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82–204 PDF 2002

S. HRG. 107–714

THE NEW FEDERAL FARM BILL: FEED GRAINS

AND OIL SEEDS

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

JULY 12, 2001

Printed for the use of the

Committee on Agriculture, Nutrition, and Forestry

(

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

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont

KENT CONRAD, North Dakota

THOMAS A. DASCHLE, South Dakota

MAX BAUCUS, Montana

BLANCHE L. LINCOLN, Arkansas

ZELL MILLER, Georgia

DEBBIE A. STABENOW, Michigan

BEN NELSON, Nebraska

MARK DAYTON, Minnesota

PAUL DAVID WELLSTONE, Minnesota

RICHARD G. LUGAR, Indiana

JESSE HELMS, North Carolina

THAD COCHRAN, Mississippi

MITCH MCCONNELL, Kentucky

PAT ROBERTS, Kansas

PETER G. FITZGERALD, Illinois

CRAIG THOMAS, Wyoming

WAYNE ALLARD, Colorado

TIM HUTCHINSON, Arkansas

MICHEAL D. CRAPO, Idaho

MARK HALVERSON, Staff Director/Chief Counsel

DAVID L. JOHNSON, Chief Counsel for the Minority

ROBERT E. STURM, Chief Clerk

KEITH LUSE, Staff Director for the Minority

(II)

(III)

C O N T E N T S

Page

HEARING(S):

The New Federal Farm Bill: Feed Grains and Oil Seeds ..................................... 01

Thursday, July 12, 2001

STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee on

Agriculture, Nutrition, and Forestry .................................................................. 01

WITNESSES

Anderson, Tony, President, American Soybean Association, Mount Sterling,

Ohio ....................................................................................................................... 09

Evans, Trudi, President, Barley Growers Association, Merrill, Oregon ............. 14

Dittrich, Keith, President, American Corn Growers Association, Tilden,

Nebraska ............................................................................................................... 06

Klein, Lee, President, National Corn Growers Association, Battle Creek,

Nebraska ............................................................................................................... 03

Kubecka, Bill, Vice President for Legislation, Sorghum Growers Association,

Palacios, Texas ..................................................................................................... 16

Miller, John, President, Miller Milling, Minneapolis, Minnesota ........................ 12

APPENDIX

PREPARED STATEMENTS:

Anderson, Tony ................................................................................................. 87

Evans, Trudi ..................................................................................................... 110

Dittrich, Keith ................................................................................................... 75

Klein, Lee .......................................................................................................... 46

Kubecka, Bill ..................................................................................................... 115

Miller, John ....................................................................................................... 95

DOCUMENT(S) SUBMITTED FOR THE RECORD:

American Corn Growers Association: The Family Farm Agriculture

Recovery & Maintenance Act ....................................................................... 148

dtp associates, llp, to The National Corn Growers Association; Re:

Counter-Cyclical Safety Net Programs and WTO Obligations .................. 138

World Perspectives, Inc., on behalf of member clients in: Coalition for

a Competitive Food and Agricultural System; Re: Farm Policies to

Preserve a Competitive U.S. Agriculture .................................................... 161

(1)

HEARING ON THE NEW FEDERAL FARM BILL:

FEED GRAINS AND OIL SEEDS

THURSDAY, JULY 12, 2001

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

The Committee met, pursuant to notice, at 9:40 a.m., in room

RS–328A, Russell Senate Office Building, Hon. Tom Harkin,

[Chairman of the Committee], presiding.

Present or submitting a statement: Senators Harkin, Stabenow,

Nelson, Wellstone, Lugar, and Roberts.

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

IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

The CHAIRMAN. The committee will now resume its seating for

the continuation of hearings on the new Federal Farm bill, and I

would ask the following people to take the witness table: Lee Klein,

president of the National Corn Growers Association; Keith Dittrich,

president of the American Corn Growers Association; Tony Anderson, president of the American Soybean Association; John Miller,

president of Miller Milling; Trudi Evans, president of the Barley

Growers Association; Bill Kubecka, vice president for legislation of

the Sorghum Growers Association. We will get you all up here at

the witness table.

Today, the committee continues to consider in detail what

changes should be made to the various titles of the Farm bill.

Again, just speaking for myself, my aim and I hope others’ is to develop policies that will help farmers get more of the consumer dollar than they are getting right now, which is at an historic low.

