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74–344 PS 2001

S. HRG. 107–136

REVIEW OF THE FINAL REPORT OF

THE 21st CENTURY COMMISSION ON

PRODUCTION AGRICULTURE

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

JANUARY 30, 2001

Printed for the use of the

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.senate.gov∼agriculture

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

RICHARD G. LUGAR, Indiana, Chairman

JESSE HELMS, North Carolina

THAD COCHRAN, Mississippi

MITCH MCCONNELL, Kentucky

PAT ROBERTS, Kansas

PETER G. FITZGERALD, Illinois

CRAIG THOMAS, Wyoming

WAYNE ALLARD, Colorado

Y. TIM HUTCHINSON, Arkansas

MICHAEL D. CRAPO, Idaho

TOM HARKIN, Iowa

PATRICK J. LEAHY, Vermont

KENT CONRAD, North Dakota

THOMAS A. DASCHLE, South Dakota

MAX BAUCUS, Montana

BLANCHE L. LINCOLN, Arkansas

ZELL MILLER, Georgia

DEBORAH ANN STABENOW, Michigan

MARK DAYTON, Minnesota

BEN NELSON, Nebraska

KEITH LUSE, Staff Director

DAVID L. JOHNSON, Chief Counsel

ROBERT E. STURM, Chief Clerk

MARK HALVERSON, Staff Director for the Minority

(II)

(III)

C O N T E N T S

Page

HEARING:

Tuesday, January 30, 2001, Review of the Final Report of the 21st Century

Commission on Production Agriculture .............................................................. 1

APPENDIX:

Tuesday, January 30, 2001 ..................................................................................... 63

DOCUMENT(S) SUBMITTED FOR THE RECORD:

Tuesday, January 30, 2001 ..................................................................................... 89

TUESDAY, JANUARY 30, 2001

STATEMENTS PRESENTED BY SENATORS

Lugar, Hon. Richard G., a U.S. Senator from Indiana, Chairman, Committee

on Agriculture, Nutrition and Forestry .............................................................. 1

Roberts, Hon. Pat, a U.S. Senator from Kansas ................................................... 5

Thomas, Hon. Craig, a U.S. Senator from Wyoming ............................................ 9

Allard, Hon. Wayne, a U.S. Senator from Colorado ............................................. 11

Hutchinson, Hon. Y. Tim, a U.S. Senator from Arkansas .................................... 11

Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee

on Agriculture, Nutrition and Forestry .............................................................. 3

Conrad, Hon. Kent, a U.S. Senator from North Dakota ...................................... 7

Lincoln, Hon. Blanche L., a U.S. Senator from Arkansas .................................... 27

Stabenow, Hon. Deborah Ann, a U.S. Senator from Michigan ............................ 33

Dayton, Hon. Mark, a U.S. Senator from Minnesota ........................................... 39

Nelson, Hon. Ben, a U.S. Senator from Nebraska ................................................ 9

WITNESSES

Collins, Keith, Chief Economist, U.S. Department of Agriculture ...................... 12

Flinchbaugh, Barry L., Chairman, Commission on 21st Century Production

Agriculture ............................................................................................................ 15

APPENDIX

PREPARED STATEMENTS:

Lugar, Hon. Richard G ..................................................................................... 64

Cochran, Hon. Thad ......................................................................................... 66

Crapo, Hon. Michael D ..................................................................................... 68

Daschle, Hon. Thomas A .................................................................................. 70

Collins, Keith .................................................................................................... 71

Flinchbaugh, Barry L ....................................................................................... 89

DOCUMENT(S) SUBMITTED FOR THE RECORD:

Summary of concerns raised during Senator Crapo’s 2000 agriculture

town meetings and possible Congressional actions .................................... 122

Press release from the Commission on 21st Century Production Agriculture, dated Jan. 30, 2001 ......................................................................... 128

Page

IV

DOCUMENT(S) SUBMITTED FOR THE RECORD—CONTINUED

Exchange Rates and Bilateral Trade: Examples from CUSTA, MinKyoung

Kim, William E. Nganje, and Won W. Koo, presented by Northern

Plains Trade Research Center, Department of Agribusiness and Applied Economics, North Dakota State University, Fargo ND, submitted

by Mr. Leland Swenson, Aurora, CO, member of the Commission .......... 130

(1)

REPORT FROM THE COMMISSION ON 21ST

CENTURY PRODUCTION AGRICULTURE

TUESDAY, JANUARY 30, 2001

U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY, Washington, DC.

The committee met, pursuant to notice, at 9:00 a.m. in room 216,

Senate Hart Building, Hon. Richard Lugar (chairman of the committee) presiding.

Present: Senators Lugar, Roberts, Conrad, Harkin, Thomas, Nelson of Nebraska, Allard, Lincoln, Hutchison, Stabenow, Crapo,

Dayton, and Cochran.

OPENING STATEMENT OF HON. RICHARD G. LUGAR, A U.S.

SENATOR FROM INDIANA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

The CHAIRMAN. This meeting of the Senate Agriculture Committee will come to order.

We are very pleased today to have the final report of the Commission on 21st Century Production Agriculture. The Commission

was created by the Federal Agricultural Improvement and Reform

Act of 1996, the FAIR Act, to identify the appropriate role of the

Federal Government in production agriculture, following the expiration of the FAIR Act in the year 2002.

In many respects, today’s hearing and the public release of the

Commission’s final report mark the beginning of the 2002 Farm

Bill process. I want to welcome Commission Chairman, Dr. Barry

Flinchbaugh and Commission members, Bruce Brumfield, John

Campbell, Donald Cook, James DuPree, Charles Kruse, William

Northey, Ralph Paige, Bob Stallman, Leland Swenson and Don

Villwock. The Commission has taken its assignment very seriously

and has worked hard to produce a substantial final report which

contains a great deal of information.

Achieving a consensus view on this issue is no easy task. I would

note that all 11 Commission members signed the final report, subject, in some cases, to minority views, which are included as a portion of the report. We look forward to hearing the Commission’s

findings and recommendations.

With respect to the 2002 Farm Bill process, I look forward to

working with distinguished Ranking Member, Senator Harkin, of

Iowa, and all Committee Senators, including many new members

on both sides of the aisle. A good place to try to begin is try to gain

a better understanding of the basic structure of farming.

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Sparks Company, Inc., for example, recently completed an analysis of this subject based on the 1999 census of agriculture. The census defines a farm as any operation with annual farm sales of

$1,000 or more. And about 2 million such entities exist in our country.

But the Sparks analysis found that of the Nation’s 1.9 million

farms, as counted in 1997, only 157,000 farms, just 8 percent, with

annual sales of $250,000 or more, account for 72 percent of the food

and fiber production in this country. These commercial farms rely

primarily on income earned from farming; that is, 72 percent of the

income of the families who were involved in these farms came from

farming. Only 28 percent came from off the farm.

A second group of 189,000 farms, about 10 percent of all farms, have annual sales ranging from $100,000 to $250,000. And they account for 15 percent of production.

Now, in this situation, 57 percent of the group’s income comes

from off-farm sources, only 43 percent from on the farm. That’s

contrasted to 72 percent with the larger group.

Now, the remaining 1.57 million farms, 82 percent of all farms,

account for only 13 percent of production. And the Sparks report

amazingly found that on a net basis, all of the total income comes

from off-farm sources. That is a striking conclusion, and one on

which perhaps members will comment and on which we will have

considerable debate, as we look at the structure of who is in agriculture and where income comes from.

Virtually all agricultural economists tell us the benefits of production-based farming, support and risk management programs,

are capitalized in the value of farm land. The most recent evidence

of this is our experience in the last 3 years, and during that period,

farmers’ returns from the market place have fallen sharply.

Yet agricultural land prices and rental rates have continued a

steady rise as regular FAIR Act programs and supplemental farm

assistance from Congress have provided farmers with increasingly

large amounts of Government assistance. The impact of this assistance on individual farmers can be very different, depending upon

whether a producer owns or rents the land that he or she is farming. Without doubt, our recent policies have helped to keep many

farmers in business.

But increasingly asked is the question as to whether many farmers are being hurt in that process. We need farm programs that

will build the international competitiveness of American agriculture, and will help provide both producers and the general public with increased environmental benefits. Our farm programs exist

because of resources provided by all of our Nation’s consumers and

taxpayers. We have a responsibility to provide farm support in

ways that are as economically efficient as possible.

Though the direct cost to taxpayers of recent farm support is

high, a new analysis by University of Maryland Professor Bruce

Gardner concludes that the combination of regular FAIR Act programs and supplemental market loss assistance is a relatively efficient way of supporting farmers’ incomes. That is that the money

either goes to farmers, to consumers or somewhere in America, as

compared to pre-FAIR Act programs, which relied heavily on acreage reduction programs, and which resulted at least in Professor

3

Gardner’s calculations, to a dead loss of about $4 billion a year to

the American economy.

Following opening statements by Senators, we will hear background testimony from Agriculture Department Chief Economist

Keith Collins on recent policy and market developments. And he

will also be available during the discussion period with Commission members, who will be a part of the second panel, and provide

additional information as required.

I want to remind Senators that Dr. Collins is here, and has been

asked to provide us with information, not to comment on the Commission’s policy recommendations. Chairman Flinchbaugh will testify today summarizing the Committee’s findings and recommendations detailed in full in the final report we have received. Senators

may want to engage all Commission members in discussion following Dr. Flinchbaugh’s testimony.

I also want to recognize Commission staff, Mickey Paggy, Matthew Howe, and Timothy Peters, all of whom provided the Commission with invaluable assistance.

It’s my privilege to turn now to Senator Harkin for his opening

statement.

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM

IOWA

Senator HARKIN. Thank you very much, Mr. Chairman, and I am

pleased we’re holding today the first of a series of hearings on the

future of agriculture and food policy in America. And I look forward

to working together, as we have in the past, in the bipartisan tradition of our Committee, hopefully to craft a balanced and thoughtful, comprehensive new Farm Bill, one that looks not to the past,

but to the future.

Over the past several years, this Commission has done a lot of

work. They’ve been meeting with farmers around the country and

consulting agricultural policy experts and debating the issues preparing this report. I want to thank the members and the staff of

the Commission for their work, and for taking part in the hearing

today.

In particular, I comment Bill Northey, a fellow Iowan, who farms

near Spirit Lake, and is one of our State’s agricultural leaders.

The Commission’s report identifies and discusses many issues

and ideas for the Farm Bill, makes a number of important recommendations. The report also leaves a lot of questions unanswered, and as reflected in the minority views, it points to some

strong disagreements. In short, despite its laudable efforts, the

Commission has left us here with plenty of work to do on the next

Farm Bill.

There does seem to be at least an overall agreement that a sound

food and agricultural policy is critical to our Nation, that we do

need a policy framework. We can’t just walk away from it.

We have some very good programs, such as in conservation, some

other areas. But I believe at its core, however, our Nation’s farm

policy is badly adrift. Freedom to Farm cut us loose from past farm

policies. Then we had to change the course charted by Freedom to

Farm to avert economic collapse in the farm economy.

4

Now, today, this year, ad hoc emergency cash assistance packages are the life blood of our farm programs. I don’t believe this

is a defensible or a sustainable policy for our farm families, rural

America or for our Nation as a whole.

For the next Farm Bill, we must better articulate the underlying

purposes and rationale of our farm policy, clearly identify our objectives, and develop consistent and cohesive programs to achieve

them. Frankly, on that score, I had hoped for more creativity and

innovation in the Commission’s report.

To be sure, finding agreement on farm policy recommendations

is a tough job. But even though the Commission acknowledges the

inadequacy of the current farm programs, it proposes only incremental changes.

Let us not set our sites too low. America’s farm families and

rural communities need new directions in farm policy. Maybe we

should start thinking out of the box, as they say, it’s a popular

phrase these days, and start thinking about farm policy and rural

policy as more than just commodity based programs, but programs

based upon a comprehensive set of economic incentives, different

types of programs that will provide alternative sources of income

and revenue, and a new focus on rural America to make rural

America a more inviting and livable place for people to live and

raise their families.

That encompasses everything from rural hospitals to transportation, clean water, good schools, closing the digital divide, off-farm

income, long-term care, a whole host of things. Whatever makes

cities livable and good places to raise your families ought to provide

the kind of dynamic that we want to look at, not the same, it’s

going to be different, because rural America is different than living

in a city.

But we ought to apply the same kind of thinking, perhaps, to the

next Farm Bill. I don’t know that we can continue to go down the

road of just saying exports, exports, exports, unless we’re prepared

to send our military forces overseas and force food down people’s

throats, and tell them they’ve got to eat what we’ve got, whether

they like it or not.

Now, we’ve got to keep our exports up, we’ve got to think about

how we provide the kind of food and fiber that the rest of the world

wants, not what we want, but what they want. The customer is always right. So what they want is what we’ve got to grow.

So I think there may have been some good things in the Freedom

to Farm, flexibility, of course, we want to continue to have the

flexibility that farmers enjoy. But I think we have to learn from the

experience and make some improvements, especially trying to get

rural farm income up, income, income up.

We also can’t forget that our farmers and ranchers are the stewards of our natural resources for future generations. We should

fully support the current conservation programs, but adopt new

ones, both to support farm income and also conservation on land

and agricultural production.

I’m hopeful that legislation that Senator Smith and I have introduced and which has been companion introduced in the House side,

bipartisan support, is something that we will look at this year, as

providing both the kind of conservation we need but the income

5

support for farmers that we need, the kind of incentives that we

need for farmers on a voluntary basis.

So again, I thank the Commission for doing its job, for having all

the hearings. I look forward to their testimony, and I look forward

to further questions to our Commission about their ideas on how

we’re going to make rural America a more inviting place. I guess

my bottom line question is, Mr. Chairman, is it possible to repopulate rural America.

Thanks, Mr. Chairman.

The CHAIRMAN. Well, thank you very much, Senator Harkin, for

that important opening statement.

I want to recognize each of the Senators who are here now for

opening statements, hopefully of less than 5 minutes or so. So I appreciate your coming early and being a part of this Commission report.

And then after that, our question period will be 5 minutes per

Senator, in rounds, as we proceed. Others who have not appeared

at this point will have to put their opening comments and questions together at that stage.

I’d like to recognize now Senator Roberts.

STATEMENT OF HON. PAT ROBERTS, A U.S. SENATOR FROM

KANSAS

Senator ROBERTS. Thank you, Mr. Chairman.

I hope the obvious answer to the question by the distinguished

Senator from Iowa is yes in regards to repopulating rural America.

And I look forward to working with him as we approach not only

the Farm Bill, but the many other issues that he mentioned, which

I think are right on the mark.

I want to thank you for holding this hearing today, Mr. Chairman. It’s the first of many hearings that we’re going to be holding

on the Farm Bill.

I welcome to the Committee Dr. Barry Flinchbaugh of Kansas

State University, home of the ever-optimistic and fighting and successful Wildcats, who has chaired the Commission on the 21st Century Production Agriculture Commission. Barry is a long-time

friend, we’ve worked together on many issues. We don’t agree upon

each and every one of them, but we have a pretty good percentage.

Mr. Chairman, the Commission was established in the 1996

Farm Bill with directions to review the effective agriculture policies

since the enactment of the 1996 legislation, and to undertake a

comprehensive review and to recommend a course for future agriculture policies, if anybody’s interested, I have that language that

we wrote. I think the Commission has fulfilled this role.

There are not specific recommendations in regards to where we

should go to implement the broader recommendations of the Commission. But then again, this Commission was never intended to be

an independent agriculture committee, to get into that kind of business.

Let me say that I think all options should be on the table for review and for consideration. I’ve often said that having experience

in six Farm Bills myself, I can’t remember a Farm Bill that was

set in stone or that was perfect. Matter of fact, it seems to me that

6

after every Farm Bill we always come back in with either a technical corrections bill, which usually is far more comprehensive.

As the distinguished Senator from Iowa has pointed out, due to

a lot of different causes, we have had to come in with an additional

AMTA payment or lost income payment, however you want to describe it, in regards to the world price, depression. So no Farm Bill

is set in stone, and obviously no Farm Bill is perfect.

I think this report is a strong basis on which to begin. It is a

road map, if you will. At the same time, I think my colleagues

should understand what this report is and is not. It is a recommendation. It is a broad outline for the policies of the Commission that its members believe should be contained in the next Farm

Bill as it relates to actual farm programs.

It is not a recommendation, at least as I understand it, on how

to deal with the issues such as a fluctuating dollar, the high energy

prices we see today, rural development, although that certainly

comes within the jurisdiction of this Committee. We must do everything we can to support rural development, and the many other

issues that will all play a role in how we shape and write the next

Farm Bill. These issues are simply beyond the scope of the Commission and what is was asked to do. And they are issues that we

as a Committee and we in the Congress must tackle.

Finally, Mr. Chairman, as we begin this debate, I have no real

preconceived notions. However, whatever policies we eventually decide on, I believe that we must maintain the individual producer

decision making and control, which was the heart and soul of the

1996 Farm Bill, and the flexibility to make their own planting and

marketing decisions.

I must also add that the component parts that we recommended

that are encompassed in the Chairman’s bill, and that of Congressman Bereuter, I am a strong cosponsor of that bill. And it entails

all of the things that we wanted to do, commensurate with any

Farm Bill. It was appropriate tax relief, regulatory reform, a consistent and aggressive export policy, sanctions reform, all the

things that I think most of the farm organizations and commodity

groups and members of the Commission have long supported.

Seems to me we must also address the responsibility of our farm

and agriculture groups as we begin this debate. Dr. Flinchbaugh

and the Commission have put forth a solid benchmark for beginning the discussion. It is now our responsibility in the Congress,

and quite frankly, that of the commodity organizations and the

farm organizations and the producer organizations to come forth

with solid proposals of their own for the next Farm Bill.

I would repeat the admonition by the distinguished chairman of

the House Agriculture Committee, Congressman Larry Combest,

who has said that these proposals need to be based on fact and

substance with an explanation on how they should be financed.

I realize, having been through a great many Farm Bill debates,

that we always get into the discussions as to a point of view as to

whether we should rely on loan rates or other kinds of payments,

or what kind of a counter-cyclical payment, and whether we go

back to supply management. Those are very, I guess, historic debates.

7

But what Larry has suggested is that we be rather specific and

we see how it fits into the budget. And I think that’s wise advice.

I have long tried to be a champion of production agriculture. I

have no greater priority in public service. But I think as a member

of this Committee, I hope we can come forward with policy and

spending proposals we can defend and justify on the Floor of the

Senate and the House, rather than simply asking for a level of

spending of what some may believe is what we are deserving of or

entitled to.

We need to do our part to support U.S. agriculture. At the same

time, I think we need to do our part to support fiscal discipline,

which will benefit everybody, as we don’t want to slide into a real

recession.

I thank you, Mr. Chairman. I thank the members of the Commission for your time, for your effort, and for your very diligent product. I did not expect a specific road map. You’ve given us a general

road map, and I appreciate it. Thank you very much.

The CHAIRMAN. Thank you, Senator Roberts.

I acknowledge again, and this Commission knows, that Senator

Roberts, as Chairman of the House Agriculture Committee, was instrumental in the success of our efforts in 1996. And it is a privilege that he is a member of this Committee now, assisting us as

we approach that task again.

Likewise a veteran of the last debate is Senator Conrad. And I

would like to recognize him now for his opening comments.

STATEMENT OF HON. KENT CONRAD, A U.S. SENATOR FROM

NORTH DAKOTA

Senator CONRAD. Thank you, Mr. Chairman.

