coupling payments to production. There is some sentiment in California that if coupling should occur, it should be limited to not more than a 50 percent planting requirement per farm number.
Crop Insurance: Another measure that we support is a modification in the crop insurance law so that premiums are set at more affordable levels and the program expanded, if possible, to provide revenue as well as yield insurance. We believe, however, that crop insurance should be in addition to, not a substitute for, existing farm program payments.
Marketing Loans: Additionally, exports are vital to the U.S. rice industry's survival. As stated at the outset of this testimony, roughly 40 percent or more of our annual production has been and must continue to be shipped overseas if we are to stay in business. An important tool in meeting competition abroad is the successful operation of the marketing loan program. The loan rate for rice is set in current law at $6.50 per cwt. This rate is below the cost of production for virtually every rice producer in California. Rice marketing assistance loans may be redeemed at the United States Department of Agriculture's (USDA) world market price if the world market price is below the loan rate. USDA has on occasion revised its world market price determinations so the U.S. rice industry could remain competitive in markets abroad with exporters of other countries. However, it should be noted that the U.S. percentage share of world rice trade has declined from 13.3 percent in 1996 to 11.3 percent in 1999. USDA must be vigilant in their management of the world market price if the U.S. rice industry is to remain competitive in the world market
Page 196 PREV PAGE TOP OF DOC
As part of our recommendations, we urge that the loan deficiency payment limitation of $75,000, established in the 1996 farm bill, should be increased or perhaps eliminated. We thank Congress for reauthorizing the use of Commodity Credit Corporation (CCC) commodity certificates, which may be used to redeem loan collateral. At times, such as is the case today, when world prices fall significantly below the loan rate, if the limitation is not removed or significantly increased, producers will elect to forfeit the collateral under loan to CCC. As a result, CCC, rather than the producer, will become the marketer of the commodity in competition with the private sector.
Export Programs: There are other measures that would enhance rice exports as the new crop comes to market. These include expanded use of USDA's export authorities, such as the export credit guarantee programs, as well as the programs under P.L. 480 and the Department's purchase and donation programs. We commend USDA on their recent inclusion of rice in the Section 416 donation program. We believe that funding must be continued and increased for the Foreign Market Development Program and the Market Access Program. These export programs provide an investment today towards the long-term objective of maintaining or increasing exports.
Import Access: In the final analysis, the rice industry can prosper only if we have improved access to world markets. We support the goal of free and open trade, devoid of government sanctions. We look forward to the forthcoming multilateral trade negotiations as a means of reducing tariffs on rice imports, and achieving fair access to important rice markets, such as Japan and Europe (EU). At present, except for a minimal tariff-rate quota, the ex-quota tariffs on rice imports are prohibitively high—approximately $3,000 per ton in the case of Japan and over $400 per ton in the case of the EU. Turkey, an important export destination for California, is considering joining the EU. This could have important trade consequences on California rice producers who annually ship 200,000 tons of calrose valued at $30,000,000 to this Middle Eastern nation. Currently, the Japanese trade represents a 250,000 metric ton market with a value exceeding $150,000,000. In Latin America, we seek equal access with other supplying nations that participate in preferential tariff arrangements, and seek elimination of restraints on imports based on licensing restrictions or phytosanitary or bio-engineering standards influenced by public or social policy and not the result of sound science.
Page 197 PREV PAGE TOP OF DOC
The multilateral trade negotiations can only be a success if Congress were to enact fast-track legislation. We hope that this will be achieved in the near future. We also fully support permanent, normal trade relations with China and China accession to the WTO.
Unilateral Sanctions: We support legislation that would exempt food and medicine from unilaterally imposed trade sanctions. In the past, unilateral sanctions have caused the loss of many of our most important markets for U.S. produced rice to our competitors. Over the past 38 years, Iran, Iraq and Cuba each have been top export destinations for U.S. rice. Cuba currently imports about 350,000 metric tons of rice on cash terms from our competitors. This amount is more than all of the rice that the U.S. exports under food aid programs. It is critically important that sanctions relief legislation be enacted this year. It is also important that restrictive licensing requirements not be imposed once sanctions are lifted. For example, food and medicine are currently exempt from the sanction in place against Cuba; however sales must be made to private entities, of which there are none that buy rice. There is little, if any evidence that trade sanctions on food have contributed significantly toward meeting U.S. foreign policy goals. At the same time, sanctions have forced our customers to turn to other suppliers for their rice import requirements.
Finally, while not on the agenda of the committee, we also wish to emphasize the importance of other measures that would help sustain a sound rice economy. These include, among others, regulatory reform, implementation of the Food Quality Protection Act based on sound science, and tax reform. Federal support for research should be increased to assist rice producers and others in the rice industry to become more efficient and more competitive in world markets. The rice industry is assisting in this effort through assessments under State research and promotion legislation, funds provided by private industry, and other measures. However, private financing is not adequate and must be supplemented by Federal appropriations.
CONCLUSION
Page 198 PREV PAGE TOP OF DOC
In conclusion, we urge the Congress move quickly to enact legislation so that additional AMTA payments, at the same level as last year, can be made this summer. Future farm legislation must likewise adequately address this issue while maintaining the marketing loan program, increased planting flexibility and freedom from annual government acreage controls that are contained in the current farm law. We note that increased loan rates and counter-cyclical payments have been recently discussed as possible solutions; while there may be some merit to exploring these ideas for a long-term farm safety net fix, we believe that it is paramount that we maintain the consistency of our current farm program with our WTO obligations. We also support enactment of crop insurance legislation that would attract greater participation and increase development of more revenue insurance, but not act as a substitute for farm program payments.
As important as these issues are to the farm community, equally or perhaps more important is the need to open up access to markets abroad. Through tariff reductions and the elimination of unilateral trade sanctions, U.S. rice will be able to compete favorably with other rice exporting countries in world markets.
Testimony of Wiley Murphy
Good morning, my name is Wiley Murphy. I produce cotton, wheat, sorgum, and barley in Marana, Arizona. I have been doing so for 26 years. I am also serving as President of the Arizona Cotton Growers Association, which represents nearly 1,000 Arizona cotton producers statewide.
All of us in the West appreciate this opportunity to tell you how important farm programs are and how they work in the West.
Before I begin my discussion of farm policy I did want to thank you and your colleagues for your assistance over the past 2 years. Let me tell you that your support made a major difference in whether we would have a viable cotton industry in Arizona or not.
Page 199 PREV PAGE TOP OF DOC
Unfortunately, we still need your help. Your recognition of that fact in the 2001 budget is greatly appreciated.
Arizona has a very ''fragile'' cotton industry and the assistance packages the Congress created were both well designed and effective. By ''fragile,'' Mr. Chairman I mean our production costs are the highest in the Belt and when prices drop Arizona is put at risk.
Again, we appreciate your understanding of our plight and your response to our needs.
The economic conditions and needs of this industry are plainly unique compared to other American industries. Our condition always pose tough choices. Clearly, America can not do without agriculture and its many contributions to our way of life.
