SPEAKERS CONTENTS INSERTS Tables
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DEPARTMENTS OF AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 1999
Wednesday, March 11, 1998.
MARKETING AND REGULATORY PROGRAM
WITNESSES
MICHAEL V. DUNN, ASSISTANT SECRETARY, MARKETING AND REGULATORY PROGRAMS
TERRY L. MEDLEY, ADMINISTRATOR, ANIMAL AND PLANT HEALTH INSPECTION SERVICE
ENRIQUE FIGUEROA, ADMINISTRATOR, AGRICULTURAL MARKETING SERVICE
JAMES R. BAKER, ADMINISTRATOR, GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION
STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE
Opening Remarks
Mr. SKEEN. The committee will come to order.
We are on the record. Today we have with us the Marketing and Regulatory Programs of the Department of Agriculture.
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Assistant Secretary Dunn, we want to welcome you and Mr. Figueroa of AMS, Mr. Medley of APHIS, Mr. Baker of GIPSA, and of course, we could not have these hearings and we would not let them go on unless Steve Dewhurst was here from the Budget Office.
I would like to thank you, Mr. Dunn, for the assistance that the AMS and APHIS provided to me and my staff on a trip that we recently took to Fort Collins, Colorado. That is an amazing institution. We certainly enjoyed the trip and got an awful lot out of it.
Mr. DUNN. Thank you, Mr. Chairman.
Mr. SKEEN. Mr. Dunn, I will ask you to present some brief opening remarks. Your written testimony, along with those from the three agencies, will be printed full in the record. It is all yours.
Mr. DUNN. Thank you, Mr. Chairman and Members of the Committee. I am pleased to be here before you to discuss the activities in the Marketing and Regulatory Programs at the U.S. Department of Agriculture.
With me today is Steve Dewhurst from OBPA; Jim Baker, Administrator of GIPSA; Enrique Figueroa, Administrator of Agricultural Marketing Service; Terry Medley, Administrator of Animal and Plant Health Inspection Service.
We do all have written statements that we will submit for the record. I would also, Mr. Chairman, like to take this opportunity to introduce Dr. Siddiqui. Dr. Siddiqui is the new Deputy Assistant Secretary for Marketing and Regulatory Programs.
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Mr. SKEEN. Glad to have you on board.
Mr. DUNN. Programs with the Marketing and Regulatory Program mission area contribute to all of the Department's strategic goals. We have activities to enhance economic and trade opportunity, which would significantly expand export market.
We have activities to ensure healthy, safe, and affordable food supply—management and resources to improve our customer service and program deliveries. We fully support the Secretary's Civil Rights endeavors at the Department of Agriculture. The strategic goals for Marketing and Regulatory Programs are directed at: one, enhancing consumer access to safe, affordable, and quality products, and assuring that producers have access to competitive markets; two, facilitating global marketing of U.S. agricultural products; three, increasing customer awareness of our services; four, providing these services in an efficient, entrepreneurial and cost effective as possible; and five, creating and maintaining a diverse and highly skilled work force.
Beneficiaries of program services, as well as taxpayers, provide funds needed to operate Marketing and Regulatory Program activities.
In total, the appropriations and user fee resources are proposed to carry out $804 million of program level activities.
Beneficiaries for these services pay user fees of over $397 million. Currently, Marketing and Regulatory Programs administers over 50-percent of the Department user fee programs.
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These programs have been market tested and continue to meet the demanding challenges. In fiscal year 1999, the budget requests, an appropriation of $11.8 million for the Grain Inspection, Packers, and Stockyard Administration; $59.7 million for the Agriculture Marketing Service; and $423 million for the Animal and Plant Health Inspection Services. We will submit legislation to recover an additional $31 million in user fees. The budget assumes that this legislation will be enacted.
Grain Inspection, Packers, and Stockyards Program goals are: one, to ensure fair, open and competitive markets for livestock, meat, and poultry; and two, protect the integrity of the grain marketing for the benefit of American agriculture.
The 1997 GIPSA investigated over 1,800 complaints under the Packers and Stockyards Act. They found 515 violations. They resolved 46 formal cases and issued 29 new cases alleging failure to fully pay livestock sellers.
GIPSA's Federal, State, and private grain inspection agencies provided 2.1 million official certificates on over 225 million metric tons of grain and oil seed.
They also weighed over 97 million metric tons of grain and issued over 87,000 official weight certificates. We are requesting several critical increases in funding to improve our performance in addressing issues regarding packers and stockyards.
As you know, the Secretary's Advisory Committee on Agricultural Concentration found an increasing concentration structure, declining marketing performance, and increasing use of complex formula and value-based marketing systems by packers continuing to raise questions about regulatory and policy significance.
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The Advisory Committee recommended resources be added to monitoring and investigating the anti-competitive implications of structural change and behavioral practices in the meat packing industry.
These resources would increase GIPSA's capability to support legal action that require complex, economic, and statistical analysis.
Recent Advisory Committee on Small Farms supported that conclusion. As the result, the 1999 budget proposes an increase of $795,000 for monitoring and analyzing packer competition and industry structure, $750,000 to broaden the size and scope of poultry compliance investigations, and $225,000 to establish electronic filing procedures for annual reports which could save packers costly paper submissions.
In addition, the budget requests $3 million to reorganize the 11 Packers and Stockyards field offices in order to implement the Office of the Inspector General's recommendations for improving Packers and Stockyards investigative capability.
Packers and Stockyards would target their resources at three major centers: beef, pork, and poultry production and slaughter. The fiscal year 1999 budget, again, proposes legislation to authorize the collection of license fees to administer all activities under the Packers and Stockyards Act. It will also include a proposal to cover the cost of developing grain standards and methods to improving grain inspection activities.
The Agricultural Marketing Service Program goals are: one, to facilitate the strategic marketing of agricultural products in domestic and international markets; and two, to ensure fair and competitive marketing.
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Recently, the Agricultural Marketing Service published a proposed rule to establish national standards for organic production, and a proposed rule to reform the milk marketing orders.
The National Organic Program addresses the methods, practices, and substance used in producing and handling organic crops, livestock, and processed products. Our goal is to develop a final rule that is acceptable to the organic community and consumers.
The changes in the Federal Milk Marketing Order Program reforms the 60-year-old program by better reflecting current economic realities. It moves the dairy industry towards greater market orientation, while ensuring a regular, reliable supply of milk across the country.
The final rule will enable producers to maximize returns, reduce marketing costs, and provide consumers with increased product values.
Both of these rules have been put on the Internet. On the organic, we have received over 16,000 comments to-date. We are requesting $10.5 million in three efforts to expand the Pesticide Data Program.
These efforts would provide a basic level of assurance regarding an abundant, available, and safe food supply that would facilitate the marketing of agricultural products.
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First, we need an additional $2.5 million to restore the funding to the levels of 1996. These funds will maintain statistic reliability by continuing contracts with four of our ten participating states.
Second, we need $1.7 million to protect American agriculture from unnecessary losses of pesticide registrations. The Food quality Protection Act of 1996 requires EPA to review more than 9,000 tolerances within the next ten years.
As you know, EPA will conduct their analysis using the maximum allowable usage rates, unless we have actually pesticide residue data.
In other words, we will lose the availability of minor use pesticides once they lose their registration. Therefore, these funds are needed to enable a rapid response to EPA's request for actually residue data that could save registered use for minor use pesticides.
Third, we are requesting $6.3 million to begin micro-biological testing of fruits and vegetables as a part of the President's Food Safety Initiative. We will minimize the cost of collecting this information by utilizing PDP's existing sampling infrastructure, state laboratories, and data reporting capabilities.
The budget includes an increase of $300,000 to expand international market news reporting. Agricultural marketing firms need market surveys conducted by AMS from these areas to take more timely advantage of market opportunities.
AMS' budget also includes an increase of $500,000 for the National Organic Standards Programs. This request is critical because the proposed rule is ready to be finalized and implemented.
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We will recover the cost of the program through user fees and deposit it in the Treasury. The Animal and Plant Health Inspection Service has five program goals. They are: one, to safeguard American agriculture from foreign pests and disease; two, minimize production losses and exploiting market disruption from exotic pest disease; three, reduce losses from pest disease and wildlife; four, ensure humane care and treatment of regulated animals; and five, to develop safe and effective treatment of scientific methods to protect the health of American agriculture.
In 1997, APHIS had major accomplishments in their domestic and international activities. At ports of entry, APHIS inspected 77 million international passengers and intercepted 65,000 pests to protect the domestic producer from exotic pests and disease.
They resolved unjustified trade barriers in 16 countries. These efforts were worth nearly $7 billion in exports to the U.S. agricultural commodities.
They are the world leaders on regionalization, which is an effort to increase trade opportunities under GATT and NAFTA by recognizing pest and disease free zones within countries.
In agriculture, the U.S. is a clear winner when these sanitary and phytosanitary standards are science-based and fair. On the domestic pests disease front, APHIS is down to having only 11 herds remaining under quarantine for brucellosis and expects complete eradication in calendar year 1999.
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For boll weevil, the new foundation loans of $40 million from the Farmers Loan Operation of the Farm Service Agency has accelerated eradication activity for cotton producers.
The program provides significant environmental benefits through reducing the farm use of pesticides. These new funding arrangements allow APHIS to focus on what they do best, provide technical assistance.
The 1999 budget request for APHIS is an example of good government. They are proposing to do more with less. In 1999, APHIS requests $417.8 million for Salaries and Expenses, a $9.9 million decrease below that of 1998.
Even so, APHIS proposes to spend $13 million more on high priority efforts, such as the $4.6 million increase in National Animal Health Monitoring Systems.
These efforts will further safeguard American agriculture from foreign pests and disease. It will reduce production loss of an export marketing disruption from exotic pests and disease.