While, obviously, fixing the commodity programs is crucial to many

farmers’ future prospects, other titles of the Farm bill are also important, as well as the wellbeing of farmers who raise livestock or

grow crops other than those currently eligible for direct payments.

The Farm bill also impacts the lives of many others not directly

engaged in production agriculture through the nutrition programs,

conservation of natural resources, provisions which encourage rural

development. The views of representatives of those groups will also

be solicited as we move through the hearing schedule. As I indicated in my statement in the previous hearing, I am determined

that we will pay attention to all titles of the Farm bill as we work

through the Farm bill process.

As is the case for most crops grown in this country, prices for

corn and soybeans and other feed grains and oil seeds have fallen

2

far from their mid-1990’s peaks and have stagnated at relatively

low levels for the past 3–1/2 years. Today, we will hear from witnesses who represent the interests of the producers and processors

of feed grains and oil seeds. Their output accounts for about a third

of the nation’s gross receipts for crop production and a similar

share of U.S. ag exports.

Of course, I am always proud to note that farmers in my home

state of Iowa remain among the nation’s leaders in both corn and

soybean production. Although this hearing clearly has a commodity

focus, I have invited witnesses to address all other issues of concern, whether or not a given issue falls within the purview of the

commodity title. Clearly, supply continues to outstrip demand, both

within the United States and globally. Until something happens

that alters one or both of those components, prices will continue to

remain low.

Beyond the programs that would be contained in the commodity

or conservation titles, however, it is crucial that we devote more of

our attention to looking at ways to generate greater utilization of

our crops domestically. For example, the single fastest growing use

of corn in this country is the production of ethanol. I believe that

we are only beginning to tap the potential for using grains and oil

seeds for energy production. To the extent that we encourage such

activities, we would also create opportunities for farmers to capture

additional income, and I believe that such an initiative is so important that it deserves its own title in the Farm bill.

Typically, we export about a fifth of our feed grains and about

40 percent of our soybeans, either as raw or as product. An increasing portion of our feed grains and oil seeds are also being exported

indirectly because of growth of our exports of meat and livestock

products. We will also need to look at how well our current set of

agricultural trade programs are performing and also consider what

else might be done in this area.

I am determined to include in the Farm bill provisions establishing a permanent authority and funding for an international food

for education program, a bill that has been introduced with Senator

Leahy and Senator Lugar, myself and others in late May. I am convinced that such a program would be a winner, both for American

farmers and for children and their families in developing countries.

I look forward to the testimony from the witnesses as they address

these issues and doubtless many other issues as we move through

the progress of developing the Farm bill.

With that, I would turn to Senator Lugar for any opening statement.

Senator LUGAR. Thank you very much, Mr. Chairman. I would

affirm your statement. We look forward to ideas from the panel

today, and from a pre-reading of your testimony, there are a number that are very important. It is a timely hearing, and I look forward to hearing the witnesses.

The CHAIRMAN. Thank you very much, Senator Lugar. Now, we

will turn—I have my lineup here—to Mr. Klein.

3

STATEMENT OF LEE KLEIN, PRESIDENT, NATIONAL CORN

GROWERS ASSOCIATION, BATTLE CREEK, NEBRASKA;

ACCOMPANIED BY RON LITTERER, GREENE, IOWA

Mr. KLEIN. Good morning.

The CHAIRMAN. Mr. Lee Klein; good to see you again. I was just

with you down in Texas not too long ago.

Mr. KLEIN. That is correct.

The CHAIRMAN. Good to see you again, and welcome to the committee. All of your statements will be made a part of the record in

their entirety. I would like to ask if you could each summarize your

statements in seven minutes or something like that. Just give us

a kind of wrapup, and then, we will come back, and I am sure you

can expound on your summaries during the question period. I

would appreciate that.

Mr. Klein, welcome.

Mr. KLEIN. Thank you, Mr. Chairman, for the opportunity

totestify here today about the farm economy and the future of farm

policy. My name is Lee Klein, and I serve as president of the National Corn Growers Association, representing more than 31,000 direct members and the 300,000 corn farmers throughout the Nation

who make checkoff payments each year. I am joined today by Ron

Litterer of Greene, Iowa. Mr. Litterer serves as vice-chair of our

Public Policy Action Team, which is our internal working committee working on farm programs.

Ron is also past-president of the Iowa Corn Growers Association.

He raises corn and soybeans along with a hog finishing operation.

