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75–496 2001

FARM AND RANCH RISK MANAGEMENT ACCOUNTS (FARRM): HOW WILL LEHIGH VALLEY FARMERS BENEFIT?

FIELD HEARING

BEFORE THE

SUBCOMMITTEE ON

TAX, FINANCE, AND EXPORTS

OF THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

PEN ARGYL, PA, AUGUST 9, 2001

Serial No. 107–24

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

DONALD MANZULLO, Illinois, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVE CHABOT, Ohio

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

JOHN R. THUNE, South Dakota

MICHAEL PENCE, Indiana

MIKE FERGUSON, New Jersey

DARRELL E. ISSA, California

SAM GRAVES, Missouri

EDWARD L. SCHROCK, Virginia

FELIX J. GRUCCI, JR., New York

TODD W. AKIN, Missouri

SHELLEY MOORE CAPITO, West Virginia

BILL SHUSTER, Pennsylvania

NYDIA M. VELAZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

BILL PASCRELL, JR., New Jersey

DONNA M. CHRISTENSEN, Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

JAMES R. LANGEVIN, Rhode Island

MIKE ROSS, Arkansas

BRAD CARSON, Oklahoma

ANIBAL ACEVEDO-VILA, Puerto Rico

DOUG THOMAS, Staff Director

PHIL ESKELAND, Deputy Staff Director

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS

PAT TOOMEY, Pennsylvania, Chairman

STEVEN J. CHABOT, Ohio JAMES LANGEVIN, Rhode Island

DARRELL ISSA, California GRACE F. NAPOLITANO, California

EDWARD SCHROCK, Virginia ANIBAL ACEVEDO-VILA, Puerto Rico

TODD AKIN, Missouri DANNY K. DAVIS, Illinois

FRANK LOBIONDO, New Jersey ROBERT A. BRADY, Pennsylvania

JIM DEMINT, South Carolina MIKE ROSS, Arizona

JOHN THUNE, South Dakota

SEAN M. MCGRAW, Staff Director

(III)

C O N T E N T S

Page

Hearing held on August 9, 2001 ............................................................................. 1

WITNESSES

Wedde, Kenneth R., Bath, Pennsylvania ............................................................... 4

Dietrich, Brian, New Tripoli, Pennsylvania .......................................................... 5

Schantz, Arland, Zionsville, Pennsylvania ............................................................ 6

Bennecoff, Cheryl, Kutztown, Pennsylvania ......................................................... 7

APPENDIX

Opening statement:

Toomey, Hon. Patrick ....................................................................................... 20

Prepared statements:

Wedde, Kenneth R ............................................................................................ 26

Dietrich, Brian .................................................................................................. 28

Schantz, Arland ................................................................................................ 33

Bennecoff, Cheryl ............................................................................................. 36

(1)

FARM AND RANCH RISK MANAGEMENT ACCOUNTS (FARRM): HOW WILL LEHIGH VALLEY FARMERS BENEFIT?

THURSDAY, AUGUST 9, 2001

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The Subcommittee met, pursuant to call, at 9:30 a.m., at Pen

Argyl Borough Hall, Ground Floor, 11 North Robinson Avenue, Pen

Argyl, Pennsylvania 18072, Hon. Patrick J. Toomey [Chairman of

the Subcommittee] presiding.

Chairman TOOMEY. Well, good morning, everybody. The hearing

will come to order now. I want to start by thanking everybody for

being here, and particularly, the witnesses from across the Lehigh

Valley who have come to share their expertise and the specific experiences that they have had in farming and how some tax risk

management measures could be helpful. I also want to thank the

Ranking Member of this Committee, Bill Pascrell, a Member of

Congress from New Jersey, who I have come to know and respect

a great deal. I appreciate his coming out here to be with us.

And let me say briefly the purpose of the hearing. A hearing is

a fundamental part of the legislative process in Congress. Congress

conducts a whole series of hearings to get input from the people

who would be affected by virtually every bill so that we can learn

the strengths and weaknesses, improve the bill, and make sure

that it really makes sense. We have these hearings in Washington,

but we also have these hearings across America.

Today, we are here in Northampton County in Pennsylvania to

hear firsthand from farmers in this area who would be affected by

farm accounts. And we will take the testimony that you provide,

the written testimony, the oral testimony, and then the question

and answer phase, and we will submit that to our colleagues back

in Washington and use that to make sure that we develop this legislation properly and also to advance momentum behind this legislation. I think we all support the idea of farm accounts and we are

looking for ways to promote it so that it becomes a high priority.

This morning, the Subcommittee—and this is the Small Business

Subcommittee on Tax, Finance, and Exports—will be examining

this legislation which is aimed at providing a tax incentive to farmers to save for any future downturn in agricultural markets and

also to even out the tax burden that farmers face. The Subcommittee will hear from four farmers from the Lehigh Valley who

2

every day bear the effects of fluctuating market prices as well as

fluctuations in weather.

These weather and uncontrollable and unpredictable weather

and market developments really determine whether or not farmers

are able to harvest a crop and what price they receive for the commodities that they are able to bring to market. Farmers clearly face

serious financial problems in poor years when they don’t earn

enough farm income to cover farm expenses. And consequently,

farmers need new ways to manage risk to stabilize their net income.

A new and innovative risk management tool for farmers, called

FARRM accounts, which stands for Farm and Ranch Risk Management Accounts, would provide a tax deferment to help farmers save

for years when prices are low or crops are poor. This type of selfinsurance program will help agricultural producers to weather the

ups and down of the farm economy.

FARRM accounts have been introduced in both the House and

the Senate. H.R. 662, the Farm and Ranch Risk Management Account, was introduced by Representatives Hulshof and Thurman,

has 100 cosponsors, including myself. Senate Bill 313, the Farm,

Fishing, and Ranch Risk Management Act, was introduced by Senators Grassley and Baucus. Additionally, the FARRM provision

was included in both the President’s initial tax package and a tax

bill that I introduced earlier this year.

Both versions of the Farm and Ranch Risk Management Act— that is a bit of a tongue twister—if enacted, would allow farmers

to put up to 20 percent of their annual income derived from farming into a tax-deferred trust account. Money would not be allowed

to remain in the FARRM accounts for more than five years. However, at any time during that period, money could be withdrawn to

help stabilize an individual’s income during a bad year of either

low crop prices or harsh weather or both.

