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REVIEW OF FEDERAL FARM POLICY
FRIDAY, MARCH 17, 2000
House of Representatives,
Committee on Agriculture,
Memphis, TN
The committee met, pursuant to call, at 10:05 a.m., in the Agricenter International Amphitheater, Memphis, TN, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Moran, Jenkins, Riley, Simpson, Stenholm, Berry and John.
Also present: Representatives Bryant, Pickering, Tanner and Ford.
Staff present: William E. O'Conner, Jr., staff director; Wanda Worsham, chief clerk; Alan Mackey, senior professional staff; Hunter Moorhead, legislative assistant; Pam Scott, legislative assistant; and Vernie Hubert, minority counsel.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. We try, to the extent possible, to get these hearings started on time and we will certainly try to do that today.
I want to thank you all for attending this hearing. This is the second of 10 hearings that the House Agriculture Committee is holding in different regions of the country.
I want to thank everyone here for coming to this important event. We were in Lubbock, TX just 10 days ago, conducting our first field hearing, and I think the time we spent there was found to be quite profitable by both the members of the Committee and those in the audience.
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While the barbecue in Memphis today probably will not compare with that in Texas, I do think the time spent here will no less be valuable.
I have the pleasure of introducing seven other Agriculture Committee members and four fellow Members of Congress who are with us this morning.
I am Larry Combest, chairman of the committee, and I represent the High Plains of Texas. On my right, is my good friend and neighbor in Texas as well, Charlie Stenholm, who is the ranking member of the committee; Jerry Moran represents the western two-thirds of the State of Kansas; Bill Jenkins is from the mountains of east Tennessee; Bob Riley represents the eastern part of Alabama; Mike Simpson represents the eastern and southern parts of Idaho; Marion Berry is from just across the river in northeast Arkansas; and Chris John represents the parishes in southwest Louisiana.
In addition to the members of the committee who are with us today, Chip Pickering is from east central Mississippi; Ed Bryant and John Tanner are from districts just to the east of Memphis in Tennessee and Harold Ford, we think will be joining us, actually who is representing Memphis and would be our host today.
Today, we plan to hear about 20 people who have built their life around the industry of agriculture. We have sought to bring folks representing the different types of agriculture in this central region of the United States, and representing a variety of thoughts on issues facing our industry. It is my hope that everyone in this room can identify with at least one of our witnesses and I would certainly encourage anyone who would wish to submit additional written testimony to be made a part of this record can do so and we would readily accept that and that testimony will weigh equally as heavy as anyone who gives verbal testimony.
I might mention to you that the audio portion of this hearing will be carried live over the House Agriculture Committee's internet site. We do that on every hearing that we have in Washington and are also carrying that into the field.
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I do not wish to speak long because I want to emphasize that we are here to listen to you. I do want to say that I think all of the members at this table know that we have problems in agriculture. What's more, we are all fundamentally of the same belief, that it is in the best interest of this nation to maintain and foster a diverse and strong agricultural sector for the future. So the question we want to answer today is how do we best do that. We want to find out what real producers think is working and what is not working in Federal farm policy.
We will be going to all regions of this country asking these same questions with the hope that we can find a consensus among producers for farm policy changes that you need.
Again, I would like to thank everyone who is here today for your participation and would like to recognize Mr. Stenholm for any comments he would want to make.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. STENHOLM. Thank you, Mr. Chairman, I am delighted to be here in Memphis, look forward to hearing from the 20 witnesses today from this region of the country.
As the chairman has stated, this is the second of 10 field hearings the full committee will be conducting for purposes of gaining input as to how we deal with the current short-term problems of agriculture, which are well known to everyone, but also to begin laying the framework for the committee as we look at the Y2K2 problem—where we go with the next farm bill and how we deal with all of the multitude of problems. So I look forward to hearing from the witnesses. I am very appreciative of the number of our colleagues from the committee and those off the committee, who by their attendance here today show their interest in the dilemmas of agriculture.
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With that, Mr. Chairman, I would yield back the balance of my time.
The CHAIRMAN. Mr. Moran.
OPENING STATEMENT OF HON. JERRY MORAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS
Mr. MORAN. Mr. Chairman, thank you for allowing me to join this committee at this hearing. I think it is a very useful exercise for those of us on the Agriculture Committee as well as other Members of Congress to gain insight from farmers across the country.
I come from wheat, cattle, and corn country and I am very much interested in learning about the agricultural pursuits of the folks in this area of the country and look forward to working with my colleagues from Tennessee and Arkansas and Louisiana and Mississippi, as we try to find solutions to bring some profitability back to production agricultural.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Berry.
OPENING STATEMENT OF HON. MARION BERRY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARKANSAS
Mr. BERRY. Thank you, Mr. Chairman. I want to thank you for holding these hearings. I think it is absolutely essential, as you have already stated, that we hear from farmers, and that is of course why we are here today.
Three of the people that will testify today—Gary Sebree, David Hillman and Jim Dupree, Gary Sebree and David Hillman and I grew up together. Jim Dupree has probably put in more time than anyone I know studying this issue and I am anxious to hear from all of them.
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I think one thing that is absolutely critical is that we, as a Federal Government recognize the national security interest of agriculture and how critical it is to the security of this country. We cannot possibly afford to allow this country to get in the shape with food that we are in with oil right now.
So I again appreciate you having these hearings and look forward to hearing from the people that are going to present the testimony.
The CHAIRMAN. Mr. Jenkins.
OPENING STATEMENT OF HON. WILLIAM L. JENKINS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE
Mr. JENKINS. Thank you, Mr. Chairman.
Let me say again thanks for holding these hearings and thank you for coming to this location here in the State of Tennessee.
I knew Congressman Ed Jones, both as a Congressman and as commissioner of agriculture in the State of Tennessee. This auditorium bears his name and he was a great contributor to agriculture across the United States of America. Thank you for getting this impressive list of witnesses that we are going to hear from.
We are here in the western end of the State, we are pretty far removed from the eastern end that I represent, where tobacco is the principal crop. Historically, cotton has been king here in west Tennessee and I guess soybeans has either caught up with it or is close second, but in between, in the middle section of our State and in the eastern and west and in the areas that are represented outside of Tennessee, we are going to hear witnesses from practically every product that is produced on the farms across America.
And there is one thing that we have in common, I think we are going to hear from the witnesses and we already know and hopefully we are going to learn more about, and that is that we have all shared the difficulties of the last 2 years. We have all had the bad weather, we have all had the weak markets, we have all had the increased—and I feel unwarranted—governmental regulations that pursue us. And now we are dealing with soaring fuel costs.
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I am sure we are going to hear about all those things and I am hopeful that we are going to get some information here that we can take back to Washington and translate into some sort of action that is going to make our farming community here in Tennessee and in the areas that are represented here today and all across this land a little stronger, for the sake of the farm families and for the sake of the entire country.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. John.
OPENING STATEMENT OF HON. CHRISTOPHER JOHN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA
Mr. JOHN. Yes, I also want to I guess jump on the bandwagon with my colleagues to thank the chairman and also the ranking member for having the foresight to be able to put together a host of hearings throughout the country. I think that to see the urgency of the situation and not wait until a couple of years down the road to be able to do this, so we can get a lot of testimony in the backyards of where a lot of the problems are. What I told a lot of folks in my district and back up in Washington is that these field hearings are all about talking to the folks that are in the fields, getting their hands dirty and having those experiences. And I think that that is why we are here today and I thank the chairman for hosting this event, especially down in the southeastern region of the United States where, of course, agriculture and rice and cattle are especially troublesome to me in these times of dire straits of our agriculture industry.
So thank you very much. I will look forward to hearing from a couple of folks from southwest Louisiana, rice farmers and cattle farmers, that will talk about their perspective of where we should go and what their problems are. So thank you, Mr. Chairman.
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The CHAIRMAN. Mr. Riley.
OPENING STATEMENT OF HON. BOB RILEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA
Mr. RILEY. Thank you, Mr. Chairman. Being from Alabama, it is good to be in the city that gave us Elvis Presley.
But let me tell you something, folks. If you look back at what has happened in the last few years, you realize that there is a lot of talk in this country today about an economic boom, about our capital markets being so high, about our Dow Jones hitting all-time records. But we have not participated as a farm entity in this prosperity. And one of the things we are trying to do today is to figure out whether or not we are going to make that fundamental decision of whether or not we are going to protect our farmers in this country. Europe made this choice a few years ago, they said that it is important to their country, they do not want to, as Marion said a moment ago, ever be dependent for food. We have got to make those same kind of choices in the United States today.
So I would ask each one of you to be as candid as you possibly can today, tell us exactly what your problems are, try to give us some solutions. Most of you understand what your problems are more than we ever will. So in your testimony when you talk to us, tell us not only what your problems are, but see if you can help us reach some kind of solution so we can go back to Washington and be an effective voice for you when we get back.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Simpson.
OPENING STATEMENT OF HON. MICHAEL K. SIMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
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Mr. SIMPSON. Thank you, Mr. Chairman. And I do appreciate you and the ranking member holding these farm hearings around the country.
As was mentioned, I am from Idaho and I think it is important not only to learn about the problems that exist in your own region of the country, but to try and get around to the rest of the country and learn about the agricultural situations there. So I am very pleased—we were in Lubbock, as you said 10 days ago and I found that very interesting dealing with some of the farm problems there that I am not familiar with. And I look forward today to listening to those people that are going to testify about some of the crops that I am not particularly familiar with coming from Idaho. And so I hope to learn about the problems that you are facing here as we move on with these farm hearings around the entire country to learn more and more about the problems in agriculture and I suspect we are going to find that many of the problems that are faced here are some of the same problems that are being faced all over the country.
So I thank you for holding these hearings and I thank the people for coming today.
The CHAIRMAN. Mr. Tanner.
OPENING STATEMENT OF HON. JOHN S. TANNER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE
Mr. TANNER. Thank you very much, Mr. Chairman, and I want to express my gratitude as well, although I am not a member of your committee, for inviting us to participate here in west Tennessee. And I want to welcome you to the Ed Jones Ampitheater here at the Memphis Agriculture Center. He was my predecessor in this office, as was another fellow that was pretty famous years ago named Davy Crockett. Now I know that you and the ranking member, Mr. Stenholm both are from Texas. We here in west Tennessee feel like we deserve a little consideration because of what Davy Crockett did for Texas several years ago, and we would like for you all to produce something while you are down here. [Laughter.]
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Mr. STENHOLM. Would the gentleman yield?
Mr. TANNER. No, I will not yield. [Laughter.]
Mr. TANNER. Seriously, all of us know, and particularly here in west Tennessee, we are not in an agricultural downturn, we are in a full-blown crisis. And the reason I say that is because we have competent, efficient farmers who simply are not going to be able to continue in that profession under present policies and under present circumstances.
Peculiarly, we have a boll weevil problem with cotton here and the Boll Weevil Eradication Program will be addressed by others from west Tennessee, primarily Mr. King from Haywood County. The first witness is from my home county and I want to again thank you all for taking the sense of urgency that we in the agricultural community of this country feel, as it relates to what is going on, both from weather and from prices.
So again, may I just simply convey on behalf of all Tennesseans, including Mr. Jenkins and Mr. Bryant, who is going to speak and my young friend, Mr. Ford, who came in. We appreciate you all being in Memphis to hold this hearing and we look forward to it.
[The prepared statement of Mr. Tanner follows:]
PREPARED STATEMENT OF HON. JOHN S. TANNER
I want to thank Chairman Combest and Ranking Member Charlie Stenholm for agreeing to hold a field hearing in order to gain more knowledge about what is happening in the agriculture community in Tennessee and surrounding States. I appreciate their willingness to travel here, along with other members of the committee. In addition, I want to thank all who came today to participate, especially those farmers who had to leave work in the field.
Mr. Chairman, I was born, raised and have lived my entire life right here in west Tennessee, and my family still farms. So, I know farmers. I know that farmers are hard-working folks. As legislators, we've been known to keep long hours, but that pales in comparison with the life of a farmer. Due to the nature of their profession, farmers are perfectionists, attentive to even the most minute detail, and creatures of habit. They quietly go about their jobs, and it is rare to see them leave the farm during daylight hours, and rarer still to hear them complain. So, it did not go unnoticed when hundreds of farmers showed up at Crockett County High School in Alamo to meet with Charlie Stenholm and myself.
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I invited Charlie down to visit with the farmers in my district this past spring. Charlie is a valued friend and a great guy. He has even been known to be somewhat entertaining on occasion, but these farmers didn't show up to be entertained. No, it was quite clear on this day that they were quite concerned for their future. They came because their circumstances were so dire as to merit leaving their fields to tell their congressman and one of this Nation's top agricultural policymakers about their problems. Although it was obvious to me long before this meeting that there was a problem, the fact that the number of people attending this meeting of farmers, which took place in the middle of the afternoon, was the largest crowd of any town hall meeting that I've held in my 12 years in Congress, reaffirmed my suspicions that agriculture is facing one of the worst economic set backs since the Great Depression.
I believe that it is a wise man who is a student of history. History shows us that a strong sovereign nation has three common traits: (1) a strong national defense; (2) a strong economy and; (3) the internal capacity to feed its citizens. A strong national defense is the most important because without it, a stronger nation can simply come and take your economy and your food supply. If a nation is not able to feed its own, it is forced to rely on outside sources to satisfy this most basic human need. As a result, a nation's dependency on outside sources becomes a liability and relegates the nation to the role of subservient.
As I mentioned earlier, I grew up in rural west Tennessee. Over the course of my life I have seen the number and size of farms dwindle. The explanation is simple, fewer children are choosing to follow in their parent's footsteps. There are a number of contributing factors. Despite the technological advancements, farming is still a tough profession. Generations of potential farmers have seen the difficulty their parents have experienced, not just the physical toil but also the mental and emotional battles. They've seen their parents work 12 to 14 hour days and live a relatively humble existence, yet still struggle to pay their bills. The expansion of wealth and decades of local, State and Federal programs have created new opportunities and made it possible for generations of potential farmers to choose to leave the farm and pursue their dreams elsewhere.
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While I welcome the creation of new opportunities for rural America, the current trend is of great concern to me. Truth be told, we need farmers. It is in our national interest to encourage the new generations of potential farmers to stay on the farm. The fewer farmers we have, the more reliant we become on other nations to feed our own citizens. Again, I do not believe that this current price crisis threatens our way of life nor do I foresee us completely losing our domestic capacity for food production. However, one need not become completely dependent upon another nation in order to feel the affects of this dependency.
I believe we can avoid such a future of dependency by making it more advantageous to farm. The United States is currently enjoying the longest economic expansion in our history. The problem is, we are enjoying it without the very people who feed us. This is unacceptable. We must reevaluate current agricultural policies in an effort to provide a more predictable marketplace and ensure that our farmers are provided basic, fundamental safeguards. While new policies will help with many of the most immediate problems, the key to the future lies in working together within our communities and within the Congress to resolve our differences regarding trade, so that our farmers may enjoy the same access as other nations to the 95 percent of the world's consumers that reside outside our own borders. Without this expanded access, it won't matter what we do domestically for our farmers because they will never be able to compete with their foreign competitors.
To be certain, the inability of the current programs to adequately respond to the ongoing price crisis and resulting market troubles underscores the need to revise the so-called Freedom to Farm bill. Last year, Secretary Glickman declared our entire State eligible for USDA disaster assistance. Farmers were sent reeling by poor weather, natural disasters and of course the financial crisis in Asia, Russia, Brazil and other countries. In addition, we suffered a ''price crisis'' as a result of a saturated world market. The Jackson Sun is currently publishing a year-long series on agriculture in west Tennessee calling it ''Farming at a Crossroads: A Growing Concern.'' The series so far is validating the gravity of these issues. I recommend these articles to the committee and request unanimous consent to have the articles from The Jackson Sun submitted for the record. Other countries subsidize their farmers substantially making it cheaper for them to operate and produce more, which ultimately drives prices down for our farmers. We must find and implement better farm-relief policies which allow the Secretary and farmers to deal quickly with the challenges of falling commodity prices, heavily subsidized foreign agriculture production, natural disasters, poor weather conditions and crop diseases. All of these conditions have left the farmer out in the cold, unable to share in the economic prosperity that is being enjoyed by others. It has been said that the biggest challenge for today's farmers is staying out of the bankruptcy courts.
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Something is extremely wrong with our long-term agriculture policy when the $15 billion in additional disaster aid approved by Congress in the last 2 years is not enough to boost the agriculture economy and save our family farmers. Neither our farmers nor our efforts to restore fiscal discipline to our Federal budget can continue to survive such drastic and short-sighted solutions. Clearly, it is time for a more comprehensive solution.
We have heard a lot of talk, since the 1996 Freedom to Farm bill, about the lack of a safety net for farmers. Theoretically I am told, the act was designed to alleviate the need for a safety net. Instead, our farmers could rely on the market for income. They would be free from Government intervention, free to farm in an open competitive market. Further, farmers would be given ''market transition'' payments to help make the transition to self-sufficiency. Unfortunately, it hasn't quite worked out like it was supposed to. I will readily admit that I don't have the answers, but I do know that something must be done sooner rather than later to provide our farmers with more stability.
In addition to our internal policies, we must do whatever is necessary to give our farmers the opportunity to get out there and compete with their foreign competitors. Part of the 1996 farm bill was a commitment to provide our farmers with new trade opportunities, which would expand their potential markets, providing additional opportunities to increase their income. I have heard Charlie Stenholm state that without new trade opportunities, the 1996 act amounts to unilateral disarmament for American farmers. I think he is absolutely right.
It is quite clear to me that trade is important to American agriculture and that further trade agreements are not only complimentary to our domestic policies but absolutely crucial to providing security for our farmers. In this country, we grow and produce more agricultural products than we consume, and the excess is sent overseas. Thankfully, the sale of our excess production has led to a trade surplus in the area of agricultural exports. Last year, agricultural exports accounted for about $50 billion of our $2 trillion in total exports. Exports accounted for about 25 percent of farm income for the two million farmers in the United States. About 30 percent of all crop acreage is exported. In Tennessee, 50 percent or every other row, of soybeans grown is exported, and 40 percent of the cotton baled here is exported.
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The trend in total U.S. exports has increased over the years, but again, the agriculture sector is not fully enjoying this trend. For example, agricultural exports in 1998 were down $10 billion from $60 billion in 1996. U.S. agriculture is two times more dependent upon trade than any other sector of the American economy. Average tariffs on U.S. agriculture commodities worldwide are 45 percent , which is more than 10 times that of the worldwide tariff on U.S. manufactured goods. In addition to the high tariffs, agricultural exports continue to be subjected to foreign governments assisting their farmers with export subsidies, value-added taxes and domestic supports. Also, farmers in other countries are becoming increasingly competitive with the assistance of the expanse of technological innovation.
Farming has never been easy. Today, a whole new set of challenges exist. Not only do farmers have to know how to prepare the land, plant and harvest, and fight unpredictable weather, but they must be extremely wise businesspeople. Not so long ago, farmers in Tennessee took their crops to market and sold them to people they knew. Today, nearly one-third of a farms production and about one-fourth of a farmer's income is dependent upon sales of his annual yield to people he doesn't know, living in places he not only hasn't seen but may not even know exists. Understanding the international marketplace and an appreciation for the complex relationship between the world's political and economic health and their farm here in west Tennessee is a prerequisite for today's farmer.
Also, I would be remiss if I did not take this opportunity to point out that I disagree with some proposals that are being discussed to further consolidate county Farm Service Agency offices. Tennessee has already taken its fair share of office and employee reductions. For the life of me, I can not understand why we need to further reduce the office and staff of the FSA. FSA staffing has been cut almost 30 percent since 1994, but in that same period, over 20 programs have been implemented that the agency is expected to administer. These are the people that help farmers most, and they are desperately needed in Tennessee and across the Nation to help quickly process applications and to provide other types of assistance especially during this time of uncertainty. I would urge the committee to address this matter to see if an amicable solution can be reached with the appropriators to adequately fund FSA operations and spare it from further budget reductions.
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In closing, I want to reiterate my belief that it is time to revisit the 1996 farm bill and to develop a more comprehensive, long-term policy which provides our farmers with some stability. In addition, we need to work together to ensure that our farmers are given the opportunity to compete. Now, I realize these are both formidable challenges, but this committee is filled with people who I know and respect. Members of this committee are quite knowledgeable about the finer nuances of agriculture, and I believe that this committee can help turn this thing around. To that end, I stand ready and willing to do all I can to assist in this cause.
Again, thank you for you willingness to travel here today and for recognizing the contribution of Tennessee's farmers.
The CHAIRMAN. Mr. Bryant.
OPENING STATEMENT OF HON. ED BRYANT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE
Mr. BRYANT. Thank you, Mr. Chairman. And I also want to add our welcome to you, both to you and the ranking member and all the other members that we are pleased to have here in Tennessee. This is a very large number of House Members to get anywhere, so I am particularly honored on behalf of the Tennessee delegation to have them in Tennessee and concerned about what is going on in Tennessee. I appreciate very much them taking their time to come on this meeting. As you can see, the full committee is not here, other members had other commitments to make, but this group before you today made this a priority and are here today to hear what you have to say.
I would like to very quickly correct Mr. Combest, our chairman, that I am going to claim this territory here, I believe this is my district. Harold, he is trying to make you the host of this and I am trying to be the host.
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Mr. FORD. I am going to object.
Mr. BRYANT. I do not know if you want any of these voters out here, I like these voters out here.
But it is very important that—I did a couple of interviews before and I said the people here do understand, as the chairman has said, they have been through some hearings. A lot of people here actually farm or they have been with industries that are associated with farming or at a minimum they represent farming communities. So we understand. It is our job to hear today and listen and then to carry your message back to Washington and to convince those folks who are not like minded, who think that food actually is produced in the grocery stores and the clothes in the department stores, we have to convince them of the need to help us out. And we are going to try to do that.
I would like to add an amen to John Tanner's comment about the boll weevil eradication plan. We have got to have that funded as fully as possible so that we can get that done here in Tennessee. I would never be able, as John would, to look at Governor Wilder in the face again if we did not bring that up. And I want the record to note that, that we both mentioned it. [Laughter.]
And finally, some of us are going to have to leave a little bit early. I know in my instance, I have got a funeral I need to be at at 2:00 this afternoon over in west Tennessee, further east of here. It is not because of any other issue, but we have other commitments that we are tied to and we will stay here—we have reviewed the statements that you have submitted.
But again, I could go on and on. I would like to hear from you as we all would, and I would yield back my time.
The CHAIRMAN. Fine, thank you for clarifying that. Harold Ford had said that he was going to host lunch, it was his district, so everyone be sure and just sign Ed Bryant's name to the ticket when we get ready to have lunch. [Laughter.]
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Thank you for clarifying that. Mr. Ford, we appreciate you joining us. I did introduce you as coming to the hearing when I was introducing the members. And welcome and please if you have any comments.
OPENING STATEMENT OF HON. HAROLD E. FORD, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE
Mr. FORD. I will not be long, Mr. Chairman. I want to again, along with Ed Bryant and John Tanner, we share the Memphis area. Ed, I will take any of your constituents if you want to give them up and I hope that they would want to come my way.
But Mr. Chairman, we appreciate you being here. All of the salient points have been raised, I am certainly happy to see my colleague, Mr. Stenholm, who has been an outspoken leader for the agriculture community and those of us in the Congress who are moderate conservatives for many, many years. And Marion Berry and Chris John, my colleague who came with me in my class.
I had the chance, Mr. Chairman, not long ago, to travel across the State and for the first time in my life actually be on a working farm. I actually had the chance to pick cotton for the first time in my life and had a young 11-year-old kid take me out on his grandfather's farm, and show me how to do it.
In my district, we do not have any farms, we are surrounded by an area that obviously is dependent upon agriculture and agribusiness. I do know that we will have a very important vote coming up in the Congress very shortly dealing with whether or not we should 7allow permanent normal trade relations with China. I would imagine a State like mine and certainly an area of the State like mine in which soybeans and cotton are so important in the market consumption there in China, the market potential there in China would certainly be important to farmers throughout Tennessee and really farmers throughout the nation.
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I look forward to hearing from all the panelists and again, thank you, Mr. Chairman and the ranking member for having the wisdom to hold this in my district, and I look forward to signing Ed Bryant's name on my lunch ticket wherever I might go today.
I too may have to leave a little bit early, Mr. Chairman, because of an 11:30 appointment, so please forgive me and I certainly want to apologize to the panelists in advance now.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Pickering.
OPENING STATEMENT OF HON. CHARLES W. ''CHIP'' PICKERING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSISSIPPI
Mr. PICKERING. Mr. Chairman, Mr. Stenholm, I want to thank you for holding this hearing here in the mid-South region and I want to thank you for letting me participate.
I look forward to hearing from our Mississippi farmers, Mr. Hood and Mr. Hawks and Mr. Sturdivant.
And I just want to join with the comments of the other members, that we are here to listen. But as my granddaddy used to tell me, invariably a piece of equipment on the farm would break down and I would go to him and say granddaddy, what do I need to do and he would say hell, son, you know where the tools are. I think our objective here is not just to listen and not just to feel the pain of a farming sector that is hurting, but to find the right tools to fix the problem. I look forward to working with all of you all to do that and look forward to the testimony from all of the witnesses today.
The CHAIRMAN. Thank you. I would be remiss in the auditorium where we are named after Ed Jones if I did not indicate what high regard that I held Mr. Jones in. We had the opportunity to serve on the committee together for a number of years before his retirement and there are few Members of Congress that I had as much regard for as I did for Ed Jones. We are doubly honored to be in Tennessee and in a facility that was named after Ed Jones.
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[Applause.]
We will call our first panel of witnesses to the table. Ms. Brenda Baker, who is a corn, wheat and soybean producer from Obion, TN. Mr. Gary Branum who is a row crop producer from New Madrid, MO. Mr. William Hawks who is a corn and soybean producer from Hernando, MS. Mr. David Hillman, a soybean, wheat and rice producer from Almyra, AR. Mr. Kenneth Brown Hood, who is a corn, cotton and soybean producer from Gunnison, MS.
I would just once again reiterate to our witnesses that if you would please pull those microphones as close as you possibly can and the lighting system is that the green light will come on and the red light is after about 5 minutes. If you can summarize in that basic period of time, so we have ample time for questions if members of the committee have any.
And I would once again mention that to those individuals who are in the audience that are not verbally testifying, we would very much welcome your written testimony to the committee as we are trying to get out and speak with people who normally do not come to Washington to testify. We appreciate again all of your attendance and we will take the testimony in the order of the introductions. Ms. Baker, please proceed.
STATEMENT OF BRENDA BAKER, CORN, WHEAT AND SOYBEAN PRODUCER, OBION, TN
Ms. BAKER. Thank you.
Mr. Chairman, members of the committee, I am Brenda Baker from Obion, TN. My husband, Sam, and I live on a diversified family farm in upper west Tennessee. Our farming operation includes corn, wheat, soybeans, cattle and two breeder hen houses. I appreciate the opportunity to address you today and share some of my concerns.
As a farm partner, spouse, mother, rural resident and consumer, I have many concerns about the condition we find agriculture in today. Tremendous pressure exists on us to maintain our agricultural heritage and to make a living from the farm. We need to remember our heritage and the agricultural production sector of our economy in all deliberations, for they have a cumulative effect on our ability to feed and clothe the citizens of this country and others around the world.
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I worked together with other producers to support changes in farm policy that resulted in the FAIR Act in 1996. The flexibility afforded producers by those changes have been good for agriculture, and I do not want to see a return to the restrictive production. Agriculture has and will respond to market signals more efficiently under current planting flexibility. However, the market for which we produce must be healthy. This means that the market for our raw and often perishable products must be protected by government from forces beyond our ability to respond. In some cases, that protection must be from government itself.
I have worked through my local and state Farm Bureau to encourage Congress to make necessary changes in estate tax laws and am proud to see movement in that regard. We must continue our efforts to eliminate this death tax.
I supported the Food Quality Protection Act, but now I see regulatory activity by EPA that violates what most believe the legislation proposed and Congress intended. EPA must be held accountable to reasonable, scientific-based regulatory activity. The regulations resulting from the Clean Water Act are based on junk science and fail to acknowledge the many improvements made to water quality by the voluntary efforts of farm producers. Tennessee farmers have reached near tolerance levels of erosion by voluntary management practices, when at one time we were at 14 tons per acre of soil lost per year. Regulation at the Federal and State level is necessary and beneficial, but must be used with reason. The issue of regulatory reform addressed by U.S. Senator Thompson still needs to be resolved. Estimates indicate a $20 billion price tag to agriculture for regulatory compliance alone. This ever-increasing regulatory burden is taking its toll.
The actions of government that deter or eliminate markets for agricultural products have been destructive to the industry and represent a failure of government to follow through on promises made. We must have unencumbered market access to support the one-third of our product that is normally exported.
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Agriculture is unique in many ways. In particular, we are subject to high input costs with marginal returns. We have no control over climate conditions or worldwide production, and limited control in pricing our products. We are transitioning from a marketing system that is decades old to one that is more market oriented. We prefer the market approach, but in the absence of a healthy market and record-setting adverse growing conditions, we are at risk. We are at risk of losing the infrastructure of farm suppliers and economic impact production agriculture has in our rural communities. This is equivalent to a cancer in our industry. Congress and Government agencies have the opportunity to address this condition.
Market expansion must be a top priority if we are to remain a world competitor and a healthy provider of food and fiber in this country. We support the continued efforts through the World Trade Organization to open and expand markets. Programs for market expansion, foreign market development and export enhancement need to be fully funded and utilized for the investment provision they offer.
Safety net provisions need to be developed to work with market forces and yet provide the needed protection for extreme adverse conditions. My husband and I do not want to be reliant on government payments, but essentially have nowhere else to turn during periods of low commodity prices and poor yields.
Crop insurance should be extended to all commodities and operated in such a way to attract participants while eliminating abuse. It is also important for the program to recognize geographical differences. Otherwise, southern producers will be at a competitive disadvantage with other areas of the country. New and innovative approaches to risk management assistance should be also pursued.
The issues I have raised have great merit. Farmers have provided an extremely safe and economical food supply. We want to be self-supporting, but have exhausted our efforts. Your assistance is critical. While the general economy in recent years has flourished, farmers have stayed the course and operated at losses. We have made the changes required of us in recent farm legislation, we have diversified, we have economized. In our operation, we responded to the changing markets by eliminating our swine operation 6 years ago when prices dropped below half the break-even price. We diversified by building two breeder hen houses in 1997.
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West Tennessee was hit by a devastating drought in 1999, following an extremely dry year in 1998 and record low prices for corn, wheat and soybeans. Our operation might not have survived without the poultry operation and loan deficiency payments. 1999 was the worst year in our 37-year farming history, adding low yields to lower prices. As conditions stand, not only our present farming capability is affected, but our very future is being threatened.
Sam and I have three daughters and one son, Robbie. Robbie graduated from the University of Tennessee at Martin in December 1998 with a degree in agriculture. From the time that Robbie could follow his father, his one ambition has been to come home to the farm. Generations of Bakers who farmed help settle Tennessee. Because of present conditions, we were placed in the position of not being able to allow Robbie to come home and join our farming operation. We could not find any way to divide our income enough to support another family. In order to stay close to the soil that he loves, Robbie is working for a seed corn company in research and development. He hopes to come home in the future, but unless circumstances change dramatically, that just may never be possible. Agriculture in general, and our operation in particular, may lose our best chance to continue with new ideas and enthusiasm.
Based on the fact that Americans spend 10.7 percent of disposable income for food, the average American family has earned enough to purchase its annual expenditures during the first 40 days of the year, February 9. Tax freedom day, the day which is corresponding recognized as the day on which the average family has earned enough to satisfy its tax obligation is months later, May 10. Now that is 40 days to pay for your food and 130 days to pay for your taxes. This is a clear signal that the productive, efficiency on the farm has supported the American consumer. We the farmers, however, are reaching a point from which we may never recover. We need your help.
I do not have the complete solutions for the problems, except to say that Sam and I and our children and members of other farm families like ours are depending on your efforts and we will work with you to help seek solutions.
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Again, I appreciate the opportunity to address my concerns and what I believe to be a critical situation. Thank you.
[The prepared statement of Ms. Baker appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Ms. Baker. Mr. Branum.
STATEMENT OF GARY BRANUM, ROW CROP PRODUCER, NEW MADRID, MO
Mr. BRANUM. Mr. Chairman, members of the committee, welcome to Memphis. My name is Gary Branum and I am a third generation farmer from New Madrid County. My wife and I raise rice, corn, soybeans and wheat. I serve on the State board of Missouri Farm Bureau, representing the southeastern part of the State.
It is an honor for me to speak with you today and I very much appreciate your interest in the future of U.S. farm policy. I am especially grateful for the decision to hold a number of field hearings throughout the country, seeking input from those who go to great lengths to avoid the nation's capitol.
First, it is important that you know I do not profess to have a solution to the woes we are facing in U.S. agriculture. I do not believe we can attribute our problems to the 1996 farm bill or any other single action. Likewise, it does not appear there is any magic bullet to solve our problems overnight.
Mr. Chairman, during your visit to Representative Emerson's congressional district last year, you saw some of the most productive farmland in the world. We are able to produce about any crop you can imagine. Yet, we are not immune from hardships caused by terribly low commodity prices. There is a tremendous amount of emotional pain being experienced by farm families in the bootheel. Many people are in real serious financial trouble. And accountants warn that even if prices make a miraculous rebound this year and profits match the losses experienced in recent years, the tax liability becomes a real threat.
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I strongly support the principles of the 1996 farm bill. I need the ability to plant for markets and oppose any effort to return to supply control programs of the past. In my case, I am able to plant a larger percentage of my acreage to rice. In fact, had this not been the case, had I been forced to plant soybeans, my situation would be much different.
There is a great deal of talk about an improved safety net, and this is important. I understand Congress is working to improve our risk management tools and this will be helpful. And I am very grateful for the emergency assistance Congress has provided the last 2 years. Unfortunately, if the current price forecast is realized, additional assistance may be necessary. In the short-term, I would ask that you review the implementation of the Oilseed Payment Program, in that many soybean producers are experiencing significant problems that either reduce their payments or make them ineligible for any payment.
As Congress begins considering objectives for the next farm bill, it is important that you not overlook the continued importance of international trade and regulatory oversight. I strongly support approving permanent normal trade relations for China and the subsequent bilateral trade agreement. We simply cannot afford to ignore China and let them take their business to our competitors. Failure to pass this bill simply amounts to a de facto trade sanction, and we know how successful those are.
Speaking of trade sanctions, I urge you to work towards eliminating trade sanctions for food and medicine. It makes no sense for U.S. farmers to be penalized by our State Department. I have heard eliminating existing trade sanctions could mean at least $500 million in U.S. agriculture exports annually.
Mr. Chairman, earlier this week, I joined a delegation of Missouri Farm Bureau members who were fortunate to have dinner with the Cuban [Counselor] in Washington, DC. Ambassador Ramirez was a most gracious host and we spoke of the trade opportunities for U.S. farmers if the Cuban market is opened. I came away from the meeting even more convinced that trade sanctions have out-lived their purpose, if ever there was one.
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Over the past several months, I have been involved in several meetings in which farmers have expressed a desire to seek new opportunities to add value to their commodities. Somehow, we have to figure out a way to gain a larger share of the consumer food dollar. While farmers are experts at raising crops, we know relatively little about the processing sector. But it is time we took time to learn.
Congressmen Jim Talent and John Thune have put together legislation that will assist farmers seeking to participate in emerging value-added opportunities. Specifically, I would ask that you support their efforts to authorize centers that link farmers with technical expertise relative to engineering, legal services, business planning and market development. These one-stop shops would be very useful tools for many farmers.
I also hope that you will consider their bill to provide Federal tax credits to farmers who invest in value-added endeavors. Given the weakness of the U.S. farm economy, we have heard all too often that a farmer lacks the capital to join a new generation cooperative and the family's lender is wary of additional exposure. State and/or Federal tax credits can help bridge this gap.
A new focus on regulatory reform and tax relief would also benefit U.S. farmers. Yet, I want to bring one regulatory issue to your attention. Federal worker protection standards are now being implemented and I recently attended a meeting on this subject that has worried me. It makes sense for farmers and their employees to use extreme caution when handling crop protection tools. And records are indeed important. Yet, I am concerned that we have been told to expect day-long inspections of equipment and records. There is a fine line between the public's right to know and the right to privacy. Furthermore, the time component alone warrants your review.
