SPEAKERS CONTENTS INSERTS
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REVIEW OF THE FEDERAL CROP INSURANCE PROGRAM
SUBCOMMITTEE ON RISK MANAGEMENT,
RESEARCH, AND SPECIALTY CROPS
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FEBRUARY 16, 1999, PERRY, GA AND DOUGLAS, GA
FEBRUARY 18, 1999, LAURINBURG, NC
Serial No. 1063
Page 2 PREV PAGE TOP OF DOCPrinted for the use of the Committee on Agriculture
COMMITTEE ON AGRICULTURE
LARRY COMBEST, Texas, Chairman
BILL BARRETT, Nebraska
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
SAXBY CHAMBLISS, Georgia
RAY LaHOOD, Illinois
JERRY MORAN, Kansas
BOB SCHAFFER, Colorado
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
JOHN COOKSEY, Louisiana
Page 3 PREV PAGE TOP OF DOCKEN CALVERT, California
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
GREG WALDEN, Oregon
MICHAEL K. SIMPSON, Idaho
DOUG OSE, California
ROBIN HAYES, North Carolina
ERNIE FLETCHER, Kentucky
CHARLES W. STENHOLM, Texas,
Ranking Minority Member
GEORGE E. BROWN, Jr., California
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
VIRGIL H. GOODE, Jr., Virginia
Page 4 PREV PAGE TOP OF DOCMIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
CHRISTOPHER JOHN, Louisiana
LEONARD L. BOSWELL, Iowa
DAVID D. PHELPS, Illinois
KEN LUCAS, Kentucky
MIKE THOMPSON, California
BARON P. HILL, Indiana
WILLIAM E. O'CONNER, JR., Staff Director
LANCE KOTSCHWAR, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director
Subcommittee on Risk Management, Research, and Specialty Crops
THOMAS W. EWING, Illinois, Chairman
BILL BARRETT, Nebraska
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
SAXBY CHAMBLISS, Georgia
Page 5 PREV PAGE TOP OF DOCRAY LaHOOD, Illinois
JERRY MORAN, Kansas
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
GREG WALDEN, Oregon
MICHAEL K. SIMPSON, Idaho
DOUG OSE, California
ROBIN HAYES, North Carolina
ERNIE FLETCHER, Kentucky
GARY A. CONDIT, California
Ranking Minority Member
GEORGE E. BROWN, Jr. California
CALVIN M. DOOLEY, California
EARL F. HILLIARD, Alabama
EARL POMEROY, North Dakota
SANFORD D. BISHOP, Jr., Georgia
JOHN ELIAS BALDACCI, Maine
VIRGIL H. GOODE, Jr., Virginia
MIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
CHRISTOPHER JOHN, Louisiana
Page 6 PREV PAGE TOP OF DOCLEONARD L. BOSWELL, Iowa
KEN LUCAS, Kentucky
MIKE THOMPSON, California
C O N T E N T S
MARCH 16, 1999 PERRY, GA
Bishop, Hon. Sanford D., Jr., a Representative in Congress from the State of Georgia, opening statement
Chambliss, Hon. Saxby, a Representative in Congress from the State of Georgia, opening statement
Ewing, Hon. Thomas W., a Representative in Congress from the State of Illinois, opening statement
Georgia Cotton Commission, statement
Sumner, Wyat, producer, Worth County, GA, statement
''Government 'piling on' Tobacco'', commentary
MARCH 16, 1999, DOUGLAS, GA
Bishop, Hon. Sanford D., Jr., a Representative in Congress from the State of Georgia, opening statement
Chambliss, Hon. Saxby, a Representative in Congress from the State of Georgia, opening statement
Page 7 PREV PAGE TOP OF DOC Ewing, Hon. Thomas W., a Representative in Congress from the State of Illinois, opening statement
Eason, Darvin, on behalf of the Georgia Agribusiness Council, statement
MARCH 18, 1999, LAURINBURG, NC
Ewing, Hon. Thomas W., a Representative in Congress from the State of Illinois, opening statement
Hayes, Hon. Robin, a Representative in Congress from the State of North Carolina, opening statement
REVIEW OF THE FEDERAL CROP INSURANCE PROGRAM
TUESDAY, FEBRUARY 16, 1999
House of Representatives,
Subcommittee on Risk Management,
Research, and Specialty Crops,
Committee on Agriculture,
The subcommittee met, pursuant to call, at 1:30 p.m. in the Roquemore Auditorium, Georgia National Fairgrounds and Agricenter, Perry, GA, Hon. Thomas W. Ewing (chairman of the subcommittee) presiding.
Page 8 PREV PAGE TOP OF DOC Present: Representatives Chambliss, Bishop.
Staff Present: Stacy Carey, staff director, Subcomittee on Risk Management, Research, and Specialty Crops; Ryan Weston and John P. Riley.
OPENING STATEMENT OF HON. SAXBY CHAMBLISS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA
Mr. CHAMBLISS. Thank you all for being here. We are out on the road today from the perspective of the House Agriculture Committee to visit with producers in the eighth district of Georgia to talk about the various commodities that we produce, and particularly with respect to the crop insurance program, why it does not work, what we need to do to change it, and how we can improve it, whether we need to scrap it and start over again, whatever it may be.
I just want to take a minute to thank my good friend Tom Ewing from Illinoisand obviously Sanford being from the second district of Georgia, I am sure there are a lot of his constituents herefor coming and joining us today to hear your concerns, to listen to you, and to talk to you about some things that we get into in the overall reform of the crop insurance program in this country.
There are a couple of folks that I would like to introduce who are here, some very special friends that we have to agriculture in the State of Georgia. First of all, our agriculture commissioner, Tommy Irvin. Tommy, we are very pleased to have you here today, and look forward to your participation.
My good friend Wayne Dollar who is from Ochlocknee which is a little bit south of Moultrie down there.
And Dr. Gale Buchanan. Dr. Buchanan of course is the Dean of the College of Agriculture at the University of Georgia, and we are very pleased to have Dr. Buchanan here to participate with us.
Page 9 PREV PAGE TOP OF DOC Ken Ackerman from USDA, who is with the Risk Management Section of USDA is here, and we have already told him he is going to get all the tough questions that you all have.
My good friend Fred Harrison, who is the Interim Dean of Agriculture at Fort Valley State University is here.
We also have from a couple of other offices around my friend Jody from Moultrie who is representing Paul Coverdell is here; Sean Portch, representing Senator Cleland's office; Michael Shaffer from Congressman Norwood's office; and Alan Hayes from John Linder's office. We are certainly pleased to have you folks here.
In Georgia we have got to be the most diversified agricultural State in the whole country. As I tell folks as we go around the country, if you can eat it, wear it, or smoke it the chances are it was grown in Georgia. And we are very proud of that long-standing agricultural heritage that we have here.
We have experienced a couple of tough years back to back in 1997 and 1998, and what that has shown us above all else is that the current crop insurance program that we have in place simply does not work. So we on the House Agriculture Committee are taking the initiative, the initiative to reform the current program, and the reform of that program may entail just scrapping it altogether and starting over again, or making significant reforms to the current program, we are not sure. But that is what we are here for. We are here to listen to you all, and I know we have virtually every commodity that is grown in Georgia represented here today, and we even have Larry Yountz, my friend from South Carolina who grows peaches down here to visit with us with some of his folks, so we have got a cross-section of Georgia farmers, and we look forward to hearing from you.
I am very pleased that my close personal friend, as well as my friend and colleague in the House from Illinois, Tom Ewing, who is chairman of the Subcommittee on Risk Management, Research, and Specialty Crops, chose the eighth district of Georgia to come to a field hearing today. And Tom, let me tell you, has been a great friend of the Georgia farmers. I have had the privilege of serving with Tom for the last 4 years in Congress.
Page 10 PREV PAGE TOP OF DOC The good thing about Tom Ewing is that he is a farmer, so he shares your pain, he knows the problems that you have, he knows and understands agriculture, and even though they do not grow peanuts, cotton, and tobacco, or peaches, or blueberries, produce in Illinois, Tom Ewing knows and understands farming.
And let me just tell you, as we went through the farm bill process back in 1994 and 1995, Tom Ewing is a great friend to every one of you in this room, and I am very pleased to have him here, and I would like to turn it over at this time to Tom Ewing.
OPENING STATEMENT OF HON. THOMAS W. EWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. EWING. Thank you, Saxby, and thank you for having us here in Perry, GA. It is my pleasure to be here with you and with Sanford Bishop who are both are excellent members of the Agriculture Committee and of our subcommittee, and very knowledgeable and involved in agricultural issues, but you know that, I do not have to tell you that.
I do want to make the point, Saxby, if you grow all these things in Georgia that you brag about, would you just lay off the corn and soybeans. [Laughter.]
Because we are a little more limited in Illinois, and the price is down just a little below production costs, and my farmers are a little restless with less than $2 corn and less than $5 soybeans.
I want to thank Ken for being here today. Ken has a tough job running the crop program, the crop insurance program with USDA, and he works very hard at it. He will be here as a resource for us today, and to add to this discussion.
The purpose of this forum is not really just to hear from the three of us at this table, or the other experts in the room, but we need to talk a little bit to set the stage, and why we really are here, though, is to hear from producers.
I know you have a lot more on your mind than crop insurance. This issue is of great importance to the subcommittee. We need to know what is on your mind about crop insurance as we get into the process of reviewing our programs. We are interested in what you have to say, what is working well, what is not working so well, what needs to be fixed, and how you think we can fix it.
Page 11 PREV PAGE TOP OF DOC The committee has really two tracks that we are on. The first track is to see what we need to do with the crop insurance program as it currently exits, can we tweak it around the edges a little bit, and we all know that it is late this year to make any changes of any significance.
But we also know that if we are really going to change the crop insurance program, we are really going to make it a safety net for the entire farmer, that is going to take a little time, and it is going to take a little time to put it in place, and we want to do it in a very reasoned way. So this year, and possibly next year would be too early to do that.
And I will tell you that the chairman of the full committee, Larry Combest from Texas, and Charlie Stenholm also from Texas, the ranking member of the committee, they have said that crop insurance reformand that is more than just tweaking around the edgesis one of their prime goals in the new Congress to set up a program that really provides protection for producers of crops in this country, so that we do not have to have ad hoc disaster bills, and we all know that there are all these problems with the administration of those.
I want to tell you that we are going to have a roving microphone, and when you have a question, and we are going to start the questions after Sanford has made his commentswhen you stand up or ask to be recognized, tell us where you are from, give us your name, and I would prefer that you tell us what kind of producer, or what your responsibilities are, and why you are here. There is a card also that they will hand you when you ask your question, and we would like to have your name, address, and a little information on that card for our own records.
So before we go to the audience to hear what you have to say, I want Sanford Bishop to have a chance to address you. Sanford, thanks for being here.
STATEMENT OF HON. SANFORD D. BISHOP, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA
Page 12 PREV PAGE TOP OF DOC Mr. BISHOP. Thank you very much, Mr. Chairman. I appreciate the very, very diligent efforts on your part to make sure that our Subcommittee on Risk Management, Research, and Specialty Crops which deals with matters that are so vital to middle and south Georgia, and certainly the Second Congressional District, are attended to. I appreciate that very much. I appreciate your holding this field hearing, and I appreciate my colleague Saxby Chambliss with whom I have worked very, very closely over the last several years on issues of mutual concern. Our districts are adjacent, we have the same crops, and basically we have the same constituents. As a matter of fact, if the truth be known Saxby is my constituent. [Laughter.]
But we work very well together, and we are working in one accord to do the best that we can for Georgia agriculture and American agriculture.
I certainly want to join the chairman and Saxby in welcoming Commissioner Irvin, my friend of long standing, who is as you all know the Commissioner of Agriculture for Georgia, as well as Ken Ackerman from USDA with whom we work on a regular basis on your behalf.
After experiencing one weather-related disaster after another, including last year's drought, the future of production agriculture and family farming in middle and south Georgia really faces a threat of almost unprecedented proportions. This is not a sudden or overnight crisis. Farmers, bankers, and communities that are dependent on production agriculture have been in a crisis for quite some time.
Our farmers have faced a threatening situation that has now become even more severe. Over the past few years I have visited farms to meet with farmers all across the second district, which is adjacent and directly west of where we are today. All over I have seen firsthand the destruction that has been wrought by droughts and other disasters which have struck our area.
Last year, and indeed as we speakand I met last night with over 100 farmers in Cairo, GAfarmers are telling me that the crisis is so severe that the direct old-style disaster payments are the only viable way to keep them going. In light of the level of support that foreign governments provide their farmers, a south Georgia farmer cannot be blamed for feeling that way.
Page 13 PREV PAGE TOP OF DOC Farmers do need relief from high production costs and low commodity prices. Last year I promised I would carry that message back to Washington and work with my colleagues in Congress, and the administration to get some relief.
I was pleased to join my colleagues from Georgia in a bipartisan effort to work together for this cause. While we did not agree on all the details, we agreed to work together to ensure that our farmers will get the relief that you need.
Beginning last July, I began working with the administration on a farm disaster relief plan, and ultimately the $5.275 billion in direct aid, and $1 billion in farm tax relief will not be enough to help every farmer recover from last year's losses and price collapses. However, we all know that the old-style ad hoc disaster assistance is not politically viable over the long term in a Congress which is increasingly dominated by suburban and urban members.
Furthermore, I think it is time for the entire Congress to face up to the fact that in a number of respects the 1996 Freedom to Farm Act has really become the freedom to fail act. There are features in the farm bill that I strongly supported, but as some of you were pointing out at the time it also had some major shortcomings. Most of all, it did not address the safety net issues that most affect farm income.
That situation is what brings us here today. I sense in Washington from all quarters a renewed willingness to comprehensively do what was left undone by the last farm bill. The ideas that this subcommittee gathers from those of you in this room today will be invaluable in this year's work, and the work of the 106th Congress. This is because it is you who are most familiar with the faults and the shortcomings of the current products that are offered by the Federal Government to farmers.
Following are some of the risk management ideas that I have gathered from other meetings with farmers in Georgia, and which I will put today at the appropriate time to the Administrator of the Risk Management Agency, Ken Ackerman:
Page 14 PREV PAGE TOP OF DOC (1) Disaster years. As declared for a specific county by the Secretary of Agriculture should be dropped from the farmer's 10-year actual production history to determine crop insurance guarantees;
(2) Cotton insurance needs to include better quality adjustments so that the insurance compensates growers if they suffer a discount on account of poor quality;
(3) We should tie Federal crop insurance to costs of production; and
(4) We should change the underlying allowable loss ratio for FCIC which is currently at $1.06 for every dollar of premium.
These are just some ideas that I have gathered from the meetings that I have had with farmers, and I am certain that the people in this room today will be able to share even more important and more significant ways in which we can use the risk management crop insurance program to shore up our sagging safety net for America's farmers.
Thank you very much, Mr. Chairman.
Mr. EWING. Thank you, Sanford.
Mr. CHAMBLISS. Mr. Chairman, I failed to recognize one of my good friends who is here, Henson Carter, our State FSA director, and my good friend and my constituent, Sanford. See, my constituent is more important than yours. [Laughter.]
Glad to have Henson here. He is a very good friend of all of us.
Mr. EWING. Let me just say one other thing here that I did not say in my opening statement about some of the items that might stir some thoughts in your minds that we might be including in the short-term improvements.
Number 1, the increase that we know we are going to get in farmer premium subsidy, how that will impact your purchase of crop insurance this year and in future years;
Adjustment of rating policies is something that Sanford alluded to as something that comes up very often, particularly when you have bad years;
Page 15 PREV PAGE TOP OF DOC Incentives to encourage private development of risk management products, is that something important that we should be looking at;
Equalizing the administrative and operating percentage subsidies for all crop insurance products;
Allocating premium discounts to producers who demonstrate a history of participation without incurring loss, and that would be in hopes of keeping these people in the program;
Improving the enforcement of the program as it currently exists.
Those are some of the items that are on my list to hear about from any of you, and not it is some for us to listen and to answer questions, and I want to look for the first brave soul who wants to get up and go first. Hopefully, after we get started we will not be able to do it fast enough. So who would like to be first? Over here.
Mt. YOUNTZ. My name is Larry Yountz, I am a South Carolina peach grower.
We want to thank you, Congressmen, for being with us, and Ken Ackerman, and all the other distinguished guests.
Saxby and Congressman Sanford Bishop, we have visited this crop insurance issue for quite a long time now with our Georgia peach grower friends, and I will have to tell you we are about at the end of the rope. I mean the dialog has got to stop. I mean we have made suggestions, we have cooperated to our maximum ability with USDA Risk Managementand by the way, Ken Ackerman and his group have tried to cooperate with us. They have got certain restraints that they have to live by that are legislative constraints that we think need to be addressed, and I think the main thing amongst the other points I want to make is the legislation with all crop insurance references actuarial soundness.
We would suggest based upon our experience in the peach industry, the experience in both South Carolina and Georgia, that the actuarial soundness is what has driven up our cost tremendously in terms of premium, and driven down our coverage in terms of when we have a disaster.
Page 16 PREV PAGE TOP OF DOC We are one of the few commodities in both states that have experienced three to four bad weather-related disasters in the last 4 years. We have often challenged our business associates and industry to withstand such a blow financially.
In 1996 South Carolina and Georgia experienced a 95 percent reduction in peach revenue. I do not know that there is any governor, or any king, or any monarch in this world that can withstand a 95 percent reduction in revenues and still be able to stay in business.
We did at that point havewe already had prior years of disaster, and so our coverages were way low, our premiums were way high, and we continued to go in that direction because in 1998 we experienced another freeze in March that took out about 50 to 53 percent of the crop, depending on what your location was.
So our point being is this actuarial soundness is crippling our ability to have a viable risk management program.
We have advocated that the U.S. Congress just delete crop insurance from the face of the Earth, and devise a risk management plan for all farmers, whether they be peach growers, or cattle growers, or row-crop folks, or anybody, that will give them the tools to manage weather disasters.
As long as actuarial soundness stays in the legislation, which is in the legislation, and that is one of the key words that is hampering risk management to redesign any program, we cannot be actuarially sound when we have got weather problems, because nobody knows when they are going to occur. Acts of God are just absolutely unpredictable.
We would suggest in the peach industry from both states that we either do away with actuarial soundness, or either subsidize the programs sufficiently so they will be actuarially sound.
I think there are guidelines in USDA risk management, they operate under the principle that you pay out one dollar, you collect one dollar. Well, that is just not going to work in the farming business, not with the low prices that the farmers in general are getting for their commodities.
Page 17 PREV PAGE TOP OF DOC That issue in itself is of grave concern because the peach growers experience the same thing that the row-crop people are, and the livestock people, because our commodity prices are going lower every year, or staying static, and our costs are just rising at an unreasonable pace, the point being actuarial soundness is crippling the program.
We feel like that there are some, in the peach industry, items that probably, that they do not help in terms of our losses, because when we lose a crop, when we lose a crop of peaches like in 1996 we automatically have a zero plugged into our five-year average.
Well, when risk management starts the crop insurance, starts figuring our coverage, we have automatically lost 20 percent, a 5-year average, 5 years if you have got a zero program, so we have automatically at that point lost 20 percent coverage.
Actuarially we have increased the premium 20 percent because it is dollar for dollar. We do not want to forget that that subsidy we are getting from the U.S. Government we are thankful for because we could not afford it without the subsidy, but we have got this problem of paying for the premium when the coverage is going down.
So we feel that is an important issue in terms of making this program viable for all of agriculture, and I am just glad that we are here today to voice our opinion and to be a part of a forum that could develop a program that we can live with.
You know, we have got other issues involved in the farming industry, and the NAFTA thing, if I could just make a point of the NAFTA, I do not know if there is any U.S. farmer, that really relishes that acronym as being positive.
I know that as we deal in international terms we are having to compete with vegetable and fruit growers with people that pay their folks $5 a day, and we are paying $50 to a $100 a day to some of the same folks, something is wrong with that picture. It is not going to work.
I would hate to think that our Nation has been built upon full stomachs, and full stomachs, the little bit I know about history, provide for a contented people.
Page 18 PREV PAGE TOP OF DOC When we start bringing our foodstuffs from another country, the automobile, the petroleum problem will just be a walk in the park. They are going to tell us what we are going to pay for it, they are going to tell us when we are going to pay for it, and they are going to say when they will deliver it.
We have got a problem in our sovereign land if that ever happens, and our grandchildren just may see that if we are not careful.
And I want to emphatically try to reach you folks to understandand I know you do, and I hope our urban Congressmen will understand the same thing, that groceries do not grow in the supermarket. They grow through the hard work and sweat of these guys in this room, and other guys in the United States, and ladies in the United States, and that is one of our most valuable resources in our food production.
We just want you to be aware of that, and we will beat our drums as much as you folks can beat you all's drums in the halls of Congress to try to get some of these things ironed out.
We would also like to commend you and recognize the fact that the reform of the H2A program, the guest worker program. It is important to most of us that utilize offshore labor, or either local labor that is high valued, high intense hand labor crops. Georgia growers are highly involved in the H2A worker program. Now South Carolina growers are becoming involved in the H2A worker program.
It is so cumbersome. Every time I think about it, we even in our operation would consider it I think how stupid can you be. I mean we have got to providewe have got to pay our recruiting agency a hundred dollars a head to go to Mexico to recruit these people, to tell them to meet them at a restaurant on such and such a street behind the U.S. Consulate in Monterrey, and then they will take the passports and go and get the visas, and then they meet them back the next day, whereby the grower charters a bus at another hundred and fifty bucks a head to bring them to South Carolina and Georgia.
Page 19 PREV PAGE TOP OF DOC Then when the grower gets them here, the grower has to provide transportation to those people to and from their labor dormitories to the fields to work, and back. They have to provide all eating equipment for those people; they have to provide workmen's comp for those people; they have to provide once a week at least to take those people to the grocery store, the grower. The grower has no subsidy to help the grower in this issue. The workers do not pay one iota.
We also have an adverse wage rate that we have to pay these folks, in Georgia and South Carolina $6.30 an hour. Now, just as we
Mr. EWING. Could I interrupt a minute? We really want to try and keep this on crop insurance. We are getting just a little far afield here, and I do not question that we have got trade problems, we have got health problems, we have got lots of problems, but we will be doing very well if we get some good ideas on crop insurance today.
Mr. YOUNTZ. I am sorry, sir. I misunderstood your direction.
Mr. EWING. You asked to be the first one to get up; you get a little extra leeway when you get up first.
So we will try and keep it on the crop insurance issue as much as possible.
Who wants to go next?
Mr. MOBLEY. My name is Cleve Mobley from Waynesboro, GA, and I thank you all for coming, and I appreciate you all taking time out of your break from Congress to come and listen to our problems.
We had a meeting here in the fall, it was aboutI think it was two farmers from every district, and we came to the Agricenter and met to discuss these crop insurance issues, and I have got some notes that I had, and I am going to try to just briefly mention four of the ideas that we came up with from different parts of the State.
Page 20 PREV PAGE TOP OF DOC This one has already been mentioned, but it is No. 1on our list, it was like Mr. Sanford Bishop said, these yields that are counted against us like 1998, when you add that 1998 yield of 200 pounds, or 80 pounds, or 50 pounds into a 10-year history that lowers your production by 10 to 20 percent for your yield guarantees on any crops. I am a cotton producer, but I grow corn, soybeans, wheat, and everything else also.
When you apply for a disaster emergency loan they automatically drop that year, they do not count 1998 against you at FSA, and then they also let you drop another year out of the past 5 to figure what your losses are to give you your yield to show how much money you lost over the course of the year. So risk management is making us use that against us.
That is not a producer's production. You have an adjuster come out, and he adjusts your crop and tells you what he thinks you are going to make. I mean you do not decide whether to harvest it or not harvest it. When they write down 50 pounds that is not Cleve Mobley's production, or anybody else in this room's production, and it should not count against us.
If we had 900-pound yields for the last 4 years in a row, and all of a sudden you have got a zero because it did not rain for 60 days, that should not count against me. It is like me driving a car down the highway, and somebody runs into the side of me, and my Farm Bureau agent is going to raise my insurance because I had not run a red light, somebody else ran it and ran into me.
Well, that is point one, and that is, by the way, something that could be done very short-term. That could be done within the next 3 weeks that would help us in the 1999 crop. When you all go back you all could just tell them do not count 1998 against these guys, they have already got a low enough yield from the 1995 crop and the 1993 crop that were both disasters, and that would help us get a higher insurance yield guarantee for the 1999 crop, and that would be a simple thing to do right now.
Page 21 PREV PAGE TOP OF DOC The next thing would be this harvestable yield. If it takes 8 bushels of soybeans, or 75 pounds of cotton to be worth harvesting, and they come in here and adjust the crop at 20 pounds per acre, and you have already paid the full premium, and if it falls below a harvestable yield why would they deduct that off? We cannot figure that out. You have got adjusters coming in from all over the country. Like this year we had adjusters from all over the place come to Burke County.
One farmer on one side of the highway, his crop would adjust at 115 pounds. Across the road a different adjuster would adjust a crop that looked identical for 50 pounds.
You go out and count the bolls, everything looked identical, the crops were planted the same day, the field looked the same, but just because he happened to get a more friendly adjuster one guy loses $78 an acre more off his insurance.
I mean why? It ought to be a set level that if it costs so much to harvest a crop, at that point draw the line, destroy the crop, and move on, let us get to the next year.
The third thing is this cost of production. We definitely need to get the amount of insurance on all crops up to the production cost, however it is going to take some figuring.
One of the suggestions that we came up with at the meeting was since banks are going to be the beneficiary of all of this crop insurance, they are going to take this crop insurance as collateral to loan us money to operate on. They have got people that are making hundreds of thousands of dollars a year on their staffs that should be able to come in and help design the program. I mean banks are the biggest business in the country. They ought to get involved with us, with risk management, with the farmers, and let us use some of their people to help us come up with some ideas on what they are going to need. Design a program that will work for the farmer, and work for the banker.
Page 22 PREV PAGE TOP OF DOC I think that is four good points that we came up with out of our meeting that day. There was a few more, but I am not going to tie up the mic that long, but those are some good things I think, and the group of us thought were some good ideas.
Mr. EWING. Thank you very much. Ken, do you want to comment on the possibility of the yield rating?
Mr. ACKERMAN. I will comment on that just very quickly. We obviously have looked a lot at the program as well from the administration and USDA point of view. We have our list of proposals as well, which I will have my opportunity next month at hearings to walk through in more detail. I can tell you some of our ideas are very similar to some of the ones that have been mentioned.
On the particular point that you mentioned about dropping out the disaster year from the APH as something that would be a relatively easy thing to do, I do not want anyone to go away with a misimpression. That would not be an easy thing to do, and the reason goes to the point that the prior gentleman mentioned..
As far as the one point about changing or dropping out the disaster yield, it goes to the earlier point that was made about actuarial soundness. If we were to make a change like that that would result in raising everyone's actual production history yields that you base your crop insurance on that would have an effect on rates. That is what actuarial soundness means that we are required by law to run the program so that we have take in premium to cover the expected losses.
Also the way the law works is that any change on that kind of structural piece is subject to the Administrative Procedures Act, and subject to contractual requirements.
So while there may be logic to it, or it may be something that we can look at down the road because the multi-year disasters, the APH problems are among the most serious that we have all over the country that we recognize have to be fixed, a change for this year would be very difficult to do.
Page 23 PREV PAGE TOP OF DOC Mr. EWING. Thank you, Ken.
The gentleman here who had the comments, if you have something that you can give our staff in writing, additional notes from your meeting that would be good, and I would encourage you to give it to Stacy Carey who is the staff director of the subcommittee staff before you leave. We would like to have it.
Mr. HARRINGTON. I am Bob Mac Harrington from Easton, GA. I am a cotton and peanut farmer.
Could we take and plug the State average over time into these bad years? Say if you are in one area, in parts of Georgia you have pockets that are just torn up. I happen to live in one. Dooly County has been in one, Pulaski County has been in one, Dodge has been in one lately. Could we plug in the State average or something to level out some of this drop in coverage?
And also a man who has a high percentage of irrigation and has any dry land at all, it is a joke for him to carry insurance. It just is prohibitive. I like to carry it; I tried to carry it one year, one of the worst years I have had in 29 years. I could collect on 16 acres out of 725 acres. It was nothing but a dead cost to me.
Mr. EWING. Did you say you did irrigate?
Mr. HARRINGTON. I do irrigate every year, and I tried to carry crop insurance in 1995. It was one of the worst years that I have had in 29 years I have farmed. I could collect on only 16 acres that was on a separate farm. And there is something wrong with that.
Mr. EWING. Your problem that year was not from drought if you irrigate.
Mr. HARRINGTON. It was from drought.
Mr. CHAMBLISS. You have got dry land and irrigated land you are talking about, Mac, and the combination of two is what gave you your problem.
Page 24 PREV PAGE TOP OF DOC Mr. HARRINGTON. Correct.
Mr. EWING. Now I understand.
Ken, do you have a comment on the county average suggestion? Mr. ACKERMAN. That again is something that we could do. We now, on an APH, allow a farmer to plug in what is called a T-yield, which is essentially the county average.