Let me give an example. If the taxable net farm income for a particular farmer is $100,000 in a particular year, say, this year,

well, that level of income attracts a high marginal tax rate on that

income. That farmer, with FARRM accounts, would be able to elect

to contribute up to $20,000, or 20 percent, to his FARRM account,

thus reducing the farmer’s net taxable income to $80,000, and reducing his tax burden for that particular year.

Now, the $20,000 that he puts in this account may be withdrawn

at any time within the next five years in order to supplement the

farmer’s income when he experiences a particularly bad year.

When withdrawn from the FARRM account, this deferred income

is then counted as taxable income in the year in which it is withdrawn. The farmer would have the discretion to withdraw the

money in a year when his income is low. And that money then

withdrawn in that year, of course, would be taxable at a much

lower rate than if it were taxable in the year in which his income

was higher.

The FARRM Act, which actually passed both the House and the

Senate during the 106th Congress, has the continued support of agricultural groups, such as the American Farm Bureau Federation,

the American Soybean Association, National Corn Growers Association, the National Pork Producers Council, National Cattlemen’s

3

Beef Association, and the National Council of Farmer Cooperatives.

As a cosponsor of this legislation, I look forward to working with

Representative Hulshof to move this legislation through the House

during the 107th Congress.

I look forward to the testimony of the witnesses who have joined

us today. Again, I want to thank the Subcommittee’s Ranking

Member, Mr. Pascrell, who has joined us from his district in Northeastern New Jersey. Mr. Pascrell clearly understands the positive

impact this legislation will have on farmers in the Lehigh Valley,

and across America. And, at this time, I want to thank him and

yield to him for his opening comments.

[Mr. Toomey’s statement may be found in appendix.]

Mr. PASCRELL. Thank you, Pat. Good morning, everyone. It is

really an honor to be in Northampton County. When, as I drive

through the towns, as I get over the river, it was a short drive. I

thought what a great country this is that an urban Congressman

will come to Pennsylvania and our problems may be different. I

don’t think there is any farms in my district, to be very honest with

you. But I have always been interested in agriculture and understanding quite well the problems that you face.

Isn’t it interesting in America what democracy is all about, is

that regardless of where we are from, we need to open up to problems that exist in other areas. And this is what makes us a United

States of America. So no problem is too small or too large.

I support this program 100 percent. I know in the past the House

and the Senate in the 106th Congress—we not only want it to pass,

but we want it to become a reality because I know of the problems

that farmers, particularly small farmers, are facing.

And I want to—I commend Pat Toomey for understanding and

appreciating the fact. You know, we deal—we have dealt in the

past 30 years in this country with large farm corporations and conglomerates, I think, many times to the detriment of the small farmer and rancher. I think that has changed. I think there is sympathy within the Congress. There must be. Because your survival

is important to the Nation’s survival. And unless we understand—

if we don’t understand that, we are not really going to fundamentally understand what agriculture is all about and what it has

meant to the growth of this greatest democracy that man has ever

known.

So I come across the river into a beautiful county. And I want

you to know I am very proud to be here as an American, more so

than for as a Congressman. And I would really like to spend some

time in the area. But, of course, these hearings, you move back into

your district afterwards. But, Pat, you have my total support.

Americans pay less for food per capita income than the rest of the

industrialized world. Farmers and families that depend on them

here and across the country face a variety of challenges that we are

going to hear from you today—primary sources, primary resource

for us, in order to make sure that we get this legislation law. So,

Pat, thank you for inviting me.

Chairman TOOMEY. Thanks for coming. I really appreciate it. At

this time, let me just briefly explain the way our system will work.

I will recognize each of the witnesses, one after another. We have

got a clock here. It runs for five minutes. There is a green light.

4

When there is one minute left, it goes to yellow. And then, when

the five minutes are up, it goes to red. We don’t have to stick to

that right to the second, by any means, but it gives you a guide.

So that we will just try to keep the opening statements to about

five minutes. And then we will have a series of questions and we

will go from there.

At this point, I would like to recognize—and first, I would like

to thank him for joining us and for all his input that he has given

me over the years on agricultural issues, Ken Wedde, from Bath,

Pennsylvania. Ken.

STATEMENT OF KENNETH R. WEDDE, BATH, PA

Mr. WEDDE. Well, thank you. I would like to thank everybody

that invited me here today. I live in Northampton County, Moore

Township, and I farm 375 acres of corn, 250 acres of beans, and

about 60 acres of wheat. And I have got five reasons why this

FARRM account would help me out.

First of all, like you guys said before, the 20 percent deduction

off a good year. Now, I am up in age, but instead of—if I have a

real good year, and I have a good year of income, either I have to

spend that money on machinery or whatever, to go and—how

should I say—to reduce my taxes. This way, I could put it into this

FARRM account and maybe next year or the following year, I could

take some of this money out and put it in when I don’t have a good

year. So this is one good reason that I think this would be good

thing.

The other thing is, up to five years. But the way I understand

it, if you put money in the first year, first in, first out. And in the

second year, if you put money in, that would be actually be going

in the sixth year and so on, and so forth. So this is another good

thing. This could go up to ten years as a reduction if you don’t— you know, if you might have two or three good years and maybe

you might have four or five bad years. You don’t know. So this is

another good reasons I think this FARRM account would be good.

The withdrawal, like I mentioned before, would be very well.

This account could be taken out at any time. And the other thing

is, you have put this money in a bearing account, which will be

drawing interest for you in good years and then taken out in the

bad years.

So I have got an example here. Last year, I contracted corn at

2.75 a bushel. And usually, my average—I don’t have it figured

out—perhaps I should have figured it out. But I usually have

around 36,000 bushels, up to 40,000 bushels of corn a year. And

this year, the best I could do was 2.33 a bushel, contracted price.

So now, like last year, I had a good year and this year, the year

wasn’t that great, as far as I know. So that is an up and down situation with agriculture. And we can’t help it. This is supply and demand. So this would be the other thing.

The other thing I would like to talk about is foreign trade. I

think it is very important that farmers are—would have this foreign trade. I don’t know—do you want to get into that, Pat, or not

or do you want to leave that out?

Chairman TOOMEY. If you want to make a brief comment on

trade, Ken, that is fine.

5

Mr. WEDDE. Yeah. I think we should. Thirty percent of the commodities raised in the United States are sent overseas. And I think

it is very important, you know, especially the last couple of years,

the farm income has been down. And with foreign trade, this could

be brought up, I think, quite a bit. But it has to be an even thing.

We don’t hold sanctions against foreign countries, and I think that

is the biggest problems there.

So with that, I would like to thank everybody that invited me

here and, thank you.