I farm near Battle Creek in northeast Nebraska. My wife and I

raise corn, seed corn, soybeans, rye, alfalfa and hay and have a

cow-calf operation. We are proud to represent two different corngrowing states yet speak with one voice.

What does NCGA want from the next Farm bill? Simply, our

growers want a farm program that ensures America’s farmers are

globally competitive; market-responsive; and environmentally responsible. This program must provide producers with access to

world markets, access to capital, access to advances in technology

and risk management in a sustainable and an environmentally

sound manner. It is our goal to develop new uses for corn; to develop and build a renewable products industry with corn as the

chief feed stock; to increase utilization of corn and to increase the

opportunity for grower profits.

We need a complete package that provides farmers with opportunities in the marketplace with minimal interference in production

decisions that includes a safety net against those economic forces

that are beyond producers’ control. We believe that we have developed a program that will do just that. In hindsight, the 1996 FAIR

Act provided farmers with many of the tools we are looking for, but

it was short-sighted in its ability to provide a safety net that would

be sufficient in times of sustained low farm income. It does not include a provision to allow producers to weather, for example, the

Asian flu that seemed to infect many of our international customers.

After three years of low prices and needed bailouts by the U.S. Congress totaling over $19 billion, we now know that an additional

component is vitally needed. Improving that safety net for future

4

farm policy while maintaining the best of freedom to farm is at the

core of our presentation today. After weighing all of the needs and

concerns of growers outlined in our full testimony, NCGA has surfaced as committed to a comprehensive, countercyclical income support proposal. This proposal, known as the National Agriculture Security Act, or NASA, addresses the inequities in the current Marketing Assistance Loan Program; puts U.S. agricultural supports in

the more favorable green box and is fiscally responsible.

The countercyclical program that we have developed replaces the

current Marketing Assistance Loan Program. We have worked with

economists to flesh out the total impact of this type of program on

the corn industry as well as other commodities and are very confident and pleased with the results. Our proposal establishes an

annual target income for corn and other loan-eligible commodities.

The target income, which is outlined on page 12 of our full testimony, is based on the average crop value during the base period

and incorporates producer benefits from the Marketing Loan Program and the market loss assistance payments over that same

timeframe.

This base period average income is adjusted for each year of the

Farm bill by a factor that reflects projected production increases.

This adjustment is necessary to ensure that producers have adequate income production as crop yields increase. In addition to a

countercyclical program, our NASA program proposal assumes a

continuation of production flexibility contract or PFC payments at

the 2002 level for the life of the new Farm bill. Consequently, the

PFC payments are not included in target income.

The growers’ portion of the countercyclical payment would be

then based on eligible units from a 5-year average of acreage and

yields production. This would allow growers to update bases and

yields for the countercyclical program to a more recent practice-reflective yield in planning levels. Each year, crop income will be calculated using USDA production estimates and the average price

during the first three months of each commodity marketing year.

For corn and other commodities with a marketing year that begins

September 1, the 3-month price will be the preliminary estimate as

determined by the National Agricultural Statistics Service.

A 3-month price allows payments to be calculated and made

when they are most needed by farmers. We would anticipate that

this would allow farmers to have the option of receiving these payments either prior to or after December 31 of each year for optimal

tax management. Whenever the national crop income is less than

the target income, producers will receive a payment based on their

eligible bushels. We think a farm program with this structure has

many benefits. It eliminates the 30-year problem of inequity within

loan rates. It is non-production distorting. It is non-trade distorting, and it provides payments when needed to those who need it

and pulls valuable and needed funds from the amber box into the

exempt category.

Chart B on our page 15 demonstrates how our proposal would

fare compare to CBO-like baseline. As the chart demonstrates, this

program would provide $31 billion more in assistance over that 7-

year period than current CBO-like baseline estimates, an average

of $5.2 billion more per year without the necessity of ad hoc disasVerDate 11-MAY-2000 14:17 Nov 08, 2002 Jkt 082204 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 82204.TXT SAG1 PsN: SAG1
5

ter assistance. We clearly demonstrate a need for an increase in

the agricultural budget baseline. This need is justified. When you

look at this program, may be a better use of taxpayer dollars in the

long run.

We believe that our countercyclical program proposal is a safety

net that eluded us in the 1996 bill. We asked the agricultural economics consulting firm Agrilogic to run this countercyclical program on a both CBO-like baseline and their own baseline, which

allows for more volatility and fluctuation in the market and in production. This has allowed us to analyze this proposal under alternative conditions and to test the sensitivity of our proposal to ensure that we have developed a farm policy proposal that is responsive to the changing conditions in weather, production, macroeconomic policy and foreign trade policies.