Mr. HARRINGTON. I did not say county average, I said plug in the State average, because that gives you a large number of acres to spread it over, and ought to help you out actuarially.
Mr. ACKERMAN. There again, that is something that we could do. It would require changing the regulation, but it is something that we could look at doing.
To be very honest, on this area of APH we recognize we have a problem, particularly in parts of the country like Georgia, like the Northern Plains, like Texas, like a couple of other areas where farmers have been hit with 2 and 3 and 4 years of losses in the past 6 or 7 years. That has a very marked effect on not only our crop insurance, because yields go down, rates tend to drift up, but also on the finances of a farm operation. When you have 2 and 3 years of losses and you are forced to dip into your equity, dip into your savings in order to have cash flow it has a very severe effect, so it is one of the basic elements that we are going to have to fix.
I will also just add very briefly, this is why we thought it was very important from the USDA perspective even before we get legislation next year to spend part of the disaster package money on a 30 percent price discount for this year, for 1999, because we recognize that the problem exists now, and that farmers are going to have to find a way to stretch their dollars to get better coverage, especially this year with lower prices dragging down the price collections on row crops.
Page 25 PREV PAGE TOP OF DOC Mr. HARRINGTON. If the crop insurance program is nothing but dead weight, we do not need it.
Mr. EWING. Ladies and gentlemen, I want to make a point here so that we do not raise the frustration level and have you go home and think you wasted your trip here.
We want every idea, no idea is too big or too innovative, and when I call on Ken it is not to put him on the spot. Ken is the Administrator of a program by the laws that the Congress passes, and so his comment does not meanI do not want you to take that as ''Well, that is your problem, sorry we cannot help you,'' but it is just to put both sides of it on the table today to see why that is not already done, but that does not mean your idea is not good and we cannot do something with it in the future. So I do not want you to go away more frustrated because it sounds like ''Well, they have already thought about that, and they will not do it.'' We have not written anything off in the real reform movement that we hope is down the road.
Mr. GRIGGS. Mr. Chairman, and members of the committee, I am Billy Griggs, a peanut and cotton farmer from Dooly County. We are also in a family cotton warehouse and gin business. I am privileged to represent the peanut farmers of this area and this State as chairman of the Georgia Peanut Commission.
Saxby, you and Sanford, it is always a pleasure to be with you, and I want to thank each of you publicly for your efforts to help us through these horrendous problems we are having in agriculture.
And Chairman Ewing, let me welcome you to Georgia. It is our honor to have you visit with us in the agricultural belt of Georgia. I have had the pleasure of working with you and your committee for what is getting to be quite a few years now, and during that time you have also earned our respect and our appreciation for your efforts for American agriculture. I want to tell you that up front.
Page 26 PREV PAGE TOP OF DOC Mr. Chairman, let me start by telling you that we are definitely seeking your help. And I had to write this down, I am afraid I would forget something that I needed to say if I did not put it down in front of me.
We are here not only out of concern, but out of desperation, and I underline that word ''desperation.'' If you will bear with me, I would like to explain where we are, how we got here, and what we believe we must do to keep American agriculture alive until such time that we can address the farm bill with more long-term solutions.
First let us look at where we are. We as farmers have always had to face Mother Nature. This is a risk that we as individuals accepted when we started farming. Simply stated, this risk combined with the undeniable importance of a strong and independent American agriculture, national economy, and national defense is the main reason Congress developed the original farm bill and has maintained the farm bill ever since.
Added to this there has been an effort to give certain protections to the inevitable wild swings in the market prices. Unfortunately, today we in the Southeast as well as other parts of this Nation have had towe have found ourselves trying to survive 4 years of greatly reduced yields due to adverse weather, and now in 1998 and 1999 extremely low commodity prices.
During this time costs have continued to escalate rapidly. The bottom line is that most farmers have been farming equity for the last 3 or 4 years, and are running low on equity. Some have already gotten out or have been forced out, and many others are on the verge of losing everything. This not only includes our younger farmers, but also many who have been farming for 30 or 40 or more years. Please do not forget the impact this is having on agribusinesses and rural economies. The bleeding does not stop only with farmers.
How we got here as with all things agriculture has continued to survive. We have gone from many small farms to fewer but larger farms during the 30 years that I personally have been farming, and up to a point efficiencies can improve with increased size, but with increased size comes increased financial risks and burdens. Put the wrath of mother nature and the wild market price swings mentioned earlier combined with drastically increased costs in the equation you will understand what I am saying.
Page 27 PREV PAGE TOP OF DOC We cannot stop there. To understand how we got to where we are we must look at the programs and policies of this Nation to fully understand our predicament. The 1990's has seen the most drastic changes in agricultural policies of our lifetime. During this time period we in agriculture have been thrust in what is known as free world trade through NAFTA and GATT agreements. These agreement weighed heavy in the formulation of the 1996 farm bill. While there are tremendous opportunities and benefits in free world trade, there are also many pitfalls, especially for American farmers. As with any totally-new concept, one always makes a few mistakes and has to learn from those mistakes.
Gentlemen, I submit that the unintended, but inevitable mistakes made in this process, combined with the adverse weather conditions of the last several years, and the lack of an adequate safety net are the reasons American farmers and American agriculture is in this predicament.
I truly believe that American farmers can and will compete with any farmers in the world, but it can only be done if free world trade is established as fair world trade. This is not the case now, and American farmers, American agriculture, and our rural and national economies are paying the price.
Under the present structure the American farmer is operating in our highly-developed society with all of its inherent costs built in through OSHA, EPA, FDA, Wage and Hour Lawsthe list goes onand at the same time the market is being opened up to farmers from underdeveloped countries who do not have any of the added costs of a developed nation such as ours. This is driving our commodity prices down to levels at or below the cost of production, and adding to our problems.
Another point that needs to be made is that while the term ''market expansion'' may sound good, it is of no benefit to our farmers if it is not profitable.
We believe the time and place to address these issues long-term is during the upcoming trade negotiations beginning later this year, and during the next addressing of the farm bill whenever that time comes. But in the meantime we must find a way to survive until these issues can be addressed.
Page 28 PREV PAGE TOP OF DOC Finally, what do we believe we must do to keep American agriculture alive until such time as we can address the trade agreements and the farm bill with more positive long-term solutions? First, this Nation and its leaders must recognize the tremendous benefits of providing a safety net for agriculture that works. Obviously what we have today is not working, and if allowed to continue as is then this Nation and its leaders will surely see the tremendous cost of this inaction.
We believe that given the short-term fuse we have on the farm, or short-term time fuse we have on the farm, a workable crop insurance program may be the best answer to agricultural survival until long-term solutions can be formulated and brought into being.
With that in mind we offer the following guidelines as to what we believe will be a workable safety net:
(1) The crop insurance program as we know it today must be eliminated, and a new workable program be installed in its place;
(2) We believe the new program should be a true risk management program for farmers, and provide coverage based on documented costs of production, both fixed and variable, rather than historic yields where the best years are averaged in with normal years to lower coverage and raise premiums in many cases to the point of increasing rather than reducing risks;
(3) We believe the new program should offer price insurance protection. In view of the new decoupled farm programs and the impacts of world trade agreements many farmers have found themselves in disaster situations due to price, even though they made a respectable crop;
(4) We believe the new program should be offered to farmers at an affordable price. It should be remembered that premiums are a part of the cost of production. The Congress must recognize that this is not a subsidy, this is an investment in the security of our national food supply and our independence as a nation, they must allocate proper funding levels for this program; and
Page 29 PREV PAGE TOP OF DOC (5) We believe that the county FSA committee should be utilized to prevent abuses and to work with farmers during disaster situations in determining whether to keep going, or if and when to pull the plug on a problem. No one knows what farmers are doing better than other farmers.
Mr. Chairman and members of the committee, all of us recognize we are preaching to the choir here today. Unfortunately, many in Congress do not have your understanding of the importance of a strong agriculture in this nation, nor do they have your understanding of how vulnerable and exposed American farmers are without a proper workable safety net in place, especially with so few multinational corporations controlling our markets and our prices.
We just want you to know that we deeply appreciate your efforts, and our prayers are with you as you try to convince others within Congress of the dire need to correct these problems. You are literally holding our hopes and our livelihoods in your hands. As always, if there is anything we can do to assist you in your efforts to assist agriculture, please contact us.
Again, we just thank you for being here and appreciate what you have meant to agriculture during the years. Thank you.
Mr. EWING. Thank you, Billy, for your kind words and for your comments and suggestions.
Who wants to be next?
Mr. VINSON. Again, I would like to thank you all for coming and listening. It is a little unusual for me to attend one of these meetings. I am a small family farmer over in Fort Valley, GA, my name is Charles Vinson.
It has gotten sort of difficult to farm, and my wife teaches school to help pay the bills. We have got kids in college. If there is anybody more traditional than me I do not know who. We are just traditional farmers.
Page 30 PREV PAGE TOP OF DOC If actuarial soundness is going to be in this thing, as far as I am concerned you can forget it. We have cut, we have skimped, we have done everything we can to farm as cheap as we can, and then when I look at this program it is going to add anywhere from $5, $10, $15 an acre that is coming straight out of my pocket, that is coming of the top, and there is not much top left to it.
The other thing is I ask you to take a look at the sizeyou know, forget the actuarial soundnesstake a look at a dual program, say a program that is set for small farmers like me, take a breaking point of about a million dollars gross. Now, people that have got more than a million I feel like, you know, they have got a little more resources than I do. If they are grossing that much they might be able to pay a higher premium, taking into account the small family farm that has a gross less than a million dollars and has some sort of program that is not going to just take what little bit there is left off the top and send it to some insurance agent.
Mr. EWING. Thank you.
Before we go on, I want to recognize Sheila Wood with Congressman Kingston's office. Sheila, thanks for coming.
Mr. WILLIAMS. Mr. Chairman, my name is Ricky Williams, I am a farmer from Andalusia, AL, and I represent the Alabama Farmers Federation Crop Insurance and Risk Management Committee. This committee was formed about 2 weeks ago by our new president, Mr. Jerry Newby, and we have met three times during this 2-week period, and we have come up with some tentative recommendations, and we would just like to give them to you today.
We are a group of 10 producers across the State, we represent all commodity groups. We would like to thank you and the other members of the subcommittee for taking time to come to listen to our suggestions, and I have heard several good ones, and we are going to be repetitious here on some of them.
Page 31 PREV PAGE TOP OF DOC Our committee would not necessarily disagree with, you know, just scrapping this program and coming up with a completely new one, but we did not have a specific recommendation for that, so we kind of worked along in the guidelines of our current system.
In 1990 the Federal disaster relief program plus low levels of producer participation in Alabama proved that the crop insurance system does not adequately provide a financial safety net for farmers.
While producers do not want the Government to guarantee them a profit, real crop insurance reform is needed to ensure farmers have adequate risk management tools for years when a disaster does occur.
Generally farmers need higher levels of coverage at affordable prices. In addition, Alabama farmers want increased emphasis on oversight by the Federal Government and private insurers to prevent fraud. By making crop insurance more affordable for good farmers, and eliminating abuse by those who would take advantage of it, producer participation should increase. Increased producer participation in turn spreads actuarial risk over a greater number of policies and reduces the cost.
Since the goal of a viable crop insurance program is to eliminate the reliance on future ad hoc disaster assistance or participation, the crop insurance program should be voluntary, purchase of crop insurance should not be required for participation in other Government farm programs, and crop insurance benefits should not be subject to the gross income test or other forms payment limitation.
We believe long-term increased participation can be accomplished through the adoption of the following crop insurance reform measures and conceptsand like I said while ago, several of these have already been mentioned:
(1) Ratings should be changed to promote broader participation levels, especially among lower-risk producers. The current 20-year historical actuarial data base being used to determine probability of loss and establish premium levels does not accurately reflect real risk, particularly in the Southeast. Specifically, this calculation includes data from years where participation levels were low and had disproportionate levels of high-risk producers.
Page 32 PREV PAGE TOP OF DOC (2) Eliminate CAT covers if necessary to provide adequate funding levels for more vital products. Because the rate of Government support for crop insurance is greatest for CAP and follows automatically for higher levels of coverage, we suggest eliminating CAT and using the resources invested in it to supplement producer cost and buy other coverage. At its current level CAT coverage is not an adequate safety net, and it receives the greatest level of Government support. By eliminating CAT and putting the money in the 50100 program it would encourage increased participation and spread actuarial risk over a larger population.
(3) Reward producers for good experience via premium discounts. In order for crop insurance to be an adequate risk management tool for farmers, participation must be increased. Currently, however, there is no incentive for low-risk producers to participate in the program. We recommend offering premium discounts for producers who demonstrate a history of participation without incurring insurable losses. These incentives would not only encourage participation, but would discourage fraud. Incentives should be graduated so that the more years a producer has without a claim the greater the premium discount.
(4) Establish unit coverage designation of less than a whole farm.
(5) Insure cost of production. The USDA should encourage private companies to develop new revenue insurance products that would insure production cost coverage even when prices are low. This should also encourage increased participation by making crop insurance available to crops for which policies have not previously been available.
(6) Do not penalize producers for disasters. This goes back to the APH yields. When calculating the APH drop disaster yields and replace with a 10-year average that includes the disaster years to get a modified APH. Additional emphasis should be placed on oversight by risk management and private companies to prevent fraud. We realize this could encourage fraud if you are not penalized for a low yield, and we know we have to look out for that.
Page 33 PREV PAGE TOP OF DOC (7) We need to develop a program to insure livestock and other crops for which insurance is currently unavailable. Whole farm policies and other revenue insurance products could be used to offer coverage for noninsured crops. This will increase participation and reduce dependence on ad hoc programs, the livestock emergency feed program, and the noninsurance assistance program which is not an adequate safety net.
(8) We need a better preventive planning coverage for cotton at levels equivalent to those of other commodities.
(9) We need to establish replant provisions for cotton consistent with other commodities.
(10) Provide incentives for new product development by private companies. Private companies did not receive compensation for developing new programs. Products developed by private companies were shared with competing companies, thus creating a disincentive for new product development. Additional incentives may be necessary to promote development of crop insurance products for specialty crops, livestock, and whole farm coverage.
(11) Better quality adjustment provisions. We realize, I hope you realize that sometimes quality shortfalls and causes just as much as a yield loss.
And last, 12, is encourage producer education regarding available risk management tools. The Government, private companies, and farm organizations such as ours should work together to ensure farmers understand crop insurance and other risk management tools, and to be prepared to make informed management decisions.
I want to thank you again for your time.
Mr. EWING. Thank you very much. If you have your comments in writing, we would be glad to have those also.
Over here, this gentleman in the front. You got passed up the last time.
Mr. LAMONT. I am Richard Lamont from Moultrie. I will try to be real brief, and try to be real down to earth about what I think. I have called Saxby's office several times and talked to him about it, this risk management and crop insurance.
Page 34 PREV PAGE TOP OF DOC Congressman Bishop mentioned the fact that we need quality adjustments. None of us in southwest Georgia or anywhere else in Georgia or Florida asked Hurricane Georges to come through, and we have recovered pretty well in the cotton, and I am going to talk about cotton, gentlemen, ladies and gentlemen, because that is what I know about.
We need quality adjustments, because a lot of us had grades that were at the base loan rate, and the base loan rate at 52 centsI will talk about that in just a secondbut we had that, and then we had 52s after Hurricane Georges came through. So we needed those quality adjustments, because it cost us $30 and $40 a bale, and therefore that was one of the reasons they could not pay the bank.
Now, I am not a farmer. I used to be, but I am in the gin business now, I am definitely part of this. And I want to talk about quality discounts again, and I want to talk about premiums versus coverage.
I asked my insurance agent not too long ago about what can I insure a combustible building in the county for, a $500,000 combustible building. He said the premium would cost me $7,000. And then I said, well, let me tell you what 1,000 acres of cotton under irrigation will cost, it is about a $500,000 investment, maybe a little bit more actually, but the premium at 65 percent coverage is $22 an acre or $22,000. So I have got a $7,000 premium for a $500,000 combustible building sitting in the county versus the $22,000 for 1,000 acres of cotton under water, under pivot.
If we had Hurricane Georges come through, which we did, and it takes that cotton crop down to 300 pounds from 900 pounds, then what we have is you have got a 65 percent coverage. What I want to suggest is, what I want to say is why do we have a 65 percent coverage for a $500,000 investment with a premium of $22,000. We need an 80 percent coverage, or maybe even a 90 percent coverage for that crop at a lower cost, which you all have helped out with a 30 percent discount. So I wanted to try to be real simple about it and say that the farmer cannot afford to pay the high premium to get a 65 percent coverage. He needs an 80 to 85 percent coverage to get that cost of production back.
Page 35 PREV PAGE TOP OF DOC And then the other thing I wanted to talk about, because this Federal crop insurance is tied a lot of times to what we receive in revenue, to the base loan rate, I am in favor of raising the base loan rate 20 percent on every commodity grown. And what we ought to do is that will help with our Federal crop insurance to be tied together because you will not have near the temptation of fraud in the Federal crop insurance program if we had low prices and if we have a disaster tied together.
I will elaborate on that later on if anybody wants to talk to me about it. I have talked to Congressman Chambliss's office about it, and I think that we have got to look at areas of Federal crop insurance that can definitely be improved. I am not in favor of scrapping the program completely, I am just saying that we need to adjust it a little bit to help these farmers out, because we all benefit from it.
Mr. EWING. Thank you very much. Let us go over to this side, not playing favorites over here.
Mr. NOBLE. Mr. Chairman, I am Johnny Noble from Dooly County. I am a cotton farmer.
I appreciate you all taking the time to come here today to listen to these problems that we have.
I have got a question I think Ken will probably need to address concerning this 20-year rolling average on this cotton. It is something kind of new to me, and I do not too much like the sound of it. I would like to hear your comments on it, and then I have got another comment I would like to make when you get through.
Mr. ACKERMAN. Thank you. I wanted to comment on the last gentleman, too, on the same point.
Crop insurance rates are based on a 20-year, we go back 20 years and we look at the actual risk experience in the county, what the actual losses have been, and then we look at our loss ratio target, and that is how the rates are determined. It is a simple mathematical formula based on actuarial soundness as the law requires. Then we take in as much money in premiums to cover what we expect to be the losses based on that 20-year average.
Page 36 PREV PAGE TOP OF DOC For cotton specifically we recognize that there has been a problem with rates, and the problem is different in different parts of the country. The experience for instance in Texas is very different than the experience in Georgia, Alabama, and North Carolina, this part of the country.
We have launched a review internally of our cotton rates based on this notion that the cotton program has changed in a lot of years, but by going back 20 years for cotton we do pick up a lot of years of very high losses and low participation. And so we are looking at those rates. We have brought in an outside actuary firm to look at our cotton rates specifically, and we have been consulting with the National Cotton Council in Memphis, TN just to help us in that process. But that is how it works.
One other pointI will be very brief and give you back the microphoneon your point about 65 percent coverage and rates and actuarial soundness, all of these issues, the debate that we always end up having internally is that if we go above 65 percent, for instance if we have gone up to 85 percent on some crops as an experiment on a pilot basis, but it is very expensive when you raise the coverage that high, and when you have these actuarial equations the rates get very high.
There are two ways to deal with that. One is you can eliminate actuarial soundness as some of you have suggested. The other way is you could put more subsidy into the program so that you invest, you put more subsidy at the buy-up level than at the CAT level to increase the incentives for buying up.
The proposals that we have put forward, we have taken the approach of keeping the actuarial framework by pumping in more subsidy to try to make the higher levels more affordable, recognizing it can go either way. Either way we will have a similar price tag, either way we will have to deal with the issue of budget offsets, but just to give you a little flavor of how we have looked at it.
Page 37 PREV PAGE TOP OF DOC Mr. CHAMBLISS. Johnny, before you make your second comment, you have raised a good point, the 20-year APHs, especially in Georgia we have been through boll weevil the eradication program, what, for the last about 13 years now, which drastically changed the way that we grow cotton. Texas and California do not have a boll weevil eradication program, and the way that yields are computed, the way we look at yields out there you have not seen the differences you are seeing here. You have seen a lower cost of production, sure, but we have really got in the process of this to reexamine the way we insure cotton in Georgia, versus the way we insure cotton in Texas, versus the way we insure cotton in Oklahoma, or California, or wherever it might be. That is the number one priority in my mind, and it is a durn good point.
And also, you know, when you have two back-to-back years like we had last year, when you throw out 1997, you throw out the highs and the lows it does not make any difference, these guys get killed anyway.
So we have got to look at that, and Ken had a good idea a while ago of maybe looking at the State average or whatever, and I think that is the type of ideas that we had hoped to generate today. Your comments are well taken.
Mr. NOBLE. My other comment is in the interest of time I have got four pages of prepared text from the National Cotton Council
Mr. CHAMBLISS. Why am I not surprised? [Laughter.]
Mr. NOBLE. I want to ask that it be submitted for the record. I am not going to stand here and read all of this. It was generated by the Cotton Council, the Southeastern Georgia Cotton Commission. And I appreciate you all coming.
[The prepared statement of the Georgia Cotton Commission appears at the conclusion of the hearing.]
Mr. EWING. Thank you. We appreciate you bringing those ideas here and submitting them for the record, and anybody is free to do that either now or after the meeting is adjourned.
Page 38 PREV PAGE TOP OF DOC Yes, sir, right here.
Mr. FLETCHER. I am Joe Fletcher, president of the Fruit and Vegetable Growers Association in Georgia, and I just spoke to the council. We thank you all for coming today, we appreciate you all's time.
The vegetable industry basically does not, you know, become involved in the crop insurance too much because it is not a feasible item to us.
I will give you one example of a grower we had last year, that he bought $2,000 worth of coverage on a crop, paid $4.70 per hundred for this coverage, which comes to $94 an acre. He had 50 percent damage in his crop, and once the adjuster came by and checked it he barely covered his premium on the crop. So it did not do him a whole lot of good to carry the coverage if it would not even cover his premium. So this is one thing on the vegetable side we would like for you all to take a look at.
Also we have broughtwe have talked about it some in our meetings and all, and maybe if we could go to something like the pilot programs that they are starting to have in Florida and all, basing it on total revenue, or your Schedule F off of your tax return, that might be some area they can work with. Most of these vegetable producers create quite a bit of income, you know, their income is quite heavy. Most of them are large, very large. And what we would like for you just to see that if some way you could tie it to that, because they have such exposure out there with the weather and all that maybe we could have some help some sort of way in that vein.
But also the fruit growers, they have had some mighty big hits in the last several years in the peach area, and hopefully some of them will speak to you on that, but that is one of the areas that we feel like there might be some help coming.
Mr. EWING. Thank you. Over here.
Page 39 PREV PAGE TOP OF DOC Mr. GILLESPIE. Gentlemen, my name is Jim Gillespie, I am from Rabun County, a north Georgia cabbage farmer.
To you, Mr. Ackerman, I would personally like to thank you, for after 4 years of meI am the farmer in the mountains that called you for 4 years about cabbage insurance. Thank you very much for that policy. [Laughter.]
Mr. Irvin, and honored guests, and the gentlemen right here: Thank you for supporting the farmers here.
Mr. Ackerman, my question to you again concerning our vegetable growers, it is I think everybody's problem regardless of if it is vegetables, or if it is cotton, corn, or soybeans, or what have you right here, it is geared to our yields. And this is going to be repetitious of what you have heard before, but can we, and how long will it take, can we drop these disaster years that are averaged in this 5-year process, can we drop them immediately, or how long is it going to take us to get to the process where our 5-year average is the same if we use T-yields. Even Rabun County, as small as it is, it will affect the yield on a statewide basis. We are a major producing area for cabbage.
Can we speed this process up? Because all of our programs, regardless if they are recovery programs or loss disaster, are geared to these 5-year averages. NAS is the same thing right here, they all reflect the disasters that we have all faced and gone through. They also reflect the prices that we are receiving from them.
Can that be done? And I am not trying to put you on the spot again, but can we do it, and how long will it take to get this process in motion?
Mr. ACKERMAN. That is quite all right. I have been put on the spot on this particular issue in forums all over the country, and I can tell you this question of averages, of APH, and dropping the disaster yield, this is something that is being raised everywhere.
Page 40 PREV PAGE TOP OF DOC The issue that was raised for instance last year in the Dakotas was they had multiple years of loss, their APHs were going down as a result, their rates were drifting upwards. As those of you who have been in crop insurance know, as your APH goes down you fall into a different R stand on your rates, and it affects your rates over time.
Yes, that can be done. Can it be done immediately? No. And the reason is this: We are subject to a couple of different laws. One of them is the Administrative Procedures Act which requires that we go through notice and comment rulemaking.
The second is actuarial soundness. We have been looking atand as Mr. Ewing said, when I say no I am simply telling you the law as it is. We have put forward legislation this year on both our recommendations and what I think you are hearing from your group, and probably from many members of Congress to try to address this.
We recognize that one of the basic elements of any piece of legislation that goes forward this year will have to deal with this problem of APHs, and what you do when you have multiple years of loss.
Again, there are a couple of ways to approach it. You can provide a special coverage for multiple-year losses, you can provide something like the 3- out of 5-year disaster program that has been put into effect for this year. You can make a national change in the APH system. Any one of those ways will get you to a similar bottom line. But whichever way you do it, it is going to require a certain forging of a national consensus to do it, because it is going to affect every State in the country and will affect the overall financing of the program.
So the answer is yes, but it will take some work.
Mr. EWING. Thank you.
Mr. WELLS. My name is Brian Wells, I am from Bainbridge, GA, a cotton and peanut grower. I also manage a cotton gin operation and warehouse operation.
Page 41 PREV PAGE TOP OF DOC I want to talk to you about the yields. In 1998 I decided to grow cotton April 1. I could not sign up for Federal crop insurance because the deadline was February 28. I thought that was really unfair because the dates for planting are April to June.
This year I decided to sign up for crop insurance, but our T-yields have been reduced by over 300 pounds per acre on cotton. That really concerns me.
It has not been feasible to really take crop insurance in our area, a predominately irrigated county. And management decisions have turned our thoughts to look at crop insurance and where it would put us on the risk management side.
Financial institutions are looking strongly at all producers having crop insurance. As of right now, February 16, and probably only one-third of our producers in our county have received operating loans for 1999, and a lot of them due to the fact of where the crop insurance program is going to be.
I do not think it should be scrapped, I think it works, but if we can adjust the yields and the rates that we are paying on, I think the crop insurance program will work.
Also I think it needs to be left in the hands of the agents, and not put back in USDA's hands. They tried that one time before, and it did not work.
The people that are implementing it now out in the field in our area are doing a good job, but we just need to have some realistic yields. And for a new grower, 585 pounds to an acre guarantee on irrigated cotton is not realistic.
Since the USDA adopted the program the county yield has been 901 pounds, probably the highest one in the state. If we can use a county yield for program payments, and it is pretty realistic to our county, then why cannot we adopt it and adopt it soon to use for 1999 and the year 2000 to get crop insurance on our crops at a realistic yield.
And one other, I have a question. I know you wanted to keep it on crop insurance, but step 2 money is out. Is Congress going to be able to go back to the table and ask for more step 2 money to finish out this program?
Page 42 PREV PAGE TOP OF DOC Mr. CHAMBLISS. The answer to that last question is we do not know right now. To totally fix that problem it is going to take about a million dollars. We have figured out a way to come up with $600,000excuse meabout a billion dollars, and we have figured out where we can get about $600 million. Three or four zeros does not make any difference. [Laughter.]
But the problem with it is that we have got our budget constraints, and we have to offset these programs when we increase, put some more money into a program to increase it like step 2, then we have got to find somewhere within that program to take that money.
Where we are going to get it now is from step 1, because we are not using all that money there, but we have got to try to figure out a way to come up with some more money there to fix step 2 permanently. That is our goal. Whether we are going to be able to do it this year or not, I do not know.
Mr. WATSON. I am Jerry Watson, a peach grower from South Carolina. I have got a question for Mr. Ackerman.
I would like to ask how they came up with the dates of signing, like most of them have to March 15. Our area is February 28. How do they come up with that, and what is the reason behind it?
Mr. ACKERMAN. The sign-up dates for the spring, March 15 and February 28 and you are not going to like this answer, but it is the answerthey are frozen in the statute. They existed, they were 30 days later on the calendar up through 1994. At that point they were moved forward 30 days as one of the budget-balancing steps in putting together the 1994 statue. There was a budget score attached to it.
At this point generally the spring sales dates are set at either March 15 or February 28. They vary for specific crops, and for some states that are very large, Texas and California, there are a few dates that are January and February.
Page 43 PREV PAGE TOP OF DOC Generally where they come from, the logic behind them, these dates are based on when planting begins. The idea is to have the date far enough ahead of planting time so that when you buy your policy at that point you do not have a sense yet whether it is going to be a good year or a bad year or how the crop is going to go. That is the way it is set up.
Mr. EWING. Ken, was that date a political date more than a date that is based on production?
Mr. ACKERMAN. No, it was not really a political issue. The dates were set that way in order to put them ahead of the planting season in order to improve the underwriting of the program.