[Mr. Wedde’s statement may be found in appendix.]

Chairman TOOMEY. Thank you very much for your testimony,

Ken. At this time, I will recognize—and also, I want to thank him

for his input on agricultural issues and for the good job he does

representing the interests of local farmers, Brian Dietrich, from

New Tripoli.

STATEMENT OF BRIAN DIETRICH, NEW TRIPOLI, PA

Mr. DIETRICH. Okay. Thank you, Pat, and good morning. My

name is Brian Dietrich and I am President of the 675-member Lehigh County Farm Bureau and I am also a dairy farmer. My family

and I own and operate a 500-cow dairy and farm 1,200 acres for

the main purpose of feeding our dairy herd and replacements.

We are a third-generation dairy farm. I appreciate the opportunity to testimony on behalf of not only myself, but also the Lehigh County Farm Bureau in support of Fish Farm and Ranch Risk

Management Farm Account legislation. I and my fellow farmers

have lobbied aggressively the past several years to have FFARRM

account legislation passed by Congress to no avail. In the meantime, dairy farmers, including myself, have seen huge swings in the

price we receive for our milk. In the past several years, I have received prices as low as $12.20 per hundredweight to prices as high as $18.80 per hundredweight.

While costs of production are somewhat more predictable, uncontrollable factors, such as the weather conditions, can have a tremendous impact on costs. Developing and maintaining a solid business plan to manage the fluctuations of the market price and costs

of production, is difficult, to say the least.

The prices that farmers and ranchers receive for their commodities are determined by forces they can’t control, commodity markets, and the weather. Farmers and ranchers do not know from one

year to the next if their businesses will earn a profit, break even,

or operate in the red. Few other industries must face such a challenge year after year after year.

Risk management tools are badly needed in production agriculture. Congress seemingly recognized this fact when the 1996

Farm Bill was passed to allow farmers to meet the market. Promises were made by the Congress, at that time, to provide more risk

management tools for farmers because of their increased market

risks. FFARRM accounts seem like a logical cornerstone to help

farmers manage volatile markets, and yet we still are waiting for

passage of this legislation to help fulfill promises made.

It is probably difficult for people who have never operated a business to understand how important of a tool it would be for farmers

to have the ability to save a portion of their earnings tax free durVerDate 13-OCT-2001 04:08 Oct 13, 2001 Jkt 075496 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 E:\HR\OC\A496.XXX pfrm04 PsN: A496
6

ing good years, for the use when the rainy days come. Ironically,

for farmers, we are probably not so much saving for the rainy days

as we are for the hot, dry sunny ones.

People who own a business understand that when you show some

good returns for your labor at the end of the year, you have two

choices to make. One, you can pay a lot of income tax and watch

your hard-earned money go to Washington, DC, or you can reinvest

that money in your business to avoid sending some of that money

to D.C. I doubt it will come as a surprise to some that most prefer

to spend the money on their businesses. Either way, the money is

gone, and when the lean times come there is no available cash to

make up for the shortfalls farmers experience. This can be a viscous cycle that drives farmers deeper and deeper into debt.

Passage of FFARRM accounts would provide farmers the opportunity to change their business practices in a way that we can better assist ourselves in planning for the inevitable cyclical nature of

our businesses. This should help lessen the need for government

assistance when market disasters occur.

My position, as President of the Lehigh County Farm Bureau,

gives me responsibility for the grassroots process that our organization uses to develop its policy positions. I listen to hours of debate

on farm policy in the county and state and I can’t think of another

idea that makes—that has such enthusiastic support as Farm and

Ranch Risk Management Accounts. Farmers like the idea that the

government wants to make it easier for them to save for a rainy

day.

I ask each and every member of the Small Business Committee

to get behind FFARRM accounts. Speak to your fellow representatives about the wisdom of doing something to improve the farm

economy long term. The future of production agriculture is dependent on new and innovative tools, like FFARRM accounts, to help

farmers and ranchers manage their financial risks. Thank you.

[Mr. Dietrich’s statement may be found in appendix.]

Chairman TOOMEY. Thank you, Brian. Now, I would like to welcome and introduce another gentleman who has been a great advocate for small farmers, who is, I believe, the legislative representative from the Lehigh Country Farm Bureau, and maybe the only

one of the witnesses who is a veteran at testifying before Congress,

because Arland Schantz testified before the Agriculture Committee

at my invitation in Kutztown a couple of years ago. Thanks for

being here, Arland, and I recognize you now for your opening statement.

STATEMENT OF ARLAND SCHANTZ, ZIONSVILLE, PA

Mr. SCHANTZ. I would like to thank Sean McGraw, the Staff Director of the Committee of Small Business, and, of course, Chairman Toomey, for inviting us farmers here today to express concern

about such an important issue to the farm community. And also as

a member of Lehigh County Farm Bureau, I want to thank Congressman Toomey for his continued support and effort to help solve

the problems we encounter back on the farm, and also Ranking

Member Pascrell. We thank you for your time and coming to the

hearing and holding the hearing.

7

We are here today to discuss Farm and Ranch Management Accounts. There are few occupations, if any, that are more uncertain

than farming. As you can see, here in front of me, from these two

Christmas tree seedlings that I brought along, sometimes you

make it, and sometimes you don’t.

As a farm owner and operator of a general crop, hay, and Christmas tree farm in Lehigh County, I try to adhere to the best management practices according to modern scientific technology, as

well as add many years of on-the-job training. As you can see, the

results still are not completely satisfactory.

For example, experience dictates that Christmas tree seedlings

should be planted early in spring when conditions are normally

cool and damp. But as we all know, this spring conditions were hot

and dry, and many of the seedlings just did not survive like this

one right here. A similar problem occurred in the hay fields. The

new alfalfa seedlings did not survive this past spring because of the

hotter, drier weather early in the spring and must now be replanted in fall. One year’s production is lost, or was lost. Time and

money must be put forth to replant these crops along with the potential loss of income because of the delayed planting and the lack

of crop for this year.

This might not be much of a problem if farming was a high-income, high reserve type of occupation. But this definitely is not the

case. In a time of depressed commodity prices and high input costs,

farmers are barely hanging on financially the way it is. In general,

there are no reserves available and local taxes never fail to come

due. One can only borrow so much against the farm real estate,

and that only incurs more expense through interest expense.

Farm and Ranch Risk Management Accounts would allow us to

take reserve monies from a good production year or a good price

year and let it earn interest in a nontaxable account for up to five

years. This money could then be used for assistance through the

devastating conditions Mother Nature heaps upon us or the low

market prices of which we have no control over.