And I’d like to welcome not only the members of the Commission,

but the new members of our Committee. Certainly Senator Ben

Nelson of Nebraska, an important farm State, and we look forward

to his contributions as we work to improve farm policy.

On the other side of the aisle, we want to welcome four new

members. Senator Thomas, who we have worked with in the past

on many issues important to our part of the country. Awfully glad

to have him here.

Senator Allard, of Colorado, welcome to the Committee. Senator

Hutchison of Arkansas, another important farm State. And of

course, Senator Crapo.

Welcome, all. We look forward to working with you. I think you’ll

find this is a congenial Committee. And we have excellent leadership. And we have feisty debate. And hopefully this morning will

be no exception to that.

I want to thank the Commission for their hard work, and especially recognize their proposal on a safety net. That was a very important proposal and I think will be well received on both sides of

Congress.

I do think that you missed an opportunity to focus on some of

the larger forces that are affecting domestic agriculture. As I reflect

on current farm policy, I believe it is fatally flawed. In fact, I personally believe it’s a disaster for domestic agriculture. And I think

the record is quite clear, we’ve had to write four disaster bills in

the last 3 years. And they have not been cheap.

8

And I think that goes right to the heart of part of what happened

the last time we wrote a Farm Bill, was in the budget process,

which was the first place we faced a fight, agriculture got hammered. And as a result, we really couldn’t write a farm policy that

made much sense.

Let me just go to a couple of charts which I think are important

for us to reflect on as we consider new farm legislation. This shows

what’s happened to net farm market, that U.S. farm market income falls as Government payments increase. And we can see from

1996 to 2000 the blue part of the bar is market income. The red

part of the bar are Government payments.

And you can see that market income, the blue portion of the bar,

has shrunk dramatically since 1996. Government payments have

increased dramatically. In fact, Government payments have about

tripled.

And if we wouldn’t have had that increase in Government payments, you can see what would have happened to overall farm income. It would have shrunk to levels that are historic lows in real

terms.

Let’s look at key factors. Obviously, farmers are paying more but

receiving less. The green line is what prices farmers paid for inputs. And that’s been moving upward, ever upward. And we can

see the red line is what prices the farmers have received for what

they sell. And you can see that it’s interesting, coincidentally, perhaps not coincidentally, some believe, 1996 Farm Bill passage was

the peak of what farmers received. And since then, those prices

have plunged. And the plunge continues through the year 2000.

I believe one of the key factors affecting us is what’s happened

to our major competitors, the Europeans. You can see on this chart

that the European Union supplies 63 percent of the world’s trade

distorting domestic subsidies, 63 percent. They’re the red portion of

the pie. Japan is the blue portion. The United States is the little

green sliver. Europe alone is beating us 10 to 1 on trade distorting

subsidies, 10 to 1.

Let’s look at the next chart. Because it shows what they’re doing

in terms of domestic support. This is from the Organization for

Economic Cooperation and Development, the OECD. They’re the

international scorekeeper. This is what they say is happening with

respect to domestic support on average. We’re the blue bar, $38 an

acre, on average. The Europeans, $313 an acre. They’re swamping

us, 10 to 1.

And the final chart showing what they’re doing in terms of world

agricultural export subsidies. This is again our major competitors,

the Europeans. They account for 83 and a half percent of all world

agricultural export subsidy. The United States, 2.7 percent. It’s not

too surprising here that our farmers are losing this battle.

Unless we address those imbalances in whatever Farm Bill we

write, we’re going to be handing our farmers a losing hand. So the

question is, do we permit our farmers to fight back, or do we leave

them in this circumstance in which the deck is stacked against

them. I hope very much that this information can get out as we

proceed on the Farm Bill debate and that it goes to the Budget

Committee, where, Mr. Chairman, I’ll have to leave, because we’re

holding a hearing this morning.

9

The CHAIRMAN. Thank you very much, Senator Conrad.

It’s my privilege now, Senator Conrad has already welcomed

these four distinguished Senators. But let me reiterate that welcome. It’s a privilege to have each one of you on the Committee.

As all of you in the audience know, we have just completed the selection of the Committee. This is the first time the 20 members of

the Committee, now 10 Republicans, 10 Democrats, have come together. So it’s a privilege to recognize each one of these Senators

for a brief opening comment and then for full participation and the

questions to the witnesses.

First of all, Senator Thomas.

STATEMENT OF HON. CRAIG THOMAS, A U.S. SENATOR FROM

WYOMING

Senator THOMAS. Thank you, Mr. Chairman.

Certainly, I want to say it’s a great honor for me to serve on this

Committee. As many of you know, I have had a strong interest in

agriculture and for a very long time, testified a number of times

here at this Committee. So I welcome the opportunity to be more

a part of that.

On other committees, I’ve dealt with public lands, continue to,

with energy, environment, foreign trade. So all those things, of

course, relate to agriculture.

As we prepare this Farm Bill, it’s important, of course, to evaluate the current direction of agriculture. Agriculture and markets

change rapidly, certainly. We need to have a plan to stay ahead of

that curve, to learn from the successes that we’ve had and also

learn from the things that have not been as successful.

We face some tough times, but we need really, it seems to me,

to take a look at where we want to be in agriculture, what our

goals really are, so that as we move towards that, we’ll be able to

evaluate the things we do. Obviously there’s no single response.

There are an array of obstacles to farm programs, of course, tax

burdens, environmental restrictions, market concentration, trade

barriers, just to name a few.

So I certainly look forward to this, and hope that we can be successful as we move forward in seeking to make agriculture more

successful in our country. I commend the Commissioners who have

done a lot of work, certainly, on their job, and they’ve come a long

way.

So, Mr. Chairman and members, I appreciate being a part of

your group and look forward to working with you. Thank you.

The CHAIRMAN. We’re privileged that Senator Nelson is a part of

our group. We welcome you again, Senator. You appeared in your

initial appearance for the hearing for Secretary Veneman. We are

delighted that you are here today. Please proceed.

STATEMENT OF HON. BEN NELSON, A U.S. SENATOR FROM

NEBRASKA

Senator NELSON of Nebraska. Well, thank you very much, Mr.

Chairman. And it truly is a honor and a pleasure as well as a great

opportunity to serve on this Committee.

I know this very often is tempting to dwell on the past with what

was. We can learn from the past. Sometimes we learn from our

10

failures and our successes equally. And occasionally, we have a

near success. But now I believe it is in fact time to focus on the

future to find a way to put together a program that will work to

return agriculture, and farming in particular, from simply a wonderful way of life to a way to earn a living once again.

I congratulate all those who have labored on this challenge over

the years. I thank you for everything that’s been done. It’s not an

easy problem to solve and the solutions, while to easy to discuss,

are hard to crystallize into a comprehensive program.

As a Senator from a rural State, I too am hopeful that we can

repopulate many of the rural areas of our country, and at the very

least curb the depopulation that we are incurring at this very time.

The important thing, ultimately, is to develop a program that will

protect income, not simply subsidize it.

I must admit, and I’m getting used to Senator Conrad’s charts,

I think they very clearly establish what has been happening. I am

sure he would be the first to say that it’s easier to point out the

problem than it is to find or to bring about the resolution.

But farm income protection is what we must be about in some

fashion or other. We have to recognize that trade agreements,

while they can be helpful at times, aren’t as helpful as they might

be if agriculture could be considered as part of the main thrust of

trade agreements, as opposed to an afterthought. I believe if agriculture, and particularly some of the so-called lesser commodities,

had been considered at the time of the development of the NAFTA

agreement we would have spelled it right—it would have had two

Fs. You’ve heard me say it before, I don’t criticize anybody for the

misspelling, but I would like to point out that it should have not

only been free trade, but fair trade.

And that I would hope, as we work toward looking at the EU,

or we look at other parts of the world, that we recognize the reality

that we’re asking our agriculture producers to compete in an unfair

market and in a market that is highly subsidized. While it may be

tempting to say, well, if you can’t beat them, join them, I think we

have to be careful in that approach. But at the same time, I don’t

think that we can totally ignore what’s going on with world markets.

Here at home, I hope this Committee will work very carefully as

an energy policy is being worked on to include biofuels, additional

sources of alternative markets for farm products, that will help us

and help agriculture not only solve the energy crisis that we’re seeing develop, but also a national security interest in producing more

of our fuels here at home.

There are a lot of things that remain to be done. I want to be

a party to these discussions and these considerations. And I want

to be a friend, if you will, of the process. But I think it is important

that we work together, and that we recognize that the solution is

not to continue what we’ve done in the past, but to find adjustments to the Freedom to Farm Act as we move forward, to retain

the flexibility, to retain what’s working and find solutions for what

isn’t. And I would hope that we would be able to do so in the context of protecting income for agriculture.

Thank you very much for this opportunity.

The CHAIRMAN. Thank you very much, Senator Nelson.

11

Let me just mention that other Senators are arriving. At the beginning I indicated we would have opportunity for opening statements of Senators that were here at that point. And those who

were not here at that point will have an opportunity to make comments, opening statements and questions during the question period.

But I would like to get on, at some point, which I hope the Committee will appreciate, to the testimony from Dr. Collins and the

panel. But I’m going to recognize two Senators who were here at

the outset, and we welcome once again Senator Allard to our Committee.

STATEMENT OF HON. WAYNE ALLARD, A U.S. SENATOR FROM

COLORADO

Senator ALLARD. Mr. Chairman, thank you. It’s a pleasure to be

on your Committee and I look forward to working with both sides

on many important issues I think that the Committee will be dealing with. I think that it’s a particularly opportune time for me to

be on the Committee, because I served on the House Agriculture

Committee at the time that we put together the Freedom to Farm

legislation, and actually at the time the Commission was set up.

And I’m looking forward to hear what they have to say in their

analysis. I think it will be something that this Committee will

probably need to rely on as we move forward in our deliberations.

I hope that we can get something passed within the next 2 years

to expand markets for our agriculture producers. I think that’s a

real challenge. I think we’re also going to be facing some real energy challenges, and perhaps maybe one of the greatest factors in

increasing the costs of farming today may be the cost of energy.

I hope to bring to this Committee kind of a special expertise,

since I am a veterinarian. I think that animal disease worldwide

will get to be a greater problem and probably more of a debate in

this Congress. So I hope to bring forward some special understanding in that, and also some science issues, dealing with production

agriculture. We’re already down the road on many of those science

issues, but I suspect they’ll be brought up by certain groups. I hope

to be a member and a spokesman of any special study that you

may have in that regard, so that we can address some concerns,

I think, out there about our high quality farm product that we

produce in this country, to explain to the American public that it

is high quality.

Thank you very much, Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator Allard.

Senator Hutchison, do you have an opening comment?

STATEMENT OF HON. Y. TIM HUTCHINSON, A U.S. SENATOR

FROM ARKANSAS

Senator HUTCHISON. Just very briefly, Mr. Chairman.

I want to thank you for the opportunity to serve on this Committee. I’m very excited about it, and I’m thrilled to be able to join my

colleague from Arkansas, Senator Lincoln. I think it bears testimony to how important agriculture is to the State of Arkansas that

both of us would desire to serve on this Committee. And I appreciate your leadership.

12

I also look forward to hearing Dr. Collins and Dr. Flinchbaugh

review the recommendations of the Commission. I think the 11

members of the Commission have worked hard and this final report will give us some guidance.

I especially want to recognize Jim DuPree, a member of the Commission from Newport, Arkansas, who is a fixture of Arkansas agriculture and well respected. In his very candid and I think creative

way he has expressed some minority views, and I want to thank

Jim for his service.

Agriculture is the backbone of Arkansas’ economy. An I was listening to other opening statements, in Arkansas, we’ve seen in the

delta a depopulation. We’ve seen a lowering of income, a lowering

of population, and so we’ve also seen a loss of hope. So I’m excited

to be able to be a part of the process by which we write a Farm

Bill and look forward to serving on the Committee.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator Hutchison.

Let me just mention for all members and those who are witnessing the hearing that Keith Collins, the distinguished economist at

USDA, has been asked to summarize his remarks in 8 minutes.

The Chair will be liberal in case it spills over a bit. That’s a rather

rigorous situation, but it’s an important paper, and we’ll take

longer if necessary. And likewise, Dr. Flinchbaugh, to summarize

in 20 minutes. That is even a more difficult task, given the volume

that the Commission has produced.

But at this point, I’d like to recognize Keith Collins, United

States Department of Agriculture, for his testimony. We will follow

on immediately then with Dr. Flinchbaugh, and then we’ll have a

round of questioning by all members of the Committee. Dr. Collins,

great to have you back.

STATEMENT OF KEITH COLLINS, CHIEF ECONOMIST, U.S.

DEPARTMENT OF AGRICULTURE

Mr. COLLINS. Thank you very much, Mr. Chairman, Senator Harkin, members of the Committee.

I’d like to start by saying that under the 1996 Farm Bill, the Department of Agriculture was directed to provide administrative

support to the Commission. That job fell to me, so I had an opportunity to meet frequently with the Commission. And I’d like to, on

behalf of the Department, compliment them for the intensity and

the dedication that they showed during the development of their

report.

Regardless of the recommendations and the differing views, I

think it’s very clear that they all shared a very strong common

bond, and that was to want to do the best they could for America’s

farmers and ranchers.

Mr. Chairman, I thank you for inviting me on behalf of the Department to help set the stage for the Commission’s report today,

by commenting on some of the recent developments in farm policy,

how we got to where we are today, and then describing the general

condition of the farm economy. As I look back over farm policy history, I think farm programs grew out of concerns about the ability

of a free market to deliver safe food at reasonable prices to consumers, assure farmers fair returns, assure farmers that they would

13

get treated fairly in international markets, and provide proper

management of the Nation’s natural resources.

Prior to the 1930s, I think most concerns about the plight of

farmers were addressed by trying to make farmers more efficient.

This generally meant expanding research, education and extension

programs, goals and policies that we still pursue today.

The farm legislation of the 1930s, which was driven by the great

depression, and driven by the fact that farm per capita incomes in

the 1930s were one-third the level of non-farm per capita incomes,

introduced price support loans, production control programs, and

even conservation programs to reduce erosion, retire land and support producer incomes.

From the 1930s through the 1960s, programs generally attempted to raise prices and incomes, and that occurred at the same

time that we had the miracle of productivity growth in agriculture,

the productivity revolution in which yields were exploding. That

often led to chronic surpluses and both mandatory and voluntary

supply control programs. During the 1970s, farm policy was pretty

much benign, as we had strong exports and higher prices. But

when we got into the 1980s, high supported prices and growing

yields once again led to the largest supply control program in history in the early 1980s.

Well, after 50 years of strong Government intervention in markets, important steps toward a market-oriented economy were

taken in the mid 1980s, with the passage of the 1985 Farm Bill.

I think that three factors contributed to this rethinking of the role

of Government in agriculture markets, and the first of course was

the fact that the budget deficit became a national priority, and

farm program costs were spiraling out of control, hitting $26 billion

in 1986.

Second, there was recognition that the high price support and

production control policy was doing some damage to consumers,

doing some damage to our international competitiveness, also affecting the environment and also affecting the freedom of enterprise of individual producers. And third, agriculture was increasingly viewed as a sector where a small share of farms produced

much of the output and this very small share of large scale producers had household incomes that on average were above those of

non-farm households.

Prior to the 1996 Farm Bill, market-oriented policy reforms included reducing target prices and payment acres, fixing program

payment yields, reducing price support loan rates, creating the concept of marketing loans, together these changes decoupled payments from current production. The 1996 Farm Bill went further

in separating payments from production and prices, giving farmers

almost total planting flexibility and eliminating annual production

controls. In addition to that, with the exception of oilseeds, price

support loan rates were capped at the 1995 level.

The move to a more market-oriented agriculture that we’ve seen

since 1985 has been slowed somewhat by the sharp drop in prices

since 1997, which led to four pieces of legislation that increased

farm program costs by about $25 billion over the last 3 years. The

downturn in the farm economy, which was caused by large U.S.

and foreign production, the global economic slowdown of the late

14

1990s and its after-effects, and the high value of the U.S. dollar resulted in some of the lowest farm prices that we’ve seen in the last

15 to 25 years.

With some of these factors improving as we go into 2001, we are

currently forecasting that the value of farm exports will go up

about 4 percent to $53 billion this year, and that the volume will

go up about 6 and a half percent. And we can look at several major

commodities where we’re starting to see some stronger markets, including wheat, corn, cotton, cattle, and a number of horticultural

products. But with large U.S. supplies, price recovery is likely to

be very slow.

In addition, we’re going to see, I think, continued price pressures

for soybeans, for milk through much of this year, and I think during the second half of the year for hogs as well.

Record large Government payments have helped avert a national

farm financial crisis. We’ve seen farm debt rising in recent years.

But non-performing loans have only risen slightly. And land values

keep rising, which are helping to keep the farm debt to asset ratios

manageable.

For 1999, the year 2000 and for our current forecast for 2001, if

you take U.S. net cash farm income and exclude Government payments, those 3 years are the lowest since 1984. However, when

payments are added in, net cash income for 1999 and 2000 about

equals the average of recent years.

Looking at this year, for 2001, we of course do not build in any

supplemental payments, since there is no legislation. So assuming

no supplemental payments, net cash income is projected to decline

about 10 percent from $56.4 billion to under $51 billion. The major

field crops, food grains, feed grains, cotton and soybeans, have had

particular market difficulty the last couple of years.

Direct Government payments to producers of those crops on average accounted for three-fourths of net cash income of those crops

in 1999, and two-thirds of net cash income in the year 2000. Absent

any new legislation, regions and crops that have been dependent

on Government payments are likely to see the greatest declines in

farm income in 2001.

Income is also going to be squeezed this year by higher prices for

farm production inputs. Last year, during 2000, higher fuel prices,

higher interest rates, along with higher prices for a number of

other inputs, increased farmers’ production expenses by $7.6 billion

in that one year. This year, higher fertilizer and other costs are

likely to increase total cash expenses another $1.5 billion on top of

last year’s level and cause total cash expenses in agriculture to

reach a record high $180 billion.

In the absence of new supplemental assistance, U.S. farm income

may drop below recent levels during the next few years, as higher

commodity price and cash receipts do not fully offset the drop in

Government payments. Beyond the next few years, I think the outlook for the farm economy improves as expanding domestic use and

exports, particularly developing countries around the world,

strengthen farm prices, and increases in farm income and asset

values help to contain farm financial stress.

That completes my statement, Mr. Chairman.

15

[The prepared statement of Mr. Collins can be found in the appendix on page 71.]

The CHAIRMAN. Thank you very much, Dr. Collins. As indicated

before, you will be available for questions of the Senators after we

have heard from Dr. Flinchbaugh.

I’d like to ask now Dr. Flinchbaugh to come to the table. Following his testimony, we will welcome all the members of the Commission to the table, all available for questions.

Dr. Flinchbaugh, you have been introduced by the distinguished

Senator from Kansas, and I welcome you because you have performed a noble service for agriculture in our country during this

Commission’s work, but for many years in your work in Kansas

and throughout the Nation. It’s an honor to have you here today,

and will you please proceed.

STATEMENT OF BARRY L. FLINCHBAUGH, CHAIRMAN,

COMMISSION ON 21ST CENTURY PRODUCTION AGRICULTURE

Mr. FLINCHBAUGH. Thank you, Mr. Chairman.

Mr. Chairman, Senator Harkin, members of the Committee, we

appreciate the invitation to appear before you today to present the

report of the Commission on 21st Century Production Agriculture.