Your continued recognition of our place in America is most gratifying. I don't envy your task in trying to assess the Freedom to Farm Act. I am sure there are voices counseling you to stick with the plan to end Federal farm program subsidies if not all farm program benefits as was envisioned by the Freedom to Farm Act. There are others who believe that the economic crisis facing the farm country is proof that the economic assumptions of the Freedom to Farm Act have been proved dead wrong by the results of the last 3 years and two major economic assistance packages. Clearly, your task is not an easy one in terms of choosing a total free market as some would want or a partnership with Federal Government.
I hope that my comments here will be helpful in guiding you in that decision.
When the Freedom to Farm Act was enacted in 1996 I think all of us had high hopes for its objectives and even for its economic assumptions of steady but growing prices and expanding markets. We also had high hopes for the promises made to us about enacting better trade policies, deregulation of onerous policies such as FQPA, which can increase the cost of production, tax relief, and crop insurance reform.
Page 200 PREV PAGE TOP OF DOC
We believed that such a package of reforms might give us the opportunity to move forward without large Federal subsidies although we were skeptical whether it could work.
Nonetheless, American agriculture stepped off in a new direction.
While we still sing the praises of flexibility as created under the Freedom to Farm Act the rosy economic scenario's painted by the advocates of the Freedom to Farm Act just didn't fit reality. Even though we experienced higher prices in the first 2 years of the Act the bottom fell out requiring additional economic assistance.
In addition, the Congress has failed to keep its commitment to pass effective trade legislation, that is trade policies that will permit us to be competitive and will expand our trading opportunities as well as necessary changes in FQPA, tax relief, and crop insurance reform.
Any policy that proposes to ''phase out'' Federal farm support without addressing trade issues, regulatory reform, tax relief, and crop insurance will hardly help us to overcome economic disaster when it occurs. Whatever you decide to do I hope you will keep in mind that a Federal Farm Policy is not just about direct economic assistance it is also about the whole range of policies that affect us.
Now let me turn to the economic crisis in Arizona, which is rather easy to describe; low prices, lower prices, and even lower prices. For those who suggest that we rely on market prices alone, 44-cent cotton doesn't help in an environment when it costs nearly 70 plus cents to grow it. Arizona has the highest cost of production per acre in the cotton belt. Irrigation and pest control costs have always placed Arizona growers at the margin of profitability.
Mr. Chairman, Arizona farmers are doing their part to reduce their costs; we eradicated the boll weevil in 1990, eliminated the whitefly as a primary economic pest but not before it devastated our fields in 1992, are using Bt cotton to reduce the cost of fighting the pink bollworm, Arizona's most persistent pest, and we are on the verge of removing aflatoxin from our cottonseed to increase our seed profits.
Page 201 PREV PAGE TOP OF DOC
We have done much of this on our own; using our own funds with the exception of the boll weevil program in which the Federal Government contributed 30 percent of the costs.
If we are to survive, however, Federal farm policy should promote profitability. In this connection those of us in the West are very dependent on sound trade policies since nearly 90 percent of Arizona's crop is exported to the Far East. When trade stumbles the effect is felt at home. Relative exchange rates put us at a severe disadvantage when trying to sell cotton to our overseas customers.
Finally, Mr. Chairman, let me discuss one of the most serious problems that we face in the West in the current farm policy as well as previous farm programs; namely payment limitations.
Most farms in the West are large and getting larger simply because of the economies of scale. Because of the high costs associated with cotton production you need commercial sized operations. Let us not be confused by the term ''corporate farms.'' Some of our farms in Arizona are large; the vast majority of which are family operations, however.
The current payment limits bears no relationship to the economics of Western cotton production. Western cotton is high yielding and because payments are made on the basis of yield western cotton production is penalized because the limits are set so low. Payment limits ought to reflect in some form the realities of western commercial farming operations. Currently, payment limits impairs effective economic assistance and should be eliminated.
Mr. Chairman, I would like to conclude my testimony by discussing what changes should be made in the current farm bill and what we should do at the expiration of the Freedom to Farm Act.
First, we want to recommend that for the balance of this Farm Program that you maintain the existing structure of flexibility, the AMTA payment delivery system as originally conceived and the cotton competitiveness provisions. We see no point in substantially changing the Freedom to Farm Act at this point with its expiration so near at hand.
Page 202 PREV PAGE TOP OF DOC
Although you are making progress on some trade issues such as CBI and crop insurance reform we still need legislation to adjust FQPA and substantial tax relief whether it is estate taxes, health care costs, or FAARM accounts.
As for the future, I believe that the Federal partnership with American agriculture is essential to America and its ongoing prosperity. The concept of a ''cheap food'' policy has given America its best days, its prosperity, and the hope for even better days ahead. To squander the contribution of American agriculture for the notion of deregulating farm policy in its entirety is simply foolish.
Therefore, I think the Congress should undertake to create a new farm program with the expiration of the Freedom to Farm Act, which should include the following:
1. Continuation of an AMTA type payment
2. A counter-cyclical payment when necessary
3. Continued flexibility
4. The cotton competitiveness provisions
5. Elimination of the payment limitation provisions
6. Continue to develop effective and affordable crop insurance
Mr. Chairman, members of the committee, I thank you for the opportunity to share my views with you.
Testimony of Thomas W. Ellis
I am Tom Ellis. I farm 1,000 acres in southern Colusa County and northern Yolo County on the west side of the Sacramento River—about a thirty minute drive straight north of this hearing room. I am very pleased to have this opportunity to talk with you and sincerely appreciate your committee coming to Woodland today. I also want to emphasize that I am speaking only for myself as an individual farmer.
Page 203 PREV PAGE TOP OF DOC
On my operation, I grow wheat, rice and alfalfa. Since alfalfa is my main crop on seven hundred acres of my farm, my comments today will be addressed towards issues affecting that crop. In addition to my acreage, I handle alfalfa for some of my neighbors. We normally produce 8,000 tons of alfalfa cubes and some baled hay each year. About 60 percent of our cube production was sold to Japan—a market we enjoyed for over 20 years until 1998 when sales dropped from 5,000 tons per year to 900 tons due to drastic economic problems experienced in that country. That hurt! In 1999, we hoped for some recovery but shipped tonnage was about the same as 1998, and we experienced continued downward pressure on price and volume. Japanese buyers were very price conscious and looked north to Canadian producers who seemed willing to sell for less. Part of the reason, I believe, is the Canadian Transportation Subsidy which helps offset the cost of shipping alfalfa and grain products to western Canadian ports. The result is a significant price advantage for the Canadian producers. I realize Midwest interests don't want Canadian grain delivered into the middle of the U.S., so they see the transportation subsidy as a benefit. But, how about alfalfa and forage products? Could we ask the Canadian government to end the subsidy to these products? We alfalfa producers in the West feel it would strengthen our position when we try to export our products to all Pacific Rim countries.