Again, thank you for allowing me to share my thoughts on U.S. farm policy. You have my best wishes that the remainder of your meetings will be successful.
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[The prepared statement of Mr. Branum appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Branum. Mr. Hawks.
STATEMENT OF WILLIAM HAWKS, CORN AND SOYBEAN PRODUCER, HERNANDO, MS
Mr. HAWKS. Mr. Chairman and Members of Congress, I certainly appreciate the opportunity to be here today to be with you. My name is Bill Hawks and I am a farmer from DeSoto County, just south of here in Mississippi.
I grew up on a small dairy farm there in DeSoto County, I worked my way through college, received both a bachelor's degree and a master's degree in agricultural economics. I came back home in 1970 and started farming. My father loaned me the money for a down-payment on a tractor. So you can suspect I have seen good times and I have seen bad times in agriculture. I am here to tell you today that I am looking at one of the most difficult times that I have ever seen in production agriculture.
The delegates to the American Farm Bureau convention in January passed a resolution supporting the implementation of a counter-cyclical safety net as a supplement to the AMTA payments that we now receive.
The FAIR Act is continuing to work as it was designed to do. Producers are reallocating resources based on the most efficient manner, much more efficient than any government edict. We are pleased with the flexibility to adjust crop acreage in response to economic and agronomic conditions. Congress must not abandon the market-based policies of the FAIR Act. And we must not go back to the era of high loan rates. The high loan rates that were implemented in the 1980's caused U.S. grain and oilseed to become non-competitively priced in world markets.
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Gentlemen, I think you must remember that loans are supposed to be marketing tools, not income support.
Congress gave farmers their word regarding access to foreign markets through trade policy reforms, relief from over-burdensome regulations, additional and improved risk management tools, and tax reforms for their support for the 1996 FAIR Act. Farmers now facing their third consecutive year of all time low commodity prices, continue to keep their end of the bargain. Congress has several opportunities to improve farm income this year.
We should have some additional assistance such as we had last year. We are in just as bad a year this year as we were last year, so given the crisis that we face now, I think that we should have at least as much supplemental funding as the level we had last year.
Another thing that you can do is make certain that we have free, open access to foreign markets. If you will look at charts as they relate to exports and gross income, you can see that they almost parallel one another.
Gentlemen, we must have permanent normal trading relationships with China. We cannot continue to use trade sanctions on countries to try to implement our social reforms and our labor standards and our ill-fated environmental regulations on every country in the world. We need to increase our food aid programs and our concessional sales.
Risk management. We have an opportunity to reform crop insurance and continue the process that was started over a year ago and to fully utilize the $6 billion set aside for the program in last year's budget.
In keeping with your request, I have deliberately kept my comments short this morning and I would like to thank you for allowing me to be here. I will be available for any questions that you might have.
But I would like to say to you one little phrase that I use all the time. And that is that working together works. Gentlemen, I am pleased to see you here today to try to roll up our sleeves and find solutions that will work. And this will implement the fact that working together works.
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Thank you very much for the opportunity to be here this morning.
[The prepared statement of Mr. Hawks appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Hawks. Mr. Hillman.
STATEMENT OF DAVID HILLMAN, SOYBEAN, WHEAT AND RICE PRODUCER, ALMYRA, AR
Mr. HILLMAN. Thank you. My name is David Hillman. I am a rice, soybean and wheat farmer from Almyra, AR, it is in east central Arkansas. I farm with my father and my brother.
I like the FAIR Act. I like the flexibility it gives me as an individual to make my own decisions. I believe that there is no Government program that can replace a farmer's ingenuity, his resourcefulness, his knowledge of his own situation. But when the FAIR Act was written, nobody could foresee what really hard times lay ahead. And as a result, the FAIR Act, as it stands today, does not constitute an adequate national farm policy.
I believe that the reason for a Federal agricultural policy is to maintain a stable, high quality, affordable food supply for the nation. And I also agree with Congressman Berry that too few realize that agriculture is a national security issue. It is a shame that we are dependent on other nations for our oil supply, but we don't need to push agriculture into the same situation by systematically letting our farmers dwindle in number. You cannot rebuild an agriculture infrastructure overnight, and once it is allowed to deteriorate to the point that quality, price and availability of food start to affect the consuming public, it will take years to turn the situation around. The time to ensure a viable food supply for the future is now.
When the FAIR Act was passed, we were promised that it would be accompanied by regulatory reform, open foreign markets, increases in research funding. These promises have not been kept. We are accepting smaller and smaller transition payments and taking an added risk and responsibility. We did our part in the FAIR deal, but the Government has not done its part.
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You have already been told how tough times are. Now we are adding higher fuel prices to the equation, and remember that farmers cannot pass on increases in their costs by charging higher prices. Remember also that we cannot control external factors—we cannot control the weather. The last few summers have been brutal to us—flooding, drought and, believe it or not, the combination of the two for some farmers have resulted in lost crops.
Another thing beyond our control is foreign policy. I understand that approximately 50 percent of the world's population is shut off from American farm exports. Most of these are because of export bans imposed on us by our own government. Cuba is a good example of this. If boycotting Cuban trade was ever going to work, it would have done so by now. Mostly, the Cuban people and the American farmers are the ones that are suffering from this embargo. The Cold War is over and it is time we got on with the business of being neighbors and trading partners.
We need to open up trade with China. The argument that trading with China somehow validates their human rights issues and problems does not hold water with me. In fact, the best way to influence someone's behavior is to establish a dialog. And gentlemen, trade is dialog. If we think limiting trade with China will bring about social change, then we have failed so far. We can sell American rice to Cuba cheaper than they can import it from Asia and we can do that quickly and efficiently. We can provide high quality American cotton and the kind of wheat that I grow on my farm to China. And remember that these exports mean additional employment in non-agriculture jobs such as transportation, marketing, processing and others for the citizens of the United States.
One reason American agriculture is the envy of the world is that we have had the benefit of excellent research. Our system of land grant colleges and research and extension have helped us become the most efficient farmers on Earth. Our knowledge and implementation of improving farming techniques have helped us succeed at being economically responsible. We are conservationists at heart. Remember my family is still farming the land that my great grandfather farmed. If that is not sustainable agriculture, I do not know what it is. But we need continuing research if we are to be better at what we do and to survive with the reduced government assistance.
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Every time a government agency passes a regulation that affects us, it costs us money. Right now, the EPA is pushing two areas of regulation that are particularly troubling to me. One is the Food Quality Protection Act. When the act was passed, I supported it, along with almost everyone else. But we thought that if we had the FQPA, it would bring some sense to pesticide regulation. We understood that the congressional intent would put science in place of politics in deciding what crop protectants we would have. We understood that a rational, methodical process would be used to regulate these pesticides. Gentlemen, this has not happened.
Another thing the EPA is trying to do is with the TMDL and the Clean Water Act. We have had three meetings in Arkansas over the last month or so, over 6,000 farmers have been there to protest this land grab by the EPA. What they are trying to do with this regulation is put agriculture under the non-point source pollution. They say they are not going to control non-point source, you are not going to have to have a permit, they just changed the definition of what point source is. They say agriculture is under that. That was not the intent of Congress, they need to be called to task for that.
There are other things I could talk about like the payment limits that affect me on my family farm. My brother and I farm about 2,000 acres, payment limits affect me. All I am trying to do is make a living for my family and my brother and his family and my father and mother who are still alive. These payment limits affect me. If you are trying to put me out of business, then you are trying to put the family farmer out of business.
In summary, let's do not throw out the baby with the bath water. Keep the FAIR Act, but put a safety net under it. Let us put crop insurance in there that really works for the southern farmer and provide us with regulatory relief. And please bear in mind that there is more at stake than the welfare of individual farmers. This is the food supply for every man, woman and child in the United States of America, and we do not need to take it lightly.
Thank you.
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[The prepared statement of Mr. Hillman appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you very much. Mr. Hood.
STATEMENT OF KENNETH BROWN HOOD, CORN, COTTON AND SOYBEAN PRODUCER, GUNNISON, MS
Mr. HOOD. Thank you.
Mr. Chairman, members of the committee, my name is Kenneth Hood. I am here as a producer, a cotton ginner and a farm equipment businessman from Gunnison, MS, which is located about 100 miles south of here. As you can see, everything that me and my family touch are agriculturally related.
Cotton ginning costs have escalated while cottonseed prices have continued lower, adding to the production cost for the producer. Farm equipment business is at its lowest ebb ever with virtually no sales of new or used equipment simply because farmers are unable to buy. In addition, accounts receivable on parts and service are grossly delinquent with many probably never to be collected.
Our family farm operation is in an economic crisis due to record low prices in 1999 for every crop which includes cotton, soybeans, wheat, grain sorghum, with the outlook now near planting time as bad as ever. It appears we will again need assistance from the Federal Government to avoid severe financial problems. While the market price for some commodities has risen, the loan deficiency payment has fallen with the net effect to the farmer being less than what he would have received in December. The second part of the equation is our bankers who are being asked to finance these crops with prices below our cost of production.
I am encouraged you are starting early to help address to help address new farm legislation. The current farm bill was driven by budget pressures and as we look to new farm legislation, my biggest concern is to develop income protection when prices are low and during low production levels due to unfavorable growing conditions. Beyond the farmers control, both these adversities can be experienced during the same growing season or separately during different years. When Congress rewrites new farm policy, considerable thought should be made in the low-price safety net in combination with longer-term policy rather than emergency relief packages. I feel this can be done by fine-tuning the marketing loan concept to be counter-cyclical, extending loan periods to 18 months in combination with marketing certificate programs, including both generic certificates and step 2 for cotton. Since cotton is our major crop, this type program would not encourage foreign acreage expansion.
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Crop insurance has failed both the farmer and the taxpayers. Huge amounts of administrative expenses with the government guaranteeing the losses. We need a program where farmers can insure the dollars it takes them to produce a crop, not unlike insuring your car or home. If it is destroyed, your insurance replaces the property. Any crop insurance program has to have FSA, Farm Service Agency, involved to maintain the records and to be involved in the oversight on losses and yields. Without FSA involvement, fraud and abuse of the program will continue.
I would like to see a revenue-assurance risk management program that would be initiated in every county for each crop based on that county's cost of production and each farmer's yield. Revenues would be derived from current Federal crop insurance allocations plus current allocated administrative costs, plus farmer-paid premiums. Those revenues would be held in a separate national fund for use. FSA would keep individual farm histories. Each farm would set its revenue assurance cap. When its premium plus other indemnities reach the cap, the premium payment would cease and that farmer would not have to put any more dollars into it until his reserve was reduced by a disaster or low prices. County FSA offices would administer this program at a minimal cost as they are already collecting this data.
As immediate past president of the National Association of Farmer Elected Committees, I am in a unique position to know the pulse of agriculture across the country. Our members cross all the political lines as well as all the different agricultural groups. I worked hard to speak out in support of local control and the Farm Service Agency delivery system.
On the issue of local control, I am very concerned with a draft proposal by USDA to strip local committees of their authority to hire the county executive director. Local control has been the reason the FSA delivery system has been able to deliver programs to farmers in a fair and timely manner. I strongly oppose this change. Farmer elected committees should not become just advisors to the employees. County committees should continue to be part of the management team.
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I would like to thank you, the House Agriculture Committee for helping provide funding for our county employees the past 2 years. Current county offices are being forced to remove temporary employees because of budget shortfalls.
And on the subject of the budget, the current administration's request is far short of what is needed for fiscal year 2001. County offices are at least 1,487 staff years short on full time employees, just to deliver the current programs, not counting any disaster needs. Farmers know FSA county employees are overworked. What they do not know is why the agency continues to not ask for enough budget dollars and continues to downsize the staff and leave them with slower service.
I have received complaints from small and limited resource farmers about the current EQIP conservation program. Most of these farmers are systematically eliminated from participating in the EQIP program because the nature of the rating system tends to favor larger operations. Many of these producers do not have the resources to enter a 5- or 10-year contract.
Under the old ACP program, we had a 5 percent administrative cost. Under EQIP, that has risen to almost 20 percent.
I see the red light has come on, so in closing, another thing that really disturbs me is I am confused when I read that USDA plans to consolidate and collocate Farm Service Agency and RCS and RD, and the reason they are doing that, it has become more productive and efficient, which in some cases that needs to happen in those areas that needs to be done. But I look at the same situation on my farm, and echoing what Mr. Hillman just said, that when my family and I consolidate to become more productive and more efficient, I am penalized by means tests and the limitations that go there. And I think that is grossly unfair.
Thank you.
[The prepared statement of Mr. Hood appears at the conclusion of the hearing.]
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The CHAIRMAN. Thank you, Mr. Hood.
Ms. Baker, let me just say to you we would love to see Robbie come back home and farm with you. If we can see that, then we may be able to consider ourselves a little bit successful.
I want to mention a couple of things that you all have mentioned so that I am for certain that you are aware of it.
I met with Mr. Thune and Mr. Talent in the past several days on their bill on value-added and we are looking at—there are a number of programs USDA has available that we are trying to make sure would be implemented and seeing what can be done. We do not handle the tax implications of that bill, that is another committee, but I have visited with John and Jim about that and we will start subcommittee hearings on that relatively quickly.
Crop insurance has been mentioned by a number of people. This committee took the lead on major reform of crop insurance last year. We passed it by voice vote in the House, overwhelming support by virtually every agricultural group in the country, full support of the committee. Hoped we would have it in place a little sooner than it has, we have been waiting for—there is another body in Washington called the Senate and sometimes they have to do things too and they have not yet, but it my understanding that the bill finally has been passed from committee and it is my understanding that the full Senate will consider that bill on the 22nd. We will chair that conference and we will ask for that conference as quickly as possible in order to try to finish up that bill and get it in place. The $6 billion is still in the budget for the expansion of the program.
I know Mr. Stenholm, Mr. Jenkins, and I came from the old ASCS, we all spent some time there. I am a strong supporter of the county committee system and giving the county committee as much—in fact, I want to give them sometimes more flexibility and powers than they want. But I think it is a great program, I think that it is one of those programs that helps to ensure that programs work well and ensure that local knowledge goes into decisions that are being made about farmers in a county and I am very supportive and continue to be of that system and certainly of the fact that the system should be able to determine who the CED is.
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A question I am asking all of the panelists, and I want to pose it to you, and some of you have touched on it, but it is a critical issue I think and one that is difficult for us. If it were left to me, we would not have payment limitations. It is not. And what I would like is to get each of your opinions about what the payment limitation should be, if it should be, and the implications and impact that that has on you as producers and the ability for a program to work or not to work.
Ms. Baker, we will start with you.
Ms. BAKER. Well, I do not know if it is good or bad. Our operation is not big enough for that limit to affect us yet. It might be a nice problem to have.
I just know that our payments, the loan deficiency payments, just did not seem to work last year. I saw some figures and it was listed by congressional districts, and Congressman Tanner's district, our home district, was the driest in the Nation and yet the loan deficiency payments were way down the list, because we did not make anything. And if you do not make anything, you do not get paid on it. So there is an inequity there. The people that made the crop got the biggest loan deficiency payments.
Mr. BRANUM. Chairman Combest, I agree with you that in my opinion there should not be any limitations. We have some huge farmers in southeast Missouri and I know other States have also and they are hurting just as much as the smaller farmers and they have the same input costs relatively as any size farm. So I agree with you that if we are going to grow food and fiber for American people, we have to do something to help all size farms.
Mr. HAWKS. Thank you. I certainly believe that payment limitations are totally counter-productive. As I told you, I started farming in 1970, my father loaned me the money to make a down-payment on a tractor and that is the only thing that I have ever had—he actually would not let me pay him back, so it was a gift. That is the only thing that I have ever had given to me.
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We started with 14 acres, so you can pretty well imagine I was not concerned with payment limitations at that point in time. Our farming operation has grown to over 10,000 acres of actual cropland. This year, I reduced my farming operation simply because of payment limitations. I am not working about 1,000 acres of cropland this year because I could not participate in the Government programs and collect those payments.
So I am sitting here with my economic training, knowing that I have got certain economies of scale that I have got to reach in order to be able to compete. But the Government is telling me that we do not want you to compete because we are not going to allow you to participate in the Government programs. So you can see that any type of means testing, any type of payment limitations that you do is counter-productive.
So I would say in answer to your question what should the payment limitation be. It should be infinity; and if there should be a payment limitation, my answer is absolutely not.
Mr. HILLMAN. Let me give you an example of what I am most familiar with, and that is rice. Currently it would take about 200 acres of rice to hit the payment limit, if it all was going under one entity, you did not have a landlord and you did not have a brother and you did not have a wife and stuff like that. With 200 acres of rice, you cannot afford to own a combine, you cannot lease a combine for 200 acres of rice. You would be out of business. So the efficiency of it is just prohibitive. You have to find ways around it.
No, sir, I do not think the payment limitation is any good, I do not think it works and I think it causes inefficiency in the farming operation. And if we are asked to keep on producing the food for the American people at lower and lower cost, I think that is something that needs to go by the wayside.
Mr. HOOD. I do not know how I can any better add to what has been so eloquently said, but I too had a good dad that got me started farming. We have been able to bring our brothers in. I am the oldest and the ugliest and I have been able to bring my younger brothers into the farming operation. I would also like to be able to continue for our children to be able to be brought into the farming operation.
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And with payment limitations, that is a limiting factor. And just to echo, in the farm equipment business, how can I sell a farmer a cotton picker, whether it is new or used, and he cannot cash flow it because of payment limitations. The price of a picker or the price of a combine, he needs to have 1,000 acres in order to have harvesting equipment. So it is a very limiting factor. Thank you.
The CHAIRMAN. Thank you all. Mr. Stenholm.
Mr. STENHOLM. The question I want to ask each of you, many of you mentioned in your opening testimony, but this will require a simple yes answer. If you answer no, then qualify it.
That is, do you support permanent normal trade relations with China?
Ms. BAKER. Yes.
Mr. BRANUM. Yes.
Mr. HAWKS. Yes.
Mr. HILLMAN. Yes.
Mr. HOOD. Yes.
Mr. STENHOLM. Each of you mentioned the difficulties we are having with crop insurance right now. If you had one suggestion to make of how to improve crop insurance, what would that one suggestion be? If you do not have one right now other than what you said in your testimony, why that is fine.
Mr. BRANUM. I would say move it back to FSA where the records are already being kept.
Mr. HAWKS. I would echo that. I think FSA definitely needs to be involved in it. I think you could eliminate some of the administrative costs and overhead.
Mr. HILLMAN. I would take out as much overhead as you could, let the benefits accrue to the farmers, not the insurance companies.
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Mr. HOOD. Who better is able to monitor what is going on in the county than that county committee that knows what their neighbors are doing and could address any abuse or any other problems that might come up.
Mr. STENHOLM. Several of you mentioned the importance of eliminating trade sanctions. You did it in the context of the Freedom to Farm Act, the 1995–96 farm bill in which we were going to produce for the market and you acknowledge that sanctions in fact keep us from participating in that market.
I would gather by that—and again, this can be a yes or qualified, that each of you would support the elimination of all unilaterally imposed sanctions; that means United States only sanctions on all countries, including Cuba.
Ms. BAKER. Yes.
Mr. BRANUM. Yes.
Mr. HAWKS. Yes.
Mr. HILLMAN. Yes.
Mr. HOOD. Yes, with reservations.
Mr. STENHOLM. What are the reservations?
Mr. HOOD. Well, every crop does not need to be counted or treated the same. Different crops have different impacts and I think you need to look at it on a crop-by-crop basis.
Mr. STENHOLM. You know, one observation here regarding the downsizing of USDA, the collocation, the question that is now—under current law, we are to do this. As a result of the 1994 USDA reorganization, it was recognized that just as agriculture was changing, we were going to have to change the way in which we deliver services to our farmers. And one of the questions that I ask of every farm group is what is it that we want USDA to do for us, with us and to us today, and how can we most efficiently deliver that service. And we have not done a very good job of that yet.
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But we will be opening hearings, the chairman will be having hearings very soon in DC, as we pursue the answer to that question. It is very timely and I commend the chairman for moving down this venue.
But also, I hope everybody recognizes a little bit of puzzlement in the question of payment limitations. And at the same time, the support for the current farm bill, that we all like the flexibility, everyone does. There has not been a witness yet and you are the 25th witness, that does not like it. But every one of you are mentioning the need of a safety net.
Remember now, and this is important for us as we look ahead, this farm bill was designed to be the last farm bill, that we were not to be even talking about payment limitations in the year 2000 because we had a fixed, flexible payment called an AMTA that was going to be the only payment and we were going to receive our income from the market. Now that has not worked out real good yet and that is the challenge the committee has now, is to look at a safety net and to do it in a way which maintains the productivity of the American farmer, which you have expressed concern about.
There have been two or three proposals put forward. One is double the AMTA payment, which is what we did last year, put additional money in, change the payment limitation somewhat to acknowledge what I have just said. Another proposal is one that we put forward called a supplemental income plan, SIP. This is designed—the change here and the amount of money we are talking about is basically the same, but the thought that I had was that it would make much more sense, if you are going to have a supplemental income payment, to pay it to the person actually producing the soybeans or the cotton or the rice or the grain sorghum or the corn, rather than an AMTA payment based on an historic payment to somebody that may not even be farming any more. Yet we are going to be faced again with that same choice again this year. The administration has put forward a second cousin of SIP called XCIAP, is the question there. The good thing about their proposal is that it gives us a chance to put some of this into the baseline for our budget. The bad news with their proposal is they put another limitation on that at $30,000 is unworkable, I guess we could say.
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But I mention these for us to think about. My time has expired now for questions, but you know, when we say we want no limitations, you are giving an impossible political hurdle for the Congress to meet because there is no way we will ever convince our colleagues outside of farm country or even inside farm country, that a Bill Gates is deserving of the same size of farm payment in his farming operation—I am just using that as an example, he is not farming—but the largest farmer is entitled to get exactly the same payments as the smaller farmer. You will never sell that, I cannot sell that even in my district and I represent an agricultural district. So we are going to have to give a little bit of thought as to how we can make this work a little better.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you. I am pleased to hear farmers in this part of the country say what farmers in western Kansas have to say, particularly in regard to the farm bill, appreciate the flexibility.
Let me follow up just a bit with what Mr. Stenholm has said. Each of you testified about the importance of developing a safety net. What I was hoping you would tell me is what that safety net was supposed to consist of and how we were supposed to develop it and how it would work. And so I would ask any of you, if you have any suggestions that you would like to share with us today about what you mean when you say a safety net and how Congress should proceed to develop one.
Mr. HOOD. I have tried to address it somewhat in a revenue assurance type program rather than a crop insurance program where a farmer could set his cost of production, he knows what his cost of production is. Then you could buy up, by putting in premiums similar to what you are paying for crop insurance now. Take the funds that have been allocated over the past 2 or 3 years and it will take somebody with a whole lot bigger statistical database than I have got to figure all this out, but take those funds that are there, appropriate them on a nationwide basis with the farmers paying into that for their cap, for their revenue cap on whatever crop they are growing. I think that is the first step maybe to getting to where you are talking about going.
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Mr. MORAN. Thank you, sir.
Mr. HILLMAN. I do not know how you are going to do it, that is Congress' job. [Laughter.]
But what we need is something that when we have low prices, low commodity production, that will tide us over. We know that agriculture runs in cycles, but last year we were hit, in our particular case in the 1998 crop, extremely low yields, on top of that extremely low prices. So the marketing loan and things like that have worked well in the past did not fit our situation last year. But what we need is something to tide us over when we do have one or both of those situations, that will get us back to the center, so that we can be there to take advantage of the cycle when it goes above the line.
Mr. MORAN. Thank you.
Mr. HAWKS. I would have to echo what the previous two have said. What we have got to have is something to take out the cyclical nature, if you will, of production agriculture when we have low prices and low yields, that is where it needs to be. And I personally think it needs to be addressed in some type of an insurance program rather than having supplemental appropriations and supplemental bills every year to try to address specific disasters or catastrophic events in some area of the country or whatever, because when that catastrophic event only happens in a small geographic area, I understand the dynamics of Congress and I understand what you said about the payment limitations—I understand those factors. So what we need is a program that will work year in and year out.
And I think another thing that we need to be doing to try to eliminate some of these cycles is to do as we had said, is to eliminate the over-burdensome regulations that we deal with. We need to deal with the tax implications that we deal with.
So there are a lot of things that we need to be doing with this safety net all at one time. And like Mr. Hood says, you all have got the big computers up there.
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Mr. BRANUM. I agree and I think that it needs to be some sort of a combination considering both yield and price. If you have a bad crop and you are in a program where you get paid according to the number of bushels because the price went down, then you are not going to get paid very much. I can see where maybe you could work out something where it was a combination of a yield and price on an individual farm basis.
I know you all have got your work cut out, and I appreciate what you have done. You do not know how much you have helped to keep southeast Missouri farmers and other farmers across this country in business. You may know that it has been a blessing.
Ms. BAKER. I mentioned that we have been farming for 37 years and this is the first time that we have had the low prices on top of low yields. Usually if you have got low prices, you have got a big yield and it kind of balances.
I do not know what the answer is, I just know that in Obion County, there are lots of farmers that can survive one bad year, some can survive 2 bad years. This third year is going to eliminate a lot of farmers and we cannot afford to lose any more.
I think someone mentioned that our census of farmers in Obion County have increased, but what has happened is that one farm has been inherited by two people, so the number of farmers has not increased, it is just maybe the number of landowners or whatever.
Another year is going to eliminate a lot of farmers.
Mr. MORAN. Thank you very much.
I will ask additional questions to the other panel. Thank you.
The CHAIRMAN. Mr. Berry.
Mr. BERRY. Given the comment that the ranking member just made about payment limitations, what would be your recommendation as to how to deal with that? That we are going to have to have some kind of payment limitation.
Mr. HAWKS. Are you asking what would the level be assuming we——
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Mr. BERRY. What would you recommend as a matter of policy to deal with that?
Mr. HAWKS. As a matter of policy to deal with the payment limitation, recognizing the fact that you have got to negotiate and you have got to get something passed, is that——
Mr. BERRY. You have got to have one somewhere.
Mr. HAWKS. That is a tall order. I think one of the things that could be done—and we say this all the time in agriculture, we talk about educating the public about the nature of agriculture. I think we need to do a better job of educating other Members of Congress. You know, I would think that would be incumbent upon you all to help educate other Members of Congress as to the nature of payment limitations and what they do, realizing the fact that they have got constituents that do not understand payment limitation. So I think that is really a step that we need to be taking. We need to be taking it as agriculture producers, as agriculture organizations. We need to be trying to relay to the general public why payment limitations are counter-productive.
I understand that, you know, you talk about the Bill Gates of the world and various things like this, but it is not like that. You know, my farm is a family farm, even though it is some 8,000 acres in cropland. So I think it is an issue that is very difficult, very delicate, if you will. But we have got to do a better job of educating the public as to how payments limitations are counter-productive.
Mr. HILLMAN. Marion, the number that I would suggest, the same number of the payment limitation that you put on the doctors that do Medicare and Medicaid, the same number that you put on lawyers that sue the Government for millions of dollars and collect untold millions of dollars in a tobacco settlement for doing absolutely no work at all—use that number. [Laughter and applause.]
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Mr. BERRY. I made that speech, as you know, David, many times.
The CHAIRMAN. That is where he got it?
Mr. STENHOLM. That is where he heard it.
Mr. BERRY. I think food and fiber are national security issues and they should be treated the same as healthcare and national defense. I can only imagine how far we would get in national defense if we had a $40,000 payment limit on all defense contractors.
Mr. HOOD. The only statement I would make in addition to that, because I do not think I can top that, but we have got to have farm programs that put us on an equal subsidized competition with your global markets. And without that, we are going to be lost and agriculture will be gone in the USA.
The CHAIRMAN. Mr. Jenkins.
Mr. JENKINS. Thank you, Mr. Chairman. I do not have any questions for this panel, but I would like to thank them for their refreshing viewpoints on all these subjects. We do not have—we did not have any discussion with this panel about beef or tobacco, but Mr. Hillman brought up an interesting point.
Let me just tell you, it could be worse, folks, even though it is bad enough. You could be growing tobacco. You are taking small arms fire, a few hand grenades. The tobacco folks are taking small arms fire, hand grenades, artillery, strafing and bombing and attacks from every governmental agency and every environmental agency and every health agency in the country. I do not know—and that may eventually come to other sectors of the farm economy.
But thank you for coming and you all did a great job.
Ms. Baker, I understand. We have four children. I should not tell this in front of Mr. Hillman, but we have got two sons that are both practicing law. The youngest one wanted to farm but I advised him that it would be much better to have some other—he is still farming part time, but it is much better to have some other occupation.
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So, like the chairman, I hope certainly that your son will eventually get back on that farm in Obion, Tennessee.
Ms. BAKER. Thank you.
Mr. BERRY. Mr. Chairman, if I may take just a moment to show you how tough it is in east Tennessee in the tobacco business, my colleague, Mr. Jenkins, was asking me on the plane on the way down about raising rice. And if you all have ever been to east Tennessee, you know how tough that would be. [Laughter.]
The CHAIRMAN. Mr. John.
Mr. JOHN. Thank you, Mr. Chairman.
I want to thank all the panel for coming out. As I, not only listened to your testimony, but also read it on the plane ride up here, there are some common threads and some repetitiveness in a lot of the, not only the problems but maybe some of the suggestions, and frankly in all the testimony that I have read, with the panel that is going to be coming behind you. So there is a lot of commonality in what we agree upon as some of the problems and how we can fix those.
But we are frankly going to have some challenges, as you have seen from some of the questions from some of my colleagues earlier. It is very difficult, as we in Congress try to put a farm policy in place that must be flexible enough to cover crawfish, rice, soybeans, wheat, pineapples, cherries, oranges—and we can go down the line. That is the challenge that we have, so that makes it a little difficult as we do that.
The other challenge that we have is that as we move into what we think—and I think all of us, even up in the audience believe— is this global marketplace. As we move into that and we start to engage more and more with other countries, I mean the WTO with China is just one example, but there will be many, many more as we open our markets. Our farm policy is going to continue to be scrutinized because if you step back and look at some of the other countries that we may want to deal with; i.e., China; yes, we would love to open those markets. I am a big supporter of it, it would be a tremendous boost for our rice industry down in Louisiana. But how do we face or how do we go back to our sugarcane farmers that have a sugar program when Cuba comes up to us and says wait, hold on, we can open the markets for our rice, but you have got to open your markets for sugarcane.
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So those are the kinds of tasks that we are going to be faced with. They are not very easy, some of them are not very pleasant, but as we move through this, it makes it really difficult for us to try to put one comprehensive bill in place that is going to be perfect and is going to be there at all times.
Specifically, I believe that a part of the solution, a big part, is crop insurance. I think it is important, I not only own a rice farm and a crawfish farm, I am in the trucking business, so I understand insurance very well, and every person in this room has insurance on their home, on their car and everything. I cannot, for the life of me, believe that we cannot simply sit down and say this is insurance, this is how insurance works in the real world, why can we not use some of those same principles in crop insurance.
The product that we passed out of this committee with the leadership of Chairman Combest and Ranking Member Stenholm, I would like just a comment, do you like it, don't you like it, and could we have improved it or will there be some room for that in the conference committee or as the Senate debates it?
Ms. BAKER. This is the first year that we have purchased crop insurance and we have just been through that process, and it was agonizing, never really saw the need and could not afford it. After the last 2 years, we decided we could not do without it.
Another comment I would like to make. I think every country in this world values its farmers above the United States. Nobody in this country—we talk about people being hungry, but people in this country have not been hungry enough. The food is always there, the variety is always there and I hope that we can educate the people of America to value the farmers before we are gone, so that we do not have to depend on other countries that might decide they want to withhold their food from us some day.
Mr. JOHN. I totally agree with you. I think that the American people really take for granted the quality of food at the low price that we have in America.
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Mr. BRANUM. I think that the insurance is somewhat complicated whenever you go to buy it. It is real complicated whenever you go to collect on it. There are some provisions there that you really do not know what you are getting. It is unlike auto insurance, home insurance. Really I think there are some things there that are not interpreted the way that they need to be whenever you go to buy your insurance.
Mr. HAWKS. I would just say that I think you are headed on the right track. I think as has been mentioned here numerous times, I think FSA has got to be involved in this process.
Mr. HOOD. If you look at a multi-peril insurance policy, it is too expensive and the coverage is not enough. I have to show a 35 percent loss before I would even participate in it, and I do not think General Motors can take a 35 percent loss and survive.
Mr. JOHN. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Riley.
Mr. RILEY. Thank you, Mr. Chairman.
I know we are trying to move this along, we have got several other panels, but when we talk about a safety net, and as I listen to your comments and I listen to you describe how difficult it is, how expensive these processes are—and you are in a cyclical type market, you are dependent on the weather—I think at some time we have to start thinking out of the box.
I was just sitting here thinking. We allow a bank to set up a loan loss reserve. Why could we not do that for you? Why could we not set you up a farm reserve loss account that could be—where you could take a part of your insurance, you could put it into something like an IRA or a Roth IRA account, that is yours. If you could go 5 or 6 years, especially during the good times, be able to take this, the way a bank does, set it aside, it is your money, you can invest it any way you want to, but at a point when you need to get through these dips, you will have something there.
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I think that is the type of new methods that we are going to have to come up with. If not, I think we are going to repeat the things of the past. You know, they say the height of idiocy is doing the same thing expecting that you will get a different result. And we keep doing that, we keep doing it over and over.
I do not see any reason why, when you have good years, we want to allow you to take some of this money, set it up in an account to be specifically used for these downturns. And I think if you could get by 5 or 6 or 7 years, you could literally get to the point you did not have to buy insurance, you would not need the government, you could self-insure yourself. Maybe we would have a catastrophic policy that you could buy through the government, but for year in, year out, especially for you people that have been in it for 25 or 30 years, I think if we had had a policy like that, I do not even think we would be having this discussion today.
I would just like to hear your comments on that.
Mr. HOOD. I will start it off. That is where I was coming from with the revenue assurance risk management program. That a farm each county would build up its equities and then if he needed it, those equities were there to draw against. And if not, the equity stayed there and he did not have added expense by paying any more or a higher premium.
Mr. RILEY. Why would you want to get the Government involved with that policy though? Why could we not just let you do it just like you would an IRA, you do it yourself.
Mr. HOOD. I hate to be short with an answer, but if you get the State Department out of it where our food products that we grow are not traded out because of Government policy, we might could do that. But that will never happen because of trade sanctions and other things worldwide.
Mr. RILEY. I am talking about as far as your account, would you want the Government to come out and tell you how much you could set aside, what percentage you could set aside, based on what you did the prior year or what your forecast is for the next year based on your crop?
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Mr. HOOD. No. Each farm would set its own revenue assurance cap based on his production.
Mr. RILEY. And set it at a number where you hope to be independent of the Government within a period of 5 to 10 years.
Mr. HOOD. That is where I was trying to go with the risk assurance program.
Mr. HILLMAN. I like your idea, I would like to hear more about it.
Mr. BRANUM. Mr. Riley, I believe [State] Senator Hulsaw from Missouri has been working on this and I know you are well aware of it, this farm account. And I think it is a great idea and I agree with you, it should have happened 10, 20 years ago. And I would love to have something available like that.
Mr. HAWKS. I too think it is a good idea. The only problem with this is that we are starting from such a depressed area right now. The timing for the implementation of that is not really good and another thing that you need to keep in mind, like has been mentioned several times here, you know, I believe that I can compete with any farmer anywhere in the world. I cannot compete with other governments of the world. That is where we need intervention from our Government, is in the trade areas, in order to put us on a level playing field and then we would be in a position where we would not need the Government, we would have the financial ability to do the things that we need to do.
Mr. RILEY. Well, what I said originally and I still contend we have to do, we have to make a fundamental decision in this country on how much we appreciate our farmers, whether we want to protect our farmers the way Europe does and some of the other countries do. But one of the things I would like for you to do, each one of you think about this, think of the best way to finance a program like this. I think all of us are looking for some creative solutions, you are the ones that can give it to us. So think about it, let us know how you would like to see it structured.