In my written statement, which is before you, I provide an outline

of the findings of the Commission with regard to the role of the

Federal Government in support of production agriculture. Today I

will cover as much of the statement as time allows.

The Commission relied on input from a diverse set of stakeholders, subject matter experts and background materials and analysis

provided by the staff to arrive at the specific findings for policy initiatives or other courses of action. I wish to thank the staff, Dr.

Paggy and his assistants, Matt Howe and Tim Peters. And I especially wish to thank the staff of the Office of the Chief Economist

and Dr. Collins.

The results of these efforts are contained in the report entitled ‘‘Directions for Future Farm Policy: The Role of Government in the

Support of Production Agriculture.’’ That report was provided to

you in advance of this hearing.

In general, it was agreed that the role of the Federal Government should be limited to activities that involved issues that were

unlikely to be solved through private sector initiatives.

The Commission concluded that the proper role of the Federal

Government should be to pursue policies and programs that promote the following concepts and/or accomplish the following outcomes: ensure a competitive agricultural economy through monitoring of concentration, enforcement of antitrust laws and related regulatory authority; ensuring transparency of market behavior, including contracting; develop policies and programs that enhance

the competitiveness of U.S. agricultural products; reduce trade barriers, open markets, and enhance the ability of producers to maximize value added opportunities; base all policy on sound science

and insist that foreign competitors do likewise; promote and enhance food safety and a clean environment; promote and enhance

animal and plant health and safety; provide support for agriculture

research and education; enhance the development and use of risk

management tools; develop and fund programs that meet the speVerDate 11-MAY-2000 10:44 Jan 17, 2002 Jkt 074344 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\DOCS\74344.TXT SAG1 PsN: SAG1
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cial needs of small and limited resource farmers; and finally, provide an effective and adequate income safety net for farmers with

minimal market distortion.

To guide us in our deliberations, the Commission relied on input

provided in a series of six public hearings held throughout the

country. At these listening sessions, the Commissioners heard testimony from over 200 witnesses from 30 States. To aid the Commissioners in their understanding of the critical issues, a series of informational meetings was held. Over the course of the Commission’s tenure, there were 14 meetings with over 60 expert witnesses

providing input on the various aspects of each major issue.

Within the guidelines established and given the limitation of

time and resources, issue priorities were set. Priority number one,

income safety net. The persistence of very low commodity prices

has rendered existing farm program support inadequate to address

the level of stress experienced over the last few years. As a result,

the Congress has had to rely on emergency measures to provide additional support to the sector. The Commission has established a

set of policies it believes will prevent the need for continued reliance on emergency measures, provide the flexibility necessary to

address unforeseen changes in future market conditions, while continuing to provide a solid foundation of support for production agriculture.

The Commission recommends a continuation of a fixed AMTA

payment in accordance with existing baseline budget allocations, in

addition to a counter-cyclical income support program. The Commission specifically recommends a program referred to in our report as supplemental income support or the SIS program. The SIS

program, along with the extension of the fixed AMTA payment,

would provide a flexible income safety net for agriculture producers

in times of depressed farm income.

The Commission also recommends as a part of the income safety

net that the loan deficiency payments and marketing loan be retained, however adjusting the marketing loan rates to reflect the

balance between the historical market value of individual crops. In

addition, the Commission recommends that the limitation on Government payments to producers be removed.

The Food and Agriculture Policy Research Institute, known as

FAPRI, provided an assessment of the Commission’s SIS countercyclical income support program. Their analysis concluded that

SIS, using a 5-year moving average program crop gross income, as

the income trigger level, would have an estimated counter-cyclical

payment of approximately $2.8 billion in the year 2003.

The payments are estimated to decline due to increased yields

and stronger prices to $558 million by 2005. This counter-cyclical

approach would be decoupled from current prices and production

and be distributed in a similar manner as the current production

flexibility contracts. The decoupled nature of the SIS payments,

along with the aggregate eight program crop gross income trigger,

yields a program that would likely be categorized as green-box

under the aggregate measure of support World Trade Organization.

The SIS program is envisioned to provide counter-cyclical income

support for eight major program crops: wheat, corn, sorghum, upland cotton, soybeans, rice, barley and oats. Producers of non-proVerDate 11-MAY-2000 10:44 Jan 17, 2002 Jkt 074344 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 C:\DOCS\74344.TXT SAG1 PsN: SAG1
17

gram crops would not receive direct benefits from this program.

However, non-program crops could be added to the aggregate.

Planting flexibility, as it currently exists, would be maintained

under this proposal.

Priority item number two, risk management. Producers have an

array of tools at their disposal with which to manage risk. The

Commission recommends that the possibility of creating an actuarially sound insurance program with coverage provided by private

companies be studied. An actuarially sound insurance program is

defined as one where the Government does not underwrite a portion of the insurance company’s risk, but rather provides farmers

with a voucher to offset the cost of insurance premiums.

The Commission also recommends the implementation of a farm

account without a time restriction on how long money may be left

in the account, thereby allowing the account to serve as both a cash

reserve for low income years, as well as an alternative retirement

fund for the producer.

Priority item number three. The Commission recommends continuation of the Conservation Reserve Program, and suggests that

any possible increase in the acreage of the program be dedicated

towards buffer strips, filter strips, wetlands, grass waterways and

partial field enrollments. The Commission recommends continuation of the EQIP program at funding levels initially proposed in

the 1996 FAIR Act, and for providing adequate support for the

NRCS staff to administer the EQIP program.

The Commission recommends that research be conducted that focuses on the following conservation and environmental issues: providing voluntary incentive-based programs to enhance agriculture’s

positive contribution to air and water quality; a means to provide

compensation to producers who establish environmentally beneficial practices, with funding from a separate environmental program; establishing a baseline measure of agriculture’s positive contribution to air and water quality; and finally, priority areas including, but not be limited to, carbon sequestration, control of

greenhouse gases emissions, manure management and alternative

fuels.

Number four, agricultural trade. The Commission endorses the

comprehensive U.S. position on trade as it was tabled with the

WTO in June of 2000. In addition, the Commission stresses the

need for agriculture negotiations to be part of a comprehensive negotiation conducted in a single undertaking approach. The Commission also recommends that Congress grant the President negotiating authority for the new round of trade talks. Last, it is the view

of the Commission that negotiations on trade reform within the

WTO are not the appropriate forum for negotiation of environmental and labor issues.

Number five, individual commodity policies. Dairy, sugar, peanuts and tobacco are commodities that have evolved into specific

and unique agricultural programs over the years. In reviewing each

of these commodities’ programs in detail, the Commission has identified areas of concern that will have an impact on the economic

well-being of the producers of each of these commodities.

In an effort to provide direction for inquiry, the Commission has

outlined a set of policy options for each commodity it feels should

18

be reviewed, and urges those within each industry to work together

to develop solutions that will provide for a prosperous future for

each of their respective commodities.

Dairy. Decisions regrading the course of future dairy policy must

address at least four issues: Federal marketing order reform, extension of dairy compacts, future price support and international market opportunities and challenges.

Peanuts. The Commission recommends that the following options

be examined: a phased reduction of the quota system with compensation to existing quota holders, allowing for transfer of quota

across State boundaries, subsidies to manufacturers to stimulate

purchase of domestically grown peanuts, a marketing loan for peanuts, a direct payment type program for producers of quota peanuts, and greater incentives for increased industry competition to

reduce concentration.

Sugar. The Commission believes that there needs to be a serious

consideration given to developing an alternative program to the

current sugar program. It is the view of the Commission that the

following program options individually or in combination be evaluated: a marketing loan for sugar, domestic marketing controls, domestic production controls and some form of direct payment to

sugar producers.

And finally, tobacco. The options to the existing program the

Commission feels should be examined include the following or some

combination thereof: increasing transferability of quota across

county lines and/or State lines; a buyout program designed to

phase out the quota program; and a marketing loan for tobacco

with a view to increased export competitiveness.

Number six, small and limited resource farms. The Commission

recognizes the importance and value of the small family farm in

production agriculture and in rural communities. The Commission

further recognizes the significant impact Government policy has on

the economic condition of small family farms. The Commission acknowledges the work of the National Commission on Small Farms.

Their work continues in the activities of USDA’s Advisory Committee on Small Farms. The Commission believes that this Advisory

Committee on Small Farms should be the lead group in this issue

area, and that it is the role of the Government to develop and fund

programs that meet the special needs of small and limited resource

farmers.

Accordingly, the Commission recommends that the work of the

Small Farms Advisory Committee be formalized as a part of the

United States Department of Agriculture, by Congressional authority, providing appropriate staff and funding.

Commissioners Paige, Brumfield, DuPree, and Swenson wish to

endorse the report of the National Commission on Small Farms in

its entirety.

That, Mr. Chairman, concludes the majority report. I now will attempt to summarize briefly the minority views.

The first minority view submitted by Commissioner Swenson on

the Farm Income Safety Net has been endorsed by Commissioners

DuPree and Paige. Commissioner Swenson’s recommendations are

based on the fundamental belief that the assumptions underlying

19

the support for the passage of the 1996 FAIR Act have proven not

to be valid, nor will they likely have merit in the future.

A fundamental part of Commissioner Swenson’s program is the

change in the calculations of existing commodity marketing loan

rates. Commodity marketing loan rates for each commodity would

be established utilizing a uniform methodology, such as some minimum percentage of the 3 year moving average of USDA’s full economic cost of production including dairy.

The program proposed by Commissioner Swenson would also include implementation of an inventory management program. The

elements of this program would include efforts to expand demand

for and the use of agricultural products; incentives for management

of existing inventories through farmer-owned reserves program and

producer-stored reserves dedicated to renewable energy production

and humanitarian food assistance and a voluntary acreage setaside

program where participants would benefit from increased marketing loans for the balance of program crops produced.

The voluntary setaside would also provide authority for the reduction of marketing loan rates for non-participants if stocks to use

ratios exceed specific levels. The program as envisioned would also

include mechanisms to provide for targeting of benefits, such as a

limitation on the level of gross benefits from marketing loan receipts.

Last, the program would provide a set of incentives that encourage the application of long term stewardship practices including

authority to create and implement a multi-year land and soil rehabilitation program.

A minority view on the income safety net submitted by Commissioner Campbell. In Commissioner Campbell’s view, the SIS program offered by the majority of the Commission would prevent adjustment in land prices and land rates attributable in large part to

the recent Congressional emergency assistance payments. As a result, in Commissioner Campbell’s view, larger producers are able

to optimize production at lower variable costs, are at an advantage

over smaller operations, and are increasing the rate at which these

smaller operations are absorbed by the larger operators.

The policy alternatives proposed by Commissioner Campbell are

made in large part with a view to remove Government incentives

for farming operations to increase in size. In addition, Commissioner Campbell emphasizes that while the farm economy has

changed significantly over time, agricultural programs and policies

have not. Commodity marketing loans, income support decoupled

from production, and planning flexibility have been policy improvements. The difficulty is finding a non-distortive direct income support mechanism.

It is the view of Commissioner Campbell that three types of programs can be economically and socially justified in the future.

Number one, safety net programs for commercial producers to protect against catastrophic markets or weather situations, including

market-oriented marketing loans, and a market-oriented risk management program.

Number two, social and/or credit programs that help farmers on

the edge transition to larger commercial operations, smaller speVerDate 11-MAY-2000 10:44 Jan 17, 2002 Jkt 074344 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\DOCS\74344.TXT SAG1 PsN: SAG1
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cialty operations, or to off-farm employment. And number three,

environmental stewardship programs.

A minority view on trade submitted by Commissioner Swenson

and endorsed by Commissioner DuPree. Specific recommendations

provided by Commissioner Swenson include a call for some mechanism to allow a nation whose agriculture producers suffer injury

due to changes in relative currency values to offset those effects

through border and export measures as well as domestic programs;

elimination of the use of direct and indirect export subsidies; international harmonization of environmental, labor, intellectual property and competition policies and regulations; elimination of nontariff barriers not based on scientific principles; increased transparency in reporting of support to agriculture prices in industry

concentration; international cooperation and economic development

and inventory management; and a streamlined and expedited dispute settlement mechanism.

And finally, a minority view on antitrust and industry concentration offered by Commissioner Swenson and endorsed by Commissioner DuPree. While the Commission clearly stated that it is the

role of the Federal Government to ensure a competitive agriculture

economy, Commissioner Swenson provided additional views on

these issues. Commissioner Swenson provided several suggestions

to revitalize the U.S. effort to ensure and maintain that the level

of market and sector concentration promotes open, competitive efficiency throughout the system, and encourages market and

transactual transparency.

The main thrust of these recommendations are to increase the

review and enforcement capacity of agencies charged with antitrust

responsibilities, provide for an ongoing review process of both past

and present mergers, and provide additional authority to ensure

that antitrust competitive practices that fall outside current or traditional antitrust regulations of enforcement are continuously reviewed and appropriate avenues for redress provided.

Mr. Chairman, members of the Committee, on behalf of the Commission, I would like to extend to you our appreciation for allowing

us to present you with our report. This concludes my testimony,

and I would be pleased to respond to any questions. Thank you.

[The prepared statement of Mr. Flinchbaugh can be found in the

appendix on page 89.]

The CHAIRMAN. Thank you very much, Dr. Flinchbaugh, for that

excellent summary of the majority and the minority views.

I’m going to ask all members of the Commission now to come to

the table, and likewise Dr. Collins, and ask staff to make there are

chairs available for each member of the Commission, so that we

can all be seated.

Gentlemen, thank you all for coming to this hearing, and for the

enormous contributions you already made to our understanding. As

previously announced, we will have a round of questioning, limited

to 5 minutes, and then we’ll proceed again if Senators have additional questions. We have a good attendance and that will take us

well into the morning and maybe into the early afternoon. But this

is a very, very important time of coming to an understanding.

Let me begin by expressing two thoughts. This is not a critique

of anything the Commission has said, but simply an observation

21

from census data that there are now 2,312 counties in our country,

out of some 3,000, that 2,300 are non-metropolitan. But of these

non-metropolitan counties, only about 30 percent have agricultural

activity or income that represents 10 percent of what goes on in

those counties, meaning the other 1,700 are non-metropolitan but

do not have significant agricultural activity.

As a matter of fact, even the 300 and some which do have from

10 to 20 percent of activity from agriculture, this is the high water

mark. I make that point because frequently the comment is made,

we don’t want to depopulate America, and obviously we don’t. Demographic policy is tremendously important. Agriculture might affect 680 some of these counties in a significant way, but that is

about it.

So as we try to take a look at a Farm Bill, it seems to me we

want to be careful in terms of outlining our demographics and

knowing exactly where it is that we might have some effect, which

I think we can.

Another comment I would want to make is that the comment is

made from time to time about the importance of exporting. And

clearly, that is something the Government can help. As a matter

of fact, perhaps the major thing that can occur. There simply is a

case with 40 percent of our rice, cotton, soybeans, more or less 20

percent of our corn in foreign trade. But the expansion of those

markets is virtually impossible on domestic consumption alone.

In the event we are not successful in our foreign policy and our

trade, we are going to have a very constrained situation of feeding

ourselves, but having a market that is not much larger than that.

So this is not a question of exports or something, we really have

to succeed in this. And likewise, in all of our efforts in this Committee, we will try to push that to happen.

I want to ask just rhetorically, because there’s no way that this

can be answered, really, in this hearing, but I’ve commented before,

Senator Grassley used to be a member of our Committee, and we

will miss him. He’s now moved on to the chairmanship of the Finance Committee. And there may be other members of the Committee who have agricultural land. I’m not aware of that, but if so,

they will respond. I have 604 acres in Indiana, which I’ve been responsible for for 44 years. I mention this anecdotally, because perhaps I’m the only one who has any stake in what you’re talking

about today. That is, some of my income really depends upon how

all this turns out. So I admit a conflict of interest or enthusiasm,

as the case may be.

Senator LINCOLN. I’ll join the Chairman on that. Absolutely.

The CHAIRMAN. All right. Now, let me just say, in the past, I’ve

mentioned, over the 44 years, we have not lost money in any year.

This brings a great deal of criticism for anybody for mentioning it

is possible to be profitable in agriculture. But it is.

Having said that, marginally so. I’ve admitted that my calculations are we’ve made about 4 percent on invested capital. Now,

when I mention that at agricultural meetings, many people say

that sounds too high.

Now, taking a look at the chart on page 86 of the Commission’s

report, that doesn’t fit exactly the question of return on equity. But

it does say farm profitability measured by return on assets. Which

22

comes reasonably close, my farm does not have debt, so essentially

we’re dealing with the value of the land, the barns, improvements

and what have you on that.

Now, the idea in this chart is that there’s a prediction that we’ll

have only 2.1 percent return on assets in the coming year, or in

2000, I guess as it’s calculated. And that’s lower than the average

of 3.4 percent from 1990 to 1999.

This raises a question for anybody who is not in agriculture. And

that is, if the average return on assets decayed, that includes 1996

in the boom times, 1997 and the downward, is in the nature of 3

or 4 percent, throughout this period of time an investor having an

asset, say, of a Government bond could have received 6 percent

every year, without benefit of weather, Government programs or

anything else involved.

Now, this is a fundamental question this Committee and hopefully some of you on the Commission, from your wisdom, can help

us on. Is there anybody in America, during any period this time,

making money on agriculture that is commensurate with other activities that people have in our country, such as retail stores, machine tool shops, quite apart from the more exotic dot-coms that

have come and gone in the process? The dot-coms come and go. But

as many of you pointed out, the number of people involved in farming has continued, has increased.

Now, my earlier comments were to say that much of the increase

comes from people who derive really on a net basis almost 100 percent of their income from something else. And in fact, 82 percent

of all farms on a net basis apparently have off-farm income, when

offset by the losses on the farms in that group, come out to a wash.

So we’re dealing, even in the category of farms in which I’m involved, the 604 acre variety, this is in that group of 10 percent behind the 8 percent that are really the true commercial farms, described as farms in transition, because the 57 percent of the income

on our group comes from off the farm, only 43 percent from on.

Now, we’re going to have to come to grips at some point with who

is a farmer in America, who is making money, as opposed to having

an interesting avocation. Are there prospects, even among those

who are trying to make money, to do so, in a significant enough

way to have even a lower middle class income in America?

I would finally mention that in the demographics I started with,

in these counties that have significant farm income, most of these

were found to have per capita incomes higher than the other nonmetropolitan counties that don’t have farming. These are not the

poor counties. The agricultural counties are the better counties in

this group, with the exception of some mountainous areas and

some very geographically challenged parts of our country that have

very severe weather or topographical problems.

In taking a look at agriculture as one whole cloth, one Farm Bill

fits all, we are unlikely to come up with a very satisfactory situation. I admit having gone through this process I think five times,

we broker all of the attitudes and ideas of America the best we can,

by State, by category, by crop and by weather and so forth.

But we’re down now to a point, and I think the Commission has

highlighted it, at which the American public is asking, and we appreciate agriculture, we are supporting agriculture, as a matter of

23

fact, we’ve had a large transfer of payments from those who are not

in agriculture to those of us who are. But why? What are the significant things that the Federal Government uniquely can do or

should do in this process? And who are farmers and do they make

money? I know there are prospects they might make money if the

proper programs and encouragements were given.

Dr. Flinchbaugh, do you have any comment, and be brief, because I’ve taken my 5 minutes and I don’t want to impinge upon

others.