Another area of concern is risk management. I am in full support of HR 957, The Farm and Ranch Risk Management Act of 1999 which would create FARRM accounts. Current crop insurance and recent disaster payment programs have not been very successful in addressing the needs of hay and forage producers. I think the idea of pre-tax savings accounts, which is my understanding of how HR 957 works, represents sound fiscal policy, is easy to understand, would be easy to administer, would be fair to all producers and would encourage savings while providing farmers with added income stability. I talked with my lender about the idea (I use the Farm Credit System) and he was very supportive of the program. I think lenders would welcome the measure as an additional tool available to farmers to help them through tough years. And, best of all, the savings account is under the control of growers themselves. I feel such a program would lessen the need for disaster assistance which is difficult to pass, difficult to implement, never entirely fair and seems that someone is always left out. The latter category is where hay and forage producers usually find themselves.
Page 204 PREV PAGE TOP OF DOC
Your consideration of these ideas would be appreciated and I sincerely thank you for coming to Woodland today. If you haven't toured the museum, be sure to do so and make sure you see the Harris Harvester display. These machines were the backbone of the Central Valley grain industry from the mid-teens to the late 1940's and early 1950's.
Testimony of David Weiss
Good morning Mr. Chairman and members of the committee. My name is David Weiss and I reside and farm in Lake County, California, in the 1st Congressional District where, I am proud to say, we are very well-represented by Congressman Mike Thompson. As a producer, I manage an agricultural operation comprised of 320 acres of Bartlett pears, 55 acres of winegrapes, and a commercial pear packing operation. Also, I am a partner in an additional 93 acres of pears and 108 acres of winegrapes. I appear today as a grower on behalf of the California Pear Growers Association specifically, and on behalf of the California pear industry in general. For your information, California Pear Growers is a bargaining cooperative whose main purpose is to negotiate commercial cannery prices for Bartlett pears grown in California.
While there are many issues of concern to the California pear industry that deserve to be heard by policymakers, I have chosen to elaborate on the following four points for your consideration today. They are:
Maintaining an adequate and affordable supply of farm labor
Leveling the playing field with regard to foreign trade
Revamping the Federal Crop Insurance Program for pears and winegrapes
Continued support of IPM research and implementation for pears and apples
FARM LABOR
The crops I grow are among the most labor intensive of any in modern agriculture. Planting, pruning, training, and harvesting are all done with manual labor in pears. Unfortunately, most of this type of work does not appeal to the majority of Americans, regardless of the national unemployment rate. Growers must therefore look to Mexico for the workers we need to complete these tasks. Suffice it to say that were it not for our Mexican neighbors, pears and many other tree fruits would not be viable crops in California.
Page 205 PREV PAGE TOP OF DOC
For the most part, the workforce from Mexico has proven itself to be very reliable and efficient for our operations. We tend to get the most motivated, hard-working individuals, who are grateful for the opportunities provided by California farmers. Many are married men with family in Mexico to whom they send the bulk of their net pay from working in the fields. They willingly pay their respective share of taxes and social security contributions through regular payroll tax withholdings. Contrary to the spirit and tone of recent ballot initiatives in California, these people do not become wards of the State or otherwise dependent on ''entitlements'' and other social programs. Rather, my experience is that the vast majority of Mexican farm laborers come to California, work very hard for several months, and return to Mexico for the remainder of the year.
I am troubled, however, by the declining trend in available labor from Mexico. The general sense among pear and grape growers in our part of the State is that there simply are not enough workers available during our most labor intensive season—harvest. To be sure, we take great pains to insure that the workers we hire are legally documented. However, in light of the current tight labor market, it is conceivable that we may someday be confronted with the dilemma of knowingly hiring undocumented workers or not harvest our crops. Unfortunately, the current system encourages a black market in smuggling of people and in counterfeiting of documents. I have heard stories about illegal immigrants paying $1,000 to $2,000 to be smuggled across the border, often at great physical risk of injury or even death from the journey they must take.
The irony of this system is that the only thing these people want to do is work in the fields and packing sheds, receive a fair wage, and return to Mexico for the winter season when the work is done. We need a simple system that:
provides farmers with a stable, legal workforce
provides farmworkers with a means by which they can be protected under U.S. labor laws, earn the right to legal status, and avoid the risks of undocumented status
Page 206 PREV PAGE TOP OF DOC
maintains immigration control
Therefore, we support the efforts of the National Council of Ag Employers in their efforts to reform the so-called ''H–2A'' guest worker legislation to make it more responsive, affordable, and fair to both the industry and the workers, but free of unreasonably burdensome regulations and stifling reporting requirements.
With regard to wages paid to farm workers, I can assure you that each and every worker we have in our operation is paid more than the minimum wage. However, an increase in the Federal minimum wage rate, while it may make for political popularity, will impact agriculture more than most other industries. Although I would prefer to pay higher wages to our workers (with or without an increase in the minimum wage), this would make us even less competitive vis-a-vis foreign producers who benefit from drastically lower labor costs, less restrictive (and often non-existent) pesticide laws, and unfair price supports and protective tariff restrictions. This leads to my next point: Leveling the Playing field
FAIR TRADE, NOT FREE TRADE
It is common knowledge that the world is becoming a smaller place by the day. As technological advances continually improve our ability to communicate, to teach and learn, to keep abreast of and evaluate dynamic circumstances the world over, we find that we are increasingly functioning on a global stage with international sources of both supply and demand. Global competition is becoming a way of life for us all, and it offers most sectors enormous opportunities. But for agriculture in general, and pear growers specifically, it is difficult to foresee a viable—let alone profitable—future under this new world economy.
The past decade has seen the U.S. economy grow at unprecedented rates. While this growth and prosperity have been more dramatic in some sectors than in others, it has generally been a decade of boom times in virtually all industries except one: agriculture.
But how can this be? After all, without a doubt, American farmers are the world's most efficient producers of food and fiber. In fact, throughout the latter half of the twentieth century, American farmers, led by the land grant universities, have not only developed technologies and strategies to increase the quantity and quality of our own products, but also we have unselfishly transferred these technologies to foreign countries in the interest of both helping them to better feed their own people and, frequently, as a means of enhancing U.S. national security interests—especially when natural resources such as oil can be secured in exchange. Consequently, we now see countries that once imported more than they exported becoming net exporters of foodstuffs. This is true, for example, in the case of China in both rice and apples, both of which commodities have had dramatic effects on our markets for these crops.
Page 207 PREV PAGE TOP OF DOC
In the context of competing in global markets, U.S. farm policy must take into account the notion set forth very eloquently by Steven Blank in his recently published book, The End of Agriculture in the American Portfolio Blank, S. C. The End of Agriculture in the American Protfolio. Westport, CT: Quorum Books, 1998.
, which concludes (among other things) that in agricultural economics, prices are global but costs are local. Simply, our cost structures are much higher than those of our foreign competitors because of local economics, regulations and politics. It is widely recognized that U.S. farmers are held to much higher standards than our foreign competitors in areas such as crop protection alternatives (including pesticides), worker protection standards, food safety issues, and worker wage rates. However, our markets and, hence, the prices we receive for our products, are driven by global factors that usually do not reward us for the added costs we incur in meeting these standards. In this way, I foresee a great and unfortunate irony on the horizon: the world's most efficient producers of the world's safest supply of food cannot afford to compete in a global market that finds itself with food surpluses in one corner of the world and, simultaneously, famine in another. (Incidentally, I do not believe the end is near for American agriculture because, in the final analysis, a safe, reliable food supply is in the best interest of our national security.)