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Ms. BAKER. I like you idea. I always said if you would leave the money with me, I believe I could manage it better than you all manage it. [Laughter.]
Mr. RILEY. You sound so much like my wife, she has always told me she was a better manager.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Tanner.
Mr. TANNER. Mr. Chairman, thank you and thanks to the panelists for the enlightening discussion this morning.
I want to reiterate I think what Marion Berry said, I used to serve on the Armed Services Committee and history teaches that a nation cannot expect to remain free without an adequate defense and without an adequate food supply that is inherent and internally raised. And that is really what we are talking about, Ms. Baker's comments about how many people are going to go out. What I said early on in my opening statement, when you have efficient, competent people who know what they are doing and have to go out of the farming business through really no fault of their own, then it seems to me, as a non-member of the committee—and I guess it is easy for me to say as a non-member—that there is something wrong with the agriculture policy of the country.
Now, as it relates to some of these tax matters, from a Ways and Means standpoint, I would be more than eager to work with your committee and Mr. Stenholm to try to fashion some sort of realistic logical, sane policy as it relates to what the Tax Code could do to accomplish the overall goal of providing our agricultural sector with the means that they must have in order to survive in an ever-changing global marketplace, from trade policy to regulations to all the rest.
So I just want, without belaboring the point, thank you for being here again. I am going to have to leave to go to another event in my district up near Reelfoot Lake, but may I just say thanks again and thanks to this panel, it has been most enlightening. And I hope Robbie can come home too, Ms. Baker.
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Ms. BAKER. Thank you.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Thank you, Mr. Chairman. I do not have any questions specifically for this panel. I feel though that being in one of the healthcare professions that was previously mentioned, that I ought to defend myself to some degree when we talk about payment limitations. In fact, the Government does put payment limitations on healthcare professionals, and in fact, if you will talk to most healthcare professionals or hospitals when they deal with Medicare or Medicaid patients, they lose money every year on those patients just like you do in farming. It is the other people that end up paying the bill for that. So there are payment limitations there. Just to defend a previous profession of mine. I appreciate that.
The CHAIRMAN. Mr. Bryant.
Mr. BRYANT. Thank you, Mr. Chairman, I will be brief.
I know a couple of you have mentioned the prices and I think some of the members of a subsequent panel are probably going to talk about it a little bit more, if they stick by their statements that they furnished us in advance. But I think it is important and I know this committee, being a non-member, I keep up with this committee though. I know it is interested in and has taken some look at what happens to your product after it leaves the farm, the upstream and the pricing there. We all know the story about what you sell something for and when you get to the grocery store what it costs you—big difference there. Kind of what has happened in between.
I think we have got some laws out there on the books and unlike other areas we are talking about today, this is clearly a point where there could be perhaps a better look at more enforcement of those laws, particularly the anti-trust laws, emerging laws and maybe even the Packers and Stockyards Act and some of those things. I thought a couple of you were going to go that way, I know some others coming up are going to go that way.
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But I do want to let you know that we are concerned about those in Washington in case they are talked about today.
Quickly, following up on my colleague Mr. John's comments, in terms of the sugarcane and the rice and those kinds of issues, that is a great example that points out how complicated things can get sometimes up there in Washington. I have been a supporter of most favored nation status—not most—well, yeah, most favored nation status. I have supported that. I go to church and people tell me why did you do that, they ask me that, in my own church. Now it is broader than simply trying to affect social policy and all those things like that. And I think I would use this—I wish some people from China were listening, but beyond that, the security issues, the national security interests, the spying and those kinds of things, allegedly pointing 13 missiles at us right now, at our country—that is a big issue out there when this World Trade Organization comes up, as well as the issue of the trade. Is it fair trade, are they really going to buy our agricultural products or are they going to farm themselves. And things like that. It is a very complex issue, it is a very broad issue and this is certainly one very important part of it.
I know many of us here have supported a bill that would not allow food and medicine to be used, whenever you do put sanctions on a country, and that is kind of a midpoint, but all of the other companies that I represent in the seventh district and others represent, the businesses say well, you know, we want to still sell and buy from over there too. So it is a very broad issue. And I say that to you as a supporter of the position you would ask us to take. It is a very complicated issue, and especially China does not seem to make it any easier every day with their threats and this and that.
With that said, I will yield back to the farm policy.
The CHAIRMAN. Mr. Pickering.
Mr. PICKERING. Well, we have addressed a number of issues important to farm policy, everything from Freedom to Farm, a safety net, insurance, tax—I would like to take a little bit of a different angle and talk about some of the regulatory issues, about good science and bad science and how I fear our Government is using bad science with a bad result for our farmers and possibly looking at doing things that would hurt good science and the benefit that it can produce for our farmers.
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I now serve on the Commerce Committee. My first term I served on the Agriculture Committee. But we have joint jurisdiction over a very important issue, the FQPA. We recently have received a commitment from Chairman Bliley on the Commerce Committee, to hold hearings on the implementation or the failure to implement, consistent with Congressional intent, the FQPA.
So I would like to ask each of you to respond to a two-part question. The first part: What do you see in the implementation of the FQPA, what are the consequences, what will be the cost in your operation and over the overall farm sector. And second biotechnology, which has tremendous potential to benefit the American farm sector, yet we are increasingly seeing either legislation or proposals from our international trading partners that could stifle the growth and the use of biotechnology and the products, especially the agricultural products which can benefit from those technologies and applications of good science.
So if you could respond on the consequences of the current implementation of the FQPA and what do you see as far as the benefit or the harm if biotechnology is not pursued, defended and the people of our country are not informed of its benefit.
Mr. BAKER. Maybe Robbie not working on the farm has had a little bit of education for me, because he is working in research and so we have talked a lot about biotechnology this last year.
We all need lots of education, I know I was as ignorant as anybody about the biotechnology, but as a farm wife who watched her husband change from the regular kind of agriculture in 1971, to no-till agriculture, we went from plowing and disking and planting the old fashioned way, and cultivating to no-till, which involved chemicals and that involves regulations, it involves lots of price, it also involved risk that I felt, that he dealt with, he handled these chemicals every day. We all hear all these scary stories.
So to me, anything that will benefit the farmers, anything that will take some of that risk out, is beneficial to us. You cannot tell me that it is not healthier for that plant, for the bug not to eat that plant, than it is to spray something on there to kill the bug. I take it to a personal level, I am sure they are all going to get a lot more involved, but as a farm family, we live on that farm every day. Whatever affects that farm is going to affect us first, health-wise, money-wise, any other wise. And everything that—all the new regulations that seem to come out of Washington cost us more money, more time gone to spend at farm service organizations; every time you go, it takes half a day.
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So it's going to take education on everybody's part. I think so many of these organizations use scare tactics and sometimes it is the people that yell the loudest that get listened to the most, even though their story is not what we need to be listening to.
This may not be the place to—I heard or saw the commercial that they have got about drinking beer instead of milk and I just could not believe how far we are going in a direction we do not need to be going.
Mr. BRANUM. As far as biotechnology, we have been doing this for many, many years, we are doing it faster, we are doing it much faster now, but we have to in order to keep up with technology and in order to keep up in the world. We have to improve and be able to do things faster.
I can see a day when everything is going to be biotech, whether you want it or not, it is going to be that way because things are being biotech influenced with our neighbors. It is going to take very few years before everything that we ship overseas or that we eat is going to have some kind of a GMO in it, it is going to have some sort of a modification there. So I cannot see any—I believe sound science is with us and I believe sound science is going to win, it is just going to take time. And like Ms. Baker says, it is going to take education. I do not believe the European countries are worried about biotech as much as they would like for us to believe they are. I believe they are worried about American farmers being able to grow things and do a better job at it and do it cheaper. I believe that is what they are concerned about. But time will have its cost.
Mr. HAWKS. Congressman Pickering, I am going to try to answer both of those questions in one and I am going to do it with a statement.
Common sense and sound science is what we need in both of those and I think that is where we really need to be going. I think we cannot stick our head in the sand and turn back the clocks of time, we have got to continue and move forward as fast as we can.
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Mr. HILLMAN. I am not that good. It is going to take me more than one sentence to answer both of those questions.
As far as the FQPA goes, the way it is being implemented now would put me out of business. I will give you an example of that. A couple of years ago, I was in Washington and went over to EPA visited with a lady over there named Marsha Mulkey. It did not take me very long to find out that her goal was to completely eliminate the crop protectants that we have in the United States today. I asked her about that and I said what are the American people going to do for food supply if you have your way. She said we will import it. My answer to her, not then but now is, do you really want to rely on foreign countries and foreign nations and their style of crop protectants and their style of fertilizers for the food supply of the American people?
When I was in southeast Asia, every morning, they had a thing they called a honey wagon. It went from town to the rice fields. They dumped that stuff on the rice fields. What was in that honey wagon was human manure. Do we really want to eat that rice that comes over here? Do we want to have responsible scientific reasons for the reasons that we use our crop protectants today.
As far as the biotech, I am trained in that area, it is safe, it is something that we have always done, we just discovered a new technique of doing it. And the very people that this will help the most are the ones that are fighting it the worst. We need to move forward with it, we need to do it in an orderly, scientifically sound way. Thank you.
Mr. HOOD. I think the first part I will answer is to use sound science to determine the fate of chemicals. On the GMOs, I have got enough faith in USDA, our scientists, our research leaders, to feel real comfortable that if anything was known that was derogatory, we would know it by now and if that is not the case, I would suggest that Congress get on the ball and make sure that does happen.
Mr. PICKERING. Mr. Chairman, just a quick follow up with Ms. Baker.
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Robbie would say, I would imagine, as a son who has gone off and gotten an education and has learned about all of these new advances, he would say if we use biotechnology, we will have less agrichemicals, less pesticides, cleaner water, better environment, higher yields and a better farm economy with the applications of this technology.
Thank you.
The CHAIRMAN. Thank you. And again, I would like to thank our panel very much for your testimony.
We will now call our second panel of witnesses. Mr. Ronald Anderson, livestock farmer from Ethel, LA; Mr. Don Dowdle, a cow-calf operator from Somerville, TN; Mr. Dean Gravois, a sugarcane producer from Vacherie, LA; Mr. Bryan Lemoine, III, a sugarcane and grain sorghum producer from Hamburg, LA; and Mr. Daniel Lyons who is a grain and livestock farmer from Church Point, LA.
Mr. Anderson, I will start with you.
STATEMENT OF RONALD R. ANDERSON, LIVESTOCK FARMER, ETHEL, LA
Mr. ANDERSON. Mr. Chairman, members of the committee, my name is Ronald Anderson. I am a farmer from Ethel, LA. Currently, my principal crop is beef cattle and until fairly recently, I operated a dairy and have produced various grain crops since I began farming in 1970. I would also like to thank you for holding these hearings and for the opportunity to address you today regarding Federal agricultural policy.
As all of you know, producers are facing serious economic problems. If the additional economic assistance had not been provided in the last 2 years, many farmers across my State would no longer be in business. We again are faced with not only low prices for most commodities, but serious drought conditions that still prevail over most of Louisiana. While livestock prices are relatively good, most pasture conditions are not. The lack of winter moisture will significantly impact production.
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Improving the short-term economic conditions through various assistance programs has been helpful but the long-term improvement or strengthening of safety nets for all types of producers is needed. Until such time as long-term improvements or programs are developed to provide support during extended difficult times, such as we are currently facing, continued emergency supplemental funding for economic assistance will have to be provided if we are going to sustain U.S. agriculture.
While I am supportive of the 1996 FAIR Act and the flexibility it provides, some modifications are clearly needed. I am supportive of adding a counter-cyclical program to improve the current safety net. Any additional programs must be able to provide adequate assistance to all producers, regardless of size and commodity produced, during extended periods of low prices. This time, modifications in policies must take into account worst-case scenarios. To me, the marketing loan is a counter-cyclical program. Currently, loan rates are below the variable cost of production for most commodities and producers. Marketing loans function very differently than old loan programs and allow us to aggressively compete in world markets. Increasing loan rates in a manner that would allow commodities to be sold at competitive prices in the world market, while at the same time maintaining adequate income support to producers, should be considered as part of the improvements. This could be part of the solution.
Crop insurance has not worked well in Louisiana. Hopefully the current debate will end up providing adequate and affordable protection for legitimate producers. That has not historically been the case in my State. The development of variable risk management plans is needed for the livestock industry. I personally support the concept of covering my cost of production and believe such a program could be provided not only to livestock producers but all commodities at a reasonable cost. Few programs are available for livestock producers, and those that are, offer very little assistance. Equitable funding for livestock producers in disaster assistance programs is needed.
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Livestock producers need access to competitive markets for price discovery that adequately determines the value of their products. USDA, in conjunction with the Department of Justice, should investigate all mergers and ownership changes in meatpacking industry for actions that limit the availability of competitive markets for livestock producers.
The Dairy Price Support Program at the current level of $9.90 should be extended for 2 more years. The price support program is one of the best tools available to U.S. dairy farmers to cope with the cyclical changes in prices. This safety net is one of the areas in Federal dairy policy that the regions all agree on. The Northeast Dairy Compact has proven to be an effective tool for producers in that region to gain more from the market. Twenty-five States, including Louisiana, have passed legislation authorizing regional compacts. Hopefully the Southeast Dairy Compact will be authorized. I encourage you to support the formation of regional dairy compacts so as to stabilize producer incomes and consumer prices and reduce the need for Government programs for the dairy industry.
The realization of promises made during the 1996 FAIR Act debate regarding access to additional foreign markets through trade policy reforms, relief from over-burdensome regulations and additional and improved risk management tools, tax reforms, would help to improve the economic outlook. While some of these issues will take time to achieve the desired result, I hope Congress will take every opportunity to act upon them this year.
Mr. Chairman, thank you for holding these hearings across the country and allowing us the opportunity to testify. I will be happy to respond to any of your questions.
[The prepared statement of Mr. Anderson appears at the conclusion of the hearing.]
Mr. STENHOLM. Mr. Dowdle.
STATEMENT OF DON DOWDLE, COW-CALF OPERATOR, SOMERVILLE, TN
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Mr. DOWDLE. Congressmen, I am Don Dowdle from Somerville, TN, 30 miles away. I would like to welcome you to Tennessee.
I am here today as an American citizen, a taxpayer and a cattle producer. There are farmers in the audience today, there are many more back home at work. They are producing food which gives our citizens life, which allows us to continue a government in a place we still call the Land of the Free.
There are other farmers who are not here today because they are not farming any more. American farmers do not want your sympathy, they do not want a handout. They do want to do what they do best, produce quality food and they want a fair return on their time and investment. Our farm programs should foster agricultural free markets and lift the heavy hand of Jack Corporate food processors and packers from the backs of American farm families.
A partial answer for the American farmer and rancher would be to guarantee them a fair return on food grown for consumption in the United States. Taxpayers will support funding for an abundant and safe food supply. They support military spending to protect their freedom. Food security is also important.
Gasoline is approaching $2 per gallon. Does anyone want a foreign food cartel? Is current farm policy pushing agriculture from our shores? That might not be your intent, but are we headed in that direction?
If someone wants to compete in the international market, let them do so at their own risk. Let the global multi-national corporations fight over the right to buy American grain without any subsidies or tax breaks, but do not use our tax dollars to bankrupt farmers in other countries. Stop allowing farms to pay less taxes on profits made abroad than they would pay if the profits were made in the United States.
Discriminatory pricing practices against American farmers must be stopped. Why did Monsanto sell Roundup Ready soybean seed for $20 to $23 a bag in the United States and only $12 to $15 in Argentina, as reported by the General Accounting Office last month?
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The importation of meats, fruits and vegetables that were grown with the use of chemicals that are banned in the United States should be prohibited.
Mandatory Government cost must be factored into prices that imported goods can be sold for in this country.
Today, there are 31 million acres in the Conservation Reserve Program at a cost of $1.4 billion. It may be time to stop putting more acreage in the program.
I have a farm lease that I run cattle on, the land is flat, not eroding and it is covered with grass. I am paying a fair market rent to a non-farming landowner, yet the U.S. Government may bid three times the going rental rate for the pastureland to put the farm back into the CRP. Why?
Perhaps landowners with an income above $100,000 or a net worth of more than $1 million should be ineligible to receive CRP payments. Perhaps the limits should be much less.
Another thing—Ms. Worsham has got something that I would ask her to pass around, maybe she already has. The label that you have on the steak up there reads USDA Grade Choice. The housewife that buys the steak thinks this meat was produced in the United States, but in reality we do not know what country it came from. The USDA label is a lie. Our own USDA is misleading American citizens and is in effect stealing from American cattle producers who believe the housewife will pay more for American beef. The USDA is violating the Agriculture Market Act of 1946. And supporting documentation on that is enclosed with what you have.
U.S. Members of Congress can quickly stop this illegal practice by supporting legislation currently in the House and Senate. We cannot afford to wait for USDA to comply with current law. You might have seen the $6.99 per pound price on that steak. That might have come from fat cattle I sold last month for 68 cents a pound. The farm to retail spread has doubled in the past decade. The widening gap between retail food prices and farm prices is due largely to the exploitation of market power. Today, four firms control over 80 percent of all beef killed and processed.
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Competitive markets are what is missing in many of today's farm markets. Concentration and vertical integration has been called a deadly combination. It is deadly to competition and deadly to producers who attempt to make a living in this environment.
Congress should see and make it happen that anti-trust laws and Packers and Stockyard Acts are enforced. Stop mergers that reduce competition.
I would be remiss in my obligation to those in the audience if I did not touch on a need for campaign reform.
Cheryl Tevis, editor of Successful Farming, recently wrote about consolidation and vertical structures in agriculture. She said, ''These trends are not driven by efficiency or dictated by consumers. They're not ordained by God. . . . They are the deliberate outcome of marketplace power and well-placed campaign contributions.''
Well-placed campaign contributions. Is that the force that drives American policy? I hope not, but the farmer who sees this stack of campaign contributions may wonder.
Members on the Agriculture Committee have received 58,000 different contributions, some from organizations I represent also, but I feel like that is part of the problem.
I would like to compliment the many dedicated USDA employees in local offices who, at least in our county, do an excellent job of interpreting very complex regulations.
With your support, Americans can continue to enjoy the most wholesome food in the world. With your support, farmers in the audience will be able to see their children and grandchildren join them as tillers of America's soil and guardians of America's livestock. Without your support, there will be no farmers left to attend your next farm policy forum. Thank you.
[The prepared statement of Mr. Dowdle appears at the conclusion of the hearing.]
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Mr. STENHOLM. Mr. Gravois.
STATEMENT OF DEAN GRAVOIS, SUGARCANE PRODUCER, VACHERIE, LA
Mr. GRAVOIS. Mr. Chairman, thank you for the opportunity to testify regarding the many problems facing America's family farmer. I am Dean Gravois and I am a family farmer rasing sugarcane in Vacherie, LA. I speak to you today on behalf of myself and the other 700 family sugarcane farmers and 18 raw sugar processors in Louisiana who make up the American Sugarcane League.
Farmers in Louisiana have been growing sugar continuously for more than 200 years. Together, we support a rural society, a culture, built on the traditions of sugar farming. The family farmer is an institution that is still an integral part of our communities. Over 32,000 people in Louisiana depend on the sugar industry for their livelihoods. Yet, while virtually every other part of our national economy enjoys the fruits of a record boom, the family farmer is suffering in ways unseen since the great depression.
For sugar, the problem is rooted in an over-supply created by many factors, but most importantly, the entry into the domestic market by subsidized foreign sugar and by program management problems that have destroyed the market confidence.
To understand how best to address these problems, we must remember how they came into being.
Until last summer, raw sugar prices remained pretty flat for almost 20 years. During all this time, the world dump market price of sugar, tossed up and down wildly as production and export subsidies by many major exporters encouraged a glut on the thinly traded world market. Under the weight of this glut, the world price eventually fell to a level that was equal to no more than a fraction of the cost of production for even the lowest cost producers in other parts of the world.
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Inevitably the pressure from this glutted world market was borne onto the United States. Importers began looking for creative ways to evade our TRQ and bring in some of their subsidized foreign sugar. They found access through a TRQ circumventing syrup known as stuffed molasses and by importing excess Mexican sugar at NAFTA second tier duty rates. The dilemma was exacerbated by the unusual 2-month delay in the USDA's announcement of the Farm Year 2000 TRQ. This delay undermined market confidence causing more problems. It was simply too much to overcome.
The domestic raw price of sugar has plummeted by 25 percent since then. Losses to the current crop from this price catastrophe translate to more than $1 billion to the cane and sugar beet industries. Unless prices rise significantly, massive, costly forfeitures are inevitable.
To resolve the current supply crisis and to avoid massive costly forfeitures, the USDA should immediately purchase a significant amount of sugar from the domestic market. The sugar could be sold or donated overseas or could be used for non-food purposes such as the production of ethanol. Such a purchase will improve the crisis by minimizing government cost, invigorating producer prices and rebuilding market confidence in the government's ability to manage the program.
The long-term strategy includes improvements to both our trade agenda and our domestic foreign policy. On the trade front, we need legislation to prevent continued circumvention of the TRQ by products just like stuffed molasses. We also need to shore up the integrity of NAFTA by refusing to be buckled by Mexico's attempts to undermine the side letter on sugar.
As for our farm policy, we must make four important changes. To put these suggestions into context, it should be remembered that sugar growers are not eligible for any AMTA payments. Except for a temporary suspension of our marketing tax, we have not shared in any emergency relief packages provided by Congress to farmers each of the last 2 years. So addressing our disaster will require focusing on specific provisions of our sugar program.
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First, Congress should reinstate the no-cost provision.
Second, Congress should permanently eliminate our marketing assessment on sugar.
Third, Congress should abolish a 1-cent forfeiture penalty. Further, Congress should direct the CCC that in the event sugar is forfeited, such forfeited sugar will not be sold for food use back into the domestic market, but instead will be disposed of in a way that will strengthen the domestic producer prices.
Finally, Congress should assure sugar farmers of non-recourse loans regardless of the level of imports.
After more than 200 years, Louisiana farmers have learned a thing or two about sugar. It is not only our best crop, it is our only crop. We have tried growing other crops with no success. Nothing else but sugar grows well in our region. The loss of our industry would mean absolute devastation to my heritage, my community and my State.
Sugar farmers do not want unfair protection, nor do we want an unfair advantage. We simply want fairness itself.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Gravois appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Gravois. Mr. Lemoine.
STATEMENT OF BYRON F. LEMOINE, III, SUGARCANE AND GRAIN SORGHUM PRODUCER, HAMBURG, LA
Mr. LEMOINE. Mr. Chairman and members of the committee, thank you for the opportunity to address you today concerning Federal agricultural policy. I am Byron Lemoine, a farmer from Hamburg, LA, which is located in the central portion of Louisiana east of Alexandria. I am active in various organizations at the parish and State level and serve on the United Soybean Board. I, along with my wife Karen and my two children, grow cotton, corn, grain sorghum, soybeans, sugarcane and wheat. As a diversified producer, I can tell you that the past 2 years have been the most difficult times in my farming career.
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Even as diversified as my operation is, there is not one crop that currently looks more promising than another to me. While some commodities are inter-related, the market forces and factors that can affect one commodity are very different than those that affect another.
As you know, improved trade and regulatory reforms were promised when the FAIR Act of 1996 was being debated. Efforts to make improvements in these areas and to add additional resources to public research should be increased.
In the area of trade, we must maximize and expand the uses of measures that will enhance exports. Investments in developing new markets should benefit us in the future, as long as there is access to those markets.
Biotechnology is the future for agriculture to be able to have an abundant, healthy and environmentally friendly food supply. It should not be a trade issue.
Currently, imported sugar is streaming across our borders disguised as molasses and flavored sugars in order to circumvent U.S. tariffs that ultimately affect our markets and the income of U.S. producers. We must also continue to realize that other factors such as extensive regulations on U.S. agriculture will diminish any competitive advantage. I cannot pass on the increased costs of regulations.
Research is also key in sustaining a viable U.S. agriculture. In my opinion, we are in jeopardy of losing the advantage we have had in developing and adopting advances in technology improvements. Technological improvements have been a key part of the success of agriculture. While private and checkoff-funded research is important and has increased in some areas, the need for continuing and increasing public research cannot be understated. We should increase public funding for agricultural research. Land grant university research and USDA's competitive grants program should be increased. New alternative uses research for all crops should be encouraged. We need to use our crops in other ways other than traditional uses.
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While I like the flexibility in the current farm bill, a personal example of the negative effect of flexibility can be cited with the rapid influx of program crop contract acres into sugar production. This in large part has led to surplus sugar production that has caused domestic sugar prices to decline by roughly 20 to 25 percent in the past year. On my other crops, I collect an LDP and sell the crop when the prices are trading below the loan rate, as sugar currently is. However, since sugar does not have a marketing loan, a downside risk protection mechanism is a non-recourse loan that is only available if we import a minimum of 1.5 million tons. This places sugar producers at a disadvantage when prices trade below the loan rate, because it requires producers to pay 1-cent forfeiture penalty and forfeit their sugar to the government, to receive the loan value for the crop. This is the only means of establishing a price floor for sugar and seems to me to be an inequitable arrangement for traditional sugar producers.
If the committee would entertain my thoughts, I would suggest a few changes:
First, remove the 1.5 million trigger to maintain a non-recourse loan. None of the other commodities I produce has to qualify to receive a non-recourse loan.
Second, remove the 1-cent per pound forfeiture penalty. If prices are so low that you have to forfeit the crop, the last thing you need to do is pay a penalty reducing your income even further.
I would prefer a system where the differential between the market price and the loan price is paid to the producer, similar to an LDP, so that we receive the downside protection and can sell into the market and not forfeit the crop to the Government.
The assistance provided the last 2 years has enabled a lot of producers in my area to continue to stay in business. However, it is nearly impossible to make any production loan cash flow without some assumptions of the assistance that will be provided this year. As I stated earlier, all commodities I produce are experiencing very low prices. The assistance provided to oilseeds last year was helpful. This year, that type of program may need to be increased and expanded to other non-AMTA commodities such as sugar. It is extremely difficult for many to obtain credit under this uncertainty. That is why an ongoing program needs to be added or current benefits need to be increased as soon as possible.
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Again, thank you for holding these hearings and allowing me the opportunity to testify. I will be happy to respond to any questions that you have. Thank you.
[The prepared statement of Mr. Lemoine appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you very much. Mr. Lyons.
STATEMENT OF DANIEL LYONS, GRAIN AND LIVESTOCK FARMER, CHURCH POINT, LA
Mr. LYONS. Good afternoon, Mr. Chairman and committee members, I am Daniel Lyons from Church Point, LA, from the heart of Cajun country and crawfish country. I grew up on a dairy farm and my total income is derived from my family farm that my wife and I have operated for the last 31 years. Our operation consists of grains, hay, dairy and quarter horses and beef cattle. I appreciate the opportunity to provide my views on farm policy, which affects the livelihood of farmers as well as the consumer, here today.
What we are really here to talk about is guaranteeing the consumer of America a safe and abundant food source for years to come and what that cost will be. We, as farmers in the United States are producing against other countries, not farmers. We must not use food as a tool for foreign policy. When we do, farmers must be justly compensated.
The 1996 farm bill promised us improved trade and regulatory reform. I feel that there has not been enough given to combat unfair trade practices. We have not lifted trade sanctions against certain countries which deny export markets for U.S. crops and livestock. I support granting permanent trade relations with China. I also support the use of carousel retaliation in enforcing trade agreements. Being in a global economy, we need to make sure that all commodities are on an equal playing field and that agriculture does not become a sacrificial lamb for other entities or special interest groups.
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Until trade barriers are removed and fair trade achieved, an increase in price supports through higher loan rates is needed. We need loan rates that reflect cost of production more closely so that when we go to the bank to make a loan, we can cash flow.
I also support additional funding for USDA export assistance programs as well as domestic programs to assist the movement of all the commodities. While I support the flexibility of the current formula, I am not interested in going back to the old set-aside program, because in today's global market, other countries would just increase their production.
Fairness of AMTA payment distribution must also be addressed. I farm 900 acres of corn, wheat and soybeans and only have 232.6 acres qualified for AMTA payments. Our ability to add program acres and yields to some of our crops was frozen in the 1985 farm bill. Program acres and yields need to be adjusted to today's planning acres and production capabilities. Agriculture production has come a long way since 1985, so if we are to use AMTA payments to help farmers survive, we must bring this up to date to get maximum benefits to farmers from this program.
My next issue deals with the safety net or crop insurance program. That can be used across the board for all commodities and has the farmer's best interest in mind. This can be achieved with a crop insurance program based on cost of production, with strong emphasis on oversight and compliance. This type of program would be adaptable to all commodities and take into effect regional differences within commodities. Insurance programs need to be optional and on an individual basis. Farmers need to get the money and not the delivery system.
The Livestock Assistance Program and programs for non-program crops need to be brought up to date so it more closely reflects today's production levels and be fully funded. The EQIP Program, which helps to protect our natural resources of this country, need to be fully funded.
In another issue, we have 25 States that have asked for dairy compacts to assure a fresh supply of milk to their consumers in their States. We need to allow them to do this.
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We also need to label meat as to country of origin as everything else is labeled. Just look on what you are wearing today.
Our FSA and NRCS offices need to be kept separate and funded at a level so that services that they provide to farmers can be met on a timely basis. NRCS, which is a science-based USDA program, put in place years ago to protect the land of this country, needs to be the source that we use to do our environmental and our EPA programs.
I support full funding for agriculture research with emphasis on value-added products, development of new varieties and best management practices. Agriculture provides us with renewable resources and agriculture research is the key to developing new products from the renewable resources. Best management practices developed to protect our environment must be based on sound science and be cost effective.
The death tax must be eliminated. My son having to buy this farm that I am buying now from the Government is ridiculous.
In closing, thank you for the opportunity of allowing me to state my concerns and as I said before, what we are doing here today is trying to decide what the American consumer is willing to pay the person producing the food for this country, to make sure that they have a safe and abundant food supply produced here in the United States.
Just a footnote, the farmers need a cost of living increase.
[The prepared statement of Mr. Lyons appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Lyons.
Mr. Stenholm.
Mr. STENHOLM. I will ask each of you the same question I asked the previous panel. Do you support permanent normal trade relations with China? If yes, say yes; if no, then give a qualification.
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Mr. ANDERSON. Yes.
Mr. DOWDLE. Not now unless all trade policies are equal on both sides.
Mr. STENHOLM. I beg your pardon?
Mr. DOWDLE. I said I would not support that now unless we are free to sell anything we want to with no tariffs or anything else.
Mr. STENHOLM. I guess my question of you then would be if—since this agreement that China has agreed to reduces dramatically the amount of tariffs and the advantages that they currently have over us, opens up their market, why would you not be in favor of taking an incremental step towards the policy that you would like to see?
Mr. DOWDLE. I am not sure that that does that. Only this week has part of that pact that you are speaking of I believe been released. There was some, not the treaty, but some agreement that the Clinton administration reached that they refused to release to the public or even to the Congress and I think that some Congressmen did ask that that be done and it may have been done. I kind of agree with Congressman Bryant, when you have got a country that has got missiles pointing at you now, if that be the case, I am not so sure how much we should be friendly with those people. The only reason any farmer in the country wants to sell grain or anything else to China is because it is not profitable to them to sell it in the United States now. If we were to change farm policy where a farmer made enough selling for consumption in the United States, he would not care whether it went to China or not. The only people that would want it sold in China then would be the people that profit by it being transported to China.
Mr. STENHOLM. For everyone's information, let me read five things that are rather key to United States agriculture in this agreement. China agrees to eliminate all export subsidies, improve market access significantly by cutting tariffs, establishing a tariff-rate quota for imports of bulk commodities, provides the right to import and distribute products without going through state trading enterprises, eliminate sanitary and phyto-sanitary barriers not based on sound science, and cap and reduce trade distorting domestic support, something that you have said you would like to see done.
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I do not want to debate it right now, you answered my question and I thank you for your opinion and I respect it.
Mr. GRAVOIS. Yes, I am for lifting the sanctions.
Mr. LEMOINE. Yes, I think it is an excellent deal for agriculture.
Mr. LYONS. Yes.
Mr. STENHOLM. Regarding sugar and your testimony, and I happen to agree with all of your points, it is also important that all of agriculture understand why sugar is different. If it were not for the European Union continuing to produce sugar and then dump it in the world market, we would not have many of these debates that we have. It is the trade distorting actions of other countries that cause us to have to try to meet that and that is why we continue to attempt to have a sugar program. And the points you raise are very valid. I have no quarrel with that except to acknowledge the difficulty we have.
There is no such thing as a free world market—has not been, is not today and probably will not be. And that is why I happen to agree that establishing—really what this China deal is all about is going to give American producers of everything the same advantage that our competitors have into China. We can choose not to take it, that is our choice, but I fail to see how that is going to advantage anyone and us to just say well because we do not like what you are doing, it is not being done perfectly, we are not going to take it but we will let the Canadians, the Australians, the Europeans, the Mexicans and everybody else participate in that market.
And so therefore I ask those that perhaps have a different opinion today to take another good close look at it down the line.
The CHAIRMAN. Mr. Jenkins, Mr. John and Mr. Pickering are going to have to leave fairly quickly for some planes and with the indulgence of our members, I might go to them first to see about any questions or comments. Mr. Jenkins.
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Mr. JENKINS. Mr. Chairman, I do not have any questions of this panel, thank you.
The CHAIRMAN. Mr. John.
Mr. JOHN. Just a very quick question I guess. Several of you on the panel talked a little bit about the dairy part of farm policy, and especially Mr. Lyons talked about—and in his own words he said we need to be brought up to date. Expand on that a little bit, Mr. Lyons, if you do not mind, and maybe Ronnie and Mr. Dowdle can also. What do you mean by up to date with the Livestock Assistance Program?
Mr. LYONS. Livestock Assistance Program, when we put the help out for the farmers and we went to the office to qualify last year for payments, under the NAP which covers—on livestock, it covers our hay that we make in our pastures. And the yields that have been established at the FSA office are 30 years old. If I produce more than 15 square bales of hay on a 60-acre farm that I was making hay on, I was out of the program. We have come a long way, we cut forage off of our land in Louisiana now four times a year, not once a year like we did 20 years ago. So none of our farmers were able to qualify under the NAP program. But everybody in the country that read the newspaper thought that cattlemen were getting some help.
Under the LAP last year, there was not enough money put into this program. If you are going to put a program in the farm bill, put enough money in it to cover the program. We had $200 million I believe it was that was put in the program last year and we ended up needing almost $900 million. So our producers this year, we had another disaster, we had a period of time that we could qualify. We got very few producers that came in to sign up because last year they got so discouraged, they did not get any money and they had a lot of paperwork to fill out.
Under EQIP, we had the old ACP Program for conservation. We used to have in our parish, we would get $60,000 to $100,000 in that program for our farmers to participate. In the last farm bill, we put EQIP in it, our parish receives now $20,000 to $30,000. So the program was cut in half to the producers. What did we do for the conservation of our soil? We took it away from the farmers, that is what I mean. I can go into more detail, but that is just——
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Mr. JOHN. No, that is fine. The only other thing that I would like to bring up, we have talked a lot about trade, and I apologize to the panel and especially to the next panel, but we have some plane reservations that we did not think we would be around quite as long for, but as far as trade policies, I am a strong opponent of unilateral sanctions. I think that they do not work and I really would implore the next panel when we get to talking about some of the rice problems which is very close to my heart, what has happened in the country of Iran, Iran used to be the largest importer of American rice, hundreds of thousands of pounds of it. That is no longer the case, we are starting to move in the right direction, but we frankly lost that base. Unilateral sanctions do not work and we are going to continue to work—and that is the message I have heard through every one of the panels, that we really ought to not use food as a weapon to try to change a policy.
So thank you very much.
The CHAIRMAN. Mr. Pickering.
Mr. PICKERING. Thank you, Mr. Chairman, let me just have a quick question for those who are in the livestock operation. Not only improving the Livestock Assistance Program and getting more funding in that program to meet the needs, what are some other things that can be done that would help our ranchers as we go forward? There are a number of issues being raised now about concentration. We did I believe in the past year address some of the reporting requirements that would hopefully bring greater transparency to this area. Are there any other recommendations that you all would give to address overall livestock cattle and any of the issues related to possible concentration?