These changes will help the Department meet its objective of significantly increasing exports, while meeting the World Trade Organization's sanitary and phytosanitary requirements.
This shift can be accomplished because of past Agency program success, proposals to reinvent select programs, and proposals to encourage beneficiaries to share more in the program cost.
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I appreciate this opportunity to present the budget for the Marketing and Regulatory Programs mission area. The proposed funding amounts and sources of funding will provide a level of service needed by our customers, farmers, ranchers, agricultural marketing industry, consumers, and also taxpayers who should get a balanced budget for the first time in 30 years.
I encourage the committee to approve these proposals. We will be happy to answer any questions.
[CLERK'S NOTE.—Mr. Michael Dunn's written testimony appears on pages 245 through 265. Mr. Terry Medley's written testimony appears on pages 266 through 292. Mr. Enrique Figueroa's written testimony appears on pages 293 through 307. Mr. James Baker's written testimony appears on pages 308 through 332. Biographical Sketches appear on pages 241 through 244. The Animal and Plant Health Inspection Service's budget justification appears on pages 333 through 427. The Agricultural Marketing Service's budget justification appears on pages 428 through 492. The Grain Inspection, Packers and Stockyards Administration's budget justification appears on pages 493 through 528.]
USER FEES
Mr. SKEEN. Thank you, Mr. Dunn.
I have to make the observation that once again the President's budget proposes user fees for some of your programs. There is $21.5 million in new user fees for GIPSA and $10 million for various APHIS user fees.
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In reviewing the USDA budget, it has come to my attention that this is a user-fee laden budget. The budget assumes that these user fees are going to be enacted, so funding increases are provided in WIC, the Food Safety Initiative and other programs.
Have these user fees for APHIS and GIPSA been proposed in the past?
Mr. DUNN. Some of them have been proposed in the past, Mr. Chairman. That is correct.
Mr. SKEEN. Which ones?
Mr. DUNN. The Packers and Stockyards Program and APHIS.
Mr. SKEEN. And APHIS as well. How has that program worked for you? What kind of returns were you getting?
Mr. DUNN. For GIPSA, it never has been approved, as I recall.
Mr. SKEEN. So, you did not convert them. You just proposed them.
Mr. DUNN. Our Agency today is about one-third appropriated and two-thirds user fees.
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Mr. SKEEN. So, you are operating on two-thirds user fees.
Mr. DUNN. Operating today.
Mr. SKEEN. Today. How about APHIS?
Mr. MEDLEY. Under the proposed user fees for APHIS, we are requesting additional authority to collect user fees in 5 programs. Agricultural quarantine inspections, of course, is a major source of funding from existing user fees.
One program, Animal Welfare, is projecting $3 million user fee collections. We currently collect licensing fees of a little under $900,000. These fees now go to the U.S. Treasury, not to the Agency where the costs are incurred for providing the service.
Mr. SKEEN. So, you had in the past a system with user fee collections.
Mr. MEDLEY. Only in the animal welfare program for the 5 areas proposed for new fees in our 1999 budget request.
Mr. SKEEN. I see. It was rather limited.
Mr. MEDLEY. Yes.
Mr. SKEEN. Well, when will the legislation to enact these new user fees be sent up for the authorizing committee's consideration?
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Mr. DUNN. I will defer to Mr. Dewhurst for that answer, Mr. Chairman.
Mr. DEWHURST. All of the user fee proposals will be in one piece of legislation. We expect to get it up here, I hope, within two weeks.
Mr. SKEEN. You had better get it up here, but I also hope that we can get it passed if you are going to rely on it.
ORGANIC CERTIFICATION
Let us talk about the Agricultural Marketing Services. As you may be aware, Dr. Figueroa, the 1990 Farm Bill authorized the development of nationwide standards for organic certification.
Last year, AMS testified that the rule was going to be finalized this spring. Finally, last December the proposed rule was published with a 60-day comment period.
Then last month, on February 6th, Secretary Glickman announced that he had extended the comment period on the proposed rule for another 45 days.
I realize that we do not want to do anything too hastily here, but what is the map-out now on this? Has AMS completed its review of the comments of the original comment period on the proposed organic certification rule?
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Mr. FIGUEROA. Mr. Chairman, we have not.
The comment period will end April 30th.
Mr. SKEEN. April 30th.
Mr. FIGUEROA. Yes, of 1998. Secretary Glickman, on December 16th, established a target date of the beginning of 1999 for us to publish a final rule. We have 16,000 comments as of yesterday.
It is likely that the organic rule will receive comments somewhere in the neighborhood of 25,000 to 30,000. Given that volume, we may be pressed to meet that January 1999 date, but still, that is our target.
Mr. SKEEN. It is going to take some time to review your comments, I gather, from what you are saying.
Mr. FIGUEROA. Yes, sir.
Mr. SKEEN. You have not accumulated all of the data yet.
Mr. FIGUEROA. No, sir.
It is also conditional, as Assistant Secretary Dunn said. It is critical that we receive the $500,000 because we will obviously need to have staff and resources to complete this.
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Mr. SKEEN. But you understand we are dealing with a moving target here. When will we get the final rule on organic standards? When will they be published?
Mr. FIGUEROA. Our target is the beginning of 1999. That is what we are operating under.
Mr. SKEEN. 1999.
Mr. FIGUEROA. January 1999.
SCREWWORM
Mr. SKEEN. Mr. Medley, it was a little over a year ago that I went down to Panama to visit with Ambassador Bill Hughes on the transfer of the screwworm project to Panama. Where are we in all of that effort? Have you done the privatization study?
Mr. MEDLEY. Yes, Mr. Chairman.
The privatization study was completed and shared with the Ambassador in Panama. With regard to facility construction, we anticipate starting the architectural and engineering part of the contract in 1999. We hope to have the facility completed and occupancy by 2002.
Mr. SKEEN. Are we getting any co-sharing of funds from some of countries that will benefit from the program?
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Mr. MEDLEY. Panama has provided some funds for the Panama facility.
Mr. SKEEN. Yes. They were going to donate a location.
Mr. MEDLEY. Yes. They have also contributed financially.
Mr. SKEEN. Financially.
Mr. MEDLEY. Yes, Panama donated about $10 million for the facility.
WILDLIFE SERVICES
Mr. SKEEN. Very good. User fees finally struck.
You are proposing to reduce the Wildlife Services budget and change the cost share basis for the States. What are the changes that you are going to make for cost sharing?
Mr. MEDLEY. Mr. Chairman, we are seeking to go more to a 50/50 cost share in those states that are not currently contributing a minimum of 50-percent.
We plan to phase-in over three years for States where total Federal/cooperative program costs are less than $1 million and two years for all other States. Our objective is to have a more equitable distribution. We are trying to reduce the federal contribution in certain areas.
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SCREWWORM
Mr. SKEEN. Could you get us a copy of the privatization study?
Mr. MEDLEY. Yes. We will be more than happy to provide that to you.
[The privatization study follows:]
[CLERK'S NOTE.—The study is too lengthy to print. A copy will be retained in committee files.]
WILDLIFE SERVICES
Mr. SKEEN. We appreciate that very much.
You are proposing reintroduction of wolves. Is this an extension of your reintroduction efforts in the Yellowstone area into New Mexico and Arizona? Do they appear to have increased demand on APHIS resources.
If that is the case, have you had to reduce your activities in other areas to make up for this effort?
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Mr. MEDLEY. We have not had to reduce our activities at this point.
Mr. SKEEN. You never actually made any insertions.
Mr. MEDLEY. In Minnesota, about $250,000 comes directly from our budget. Because of the increased wolf activity, we are fast approaching the point where we are not able to maintain the level of service necessary with our current funding.
Mr. SKEEN. So, funds have been a restriction as far as enforcement of the program.
Mr. MEDLEY. They have.
Mr. SKEEN. Well, we would appreciate having a record of how that program is going.
Mr. MEDLEY. We will definitely get it to you.
[The information follows:]
WOLF CONTROL IN MINNESOTA
In Minnesota, eastern timber wolf populations have grown to record levels and are expanding to other parts of the State and into previously wolf free areas of Wisconsin and Michigan as well. Two full-time APHIS biologists are located in Minnesota to handle wolf damage conflicts, but the expanding population is rapidly exceeding their ability to ensure an adequate level of control. APHIS estimates that a total of $350,000 will be required in FY 1999, including $10,000 to begin work in Wisconsin. There are no contributions from the Fish and Wildlife Service or the State of Minnesota towards this effort. The $250,000 which APHIS is currently directed by Congress to spend in Minnesota is the sole source of funding for wolf control efforts in this State.
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Mr. SKEEN. Ms. Kaptur.
KARNAL BUNT
Ms. KAPTUR. Thank you, Mr. Chairman.
I want to welcome Secretary Dunn and all of the gentlemen from the USDA who are with us today. We have really had quite a set of hearings here already this month. They are really quite good ones actually.
I have several questions related to the testimony and some of the back-up information that was submitted to us. The first concerns karnal bunt.
I am concerned about farmers being compensated for their losses as a result of this. I am curious as to whether your budget submission includes a special account for this purpose, Mr. Medley.
Mr. MEDLEY. Our pest detection budget for 1998 contains $2 million for management of a karnal bunt national survey.
The funds for compensation are available through emergency funding from the Commodity Credit Corporation.
We have about $10.8 million available for compensation for producers and seed companies who suffered losses in value for wheat seed and straw in the 1995–1996 crop season.
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Ms. KAPTUR. In the CCC?
Mr. MEDLEY. Yes, it is a carry over account.
Ms. KAPTUR. Now this is a District interest, but I have been contacted by a small grain dealer in our area, and I am sure other Members have the same situation, who suffered substantial economic hardship because his grain was quarantined for nine months, but then was found not to have karnal bunt.
Does he qualify for compensation under the current Karnal Bunt Program?