As a grower, I do not advocate lowering our standards to those of the competition; nor do I believe we should attempt the impossible by requiring our competitors to implement all the regulations with which we are confronted; nor do I hope for government handouts and price supports to make ends meet ''down on the farm.'' Rather, I believe that our policies should strive for fair trade, not free trade. If the so-called playing field were a level one, American farmers would thrive and successfully (and profitably) feed Americans as well as people in other countries.
Page 208 PREV PAGE TOP OF DOC
CROP INSURANCE REFORM
I am very frustrated by the Federal Crop Insurance Program as it pertains to pears and grapes, especially pears. This frustration arose from personal experience I gained while willfully participating in the program from 1994 through 1998. During that period, the operations I manage purchased crop insurance under one or more of the various ''buy-up'' programs, and our premiums averaged between $20,000 and $25,000 per year. We elected to purchase the higher level of coverage because of the very high costs (and consequent high risks) of pear production, and because we believed in and supported the government's stated objective of stopping the disaster payment approach to propping up the farm sector in favor of subsidized insurance premiums for farmers under a help-those-who-choose-to-help-themselves philosophy. In fact, we were told that Federal assistance in tough times would no longer be available to farmers who failed to purchase crop insurance.
As you will recall, 1998 brought us the weather phenomenon known as ''El Nino'' which resulted in heavier-than-normal rainfall and other difficult conditions during the spring and early summer of that year. Not only did our yields suffer, but the quality of the crop was severely impacted as well. Also, we were required to make more than twice the applications of fungicide and antibiotic sprays in order to save the crop and prevent long-term damage to the trees. These circumstances manifested themselves into the poorest quality, highest cultural cost, below-average yield pear crop in over 20 years, all of which together caused our worst financial year ever.
To add insult to injury, in early 1999 I attended a meeting hosted by the local Farm Service Agency office to learn about possible Federal assistance for pear growers. The news was very disappointing for me: while our yields had been significantly below average, they were not sufficiently low to qualify us for any benefits under the crop insurance policies for which we had paid so dearly. Moreover, despite the previously-noted tough talk about abandoning the disaster payments system, the U.S. Congress had approved a multi-billion dollar program to bail out the farm sector. Worse still, disaster payments would be paid with parity to anyone qualifying, without regard to whether or not the qualifying farmer bought crop insurance! As you might imagine, we have not purchased crop insurance for pears since.
Page 209 PREV PAGE TOP OF DOC
The point of this anecdote is that, from my perspective, the crop insurance program needs to be completely revamped. It must provide for the special needs of specialty crops (like pears and grapes), which needs are very different from those of corn, wheat, soybeans, and cotton. For example, cultural and harvest costs for pears are typically $3,500 per acre annually and in excess of $3,000 per acre for winegrapes. These figures are higher than the cost of ag land in most of the US. In other words, it costs us a lot more to ''roll the dice'' each year than it does for most other crops, and the crop insurance program needs to reflect this fact in order to be a useful risk management tool for pear growers.
Continued Support of IPM Research and Implementation for Pears and Apples
The pear industry in California has been a widely recognized leader in developing alternative pest control programs. Specifically, Integrated Pest Management (IPM) has been a priority for our industry for more than 25 years. Since 1990, pear growers have funded more than $2.5 million in research, $1.8 million (72 percent) of which has been directed specifically to IPM research and implementation of reduced risk practices California Pear Advisory Board, 2000.
. Significantly, the pear industry began focusing its resources on developing ''soft'' technologies for its pest management needs long before the Food Quality Protection Act (FQPA) mandated such reforms.
Regardless of the crop, the single most important ''critical success factor'' of any IPM program is the ability to draw on a broad array of pest management tools. Such tools include:
natural enemies and predators
weather monitoring in conjunction with insect population biology and plant pathology models
Page 210 PREV PAGE TOP OF DOC
critical field assessments/monitoring of insect life cycles, fungal spore releases, and bacterial counts
mating disruption of insect pests
chemical controls
Pure reliance on any particular technology (hard or soft) eventually leads to tolerance and ultimately resistance by the target pest, even in the face of increased application rates. However, an integrated approach provides for managing the pest from different points of vulnerability, thereby allowing growers to reduce the overall use of toxins and rely on them when the softer approaches weaken. It is absolutely essential that all tools be kept available, however, or we jeopardize the long-term effectiveness of the IPM programs.
In this regard, on behalf of the pear and apple industries in California, Oregon and Washington, I urge you to support continued funding of Section 406 of the Agricultural Research, Extension, and Education Reform Act of 1998 (7 USC 7626) for 2000 and beyond as we strive to finalize, then implement, our ''Transition Strategy for the Western U.S. Apple and Pear Production Region.''
Also, we request your support of the ''Regulatory Fairness and Openness Act of 1999'' (HR 1592), which seeks to require the implementation and administration of the FQPA by relying on science and scientific methods rather than assumptions and emotions.
In closing, I would like you to understand that I am very proud of what I do for a living. In the context of over-hyped dot-coms and instant billionaires being regularly made on Wall Street and in Silicon Valley, I take comfort in the fact that my business is real, not virtual; and that the products I grow are essential to human life, not fanciful trends of the internetters. I ask you not for handouts, nor for any other means of artificially propping up me and my fellow pear growers. Rather, I hope you will consider the issues I have raised and support them in our behalf. Thank you for your time and consideration.
Page 211 PREV PAGE TOP OF DOC
Statement of John Giovannetti
Good morning and thank you very much for holding this hearing in California to discuss Federal agricultural policy issues. I am John Giovannetti, a grower and shipper of fresh fruits and vegetables in Yolo, California. Today I am presenting testimony on behalf of Western Growers Association (WGA), as a member of the Board of Directors. WGA was established in 1926, and represents over 3,300 members who grow, pack and ship more than half of the nation's fresh fruits, vegetables and nuts. The Association represents over 90 percent of the fresh vegetables and about 60 percent of the fresh fruits and nuts grown in Arizona and California.
FEDERAL AGRICULTURAL POLICY
The U.S. horticultural sector has always been on the periphery of farm policy because our fruit and vegetable growers have never participated in the historical ''farm programs'' as have other agricultural sectors, such as dairy, cotton, or wheat. Our growers, however, believe that Federal farm policy also includes import and export policies, and it is to these policies that I wish to first address my remarks today. In addition to agricultural trade policy, my written statement also will comment on the Perishable Agricultural Commodities Act, the U.S. Department of Agriculture's Animal and Plant Health Inspection Service (APHIS), planting flexibility on subsidized acreage under the 1996 farm bill, guest worker legislation, crop insurance, supermarket consolidation, and agricultural research and other issues of importance to our industry. As you can see, fruit and vegetable growers have many issues on our plate.
AGRICULTURAL TRADE POLICY
With U.S. tariffs on imports being among the lowest in the world, our market is open to fresh fruits and vegetables from around the world. When trade negotiators raise the issue of reducing domestic and export subsidies, there is nothing to debate with regard to the U.S. fruit and vegetable industry, since our industry receives no trade-distorting subsidies. There are no protectionist safeguards or sophisticated price or volume mechanisms designed to keep imports out when our produce is being harvested and marketed.