There had been a study done in 1992 or 1993 by the General Accounting Office that suggested that if the dates were moved forward by 30 days that would result in savings of I believe it was $10 or $20 million per year, and that was the basis for the decision to move them forward.
Mr. BISHOP. That was a budget decision, and not necessarily a weather decision.
Mr. ACKERMAN. Right. It was primarily a budget decision that was made to move them forward based on the analysis that the General Accounting did of how farmers might perceive the weather.
Mr. BISHOP. So that means that no consideration was given to El Nino and the changes in climatology that we have been experiencing, but it also means that it is something we can do legislatively.
Mr. ACKERMAN. Yes, it is something that could be done legislatively. Also, as I said, it was based on one study that was done by the General Accounting Office in the early 1990's. Now that these dates have been in place for 4 or 5 years, I do not know that anyone, not the General Accounting Office, not any of the academics around the country have really looked at whether it in fact saved any money or not.
Page 44 PREV PAGE TOP OF DOC Mr. WATSON. Thank you. In our case it is peaches, and it would make a good bit of difference on the decision at that time.
Mr. CONDON. I am Ronnie Condon, I am an insurance agent from Vienna, GA, also a farmer.
What I would like to ask is this emergency relief money that has been allocated right now that all of the producers are signing up for, have you all made a decision on how you are going to pay off on it? Are you going to count everything as one unit, or are you going to let these units be separated?
Mr. ACKERMAN. On the disaster program that is being implemented right now there are two different thoughts, and they are handled a little bit differently. If you qualify under T multi-year loss part of itin other words, if you have had losses in 3 out of the last 5 years and that is the higher part, the way that is done is we simply look at what your crop insurance indemnities have been for the last 3 years, whether you have one unit, whether you have multiple units, whatever it was, and use that as the raw number against which everything is calculated.
If you apply under the single-year loss provision, I believe it is done by farm serial number, and it is based on that system. It is not based on crop insurance units.
There will be some adjustment because on all of these payments we have to compare the two together to see which is higher. There will be some adjustment on units.
Mr. CONDON. So you are saying that if you had an irrigated practice and you also had a non-irrigated practice, you are going to commingle those for the production?
Mr. ACKERMAN. For the single-year loss?
Mr. CONDON. Yes.
Mr. ACKERMAN. I believe it is based on farm serial number. That is the traditional way that ad hoc programs have worked, and that is the way this one is set up.
Page 45 PREV PAGE TOP OF DOC Mr. CONDON. Well, that will penalize every producer that has irrigation, has put in just thousands of dollars to try to increase their yields, and now they will not get anything out of this disaster relief stuff.
I first said when this come out, this $2.375 billion I thought that would be one tenth of what we would need across the nation, but if it is working under these terms I believe you will have a reserve.
Mr. ACKERMAN. This I can tell you has been a very difficult program to work with, and in a way it is showingthere was some discussion before about how ad hoc disaster programs work compared with crop insurance. The single-year loss is designed with a lot of features of an ad hoc disaster program, payment yields and so on.
Mr. EWING. Ken, do you know when we are going to have the rules come down on this? They have not come down is my understanding.
Mr. ACKERMAN. The final regulations have not yet been put in the Federal Register, that is right.
Mr. CONDON. Do you not take a vote this week on that? Is there a vote this week?
Mr. EWING. No, there is no vote this week, and I do not know that there is any vote scheduled on that. That is an administrative thing I would imagine.
Mr. CONDON. I understood that would come up some time in the near future, there would be a decision made on it.
Mr. ACKERMAN. It may be that there is an internal decision that is going to be made on it, but Mr. Ewing is right, that is done through the administrative process. The regulations will be issued by USDA, and there mayI have been on the road for the last couple of days, so I may be behind on this stuff, you may know something that I do not.
But the rules are being finalized, they should be published soon. What you may have heard is some internal meeting that is going to take place on that issue.
Page 46 PREV PAGE TOP OF DOC Mr. BISHOP. Can I just ask a question about how to fix it? It seems to me that we are penalizing producers who irrigate, and particularly if they irrigate in disasters and they have some dry land, and when you commingle like that it puts them at a great disadvantage.
Is there not a way that we can as we restructure this program take that into account so that they will not be penalized, so that there will be incentives to irrigate rather than disincentives to irrigate?
Mr. ACKERMAN. Within the crop insurance program we can divide out units. The problem has come up within the emergency single-year program, and that is an administrative process. The rules have not been finalized yet. I imagine there is still an opportunity to for input.
Mr. BISHOP. But it is absolutely counterproductive for us to want producers to do the best that they can, and invest to try to reduce their losses, and then penalize them in the end because they did that, they put in the extra funds.
We ought to be able to develop something in this crop insurance package that will give them some reward for their diligence.
Mr. CHAMBLISS. Ken, Hansen may be able to answer this. My understanding from Keith Kelly was that those rules came down last Thursday, and that the sign-up date endsis it the end of February, February the 26 maybe?
VOICE. March 15.
Mr. CHAMBLISS. March 15, and that they anticipated that all payments were going to be made by the first of May, so I mean that is kind of the schedule that they are looking at.
I hear what you are saying. All payments may have already been made, there may not be any more forthcoming.
Page 47 PREV PAGE TOP OF DOC And, yeah, that is the problem, Ken, that we have got in our part of the world where these folks have one farm serial number, and they have got irrigated peanuts and non-irrigated peanuts, they make just enough when you combine them with good yields on the irrigated peanuts that they wind up getting nothing, and that is a real problem for us, and unique to us, and separates us from most parts of the country, and it is one reason we have got to devise a crop insurance program that treats farmers in different parts of the country differently from a coverage as well as a premium standpoint.
Mr. ACKERMAN. I hear your point, and it is a good one. We set up these programs a lot of times on a national basis, and we find that they do not necessarily apply that well in special situations for different crops, and I understand for some crops in this part of the country that that may be the case.
Mr. EWING. Yes, sir.
Mr. CARTER. Congressman, March 12 was the original date to sign up, but I understand that now the rules have to be published, and the regs published before you can even end the sign-up, so we are probably looking at towards the end of March I imagine on the sign-up.
Mr. EWING. Over here.
Mr. RABUN. I am William Rabun, and I am from Jefferson County. Mostly we grow, cotton, corn, and peanuts, and soybeans and wheat.
My questionin our area we do a lot of double-cropping, and on the insurance we did not have anything, we did not know this year that we that we would not get anything on preventive planning, because of one thing that was in the program, and I did not know it was in there, was a farmer drought severity index.
Folks, it got so dry up in our area you could not plant soybeans, so we are going to get knocked out of the insurance coverage, plus the disaster coverage if they do not let those acres count.
Page 48 PREV PAGE TOP OF DOC Mr. EWING. Who is next?
Mr. WHITE. I am Arthur White, Jr., I am a has-been farmer. I farmed for 40 years in the north end of Houston County.
Back in the 1970's I do not guess there is anybody in this room worked any harder than I did to get workable crop insurance for the farmers.
I made four trips to Washington testifying before House and Senate Agriculture Committees. Also I went to Kansas City twice to talk with the people that supposedly were drawing up this crop insurance deal. And I want you to know from what I have heardI just walked infrom what I have heard here today they have all got legitimate questions.
Now, I had to quit farming, and I farmed for 40 years. These trips that I made, I paid for them out of my own pocket to go up there. And I do not know whereafter 1984 I quit keeping up with it, I was disgusted with itI do not know how many changes have been made since 1984 in the crop insurance, whether any have, but the Federal crop insurance, if it is a bill that is written for the farmersand I say farmers, I do not mean the people in Washington, I have been tied up with those guys in the pastthen it is the best thing that could ever happen for the farmers in the United States.
The gentleman right over here while ago somewhere mentioned different areas. Well, I got in that billI do not know whether it is still in there or notthat there had to be at least five directors, and three of them are located through different geographical areas of the United States. I think that is still in there, I do not know, you may have cut it out.
But if you will put some farmers on therenow, the one that was from our area was from Mississippi. There is quite a bit of difference between Georgia and Mississippi.
Now, I know what crop insurance can do. It can help you with the bank, it can help you with selling your crops, and all those kind of things. But if you are just going up there and just mess with it a little bit there is no need for you to reconstruct it.
Page 49 PREV PAGE TOP OF DOC As I said, I am a has-been. These other guys around here may say ''You are nuts, it needs to restructuring,'' and I agree it needs restructuring, but when I helped write that bill, when it came out the other end I would not have recognized it being a farm bill if it had not seen it it was so screwed up.
So I just want you to know I have worked on crop insurance, and I just want to put those few statements in there. I appreciate you guys coming down.
Mr. EWING. Thank you very much.
We have time for a few more. We are trying to finish up by quarter after so we can go on to our next one. This gentleman here in front.
Mr. WAYNE. My name is Duke Wayne, I am a peach and pecan grower from Fort Valley, GA.
As I look around the room I see other pecan growers, and I wanted Mr. Ackerman to comment on the pilot program for pecans. I understand there is three counties in the State of Georgia that are involved.
Mr. ACKERMAN. I understand it is going pretty well. If you will give me a minute to look over papers I can tell you exactly how many people are in it. The sales have been
Mr. EWING. Ken, why do we notif there is another question and you find your material, then we will come right back to you and we will answer the gentleman's question.
Mr. ACKERMAN. Let us do that.
Mr. EWING. Anyone else?
Mr. OLIVER. My name is Hugh Oliver, I am from Glennville, GA.
I was just going comment with respect to the gentleman's comments about what happened 40 years ago. Forty years ago there was a much bigger percentage of farmers in the United States as a percentage of the total electorate, and that is a limitation you gentlemen are laboring under, and we respect it.
Page 50 PREV PAGE TOP OF DOC Mr. EWING. Thank you. The gentleman on the end.
Mr. TRIPP. Just a point of information. I am Jim Tripp from Dodge County, family farm. I have got a lot of neighbors around, and we are talking about irrigation, irrigation. Even those irrigated farmers, and Mac Harrington can tell you, and that smart man Ronnie Condon, in 1995 we irrigated cotton, and we irrigated cotton. In 1998 we irrigated cotton, and we irrigated cotton. We still lost money.
We need to look at a way that even though we have got center pivots, and wells and ponds we can insure those irrigated acres for revenue, how much we spend on that irrigated cotton, we still can have some form of coverage for that, because in 1998 when you figure in your electricity, your diesel fuel, your labor, even if we made 1,150 pounds at 70 cents we did not make any money, and that is something just a point of information for us to look into.
Mr. BISHOP. Would not the cost of production, if we incorporated that as a factor, the cost of production, would not that help solve the problem?
Mr. TRIPP. Yes, I think so.
Mr. EWING. Are you ready to answer the question, Ken?
Mr. ACKERMAN. On the pecan pilot program that is in effect now in the State of Georgia, I can tell you that for crop year 1998 we have almost 20,000 acres of pecans signed up for it, so for a pilot program it seems to have gotten off pretty well.
We have liability of $350,000, 82 active policies, and we actually paid out this year not quite $350,000. So the program is out there, we have gotten some good participation in it, and it looks like it is one that will be able to graduate into a permanent program pretty soon.
Mr. CHAMBLISS. That is 72 growers.
Mr. ACKERMAN. Generally we run these for 2 to 3 years, and then they graduate. That is right, pecans are a little bit different, because it is a 2-year cycle on the actual trees. I can get back with you on that in answer to that question, but generally the program seems to be working well. There is no danger sign, there is no reason that is visible why we would not graduate it when it gets to the right time.
Page 51 PREV PAGE TOP OF DOC Mr. BISHOP. How long will that time be, though?
Mr. ACKERMAN. I would have to check, but generally these run about 2 to 3 years, and then we graduate them into a permanent program.
Mr. BISHOP. It has already been 2 years; right?
Mr. ACKERMAN. I believe that is right.
Mr. EWING. Over there.
Mr. THOMPSON. I am Roger Thompson from Pulaski County, Logansville that is.
The bottom line talking about crop insurance, it should take care of your expenditures that you have put into a crop, and thatI mean when you have got that you can operate. If you have got half enough, that just will not get it.
And we have had some economists to come in our area to help us to look at the farmers' situation as it isand I saw my county agent sitting over thereand they tell us with the problems that we are facing that we cannot make no money, and that is the name of the game making a little money.
Mr. CHAMBLISS. And they have been right, too, have they not? [Laughter.]
Mr. THOMPSON. But we need some prices to go along with this. It is one of the main things we have got to have. Thank you.
Mr. Ewing. Thank you very much. The lady here.
Ms. MCKINLEY. My name is Alicia McKinley, I am a crop insurance agent also, and I would like to direct my question to Mr. Ackerman also on the pecan pilot program.
Since pecans are an alternating crop, do you feel like that will be a 4-year pilot, or do you think it might be just a 3-year pilot?
Page 52 PREV PAGE TOP OF DOC Mr. ACKERMAN. Generally we do these in 2-year cycles. To be very honest with you, I would want to check on this. We set it up I believe as a 2-year pilot program on a 2-year cycle, but I do not want to give the wrong answer at this point. I would want to check on that specifically.
The one thing I can tell you, though, is that the pilot is running smoothly, there are no visible problems that have come up, and there is no reason why it would not go through the normal process and then we graduate it.
Ms. MCKINLEY. OK. The second question that I have is in regards to cotton quality adjustment. It is my understanding that that is being worked on, but that it failed to pass this year. It was addressed. Is that something that is done within your department, or is that something that has a legal twist to it? Because I know that my husband has a cotton gin, we face this problem along with all the others in the room. It is my understanding that cotton is adjusted to grade 4134. Texas cannot grow a 4134, yet they quality adjust all of their cotton to the grade that we grow.
You will never get people to agree to change quality adjustment when you have people on the west side of the Nation that collect on it regularly, and south Georgia can never collect on it.
Can we change that to a regional grade by going to our local classing offices to establish a regional grade, and put cotton quality adjustment to regions?
Mr. ACKERMAN. I would like to take that idea back and see if we cannot do that. I can tell you the point you are raising, the difference in how cotton works generally as a crop between Texas, the Texas region versus the Georgia/North Carolina/Alabama region is very marked, and it has been at the center of a lot of discussion about rates, quality adjustment, and others.
Your point about a quality adjustment being addressed this year and not passing, and how that worked, that was something within the Risk Management Agency, within my department, and basically what happened was that we put out a proposed regulation through the Federal Register process that contained a number of piecesan increase on preventive planting coverage for cotton, a piece on quality adjustment, a provision on replanting, and a few others.
Page 53 PREV PAGE TOP OF DOC When we got to the end of the year through the comment period the major comment that we got from the cotton organizations, the National Cotton Council and others, was that since most of these steps required rate adjustments, rate increases because of the cost involved, the actuarial soundness. The feedback we got was until we had done the review of rates that there was not a lot of sympathy to make changes in the policy that would cost money. That was the feedback we got at the end of the year last year, and that is why we are working now on an outside review of the cotton rates.
Once that is worked out, we have had a number of meetings with cotton adjusters, we have done a number of visits to cotton classing plants to see how this works.
We think we can resolve the other issue very quickly once the rate issue is resolved.
Mr. EWING. We have time for one more gentleman over here.
Mr. MALONE. My name is James Malone from Laurens County, I am a peanut and cotton farmer.
First off I would like to thank you all for the 30 percent premium reduction.
Let me give you a little example how a good program leaves Washington and goes back home and it is not a very good program. I have my insurance agent with me today, and I was shocked about 2 weeks ago. I told him to work up my premium on my cotton. Well, I was in a drought area, I had about 1,300 acres of cotton last year. My premium is identical within a nickel from last year's premium. My coverage went down 40 pounds because of what we have been talking about all day. My coverage went down, the price I was protected at went from 69 to 66 cents, and I am paying the same premium.
My second point is I think you all understand the problem, you need to take it back to Washington, tell the people, tell your colleagues we have got to do one of two things, we have got to increase the cost that the Government will put into this program to have a sound program, or we are not going to have an insurance program, we are not going to have the United States farmers, and we are going to be dependent on other countries for our food supply. That is the bottom line.
Page 54 PREV PAGE TOP OF DOC Thank you.
Mr. EWING. Thank you very much.
We are going on for another meeting, and what I would encourage anybodyI hope I got to all of them, I see a couple of hands going up here, it is kind of latewe will take your written comments, your telephone calls, or whatever you want to do to have your input into this issue.
I think we have had very good comments here today. We repeated some of them more than once, but I think that kind of shows when it is repeated that there is more than one person out there who believes that is a problem, and that is exactly what we are out here today to hear what your problems are, and to have your input.
I thank you for coming and spending the afternoon with us, and if either Sanford or Saxby want to add a word, you may add it. My appreciation for your participation. Thank you.
If you want to follow us over to Douglas, you will have a second chance.
Mr. CHAMBLISS. Mr. Chairman, I just want to make a couple of comments. First of all, I too appreciate you folks coming out. We have not solved your problems today, but that is not what we were here for, but I think Tom is exactly right, we have heard you, and we have heard certain problems mentioned over and over again, and those are the ones that we are going to try to address the quickest.
There is one thing that I cannot be here and say because it has been alluded to a couple of different times, and it really does not have anything to do with what we are talking about today, but it is the issue of trade.
I have been very outspoken, and I have talked, and most of you in this room have heard me say this, and I think the future of agriculture in this country is our export business. There is only so much money we can make off of domestic consumption, and we have pretty well saturated the domestic market.
Page 55 PREV PAGE TOP OF DOC We have got to drop the barriers in foreign countries to allow peaches to be shipped out, and to allow our other food products to be shipped into countries where they are not going right now, and we have got toand pecans is another one where we are not able to ship into Mexico and certain other countries, and there is just absolutely no excuse in it.
I was not there when these trade agreements came in, and those that were it is immaterial that we stand up now and try to criticize those. We have got them, and we are not going to get rid of them.
What we have got to do is we have got to try to do a better job of negotiating agreements within NAFTA, within GATT, and if we get fast-tracked to ensure that agriculture's voice is heard.
The current administration is not totally to blame for the fact that we have not negotiated good agricultural agreements. This has been going on for years. Very honestly, previous administrations were just like the current one.
Agriculture has not had a high priority when it came to negotiating trade agreements, and there is really no excuse for it, and we have finally gotten the attention of some folks in this administration with respect to agriculture. They have hired some people in the U.S. Trade Office that understand agriculture. One of them is from South Carolina, she went to the University of Georgia. She decided to get an education. [Laughter.]
It is folks like that that know and understand agriculture that are involved in UST right now, and are going to be able to help us long term.
And there is one other critical problem that we have got out there that is affecting every single one of you, and it is the international financial crisis that we are in right now, and I will just tell you we can legislate all we want to in this country and we cannot solve that problem.
I am not a big supporter of sending our tax dollars into places like the IMF to loan money to countries, but when it comes to tying strings on that money to the purchase of agricultural products I am willing to do that, because in the long run it has got to benefit you folks.
Page 56 PREV PAGE TOP OF DOC That is an area that you are going to hear more of us talking about over the next several months and several years, because we have simply got to concentrate further on exporting, or being allowed to export what are unquestionably the highest quality agriculture food products of anybody in the world.
Cotton for example has benefitted from NAFTA. Mexico is our largest purchaser of U.S. cotton. But there are other problems within NAFTA that are killing us.
As a lot of you know, my son-in-law is a produce grower, and his number one competitor is Mexico. And there is just something about that that is not right, and the playing field is just so unlevel is what it is, but by negotiating better trade agreements every single one of you is going to be better off.
We have got to concentrate on crop insurance in the short run and the long run, but this issue of trade in the long run is going to be what saves agriculture for our children and grandchildren.
Mr. BISHOP. Could I dovetail on what Saxby just said about that?
Saxby and I both come from conservative areas in south Georgia, and people, and particularly farmers to a large extend do not feel real good about sending our money abroad and investing in foreign economies.
But when you look at who we have to sell our products to, and when you start participating in the world market, if we have a market on the other side of the world that can purchase our products because they are able to borrow money from the International Monetary Fund and buy our cotton, or buy our grain, then that helps our farmers here and we can expand our markets.
So I hope that we can begin to expand our thoughts in terms of how we use our money to leverage new markets so that we can expand our opportunities, and therefore the prosperity for American farmers.
Page 57 PREV PAGE TOP OF DOC Mr. EWING. Thank you, Sanford, and thank you, Saxby.
A couple of comments were made earlier about trade and trade agreements, and I did not get into that because I know there are different feelings around this country, and one of the experiences that I have had that I appreciate so much is seeing the diversity of American agriculture. We have so much to be proud of, and it is so diverse.
And I will just tell you ladies and gentlemen if you came from central Illinois you are for trade. I can get a room full of farmers that really get excited about this trade agreement, so it does differ depending on your crops, and depending on where you are coming from.
And it does not make our job one bit easier because of the diversity, but it is one of the great strengths of America, and we just have to keep working to make it work for all of us.
Thank you all for coming, and we are adjourned.
[Whereupon, at 3:23 p.m. the subcommittee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
"The Official Committee record contains additional material here."
REVIEW OF THE FEDERAL CROP INSURANCE PROGRAM
TUESDAY, FEBRUARY 16, 1999
House of Representatives,
Subcommittee on Risk Management,
Research, and Specialty Crops,
Committee on Agriculture,
Page 58 PREV PAGE TOP OF DOCDouglas, GA.
The subcommittee met, pursuant to call, at 5:10 p.m., in the South Georgia College, Douglas, GA, Hon. Thomas W. Ewing (chairman of the subcommittee) presiding.
Present: Representatives Chambliss and Bishop.
OPENING STATEMENT OF HON. SAXBY CHAMBLISS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA
Mr. CHAMBLISS. Let me welcome all of you to our second field hearing of the day with regard to crop insurance, and I want to thank Dr. Ed Jackson.
Ed, thanks very much for you folks here at South Georgia College hosting us today. We appreciate it very much. They were very easy folks to work with and provided us a great facility here.
You know, we in south Georgia have had a terrific farm problem over the last couple of years, and one thing that we have certainly realized out of this is that the current crop insurance program that we have in place does not work. And the purpose in our field hearings today is to listen to you producers and bankers and everybody else involved in the crop insurance issue, not to solve all the problems today, but find out what the problems are and take these problems back to Washington as we move towards a true reform of the current crop insurance program.
I am very pleased today to have a number of very special people here, and I want to take a minute just to recognize a couple of folks.
First of all, one of the gentlemen who has been integrally involved with all of us in Washington with respect to what we are doing on the Federal level, and at the same time, he is very integrally involved with each of you because he is the dean of the College of Agriculture at the University of Georgia, and that is Dr. Gale Buchanan. Gale, we are pleased to have you today.
Page 59 PREV PAGE TOP OF DOC We have Ken Ackerman with us today who is going to be answering a lot of questions because the three Members of Congress up here do not know the answers, but we brought an expert with us. Ken heads up the Risk Management section at the U.S. Department of Agriculture, and I want to tell you, he has been under fire with respect to the crop insurance program off and on here for the last couple of years, but he does not back away from it. He is always ready to come forward and help us solve the problems, and that is the purpose in Ken being here today. He has been very gracious to come down and be with us at both hearings, and Ken, if you will stand up where they will recognize you. Thank you.
I have got any number of members of my staff here. I think most of you all know them, Debbie Cannon, and Christy Cromley, and Steve Meeks, and Marcey Simpson, and Eric Betts. We also have from Senator Coverdell's office, Jody Redding. From Senator Cleland's office, Tom Williams, and I probably have left somebody out, but my chief of staff went off with my notebook when he left Perry, and he is headed to Atlanta with it right now. I do see one other one, Sheila Wood from Jack Kingston's office is with us.
I am very pleased to have my subcommittee chairman as well as my good, personal friend, Tom Ewing down here. Tom, is the chairman of the Subcommittee on Risk Management, Research, and Specialty Crops. That includes tobacco and peanuts and all of the insurance questions. Tom has been very much a friend to every one of you. Tom was very active during the farm bill debate in 1995 and 1996 and was very instrumental in helping us craft a peanut program that continues to be viable and while it is not exactly what we wanted, in the end, let me tell you, were it not for folks like Tom Ewing we would not have the program that we have got today. Tom comes from the State of Illinois. He comes from ag country in Illinois, and the best thing about Tom from your perspective is that he is a farmer. He grows corn and soybeans, but he has come to love peanuts, tobacco, cotton, produce, and blueberries, Donnie, and everything we grow down here. And he has a great appreciation for the fact that we are a lot more diversified than what they are.
Page 60 PREV PAGE TOP OF DOC Tom is in his fourth term in the U.S. House. He is just a prince of a fellow in addition to being a very knowledgeable, hard working Congressman.
And Tom, I just want to again welcome you to the 8th district of Georgia, and we appreciate you being here today.
OPENING STATEMENT OF HON. THOMAS W. EWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. EWING. Thank you, Saxby, I was sorry you made your remarks so short. I was enjoying them. Back home they do not talk about me like that. [Laughter.]
Well, it is nice to be here, and I am really glad to be in Douglas today, and I do enjoy getting around and seeing the great diversity of American agriculture, and it really is something that we are very proud of, and we have our work cut out for us always, but as we have in the past, we have met crisis before, and we will meet them again as we go through the years and the months ahead.
I appreciate every one of you taking time this evening to spend a couple of hours with us to discuss crop insurance, and I am going to ask that while there are many things on your mind, we really want to kind of concentrate on crop insurance for this meeting and would hope that you will put your comments to that issue, but we are here today to listen to you. We are going to make short statements and then you are not going to hear a whole lot from the three of us at this front table because we want to know what is on your mind, and you, as a producer, I know, have some very serious problems, maybe a lot more serious than you think you have with crop insurance, but we want to know what you think about it. We want to know what is working, what is not working, what you think we can do about it to make it better.
And Saxby introduced Ken Ackerman, and he is a good man. He is here today and then sometimes he is going to get up and talk when you have a question, and he is probably going to sound like he is telling you you cannot do it, and you are going to say, well why in the world did those people come out from Washington and bring somebody with them that is just going to tell us no. Well, that is not the point. We are here to find out what you think we can do to the program. Ken tells you how it works today. That does not mean that is the way it will be when we get through with reorganization, and we hope that that will be successful and something that you will like. So do not take it out on Ken; he is just a resource person today to help us understand why we are where we are and what the rules are.
Page 61 PREV PAGE TOP OF DOC The committee has two tracks. Crop insurance, it is too late to say we are going to do much of anything with crop insurance this year, though we may pick up some ideas. We had some ideas in the first meeting that maybe can be implemented yet this year, but the long term reform of crop insurance will take a couple of years. I mean you have to have it ready well before you, the producer, want to go to the field before it can be implemented; so that is the second track. To do what we can today and then to find out what we can do to remake this program to try and be the safety net, to try and be the assistance that we need in agriculture.
Now, some of the short-term improvements that we have been talking aboutand I just kind of throw these out to kind of interest you and tweak your thought process as we get ready to hear from you.
No. 1 would be an increase in the farmer premium subsidy. What do you think of that? How would that help you? We all know that there is going to be an increase this year because of the agriculture disaster bill. Maybe we could do more.
Adjustment of the rating of policies. We have heard a lot about that earlier today. When you have had some losses and then your policy is rated differently and you feel your insurance is inadequate.
Incentives to encourage the private sector to develop a better product that might serve your needs more. We need sometimes to consider equalizing the administrative and the operating percentage subsidy for all crop insurance products.
Allocation of premium discounts to producers who have demonstrated a history of participation but have not had claims and ways to improve the enforcement of the program.
So those are some of the things we would like you to think about. We would like you to think about anything else that you have that you think would be helpful in our deliberations.
Page 62 PREV PAGE TOP OF DOC We are going to have some of the staff walk around with microphones. We would like to have you keep your question, your comment, as short as possible. Keep it on the issue of crop insurance, and we will hear from just as many people as possible. They will also hand you a white card that I do not have for you to put your name and address on after you have given your comments so that we will have that information.
And now with your cooperation, I wanted to turn to Sanford Bishop who we are very pleased to have with us today, one of your good Georgia Congressmen and a member of my subcommittee and somebody who has worked very hard on these issues and always been most helpful and cooperative with me.
OPENING STATEMENT OF HON. SANFORD D. BISHOP, JR., A REPRESENTATIVE OF CONGRESS FROM THE STATE OF GEORGIA
Mr. BISHOP. Thank you very much, Mr. Chairman. Let me thank you for agreeing to hold this field hearing of our subcommittee. I want to thank Saxby for the part that he played in persuading you to come down to south Georgia and to listen to our farmers here. We also want to thank Dean Buchanan for helping us to put this together and to come and supervise us to make sure that we did the right thing and to provide us transportation. And of course Ken Ackerman who is with USDA Risk Management and is the person who really is the expert in this area, and we are just delighted that Ken is here in south Georgia to hear firsthand from the people who are affected by the policies that USDA has with regard to risk management.
You know, after experiencing one weather-related disaster after another including last year's drought, the future of production agriculture and family farming in midland south Georgia really faces a threat of almost unprecedented proportions. It is not a sudden, overnight crisis because farmers, bankers, and communities that are dependent on production agriculture have been in a crisis mode for a while. Our farmers have faced a threatening situation that has now become even more severe.