Mr. MEDLEY. Under the current requirements he would not qualify for compensation. I believe that in this situation, the grain was found to have a spore that was similar to karnal bunt, but it was from rye grass.
Once tests verified it was not karnal bunt, we were able to release the grain. We never actually placed that grain under the Emergency Declaration, which would be necessary to qualify for the compensation payment.
Ms. KAPTUR. Now, is the problem that he is having in getting some kind of closure on this, a problem of the legal authority?
Mr. MEDLEY. Legal authority would be one consideration. The other consideration would be whether the Emergency Action Notice delayed your constituent from selling his grain. When he was able to sell it, the price was lower.
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He is comparing the price he got to the price that was available months earlier. So, we would have to see, first, if there is authority to make payments. Secondly, whether or not it was the emergency action which caused the losses.
Ms. KAPTUR. All right. Now, how would he work with USDA on this problem?
Mr. MEDLEY. You are correct in that we have had a number of other producers that have suffered losses.
Unfortunately, under our current provisions and statutory authority, we do not have the ability to pay unless losses were sustained under an Emergency Declaration. This gives us the authority to pay indemnity or compensation.
This is an area where, in the past, the Department has explored to determine if some type of private relief bill would be appropriate. We have also had some producers asking whether or not they can file a claim under our Torts Claim Act.
Currently, our General Counsel's Office opinion is that these claims did not meet our requirements for payment.
Ms. KAPTUR. It is my understanding, that was quarantined specifically because of karnal bunt; the concern that it might be.
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Mr. MEDLEY. Yes.
Ms. KAPTUR. It was not his choice to have it quarantined. He wanted to sell it at that point. I guess I was very surprised to find that the law, you know, that he could not even get any redress of any kind. He suffered loss.
You hate to go back to hit the NAFTA drum, but I am going to hit it again because this is just like the tomato people down in Florida.
Here is another situation where one of our farmers, and many of them get hurt around the country, and we just ought to be more able to at least meet with them or figure out a way to redress some of their concerns.
I would just ask you, Mr. Medley, if you could work with us to be fair to everyone in the country who should get some kind of quick turn around on this, so that they get answers and they can go on with their lives and their businesses.
Mr. MEDLEY. We would be very pleased to work with these people. We realize that although we were able to save about a $5 billion market, there were losses suffered. We would want to properly address those who suffered losses.
Ms. KAPTUR. Thank you. Thank you very much.
ORGANIC CERTIFICATION
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I wanted to ask you about the rule on organics, Dr. Figueroa. Some of our folks have said that the proposed rule is too weak and that in fact, it will disadvantage American producers in international markets. They believe that the rule should better adhere to industry norms and the recommendations of the National Organic Standards Board. How will your recommendation address their concerns?
Mr. FIGUEROA. Good afternoon. As you know, Congresswoman Kaptur, we are still in the comment period. We are, as I mentioned earlier, we received 16,000 comments. The comment period will end April 30th. Then we will analyze and evaluate all of the comments.
Secretary Glickman committed himself in his February 6th press release to indicate that we will not release a final rule that could not be embraced by the organic industry nor the American consumer.
We are taking all of these comments very seriously. I can say that I was in New Jersey last week and I spent ten hours receiving comments. It was clear that the vast majority of the individuals that offered testimony were clearly concerned about the weakness that you have just identified.
We have also committed ourselves to allow for further public comment after the April 30th deadline. We will embark on that process as well.
Ms. KAPTUR. You said the final rule will come forward when?
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Mr. FIGUEROA. Our target date is January 1999.
SCREWWORM
Ms. KAPTUR. Thank you. I wanted to ask another question regarding APHIS. I understand that APHIS currently runs a facility related to screwworms in the Chiapas Region of Mexico.
The proposal is that it be closed in the year 2004. I wonder if you might give us a little more detail about how many people are employed there and why it is proposed for closure?
On pages 14 and 15 of your budget, it indicates that there have been prior labor disputes at that particular facility. I wonder if you might enlighten us a little bit about what is going on there? Then I have a final question related to this facility.
Mr. MEDLEY. The projected closure of the Mexico facility and our movement to a Panama facility is consistent with our overall eradication plans and with our maintaining a barrier at the Darien Gap in Panama.
This is a part of a sequential movement south, as we are successfully eradicating, to provide a permanent barrier against the screwworm reinfestation into the U.S.
Phase-out of this production facility is scheduled for 2004 to allow for a transition period, once we begin operations, hopefully, in 2002 in Panama. Also, there were some issues having to do with management and the union within the Mexico facility.
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Those issues have been resolved. We have been able to address the immediate concerns raised and to work out how the facility will be managed as it relates to the foreign nationals and the responsibilities inside of the facility.
I believe that the joint U.S./Mexico screwworm commission has a little over 650 employees.
Ms. KAPTUR. So, this is a significant presence in that very tender area of Mexico. I am deeply concerned about the people of Mexico.
I have plenty to say about their government, but deeply concerned, particularly in the agricultural country side and about any destabilizing force in that area, certainly by the United States, I do not think would be viewed as a good sign.
I realize the screwworm problem is a separate problem from a political problem, but nonetheless, it is the presence of the United States in that region. Are you coordinating this with the State Department so as to minimize any——
Mr. MEDLEY. We are working with full concurrence and support of the Mexican Government.
From a bio-security standpoint, having the facility located where the screwworm has been eradicated could jeopordize free status if there is an accident and this is why the Mexican Government also wants the facility to move south, as we are eradicating screwworm south through Central America.
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We work very closely with our counter-parts in Mexico. We make these decisions based upon long term program goals, as well as being very sensitive to the factors that you have identified.
Ms. KAPTUR. What will happen to the people? First of all, what are the people in that facility doing? Are these scientists?
Mr. MEDLEY. No, they are primarily technicians. There is a lot of work associated with growing the larvae and producing the flies that we released; the billions of flies that we released for this eradication effort.
The majority of the employees working in the facility are technicians. These people are covered by union contracts. There have been reductions in employees as we have successfully eradicated screwworm and reduced the size of the program.
Included in the union contract were specific requirements for what they must be paid, for severance pay, et cetera, when positions are eliminated.
Ms. KAPTUR. When they were employed there, they knew that this would be a job that would not be there.
Mr. MEDLEY. Yes, that is correct.
Ms. KAPTUR. You are coordinating with the State Department then to minimize any negative impact in the area.
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Mr. MEDLEY. Yes, we have our Region VI office in Mexico working with the State Department.
Ms. KAPTUR. All right. Mr. Chairman, I will hold my remaining questions for the second round. Thank you, Mr. Medley.
Mr. SKEEN. Thank you, Ms. Kaptur.
I am delighted with your interest in the screwworm program because the whole map-out for this was done back in the 1950s. I think what the Department has been doing is following that.
That has been one of the most successful eradication programs I have known. Speaking as a livestock operator, I can tell you this. We used to spend about 60-percent of our time doctoring for screwworms back in the early days of the 1950s.
Since that time, we have not had a case at all and no reinfestation. It has been very successful. I just had to get that in there.
Ms. KAPTUR. I remember that from prior hearings, Mr. Chairman. I just did not realize that the facility we were closing was in Chiapas.
Mr. SKEEN. Well, there is an awful lot of their own political unrest in that area that are creating problems. It has nothing to do with the plant. Mr. Serrano.
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Mr. SERRANO. Mr. Chairman, there is a senior Gentleman to my right here.
Mr. SKEEN. I was going to let him collect his thoughts.
Mr. SERRANO. I. See, I look like a good guy now.
Mr. SKEEN. Are you going to talk or are you not? The clock is running.
Mr. SERRANO. Yes, I am, sir.
Mr. SKEEN. Okay, Mr. Serrano. It is all yours.
SANITARY/PHYTOSANITARY STANDARDS
Mr. SERRANO. Thank you, Mr. Chairman.
Let me first thank all of you for being here today and for the work that you do on behalf of the folks in this country. I thank Mr. Dunn and Mr. Medley for finally allowing Serrano Ham to enter the country; no relation.
I have a question on that though. I know that, for years the whole issue was tabu, you know, the idea. Then, there was a lot of press on the fact that this famous ham was not allowed into the country.
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What were the problems and how did you reach a conclusion that it is okay to do it now? As I understand it now, it is not all forms or all products that go under the headline of Serrano Ham, but just some.
The reason I ask you that question, not really because of the last name, but I know that some people do want to know how those decisions are made; how you reached that point where it was a big no, no, and now it is okay.
Mr. MEDLEY. The major reason for the change is that we were assured that entry of the product would not present a risk to our domestic livestock population. We were concerned about very serious communicable diseases of swine, primarily African Swine Fever and Classical Swine Fever better known as Hog Cholera.
We put in place certain protocols against entry of any live animals, but we also have entry protocols for either cured or processed pork products. If they meet our requirements for safety, then they can be imported.
Mr. SERRANO. But you are painting, I mean, while accepting it into the country, you are still painting kind of a scary picture, with your choice of words. There seems to still be some concern on your part regarding that entire area.
Mr. MEDLEY. It is, Congressman, because currently the European Union is having a serious outbreak of Hog Cholera in various countries.
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With product and, perhaps, swine movement among the countries, the outbreak of Hog Cholera has spread to the Netherlands, Germany, and Portugal. We foresee receiving positive tests from Spain and we know the disease is in Italy.
Because of these outbreaks, we are very concerned, and have very specific entry requirements. These requirements are aimed at allowing, trade under conditions that do not present a risk to our domestic pork industry.
Mr. SERRANO. I understand. But see, that brings up another question. If for years this product was not acceptable as a product to be sold in this country, and now you are telling me that it is, you still did not tell me if it is all of it or some of it.
Secondly, if there are no current outbreaks of cholera. Why was it unacceptable before. It is more dangerous now or at least that is how I see it.