Mr. ANDERSON. I will take a stab at it and then pass it on to the other members of the committee. There are several things I think that would help us in agriculture. With reporting of prices, the small number of packers that control the market, to the extent that there are only two or three that really determine what the prices are, it gives us some concern as producers as to whether those are really legitimate prices or something that is set by a small group of people that are involved in that area.
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Another area that gives us some concern in Louisiana is dealing with environmental issues and concentration and some of the things that we are looking at from the standpoint of confined animal feeding but from grazing and pasture problems that we are having, is some of the regulations that are being forced upon us by EPA. We have had a great working relationship in Louisiana between our DEQ, our land grant university, different farm organizations in the State to work out best management practices that would let us voluntarily try to reach goals of TDMs and different things as far as any discharges that might be there and any other problems that we might have. And if we keep those voluntary and keep them controlled by the States, I think that would do a lot to help relieve some of the burden of cost on animal production in our State.
Mr. DOWDLE. There is strong feeling I think among producers that sell livestock to the four packers that there is not really true competition and that through mergers, consolidations, that in fact competition is just not there any more. And different anti-trust laws, Packers and Stockyards law, they say that if you reduce competition, it does not matter if you intend to, but if the effect of mergers reduces competition, that is wrong. Part of it, I think, there is nobody—the USDA does not have enough manpower I think to really fight the large companies that are doing this. I read somewhere that they only have four lawyers in one division that would be employed and working on this, where one specific packing company might have as many as 900 lawyers—that is something I read.
But I think the laws that are on the books need to be enforced and looked at and not just ignored.
Mr. LYONS. GLCI. We have a program where we are putting money into GLCI, that is conservation of our lands, that helps out cattlemen put a farm plan together to protect the land and maintain and stay on the farm. We have to fully fund that program. We have been fighting for the last few years to get funding for that program. You need to fund the program so that the department of USDA, which I already named, NRCS, which is already there, that goes through their department. Do not create a new entity when we already have one to help us. In GLCI, we have written rules, there are producers on that national board to make sure that that money is spent right. That is one thing you need to do.
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The Extension Service, you need to fully fund the Extension Services in the different States because they are our hands-on. If I need some help in the cattle industry, I call them, they are right there in my parish, I can get some help. So we have to help those people.
When we talk about rules and regulations and we talk about market discovery, through rules and regulations, we have put market discovery out of business in the livestock industry. That is all our small, family-owned slaughter houses. We have taken that market discovery away from them through regulations. Please do not put any more, relax the ones you have now. I have a small slaughter house in my area that is trying to get back into business. It was sold and then it was closed and then somebody else is trying to reopen it. If it would have never been closed, he would probably have it reopened now, but since it stayed closed just for a few days, there is a lot more money that has to be spent for him to reopen it. Do not put the ones we have left out of business.
The CHAIRMAN. Are there other members who have questions? Mr. Riley.
Mr. RILEY. Your note here on USDA grading, you make a very compelling case. To be perfectly honest with you, I did not realize that was going on. I look forward to finding out what happens in the meeting that you have requested on April 7. If you do not get a satisfactory resolution to that, I think I would like to talk to our Chairman about holding a hearing for it, because I think your point is well made. The USDA stamp represents something that I think is being used to foster an illusion that is not there. I was under the impression that the only way you got that stamp is if USDA had an inspector in a plant. And if that is not going on, then I think you are right, they may need to put a stamp on it, but I do not think they need to put the same stamp that we are using for American products.
Mr. DOWDLE. We would appreciate any help you can offer.
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Mr. RILEY. We sure will. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Simpson.
Mr. SIMPSON. Mr. Chairman, let me follow up on that for just a minute. Do cattlemen here—in Idaho, which is, as you know, against the Canadian border, country of origin labeling has become quite an issue. Is country of origin labeling something that you support here, the cattle industry here in this area?
Mr. ANDERSON. We do.
Mr. DOWDLE. Yes, sir, we do.
Mr. LYONS. Yes, definitely.
Mr. SIMPSON. Does it need to be government mandated or can the industry and the packers and the retailers get together and voluntarily create a country of origin label? Most labels that you see on products are not government mandated labels, they are put there voluntarily.
Mr. ANDERSON. I think a good comment was made about the voluntary aspect and the value of having U.S. on there, would work as far as from here, but I do not know if you would get the other countries to voluntarily stamp that it came from Argentina or Brazil or wherever it might come from. So it would probably have to be government mandated that it was done.
Mr. DOWDLE. The retailers and packers are working too much together now. The retailer makes $600 on a carcass based on the length of time they have it two days, their profit is $600 on one beef carcass. I sold that beef carcass for maybe $680 and owned the cow, investment for the cow, the calf that was born, kept it on my property for 15 to 16 months, paid to have it fed in a feedlot. I have ownership, a year and a half and my net income is just barely a little bit more than the retailer made for 2 days. So I would be in favor of mandatory, government required country of origin labeling.
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Mr. LYONS. We passed a law in Louisiana to label beef some years ago and one retailer took us to court and took it out.
Mr. SIMPSON. I know Idaho has a State law that requires it also.
Mr. LYONS. Right. Now we have passed it again through our State legislature, but it has to be through the government because you are the regulatory agency that oversees USDA that this is done. So you have to mandate it.
Mr. SIMPSON. Let me suggest to you, as I have to cattle associations in Washington and Idaho and other places, the best commercials on TV that I have ever seen are put on by the beef industry. You have to create a market out there, when the housewife starts going into the supermarket and asking where that beef was produced, then they will start voluntarily labeling that this is U.S. beef. And I think with the commercials that you guys run, that if you said ''Do you know where your beef is coming from?'' in your commercials that you do on TV, that you would create the market and when the housewife that goes out and buys that beef, that is who is going to demand that it be done more than anything else and quicker than anything else.
Mr. LYONS. If we put commercials on TV saying ''Do you know where your beef comes from?'' I guarantee you there is a foreign country that will sue the U.S. beef industry and the checkoff program for doing that. Because right now our commercials, we have to very fine tune. I am on the Beef Board, we have to watch very carefully what we say in there, not to get sued. That is a problem, we have tried that.
In Louisiana, when the people from Louisiana ask me does that beef come from Louisiana? I cannot tell them, I cannot guarantee it to them because it went out of the State to be processed and grown and then it comes back to Louisiana. On some of it, I can tell them it possibly did but I can guarantee it came from the United States on the hanging carcass, but on your ground meat, I cannot because on the ground meat, it is 80 percent foreign beef, 20 percent American beef, if I remember right, or was told right. And it is labeled American beef.
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Then when we have an e. coli outbreak, who is blamed? The American cattleman, and the stuff came from overseas.
Mr. SIMPSON. One more question on the sugar. Do you support opening trade relations with Cuba also?
Mr. LYONS. Yes, the cattle industry does.
Mr. LEMOINE. If you do open trade with Cuba, I think that Cuba should come under the same regulations that everybody else has to come under. I am fearful that if we start trading with Cuba, that we will give them special preferential treatment and the American farmer will be the one that will be the loser in the whole deal. So I think that we should make sure that if we decide to trade with Cuba in the sugar, we make sure that they have to come under the same rules as everybody else, and their sugar has to participate in the same structures that everyone else does.
Mr. SIMPSON. Maintain the same tariff rate quotas and stuff and the quota on the amount of sugar that can come in.
Mr. LEMOINE. Right, same import quota.
Mr. SIMPSON. Okay, thank you.
The CHAIRMAN. Mr. Berry.
Mr. BERRY. I would just say that I think you have all done an outstanding job and made your points particularly well, especially the fact that we do not need to reinvent the wheel every year, Mr. Lyons. And if we are going to have a program, let us put enough money in it to make it a viable program, not just try to make you think we had a program to try to look good on the political end. You did a good job.
Mr. LYONS. Thank you.
The CHAIRMAN. I think Mr. Stenholm had another question.
Mr. STENHOLM. Mr. Dowdle, I appreciate your testimony concerning the discriminatory pricing of the chemicals where foreign farmers and competitors can buy—and you used the example of Roundup Ready soybean seed for $20 to $23 in the United States and $12 to $15 in Argentina. This is something that has been overlooked. We have been talking a lot in the Congress about pharmaceutical costs and advantages of going to Canada and Mexico. The same is happening regarding the cost to purchase inputs and that is something that we need to be mindful of as we continue this discussion.
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Many of you in your testimony call for increases in research and development. We hear a lot about value-added. This committee has got our work cut out for us next week because other committees, namely the Appropriations and Budget Committees have within the last several hours cut out $120 million from agricultural research and development funds and used them for other purposes, because of a difference of opinion regarding the philosophy of the use of those. That is $120 million that would have been available.
And also talking about perhaps using sugar for alternative energy, for gasohol, et cetera, I happen to be supportive of research and development of creating additional alternative energy sources. It just makes sense, particularly when we are seeing what we are now seeing in the area of gasoline and diesel prices. But the Budget Committee just cut, as I understand it, all of the research and development funds for alternative energy because apparently that committee believes that that is a waste of taxpayer dollars to provide research and development. And that is something that this committee needs to be looking at and we appreciate you calling our attention to it.
Mr. LYONS. Could I talk about that?
Mr. STENHOLM. Sure, Mr. Lyons.
Mr. LYONS. Senator Grassley I think just introduced a bill or put out, I found on my DTN machine, where if we would be using ethanol in gas, that that would save some $3 per barrel to the oil industry and end up saving the American consumer $20 billion a year. Now if that is not reason enough to put agricultural research back in, I do not know where they are.
And when you talk about Brazilian soybeans, in Brazil, I have got a better figure. I have got a friend of mine that came back from there, it is $8 a bag compared to $26 here. It is $11 a gallon for Roundup compared to $32 here for Roundup. And you can replant—you can keep your own seed and replant in Brazil. And what is going to happen there, folks, is we have GMOs, people raising hell on GMOs, OK? The companies are going to force GMOs on people doing that. They are going to force them to plant it, they are going to force us to plant it and then we are going to have it on the market and then we are going to be told in the United States not to plant GMOs. Our input costs will be that much higher and then we will not be able to compete on the world market.
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So we have to have some common sense here and understand what is happening throughout the world when it comes to our cost of production.
Mr. STENHOLM. Mr. Lemoine.
Mr. LEMOINE. A couple of examples I can think of on research. It is much better for you to put the research in the front instead of having to pay on the end and that is what we are doing now. Because our research dollars have fallen in the last year, you can track it, you can see our advantages between us and foreign countries and the gap is closing up. And what we are having to do now, we are coming to Congress and asking for additional help to close that gap. You have to spend your money on research if you want to get the trades out on the end.
Another example, I have been familiar with some biodiesel research. Congress mandates that by year 2007 sulphur has to be reduced out of our regular diesel. And once they do that, the levels that they are going to have it are going to be so low that they are going to have to add a lubricity agent back into diesel in order for it to be a satisfactory fuel. One of the diesel injection pump manufacturers wants to use that lubricity agent to be biodiesel. If they do that at a 1 to 2 percent blend rate, it will take care of a lot of the excess vegetable oil, if not the entire vegetable oil used in the United States. That is another example of research working for us and being of benefit not only to the American farmers but the entire U.S. population.
Mr. STENHOLM. I could not agree more with that and would just observe that Secretary Glickman will be recommending to this committee I believe very soon, the need of additional resources in the area of inspection of imported food and product. We are basically still doing the same—well, many fold additional inspection needs with the same resources we had 5, 6, 7, 8 years ago. And this committee is going to have to address that in the area of budget.
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Let me end with some good news. Today's Washington Post headlines on I forget what page, but ''Tougher Inspection of Food is Bearing Fruits,'' Centers for Disease Control says. It has been like pulling teeth to get our meat and poultry inspection system to enter the 21st century. Folks have wanted to do it like we have been—we know through science and development that we could have a better system, it is called the Hasip system, it has been implemented over the objections of a lot of folks, but it is working.
And we also had some good news this week, of the 12 billion meals served by our school lunchroom program, the number of food-borne illnesses amounted to 0.000014. Now that again is a good sign. So we do have a safe food system, we can make it safer and that is what we want to do, but we are not doing a bad job right now.
Thank you.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you.
A couple of observations and perhaps just an opportunity for me to understand your kind of agriculture here. We used to raise sugar beets in Kansas, used to process sugar beets in Kansas. We do not do that any more, cannot do it financially. One of the things in listening and reading the testimony is about the use of sugar in ethanol. And I would just be interested in knowing about the relationship between raising of sugar and its use in ethanol, how common is that, what percent—is that the way it works today and what percentage—we turn corn into ethanol but I do not know a lot about sugar being turned into ethanol.
Mr. GRAVOIS. I do not have enough expertise in it to give you the details about it, but it is very similar to the sugar content in corn.
Mr. MORAN. Is it a common occurrence for the sugar crop to be used to produce ethanol?
Mr. GRAVOIS. It is not common, but it has all the chemical analysis that could be readily changed to ethanol.
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Mr. MORAN. One of the concerns we have in our part of the country is transportation cost, our ability to get our crops to market. We see mergers of railroads and we see proposed mergers of railroads. I assume you all have barges that we do not have on the plains of Kansas, but I am interested in knowing what the state of your transportation industry is in regard to trucks and barges and railroads and what kind of investment you think we need to be making in that infrastructure. And a comment perhaps by Mr. Lyons about our ability to compete with other countries that caused me to think of this. Are we doing the things in this part of the country to be able to transport our agriculture commodities to market and compete with foreign suppliers of similar commodities?
Mr. LYONS. Well, when you talk about railroads, the railroads were put into this country to move grain and move agriculture products. And what is happening to them today? They are all being torn down, so we have lost that. So it all has to be by trucks. And the biggest problem in Louisiana is the weight limits and the highway system being able to maintain these weights that we have to put on them. So that is a cost that goes into production, so we have to put that in our production cost, and we will not be able to over-weight these trucks and break the highways, to be able to continue getting Federal funds. It is a problem in Louisiana, it is a little bit different from yours because we move it all by trucks. But we have had problems where we could not get enough barges. So it is something that has to be addressed, but the answer I cannot give it to you today.
Mr. MORAN. Mr. Lemoine.
Mr. LEMOINE. In Louisiana, we do not have that big a problem, but I am familiar with what you say because we have had the problem in soybeans where we had to import soybean mean because of the freight differential of carrying it to North Carolina, South Carolina, that area, there was not enough soybeans produced in that area to take care of the feed usage in that area. So the freight, taking it by train from the Midwest over to that area was more expensive than importing soybeans into that area. So it is a very difficult concern and I hope that you all can address that because it is very important to agriculture in the United States.
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Mr. MORAN. In Kansas, this is the first year that more of our wheat harvest has been transported by truck than by train, it is a trend and it has a tremendous impact upon the demands upon our highway system.
And the final thing I would say and it is somewhat in response to Mr. Lyons, and then Mr. Stenholm talked about HACCP working and yet I heard Mr. Lyons talk about no more regulations, the increased cost. One of the things that seems to me to be occurring as we worry about the concentration in the packing industry is that we have created less competition because we have put out of business many of our smallest meat processing plants, what we call locker plants. They do not exist any more in most of my communities, in an attempt to try to comply with HACCP and its rules and regulations, and particularly the smallest, less than 10 employees, has become so expensive and it seems to me that there are two forces at work here. One, food safety—and these rules and regulations were developed not by Congress, but by the Department of Agriculture, but you are moving in the direction of food safety and in doing those rules and regulations, as they impact the smallest ones, we reduce the entities, the businesses that can compete with our largest packers. And so when we talk about having three or four packers, I think that is true and part of it is that my smallest ones have been unable to stay in business and comply with the current rules and regulations.
Mr. LYONS. I did not say do away with rules and regulations, I said you have to relax the rules and make sure that the rules and regulations are based on sound science and not some ridiculous—it slips my mind now one of these ridiculous things that they have done some of these people in our State. But when you close a packing plant for a week and going to reopen it and you just change ownership and you have to go through all kinds of different regulations, now that is ridiculous. That is the kinds of things I am talking about. Make it common sense approach because when we get it from the foreigners, that is not almost the way that it is being produced there.
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Mr. MORAN. Thank you very much. I am going to eat my turkey sandwich which surprises me somewhat that we are having turkey. If you come to Kansas, we will serve beef. Thank you. [Laughter.]
The CHAIRMAN. I want to thank the panel very much for your comments and for your contributions.
I would call now our third panel. Mr. Flavius Barker, a farmer from Columbia, TN; Mr. Jim Dupree, a soybean and rice producer from Newport, AR. Congressman John requested a swap in the presentation, Mr. Gary Sebree, rice and wheat producer from Stuttgart, AR; Mr. Ken Minton, a rice producer from Dexter, MO; and Mr. Paul Loewer, Jr., a rice producer from Branch.
Mr. Barker, we will begin with you, please.
STATEMENT OF FLAVIUS BARKER, FARMER, DUNLAP, TN
Mr. BARKER. Thank you. Mr. Chairman, members of the committee, I am Flavius Barker from Dunlap, TN. The family farm which we operate is located in the Sequatchie Valley and is an expansion of the family farm of my grandparents and parents before me. We have a diversified operation of dairy, livestock, corn, wheat, other feedstuffs and about 50 percent of our 900 acres is in timber. On behalf of the other members of my family and myself, I look forward to sharing with you today what I feel is critical for our future.
Before I go any further, I would like to thank this committee for coming here and letting our farmers participate in this and the Congressman awhile ago that made the statement that we have got to think out of the box, I think we as farmers have got to think out of the box and you as Congressmen have got to do that also, because we are not the same farmers we were even 5 years ago, much less 10 or 15 years ago, and we have got to do things different than we did.
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We want to provide our customers with the highest quality commodities. The consumers of our products are supplied a safe and abundant food supply. Our nation leads the world in the lowest percent of personal income spent for food. Low commodity prices and rising input costs have dictated that only the efficient farmers remain. However, as efficient as we may be, we are prohibited from reaching our potential.
I believe there is much progress to be made for this country in the name of agriculture. If America is to produce enough to feed itself and continue to export food and fiber, we must develop a system that provides the producer of agricultural products a fair return from the marketplace. Market demand for our products is a far better way to achieve profits in agriculture than from production controls embedded in farm policy. We are experiencing extremely tough times with regionally record low production from adverse growing conditions and economic adversity in part of the world where market demand should exist. Some of that is to be expected in a worldwide marketplace. The pressure is increasing daily for Congress to take the necessary steps to open world markets and prevent the loss of current markets. Trade sanctions cripple our market expansion.
Given the ability of U.S. agriculture to produce abundance and the current phase-out of Government price supports, export markets are more important to agriculture than ever before. We were promised during the last farm bill debate increased export expansion. Yet the opposite has occurred. Global food demand is expanding rapidly and more than 95 percent of the world's consumers live outside the U.S. borders. We depend on exports for over one-third of all our sales. Unilateral sanctions seal off needed export markets and brand us as unreliable suppliers. We must have sanction reform, we must develop a strong trade negotiating authority and adequately fund export credit and market development programs.
Until we are able to develop sound risk management programs, government must continue to assist producers with weather related disasters. During the 1999 record low prices for most farm commodities, Tennessee farmers also experienced catastrophic yield losses. The drought and price effect on Tennessee commodities will likely eliminate many efficient producers operating on thin margins. Corn values are down 41 percent in 1999 compare to the 5-year average; soybeans are down 56 percent, cotton is down 62 percent, wheat is down 17 percent and tobacco is down 34 percent. We have no choice but to request assistance from government for disaster relief. At the same time, we need to develop ways to avoid this position again. The development of a counter-cyclical payment structure is a possible solution.
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One major setback for producers is the increased production costs that occur outside the control of agriculture. For decades our production efficiency has allowed us to continue to deal with inflation of input items while receiving steady and lower prices for our commodities. But in today's marketplace, farmers suffer. The current high fuel cost is an example. Fuel cost increases from one year ago for our west Tennessee row crop farmers has risen 65 percent. Rising fuel costs affect farmers in many ways. The most obvious is the extra cash spent for diesel fuel, but high fuel prices drive up costs for delivery of other inputs like fertilizer, and ultimately reduce crop prices as bids are lowered to accommodate transportation costs. It also will drive up the cost of many of our inputs such as fertilizer, feed, crop protection tools and so forth.
Other inputs costs are driven as a result of continually increasing government regulations. Again, we were promised regulation reform in the last farm bill debate, but that has not been delivered. Each year, America's farmers and ranchers must spend $20 billion to comply with Federal regulations. There are numerous related costs to many Federal regulations. When Federal, State and local money is spent on regulating low level risks, the money is unavailable for more pressing needs. Regulatory compliance costs are estimated to be equivalent to 44 percent of the size of all Federal spending in 1998. Congress needs to lay down specific guidelines and restraints on the agencies that have the power to adopt rules and regulations and ultimately administer laws. The Environmental Protection Agency must not be allowed to operate unbridled. And all of the other regulatory agencies must be reined in if we are going to save the family farm.
All of us, and I have done this before when we make talks, we talk about trying to save the family farm, but a lot of us begin to think that it is time that we have some action besides just talk. We have got to do some things to save it and I think that is what we are here for today.
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The Congressional Budget Office should produce an annual cost/benefit analysis of regulations on the private sector and all proposed regulations should be measured accordingly. Regulations should be understandable and easy to comply with.
And I want to tell you a story here that is not in my prepared statement, but my brother and I started farming together when we were little boys. We formed a partnership while we were in high school and we were able to survive many adversities such as drought in the early 1950's and we put in an irrigation system at that time and in the late 1970's and early 1980's, we had another drought and we put in an expanded irrigation system at that time. And we pump water out of the river for those irrigation systems. We talked a few weeks ago, if we were starting a farming operation today as we did back in the 1940's, and that is when I am talking about, would we be willing to put up with all the hoops and the regulations that we would have to go through to start a farming operation, and we both determined that we would not be willing to do that today.
I applaud your accomplishments as an Agriculture Committee and your many considerations given to farmers. I encourage you to work toward a satisfactory resolve of the issues I have mentioned. I am willing to assist your efforts toward that goal.
Thank you for your attention and the opportunity to share my thoughts. And we really appreciate you all doing this.
[The prepared statement of Mr. Barker appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. Dupree.
STATEMENT OF JIM DUPREE, SOYBEAN AND RICE PRODUCER, NEWPORT, AR
Mr. DUPREE. Mr. Chairman, I appreciate the invitation here. I will be speaking from notes, although I had a prepared presentation that I hope was furnished you. I am going to try a daunting task. I am going to cover a comprehensive farm bill proposal for your examination and to try to do something like that in 5 minutes is quite a thing, but I will try to honor the lights for sure.
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I am a farmer of 47 years. I live in a little place called Weldon, AR. I have farmed all the major crops, one time ran an extensive cattle herd and even tried cattle feeding in Mr. Moran's district in Kansas until they cured me of trying to get rich doing that.
But I am also a Presidential appointee, one of three Presidential appointees on the Commission on 21st Century Agriculture and we have just done a series of hearings across the country such as you are doing now and finding out many of the same things.
I am going to take very seriously in the call for responders at these meetings to not spend a lot of time talking about our problems because I think you already know those and I would like to really get to the solution aspect of things.
In 1978, I spent a year in Washington as staff aide to Senator Kaneaster Hodges who was a member of the Senate Agriculture Committee and really worked for he and Senator Bumpers. Senator Bumpers was Chairman of Senate Appropriations. And I did a farm bill effort up there, a hearing book was published on the thing. The Chairman of the Agriculture Committee at that time was from Georgia and he was not about to let a freshman Senator from Arkansas put a farm bill through up there, and it languished but its basic concept was what we called a long-term commodity credit loan.
And while it might have worked in the 1970's when we were truly residual supplier for the world, as condition change, why it became less and less a real option for things. It had a fatal flaw also that we ought to have learned back in the 1950's and 1960's when we used so extensively the CCC loan in that it is inflexible and it is possible to get your prices up so high that you cannot clear the markets and then you start piling up surpluses and then you have a problem trying to get rid of those. I could not overcome that flaw.
In 1984, I was asked by the Democratic Policy Committee of the Senate to try to craft something for them to present getting ready for the 1985 farm bill. And I admitted to them that I really had no solutions because my idea in 1978 simply had that fatal flaw and I could not overcome it.
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One day before that meeting came about of that group, I picked up the Commercial Appeal here in Memphis, and there was a small wire story in that publication and it was about a speech that a Dr. Wayne Boutwell, who was agricultural aide for Senator Cochran for several years, made in Washington where he described a thing he called a market loan, a loan that could be taken out at one level and paid back at a lesser level if world prices dictated, or if they did not, why then of course it paid back at the original figure.
When I saw that thing, I thought that thing had amazing possibilities. So I enlisted the aid of two agriculture economists in Washington who formerly came out of the ERS, worked for Dr. John Lee up there—Dr. J.B. Penn, who is an Arkansan and owed me a favor, and Dr. Bill Moates. They are still in Washington. And asked them to help me take that concept and craft it into a workable farm bill, at least consideration for it. In other words explain the thing and also do some sort of rough costing because I realized full well that anybody that gets any serious consideration before the Congress has to have done some preliminary work as far as costs are concerned.
Well, I sent that thing up there and of course it became part of the 1984 farm bill. And just for cotton and rice, I think the rest of the commodities did not understand it and it came about in a strange way—I will tell you a story about that one time, it actually happened in the parking lot one night about 12:00. But at least it became part of the farm bill in 1985 for rice and cotton, was then once again incorporated into the farm bill of 1990 and of course in 1995 became one of the features of the so-called FAIR Act.
We contend that farmers really face only two major problems. All this other stuff gives us headaches and high blood pressure—EPA and FDA and embargoes and sanctions and all those sorts of things, and they are problems, but at the same time, the two main problems that farmers face, and they face it from California to Maine or from Texas to Minnesota, it does not make any difference—the two main problems they face are low farm prices and low production levels.
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My farmers tell me if you can help us solve those two things, we will handle the rest of it. We might be exasperated by it, but at least those things will not take us out, the first two problems will. So we tried to approach this thing as if some sort of rational approach to answer those two major problems for farmers might be the basis for some sort of farm bill legislation.
It is obvious that a farm bill should be counter-cyclical. The idea of a non-counter-cyclical bill is difficult for me to defend and rationalize, for the American people to understand and it is just not a good approach. A truly counter-cyclical bill, one that kicks in when farmers need it and kicks out when they do not need it, makes all the sense in the world. And of course, it can be crafted to be a truly safety net type approach. I am not talking about something that will make farmers rich because there is not enough money to do that. But at least it will keep them in business when we end these cycles that have low prices or low production because of weather adversity, and then when those conditions improve, then they kick back out and there is no actual Treasury outlay on those things.
I had a list of things that I thought—really I call these political decisions, they are really options that are in farm bills and have been for some time. I think sometimes they are kept in there just because nobody suggests changing it. But it is obvious that you can craft a bill that has the same flexibility that the present FAIR Act has and yet overcomes the other problems that we found, that it is not adequate when we have low prices or low production and it also, because it is a non-counter-cyclical bill, then there are times when we receive Treasury monies when really Treasury monies are not necessary. And that is just not a good idea.
But the idea of payment limits, I would take off. And I know the problems with it, but it is a political decision. I told John Podesta about 4 weeks ago in the White House, he suggested the same thing, he would have much more stringent payment limits than has even been suggested, but that that is a politician pander, and it is. There is no actual economic statistics that will support having payment limits. These are not welfare payments that I am suggesting, this is an agriculture policy bill. And it ought to apply to all farmers regardless of size, regardless of the commodity they raise and in any section of the country. The idea that these things ought to take care of need, and there is no absolute correlation between size of farms as based on acres worked or sales or where they are or the kinds of farms, that have anything to do with need. Therefore, the idea of payment limits came about years ago and it has been continued on and I realize the political necessity of having to consider it. But as far as rationalizing or justifying it, I cannot do it and I defy anybody or John Podesta or anybody else to come up with the reasons.
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It is absolutely not necessary that we have set-asides any more. I think that is an anathema, I do not think Washington—and you know this as well as I do—will stand for planting reductions to get prices up. We are just—in the short-term, it is productive; in the long-term, it is counter-productive and we pay for it. We are going to have to produce this stuff, move it and sell it.
Another thing that I would do in relation, if we put in a marketing loan and use it to scotch price—and that is really what it is—is make it work all the way across and not try to—it is going to have to be specifically targeted toward the crop that has need, but it automatically does that anyway.
I would also consider making this a full recourse loan. That is not really the right kind of legal terminology, but it is a loan in which the collateral for that loan could not be forfeited to fulfill that loan requirement. A farmer ought to sell this stuff, there is no reason for him not to, and turn the money in on the loan.
Another problem it gives the CCC real problems to try to handle these commodities. And you know, one of the things about the market loan, it can be enlarged to take care of beef cattle or the dairy industry or sugar or peanuts or any other commodities that we raise in the United States that the Congress in its wisdom decides needs this kind of protection. That is this wonderful flexibility. The market loan is truly a different animal than the old CCC loan and can be used in an entirely different way.
It is absolutely necessary that we have—and I just want to mention this very quickly—that we have some sort of safety net as far as production shortfalls are concerned. I have talked to insurance agents who think that if we set these policies that would restore a farmer to maybe 80 percent of his normal production, that that would then restore him somewhere back to being whole again. When you talk to professional insurance people about offering a policy that the returns for having a loss are greater than the loss itself, they call that a moral hazard. And I fear that if insurance is used in income assurance or that the benefits are greater from failing a crop than making it, you open yourselves up to tremendous risk. Farmers are like everybody else, if their backs are against the wall and they see that is the only avenue, they will do it. And what I mean by do it, they will fail a crop. It is too hard to make one of these crops, there are 101 ways to fail one. I think I know about all of them because I have made them. I can set that planter that much too low on judgment and not get a single seed up. And yet it is imperceptible what we did wrong, sometimes we cannot even tell ourselves.
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I am just saying it is an impossible thing to police failure and the moral hazard and the risk of fraud and abuse there is indeterminable. And I just think you are asking for real trouble if you try to do something like that.
I realize the problem of areas that have high risk in them and I think this will take care of it coupled with the market loan.
I have a set of values on the back sheet of my thing because that is the first thing farmers ask me, they cannot—they sometimes cannot imagine how these things will work but when they get to the bottom line, what kind of price are you talking about offering. These prices were put together for me—I was helped in this respect by the people at FAPRI that work with you. We took this, that if we took the money that we had been using for these farm programs, particularly the last 2 years, and had a marketing loan in place, raised all the commodities to the same level, what kind of price levels would we be able to offer farmers. And that is what it shook out on the back. I was surprised at how good they really were. On a counter-cyclical basis, I think you could even do better than that.
My point is that you can decide how much money you want to put in these farm programs and you can style a program that will answer that sort of thing. These are safety net prices, they will not make anybody rich, but they will keep farmers in business. I have asked farmers to evaluate those numbers and I have asked bankers to do the same thing, and they have all assured me that it is not great stakes but at least it will get us along. And that is the whole thing.
I can tell you the two limits of these prices that have to be met. They have to be high enough to let farmers cash flow or these things are of no use to them. You can get them too high and you will have a revolt from the taxpayers and such a drain on the Treasury that nobody can defend it. It has got to fit between those two levels. It depends on how much money you want to put in it. If you put it in in a counter-cyclical way, I think you will have enough money to support these programs. And how much more wholesome it would have been than maybe the way that it fell out with the AMTA payments and that sort of thing.
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I am going to break off there, I know I have overused my time, Mr. Chairman, and I apologize for that. And I can respond to questions when we complete.
[The prepared statement of Mr. Dupree appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Dupree. Mr. Sebree.
STATEMENT OF GARY SEBREE, RICE AND WHEAT PRODUCER, STUTTGART, AR
Mr. SEBREE. Yes, sir, Mr. Chairman, members of the committee, I thank you for allowing me to appear before you today. I am Gary Sebree, a rice, soybean and wheat producer from Stuttgart, AR. I am representing the USA Rice Federation.
I have been farming for 36 years and I am in the field every day of the working season, and I feel the pressure of low commodity prices and the increasing cost of production. With the prediction of a drought for the upcoming summer, and the tremendous increase in fuel cost, I see no reason to believe we will not need assistance in the form of additional AMTA payment this year, at least equal to last year's funding level. I would point out that most producers in the south must have the payment limits waived, as occurred last year to be eligible to receive these benefits.
A marketing loan program is a good program that has worked well and is a sound program to move grain when markets are depressed. Presently for rice, the loan rate is $6.50 per hundredweight and this is well below the cost of production. It makes no sense to set payment limits that force farmers to forfeit rice to Commodity Credit Corporation and we thank you for reauthorizing the use of commodity certificates. It was only by raising limits and the use of certificates that allowed the emergency AMTA payments to help many of the financially strapped farmers in the south that raise multiple crops.
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I also encourage you to use the AMTA payment if additional assistance is enacted. And the point being that the $475 million that was allocated to oilseeds this past year is still in the hands of the USDA while the AMTA payment was in the farmers' bank accounts 2 weeks after enactment. And I thank you for that and my banker is in the audience back there and he thanks you for that.
I would like to talk just a little bit about payment limits and targeting. There is a misconception that small farms should be helped more and that means the ''family farm.'' In rice growing areas of Arkansas, I would say that I am an average sized farm and I am a family farm. I bought out my dad, two uncles and a cousin and all of my neighbors are family farmers. Congressman Berry is a family farmer, he knows what we are talking about. I do not know of one corporate farm in Arkansas counties. There are corporations but they are all family-owned corporations.
A farmer that raises 450 acres of rice and 450 acres of soybeans is not eligible because of payment limits on LDP payments at the levels that we have today, and that is below the average size farm and does not consider that in many parts of Arkansas, Mississippi, Missouri and other southern States, that cotton is added to the crop rotation. Therefore, I would strongly encourage that limits and targeting be eliminated altogether.
On crop insurance, I would like to see reform that set premiums at more affordable levels and see the program expanded to provide revenue as well as yield insurance.
Also, we would like to explore possibilities that allow rice to be covered under drought conditions. At the present time, this is not possible. However, I believe that crop insurance should be in addition to and not a substitute for farm program payments.
In closing, I would like to make a few comments. You asked that we say what we like and what we do not like about the present bill. Here are some things that I like very much:
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Marketing loan
Planting flexibility
Freedom from Government acreage control
AMTA payments
Reduced tariff
Better market access
Removement of trade sanctions
Reduced Government regulations of EPA and others.
Here are some items that I do not like:
The fact that the last four items I have mentioned were never delivered. We still have limited market access, we still have excessive tariffs on rice in the EU is $400 per ton; in Japan it is $3,000 per ton. Do not tell me I cannot compete with these people if you take those tariffs off. We can give them a shot.
Trade sanctions are still in place in Cuba, Iran and Iraq and these were all the number one market for U.S. export rice when they were imposed.
Quite frankly, I am reluctant to tell you today what our No. 1 market is, for fear that we will lose it.
On regulations, we in fact have more regulation instead of less. And I could go on about that for a long time, but just leave it at that.
Mr. Chairman, in 36 years and many farm bills—and I have not farmed under all of them but I farmed under most of them—I can never recall when a farm bill was passed and only 80 percent of it enacted. And I truly believe had the above mentioned actions been delivered as promised, we would not be having this hearing today.
I do not pretend to have all the answers and I am a little embarrassed to tell you that after all of these years, I do not even know what all the questions are. I thank you for your time.
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The CHAIRMAN. Thank you very much. Mr. Loewer.
STATEMENT OF PAUL LOEWER, JR., RICE PRODUCER, BRANCH, LA
Mr. LOEWER. We appreciate the Agriculture Committee coming and hearing our comments and for the opportunity you afford us.
My name is Paul Loewer, I am a rice producer with my wife and my two brothers and their wives on a family farm of 3,500 acres in Acadia Parish in Louisiana, the home parish of our Congressman Chris John, who did have to leave and we are sorry about that.
Those two brothers are walking levees today, so I can be here talking to you. It is kind of indicative of the times that we live in that you need to be as skilled in front of a camera as you are behind a tractor steering wheel. Both are necessary at this time. Also, just to point out, my wife and I also own 500 acres of ground in Marion County, KS, Mr. Moran—to make you feel a little bit more at home.