Page 63 PREV PAGE TOP OF DOC Over the past few years, I have visited farms to meet with farmers all across the second district which as you know is adjacent and directly west of where we are today. And all over I have seen firsthand the destruction that is been wrought by the droughts and the other disasters that have struck our area. Last year, and indeed as we speak now, farmers are telling me that the crisis is so severe that the direct old style disaster payments are only a viable way for them to keep going. In light of the level of support that foreign governments provide their farmers, a south Georgia farmer cannot be blamed for feeling that way. Farmers need relief from high production cost and from low commodity prices. Last year I promised that I would carry that message back to Washington and work with my colleagues in the Congress and the administration to try to get some relief. I was pleased to join my colleagues from Georgia in a bipartisan effort to work together for this cause, and while we did not agree on all of the details, we agreed to work together to ensure that the farmers get the relief that they deserve.
Beginning last July, I began working with the administration on a farm disaster relief plan, and ultimately the $5.275 billion in direct aid and $1 billion in farm tax relief will not be enough to help every farmer recover from last year's losses and from the price collapses. However, we all know that the old style ad hoc disaster assistance is no longer politically viable over the long term, especially in a Congress that is now dominated by urban and suburban members.
Furthermore, it is time for the entire Congress to face up to the fact that in a number of respects, the 1996 Freedom to Farm Act has in the eyes of many become the freedom to fail act. There are features of the farm bill that I strongly support, but as some of us were pointing out at the time, it has some major shortcomings, and most of all, it did not address the safety net issues that most affect farm income.
The situation that I am describing is, of course, what brings us here today. I sense in Washington from all quarters a renewed willingness to comprehensively do what was left undone on the farm bill. Ideas that this subcommittee gathers from those in this room today will be invaluable to us in this year's work and the work of the 106th Congress. This is because it is you who are most familiar with the faults and the shortcomings of the current products that are offered by the Federal Government to farmers by way of risk management.
Page 64 PREV PAGE TOP OF DOC Following are some of the risk management ideas that I have gathered from other meetings with farmers in Georgia, and which I have put before Mr. Ackerman at the appropriate time, who is head of the USDA's Risk Management Agency. The chairman has mentioned some of them, but we want to consider disaster years as declared for a specific county by the Secretary of Agriculture, should be dropped from the farmers' 10-year actual production history to determine crop insurance guarantees.
Another thing is that the cotton buy-up insurance needs to include better quality adjustments so that the insurance compensates growers if they suffer a discount on account of poor quality.
Next, we need to tie the Federal crop insurance to cost of production. And finally, changing the underlying allowable loss ratio for FCIC which is currently $1.06 for every dollar premium.
There are other ideas that you have that will be very, very valuable to us and be constructive as we try to really look at how we can reform and repair the safety net that has been torn and that places so many family farms in peril.
With that, Mr. Chairman, I turn it back over to you, and we look forward to hearing from the people who have gathered here who have firsthand knowledge of what needs to be done.
Mr. EWING. We want to have the bravest soul in the room get up first and start it off, and they will bring a mic to you. I can tell you if this is like the last meeting, once we got it opened up, we had plenty of speakers. So who wants to be first?
There, we have got a brave soul in the back. If you would stand up and give us your name and maybe you can tell us if you are a farmer or what your business is.
Mr. CARVER. Good evening. My name is Stan Carver. I am glad to see you all here today. I work with Farm Credit, and I farm just a little bit on the side, but I wondered if you had ever considered making crop insurance tract specific instead of whole farm specific?
Page 65 PREV PAGE TOP OF DOC Mr. EWING. Make it what?
Mr. CARVER. Make the crop insurance tract specific instead of whole farm specific. A typical farm might have 10 tracts and 2 of them might be a complete loss, but it still would not kick in enough overall for the insurance to pay.
Mr. EWING. Ken, do you have an answer? I know some policies that I am aware of, you have to have a county average, and some policies are farm specific, but we will get the true answer here, what has been considered in the past.
Mr. ACKERMAN. What we have done is, crop insurance is offered for units that can be broken down from a whole farm to subdivisions. Generally, for units we require some kind of physical separation in the different parts of the farm and separate recordkeeping of the different parts. I believe there are some situations where you can go down to as far as a tract, but it is something that you might want to talk to an insurance agent on the specifics. There are sometimes when you can break it down.
Mr. CARVER. Right now I think as a rule it is not; it is just the whole farm on cotton and peanuts.
Mr. ACKERMAN. Cotton, I believe you can have units; peanuts, you can have units as well. There is an extra charge for units, but generally yes.
Mr. DOCKERY. You have to know what the definition of a unit is.
Mr. ACKERMAN. That is correct. That is why on this one I would suggest you might want to talk to an agent and see how it applies. There are requirements for units, the main ones being that it be separable pieces of land and that you are able to keep separate production records for each one, and there are some other more particular ones.
Mr. CARVER. But if you could do that, that would be a big help right now, but I think as it stands in this area anyway you cannot break it out per tract.
Page 66 PREV PAGE TOP OF DOC Mr. CHAMBLISS. We had this similar discussion in Perry with respect to the problem that I think you may be alluding to and that is that we are a little bit unique in the southeastern United States, particularly in Georgia, because we have so much irrigated an non-irrigated land that is combined together, and as we explained to Ken what happens is that we make just enough off our irrigated land to raise us above the production level so we do not qualify for any crop insurance, and as long as it is within the same farm serial number, you have pretty well been forced to do that.
As we go into the new reform program, we need to try to figure out a way, number one, to separate irrigated and non-irrigated, and let you insure one versus the other, and secondly, to try to break it down. What you have to rememberand we may as well lay this on the table because those of you who farm know that this happensyou have to be concerned about fraud and abuse in the program, and you have to make certain that those folks who are saying they had a loss on a certain tract have not gathered those peanuts or gathered that cotton and combined it with another tract. So it opens us up to a few more problems, but it is one of those type things that we have got to address in this reform package.
Mr. DELOACH. Congress Chambliss, Congressman Bishop, thank you. Congressman Ewing, I am Lamar DeLoach. I am a tobacco farmer, from over in the eastern part of the State along with cotton, corn, soybeans, peanuts, and as I told you earlier, 2 acres of strawberries for my wife. First I would like to thank you for taking the time of your busy schedule to hold this very important field hearing on crop insurance today in south Georgia. We truly appreciate your appearance today, and we appreciate your willingness to stand up for the tobacco farmers in Congress. I know there is not a whole lot of tobacco in Bloomington, Illinois.
Congressmen, critics of the tobacco program and those who feel the tobacco program should not be covered under the Federal crop insurance program, or the non-insured disaster program now, always says that tobacco should not be covered because USDA does not cover hundreds of crops under crop insurance. It is my understanding, however, that USDA is attempting to expand the crop insurance program for other crops as an indemnity data becomes available. The agency that is supposed to be the former arm of the Clinton administration is expanding crop insurance for farmers and not taking it away. Can you tell us a little more about this and also share your thoughts whether you think that there will be another attempt, once again, to do away with crop insurance for tobacco farmers?
Page 67 PREV PAGE TOP OF DOC Mr. EWING. You are absolutely correct that there is very little tobacco grown in Illinois, and I would welcome all of you to come up and help me in my next campaign because my opponents have used that against me every time. [Laughter.]
But it is not a problem for me because I believe farmers are farmers, and people who till the soil and who are involved in agriculture, we have to stand together, and if we do not stand together, then they will pick us apart and take what we have away from us.
Yes, I would imagine that somebody will see the political gain in coming to the floor with an anti-tobacco amendment. We will work very hard. The gentlemen on each side of me are always there, always helping to try and turn that back, and so we will fight that battle again. I believe we will win the battle again, and we will continue to offer crop insurance to tobacco farmers and the right to access your extension service. Those are other things that they want to take away from you. So we will continue to battle that and probably will for the foreseeable future.
Mr. CHAMBLISS. Who is next?
Mr. STALVEY. I am David Stalvey from Berrien County. I also farm. And, of course, it is my understanding that an insurance company when they insure crops, they make the payments back out of their profits, and you, of course, are subsidizing the crop insurance companies which I think may be a good idea. But my problem with crop insurance and Federal crop insurance is I would rather have David Stalvey insurance. In other words, I would rather make a profit every year and when I have a difficult time, my profits ensure myself. So like I say, we sort of may be getting off the road here a little bit, but where we are making payments and subsidies to crop insurance every year, we are only subsidizing farmers on an ad hoc basis. I believe if we would contribute to farmers and make sure that we had a viable income each and every year, we would not need to depend so much on a Federal crop insurance program. And like I said, risk management is important, but I am a farmer. I am willing to assume risk, but with my risk, I expect to receive some dividends, and I am not receiving adequate dividends for my risk, and our Congress is subsidizing Federal crop insurance in an effort to help farmers. I would rather you subsidize me in an effort to help me and let me help myself and let me continue to produce a crop that I am proud of and a crop that is going to feed and clothe America. And I believe when we get down to the very bottom line, that is the biggest problem with crop insurance is it is a product that we do not need if we had all of our other priorities in the right place.
Page 68 PREV PAGE TOP OF DOC Mr. EWING. Who is next? Right here.
Mr. POWER. I am Jerry Power from Lumber City, GA. I agree with gentleman and basically what he has just said. Every way you try to help the crop insurance situation and the things you are talking about doing, leads to more and more fraud, more and more people stealing and beating it. That is all there is too it. All the programs that is come up so far will only help the people trying to beat their way through life, and that is not the right way to go. In 1973, I was still in high school, and corn was $4 a bushel, now corn is about $2.70 a bushel. A 150 horsepower John Deere tractor at that time was $22,000. Today, it is $75,000. Fertilizer was about $80 a ton. Today, it is $180 to $190 a ton comparable cost. Seed for corn then was about $30 a bag. Today, it is about $90 a bag. At the same time, hogs were about 65 cents a pound, and I remember my grandmother saying one morning when she was cooking breakfast, pork chops were $2.39 or $2.49 a pound; it was costing 50 cents a piece. Not too long ago hogs were 8 cents a pound; here in the grocery store, pork chops were $3.95 to $4.19 a pound at the same time. And every time we have a disaster program and stuff like that it brings problems on for the people who is out here trying to make an honest living. What we need is fair prices to get everything in line for what we grow.
Mr. EWING. I guess both gentlemen are saying, if I can summarize it, that you would like to see a reasonable, profitable commodity price for what you grow and not worry about crop insurance. I guess I would only ask the question, how many would want a disaster bill when a hurricane goes through or a drought or whatever it might be? I mean that is just a question for anybody who may want to comment on it.
Mr. POWER. I am a watermelon grower and grow a good many acres of watermelon. Three years ago we had a storm come right through here, wiped out a good bit of our production. They got a disaster farm bill nowI do not know all the particulars about itbut we had the disaster programs in. We do not qualify, but however these people that filed for crop insurance three or four times in a row, they are the ones that are going to get benefits from this kind of programs. We basically do not need a crop insurance program or nothing. What we need is fair prices.
Page 69 PREV PAGE TOP OF DOC Mr. SMITH. I am Donnie Smith. I do appreciate you gentlemen coming and listening to us. I too feel we need good commodity prices. We all want that, and we none do not want insurance, but I think we need it sometimes. It is there when we need it. An idea, We can tie this to cost of production, separate our irrigated and non-irrigated crops. It is all different. And then one way we might can save some money also is on premiums. If we do not have any losses for several years, kind of reduce our premium each year, but we need Federal crop insurance I think, but we need it at an affordable price, and there I think we needyou know, we do not want it, we hope we never have to have it, but I think we need it just in case for emergencies, but at an affordable price.
Mr. DOCKERY. I am Jimmy Dockery. I am with Southeast Georgia Farm Credit, and I also am in crop insurance. This question is probably for Mr. Ackerman.
I have been in crop insurance since 1978 in one form, fashion, or another of either adjusting, selling, and now as a full time agent, and my question to Mr. Ackerman is in 1978, 1979, 1980, we sold peanuts, tobacco, and cotton. Those policies were approximately two and three pages long, very detailed, and explained to the farmer what he was purchasing and at what cost and what his peril that he is being insured against. Today, the policies run upwards of 20 and 30 pages. Mind you, this is after the Paper Reduction Act ofwhat year? The policies are now 20 and 30 pages written in languagewe have some real sharp lawyers in this townbut written in language that none of our lawyers, farmers, nor I as an agent can understand. Why cannot something simple as a crop growingI know it is not a simple job to grow a cropbut a corn stalk is pretty basic. Why cannot you use language that relates to corn, soybeans, peanuts, so that we, as agents and farmers, will understand what we are selling and what we are buying? Thank you.
Mr. EWING. Ken, before you answer that, Jimmy, can you imagine what that policy would be like if we had not passed that Paper Reduction Act?
Page 70 PREV PAGE TOP OF DOC Mr. DOCKERY. Exactly. [Laughter.]
Mr. ACKERMAN. All I can say is you do point out something that is a struggle for us. It has just gotten more complicated. Can you hear me now? Crop insurance has gotten a lot more complicated. In 1978, we covered fewer crops. We sold basically one thing, multi-peril crop insurance. Today we sell catastrophic coverage, buy-up, limited buy-up, revenue insurance of five different types, the group risk plan, several other things. We also have a lot more lawyers in America who sue a lot more, and that is a fact of life that affects crop insurance like any other walk of life.
Yes, the policies are long and complicated. We have tried to simplify them, but there is just so far you an go. A corn stalk may be a simple thing, but we cover corn in 50 different States with several different varieties and a number of different growing conditions, and you would be amazed at how complicated a stalk of corn can become when you get into a question of loss adjustment. You know how complicated it can become when you get into a question of loss adjustment. I do not make excuses for the fact; it is a fact of life that we are struggling with all the time.
I would only make one other comment on the discussion before about commodity prices and crop insurance. One thing that I have been very sensitive to on the crop insurance side is the expectations for crop insurance and the farm safety net have really changed a lot and gone through a period of questioning over the past couple of years. What made last year's crisis very unusual was the fact that it was a time when you had low prices and bad crops happening at the same time. Usually, they go in opposites. If you have bad crops, prices are high. If you have good crops, prices are low.
Last year they both happened at the same time, and it raised a lot of questions in people's mind, what program was supposed to be there? Who was supposed to do what? In crop insurance we have branched out into revenue coverage the last few years, but revenue coverage does not really protect you for long term price declines. Revenue insurance does not give you a price that is not in the market. So it really is a question of what are you trying to do with a safety net program, what your expectations are. Crop insurance is designed to help if there is a disaster that causes you to lose your crop. It can be designed to help you with short term price swings, generally intra-year. For instance, there is been some suggestion to tie a risk management product to the price of hogs, given the recent price collapse, but there are some things it does not do well, and it is something that we have to look at when we talk about this debate on the big picture of the safety net.
Page 71 PREV PAGE TOP OF DOC Mr. EWING. This gentleman over here.
Mr. WADE. If this was covered, I apologize. I came about 20 minutes late. I am Lane Wade from Bacon County. I am a blueberry farmer. Last year on May 15 we had a meeting over in Alma concerning insurance for blueberries, and I think it was with Senator Cleland's office and all. Well, during that meeting, and I found out afterwards, we had a blueberry farm that we got hail damage on, so much that we dropped from about 106,000 pounds to 13,000 pounds. So we lost quite a bit. Now blueberries, as some of you may know and all, we are not offered crop insurance at all. Now luckily, or unluckily, because of the other damages, now we are able to qualify for that because of some other disasters, but if it were not for that, we would just be left out in the cold. We would love to have the opportunity to at least, you know, deny crop insurance for blueberries to where we can spread our risk out. We have been trying to get it for a while, and we wonder sometimes how far we have gotten on that, if you all could respond. I appreciate it. Thank you.
Mr. EWING. Ken, I think that is probably something that you can address, crop insurance for blueberries.
Mr. ACKERMAN. Thank you for the question. Blueberries is one of the crops that we have recently started a pilot program on. I believe the pilot program is in its second year, and again, this is a pilot program that has been very well received. We have had a number of requests for expansion. The way our law is written for pilot programs, we are generally required to start small and then expand them. In our legislative proposals for this year that I will be presenting early next month, we would like to speed up that process because there are a lot of new crops that we really can expand quicker. There is no reason that we cannot technically. We can do the underwriting work. We can do the rating work. We can do the actuarial work. But as a matter of law, we are required to start small and go large.
Blueberries is one that I fully expect will expand once we go through the pilot period on it. I believe we are nearingwe are in the second year of it. It is a 3-year pilot program, and once that happens, it would be graduated and become probably nationwide. And I understand that there were some problems with loss adjustment the first year of it. I assume that we are addressing those, that those will be fixed so that we will be able to expand it.
Page 72 PREV PAGE TOP OF DOC Mr. CHAMBLISS. Where is that pilot program taking place?
Mr. ACKERMAN. I believe it is in Mississippi, North Carolina, just those two States?
Mr. MORRIS. Michigan and New Jersey.
Mr. ACKERMAN. Michigan and New Jersey, thank you.
Mr. EASON. My name is Darvin Eason, and I am a peanut and cotton farmer and also an agri-businessman. My question is, I do not know if this has ever beenand first let me say thank you three gentlemen for your commitment to agriculture, and I do not think anybody in this room doubts your commitment to agriculture. We appreciate it, appreciate your interest in this.
But back 3 or 4, 5 years ago I am with the Georgia Agribusiness Council, and we started a self-funded insurance program for workmen's compensation, and that program has been very, very good for us, and it has been a program that has also reduced our workmen's comp tremendously, and we are very selective in who comes into that program. But I am just wonderingI would love to go into my area and select 70 percent of my farmers to go in a pool withI would be glad tobut 30 percent of them I do not want to be in any kind of pool with because they are the ones that collect the insurance every year, and I do not know the answer to this, but I can pick the ones out that is going to collect insurance and the ones that is farming dry land. They do not have any form of irrigation. Somewhere down the road that is going to have to be addressed. I will be honest. I will just call a spade a spade, 30 percent of my farmers in my area do not need to be farming; 70 percent of them need to be farming, and we somehow have got to address the problem.
Eight out of 10 years, drought causes our problem. OK, in that context what can you do about drought? You can have permanent irrigation out there. Now, everybody may not can afford permanent irrigation, but somewhere we need to be spending some of this money on that rather than risk and paying insurance or disaster payments every year.
Page 73 PREV PAGE TOP OF DOC I do not know whether this has been addressed or not, like the workmen's comp pool, but pooling crops and pooling irrigated farmers compared to non-irrigated farmers, I do not know, but I am just saying a suggestion like this I think needs to be looked into. It worked very well in workmen's comp, and I think it can be investigated and looked at in crop insurance also, like a self-funded. This past year we paid dividends back to most all the participants, and all the participants are very understanding that the less accidents, the better management they have got, the less insurance they are going to have to pay, and the more money they are going to get back. So I think that could go right on over into farming, too, and I think it needs to be looked at, and I would be willing tolike I say, I would be willing to get in a pool with about 70 percent of my farmers. I would love to have a pool. I would love to select them to be in a pool. Somebody might want to address that.
[THe prepared statement of Mr. Eason appears at the conclusion of the hearing.]
Mr. CHAMBLISS. Darvin, of course like we said earlier, we are here looking for ideas, and you have laid an idea on the table that might be workable. The problem is I do not know how you are going to tell that other 30 percent they cannot get in your pool. We will say, call Darvin Eason and see if you can get in. [Laughter.]
Mr. CHAMBLISS. But seriously, that is something that we need to look at. One of the ideas that I have heard talked about is on a crop by crop basis, have some sort of check off program that does go into a pool that allows all peanut growers to participate in a pool for crop insurance. You need to, if you do something like that, you got to spread it out more than a one locale because if that is the case then everybody in that locale is going to have disaster most likely. But it is an idea.
You talk about something else with respect to the number of farmers that are out there, and those farmers historicallyand we all know it, I can go into my county today and I can tell you who is going to have a crop insurance claim this year and everybody in this room can do the same thing in your counties. I am not sure that there is a good answer to that problem except that every disaster program that I have ever seen come out of Washington rewarded the farmer who did not make good business decisions, and it penalized all of you folks that made good farming business decisions. We changed that this year in that anybody that purchased crop insurance, you got to bump up in the disaster payment. We are going to continue to do things like that to make sure that those of you who are willing to invest a little bit more money in good programs benefit more so than those farmers that do not make what is a good business decision. Again, we will not have all the answers to that type of situation, but the more we can move in that direction, the more it is going to eliminate the farmers that ought not to be farming, whatever percentage that really is.
Page 74 PREV PAGE TOP OF DOC Mr. BISHOP. That goes back also to the irrigated versus non-irrigated land and tracts. In reforming this system, we have got to come up with a way to give incentives to people who employ good practices, who irrigate, and who spend the extra money in times of drought to make sure that their crops survive so that it will cause others to do that, as opposed to only rewarding the people who are dry land farmers who have losses. It seems to me that we are counterproductive if we do not have incentives in the program built in, and Saxby put his finger on it, to encourage folks to do the right thing and to invest and to try to be prudent. If we do that I think that we will make a major step forward, and I think it will be fairer to everybody and will reduce the overall loss pool.
Mr. EWING. Your comments are very interesting and probably braver than most of us in elected office want to get up and say. [Laughter.]
I could say it down here, but
I think it is reasonable to say that if you came in and picked the cream of the crop in almost anything, it is going to be more profitable and less loss, and insurance has always been kind of the coverthe broader your coverage, the better it is. In my part of the country we do not really have dry land and irrigated. We are all dry land, and that is why they call Illinois God's country because it rains more up there, but we do not have that sameI mean, you have a different climate here. It gets very hot, and if it gets dry and very hot in the summer, you really have a problem. So irrigation is very important.
But I would say if you go down the road, drive down the road in my part of Illinois, if you have a claim, your neighbor has got a claim, and generally it is weather related or hail or something like that that has come through in some kind of squall, and we can have part of our county have good crops and part of it not have good crops because it rains in the northern part of the county and it does not rain in the southern part or vice versa. So your comment would not be as relevant in my part of Illinois where it is not the poor farmer that collects every year, it is really more goes in strips by weather.
Page 75 PREV PAGE TOP OF DOC Mr. HADSOCK. Gentlemen, I would like to say I appreciate you being here today to listen to these folks. I am an ag teacher here in Coffee County, and like some of the other folks that have spoken, we all know farmers that farm insurance. I do not think that is any secret anywhere probably in the country.
Congressman Chambliss, in relation to your comments about how do we get those folks in that other pool over there, it strikes me that I think Georgia has an auto insurance law that if I walked into an insurance agency and I want to buy car insurance, and I have 14 DUIs and five at-fault accidents, they would still have to write me insurance. Now, the premium might be something that I have got to mortgage the house to pay. Could there be a policy set up so that we could adjust crop insurance on past history? Now, we have heard some talk today about reducing rates for folks that do not have a claim over a period of time and I think that is a step towards that. We also could go back and refer back to past history and what the claim history of an individual is and adjust his rates accordingly.
Mr. CHAMBLISS. Ken, what do we do in that respect?
Mr. ACKERMAN. This gets into one of the more sensitive issues in the program, APH. We have a system where the yields that a person can insure are based on the actual production history. Actual production history is good in a lot of ways in that it means that every farmer lives with their own history, that good farmers with good histories get better coverage, bad farmers, or farmers who are on riskier ground get lower coverage. The bad part of APH is what we have also been hearing today, is that if you have 2 or 3 disaster years in a part of the country, the farmers in that part of the country have their yields go down. It is thethis is one of the hardest issues to deal with because if you try to make crop insurance really track an individual farmer's record, it does mean that those farmers who have had legitimate losses often end up having their yields go down at the same time that someone who has an illegitimate loss, their yields go down.
Page 76 PREV PAGE TOP OF DOC There is no easy answer to this question other than good law enforcement. We had a program that was in effect until last year called the Non-Standard Classification System. Some of you involved in the program are familiar with it where a farmer who met certain criteriaI believe it was 3 years of loss in a period of time plus a very high loss ratio individually, those people got put onto a special list and their rates were raised substantially, and what we found was that a lot of those people had dropped out of the program. A lot of those people had changed their names, a lot of those people changed their corporate identities. Fathers became sons and that kind of thing. It was very difficult to deal with, and also in the areas where people were being honest about it, they were the people suffering the worst in bad weather cycles. We found, for instance, in some of the areas in the Dakotas, and even around here, that the farmers who were being honest about their records were often the ones being caught when weather went against them.
So this really is one of the most difficult questions. It gets right into the APH history of how do you track farmer's yields. We have been trying to beef up our law enforcement, our compliance arm, to go out and work with local U.S. Attorneys, and with our Office of Inspector General to try and find the people who are abusing the program. It is hard work. It is hard to do. We have had some good results. We have had some prosecutions. Some people have gone to jail for defrauding crop insurance, but it is a lot of hard work that goes into that.
Mr. CHAMBLISS. If we have had some fraudulent cases in Georgia, I am sure they were all in the second district though, Sanford. None of my farmers would do that. [Laughter.]
Mr. WALLER. Good evening, gentlemen. My name is David Waller. I am from Blakely, GA. My business is crop insurance. I am the field rep for America Agri Insurance, Gulf States in this area. I come in a little late. This might have been addressed earlier, but I have had a lot of the farmers asking us what about the quality adjustment on cotton? That has been a very serious issue in our area, and I do not know if that has been addressed or not. If it has, I am sorry for being a little late, but I would like to know if we are trying to get anything to go forward on that.
Page 77 PREV PAGE TOP OF DOC Mr. ACKERMAN. It has not come up in this meeting. It came up in the earlier meeting. I can tell you on cotton, we had a proposed rule out for public comment last year on cotton that covered quality adjustment, replanting, preventive planting rates, and a couple of other items. Generally at the end of the year the comment that we got from the cotton community, the Cotton Council, and many of the State cotton groups was that they felt that the core problem with our cotton policy was the rating, was the premium rating, and that anything that we did at this point before reviewing the rates that would make the coverage more expensive, we got a negative comment on. And I will just tell you that, well, we have had a lot of general discussion about crop insurance costs nationwide. We have had a particular issue with cotton because the rate historythe rating history for cotton is different in different parts of the country. We have had a different experience in Texas, for instance, than in Georgia and North Carolina and Alabama. Our crop insurance rates are based on data going back 20 years and in cotton in particular, that brings in a lot of years where there was bad experience and where participation was quite low.
We have been working with the Cotton Council and brought in an outside actuary to do a review of the cotton rates and the procedure for cotton rates generally, and we hope to have that done in the next couple of months.
Once we get agreement on the cotton rates, then it will be much easier to look at these other issues, but I can tell you we did propose a solution onor a proposed fix on the quality adjustment, but the feedback we got was until we fix the rates thatat least the major cotton organizations were not interested in it.
That is where we are on it. We have gone back to them to talk about the rate specifically.
Mr. BISHOP. Can I just comment on that? In spite of what Mr. Ackerman has said, I have heard over in our area from farmers who are, I am sure, the same ones that you have talked with that they feel that they need some protection, the quality, if they make a good crop. But the quality is down, and so they lose money, and they need some protection against that kind of risk, and how we develop a product to address that, of course, remains to be seen, and maybe the premium for that may have to be a little bit higher, but there is a need for that product, and I think that we when reform the system we ought to be able to develop a product that will address the needs of all the farmers and all the commodities and they may have to be tailored to those respective commodities.
Page 78 PREV PAGE TOP OF DOC Do you want to followup?
Mr. WALLER. Yes, sir. Most of the ones I have talked to are fine with the premium as long as they can get the coverage. Most of them are making the pounds, they are getting their guarantee in there, but they are getting cut back at the gin when they are getting cut for the quality. I have not heard any complaints for a little higher premium for the quality adjustment, and I have traveled all over the State. I work Georgia, Florida, and Alabama with the crop insurance and I put on farm seminar after farm seminar. I have put on 43 farm seminars in the last 3 months, and I continually hear this and continually hear this. They are not worried about the rates, they are worried about the adjustment. It is killing them and they cannot take it.
Mr. SELLERS. I am Billy Wayne Sellers from Baxley. I think my problem is basically what they are just talking about. My soybeans, I turned a claim in on those this year, and basically what it amounted to, I sold a certain amount of bushels per acre, but when the insurance company got through with their pencil, they charged me for more soybeans than I sold. So basically what I am saying, we all need to be figuring with the same pencil. Because if I sell 5,000 bushels of soybeans per acre, and I have got a claim on a certain amount of acres, and when they get through figuring I have got 6,000 bushels of soybeans, something is wrong somewhere, and that happened to me this time.
I would like to hear something on that.
Mr. ACKERMAN. Well, what I am thinking, we may need to have a talk after the meeting to check on that.
Mr. WALLER. Well, they were talking test weight and this kind of stuff, but it does not matter what I carry across the scales; it is what I sell. And when I turn a claim in, I do not want to come up with more bushels than what I sold. I am getting beat two ways down the line is the way it looks to me.