Mr. FLINCHBAUGH. Well, Mr. Chairman, I would like to comment

on your statement that one size fits all. I think that’s the peanut.

A one size doesn’t fit all. And as the Commission deliberated, we

clearly understood that. And we have come up with what I would

call a four wheeler, or a four legged stool or whatever you want to

call it. And that is the income safety net, the counter-cyclical assist

program, the marketing loan, crop insurance, revenue insurance

and the farm savings account.

And that gets at this problem of one size doesn’t fit all, so that

with that four wheeler plus conservation programs, you may want

to call that the spare tire, we try to get at this differentiation and

these unique sets of problems as we move from region to region,

etc. So clearly, one size doesn’t fit all.

The CHAIRMAN. Well, I appreciate that comment, because I think

your report does attempt to differentiate, and obviously, in the best

of all worlds, I would want to do some more. We might have a long

conversation with all of you in which we would glean more, and

hopefully we will do that, that you will be available for our questions and to participate in further conversations as we try to enhance our understanding.

Senator Harkin.

Senator HARKIN. Thank you, Mr. Chairman.

Again, I want to thank all of the Commission members for your

years of diligence and hard work and traveling all over and going

to meetings and coming up with this report.

I guess I want to start, Mr. Flinchbaugh, by just saying, I like

what I hear when you say one size can’t fit all, doesn’t fit all. But

I look at the proposed SIS or whatever you want to call it, is that

not what it is? I mean, for example, SIS payments would be made

to producers with aggregate program crops, wheat, corn, soybeans,

sorghum, rice, upland cotton, oats and barley. Gross income falls

below some percentage of the historical income level calculated

over fixed base period, whatever you want to figure that out to be.

Well, let’s say king corn has a good year. Let’s say corn has a

darned good year and that income’s up. But my rice farmers down

there, they don’t have such a good year, or the wheat farmers don’t

have such a good year. But when you aggregate it, one size fits all.

What do you square this with?

Mr. FLINCHBAUGH. Well, that’s one leg of the stool. And you will

note in the report that we clearly state that other crops could be

added to the program. And then we go on and talk about a marketing loan, we go on and talk about studying a voucher system for

crop insurance, a farm savings account, etc. So that’s where we

come, where I come to the comment that we’ve tried to come up

24

with a package that gets at individual, unique problems, crop to

crop, region to region, etc.

The SIS program, just one leg of the stool, could be designed on

a regional basis, for example.

Senator HARKIN. That seems to me like the biggest leg, the fattest, strongest leg of that stool right there.

Anybody else have any thoughts on this at all? Mr. DuPree. Mr.

Swenson. Mr. DuPree.

Mr. DUPREE. Yes, sir. Looking at SIS and SID both, two different

kind of programs, when those were applied against the farmer profiles at Texas A&M, where they actually have histories of farmers

out there and know something about their economic—they’re not

projected numbers or anything like that, these are actual farmers

in the United States of all sizes. This left holes in the safety net

for those fellows that was almost a little better than no program

at all.

This harks back to something, Mr. Chairman, that I kind of want

to make a statement about. The mistake I think sometimes made

of using aggregated numbers to draw too many conclusions about

agriculture. I asked a farm economist that I know and like a great

deal about the use of that, and he warned about it. He said usually

they’re not accurate enough to be useful, very useful, in policy

work. And you’re going to have to get more specific. There’s just too

much diversity in agriculture, the way it’s done in the United

States. And for that reason, try to draw too much from any of those

numbers, you have to be very cautious that you don’t leave someone out of the situation or the program doesn’t aptly fit.

Senator HARKIN. Mr. Swenson.

Mr. SWENSON. Thank you, Senator Harkin.

Mr. Chairman, I did not sign the majority report, and the point

you raised is one of the reasons. It’s that when you lump it into

an aggregate, and if you’re tying it to where the market revenue

has been, you’re on a slippery slope down. And the pressure would

be for you as members of the Ag Committee to come in with additional supplemental income as SIS payments went down, just as

we have seen under the current farm program.

That is why in the nature of how I addressed and was supported

by Mr. DuPree and Mr. Paige in the minority report, we chose a

different avenue of which to provide the counter-cyclical support.

And if you take a look at the minority report, what we did is try

to address what are the issues that are impacting producers that

are beyond their control. And you have heard already this morning

talking about what happens to interest rates, what happens to energy prices, and that’s why we felt it was important to take a look

at tying the support mechanism, or the counter-cyclical support

mechanism, to that of a cost of production factor, some percentage.

And then you treat all farmers on an equalized basis, and you

leave planning and flexibility in place.

So that to me then directs the payments to those farmers, what

they’re producing today, what kind of yields they’re getting today,

what kind of yields they may get tomorrow. If you look at the minority report, we also included some other elements, which interestingly enough, was raised by Committee members in their comments earlier.

25

One of the unique things I hope you would look at is the limited

Farm Loan Reserve that we call for. What that does is allow farmers who really right now are left bare in the first 25 or 35 percent

loss they must suffer before crop insurance kicks in, Congress does

a great job of protecting the interests of the bank and the interests

of the insurance companies and agents that are selling crop insurance. But they do very little to help subsidize that first 25 to 35

percent loss that the farmer must endure.

One of the concepts we’re laying before you in the Farm Loan Reserve is that if farmers voluntarily participate in that, they could

draw out of that if they suffer a crop loss in that next year. So it’s

a way for them to voluntarily participate in a limited reserve of

which then to protect their interests in the future. It’s that idea

we’d like to see you sort of delve into.

The other is an energy thing, to be able to have an energy reserve. We have an oil reserve. We think that we also, in the support of developing alternative sources, especially as we take a look

at the sugar problem we’ve had, take a look at what we can do

with corn and many other commodities.

But we throw those out because of some of the concerns we had

in the majority report. Thank you.

Senator HARKIN. I see my time has run out. But on my next

round, I want to get into that, also, that aspect of why the Commission didn’t look at the other uses of agriculture in terms of energy

production in this country. Thank you.

The CHAIRMAN. Senator Cochran.

Senator COCHRAN. Mr. Chairman, thank you very much. I’m glad

to be here today to welcome the Commission and to thank all of

you for your hard work in compiling a report that can be very helpful, I think, to the Committee as we proceed to consider the options

for supporting the efforts of those involved in production agriculture and helping make sure that we continue to have as vibrant

and healthy as possible agricultural economy.

I particularly want to thank my friend, Bruce Brumfield, for

serving on this Commission. He’s a blue ribbon member of a blue

ribbon commission and a leader in our State for a long time in agriculture organizations such as the National Cotton Council and the

Delta Council and many others. We’ve come to look to him for dependable advice and counsel over the years, so I’m glad he had a

part in developing this report.

There are a couple of observations I guess I would make, and one

is that there seems to be an underlying fundamental conclusion in

this report, and that is that there should be a market orientation

to farm policy and to legislation that endeavors to support production agriculture. Is that a correct conclusion? Should I ask Dr.

Flinchbaugh or Bruce if that’s a correct conclusion?

Mr. FLINCHBAUGH. The majority report clearly comes to that conclusion. And as you read, the minority reports, of which there are

several, there’s various degrees. But yes, overall clearly, market

orientation, when we came up with the role for Government, the

report says clearly, we’re looking at activities that cannot be solely

done in the private sector.

Senator COCHRAN. One other aspect of your report deals with

conservation programs. You seem to support without question the

26

Conservation Reserve Program, the EQIP program, you call upon

the Congress to expand those programs, as I understand it. You

don’t mention specifically some of the other conservation programs.

Do you mean by leaving them out that you don’t think they should

be continued? Such as the Wetlands Reserve Program, Wildlife

Habitat Incentives Program, and others, that are designed to encourage land owners to use their lands and set aside those lands,

in effect, under a lease arrangement in some cases, so that it’s not

added to the problem of over-production.

Mr. FLINCHBAUGH. Do not draw the conclusion that because

something is not in here that we didn’t look at it favorably. We had

to set priorities. We could have worked 5 years and produced 1,000

pages and we would have scratched the surface. Senator Harkin

mentioned rural hospitals. They are not mentioned in here. Obviously they are important, especially as this Commission gets grayer

hair, you understand. [Laughter.]

Obviously, there’s nobody that doesn’t support a strong system of

rural hospitals. But the charge to this Commission was very specific: the role of Government in production agriculture. Given our

limited resources, given the complexity of the multitude of issues,

we had to set some priorities, which we did. But do not draw the

conclusion that you don’t read something in here that you think

should be in here, we’re not interested, we don’t care. That’s certainly not the case.

Senator COCHRAN. We have been confronted in the last couple of

years with requests from the agriculture community for emergency

assistance in a wide variety of descriptive titles, counter-cyclical

aid, emergency assistance, disaster assistance, restructuring crop

insurance program so it’s more responsive to the real needs out

there, and the problems of getting value for the investment you

make in that program.

What, in the opinion of the Commission, if you touched on this,

is your view about the future of emergency assistance? Should we

limit ourselves to any particular kind of emergency assistance, or

should we continue to try to assess it on an ad hoc, case by case

assessment of the needs and try to respond when the Congress

feels that response is necessary, on an annual basis?

Mr. FLINCHBAUGH. At the beginning of the section on the income

safety net, we clearly state that it was our goal to develop a mechanism that was flexible enough to take care of emergency situations

so that we didn’t have to come back in on an ad hoc basis. So specifically, we attempted to produce a mechanism that would relieve

you from doing that, that would formalize it, that would provide a

safety net under farm income. And we further state that we attempted to do that with minimal market distortion.

So you’ve really hit on the key point, in the majority report, at

least.

Senator COCHRAN. Thank you very much. That’s very helpful.

The CHAIRMAN. Thank you very much, Senator Cochran.

Other members of the Committee have introduced members of

the Commission from their States. I’ve been neglectful in failing to

mention one of the best farmers in Indiana, Don Villwock, who has

been a distinguished member of the Commission, but beyond that,

27

a personal friend of mine and an advisor on agriculture in Indiana

for the last 24 years.

So I appreciate, Don, your service, and it’s great to have you here

today.

I’d like to call now on Senator Lincoln.

STATEMENT OF HON. BLANCHE L. LINCOLN, A U.S. SENATOR

FROM ARKANSAS

Senator LINCOLN. Thank you, Mr. Chairman.

I first would like to welcome my friend and colleague from Arkansas, Senator Hutchinson, to the Committee. I’d certainly like to

echo his comments that agriculture is so important to Arkansas

that it takes two of us on the Committee. I’m looking forward to

working with him and with you, Mr. Chairman. To all the other

members, certainly Senator Thomas and Senator Allard and Senator Crapo as well, we welcome them to the Committee.

I want to thank you, Mr. Chairman, for bringing up the issue

you did. As a matter of fact, we have a family farm as well. I have

visited with both my siblings and my cousins over the holidays,

and they pointed out that they could be making a great deal more

money in other industries, which caused me a great deal of concern, because I enjoy the family farm, and I don’t want to lose it.

I want to thank the Commission for all of their hard work. Dr.

Flinchbaugh and Dr. Collins, in particular, thank you for all of

your leadership and hard work.

I’d also like to say a very special and personal thanks to Jim

DuPree, who has been involved in farming for a long time, and he’s

also participated in ag policy debates for many, many years. I depend on Jim for a lot of insight into what’s going on, and I really

appreciate his expertise. The farmers of Arkansas are fortunate to

have his voice and his experience present on this Commission and

I thank him for all of his work.

I’m also delighted that we’re finally here having this discussion.

I’ve served on the House Ag Committee and now the Senate Ag

Committee, and I’m delighted that we are bringing forth some of

the concerns and the problems that we have seen over the past 5

or 6 years, and that we’re really beginning to look and visit with

individual farmers about how we can address those concerns. My

phone lines in my office have been lit up with calls not only from

farmers, but also from our bankers at home, who are trying to cash

flow loans for the upcoming growing season, our car dealers, our

grocery store operators, our furniture store owners, and everybody

else out there in this rural economy whose businesses are based on

agriculture. They are a part of that economy in their own businesses.

So I think this is an important issue that we have to deal with.

Without a doubt, farmers do need to know ahead of time what they

can expect from their Federal Government, and we need a sound

policy in place. And now is the time. Time is a critical issue here,

and unfortunately, agriculture, for too long, has not been the glamorous or glitzy issue here in Washington that it perhaps should be.

I think the energy crisis, fertilizer crisis, and everything else

that’s going to come knocking at our door in the next 18 months

definitely warrants the movement on this by the Committee.

28

Just a couple of questions if I may. In reviewing your report, I

see that the Commission does recommend removing limitations on

all Government payments to the producers. The payment limitations are certainly an area that can be a politically sensitive one,

as we’ve found on this Committee and on the Floor. And I’d certainly like just to ask you all to expound on the need for raising

or eliminating those payment limitations, if you would.

Mr. FLINCHBAUGH. Well, we certainly concur with your comment

about the political sensitivity.

Senator LINCOLN. Yes, sir.

Mr. FLINCHBAUGH. We attempted to look at it from a practical

standpoint, and if you look at the record, at least historically they

haven’t been effective. They penalize efficiency. They assume that

there’s a very strong correlation between size and profitability.

There are efficient family operations that would get eliminated

from the program if we had an effective payment limitation, especially the last 3 years. I’m most familiar, of course, with the State

of Kansas. But I can show you wheat farms in western Kansas

with a $30,000 or $40,000 payment limitation the last 2 years, and

they’re total family operations, right out of Americana, that would

not have survived.

And you all recognize that, because you repeatedly increased

those payment limitations.

We can wire around them pretty effectively. They provide all necessary paperwork, etc., etc. But as a Commission, we can say all

that, because we’re not subject near to the degree that you are of

the political sensitivity of eliminating them.

Senator LINCOLN. We appreciate your backup. [Laughter.]

Quickly—yes?

Mr. VILLWOCK. Senator, let me comment to that, too. In my previous life, I was also our State ASCS director, now would be FSA

director. We spent a tremendous amount of time in oversight and

payment limit work. And I guess all the dealings that I had in my

tenure there, we spent more in administrative costs dealing with

payment limits and what we saved the Government.

I know it is a political issue for you, and it is a sensitive issue.

I’m a 2,000 acre farmer that just lost some land to a 7,000 acre

farmer, so I’m starting to question this payment limit thing myself,

whether or not maybe that 7,000 acre farmer shouldn’t do that. But

I consider myself a family farmer.

But to look at the cloud from an administrative side is, payment

limits, our farmers are very intuitive and very creative in the way

they find their way around that. And even though the political favoritism that payment limits might receive, there is no way that

I think we will ever create, or at least to date, we have found any

way to make payment limits an effective mechanism to target revenue.

Senator LINCOLN. Thank you.

Mr. PAIGE. I’d like to make a comment on it. I’m more concerned

with the fairness of payments, you know, in the FAIR Act, limited

resource funds, minority funds, especially African-American small

farmers, did not receive a proportionate share of these payments to

them. In fact, most of them were too small or did not have payment

histories and other things.

29

So the question is, how do we make limited resources fair and

put it on a level playing field. And I think we have to look at those

kinds of things.

Senator LINCOLN. Thank you, Mr. Paige.

Mr. SWENSON. If I may, just quickly, because not all Commission

members necessarily agree that we need to eliminate total payment

limitations from this standpoint. It’s sad that we get in a debate

over payment limitations. All it is is an indication that farmers are

relying more and more on direct Government assistance in order to

survive. What we’ve really lost sight of is the purpose of the farm

program intended to which to elevate greater returns for the commodities in the market, or is it designed to which to totally depend

upon Government in order to survive.

If the intent of the farm program is only to hand out money, then

unlimited payments will only drive greater concentration in the

structure of agriculture. And that’s what my concern is. And I don’t

advocate necessarily going back to the old concept of payment limitations, but I do charge this Committee with having to deal with

the issue of payment limitations. Unless you’ve got unlimited funds

with which to work with, then it’s a different issue. But if you’ve

got $25 billion a year to work with, then you don’t need payment

limitations.

Senator LINCOLN. But if we craft a program that’s going to be

one that fits everyone, I don’t think that we’ll have as much of a

problem with that, or certainly an abuse of a program without limits.

Mr. Chairman, can I ask one quick question, please? I think it

will just be a yes or no answer. I just would like to ask, would the

AMTA program that you described continue to be based on the

1990 basis, or would they need to be updated? Did you indicate in

there?

Mr. FLINCHBAUGH. We didn’t indicate either way, except that

when the analysis was done, the answer to your question would be

yes.

Senator LINCOLN. Yes to update them?

Mr. FLINCHBAUGH. No, yes to keep the current base.

Senator LINCOLN. Oh, to keep the 90.

Mr. FLINCHBAUGH. But we didn’t make a recommendation on

that. But the tables in the back that make the analysis assumed

that.

Senator LINCOLN. Okay, thank you, sir. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Lincoln.

Senator Roberts.

Senator ROBERTS. Mr. Chairman, I have some questions of Dr.

Collins and Dr. Flinchbaugh and Mr. Swenson. But I think before

we head out on the trail to corral the next Farm Bill, it’s good always to take a look at where you’ve been and avoid any box canyons. Or put another way, there’s a lot of cactus in the world, I

don’t think we have to sit on every one of them. [Laughter.]

And I’m a little concerned about what I’ve heard for the past 3

years. On occasion I have taken the Floor of the Senate, very few

times, to say, well, now, wait a minute, that isn’t exactly my recollection of what happened and why in regards to the Freedom to

30

Farm Bill. And since I’m described in the press and others as the

godfather of that critter, when we let him out of the chute, I’d like

to say that the goal of the Freedom to Farm bill was not to march

our farmers off any kind of a free market cliff, more especially

when we all know that a total free market doesn’t exist without

any appropriate support. That’s not the case.

Maybe somebody in the House of Representatives at that time,

who I affectionately now call the Khmer Rouge, thought that that

was the case, but it wasn’t. It was to do our part to try to achieve

a balanced budget and reduce interest rates, which we did, more

than any other entity of Government, with the help of the distinguished Chairman. I think it was $8 billion in savings in regards

to farm programs over the life of the bill, and also a tremendous

savings with regard to food stamp reform. We kept food stamps,

but we reformed them.

The biggest thing we wanted to do was restore the decision making back to the individual producer. I can remember these days, everybody sitting here talking about a more consistent farm program.

You remember those days, when you couldn’t figure out what the

setaside was until June, July, August, September? Stood outside

the ASCS filling out the paperwork and the Congress was changing

loan rates and changing the target price deficiency payment year

after year after year?

I mean, this isn’t exactly, or that bill wasn’t exactly a paragon

of consistency. We wanted to provide an adequate safety net, but

we wanted it to be consistent. And we made a contract with farmers and said over a period of years that they could have a guaranteed AMTA payment. That was the transition payment.

All the talk about the lack of a safety net, I don’t hear many people talking about the AMTA payment. Doesn’t exist in regards to

those kind of arguments and that kind of rhetoric. We have an

LDP program, never thought we’d have to use it. Had hoped during

those years that obviously we wouldn’t into a world of market depression that we’ve experienced.

But it does exist and it is counter-cyclical and it’s $8 billion

worth, for goodness sake. Then we added on an additional AMTA

payment because of the lost income that we’ve all experienced. And

I think that’s appropriate in regards to the real causes of what the

farmer is facing. We wanted to make it WTO friendly, didn’t want

to have it to be market distorting, because we had hoped all the

countries in the world would meet under the WTO umbrella, barn,

whatever, and achieve some progress. Boy, that didn’t work out

very well.