We ran many scenarios under both CBO-like and Agrilogic baseline. Under all the options run, the economic models demonstrate

that this program will provide assistance when needed without further Congressional action.

While the countercyclical proposal will assure grower income in

times of low prices in amounts comparable to current marketing

loan benefits, it will not address our goal of a policy that provides

access to capital, which is why we propose recourse loans as part

of this program. Recourse loans will provide producers with access

to capital but should not encourage production. Since a producer

will be required to repay the loan plus interest at the end of the

9-month loan program, we view this as only assisting with access

to capital for short-term cash-flow.

Our NASA program strengthens the farm safety net by providing

a more predictable level of income. This program has two roles. It

serves as a safety net with crop insurance that facilitates the ability of farmers to effectively manage their individual annual production risk in the private sector, and it provides a safety net to the

equity base of U.S. farm production in a cost-effective, private-public partnership that maintains the soundness of the agricultural

production system for the benefit of U.S. consumers and the national economy.

In conclusion, we believe that we have identified very real problems with today’s farm policy and proposed a policy that we believe

addresses them. We also contend that this policy proposal is both

less production and trade distorting than current policy and offers

this country’s farmers a real safety net when it is needed most. In

conclusion, we must all recognize, and I hope you agree, that there

is a significant and important public benefit in the food security,

wholesomeness and integrity of production resulting from the tremendously efficient food and fiber production machine of America’s

production agriculture sector.

Of equal value and importance to our nation is the economic viability and activity of rural communities and the work ethic, integrity and commitment to community fostered in the domestic food

production sector of our economy. In a global market, an economy

distorted at its best by world political pressures and non-production-related economic factors such as exchange rates, there is a significant public interest and need to protect the viability of agricultural producers in a manner that is market-oriented, WTO-compliVerDate 11-MAY-2000 14:17 Nov 08, 2002 Jkt 082204 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 82204.TXT SAG1 PsN: SAG1
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ant and environmentally responsible and responsive to the vast

geographical and economical differences faced by our rural farm

families and corn grower members.

Thank you for the opportunity to share the National Corn Growers’ vision in this important effort.

[The prepared statement of Mr. Klein can be found in the appendix on page 46.]

The CHAIRMAN. OK. Thank you very much, Lee, for a great summation of a very long and complex written statement. I can just

say to you and say to the other ones, too, that we are going to be

in further consultation and in conversation with you as we go along

in this Farm bill.

Mr. Dittrich, American Corn Growers Association, welcome.

STATEMENT OF KEITH DITTRICH, PRESIDENT, AMERICAN

CORN GROWERS ASSOCIATION, TILDEN, NEBRASKA

Mr. DITTRICH. Thank you, Chairman Harkin and Senator Lugar

and other members of the committee. I am Keith Dittrich. I am

president of the American Corn Growers Association. Seated with

me behind me today is Larry Mitchell, our Washington-based chief

executive officer, and David Center, our director of Congressional

affairs.

I would like to say that this day has been a long time coming

for the American Corn Growers Association. As you may know, we

were denied testimony in the House even though our proposal that

we did submit we believed was the most broad-based comprehensive proposal that was submitted. Again, I thank you for our time

today and do appreciate it.

We represent producers from 50 to 15,000 acres in size, and they

all have one thing in common: they need a fair price for what they

produce. The American Corn Growers Association is a relatively

new and rapidly growing organization for a reason. We have new

ideas that make bridges with other organizations and varied interests.

I would like to say also to Mr. Klein, that although I, as a producer, have paid checkoff fees on over 2 million bushels of grain in

the last 10 years in my farm operation, respectfully, he does not

represent my interests in farm policy.

Going on to our proposal, I would like to say that our proposal

is much different than other farm policy and different than current

farm policy, and there are many inequities in the current farm policy structure with the AMTA payments going to producers with antiquated crop bases and varied production programs which have

made this program very difficult and unfair in many ways. We look

forward to working with the committee on improving the system

and trying to rectify some of these problems.