Page 79 PREV PAGE TOP OF DOC Mr. ACKERMAN. I think we need to followup, and I will be happy to talk to you after the meeting.
Mr. CHAMBLISS. While we have got a little lull there, and somebody is thinking about their question, let me just make a little comment with respect to something I have had several folks ask me about tonight, and that is where we are on step 2 payments. We have had a problem on step 2 with respect to getting an agreement between the various groups that have an interest in step 2, but as of last week, we did have an agreement that was reached between the National Cotton Council and the manufacturing group and the other interested parties, and there is a proposal to fix step 2. The problem is the same problem we have got with everything else. It is money. In order to have a permanent fix of the step 2 program, it is going to cost us about a billion dollars. Now, under the way our budget operates now, under our PAYGO rules, we have to offset any amount of money that we put into a program from another program or series of programs within that same department. We have got about $600 million in the step 1 program that we can shift over to step 2, but we have still got to find another $400 million somewhere to try to solve this problem permanently. It does not do us any good to try to solve it for one year. We want to try to do it permanently, and as we get into the budget process, we have got to allocate some money for crop insurance and we hope we are going to be able to find that other $400 million to fix that step 2 program permanently.
Mr. EVANS. What kind of time frame have you got?
Mr. CHAMBLISS. Ben, I am not sure. The final proposal has not even been written yet. The National Cotton Council just came in and explained this to us last Thursday. The agreement had just been reached in the last day or two before that. So, I do not even know what the final language is going to be and what exactly they are going to come back and ask for.
Mr. EVANS. Can you pull anything out of the air1 month, 2 months, 6 months? I am sitting here, I have got producersright now I have got probably 12,000 bales of cotton left to sell. I am sure there is that much or more over at Tri County Gin and, you know, that kind of seems to be the one saving grace is if we can get step 2 refunded that should help drag the price of cotton up as much as it does not want to go there. And I am trying to give my guys some kind of hope, some kind of encouragement, but you know, everything is up in the air.
Page 80 PREV PAGE TOP OF DOC Mr. CHAMBLISS. My guess is you are probably looking at 4 or 5 months anyway. So, I do not
Mr. EVANS. So no hope for old crop?
Mr. CHAMBLISS. I do not think it is going to help last year's crop, very honestly.
Mr. BISHOP. Saxby may have a better handle on the budget figures, being on the budget committee, but I heard through the Cotton Council also that an agreement had been reached and that they were hopeful that an additional $300 million would be added to that which would not quite reach the billion dollars he was talking about, but it would be somewhere around $900 million if they could shift that step 1 to step 2. Again, the timetable, I do not know, but I would have to guess and go along with what Saxby suggests on that.
Mr. CHAMBLISS. If I tell you 30 days, you will be calling me in 30 days saying where is that money. [Laughter.]
I know you, Ben. [Laughter.]
Mr. EWING. Are you saying that Saxby ought to be able to get in done in 30 days. [Laughter.]
Mr. AKINS. Saxby, I am Parrish Akin, Nashville, GA, cotton farmer. But according to, if we listen to Bill Clinton when he presented his State of the Union Address, they have excess money in the budget. So why do we have to fund it from agricultural? Why cannot we go ask your president? [Laughter.]
Mr. CHAMBLISS. Parrish, I will deliver a handwritten note, signed by you and Sarah, and personally take it to him and tell him that is what we need to do. [Laughter.]
Mr. MORRIS. Saxby, I am Donnie Morris, and I am in the blueberry business. As I sit here, I am not sure why I am here except that we are not availableI mean, we are notwe cannot get any type of insurance on our crop. I have been involved in the one in Michigan, and I have been involved in the one in Mississippi, and it is not the answer, and I think you will agree with that, but we represent a group of farmers that 20 years ago in Georgia was no such. Today we represent the fifth largest producing State in the Nation. We have come through three disasters in that 20 years. None of those disasters have we ever been able to get any NAP Program or anything else. And I am not here asking for that. What I am asking is, once you do work out these things, let us bide on a dollar value, dollar loss, and I think that is what everybody here has said today. Help usI am not sure we need Federal crop. We need a way of insuring our chance of risk, and since I do not really know how to explain it any further than that, I am going to leave it that way, but I think that is what I am trying to say is that we do not know the answer, and I am sure you do not, but if we have some way that we can insure, we are willing to pay for it, as long as we can be dollar for coverage.
Page 81 PREV PAGE TOP OF DOC Mr. EWING. What was your crop, sir?
Mr. CHAMBLISS. Blueberries.
Mr. CHAMBLISS. Donnie, one thing we have got to look at in this whole picture as we go through the reform process is what type of product do we ultimately want to have on the market for you all to look at to buy. Today you can buy a revenue product or you can buy a yield product that does not necessarily tie into revenue. Revenue product, as I understand it, is pretty dern expensive, and what we are going to try to do is hopefully be able to come out with maybe a revenue product, a cost of production product, some other product that basically does look at your yields like we do now and let you insure that. I do not know what all may be out there, but I hope we can have somewhat of a smorgasbord of alternatives that you can look at and you can make a business decision and buy what you think is best for your particular farm. Whether we are going to get to that point, I do not know, but that is certainly what our hopes are, and what I hear you saying there is that you are looking at product that you can buy that will more or less guarantee you X number of dollars, you are willing to pay X number of dollars for it.
Mr. MORRIS. If we have a disaster. We can pretty well make it if we do not.
One other commentI will not say comment, but question I would like to ask you three gentlemen, if you would comment on the Food Quality Protection Act that the President has passed and that we are going to be facing in the year 2001, I understand.
Mr. CHAMBLISS. Mr. Chairman?
Mr. EWING. That is another part of the jurisdiction of this committee that is non-controversial. The Food Quality Protection Act was passed unanimously by the Congress. I mean by unanimously, that is everybody voted for it. We pass a lot of bills with bipartisan majorities. We do not pass many unanimously, and the thought was in the Members of Congress, I believe, to a person, believed that they were improving the system. We had the Delaney clause, which causedwhich was going to take off the market our herbicides, insecticides that we need as producers to grow our crops, and we had to do something about it. Unfortunately, we do not always control the bureaucracies, and in particularly the EPA. We are very, very, very unhappy with the way they are implementing that law, and we have expressed that. This is not a Republican or Democrat situation, this is common sense, and they refuse to use good science, they refuse to use the best evidence, and they have their agenda, and their agenda is to remove a number of insecticides and herbicides from the market, and probably those most apt to be hurt are specialty crops like yours. There are more apt to be chemicals out there for use in corn and soybeans and cotton and some of the larger commodities that we use more, but we will not, should not, and I do not think allow them to be successful in that endeavor, and we are going to just have to keep hammering.
Page 82 PREV PAGE TOP OF DOC You wonder, well, should we pass another law? We thought this one was pretty clear, and they have not followed it, but we have to get to some kind of solution that we can live by, and we are going to be working on that this year.
Mr. MORRIS. That is a very quality law that you passed, the implementation of it.
Mr. EWING. I think most of us reasonable people would read it and understand what it said.
Mr. MORRIS. Right.
Mr. DORMINY. Mr. Chairman, Congressmen, thank you all for being here again. My name is Chip Dorminy, and I would like to address Mr. Ackerman on the APH that you were talking about and the problems they seem to have there.
It seems fairly simple that there is a declared disaster year, which there have been four in Georgia in the 1990's, that those disaster years should not be included in your yield averages, and yet they are still being included, and we know that that is a false yield. That is not a true yield for anybody. So, you know, I do not see that that is a hard problem to solve. Any year that is a declared disaster year by the Government should be thrown our in our yield history.
I would like one more question after that.
Mr. EWING. OK.
Mr. ACKERMAN. This is one where I hope I do not come across where I am making it sound harder than it is, but it is not as easy as it sounds.
Simply throwing out the disaster years from an APH has an impact on rates. Crop insurance by law is required to operate in a way that is actuarially sound, since we have to collect premium in order to cover the expected losses. If we take a step that throws out all of the disaster years from the APHs from farmers all over the country that means that the guarantees that we are buying onto all over the country will go up. That has an effect on rates, and that is the tradeoff that you have when you throw out those years. You can argue back and forth what is the best way to deal with that problem. There is a concernwe have heard it, I hear it everywhere I go, we have heard it at both meetings today. The farmers are concerned that APHs, because they do reflect real history, and real history includes disaster years, that they do go downif you have had a couple of bad years. That means that a farmer that has just gone through a disaster often gets the worst of both worlds. Their coverage slides down, their rates go up. That is a basic problem with the program that we are going to have to figure out how to fix. Whether we fix it with some kind of multi-year coverage, whether we fix it by putting some kind of floor under APH, somehow or other we have to fix that problem.
Page 83 PREV PAGE TOP OF DOC Simply throwing out the disaster years, it sounds easy, but if you do it, it has side effects. The No. 1 side effect is on rates. It also raises the question, what is a farmer's honest, legitimate expected yield. The reason the logic behind APH is that a 10-year average gives you a realistic picture of how likely it is to have bad yields in a given geographic area, how likely it is to have floods in a geographic area. Probably if we had perfect data, APHs should be based on 20 years or 30 years, but even that notion has problems because technology has changed, and probably any one of you that has been farming 10 or 20 years knows that your yields are better the last few years than they were 10 or 20 years ago because the technology is better.
So, again, I do not mean to make something sound harder than it is. There is a real problem here that we have to deal with and that is what happens to a farmer's coverage when they have had a couple of bad years in a short period of time. If it is one bad year, generally the APH system works. There is a cup under how far you can fall in a given year, there is a yield floor. If it is one bad year, it is usually not a problem. It is when you get 2 or 3 in a period of, say, 5 to 7 years that you see this larger problem, and as I say, it is one that we have to fix. I do not know that the quick answer, though, is the one that is going to work.
Mr. BISHOP. But, you know, we had two 500-year floods in a 4-year period over where I come from. [Laughter.]
Mr. EWING. You must be 1,000 years old then. [Laughter.]
Mr. BISHOP. I mean, you know, we had the flood of 1994 and the flood of 1998, and you know, I am just not sure that that really is actuarially sound. [Laughter.]
Mr. ACKERMAN. This issue is one of the most difficult ones to deal with because when you look at the whole country the last 10 years, over the last 10 years we have hadin 1998 you had the drought of the century in the Midwest, in 1989, you had another drought of the century in the Midwest, in 1992, you had the hurricane of the century, Hurricane Andrew, in 1993, you had a 500-year flood and a major drought in the Southeast, you can go year in and year out over the last 10 years. This past year in the Southeast, the drought in the Southeast this past year, we sawand a lot of counties here in south Georgia were literally the hottest and driest since records were started being kept 104 years ago. In some of my speeches I have a full color map that shows the countiesyou may have seen itthat are either the hottest or the driest in 104 years, and there are several of them in this part of the country.
Page 84 PREV PAGE TOP OF DOC Mr. DOCKERY. But your drought index that you use said we were not in a drought zone during that time.
Mr. BISHOP. What you are insuring against is the risk of loss, and it seems to me that in areas where we do have that experience, maybe there ought to be some adjustment in the rates where there are more experiences of losses, but I do notI think that we need to develop a system that will really adequately measure the loss and not some artificial mechanism that is put in place because what it appears to be is simply budget driven, to structure it in such a way that you can reduce the number of claims that have to be paid out. And I am not sureand if it is simply budget driven, then maybe we ought to just say that and figure out how we can subsidize or support or underwrite the cost of the premium, but the bottom line is, if our farmers and our producers are not able to stay in business, then we are not going to have the part of life in America, we are not going to be able to continue to be leading the world in the production of agriculture.
Mr. ACKERMAN. I do not disagree with any of that, and my only point is that doing it is going to be a difficult challenge to do to come up with a way to measure that. And you are right in that a lot of this is budget driven.
Mr. DOCKERY. My second question, I guess, is not really a question, but it is a little bit facetious. I would like to know who in the world you all get to write these regulations after the fact. The new 1999 peanut regulations, in specific, you have got one in here that says, we will not insure any acreage on which peanuts are grown using no tillage or minimum tillage farming methods unless allowed by special provision.
I know you have got a special provision in there, but I do not know if you have ever tried to get a special provision or not, but it is close to impossible.
Also, we have another problem in these regulations that peanuts have got to be adjusted before quota is moved from a farm. It is going to be mighty hard on these crop insurance agents to be able to adjust the peanuts before that quota is moved from the farm to move to another farm. That is going to put a lot of weight on them in a quick time when the farmers need to move and got the peanuts on the wagon.
Page 85 PREV PAGE TOP OF DOC Mr. EWING. Here we have one up here.
Mr. POWER. Have you all ever thought of kind of an appraisal during the growing season of the crops, maybe a pre-step appraisal of each crop, if a man wants it done to prove yields for insurance?
Mr. ACKERMAN. There is no reason that we could not, a mid year appraisal of how a farmer is doing on his crop?
Mr. POWER. Right.
Mr. ACKERMAN. There is no reason that we could not do something like that for enforcement, for compliance. It is just a matter of manpower.
Mr. CHAMBLISS. I think, obviously, what you are talking about is more expense, but it is certainly something that could be done.
Mr. POWER. The expense could be offset by the fraud. If you stop a lot of the fraud, you would save enough to overcome having one man in every office be able to do it.
Mr. ACKERMAN. The point you are raising is a good one. We have tried a couple of pilot programs like that in some parts of the country where we have put rules in effect saying that no one could get a claim processed until they got a direct visit from someone in our compliance office. We actually put that in effect for a couple of counties. As a matter of fact, I think we did that in Georgia. We did it in a couple of other areas. It is like any other form of police work, really, being very visible at a time when you know there is a problem, has a big impact, and
Mr. POWER. For instance, in 1996 I had probably the best crop of watermelons in the field I had ever had. I asked the ASC office to come out and give it a fair appraisal, and they said they could not do nothing like that. The melons was left in the field because of the price and they were harrowed up.
Page 86 PREV PAGE TOP OF DOC Mr. ACKERMAN. It sounds like a good idea. Sounds like something we should try to do more of, and where we have done that kind of thing, it has generally worked well.
Mr. CANNON. Craig Cannon from Colquitt County. Saxby, a while ago when you said something about the crop revenue coverage being too high, I just want to give you an example of what it was. I had roughly 1,000 acres of cotton this year. Me and Glen Hunnicutt, my agent, sat down and looked at the crop revenue coverage. It was going to cost me in excess of a little over $30,000 to insure that 1,000 acres of cotton, and that was only for a $300 an acre return. So I wanted to give you a little bit of an example of what, when you say it is expensive, it is real expensive, and I mean, that it was going to take 100 bales of my cotton just to pay a premium, and as it turned out, it would not have done anything anyway. I made just a round bale of cotton, even with irrigated cotton, we lost, you know, to the rain in September. You know, we figured it up after that and I would have stilled owed that thirty-something-odd thousand dollar premium, you know, with just a bale of cotton. So I wanted to let you know that, and I also wanted to tell you one other thing maybe to give you a definition of what a farmer is around here. We are the only people in the world that buys everything retail and sells everything we have got wholesale, and do not have any control either way.
Mr. DOCKERY. Jimmy Dockery, again. I would like to propose this scenario with Mr. Ken Ackerman there. Listen closely, please. [Laughter.]
Tell me if, after I finish, tell me if you think this could or could not implemented and why. Could we not insure the levels of cost instead of levels of production at a predetermined Government set price up to a margin of income for an actuarially sound premium? We could work with Extension, Statistical Reporting Service, and other State and Government agencies, Federal agencies who make the program actuarially sound, require the strictest reporting at FSA and a well documented sales receipt that we have with our peanut and tobacco cards now. You might institute a cotton card or some way track the cotton through warehouses or gins or soybean and corn card, and have just graduated levels of insurance covering cost on into some margin of income for a price. I think this is kind of what Mr. Morris was alluding to that he would like some insurance like that. Someone has stated here that we have got a lot of programs out here now, are given a lot of choices. What we have, in my opinion, we have a basic crop insurance program that will give you a yield protection or a revenue protection and the other is just bells and whistles added on that. It is still crop insurance and it just causes your policy to get longer and more complicated and it drives the cost on it. It is harder to adjust. People do not understand the adjustment, and you were talking about the CRC, I think it is going to be dead in the water now when you check your cotton price that is going to come out the 20th because what I have been told, the average price for the last month has been somewhere in the 59 to 60 cent rangeis that rightand that is what you are going to go into your CRC program with, that is going to be your base price is 59 cents, 60 cents. So you are already 6 cents behind APH, so you will have an uphill sale in this part of the country, plus you only give us 8 days to sell it. So you need to do something about your dates also.
Page 87 PREV PAGE TOP OF DOC Would you address my scenario here, please?
Mr. ACKERMAN. I am glad you raised this one and I am glad for a couple of reasons because the question of whether we can design an insurance policy that would cover cost of production is something that I am hearing every place. I can tell you we heard it a lot at the meeting this morning. I can tell you I had a meeting like this in Montana on Saturday and heard the exact same thing there. Cost of production.
Mr. DOCKERY. And I want mine to go on into some income. Not get rich, but some marginal income.
Mr. ACKERMAN. I guess so. Well, let me tell you the issue as I see it. There are a couple of technical problems, technical issues about cost of production, but the technical issues are things that can be overcome with a little bit of research and work. Cost of production coverage, the biggest thing that economists raise right up front is that if you base it strictly on an individual farmer's cost of production, in any room, in any one county there will be a lot of variation. The more efficient farmers with lower costs might not get amay get a worse deal than those with higher costs, but those, frankly, those kinds of questions can be worked out. That is not hard. You come up with a county average, you get a local university to do the research and come up with what the average cost of production in this part of Georgia is, you bill that into the policy as a guarantee. That part can be worked out. Now, the other part is the actuarial soundness part, and this gets a little tricker, and I do not know if there is a good answer to this or not. Crop insurance is designed to cover the value of the crop. That is the way the law is written. The current statute has formulas about price selections and yield guarantees, APH, all of that, but where all of those provisions are trying to get to is to determine what is the value of your crop in the ground or what you expect it to be at the time that you plant it. If it is a matter that you know that your cost of production is $500you have a number, we can generate a number for insurance purposes. It is not hard to do. We have computersso long as the value of the crop covers it. So long as the value of the crop, in terms of the expected yield and the expected price, per acre, that is what you have on your land, comes out to $500 per acre, then we can give you $500 per acre. The problem comes in, and again, I do not know if this is a solvable one or not. I am stating it as a question. The problem comes in as the cost of production gets above the value of the crop, and that has become a very widespread situation this year around the country for a lot of reasons. You know it better than I do. One of the top reasons is that prices are low. You mentioned the cotton price. I will tell you for, Mr. Ewing, price of corn, or price election for corn went from $2.60 to $2.10 in one year. Suddenly all the corn farmers who had calculated their insurance around their cost of production being covered by their policy are finding the value of their policy going down very sharply. Another factor is that cost of production is going up in a lot of areas. Someone threw out some numbers before about the cost of fertilizer going up very sharply, but it is not just normal inflation. When you have an area like Georgia or Texas or the Dakotas that have had multiple losses over the past few years, one of the things that means is that input costs are going up and credit costs are going up. The basic cost of production is going on. So that creates a dilemma. If the cost of production is higher than the value of the crop as you can determine by yield and price, can you make it actuarial sound? On its face you may not be able to do that without somehow building in some underpinning. This is where you do get into much deeper economic questions that may go beyond crop insurance. If you try to develop a crop insurance program that gives you enough coverage that it covers the cost of production higher than cost in price and yield, then you are in fact building in a kind of income support that goes beyond what we traditionally have thought of as crop insurance. That may be the outcome of this whole debate. I do not know at this point.
Page 88 PREV PAGE TOP OF DOC Mr. DOCKERY. What is the difference between support and subsidy?
Mr. ACKERMAN. It will require subsidy to do this. It may require more subsidy to do it. But I think, frankly, my own reaction given what I am hearing from meetings like this all over the country, I think this is something we have got to put on the table. I can tell you that the way you are describing it and the way I am describing it is not part of any of the proposals that have been put on the table yet. It is something different and it may require a little bit more work, but I think given the reaction I am getting and that you seem to be expressing, I think it is something we definitely have to do some homework on.
Mr. DOCKERY. The idea of insuring against changes in the value, that is a risk that the producer also has to assume.
Mr. ACKERMAN. Right.
Mr. BISHOP. And it seems to me that there also insurance product that would adjust for price fluctuations in between the time that he plants and the time that he sells it.
Mr. ACKERMAN. There are products that do that, and crop revenue coverage is one. Crop revenue coverage is very expensive because it has an up side and a down side. There are other revenue products that are less expensive, but they do not give you, in the off chance that the price of cotton actually goes up this year, they will not give you the protection if you lose your crop and it is more expensive.
Mr. BISHOP. But at least it is an option. It is an option that the producer can make a business decision and decide whether he wants to take that risk or whether he wants to protect himself against that risk in the fluctuation of the market along with the other risks that he has to take.
Mr. ACKERMAN. That is right.
Page 89 PREV PAGE TOP OF DOC Mr. DOCKERY. And, Mr. Ackerman, you have not mention that yield is directly tied to CRC too. So I mean, you cannot get away from this yield as the gentlemen over here mentioned awhile ago. Yield is a function of crop revenue as well as the dollar.
Mr. ACKERMAN. My point is thatboth of you are right. Crop revenue coverage gives you that price protection within a year, but it does not go as far as you are talking about. Crop revenue coverage, say, take corn this year. The price of corn starting out the year is low. It is going to be around $2. I do not know the exact number. By the end of the year it may very well also be $2. Crop revenue coverage is not going to get you up to $3. Even a perfect crop insurance tool, revenue insurance tool, will not give you something above the market, and if your cost of production requires you to get $3 a bushel, then there is a gap, and whether you can close that gap with a new crop insurance tool and still have to be actuarially sound, I do not know the answer to that. It may not be possible. It may mean we have to invent something new over the next few months to deal with it.
Mr. DELOACH. I was sitting over here looking and listening, and I hate to offer a simple solution because that is not normally the way our Government works, but I guess everybody has heard of tobacco crop hail and wind insurance. And, Jimmy, I think that is what you are trying to allude to.
Mr. DOCKERY. Kind of going that way, right.
Mr. DELOACH. Where if I want to insure my crop of tobacco for $3,000 an acre, and I have enough money in my pocketbook to do it, that is the bottom line. If I want to buy $500 worth of cotton insurance, it does not matter what my production cost is. It does not matter if it $800 or $200. If my pocketbook can stand it, then I can buy that. Now, if you want to make it simple, figure out a way to subsidize, if you want to subsidize us, in crop insurance where we can buy a per acre dollar coverage, like we can crop hail and wind, and let us be responsible for that. It is real simple. The guy comes out, he sells you insurance, the amount that you want to buy, whatever your pocketbook can stand, $3,000 worth of tobacco hail and wind insurance is probably $200 an acre, Jimmy?
Page 90 PREV PAGE TOP OF DOC Mr. DOCKERY. That is the way it was sold 20 years ago.
Mr. DELOACH. And that is the way crop insurance can work. If you want to buy $500, if you want to buy $800 on your cotton and we know that the real figures should be in the $500 range, then when it gets to $800, that guy is going to pay. You do not have to worry about him being a good farmer or a bad farmer. You do not have to worry about the blueberry farmer. If he wants to buy $3,000 worth of coverage or $1,000, he can do that. Why can we not keep it simple? I do not understand.
Mr. ACKERMAN. There is no reason we cannot keep it simple. The problem is the concept. The problem is this. If you want to buy $1,000 worth of coverage for that acre of tobacco, but based on your expected yield and the expected price, the value of the tobacco is less than $1,000, then you have a problem, and that is the gap that we are talking about.
Mr. DELOACH. You need to re-explain that to me. I am not following that.
Mr. ACKERMAN. If you want to buy $1,000 per acre of coverage on an acre of cotton, but the expected value of the acre of cotton is $800, then there is a disconnect, and that is the problem that we are talking about. The law requires us to base crop insurance on the expected value of the crop, and if that is different from the dollar per acre you are wanting to buy, then we have to change the law.
Mr. DELOACH. But how do we control the value of the crop when you said that Congressman Ewing's corn went from $2.60 to $2.10? We cannot control that value. That is something that is out of all our hands because it is driven by market. What I am offering you is something that is stable. We keep talking about CRC at $60 an acre this year, I think it is, Jimmy, for cotton, the CRC plus $60 an acre, there is not a farmer in this room that can afford $60 crop insurance with 48 cents and 58 cents cotton. It is impossible. So if we get something that is not market driven and does not have anything to do with production, you can buy per dollar level, that is so simple to me.
Page 91 PREV PAGE TOP OF DOC Mr. ACKERMAN. I am not disagreeing with you. I am just saying that to get to that bottom line would require changing the law and it may mean going beyond the crop insurance law to get there.
Mr. METTS. Is not that what they are proposing to do, change the law?
Mr. CHAMBLISS. I think the real answer to your question is, he is saying he does not know what the market price is going to be when you buy the insurance. With tobacco, you know what your floor is going to be, and that is what you are insuring. You know you are going to get whatever the support price is, and that is the difference in being able to insure rain and hail on tobacco than it is from getting a true revenue figure on any other crop early in the year.
Mr. STRICKLAND. My name is Barry Strickland. I am the manager of Sowega Cotton Gin over in Decatur County, GA. I have got a couple of comments. Brother Darvin Eason over there was talking about irrigation awhile ago compared to the non-irrigation. One of my stockholders has one of the highest average yields in the county; 99 percent of his acreageI will not say that, probably 95 percent of his acreage is irrigated. He had 1,200 pounds an acre made until September. I mean, it was on there. You could see it, all of it open. We got 11 inches of rain. He gathered about 650 pounds an acre average, and not only that, but the quality was 52s and 53s. You know what that means if you are a cotton farmer. We are talking about severe income reduction. And if you gotin a year like this year with prices like they are, under constraints that you are working on, Mr. Ackerman, this thing is doomed to failure from the start. I just want to say this. As long as this country is going to have a cheap food policy and food and fiber, et cetera, is going to be used as a foreign policy tool, as it has in the past, this Government is going to have to subsidize the agriculture in some means, and we can make it more palatable to suburban or urban congressmen by calling it crop insurance or by calling it LDPs or whatever you want to call it, but we are going to have to subsidize agriculture. And I do not really care how you do it, but it needs to be fair, and the way it is being done right now, it is not. These guys are asking for something simple and straightforward and cover the cost of production. I do not know what we have got to do, if we have to change the law, but that is what we need to do, and that is what we need to consider doing. Thank you.
Page 92 PREV PAGE TOP OF DOC Mr. CARVER. I just wanted to make a comment. I think we are going to have 4 years left on the Freedom to Farm bill. It would have been slim for a lot of folks around here if there had not been the POT payments this year and the extra transition payments, but from what you read, after the end of 4 years, basically crop insurance is going to be the safety net. As long as you have, you know, a bunch of guys with actuarial tables and analysts and whatever to make the program sound, you will not ever be able to transfer that safety net onto the crop insurance program. It is two competing ideas. You cannot use crop insurance to compete with the subsidies in foreign countries. It just seems it is two competing ideas to have a business that if they have a loss that the premiums will still pay for the business, and that is just myI believe that is sort of what you were alluding to that you could come up with a program like that, but somebody is going to have to pay for it, and definitely the premiums will not pay for it.
Mr. CHIZEK. Hey, my name is Jim Chizek. I work for a crop insurance company, so do not kill me in this room. It sounds like we are getting a little ugh. But I just have a quick comment, and a couple of quick questions.
Number 1, are you holding any of these forums for any dollar plan products or in any dollar plan areas? You know, say, south Florida in particular. I mean, are they having the same sort of problem with the dollar plan as far asin comparison to APH. That is question No. 1.
Then question No. 2, is there pilot programs being run? And beyond popular belief, with me being involved in it and doing farmer meetings like this other fellow who said he had done a bunch, we try to stay on the road and do these things, some of them are working in some areas, andbut the problem, I think in general is it is not working for everybody in every area, and I do not thinkthe question over here about his comment concerning why we cannot do this, and why we cannot just have a product where I want so many dollars worth of coverage, I think a lot of times what we get into in Georgia is we are concerned about drought, unless we are irrigating, and we are concerned about hurricanes if we are in north Florida, in the Panhandle, or in south Alabama or in southwest Georgia, whatever. A lot of times what it seems like we are doing is we are giving a lot of bang for your buck, and it looks like we are doing that, and we have got a lot of the stuff in the policy, do not get me wrong, but when we talk about actuarial soundness, sometimesthis is a personal opinionthat if we would back out, and back out some of the perils, could we not save premium dollars to the producer? So, run with that, I guess.
Page 93 PREV PAGE TOP OF DOC Mr. ACKERMAN. On your last question, yes. If you back out some of the perils, you can save premium dollars to the producer.