Page 212 PREV PAGE TOP OF DOC
Let's compare this situation with the fruit and vegetable industry in Europe. Taking a look at the most recent data (for the marketing year 1996/97) which the European Union has provided the World Trade Organization, we find that the EU's aggregate measure of support (the WTO's measure of domestic support) exceeded $17 billion. Let me reiterate—the European industry received $17 billion in subsidies for one marketing year, compared to zero for the U.S.!
Additionally, the EU was allowed in the Uruguay Round to basically retain its Reference Price System for certain fruits and vegetables. It is now called the Entry Price System. This system imposes a duty on imports that enter the EU below a specified price. For the EU's most sensitive fruits and vegetables (15), there is a special volume-based safeguard (additional duty) that protects the domestic industry by effectively keeping out U.S. exports when the EU is harvesting and marketing its own crop(s). In 1996/97, this safeguard was used for tomatoes, cucumbers, oranges, clementines, mandarins, lemons, apples, and pears.
In addition to these measures, the EU uses Producer Organizations (POs) to provide subsidies more directly to fruit and vegetable growers. Growers pay levies to the PO which are reimbursed 100 percent by the EU, up to 4.5 percent of the value of the product marketed. The U.S. Department of Agriculture's Foreign Agricultural Service estimates that in 1999, the total estimated EU direct support to the POs was approximately $1.8 billion. While the EU member states do report the activities of the POs to the European Commission in Brussels, there is no strict oversight by the EC. Thus, there is ample opportunity to report the activities of POs as non-trade distorting, a classification which does not require reductions in support levels. With ongoing efforts to reduce all subsidies, it is expected that more and more effort will be made to disguise the PO subsidies as non-trade distorting, and thus not subject to reduction efforts.
WGA is a member of the Agricultural Coalition on Trade (ACT) which is comprised of California fruit and vegetable associations. ACT has reviewed the U.S./EU fruit and vegetable trade picture since implementation of the Uruguay Round. Attached to my testimony are two charts for your review. Please note the significant increase in imports from the EU—over 141 percent in quantity (95 percent in value), while there has been a 12 percent decrease in the quantity (16 percent in value) of U.S. exports to the EU.
Page 213 PREV PAGE TOP OF DOC
WGA believes that this disturbing imbalance of trade is due primarily to inadequate attention in the Uruguay Round to the U.S. fruit and vegetable sector. When the U.S. negotiating strategy is to reduce subsidies, and the U.S. sector has nothing to reduce, our industry stands to gain very little, especially when the subsidies are as high as those of the EU. The situation is even more severe when the subsidy reductions are made on an aggregate basis.
While WGA believes this situation can only be rectified by complete elimination of all domestic and export subsidies, we are realists and do not expect this to happen in the next trade round. However, WGA believes the U.S. fruit and vegetable sector can benefit from a new trade round only if the following approaches are taken:
1) Elimination or reduction of domestic subsidies on a product basis (not in aggregation) to prohibit any future increase in subsidies;
2) Substantial percentage reductions in subsidies based on the value of the aggregate measure of support (AMS) for each product (i.e., the higher the AMS, the larger the percentage reduction);
3) Elimination of export subsidies;
4) Elimination of the Peace Clause;
5) Clarification and harmonization (to the greatest extent possible) of domestic support terms (i.e., price support, direct aid, premium, etc.) used in WTO notifications;
6) More transparency in WTO required notifications to clearly determine whether the support is appropriately placed in the green, amber, or blue box; and,
7) Symmetry in safeguard measures.
WGA recognizes that members of the House Committee on Agriculture will not be negotiating the next WTO trade round. However, decisions made in the next trade round will directly affect the future economic health of the U.S. fruit and vegetable sector. Thus, when developing U.S. farm policy, members must carefully scrutinize the impact of our trade actions on all sectors of U.S. agriculture. This includes specialty crops as well as the bulk commodities.
Page 214 PREV PAGE TOP OF DOC
WGA supports free trade and has endorsed previous multilateral trade rounds. However, our members cannot continue to endorse future trade negotiations that allow the EU to continue providing its fruit and vegetable industry with billions of dollars in subsidies.
With respect to the Free Trade Area of the Americas (FTAA), these negotiations are proceeding faster than the WTO negotiations. WGA is concerned that our government's WTO objectives are influencing the FTAA negotiations. The domestic subsidy objective appears to be the same as the WTO objective—a substantial reduction in domestic trade distorting subsidies. Why? The Western Hemisphere countries do not appear to be subsidizing there horticultural crops. Congress needs to consider separating the trade negotiations for horticultural crops from other agricultural crops and prohibit domestic subsidies.
WGA hopes that as members of the committee focus on U.S. trade policy and the future health of American agriculture, you will be able support a trade policy that is fair and equitable to the U.S. fruit and vegetable industry.
MARKET ACCESS PROGRAM LEGISLATION
WGA strongly supports legislation currently pending before this committee to expand the successful Market Access Program (MAP). This legislation, H.R. 3593, would authorize $200 million annually for the MAP, $35 million annually for FMD, and allow 50 percent of unused Export Enhancement Program funds to be used for market development and promotion activities. As members of this committee are well aware, the non-trade distorting MAP program has proven to be extremely successful in promoting the expansion of U.S. agricultural exports in international markets, especially those in which we face unfair trade barriers. Passage of the legislation, which would restore MAP funding to levels of the early 1990's, would expand agricultural exports and also would strengthen the U.S. negotiating position in new WTO trade discussions. We hope the committee will expeditiously approve this legislation.
Page 215 PREV PAGE TOP OF DOC
PERISHABLE AGRICULTURAL COMMODITIES ACT
The Perishable Agricultural Commodities Act (PACA), which is administered by USDA to regulate trade in fresh produce, but which is fully funded by the industry, is critically important to our industry. PACA has enabled growers, shippers and receivers to move perishable fruit and vegetable crops great distances with assurances that all parties are fairly compensated. In playing a critical role in ensuring an abundant and affordable supply of healthy fruits and vegetables, PACA provides many benefits to consumers, as well as to all sectors of the industry.
HUNTS POINT TERMINAL MARKET CRIMINAL ACTIVITY
Unfortunately, it was learned last year that USDA inspectors and wholesalers at the Hunts Point Terminal Market in New York City entered into a massive kick-back scheme to defraud growers and shippers by falsifying inspections of fresh produce over nearly a two decade period. All of the inspectors involved in the scheme, and most of the wholesalers' employees, have agreed to plead guilty in criminal proceedings. WGA is pleased to see that this criminal activity has been uncovered and prosecuted.