And so under the banner of consistency and the WTO and the

safety net and the decision making which is the biggest thing, you

restore that back to the farmer and not have the command and

control decisions being made in Washington, that was the goal. It

was not, I repeat, to go into the ocean of the free market that may

not exist.

I don’t think it’s been a disaster. I think farmers have appreciated the flexibility. I think if there has been a disaster, I’ll tell

you where that responsibility lies, and that’s the component parts

that we said had to be part of any farm program. Some of you represent some of the farm organizations, and some of the commodity

31

groups. And every meeting that you have in every county and every

State in this country, they said, here’s the laundry list of things

that we think we ought to be doing. You know what they are,

they’re tax relief, State tax reform, greater deduction on your

health care, regulatory reform.

Not to mention the farmer savings account. If we had passed

that like we tried to do for the last 4 years, the situation would

be better than it is today. No, it wouldn’t have answered the whole

thing. And that’s an editorial we in terms of our responsibility.

Both Republicans and Democrats and yes, the President, and yes,

the distinguished chairman of the Finance Committee and Ways

and Means Committee, bless their hearts. And they’re gone now,

so maybe we can get a little bit of progress.

Export policy. I know we hear a lot about exports and we can’t

rely on it too much. We wanted a consistent and aggressive export

policy. We wanted sanctions reform, the Chairman’s worked for

that as long as he’s been in the Congress. We wanted fast track

legislation, we wanted success with the WTO. Zero for three.

Regulatory reform. All of you want the regulatory reform. And

now we need a comprehensive energy policy, which we tended to

ignore for the past 8 years. If we put those component parts together, I would wage to you that the situation would be serious because of the world depression in market prices, but not as serious

as before.

Why are prices low? Well, you know, you check Canada, same

thing. You check Australia, same thing. You check Brazil, same

thing. And all throughout the European Union. Argentina. As the

distinguished Dr. Collins has pointed out, this is a worldwide depression. Guess what? None of those countries ever passed Freedom to Farm.

I don’t think that Freedom to Farm added to the problems in

terms of the price depression in the EU. Everybody talks about,

well, maybe we had the over-production. Keith, you’ve mentioned,

we’ve had large production in the United States. Well, I checked

back, let’s see. In the height of the land retirement days and the

days of PIC in the 1980s, when John Campbell was aboard down

there at the Department, we had one-fourth of our production set

aside and we had a PIC program. And we rolled out the money

from the CCC, doors were wide open, $26 billion.

And we had 325 million acres in production at that time, with

one-fourth of our production simply taken out. Do you know how

much we have today? We have 328. Three million acres more. Only

3 million. That’s a drop in the bucket.

Now, what happened? Well, the farmer increased his productivity. Are we saying we’re going to have a Farm Bill to deny the

farmer the productivity advances? Now, come on. Farmers made

the decision in regards to land retirement. You don’t have to plant

anything under this bill. You can get a payment and have zero in

regards to crop production. They made the decision.

And in Kansas, 25 percent of the acres that were planted to

wheat are no longer planted to wheat. We have 40,000 acres of cotton. Thad Cochran doesn’t realize it, but when Stephen Foster

wrote the song, Those Old Cotton Acres Back Home, hey, that was

Kansas. [Laughter.]

32

And so they enjoy the flexibility, and it is their decision, not

somebody waiting in Washington to figure out where all of this is

going to be in terms of budget exposure and then finally telling the

farmer in regards to September.

Safety net. Oh, there’s not enough safety net. Have to have a counter-cyclical safety net. LDP, $8 billion, AMTA, and an additional AMTA payment, all under the architecture, under Freedom

to Farm, has put the wheat guarantee around 4 bucks. There’s

never been a farm program that guaranteed the wheat farmer $4

before, and I will wager never again.

All under the architecture of this bill that has been so pilloried.

John, am I right when I’m saying $2.7 billion more each year

under this bill than under the old farm program? Is that right, is

that what you told me?

Mr. CAMPBELL. No, sir, it’s actually $3.6 billion. That farm income average above the last Farm Bill.

Senator ROBERTS. Well, on one hand, the critics say that’s not

enough. And on the other hand, they say it’s too much, has to come

from the marketplace. But when they say it’s too much, all the critics of the farm programs, they do not take into consideration what’s

happened to us in terms of the real causes out there, the value of

the dollar, the lack of an export policy, world depression in our

markets. It seems to me that there are some things that we ought

to consider.

I remember, there seems to be a situation here where in the old

Farm Bills, we never got into the situation of changing anything.

And oh, all these disaster payments that we’ve had to make. Well,

let me see. There was the Disaster Bill of 1988, the Disaster Bill

of 1989, the Disaster Bill of 1991, the Disaster Bill of 1992, the

Disaster Bill of 1993, thank God for Thad Cochran, and the Disaster Bill of 1994 and the Disaster Bill of 1994, and on and on.

I remember during the ag crisis of the late 1970s, where we

moved the target price from 242 to 290, we thought it was the biggest deal in the world. And Republicans actually proposed that,

and Tom Foley, the former chairman of the House Ag Committee,

found it on the Floor and said, guess what I found, and we passed

it. In the 1980s, we had the PIC program, and as I said, we opened

up the doors.

So when we get in trouble in farm country because of the high

volatility and in regards to the roller coaster, hey, we respond. And

we’ve had to respond. But at least we’ve responded under architecture where the farmer got a payment, money. And I know people

say, oh, my gosh, we don’t want to give them money, that’s terrible,

a cash payment. I’ve got news for you. It’s way ahead of whatever’s

in second place or standing in line waiting for paperwork and loan

rates and whatever else that you could come in.

Mr. Chairman, I’m going on a little bit long here, but I’m going

to keep going. [Laughter.]

It’s not so much as to whether or not the payment, and I will finish this and I’ll come back with my questions in just a minute,

there will have to be a payment because of the volatility. But what

kind? Do we do loan rates and setasides? I don’t know how we can

do setasides when we only have 16 percent of the world grain market. That’s 84 percent of the grain market by the other fellow. We

33

only have 16 percent, we’re going to cut back on our production and

that’s going to answer the thing with the world market as opposed

to other people coming in and taking our markets, more than we

set aside?

So I would just say that with a little bit of blood pressure and

hearing all of the comments by my colleagues, I’ll make a prediction to you. I think with the members who come from the States

who have been most critical of this bill, they have received more

income assistance under this bill than any other bill we’ve ever had

and ever will have again.

Is it perfect? No. Is it set in stone? No. Can we do better? You

bet. But nothing hurts the truth like stretching it. And there’s been

a lot of stretching in regards to this Farm Bill debate. I thank you,

Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator Roberts.

Senator Stabenow.

STATEMENT OF HON. DEBORAH ANN STABENOW, A U.S.

SENATOR FROM MICHIGAN

Senator STABENOW. Well, thank you, Mr. Chairman. I appreciate

very much being a part of this Committee, and I appreciate the

work of the Commission and the hours that you have put in. I certainly hesitate to follow my colleague, who is knowledgeable and

certainly passionate on the issue of Freedom to Farm, and look forward to debating and discussing the impacts around the country,

and certainly in Michigan, where I represent what is one of the top

two industries for Michigan. People think of Michigan, they think

of cars. But agriculture is critical to us, as you know. We are second only to California in terms of the variety of crops.

So everything you’re talking about except for rice, peanuts, tobacco and some citrus, everything else really is Michigan. And

we’re very concerned about what’s happening.

The bottom line for me in looking at Freedom to Farm is that

in the time that I’ve been in the Congress, 2 terms in the House,

after passing Freedom to Farm, I saw us passing supplemental

emergency funding bill every year, I believe. And so there really is

a question, I think, about what’s happening in terms of the inadequate support for our farmers. And we’ve seen, as you’ve mentioned, that while the incomes are going up for farmers, it only

counts if you include the emergency funding coming from Congress.

If you extract that, in fact, we are seeing incomes going down.

And I am very concerned about the swings in the market and the

low commodity prices and frankly, the incredible pressures on family farmers in Michigan and around the country, and I think that

we all have a stake in helping them to be able to survive and

thrive.

I’m very concerned that Michigan’s share of total acreage of farm

land since 1995 has declined 300 percent. I’m very, very concerned

about what’s happening. I realize there are many complicated reasons for that. But we have a lot of challenges in front of us in addressing your recommendations and the realities of Freedom to

Farm and its real impact on the agricultural community.

I wanted to ask one question as it relates to specialty crops. I notice that those are not listed as part of the SIS program that you

34

propose. And as a House member, I was very involved in efforts to

expand our crop insurance efforts, to begin to move in that direction. Because they also were not included in crop insurance.

And as someone who represents many specialty crops, I’m concerned about whether or not you see the SIS program covering specialty crops and what kind of a timetable you would see in that

happening, so that we might broaden, if in fact we were to take

your recommendations on this program, would we in fact under

your recommendations be broadening that to crop insurance.

I welcome anyone’s response.

Mr. FLINCHBAUGH. Well, Senator, that’s up to you, frankly.

That’s up to the Congress.

Senator STABENOW. I’m asking what you recommend. Do you envision that, as you made your recommendations?

Mr. FLINCHBAUGH. No. We took the eight program crops that are

now included, and we developed the program around those crops.

But we have a statement in the report that if the Congress so

wishes, they can add additional crops. Theoretically, you could add

livestock. But we did not make a recommendation. We just simply

analyzed the eight program crops to show an example of how this

would work.

Mr. PAIGE. Most of the farmers that I work with grow a lot of

specialty crops, fruits and vegetables and small livestock and so

forth. This is something we’ve advocated for a long time, to get it

in there. And I think, given the language that’s in the report, I

think you should look at that as you deliberate the Farm Bill. It

would help them.

Also on crop insurance and so forth, this is one thing we’ve recommended and tried to get to happen from the last Farm Bill, to

get it expanded to cover specialty crops. A lot of the farmers who

did not receive payments under the Freedom to Farm, they were

in fact in that. A lot of people who suffered from drought after

drought or specialty crops, and there’s no relief for them. And I

think it should certainly be considered as you deliberate. And that’s

an option of yours, but I would say, you need to do that.

Mr. VILLWOCK. Senator, I take a little different view, and I appreciate the reforms we made in crop insurance to include some of

those crops. We have heard some discussion on livestock and some

discussion of specialty crop inclusion in the farm programs. But I

want to make the point that 60 percent of net farm income that

we look at today is not farm program affected in any way.

Until recent times, until the collapse of the world economy in certain big areas, most of these areas have been pretty profitable, and

in fact, more profitable than program crop areas. And I question,

and we have had testimony at our field hearing from specialty crop

producers, saying, don’t include me into this mish-mash of farm

programs and dictation from Washington on how to run our programs.

The point that I think that hits home with me that I try to remember is, the more risk, the more profit. And if we take all the

risk out of some of these crops, everyone tends to want to get in

them, and we take away their profitability. There is no such thing

as a big niche market.

35

I have a neighbor who is a tomato producer. It is a very expensive crop to be in. His production costs are three to four times per

acre more than mine. But they’re also very profitable in good years,

when times are good.

My banker, when I go say, well, maybe old farmer Don ought to

get to raising tomatoes, and he says, well, what’s your guarantees,

and what’s the farm program payments, or what’s your risk, and

I say, it’s a $1,000 an acre risk, plus or minus. And he’ll say, well,

you’d better stay to those program crops.

If I would start raising tomatoes because the guarantee is there,

and my next door neighbor starts raising tomatoes, guess what?

There’s no money left in raising tomatoes.

So specialty crop producers, the one that testified to us, and the

practicality of the economics say, do we really want to get in this

Pandora’s box. And I think most of them want to stay away from

it. And I challenge you to visit with your producers and make sure

that’s their consensus as well.

Mr. NORTHEY. Certainly one of the values, Senator, of the farm

savings accounts, is to be able to include those that are not just in

program crops now. So as we heard testimony and comments, there

were those that expressed some desire to be able to get through

those years that were very profitable, save some of that money for

those years they knew were coming, rather than be subject to any

kind of limitations, any kind of other rules and regulations that go

along with the commodity programs, to be able to do it on their

own through a farm savings account.

Mr. SWENSON. If I could, Senator, make a couple quick comments. Separating out the specialty crops, just in the issue of risk

management, I do think it’s a challenge that faces this Committee

of how to develop an insurance program that may cover production

loss. Either that, or as Senator Roberts has pointed out, it will be

the responsibility of this Committee to deal with an ad hoc economic or disaster program every year. Every year. Not just once in

a while.

Because as you take a look, just in the last number of years,

you’ve had potato disaster, both economic as well as production

loss. You have had economic situations face wool producers that

has come before this Committee, and economic assistance provided.

You name the commodity, it’s come before this Committee either on

an economic front and/or disaster front.

So if we’re going to deal with it only in the risk management

area, that I want to talk about, is developing an insurance program

that might fit that commodity. And that will be challenge, and be

an interesting debate. Because being outside of the farm program

area, which is a separate issue and a debate in itself, the other

crops had an historic production history of which to sort of use to

develop the insurance program around, and you had a lot of other

information of which doesn’t necessarily exist in the public arena

on the specialty crops. I think it exists more in the private sector

through their marketing structures. Not that information cannot be

obtained, but it doesn’t exist currently in the public sector.

Senator STABENOW. Thank you, Mr. Chairman.

I look forward to working on these issues as we sort through the

Freedom to Farm bill and where we go from here.

36

The CHAIRMAN. Thank you very much.

Senator Thomas.

Senator THOMAS. Several of you have mentioned, and certainly

there are some questions there about fairness in trade, foreign

trade. Tell me where you think that unfairness occurs and what do

you suggest we do about it?

Mr. FLINCHBAUGH. The Commission basically endorsed the protocol that was submitted to the WTO in June of 2000. And it had

a list of areas to address the fairness situation. And basically, that

is a more market-oriented approach, reduction in tariffs, reduction

in tariff trade barriers, reduction in export subsidies, etc., etc., to

more level the playing field, move to a more open trade situation.

Fairness is in the eyes of the beholder. It’s a very difficult concept. If you read the section in the report that looks at the role for

Government, we clearly state up front that it is the role of Government to ensure a competitive environment for agriculture, not only

domestically, but internationally. So that gets at the fairness concept. But to specifically define what it ought to be is certainly beyond the scope of this Commission.

So it’s a matter of degree in moving that direction—— Senator THOMAS. Well, I don’t know that it’s beyond the scope of

it. Several of you have indicated, you mentioned a world economic

disaster. Is that what we’ve had?

Mr. VILLWOCK. I don’t think we’ve had a world, maybe that was

too strong, but surely our largest customers of agriculture have

been in an economic decline, in especially the Asian community.

Senator THOMAS. But it’s hardly a world, what you mentioned a

moment ago.

So what do these payments have to do with having a fairness in

trade?

Mr. FLINCHBAUGH. Are you referring to the SIS program?

Senator THOMAS. Any program where the Government assists agriculture, and then we go into the market and want fairness in

trade.

Mr. FLINCHBAUGH. Well, there is a protocol that the WTO has,

basically operates under. And we attempted, as we developed our

report, as we developed the SIS program, to stay within those

rules. That’s why we came forth with an aggregate base that

throws those eight crops all in the same pool. So that we think

we’d have at least a fighting chance to get it in the green-box. That

was the thinking behind that, to not only provide the income safety

net for farmers, but also meet the rules and regulations of WTO.

And after all, we said it was the function of the Federal Government to ensure a competitive environment not only for us but

around the world.

Senator THOMAS. Okay. Good. Yes?

Mr. STALLMAN. Your question brings up a point that sort of ties

in comments from many of the Committee members with respect

to our SIS proposals. Specifically, you’re asking what we should do,

and the chairman has outlined one of those factors. The other thing

is, the reason we had the SIS as the primary leg of the stool in the

form that we did, it is decoupled, and as a rice producer, I understand the potential dynamics that could occur if different crop

prices were different relative to each other.

37

It’s been an easy decision for the past 3 years, with all crop

prices being down, for Congress to allocate more money to solve a

problem. Now, I question what would have happened had corn been

up and rice been down, or rice been up and corn was down, what

the Congress would have had to deal with then. And it would have

been a lot more difficult.

The SIS program institutionalizes sort of the concept that when

net farm income is reduced overall, in the aggregate, then some assistance can be provided. It addresses the uncertainty issue that

Senator Cochran raised with respect to, what is our program and

what can producers depend on.

But one of the most important things we can do for trade, given

the fact that we’re trying to start another round of multilateral negotiations, is to use every dollar, if you will, up to the limits. We

need to observe our WTO commitments. But we don’t want to exceed our caps under the amber-box, because that has some consequences which I don’t think agriculture wants to deal with.

Senator THOMAS. Yes, that’s good.

Mr. STALLMAN. So sort of tying it all in, that’s why we structured

the SIS program the way we did, because if it’s coupled, we would

probably exceed those. But on the other hand, we need to keep the

pressure on our international trading competitors out there to get

them to come to the table and deal with a lot of these multilateral

trade issues.

Senator THOMAS. Well, it’s important, because we obviously

produce more than we’re going to consume domestically. And that

has to be it.

Tell me a little bit about the concentration area. Do you think

concentration, say, of packers or any other processors, is it under

control? Is there a concentration? And again, what do you propose

to do about it, if you say there is?

Mr. FLINCHBAUGH. Senator, when I answered a question earlier,

I stated that we had to set priorities. And we didn’t rank priorities,

we didn’t say this is important and this isn’t. We simply tried to

get our arms around issues that we had the resources and the time

to do. Concentration was initially on the list.

The majority finally concluded that we would open the statement

on the role of the Federal Government with a very clear statement

of what the real role ought to be. We said clearly, it is the role of

the Federal Government to ensure a competitive economy. And

therefore, the Government should enforce the antitrust laws,

should look at those laws, modernize them if necessary. We talked

about transparency, monitoring, including contracts.

And we chose to handle that issue with that statement, and we

did no go further.

Senator THOMAS. So you just suggested if that’s the case, it

should be handled, but you didn’t suggest that that was necessarily

true.

Mr. FLINCHBAUGH. That’s right. That’s the majority opinion in

the report.

Senator THOMAS. Well, it just seems, one of the things that’s

been so obvious in the years is that the difference between the producers price and the retail price seems to have gone substantially

higher. And one wonders why that is.

38

I think I’ve used my time, Mr. Chairman.

Mr. PAIGE. If I could make one statement on concentration. As

the larger factory farms and large farms get bigger and bigger,

smaller farms, especially minority farmers, are being driven out of

things that have been cost effective to them, such as hog production and small animals and so forth. I think some attention needs

to be paid to that. Because that trend has contributed to the limited number of minority farmers, that is African-American farmers

that we have on the land today.

And it’s back to your issue on the trade. You know, peanuts, if

they are allowed to move in from Mexico without any tariffs or restrictions, and south Georgia specifically, if you take away, if we

destroy quota, it’s going to drive communities, and it’s going to

cause loss of jobs and farmers are going to go out of business

wholesale. I just wanted to make that comment.

Mr. SWENSON. If I can make a short comment on two points. One

on trade. One of the reasons that I submitted a minority report,

though it was mentioned in the majority report, I think the biggest

challenge facing us in international trade, both in our opportunity

to procure markets, but as well as what’s impacting our domestic

market and prices, is currency values. And I just think that’s an

issue. I know that many people say we can’t address it. I believe

it’s an issue we have to address.