I would first like to say that in September 1999, we developed

a chart called Key Indicators of the U.S. Farm Sector, a 25-year

history with inflation adjustments. The specifics of our bill were

then based on this research in the key indicators table that is attached to my testimony. I would like to touch very briefly on several of the key points that the key indicators covered. No. 1 is that

real inflation-adjusted CCC price support loan rates have dropped

dramatically over the past 25 years, and real farm prices have

7

dropped in a similar matter. Second, on average, export volume of

all major commodities has been virtually static over the last 25

years. Regardless of farm price, support policy, trade agreements or

currency valuations, they have remained static. That is the reality.

Another point is that on the other hand, our domestic use of commodities has increased steadily over the last 25 years very substantially, and No. 5 is that total use of commodities is now at all-time

record highs and did not decline during the Asian economic crisis,

as has been mentioned today.

In spite of this, farm prices have collapsed, and on a historical

basis, ending stocks to use ratios or surpluses are now tight to

modest and have not been high during the five years of the Freedom to Farm Act as we have all talked about. In spite of increasing

yields and government payments, real gross income per acre for

basic commodities has dropped 40 to 50 percent over the past 25

years. Finally, with emergency AMTA payments included, farmers

have received a national average equivalent price of over $2.60 a

bushel for corn and over $4 a bushel for wheat for the past five

years.

I would like to say that these observations are simply the facts.

This is what we concluded after compiling this data of 25 years of

history. If this has happened, where do we go from here in farm

policy? I would just like to touch on a few points of our Family

Farm Act to mention what we are interested in.

I would say that the overall goal of our bill is to give farmers

tools to extract profitable farm prices from the marketplace with

much less reliance on government payments. If we do not give

farmers tools to increase prices, we will run far short of the money

required to just maintain current income levels, which are still inadequate, given the current budget restraints.

The first part of our legislative bill will contain a section called

the findings of Congress, which is included in our testimony. The

intent of this section is to define by law why a decentralized, competitive family farm structure of food production is desirable to society and also to define why the business of farming is unique and

why long-term legislation is required to allow family farm agriculture to prosper.

We believe that this family farm structure is desirable to society

as a whole and also as a national security issue. I would like to

touch on a few reasons why we believe it is unique. First, that

farmers have virtually no ability to negotiate price with buyers.

That is because millions of farmers sell to a handful of buyers,

which is the reverse of most business structures in this country.

Second, farmers as individuals have no control over their output or

inventories due to weather, long production cycles and all of the vagaries of agricultural production. Third and very importantly is

that consumers must have a stable supply of food, because it is a

daily necessity, and food shortages are intolerable. Think of the

chaos that the California energy crisis and rolling outages has

caused, and think of that if food was involved.

I would like to touch on the outline of our bill quickly. Concerning price and income support, we propose a new, unique CCC market participation loan which would provide the primary price and

income support to crop producers only. We believe that the definiVerDate 11-MAY-2000 14:17 Nov 08, 2002 Jkt 082204 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 82204.TXT SAG1 PsN: SAG1
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tion of countercyclical is the loan rate. The loan structure is fair

and simple and an easily targeted way to support family farmers.

We base our loan rates on an agricultural equity formula, which

would be established. To set loan rates, we would adjust the loan

rates annually to reflect inflation and tread line increases in yield.

Initial loan rates, therefore, would be about $3.15 a bushel for corn.

When considering this level, keep in mind that with current AMTA

payments, supplemental AMTA payments and loan deficiency payments and market loss gains, we have been averaging the equivalent of about $2.60 a bushel for corn right now, and we are still

facing an economic crisis in farm country. This is also very close

to USDA’s average cost of production figures for corn.

Other crop loan rates would be set at historical price ratios. I

would like to mention also that this Farm bill proposal is very comprehensive. We are not just focusing on corn; we are looking at all

of the other aspects in agriculture and trying to pull those interests

together.

We also support a farmer-owned reserve. This farmer-owned reserve could also be working hand-in-hand with the strategic energy

reserve to protect the interests of the ethanol and fuel industry and

make sure that we do not ever run out of commodities for that. We

would support discretionary Secretarial authority for short-term

acreage idling. We say that Generals all use supply management:

GE, General Dynamics, General Foods and General Motors all use

some sort of supply management. Although our proposal is primarily a free stocks management program, we believe that free

stocks can be managed in a wide range and still maintain market

price if the right tools are available. We would maintain planning

flexibility, and a target price and deficiency payment program

would be studied for livestock also as detailed in this proposal.