However, WGA is concerned that growers and shippers will have great difficulty in recovering the substantial financial losses they have suffered due to the Hunts Point criminal activity. While the PACA process permits defrauded shippers to file grievances against the wholesalers in order to recoup losses suffered as a result of this admitted criminal activity, the burden of proof rests solely with the shippers. Some accommodation must be made to relieve the shippers' burden of proof requirement in this situation, or it will be virtually impossible to recover any of the losses caused by this criminal activity. In addition to the burden of proof problem, the industry has the burden of investigating all the inspections by the AMS inspectors who have pleaded guilty. The inspection certificates used for the indictments will be the shippers basis for filing the PACA grievance, but there remains the investigation of all the inspections made by the indicted inspectors. It is the contention of WGA that all of these inspections are suspected of being part of the same kick-back scheme, and therefore need to be fully investigated by the Federal Government, not by the industry.
Page 216 PREV PAGE TOP OF DOC
Procedurally, the statute of limitations will expire on July 27, 2000, yet the evidence needed to go forward in the PACA proceedings has not yet been made available by the USDA Office of Inspector General. It is appropriate for Congress to either extend the statute of limitations, or make it clear that the Inspector General should do everything possible, in addition to retaining a non-government contractor, to assist with making this evidence available to shippers.
Another problem in the Hunts Point matter is the shipments involved in the government's sting operation. The shippers were unknowingly involved in, and paid a heavy price for, Federal efforts to catch criminals. Our shippers are not asking for a reward, but we do believe we should be compensated for the fair market value of our produce involved in this government operation. It is well within the power of Congress to reimburse shippers for such losses involving the Federal Government.
ADMINISTRATIVE INFRASTRUCTURE IMPROVEMENTS
During the last decade, the trading of perishable fruits and vegetables has changed substantially, just as other aspects of the economy have changed. However, USDA's Fresh Products Branch operates today just as it has for many decades, and is in serious need of modernization. Our industry is now utilizing digital imaging, internet trading, and more direct sales to supermarkets, and the inspection process needs to be modernized to keep up with private industry. Moreover, criminal activities, like the Hunts Point matter, could be minimized with updated procedures and facilities. The Fresh Products Branch staff and internal procedures at USDA require updating in order to meet the challenges of supplying consumers with a nutritious supply of fresh produce in the 21st century.
WGA believes that the House Agriculture Committee should work with USDA to ensure that a number of improvements to the Fresh Products Branch inspection program are implemented. This should include, at a minimum, the following initiatives:
Page 217 PREV PAGE TOP OF DOC
1) The ethics training that the Fresh Products Branch staff receives each year should be improved. In addition to strengthening existing ethics training, staff should be required to be trained yearly on changing inspection procedures and new inspection techniques;
2) Efforts to improve our inspection procedures by learning from, and adopting, the best inspection practices used by other developed countries;
3) Capital improvements such as notebook or hand-held computers, digital imaging equipment, and simple items such as inspection tables at inspection locations must be authorized and funded.
These and other updated procedures or facilities would greatly improve the Fresh Products Branch services, and are in the best interest of consumers and industry alike. We urge the committee to authorize such capital improvements for the Fresh Products inspection program in a timely manner.
ANIMAL AND PLANT HEALTH INSPECTION SERVICE
WGA encourages the committee to provide strong oversight and provision of adequate authorization of funding for one of the most important agencies of the U.S. Department of Agriculture, the Animal and Plant Health Inspection Service (APHIS). This agency provides invaluable assistance to exporters of U.S. agricultural products by working with foreign plant health officials to resolve phytosanitary barriers which stop or delay our exports. Unfortunately, APHIS's efforts to improve our export picture have been diminished by the growing list of import petitions received from foreign governments eager to export to the U.S. In fact, APHIS appears to have made consideration of import petitions a priority at the expense of assisting American exporters. WGA fears that APHIS has somehow strayed from its original mission of focusing on the problems facing our exporters.
Another concern is that the responsibilities of APHIS were increased dramatically with the adoption of the Uruguay Round WTO Agreement (which includes the Sanitary and Phytosanitary (SPS) Agreement), yet the agency's personnel and other resources were not increased at anything close to the level needed. The release last year of the National Plant Board's study, Safeguarding American Plant Resources, makes clear how extensive the needs are at the agency—and how important this agency is to the future of U.S. agriculture.
Page 218 PREV PAGE TOP OF DOC
Given the critical importance of opening new international markets for our fresh produce exports, WGA believes that APHIS should have a specific mandate from Congress to assist U.S. agriculture in these efforts.
Western Growers is also quite concerned that APHIS is being made subject to political pressures, and is not taking the necessary care required to protect domestic agricultural crops from the risk of pest infestation before approving new import petitions. Exotic pest infestations are much more prevalent than they were even 10 years ago, due to the increased level of international trade. With increased trade comes increase risk of exotic pest infestation, and APHIS must have the resources to confront the task of keeping exotic pest infestations to a relatively low level. Obviously this is necessary if we are to continue to have a successful agriculture industry—for both specialty crops and commodity crops.
WGA believes that Congress should undertake a comprehensive, detailed review of APHIS activities and adopt a new law which clarifies APHIS's role with respect to expanding access to new markets for U.S. agricultural exports. Further, Congress must provide the agency with vastly increased resources. There is no more important investment that can be made for the future of U.S. agriculture.
PLANTING FLEXIBILITY ON SUBSIDIZED ACREAGE
Western Growers Association is strongly opposed to allowing fruits, vegetables and nut trees to
be grown on acreage which is enrolled in USDA subsidy programs for the bulk commodities (the so-called ''Flex Acreage'' policy). This is necessary to ensure that producers of fruits and vegetables who do not receive USDA subsidies are not put at a competitive disadvantage against growers who do participate in the Federal farm programs. This policy also prevents against the disruption of produce markets due to artificially imposed signals arising from changes in government policy.
Page 219 PREV PAGE TOP OF DOC
Along with other produce organizations, WGA worked hard to ensure that Congress abided by this policy in writing both the 1990 and 1996 farm bills. The Federal Agricultural Improvement Act of 1996 (1996 farm bill) prohibits the planting of fruits and vegetables on all USDA contract acres, with certain narrow exceptions specified in the law. In testimony before the House Agriculture Committee in 1999, Secretary of Agriculture Glickman recommended that Congress expand ''planting flexibility so that producers can elect to plant fruits and vegetables [on subsidized acres] if they choose to do so.'' This proposed amendment would overturn the policy, included in the 1996 farm bill, of preventing subsidized growers from planting fruits and vegetables on contract acreage. WGA is strongly opposed to Secretary Glickman's proposal, and will strongly oppose any new legislation which would allow subsidized producers to compete against non-subsidized growers in the production of fruits and vegetables.
WGA also is concerned about USDA's enforcement of the Flex Acreage provisions of the law. On May 5, 1999, USDA issued an Advance Notice of Proposed Rulemaking indicating that many growers believe the penalties for violating the current prohibition of planting fruit or vegetables on contract acreage are unduly harsh, and that the agency is considering reducing these penalties. While WGA does not believe that penalties should be unnecessarily punitive, we do believe it is incumbent upon USDA to ensure that any reduction in the current penalty regime does not lessen the deterrent effect of the penalties in enforcing the Flex Acreage policy, as clearly intended by Congress. WGA opposes any substantial change in the penalties which would weaken current law.
WGA remains committed to ensuring that the fundamentally fair policy of prohibiting subsidized growers from competing against growers who do not receive government assistance in fruit and vegetable production remains the law of the land, and that the law is effectively enforced.