Mr. MEDLEY. There are actually two things that have occurred. One, is the ratification of GATT and the other is the requirement that the 1930 Tariff Act which prohibited us from even allowing entry of meat products from certain countries where they had exotic disease, be amended.
Under that new procedure, we have regionalization, in which we are able to certify and accept products from free regions within the countries where there are disease problems. This is actually one of the major significant advantages that should work both with importing and exporting meat and poultry products.
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Similarly, if we have an isolated case or a major disease outbreak in the U.S. occurring in one area of one State, it would not impede commerce in other areas in that state that are free or in other States.
So, there have been significant international rule changes over the last five years relating to trade and animal products.
Mr. SERRANO. You bring up an interesting point in terms of outbreaks in this country. We always, of course, get a picture of what we think about everyone else or their products and so on. Do you know of instances where other farming governments have sat around the table, as we are now, concerned that something we are sending them is going to create a problem for them?
Mr. MEDLEY. Yes, Congressman, it happens all the time. There are various areas, whether we are talking about our negotiations with Australia, Europe, or China where there are various products from the U.S. that are not allowed entry because of concerns about particular diseases present in the U.S.
Mr. SERRANO. Such as?
Mr. MEDLEY. For instance, in the area of poultry products, we look at concerns with certain poultry diseases. A year and a half ago, Russia cut off a $700 million export market because of their concern about six different poultry diseases.
We are trying to gain market access in South Africa, and Australia with pork products. The concern over BlueTongue prevents our export of cattle to certain countries. Other diseases can impact our horse industry exports.
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There are a number of requirements that are imposed upon the U.S. because of diseases that our products or animals might have. In the animal area, there are 17 major diseases that concern most of the world. Fortunately, we do not have most of those diseases.
Mr. SERRANO. Just one further concern; you know, this week, I am sure you could not have missed it on any of the major stations.
There was a major debate on the House Floor about the political future of Puerto Rico. A part of what that debate showed was the lack of information that exists among House Members in terms of the relationship between Puerto Rico and the U.S.
You always think that because you were born there that everybody knows what you know, but that is not a fact. Many people reacted in terms of dealing with a foreign country, if you will.
I sounded very much on the Floor like they were talking about a foreign country. Should Puerto Rico be a state, an independent nation, or not?
Even though we have the same Department of Agriculture covering Puerto Rico, sometimes we act like it is a foreign country, in terms of their tropical fruit coming into the country.
Now, I am sure that is not in any way related to the relationship. Is it related to the fact that many of Puerto Rico's products are not naturally grown in the State.
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I mean, do Virginia apples go through the same scrutiny when moving over to Seattle? Although, probably Washington State would not want any Virginia apples; right?
Do they go through the same scrutiny, say that mangos from my hometown, in Puerto Rico, go through in getting to New York?
Mr. MEDLEY. In all of the States, territories, and possessions, APHIS applies the same standard across the board for domestic agriculture that we are protecting.
We are very concerned about cholera in the Dominican Republic and in Haiti and the threat it poses to Puerto Rico. We have intensified inspections in Puerto Rico, as well as in New York, New Jersey, and Miami equally.
In Puerto Rico, as with Hawaii, because of their tropical climates, there are identified significant quarantine pests that are in the fruits and vegetables that are not in the citrus producing areas on the mainland.
We have a pre-departure inspection activity as a mechanism for identifying and safeguarding against pests in those areas from entering the U.S. mainland.
Let me reassure you that our activities are designed to protect all domestic agriculture, which includes all territories, possessions, as well as States.
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Mr. SERRANO. Well, let me congratulate you, Mr. Medley. I have been asking this question in and out of Congress for a long time. No one has answered it as clearly and direct as you have.
It is too bad a lot of other people do not get to hear your answer because that would alleviate a lot of concerns about the inspections and the treatment being based on the relationship rather than on the concerns of protecting our crops throughout the country. So, I thank you. I have no further questions, Mr. Chairman.
Mr. SKEEN. Mr. Serrano. I will vary the format a little bit and ask Mr. Fazio next.
QUALIFIED THROUGH VERIFICATION PROGRAM
Mr. FAZIO. Thank you, Mr. Chairman. Welcome everybody. It is good to see you. There are a number of people I am getting to know in the capacity of Marketing and Regulatory Programs here. I appreciate the help I am receiving from those at the table and those on the first row.
This relates to concerns that some of my growers, fresh fruit and vegetable growers, and some fresh cut product manufacturers have. I would like to ask about the Qualified Through Verification program.
I understand that up to 60 requests are pending before the Agency for application to and certification from the program. I understand USDA has agreed to use the USDA shield on some of the products that my growers are involved with.
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There is concern among those whose applications are pending that this represents a competitive advantage to the few companies that are now qualified. I guess everybody wants to be in at the same time.
So, my questions are, how many applications are pending? At what rate do you process these applications now with your available resources? I suppose, Mr. Dunn, perhaps I could go to you first. Then we will see who else may want to comment.
Mr. DUNN. What I will do, Mr. Fazio, is fill in a little time while Dr. Figueroa consults with staff on how many are actually on board.
Mr. FAZIO. He is doing it as you speak.
Mr. DUNN. This is something that we have worked out with the producers. I was in consultation just the other evening with the Dean of the Agriculture School from U.C. Davis.
We were talking about this program and how we could work with U.S. Davis to expand this program and be able to provide greater service to other folks. I think Dr. Figueroa now has the answer.
Mr. FAZIO. That was really very good, Mr. Dunn.
Mr. DUNN. Dr. Figueroa certainly knows Davis, too, from his experience. He has touched down at Cornell to cover Mr. Walsh as well. So, he is well-settled before this committee.
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Mr. FIGUEROA. Good afternoon, Mr. Congressman.
The answer is pending, and I will provide you with the exact number, is somewhere in the neighborhood of between 40 and 60 firms.
We are moving as expeditiously as possible to get as many of these firms qualified. It is a function of the plans that each of the firms submit to us as to how quickly we can get those firms into the programs.
The firms that are using the shield are very satisfied with it. That is probably indicative of the number of firms that want to join it.
[The information follows:]
MARKETING AND REGULATORY PROGRAMS AGRICULTURAL MARKETING SERVICE
There are five firms involving six production facilities that are in the Qualified Through Verification program, or QTV. Another eleven firms have submitted their proposed QTV plans for our review. We expect to have most of these approved and in the program before the end of the summer. In addition, some 30 other firms have expressed interest in the QTV program but have not applied for acceptance.
Mr. FAZIO. What does this mean to the consumer? I do not want this to sound like just something that is to convenience the industry. Describe for the committee, if you could, what it means to the consumer.
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Mr. FIGUEROA. The program is not a program where certifying makes the product any safer. What the shield means to the consumer is that the USDA has certified that a firm used a HACCP Program to process the product.
That during the process of that product, and meeting the HACCP requirements, it was produced in a manner that minimizes exposure to microbial contamination. That, in my judgment, is what the consumer sees in that seal.
Mr. FAZIO. I understand there is a fairly significant inspection and verification fee involved here. Is this in any way a limitation on who can afford to participate? Does it in some way become an advantage for the larger producer over the smaller? Is there a way to sort that out over time?
Mr. FIGUEROA. I cannot give you the exact fee, Congressman Fazio, but I will provide that for you. I raised the same issue. As you know, I have been on board for four months.
On a per package basis, the cost is minimal. As I understand it, it does not have much of an effect in the implementation of the program.
[The information follows:]
QTV is a voluntary, fee-for-service program. We have been pleased that firms of widely varying size, from the industry giants to relatively modest-sized regional suppliers, are participating. To recover the costs of the program, we charge about $1,800 for each audit, although that fee may vary slightly depending on the facility's location. Audit frequency is determined by the facility's ability to operate according to its approved HACCP plan.
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Initially, we conduct one unannounced audit every two weeks. Our experience has been that firms move relatively quickly to a reduced audit rate of once a month or once every two months with attendant reductions in their audit costs. The continuing decision by participating firms of very different sizes to stay with QTV, along with anecdotal evidence from these firms of cost savings from their heightened sensitivity to details of the production process, strongly suggest that QTV is a good value.
Mr. FAZIO. So, it is kind of first-come, first-served. If you are more aware of the program and aggressive about it, you got in first and perhaps everybody else has had to wait maybe longer than was originally intended because the backlog has grown.
Mr. FIGUEROA. That is correct.
Mr. FAZIO. Could you give us a time line as to how quickly you can work that backlog down? For example, if you were in that 40 to 60 applicant line that you outlined a minute ago, how would it be before you get the next 40 done and the next 20 after that?
Mr. FIGUEROA. Congressman, I cannot give you a precise number. We are indeed working as we speak today with some firms that will be indeed in the program soon.
As I mentioned earlier, it is a function of the firm's plans, how they submit them, and how complete they are. So, that is a key factor in the relative rate in which we can bring the firms into the program.
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Mr. FAZIO. So, you are trying to be user friendly, but not everybody is equally prepared when they walk in the door.
Mr. FIGUEROA. That is correct.
Mr. FAZIO. I am reading between the lines.
I hope you are doing everything you can to reach out to people to make sure that they provide you with the data you need and are able to be processed as quickly as possible so that we do not have any disparity in terms of who can more readily access the market.
Mr. FIGUEROA. I can assure you that we will work as expeditiously as possible with all the applicants.
Mr. FAZIO. I am interested in the inter-relationship with the FDA on this. Your testimony indicates a memorandum of understanding with them. Since they have regulatory responsibility for the safety of produce, I am wondering how this fits into the inter-relationship between the two departments.
Mr. FIGUEROA. I want to restate that we are not marketing the program, if you will, as a food safety program. It is a program that minimizes the rate of contamination, if they adhere to the HACCP principles.
In addition, as of today, the memorandum of understanding that you just referred to has not been signed off by the FDA. So, that is still pending.