I would like to make this comment on your comment. A lot of what is happening in the crop insurance program is working. Despite all of the criticisms, all of the problems we are havingand those are legitimate, and I do not understate them at alla lot of what is in the program is working, is sound. This year we paid out quite a lot of money for losses. A lot of people were well covered and payments were made quickly. The payments showed up in a timely way and they were very seamless. We had very few complaints this year about service, even given all the problems we had around the country. The only real problem in this part of the country had to do with the aflatoxin and some of the tests having a lot of disparities in the aflatoxin tests, but that is the only major insurance problem that I have heard about in this part of the country. I think the reason there is so much focus on crop insurance is that we are going through a severe test in the farm economy right now. We are going into a period of low prices, of problems with trade. Many areas, like south Georgia, coming off several bad years are creating a lot of economic stress, and crop insurance being the principal safety net element that people are looking to perform, in many ways looking for crop insurance to do a lot of things beyond what it was designed to do. And I think that is why we are having a lot of the debate that we are having. We have been pumping out over the past 2 years a lot of new crop insurance pilot programs to test a lot of ideas. CRC has only existed for 2 or 3 years. The whole farm revenue program, this is its very first year. Frankly, we do not know if it works yet. We were waiting to see how many farmers are actually going to sign up for it, but it is a new idea based on the gross revenue from your tax return, and it may give us some answers to some of these things.
I think a lot of what we are reacting to here and what we need to react to is the fact that the agriculture part of the American economy right now is under a lot of stress and crop insurance, given the current mosaic of programs, is the one that is most out front. And when we look at it as part of the farm safety net, we are going to have to look at the whole range of programs, how they all fit together. It is important to remember this year crop insurance was not the only player at the table. We paid about $1.7 billion in indemnities. Loan deficiency payments paid out about $2.3 billion this year. CPR paid out quite a lot of money this year. AMTA paid out a lot of money this year. A lot of programs were there. Crop insurance is simply the one that was on the front line and so was in the middle ofhas had the highest expectations for fulfilling an enlarged role.
Page 94 PREV PAGE TOP OF DOC So I guess that is the comment that I would make. Despite all the problems, there were a lot of positives. Not everything was negative.
Mr. MCMILLAN. My name is Tim McMillan. I am from Enigma, GA. I am a tobacco, cotton and peanut farmer. Tobacco pays my bills, which is tough, by the way.
I found whether it is on my farm or in my home if I solve a problem before it occurs, it is cheaper than trying to solve the problem after the occurrence, and so I do not think I am straying when I ask you this question, but have you considered giving farmers some kind of investment tax credit? When I say that I am talking about the old kind of tax investment credit where a dollar spent, it came right off the top of your taxes, to put in risk management pools such as center pivot irrigation and drain tower and PVC pipe and things like that that wouldthis would encourage the farmers to do these things to reduce their risk, and it would also give them funds to do it. Because like on our farm, we would like to put in more irrigation, but you can only do so much over a period of years, and a lot of times, you knowyou know, you try to keep your debt down. So I just wondered if you all had considered trying to give us some kind of tax credit or something to help us put in some risk management pools.
Mr. EWING. I think the answer to that is, yes. Yes, we have considered it as part of tax policy. It is not part of this subcommittee's responsibility. That is a Ways and Means question, but we have discussed it when we have had tax bills before the Congress. There are many, many different parts of our society and even of agricultural who have certain tax provisions they would like to see in any tax bill that passes, and probably the one reason that it has not been enacted, and you know it was part of the law at one time, is just the costthe lost revenue that it cost, but it certainly is a provision of the tax law that you may see again at some time. I guess my opinion is probably not in the next few years.
Mr. FUTCH. John Futch.
Mr. EWING. One more question, John. You get to be the last one.
Page 95 PREV PAGE TOP OF DOC Mr. FUTCH. Wonderful.
Mr. EWING. So sum it all up for us, please.
Mr. FUTCH. I am an agent, I sell insurance. We have paid out a lot of claims. No one has refused their claim check. Everyone has taken it, and 99 percent of them have smiled. We need this program. Thank you for coming tonight.
Mr. EWING. Thank you, John.
Ladies and gentlemenwell, I always get talked into one more.
Mr. TANNER. Like all these other farmers and people here, I appreciate you coming, but I am surprised that you got to be chairman of a subcommittee being so naive to think that you elected officials are the Government. I mean everybody knows the bureaucrats are the Government, you are just temporary help. You may not be here 2 years from now. [Laughter.]
Mr. EWING. We keep trying to fool you people though that we are the Government.
Mr. TANNER. I know we have heard some rumors that there is going to be a reduction of staff in our ASCS office. I agree that we should reduce the size of Government, but let us do in Washington. These people on the local level are overloaded. We have combined counties and they have got such a load it takes weeks to do things that they would normally be able to do in a short period of time, and I have been to Washington. I have been to the Department of Agriculture, and I think we are paying a lot of people to stay in that big cafeteria over in the annex that I think we could spend our money better here with our local folks.
Mr. BISHOP. Can I comment on that before the chairman does? [Laughter.]
Page 96 PREV PAGE TOP OF DOC Mr. BISHOP. When the Department of Agriculture was the first department to complete its reorganization and reduce the number of employeesand the Secretary then was Mike Espy, and his decision was before he cut any of the program, the people who actually delivered the services, where the rubber met the road, that he was going to cut Washington first. That is the very first area where cuts were made in the Department of Agriculture when they reorganized in Washington. Unfortunately, with the stress it has placed on the Department of Agriculture now and particularly with the last three or four growing seasons where we have had disasters, a lot of stress is being placed on the Farm Service Agency and the people who deliver the services. They are being asked to do more with less, and while there is some sentiment that we might need to do some more cutting, I am not so sure that we can afford to cut anymore in those people that are delivering services. In fact, I think we have cut to the bone and we need to give some more help to the people who are processing those claims and processing all of the other services that the producers are actually utilizing in the field. I agree with you about Washington. We need to keep that trim and get more for less there, perhaps, but we need to have more people in the field who are actually delivering that service where the rubber meets the road.
Mr. EWING. I think Sanford has summed it up very well, and I think we all here believe that while a couple of years ago we thought we could reduce the size of these offices, we have in the last year, and maybe the last 2 years, put enormous new burdens on those offices, and we are going to expect them to do the work and do it in a timely fashion, and with a pleasant smile, we are going to have to give them the help to do it. And while the proposal is to cut that budget this year by 6.1 percent, I would doubt that happens. It just is not able to make it come together to do that.
Ladies and gentlemen, thank you on behalf of the committee for being here and for you input. I thank the South Georgia College for allowing us to meet here and for everybody who helped make this come together, to Sanford for participating and for Saxby for hosting it. We have learned something today and it is our responsibility to try and bring it together in the nextthis is not going to happen for this crop year, but later to bring it together in something that is very meaningful.
Page 97 PREV PAGE TOP OF DOC Saxby, do you want to add anything?
Mr. CHAMBLISS. Thank you, Tom.
Well, let me just say we have got a few more folks in Washington I still think we can cut out and we are going to work on that, I promise you.
I want to thank, again, all of you for being here. I particularly want to thank Sanford and Tom for taking the time to come down. We all operate on very busy schedules, none busier than you all, and it means a lot to me personally for you all to take your time to come here, but it also means a lot to me personally for Tom Ewing and Sanford Bishop and Ken Ackerman and Dr. Buchanan and all these folks to be here to listen because, folks, nobody doubts that Ag country all across the United States is in serious trouble, and I think that was made perfectly clear in Perry. It has been made perfectly clear here again tonight. We understand that. And can we solve all the problems? Absolutely not. But I think what you are going to see is a conscientious effort on our part to do the very best that we can from a Federal perspective within certain constraints that we have to operate in to try to continue to deliver farm programs that are meaningful to you.
We are going to take this information back, as Tom says, and we are going to decipher it in our committee, and we are going around the country. I wish south Georgia was the only place they would hold these hearings; we could have a couple more of them. But we are going to hold these hearings all over the country, and we are going to be hearing some of the same things in other parts of the country that we have heard tonight, just from a different perspective.
So, again, thank you all for being here. Thanks to Ed Jackson's folks at South Georgia College for hosting us, and again, we appreciate all of you being here.
[Whereupon, at 7:00 p.m., the subcommittee was adjourned, subject to the call of the Chair.]
Page 98 PREV PAGE TOP OF DOC [Material submitted for inclusion in the record follows:]
["The Official Committee record contains additional material here."
REVIEW OF THE FEDERAL CROP INSURANCE PROGRAM
THURSDAY, FEBRUARY 18, 1999
House of Representatives,
Subcommittee on Risk Management,
Research, and Specialty Crops,
Committee on Agriculture,
The subcommittee met, pursuant to call, at 1:30 p.m. in the Avinger Auditorium, St. Andrews Presbyterian College, Laurinburg, NC, Hon. Thomas W. Ewing (chairman of the subcommittee) presiding.
Present: Representative Hayes
Staff Present: Stacy Carey, staff director, Subcomitee on Risk Management, Research, and Specialty Crops; Ryan Weston and John P. Riley.
STATEMENT OF WARREN BOARD, PRESIDENT OF ST. ANDREWS COLLEGE
Mr. BOARD. I am Warren Board, I am the president of St. Andrews Presbyterian College. I want to welcome all of you, Congressman Hayes, Congressman Ewing, and other distinguished guests this afternoon on behalf of the college community.
It is good you are here just a couple of days before the 100th birthday of Scotland County. St. Andrews imports commodities from every State in the Union, and 30 countries, and exports finished products all over the world.
Page 99 PREV PAGE TOP OF DOC The college was planted here about 40 years ago this spring, in Aprilwe are not all that old, planted by Highland Scots, the descendants of farmers who have been hereabouts for a lot longer than 40 years. And we are growing in what used to be about 800 acres of cotton.
So I want you to know that this liberal arts college whose programs are recognized internationally is inextricably tied to the destiny of agribusiness in this region.
I am glad you are here. I think this is a wonderful opportunity for those of us who depend on agriculture to have a grassroots conversation with those whose policy decisions determine our destiny, so I wish you well this afternoon. I hope the conversation is a productive one.
At this point I would like to turn the program over to our Congressman, Robin Hayes. Robin.
OPENING STATEMENT OF HON. ROBIN HAYES, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. HAYES. I want to step up to this microphone for just a minute. You can tell this is a Presbyterian institution, everybody is fighting to get in the back row. What were we going to do to get them to move down a little bit closer?
VOICE.You cannot do anything.
Mr. HAYES. You cannot do anything.
Well, I did make the mistake one day, I thought I was going to be innovative. I was in my Presbyterian church at home, and I said ''People need to get to know each other, they have been sitting in the same pew, the same people for 300 years. I am going to put people in a different pew.'' Mr. Chairman, that was one of the dumbest things I have ever done. It took the church 3 weeks to get over that.
Page 100 PREV PAGE TOP OF DOC But maybe that is the problem, but anyway I would invite you and encourage you come down front, and we are really glad you are here. And I want to take just a few moments to introduce our very, very special guests, and I am going to name some people, and always you run the risk of forgetting somebody, so I do not want to do that.
First our special guest is someone who has become a very dear friend of mine in a short period of time. When you go to Washington as a newcomer you always are looking for somebody that will give you a smile, a pat on the back, and some encouragement, but more particularly someone that will point you in the right direction because there are a lot of directions that you can travel in Washington. Tom Ewing has been that kind of friend to me.
Tom is beginning his fifth term, he is from the 15th Congressional District of Illinois, which is an area in Illinois that raises a lot of corn, a lot of soybeans. He shares ideas, information, problems, and the challenges that many of you face here in the eighth district, so I think it is particularly relevant that he is here with us today.
I always need to refer to my dear friend Jim Graham. Is there anybody in here that does not know Jim Graham?
That is what I thought. The one saying that everyone remembers Jim Graham, ''I love my job.'' Well, folks, this is my 42nd anniversary, I have been on the job 42 days, I love my job, and I appreciate your help in getting me there, and I am going to make sure that I earn your trust and your respect so that I can stay on the job and continue our idea of bringing Washington here to the district.
As I say, Tom Ewing is the chairman of the subcommittee on which I am privileged to serve, Risk Management, Research, and Specialty Crops and we will talk about a lot of those issues, but most of the talking I hope is going to be done by you. We are here to listen.
We particularly enjoyed our visit a couple of weeks ago when we met downtown, and again I think the solutions, the answers are generated here in our district, they do not come from Washington, but if you can give us the information we need we will take it back to Washington and try and fashion something that works for the people. We serve at your pleasure, and we are there for you.
Page 101 PREV PAGE TOP OF DOC A couple of people I want to call your attention to early on: Eva Clayton was scheduled to be with us today, and unfortunately she is unable to come.
Also a misnomer. People think that when we are not in Washington we are not working. This is a district work week, this is not a recess period. We are in our districts meeting with our constituents trying to help solve problems, we are not at home on vacation. So, Tom, thank you for coming here to our district.
Having said that, Mike McIntyre who is also a good friend of mine, and we are almost across the hall from each other in our apartment building, is tied up in his district doing the things that he needs to be doing, but he is certainly interested and sends his regards. And one of his folks is here with us today, I have got his name on my list, Bill Bonchu. Bill, raise your hand. If anyone needs to talk about things from the seventh district, Bill is here, and we are sorry Mike could not be here. He worked very, very hard to get here, he has been a great person to work with.
Also we have got some staff folks from Washington on the Agriculture Committee. We have Stacy Carey, John Riley, and Ryan Weston.
Mr. HAYES. With the U.S. Department of Agriculture Larry Atkinson.
The North Carolina Department of Agriculture I think we have got someone. Name, please? I have got the department without the name.
Mr. DOCKETT. David Dockett.
Mr. HAYES. David, thank you for being here.
We have Mark Fleming and Michele Morrow from NC State. Thank you all for being here.
Farm Service in Raleigh, Phil Barland, and some local representatives. Thank you for being here.
Page 102 PREV PAGE TOP OF DOC All right. And for the Farm Bureau, we have got Peter Daniel from Raleigh. Thank you for being here.
Have we missed identifying anyone that wants to be identified? Has anybody been identified they want to disavow having been here?
Anyway, thank you all very, very much for being here. We look forward to your questions, your comments, and this is a great opportunity for us, and we appreciate your willingness to take the time and come and be with us today.
And thanks to the doctor and St. Andrews for hosting us today.
Mr. Chairman, without further ado I am going to turn it over to you, Chairman Tom Ewing. Let us give him a warm welcome. [Applause.]
STATEMENT OF HON. THOMAS W. EWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. EWING. Thank you, Robin. I am going to get this meeting started, and I will make a few comments myself, but as Robin has said we are here to hear from you and to find out what is on your mind.
We want to discuss primarily crop insurance and risk management, but I am sure some other issues will come up.
Larry Atkinson who was introduced, I want to make it plain that Larry has come down here at our request. We had his boss with us in Georgia earlier this week, and many of the things that we are going to talk about concerning risk management he will have the answer, and he will be up answering questions and talking about some of the issues that I would anticipate will be raised in this meeting.
As I said after a while in Georgia, I said ''I do not want anybody picking on him when he leaves, because he is just telling you what the law says today. That does not mean that it will not change. He is not here to say we cannot do what you are suggesting, he is here to tell you the way it is today, and so it gives us a real good comparison, and we are really glad to have you, Larry, and thank you for making the effort to get down here.
Page 103 PREV PAGE TOP OF DOC I want to thank all of you for coming out today. It is a pleasure to be here in Scotland County. I am sure that most of you never recognized that a person by the name of Ewing would be Scottish, but that is a good Scottish name, and my ancestors did not come to North Carolina, they ended up in Virginia and then moved on to the Midwest. But it is good to be here and to visit with you today about some of your concerns.
I am really pleased to have Robin Hayes on the committee. He brings a whole new breadth of information and concern to the Subcommittee on Risk Management, Research, and Specialty Crops.
I am a corn and soybean farmer, and I am also going to be checking on your soybeans down here while I am here, and if I think you are growing too many of them we will take care of that in the next farm bill, because we cannot grow all the things you can grow, and so we have got to have our soybeans, but I know that this is pretty good soybean country too.
But Robin comes to the committee, and it is an important committee because we deal with some of the things that are really most personal to the farmers, and today is certainly an example for everyone in agriculture.
Things are tough in agriculture, and we know that in Washington, and we are struggling with it also because the answers are not simple. Many of the things that impact agriculture today are things that are beyond our control even in Washington, they are international in scope, but we want to talk about the risk management program and how we can make it better, and we are interested in learning from you what works for you, what you do not think works, what we can fix, and we need that information.
We are going to be doing meetings like this around the country. We have done some, we have been to South Dakota, we have been to Georgia, we have been to North Carolina, we will have some hearings in Washington, and we will be out in the Midwest and probably on the west coast before it is over.
Page 104 PREV PAGE TOP OF DOC We have got a two-track plan out there. Number one is there is not much we can do with crop insurance this year. Most of you are already, or will soon be visiting with your insurance agent and deciding what you are going to do about crop insurance for the 1999 crop.
We might be able to make some changes that will improve it, but basically that is one track to do what we can now to make it a little better.
And the other track is to wonder when we are going to revamp this program, and that is one of the announced ambitions of the new chairman of the Agriculture Committee, Larry Combest, to redo the Federal crop insurance program to make it a much better safety net for American agriculture.
And so the other part of our track is to get some ideas about what we can do to make this program much more of a safety net than it has been in the past.
So we are interested in your comments on how the program works, what we can do today, what we can do in the long range to make this a better program.
I am pleased to be here in Robin's district, and I thank you for announcing the different staff members and recognizing them.
Mrs. Clayton was not able to be here, and she has asked that a letter be placed in the record at this time.
[The letter from Mrs. Clayton follows:]
HON. THOMAS W. EWING
Chairman, Subcommittee on Risk Management, Research, and Specialty Crops
Committee on Agriculture
February 17, 1999
Page 105 PREV PAGE TOP OF DOC DEAR TOM:
It is with much regret that I must inform you that I will be unable to attend the hearing of the Subcommittee on Risk Management, Research, and Specialty Crops, scheduled for Thursday, February 18, 1999. A long-standing prior commitment that I am unable to change does not allow me to join you.
My disappointment is not being able to attend the hearing is heightened by the fact that it is being held in Laurinburg, NC. And, my disappointment is further elevated by the fact that the subject of the hearing ''Review of the Federal Crop Insurance Program'' is a matter that I feel very strongly about and to which I have devoted considerable time and attention.
Please express my deep regret and disappointment to the other members of the subcommittee, to the witnesses and especially to any North Carolinians who might be in attendance.
EVA M. CLAYTON
MEMBER OF CONGRESS
Mr. EWING. The way we are going to operate is we are going to start as soon as I am finished with whoever wants to make the first comment. They get the door prize, whoever speaks first gets the door prize, because I found out that sometimes people are a little hesitant to be the first one up, but once the ice is broken we get plenty of comments, and that is what we are after.
There are microphones in different places. And we would like for you to come to the microphone because what we are doing here today is being recorded, and there will be a permanent record, and if any of you do not want to talk, but have something in writing that you want included in the record we will do that also.
Page 106 PREV PAGE TOP OF DOC We would like to ask you to keep your comments to the point and as quick as possible so that we can hear from as many people as possible in the time we have allocated.
So with that, let us get started, and like I say the door prize goes to the person who speaks first. There we have got one.
Mr. HAYES. Peter Daniel with the Farm Bureau.
Mr. EWING. The door prize is cleaning up afterwards. [Laughter.]
Mr. DANIEL. We at the Farm Bureau are very good at doing that, sir.
Chairman Ewing, we welcome you to North Carolina. I am Peter Daniel, I am representing the North Carolina Farm Bureau Federation, and we are pleased to be here with you and Congressman Hayes today.
President Jenkins sends his greetings and regrets that he could not be here. We have our presidents' conference going on in Raleigh right now, and we have all our county presidents in town trying to figure out what in the world we are going to do about tobacco, so timing is of the essence, and I am just going to cut right to my comments.
The North Carolina Farm Bureau firmly supports changes in the crop insurance program. We support long-term solutions which do not require legislation every year. There are about 1.3 million crop insurance policies nationwide with a total protection of about $25 billion. Only 63 percent of eligible acres are covered because of inferior coverage and high rates.
We are convinced that a dependable, voluntary, and comprehensive crop insurance program plays a significant role in both production financing and the development and implementation of successful marketing plans.
There is no doubt that the program needs to be modified to stimulate increased producer participation and provide better coverage levels in the options across more crops, regions, production practices, including the needs of livestock and dairy producers. We suggest the following:
Page 107 PREV PAGE TOP OF DOC Increase the farmer premium subsidies to make the program more affordable. Crop insurance rating practices should be modified to encourage a broader participation level, particularly among lower-risk producers.
Regulatory incentives and monetary reimbursements for approved insurance products should be provided to encourage the private development of risk management products, and the insurance program expanded to additional commodities.
Alternatives must be made so the program is able to respond to multi-year disasters and to economic disasters.
If I may, we have some other areas of concern to our members in North Carolina, and I would like to say that the North Carolina Farm Bureau strongly supports the establishment of a Southern Dairy Compact. It is one of our priority issues.
North Carolina is one of the most diversified agricultural States in the Nation. As all farmers, we are dependent upon the use of farm chemicals. We are concerned that the Food Quality Protection Act should be implemented, that when it is implemented that it be based on sound science, and that the cost of reregistration of agriculture chemicals on the minor crops grown in this Stateand, sir, all our crops are identified as minor, they are major to usbut the re-registration costs will cause the chemical manufacturers to withdraw use of that chemical for our crops. We ask that you diligently oversee EPA's implementation of the Food Quality Protection Act.
Also North Carolina is the largest user of H2A workers in the country. The workers provided under this program are an instrumental element in our farm economy. Over 50 of our 100 counties use H2A labor on the farm. Tobacco, fruit and vegetables, including sweet potatoes, nursery and Christmas tree growers simply cannot operate without an adequate supply of labor. A severe shortage of labor will leave many farmers in our State bankrupt, stranding millions of dollars in investment, and putting a serious strain on the already-crippled rural economy. We ask your support as changes are proposed to reduce bureaucratic roadblocks and control skyrocketing costs.
Page 108 PREV PAGE TOP OF DOC And finally, unmanufactured tobacco is excluded from access to Government export programs. Flue-cured tobacco has suffered an approximate 30 percent cut in quota over the past 2 years, and burley has received about the same amount of cut announced 2 weeks ago.
While loss of quota is a direct result of the master settlement agreement between the tobacco manufacturers and the States' attorneys general, lack of access to overseas markets exacerbates the situation. Tobacco farmers should be treated no differently by their government than any other American farmer.
And I would like to conclude by again thanking you for the opportunity to share our thoughts on crop insurance and other issues.
I would like to introduce Mr. Elton Braswell. He is vice-president of the North Carolina Farm Bureau, and I believe will have comments a little bit later. And also Ron Cox and Don Carr are also here from the Farm Bureau, and we are expecting some more coming in shortly.
Thank you. [Applause.]
Mr. EWING. Thank you very much, and if you have a written statement and want to leave it with us, we would be more than happy to have it.
Who is the next person that would like to comment? Please just introduce yourself and start in.
Mr. BYRD. Congressman Ewing, Congressman Hayes, I am Wade Byrd, I am here representing the peanut growers in the Virginia-Carolina area. I am a peanut farmer and corn farmer from Bladen County.
A meeting of the Virginia-Carolina growers was held in January to discuss Federal crop insurance. There are many producers in our area who carry crop insurance, with the 65 percent coverage probably the most prevalent. However, there are also a number of producers who do not carry insurance because the benefits do not justify the cost of their situation.
Our meeting concentrated on crop insurance for peanuts, and we discussed changes which are needed within the framework of the crop insurance system as it exists today.
Page 109 PREV PAGE TOP OF DOC We did not discuss trashing the current system in favor of a new system, and we are not in favor of a revenue insurance program if it is to be used as a means to abolish the present peanut program.
We identified four important changes which should make the program more affordable and worth the effort. These are:
(1) Crop insurance guarantees are based on a 10-year yield average, with the highest and lowest dropped in the case of peanuts. If a producer has 3 bad years in a row with yields below his average, then his guarantee continues to drop each year leading to less coverage the following year when he needs it the most. To be fair, crop insurance should be based on normal years without being adjusted each year based on his recent history.
If a producer has the proven potential to be a 3,000-pound-per-acre producer, then this should be his yield every year, which, when multiplied by his selected coverage level of, for instance, 65 percent, gives him a guarantee of 1,950 pounds per acre.
(2) Instead of lowering a producer's guarantee when he has a few bad years in a row, usage should be reflected in the premiums paid each year. There is crop insurance abuse in some instance, and if records show claims each year, then the premium should go up for that particular producer, and, believe me, there are producers out there who are producing for every crop rather than producing a commodity.
At the same time, if a producer goes a period of years with no claims, then his premium should be reduced. An individual's premium should be raised or lowered depending on his experience, which will make crop insurance work just like many other types of insurance.
(3) Most farmers carry the 65 percent price election rather than a higher level of coverage, because the higher levels are not affordable. There is a 40 percent premium increase when you move from the 65 percent price election to the 70 percent price election. From 65 to 75 percent the premium doubles. This is due for the most part to the amount of Government subsidy provided at each level. Government subsidy levels range from 41 percent at the 65 percent selection to 13 percent at the 85 percent level. If higher price elections were subsidized at the same amount as the lower elections, then more growers would buy crop insurance.
Page 110 PREV PAGE TOP OF DOC There is very little profit in peanuts at present, but as is the case with most commodities growers who buy the 65 percent coverage cannot even expect to recoup their production costs if a claim is filed. This does not give the producer a chance to break even, which puts him in the hole headed into the next crop season. It is very important, however, to build safeguards into the system to prevent abuse if higher coverage levels are more affordable.
(4) More time needs to be given for reporting by the producer to the company he deals with. The current reporting date is June 10, which is one of the busiest times of the year for most farmers.
The above changes within the context of the current crop insurance program would make crop insurance more affordable, more effective, and would provide incentives for more participation. As a greater number of producers participate in the program, loss ratios should improve in most areas of the country, which would help to stabilize the system.
And if we are talking about risk management, to me a program with a supply control system such as the peanut and tobacco program is one of the best avenues to help eliminate risk. At present I understand peanut manufacturers are lining up an extensive lobby program to try to abolish the peanut program during the next farm bill.
Congress needs to be extra careful not to take the bait that these manufacturers are hanging out there. The manufacturers are tooting their horns. We have had a small increase in peanut consumption in the past 3 years. Manufacturers are trying to take credit for this increase in consumption. They say they are responsible for it due to the price decrease at the farmer level that the 1996 farm bill provided. This is a bunch of bull. The manufacturers have not passed this price decrease along to the consumer in the same way that they have not done it in the hog industry recently. We need to recognize the evils that are possible here.
The recent increase in the past 3 years in consumption of peanuts has been due to some positive research data that has come out indicating the positive aspects of having peanuts included in one's diet, and Congress needs to be careful not to accept these false statements that the manufacturers are making.
Page 111 PREV PAGE TOP OF DOC I thank you for this opportunity, and look forward to working with you in the future. [Applause.]
Mr. EWING. Thank you for your comments. You certainly did touch on some of the things that we have heard other places about the current crop insurance program and how we might improve it, and that is exactly what we are looking for are suggestions such as yours.
I will also say that the peanut program and the peanut responsibility is part of this subcommittee's jurisdiction, and a lot of people wonder how a corn and soybean farmer happened to end up with noncontroversial crops like peanuts, sugar, and tobacco, and I sometimes wonder that too.
There is and has been a lot of support for the programs that we passed in 1996 for peanuts particularly, and we fight that battle. Robin will get a taste of that. Every year when we go through the appropriations process we have won, we will continue to win that battle because I think the program is working, and it is helping your farmers, and that is the way we want it.
Who else would like to step up?
Mr. BAXLEY. Mr. Chairman, my name is Roy Baxley, I am a cotton producer from over in South Carolina just across the line. I appreciate your having this hearing today and coming over to address our needs in crop insurance.
Congressman Hayes, the last time we met you were Candidate Hayes, so I think I should congratulate you. It is good to see you in Washington now.
I would like to just make a couple of observations. I do not have any prepared remarks. Under the current farm law that we have now we basically have no safety net. That was pretty much removed. I think a properly constructed crop insurance program that is adapted to the various growing regionsfor example, the Southeast, the Far West, the mid South, et ceteracould become that safety net again if it would properly address the needs of the various regions.
Page 112 PREV PAGE TOP OF DOC And specifically I mean for example we in the southeast should not have to subsidize the high-risk areas, for example like Texas, through higher premiums.
I personally do not carry cotton crop insurance on my farm, or Federal crop insurance for cotton. Obviously the premium is too high, the coverage is too low, as has been brought out by the other people here that have spoken.
We definitely need lower premiums, we need higher coverage. And just to give you a brief example, by previous 5-year average yield is 765 pounds on my farm. In 1998 it would have cost me $57 per acre to have locked in a yield of 574 pounds. Now, three times in the last 26 years have I produced under that level of 574. So I would have spent $57 an acre on approximately 1,200 acres of cotton, and even last year as bad as the crop was I would have collected nothing.
This year with the reduction in premium I was told this morning by my agent that that same level of coverage would cost me $31 per acre, so I am still paying a tremendously high premium and locking in a yield that hopefully I will never make, or make less than.