A strong agricultural industry nationwide means a strong and

healthy country. That is why I urge the U.S. Congress to make

FARRM accounts available to us in the very near future. Thank

you.

[Mr. Schantz’s statement may be found in appendix.]

Chairman TOOMEY. Thank you, Arland. And, at this time, I will

recognize Cheryl Bennecoff. Cheryl has come to us from the far

western reaches of Lehigh County, so it is a long trip for you and

I appreciate your coming today.

STATEMENT OF CHERYL BENNECOFF, KUTZTOWN, PA

Ms. BENNECOFF. Thank you for inviting me to speak at today’s

hearing. My statement is made on behalf of not only myself, but

over 28,000 rural and farm families of the Pennsylvania Farm Bureau. My name is Cheryl Bennecoff and we run a farm family operation that has been in the family for four generations and 100

years. We farrow to finish 80 sows, specializing in purebreds. We

farm 250 acres, raising corn, soybeans, wheat, barley, and oats.

Farm Bureau is most appreciative of legislation passed in Congress in recent years to provide immediate relief for farmers and

8

ranchers who have suffered from weather and market disasters. If

similar emergencies are to be minimized in the future, farmers and

ranchers must have new and innovative ways to deal with uncertain incomes caused by weather and markets. Congress must act

to give producers the risk management tools they need to manage

financial jeopardy caused by unpredictable weather and markets.

The pig market provides no guarantees. It is always changing,

never knowing what price we will receive. Two years ago, when

times were bad with the drought, we also experienced low fat pig

prices. They were down to 15 cents per pound. Prices increased to

38 to 39 cents the following year. To break even, we need 42 to 43

cents, and to make anything extra, 50 cents. Prices have continued

to improve since then. Right now, they stand around 49.5 cents per

pound. I would like to believe that prices will continue to improve

and remain at profitable levels in the future. However, history has

taught us all too well that will likely not be the case.

Fish, Farm and Ranch Risk Management Accounts, FFARRM accounts, are exactly the kind of risk management tools that farmers

and ranchers are looking for. Using these accounts, producers will

be encouraged to save up to 20 percent of their net farm income

in higher income years by the benefit of deferring taxes on the income until the funds are withdrawn. The program is targeted at

real farmers, contains guarantees that the funds will not be at risk,

prevents abuse by limiting how long savings could be in an account

for up to five years. FFARRM accounts are simple, and that is why

they are so appealing to farmers. Farmers would decide when to

save rather than spend and when to withdraw and pay taxes on

the money.

Legislation to create FFARRM accounts, H.R. 662, has been introduced by Representatives Kenny Hulshof and Karen Thurman.

These are two smart representatives because they have written

their bill so that producers of all commodities, from all sizes of operations, who come from all parts of the country, can take advantage of FFARRM accounts. That is the reason many agricultural

organizations and over 100 Congressional representatives support

the bill.

We know that members of the Small Business Committee understand the need for FFARRM accounts. But I must tell you that

many of my fellow farmers wonder why it is taking Congress so

long to pass them into law. When agriculture agreed to support the

phase-out programs in 1996, it was with the full expectation that

Congress would make good on their promises to reduce regulations,

expand markets, and provide risk management tools.

I have been told that passage of H.R. 662 would cost $500 million

over five years and $900 million over ten years. Rather than talking about cost, I think we should all be talking about the benefits

of the legislation. It would be better to say that FFARRM accounts

will provide an important safety net for farmers and ranchers

worth just short of a billion dollars.

Many growers of perishable commodities, along with the producers of livestock, poultry, and other nonprogram groups, have

had the benefits of a farm program—have never had the benefits

of a farm program safety net. What all farmers hope for is that

good years will outnumber the bad ones.

9

Believing that better times are coming, farmers and ranchers get

through their tough times by spending their retirement savings,

borrowing money, refinancing debt, putting off capital improvements, and lowering their standard of living. All of these activities

damage the financial health of a farm or ranch and the well-being

of the family operating the business. We rely on management

skills, marketing ability, and a little luck with the weather, to

make our businesses turn a profit. We are always looking for new

and innovative risk management tools to help us manage our businesses successfully.

Pennsylvania Farm Bureau asks for you to support the FFARRM

accounts. We urge Congress to pass them into law as soon as possible. Their creation will give farmers and ranchers a meaningful

incentive to save for a rainy day and provide a valuable, very valuable, tool for managing financial risk.

Thank you for your time and consideration of this most important issue to our Pennsylvania farmers.

[Ms. Bennecoff’s statement may be found in appendix.]

Chairman TOOMEY. Thank you very much. I have got some questions I will begin with. But before I do, I want to take a moment

to thank Jaymes Vettraino, who is the Borough Manager of Pen

Argyl, and Pen Argyl Borough, for allowing us to use this facility

for the hearing this morning.

My question—and I will start off with you, Cheryl, if I could. In

your testimony, you indicated that your break-even price is about

42 to 43 cents a pound. And if I understood correctly, you have had

to sell as low as 15 cents a pound. Today, the price is close to 50

cents. Of course, its future is uncertain. Just to state the obvious

for the record, so that we have got it clear, a year in which the majority of your output is sold at the lower end of that range, you finish that year in the red. I mean, you actually incur a cash loss——

Ms. BENNECOFF. Right.

Chairman TOOMEY [continuing]. For your business. Is that correct?

Ms. BENNECOFF. Right. And on top of the drought, too, it doesn’t

help.

Chairman TOOMEY. Right. The very next year, is it possible that

the price could be back up in the high 40s or 50 cents where you

could have a problem?

Ms. BENNECOFF. If the weather holds out with the crops on top,

and, you know, we would need a couple of years to sort of recoup

back to where we were.

Chairman TOOMEY. To recover. Okay. It seems to me that that

is exactly the kind of the circumstances in which this kind of farm

account would be helpful.

Ms. BENNECOFF. Right.

Chairman TOOMEY. Because if you have a particularly good year,

there is no assurance that that is going to continue.

Ms. BENNECOFF. Right.

Chairman TOOMEY. In the last five years, have you had both

profitable years and money-losing years?

Ms. BENNECOFF. We mainly have just break-even or nonprofit

years. We are—we just struggle to survive.

10

Chairman TOOMEY. So if you had a good year, it would be all

that more important—— Ms. BENNECOFF. Right.

Chairman TOOMEY [continuing]. That you be able to take some

of that income—— Ms. BENNECOFF. And put it away.