And Mr. Chairman, I would offer, because I just got this Friday,

a copy of a study done by the Department of Agribusiness, Applied

Economics, at North Dakota State University, Northern Plains Research Center, that did an in-depth study of the currency value between Canada and the United States, especially since CUSTA was

passed. In summary, it just points out one thing real clear, and

that is that currency differences have made a huge impact on

tarde. And I just think it’s an issue of which we must spend more

time on.

The second element I would mention, that stands out to me, is

the dispute resolution process, especially the livestock sector, has

been impacted, I think in the price, over the years, volatility in

price, over how the issue has been treated on international trade,

from the hormone issue to other issues in relevance to livestock.

Producers have been impacted, and yet there’s no way to compensate them for that volatility in the market that I think comes

about because of our inability to get a dispute settled in a timely

manner.

And so I want to emphasize that the dispute resolution process

I think needs a higher priority in the nature of our trade negotiators.

And the other is the area of transparency. I am really concerned

at the lack of transparency in our market, but the public market

as well as what’s happening in the contract market, and how those

prices are not reported into the public sector in a timely manner,

both on the domestic side as well as international side. So on trade,

I share those points with you.

On the consolidation, I couldn’t emphasize more, and that’s why

I submitted a minority report. But I truly believe, from the retail

sector all the way down to the control of genetics, concentration is

becoming probably second to price as the issue of concern to farmVerDate 11-MAY-2000 10:44 Jan 17, 2002 Jkt 074344 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 C:\DOCS\74344.TXT SAG1 PsN: SAG1
39

ers. That includes transportation concerns, who’s handling trade

versus who’s handling domestic processing, are they global in concentration, not just domestic in concentration. I think it’s the second priority of concern to farmers across this country.

[The information referred to can be found in the appendix on

page 130.]

Senator THOMAS. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator Thomas.

Senator Dayton.

STATEMENT OF HON. MARK DAYTON, A U.S. SENATOR FROM

MINNESOTA

Senator DAYTON. Thank you, Mr. Chairman. I certainly want to

commend all the members of the Commission for taking on a herculean task, and particularly for your forward looking orientation.

I think that’s, obviously these are complex issues and ones, as you

say, that affect different parts of the country differently. So I think

what you’ve undertaken is extraordinary.

I don’t want to try to debate the history, because I don’t think

that’s productive, but I also believe that if we don’t recognize or

aren’t willing to acknowledge all the forces that have brought us

to this present point in time, that we’re not going to make an accurate diagnosis, and therefore, an accurate prescription for what we

might try to do. I’m aware that the experience of administrations

and committees and bi-partisan efforts throughout the decades

should make anybody humble about the task of trying to direct agriculture policy from Washington.

But I’m concerned, the record shows, at least the Commission’s

majority report, that really the only sentence that I find that directs itself to what has occurred in the last few years in agriculture

is one on page six that says, these price levels, the market prices,

succumbed to international economic events and began their current slide in 1998.

I don’t disagree with that, but I think that’s an incomplete analysis, in my view. And I guess I am concerned that since we have

been saying to American farmers, at least many have been saying

for the last couple decades, that, increased international trade, increased exposure to world markets, is going to be the solution to

prosperity, that then we complain when the international market

conditions aren’t exactly the way we would like them to be to serve

our interests. I think it’s naive to assume that other countries are

going to act accordingly, or that we are going to be able to rely on

that segment alone of the agricultural economics to produce our

salvation.

And I particularly point out that I don’t see anything in the report looking at these levels of U.S. production. Certainly our increased productivity is one of our strengths, but at least in some

of the major commodity groups that affect my State of Minnesota,

corn, nationally, wheat, soybeans, milk have been record high levels of domestic production in the last year or 2, and not surprising,

to the basic law of supply and demand. Therefore, market prices

have dropped to very low levels, and as others have noted, therefore, the Federal Government payments have increased in order to

avert market disasters.

40

So we’re left in this paradoxical situation where we have market

prices at record low levels, and we have taxpayer subsidies at

record high levels, which if they were to continue, I suppose, might

obviate the problem. But that wasn’t the purpose of the program,

and shouldn’t be.

So I guess I go back to my question, if our goal is to get the Government out of agriculture rather than put it foursquare as the sole

basis of financial support for agriculture, how are we going to

achieve that by extending the current program, really I’m simplifying your report, essentially as large an extension of the current

program, lifting the limit on payments? I don’t see how we get anywhere other than continuation of over-production relative to market demand, low prices that are so low that farmers cannot survive

except by the Government payments and are going to be increasingly then dependent, and we’re going to be increasingly called

upon to, as others have noted, avert every disaster.

I mean, where are we going with—and then we’re hoping that

international conditions improve so that we can get the salvation

that we haven’t gotten yet. I don’t see where we’re going with this,

and I wonder if you, Mr. Chairman, would like to comment on that,

or other members.

Mr. FLINCHBAUGH. Well, clearly speaking, when you talk to farmers, they prefer their income out of the marketplace. But in a dynamic, global, political economy, there are periods when that isn’t

going to happen. It hasn’t in the past, and I don’t think it will in

the future. It’s not a perfect world.

So the Commission then concluded that it was the role of the

Federal Government to come in with an income safety net to basically provide a foundation under farm income. Now, the distinct departure from the past is the counter-cyclical income program, as we

call the SIS program, provides a mechanism, a formal mechanism,

to do just that, where we have relied up until now on a program,

and you can go back to 1933, that does not have a mechanism in

place, and therefore, the Congress had to come in with emergency

payments and so forth.

Now, the program we have proposed, is it foolproof? I doubt it.

But at least it provides a mechanism that can react to future problems that aren’t anticipated. And that’s the distinct change.

Mr. CAMPBELL. Senator, your question was the same question I

asked myself, and is the reason I wrote minority comments, where

are we going with all this. Because we’re changing it at the margin,

but essentially, we’re continuing it. And there are some glaring

omissions, I think, here in the report.

I find myself hearing echoes of Senator Harkin’s words back in

1996 when he said, this program’s too much. I couldn’t believe it

at the time. And here we are, where essentially it’s proven correct,

that the windfall of 1996 and 1997, billions and billions in windfall,

have now become the high water mark that you all are expected

to defend. That in fact has been inflationary, and that is why the

2,000 acre farmer down on the end of the table is being squeezed

out by the 7,000 acre farmer.

These programs are based on bushels, bales and pounds. Whether you call them decoupled or not, they are. And bushels, bales and

pounds don’t experience financial stress, farmers do. Very, very few

41

of these payments go to farmers experiencing financial stress. Very

few commercial farmers are experiencing financial stress, according

to USDA and the Federal Reserve Board.

So what can we do different? We tried supply controls. They

didn’t work. We tried coupled supports. They didn’t work. We tried

decoupled supports. Now we have built ourselves a huge beast that

needs fed.

We’ve tried everything, at least in my lifetime experience working with this Committee. And to Senator Harkin’s point again,

we’ve got to think outside the box. And there’s two areas where we

can do that, where we can begin to take some of this money, and

instead of putting it into the same old programs, we could put

them into different programs for different reasons. One of those is

stewardship programs.

For example, USDA estimates that there needs to be 2 million

miles of grass waterways and filter strips. That’s 7 million acres.

We should be paying $300 an acre to get that done instead of $150.

We need to have a program, a pilot program, to begin the greenhouse gas emission reductions for agriculture, not only carbon, but

methane, nitrous oxides and the other greenhouse gases. Tremendous economic benefit there that farmers can receive compensation

for that’s based on how they farm, not what they farm.

Another area that Senator Lugar and Senator Daschle and Senator Harkin and others, and Senator Nelson, have worked on, is

the renewable fuel standard. We can double, with the stroke of a

pen, the use of corn, sugar and soybeans for energy. Never before

have the needs of our national energy policy coincided with the

needs of agricultural policy like they have today.

Senator Lugar’s bill would add 15 cents to the average price of corn, and would therefore reduce by $1.5 billion the cost of farm

programs. This Committee could reimburse the Highway Trust

Fund $500 million and still be ahead by $1 billion.

The same is true in oilseeds. Five hundred million pounds of oil off the market through biodiesel costs $70 million and saves you

hundreds of millions of dollars in oilseed LDP payments. Those are

the things that we didn’t deal with, and those are the things that

I think, if we want to get out of the same old worn-out stuff, we’re

going to have to come to terms with.

Senator DAYTON. Thank you, Mr. Campbell. Well said. My time

is up, Mr. Chairman. I don’t know if other members want to respond, of the Commission, want to respond.

Mr. SWENSON. Thank you, Mr. Chairman.

Senator very shortly, I would agree with your comments very

much. And it’s another reason why we submitted a minority report.

The comments made by Mr. Campbell, I agree with many of

them, not all of them. But if you take a look at the section in the

minority report on conservation, some of the points that he raised

are submitted, the carbon sequestration, supporting additional wetlands areas and those types of efforts. So some of those ideas are

expressed. But I think he was right on with many of the points

that he made.

Mr. PAIGE. Under the small farm section, we asked for special

session on the minority register, on which minority farmers would

register voluntarily and get incentives to participate in programs.

42

What you’ve just heard from Mr. Campbell and parts of the other

minority reports is, these are programs that they could get incentives to.

One reason, on the conservation side, that many small farmers

don’t participate, is because they’re restrictive because of different

payment limitations. People don’t have the amount for cost reimbursement. Cost share should be raised.

This is the intent of the minority register put in, that people register voluntarily and get incentives to programs to participate in

that. And that would increase, that would really help a lot of farmers to stay on and do different things. Otherwise, it’s out there and

we need to look at these type programs very strongly. Thank you.

Mr. KRUSE. Mr. Chairman, if I could very quickly. Senator Dayton, I’m a fourth generation farmer from Missouri and raise many

of the same crops on my farming operation that your farmers do

in Minnesota. And I think it’s important that we not in any way

by anything any of us individually or collectively say, that we leave

the impression that this current Farm Bill is all bad. I would go

back to what Senator Roberts said a few minutes ago, there are

some very good features that I personally like in this Farm Bill.

And as I talk to my neighbors, get the same reaction.

Clearly, there are some things, as Senator Roberts said, can we

make this Farm Bill better? Absolutely we can. That’s part of what

we have to do. But I do think, too, sometimes we don’t spend

enough time talking about, as Senator Roberts, said, there are basically three main categories, that, if we look at a report card, looking back now, whether it’s trade policy, whether it’s tax policy or

whether it’s regulatory policy, there are a lot of missing things in

there.

We could spend a lot of time just this morning talking about

things we haven’t done in terms of trade. Because I personally believe that trade is absolutely important. I think we all do. So I

think again there are some very good features of this Farm Bill,

and I certainly as a farmer don’t think it’s correct to characterize

all the problems we have in agriculture today as just simply a result of this Farm Bill. I disagree with that very strongly.

And I think as we move forward we have to find ways to make

it better. But we really need to continue to emphasize trade and

tax policy and regulatory policy and all the things associated with

those issues.

Mr. DUPREE. Senator, I’m kind of the old man on this Commission, from appearance and also experience. This is my 48th farm

crop I’ll be making, it’s my total income, it’s what I do and what

my family does, an operation that began in 1832. My farmers know

I’m up here, and I get questions from not only them, but bankers

and all about what I think the outcome is going to be, because

they’re all vitally interested.

In Arkansas, this whole thing, agricultural income is 25 percent

of the total resource, income resource, of the State. And therefore,

although all counties don’t have agriculture to the same extent, to

the extent that that 25 percent is impacted with low incomes and

economic problems, it affects the whole State very dramatically.

And my people tell me you know, if we can do anything in the

world, we need some sort of comprehensive, long range food and

43

agriculture policy that tells us what we can do, not only what is

expected of us but what we can expect in return for doing those

kinds of things. Some of the burdens that are placed on agriculture,

in the absence of some of this, is so overpowering that agriculture,

the fragile nature of its business, that’s the reason it’s having these

throes that it’s in and the depression that’s out there.

I don’t have any small farmers left in Arkansas. We got rid of

those back in the 1980s. Therefore, everything is large scale commercial agriculture. And yet it’s having real difficulty. Forty-nine

percent of net farm income last year came as direct result of these

payments. And yet when they were analyzed, the return on agriculture in Arkansas is only 1 percent. That’s not going to be good

enough to satisfy creditors and all. That’s going to have a real influence on structure.

What you’re doing by these programs, Senators, is you’re defining the kind of agriculture this Nation is going to have as we go

into future years. Don’t mistake you’re not. And to the extent this

Nation has always, in trying to rationalize these, and I think we

should somewhat, the Nation has always had a history of moving

into areas where a sector is important, and yet cannot do things

for itself collectively. And therefore, the Government plays an influence on that.

That’s the reason for Government programs, and has been. And

surely, our difficult has been sometimes that they were not adequate to address the real problem, which in my area down there

is simply low prices. And there are better ways to get at it than

the tools we’ve been using in the past.

Hence, that’s the reason I signed on the minority report using

the market loan is that I think it’s directly coupled and is responsive to need directly and therefore, who can beat that kind of tool?

It has its shortcomings but all the rest of them do as well. But you

can do it for a whole lot less than AMS $19 billion that we’re talking about. We think $12 billion would give you market loans at

prices that farmers can get along with, particularly if you couple

them to cost of production.

The CHAIRMAN. Well, thank you very much, Senator Dayton, and

likewise the responses your questions brought.

Let me start a second round of questions by just observing things

that I’ve heard. I thought a comment that very few payments go

to farmers who are in distress is an interesting point. Clearly, distress is a value judgment, likewise, as to how much distress.

I would start by saying, as I did in the beginning, that whether

it’s the 1 percent farmers are making, as you said, Mr. DuPree, in

Arkansas, or 2 percent which annually may come in the prediction

of the Commission, or the 3 or 4 percent that I mentioned glibly

from my own operation, this is very little money. In other words,

what fundamentally we have to come to grips with is why people

in America are still farming. Each one of you would be able to give

a commencement speech on that subject. [Laughter.]

And you would inspire young farmers to go out and do the job.

And I understand that. The question you raised is, why have I

been at it for 44 years, if I could have got the money. And there

are good, emotional, family, quality of life, all those sorts of reasons. Plus the fact that I had other sources of income, as do almost

44

everybody in my category of farming. In fact, a majority of the income comes from something else.

So maybe with the 8 percent at the top of this, they receive 72

percent, we’re told, of their income from farming. So this is very

serious, because there’s not everything else.

But I’m trying to come to grips in my own mind’s eye with exactly who it is we’re trying to help. Now, essentially, everybody, because the return for almost everybody is very low. There’s very little we could do in sending money in any of these directions that

would not help somebody have a higher return. And my guess is,

a good number of people are below zero. So they are very distressed. And in fact, the whole safety net idea of the last Farm Bill,

in a way, is to keep everybody in the game. Everybody. We may

not have succeeded, because people do become tired of receiving

these low returns and what have you. But that’s the idea.

Now, you can do it by crop, and Mr. Villwock’s comment in response to Senator Stabenow I thought was very interesting, as to

why he believes you should not try to get crop insurance or risk

management into the specialty crops. But what Mr. Villwock is

saying in essence is, leave us alone, because this is some part of

agriculture that still could be profitable if not everybody is in it.

But once you begin to have risk insurance, and you stabilize, say,

corn, wheat, cotton, rice, then everybody is in it. In fact, we’re

keeping everybody in it by definition, as we get better at it, in

terms of yields per acre, there will be more of it.

Now, one strategy is of course that the world must still have

hunger needs, and it does. And maybe we will be successful politically in moving the product and reducing tariff and non-tariff barriers, so people eat better around the world. But it is a fact that

many governments, as a matter of policy, would rather starve certain sectors of their population, or are so protective of their farmers

that the rest of the population doesn’t eat very well.

We hopefully will finally come to a more humane set of governments with whom we’re dealing, and maybe that will be an outcome that will lead to higher prices. But I just have not seen the

end of the rainbow at this point, as to how any Farm Bill achieves,

really, the kind of income levels that I believe are required for a

normal family, husband and wife and some children, to have a middle class income and send their children to college and have upward mobility in our society without having other income, and a lot

of it, and with the agriculture as a piece of this action.

Now, you know, you finally boil this down, there are very tough

circumstances in some parts of the country. Challenges that are

very formidable with regard to whether, and the soils that you

have to deal with and all of that. Maybe we target those situations.

We do ultimately in terms of most of our emergency legislation.

And these are people who are just sort of outside the box of any

program we have.

There has been suggestion that as opposed to crop by crop we

deal with total income on the farm. And that’s an interesting idea,

certainly, for economic theorists to take a look at. And that does

get to the specialty crop business in a way. It gets into livestock

in a big way, which is not really on the charts now in terms of the

stabilization program.

45

On the other hand, this is an intrusion, of physically, how the

local ASCS officer or anybody gets into the income tax returns, is

able to quantify precisely what the net income of that operation is,

has defied many people in agriculture, long before we came along.

Although conceptually, there’s something to be said for the whole

farm idea and for the whole income business in this thing.

I raise these questions just simply as a part of the record, because I think that we and hopefully you helping us in your testimony, may help us wrestle out a solution that is a better one than

we have now. But I would say that for the moment, the Farm Bill

that we have, with all of its infirmities, has at least maintained,

as has been suggested, a fairly high level of income for the country

as a whole. Even in the midst of this, the speeches on the Floor,

if you had a dollar for every one that’s establishing the crisis, the

turmoil, everything falling in the drink, you’d be a wealthy person.

This is a part of our life, to both give these speeches and to listen

to them. [Laughter.]

But here we finally have to come to grips with how to make any

difference. And I don’t know whether in American agriculture everybody will stay, and whether they find the returns or whether

maybe the emotional content overwhelms this. But I’m intrigued by

this whole idea: why do we have so many farmers, why do they

stay in the business, why, for instance, in the dot-com business,

where people are routinely leaving every day because they run out

of money, and there is no stabilization of this at all, is this substantially different?

So does anybody have a philosophical comment, because it would

have to be that, I suspect. Mr. Swenson.

Mr. SWENSON. Thank you, Mr. Chairman.

Dot-coms will come and they will go, movie theaters will come

and they will go. But they aren’t a necessity of life, as food is. And

I think if there’s one reason why this debate needs to maintain the

priority and the level of consideration and intention that it deserves, the same as energy, look at the debate we’re now giving to

the energy situation, because of the situation we find ourselves in,

and dependency of the world for our energy source, and the lack

of commitment we’ve made in the past to develop our own domestic

energy sources.

So I think it’s significantly different than other sectors, and deserves that attention.

The other thing I want to emphasize is that I think the world

will consistently change. We’ve talked about our own productivity

increase. The world’s productivity and agriculture will increase as

well. And I think probably more rapidly, as we look to the future,

than what we’ve seen in the past. Because the globalization of the

chemical companies and the seed companies and the equipment

companies will be able to apply that technology to the world, where

in the past, a lot of that was developed internally here, and then

went from the United States to other parts of the world. That’s

changing and I think will continue to change.

So those are factors that I think require us to maintain the discussion and the debate of agriculture providing food at the level of

consideration that I believe we should give it.

46

The CHAIRMAN. Let me just ask, though, granted that we have

to have farms, we have to have food production, is there any reason

why we have to have each person doing this? And if you suggest

around the world that people are going to do it better, this is of

small comfort. We’re at that point squeezed even further. In other

words, at what point do we grant that we ought to have these acres

tilled, but the question is by whom, and does agricultural policy determine that?