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Mr. FAZIO. When it has been signed it would go into the Federal Register and sit before the public for comment and all the rest. Is that correct?
Mr. FIGUEROA. The memorandum itself will not, but the program itself will be fully recorded in the Federal Register, yes.
Mr. FAZIO. Let me talk to you a bit about the Food Quality Protection Act; that bill that we were pleased to put through in the last Congress which did away with the outdated Delaney clause.
Obviously, many of my growers and commodity groups are concerned about the implementation of it. EPA has been going through some debates, shall we say, with the affected commodity groups and the crops they grow over the risk cup.
PESTICIDE DATA PROGRAM
I think we have had minimal success so far in moving some products into the market that we need, but I remain hopeful. I notice you have requested additional funds for the Pesticide Data Program; trying to maintain sampling levels.
Could you give us an update on how you see this program working, knowing that it is important to your constituent group and at the same time you do not have, obviously, the authority to implement all of it?
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What issues are rising to the surface? How do you see them getting resolved? Where does the Pesticide Data Program, which has had a checkered history with this committee, I think is fair to say, where does it sit at the moment?
Mr. FIGUEROA. There are two components to our request. One is for the Pesticide Data Program as we know it. There are $2 million for restoring the funding levels that were in place for 1996.
The other component is on the rapid response. The first component, obviously, provides statistically reliable information to the EPA and for other agencies within the USDA for them to conduct research to find out what indeed is there. I think importantly it has allowed FAS to be able to negotiate and convey the information to our trading partners to ensure them and at least provide to them statistically reliable information actually on fruits and vegetables at the wholesale level.
With respect to the rapid response, it is our intent that we can provide information to the EPA to facilitate their process of re-registering some 9,000 new pesticides they are responsible for doing. Our pesticide data program indeed will assist them in doing that in a more expeditious way.
Mr. FAZIO. I am wondering if you or anyone else would want to comment on how that FQPA implementation is going. You probably would not, but I would like you to, if you would.
Mr. DUNN. Mr. Fazio, I thought Dr. Figueroa was doing quite well on his own there.
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Mr. FAZIO. Not to over-test him.
Mr. DUNN. As you are aware, we contract with ten different states which gives us a very good across the board sampling. What we intend to do is to expand on that infrastructure that we have out there with the PDP Program to get the additional information on the food born illnesses.
To allow for data to be collected for the first time so that we would have a sampling of what may be out there. We feel the program presently is doing very well.
I must say it is one of those programs where the majority of the money is a pass through to the states. It is a very good partnership that we have with the various states.
I had an opportunity to tour the facility in California. I saw the spectrometer that was out there that we had purchased under that particular program and how well that was being utilized.
I see it as a tremendous asset and something that works very well. You were not here earlier when I introduced our new Deputy Assistant Secretary, Dr. Siddiqui, whom I am sure you have had opportunities to work with in the past.
We see this as a continuation of the partnership with the states that we are working with and an opportunity for all of us to collectively provide the information we need to ensure food safety.
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SANITARY/PHYTOSANITARY STANDARDS
Mr. FAZIO. I know there has been concern about our bill picking up work that perhaps another bill should for the EPA, but this is really essential agriculture as we struggled to implement the Food Quality Protection Act.
I appreciated your reference to the trade issues. I wanted to get APHIS involved in this too because I was pleased by their testimony regarding that agency's involvement in resolving some of the sanitary, phytosanitary trade barriers.
I think you both go into concerns that if we do not provide the proper data, we end up having people, unfortunately, use this sometimes in restraint of trade. I would be interested in the comments from either of the agencies on that score. Mr. Medley, maybe.
Mr. MEDLEY. Congressman, I concur. With the WTO and implementation of GATT, agri-data becomes very crucial for the ability to certify our plant and animal health status.
Without the ability to certify, we could have restrictions imposed that may or may not be scientifically justifiable, and we would have no way of countering those restrictions. This is an essential part of how we must operate today.
It is one of the areas that we have proposed an increase to allow us to collect data and to be able to certify our animal and plant health status through surveillance, which is very necessary to compete in today's global environment.
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Mr. FAZIO. Dr. Figueroa.
Mr. FIGUEROA. If I just may add, my staff has indicated to me that FAS has used the data, particularly in Japan and some of the Pacific Basin countries, in indicating to them exactly what we have found.
In California, for example, the data has certainly facilitated trade and dissuaded purchasers of the notion that there are pesticides in the products that are coming out.
Mr. FAZIO. Well, we know often this causes a boat load of produce to be undeliverable. It can be an absolute disaster to the grower, the processor, everybody in the chain.
I just wonder if either of you have any way of estimating how often these are legitimate inquiries that need to be taken seriously for general public health, and the good of the trading relationship over time, versus how many are thrown up as an obvious effort to avoid taking responsibility for receiving a product.
I see some people shaking their head recognizing that trade-off. Does anybody have any grounds for even a ballpark estimate?
Mr. FIGUEROA. I am not prepared to offer that number for you, Congressman. I will discuss it with my staff and if a number comes up, then we will provide that for you.
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Mr. FAZIO. Well, your staff is smiling, smirking, shaking their heads. I wonder how many of them might be able to give you some input while Mr. Medley gives me an estimate?
Mr. MEDLEY. Congressman, I believe Mr. Figueroa will provide the information to you.
Mr. FAZIO. Nobody wants to typify what is out there. But it is a problem, I think I could tell from looking around. This does happen on occasion and you are often called in to be the policeman. Whether they will take the authority or not is another question, but at least you are in a position. Could you, for the record, try to quantify? I realize these contexts can be informal to formal.
Mr. FIGUEROA. To my knowledge, that information is not available.
Mr. FAZIO. How often are you brought in, in these situations in general? How often do you find them warranted or an obvious effort to use these concerns as a way to avoid living up to the trade agreement?
Mr. FIGUEROA. I want to be clear. Are you specifically referring to pesticide residue issues or other issues beyond that?
Mr. FAZIO. What you do certainly and anything else that is relevant that would be in your jurisdiction, and certainly Mr. Medley in his.
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Mr. FIGUEROA. In the sanitary and phytosanitary arena?
Mr. FAZIO. Yes.
Mr. DUNN. Certainly, Mr. Fazio, the sanitary and phytosanitary issues have come to the forefront with the event of GATT and NAFTA; the tearing down of the old tariff barriers. It is imperative that we base our SPS protocols upon sound science.
That is the basis that we use. That is why it is so important for our budget request in there to ensure that we have a strong APHIS, a strong AMS, a strong GIPSA, for that matter, as well.
Many times Mr. Baker ends up sending people over to foreign countries to certify the content and quality of grains as it is disputed.
Mr. FAZIO. Do you want to comment, Mr. Baker on that?
Mr. BAKER. Yes, I would. When the U.S. sells grain to a foreign country, we seek to ensure that the product is delivered as ordered. If, at the receiving end a discrepancy arises, we try to address it.
I think that the area that you are leading into is probably more in the phytosanitary area than it is in the grain inspection area. This past year, GIPSA addressed approximately 20 complaints from importers.
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We went and addressed them primarily on their soil. Our willingness to do that reflects well on the integrity of our system.
Mr. FAZIO. Well, we have got to build confidence in this trading relationship. I am not just implying that we do not occasionally bear the burden.
We have people who cut corners. We have unfortunate circumstances that we need to own up to. We spend a lot of time worrying about the failure to have enough money to compete in promotion of trade.
We find increasingly our trade problems in this category. It is hard for Members of Congress to get a handle on this. One method, I hope, is adequately funding your budget, but the way I expect you to spend the money, of course, is to be aggressive in this area.
Mr. DUNN. Mr. Medley's statement for the record indicates APHIS assisted involving trade barriers worth nearly $7 billion in exports of U.S. agricul
tural commodities.
Mr. FAZIO. I saw that.
Mr. DUNN. That we were able to keep in progress.
Mr. FAZIO. It was 12-percent of the total agriculture.
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I noticed that APHIS oversees field testing of genetically-engineered plant varieties.
Mr. MEDLEY. Yes, APHIS does this work.
Mr. FAZIO. There has been some concern about proposed EPA regulation in this area. You mentioned the need for education of our trading partners and safety and benefits of these new genetically-enhanced plant products.
I think we all understand this is a way to put aside some of the pesticide concerns ultimately over time. Would you elaborate on these testing and educational functions? Who do you work with in this regard? What kind of progress are we making? Are there genetically-engineered plans?
Mr. MEDLEY. For some time, Congressman, we have had a program called International Harmonization, where we have worked through various international regional organizations to promote harmonization in the oversight of these products.
The oversight is based upon using sound biological principles and compatible scientific evaluation approaches. We coordinate reviews, for example, with one organization, the Organization of Economic Cooperation and Development in Paris.
The program now includes 29 of the most developed countries of the world. We have also worked in regional forums such as the North American Plant Protection Organization.
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We have demonstrated, through making our system transparent, that we have addressed the pertinent safety issues concerning these genetically-engineered products.
The question you have raised about the plant pesticide rule is one issue we face quite often. That is, how do you properly define the scope of what should be included in an oversight system?
Mr. FAZIO. We are working at that with EPA as we speak, I assume?
Mr. MEDLEY. Yes, they are involved as well.
KARNAL BUNT
Mr. FAZIO. We will be very interested to know how that comes out. I think we generally would favor responsibility remaining where it is.
Let me just, Mr. Chairman, ask my last question. I know you and Ms. Kaptur have raised the issues related to organic foods, but there are several losses from 1996 connected with the karnal bunt quarantine that remain pending.
I have got some examples in Northern California, San Joaquin Valley and some, obviously, in the southern part of the state that was more immediately impacted. There seems to be a very long time here being taken to compensate growers and shippers for the losses they incurred.
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Of course, they were doing what they had to do making extreme sacrifices in cooperation with state and federal officials for the good of the industry, in general, and certainly our trade posture.