Concerning market concentration, we would establish a maximum level of market concentration for any food-related or processing company. We suggest that one company hold no more than 15

percent of any related market. Finally, on international trade, we

believe that trade agreements should recognize the uniqueness of

agriculture around the world and should instead focus on a shared

system of international food reserves for food security and humanitarian relief and shared production costs by exporting nations when

world grain stocks become burdensome and finally the recognition

and limiting of world market distortions caused by anticompetitive

commodity trading and food processing companies.

In conclusion, considering cost, we believe that our proposals can

be enacted and administered with reasonable government outlays.

The Agricultural Policy Analysis Center at the University of Tennessee has provided preliminary numbers to us. These simulations

indicate that we can maintain farm prices in ranges that result in

modest Government costs using our farm bill proposal. Concerning

trade rules compliance, Secretary Veneman and USDA have classified 1998 supplemental AMTA payments as amber box for WTO

compliance purposes. This means that virtually any action taken

by the U.S. to protect its farmers could be in violation of current

WTO rules. Can we realistically protect our national interest under

such rigid and unrealistic rules?

9

Finally, we hope that the Agriculture Committee recognizes that

based on the facts, current farm policy is not working, though

many well-meaning members were assured that it would. We believe that it is unreasonable to expect different results in the future

if we do not change direction, and we believe that it is unrealistic

to expect good farm policy advice from those who misadvised Congress so badly in current farm policy. We wish to work with this

esteemed committee to complete a farm bill that fulfills the needs

of this great nation, and I wish again to thank the committee for

this opportunity and would answer any questions that you may

have.

[The prepared statement of Mr. Dittrich can be found in the appendix on page 75.]

The CHAIRMAN. Mr. Dittrich, thank you very much again for a

very good summation of a long written statement, and as I said to

the other witness, we will be, I am sure, following up with our

questions. As we proceed in the Farm bill, we will look for your further input and advice and suggestions as we move ahead.

Mr. DITTRICH. Thank you.

The CHAIRMAN. Next, we turn to Mr. Anderson, Tony Anderson,

president of the American Soybean Association. Welcome.

STATEMENT OF TONY ANDERSON, PRESIDENT, AMERICAN

SOYBEAN ASSOCIATION, MOUNT STERLING, OHIO

Mr. ANDERSON. Thank you. Good morning, Mr. Chairman and

members of the committee. I am Tony Anderson, a soybean and

corn farmer from Mount Sterling, Ohio. I serve as president of the

American Soybean Association, representing 28,000 producer members on issues of national importance to all U.S. soybean farmers.

In additional to the American Soybean Association today, I am appearing on behalf of the National Sunflower Association and the

U.S. Canola Association.

I would like to commend you, Mr. Chairman, for holding this

hearing today on policy priorities for the next Farm bill. Oil seed

producer organizations look forward to working closely with the

committee to develop legislation that maximizes the competitiveness and future opportunities for U.S. agriculture. As committee

members are aware, the fiscal year 2002 budget resolution provides

an additional $73.5 billion over the next 10 years for development

of omnibus agriculture legislation. However, $66.15 billion of this

amount represents a reserve fund that could be reduced if projected

budget surpluses are depleted by a downturn in the economic conditions or spending in other programs.

With estimates of that anticipated budget surplus already declining, it is important that Congress enact a new farm bill without

delay. Before describing our specific recommendations, I would like

to briefly outline the basic policy objectives that oil seed producers

have established for the next Farm bill.

The authors of the FAIR Act did not expect U.S. agricultural

economy transition from government dependence to market orientation solely as a result of changes in domestic farm policy. They

made clear that the overall economic and trade environment of

U.S. agriculture needed to be changed to reduce production costs

and enhance the competitiveness of U.S. farm exports. Those reVerDate 11-MAY-2000 14:17 Nov 08, 2002 Jkt 082204 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 82204.TXT SAG1 PsN: SAG1
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quired changes included agricultural trade being given the same

weight in U.S. economic and foreign policy decisions as accorded by

our primary international competitors and customers; export assistance and promotion programs authorized by the WTO must be fully

and aggressively utilized as our competitors do.

Ineffective, unilateral economic sanctions that discredit our reliability as a supplier and encourage competitors to expand production and exports must be rescinded and prohibited. Funding for the

U.S. humanitarian assistance programs must be increased and

maintained at a level that reflects our responsibility to enhance societal, economic, political stability in developing countries. An effective case must be made for modernizing the U.S. transportation infrastructure, including the lock and dam systems on the Mississippi and Illinois Rivers. Barriers to U.S. farm exports based on

non-scientific standards, including restrictions on biotechnology

trade, must be challenged and overcome. Funding for agricultural

research must be restored and increased. Unnecessarily onerous

regulations that increase agricultural production costs must either

be compensated or eliminated.