Chairman TOOMEY [continuing]. And not have a very high tax

rate on all of it—— Ms. BENNECOFF. Right.

Chairman TOOMEY [continuing]. Save it for that rainy day

when—— Ms. BENNECOFF. Right. Because usually what we try to do is put

it back into the farm so it doesn’t have to be taxed like other statements were said.

Chairman TOOMEY. Right. Thank you.

Ms. BENNECOFF. Thank you.

Chairman TOOMEY. Brian, you mentioned that the price fluctuations in recent years of your products, the dairy products, have

ranged from $12.20 to $18.80. About what do you consider your

break even to be in price terms?

Mr. DIETRICH. Our break-even is usually around $12.50 to $13.00—in there.

Chairman TOOMEY. Okay. And is that pretty typical of dairy producers in the Lehigh Valley do you think?

Mr. DIETRICH. That is pretty typical of ones in the Lehigh Valley.

Larger ones, when you get into different parts of the country, may

be of lower cost of productions. But in the Lehigh Valley, I think

that is pretty typical.

Chairman TOOMEY. So, again, just for the record, so that people

understand, because most businesses are a little different from agriculture, as you know. Most businesses, if it is a good year, you

make a substantial amount of money, and a bad year, you don’t

make quite so much. But it is my understanding that if you go

through a year when milk prices are at $12, you are going to lose

money.

Mr. DIETRICH. Oh, absolutely.

Chairman TOOMEY. And you are just going to finish the year in

the red, out-of-pocket cash. And in a subsequent year, if prices are

at 18, you are going to make a nice tidy profit.

Mr. DIETRICH. Right.

Chairman TOOMEY. But if that all gets taxed at the highest possible tax rate, because it is a good income year for you, then you

lose the opportunity to cushion the bad years. Is that the way you

view this?

Mr. DIETRICH. Absolutely. Actually, since, well, the ’96 Farm Bill,

the milk prices are fluctuating unbelievably. Right now, the prices

are pretty decent. And I am just hoping that this legislation can

get passed because it is going to mean a big difference for us because there is times when that—the bottom just drops out of the

milk price. And in that year, it is like pathetic. And over the last

five years now, we have had a couple of—well, we had the drought

in there—but we had a couple of years that were, you know, not

very good. And we had years that were pretty good.

Chairman TOOMEY. Right.

11

Mr. DIETRICH. So in those pretty good years, we are sending all

the money that—to Washington.

Chairman TOOMEY. And this would effectively sort of even out

the flow a little bit—— Mr. DIETRICH. Yes.

Chairman TOOMEY [continuing]. And balance that off.

Mr. DIETRICH. Absolutely.

Chairman TOOMEY. Okay. Ken, you had mentioned that you grow

three different crops. Corn is your biggest—— Mr. WEDDE. Right.

Chairman TOOMEY [continuing]. Soybean is next—— Mr. WEDDE. Right.

Chairman TOOMEY [continuing]. And then some wheat. And you

have also seen big fluctuations in those prices. Could you give us

a general idea—take corn, for instance—approximately what is

your break-even and what has been the high and what has been

the low in the course of the last, say, five years?

Mr. WEDDE. My break-even is about 2.30.

Chairman TOOMEY. Okay.

Mr. WEDDE. And the highest I have ever got for corn was 3.45.

Chairman TOOMEY. Okay.

Mr. WEDDE. That was back in 1998, I think. All right. But ever

since that, the corn prices dropped. And then, of course, we had

that bad year in ’99 with that drought. That really was a bomber.

Chairman TOOMEY. Right.

Mr. WEDDE. But overall, the last couple of years, there was no

profit margin in farming grain.

Chairman TOOMEY. Right.

Mr. WEDDE. The overall expenses—especially now this year, I

contracted corn at 2.33. Now, I haven’t figured out—we had a dry

summer. The herbicides didn’t work. I had to go back in the second

time. Usually, the first time herbicides will cost you anywhere from

$15 up to $20 an acre for the first time. The second time you go

in it is going to cost you anywhere from $20 up to $30 an acre——

Chairman TOOMEY. Uh-huh.

Mr. WEDDE [continuing]. Because you have to use a special herbicide. Now, I haven’t figured that out yet. And it still didn’t

work—— Chairman TOOMEY. Uh-huh.

Mr. WEDDE [continuing]. On the dry weather. So this is what I

say. With the FARRM account, you can even out your income more

or less——

Chairman TOOMEY. Right. Right.

Mr. WEDDE [continuing]. From year to year.

Chairman TOOMEY. So it sounds like to me is you have a risk of

not only weather conditions, and not only the commodity, price

fluctuations, but also some years in which your inputs vary significantly.

Mr. WEDDE. Right. Right. Absolutely. Yes.

Chairman TOOMEY. So all three of those variables are at play. If

everything comes together, great, the price is strong and the

weather is good, and the insects aren’t a problem, you have a good

year.

Mr. WEDDE. Right. Yes.

12

Chairman TOOMEY. And when things—but most years, in recent

years, you have been basically operating at about a break-even.

Mr. WEDDE. I know you—I am farmer, but as you drive along

and you just look at the soybean fields right now, at the edges,

they are turning brown—— Chairman TOOMEY. Uh-huh.

Mr. WEDDE [continuing]. And that is from the spider mite.

Chairman TOOMEY. Okay.

Mr. WEDDE. And, really, we should go in to spray that right now.

But I am hoping for rain in the next couple of days. And if we have

to go in for spraying for spider mites, it is going to cost $9 an acre

just to go into spray with equipment, plus the spray material,

which could be another $3 or $4 an acre. So there is another $13

there. And I did spray twice before with Roundup one time early

and another time later on. So you have another cost of maybe $30

there. And the soybean prices are terrible—worse than corn prices.

As a matter of fact, this year—last year I did the same thing. I

took a loan out on the soybeans and I am going to turn the soybeans over to the government at the end of this year, at the end

of the ninth month, because I can’t sell the soybeans for what the

market is. I can get more on a loan price than at the market price.

Chairman TOOMEY. Thank you. One last quick question. Arland,

your main products are Christmas trees and hay.

Mr. SCHANTZ. Yes.

Chairman TOOMEY. And my understanding is that those prices

don’t tend to fluctuate quite as much as the grains, for instance,

in terms of the commodity prices themselves. But you have all the

same risks on weather and input costs. Do you still see the variability in income that would really justify your using farm accounts?