I also have a neighbor in Hampton County that I spoke with at a meeting Tuesday morning of this week who is from Hampton County in lower South Carolina, and he made the comment that he had just checked with his agent, and he has I think it is like an 8-year yield of 700-plus pounds, a few pounds over 700. It would have cost him $39 an acre to lock in a yield of 525 pounds, which like myself he said he has rarely made below that yield. So that is just kind of an example on my farm of what it would cost me, and that is why we just do not carry it.
Mr. EWING. Is all yours dry land? Do you use irrigation?
Mr. BAXLEY. We have about 10 percent irrigated.
Mr. EWING. And is your history of production on the irrigated, is that pretty stable? I mean do you have the most fluctuation because of drought on the dry land?
Page 113 PREV PAGE TOP OF DOC Mr. BAXLEY. Oh, yeah. The real variable in our yields is drought, heat and drought. And even this past year the dry weather was so severe, and of course the heat was prolonged to such an extent that the irrigated cotton did not even do as well as it normally would under a typical growing season.
Mr. EWING. An issue that came up in our meetings before was that the crop insurance as it is currently constituted, you go in and many farmers have a lot of irrigated, maybe 50 percent or more irrigated, and it totally skews their production to the point they never can collect on their dry land.
Does the fact that you have a smaller percentage, does that still throw off your chances of collecting under the current policy on your dry land cotton?
Mr. BAXLEY. I think what throws off our chances of collecting is that fortunately we farm pretty good land, and we have a high yield average. Over the past 5, and even 10 years our yield average is pretty high, so therefore that is what really throws out our chances of collecting.
Now, the area that I farm in, we are kind of hampered by small fields, really small fields, and of course they are irregular in size and shape, and that really restricts us as far as irrigation possibilities, so it is hard for us to put in irrigation at an economically feasible price and make it work.
Mr. HAYES. I would assume being in this part of the world your land is sandy; right?
Mr.BAXLEY. Yes, sir.
Mr. HAYES. That is an unusual characteristic. You go to a certain point in the eighth district it is sandy going east, and it becomes red clay going west. It is rather interesting how that works out.
Mr. BAXLEY. And that is why I say that the crop insurance program needs to be written, or adapted to each of the various growing regions. You cannot have a crop insurance program and just give blanket coverage to the whole United States, or to even the whole cotton belt region, because the regions vary so much in their production methods it just will not work.
Page 114 PREV PAGE TOP OF DOC Mr. HAYES. We want to thank the chairman for bringing the rain today. We have not had any recently either.
Mr. BAXLEY. If he brought it today, could he come back in July for maybe a 2-week visit? [Laughter and applause.]
Mr. EWING. I would not want you to really know. I will take credit for it today, but I do not want to come back in July and have you know the truth.
Mr. BAXLEY. If you can do that, I think we can take up a collection, and offset your expenses.
Mr. EWING. Thank you.
Larry, did you want to comment?
Mr. ATKINSON. I have one thing on his issue. Your rates for your particular county are not based on, you are not subsidizing producers in Texas. Your rate is derived from the experience, historical experience for the producers in your particular area of the country, so you do not have to worry about subsidizing the producers from Texas. It is based upon your local growing conditions, and your past history of that particular county.
Mr. BAXLEY. Well, what I was addressing my remark to was any reform that is done in the program, if we scrap this program and go with a new one I would like to make sure we continue to have it done region by region.
Mr. ATKINSON. Great. I agree 100 percent.
Mr. HAYES. That is a perfect opening for the dairy farmers to ask why your price of milk is set by a cheese price in the Midwest, John.
Mr. EWING. The last speaker came up, like we anticipate many of you will, without prepared notes, so you do not have to have prepared notes to tell us what your concerns are.
Mr. HAYES. You all were not nearly this shy 2 weeks ago.
Page 115 PREV PAGE TOP OF DOC Mr. EWING. We have got two more coming.
Mr. GIBSON. Mr. Chairman and Congressman Hayes: I have about the same notes that Mr. Baxley had. The only thing I would like to add to that is that if you all change the crop insurance would there be any way where you could address income protection, since we do not have any safety nets? You are taking away our deficiency payments, and our transitional payments I assume will phase out in 2002. Is that something that something that could be addressed where we are looking at income protection as well as yield protection? Because like Mr. Baxley, my yields do not ever go down far enough to collect on the insurance. You pay $50 an acre for insurance, and you never lose that much crop if you are actually trying to make a crop.
If we lose step 2 and LDP, right now we are looking at 57 cents for cotton, we are competing with the Chinese, and it is my understanding through some of the meetings that I have been to that the Chinese are subsidizing their farmers at 80 cents, and turning around and selling it at the world market which is 40-plus cents. It is kind of hard to compete with that if we do not have a floor or a safety net where we can at least make a profit.
Mr. EWING. What crops, are you cotton?
Mr. GIBSON. I grow 1,000 acres of cotton plus or minus, corn, soybeans, and wheat. In addition to that I have a livestock operation where I am finishing out hogs under contract. A lot of people are against that, but that will be the only thing that will pay my bills in 1999 at current price levels.
Mr. EWING. Do farmers in this area use the LDP payment? Is that a program that you have used a number of years?
Mr. GIBSON. All of my cotton went through the LDP. I did not put any cotton in the loan.
Mr. EWING. Is that just this year, or have you used it in the past?
Page 116 PREV PAGE TOP OF DOC Mr. GIBSON. To my knowledge in the 15 years that I have been growing cotton I have never put any cotton under the loan. I know that is a tool that was used, but I usually forward price part of it, and I have just never used that option to go into the loan.
Mr. EWING. The LDP payment is a program that has been on the books, I cannot speak for how many years, but a number. Only this last season the first I ever knew it was on the books or was ever actually used in Illinois for corn and soybeans, but I had heard the comment that it was used for different crops in different parts of the country for several years.
Mr. GIBSON. I think that it has been around in cotton, I am not sure, David?
Mr. DOCKETT. Since about 1991.
Mr. GIBSON. It has been around most of the time since I have been growing cotton, and, like I say, I have been in the cotton business 15 years.
Mr. EWING. I would just like to address one other comment which you made about a safety net and that it is going to phase out.
The Congressand I was there, Robin was not there, so if you have got any complaints you can direct them to mewhen we went to Freedom to Farm, and Freedom to Farm is built on the basis that there are going to markets out there, and that those markets are going to allow American producers to produce at a price that will be profitable.
We are in a bad year. We would like to think it is not going to have to deal with that very long, but we do not know that, and I guess while I do not speak with any authority outside of just what I believe to be the real truth of the way the Congress feels, they are not going to leave American agriculture to go down the tube at the end of the 6-year transition payment period if in fact the commodity prices do not allow American agriculture to be profitable.
Page 117 PREV PAGE TOP OF DOC We cannot do that, we should not do that, and I really do not think either party in America would stand for that kind of a policy towards agriculture. We just need to work our way through what we hope will be a short downturn. If it is not, then we have to find some new answers. [Applause.]
Mr. EWING. Who is next?
Mr. JERNIGAN. Good evening, Mr. Chairman and Congressman Hayes. I too do not have any prepared notes. I just jotted down a few things here as I come in, most of which have already been talked about, but I want to reiterate some of them.
I am Sherrill Jernigan from Cumberland County. I am involved in agriculture, been in agriculture all my life. We are a small family farm, my wife and I tend 500 acres approximately, and I have been involved in agriculture all my life at the point where the plow hits the ground. I do not have any income other than farming.
The crop insurance program is a wonderful program, but it is only one tool of the many tools that we need to remain successful and profitable on the farm. It is not perfect, it needs some reform, and I am sure that is why we are here today to address that, but it is no substitute for price.
I have talked with Farm Credit, I have a good friend who works in Farm Credit, grew up within a half a mile of me, another good friend in the banking industry, private banking industry, and both of them tell me that when you put the pencil and the paper together Federal crop insurance is not justified at the price we pay now for the coverage that we are getting. So we need to address it from the price, the cost standpoint, as well as the return advantage.
Now, it is true that both of these people told me that the majority of the people that they work with would not be able to get a loan from their institution in 1999 without crop insurance, but they still tell you it is not a cost-effective tool, it is just a tool.
Page 118 PREV PAGE TOP OF DOC There is abuse in the program, it needs to be weeded out. I have carried Federal crop insurance on my tobacco since 1968 and never collected but 1 year. In 1995 I had 32 inches of rain in 28 days. The only time in my life I have ever collected. And I just do not feel that it is fair that I pay the same rate for insurance that my neighbors do that collect 2 out of 3 years, or 3 out of 4 years. It needs to be addressed, and I am sure you will.
Mr. Chairman, you mentioned about the end of the 6-year program in 2002. I certainly hope that there will be some safety nets put in place for the ones of us who are left in 2002. Without some price stability, and increased prices, and better weather conditions there is not going to be anybody left in my neighborhood in 2002. It is serious in my neighborhood, and my county, and the counties surrounding me. The farm economy statewide and nationwide is booming, but when you get back to where the plow touches the ground it is in absolute shambles.
The thing that separates the situation we are in now more than anything else from the crisis we went through in the 1980's is the interest rates. If interest rates were anywhere close to where they were in the 1980's, farmers would be going out so fast you could not schedule enough auctions to take care of it. It is serious, and we cannot wait until 2002 for some safety nets and prices.
We cannot do anything about the weather. You cannot, I cannot, nobody else can, but we can do something about the price, and I think if the American public had any ideawe are living in a land of plenty now, but if they had any idea how close they were to being without just one growing season, or one partial growing season of catastrophes, continued catastrophes, and farm foreclosures and things that I am predicting that you are going to see more of in the next 12 to 18 months, if they had any idea how serious it was they would put a lot of pressure on you, I do not know whether you could stand it or not. You have enough already, and I appreciate what you are doing for us, but I cannot emphasize enough how serious the situation is down on the farm.
Page 119 PREV PAGE TOP OF DOC And I thank you for your time.
Mr. EWING. Thank you. [Applause.]
Ms.BULLARD. Good afternoon. Congressman Hayes and Congressman Ewing, I would like to thank you all for coming again to Scotland County. While I do not live here, and I do live in the seventh district, I do have some customers that live in this area, and a lot of friends.
First of all what I would like to do is tell you a little bit about myself, what I do, what my family and I do. My name is Sybil Bullard, I run a grain elevator, so have just been introduced to the concept of an LDP payment. I never heard of it in the 15 years I have been involved in this business until this year.
My husband and I also farm, we farm about 2,500 acres, and I see my crop insurance representative here today, and I am glad to see he is here.
We farm cotton, soybeans, tobacco, and corn. We do carry crop insurance, but some of the problems that people have expressed today, I would just like to put them in numbers for you, in dollars and cents.
We farm approximately the same number of acres of each crop, 1,500 acres of soybeans, 400 acres of corn, 400 acres of cotton, and 200 or 300 acres of wheat every year. The only variability we have seen has been in the tobacco, and that is due to the tobacco allotment.
To share with you, though, in 1996 our gross proceeds from farm income, including insurance proceeds, CCC payments, and cash payments due to the marketing of the crop was $728,000. We grew 68 acres of tobacco that year, the only variable thing.
In 1997 we grew 72 acres of tobacco. Our gross proceeds were $758,000. In 1998now, I acknowledge once again that this was a drought year, but once again we carried crop insurance to attempt to level off the variability of production, you know, the number of bushels we produced550,000, $200,000 less than we had the previous years with approximately the same cost.
Page 120 PREV PAGE TOP OF DOC Everyone has brought up the issues that we need revenue protection as well, and even from looking at the revenue protection, the CRC program as it now exists, the prices are too low. I think this year the guarantee on soybeans, for example, is somewhere around $5.28, $5.30, 5.78. At $21 an acre for a 65 percent guarantee it is just not cost effective.
When I as a farmer look at trying to figure out what I am going to grow, and try to incorporate theyou know, coming down here I stopped and I called Cargill, and I asked Ron, I said ''What is the price of soybeans right now?'' $4.79. That is where the market was, that is where March beans were at $1.12 coming down the road. And, yes, crop insurance, the CRC program does offer us a dollar more, but even that dollar I guess is what I am trying to say is not enough. We need to find a way to get these prices back up to a more reasonable level, something where we as farmers can survive.
We consider ourselves good managers, but we have had trouble marketing our crop. My farmers have had trouble marketing their crops here this year, because we did not understand the LDP payment, for example. We did not use it as a marketing tool, we were not familiar with it, and from what I have been able to show my customers that still only guarantees us today somewhere around $5.42 for soybeans. A 66-cent LDP payment in our county today and a market price of somewhere around $4.78, so whatever that ends up being, $5.40, and we had a poor crop yield on top of that, but even if we carried insurance, north Robeson County has a soybean average of somewhere around 21 bushels, that if we get 65 percent of that that is 18 bushels, 16, 17 or 18 bushels at $5.40 we still cannot survive when we look at the cost of our inputs.
Once again, I would like to emphasize that we look atthe problem is notI know we are addressing insurance here today, but we need to look at crop revenue, but we also need to find a way to become more competitive on a global market, and I would like to ask you folks to take that back to the other Congressmen in Washington and express our concerns, as I am sure they knowI know they know if they are there, but it is difficult for us as farmers to grow $4.78 a bushel beans even if we produce 50 bushels here in this area.
Page 121 PREV PAGE TOP OF DOC Thank you. [Applause.]
Mr. EWING. Just a moment. Back to your figures, did you give us 3 years?
Ms. BULLARD. Yes, sir.
Mr. EWING. Two years that were about the same?
Ms. Bullard. About the same. 1996 was a little dry in this area, and we did actually claim on our corn crop that year. However, prices were substantially higher.
Mr. EWING. What was the other year?
Ms. BULLARD. I gave you 1996, 1997 which was an average production year, reasonable prices, what I consider average prices. In 1998 once again we had poor production, very poor prices.
And I have also done my projections for 1999 based on normal production, an average production for us, and my numbersthese were done about 2 weeks agoare still somewhere around the $550,000 mark.
Mr. EWING. Does that cover your costs?
Ms. BULLARD. No, sir.
Mr. EWING. Costs are higher than that?
Ms. Bullard. Costs are higher than that, especially if you start incorporating capital expenditures, which we have to do.
Mr. EWING. And you included all the different things that are there?
Ms. BULLARD. CCC payments, LDP payments
Mr. EWING. Lost market, the whole thing?
Ms. BULLARD. Premium payments from southern States, or Farm Bureau, or anyone I might have gotten, anything that was related to the farm is included in that income.
Page 122 PREV PAGE TOP OF DOC Mr. EWING. And did you say your crop yields were down considerably in 1998?
Ms. BULLARD. Yes, sir, they were, but we did carry crop insurance.
Mr. EWING. Well, I guess the question since we are talking about crop insurance, did crop insuranceit does not make up for the lost yields?
Ms. BULLARD. No, sir.
Mr. EWING. It never does, I mean it is really intended hopefully to keep you in operation for another year if you have a terrible crop year.
How would you relate figures to what you got from crop insurance as to what you would have received from those crops maybe if you had had a normal year?
Ms. BULLARD. OK, I will share once again my personal financial data.
We had approximately 400 acres of corn this year. We had 65 percent coverage. We received insurance premiums of $61,000, market sales of about $20,000, and LDP payments of about $1,200. The LDP payment is fine if you have a crop. We did not have a crop.
Thank you once again.
Mr. EWING. Thank you. Thank you for sharing with us. [Applause.]
Mr. HAYES. We have talked a lot about crop insurance today, and that is fine to continue on that vein, but is there anything else you want to talk about? This is not strictly about that, so do not hold back on other areas if you have them.
Mr. WATSON. Good afternoon, everybody. My name is Dwight Watson, I am from Nash County, NC. I am a tobacco farmer and a general row crop farmer.
I went home last night and opened up the paper, and my Evening Telegram from Rocky Mount, NC had a little article about this meeting down here today, and it was about the Federal crop insurance program, and also said any other issues, and you just stated that we could discuss any other issues, so I just want to take a brief few minutes to bring up a couple of points that are important to me.
Page 123 PREV PAGE TOP OF DOC I am not here representing any farm organization, I am just a farmer. I am not here trying to offend anybody, I am not here trying to create any controversy. I just want to point out a few facts for everybody to think about, because I believe it is going to have an impact on the whole country down the road if we do not make some changes, because just as Mr. Jernigan so eloquently said awhile ago, being down on the farm from the plow hitting the ground right on up through it there is a lot of people that are in agriculture that are scratching their head trying to say what are we going to do next?
There is no way that you can match the numbers up, no matter how good a manager you are, unless you are completely debt free, and there is not many farmers that I know that are not servicing some debt, and it is hard to do.
I am a 4th-generation tobacco farmer. I have got my cousin here with me, Jason. He is the 5th generation. He is 19 years old, he is in college now, he helps me on the weekends and during the summers to raise the crops. And we were just sitting there awhile ago before the meeting started, and he was just doodling on a piece of paper right here, and he drew out something that says three tobacco leaves, and he drew out at the topand this is on his own thinking now, he is 19 years old, and he drew out at the top, he said ''The pride of the Carolinas,'' and under it he put ''Golden Leaf.'' Well, here is a 19-year-old young man that has been around tobacco farming probably for the last 10 years of his life to where he was kind of noticing, and he is already understanding that it is the pride of the Carolinasthe pride, see.
So one of the issues that I want to address is tobacco is under a lot of attack, and the tobacco industry in my opinion has been villianized because it is misunderstood.
One thing I want to share with you is that last year the Eastern Belt in Wilson, NC averaged about $1.74 per hundred pounds. I do not know exactly what my average was, I was probably lucky to do $1.65 for the whole season per pound of tobacco. There is a little bit of talk in our neighborhood now with a few farmers getting together and organizing and saying ''Well, you know, if we could just get Aunt Lucy out of this picture where we do not have to pay her any rent, we can reduce what we can grow our tobacco for and sell it for about 30 cents if we can just take care of Aunt Lucy, get her out with the quota picture.''
Page 124 PREV PAGE TOP OF DOC And I got to thinking, I said ''Well, I manage about $1.65,'' and they are talking about taking another 30 cents of, and then if you take it off the support price of the average last year of $1.74, that still gets it down around $1.50 or below.
Well, one thing I want to share with you, let us just use last year's figures, $1.70. That is about what good farmers could average. If you multiply $1.70 times a 275-pound pile of tobacco, which is the most you can put in a pile of tobacco when you put it on the floor for auction, that will gross you $467.50. Well, we just had a 45-cent tax increase on a pack of cigarettes due to the settlement with the State attorneys general.
Mr. Clinton, bless his heart, he is proposing a 55-cent-a-pack tax increase. He is a pretty good guy, he is just misinformed, and I am going to see if I cannot help him get the real story.
But the thing about it is that is a dollar. We have already got 45 cents, he is talking about another 55 cents, that is $1 per pack tax, okay? Well, we have already got an average of 52 cents per pack State and Federal excise tax right now today.
Well, let us just use the new tax of the 45 that has been passed with the settlement, the 55 that Mr. Clinton wants, that is a $1. Well, you know, you can make, you can manufacture 23 packsnow listen23 packs of cigarettes out of one pound of tobacco. So the Federal Government is saying ''Hey, we are going to increase our share for the tax man for $23 a pound, but we want you the tobacco farmer to drop back 30 cents, get the rent out of it.''
So I am going to be getting $1.70, or maybe $1.50, and we are getting a $23-per-pound tax increase to already go along with 52 cents. Well, if you would calculate the 52 cents in there the Federal Government, the State Governments, the tax people will be getting $34.50 a pound. One sheet of tobacco will be worth close to $9,000 to the Treasury, and I am going to be lucky if I can get $467.50. You see, it is out of kilter. That is not what America was founded on. You know, it is taxationwe have representation, but it is unfair taxation in my opinion. Now, until we can bring this to the American people's attention I think we are going to continue to be villianized.
Page 125 PREV PAGE TOP OF DOC Now, I want to ask you something, and I want to share something with you. My father never woke me up as a child and a young teenager and said ''Boy, get up, we are going out to raise tobacco today to kill people.'' He said ''Son, get up, we are going out here to do the best job we can do,'' and I will guarantee you every other farmer and their father told them the same thing. I guarantee you that just about every father in the United States of America told their child that, ''Do the best job you can.'' I know they did, because this is America.
So for people to think that the tobacco industryand I know they say ''Well, the farmers did not have anything to do with it, it is Phillip Morris, it is R.J. Reynolds, it is Lorrillard, it is all them.'' Those are the same people just like us, they just happen to work in the tobacco industry. They have been misrepresented, they have been attacked by the Government officials.
Dr. David Kessler, he is so mixed up he does not know which way is up or down, and it is up to you all as our representatives to stand up and tell them, say ''Hold it, hold it, you are misinformed.''
And all these allegations they make about nicotine addiction, I am going to share something with you. Go back and ask the Secretary of Agriculture's people, which you all are part of, say ''Hey, how about the records at Oxford, NC, or the Agriculture Research Center, the USDA Tobacco Research Center, how about sending some of those records over here?'' You will find out all you want to find out about nicotine and tobacco. It was researched through the seed genetics. That is how the nicotine is controlled in tobacco, it is done in the seed genetics. It is not done at the tobacco factory. If you have not got it by the time you get it to the factory, you are not going to make it.
There is also something called the Tobacco Variety Release Committee. My daddy served on it for 25 years. Part of their job was to weed out the low-nicotine varieties, and if it was too high to weed those out. It is a certain standard that it has got to be, and that was part of the industry.
Page 126 PREV PAGE TOP OF DOC Another thing people talk about, Dr. David Kessler who is the FDA [Commissioner]was, he is not any moresaid ''Boy, they have got everybody addicted on nicotine. Well, I want to ask you something. Why is it that I as a tobacco farmer go to the FSA office in Nash County in July and make my crop report, and I sign an MQ32 form, and on paragraph 3 it says did you or did you not plant discount varieties of tobacco? And if I say yes, I did, that means that my tobacco marketing card, and all my tags on the floor are going to be marketed as discount variety, and I am only going to have half price support. There is no farmer I would think that would want to try and sell his tobacco at half price support.
Well, see, it used to be you did not get any price support if it was discount variety.
Well, see, let me tell you something about discount variety. The reason is the discount variety is low in nicotine. Now, how can the people in Washington, DC stand up and keep talking about nicotine, nicotine, nicotine, nicotine, when the Federal Government is discouraging the tobacco farmers from planing the low-nicotine varieties of tobacco? It is hypocritical.
Now, the tobacco industry is probably one of the proudest industries in America. They are some of the greatest people you ever want to meet. These people that work with the tobacco companies are some of the smartest, most gifted people in America. The people at Oxford, NC that did the research, the plant breeders, they are some of the most gifted people in America. These are the people, whether it be in tobacco, corn, soybeans, pumpkins, whatever crop you talk about, the plant breedersand those are the people who come up, who have allowed us to be able to go from 30 bushels of corn 50 years ago to 250 now.
So all I am trying to say is we can beat everybody up, say ''Man, you did this, and you did that,'' or we can continue to do what agriculture has always done, identify the problems, get together, talk about them, correct them, and go on.
Page 127 PREV PAGE TOP OF DOC But like Mr. Sherrill Jernigan said, and I personally believe that if agriculture continues down the path it is going nowand I lived through the 1980's, I was in a farming operation, it was a big farming operation, and I saw interest rates go from 6 percent to 23, it wiped us out. It wiped us out, we could not stand it. And the only thing that is keeping people from being wiped out today is like he said, and I agree with him, low interest rates.
Now, everybody can talk about ''Well, I am just going to go down to the grocery store and get what I want.'' A lot of peoplenow believe it or not, a lot of people believe that the stuff is made in the back of the grocery store behind the silver doors. They do not have any concept that it comes off the farm. Now, believe it or not. Everybody here that has grown up on a farm understands it, but people who have never understood agriculture. A lady was in the grocery store one day, and she told the man ''I want some more pork chops.'' He said ''Ma'am, we are out right now.'' ''Out? Just go back there and make me some.'' Now, I saw that, witnessed it. And there are a lot of misinformed people.
The point I am trying to make is we are going to wake up one dayand the old saying if you eat three times a day you are involved in agriculture and we are going to wake up one day and there is not going to be nothing in the store to eat.
Now I would like to ask everybody, do you reckon we could pull out precious money and eat it, and do you reckon it is going to fill us up? I do not think it is.
So what I am here, I am not here to point out the problems and say ''Hey, there is a problem.'' I want to be a part of the solution. I want to be a part of the solution, and it takes hearings like you all's so we can get everybody on the same page.
I do not personally think that the U.S. Treasury, as good a folks as they are, is entitled to $34 tax revenue per pound of tobacco that I am going to $1.70 for. I think it is out of kilter.
And the last thing I would like to close withand I want to thank you for your time and being so patientI am not trying to cause any trouble, I am just trying to tell you the farmers are in trouble big time.
Page 128 PREV PAGE TOP OF DOC The last thing I want to share with you is I was reading on the Internet last nightand thank God for Bill Gates. You know, Ms. Reno, they came up with a lawsuit against Bill Gates, ''Man, we have got antitrust, we have to break him, he has done all this kind of stuff.'' Well, suppose Mr. Gates had lost $70 billion rather than made $70 billion, do you reckon Ms. Reno would be suing him? I do not think so.
And the thing I was reading on the Internet, see, there was a proposal that maybe Ms. Reno could sue the tobacco industry under the RICO Act, racketeering. I said ''God almighty knows, how can we be sued, whether it be Phillip Morris or the tobacco farmer for racketeering when we only did what the Federal Government told us to do?''
On the way down here I passed Fort Bragg. Well, in 1972 I was serving with the 82nd Airborne, 82nd Military Police Company, and one of the things they taught us as a military policeman was that everybody in the Army would be held to the same standard, the private and the general. It was fair, it was equal.
My daddy, he was airborne, my brother was airborne, and now being involved in the tobacco industry for people to say that we are a bunch of conspirators, and liars, and drug dealers, hey, I just said I am going to start standing up and telling them what I know, which is, you know, when I got out of the Army and got out of school I started farming on the farm, and I started working for something called the Tobacco Division of the USDA. Look it up, it is called the Tobacco Division of the USDA. They control it, you all make the laws in Congress. Not one single thing happens in the tobacco program that you all do not know about, because you all passed the laws, Congress did.
I am not here to point the finger at you, I am saying ''Look, this thing is mixed up, there are a lot of people that are hurting, you are wrenching people's hearts out every day. Somebody has got to stand up and tell the other side.
Now I will tell you this, if somebody asked me ''Hey, do you think I ought to smoke?'' I would say ''No, do not,'' but I am going to tell you this, and this is what people do not want to hear, they do not want to hear this, and this is only my opinion. Tobacco is not what is killing people. God almighty made the tobacco. What is killing people is the organophosphates, the carbonates, the MH30, the Penar, the chemicals that are being put on it. Look up the tobacco company documents on the Internet that they were forced to release with this State settlement of the attorneys general, and it shows you in there that tobacco scientists contacted the USDA in the late 1950's and 1960's and said ''Hey, we have got a problem, some of these chemicals that are being put on tobacco are causing cancer.'' The USDA said ''Well, we cannot do nothing about it.''
Page 129 PREV PAGE TOP OF DOC See, every time you bring something to USDA sometimes something gets done, sometimes it does not. So until we know the full story about tobacco we do not need to judge it. Now, I am just speaking my side of it, and, you know, when I was in the military I was trained for nerve agent warfare, and this family of chemicals I was talking about called organophosphates, we use them on tobacco, we use them on all the food, we use them on the crops, everything. It is just part of the chemical industry. If properly used correctly there is not much that could go wrong, but there are a lot of mistakes made when we are applying that stuff, I hate to admit it.
But in that family of chemicals called organophosphates there is four other ones that are named VX gas, sarin, tabun and samun. These are the nerve agents that the military uses. The United States had that VX gas, and the sarin, and the Russians had the tabun and samun. That's what Saddam Hussein used on the Iranians in 1984, and there is some conjecture that he used it on the troops, our troops in 1991 in Desert Storm, but everybody at the Department of Defense says ''I do not think nothing was used.'' Well, the boys out on the front line brought the reports back and said ''Yeah, we saw the nerve agent, we saw the chemical payments, we saw the dumps,'' so, you know, I am just trying to tell you that there is a lot of people out there that are hurting and we need some help. That is all.
Mr. HAYES. I appreciate your comments. Do you know Earl Rountree by any chance?
Mr. WATSON. No, sir, I do not.
Mr. HAYES. He lives up in your part of the world. Next to him you are the second best presenter I have ever heard.
Mr. WATSON. Well, I appreciate everybody listening. I am not trying to dominate anything, I am just saying that last year in 1997 and 1998and I will close with thiswhen the USDA, the Agriculture Secretary cut the quota 35 percent he reached down in my pocket and took $175,000 of my income out and said ''Well, you do not have it no more.'' But when he did it, he forgot to take my John Deere payment, he forgot to take my farm mortgage payment, and he did help me with any other thing.