Unfortunately, few of these needed changes in economic environment for production agriculture have been addressed, much less

achieved, in the last five years. Unless these key issues are resolved, it will be difficult if not impossible to move farm policy beyond the role of a safety net for producers facing disadvantageous

conditions, both at home and abroad. Oil seed organizations also

support the following objectives in the next Farm bill: domestic

farm programs should be equitable and balanced among program

crops, defined as all loan-eligible crops that can be planted on the

same crop land on a farm. No program should favor production of

one crop over another.

The primary objective of the next Farm bill is to provide adequate long-term price and income support for producers of program

crops and other crops that have traditionally received multi-year

support under Federal farm programs. To the extent additional

funding is available, other priorities that are appropriate for omnibus farm legislation should be addressed. Additional priorities include providing voluntary incentive payments to encourage improved conservation practices. ASA helped develop and strongly

supports the Conservation Security Act as a means to raise conservation standards. However, incentives provided under the CSA

should not come at the expense of price and income supports.

Other priorities also include increased funding of export promotion and assistance programs and of foreign food assistance.

Food aid should be based on a minimal annual tonnage commitment, which should not be subject to variations in production and

availability of surpluses. Programs established under the omnibus

farm legislation provide multiyear support to crops that are either

produced on the same acreage or that have traditionally received

support. These crops are also required to comply with conservation

measures, including sodbuster and swampbuster requirements.

Crops that do not meet these criteria should not be included in the

next Farm bill. Any assistance required by producers of these crops

due to economic or crop losses should continue to be addressed in

annual disaster legislation.

11

With regard to domestic farm programs, oil seed organizations

support maintaining key elements of the FAIR Act in the next

Farm bill. These include full and unrestricted planning flexibility;

continuation of non-recourse marketing loans; no statutory authority to impose setasides and no authority to establish Government

or farmer-owned reserves for oil seeds. In addition, oil seed producer organizations oppose any limitations on marketing loan benefits, fixed-income payments or any kind of countercyclical income

payments.

I would now like to briefly summarize recommendations on the

various components of a domestic farm program for major commodities. Oil seed producer organizations support maintaining current

oil seed loan rates for the 2002 crops and setting these rates as

floors rather than ceilings under the next Farm bill. The formula

for adjusting loan levels to 85 percent of Olympic average prices in

the previous five years should be retained, and the discretion

should be provided to the Secretary to set loan levels above the

floor when prices warrant.

Our written statement provides a number of compelling reasons why the current national soybean loan rate of $5.26 a bushel has

not been responsible for most of the expansion in the U.S. soybean

acreage since enactment of the FAIR Act. With regard to loan repayment rates, our organization supports requiring oil seeds to be

repaid at the lower of a posted county price or an adjusted world

price. The adjusted world price would be set on a weekly basis in

reference to index of prices of oil seeds delivered at major foreign

markets, including freight costs.

Using an adjusted world price would ensure that U.S. oil seeds

and oil seed products are competitive in both foreign and domestic

markets under the next Farm bill. Oil seeds are not included in the

formula for determining payments under the production flexibility

contracts. Oil seeds were grown on 31 percent of row crop acreage

last year, and the percentage is likely to rise when the final crop

is know for 2001. Our organizations strongly support expanding the

PFC program to include oil seeds.

Oil seed producer organizations support replacing ad hoc economic loss assistance payments, which have included an oil seed

payment, with a countercyclical income support program. We propose a program that would offset any shortfall in national gross return per acre for a crop in the current year from an Olympic average national gross return per acre for the crop years during 1993

to 1997. The concept of compensating producers for low income

based on acres complements the Marketing Loan Program under

which benefits are tied to actual production. It also addresses a perennial shortcoming in the Federal crop insurance program. Every

year, many producers experience losses due to below average yields

but not low enough to qualify for compensation under crop insurance. This low yield gap in income support would be at least partially offset by providing payments based on harvested acres rather

than actual production.