It seems a little difficult to justify going this long before they got compensation. After all, these are people who are working every day in the business and cannot go with these losses on a perpetual basis.
Is there a problem of having adequate money? Do we not provide the funds that are available? What is the slowdown?
Mr. DUNN. The issue really, Congressman, has been that since we first found the tilletia indica spores in March of 1996, the program had 14 different regulatory changes. We have gone from a program design to initially compensate the original producer to including the handler, and the millers.
It has been a program that has constantly evolved as the size, the biology and things have changed. That has been a part of the problem. A part of the problem has been getting a fixed formula for not only who should be compensated, but on what basis and at what level?
We have in fact published the compensations for the 1995–1996 crop season and will propose compensation for the 1996–1997 crop season. Some payments have been made. Others are being made. I think that for the most part, we do have a system in place.
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As Congresswomen Kaptur pointed out, however, there do appear to be individuals who have suffered losses that currently are not being covered in any of these compensation schemes.
We have committed to working with her office, your office, the Hill to try to address that. Currently, we are constrained because the authorities to pay compensation are limited unless certain factors have occurred.
Clearly, it is in our best interest, the interest of American agriculture, to have industry producers willing to cooperate with us when we do have a problem, realizing that they will be fairly and fully compensated.
Mr. FAZIO. Is that the problem; they have not been willing to cooperate with you? Is that why they have not been paid?
Mr. DUNN. No, that has not been the problem. It has been a matter of determining which would be paid, what would be the amount.
Mr. FAZIO. We cannot pay anybody until we can determine who everybody is?
Mr. DUNN. We have made some payments.
Mr. FAZIO. But there have been a number of people that have waited several years. I guess, they have not fallen into any of the easily-defined categories?
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Mr. DUNN. The most difficult category, of course, was for the seed and straw compensation. We were easily, in terms of the initial producer. We then went to the millers and the handlers.
Those were more difficult, but that has been established. It has taken some time. We did publish the final compensation provisions. We have made some payments. The farm service organizations are geared up to make the remainder.
Mr. FAZIO. So, we are on the verge of solving this problem; is that what you are contending?
Mr. DUNN. Yes, sir, I am. Those that have fit under any of those conditions.
Mr. FAZIO. If they have not fit under them, it is time to tell them the truth, that you are not going to get any compensation and not just string them along another year or two.
Mr. DUNN. We have said that to those individuals. In a number of cases, that has been appealed. We are looking at any way possible to make fair compensation to those that have suffered losses.
Mr. FAZIO. Well, could you give the committee a report on this? I will be happy to yield to the Chairman, I personally would love to see the committee get an update on this because we do have constituent interest.
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[The information follows:]
"The Official Committee record contains additional material here."
Mr. DUNN. We will provide that.
Mr. SKEEN. Thank you. Mr. Nethercutt.
TRANSPORTATION AND SANITARY/PHYTOSANITARY STANDARDS
Mr. NETHERCUTT. Thank you, Mr. Chairman. I will stay within the five-minute rule. Gentlemen, thank you for your appearance here today.
Producers and processors of my District have sustained large losses late last year due to the railroad's inability to deliver product for P480 contracts to Gulf Ports in a timely manner.
The product was in the control of the railroad for about a month. Title does not transfer, you may know, on these contracts until the product is delivered along side ship.
So, the processors were dealing with bills for dead freight by USDA between $5,000 and $9,000 per car, I am informed. The railroad did not deliver the goods and the products in a timely manner.
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My sense is the farmers ought to be held harmless for this problem that is outside of their control. It was not under their control to determine what the railroad's problems might be in terms of getting the product to where it ought to go.
Due to the merger of railroads, many of the processing plants in my District have access to only one railroad. So, this has not allowed people there to use the value of competition. How are you addressing those problems for farmers and processors in my District, as well as many others around the country?
The second question, I will ask these and then I have got to run. Reuter's came out with a story just yesterday. This is a quote, ''The APHIS Administrator said he was confident Brazil would soon reopen its market to U.S. milling grade wheat following a key vote last week by a regional plant protection group.
''Brazil has had a ban on imports of U.S. wheat since 1995 because of concerns about the presence of TCK Smut, a fungus that is prevalent in some portions of the Pacific Northwest wheat crop.
''Last week, COSAVE, a regional plant protection group that includes Uruguay, Paraguay, Brazil, Chile, and Argentina voted the TCK Smut should not be treated as a quarantine-significant test,'' he said.
I just want to make a point before I have your answer, that this greatly affects the Pacific Northwest relative to China. China has been fighting with us on TCK Smut for years. It means dramatic consequences to us out west, especially with the price of wheat dropping.
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Maybe you can give us an update as to whether the progress you have made in the other areas would have some benefit to China and also what you might want to be able to do or can do with regard to this railroad problem.
Mr. DUNN. Mr. Nethercutt, if I may take a shot at the railroad problem. First of all, I believe that is under the PL 480 Program, which would be in Foreign Agriculture Service, which unfortunately maybe I do not have jurisdiction over it, but we do have oversight over the transportation issues.
I must say that Secretary Glickman has been extremely aggressive on the railroads and holding their feet to the fire. He has had me appear twice before the Service Transportation Board to point out problems, movement of grain; exactly the types of things that you were talking about where producers and grain handlers were the ones that got caught holding the bag.
We will continue to keep their feet to the fire on that issue. I will let Mr. Medley answer for himself on his remarks.
Mr. MEDLEY. We have been able to demonstrate to the Brazilian authorities that because of the unique climatic conditions that are necessary for this particular pathogen to survive, and also because of the entry conditions for wheat used for milling or for processing, that it would not present a significant risk to the Brazilian wheat industry.
This assessment was reaffirmed by a regional plant health organization, which is the COSAVE Group that you referenced. They determined that our wheat did not present a significant risk. I did speak with my counterpart in Brazil this morning and he assured me that the issue had been resolved and they would be publishing very soon, regulations that at least provide the opportunity for the entry of U.S. wheat.
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I say opportunity because of other issues that we would have to address such as the grain that would be requested, competing with Canada, et cetera. It would allow entry. We should be able to use the same scientific basis for addressing the China issue.
We should be able to export to China without presenting a significant risk. We will be carrying the same message as we continue these discussions with China. This action should help us and enhance our chances of establishing scientifically based criteria in China as well.
Mr. NETHERCUTT. Thank you very much for your time. Thank you.
Mr. SKEEN. Thank you, Mr. Nethercutt. We will have adequate recognition of the rules. You all are doing very well. Mr. Latham.
Mr. LATHAM. No questions this round.
PACKER CONCENTRATION
Mr. SKEEN. Let us start the second round then.
Mr. Baker, as you know, this subcommittee has been concerned with the packer concentration in the livestock industry. It has been the focus of inquiry here since at least 1996.
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I read in your explanatory notes that you initiated an investigation involving the trade practices of major lamb slaughters. Would you tell us what prompted that investigation? Tell us what you found when you were looking into it during your investigation.
Mr. BAKER. Let me start with the last question on lamb and what prompted it. Probably in the last five years, we have seen concentration have more of an effect on the lamb industry than any other commodity, from the standpoint of closing packing houses in different areas.
There are presently seven packers that are still involved in major lamb——
Mr. SKEEN. That would be my next question. Are there seven all together?
Mr. BAKER. Seven of the major ones. In other words, they are still primarily lamb slaughter. We are looking at what influence procurement practices had on detrimental or unfair practices and contractual arrangements.
A lot of the lambs are sold under contract arrangements. Ours is an extensive investigation primarily in the West, in California and the Colorado area. We were looking at the seller, plant and farm comparisons.
In other words, it is an extensive investigation of the lamb market. It should be completed this year. On the concentration issue, we are very concerned about it. A major focus in our agency in the packers and stockyards program area has been concentration.
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We are reorganizing our Packers of Stockyards program to better address the complex entities that are involved in procuring livestock, meat, and poultry in this country.
We presently have a major steer and heifer investigation in the Texas panhandle looking at all of the cattle that were marketed in that area. We have a pork investigation going on in the Mid-West looking at 11 major packing houses for pork.
We are doing a poultry investigation in the southeast. These fact finding studies may show how concentration has affected the industry.
Mr. SKEEN. The beef industry, as I understand it, has been consolidating for the long period of time that they have been in the business world. You are down to about, what, three to four major packers.
Mr. BAKER. There are four major packers.
Mr. SKEEN. Four major packers.
Mr. BAKER. It is assumed that they control about 80-percent of the steer and heifer kill in this country.
Mr. SKEEN. How many of these operations also feed their own cattle or have stockyards?
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Mr. BAKER. None of them have stockyards as such. They have the feed lots. Three of the major four feed their cattle.
Mr. SKEEN. Three out of the major four feed their own.
Mr. BAKER. They feed about 4-percent of the cattle they kill; not all of the cattle, only about 4-percent.
Mr. SKEEN. I was trying to get somebody to engage on just how concentrated this was also; what line of supply that they have and control out of that type of situation. They can play the game back and forth when the futures are up, or whatever. There is a possibility that the market can be manipulated.
Mr. BAKER. Yes, sir. The work that we are doing is trying to discover if that is happening. That is why we are doing the investigations.
Mr. SKEEN. Thank you.
Mr. BAKER. We might talk a little bit about further concentration for just a minute. The feedlot—concentration is a big issue. It is not talked about much, but one percent of the feeders feed about 45-percent of the cattle.
Mr. SKEEN. One-percent of the feeders feed 45-percent.
Mr. BAKER. Of the cattle.
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Mr. SKEEN. That is pretty good monopoly.
Mr. BAKER. That is a fact. When you hear about concentration, you just hear about it from the packers side.
Mr. SKEEN. You do not want to identify all of them?
Mr. BAKER. Well, I could, but I am not going to.