Mr. MORAN. That is in my district.
Mr. LOEWER. We find in Louisiana that there are three resources necessary to farm in this global economy; Mother Nature, Father Time and Uncle Sam—a family business. Many things farmers are doing, they can do for themselves, but there are a lot of things that we cannot that only our Government can, and that is why we are here today.
Mr. Sebree mentioned that we probably harvested the largest crop that we have ever harvested in the last year and it probably begs the question why in the world do you stupid farmers keep doing that. There are six answers to that, but because of time, I am only going to give you one, because it is the most important.
When Freedom to Farm was passed, we were given assurances from our Government that if we accepted a declining, fixed payment, then the Government would begin to dismantle the barriers that have walled off our markets. I recommend, therefore, that the lifting of the unilateral sanctions give us back our markets in Iran, Iraq, Syria, 90 miles away is a customer that consumes 350,000 tons of rice and we cannot sell to them. Give us back Cuba. Remove the licensing restrictions that you have given us that are so cumbersome that it makes it almost impossible to use.
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Help us gain access to those markets that you do have open to us, but that are closed by other governments through tariffs in the EU and tariffs in Japan and in other countries that are closed to us through shallow, superficial excuses that keep our products out.
We need help in enforcing WTO standards. We need fast track.
We would like the export programs to be expanded. We want to commend you and thank you for the recent section 416 that was granted for additional purchases of rice for our Government for donations. We need increased P.L. 480 funding, we need increased use of credit programs, GSM, and additional market promotion programs that are so important to us as we compete with other countries around the world.
We also recommend that the LDP and under the marketing loans that this program be managed aggressively so that the adjusted world price for rice is increased so that our share of world trade would go back to 17 percent from 13 percent where it is today. Historically, we have been at 17 percent.
Mr. Chairman, farmers are an independent, industrious lot. We appreciate the freedom we have to farm for the market, but our hands are tied in dealing with markets closed to us by our own Government and other governments. We need help in dealing with these things we cannot control.
There is more to farming than placing the seed in the ground. Farming is also marketing the crop. Marketing is to selling what shopping is to buying. We are free to shop and buy, we are not free to market.
Freedom to farm should mean freedom to market. If we cannot get these markets open, we are not free to farm. We are not free to farm if we are not free to market.
I thank you for this opportunity to visit with you today and if you have some of these hearings at a later year, we invite you to come to Louisiana and we will feed everybody.
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[The prepared statement of Mr. Sebree and Mr. Loewer appears at the conclusion of the hearing.]
The CHAIRMAN. We will be there about 6:00 tonight. [Laughter.]
Mr. Minton.
STATEMENT OF KEN MINTON, RICE PRODUCER, DEXTER, MO
Mr. MINTON. Thank you, Chairman Combest, members of the committee. I would like to thank all the panel for their time, energy and enthusiasm that you have shown for agriculture by being here today.
I currently serve as secretary of the Missouri Rice Research and Merchandising Council, I am a charter board member and secretary of the U.S. Rice Producers Association. I am also a charter member of Cargill's Missouri producer board.
You know the worst thing about speaking toward the end of all these panel members is that everybody swiped your ideas and there is no tree to go behind when you really need one.
As each of you know, agriculture is in a very precarious position. I recently read in a local agriculture paper that Congress is considering doubling the current AMTA payment to farmers. Based on the current market conditions and outlook, I urge Congress to do that for the 2000 crop year. Market loss payments and other program improvements provided by Congress last year made the difference between a profit and loss for many farmers.
With regard to farm policy, I ask the committee to consider what would happen if the commodity loan rates were raised while keeping the loan deficiency payment in place, to ensure that the grain would be sold and not stockpiled.
There has been debate over revisioning set-aside acres in the next farm bill. I have mixed emotions in that area. My question is if increased set-aside decreases commodity levels, how do we stop our foreign competitors from filling the void?
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I am also concerned about the distinction between big business and the family farm. Payment limitations of $30,000 as has been suggested by some, will now allow the family farm to survive during these economic times. In our area, a full time farming family of four needs a gross income of close to $500,000 just to make ends meet. If they get a 5 percent return on this gross income for living expenses that leaves them with about $25,000. We cannot all be hobby farmers, someone must purchase the new assets.
We need to continue open export markets if producers are to survive. More than 40 percent of the U.S. crop must be exported each year if the industry is to remain profitable.
In Missouri, we have a producer export project that is nearing completion. A group of farmers decided to raise a new variety of rice in the United States and market it directly to the foreign importers. Each of us understanding that if our project failed, we would be responsible for our own losses.
Programs that help educate producers while at the same time helping importers cover the costs of working with new-to-the-game producers are a valuable resource. USDA's Foreign Agricultural Service has an ingenuous new program called a Quality Samples Program, which was a valuable asset in our making a new rice sale. We are very appreciative of the FAS and of the U.S. Rice Producers Association which helped us with the technical aspects of this new program. We are also very appreciative of Missouri's congressional representatives particularly Congresswoman Jo Ann Emerson, Senator John Ashcroft and Senator Kit Bond, who all endorsed our efforts.
Rice growers from Missouri and other States continue to encourage USDA to provide our export buyers with the rice form that best suits their needs. Despite these efforts, rice is the only remaining major farm commodity that our Government routinely fails to offer potential customers in its unprocessed form.
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For example, late last year, USDA broke its 45-year record of restricting access to the P.L. 480 program to rice processors and granted the Government of Jamaica's request to allow unprocessed rice to be sent to Jamaica under the program. Unfortunately, just last week, USDA reversed this policy and denied Jamaica's request for further shipments of rough rice.
I would ask the committee to urge USDA to conduct a thorough review of its export promotion, export development, export maintenance and food aid programs to determine how these programs can be better administered. Example, the Quality Samples Program.
Neither the Missouri Rice Council nor the U.S. Rice Producer Association favors crop insurance as being the only means of a safety net, and we wonder why the FSA would not be a more efficient administrator than private insurance companies.
More than anything, we would like to see Freedom to Farm work through freedom to market, as provided for in the 1996 farm bill. Unilateral sanctions have proven they will not work. Cuba has had sanctions for over 30 years, Castro is still in power, Cuba is still Communist and we have simply turned the market over to our competitors. We do not need to make this mistake with China.
Fertilizer and fuel costs have taken quantum leaps this year. If there ever has got to be a time to support funding of renewable alternative fuels, this has got to be it. This period of oil price hikes is a good time to remind all U.S. citizens, please let us not wait until we have a national—does that mean my time is over? [Laughter.]
The CHAIRMAN. No, there is a trap door that falls that lets you know when that happens. We lost that microphone somehow there.
Mr. MINTON. Okay. I will just talk a little louder. I did not know if it was an eject button or a trap door that was going to happen.
With the last round of oil price hikes, it is a good time to remind all U.S. citizens, please let us not wait until we have a genuine crisis to figure out we should have been funding ethanol projects.
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The Missouri Small Business Authority has made 50 percent tax credits available for new farmer-owned value-added business ventures if their State-funded feasibility shows potential. If these projects are deemed feasible, there may be a 50 percent tax credit available. Unfortunately, there will be many more projects than the State alone can afford to fund. I believe that there may be a bill presented to you by Congressman Jim Talent from Missouri to provide Federal incentives to promote value-added producer-owned businesses. Hopefully, Federal tax incentives and successful feasibility studies could help entice lenders and producers alike to feel comfortable in investing into these new ventures. I believe if we can obtain startup information and funds, industrious producers will take the lead in helping producers to help themselves.
The Lord did not promise to shield us from every problem, but he said he would help us through them. We pray for the strength and the courage to meet our problems head-on and to find solutions from the ideas of our own peers, our own ingenuity and our own resolve.
We thank you for seeing the need to help us with these issues, we are grateful for your time and concern.
[The prepared statement of Mr. Minton appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you very much. I want to just make some sort of general comments here. I thought about it earlier, one of the panelists said they did not have the answers, that that was our job. There were a few giggles around, but unfortunately that is the case. What prompted me to do this in September, announce that we were going to do these hearings, we had a panel of witnesses in talking about the current conditions in agriculture and one of the witnesses was representing a commodity group, and he read a policy statement and after he finished it, he said I just want you to know that that is the third policy statement that our group has come up with in the past year. And I said and you expect us to make long-term agriculture policy listening to you about what your recommendations are?
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And that is somewhat the difficulty because it is a balancing act. There are 51 members of the Agriculture Committee, unfortunately there are 435 Members of the House. I will not begin to start putting blame, there is plenty of blame to go around in different places of why it did not occur, but I think the members of this committee you would find as friend when it came to some of the promises that were made when the current farm program passed relative to regulation relief and relative to tax relief and relative to opening trade, opening our markets. And those have not occurred, it has not occurred not because we are not interested in it and supported it, it is because there are occasionally some other people that think they have a right to vote as well as we do.
But those are things that obviously do have an impact on the problem and on trying to come up with a solution. And I appreciate, Mr. Sebree, you mentioning the benefits. We have all heard the benefits of the close to $15 billion that has gone in in additional farm income in the last 2 years and I think there will be some more this year.
The challenge comes in how do you do that. There are a lot of different ideas about how different people want to do it, but the challenge that we were trying to meet in doing that was you have got to recognize we have got low markets in some areas. In some areas, you have got no production due to adverse weather conditions and so it does not matter what the price is to those people. And the third is trying to get it out in the fastest possible time. And that is why we have done the AMTA payments in the past, because it gets out, as you mentioned, very quickly. It does go to the producer, whether they have had a crop or not, so it does help in both instances where you have got low market conditions and you have got farmers that do not have any production and it does not matter what the market would be in their case.
And there are other suggestions and alternatives out there, and weighing those is, you know, how much do you give away in terms of time before you can deliver the assistance and all this sort of thing. So it is a balancing act and it is something we have heard a great deal about in terms of the fact that there are people farming today that would not be otherwise, and we have heard from a number of people like your banker that may be in the audience about how much they appreciate this as well.
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Coming down here this morning, I was looking through the testimony, we had all of this, and Mr. Dupree, I do not know what page for sure, on mine it says it is your page 9, it is the additional features of a marketing loan. Of the 51 members of the Agriculture Committee, there are only two of us, Mr. Stenholm and myself, who were there for the 1985 farm bill, and you are right, at that point in time, many of the grain crops did not care for marketing loan and did not want to go in that direction and cotton and rice did. Looking back, I would have to think that is probably one of the best programs we have ever had. I was in the Senate on staff in 1971 working on farm legislation and prior to that was in an ASCS office and prior to that I was farming myself. So I have seen a number of different farm bills over the years myself. I think it reached a lot of the goals and that was that basically what you were doing was paying an export subsidy to the producer, this is where it should go.
I like your approach, but I do not know how we are going to ever get it done. We get a lot of recommendations from people about how we should go about the approach, but then you start taking and making the changes that occur in those that are going to occur because of, as you said and Mr. Podesta is a friend of mine and great luck with him on your payment limitations argument—but the no producer payment limits. Well, that was my first question and it is normally in all these hearings. But as Mr. Stenholm said, that is probably not a reality. The reason that you have freedom to plant anything you want—you know, at some point there has to be some kind of a control on the exposure that Treasury has. Now there is a control over it and they know—well, they did know until we passed additional payments—pretty much what that exposure was. And in the past they have done it either through acreage or production controls or payments limitations of some type.
But how do we go about implementing a program like that?
Mr. DUPREE. You are talking about limiting your exposure for the budget?
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The CHAIRMAN. Yes, Treasury's exposure.
Mr. DUPREE. Well, you know, to a certain extent, you people sit down and look at 5 or 10 years out and you have somebody like FAPRI or somebody that is capable of doing this do some sort of projections that give you some sort of idea. Now all the programs over the past have been entitlement type programs which means that you project what you think you are going to need and then if you need additional monies, then you come in and ask for them through a supplemental and it is granted and you go ahead and wallow through.
The counter-cyclical aspects of this, I think give you a good deal of protection. I mentioned awhile ago about a $10 billion figure, the best guesses of people that I appreciate in Washington, that the American people will probably support a funding level of something like that. They have been doing—the last 2 years have done even more than that, a great deal. But that sort of thing done over a counter-cyclical basis gives you a good deal of flexibility there.
The people at FAPRI think that this problem of low prices, really historically if you look back at it, they would only come into effect like I have set them out here 2.7 years out of 10. That means for 7.5 years, you have got no Treasury outlays in the main for this sort of thing. I do not think you can get the preciseness in this kind of approach, and I acknowledge, that you might have to have or desire. But I think it can be accommodated, we accommodated some of that in the past. We did not always know exactly what we were going to get into as we went through the year or 5 years out and yet the programs projected an outlay and you took care of them through a supplemental. And that is the only way I would know to do something like this.
As I said, I am not—I was merely telling you what I think was ideal situation. The practical problems of trying to do something without these payment limits I appreciate full well. But I am saying a lot of that, like I told John Podesta, is really a political pander, it plays to certain people who think that if we did not pay out this money to those big fellows, we would have more to give to you little fellows over there. I dislike that because it tends to split us out and makes distinctions that I do not think you can support.
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I saw a study done by the ASC people, it has probably been 8 or 10 years ago, that indicated that the cost of administering payment limits did not offset—in other words, payment limit exceptions or exaggerations of that would not offset the cost of trying to administer and police them. It just gives us a heck of a problem out here in the farm sector, particularly if you talk about using a market loan to scotch prices, you are not going to know what your limits are going to be. How in the world can you accommodate something like that? I just think I might want to bite the bullet and try that one, it might give my old populist instincts down here some problems but that is really what it comes from.
The CHAIRMAN. I understand, and I will let the other members ask some questions.
The question in my mind is if you can do it in its purest form, that is one thing, but as payment limitations are beginning to be added and people start talking again about some kind of control over either production or acreage or something of that sort, then you start making some changes and it totally changes the dynamics of the proposal and all of a sudden it quits working. That is the challenge that it is to us, is at what point through a process of trying to move forward with some kind of farm legislation do the changes in it all of a sudden make a good idea originally not working any more.
Mr. DUPREE. You see, ideally I would have asked for a 5-year projection to see how these prices would stand up under that kind of budget exposure. FAPRI cannot do work for me as an individual, they did this as a little accommodation because they owed me a favor. But it is going to take somebody like your committee asking them to look at something that they can put through their computer studies, you know, and do the right kind of costing for.
The CHAIRMAN. Mr. Stenholm.
Mr. STENHOLM. In fact, some of us have already done that and I have 5-year projections regarding now the SIP program that we are talking about. We are also asking it to, and have got some numbers now that would show what a market loan could do with the same amount of money we are talking about in SIP, which is the same meet of money we are talking about in AMTA.
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Mr. DUPREE. Yes.
Mr. STENHOLM. So we will have these choices to look at when we get to that point.
Mr. DUPREE. Excuse me, let me break in there, how did that compare, do you know? Because we have not seen your numbers, is the reason I said that.
Mr. STENHOLM. How does what——
Mr. DUPREE. How do they compare, how do the prices compare from your SIP when you ran it through this.
Mr. STENHOLM. I do not have that part of it completed yet, we are just in the process of looking at the 5-year numbers and then seeing what we might do on a per-bushel, per-hundredweight basis. I do not have that in my head, is what I should say, and I do not have it with me. But we are looking at that, that is one of the three options that we are looking at for consideration by this Committee as well as the Congress.
The question I want to ask you is the same question I have asked the other panels, do you support permanent normal trade relations with China, as well as lifting all sanctions including Cuba? Yes or no; if you say no, qualify your answer, please.
Mr. BARKER. Yes.
Mr. DUPREE. Yes.
Mr. SEBREE. Yes.
Mr. LOEWER. Yes.
Mr. MINTON. Yes.
Mr. STENHOLM. Mr. Minton, I appreciate you bringing up the current problem with gasoline and diesel prices and the current market situation we find ourselves with in the oil industry. I happen to represent the oil patch as well as the cotton patch, and 14 months ago, there were very few folks complaining about the price of diesel, cheapest diesel in our country was 39 cents, most of it was going for 59 cents and 60 cents—not a single person was complaining except those who were in the oil business that were losing their jobs, the rigs that were being shut down, the businesses that support industry were going down, the wells were being shut down, because you could not produce at those prices. Fourteen months later we have got $30 oil and now we are having the problems on this side.
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One of the things that I did at the time was try to generate a little bit of farm support, sympathy if you please, in recognition that you cannot produce food and fiber without oil and gas, you cannot produce oil and gas without food and fiber. We are both minority voices, we both have environmental problems so similar you can change from a farm magazine to an oil journal and never know the difference between the problems. We could have a hearing today talking about the oil industry and you would almost have the same type of conversation going on. But here today, we find ourselves with a little different proposal.
So as we deal with the high cost of oil—and I say that because 94 percent of my constituents even though I represent a rural district, 94 percent are not farmers and ranchers, but all of us consume. And if you represent a rural district, you have got just as many problems with that because you are driving long distances to get to work, as we are going to have in production at the prices that we are asked to produce at, as witness after witness has talked about today.
I hope that we can look long-term in both and that is one of the reasons why as we talk about a safety net for farming, I really think we need a safety net for energy because it is a national security problem for us when we become as dependent upon foreign sources for oil and gas. And I think it is important for us to think, at least think for a moment, today where we are complaining about the price, what if someone would disrupt the current production. What if a well-placed bomb was on a pipeline, et cetera, and suddenly would disrupt the flow right now, what we would be looking at. We would not be complaining about $2 or $2.50 gasoline, we would not have any to burn until that supply got put forward. And therefore, there is a niche for agriculture in this.
I have been guilty in the past, coming from the oil patch, we have not been as supportive of gasohol as we should, because we have looked at it—we, now I am putting my oil hat on—we have looked at that as unfair competition because it was subsidized. And here, you have got the folks out producing for the market, particularly independents now, I am talking about the folks in the United States, in our various States that are producing, completing with governments in the rest of the world. We have recognized in the oil patch that that is not fair, you are going to be an 80 cent or a 50 cent subsidy on corn to produce so that it can compete with me.
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Well, we are getting a change of attitude now because most of us are beginning to understand in the oil patch that it is important that we not allow prices to go back to $10 because you cannot produce it at that. And when you shut down an oil well, you do not put it back on. You can shut down land for a year but somebody else will pick it up and farm it next year. You do not do that with oil.
I say this because I appreciate your comments, your testimony and what you said, because there is a realization of that throughout our panels today because there is a concern of price today. But the answers are the same. We are in the international marketplace, that international marketplace is not free no matter how many philosophical statements I hear from folks day after day about the free market. You are whistling in the wind if you believe that our answers are get the government out, which was the intent of the farm bill in 1995 and 1996, it was philosophical. What we are finding out now, you cannot farm on philosophy and you cannot produce energy on philosophy. And the solutions to both industries might benefit us both if we work together on those, and I think that is—I have heard a little bit of that today and I appreciate that in the testimony.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you.
Again, I am here to get educated about rice production. I am interested in knowing what percentage of rice is for the export market, who your competitors are and what advantages they have in rural markets.
Mr. LOEWER. We export about 40 or 45 percent of our rice. Our No. 1 competitor is Thailand and then Pakistan and then Vietnam. We are third right now, we have been fourth, we have been second, but right now we are third.
Mr. MORAN. Do you have competitive advantage or disadvantage in regard to those other countries?
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Mr. LOEWER. Quality.
Mr. MORAN. And assistance or lack of assistance from their government compared to your government?
Mr. LOEWER. I will pass the mic on, not to take it over. We have got three or four farmers.
Mr. MINTON. Could you repeat your question?
Mr. MORAN. I am curious, I guess what I have learned is that you export at 45 percent of the rice grown in the United States, your competitors are generally Asian countries, you are second, third and fourth from time to time. What do those countries have as an advantage from their government in assistance to aid in export of rice as compared to what you have as far as something our government does to help you or some impediment that we put in your way?
Mr. MINTON. There is, of course, like shipping rough rice to Europe, when the GATT negotiations occurred, they lowered the tariff on all forms of commodities except for rough rice. So it is virtually the same price to get milled rice and rough rice into Europe. Also, there are other forms of rice that are easier to ship, closer location, than other countries and shipping the rough rice versus the milled rice has extra added weight in the byproducts.
Mr. MORAN. And part of what I heard you say I think, Mr. Minton, was that rice is excluded from a number of programs, P.L. 480—is that your testimony?
Mr. MINTON. That is kind of an ongoing debate at this time. P.L. 480 is a product—it is Food for Peace kind of thing, and it is not specifically stated that we cannot ship it. All other commodities get to ship their commodity in its rough form—corn, beef, wheat, milo—except rice. It recently came up, we tried to ship some to Jamaica, we did last year for the first time in a 45-year history, and then there came a decision this year that we would not be able to ship the rough rice to Jamaica.
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Mr. MORAN. What does China add to the equation or are they self-sufficient?
Mr. MORAN. I had better hand the microphone on down on that one.
Mr. SEBREE. You asked about China? For rice, I think that is going to remain to be seen what happens. They raise a tremendous amount of rice. I think one of the things that we have with some of the countries, particularly like China, when it comes to an issue, sometimes they will become an exporter when they might would not be, as a swap. In other words, they may not be as concerned about some of their constituents being a little hungry if they can use that rice, you know, as leverage on the thing.
Mr. MORAN. Mr. Dupree.
Mr. DUPREE. China is truly an enigma. They really do not know what they have got over there. Dr. Penn told me about an experience, he stayed over there 5 or 6 years ago and tried to help them set up a reporting system like we have here where we catalogue crops and know what the production is and what the supply is doing. He said there are part of China they do not even know what they are going to produce over there and they do not know there is a drought or a problem over there until the people start streaming into the capitol hollering we are out of food and then they start trying to do something about it.
So their whole thing is a hit or miss thing. They might decide to export or import just on a whim, a political decision, that sort of thing.
I wanted to mention a minute ago, I did not get a chance to cover this in my delivery, but the market loan is obviously a real leveraging point, or could be, in trade negotiations. When that thing went to Washington in 1984, Dr. Penn called me and he said you cannot imagine who is up here lobbying against the market loan bill. I said no, I sure cannot. He said the Thai Government. I said the Thais? He said yeah, as a matter of fact, they have got the State Department and Defense people over there with them. They say if you put this market loan in, it is going to be such a threat to their rice exporting situation that they are going to regard it as almost an act against the government. They brought the Defense Department in on the thing because Thai bases were fixing to be negotiated over the SAC bases and the Thai Government was threatening to withhold those agreements to see how the outcome of this bill was.
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Well, we had not much got that satisfied and it kind of laid down until he called me back and he said guess who is up here lobbying against the market loan now? And I said I cannot imagine. New York banks. I said what do New York banks have against it. They are afraid of the soybean aspect of this thing. South Americans have told us up there that if we incorporate something like that it is going to be such a threat to them in exporting soybeans against our soybeans, and soybeans is the only means they have to satisfy those debts from those New York banks that they were carrying in South America a few years ago.
So with those kind of folks allied against you and other folks, farmers ain't got a chance.
Mr. MORAN. Thank you, Mr. Dupree.
Mr. DUPREE. I did not mean to take such a long time on that.
Mr. MORAN. I am happy to share my green light with you.
I do appreciate your comments and you all being here today. It does seem perhaps this is an agreement with Mr. Stenholm when we talk about free markets, it does seem to me that one of the fallacies that we face with the current farm bill is that we assume everyone plays by the same rules that we do. And that is so far from the truth. And that our ability to compete—I have been interested to see and I have not had the chance yet to ask questions about what we do to combat the European community and others in the way that they subsidize exports, subsidize production and how do we combat the circumstances we find ourselves in.
Having the red light in front of me, I will save that I guess for the next panel when I will get a chance to ask that at that time.
The CHAIRMAN. Mr. Berry.
Mr. BERRY. I do not have any questions. I appreciate very much you taking the time and trouble and going to the effort to be here today to help educate all of us.
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The CHAIRMAN. Mr. Riley.
Mr. RILEY. Thank you, Mr. Chairman. I will follow Mr. Berry, I have really learned a lot about rice today. We do not grow a lot of rice in Alabama.
There is one thing I would like to know, other than tariffs, are there any other trade obstacles or impediments that you find to exporting rice, especially into the European Union?
Mr. LOEWER. Not so much impediments. European Union has high tariffs, that is the impediments. The other impediments that I was referring to——
Mr. RILEY. But are we having any problem with genetically modified grain or——
Mr. LOEWER. There will be. There are no commercial varieties at this moment in genetically enhanced organisms. Where we run into problems is generally in South American and Central America with phytosanitary and sanitary reasons for stoppage of unloading ships. This is why I mentioned most of them are superficial, they usually come from the local trade trying to do what they can to stop the importation of grain. And so they rally and have the shipment stopped and then we have to go in with our people and USDA people and ambassadors and correct it because in most cases—this is not a scientific fact, but it just a ploy to delay and it takes a lot of time and it takes a lot of energy and it costs a lot.
Mr. RILEY. If I understand the answer, do we not have a genetically altered or modified rice now, but we will have soon?
Mr. LOEWER. We have one, it is not commercially available yet. In fact, the experimental use permit for two varieties are underway right now with the EPA.
Mr. SEBREE. I would like to respond to that too on the genetic modified rice. If it were to be on the market today, it would be a problem because the Europeans are using that as a way to get around some of the GATT agreements, they have thrown that up. And so I think it is something that we have to deal with at some point. I think we will eventually win that battle because there is also a genetic modified rice that has been developed that is vitamin A enhanced and, you know, just for information, there is something like 40,000 to 50,000 children born blind, basically in some of the African countries because of the deficiency. And it is hard for me to comprehend how Greenpeace and some of the other groups that are fighting this can gain the support. How do you fight support or gather support when you have got a commodity out there that could save 40,000 blind children a year by just feeding this rice to their mother whenever they are carrying the child.
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These are some of the benefits that we have to develop. Maybe we went about it the wrong way, the original benefits helped the farmer more, we should have maybe went the other way where it would benefit the consumer. We are going to have to deal with that.
But there is a tremendous tariff in Europe. There is $400 a ton that comes in there. That means we are selling rice at say $380 a ton, that comes back to $780. The housewife in Europe is paying probably the equivalent—I want to qualify this—exactly, but it is probably in the neighborhood of $5 to $5.50 a bushel net the farmer, if we were getting that. And I think all of us at this table would agree that if we could get that—what I am saying, we can compete, people are willing to pay that, they are doing it every day. And on the P.L. 480 rice that we talked about, one of the arguments on that was that the countries could not buy it. The rice that comes into some of these countries, they take the tariff off with P.L. 480.
In the case of Jamaica, they have been buying that rice down there for 18 to 20 years in the brown and finishing it out. And I think one of the problems that we have had in this argument is that why should we spend American taxpayer dollars to subsidize through building of an infrastructure in a country that, quite frankly, would rather buy that rice from another country right now who can come in there duty free. We cannot come in there duty free.
And it is my understanding that Jamaica right now is tendering for some 6,000 tons of rice under a different credit corporation, which would be a cash market, which we are for that 100 percent, you know, in the cash market.
Mr. RILEY. Thank you, Mr. Chairman.
The CHAIRMAN. I want to thank this panel very much for your input.
The fourth panel is Mr. Tommy Barham, a cotton, corn, soybean producer from Oak Ridge, LA; Mr. Willie German, a cotton producer from Somerville, TN; Mr. Allen King, a cotton producer from Brownsville, TN; Mr. Mike Sturdivant, Jr., cotton, rice, soybean producer from Glendora, MS; and Ms. Donna Winters, a cotton, corn and wheat producer from Lake Providence, LA.
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We want to thank you all for your patience.
Mr. Barham, we will start with you.
STATEMENT OF TOMMY BARHAM, COTTON, CORN, SOYBEAN PRODUCER, OAK RIDGE, LA
Mr. BARHAM. Thank you, Mr. Chairman. My name is Tommy Barham and I am from Oak Ridge, Louisiana. I am a 4th generation farmer and I am the principal owner and manager of Larkin Plantation Farms. Our main crop is cotton, but we also grow soybeans, corn and rice. We have commercially produced other crops such as peanuts, vegetables, wheat, cattle and timber.
If we consider today changes in our current farm legislation, we first need to identify the good things we should retain. And two items stand out:
First, the ability under Freedom to Farm to flex acres from one crop to another is vital if producers are going to respond to changing global markets. We must keep this option open for farmers if at all possible.
Second, the current law gives financial support through AMTA payments and loan deficiency payments and both have provided funds for farmers facing extremely low commodity prices. In some form, these payments are essential for farmers to survive under current conditions.
What are the flaws of the current farm bill?
First, limitation of payments penalizes the most efficient producers. Facing global competition, we should support our most efficient farmers so that we retain our markets, both domestic and foreign. Limitation of payments should be eliminated or replaced with a system that reflects the reality that the small family farm is no longer the unit most likely to succeed in the long run. The trend is toward larger farms, and limitation of payments only forces unnatural structuring that is counter-productive.
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Second, the present price support structure does not provide adequate price protection to allow lenders a sound basis for financing farmers. Most operations will not cash flow at current commodity prices. Current support levels for most crops must be raised if farmers without self-financing are to secure operating capital.
Third, more dollars have gone to non-active farmers than under past law, and that reduces funds available for the support of active producers. I do not suggest that non-active farmers should be entirely cut off from support. However, I do believe those that are taking risks, providing jobs, and producing goods for the market should be given more assistance than those who are not. Perhaps a factored payment for non-active farmers would be better.
Now there are some other items that I think we need to consider in general:
Agricultural trade sanctions must be ended. Consider rice. At one time, the three largest importers of U.S. rice were Cuba, Iraq and Iran. Sanctions have not stopped these countries from getting rice, they have only taken our export markets away, and in all three countries the same leadership is still in place.
American agricultural interests must not be traded away. No farmer or crop association can effectively negotiate against competing governments. We as independent producers, are dependent upon our government to represent us in international trade and we must be protected from unfair competition.
Grades and standards have been misused to deprive farmers of rightful returns. An example of what I am speaking of occurred in 1998. Large areas of the country were hit with high levels of aflatoxin in corn. The price for a huge portion of the corn crop in affected areas was discounted, yet a great part of that same corn went right into normal market channels, including that for human consumption, as corn buyers manipulated and regraded the grains to receive full price for themselves. This process amounted to nothing less than preying on vulnerable farmers by buyers who reaped huge profits in the process. Another example is the recent case in Hunt's Point, NY where the misuse of grades was used to deny farmers full value for their goods. I am not suggesting that there is anything in the current law that encourages these activities, but I am saying that new laws should be much more active in eliminating these practices.
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Recently, a great deal of emphasis has been placed on crop insurance. Historically crop insurance has been a poor method to deliver support to farmers. This year for the first time, crop insurance is available that seems to offer a tool for reasonable risk management. But the problem with insurance is fraud. Each dollar paid out for fraudulent claims reduces the funds for legitimate claims and drives up premiums. Crop insurance will not work as a method of assistance to farmers unless a stringent program of claims adjustment is put in place and maintained. If crop insurance is considered as a major part of any new law, it will best be managed through FSA rather than through a private agency.
In closing, Mr. Chairman, I would also add that we are here today largely because of the extreme financial stress that agriculture faces. I want to assure you and all members of the committee that every farmer you see that is producing efficiently for markets would rather live off the sales of commodities at profitable prices than to have any income from the government.
Thank you, sir.
[The prepared statement of Mr. Barham appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Mr. German.
STATEMENT OF WILLIE GERMAN, COTTON PRODUCER, SOMERVILLE, TN
Mr. GERMAN. Mr. Chairman, members of the committee, I am Willie German, a farmer from Somerville, TN. I appreciate the chance to address you today and present some of my concerns about the present condition of agriculture and my concerns about its future.
Following high school, I enrolled as a student at the University of Tennessee at Martin, studying for a career in my chosen field of agriculture. My education plans changed immediately in 1977 when I learned that a large farm near home was going to be available for rent next year. My decision to leave school and pursue a dream of becoming a farmer was a difficult one but one that I have been comfortable with ever since. I have been able to grow the family operation from 150 acres to our present size of 7,000 acres, producing 3,000 acres of cotton, 2,500 acres of soybeans, 1,000 acres of corn, 540 acres of wheat, 300 acres of peas annually and producing 200 head of feeder calves each year. Today, my sons are 20, 17, and 6 years old. When I look around and see the deteriorating condition of the agriculture economy, I often wonder if there will be an opportunity for them to continue the family operation that those before them have worked so hard to build.
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Why do I wonder? According to USDA data, the January 2000 farm price for cotton was 43.1 cents per pound, up a mere 0.10 a pound from December 1999. January marks the fourth consecutive month that cotton prices have been below 46 cents a pound, a level not previously seen since August of 1975. University of Tennessee economists have established a break-even price for 2000 cotton production at 57 cents per pound. Barring disaster in the production areas of the country or some other unforeseen market impacting event, most economists predict very little, if any, improvement in these current price levels that are below the cost of production for even the most efficient farmer. I have seen neighbors that have farmed all their life decide that production agriculture is no longer in their future and they have placed their equipment, their land and their life on the auction block and have turned to other jobs to support their families.
There is no one action that can be taken to end the economic crisis now occurring on the farms across this country. It will take a concerted effort on a lot of fronts to bring an acceptable level of profitability back to the rural landscape. Please allow me to address what I believe to be some of the major issues.
As you know, agriculture consistently runs a trade surplus every year in this country, shipping more products abroad than we import. We are one of the few sectors of the economy that continues to contribute positively toward or Nation's trading balance. Exports are U.S. agriculture's source of future growth in sales and income. Global demand for food is expanding rapidly and more than 95 percent of the world's consumers live outside U.S. borders. Not only do farmers benefit from these exports, nearly a million high-paying jobs are created for U.S. workers.
I think we must find ways to include trade talk dialog in order to achieve tariff equalization with our trading partners. Fast-track trade negotiating authority must be restored so that we can take advantage of every opportunity to resolve issues such as unfair tariffs, trade-distorting subsidies and other trade restrictive practices. Funding for export promotion and market development programs should be increased to meet promises made to farmers during the 1996 farm bill debate, and to build more markets abroad for U.S. grown farm products. One recent example of the positive effect of market enhancement programs is the reinstatement of step 2 for cotton last fall. As a result, since October of 1999, U.S. cotton export commitments have more than doubled to 6.7 million bales of cotton as of March 2, 2000. Export shipments are currently averaging almost 200,000 bales per week, which is nearly 50,000 bales more than needed to meet yearly export projections.
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In addition, we must resolve issues based on sound scientific evidence. A new obstacle to the acceptance of U.S. farm products is the worldwide concern involving GMOs. I agree with those that suggest that we probably should have originally identified this new science as generically enhanced organisms and maybe the acceptance by the general public would have been better. I think that all segments involved with this issue must use every avenue available to find answers to the concerns that some consumers are voicing. We cannot afford to lose processors that are major buyers of U.S. farm products due to the demands of small consumer groups using junk science as a basis for concern. We must allow sound scientific data to take precedence over unsubstantiated opinions or junk science in maintaining a policy for safe food and fiber in this country.
This new technology is one of the greatest breakthroughs for the efficient production of food and fiber to come along in many years. The development of new varieties that can carry enhanced genes has allowed farmers to again increase their level of production efficiency and the acreage farmed. The positive environmental impact of these production changes is visible immediately.
One final concern is the need to improve the crop insurance products to a level that encourages more farmer participation.
I see the light has come on so I will try to end on time.
Members of the committee, thank you again for the opportunity to address you today during this hearing. We have many issues in agriculture, which will need the attention of both Congress and the farming community. I appreciate the chance to share what I see as some of the most pressing issues where we need your assistance.
Thank you very much.
[The prepared statement of Mr. German appears at the conclusion of the hearing.]
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The CHAIRMAN. Thank you. And I just want to make sure that it is clear—I should have said this earlier I suppose—but that all statements in their entirety will be a part of the record.
Mr. King.
STATEMENT OF ALLEN KING, COTTON PRODUCER, BROWNSVILLE, TN
Mr. KING. Yes, sir. Mr. Chairman and members of the House Agriculture Committee, I certainly do thank you for taking up your time and coming and listening to our problems. I know that you get tired or everybody saying what is bad about everything going on.