Page 130 PREV PAGE TOP OF DOC Now I am going to close with this, if you got a notice in the mail from your employerCongress, Congress, let us get to the heart, Congress said ''Ladies and gentlemen, due to the economic times we are going to reduce your pay 35 percent'' how would you feel? Think about it. Because we went out and made these plans, and expanded for tobacco because we got an increase, and the next thing we know it is yanked out from under us.
All I am trying to say is that the Federal Government is just as responsible for anything as anybody, and we need the Federal Government. We need them. But do not blame us for doing what you told us to do. That is all I want to say.
Thank you very much. [Applause.]
Mr. HAYES. Thank you, Dwight.
Let me say one thing while it is still fresh on our mind, nicotineyou can discuss what you want to about the addiction, but there is no secret in anybody's mind, the Federal Government is addicted to the tax revenues that come from tobacco.
And our story needs to be told. The chairman and I do not have a whole lot of friends. The state of the union, 758 different agencies and individuals are given some type of gift, and under that atmosphere who gets attacked. Only the tobacco farmer.
So we are a small voice, but your being here, your willingness to help us tell the story is very, very important. Public opinion matters, and I absolutely agree the industry, the family farm and what it means not only to the economy, but to our families is very, very important, and your ability to help us tell that story greatly enhances our effectiveness in the job that we are trying to do, so thank you again on that score for being here.
Mr. EWING. Robin, before we go on to the next presenter, we fight the battle, some of us fight the battle on tobacco every year, and they try and take away your crop insurance and your ability to use the Extension Service.
And coming from Illinois were we do not grow tobacco I want to tell you that my last three opponents have run against me on my support of the tobacco program. So it is a political issue out there that is a very hot issue, and members of Congress who step out in front on behalf of legitimate farmers like yourselves who grow tobacco get hit politically with it.
Page 131 PREV PAGE TOP OF DOC I do not know the answer, because the tide is not running with us on tobacco. We are going to win those little battles about your crop insurance and your ability to use the Extension Service. I believe we can continue to win those, but it is politically popular to be against tobacco today, and not just members of Congress, but in the Nation.
You need to take up a collection and put somebody out on the road like this gentleman who can tell your story and get the support of other agricultural people around this nation, because when they get through with tobacco they will probably start on the hops and all the other things we use for liquor, or whatever else they want. Those who want to purify the world will never be satisfied.
Mr. PATE. I am Jimmy Pate, I am a farmer in neighboring Robeson County.
Congressman Ewing, I heard Congressman Hayes say earlier that he was a Presbyterian. Well, a neighbor of mine came by several weeks ago and told me that he had been reared in the Methodist church, and he had tried to be a good Methodist all his life, but he had such a tough year farming in 1998 he had decided to join the Presbyterian Church, that when the Methodists pray they say ''Forgive me of our trespasses,'' and when the Presbyterians pray they say ''Forgive us of our debts,'' and that he had never had been bad about trespassing.
This story has a lot to say about the state of agriculture. What agriculture needs is some stability, and that is what the Federal tobacco program has provided for the tobacco-producing areas of our country.
I would love to talk about tobacco a little bit more, and I know that you have just heard a lot about it. The Federal tobacco program has operated at a no-net cost to the Federal Government since 1984, with the exception of the administrative cost to the FSA and the subsidy of Federal crop insurance.
Congressman Hayes, a mutual friend of ours gave you a great compliment lately. He said that if you were in a foxhole that Robin Hayes was the type man you would like to have in that foxhole with you.
Page 132 PREV PAGE TOP OF DOC Well, that is where we as tobacco farmers feel like we are is in a foxhole with the Clinton administration firing at us. The Clinton administration would lead you to believe that tobacco is some new menace to our society, but as we all know when the first Europeans landed in Jamestown over 400 years ago tobacco was being grown, and tobacco was the first commodity to be exported from the Jamestown Colony.
Approximately half of the tobacco we produce today is exported, and has a very positive impact on our balance of trade. I wish I could adequately express how important tobacco is to the economy of North Carolina, and how the important the Federal tobacco program is to the tobacco farmers from Virginia to Florida.
The Federal tobacco program controls production, it guarantees the farmer a minimum price for his tobacco, enabling him to make a reasonable profit if he produces a good crop.
It also has a system in place to prevent the planting of illegal varieties such as your Y2 high-nicotine varieties, and it checks for the possible use of illegal pesticides.
Now, this was put in place in recent history to solve some of the problems Mr. Watson has talked about. The Federal tobacco program is good for everybody, even the health advocates, because it is a safer form of tobacco.
The United States grows the safest tobacco in the world. We realize that it is going to be a constant battle with tobacco, and we realize we need to make changes in the Federal tobacco program, and if the opportunity arises that we can make these changes without jeopardizing the entire tobacco program.
During the past 2 years we have lost approximately 30 percent of our tobacco quota, due primarily to the national tobacco settlement. But even now tobacco production is the only thing that is keeping us in business.
Page 133 PREV PAGE TOP OF DOC We thank you for your support in the past, and we ask you for your continued support in the future. We know that the Clinton rhetoric will continue, the latest being the additional 55 cents tax that has been discussed, and the possibility of a Federal lawsuit against the tobacco companies, and we know that Senator Lugar and Congressman Waxman will again attack the Federal tobacco program in this 1999 session of Congress.
Thank you. [Applause.]
Mr. HAYES. Thank you for those comments. I think I need to reemphasize the fact, particularly since Bill Bonchu is here, we certainly have a very, very strong friend in Congressman Mike McIntyre. He is tirelessly telling the right story, the true story about challenges the tobacco farmers face, and I hope that we can come up with some sort of a reasonable approach and bring some reason to what has become a real political battlefield where it should not be.
Let us talk a little bit about trade, if you all would like to switch gears for a minute. The chairman here is very actively working on legislation that would improve our ability to increase our markets. I think increased markets are one of the real answers to stability and higher prices for commodities.
Some of you all might like to ask a question or make a comment about that, or, Mr. Chairman, you might like to talk about that. We have done a poor job of negotiating in my opinion trade agreements in the past, and that is something that is a very important part of this puzzle.
Mr. CARR. Congressman Ewing and Congressman Hayes, I also would like to thank you for being here today. I am Don Carr from Union County. I would like to reiterate everything that was said from the Farm Bureau. The Farm Bureau does do a real good job of representing agriculture in North Carolina and across the Nation.
Lots of people in the Congress, either State representatives or in Washington, seem to discount sometimes what organizations do, saying they just have an axe to grind, but the Farm Bureau does have the grassroots policymaking procedure, and when the Farm Bureau speaks it is speaking for the farmer in the field that does push the plow, so to speak.
Page 134 PREV PAGE TOP OF DOC I would just like to touch onyou mentioned exports and those things. Another one of the major problems we have that seems to be no end to is the endless regulations that some of these people that Congressman Ewing just said that was going to save the world.
We do not mind regulations that are beneficial in agriculture, that present safety to the farm and to the people working on the farm, and to everybody, but regulations that are just made by some of these regulatory organizations that seem to feed on themselves to increase their own authority and their own way to regulate, and to control people is just absolutely ludicrous.
And I do not think we can say enough about the need to control over-regulation and make every regulation cost-effective and scientifically based.
Another point I think that has already been mentioned, but has not been discussed much yet is our exports. We had the Freedom to Farm Act, and some of us worked real hard when that act was being put together to keep the Export Enhancement Program that was in effect before that, and I think that is one of the tools that we need if we talk about a safety net, but if the Freedom to Farm Act was based on the market being there, and the market where we have other countries such as China that is subsidizing highly their production in cotton namely.
We need a program that when other nations are subsidizing their commodity, ever what it is, that we have a program ready to go in effect immediately to combat that. If they are selling a commodity below world prices, then they have the U.S. Treasury behind us as farmers in the United States to sell our products at the world price, and I do not think they are going to threaten us if they know that we have an enhancement program that will bring that commodity so that it would be competitive on the world market, because they just cannot stand it economically.
Crop insurance has already been talked about I think sufficiently. I noticed that one of the programs that is an international program on international economic oversight, and the problems we have in Indonesia and Japan, and so on where their economy is in shambles, and those are some of our major markets to sell the products when we sellI do not know what, 40 percent is a general figure of what we produce overall in the United States. We do need something to help these countries that are unable to manage their economies, not to try to take them over, but to build with them the confidence to help them manage.
Page 135 PREV PAGE TOP OF DOC I feel like that some of these countries are threatened by the United States, that Big Brother comes in and going to show them how to do everything, but if we go in maybe with the right attitude and helping to push out fraud and so on in those governments we might gain some respect and cause the world economy to be more stabilized, therefore keeping our markets open, therefore preventing some of the problems that we have in agriculture today.
On tobacco, I think the Federal Government has no business in tobacco. I just think that they will get tobacco out of the way, we already are hearing rumblings that they are going to do something on controlling guns and making the gun manufacturers responsible for something. So when are they going to start, the do-gooders going to start saying ''Well, that automobile is a potential weapon to kill somebody,'' so I just feel like we need to put things in perspective, but if I had to emphasize I would say regulations and keeping our export markets open, and everything you as Congressmen can do to do those things would be the greatest benefit that agriculture can have.
Thank you. [Applause.]
Mr. HAYES. While someone else is heading up to the microphone, I forgot to tell you earlier that my staff person in Washington who handles agriculture specifically is Kyla Sell. Many of you met her a couple of weeks ago. Her telephone number in Washington is (202) 2253715, and my toll-free number at our Concord Office is (888) 2071311.
Now, sitting beside Kyla is Richard Hudson, he is our District Director. He will be in the district 7 days a week, 24 hours a day. Right, Richard? Or longer if necessary.
So that is providing access to the resources that are available to you in our office, and please feel free to make use of those resources.
Mr. BRASWELL. My name is Elton Braswell, I am a dairy farmer, one of those endangered species in North Carolina. I farm in Union County with my brother. We have been farming in the dairy business since 1955 as a partnership. Actually I started milking cows in 1943 when I was 6 years old.
Page 136 PREV PAGE TOP OF DOC Let me give you a few facts of the dairy industry in North Carolina right quick, to sort of shift gears and get on dairy for a moment. We have got some things coming up in the legislature regarding dairy as far as the compact and what have you, and the Federal milk market reforms and what have you.
The North Carolina dairy industry generated an estimated 572 million. That was the activity in 1997. North Carolina has 10 grade A dairy processing plants. Total milk production in the State last year amounted to 146 million gallons. There were 478 commercial dairy farms in North Carolina as of July 1998. In addition, there were 35 grade B dairy farms in the State. Now, back in the early 1960's there was 5,000 dairy farms in North Carolina. See the difference.
Cash receipts for the sale of milk with dairy farmers amounted to $187 million. The price paid to North Carolina dairy farmers was estimated at $14.85 per hundredweight, approximately $1.28 per gallon of milk.
Last year there were 75,000 milk cows in the State. Each cow in North Carolina produced an average of 1,947 gallons of milk. About 83 percent of the milk produced in 1997 was used in fluid dairy products.
A typical North Carolina dairy farm herd has approximately 160 cows. That gives you a background of the dairy industry that is still in North Carolina, and we are going to need to maintain some of those herds to keep a valid milk supply in North Carolina.
We need the Southern Dairy Compact to stabilize prices so they will not fluctuate so much up and down. It will help the consumer, it will help the dairy farmer establishing credit.
When you go to a creditor and want money, you have to give them some way of being able to pay it back.
On the dairy compact production capacity in the Southern United States has deteriorated to the point that further decreases will push production below the point of no return. The loss of the critical mass necessary to maintain efficient support industriesthat includes milk hauling, feed, milking equipment, custom forage productionwill lead to unsustainable costs of production and marketing.
Page 137 PREV PAGE TOP OF DOC Production in the States of Louisiana, Mississippi, Alabama, Georgia, Florida, North Carolina and South Carolina was 5.7 billion pounds less than required to supply fluid markets in these States in 1996.
Regional production is decreasing while consumption increases, and supplemental supplies are being drawn from farther and farther away. Missouri, Kentucky and Tennessee, which have traditionally provided supplemental supplies have lost 14 to 18 percent of their production since 1995.
Texas now produces less than its own fluid needs. The loss of production in Texas has occurred primarily in east Texas, leaving remaining supplies farther west.
For Louisiana, Mississippi, and Alabama this means there is less supplemental milk available, it has got to come from farther away, and more likely to be needed locally.
More reduction in milk production in the Southern Milk Shed between July through September 1997, this reduction in milk supplies required an additional 3,110 tanker loads of milk to be brought into the region between August 15 and September 30, 1998, so we are going to need to do something to keep milk available. Milk is the best nourishment for young children to grow healthycalcium, protein, what have you.
Also considering the Federal milk marketing orders, we need option 1-A at the southern region.
I thank you. [Applause.]
Mr. HAYES. I thought you had been sitting still an awful long time.
Mr. BULLARD. Well, I have been involved in farming, and I cannot give some of the information that some of the others can, but basically I want to make a little break and tell two little short slightly humorous stories.
Page 138 PREV PAGE TOP OF DOC The first one goes back to my childhood when I read Scrooge McDuck comic books, and one that stuck with me was the day that the cyclone blew his money bin apart and rained trillions and trillions of dollars down on the countryside, and everybody simply scooped it up, and since everybody was now rich they all quit their jobs, and poor Scrooge McDuck who had no money left started raising cabbages, and of course since nobody else was working, within a couple of years Scrooge had all his fortune back, because without the food of course money is worthless.
The other short little story close to hand, one of my neighbors was in a conversation with some fellows, and they said ''Your car is getting a little old, is it not about time to trade it in?'' and he said ''Well, I guess it is,'' he said ''And I went down to the dealer and asked him what it would cost to buy another car pretty much like I have got.'' He said ''Well, several years ago I paid 1,000 bushels of soybeans for the car I have got now, and now they want 2,000 bushels of soybeans for a car to replace it.''
And of course we know that if you operate an automobile factory and the demand goes way up you can construct more factory, hire more people, produce more automobiles.
If you are farmer and the demand goes up for your crop, there is absolutely nothing you can do about it. You cannot add any more acreage to your farm. You could buy your neighbor's, but that is simplythat is the same acreage that was already being used to produce food, or fiber, or whatever crop.
The amount of available cropland is absolutely limited. And I am 55, and I believe right now any agricultural product that I purchase is cheaper at the retail level than it ever has been in my lifetime, which means that the farmer has had to get much more productive than any other segment of our economy, but he or she is extremely limited in the amount they can produce, so when their price goes down relative to other things, like how many bushels of soybeans, or how many bushels of corn, or how many sheets of tobacco does it take to provide the necessities for your family, you can only produce a limited amount.
Page 139 PREV PAGE TOP OF DOC If there is any fluctuation in the price, if cars go up in relation to tobacco or soybeans you have to walk, there is nothing else you can do.
Mr. HAYES. A very good point. [Applause.]
Ms. BULLARD. One more comment relative to exports. I have heard some inklings lately that there is in the revamping of the farm bill consideration to put production controls back on farmers.
As a producer, I do not want to that. I think that is one of the problems that we developed for ourselves back in the 1980's with the PIC program and some other things when we encouraged folks not to farm land. We were no longer a reliable supplier of products to the world markets, and I think that has hurt us in the long run. So as these programs are being revised I hope we will sort of stay away from that issue.
Mr. HAYES. The point I wanted to make just a minute ago is thatsomeone made it earlier todaywe are doing a lot of polling, and when I say we I am not including the chairman. There is a lot of polling being done in politics, and the pollsters are saying that only 1.7 percent of the population are farmers.
Well, from a purely political standpoint that means that nobody is paying the attention to you that they should be. Someone made the point 100 percent of the population is involved in farming because we eat thanks to you three meals a day. That should be and must be part of our message going forward, and I think that is going to help call attention to things that need to be realized.
Mr. DEGANEY. I am Brian Deganey. I just wanted to say that I do not agree with what she just said. A lot of our land is marginal land, and we have so much equipment, and we go out there to produce as much as we can. We need more CRP programs and things like that to limit the production to the amount of exports that we have got.
Thank you. [Applause.]
Page 140 PREV PAGE TOP OF DOC Mr. HAYES. This sounds like a very political response, but you are both right. And the reason I say that, when we met downtown a couple of weeks ago I came up with the idea, and the chairman and I talked about it briefly coming over here today, there should be a way that with today's desire to increase the amount of green space that is available for people living in urban environments, with the desire to create habitat for game and nongame species, for the true need to create environmental buffers and protection for streams and rivers. There are things that farmers can be doing that will help the whole of the population, while at the same time that reduces in my opinion some of the land that is now in crop production, and this is something that we are going to be looking at on an ongoing basis so that everybody comes out ahead because we did it.
The problem that I think one of you alluded to a minute ago is the CRP program paid people not to do something, and that created a tremendous justifiable backlash from the public, so we do not want to go in that direction, but I think it is reasonable to pay people for doing something that is constructive and it is productive as well. So we are going to try and look and see if there is something there.
Mr. EWING. Robin, to chime in on that a moment, I guess I would agree with you, too, that both parties are correct there. I have been talking to farmers in my district, as well as going around the country on different things, and when you look at the total picture American agriculture produces about 40 percent more than we can use locally, so exports are extremely important. It is a lot of product to be exported.
Unfortunately agriculture is pretty free in America compared to what it is in many other places in the world. If we back off of providing the grain and the fiber for world markets there are other places in the world where there are glad to plow up some more ground, plant some more grain, or grow some more fiber to take the place. So it just seems like it is very hard to withdraw back to just what you need for a good price. We have tried that.
Page 141 PREV PAGE TOP OF DOC Now, I think there is certainly merit in trying to find ways to take marginal ground out of production and use it for something else and produce the most effectively as we can on our best ground.
That is easy to say, except when you have got a constituent or a farmer who may be out there with marginal ground, and he does not see his farm that way. We all think our kids and our grandkids are beautiful, and the same way with our farm, and we do not like to be told that maybe we should not be using it for production agriculture if that is what we want to be into.
I think we need to concentrate as much as we can, though, on fighting for those markets that are ours out there in the world, and legislation which passed the Agriculture Committee a week ago, and will hopefully be on the floor very shortly, says to this president and any other president who sits in the White House that we are not going to allow you to have agricultural specific embargoes unless you come to the Congress and make your case and get the permission.
We cannot fight our own Government and the world markets, and todaythis is all prospectivebut today there are 60 countries at least in the world in which we have sanctions against that do not allow agricultural products, or maybe anything from the United States to go into those countries.
And the problem is most of your friends around the world, and our trading partners are not under the same constraints that we are, so they step right in and take the market, and many of these countries say we do not need to go to the United States, we will get it from Argentina, or Brazil, from the European economic community. So it is a tough issue, but I believe we have to fight for our share of the world markets, because agriculture is one of the things that we do best in this country, and certainly it would be very difficult to reduce our production to just the point of what we need in America.
Page 142 PREV PAGE TOP OF DOC We have a gentleman waiting.
Mr. GORE. My name is Phil Gore, I am from Columbus County. Mr. Hayes knows where I am from. I farm about 200 acres. I also sell crop insurance.
I would like to endorse the idea of the old premium adjustment factor coming back into existence that was taken out in 1980, which is if a farmer has a good year he receives at least a 5 percent discount on his premiums the next year on that crop. If a farmer has a bad year, when he reaches a certain loss ratio he starts paying an extra premium. That is fair, it was fair up to 1980. Why it ever went outa farm bill happened to take it out, I will say Congress.
One thing we need to look at is Congress is mandating that Federal crop be actuarially sound. In other words, they are telling the USDA if they want to sell Federal crop to the farmer they have got to do it not at so much a profit, but it has got to be actuarially sound, so if the farmer has to pay $10 an acre in this county and $50 an acre in the other county that is what they are going to be looking at doing.
What we are hoping Congress will do is look at this and give crop insurance, the Risk Management Agency some leeway in establishing theseI believe it is a dollar, a $1.075 is what Congress has mandated crop insurance to do.
And just like our friend from Nash County said on tobacco, Congress mandates what we do on tobacco, Congress is mandating what happens on crop insurance. So you gentlemen when you go back, look out for us. Help the farmer keep his premium down where he can get more coverage.
I would love to sell it for $2 an acre and have everybody happy, but you cannot do it when you are mandated to sell crop insurance at $1.075 and then Congress can come in and give a disaster payment at $6.40, and nobody counts that as being part of the mandate.
If you are going to get the $6.74 mandated over here where we can say it is actuarially sound at $2 instead of 1.075, or whatever Congress has got mandated at this time.
Page 143 PREV PAGE TOP OF DOC Thank you. [Applause.]
Mr. HAYES. I have heard you say very clearly that the floor is too low and the premiums too high. I have got that.
Mr. JERNIGAN. If I might impose upon the committee to make one other comment and to reiterate what this gentleman said about Farm Bureau and the farm organizations. Some people view them as having a political axe, or an axe to grind.
I am president of the Cumberland County Farm Bureau, and I left Raleigh today to come down here to this meeting. We were having our presidents' conference where all 100 presidents from 100 counties in North Carolina meet once a year.
We have a commodity group for every major commodity in the State of North Carolina, and these groups meet three or four times a year.
It may appear that they have a political axe or a particular axe to grind, and in most cases they do. It is my axe, because we meet as a commodity group and discuss these problems and formulate our policy, try to anticipate what is going to happen, and send them up there with a clear message as to what we want.
We also get the Legislative Newsletter at least once a month informing us of issues that are being discussed, and if we have any questions or problems we contact them and express our desire, and from time to time they ask us to contact you folks.
So while they may appear to an outsider to be grinding an axe, as I said it is my axe, and Peter Daniel sitting over here, and President Jenkins and Larry Wooten will be the first to tell you that if it gets to a point that I think they are blunting my axe I am going to call you. They are representing me, and you can rest assured they are representing my view, but if I ever find out they will not or are not, then you will hear from me personally.
Of course I from time to time contact several of you anyway on other issues, but you can rest assured that they are representing the farmer, and we meet at least quarterly to ensure that, and we instruct them what we want them to do. They do not formulate that policy, we tell them what we want them to tell you when they get to Washington.
Page 144 PREV PAGE TOP OF DOC I cannot go to Washington, I have to stay at home and work and make a living. But I can go to Raleigh three or four times a year and meet with the farmers from all over the State of North Carolina, and we hash out our problems and instruct these people as to how to look after our interest.
And when things really get tough we will contact you, you can rest assured of that. We have a legislative committee in every county, and when the issues get really tight you will be hearing from us. In the meantime as I said you rest assured that they are representing the grassroots of the North Carolina Farm Bureau.
Mr. HAYES. There is no question in my mindand to pick up on that just a minute, you have been a wonderful audience. I am sure I speak for the chairman in saying that we have felt very warmly received, and we appreciate the spirit with which you have brought your ideas, suggestions, and positions.
The stronger the relationship there is between me in our district, the chairman and our district, the better off we are going to be.
As I was sitting here, Peter was in Washington not long ago, and I hope it was helpful to you and particularly to this groupI made it a point to introduce Peter to every single Congressman that came to that reception, and there were a lot of freshmen there. We have more energy sometimes than some of the older members, but I think it is very important that folks from Illinois, California, even New Jersey get to know our folks and our problems, so that is something that I enjoy doing, and that is why your being here is so important, because as we get to know each other on a first-name basis I hope we will do this on a regular basis, and when we come back you all can ask us ahead of time about issues, about legislation, about initiatives that are in the works so that we can bring you specific reports on different things that you are particularly concerned about, and I think we can increase the productivity of what I think has been a very productive session, and I want to thank you all for being here.
Page 145 PREV PAGE TOP OF DOC We talked earlier about the issue of monopolies, the family farm being gobbled up by large agribusinesses. We had a very informative hearing last week on just that subject, and it gave us the opportunity to sayand this is what I saidthe family farm, the personal genius commitment, hard work, creativity that comes from that 19-year-old who still wants to farm, and sometimes we wonder why, cannot be lost in this overall debate about agriculture.
So again your presence helps to reinforce that fact to a very hungry United States and a world, so our thanks.
Mr. CARTER. A couple of things. I want to try to change our focus just a second. I do not think there is any way that I could drive it home any harder about the hardships on the farms and all these gentlemen have done today.
A couple things I want to mention. It has not been talked about, the H2A program. We participate in that, and it is in pretty rough shape. I understand it is coming up pretty soon for a revamp hopefully.
The adverse wage rate is too high, it is ridiculous. We need to work on the adverse wage rate of the H2A program and the referrals. We need to do away with the way it is structured. I am sure you are familiar with it now. We have to accept anyone, any United States citizen that wants a job, we have to accept them over the H2As whether they are qualified or not, and that opens the door for the legal services to come in, and we are involved in quite a few legal suits with the legal services, and they are making it really hard on our program. It is a really good program, but it is getting almost too expensive to participate in.
Also is taxation. As hard as things are on the farm now, you know, we have to do our taxes by the end of February, farmers do, and I was just looking over mine and I see where I am paying on top of everything, all my other farm hardships I am paying almost 60 percent tax, and that makes it pretty tough, too. I am in a 28 percent Federal tax bracket, I pay the 15.3 percent self-employment tax, 7 1/2 percent North Carolina tax, and if you figure my income in comparison with my county taxes that is about 10 percent, so, you know, I am strapped with all my other problems of looking at 60 percent tax on what I make, and I do not know of another group in the world that has to pay that kind of tax.
Page 146 PREV PAGE TOP OF DOC Anyway, thank you for your time. [Applause.]
Mr. HAYES. One of things we are working hard on is the whole idea of inheritance tax, the death tax some people call it, that is a tremendous burden on a family farmer. That needs to be changed. I sense a high degree of interest in doing away with that, because that is a huge impediment to future generations farming.
And we are in the process of forming an agriculture committee for us here in the eighth district, and if any of you would like to belong we would love to have your input and have you on that committee, so that is something we are going to do to keep this whole thing going.
I think I am pretty well talked out in terms of what is going on. I really enjoy what I am doing. I got a pay check the other day. I know you all think I should not get paid for doing this, and you are probably right, but I had the same experience when I saw what is said net and what it said gross, and we are firmly committed to the idea that you can spend your money much more wisely than the people in Washington can, and we are going to work hard to make sure that you get to keep more of our pay check because it is fair, it is the right thing to do.
We are also working very hard to see that education in the United States, particularly in the public schools creates the opportunities where ordinary people can do extraordinary things. That is what America is famous for.
We had a whoo-hah man up theredo you reckon these people know what whoo-hah means, Dwight? The 82nd Airborne. Here we have in our back yard the unique and special strike force, the defense force that makes us the most powerful nation in the world. Our military is going to be rebuilt because again it is the right thing to do. We have got to give those young men and women the best equipment, the best protection because they are protecting us, and they give us the freedom that we have.
Page 147 PREV PAGE TOP OF DOC So those are the things that you are going to sees coming out of the 106th Congress. These are the things that when I travel the district, and when Chairman Ewing travels the country these are the things that people are telling us are important to them.
So we are going to work hard to do that. We are there only because of you. We have the privilege and the honor to serve because you have put there, and we are keenly aware of that. We appreciate that trust, and we respect it, and we are going to do what we think is right, not by opinion polls, but what is the right thing for America.
Mr. EWING. Thank you, and thank you all for taking time this afternoon to come here and talk about some of the challenges we have in agriculture and all different phases of it.
I want to say that I have enjoyed serving with your North Carolina delegation. You have some fine people on both sides of the aisle that you sent to Washington. Robin Hayes is one of those people, and I just suggest that you will be well served to keep that type of delegation in Washington working for you, because they are all good people, men and women who are dedicated to making this State as good as it can be and as profitable as it can be in the country.
And finally I did wantand the gentleman leftI was not taking sides with the lady particularly on the issue of trade, or cutbacks, or set-asides. This is a big debate in agriculture. That is just one of the large debates. I mean we know that our commodity prices are too low, we know we can identify the problems. Income is too low, costs are too high, markets are too limited. We just have not got an easy answer to the problems affecting agriculture today.
Just a couple points I would make on that. Your Government cares, it really does care about agriculture. And while there are not many of us that have rural districts, we do have the ability, and we have been able to persuade our colleagues of the importance of agriculture, and, thank goodness, most Members of Congress know that the food supply of America is not out of the back room of the supermarket. Though we know that other people do not necessarily understand that, most Members of Congress do understand that, and they know that there is two things we have to have that are strong in this Nation above all else, and one is we have to be able to defend our borders from those who would take us over. And, No. 2, we have to feed our people to be a strong nation. And those are things that we will put a top priority on.
Page 148 PREV PAGE TOP OF DOC We have got a tough year ahead of us. 1999 is going to be a tough year for agriculture, but that does not mean that we will not put our best thoughts to trying to find some solutions.
I have a page full of ideas from this meeting today on top of what I received earlier this week in Georgia, and so Georgia did not have all the ideas, there are some new ones here in North Carolina, and I thank you for that, and I look forward to working with your delegation and with the representatives from agriculture in North Carolina as we try and craft a program that really works for American agriculture.
Thank you all very much.
[Whereupon, at 3:30 p.m. the subcommittee was adjourned, subject to the call of the Chair.]