Mr. SKEEN. I thought we would just walk around the room. I appreciate the response. It has been a real problematic situation. I know that you have been concerned with it.
Mr. BAKER. We are trying to stay in the middle of it and have a focus in those areas.
Mr. SKEEN. I thank you. Mr. Bonilla.
SCREWWORM
Mr. BONILLA. Thank you, Chairman.
Gentlemen, I want to start out with the subject that the Chairman brought up earlier, the screwworm situation. I come from the town where the dog was recently discovered with screwworms. I think this reaffirms the need to move the sterile fly lab to Panama.
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I know the Chairman has brought this up already. Could you tell me more specifically what the current schedule is? What is the current schedule for moving the plant to Panama? What kind of emergency plans do we have in place should we have the repeat of the labor problems this summer?
Mr. MEDLEY. Congressman, the timetable is to have the plant in Panama operational by 2002, then to have complete transfer from Mexico by 2004. We are hopeful that our response to the current labor unrest by identifying some of the specific problems and correcting those, will prevent a repeat of the labor disruption that occurred.
Mr. BONILLA. So, are you pretty confident of that, it sounds like.
Mr. MEDLEY. Congressman, as confident as I can be sitting here in Washington.
Mr. BONILLA. That sounds good. I have always believed though in having a Plan B, if Plan A does not work.
Mr. MEDLEY. Yes, one of the things we have constantly looked at is having modules where we could successfully produce the steriles necessary if there was a problem.
That is something that we have spent considerable time evaluating. Our timetable for the new facility is such that we hope to be able to address the module issue.
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Mr. BONILLA. We will keep an eye on that hopefully.
Mr. MEDLEY. Yes, we will.
Mr. BONILLA. I want to move now to the boll weevil eradication program. In Texas, the total operating costs during fiscal year 1999 are estimated to be $120.6 million.
With APHIS only proposing $4 million for the program this year, a heavy burden will be placed on producers. The Administration is advocating the use of FSA loans to offset the decrease in funding.
The Texas Boll Weevil Foundation has estimated that $78.8 million in loans will be needed to conduct the program. Is the Administration prepared to issue the amounts of loans necessary to operate the program?
If it is perceived that the federal partnership in this program is backing away from the program, do you think there will be a reduction in producer participation?
Mr. DUNN. We will defer to Mr. Dewhurst as to the availability of the Farm Service Agency funding.
Mr. DEWHURST. Well, we have budgeted money in the Farm Service Agency for those loans. Frankly, I am not conversant enough in the numbers.
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We have budgeted about $30 million for new loans in fiscal year 1999. The $78 million figure is higher than what I had heard. The intent here was to provide enough loan money to do the job.
IMPORTED FIRE ANT
Mr. BONILLA. Okay. I want to move now to another subject. It is not unique to Texas anymore, but the fire ant situation that we have down there. In fact, how far north, just before I have a specific question about that program, how far north have these guys gone already?
It used to be that they were not even in South Texas. Now they have surpassed that by a long shot. Do you have information on that?
Mr. MEDLEY. I will provide a map, Congressman. I know the range has expanded considerably.
[The information follows:]
"The Official Committee record contains additional material here."
Mr. BONILLA. I can remember as a kid this was non-existent, when I was growing up in the late 1950s, early 1960s. Now, you cannot even lay out in the grass and have a picnic or do anything.
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You have to watch your kids all the time because fire ants are almost demonic in the way they behave, as you are probably well-aware.
Now, we are talking about damage estimates in the range of $300 million a year just to the Texas economy. Wildlife is not safe anymore. Livestock is affected by this problem. They have even shorted out electrical systems.
In some cases, they have kept people from using their own backyards. My question is, what plans does APHIS have to continue eradication efforts on this pest? You have proposed elimination of the $1 million Fire Ant Program.
You state that APHIS has not received any request for treatment programs, which is interesting considering it is something that is discussed quite a bit in my part of the country.
You may have heard that it has been a big project on the other side of the Capitol with Senator Phil Gramm who talks about this quite a bit.
I understand that this money is also used to enforce federal quarantine laws. Do you anticipate providing any support for this activity under another program if the requests do come up?
Mr. MEDLEY. The problem, Congressman, is that we are unable to identify a suitable tool to allow us to effectively conduct an eradication program of a large scale on agricultural lands. That has been the major problem.
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What we are doing now is to identify, if we can, biological control agents that might be able to help us. There is some funding identified for research cooperative agreements to identify a potential way by which we could effectively treat the imported fire ant, if asked.
Currently, we do not have an effective, efficient, and environmentally acceptable methodology for controlling the fire ant.
Mr. BONILLA. I know they are doing a lot of work, I believe, at Texas A&M on fire ants. I do not know if they are making any progress. It is a serious problem.
WILDLIFE SERVICES
I want to ask now about the Texas Wildlife Services Program. As you know, my Congressional District is a major sheep and goat production area. Funding levels have taken their toll on this program.
There are several positions in Texas that have gone unfilled due to the lack of funding. I know some Members on the subcommittee have already asked about the funding levels.
Specifically, I would like to know if this funding level will support filling three vacant supervisory training positions in Texas?
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Mr. MEDLEY. At the requested funding level, Congressman, it would not support those three positions.
Mr. BONILLA. Well, this is a great concern that I would have. I hope that even if the money is not there now, maybe we can work together on trying to make this happen because it is very important to a lot of those counties in West Texas. They are large wool and mohair producers.
Mr. MEDLEY. Yes, we will work with you.
Mr. BONILLA. Gentlemen, I appreciate your time today. Thank you.
Mr. SKEEN. Thank you, Mr. Bonilla. Ms. Kaptur.
SCREWWORM
Ms. KAPTUR. Thank you, Mr. Chairman.
I wanted to go back to Mr. Medley, if I might. I wanted to ask in a District like mine of over 600,000 people, a loss of 650 jobs anywhere is a big loss. I can only imagine what it would be like in a very impoverished area of the world.
This morning, I met with some of the people from the U.N. Development Program. We have AID. We have the Foreign Agricultural Service. We have all kinds of Catholic Relief Services; lots of groups that work around the world.
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Is USDA making an effort to see if perhaps alternative purposes; alternative uses can be designed. I have been told the building is not in that great a shape, but maybe starting a coop with some of those workers, since Agriculture is at the root of the unrest there. Has USDA tried to work with any other agencies to find out? I know that is not your job.
Mr. MEDLEY. We would be more than happy, Congresswoman, to explore what can be done. I understand fully the impact on the area.
Obviously with our budget remaining flat, if not decreasing, moving closer to the current eradication effort considerably reduces the cost overall of the program by not having to transport sterile flies from Chiapas to Panama.
Mr. DUNN. Ms. Kaptur, I have had considerable conversations with my counterpart in Mexico about reuse of that facility when we do phase out on it. He has since gone on to become the Secretary of Agriculture of Mexico.
We have talked with Banc De Mexico about possibilities of how we could refurbish that building to use it for other uses. The Mexican Government is very actively involved in looking at what we could do, once we do a phase out.
Ms. KAPTUR. I am glad to hear that. I understand the Government of Mexico owns the building. Is that correct? They own the building, the Government of Mexico, the property itself?
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Mr. MEDLEY. The U.S./Mexico screwworm commission owns the facility.
Ms. KAPTUR. The commission should own the facility.
Mr. MEDLEY. Yes, it does.
Ms. KAPTUR. I was just thinking. I mean, I am not an expert in Chiapas. I will tell you this. Our community of Toledo has been trying to figure out a way to be helpful in Chiapas.
We have not been successful. It is pretty hard to know who to relate to. If our goal is to help the peasants who live there, and I as one Member of this Congress is very interested in being a positive force to help those people survive under very difficult conditions.
So, if there is some way that our office can be helpful in accessing some of these other resources through the committee's subcommittee, and other subcommittees that I serve on, if agriculture cannot be helpful, my heavens, agriculture is at the root of so much of the unrest there.
Even though we are closing this facility and phasing it down, and I understand why. I want to take care of the screwworm. I do not want it to come back to Mr. Skeen's property up there in New Mexico.
While we are there, my gosh, we have got a reason to be there. We have got some experience in the area. Maybe we can help those folks develop a coop in coffee-growing or pineapple or whatever else is raised down there. I have never been there.
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Mr. DUNN. I am sure that, that is one of the best coffee regions of Mexico. We will take you up on that offer as we continue to explore ways and means in which we do the phase-out in an orderly manner.
Ms. KAPTUR. I would, Mr. Dunn, recommend to you to speak with the U.N. Development Program, Mr. Gus Spade. They work all over the world, including New Mexico. There are lots of other resources that are outside your jurisdiction that might be able to be helpful.
Mr. DUNN. I was informed, Congresswoman Kaptur, that we have discussed trying to maybe look at rearing beneficial insects for bio-control organisms as a part of integrated pest management.
Ms. KAPTUR. So, I think that following up on what Assistant Secretary Dunn said, there are maybe some ways that we could look at other uses. This is extremely helpful because it normally does come down to resources to provide that.
Again, we offer our help in any way that we can to aid you in your inquiry into this. I wanted to ask Mr. Baker, gosh, did anyone pick on you yet, this afternoon?
Mr. BAKER. No.
GIPSA REORGANIZATION
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Ms. KAPTUR. You are requesting an appropriation of $3 million for one-time costs associated with a soon to be announced reorganization.
Mr. BAKER. Yes.
Ms. KAPTUR. Could you tell us a little more about that? What will the $3 million specifically pay for?
Mr. BAKER. Primarily, the $3 million will pay for relocation costs associated with a reorganization of our Packers and Stockyards Program. We presently have 11 regional offices around the country. Our proposed reorganization would reduce that number to three major offices that will be beefed up with economists, legal personnel, and better resources to investigate the complex industry.
So, we will have to move people from different parts of the country to these offices. That is what the $3 million is for. It is a one-time cost.