My name is Allen King, I am a full time cotton farmer in Haywood County, TN. I am also chairman of the Tennessee Boll Weevil Eradication Foundation and I am chairman of the Southeast Boll Weevil Eradication Foundation, which has the responsibility for eradicating and controlling the weevils on this 5.5 million acres of cotton east of the Mississippi River. Now if it were not for my two sons at home on the farm, I might not have time to run do all this stuff that I am involved with, but I have got two sons that are full time farming with me.
I have never seen in my 45 years of farming the financial situation of the farmers in my county as bad as it is now. On my farm alone, our per acre sales of cotton was only 38 percent of what it was in 1998. We had lower prices in 1998 and we had lower quality due to the drought in 1998. Basically this was because we had a lot of short staple cotton. I personally think that farmers do not have enough of a safety net in the Freedom to Farm bill as we have it now. We need to either have higher loan rates or a target price concept or something more realistic to our production costs. We are paying 2000 production costs and receiving 1970 pricing.
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All my life in farming, I have concentrated on production agriculture and I do not claim to be an agriculture economist and I certainly do not have a specific recommendation to you all now, except that the farmers need some kind of a safety net to be able to compete worldwide.
Now I will get down to the boll weevil. Cotton farmers in west Tennessee, southwest Tennessee, are in their third year of the weevil eradication and are faced with a $36.80 per acre assessment fee. They voted upon themselves a full cost share program of $211 per acre for 7 years—that is the highest in the Nation—4 years ago, not knowing the economic situation that would be facing them now. We need badly to restore the 30 percent Federal cost share program which was stopped just before the west Tennessee eradication began. It stopped at the Alabama-Mississippi line. All of the Alabama farmers and back east of there got the 30 percent cost share. The farmers in northwest Tennessee, which I am in, will be the last acreage to begin eradication east of the Mississippi River and they will start a diapause program in August of this year. We hope and plan to use 10 ounces of malathion per acre, which is by far the cheapest and most effective chemical that we have to eradicate the weevil.
We were able to start up this program because of the $100 million FSA loan program. Were it not for this loan program, we would not be able to start up a program without the Federal cost sharing and the loan assistance. We sincerely request that the loan program be continued. As we understand it, it is primarily a no-cost program to the Government due to the payback and to the nature of the program.
Now I will get onto something that is a little bit more pleasant. One of the few pluses that the Tennessee cotton farmer has today is our Extension Service Program. You all have supported the Extension Service well. It carries out a scientific, non-biased evaluation of all the new GMO seed varieties based on actual field experience. Due to the high cost of seed and the tech fees attached with them, this gives the farmer the actual economic benefit of this new technology.
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Another one of the best programs that the Extension Service has conducted for us in the past decade has been the no-till practice that they have promoted for our highly erodible soils. With the emphasis in Washington on clean water, I think the continued increase of no-till acres in Tennessee is leading to cleaner streams and rivers. Last week the Haywood County Conservation Board had its annual meeting and had an environmentalist that worked for Nature Conservancy to give the program. He had been working for the past 3 years on the Hatchie River in west Tennessee. The Hatchie River happens to be the northern edge of our eradication zone. He said this is the longest free channeled river in the United States and one of the few left in the world. He has been studying the sedimentation and the quality of water in the Hatchie River. He presented slides of how the water has become much cleaner and the erosion of the banks a lot less. He credited no-till farming and the lack of soil preparation in the fall as the main factors. We can thank the Tennessee farmers for what they are doing to make our water supply cleaner.
Thank you.
[The prepared statement of Mr. King appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Sturdivant.
STATEMENT OF MIKE STURDIVANT, JR., COTTON, CORN, SOYBEAN PRODUCER, GLENDORA, MS
Mr. STURDIVANT. Mr. Chairman and members of the committee, I am Mike Sturdivant, Jr., a 5th generation farmer and I operate a cotton, soybean and corn farm with my family in Tallahatchie and Leflore Counties in the Mississippi Delta. We appreciate the committee scheduling an opportunity to meet and exchange ideas with you here in the mid-south area.
First, it has been pointed out that the FAIR Act of 1996 has operated and functioned precisely as it was planned, but at the time that the bill was being written, there was almost unlimited world demand for U.S. agricultural commodities, and consequently commodity prices for every major commodity were strong. There was little emphasis placed on policy considerations which would be necessary for periods of extremely depressed prices and low market demand. Therefore, we must acknowledge that Congress has acted responsibly and with significant conviction in the passage of two emergency disaster relief measures during the 1998 and 1999 harvest season, at a time when commodity prices were hovering at 40-year lows for corn, soybeans, cotton, rice and wheat.
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For purposes of highlighting some of the most critical issues in current farm policies which we hope to get special consideration, I would like to submit the following:
1. Should the delivery mechanisms for income support be maintained and extended as currently designed in the FAIR Act, the Congress should carefully evaluate the sharp decline which has occurred in the agricultural market transition adjustments since the enactment of this measure in 1996. The adjustments in 2000 are almost half the amount of the level in 1996 and this is causing grave hardship on the farm during periods of low prices.
2. At a time when every land grant university economic model is pushing farmers toward larger, more efficient equipment and expensive harvest equipment, the arbitrary limitations on market transition adjustments and marketing loan gains continue to pull in an opposite direction. The current market oriented farm policy which relies on a cost efficient family farming operation does not point toward a family farming operation targeted toward a smaller size.
3. The planting flexibility, marketing loan and payment base and yield provisions tied to historical averages are components of the FAIR Act which should be maintained.
4. The CCC non-recourse loan is fundamental to the success of any farm program. The current formula is operating as designed with the exception of the loan caps. Careful study should be given to removing those loan caps. However, if there are overriding budget considerations associated with the removal of those loan caps, Congress should review this in context of its comparison to other mechanisms for maintaining farm income while ensuring that the CCC loan serves as a tool for orderly marketing of commodity stocks.
5. Significant agricultural subsidization continues among our world trading partners and therefore, the United States should not unilaterally disarm by phasing down domestic farm programs. In foreign trade matters, our orientation as a country has been designed to open up trade. However, sophisticated trade barriers and other practices administered by many of our competitors in developing countries have resulted in exemptions and waivers from many of the WTO rules. NAFTA, CBI parity legislation, and normal trade relations with China are viewed favorably by the farmers in my area. But in order for the U.S. farmer to compete, Congress must continuously remind the administration and USTR that a heavy price will have to be paid through the cost of domestic farm policy if they do not carry out trade agreements in a way which reflects reciprocal enforcement.
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6. In the interest of income stability for U.S. rice farmers and market demand, P.L. 480 and other export assistance programs should be extended to the export of rough rice, as well as milled rice, as has been mentioned earlier.
7. The Conservation Reserve Program and the Wetlands Reserve Program are valuable programs as an alternative for the highest and best use of land that can also bring environmental benefits for the public purposes provided by this program. Our region of the country has benefitted significantly from the CRP and WRP programs and we emphatically endorse their continuation.
Congress should carefully study proposals aimed at authorizing the expansion of CRP and WRP, so that the growth of these very positive conservation programs do not carry the unintended consequences of causing budget offsets in other vital entitlement programs such as nutrition and domestic farm programs. These programs must be funded under the same mandatory spending accounts as CRP and WRP and any plan for the expansion of these programs should include provisions that ensure that other entitlement spending will not be adversely impacted.
In the area of crop insurance, there is little support in our area among farmers for this program to serve as a delivery mechanism for domestic farm programs. Crop insurance has not been as effective as it needs to be in terms of serving as a risk management tool for southern agriculture. We applaud the work being done by the House committee and we stress that Federal involvement in crop insurance should be sharply focused on those elements of the policy which extend the farmer a low-cost insurance product to protect against disastrous impacts of reduced income due to lower than expected yields. The farmer does not need for USDA to continue extending huge amounts of resources on overhead in order to be an insurance product to the farmer.
In conclusion, we are encouraged that the administration's budget request included funds for additional agricultural assistance, but we would caution that it is not likely that the administration's proposed assistance will be enough if prices remain low and we experience another crop like 1999. Further, I strongly disagree with the emphasis placed on arbitrarily targeting domestic farm program benefits to operations on the basis of their size. This approach flies in the face of the vast majority of farm balance sheets throughout the mid-south and it completely ignores existing USDA cost-price data which leads us to larger farming units.
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I appreciate the opportunity to appear before you today.
Thank you.
[The prepared statement of Mr. Sturdivant appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. Ms. Winters.
STATEMENT OF DONNA WINTERS, COTTON, CORN, WHEAT PRODUCER, LAKE PROVIDENCE, LA
Ms. WINTERS. Mr. Chairman, members of the committee, I appreciate the opportunity to come before you today. My name is Donna Winters and my husband and I farm about 3,200 acres of cotton, corn, soybeans, wheat, milo in East and West Carroll Parishes, LA. We are both third generation farmers in our respective family farms and I guess you could say our consolidation occurred when we got married. We had two family farms that were combined. But again, I thank you for the opportunity to share my views today.
I also want to take this opportunity to thank you for the emergency relief provided these past 2 years. This relief was a great benefit to producers of all commodities and your action helped stave off many potential bankruptcies and we are greatly appreciative.
As I look at the situation, it seems to me we have two separate problems. The first one is a short-term problem and that is how do we get through another year where commodity prices are below the cost of production. And everything that I read says barring disaster and barring a weather, insect or disease disaster somewhere else in the world, that this year prices will continue to be below the cost of production. And this will necessitate growers going to Congress again asking for another financial assistance package, hopefully one structured like the one you delivered last year.
The longer term problem and the more challenging one that has been addressed all day today is how do we address long-term farm policy.
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I really believe in my heart that the next farm bill that you enact will determine the future of agriculture in America. I do not envy you your position, because you have some very difficult decisions to make. I do not think we have ever had a farm bill, start talking about a farm bill when agriculture has been, in my lifetime, in as much crisis as it is today.
But my first concern when you look at long-term policy is budgetary. Congress must be willing to allocate enough budget authority to fund a workable farm bill. The remaining budget authority at the end of the FAIR Act of $4 billion is just grossly inadequate and it does not matter how good our policy is if we do not have sufficient spending authority, it is really of little good.
Generally speaking, cotton farmers in Louisiana like some aspects of the FAIR Act. We like the flexibility that has been discussed by everybody here today, we like the marketing loan being keyed to the world price for cotton. Most producers that I know would welcome an opportunity to remove the budget caps that were placed on cotton—I mean on the loan, early on. We also like the 3-step competitiveness provisions and that it has helped keep U.S. cotton price competitive to our customers.
As has been discussed, the most glaring weakness is the FAIR Act's inability to provide adequate income protection when prices are very low. And I hope when Congress begins serious deliberations, you will address this low-price safety net. Longer term policy is much preferred to the uncertainty of emergency relief packages and our lenders are reminding us of this fact as we seek production financing this spring.
In discussing how to strengthen the safety net, many issues have been discussed among the farm groups. We have looked at whether farm program benefits should be coupled or decoupled, and the pros and cons of fixed benefits versus price or income related benefits. It appears though that some combination of fixed, decoupled payments, together with a coupled counter-cyclical payment could have the most merit.
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A most disturbing trend is the mindset of some policymakers to put even greater limits on farm program benefits through means test, reduced payment ceilings or other forms of benefit targeting. Payment limitations are counter-productive for American agriculture and every American citizen. Commercial size family farm operations in the United States need Federal assistance, primarily because they face highly subsidized competition in the global marketplace. There is no data to support the conclusion that large farms do not need assistance because they are not under the same financial stress as smaller farms. Unless the United States is willing to sacrifice its agricultural production base to foreign subsidies, we must have farm programs that enable commercial size farming operations to enjoy a reasonable partnership with our Government.
Mr. Chairman, we applaud your efforts in shepherding a meaningful crop insurance reform measure through the House of Representatives. We, like you, want an improved product. However, we strongly belief that crop insurance should not be used as a delivery mechanism for farm program benefits. We believe it should be a separate production loss risk management tool.
In summary, from my perspective in Louisiana, there are a few adjustments I would like to see made:
We need a better safety net to protect farm income when prices are low.
We need at a minimum continuation of the adjustments made in 1999 to permit commercial sized farming operations to participate more fully in farm program benefits.
And we need an effective crop insurance program for insuring production losses.
Thank you for the opportunity to share my views.
[The prepared statement of Ms. Winters appears at the conclusion of the hearing.]
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The CHAIRMAN. Thank you very much, Ms. Winters.
I would like to just make a couple of general comments. One, thank you all and all of the panelists for your participation today.
Mr. Stenholm has made reference a number of times to the fact that the idea of the 1996 farm bill was that it was the last farm bill and that was very definitely a consideration and discussion of some people. I have told people all along, that was never part of the deal with me.
Mr. Stenholm or I one intend to be chairman of this committee when this farm bill comes for review and I cannot speak for Mr. Stenholm, even though I think I can, there is going to be another farm bill. I do not know what it is going to be.
I have been around through a whole bunch of them for a whole lot of years and we did not know the next year, as I had mentioned, Mr. Stenholm and I were here for 1985, 1990, 1995 and we never know what it is going to be the next time. We start gathering information and that is part of what we are doing, but there has got to be an agricultural policy. This country cannot move away from an agricultural policy.
Second, on the idea that you were talking about, Ms. Winters, you probably stressed this more than anyone else in the testimony, we do have two problems; one is short-term and the other is long-term. And long-term is developing markets and doing all of those things that we can. The short-term is trying to make for sure we still have farmers around to take advantage of it when it finally turns.
Twenty-one members of this committee went to Seattle to the WTO talks. I commend and have publicly and privately Charlene Barshefsky's tenacity in standing up for American agriculture. There was a proposal on the table in which we just simply wanted—the American position was that we wanted to begin the discussions of the total elimination of export subsidies. There was a number of things that fell apart at Seattle, but that was one of the agreements that was not able to be reached.
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It was my opinion at that time and I made a statement that reflected that, and it continues to be, that I do not want us to enter a bidding war for world trade. But if we cannot begin to have an agreement by those country that so highly subsidize their exports, so much more than we do, to begin to look for the elimination, then the position that I have taken is that we should look at every possible tool that we have on the books today and any possible tools that we can potentially put on the books that if in fact we do have to enter into a bidding war internationally in order to make for sure that our farmers are not left behind, that we want to make for certain that they have every possible tool that they can and they have got plenty to back up their bidding efforts. And if there is going to be a trade war in the world—and I think it would be terribly devastating if that is the case—but unless we can get some other countries to agree to change their policies, then I think we need to change ours and become much more aggressive in making for certain that the American farmer is represented equally in world trade.
Mr. Stenholm.
Mr. STENHOLM. Mr. Chairman, you can and you did speak for me in your earlier statement. I associate myself with your remarks.
Ms. Winters, you as well as several other witnesses today were acknowledging that we are trying to do two things with crop insurance and there is a growing belief it cannot be done. You cannot support price and yield insurance with the same policy, without getting into problems, and we are seeing that, cost, et cetera. And therefore, you will not hear today, but there was testimony presented to us today and there was also presented at the Lubbock hearing concerning one of these thinking outside the box proposals now that is being developed by the farm credit system and many of our State departments of agriculture have participated in this. And you very soon, through various producer commodity organizations as well as all others interested in this will begin to see this recommendation. And I would encourage you to look at it as quickly as you can and then make a reaction to it.
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It is a proposal to insure cost of borrowed inputs and it is something that is catching a lot of interest now and we are going to have some good information on that, to see whether it has merit for the future.
I want to ask before my time expires the same question of you I have asked of every witness. Do you support permanent normal trade relations with China, as well as lifting all unilaterally imposed sanctions on food and medical products?
Mr. BARNUM. The answer, Mr. Stenholm is yes, if it is on an economic basis and not a political basis. And I would also favor trade, not just with China, but with Cuba and Iraq and Iran and all other countries, as long as it is done on a straight-up economic basis.
Mr. GERMAN. Yes.
Mr. KING. Yes.
Mr. STURDIVANT. Yes.
Ms. WINTERS. Yes.
The CHAIRMAN. You're batting 100 percent.
Mr. STENHOLM. Well, no, we are not batting 100 percent, but we have now had 40 witnesses, 38 have said unequivocally yes; one has said almost no; and one has said yes with qualifications. That is kind of the way we are hearing it from all ''organized'' farm groups also—not everyone, it is not unanimously agreed to.
When we are talking about budget, Ms. Winters, you mentioned this very specifically and the chairman acknowledged that this is not the last farm bill, at least from our perspective. But we do have a very serious problem with the baseline and unless we can find ways to deal with that, that baseline is congressional talk which most do not understand, including most of us in the Congress have a difficult time understanding budget baselines because that is different lingo. But unless we can find ways to lock up some additional baseline, we are not going to be able to do any of the things that you are proposing today or that we have heard in the previous witnesses. And that is a challenge that we have got and we hope to work through that beginning next week.
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Finally, everyone has expressed appreciation for what Congress has done in 1998 and 1999 with the additional AMTA payments, with the additional disaster payments, with all of the things that we have done. Interestingly, in 1999, our figures now show it is approximating $22 billion, that is getting within $2 billion of what we can legally do under GATT supporting our agriculture. So we are fastly approaching that which we can do legally under the rules that we have agreed to play by. But it shows the dedication of the Congress to deal with a very real and realized problem.
Most of us though agree that would could do a better job with less money. And that is the challenge that we have got in looking ahead. I do not believe that it is going to be possible to get $22 billion in 2000, in other words.
But it is important for us to acknowledge in our public statements—information has been worked up to us now that shows that in 1999, the effective price for cotton was 80.9 cents. Now that does not say everybody got 80 cents for cotton, some got less and some got more. But what was spent was 80.9 cents on cotton. On rice, it was $11.94; on corn, $2.70; on wheat, $4.34; on soybeans, $5.85. That is what $22 billion has bought us.
Now we complain about it—and not everyone got it. But that is the effective price when you take the pounds, the bushels, the hundredweight produced and compute that into what was spent on crop insurance, on additional AMTA payments, on LDPs and on loans, on cost of loans, interest, et cetera.
So we need to acknowledge that and I do acknowledge that. The challenge for us is to see if we cannot find a better way of supporting farm income—by better way, doing it with less of our taxpayer dollars than what we have been doing it under these emergency declarations that we have been going through.
The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, I think I only have one comment.
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I appreciate this panel's testimony, I appreciate learning a little bit more about cotton in particular, although Kansas is becoming a cotton producing State as part of the reaction to the FAIR Act of 1996. I think we have 26,000 to 28,000 acres now planted to cotton.
Ms. Winters, I just wanted to point out in your written testimony, your concluding paragraph, which I do not believe you addressed, about what we face in our failure to have an agricultural situation that allows for the next generation to return to the farm. And I think that is a significant point that I did not want to let pass, as we think about what we can do to save rural America, certainly where I come from, economic development is whether or not farmers are making a living.
And I think there is some value to that farming situation that goes even beyond the economics. I think this country, our society is greatly impacted by the loss of our ability to have children working side-by-side with their parents. Farming is one of the few opportunities that still remain in which families still work together.
So I commend you for bringing that issue to our attention and I think it is one that we really need to grapple with, how do you get capital to that young family that is looking to start or acquire a farm. I would also be reminded that we probably do not need the ability to borrow more money, we need the ability to earn a living and to make a profit.
I represent the people who live in 66 counties, 56,000 square miles, the largest city in my district is 41,000 people. It is a very rural area of the country. I spoke in one of my communities of 1,800 people to a local Rotary Club several weeks ago and I was chastised by a retiree there for my efforts on behalf of farmers, and his evidence that farming was doing fine was that the farmers he knew drove Cadillacs and he was disturbed by the amount of dollars and money that went into agriculture.
My response was, let me ask you, sir, how many young men and women have returned to this community of 1,800 people to the family farm. He could not think—I gave him 1 year, 2 years, 5 years, countywide. We could not come up with any names, which I think is a pretty clear indication of what we all face in agriculture country and this idea that if anyone believes things are good on the farm, you just need to look around to see how many sons and daughters are there side-by-side with their parents.
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It is a critical circumstance. The average age of our farmers in Kansas and across the country is climbing. You are an awfully young panel, I congratulate you on your young age. I am delighted that you were willing to be with us and my thanks——
Mr. KING. He did not look at me.
Mr. MORAN. It is an election year, Mr. King. [Laughter.]
The CHAIRMAN. You ought to see the farmers in Kansas. [Laughter.]
Mr. MORAN. Thank you very much.
The CHAIRMAN. Mr. Berry.
Mr. BERRY. Well, as the chairman has put it so eloquently and the ranking member, our ranking member has a saying that everything has been said but everybody has not said it, so I guess I will take my shot at that.
I appreciate very much you all going to the trouble and putting forth the effort to do what you have done today and do what you can to help American agriculture.
I was reading the paper a few Sundays ago and I ran across a fact that has bothered me a lot since I read it. The soft drink industry in the United States last year took in $58 billion. The net farm income for everything that was sold off of United States farms last year was $50 billion, $22 billion of that was from the United States Government. So we have got $28 billion from the marketplace—now that was gross revenue to the soft drink industry and net to the farmers, but those numbers have just bothered me a lot since I read them. It is absolutely ridiculous that everything that was produced from U.S. farms netted back to the farmers less than half as much as we spent on soda pop in this country last year.
So to me, that points up the problem about as adequately as anything I can think of as a way to describe it.
I think you all have done a great job and again, I appreciate you being here.
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I was going to tell Mr. Moran—I guess he is gone right now, but you know, at the Department of Agriculture, they used to spell rice w-h-e-a-t. [Laughter.]
And I think we have improved that just a little bit over the last few years and I also have got a colleague named John Baldacci from Maine and he sits beside me on the Agriculture Committee, and of course his great interest is potatoes and I tell him rice is just little bitty potatoes. [Laughter.]
Thank you.
The CHAIRMAN. Mr. Riley.
Mr. RILEY. I do not know how to follow that.
I just want to compliment this panel. Your level of sophistication and articulation, I think just points up the fact that farming has definitely changed in the last 10 to 15 years. We have a different type of family out there, we have a larger farm. And I think we have got to begin to address some of the problems other than just support payments, loan payments, AMTA payments.
There are a couple of things that I hope we do and I am kind of batting cleanup here. But I think you also should be just as supportive of reduced income taxes because that raises your cost.
I was in the poultry business for 25 or 30 years and I know what you are having to deal with now compared to what I had to deal with when I first got out of college. And the differences are dramatic. The inability for you to have tax credits, the inability for you to have accelerated depreciation—those are the things that will probably help make you as efficient as anything else we do. I do not know that we should consider that farm policy, but maybe we should, because there are very few people out there that will benefit more than you will if we reinstitute some of these policies. It is a way that the Government then is not dictating to you what type of money you will get for what, it allows you more flexibility to plan your own life.
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One other thing that I hope we can do—we have tried in this Congress a couple of times and have not been able to get it done. We have got a Presidential election coming up this time and I hope all the farm groups will absolutely demand of both Presidential candidates that we do something to finally, once and for all, do away with estate taxes. If we can do that, I think that will help you. I do not know how much—in the size farms you have today, I cannot imagine what your insurance payments are if you are trying to leave it to another generation. All of these things I think are just part of a combination that we have to address if we are going to save our family farms.
But again, let me congratulate you on your testimony, it was very enlightening to me. I can promise you the chairman, the ranking member, everyone on this committee is on your side. It is up to us now to convince the other 400 Members of Congress.
Thank you very much.
The CHAIRMAN. Mr. Stenholm needs to clarify the record.
Mr. STENHOLM. I need to clarify the numbers that I gave off on the effective price did not include crop insurance cost.
The CHAIRMAN. Thank you all again very much. We appreciate the hospitality of the people in Memphis. The hearing is adjourned.
[Whereupon, at 2:57 p.m., the hearing was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Statement of Gary Branum
Mr. Chairman, members of the committee, welcome to Memphis. My name is Gary Branum and I am a third generation farmer from New Madrid County, MO. My family and I raise rice, corn, soybeans and wheat. I serve on the State board of Missouri Farm Bureau, representing the southeastern part of the State.
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It is an honor for me to speak with you today and I very much appreciate your interest in the future of U.S. farm policy. I am especially grateful for the decision to hold a number of field hearings throughout the country—seeking input from those who go to great lengths to avoid the Nation's Capitol.
First, it is important that you know I don't profess to have a solution to the woes we are facing in U.S. agriculture. I don't believe we can attribute our problems to the 1996 farm bill, or any other single action. Likewise, it doesn't appear there is any magic bullet to solve our problems overnight.
Mr. Chairman, during your visit to Representative Emerson's congressional district last year you saw some of the most productive farmland in the world. We are able to produce about any crop you can imagine. Yet, we are not immune from hardships caused by terribly low commodity prices. There is a tremendous amount of emotional pain being experienced by families in the Bootheel. Many people are in real serious financial trouble. And accountants warn that even if prices make a miraculous rebound this year and profits match the losses experienced in recent years, tax liability becomes a real threat.
I strongly support the principals of the 1996 farm bill. I need the ability to plant for markets and oppose any effort to return to supply control programs of the past. In my case, I am able to plant a larger percentage of my acreage to rice. In fact, had this not been the case, had I been forced to plant soybeans, my situation would be much different.
There is a great deal of talk about an improved safety net and this is important. I understand Congress is working to improve our risk management tools and this will be helpful. And I am very grateful for the emergency assistance Congress has provided the past 2 years. Unfortunately, if the current price forecast is realized, additional assistance may be necessary. In the short-term, I would ask that you review the implementation of the Oilseed Payment Program in that many soybean producers are experiencing significant problems that either reduce their payments or make them ineligible for any payment.
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As Congress begins considering objectives for the next farm bill, it is important you not overlook the continued importance of international trade and regulatory oversight. I strongly support approving Permanent Normal Trade Relations for China and the subsequent bilateral trade agreement. We simply cannot afford to ignore China and let them take their business to our competitors. Failure to pass this bill simply amounts to a defacto trade sanction—and we know how successful those are.
Speaking of trade sanctions, I urge you to work towards eliminating trade sanctions for food and medicine. It makes no sense for U.S. farmers to be penalized by our State Department. I have heard eliminating existing trade sanctions could mean at least another $500 million in U.S. agricultural exports annually.
Mr. Chairman, earlier this week I joined a delegation of Missouri Farm Bureau members who were fortunate to have dinner with the Cuban Ambassador in Washington, DC. Ambassador Ramirez was a most gracious host and we spoke of the trade opportunities for U.S. farmers if the Cuban market is opened. I came away from the meeting even more convinced that trade sanctions have outlived their purpose—if there ever was one.
Over the past several months, I have been involved in several meetings in which farmers have expressed a desire to seek new opportunities to add value to their commodities. Somehow we have to figure out a way to gain a larger share of the consumer food dollar. While farmers are experts at raising crops, we know relatively little about the processing sector. But it is time we took time to learn.
Congressmen Jim Talent and John Thune have put together legislation that will assist farmers seeking to participate in emerging value-added opportunities. Specifically, I would ask that you support their efforts to authorize Centers that link farmers with technical expertise relative to engineering, legal services, business planning and market development. These one-stop shops would be a very useful tool for many farmers.
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Also, I hope you will consider their bill to provide Federal tax credits to farmers who invest in value-added endeavors. Given the weakness of the U.S. farm economy, we have heard all too often that a farmer lacks the capital to join a new generation cooperative and the family's lender in wary of additional exposure. State and/or Federal tax credits can help bridge this gap.
A renewed focus on regulatory reform and tax relief would also benefit U.S. farmers. Yet, I want to bring one regulatory issue to your attention. Federal worker protection standards are now being implemented and I recently attended a meeting on this subject that has me worried. It makes sense for farmers, and their employees, to use extreme caution when handling crop protection tools. And records are indeed important. Yet, I am concerned that we have been told to expect daylong inspections of equipment and records. There is a fine line between the public's right to know and my right to privacy. Furthermore, the time component alone warrants your review.
Again, thank you for allowing me to share my thoughts on U.S. farm policy. You have my best wishes that the remainder of your meetings will be successful.
Testimony of Byron F. Lemoine, III
Mr. Chairman, and members of the committee, thank you for this opportunity to address you today concerning Federal agricultural policy. I am Byron Lemoine, a farmer from Hamburg, LA, which is located in the central portion of our State, east of Alexandria. I am active in various organizations at the parish and State level and serve on the United Soybean Board. I along with my wife Karen, grow corn, cotton, grain sorghum, soybeans, sugarcane and wheat. As a diversified producer, I can tell you that the past 2 crop years have been the most difficult times in my farming career and have highlighted the shortcomings of our current program. I am very pleased you are holding these hearings.
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Even as diversified as my operation is, there is not one crop that currently looks more promising than another to me. While some commodities are inter-related, the market forces and factors that can affect one commodity are very different than those that affect another. Therefore, I believe agricultural policies should continue to address the different needs of the producers of various commodities.
I think we should also focus more emphasis on the policy areas that will help all U.S. producers compete and prosper in the global market place as well as policies that accommodate producers satisfying domestic markets. As you know, improved trade and regulatory reforms were promised when the FAIR Act of 1996 was being debated. Efforts to make improvements in these areas and to add additional resources to public research should be increased. While some of these areas are complex and the desired results are often difficult to achieve, I believe it is more efficient and beneficial to invest resources up-front rather than to have to address issues after the fact when they have become problems. At that time, solutions are often more difficult and expensive to obtain. In addition, our program structure should be able to address agriculture's worst case scenarios such as when no cropping alternative is profitable over an extended period of time and when multiple year disasters affect credit worthiness.
In the area of trade, we must maximize and expand the use of measures that will enhance exports. The importance of U.S. agriculture trade to farmers and our entire U.S. economy cannot be overstated. In the near term, some of the current programs will be critical to increasing U.S. exports. Investments in developing new markets should benefit us in the future as long as there is access to those markets. Improved access to world markets must be obtained and a more fair trade environment provided in future agreements. In trade negotiations, we must get credit for the lower level of U.S. agricultural subsidization and utilize a request-offer strategy instead of across the board subsidy reductions that have allowed trading countries to maintain an unfair trade advantage against U.S. producers. In addition, enforcement of standing trade agreements must be re-doubled. Currently, imported sugar is streaming across our borders disguised as molasses and flavored sugars in order to circumvent U.S. tariffs that ultimately affects our markets and the income of U.S. producers. We must also continue to realize that other factors such as excessive regulations on U.S agriculture will diminish any competitive advantages. I cannot pass on the increased costs of regulations. Hopefully, some of the present and proposed regulations on U.S. agriculture will become less emotional and fall victim to sound science before we end up exporting another once viable industry to other countries.
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Research is also key in sustaining a viable U.S. agriculture. In my opinion we are in jeopardy of losing the advantage we have had in developing and adopting advances in technological improvements. Technological improvements have been a key part of the success of U.S. agriculture. We currently do not seem to be advancing as fast as we once were. While private and check-off funded research is important and has increased in some areas, the need for continuing and increasing public research cannot be understated. We should increase public funding for agricultural research. There is no doubt as to the tremendous benefits that investments in public agricultural research have had for our society and the world. Land Grant University research has provided significant benefits and their funding should be increased. USDA's competitive grants program should also be increased. New alternative use research for all crops should be encouraged.
Without increases in productivity, increases to fair trade opportunities and the ability to produce without undue regulations and costs, I believe the problems we are facing will increase and the other agricultural policy options used to offset these problems will become more difficult to obtain and expensive to support.
Probably, the planting flexibility that is provided by the Fair Act (current farm program) is the most popular provision of the current law. While this flexibility allows me to shift acreage to other crops, some producers who have fewer cropping options may receive less benefit from this provision and in some cases, the effect of flexibility can be negative. For instance in my part of the State, years ago when crop yields for program payments were established and crop acreage bases were determined, there were a lot of farms that mainly produced soybeans. Producers on those farms are now at a disadvantage when compared with others that receive greater amounts of AMTA payments decide to plant more soybeans. The same is applicable to traditional sugar producers and the effect it has had on the program by allowing program crop producers to collect AMTA payments and plant sugar cane and sugar beets on contract acres. While I like flexibility, this demonstrates how the same policy affects different producers and the need to make sure all commodities receive adequate support.
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A personal example of the negative effect of flexibility can be cited with rapid influx of program crop contract acres into sugar production. This in large part has led to surplus sugar production that has caused domestic sugar prices to decline by roughly 20 percent in the past year. On my other crops, I could collect a LDP and sell the crop when prices are trading below the loan rate, as sugar currently is. However, since sugar does not have a marketing loan, the downside risk protection mechanism is a non-recourse loan that is only available if we import a minimum of 1.5 million tons. This places sugar producers at a disadvantage when prices trade below the loan rate because it requires producers to pay a 1 cent forfeiture penalty and forfeit their sugar to the Government to receive the loan value for our crop. This is the only means of establishing a price floor for sugar and seems to me to be an inequitable arrangement for traditional sugar producers. If the committee would entertain my thoughts, I would suggest the following changes. First, remove the 1.5 million ton trigger to maintain a non-recourse loan. None of the other commodities I produce has to qualify to receive a non-recourse loan. Second, remove the 1 cent per pound forfeiture penalty. If prices are so low that you have to forfeit the crop, the last thing you need is to pay a penalty that reduces your income even further. I would prefer a system where the differential between the market price and the loan rate is paid to the producer, similar to an LDP, so that we receive the downside protection and can sell into the market and not forfeit the crop to the government.
Even though current payment yields and acreage are frozen and are the basis of the production flexibility contracts and AMTA payments, I think we should also address payment acres and yields in the next farm bill. The current yields on many farms are outdated and do not reflect what is actually produced. The 1985 farm bill froze payment yields. A lot has changed on my farm since we were last able to provide yield data for payment purposes in 1984 (16 years ago). We should also consider the changes in cropping patterns and farm acreage use in the future programs.
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Also, in my area, crop insurance has not been a viable or affordable tool for efficient producers. To me, the delivery system has benefited more than farmers have. Years ago, the fraud and abuse of the program led to rates being increased because of the excessive losses experienced. Hopefully, the current changes under consideration will not only decrease the costs to producers through additional premium subsidies but will also include alternative rating methods so that the true risk of growing a crop in a given region is used to rate the policy and not just the experience of the ones that used the program. I also believe that these changes must come with additional oversight and controls so that potential abuses can be minimized or eliminated.
I also support the addition of a counter-cyclical program being added to the current farm program structure. We need something that in depressed times such as these we can count on to assist us in sustaining our operations until prices and incomes improve. In my opinion the marketing loan is one type of counter-cyclical program that has worked well. Increasing the loan rates equitably among commodities to provide an increased safety net should be considered in the debate. Whatever programs are developed or modified, they must be structured so that a farming operation can not only participate but also remain a viable enterprise during a prolonged period of unfavorable economic times such as these.
The assistance provided the last 2 years has enabled a lot of producers in my area to continue to stay in business; however, it is nearly impossible to make any production loan cash flow without some assumptions on what assistance will be provided this year. As I stated earlier, all of the commodities I produce are experiencing very low prices, the assistance provided to oilseeds last year was helpful. This year, that type of program may need to be increased and expanded to other non-AMTA commodities such as sugar. It is extremely difficult for many to obtain credit under this uncertainty. That is why an ongoing program needs to be added or current benefits need to be increased as soon as possible.
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Again, thank you for holding these hearings and allowing me the opportunity to testify. I will be happy to respond to your questions.
Testimony of Donna Winters
My name is Donna Winters. My husband and I farm 2,600 acres of cotton, soybeans, corn, winter wheat, and milo in East Carroll Parish, LA, and rent out approximately 650 acres for sweet potato production in West Carroll Parish, LA. We are both third generation farmers on our respective family farms. Thank you for the opportunity to share my views with the panel today.
Mr. Chairman, I know that your committee will hear repeatedly during the course of these field hearings that, agriculture has not shared in the robust U.S. economy and in fact, U.S. producers face a severe economic crisis due to record low commodity prices. The emergency relief provided by Congress over the past 2 years have helped stave off many potential bankruptcies. For that we are extremely grateful.
Unfortunately, prices for our primary crops in this area look as bad at planting time as they have over the past two seasons. It appears we will again need some special assistance from the Federal Government to avoid catastrophic financial problems. The financial aid package passed by Congress in 1999 was of great benefit to producers of all commodities. I would strongly support a similar proposal for the 2000 crop.