SUPERMARKET CONSOLIDATION
Page 220 PREV PAGE TOP OF DOC
Supermarket consolidation is a concern from the grower to the consumer. The ability of the supermarket to drive farm-gate prices down and drive retail prices up when a supermarket chain dominates the market is economically unacceptable. Unlike non-perishable consumer products, a family farmer with a perishable crop ready for harvest does not have the alternative of waiting for prices to rise. The immediate requirement to market the product is further complicated when the market is dominated by a few large chain supermarkets. The trend of retail supermarkets demanding slotting fees from grower/shippers of fresh produce is evidence of market power which puts family farmers at a great disadvantage.
GUEST WORKER LEGISLATION
Western Growers Association also strongly supports bipartisan legislation to reform the H–2A agricultural guest worker program (S.1814 and H.R. 4056). An effective guest worker program is needed to ensure that legal workers are available to harvest perishable crops when there are not enough domestic workers for this purpose. The inability to secure a sufficient number of workers in a timely fashion to harvest perishable crops results in adverse consequences for growers, workers, and consumers of fresh fruit and vegetables.
In recent years, the H–2A program has proven to be cumbersome and inefficient when faced with the task of supplying significant numbers of guest workers on short notice. As our industry continues to experience localized labor shortages throughout California and Arizona, the need for a reformed program to avert labor shortages continues to grow. Thus, legislation to reform the H–2A guest worker program is very important to the California fresh produce industries.
S. 1814 and H.R. 4056 also include provisions that will provide undocumented workers with the opportunity to earn permanent status through employment in agriculture. This ''adjustment of status'' provision is a ''win-win'' situation for growers and farmworkers. Growers benefit through the stability of a legal workforce and the certainty that highly perishable crops will be harvested in a timely manner. Farmworkers benefit by earning the right to legal status, avoiding the substantial risks inherent in undocumented status, and get the protection of U.S. labor laws.
Page 221 PREV PAGE TOP OF DOC
Again, WGA strongly supports the bipartisan agricultural guest worker legislation with adjustment of status for farmworkers, and urges Congress to enact this legislation in 2000.
FEDERAL CROP INSURANCE
WGA has generally been supportive of efforts to expand effective risk management tools to growers of fresh fruits and vegetables. However, due to recent experience, we are concerned about potential adverse impacts on growers from any expansion of the Federal Crop Insurance Program. WGA strongly urges USDA and the Risk Management Agency to ensure that new crop insurance programs are structured in such as a way as to ensure that they do not disrupt existing markets for fresh fruits and vegetables.
WGA's concerns are illustrated by the situation with the watermelon pilot program in 1999. Last year, watermelon growers in Arizona and California experienced one of the worst markets in history. The supply of domestic watermelons was much greater than in previous years, which produced record low farm-gate prices. Moreover, watermelon consumption did not increase significantly because the retail supermarkets did not pass along the low farm-gate prices to consumers. The watermelon farm-gate price collapse also adversely affected farm-gate prices for other types of melons grown by WGA members.
WGA is concerned that the USDA's watermelon crop insurance pilot program was a major factor contributing to the increased supply of watermelons in the U.S. market. The pilot program implemented in select counties in a few States appears to have provided incentives for growers to expand production, or for new growers to enter the market. This created an imbalance in an industry that previously was characterized by a reasonably balanced supply and demand history. Large increases in acreage planted to watermelons in areas served by the pilot program indicate that the program may have been a major factor in causing this shift into watermelon acreage.
Page 222 PREV PAGE TOP OF DOC
WGA strongly opposes the continuation of the watermelon pilot program, and expansion of the Federal Crop Insurance Program to other fruit and vegetable crops, unless USDA can ensure that such programs will not disrupt traditional marketing patterns and will not provide artificial signals or stimulants towards increased acreage and supply. It should be remembered that fruit and vegetable markets are much different in nature than markets for the bulk commodities. Government programs designed for growers of bulk commodities generally are not effective for fruit and vegetables growers, and can often be detrimental to the latter.
Ensuring that new programs are available on a equal basis among all growers, and will not disrupt markets, should be a standard requirement for RMA in developing any new crop insurance programs for fruit and vegetable commodities. WGA also believes that association and cooperatives have a vital role to provide in crafting crop insurance policies and providing premium discounts to growers. Any crop insurance reform approved by Congress must include a role for agricultural associations and cooperatives.
FOOD QUALITY PROTECTION ACT REFORM
WGA strongly supports efforts to provide for a better implementation process of the Food Quality Protection Act (FQPA), such as the ''Regulatory Fairness and Openness Act of 1999'' (H.R. 1592) by Rep. Pombo. This legislation does not change the fundamental requirements of FQPA, but rather reinforces the original FQPA language to ensure that the EPA uses actual data and realistic models in their risk calculations. The bill also would require EPA to use the data call-in provision of the law where there are data gaps. Effective and fair implementation of FQPA based on actual data and sound science is critical to ensuring that growers have access to the crop protection tools needed to grow nutritious and affordable fruits and vegetables.
WGA is pleased to see that this FQPA reform bill has 218 cosponsors, thus attaining the support of a majority of the 435 members of the House, and urges Congress to move forward with the legislation as soon as possible.
Page 223 PREV PAGE TOP OF DOC
AGRICULTURE RESEARCH
WGA appreciates the small increase in funding for Federal agricultural research that Congress has provided in the last year or two. However, our industry has two concerns regarding research. First, the Agricultural Extension Service has been decimated over the last 15 years. Their advice and applied research is critical to assisting growers in the development of more efficient ways of growing crops. In California, many of the long time extension advisors are reaching retirement age and it is not clear that there is the will to replace them. Second, we believe that more funding should be directed towards applied research. As we struggle with changes in pest control, new environmental legislation, and other challenges, applied research has the potential to assist in the development of new solutions to these issues.
Thank you for this opportunity to present the WGA's views on Federal agricultural policy. I will be glad to respond to any questions.
Statement of William Zech
Mr. Chairman, it is a pleasure to appear before the House Committee on Agriculture to discuss U.S. agricultural policy. My name is William Zech, and I am an asparagus grower appearing before you today on behalf of the California Asparagus Commission.
Asparagus is a valuable crop in California. California is the number one asparagus producing State in Nation with over 37,000 acres harvest in 2000. Asparagus contributed more than $126 million to California's economy last year. However, we are not the only region experiencing substantial production growth. Our neighbors to the south, Mexico and Peru have significantly increased imports to the U.S. over the last few years. From 1994 to 1998, imports into the U.S. increased by 42 percent, to approximately 108 million pounds. Mexico and Peru provide most of our fresh asparagus imports.
In contrast, U.S. asparagus export sales have decreased by 30 percent during the same period, to about 33 million pounds. This decline in export sales has come about despite our best efforts to expand our export sales. The California Asparagus Commission partners with commodity organizations in other production areas to participate in the Federal Market Access Program (MAP). The national marketing organization, known as Asparagus USA, has participated in MAP since 1996. The program has contributed approximately $250,000 to the grower's international marketing budgets. In general, we've experienced tremendous success in target markets and believe the program is essential to our continued efforts to combat unfair trade policies of our trading partners. The program becomes more important as producers in other countries begin to compete toe-to-toe with U.S. producers in those markets we developed with MAP funds.