Mr. CAMPBELL. Senator, there’s some very interesting USDA

data that go to your question. And it’s derived from the census, as

well as their own surveys. Every sales category of farm size has a

household income above the American median household income,

the smallest and the largest. They also have net worth many, many

times above that of the average household. Only until you get to

that 8 percent that produces 72 percent, those above $250,000 in

sales, do you get to what we know as commercial farms, who earn

most of their income on the farm.

Most farmers earn most of their income off the farm. That’s why

we have as many farms as we do today. In 1970, had we continued

the trend that we had then, we would have only had 600,000 farms

instead of the 2 million that we do today.

But to the challenge of this Committee, only 36 percent of farms

get payments. Only 36 percent. And only one-fifth of the total cash

receipts is affected by the AMTA payments, the LDPs and those

sorts of things.

So for example, when Senator Conrad shows the charts, it’s the

charts for all of agriculture. But when hog prices go to $8 or cattle

prices go to $80, those numbers get put into those net farm income

figures. But when you look at the eight program crops, and I’m excluding dairy, but when you look at the eight program crops, the

last 5 years, the net, net farm income for those eight program crops

has been $3.6 billion per year average higher than the previous

farm bill. And that is what’s driving land prices for those crops.

So even though you might say aggregate income or net profits is

only 4 percent, the fact is, they’ve been high enough to drive land

prices higher, drive rents higher, and therefore drive the less efficient or the smaller producer into doing something else.

So we have kind of a tale of three cities, actually, here. We have

the commercial farmers who, on average, are doing extremely well.

That’s that 8 percent. We have the small farmers, who earn most

of their income off the farm, in fact, lose money on the farm but

still make up for it with enough farm income to have incomes higher than the average American family.

And then we’ve got a group in the middle that call themselves

or consider themselves to be full-time farmers. But they are not

earning enough from those operations to keep going. And that,

when you start to slice it and dice it, you come to some interesting

conclusions. And Keith Collins has got some information which I

think is very interesting about what percent of those people are experiencing financial stress.

In my recommendations, what I try to say is that we need to

zone in on those producers. Those producers either need to get bigger and more efficient in order to achieve their objective of full-time

income from full-time farming, or we need to have some credit proVerDate 11-MAY-2000 10:44 Jan 17, 2002 Jkt 074344 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 C:\DOCS\74344.TXT SAG1 PsN: SAG1
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grams or some transition programs so they can earn off-farm employment.

When we continue to look at agriculture as one big glob, we can’t

get there from here. We’ve got to begin to look at it in its individual

pieces and design policies that fit each of those pieces.

The CHAIRMAN. My time is up and I want to—Mr. Paige.

Mr. PAIGE. I want to make one last comment on it, more philosophical for me, but it’s true that now the African-American community only owns a little over 2 million acres of land, when it

comes to that. And that in itself is sad. Then with about 18,000,

19,000 black farmers, at one time over a million farmers were receiving life and livelihood. What happened to them? They’re in the

inner city now, unemployed, underemployed, and perhaps on other

types of services. So we pay now, we pay later.

There’s opportunities in the small farm section to do things with

beginning farmers. There are farmers who want to go in to do that

in other incentive type programs that would encourage this, that

would encourage niche markets and other kinds of things. But resources have to be put there. Technical support for minority farmers has by and large not been there like other farmers have enjoyed over the years.

Just putting money into that, there’s a program called 2501 that

we’ve tried to get funded for the last two Farm Bills. We have not done it. Congress has only put up $3 million, and we’ve had to fight

for it which means that we’ve not been given the opportunity for

survival on the farms. We’re talking about life and livelihood. We’re

talking about communities. We’re talking about families. There are

several reasons that folks want to stay on the farm and want to

own land. And it has been proven, the best stewards of the environment, of land, has been small family farmers.

So I think it’s something that we have to take a serious look at,

and find a means to do that. And I think the small farm portion

off of that, and also we need to find those types of incentive programs as you deliberate over the next Farm Bill. Thank you.

The CHAIRMAN. Thank you.

Senator Harkin.

Senator HARKIN. Well, very interesting discussion. But I’ve got to

get back to your question, with this kind of return, why do we have

farmers? I might answer that with a question: why do we have history teachers? You’re not going to get rich unless you write a book,

you know, maybe if you’re one of those few that write a book. Why

do people go to college to become history teachers? You get a decent

income, but you’re not going to get very wealthy.

I think people like to do it. And in agriculture, people like the

independence of it. They like living out on the land, owning some

land, people like to do it, and they’re willing to trade off a lot of

things to do that.

But what I’ve sensed in the last 25 years is that it’s gotten to

the point where they’ve traded just about everything they can off.

And it used to be, the neighbor was across the road, maybe down

the road a few hundred yards and your kids could play together

and stuff. Now the nearest neighbor is 2 miles away. Can’t even

get groceries unless you drive another 15 miles, or you can get

maybe a small Casey’s store or something like that, out our way.

48

So the whole infrastructure has broken down in rural America.

And even though people would like to live there, I mean, they’ve

got to have neighbors, they’ve got to have some social support. Our

churches are closing down because they can’t even keep the congregations up. Schools are consolidated, not unusual in my State,

and I’m sure a lot of yours, kids get on that bus in the morning

and they’re going an hour to go to school—and that’s in good

weather—and coming back.

So when this happens, people say, yes, I’d like to farm, I’d like

to do this, but I’ve got to have something else out there. That’s

why, when I opened my comments, I think we have to break out

of the box and start thinking. I like what you have to say, Mr.

Campbell. I think you’re right on target.

I was making notes when you were talking there, talking about,

you know, we’ve raised this thing up, now we can’t go back. In

Iowa, in 1999, Government payments were 130 percent of net farm

income. Explain that to somebody, they say, how can that possibly

be, that Government payments were more than net farm income.

Well, go figure when they paid their debt and expenses, they had

some more.

But obviously, Mr. Campbell, you’re right, individual pieces.

Look, we’re a technologically advanced society. And that’s when I

get back to where I started with this one size fits all type of things.

We have the wherewithal, I think, to begin to break this down into

individual components, and maybe to do something a little bit different than what we’ve been doing.

Again, I will take you all to task. I am disappointed in this report. There isn’t one word in here on energy. Not one word. Now,

Mr. Flinchbaugh, I read the law, I was involved in it when we

wrote it. Production agriculture. That’s what we talked about, production agriculture, an assessment of economic risk to farm—oh,

but to continue, production agriculture, and I had another thing

here I wanted to talk about, too. An assessment of economic risk

to farms delineated by size of farm operation, small, medium, or

large, what Mr. Campbell was talking about there. I’m not certain

that we got that assessment. Delineated by small, medium and

large. Mr. Campbell talked about it a little bit in his minority report.

But not one word in there on energy. That’s production agriculture. If we just replace all the MTBE with ethanol, I hate to get

on this kick again, what a boon that’s going to be. That’s going to

help every farmer in America, corn, sugar farmers, things like that.

Biodiesel, biomass, one pound of switchgrass has more BTUs than

one pound of coal. True. The only problem, a pound of coal is this

big and a pile of switchgrass is this big.

But we do have some interesting programs going on now about

biomass production. Now, will it replace all the energy in this country? No. No one’s saying that. But it could be a substantial part

of it.

Production agriculture, value added energy, a lot of things like

that. Drugs, we already know that pharmaceuticals are looking at

the new biotech regime and genetic engineering to begin using

crops to actually grow drugs. We ought to be thinking about that,

and how that’s going to help small farmers, who could specialize

49

on a small area of using biotechnology to grow a specific type of a

drug or pharmaceutical for a company. You don’t need 7,000 acres

to do that. You might only have, Ralph, 40 acres. You might make

a pretty good living off that. Maybe that’s something our tobacco

farmers ought to start looking at, when we’ve got to wean them off

of that.

So I am really disappointed that you didn’t look at the whole aspect of production agriculture as being outside the box of food and

fiber, food, feed and fiber.

And in international programs, Senator Dole and Senator

McGovern, I think the former Senators had something I never

thought about before, I thought it was a great concept, international school lunch and school breakfast program. Why not? Why

not take this great program that we’ve had in this country and

internationalize it. Does that mean we’re going to supply every

ounce of every food to every kid in the world for school lunch and

breakfast? No, but we should do some of it. We can do a lot of it.

We could be the instigator of that, worldwide, to get this kind of

process going around the globe. That would help also.

I just think we’ve been too long with accepted orthodoxy. Mr.

Villwock, I’ve got a comment on the risk aspect. When you were

talking, I thought about it in a different contextual framework. If

you’ve got all these big payments out there, and they go to the bigger farmers, and it takes away the risk of getting larger, then big

farms become stronger, better able to out-bid their neighbors for

that extra bit of land that’s coming up.

So our policies engender that, if we take that risk away, by having these big payments out there. Mr. Campbell’s right, we have

had a generalized orthodoxy of, we pay pound, bushel and bale.

Well, maybe we ought to think of some other way of focusing on

those payments, because it is, I believe it’s factual. We can debate

it, I suppose.

But I believe our farm programs really have promoted farm getting bigger in this country, because it does take away that top end

risk. So you can go and out-bid your farmers for that extra bit of

land.

Well, I don’t know, I guess everybody’s giving speeches, why can’t

I give mine. Anyway, there are a lot of questions I have, I know

the hour is getting late. The Commission recommended eliminating

all payment limitation provisions, yet you say we should recognize

the importance and value of small family farmers. You oppose raising loan rates, but you want relative loan rates rebalanced. Well,

then, are you suggesting we lower soybean rates? Anybody suggesting that?

Well, how can you have it both ways, if you want the relative to

close, but you don’t want to raise the bottom, you’ve got to bring

the top down some way. Am I missing something here?

So anyway, and the natural environment, again, I take the Commission to task for viewing a farmer’s role and preserving the natural environment as a crucial policy goal that we ought to have. Not

the old hit them on the head, but what can we do policy-wise out

there that would encourage, again, as Mr. Campbell said, more

grass waterways, more buffer strips, more switchgrass, a lot of difVerDate 11-MAY-2000 10:44 Jan 17, 2002 Jkt 074344 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 C:\DOCS\74344.TXT SAG1 PsN: SAG1
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ferent conservation crops, which can be carbon sequestering also,

and help our farmers with an income there.

Well, so those are some of my questions. Maybe I might, as we

come back later, these and in the future, I hope in the future that

all of these gentlemen sitting here in front of us—why aren’t there

any women on this Commission? Just thought about that. Why

aren’t there any women on this Commission? I mean, women are

a part of agriculture, unless I missed something here.

Senator ROBERTS. Well, we have one for Secretary, though.

Senator HARKIN. We have one for Secretary of Agriculture now.

But anyway, that’s enough of my speechifying. I hope, Mr. Chairman, as we move ahead on the next Farm Bill, these people have

a lot of expertise, they’ve been involved, I hope we can ask them

to come back either individually, as groups or something like that,

to help us in our thought processes on this.

The CHAIRMAN. I think there are two comments from Mr.

Swenson and Mr. Paige, so we’ll take those before we move on.

Mr. SWENSON. I would just urge Senator Harkin to make sure he

reads the minority report of the farm safety net, including the conservation section.

Senator HARKIN. That’s what I mean. I said the Commission

didn’t. I said they were in the minority sections. I’m sorry, if I

didn’t say that, I meant that. The Commission didn’t, but they

were in the minority section, two minority sections.

Mr. PAIGE. On the small farm section, both the minority report

and the regular report, we referred to a document, the National

Commission on Small Farmers. In that commission, a couple of

things that were pointed out in that commission report, research

and extension. And conservation is another one, beginning farmers.

But the research that’s certainly what you’ve said, looking at

niche, looking at different types of research, looking at markets,

looking at research for value added type products that small farmers can use, and certainly that is the intent of that, and the talk

about that, doing that. Research being biased towards large farmers and large agriculture interests. That’s what this report talked

about.

And one of the things we tried to do, and certainly in the minority report, is get you to look at it, and continue this as an advisory

committee or put a budget to it, put some resources in it, where

it could have an ongoing concern with small farmers, whereas they

did spend a lot of time talking about conservation, lots of time and

energy in there looking at extension, looking at research and this

type of thing. And they did take those to task, that’s why we suggested that we look at these things. And those are just a few.

There was a report given out on these things, and I’ll go through

it very quickly. On some of the things, such as research and extension for farmers, they’ve got C. Conservation, C. Credit, C. Farm

workers, D. Civil rights, C. Not taking on any of those things that’s

concerning small farmers. And I would say, and I would hope that

after you look at that, you would see fit to continue this Commission and let them work on issues of that kind.

Now, grant you, we had a lot of things to do at the 21st Century

Commission, and we decided to put, that was one of the things, put

this in there where you could look at that. And those things were

51

thoroughly discussed in there. And here again, a lot of meetings

were held, just like we had meetings around the country. And

money should be put in it, and a continuation of that, where that

dialogue can be continued.

And I could talk to you a lot about different initiatives that are

going on in the field around small farms and around niche markets, around even the pharmaceutical you’re talking about, we are

doing that with small cooperatives. We need money in this. We talk

about funding for cooperative development, 2501 research and technical assistance, that’s exactly what you’re talking about, Senator,

that we are trying to do.

But there was nothing in the last Farm Bill that really dealt

with that, that really dealt with it. In fact, the 2501 didn’t even

get any money for it. And we have 1890 land grant universities,

organizations, depending on $10 million to provide research, technical assistance, value added and other kinds of things for small

farmers. That is not fair and we need to look at that.

The CHAIRMAN. Thank you. Senator Roberts.

Senator ROBERTS. Thank you, Mr. Chairman.

I think on your philosophical question, we should have the

former chairman of the House Ag Committee, the Honorable Kika

de la Garza, come in and make his submarine speech. That takes

you back a little bit, but it does indicate the value of agriculture.

And I might say, sir, that when I was zooming around to 12

States and talking to all the editorial boards that I could shake

loose in regards to the value of agriculture and where we were

headed with the 1985 Act, which was passed in 1986, I was meeting with the Wall Street Journal. And I had a young man ask the

question which is often posed: why are farmers any different from,

say, somebody who has a manufacturing plant and makes widgets.

And I asked him if he had ever put a widget between two pieces

of bread and tried to eat it. I said it would be high fiber but might

not really work so well.

Then I asked him about all of the folks who were on fixed income

and all of the minorities who live in our cities who only spend 11,

12 percent out of their disposable income dollar for that market

basket of food, if in fact we put agriculture in the same basket or

the same category as any other manufacturing entity or any other

business entity, I suspect that price would rise rather dramatically.

That has always been one of the rationales that we have used

when we talk about farm bills, that it is not only a farmer subsidy,

if you will, or an investment, it is a consumer subsidy as well.

Mr. Swenson, thank you for your concentration on concentration.

I would report to you in Kansas that, while we’re concerned about

price, we are also concerned about the merger and concentration

issue. But it’s throughout our economy. My gosh, look at the

Daimler-Chrysler issue, and Tysons-IBP. I just put down here U.S.

Air and what happens there, since I go to Kansas City on U.S. Air.

Banks, all the communications, all the dot-coms. This is a development that is affecting our entire economy.

But I detect a sense of fear among our agriculture producers

about losing control of their destiny. And I think you’ve hit on that.

I’m not sure which antitrust provision, Senator Harkin has had

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several bills in that regard, Senator Grassley, others. Obviously

we’re going to have to monitor that very closely.

I also want to pay credit to my colleague from Iowa for his plan

in regards to conservation. You get a double benefit there not only

from conservation but also from investment in agriculture. But I’ve

been adding up these payments that everybody’s been talking

about here. We had a conservation payment, a supply management

payment, a transition payment, stewardship payment, CRP payment, LDP payment, SIS payment, I have to add in Charlie Stenholm’s SIP payment. It could be a gulp by the time we’re through.

An energy payment, a carbon sequestration payment, and then let’s

see, a social welfare payment, I’m not trying to perjure that term,

there’s nothing wrong with social welfare. Look at the food stamp

program.

Mr. Chairman, we add up all these payments in place of the current payment criteria, we’re going to have to get a lot bigger mailbox, it seems to me, out on the farm, or a CD–ROM for somebody

at the Department of Agriculture to figure out who’s going to administer all this, how much paperwork, whatever. But I do think

at least it is a good suggestion.

Let me say that one of the reasons that we stuck with the AMTA

payment, even though the Administration declared that it was not

the best way to do things, and that’s the mildest way I can describe

that, was that the payments went out, and in 2 weeks, where they

got to farmers. And they were hard pressed, we were going through

a lot of weather problems, we were going through planting or harvesting cycles.

I can recall the other payment that was made on a different

basis took 6 months to 1 year. So expeditious handling of these

payments without all the paperwork is a consideration.

Let me ask Keith Collins a question—no, I’m not going to do

that. I am going to do it.

But, farm numbers and size, and this is from the directions for

the future of farm policy here, the National Agriculture Statistics

Service indicated there were about 947.3 million acres of land divided among the Nation’s 2.19 million farms in 1999. Since 1995,

over the past 5 years, the number of farms has increased from the

2.07 million, and the amount of farmland has decreased from the

970.2 million acres. The increase in the number of farms in 1995

is attributable to a continued rise in the number of small farms.

Oops. Where are we off base here? I suspect it’s because of where

you come from. As I look at the States that you represent, there

is a decrease, not much. In Kansas, we lost 300. We went from

47,800 to 47,500. Let’s see what Iowa owes me, or Indiana owes me

here. No, I owe Indiana and I owe Iowa.

But at any rate, it seems to be, what is your definition of a small

family farmer? I always got into that argument over in the House

when we were trying to determine of farm program payments

would be adequate. And I finally deduced that a small family farmer is somebody 5 feet 2 inches from Vermont who is an airline pilot

who has 40 acres in orchard, quite a bit of holdings and a threelegged dog named Lucky. [Laughter.]

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But the guy in Kansas who’s now 2,000 and now 6,000 acres, he

produces the food and fiber for this country. So you’ve got to figure

out, where are we here on the criteria.

Keith, your statement states, the recent reduction in farm prices

and returns from the market reflects large U.S. production, large

production in key countries such as China, Argentina, Brazil, the

global economic slowdown of 1998, 1999, its after-effects on the

continuing high value of the dollar. In your opinion, do these facts

have a greater impact on farm prices and income and the wellbeing of farmers and ranchers than the actual underlying farm bill,

whether it is, whether it was the past bill, the current bill, or the

bill down the road? The answer’s yes.

Mr. COLLINS. I think those facts have a greater influence on market prices than the underlying Farm Bill. The answer is yes.

Senator ROBERTS. Where are we headed? You have a whole paragraph. Where do you think we’re headed? You say now we’re going

through a tough time, but things down the road are going to improve a little bit, if we get our exports cracking and all the rest of

it.

Mr. COLLINS. Well, I think we’re already starting to see some

signs. As you know, agriculture is cyclical. Within agriculture,

there are sub-cycles, like cattle. When you’re at the top, you don’t

see the bottom very well. When you’re at the bottom, you don’t see

the top very well. And we’ve been at the bottom for the last 2

years, but we’re starting to see some signs. The dollar exchange

rate has been coming down some, it’s still quite a bit higher than

it was in the mid–1990s. But it’s coming down.

We’ve seen some adjustments in production, both in the U.S. and

around the world. Wheat is a good example. Our winter wheat

plantings this fall are down 5 percent, 2 million acres. In addition

to that, the world economy, which was fairly slow in 1998 and

1999, is starting to grow pretty well. It will be down a little bit this

year, mainly because of the United States.