It is true, of course, that the price of cotton on the New York Board of Trade has risen about 10 cent a pound since the low point reached last December. During the same period, the world price and, therefore, the adjusted world price have risen about 12 cents. This price rise may prompt some optimism for the season ahead. However, any optimism associated with the price recovery to date is probably misplaced. While the market price for cotton has risen about 10 cents, the loan deficiency payment has fallen about 12 cents. The net effect is that a farmer with cotton to sell today would net about 2 cents less than he could have gotten in December, despite a 10 cent rise in New York futures prices.
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A Louisiana cotton farmer can look to December 2000 prices and, assuming he expects to harvest base grade cotton, his return prospects from the market approximate 55 cents a pound. Assuming planted acres and payment acres are roughly the same, the fixed AMTA payment would add about 7 cents a pound for a total gross return approximating 62 cents a pound. According to the Louisiana State University Ag Center, it costs between 68 and 72 cents per pound to produce cotton in Louisiana, so this price is still well below our cost of production. This not only concerns producers, but adds serious doubts to bankers who are being asked to finance these crops.
Mr. Chairman, cotton has paid the bills in my region of the country for well over 100 years, and when our best crop is shaping up for a loss, it underscores the importance of these hearings. Your listening sessions across the belt are both timely and very much appreciated.
In the absence of disastrous weather, insect or disease problems somewhere in the world, economic consensus suggests that agricultural prices will remain below production costs on most farms again this year. Unless Congress is prepared to amend current farm law to provide a better safety net (which I strongly support) I know farmers in this region—and I suspect farmers from all regions—will be seeking emergency relief again.
As we look to new farm program legislation, my first concern may seem obvious, but essential to the development of any viable agricultural policy. Congress must be willing to allocate sufficient budget authority to fund a workable farm bill. The remaining budget authority left over at the conclusion of the FAIR Act of approximately $4 billion is grossly inadequate. So my first concern is budgetary. Unless we have sufficient spending authority, sound policy is of little good.
Generally speaking, cotton farmers in Louisiana like many of the policy principles contained in the FAIR Act. We like the planting flexibility permitted by the FAIR Act as well as the marketing loan provisions keyed to the world price for cotton. We would strongly support removing the budget-driven cap on loan rates and return to a formula-based loan. We also like the three-step competitiveness program that has helped to keep U.S. cotton price-competitive to our customers while underpinning the price received by growers.
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The most glaring weakness with the FAIR Act is its inability to provide adequate income protection when prices are very low. Mr. Chairman, agricultural supply, demand and price behavior have always been volatile, and always will be. It was entirely predictable that we would experience low prices at some point during the 7-year life of the FAIR Act. We knew when the Act was passed that the safety net was inadequate, but Congress was driven by budget pressures and farmers simply hoped that when low prices developed, Congress would be forthcoming with some kind of help. That, of course, is what has happened.
When Congress begins serious deliberations about new farm policy, I hope some improvement can be made in the low-price safety net. Longer-term policy is much preferred to the uncertainty of emergency relief packages. Our lenders are reminding us of this fact as we seek production financing this spring.
Another disturbing trend is the mindset of some policymakers who want to put even greater limits on farm program benefits through means tests, reduced payment ceilings or other forms of benefit targeting. Payment limitations are counterproductive for American agriculture and for every American citizen. Roughly 20 percent of all farms produce 80 percent of the total output. A family farming operation today could easily consist of several thousand acres. How else could one justify paying $250,000 for a four row cotton picker. It is these very farms that purchased the vast majority of all farm equipment, various agriculture production inputs, and who hire the lion share of all farm laborers. Commercial size family farm operations in the U.S. need Federal assistance primarily because they face highly subsidized competition in the global marketplace, as well as continued regulation here at home, such as the forthcoming increase in the US minimum wage. Unless the U.S. is willing to sacrifice its agricultural production base to foreign subsidies, similar to the situation we currently face with the OPEC cartel, we must have farm programs that enable commercial size farming operations to enjoy a reasonable partnership with our government.
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While on this subject, I want to express appreciation for the special accommodations made by Congress for the 1999 season. If the separate payment limit had not been provided for supplemental AMTA payments, and if the limit had not been raised for marketing loan gains, farm program benefits would have been denied to many family farmers who again are responsible for the great majority of our food and fiber production.
Authorization for loans to be redeemed with certificates was also a very important adjustment. It prevented the forfeiture of about a million bales of cotton to the Commodity Credit Corporation which would have been auctioned this fall at about the same time farmers were harvesting their new crop and attempting to price it.
With regard to other recommendations for future farm policy, I can tell you that the cotton industry generally does not look favorably on supply management programs. Prices tend to be driven largely by world supply/demand conditions and, therefore, U.S. set-aside programs have generally proven to be ineffective. More than anything else they encourage foreign acreage expansion while providing little or no help for prices.
Our industry would favor an increase in the conservation and wetlands reserve programs that help to generate optimum returns from marginal lands while providing significant environmental benefits. Perhaps, it might be feasible to offer an increased choice of terms and conditions to encourage greater participation in the conservation and wetlands reserve programs.
Other issues under consideration include whether farm program benefits should be coupled or decoupled, and the pros and cons of fixed benefits versus price or income related benefits. Some combination of fixed, decoupled payments together with a coupled, counter-cyclical payment could perhaps have merit.
There has also been considerable discussion in the area of crop insurance reform. Crop insurance has not been a viable option for main-stream producers in my region mainly due to fraudulent behavior on the part of the producer and the lackadaisical attitude of those selling the product. Mr. Chairman, we applaud your efforts in shepherding a meaningful reform measure through the House of Representatives. We, like you, want an improved product—one that does not contain loopholes that allow abuse or misuse. We also want an improved delivery system, more specifically, one that will allow farmers to purchase insurance from grower-owned cooperatives.
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However, we strongly believe that crop insurance should not be used as a delivery mechanism for farm program benefits. We believe it should be a separate production loss risk management tool.
In summary, Mr. Chairman, from my perspective in Louisiana, there are several adjustments to the farm program that I would very much like to see made:
We need a better safety net to protect farm income when prices are low;
We need, at a minimum, continuation of the adjustments made in 1999 to permit commercial-sized farming operations to participate more fully in program benefits; and
We need an effective crop insurance program for ensuring production losses.
I would share one final observation in closing. I am concerned about the extreme difficulty that young people face in getting into farming. I frankly come with no specific recommendations about how to improve this situation, but I believe it is a concern widely shared among virtually everyone who has devoted a working lifetime to farming. Most of us would like to be able to pass the baton to our children and grandchildren. However, the absence of profits from the market, the uncertainty of farm programs, the high capital requirements, the scarcity of financing and the excessive risk make it nearly impossible for us to bring family members into our farming operations. I hope something can be done to improve this situation in new farm legislation.
Thank you for the opportunity to share these views.
Testimony of Dean Gravois
Hello, and thank you for the opportunity to testify before the committee regarding the many problems facing America's family farmer. My name is Dean Gravois, and I am a family farmer raising sugarcane in Vacherie, LA. I speak to you today on behalf of myself and the other 700 family farmers and 18 raw sugar processors in Louisiana that make up the American Sugar Cane League.
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Farmers in Louisiana have been growing sugar continuously for more than 200 years. Together we support a unique rural society, a culture, literally built on the agrarian traditions of sugar farming. I describe this society as unique for a reason. First, we are unique in that we descend directly from Acadian immigrants who bequeathed to us our rich Cajun heritage. Our customs and even our accents distinguish us, as anybody who has been to south Louisiana can tell you. Yet, unfortunately, we are also unique in that we are among the last of a dying breed—an entire region of communities bound together by a common agrarian goal. The family farmer is an institution that is still an integral part of our communities. Over 32,000 people in Louisiana depend on the sugar industry for their livelihoods. Yet, while virtually every other part of our national economy enjoys the fruits of a record boom, the family farmer is suffering in ways unseen since the Great Depression.
American farmers are among the most efficient, the most productive, and the most environmentally-friendly in the world. This is true for sugar farmers, just as it is for corn, cotton, rice, and soybean farmers. A global economy that seeks to increase the health and living standards of all people, that aims to encourage the most efficient allocation of economic resources, that hopes to save the rain forests and improve the environment on every corner of the planet, should theoretically offer a commercial framework ideally suited to the American farmer. Why, then, is the American family farmer suffering so much, just as new trading regimes promise to create a new, free world trading system?
For sugar, the problem is rooted in an over-supply, created by a variety of factors, but, most importantly, by entry into our domestic market by subsidized foreign sugar and by program management problems that have destroyed market confidence. Since we face both short-term and long-term uncertainty, due to our current over-supply and to changes on the global trade horizon, we need both short-term and long-term solutions.
First, in the short-term, the USDA must remove enough sugar from the domestic market to avoid forfeitures, which will otherwise be massive and very costly. The sugar could be purchased for sale or donation overseas, or it could be put to domestic non-food use, such as to make ethanol.
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Second, in the long-term, we must find a way to discourage the unfair entry of subsidized sugar outside our tariff-rate quota, or TRQ, and we must improve the mechanisms by which our sugar program is managed.
A Short History. To understand why these solutions are necessary, we need to review how our over-supply and market problems occurred.
Until last summer raw sugar prices had been flat for almost 20 years. Of course, over that time, production costs had risen just as it would for any industry, due to normal inflation. Farmers were getting pinched within the narrowing gap between rising costs and flat prices. Changes to the program imposed by the 1990 and 1996 farm bills added further pressures by imposing a marketing tax, a later increase in that same marketing tax, and a forfeiture penalty. In addition, the 1996 farm bill raised the minimum import level needed to receive non-recourse loans to a floor higher than that to which we had agreed under the Uruguay Round, a unilateral increase in our import commitments that was neither asked for nor matched by our trading partners. By the way, the Uruguay Round had already required us to import at least 1.256 million tons, which was then equal to about 15 percent of domestic consumption, regardless whether the market demanded the extra sugar or not.
Over the years, as a result of these developments, marginal producers began to fall away. Important segments of the domestic industry began to disappear. Keep in mind, this means that real families were losing out, not the large, corporate farms who many people think suffer only on the proverbial bottom line. And these real families made up real rural communities that were depending on a healthy agricultural economy. To understand the devastation this kind of loss means, you need to look no further than Hawaii. Sugar production in that State is a fraction of what it was only a decade ago. And the rural communities there have yet to rebound fully. No industry has come to take sugar's place. The void has been filled by rising crime rates, disintegrating family structures, and just about every other social symptom you can name to index the misery.
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The flat prices forced the more efficient farmers to do whatever they could to lower fixed costs, which of course were being pushed continually upward by inflation. Since sugar production, compared to many other commodities, requires a relatively high degree of capitalization with a rather long investment horizon, the only way to lower fixed costs was to target investments toward improving yields and expanding acreage to achieve an efficiency of scale. In this way, the more efficient farmers were able to stay afloat, while trying to capture some of the market left by the marginal producers who fell to the side. Yet, always looming overhead was the flat price, which came to resemble a glass ceiling.
With the passage of NAFTA, our trade negotiators imposed a new pressure onto the domestic market. We were assured by our government negotiators that Mexico, long a deficit producer, would never produce enough sugar to damage our industry. An obscure provision was included in the NAFTA side letter on sugar that offered to Mexico access to our market outside of our TRQ at a declining second-tier duty rate. Again, we were assured this would not affect us because Mexico would never produce enough to send over-TRQ shipments. Nevertheless, within a few short years, creative government financing in Mexico, which essentially relieved its industry of capitalization costs, spurred a boom in Mexican production.
During all this time, the world dump price of sugar tossed up and down wildly, as production and export subsidies by many major exporters, like the European Union and Brazil, encouraged a glut on the thinly traded world market.
By last summer, the world market was stumbling under the weight of this glut. The world dump price fell to a level that was no more than a fraction of the cost of production for even the lowest-cost producers in other parts of the world. Exporters such as Mexico and the European Union, facing subsidy-fed over-production internally, were doing everything they could to get sugar out of their domestic markets. Inevitably, the pressure from this glutted world supply was borne onto the United States.
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Importers began looking at creative ways to evade our TRQ and bring in some of this subsidized foreign sugar. Eventually, they found just the method. Imports of a sugar syrup, known as stuffed molasses, began entering Michigan through Canada. Importers stuff this syrup with refined sugar, ship it across our border in the syrup form so that it receives a tariff classification under a different subheading than those subject to our TRQ. Then, once it is in the United States, they spin the sugar out the syrup. They sell the sugar into our sugar markets, ship the syrup back to Canada, and re-stuff it with more sugar for another shipment to the United States. This amounts to a clear and calculated evasion of our TRQ, our internationally negotiated rights, and the spirit of our domestic customs laws.
Meanwhile, excess Mexican sugar began finding its way to warehouses just outside our customs zones, where some of it still sits under bond, waiting for importation under the ever-declining second-tier NAFTA duty.
The presence of this Mexican sugar, along with steady shipments of stuffed molasses, dumped a heavy weight onto domestic raw sugar prices. By last summer, this weight became too much as all of this foreign sugar contributed to a sudden and unexpected oversupply on our domestic market. The price of raw sugar began to fall.
Officials at USDA were faced with a dilemma regarding the management of our program. Back in 1996, after passage of the FAIR Act, the USDA had instituted a new method for administering our TRQ. The idea was to connect the decision to import sugar with the domestic stocks-to-use ratio, which offered a rough estimate of the domestic supply-demand balance, and thus remove human discretion as a factor in management of the program. It was presumed that if stocks were lower than an arbitrarily fixed trigger, then domestic demand, and thus price, would be high enough and stable enough to withstand import tranches. Unfortunately, there appeared to be insufficient correlation between the stocks-to-use ratio and the price of raw sugar. As a result, import tranches under this system further exacerbated external pressures on our domestic price, and created considerable turbulence throughout each year for farmers who could not rely on the USDA to prevent unnecessary imports.
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By the autumn of 1999, it had finally become clear to all that this trigger method would not work. The price of raw sugar had fallen through the floor, while the stocks-to-use ratio indicated that prices should be just fine. And now, the picture was undeniably clouded by the sudden imbalance between supply and demand. The presence of stuffed molasses through Canada and second-tier sugar from Mexico meant that there was far more sugar than the domestic market could absorb. Domestic production was already expected to be high, due to the higher yields that had been sought by surviving growers to lower fixed costs.
Debates within the Clinton administration over how to deal with this problem led to an unusual delay in the announcement of the fiscal year 2000 TRQ. The nearly 2 month delay created even more problems. First, it simply confirmed fears among market participants that the USDA could not reliably manage the program and severely undermined market confidence. Second, it eventually forced foreign suppliers to cram unnecessarily high shipments into a shortened first quarter, in order to comply with normally desirable shipping pattern requirements. Third, it led to a horrendous error by the USDA, which created an entirely new source of foreign supply. This error occurred when the USDA granted a unique waiver of the re-export program to a single refiner, extending the period of re-export from 90 days to 5 years. The USDA later shortened the period to 7 months, still long enough for this additional sugar to wreak havoc on the market.
These problems were all simply too much and the price of raw sugar plummeted. Soon, the downward draw of raw sugar prices pulled beet sugar prices down, as well. And that is where we are today.
Overall, raw sugar prices are down approximately 25 percent to the lowest level in almost two decades (See Attachment). Losses to the current crop from the price catastrophe currently translate to more than $1 billion to the cane and beet industries. Unless the price rises significantly, massive forfeitures are inevitable. The Commodity Credit Corporation (CCC) reports that it has more than 1.3 million tons of sugar under government loan.
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The long-term picture is not much better. Unless something is done, imports of stuffed molasses will continue to be dumped onto the domestic market. And, beginning later this year, access to our market for Mexican sugar will increase 10-fold.
Solutions. What can Congress do to resolve this catastrophe? The solutions must address both the short-term and long-term problems.
To resolve the current supply crisis, and to avoid massive and costly forfeitures of sugar to the CCC, the USDA should immediately purchase a significant amount of sugar from the domestic market. The sugar could be sold or donated overseas, or it could be used to produce ethanol to help meet rising demand for that commodity. Such a purchase would improve the current crisis in three important ways. First, it will avoid the massive forfeitures that would otherwise occur, and thus minimize costs to the government. Second, by removing sugar from the market, something forfeitures would not accomplish, the purchase would invigorate producer prices and thus strengthen producer incomes. Third, it would help to rebuild market confidence in the government's management of the program. Renewed confidence can often provide a sort of domino effect by soothing market nerves. Further, by serving as a precedent for future crises, the purchase will contribute to needed stability down the road.
A long-term strategy includes improvements to both our trade agenda and our domestic farm policy.
Improving our trade agenda means addressing our problems with stuffed molasses and with subsidized sugar from Mexico. We need legislation to prevent continued circumvention of the TRQ from stuffed molasses and any other similar evasive products. And the U.S. government must shore up the integrity of NAFTA by refusing to be buckled by Mexico's attempts to undermine the side letter on sugar.
Improving our domestic farm policy involves four important changes. To put my suggestions into proper context, it should be noted that sugar growers are not eligible for the market transition payments, known as AMTA payments. In fact, availability of AMTA payments to other commodities has indirectly exacerbated the problems sugar growers now face. Many growers of other major commodities who receive AMTA payments have utilized these funds to enter into sugar production, which in turn deepened our supply and producer price dilemmas. Except for a temporary suspension of our marketing tax, sugar growers have not shared in any of the emergency relief packages provided by Congress to farmers each of the last 2 years. Thus, to address the disasters in the sugar-growing regions of the country, your approach must focus on these four specific provisions of the sugar program:
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First, Congress should reinstate the no cost provision that was left out during drafting of the 1996 farm bill. Reinstatement of this provision could be achieved through a technical correction, since its inclusion in the FAIR Act was clearly the intent of Congress. It would also add a significant measure of stability to the USDA's management of the sugar program.
Second, Congress should permanently eliminate the marketing assessment on sugar. This tax was included in the 1990 farm bill, and increased by the 1996 farm bill, to help reduce the Federal budget deficit. That deficit has now been replaced by a surplus. Mission accomplished. The assessment still means about $40 million annually to sugar farmers, money they sorely need.
Third, Congress should abolish the one cent forfeiture penalty added by the 1996 farm bill. This penalty reduces further the incomes of sugar farmers, whether they have forfeited or not. Nevertheless, Congress should direct the CCC that, in the event sugar is forfeited, such forfeited sugar will neither be sold for food use onto the domestic market nor otherwise be disposed of in a manner that would further depress domestic prices. Instead, the CCC should be directed to dispose of forfeited sugar in a way that will strengthen domestic sugar producer prices, for example by sale for non-food use.
Fourth, Congress should assure sugar farmers of non-recourse loans, regardless of the level of imports. Sugar is the only program crop without a guarantee of non-recourse loans. The minimum import level required to receive non-recourse loans added to the misery of farmers this year by undermining USDA management of the program. It also represents a unilateral increase in our international trade commitments that our foreign partners neither asked for nor matched. Thus, it weakens our bargaining leverage.
Making these important changes will go a long way to strengthening the integrity of the sugar program and to assuring our sugar farmers that their livelihoods will not be tossed aside simply to make room for heavily subsidized, less competitive foreign producers.
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After more than 200 years, Louisiana farmers have learned a thing or two about sugar production. It is not only our best crop, it is our only crop. We have tried to grow other crops, without success. Nothing else, but sugar, grows well in our region. The loss of our industry would mean absolute devastation to my heritage, my community, and my State. I cannot help but remember the lesson painfully learned in Hawaii
I urge you also to keep the Hawaiian experience at the forefront of your thoughts as you consider what Congress can do to repair the terrible crisis facing our family farmers. Sugar farmers do not want unfair protection, nor do we want an unfair advantage. We simply want fairness, itself. Join our fight against the vagaries of the subsidized world market. Join our effort to fix our broken program. Join our struggle to rebuild the family farmer.
Testimony of Daniel Lyons
I'm Daniel Lyons of Church Point, LA, from the heart of Cajun and crawfish country. I grew up on a dairy farm. My total income is derived from a family farm my wife, children, and I have operated for the past 31 years. Our operation consists of grains, hay, beef and dairy cattle, and quarter horses.
I appreciate the opportunity to provide my views on farm policy that affects the livelihood of farmers as well as that of the consumer here today. What we are really here to talk about is guaranteeing the consumers of America a safe and abundant food source for years to come and what that cost will be.
We, as farmers in the United States, are producing against other countries, not the farmer. We must not use food as a tool of foreign policy. When we do, farmers must be justly compensated.
The 1996 farm bill promised us improved trade and regulatory reform. I feel that there has not been enough effort given to combating Unfair Trade Practices. We have not lifted trade sanctions against certain countries which denies export markets for U.S. crops and livestock.
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I support granting permanent trade relations with China. I also support the use of carousel retaliation in enforcing trade agreements. Being in a global economy, we need to make sure that all commodities are on an equal playing field and agriculture does not become a sacrificial lamb for other entities or special interest groups. Until trade barriers are removed and fair trade achieved, an increase in price supports through higher loan rates is needed. We need loan rates that reflect cost of production more closely so that when we go to the bank to make a loan we can cash flow.
I also support additional funding for USDA Export Assistance Program as well as domestic programs to assist in the movement of commodities. While I support the flexibility of the current farm law, I am not interest in going back to the old ''set aside'' program of ''Flexible Fallow'', because today's global economy other countries would just increase there production.
Fairness of AMTA payment distribution must also be addressed. I farm 900 acres of corn, wheat, and soybeans, and only 232.6 acres qualify for AMTA payments. Our ability to add program acres and yields need to be adjusted to today's planted acres and production capability.
Agriculture production has come a long way since 1985. So if we are to use AMTA payments to help farmers survive, we must bring this up to date to get maximum benefits to farmers from this program.
My next issue deals with a safety net or crop insurance program that can be used across the board for all commodities and has the farmers' best interest in mind. This can be achieved with a crop insurance program based on cost of production with strong emphasis on oversight and compliance. This type of program would be adaptable to all commodities and take into affect regional differences within commodities. Insurance programs needs to be optional and on an individual basis. Farmers need to get the money not the delivery system.
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The Livestock Assistance Program and NAP program for non-program crops need to be brought up to date, so it more closely reflects today's production levels and be fully funded. EQIP, which helps to protect the natural resources of this country, needs additional funding.
Another issue, 25 States have asked for dairy compact to assure a fresh supply of milk for their consumers in their States. You need to allow them to do this. Our FSA and NRCS office needs to be kept separate and funded at a level so that the services they provide to the farmer can be met on a timely basis. NRCS which is a science based USDA program formed to protect the land must be involved in environmental issues or issues that involve land and water resources.
I support full funding of agriculture research with emphasis on value added products, development of new varieties, and best management practices. We also need to label meat as to country of origin.
Agriculture provides us with renewable resources and agriculture research is the key to developing new products from those renewable resources.
Best Management Practices developed to protect our environment must be based on sound science and be cost effective. The death tax must be eliminated.
In closing, I thank you for the opportunity of allowing me to state my concerns. And as I said before, what we are doing here today is trying to decide what the American consumer is willing to pay the person producing the food for this country, to make sure they have a safe and abundant food supply produced here in the United States. Just a footnote, ''The farmers need a cost of living increase.''
Statement of David Hillman
I am David Hillman. I'm a farmer from Almyra, in east-central Arkansas and I grow rice, soybeans and wheat. I am the fourth generation of my family to farm our land and I farm with my brother. I am also president of the Arkansas Farm Bureau Federation but I want to speak to you today as a family farmer.
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I like the FAIR act. I like the flexibility it gives me as an individual to make my own decisions on the farm. I believe that no government program can replace a farmer's ingenuity, resourcefulness and knowledge of his own situation. But when the FAIR act was written nobody could forsee what really hard times lay ahead, and as a result the FAIR act as it stands today does not constitute an adequate national farm policy.
I believe that the reason for a Federal agriculture policy is to maintain a stable, high quality, affordable food supply for the Nation. And I agree with Congressman Berry that too few recognize that agriculture is a national security issue. It's a shame that we are dependent on other nations for our oil supply but we don't need to push agriculture into the same situation by systematically letting our farmers dwindle in number. You cannot rebuild an agricultural infrastructure overnight and once it is allowed to deteriorate to the point that quality, price and availability start to affect the consuming public, it will take years to turn the situation around. The time to ensure a viable food supply for the future is now!
When the FAIR Act was passed we were promisedthat it would be accompanied by regulatory reform, open foreign markets and increases in research funding. These promises haven't been kept. We're accepting smaller and smaller transition payments and taking on added risk and responsibility. That did our part of the FAIR deal. But government hasn't done its part. You've already been told how tough times are. Now, add higher fuel prices to the equation. And remember that farmers cannot pass on our increased costs by charging higher prices. We are price takers. Basically, we have to sell our products for whatever the market is paying. We have no mechanism to raise our prices to cover higher fuel costs, increased regulatory costs, inflation or any of the other input and overhead costs we incur.
Remember too that we cannot control external factors. We can't control the weather, and the last few summers have been brutal. Flooding, drought and, believe it or not, a combination of the two for some farmers, have resulted in lost crops. Another thing beyond our control is foreign policy. It's my understanding that approximately 50 percent of the world's population is shut off from American farm exports. Most of those because of export bans imposed on us by our own government. Cuba is a perfect example. If boycotting Cuban trade was ever going to work, it would have done so by now. Mostly, the Cuban people and American farmers are the ones suffering. The Cold War is over and it's time we got on with the business of being neighbors and trading partners. We need to open up trade with China. The argument that trading with China somehow validates their human rights problems doesn't hold water. In fact, the best way to influence someone's behavior is to establish dialog. Trade is dialog. If we think limiting trade with China will bring about social change there, we've failed so far. We can sell Arkansas rice to Cuba cheaper then they can import it from Asia. We can provide high quality Arkansas cotton and the kind of wheat I grow to a huge Chinese market. And remember that these exports mean additional employment in non-agricultural sectors such as transportation, marketing, processing and others.One reason American agriculture is the envy of the world is that we've had the benefit of excellent research. Our system of land grant colleges and research and extension have helped us be the most efficient farmers on earth. Our knowledge and implementation of improved farming techniques have helped us succeed at being environmentally responsible. We are conservationists at heart. Remember, my family is still farming land that my great-grandfather farmed. If that's not sustainable agriculture, I don' t know what is. But we need continuing research to be better at what we do if we are to survive with reduced government assistance. Every time a government agency passes a regulation that affects us it, it costs us money. Right now the EPA is pushing two areas of regulation that are particularly troublesome for us. One is the Food Quality Protection Act. The other is Total Maximum Daily Load regulations.
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Many of us supported the FQPA as a means of bringing some sense to pesticide regulation. We understood Congressional intent to mean that science would replace politics in the determination of the safety of crop protectants. We understood that a rational, methodical process would be used to regulate pesticides. Instead, we see the EPA circumventing its own rules in the rush to take crop protection tools off the market. We see politics replacing sound science. We see an EPA flaunting the intent of Congress and disregarding the wishes of our congressional delegation who have called them to task. Without these tools we cannot farm. Show us how to farm without these crop protectants and we'll do it but don't take them away without providing an alternative. A second troubling and potentially costly regulatory activity of the EPA and one which we believe is illegal is the EPA's move to classify agriculture as point-source pollution. It is clear that this was not congressional intent. It is also clear that in Arkansas there is no need for new regulations because we have have voluntary compliance efforts in place for years and our lakes, rivers and wells are clean. The potential economic impact of us having to modify our land and operations to comply with an unneeded Federal regulation intended for sewer plants and chemical factories would be unbearable by many farmers.
It is almost inconceivable that a Federal agency would persist in overreaching Federal law, imposing onerous burdens on farmers during the worst economic crisis agriculture has faced since the Great Depression. There have been three meetings in Arkansas in the last month or so over the TMDL regs and if you don't believe farmers are outraged, ask the regional EPA representatives who attended those meetings. Ask your fellow congressmen from Arkansas. In those three meetings alone, about eight thousand farmers came to demonstrate their concern over these new regulations. Farmers are looking for regulatory relief.
With all of these external factors which we farmers can't control, we believe we need a safety net. Not just for our sake but to maintain a healthy stable food production system in this Nation. We need a workable crop insurance program but the current plans are not economically feasible, at least for Arkansas and many southern crops. We need a counter cyclical safety net. I know that payment limitations are popular with those who oppose farm programs but many of our most efficient farms are larger farms which would be helped very little by a payment limitation. It's not uncommon for family farmers to farm a thousand or more acres, yet, they're still family farms. Still at risk in today's fragile farm economy.
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In summary: Let's not throw out the baby with the bath water. Keep the FAIR Act, but put a safety net under it. And provide us with regulatory relief. And please bear in mind that there is more at stake here than the welfare of individual farmers. This is the food supply for every man, woman and child in America.
Statement of Tommy Barham
Mr. Chairman, members of the committee:
My name is Tommy Barham and I am from Oak Ridge, LA. I am a fourth generation farmer, and I am the principal owner and manager of Larkin Plantation Farms. Our main crop is cotton, but we also grow soybeans, corn, and rice. We have commercially produced other crops such as peanuts, vegetables, wheat, cattle, and both hardwood and pine timber.
If we consider changes in our current farm legislation we first need to identify the good things we should retain. Two items stand out:
First, the ability under Freedom to Farm to flex acres from one crop to another is vital if producers are going to respond to changing global markets. We must keep this option open for farmers if at all possible.
Second, the current law gives financial support through AMTA payments and loan deficiency payments, and both have provided funds for farmers facing extremely low commodity prices. In some form these payments are essential for farmers to survive under current conditions.
What are the flaws of the current farm bill?
First, limitation of payments penalizes the most efficient producers. Facing global competition we should support our most efficient farmers so that we retain our markets, both domestic and foreign. Limitation of payments should be eliminated or replaced with a system that reflects the reality that the small family farm is no longer the unit most likely to succeed in the long run. The trend is toward larger farms, and limitation of payments only forces unnatural structuring that is counter productive.
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Second, the present support structure does not provide adequate price protection to allow lenders a sound basis for financing farmers. Most operations will not cash flow at current commodity prices. Current support levels for most crops must be raised if farmers without self-financing are to secure operating capital.
Third, more dollars have gone to non-active farmers than under past law, and that reduces funds available for the support of active producers. I do not suggest that non-active farmers should be entirely cut off from support. However, I do believe that those who are taking risks, providing jobs, and producing goods for the market should be given more assistance than those who are not. Perhaps a factored payment for non-active farmers would be better.
There are some other items that should be considered in general:
Agricultural trade sanctions must be ended. Consider rice. At one time the three largest importers of US rice were Cuba, Iraq, and Iran. Sanctions have not stopped these countries from getting rice, they have only taken our export markets away, and in all three countries the same leadership is still in place.
American agricultural interests must not be traded away. No farmer or crop association can effectively negotiate against competing governments. We, as independent producers, are dependent upon our government to represent us in international trade, and we must be protected from unfair competition.
Grades and standards have been misused to deprive farmers of rightful returns. An example of what I am speaking of occurred in 1998. Large areas of the country were hit with high levels of alfatoxin in corn. The price for a huge portion of the corn crop in affected areas was discounted, yet a great part of that same corn went right into normal market channels, including that for human consumption, as corn buyers manipulated and re-graded the grain to receive full price for themselves. This process amounted to nothing less than preying on vulnerable farmers by buyers who reaped huge profits in the process. Another example is the recent case at Hunt's Point in New York where the misuse of grades was used to deny farmers full value of their goods. I am not suggesting that there is anything in the current law that encourages these activities, but I am saying that new law should be much more active in eliminating these practices.
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Recently a great deal of emphasis has been placed on crop insurance. Historically crop insurance has been a poor method to deliver support to farmers. This year for the first time crop insurance is available that seems to offer a tool for reasonable risk management. But the problem with insurance is fraud. Each dollar paid out for fraudulent claims reduces the funds for legitimate claims and drives up premiums. Crop insurance will not work as a method of assistance to farmers unless a stringent program of claims adjustment is put in place and maintained. If crop insurance is considered as a major part of any new farm law, it will be managed best through FSA rather than through a private agency.
Statement of Kenneth B. Hood
Mr. Chairman and members of the committee, My name is Kenneth Hood. I am here as a producer, cotton ginner, and a farm equipment businessman from Gunnison, MS about 100 miles south of Memphis. As you can see everything that I touch, is agriculture related?
Cotton ginning cost has escalated while cottonseed prices have continued lower adding to the production cost for the producer. Farm equipment business is at its lowest ebb ever with virtually no sales of new or used equipment simply because farmers are unable to buy. In addition, accounts receivables on parts and service are grossly delinquent with many probably never to be collected.
Our family farm is in an economic crisis due to record low prices in 1999 for every crop which includes cotton, soybeans, wheat, and grain sorghum, with the outlook now near planting time as bad as ever. It appears we will again need assistance from the Federal Government to avoid severe financial problems. While the market price for some commodities has risen, the loan deficiency payment has fallen with the net effect to the farmer being less than what he would have received in December. The second part of the equation is our bankers who are being asked to finance these crops with prices below our cost of production.
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I am encouraged you are starting early to help address new farm legislation. The current farm bill was driven by budget pressures and as we look to new farm legislation my biggest concern is to develop income protection when prices are low and during low production levels due to unfavorable growing conditions. Beyond the farmers control both these adversities can be experienced during the same growing season or separately during different years. When Congress re-writes new farm policy considerable thought should be made in the low-price safety net in combination with longer-term policy rather than emergency relief packages. I feel this can be done by fine tuning the marketing loan concept to be counter cyclical, extending loan periods to 18 months in combination with marketing certificate programs including both generic certificates and step 2 certificates for cotton. Since cotton is our major crop, this type program would not encourage foreign acreage expansion.
Crop Insurance has failed both the farmers and the taxpayers. Huge amounts of administrative expenses have been paid to the insurance companies with the government guaranteeing the losses. We need a program where farmers can insure the dollars it takes them to produce the crop. Not unlike insuring your car or home. If it is destroyed, your insurance replaces the property. Any crop insurance program has to have FSA involved to maintain the records and to be involved in the oversight on losses and yields. Without FSA involvement, fraud and abuse of the program will continue. I would like to see a revenue assurance risk management program:
that would be initiated in every county for each crop
based on that counties cost of production and farmers yield
revenues derived from current Federal crop insurance allocation
plus current allocated administrative cost
plus farmers paid premium
Revenues would be held in a separate national fund for use
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FSA would keep individual farm history
Each farm would set its revenue assurance cap. When its premium plus other indemnities reached the cap the premium payment would cease until the reserve was reduced.
County FSA offices would administer this program at a minimal cost as they are already collecting this data.
As immediate past president of the National Association of Farmer Elected Committees, I am in a unique position to know the pulse of agriculture across the country. Our members cross all the political lines as well as all the different agricultural groups. I worked hard to speak out in support of local control and the Farm Service Agency delivery system.
On the issue of local control, I am very concerned with a draft proposal by USDA to strip local committees of their authority to hire the County Executive Director. Local control has been the reason the FSA delivery system has been able to deliver programs to farmers in a fair and timely manner. You can just imagine what would happen if you turned over this control to Federal Bureaucrats who are unaware of the situations in each of the county offices. I strongly oppose this change. Farmer elected committees should not become just an advisor to the employees. County committees should continue to be part of the management team.
I would like to thank you, the House Agriculture Committee for helping provide funding for our county employees in recent years. Currently, the House Appropriations Committee has marked up a supplemental appropriations bill for fiscal yyear 2000 to provide extra money for temporary employees. Currently county offices are being forced to remove temporary employees because of a budget shortfall. This shortfall is a result of the administration's budget request. I support the $77 million emergency request. This will allow FSA county offices to deliver the programs in a more timely fashion.
On the subject of Budget, the current administration request is far short of what's needed for fiscal year 2001. County offices are at least 1,487 staff years short on full-time employees, just to deliver the current programs not counting any disaster needs. Current estimates for 2001 is the County offices need, $75 million for full-time employees and additional $30 million for temporary employees. Farmers know FSA county employees are overworked. What they do not know is why the agency continues to downsize the staff and leave them with slower service. In most cases, office closures do not save money; they cost through higher rents and longer commutes for farmers and employees.