Page 224 PREV PAGE TOP OF DOC
The California asparagus industry faces a number of trade barriers which should be a topic of consideration for this committee as a part of the trade title of any future farm bill and other legislation which comes before you.
First, the California asparagus industry has encountered a number of phytosanitary barriers in our efforts to expand our export sales. I want to share a recent success story with you that illustrates the important role of the Federal Government in phytosanitary matters. Last year, the government of Taiwan halted some of our shipments, contending that U.S. asparagus was infected with an insect known as the burrowing nematode. However, officials from the Animal and Plant Health Inspection Service (APHIS) were able to provide the necessary scientific evidence proving the nematode does not affect U.S. asparagus. APHIS' work on this particular issue has significant economic benefit to the grower community. Taiwan has exported a study volume of California fresh asparagus since the beginning of our season. We are very pleased with the work of APHIS, particularly in light of our understanding that the agency is under-funded and understaffed. I trust that the committee, as it looks at our future agricultural policy, will take a close look at the activities of APHIS, which are so critical to the future health of U.S. agriculture and to our export sales.
The California asparagus industry also has concerns with several aspects of the European asparagus market. The EU has allowed the formation of Producer Organizations through which fruits and vegetables are marketed. It is unclear how the specific benefits of these organizations, which we understand received over $1.8 billion last year, are passed along to European growers. Vegetable growers in the EU also receive export refunds, and we are advised that in 1997, they received approximately $76 million in such refunds.
Additionally, the EU approves proposals from time to time that provide specific funds to certain crops. We have heard the Spanish asparagus industry has received funding in the amount of $125 per acre. Spanish asparagus has become a strong competitor in the Swiss market, historically one of our top export markets, and we suspect that the recent EU subsidies were designed to make the Spanish asparagus industry more competitive with U.S. exports.
Page 225 PREV PAGE TOP OF DOC
The Swiss market also causes us some concern. The Swiss government has established quotas on asparagus imports from May 1 to June 15. Asparagus imports above the allotted quota for the given week face a high tariff of approximately 7.5 Swiss francs per kilogram which essentially prices our exports out of the market with respect to Swiss domestic asparagus. While these quotas can be revised upward on a weekly basis depending on domestic supply, consumer demand, and pressure from our California exports, these trade restrictions continue to be a barrier to U.S. asparagus exports.
I bring this information to your attention to point out that the U.S. asparagus industry continues to be confronted with European subsidies which undercut our efforts in the EU market. Our industry asks that, as you consult with Administration trade officials, you support a negotiating stance that will result in substantial reductions in EU subsidies. This is critical if U.S. asparagus growers are to be given the opportunity to compete on a more level playing field in international markets.
In closing, I would like to ask for your support of H.R. 3593, a bill to authorize increased funding for the Market Access Program (MAP). Over its 15-year history, MAP has proven to be a non-trade distorting export promotion mechanism which assists in efforts to expand U.S. agriculture exports, and therefore is an excellent investment of resources. As noted earlier, Asparagus USA received limited funding under MAP ($257,039 in 1998, $245,526 in 1999) which provided vitally needed support to our efforts to share our very fine product with the rest of the world.
Thank you for allowing me to speak to you on behalf of the California Asparagus Commission. I would be pleased to answer any questions the committee members may have.
Statement of Tom Sanford
Page 226 PREV PAGE TOP OF DOC
Mr. Chairman, members of the committee, my name is Tom Sanford. I am the mayor pro-tem of the city of Gridley, California.
I appreciate the opportunity to testify before the committee today. The city of Gridley is largely an agricultural community whose primary product is rice. For many years our growers have grappled with the complex issues surrounding the disposal or use of the rice straw that remains after rice is harvested. The city of Gridley is leading a public-private partnership that plans to construct a biofuels plant that will turn rice straw into ethanol. The plant will take a byproduct of rice production and turn it into a commodity of value. In so doing, it will take a liability—costly rice straw disposal—that threatens to drive growers away from rice production and create an asset that will help keep rice acreage in production and farm families in our region healthy. In short, the opportunity to turn rice straw into ethanol will benefit both rice growers and the region at large.
Support of our agricultural producers and development of our economic base is an important goal for the city of Gridley. We are located in the heart of the Sacramento Valley's rice-growing region. A healthy rice industry is important to the health of our community, and to other communities like ours. We also fully recognize the value of research into production of environmentally beneficial fuels, and the importance of this research to the rice industry. Thus we are grateful that the Federal Government, through the Department of Energy, has taken a leadership role in helping us to advance our goal of turning the rice straw disposal problem into a new source of clean-burning, renewable liquid fuel for our State and Nation.
The technologies that will be demonstrated at the Gridley ethanol plant will have applicability throughout rice-growing regions of the country as well as in other agricultural areas of the nation. These technologies will be applicable to corn fiber, for example. The lessons learned at the Gridley plant will help us understand the best ways to turn other agricultural byproducts into liquid fuels that will benefit rural economies as well as the environment. This pilot project is an introduction to the limitless potential of bio-refining.
Page 227 PREV PAGE TOP OF DOC
While we are confident that we can demonstrate a cost-effective technology that can be replicated elsewhere with limited or no Federal support, we believe that there is an important role for the U.S. Department of Agriculture in initiatives like the Gridley ethanol plant.
Specifically, we recommend that USDA be authorized to provide financial support to help develop and demonstrate more cost effective and safe methods for collecting, storing and transporting rice straw and other similar agricultural byproducts intended for use as feedstock for ethanol production. Driving down the cost of collecting, storing and transporting rice straw will help improve the economic viability of ethanol production from this and other agricultural byproducts. In addition, it will help ensure our growers who produce rice receive the greatest possible benefit from the development of this important rice straw disposal technology.
The need for safer storage methods was highlighted this past year when 4,000 tons of rice straw intended for use in a test facility burned uncontrollably after being ignited by vehicle exhaust. We must be able to protect the asset once it is collected from the fields after harvest and prior to its use in the ethanol making process. The development of safe, cost-effective collection, storage and transportation technologies and systems are critical to rice growers and the long-term viability and reliability of ethanol production from rice straw.
On behalf of this important new industry to rural America, our experience also suggests that the committee should consider providing some form of federally-backed credit enhancements to help promote private sector financial support for the construction of the facilities that will be needed to maximize the use bio-refining. Congress has provided credit enhancements to encourage private investments in toll roads and other similar public-private partnerships. Limited Federal support in the form of credit enhancements would greatly ease access to much needed private capital to make bio-refining a possibility throughout the agricultural areas of our country.
Page 228 PREV PAGE TOP OF DOC
Again, Mr. Chairman, members of the committee, I strongly urge the committee to authorize USDA to provide additional financial support for biofuels. Such support would represent a wise investment of scarce USDA funds, and I encourage the committee to consider addressing this issue in the upcoming reauthorization of Federal farm programs.