But I think we’re looking at world GDP growth of 3 percent or

more, consistently over the next several years. And if you look back

over the last 20 years, whenever we’ve had GDP growth in the

world of 3 percent or more, that’s when we’ve had our peak export

periods.

So I’m beginning to see some things turn. If you look at specifically some of our markets like corn, we had a 10 billion bushel demand this year in corn. If we get a little bit of cutback in acreage,

maybe because of high fertilizer prices, we get a normal yield, we

have every prospect of running down our corn stocks in the United

States by a couple of hundred million bushels.

Our stock situation in the world wheat market is extraordinarily

tight. We’ve had several consecutive years of world consumption exceeding production in wheat as we have had for coarse grains as

well. So I think that those markets are going to be stronger over

the next couple of years.

Look at cattle. We started liquidating our cattle herd in late

1995. We’re now down to 97 million head in the United States. And

I think that that’s going to start to turn, as heifers are retained.

I think that we’re going to see cattle prices, we’ve already seen

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them at $79, $80 for fed cattle here recently. I think we could see

that consistently in the second half of 2001 and beyond.

So I think there’s a lot of little markers that are starting to tick

up and are a little promising for the farm economy. But I still

think there are other sectors like oilseeds, for example, where it’s

hard to see where we’re going to get much price strength over the

near term.

Senator ROBERTS. I guess my point is, I think it would be wise

for us to take that into consideration, at least to some extent. I

hope that the good Lord is willing and that the creeks don’t rise,

or that there is something in the creeks, and that our demand factor picks up as these economies occur. But so many times, you

know, Congress arrives late to the issue and then proposes something, only to find out that it could be actually counter-productive.

And I think we have to keep that in mind.

Dr. Flinchbaugh, you just didn’t have the Commission meet in

Washington, you went out around the countryside and talked to a

lot of producers. Tell me what they said in regards to maintaining

the flexibility of the Farm Bill.

Mr. FLINCHBAUGH. Well, if there’s anything that there’s almost

total unanimity—too big a word for a professor—on which there’s

consensus, you hear very little negative about planting flexibility.

And if you look at the minority reports, they don’t propose we move

away from planting flexibility, at least not in total.

So if there’s one item out there on which there’s consensus, it’s

planting flexibility.

Senator ROBERTS. Let me ask you, on CRP, you made the comment, I think, a continuation of the current CRP program with increases in size being directed toward buffer strips, filter strips, wetlands, grass waterways and partial field enrollments, all part of the

basis of Senator Harkin’s bill. Do you suggest fitting this within

the current cap, that’s 36.4 million acres, or an increase in CRP?

Mr. FLINCHBAUGH. Basically within the current cap.

Senator ROBERTS. Since we don’t have the sign-up up to the cap

yet, then we would go on beyond that.

Mr. FLINCHBAUGH. Right.

Senator ROBERTS. Mr. Swenson, I had a question on crop insurance. I’m not going to ask it, just take a look at allowing our producers to plug in 60 percent of their T yield in any year that they

suffer a loss that falls below this level. Senator Kerrey and I

worked very hard on that bill. It’s $8 billion, it’s not everything

that we had hoped. But I noted in the minority report, you were

a little critical of the crop insurance bill. Also on the revenue side,

we think we made some progress. We’d welcome your suggestions.

But I do think we’ve made some progress.

Let me ask you something. There was a fellow back there, he’s

still there, has his coat off, Mr. Bill Lescher, used to be with the

Department of Agriculture. The first amendment that I ever had

in the Farm Bill, way, way, way, way, way back, was a farmer cost

of production board. And Bill met with those folks for the better

part of 11⁄2, 2 years. And the chairman was from Kansas, a guy

named Bill Turrentine, we called him Bill Turpentine.

And we had all sections, all regions, all commodities, just like

this. And we tried to come up with a uniform, flexible whatever,

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comprehensive cost of production, and couldn’t, because of the regional differences and wherewithal of farmers and the Senator’s

cost of production on his farm might be different from somebody

else’s in terms of that operation.

How do we do that? And if you know, whisper in Bill’s ear and

my ear, because it may be a criteria that we can use. You and Mr.

DuPree indicated that there’s a yardstick to determine a cost of

production. We used to do that, sort of, with the deficiency payment, depending on what happened. I remember the marketing

loan vote served back in 1985 or something in there, and we fell

31 votes short from going to a marketing loan, which by the way

is very expensive, if we really fall off.

But how do you determine the cost of production?

Mr. SWENSON. In the development of our report, we used USDA

statistics. That was our method of development.

Senator ROBERTS. That’s why we had the farmer cost of production board, because most farmers didn’t think the USDA stats really measured their cost of production.

Mr. SWENSON. That’s a political decision you have to make if

you——

Senator ROBERTS. I mean, one fellow doesn’t have a friendly

home town banker, he’s got a heck of a higher cost of production

than the other fellow.

Mr. SWENSON. Well, costs of productions are going to vary. If a

farmer’s out there and got 80 percent debt, his costs are going to

vary in productions of commodity of the same producer that has a

20 percent debt ratio. So there’s no doubt that costs of production

for every producer in this country, even of the same commodity and

different commodities, will vary. So you have to use an average. All

I did in my report was try to come up with an analysis of saying,

here’s something for you to look at.

Senator ROBERTS. Mr. Chairman, my time has expired a long

time ago, and I apologize. I again want to thank every member. I

don’t think you’ve fallen short at all. I think you’ve done a damned

fine job. Thank you.

Mr. SWENSON. If I could comment, Mr. Chairman, real quickly,

in regard to the crop insurance. When this report was developed,

we had not yet seen the implementation of the action taken. And

we worked very hard from the organization I also represent, in

working with the members in trying to advance reforms of the crop

insurance. We look forward to seeing how they are achieved.

Senator ROBERTS. So you’re ready to give Bob Kerrey and I a little attaboy or a little pat on the back?

Mr. SWENSON. Oh, absolutely. Absolutely. But we would like you

to consider what we do to help farmers ensure themselves on that

first 25 to 35 percent loss area and would like your consideration.

Senator ROBERTS. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Dayton.

Senator DAYTON. Mr. Chairman, thank you. I have a number of

questions, but in deference to the time, I’m just going to ask one

of them. That’s regarding dairy, since Minnesota’s lost 6,000 dairy

producers in the last decade, you make your reference to four areas

of reform. I wondered if you’d like to elaborate on any of those. And

again, in deference to the time, Mr. Chairman, if anyone would like

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to submit a written response, I’d welcome them, because the Minnesota dairy producers are in serious economic straits today.

Mr. FLINCHBAUGH. Well, the frank answer to your question is,

Senator, no, I don’t want to elaborate on them. [Laughter.]

The Commission discussed these four commodities that are in

the report. And we simply concluded that there is so much disagreement within those industries that it would be very presumptions on our part to try to come to any kind of consensus. So we

basically have said to those industries, get your act together. What

do you want, where are you coming from? And I, frankly, as the

chair of the Commission, am not going to go any further than that,

because the Commission didn’t go any further than that.

Senator DAYTON. Mr. Swenson.

Mr. SWENSON. Thank you, Senator.

In the minority report, we touched very briefly on dairy. And

that was in offering for your consideration, looking at establishing

the same type of support program that we advocate for the other

commodities to be researched and looked at for dairy. Since I’ve

served on the Commission and we’ve developed that kind of scenario because of the interesting element when we plugged it into

USDA’s cost of production, if you tie it into support it comes up to

1250, which many dairy producers across the country say, that’s

not a bad target for support price to be looked at.

We’ve shared it with dairy producers from California to New

York to Texas, throughout the country. And dairy producers have

a lot of interest in that concept.

Now, if you talk to the industry, which has different goals and

different objectives, you’re going to get a different answer. So I

think it’s important, when the Committee begins its deliberation,

be it in dairy policy or grain policy or whatever, is the argument

brought forward in policy that representative of producers or that

representative of industry. They have different goals, different objectives. And I hope that the Committee will recognize those in the

deliberations. Because you’re not going to get a unified voice.

Mr. COOK. I think as this discussion goes forward that it’s important to recognize some of the realities that have to be dealt with.

And one of those is that a Farm Bill can’t be all things to all people. And I would hope that we’d be able to identify those things

that maybe can be influenced and spend our energy and our resources on that. And an example of that relates to your dairy question. There are so many circumstances far beyond governmental

control that are influencing the concentration of farms these days

that in our community there are three new 5,000 head dairy operations being developed right now. First one will be on-line this

summer.

Those are situations that technology, machinery, efficiency, need

for less labor, a whole lot of things that are beyond the influence

of a farm bill. The same thing relates to the repopulation of small

communities. I think it’s very unlikely that whatever comes out of

the Farm Bill can have a very major significance on repopulating

rural communities with farmers.

Now, a lot of the smaller communities in our area are growing

some through industrialization, small and sometimes not so small

businesses. But there are a lot of circumstances out there that you

57

just aren’t going to influence that much through the farming community. And I think it’s important to recognize that and not spend

a lot of time and energy and maybe resources on something that

isn’t going to happen because of circumstances beyond anybody’s

control. That’s our free market system working.

Senator DAYTON. Thank you. Thank you, sir. Thank you, Mr.

Chairman.

The CHAIRMAN. Thank you very much, Senator Dayton.

Senator Nelson.

Senator NELSON of Nebraska. Thank you, Mr. Chairman. Now

that Senator Harkin has left, I feel comfortable commending you

on your work. [Laughter.]

I know it’s difficult work, and I’m sincere when I say that if you

didn’t know before, and I’m sure you did, that we talk about the

agricultural business, though it’s a unitary industry, it’s not, this

is a part of the discussion, and that there might be unanimity, I’ll

try that, Doctor, I tried the word unanimity, I got it out. But people

will speak as though there is agreement, and it’s a single industry.

And I think the fact that it’s come out in this discussion as on so

many other occasions that we have segments of agriculture that

are altogether different. They may have some similarities. They are

in fact agriculture. But that may be where the similarity ends for

a lot of the commodities and the programs.

I commend you for trying to identify what you can in separating

out so that we don’t continue to make that kind of an error.

I want to commend my good friend, John Campbell, from Nebraska, who has been back here in Washington and has been in the

U.S. Department of Agriculture, and has fought many of the wars

that we continue to fight today, and recognizes that a lot of the topics are similar. What seems to be an ongoing source or a search for

solutions probably thought would have been solved by now.

But we’re not going to solve it, but I think we can improve it.

And they need to continue to work for improvement.

I want to address one issue, and that’s the recommendation of

the Commission on moving to an actuarially sound crop insurance

program without the risk sharing agreement that now exists between the Federal Government and the private companies. As a

former insurance commissioner in Nebraska, and having been

around the business of insurance all my adult life, when I haven’t

been Governor or Senator, I would say that that would generally

appeal to me.

But there are a couple of concerns that I have. One, are we

aware that doing that and eliminating the subsidy, if you will, or

the risk sharing agreement, could raise the price, the premium, up

to the point where it’s then unavailable to many of the farmers

that we’re trying to protect, as Mr. Campbell points out, that middle group. We don’t want to see the program priced out of the

reach. We don’t want to get adverse selection. We don’t want to see

the program not succeed.

I commend Senators Kerrey, my predecessor, and Roberts, for

their strong work, and Senator Lugar, for working through that,

over the last several years, to make sure that we have a program.

I would be very concerned about anything that would tend to weaken it. As tight as I am about not having the Federal Government

58

involved, inasmuch as I emphasize and support private industry

and the insurance business, I am very concerned about what the

implications are, whether you would have an exit of companies

from this business, whether or not it would be supportive on an actuarial basis. I’d like to say that that could happen, but I question.

Did you spend much time going into that aspect?

Mr. FLINCHBAUGH. Well, Senator, first of all, we recommend a

study of the voucher system. We’re not recommending the voucher

system until it’s studied.

Several factors brought us to that conclusion. Number one, you

just mentioned the bill that Senator Kerrey and Senators Roberts

sponsored and that was finally adopted, just passed. We think it’s

premature to recommend an overhaul when the bill just passed.

We don’t know how well it’s going to work, we hope it works.

So that’s why we thought it was prudent to come up with the

idea of a study. We also think we need to bring more market discipline to the insurance program, enhance competition. So we’re

looking at an alternative program. And I think your questions or

your concerns are certainly valid. And that’s why we recommend

studying the voucher system. We didn’t go any further than that.

We didn’t outline the value of the voucher, etc.

So we certainly share your concerns. But we think we ought to

take a look at a voucher system, and then 3 or 4 years down the

road, when we’ve had a chance to evaluate the Act that was passed

this summer, we’d be prepared.

Senator NELSON of Nebraska. I appreciate it.

Mr. VILLWOCK. Mr. Chairman, just briefly, to your earlier comments to the Commission, and before we take off here, we’ve have

11 people together for 3 years here, and we’ve brought all the kings

horses and all the kings men together to try to give us the silver

bullet to fix farm policy.

We worked without any partisanship. I was very pleased with

this group. I don’t think one time that partisanship raised its head,

that we were thinking along those levels. We had disagreements on

policy and how to get or solve policy. But I don’t think any partisan

views got in our way. And we realize you and the Committee deal

with that. I guess I want to say publicly, I admire the Committee

and their ability in their deliberations to be able to deal with that

and the complexity of farm policy, how difficult it is.

Of course, we didn’t meet with the regularity that you do. But

come together with all of us in good spirit, to try to come with the

silver bullet, to try to come here today and say, do thus and so and

net farm income is solved for producers all across the country, and

we’re going to keep all farmers and every farmer that wants to

farm in business. We couldn’t do it. And we understand that’s difficult for us.

But we also want to say to you, it’s very difficult for you and you

have our respect on a greater level, after going through this process. Because farm policy is very difficult, at best. And I want to say

thank you for your patience and your deliberation and thought on

behalf of American agriculture, that you work trying to fix these

problems that we bring to your attention.

Senator NELSON of Nebraska. Thank you, Mr. Chairman.

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The CHAIRMAN. Well, thank you very much, Senator Nelson, and

thank you very much, Mr. Villwock, for that commendation to the

Committee. I will pass it along to the other members.

I just wanted to touch upon a point that Senator Nelson mentioned with the crop insurance. Clearly, the policy we adopted last

year would not work if it were simply a free market affair. The

idea was for deep subsidy, underlying, very deep, with the thought

that almost every crop that is covered, and every farmer having

that crop, would find value in using the program. We have found

in our hearings, for instance, in my home city of Indiana a couple

of years ago, only 40 percent of farmers had any crop insurance,

even the most basic level. The other 60 percent did not.

Now, as someone who testified indicated that that’s right, they

didn’t have any and they didn’t want any. And essentially we were

off on the wrong course. And as a matter of fact, charged that crop

insurance is specifically very valuable to North Dakota, South Dakota, the plains, other places where people were using it already

in fairly large percentages, found value in doing that, and thus

skewed the policy.

It’s impossible to solve any of these problems in a national sense

with perfect equity, State or county by county, and this is a good

example of that, I think. But in any event, as a Senate, we resolve

to have another safety net. The problem still is one of education.

Many farmers that I visit with do not understand the agatype of

these policies. They need consultants and interpreters and what

have you even to come to grips with the basic aspects of the thing.

And so we all are encouraging them to get that advice, and certainly trying to get supplementary educational material, so that

the policy we adopt, that we thought would help them, will help

them because they will use it. But as Dana said, the jury is still

out on this one. We’re coming into a planting season, we shall see.

But for the moment, that was designed literally to try to bring

about a safety net and to stave off emergencies, disaster payments,

the appropriate committee at the end of the session, this sort of

thing.

The LDP question did not arise in this form, but one question

often arises, why would the price of corn really sort of, at $1.89,

given the LDP, do people continue to produce a lot of it. Many people say, well, you have rocks in your head, the cost for many farmers is less than $1.89. Mr. Swenson and others have testified on

occasion that probably the price of corn for some farmers in production costs more than $1.89. But for a lot of farmers, it’s lower than

that.

So if you have $1.89, why do people produce? Because there are

incentives to do so. The Federal Government almost guarantees

you’re going to get $1.89 for every bushel you can produce, at least

if you have low production costs.

That is not an argument for lowering the LDP. But the fact is,

our policies, whether they be crop insurance, which takes away a

lot of risk, an LDP, which is higher than marginal costs for many

people to produce, for example, are incentives to produce more. If

people are wondering why the rich get richer and the poor get poorer, those two policies help a lot. And so studies indicate furthermore that if you are pretty good in figuring out crop insurance, you

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might also be pretty good as a marketer. You might have a consultant for that. And that large farmers predictably sell their corn for

25 cents more than do small farmers because of marketing expertise.

So once again, this is compounded. We’ve got an interesting debate today, who should these payments really go to? And the Commission has said, no limits. And Senator Roberts suggested that’s

exactly right. Senator Harkin is more skeptical. But the fact is that

the payments to go where the production is. If the 8 percent of the

farmers do 72 percent of the business, predict that about three

quarters are there.

Now, you can say, the fact that you’re big doesn’t mean you’re

necessarily profitable. You may be running it very badly. There are

always people in life who do big things badly. But on the other

hand, that’s not a lead pipe sense. It occurs to be the other way

around frequently.

So here this Committee has this kind of a problem. We’re paying

a lot of money in very different sorts of ways to the beneficiaries,

it’s fairly clear. But then Mr. Paige raises a very important point,

and that is, what about 18,000 to 19,000 minority farmers in America with just 2 million acres? Where do they fit into this situation?

And that’s a very important question. And I’m not certain any of

us have a very good solution.

But you suggested a reasonably good one, that is the small farms

commission, the emphasis upon trying to really zero in on particular situations. That’s the only way I can think of, and will be much

more sensitive. The Commission as a whole has mentioned the

small farmers commission, and Mr. Paige has outlined that, it

seems to me, today, in ways that are very important.

But these are all situations that your report has brought to our

attention. You quite correctly said you could not solve or even take

up in detail everything. But you have covered a lot. And the charts

and the data that you have, they are subject to all of us to interpret, to try to be more thoughtful in raising further questions.

Now, at the end of the day, we have some intractable problems,

and you were brave enough to touch upon those. The sugar program, for example, an unmitigated disaster, in my judgment. But

that’s simply an editorial comment. And that is sort of one of a

kind. I’ve been trying to offer reforms for the peanut program for

24 years. I served on the committee 2 or 3 years, it had some success. Most years we did not.

Tobacco, a case all by itself that’s sort of being dealt with generally in other committees, other issues sort of tangentially impinging upon our own. Dairy in vast change. In my State, a remarkable

dairy operation in the northern part of the State, I visited there at

some length this summer. Probably 18,000 cows, and an operation

that has no relationship to the dairy program at all, or any aspect

of this Farm Bill.

But it is juxtaposed to herds with a father and son of 60 cows,

100 cows, people trying to decide, do we stay in the business, what

kind of support is required for us to handle this. And all these

things exist in our own constituency, side by side, arguing with

each other, quite apart from this Committee in a general way. So

we are cognizant of each of these special things that you mentioned

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that have really important implications for a lot of lives and communities.

But I thank you again, I thank you for your patience. You’ve

been stalwart to last almost 4 hours through one of our Committee

hearings, and we will have many more, and we hope that you will

contribute as you can.

Thank you very much, and the hearing is adjourned.

[Whereupon, at 12:40, the committee was adjourned, to reconvene at the call of the Chair.]

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DOCUMENTS SUBMITTED FOR THE RECORD

JANUARY 30, 2001

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Æ