Mr. SCHANTZ. Yes. Because we still have the problem with the

weather. Will we get a hay crop? Won’t we get a hay crop? Some

years get more. Some years get less. And the same thing with the

Christmas trees. Will you have trees or not? You know, will—not

only drought, as you can see here, affects the trees, but, like Kenny

was saying, there are certain insect problems, certain fungus problems, that can hit depending on the conditions. And that could not

necessarily wipe out your crop, but could reduce the marketable

availability of the crop. So it very much is a variable type income

also, even though price-wise I do have maybe a little better control

over it than just the commodity market price.

Chairman TOOMEY. Okay. Thanks. Bill?

Mr. PASCRELL. Yeah. Thank you. Ms. Bennecoff, I am interested

in your testimony on the fourth page. I think you have kind of hit

the nail on the head. When you said rather than talking about cost,

I think we should all be talking about the benefits of the legislation. It would be better to say that FARRM accounts will provide

an important safety net for farmers and ranchers worth just short

of a billion dollars. What—how do we get people to understand that

this is an investment that we are making here? I mean, that is

critical. We have got to get this thing signed and passed into law.

I mean, that is the objective here. We could get caught up in the

minutiae and, you know, pat ourselves on the back and have no

law by the time we finish this session—this Congress. How do we

get people to understand that this is an investment?

13

Ms. BENNECOFF. Well, they are investing in the future of the

small farmer, which, like was said in the beginning of the session,

which is what—you know, what agriculture is, is if there is no

small farmers coming up, if there is no incentive, like for our children, which will be the fifth generation coming up, which my son

shows a lot of interest in—but if there is no incentive, that—not

necessary to make profit. We are not in it for that. It is the whole— how do I want to say it—it is my husband’s—not a hobby either.

It is his lifestyle. It is what he believes in. You know, the country

needs food. If there is no farms, there is no food.

And they got to realize that if we are not helped, the small farmer—there is no incentive for the families, like Brian’s generation

also, to take over that business—and where are the farmers going

to come from? They can’t be taught in a school. They have to have

that hands-on. And I think to save the small farmer, to help the— you know, maybe one time he will get a chance to go work for a

larger farmer. But if he doesn’t have that hands-on experience, it

is not going to be there. So they have to realize that we have to

save the small farms, and this program will help save the small

farms.

Mr. PASCRELL. We talk about investment—that is one of the arguments I use in talking about investment on a state level and federal level in education. It is an investment in our future—— Ms. BENNECOFF. Right.

Mr. PASCRELL [continuing]. For children. I see this the same

way. And this, to me, is no different than investing in research and

development in many areas.

Ms. BENNECOFF. Exactly.

Mr. PASCRELL. We have spent a heck of a lot of money. And wondering sometimes where the money goes to—— Ms. BENNECOFF. Uh-huh.

Mr. PASCRELL [continuing]. In certain areas. Will you put off capital improvements if you don’t have the money? This is for everyone. If you don’t have the money to invest in capital improvements,

you become less competitive.

Ms. BENNECOFF. Exactly.

Mr. PASCRELL. You become less able to deal with that present

market at that time. Can anybody give me any specific examples

of that? That because you had a couple of bad years, you didn’t

have the money—you were trying to put food on the table. Brian?

Mr. DIETRICH. Yeah. I would like to address that. I have a perfect example. The last couple of years, the milk prices were stagnant to low. Our barn was—our new dairy barn, what we call our

new dairy barn, was built in 1981. Okay. It is 20 years old. So

there is a lot of updates that we should be doing to that barn over

the last number of years. As far as doing more of the modern

things, as far as keeping it cool in this hot weather, keeping the

cows cool, maybe putting more fans in or putting a sprinkler system in, or putting curtains up on the sides instead of mounted

steel. Now, since the milk prices are up this year, we are taking

that money and putting it into that barn. I said to my brother and

my sister, I said, this is the year to do it because who knows where

this milk price goes. Next year it may not have the chance. So we

better put some capital improvements into that barn to stay comVerDate 13-OCT-2001 04:08 Oct 13, 2001 Jkt 075496 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A496.XXX pfrm04 PsN: A496
14

petitive, keep our production up, keep it more even, rather than,

in this hot weather, see it plummet.

Mr. PASCRELL. When you are looking at a large federal budget,

the amount of money that we are talking about here, that is really

insignificant, and yet it could help a heck of a lot of people. I would

like to ask anybody in the Panel, how do we stop this money to get

to—getting to the large conglomerates and that the small farmer

can’t take advantage? Because that is who we want to help. We

want to help the small farmer. I think that is important and I

think it is critical.

And I want you to know that even though I may be across the

river and in an urban district, I feel that this is critical—as critical

as cleaning up the streets in my cities. And I want you to understand and believe me, I am sincere about that. I see this as critical

in bringing us, you know, together. This still is one Nation, and I

think that this is important. But how do we keep this money targeted and focused to the small farm and not to the large conglomerates? Ken?

Mr. WEDDE. What do you consider a small farmer, to start out

with?

Mr. PASCRELL. Well, you are a small farmer.

Mr. WEDDE. You are absolutely right.

Mr. PASCRELL. I guessed right.

Mr. WEDDE. Compared to everybody else.

Mr. PASCRELL. What do you got, 250 acres or—— Mr. WEDDE. Yeah.

Mr. PASCRELL [continuing]. How many acres?

Mr. WEDDE. But how big must you be to stay in agriculture?

Mr. PASCRELL. No. I am asking you.

Mr. WEDDE. The way it is going, we are going to force out the

small farmers. And that is the way it is going right now.

Mr. PASCRELL. Is that good or bad?

Mr. WEDDE. That is bad.

Mr. PASCRELL. I think it is bad. You tell me why you think it

is bad.

Mr. WEDDE. Well, you don’t have the competition. We are seeing

it already. We have less and less farm equipment dealers around.

Mr. PASCRELL. Uh-huh.

Mr. WEDDE. We have less and less fertilizer dealers around. And

this way, the farmers are supporting a lot of people. You have the

tire industry. You have the fuel industry. You would be surprised

how many industries that farmers are supporting. And my son

can’t start farming. The cost is too expensive.

Mr. PASCRELL. Uh-huh.

Mr. WEDDE. How are you going to keep them on the farm? If

there would be a half-decent income, you would have a lot of young

farmers coming in here.

Mr. PASCRELL. You think so.

Mr. WEDDE. I would think so. Yes. And maybe I am getting off

the subject here—— Mr. PASCRELL. No. You are not. I think you are right on target.