Ms. KAPTUR. A one-time move. How will the reorganization benefit the concerns of this committee and others in this Congress about the anti-competitive practices?
Mr. BAKER. It will help us better address concentration and anti-competitiveness. Under our reorganization, we are going to structure our organization so that we can more effectively address competition, trade practices, and financial practices. We are going to gear up with people and resources to do just that.
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Where we presently have 28-percent of our program staff in Washington, under the reorganization there will be only 20-percent in Washington. We are going to move needed resources to the field.
We are going to hire economists with Masters and Doctor's degrees to better look at the complex industry issues and structures. In other words, we need to re-tool to help us better address concentration issues.
Ms. KAPTUR. In other words, you go from 11 offices to 3, as I understand it.
Mr. BAKER. Yes.
Ms. KAPTUR. Will there be any reductions in force associated with that?
Mr. BAKER. No, in fact we have asked for 25 additional slots. We would also implement a resident agent concept for remote areas. People would work out of their homes.
We feel like we can better serve the industry by doing this. We want to mirror what the industry has done. The industry has concentrated into the beef cattle segment, pork and poultry.
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We want to get right in those concentrated areas with our major offices so we can better address concentration.
Ms. KAPTUR. Thank you. Thank you very much.
Mr. BAKER. We need your help.
Ms. KAPTUR. I am behind you 1,000 percent.
AGRICULTURAL QUARANTINE INSPECTION
I wanted to, again, ask Mr. Medley on a different subject on APHIS pests and diseases. Last year in a report entitled ''Agricultural Inspection: Improvements Needed to Minimize Threat of Foreign Pests and Disease.''
The GAO examined APHIS' effectiveness in minimizing risks to agriculture from pests and diseases entering the United States. They made several recommendations in that report. Could you summarize for the committee what improvements might have been made to-date as a result of that report and anything additional this committee might help you with in order to achieve the recommendations in that report?
Mr. MEDLEY. A number of the areas that were identified in that report are addressed under our strategic plans.
For instance, we had a pilot program to look at how to do more risk-based inspections rather than just a representative sample. We have completed the pilot and put into place the risk-based inspection approach.
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We have requested an increase in AQI appropriated, which funds inspections of people and agricultural products from Canada and Mexico. In the AQI user fee program, we have added additional detector dog teams.
We have additional, new types of x-ray equipment. We have established a National Canine Training Center so that we have more teams in service. We consider all of this under our safeguarding concept.
Under the concept, we are focused on three primary points. First, we have activities abroad; the pre-clearance activities to keep exotic pests and diseases on foreign soil. Our International Services unit has pre-clearance inspectors on six continents.
Second, we have increased our activities at the first port of arrival, moving to more of a risk-based inspection system using more technology with the x-ray equipment and the detector dogs.
The third area of our focus is infrastructure, domestic infrastructure. The ability to rapidly detect pests and diseases if they get through our borders so we can quickly contain and then eradicate.
We have asked for increases to enhance our pest detection; this will help us in Florida deal with citrus canker which is widespread.
I believe that with the safeguarding concept, we are fully responsive to the areas identified in that report.
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Ms. KAPTUR. Have you noted as a result of the increasing level of imports, a lot more insects, bacteria, fungi that your labs are having to analyze? If so, could you provide that to the committee in some way that I can understand it; especially past years compared to last year, this year?
I mean, how does one look at this time horizon and explain to an audience, this is what is happening?
[The information follows:]
Mr. MEDLEY. We will provide you with that information. I think you will see increases in pest interceptions. Assistant Secretary Dunn reported that in 1997 we inspected 77 million international passengers. There were 65,000 pests intercepted.
We anticipate that next year, we will have 85 million inspections of passengers, cargo, and conveyances. You can see that our inspections are increasing; the potential for prohibited material entering is also increasing. We can give you that type of information.
Additional resources are needed to provide additional inspections. We are moving from the current system, which is based upon a percentage of product, to identifying the source of the product and the risk basis for an inspection. This will also help us prevent exotic pests and diseases from entering the country.
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Ms. KAPTUR. I think some of the samples get sent over to Vix Date over at Davis. I remember one witness telling us a couple of years ago they were so backed up, they could not get through the work really.
Mr. MEDLEY. That is an excellent point. As we address our year 2000 compliance, we need to use technology for more rapid identification of intercepted pests at the entry points.
Currently, we may have a situation where, unless it is very obvious, we may have to send it away for analysis. We feel that in using new technology, we have the ability for inspectors on-line to make a positive identification. This is another way to use technology to help us.
QUALIFIED THROUGH VERIFICATION
Ms. KAPTUR. All right. My final question will be to Dr. Figueroa, on the pilot HACCP Program that you have been operating for five fresh cut fruits and vegetables in conjunction with the FDA.
Could you tell us a little bit about how long you have been running that pilot and any key observations that you have made to-date?
Mr. FIGUEROA. I believe we have been operating that for two years.
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Ms. KAPTUR. Two years.
Mr. FIGUEROA. As Congressman Fazio asked me a little earlier, we have a waiting list of about 40 to 60 firms that want to also join the program. The firms that are currently using the program are very content with it. They are satisfied with it.
That is, I think, the reason why we have these other 40 or 60 firms that are in a queue to join the problem. The program certifies. It is qualified through verification.
There is a seal that is put on the retail packs. So, the consumer knows that the USDA has qualified this product.
Ms. KAPTUR. What does that say? I do not know that I have ever seen that.
Mr. FIGUEROA. The seal says, ''Qualified Through Verification'' in red and blue and it has the USDA shield on it. It is positioned in different areas in the retail packs, depending on what the product is.
It is not a food safety program. It is a program that minimizes the rate of contamination of the firms that are following the HACCP Program that we verify.
Ms. KAPTUR. Do you see this program as helping to reduce the incidents of food born illness in this country?
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Mr. FIGUEROA. That is, as I understand it, the intent of HACCP, to minimize the points at which a product can be contaminated.
Ms. KAPTUR. All right. I want to thank you gentlemen very much. Thank you, Mr. Chairman.
Mr. SKEEN. Thank you. Mr. Latham.
Mr. LATHAM. Thank you very much, Mr. Chairman.
USER FEES
Mr. Baker, I see in the budget you have got $21.4 million in new user fees and are asking for an additional appropriation of $4 million to setup the user fees. Who are you going to charge? Who is going to pay for that?
Mr. BAKER. Congressman, it is in two programs. Part of it is in our grain program. It is a shift of our standardization activities and methods development activities which are presently appropriated over to user fees.
The customers that handle grain will be the ones to pay for that. Ultimately, the producer will pay for it, but the customer who handles the grain will be the one that has to pay.
Mr. LATHAM. So, you are saying there is going to be an assessment, say, per bushel of corn or something?
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Mr. BAKER. We are looking at one program right now that would be an assessment per thousand bushels.
Mr. LATHAM. So, you do not know what it is yet.
Mr. BAKER. Yes. Between 85 and 90 cents per thousand bushels.
Mr. LATHAM. To be charged at the point of delivery from the farmer?
Mr. BAKER. It would be charged at the elevator, yes; the elevator handling grain. The other is our Packers and Stockyards Program, which is presently all appropriated. It would be shifted to licensing fees which would be paid by market operators, dealers, packing houses and people who handle products. The fees will probably range from somewhere in the low of $250 for the small operator to probably as high as $10,000.
Mr. LATHAM. How can you say how much money you are going to generate if you do not know what you are going to charge yet on either?
Mr. BAKER. The projection that we have to offset it was 85 to 90 cents per thousand bushels; 87 cents is exactly what we projected. The operators that we charge under the Packers and Stockyards Program, it will depend on the volume that they handle and the size. The small ones would be in the $250 range. The large one would be as high as $10,000.
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Mr. LATHAM. Is this something you came up with?
Mr. BAKER. That I came up with, no. I have only been here three years. It has been posed for the last five.
Mr. LATHAM. Did you propose this in the budget?
Mr. BAKER. Yes, sir.
Mr. LATHAM. You did. OMB had nothing to do with it?
Mr. BAKER. I am a team player. It is an effort of my agency to maximize and try to balance the budget. That is our proposal.
Mr. LATHAM. God bless you.
PRICE DIFFERENTIALS
You gave a great team answer to that. I think I have asked everyone who has testified so far, and no one has had a good answer.
One question I get a lot at home. The Chairman referred to it as far as the packer concentration. I think even more so I get more questions about the price differentials paid from some of the larger producers to the smaller producers.
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Could you give us an outline of what the criteria is that justifies a difference in price; say, for a pork producer?
Mr. BAKER. I do not know if there is a criteria or not that justifies it. It is probably based on the fact that if I have a product that is better quality, I should receive a better price. Not all hogs are equal. If I have a leaner hog, I want a better price. That is the way the system ought to operate.
The person who has the best hog ought to get the best money. I do not want to do anything to the system that changes that. You cannot pay everybody that has a hog the same money.
It is perceived that the larger operators get the highest money. Our facts show that the ones with the best quality get the best money. That is where I will have to leave it. As far as an agenda, I do not have one.
Mr. LATHAM. There is no set criteria as far as you are concerned. I know you have heard this a lot.
Mr. BAKER. Yes.
Mr. LATHAM. The smaller producers, you know, I have a lot of them in my District, or used to, and it is something you hear everywhere you go. Is there concern at USDA about this?
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Mr. BAKER. Yes, yes, there is concern. There is perception. However, there are some facts that back that up. If I can start a kill line in the morning at 7:00 a.m. with 2,000 or 3,000 hogs there, chances are there is some premium paid for being able to do that. It is not significant. The significance is on the quality. We have seen hogs where the value of the hog is about $6 higher than another hog.
Mr. LATHAM. Is it somewhat on uniformity?
Mr. BAKER. That is part of the quality.
Mr. LATHAM. Well, I me