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Earlier I mentioned temporary employees. I want to point out to this committee a real inequity temporary employees that have for years worked full time but are carried as temporary. I have identified numerous temporary people that have worked for up to 20 years full time but have not received retirement, health care nor any other employee benefit. These employees are being treated unfairly and should be eligible for these back benefits. I believe that any employees that have worked 5 years or more should receive full benefits.
I have received complaints from small and limited resource farmers about the current EQIP conservation program. Most of these farmers are systematically eliminated from participating in the EQIP program because the nature of the rating system tends to favor larger operations. There is a clear and distinct need for an additional conservation program designed similar to the old ACP program for small operators to signup and install practices on an annual basis. Many of these producers do not have the resources to enter five or 10-year contracts.
Several new programs that have been created in recent years to deal with natural disasters would not have been necessary had the ACP program still been available. This program was operated in the past using 5 percent of the funds for technical support. Currently under the EQIP program, over 20 percent of the funds go to technical support. Every county should be given an equitable share of this additional money. This way, local officials could involve more farmers with small conversation needs, which would help tremendously with soil and water conservation. Under the current, EQIP program, up to 75 percent of the funding goes to Priority Areas. This leaves large portions of the State with little or no money.
I want to make a few comments pertaining to the Consent Decree resulting from the Discrimination Suit against USDA. It is clear from information NAFEC has received that over 95 percent of the complaints resulted from actions taken by the old FHA through its lending program. NAFEC has worked with the Department to identify needed changes in order to prevent future problems.
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More than 2 years ago, NAFEC took the lead to develop ways to avoid future problems. One such action was to create at-large-voting seats for minority and underrepresented groups. Several farm groups were involved with NAFEC and NASCOE in developing this plan. It was learned that USDA could implement this change by changing the regulations. NAFEC has seen no interest from USDA in making minority advisors full elected voting members of the committees. NAFEC supports elected voting minority members on our committees.
Statement of Allen King
Congressmen, members of the House Agriculture Committee
My name is Allen King and I am a full-time cotton farmer in Haywood County, TN. I am also chairman of the Tennessee Boll Weevil Eradication Foundation and also the chairman of the Southeast Boll Weevil Eradication Foundation, which has responsibility for eradicating and controlling weevils on the 5.5 million acres of cotton east of the Mississippi River.
I have never seen in my 45 years of farming the financial situation of the farmers in my county as bad as it is now. On my farm alone our per acre sales of cotton was only 38 percent of what it was in 1998. We had lower prices than in 1998 and lower yields and quality due to drought than 1998. I personally think that farmers do not have enough of a safety net in the Freedom to Farm bill. We need to either have higher loan rates or a target price concept more realistic to our production costs. We are paying 2000 production cost and receiving 1970 prices. All of my life in farming I have concentrated on production agriculture and I am not an agriculture economist and don't have a specific recommendation except that farmers need some kind of a safety net to be able to compete world-wide. The cotton farmers in southwest Tennessee are in their third year of weevil eradication and are faced with a $36.80 per acre assessment fee. They voted on a full cost share program of $211 per acre for 7 years (highest in the Nation) 4 years ago not knowing the economic situation now facing them. We need badly to restore the 30 percent Federal cost share program, which was stopped before west Tennessee began eradication. The farmers in northwest Tennessee, which will be the last acreage to begin eradication east of the Mississippi River, will start their diapause program in August of this year. We plan to use 10 ounces of malathion per acre, which is by far the cheapest and most effective chemical to eradicate the weevil.
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We are able to start this program because of the 100 million dollar FSA loan program. Were it not for this loan program we would not be able to start up a program unless we had the 30 percent Federal cost and loan assistance. We sincerely request that the loan program be continued as we understand it is a ''No Cost'' program to the government due to the nature of the program. One of the few pluses that the tennessee cotton farmer has is our Extension Service Programs. It cares out a scientific non-biased evaluation of all the new GM0 seed varieties based on actual field experience. Due to the high cost of seed and the tech fees attached with them gives the farmer the actual economic benefit of the new technology. One of the best programs that the Extension Service has conducted for the past decade has been it no-till practices that they have promoted for our highly erodiable soils. With the emphasis in Washington on ''clean water'', I think the continuing increase in no-till acres in, Tennessee is leading to cleaner streams and rivers. Last week the Haywood County Conservation Board had it annual meeting and had an enviromentist with nature conservancy to give the program. He has been working for the past 3 years on the Hatchie River in Tennessee, which he said is the longest free channeled river in the U.S. and one of the few left in the world. He has been studying the sedimentation and the quality of the water in the Hatchie. He presented slides showing how the water has become much cleaner and the erosion along the banks much less. He credited no-till farming and the lack of soil preparation in the fall as the main factors. We can thank our Tennessee farmers for their confidence in no-till.
Thank you for allowing me to speak to you and I will be glad to answer any questions.
Testimony of Ken Minton
Chairman Combest, members of the committee, good morning. My name is Ken Minton, and I am a rice, corn, wheat, soybean, milo, and cattle farmer from Missouri. I currently serve on the board of directors of the Missouri Rice Council, and as secretary of the Missouri Rice Research and Merchandising Council. I am a charter board member and secretary of the U.S. Rice Producers Association. I am a charter member of Cargill's Missouri producer board. I also serve as chairman of the board of Pleasant Grove Community Church.
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I would like to thank all of the panel for their time and concern for agriculture. As each of you know, agriculture is in a very precarious situation. At a time when the rest of the economy is performing at historically high levels; agriculture, at all levels, is left searching for ways to simply survive. Even though agriculture is the backbone of our Nation, both domestically and internationally, we as a nation are left struggling with how to correct the current situation. As our leaders, we appreciate that you will listen to many ideas from across the Nation; and we put our faith in you to identify the best of these and other strategies, and to implement these strategies to the benefit of agriculture.
IMMEDIATE AND MEDIUM-TERM FARM PROGRAM ISSUES
Agriculture is a multi-faceted enterprise, which encompasses many layers of American society. More than anything, the people of agriculture are hardworking, cost conscious, enterprising individuals. We are not looking for a hand out. We would like a hand up. Some people are concerned about big business taking over agriculture; and we should be. We do not need our food supply controlled by a strong group of a few. A few very strong groups are seldom good for the whole.
Low prices have plagued the rice industry for the past couple of years. I recently read in my local ag newspaper that Congress is considering doubling the current AMTA payments to farmer. Based on current market conditions and outlook, I urge Congress to do that for the 2000 crop year. The market loss payments and other program improvements provided by Congress last year made the difference between profit and loss for many rice farmers.
With regard to farm policy, I suggest that the committee consider what would happen if commodity loan rates were raised, and the Loan Deficiency Payment program was allowed to work to insure that the grain would be used and not stockpiled. We all remember what happened the last time the government ended up with grain. It sat in storage all across the U.S., and depressed prices even more. The government doesn't need to own the grain, we have learned that. The LDP needs to make sure the grain stays in the marketplace, and is moved to consumers.
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What would happen if we tried raising the loan rates for a trial period of perhaps a year or two, just to help us out of our current dilemma? After that, we could take a more in depth look at what the long term consequences might be. We realize higher loan rates carry some negative possibilities, but we need some temporary help while we develop a more long-lasting approach.
There has been debate over revisiting set-aside acres in the next farm bill. I have mixed emotions in that area. My question is: If increasing set aside acres the amounts of commodities produced in this country, how do we stop our foreign competitors from filling the void? We can't tell other countries that they cannot export to us, or we will face retaliation. At the same time, we would be losing our own markets internationally; markets we have worked hard to build and maintain.
FARM PROGRAM PAYMENT LIMITS MUST REFLECT FARMING REALITIES
However, I am concerned about the distinction between big business and the family farm. The definition of family farm seems to have implications in the upcoming farm program debates. Payment limitations of $30,000, as have been suggested by some, will not allow the family farm to survive these economic times. In our area, a full time farming family of four needs a gross income of close to a half a million dollars to make ends meet. If they get a 5 percent return on this gross income for living expenses, that leaves them with about $25,000 to live on. Many producers cannot clear even that 5 percent, and are chewing up their equity every year. Unless a producer is a hobby farmer, he or she must maintain an adequate size of operation across which to spread equipment costs. A used combine—at half its original price—still costs $80,000. We can't all be hobby farmers. Someone must purchase the new equipment. The family farm spends an unbelievable amount of money on assets and inputs.
FEDERAL EXPORT PROGRAMS MUST ASSIST ALL FORMS OF COMMODITIES
We need to continue to open export markets if U.S. rice producers are to survive. More than 40 percent of the U.S. rice crop must be exported each year if the industry is to remain profitable. Excess rice stocks are increasing, further driving down domestic prices. These stocks need to be exported or they will continue to drag down our domestic prices.
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In light of these facts, the future of our industry over the short and the long term will be heavily influenced by our government's export policies and programs. I would like to share with you good and bad examples of the type of export program design your committee should encourage or avoid as you consider agriculture legislation in the months ahead.
QUALITY SAMPLES PROGRAM—AN INNOVATIVE SUCCESS STORY
In Missouri, we have a promising export project at the producer level that is nearing completion. We have raised a new variety of rice in the U.S., and have marketed it directly to the foreign importer with assistance from a new Federal program. A group of farmers decided to develop this rice, and market it; each of us understanding that if it failed we would be responsible for our own losses. There is a sizable learning curve for a producer to market his crop internationally, with no middle man bureaucracy to muddy the waters. However, we are nearing completion of this project, and hope to have it shipped out in the next 3 weeks.
Programs that help educate producers, while at the same time helping importers cover the cost of working with new-to-the-game producers, are a valuable resource. USDA's Foreign Agricultural Service has a program called the Quality Samples Program, which was a valuable asset in making our new rice sale. I believe that the Quality Samples Program is a good example of our government using an ingenious new program to help farmers market their crop directly to foreign buyers. We are appreciative of the FAS, and of the U.S. Rice Producers Association, which helped us with the technical aspects of this new program. We are also very appreciative of Missouri's Congressional representatives, particularly Congresswoman Jo Ann Emerson, Senator John Ashcroft, and Senator Kit Bond, who all endorsed our efforts in this regard.
TRADITIONAL USDA EXPORT AND FOOD AID PROGRAMS NEED PRODUCER-FRIENDLY IMPROVEMENT
There are many other USDA programs designed to increase exports of U.S. farm commodities. Unfortunately, many of these programs are older, hidebound programs that put the interests of exporters before the interests of actual farmers.
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For example, rice growers from Missouri and other States continue to work with USDA to encourage it to provide our export buyers with the form of rice that best suits their needs. Despite these efforts, rice is the only remaining major farm commodity that our government routinely fails to offer or make available to potential customers in its unprocessed form. As a result, USDA's management of PL 480 and other food aid programs continue to discriminate unfairly against rice producers.
For example, late last year, USDA broke its 45-year record of restricting access to the P.L.480 program to rice processors, and granted the Government of Jamaica's request to allow rough (unprocessed) rice to be sent to Jamaica under the program. Unfortunately, just last week USDA reversed this policy and denied Jamaica's request for further shipments of rough rice.
Rice producers believe that there are export markets and customers willing to pay for U.S. rough rice as a substitute for foreign brown and milled rice. As such, I would ask the committee to immediately urge USDA to conduct a thorough review of its export promotion, export development, export maintenance, and food aid programs to determine how these programs can be better administered—like the Quality Samples Program—to identify and exploit markets for U.S. rough rice.
CROP INSURANCE IS NOT A SAFETY NET FOR RICE PRODUCERS
One area that funds could be better utilized is in the area of crop insurance. Rice is one crop that does not fluctuate through yield disasters, but has price fluctuations. We support insurance reform only as a last measure. Farming with a subsidized insurance program will encourage producers to cut expenses and crop yields to generate cash flow. Some producers will say to cut back on inputs have a poor crop, and collect the money. Now, most folks will be honest, but there are always those who will take advantage of any situation, and the tighter the cash flow, the greater the likelihood that honest people will have second thoughts.
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This system does not encourage farmers to do what they do best: to maximize revenue from their crop while minimizing input costs. We need a safety net that rewards people for doing the best job they can, not one that rewards sub-par performance. We are not sure what the best approach is, but wonder if there isn't a plan better than further subsidizing crop insurance policies that do not work for rice producers. The Missouri Rice Council and the U.S. Rice Producers Association would emphasize that crop insurance, reformed or not, does little or nothing to help rice producers.
Many producers wonder why it is not more prudent to let our local FSA office administer the crop insurance program. We have already turned in all of our production history to FSA, and they have the ability to implement the program. Over the last few months, I have spent several different days trying to get my production history corrected with my local insurance agent for purposes of calculating my Federal disaster payments. Sadly, we have yet to fix all of my problems. However, when I was at the FSA office, they had all the correct information already in place. Unfortunately, the FSA had to accept the insurance company's information, even though the FSA knew it was incorrect. The current insurance system has inherent flaws that will be hard to correct.
Many producers also take the low price in a low market. Can we save money by guarding more against price fluctuation rather than yield loss? As an alternative to crop insurance, is there a way to help farmers to hedge their risk through the futures markets? Using puts to help set a price floor or calls to take advantage of the market uptrends, and helping educate farmers about how the futures markets work could be a wise investment. Many producers are lacking in knowledge and experience in that area, including myself.
UNILATERAL SANCTIONS HURT U.S. FARMERS
More than anything, we would like to see Freedom to Farm work, through freedom to market; which the 1996 farm bill addresses. Other countries subsidize their farmers tremendously. Also we have a boatload of sanctions against some of our potentially best export customers. How can we have free trade when we maintain unilateral sanctions against these countries? Unilateral sanctions won't work. Cuba is a prime example, there have been sanctions against Cuba for over 30 years, but how has the sanction helped us? Castro is still in power, they are still communist, and they still eat a lot of rice produced by our competitors. We haven't stopped anything, we simply turned the market over to our competitors.
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The Government should not be restricting private trade by mixing political issues with policy decisions. Introducing restrictive measures like high tariffs, phytosanitary controls, and exorbitant subsidies that are the result of politics should not intermingle with policy decisions. At the Federal level, we need to be more aggressive in bargaining with other countries. It seems as if our competitors stay one step ahead of us too much of the time.
Other countries find loopholes to cancel their grain buying agreements. For example, Europe doesn't want our genetically engineered grains in their country. Do they really—not want it,—or could this just be an excuse for them to avoid their obligations? We need to keep an eye on them and see what their farmers do with Roundup Ready Products. Japan ships out U.S. rice as food aid to other countries so the Japanese won't develop a taste for American rice. Many countries we sign agreements with try to get out of their agreements while many countries that would like to do business with us have sanctions against them. It just doesn't make sense, does it?
SUPPORT ETHANOL AND OTHER ALTERNATIVE FUELS
Fertilizer and fuel costs have taken quantum leaps this year. Rising fuel prices will add substantially to the cost of producing our crop and drastically reduce our net income. If there has ever been a time to support funding of renewable alternative fuels, this has got to be it. With this last round of oil price hikes, all Americans realize how dependent we are on foreign oil. The oil cartel can have a vicious impact on our well being. Now is the time to invest in our future. Please, let's not wait until we have a genuine crisis to figure out we should have been funding more ethanol projects. We need to have a clean, renewable energy source available and ready to expand before we have a national crisis.
TAX INCENTIVES CAN ASSIST PRODUCER-OWNED VALUE-ADDED VENTURES
We have some interesting projects going on in Missouri at the State level. The Missouri Small Business Authority has made 50 percent tax credits available for new farmer-owned, value-added business ventures. We have hopes that these tax credits will bring farmers together to control and profit from their commodity a little longer. The State of Missouri has funded feasibility studies for several projects, with several more underway. The Missouri Rice Council has received funds for a feasibility study for a rice dryer and storage facility. This study has sparked a healthy interest in the possibilities of this new facility. Other studies include pork processing plants, pecan hulling and bagging, organic produce, ethanol plants, and many others. If these projects are deemed feasible, there may be a 50 percent tax credit available. Unfortunately, there will likely be more projects the State alone can afford to fund.
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I believe there may be a bill presented to you by Congressman Jim Talent, from Missouri, to provide Federal incentives to promote value-added, producer-owned businesses. We hope these tax credits will lead to producers attaining more value from their products. Farmers must learn to diversify and add value to our commodities by providing consumers the products they demand in the form that they desire. Hopefully, Federal tax incentives and successful feasibility studies will help entice lenders and producers alike to feel comfortable in investing into these new ventures. I believe that our State has a good process started, and that if we can get start up information and funds, industrious producers will take the lead in helping producers to help themselves.
The Lord didn't promise to tell us why we have every problem, he said he would help us through them. We pray for the strength and the courage to meet our problems head on, and to find solutions from the ideas of our peers, our own ingenuity, and our own resolve. We thank you for seeing the need to help us with these issues, and we are grateful for your time and concern.
I would be pleased to answer any questions that you may have.
Statement of Ronald Anderson
Mr. Chairman, and members of the committee, my name is Ronald Anderson. I am a farmer from Ethel, LA, north of Baton Rouge. Currently, my principle crop is beef cattle and until fairly recently I operated a dairy and have produced various grain crops since I began farming in 1970. I would also like to thank you for holding these hearings and for the opportunity to address you today regarding Federal agricultural policy.
As we all know, producers are facing serious economic problems. If the additional economic assistance had not been provided in the last 2 years, many farmers across my State would no longer be in business. We again are faced with not only low prices for most commodities, but serious drought conditions still prevail over most of Louisiana. While livestock prices are relatively good, most pasture conditions are not. The lack of winter moisture will significantly impact production. Hopefully, weather conditions will improve soon.
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These are very difficult times and present serious problems for all producers. Improving the short-term economic conditions through various assistance programs has been helpful but a long-term improvement or strengthening of the safety net for all types of producers is needed. Until such time as long-term improvements or programs are developed to provide support during extended difficult economic times, such as we are currently facing, continued emergency supplemental funding for economic assistance will have to be provided if we are going to sustain U.S. agriculture.
While I am supportive of the 1996 FAIR Act and the flexibility it provides, some modifications are clearly needed. While I am supportive of adding a counter-cyclical program to improve the current safety net, any additional programs must be able to provide adequate assistance to all producers regardless of size or commodity produced during extended periods of low prices. This time, modifications to policies must take into account worst-case scenarios. To me, the marketing loan is a counter-cyclical program. Currently, the loan rates are below the variable cost of production for most commodities and producers. Marketing loans function very differently than old loan programs and allow us to aggressively compete in the world market. Increasing loan rates in a manner that will allow commodities to be sold at competitive prices in the world market while at the same time maintaining adequate income support to producers should be considered as part of the improvements. This could be part of the solution; however, it should not take away from current AMTA payments. While I do not receive any AMTA payments, I do believe they should be continued. Others may comment on whether they should be increased or even be modified in the future to reflect market conditions. The current provision that limits farms that do not have a production flexibility contract, or contract acreage, to only being eligible for the soybean loan, limits the safety net and the true flexibility of that land. While this provision may not affect many producers, I believe it should be changed to allow all crops to be eligible for loan programs.
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Crop insurance has not worked well in Louisiana. Hopefully, the current debate will end up providing adequate and affordable protection for legitimate producers. That has not historically been the case in my State. The development of a viable risk management plan is needed for the livestock industry. Congress has proposed the development of an insurance program for livestock producers. A program of this nature should be based on a producer's input cost. I personally support the concept of covering my costs of production and believe such a program could be provided not only to livestock producers but all commodities at a reasonable cost. Few programs are available for livestock producers and those that are offer very little assistance. Equitable funding for livestock producers in disaster assistance programs is needed.
Consolidation and concentration in the industry have essentially eliminated price discovery in the market place. Livestock producers should have access to competitive markets for price discovery that accurately determines the value of their products. USDA, in conjunction with the Department of Justice, should investigate all mergers and ownership changes in the meat packing industry for actions that limit the availability of a competitive market for livestock producers.
The dairy price support program at the current level of $9.90 should be extended for 2 more years. The price support program is one of the best tools available to U.S. dairy farmers to cope with cyclical changes in prices. This safety net is the one area of Federal dairy policy that all regions agree on. The Northeast Dairy Compact has proven to be an effective tool for producers in that region to gain more from the market. Twenty-five States, including Louisiana, have passed legislation authorizing regional compacts. Hopefully, the Southeast Dairy Compact will be authorized. I encourage you to support the formation of regional dairy compacts so as to stabilize producer incomes and consumer prices and reduce the need for government programs for the dairy industry.
I believe we all have a responsibility to work together to not only develop, but to build support for Federal policies that provide U.S. agriculture the means to maintain our competitive position in global markets while preserving domestic markets and long-term profitability for U.S. producers.
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The realization of the promises made during the 1996 FAIR Act debate regarding access to additional foreign markets through trade policy reforms, relief from over burdensome regulations, additional and improved risk management tools and tax reforms would help to improve the economic outlook. While some of these issues will take time to achieve the desired results, I hope Congress will take every opportunity to act upon them this year.
Mr. Chairman, thank you for holding these hearings across the country and allowing us an opportunity to testify. I will be happy to respond to your questions.
Testimony of Gary Sebree and Paul Loewer, Jr.
We are both family farm based rice producers, from Arkansas and Louisiana, respectively. We are both members of the Board of Directors of the USA Rice Federation and are closely involved in our respective State level rice producers organization as well.
The USA Rice Federation is the Nation's largest rice association, representing all segments of the U.S. rice industry. The Federation's charter members are the USA Rice Council, U.S. Rice Producers' Group and the Rice Millers' Association. Through these organizations, Federation membership encompasses U.S. rice producers who grow 80 percent of America's rice crop; farmer-owned cooperatives and privately owned mills comprising virtually all of the U.S. rice milling industry, with members in Arkansas, California, Florida, Louisiana, Mississippi, Missouri, and Texas; and a wide range of allied businesses in these and other States. The diversity and scope of this association permits it to provide a view common to all aspects of the industry, and to the vast majority of its participants.
BACKGROUND
Mr. Chairman, and members of the committee, we would like to preface our remarks by a few words regarding rice production and use. U.S. rice production provides a versatile, nutritious food product for people here in the United States and around the world. Rice is used in everything from baby formulas to the wide variety of ethnic cuisines enjoyed by many populations. Rice hulls and other co-products are being used in a number of innovative applications—in building materials and to provide energy to run a rice mill. Winter flooded rice fields provide important habitats for migratory waterfowl and other species.
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Rice production is capital intensive and an expensive crop to produce because of its requirement for irrigation. Rice is primarily produced in six States: Arkansas, California, Louisiana, Mississippi, Missouri, and Texas. Almost 40 percent of total production originates in the State of Arkansas. Since the marketing year 1993–94, production has varied from a low of 172 million hundredweight (cwt.) to a high of 211 million hundredweight for the current marketing year of 1999–2000. Approximately sixty percent of total supply is used domestically and the balance is exported. The United States is currently the third largest exporter of rice in the world.
Most of global rice production is consumed in the country where it is produced. At present, global rice trade is estimated at almost 21 million tons. The major exporter of rice is Thailand. Other major exporting countries include the Pakistan, India, and Vietnam. The United States is in competition with those countries and others in the world market, and the price for rice traded on the world market, unlike the price for U.S. produced wheat and feed grains, is determined in large part by the Asian competitors.
REVIEW OF CURRENT LEGISLATION
As you know, in 1996, major changes were made in farm program legislation which became effective for the 1996 through the 2002 crops of the commodity. Under this legislation, farm program payments (familiarly called AMTA payments) are made to producers of the major crops, based upon a producers' contract acres which is the crop acreage base established under prior legislation. The amount of the fixed payment was established so as to be gradually reduced during the seven year period 1996–2002. This is supplemented, in the case of rice, by non-recourse marketing loans at a rate of $6.50 per cwt., which is below the variable cost of production for most rice producers. An important element of this law is the flexibility granted the producer to plant any crop on the contract acres or to leave the contract acres in conservation uses without jeopardizing the AMTA payment.
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Mr. Chairman, at this time, the rice industry is hurting and hurting badly. We need help and our situation today demonstrates that while there are provisions in current legislation that we deem beneficial, there are immediate changes that need to be made if the present structure is to remain. We fully understand that we will probably be criticized for advocating additional subsidies for U.S. agriculture; we strongly believe that additional financial help for U.S. farmers is entirely justified when considered against the backdrop of the longstanding U.S. policy for low cost food and the fact that our access to global markets is substantially denied due to trade sanctions and other barriers. In fact, additional financial assistance for farmers will indirectly, but immediately, translate into maintenance of the low cost food policy.
The farm economy problem that has affected many segments of American agriculture has had an equal and perhaps a more devastating impact on rice producers of this Nation. This year we have harvested an unprecedented rice crop. According to USDA's most recent World Agriculture Supply and Demand Estimates (WASDE), the crop has reached almost 211 million hundredweight (cwt.) as contrasted with 188 million hundredweight in the 1998–99 marketing year and 183 million hundredweight in the 1997–98 marketing year. At the same time, the WASDE report estimates that there will be only a very small increase in rice exports. The net result is that there will be an increasing build-up of carry-over stocks to depress prices. 1999–2000 ending stocks are currently projected to grow by 79 percent over the last year.
The WASDE report projects prices for the 1999–2000 marketing year as low as $5.80 per hundredweight. This price projection is $3 per hundredweight less than the price for the 1998–99 marketing year and $4 per hundredweight less than the average price for the 1997–98 marketing year. At the same time, over-all costs continue to rise. Rice is the one of the most costly crops to produce since it depends on irrigation. The cost of water and energy to move the water are expenses not encountered by producers of most other crops. If the current situation is permitted to continue without government assistance, we will find more and more producers abandoning farming, an occupation in which their families have been engaged for many generations.
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RECOMMENDATIONS
We appreciate the Chairman's efforts to gain input from rice producers through these field hearings in preparation for the 2002 farm bill debate. We also appreciate the opportunity to comment on the impact of Freedom to Farm on the rice industry and to recommend specific changes that will allow our industry to obtain the highest level of income for a given level of government spending. It is with this objective in mind that the we make the following recommendations:
Farm Program Measures: The objective, both today and in the long term must be to significantly strengthen the farm safety net. At this time, based on our experience under the 1996 farm bill, it is imperative that we do not wait until the year 2002 before acting. Immediate changes must be made to protect farm income during the final 3 crop years covered by the legislation. In the last 2 years, Congress provided supplemental income assistance to help farmers through a period of low prices and declining income. Rather than having to enact emergency assistance each year, we would recommend that the law be changed so that AMTA payments are increased for crop years 2000 through 2002. However, we also believe it is important that certain features of current legislation be maintained. Increased planting flexibility that producers have without jeopardizing their payments, and also the ability of producers to produce for the market without any annual acreage controls or constraints are extremely important to the U.S. rice industry.
Crop Insurance: Another measure that we support is a modification in the crop insurance law so that premiums are set at more affordable levels and the program expanded to provide revenue as well as yield insurance. We believe, however, that crop insurance should be in addition to, not a substitute for, existing farm program payments.
Marketing Loans: Additionally, exports are vital to the U.S. rice industry's survival. As stated at the outset of this testimony, roughly 40 percent or more of our annual production has been and must continue to be shipped overseas if we are to stay in business. An important tool in meeting competition abroad is the successful operation of the marketing loan program. The loan rate for rice is set in current law at $6.50 per cwt. This rate is below variable costs of production for many rice producers. Rice marketing assistance loans may be redeemed at the United States Department of Agriculture's world market price if the world market price is below the loan rate. USDA has on occasion revised its world market price determinations so the U.S. rice industry could remain competitive in markets abroad with exporters of other countries. However, it should be noted that the U.S. percentage share of world rice trade has declined from 13.3 percent in 1996 to 11.3 percent in 1999. USDA must be vigilant in their management of the world market price if the U.S. rice industry is to remain competitive in the world market.
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As part of our recommendations, we urge that the loan deficiency payment limitation of $75,000, established in the 1996 farm bill, should be eliminated or, at a minimum, significantly increased. We thank Congress for reauthorizing the use of Commodity Credit Corporation (CCC) commodity certificates, which may be used to redeem loan collateral. It was only by raising the payment limitation to $150,000 for the 1999 crop, that the emergency AMTA payments were able to help many financially strapped rice producers. At times, such as is the case today, when world prices fall significantly below the loan rate, if the limitation is not removed or significantly increased, producers will elect to forfeit the collateral under loan to CCC. As a result, CCC, rather than the producer, will become the marketer of the commodity in competition with the private sector.
Export Programs: There are other measures that would enhance rice exports as the new crop comes to market. These include expanded use of USDA's export authorities, such as the export credit guarantee programs, as well as the programs under P.L. 480 and the Department's purchase and donation programs. We commend USDA on their recent inclusion of rice in the Section 416 donation program. We believe that funding must be continued for the Foreign Market Development Program and the Market Access Program. These export programs provide an investment today towards the long-term objective of maintaining or increasing exports.
Import Access: In the final analysis, the rice industry can prosper only if we have improved access to world markets. We look forward to the forthcoming multilateral trade negotiations as a means of reducing tariffs on rice imports, and achieving fair access to important rice markets, such as Japan and Europe (EU). At present, except for a minimal tariff-rate quota, their ex quota tariffs on rice imports are prohibitively high—approximately $3,000 per ton in the case of Japan and over $400 per ton in the case of the EU. In Latin America we seek equal access with other supplying nations that participate in preferential tariff arrangements, and seek elimination of restraints on imports based on licensing restrictions or phytosanitary or bio-engineering standards influenced by public or social policy and not the result of sound science.
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The multilateral trade negotiations can only be a success if Congress were to enact fast-track legislation. We hope that this will be achieved in the near future. We also fully support permanent normal trade relations with China and China accession to the WTO.
Unilateral Sanctions: We support legislation that would exempt food and medicine from unilaterally imposed trade sanctions. In the past, unilateral sanctions have caused the loss of many of our most important markets for U.S. produced rice to our competitors. Over the past 38 years, Iran, Iraq and Cuba have been top export destinations for U.S. rice. Cuba currently imports about 350,000 metric tons of rice on cash terms. This amount is more than all of the rice that the U.S. exports under food aid programs. It is critically important that sanctions relief legislation be enacted this year, covering Iraq, Iran, Syria, Libya and Cuba. It is also important that restrictive licensing requirements not be imposed once sanctions are lifted. There is little, if any, evidence that trade sanctions on food have contributed significantly toward meeting U.S. foreign policy goals. At the same time, sanctions have forced our customers to turn to other suppliers for their rice import requirements.
Finally, while not on the agenda of the committee, we also wish to emphasize the importance of other measures that would help sustain a sound rice economy. These include, among others, regulatory reform, implementation of the Food Quality Protection Act based on sound science, and tax reform. Federal support for research should be increased to assist rice producers and others in the rice industry to become more efficient and more competitive in world markets. The rice industry is assisting in this effort through assessments under State research and promotion legislation, funds provided by private industry, and other measures. However, private financing is not adequate and must be supplemented by Federal appropriations.
In conclusion, we urge the Congress to make available appropriations so that additional AMTA payments, at the same level as last year, can be made this summer. Future farm legislation must likewise adequately address this issue while maintaining the marketing loan program, increased planting flexibility and freedom from annual government acreage controls that are contained in the current farm law. We note that increased loan rates and counter-cyclical payments have been recently discussed as possible solutions; while there may be some merit to exploring these ideas for a long-term farm safety net fix, we believe that it is paramount that we maintain the consistency of our current farm program with our WTO obligations. We also support enactment of crop insurance legislation that would attract greater participation and increase development of more revenue insurance, but not act as a substitute for farm program payments.
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As important as these issues are to the farm community, equally important is the need to open up access to markets abroad and enable U.S. rice to compete with the rice of other exporting countries on the world market. We face trade barriers in every region of the world and have lost our biggest export markets repeatedly due to unilateral trade sanctions.
Testimony of Mike Sturdivant, Jr.
Mr. Chairman and members of the committee, my name is Mike Sturdivant, Jr. and I operate a cotton, soybean, and corn farm with my family in Tallahatchie and Leflore Counties, MS. We appreciate the committee scheduling an opportunity for farmers to exchange with you in the Midsouth area.
First, it should be pointed out that the FAIR Act of 1996 has operated and functioned precisely as it was planned, but at the time that the bill was being written, there was almost unlimited world demand for U.S. agricultural commodities and consequently, commodity prices for every major commodity were strong. There was little emphasis placed on policy considerations which would be necessary for periods of extremely depressed prices and low market demand. Therefore, we must acknowledge that the Congress has acted responsibly and with significant conviction in the passage of two emergency disaster relief measures during the 1998 and 1999 harvest season, at a time when commodity prices were hovering at 40-year lows for corn, soybeans, cotton, rice, and wheat.
For purposes of highlighting some of the most critical issues in current farm policy which we hope to get special consideration, I would like to submit the following:
Should the delivery mechanisms for income support be maintained and extended as currently designed in the FAIR Act, the Congress should carefully evaluate the sharp decline which has occurred in the agricultural marketing transition adjustments since enactment of this measure in 1996. The transition adjustments in 2000 are almost half the amount of the 1996 level, and this is causing grave hardship on the farm during periods of low prices.
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At a time when every land-grant University economic model is pushing farmers toward larger, more efficient equipment, and expensive harvesting equipment, the arbitrary limitations on market transition adjustments and marketing loan gains continue to pull in an opposite direction. The current market-oriented farm policy which relies on a cost-efficient family farming operation does not point toward a family farming operation targeted toward a smaller size.
The planting flexibility, marketing loan, and payment base and yield provisions tied to historical averages, are components of the FAIR Act which should be maintained.
The CCC non-recourse loan is fundamental to the success of any farm program. The current formula is operating as designed, with the exception of the loan caps. Careful study should be given to removing these loan caps; however, if there are overriding budget considerations associated with the removal of the loan cap, Congress should review this in the context of its comparison to other mechanisms for maintaining farm income while insuring that the CCC loan serves as a tool for orderly marketing of commodity stocks.
Significant agricultural subsidization continues among our World trading partners and therefore, the U.S. should not unilaterally disarm by phasing down domestic farm programs. In foreign trade matters, our orientation as a Country has been designed to open up trade; however, sophisticated trade barriers and other practices administered by many of our competitors in developing countries have resulted in exemptions and waivers from many of the WTO rules. NAFTA, CBI Parity Legislation, and normal trade relations with China are viewed favorably by our farmers, but in order for the U.S. farmer to compete, the Congress must continuously remind the administration and USTR that a heavy price will have to be paid out through the cost of domestic farm policy if they do not carry out trade agreements in a way which reflects reciprocal enforcement.
In the interest of income stability for U.S. rice farmers and market demand, P.L. 480 and other export assistant programs should be extended to the export of rough rice, as well as milled rice.
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The Conservation Reserve Program and the Wetlands Reserve Program are valuable programs as an alternative for the highest and best use of land that can also bring environmental benefits for the public purposes provided by this program. Our region of the Country has benefited significantly from the CRP and WRP programs, and we emphatically endorse their continuation.
The Congress should carefully study proposals aimed at authorizing the expansion of CRP and WRP, so that the growth of these very positive conservation programs do not carry the unintended consequences of causing budget offsets in other vital entitlement programs, such as nutrition and domestic farm programs. These programs must be funded under the same mandatory spending accounts as CRP and WRP, and any plan for the expansion of these programs should include provisions that ensure that other entitlement spending will not be adversely impacted.
In the area of crop insurance, there is little support among farmers for this program to serve as a delivery mechanism for domestic farm programs. Crop insurance has not been as effective as it needs to be, in terms of serving as an effective risk management tool for southern agriculture. We applaud the work being implemented by the House committee and we stress that the Federal involvement in crop insurance should be sharply focused on those elements of the policy which extend the farmer a low-cost insurance product to protect against the disastrous impacts of reduced income due to lower-than-expected yields. The farmer does not need for USDA to continue extending huge amounts of resources on overhead in order to get an insurance product to the farmer.
In conclusion, we are encouraged that the administration's budget request included funds for additional agricultural assistance, but we would caution that it is not likely that the administration's proposed assistance will be enough if prices remain low and we experience another crop year like 1999. Further, I strongly disagree with the emphasis placed on arbitrarily targeting domestic farm program benefits to operations on the basis of their size. This approach flies in the face of the vast majority of farm balance sheets throughout the midsouth and it completely ignores existing USDA cost-price data which leads us to larger farming units.
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I appreciate the opportunity to appear before you today.
"The Official Committee record contains additional material here."