Mr. WEDDE [continuing]. But let us go take farm land preservation. What has farm land preservation done for a farm? I would say

95 percent of those farmers in farm land preservation, the only reaVerDate 13-OCT-2001 04:08 Oct 13, 2001 Jkt 075496 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 E:\HR\OC\A496.XXX pfrm04 PsN: A496
15

son they went in there, to pay their expenses. What have they got

left? Nothing. Now, you sell the farm.

Mr. PASCRELL. That is right. And we don’t—we want—and that

is why I think it is imperative that there be, in this program, accountability. Part of the accountability is that the money be directed to the small farmers like yourself and folks that are being

represented today. I think that is essential. I think it is important.

That is how we sell—part of how we sell this—become law.

Mr. WEDDE. And the other thing is, you ask any young generation, where does the food come from? Out of the store.

Mr. PASCRELL. You are right.

Mr. WEDDE. They don’t know where it is coming from.

Mr. PASCRELL. Yes.

Mr. WEDDE. One day they will find out where it is coming from.

Mr. PASCRELL. Or Mexico.

Mr. WEDDE. Yeah.

Mr. PASCRELL. You don’t want me to start talking about that.

Mr. WEDDE. And they won’t have the quality of what they have

today. Sorry that I got a little heated up.

Mr. PASCRELL. No. Good. That is good. That is good. I like your

style. I like it. Very good. Anybody else want to jump in on the capital thing? Arland?

Mr. SCHANTZ. Yeah. I think you asked about what must be done.

I think what must be done is educate the nonfarm public. I mean,

we, the farmers, know what are problems are and what we need.

But we have to educate the nonfarm public, first of all, where their

food comes from. Second of all, that farmers are the backbone of

the country, of the economy. In Pennsylvania, farming—agriculture

is the number one industry. We have to educate the public that if

they would like to see the open spaces, the corn fields, the soybean

fields, they are going to have to support the farmer. They are going

to have to—the farmer is their friend. The farmer is not their foe.

When the farmer is out there driving down the road with his slow

tractor, they shouldn’t get mad at them. They should be happy he

is there.

And I think you guys can go about that. I am not quite sure how.

But you guys have the—maybe the access to the media and somehow have it support the farmer program—I mean, for the general

public, not for the farmers, for the public, so——

Mr. PASCRELL. Are we losing farms in this area—small farmers

going out of business—Lehigh Valley?

Mr. WEDDE. Oh, yes. Definitely.

Mr. SCHANTZ. Oh, yeah.

Mr. DIETRICH. Yes.

Mr. SCHANTZ. Oh, yeah.

Mr. PASCRELL. Is that a major, major problem or a problem in

the future?

Mr. SCHANTZ. It is a problem now. Yeah.

Mr. WEDDE. It is an ongoing problem.

Mr. PASCRELL. And what is the main reason?

Mr. WEDDE. There—are you going to answer?

Mr. PASCRELL. Anybody. Yeah.

Mr. WEDDE. There—I think the biggest problem is, for one thing,

they are at retirement age and they have nobody else to take over.

16

And the price that they can get for their farm, that is part of their

retirement.

Mr. PASCRELL. There has got to be some incentive to keep the

farm within the family or to sustain it.

Mr. WEDDE. I would think there are a lot of young farmers—I

have got grandchildren. One is nine years old and the other is 11

years old. And this is all what they talk about, farming. But, you

know, you never know what they are going to do until they get

older. But I would think if the income would be supportive, they

go into farming.

Mr. PASCRELL. Uh-huh.

Mr. WEDDE. And I would support that idea. But right now, I

can’t support that idea.

Mr. PASCRELL. It is part—Pat, I don’t know if you agree with me

on this—it is part of a mentality in America, growing mentality, of

looking down at working with your hands. This is incredible what

has happened in this country. Whether we are talking about producing food and vegetables and stock, whether we are talking

about making candles or machinery or textiles, we have lost—and

this is how people got their identity in this country, which made

it such a great country—people worked with their hands. And why

do we look down at that? Why do we think that sitting in a room

and dealing with a computer is a more holy way to deal with your

life in the 21st century is beyond me.

Mr. WEDDE. Do you get the Morning Call, the Sunday Morning

Call? Probably you didn’t.

Mr. PASCRELL. No, sir.

Mr. WEDDE. But there is a very good article in the Sunday Morning Call, ‘‘The Man Behind the Plow.’’ Pat, did you see that—Leon

Turner.

Chairman TOOMEY. I did not see that. This past week?

Mr. WEDDE. He started as an orphan boy. And he worked his

way up worth a million dollars.

Mr. DIETRICH. When he retired. Yeah.

Mr. WEDDE. What young farmer can do that today?

Mr. PASCRELL. Uh-huh.

Mr. DIETRICH. Well, that is the whole problem. That is why

young farmers aren’t coming in or taking over. I mean, I have got

children too. I was fortunate. I consider myself still young. I mean,

I am 37 years old. But I had parents that worked their butt off and

provided an opportunity for us children to take over their operation. And my dad had a plan over a period of so many years to

have us work into the business and take over the business, eventually buy his portion out. But there is a lot of young farmers that

don’t have that opportunity.

Mr. PASCRELL. Uh-huh.

Mr. WEDDE. Absolutely.

Mr. DIETRICH. And why don’t they have that opportunity? Because you have got $2 corn. You have got $10 or $11 or $12 milk.

You have got low hay prices. You have got low, 15-cent pork prices.

And that is the major reason.

Mr. PASCRELL. Well, we are—Pat and I are going to go back in

September and make sure we have a lot more names, including my

own—I think I am on some of the bills, but not this one specifiVerDate 13-OCT-2001 04:08 Oct 13, 2001 Jkt 075496 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 E:\HR\OC\A496.XXX pfrm04 PsN: A496
17

cally—want to get on this bill. And we can get names and we can

build the pressure. We have done this in the past in order to bring

this—see, it is not on everybody’s radar screen. But this is a very

critical time. And unfortunately some good will come out of disaster. The Lord knows what he is doing, whether we are dealing

with heat or water problems. This is the time to move on this.

Chairman TOOMEY. Right.

Mr. WEDDE. Well, the other thing is, we are on a worldwide market. This is why I brought up exports. I think the only answer is

that we do more exporting. We have to. But, you know, the dollar

is strong. How can we do that there? It is not a simple answer.

Mr. PASCRELL. That is right.

Chairman TOOMEY. If I could just briefly get back to one specific

technical question, I want to be able to be confident that we have

got right in this bill. And this goes back to something, Ken, you

mentioned in your testimony. The bill has a five-year window

where you can put income into an account and you have got up to

five years to take it out. And Ken is exactly right—it becomes a

rolling five years—— Mr. WEDDE. Right. Right.

Chairman TOOMEY [continuing]. Because in 2001, you have got

through 2006, but in 2002, you could put money aside and then you

have got that until through 2007. Does that give enough of a window? In other words, is it—over a five-year period, is that likely to

be a long enough period of time to see the fluctuations, to see the

ups and downs, so that you can take some income out in a good

year, and you probably will have a bad year to even it out? Is that

a good window that we have got?

Mr. WEDDE. I would think so. Because you can just keep on rolling that along.

Chairman TOOMEY. Right.

Mr. WEDDE. I mean, I don’t think you have a period of five or

ten years. I mean, you get up to the fifth year, you can start rolling

over again. Right?

Mr. PASCRELL. Yes.

Chairman TOOMEY. With the income from that year.

Mr. WEDDE. So, I mean, this just keeps on rolling along.

Chairman TOOMEY. Right.

Mr. WEDDE. So I think the window is great—an open window.

Chairman TOOMEY. Anybody else have any comments about

that? I think that——

Mr. SCHANTZ. Yeah. I could see that maybe a longer period would

be beneficial in a longer-term crop, like Christmas trees, where you

have a—you know, a crop year—not a crop year, but a crop life of

from seven to ten years. And like this tree, I am going to miss this

tree seven years from now.

Chairman TOOMEY. Right.

Mr. SCHANTZ. Even though I am going to replant it next year,

seven years from now there is going to be that gap of less marketable trees.

Chairman TOOMEY. Right.

Mr. PASCRELL. That is good point. We sort of assume that every

crop comes in, in the year you plant it—— Mr. SCHANTZ. Right.

18

Mr. PASCRELL [continuing]. But that is not the case at all. It is

not the case with livestock, obviously, either.

Ms. BENNECOFF. Right.

Chairman TOOMEY. So do you think that there is a case to be

made that maybe the period of time should be related to the period

of developing a product or the crop?

Mr. SCHANTZ. It would be beneficial. I mean, the five-year is

great compared to nothing.

Chairman TOOMEY. Yeah. Sure.

Mr. SCHANTZ. I mean, if——

Chairman TOOMEY. Well, I think it is just something we want to

keep in mind—as this thing moves through the legislative process,

it is likely to change along the way.

Mr. WEDDE. Right.

Chairman TOOMEY. And this is something that, you know, maybe

five years might work better for a grain farmer than it works for

a pig farmer or a Christmas tree farmer.

Mr. PASCRELL. I want to ask Ken another question. Ken, you

gave the example of a—because of this season, your soybean crop

starting to degenerate on the borders.

Mr. WEDDE. Right.

Mr. PASCRELL. And if you want to spray again, it is going to cost

you probably——

Mr. WEDDE. $13 an acre.

Mr. PASCRELL [continuing]. 23, 2,400 bucks.

Mr. WEDDE. Well, there is—oh, more than that. It is going to cost

me—well, let us see, 200——

Mr. PASCRELL. It is $9 an acre. Right?

Mr. WEDDE. No. $13 an acre.

Mr. PASCRELL. It is $13 an acre.

Mr. WEDDE. $9 just for the rake. All right.

Mr. PASCRELL. So and that is—right. Go ahead.

Mr. WEDDE. And then, plus your spraying material.

Mr. PASCRELL. And what is that, $4 more?

Mr. WEDDE. Yeah. About $13 an acre. Yeah.

Mr. PASCRELL. So it is going to cost us close to 4,500 bucks.

Mr. WEDDE. Yeah. Yeah.

Mr. PASCRELL. And that is—you know, unless you have that

money handy, you can’t do that—unless you go—where are you

going to borrow it? Where are you going to loan that money?

Mr. WEDDE. But can you leave the crop go?

Mr. PASCRELL. That is correct. Because they will eat it all up

pretty soon.

Mr. WEDDE. Right. That is——

Mr. PASCRELL. And then what do you do?

Mr. WEDDE. Borrow money.

Mr. PASCRELL. Just chalk it off.

Mr. WEDDE. Yeah. You have to either borrow money or just leave

it go.

Mr. PASCRELL. What do you do on your income tax in that case?

What do the farmers—small farmers—is this depreciation? I mean,

how do you work that out on your tax that if you have lost a crop?

19

Mr. WEDDE. Well, you have your cost and whatever your soybeans are, you just deduct that from your cost, so you are in the

red.

Mr. PASCRELL. Right. Well, we have got to get this bill passed.

Right, Pat?

Chairman TOOMEY. Yeah. Absolutely.

Mr. DIETRICH. Retroactive 2001.

Chairman TOOMEY. It would be all right with me.

Mr. PASCRELL. Where did I hear that yesterday?

Chairman TOOMEY. And we had some folks yesterday that wanted a retroactive—tax cut retroactive to, I think, 1981 or something

like that.

Mr. PASCRELL. Smart people.

Chairman TOOMEY. Did you have anything else?

Mr. PASCRELL. No. I—no questions.

Chairman TOOMEY. Did any of you have any last comment you

wanted to make?

Mr. WEDDE. No. I don’t. I just thank you for inviting me. I appreciate that you invited me to give you my thoughts on it. Good or

bad, but you got it.

Mr. PASCRELL. Okay. Thank you.

Chairman TOOMEY. We all—Brian?

Mr. DIETRICH. I would like to just add one final comment. And

when I told my uncle, who helps us part time on our farm, that

I was going to a hearing today, and I told him the content of what

I was testifying on, he is there, oh, my God, Brian, you must get

to that. He is not in business anymore. He retired. And his son is

not there farming that farm anymore. And he said, boy, if that

would have been around when I was still farming back in ’92, ’94,

is when he sold out then, you know, there is definitely a possibility

that his son may have taken over.

Chairman TOOMEY. Yeah. Well, I want to thank you all very

much for your testimony. Your input helps us to promote this. And,

as Bill was saying, we go back to Congress and we get more Members of Congress to cosponsor the bill, more names on the bill. And

when we get enough, that is when the bill starts to move. And we

will do our best to get that support so that we can enact this sooner

rather than later. Thank you very much and the hearing is adjourned.

Mr. DIETRICH. Thank you.

Ms. BENNECOFF. Thank you.

Mr. SCHANTZ. Thank you.

Mr. WEDDE. Thank you very much.

[Whereupon, at 10:28 a.m., the Subcommittee was adjourned.]

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