Additionally, ASA supports increased funding of export assistance, market development and food aid programs that are critical

to expanding demand and improving commodity prices. The Foreign Market Development Program should be authorized at not less

12

than $43.25 million annually, reflecting 1986 program level indexed to international inflation rates over the past 15 years. The

Market Access Program should be restored to its previous funding

level of $200 million a year.

Regarding food aid, a commitment should be made to provide a

minimum of 5.6 million tons of food per year under U.S. humanitarian assistance programs to address market access, regulatory

and marketing issues in agricultural biotechnology. ASA recommends establishment of a new biotechnology and agricultural

trade program.

That would conclude my statements. Again, I appreciate the opportunity to testify today and appreciate the hearing.

Thank you.

[The prepared statement of Mr. Anderson can be found in the appendix on page 87.]

The CHAIRMAN. Thank you very much, Mr. Anderson. Again, we

welcome your continued involvement, suggestions and advice as we

continue development of the Farm bill.

Next, we turn to Mr. John Miller, president of Miller Milling in

Minneapolis. Mr. Miller, welcome.

STATEMENT OF JOHN MILLER, PRESIDENT, MILLER MILLING,

MINNEAPOLIS, MINNESOTA

Mr. MILLER. Good morning. I am John C. Miller, president of

Miller Milling Company. My company is headquartered in Minneapolis, Minnesota, with U.S. plants in Fresno, California and

Winchester, Virginia. Today, I am representing the Coalition for a

Competitive Food and Agricultural System, of which Miller Milling

is a member. CCFAS is comprised of more than 120 companies and

organizations representing a broad range of agricultural interests.

We are committed to working for market-based policies designed to

benefit all 21 million people working in the U.S. food and agriculture industries.

First, I would like to briefly summarize the strengths and weaknesses of the current law. The FAIR Act gives producers freedom

of choice and allows them to respond to market signals while providing income support to farmers. These are positive things that

should be continued in any new legislation. However, income support payments have not been completely decoupled from production. The current Marketing Loan Program distorts farmers’ planning decisions by making some crops more profitable than other

crops due to Government payments.

As Congress debates the next Farm bill, there are some fundamental policies that should not be changed. CCFAS recommends

keeping the following features with some modifications: first, continue PFC payments for current commodities and add a direct payment for oil seeds. PFC payments should continue to be decoupled

from actual plantings. Payments should be based upon existing

contract acres for the grains and cotton and the most recent 3-year

planted acres for oil seeds. The additional payment acreage for oil

seeds should not reduce payment acreage for grains and cotton.

Second, continue the Marketing Loan Program but allow loan

rates to adjust to changes in average market prices by eliminating

the discretion of the Secretary to freeze loan rates. Utilize the curVerDate 11-MAY-2000 14:17 Nov 08, 2002 Jkt 082204 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 82204.TXT SAG1 PsN: SAG1
13

rent formula of 85 percent of the 5-year average market price excluding the high and low years but limit the yearly adjustment up

or down to no more than 10 percent. Third, continue flexibility provisions that allow producers to increase income by planting crops

that receive more returns from the market and encourage soil conservation practices.

We oppose the inclusion of the following features: do not add any

supply management features in any form to current policy. Do not

create new inventory management programs such as a farmerowned reserve, energy reserves or hunger reserves, and do not add

any new countercyclical payment program. The Marketing Loan

Program is a countercyclical program with loan deficiency payments and gains on marketing loans increasing or decreasing as

market prices change.

In order to put these recommendations to the test, CCFAS commissioned a study by World Perspectives Agrilogic, Incorporated to

look at several policy proposals now under consideration by Congress. The analysis compares a policy of all direct payments; one

of direct payments combined with flexible loan rates; and a third

policy in which direct payments are eliminated, and existing loan

rates are subjected to a one-time increase of 16 percent and maintained at that level throughout the analytical period.

The third policy stimulates the guaranteed rate of return proposed in most countercyclical programs. Overall, the analysis

shows that a policy of all direct payments or direct payments combined with flexible loan rates provides farmers with the highest net

farm income delivered in the most efficient manner and least distorting manner. In stark contrast is the high loan rate policy that

results in lower average annual net farm income and generally

lower average farm prices.

The high loan rates are driving the planting decisions of farmers

as much or moreso than market signals. Farmers actually receive

more money from the market when loan rates are lower. CCFAS

believes that a policy based on all direct payments or one based on

a formula loan plus direct payment is the best and most efficient

way to deliver support to farmers because it provides a more efficient means of enhancing farm income with farmers receiving more

profits from the market; high loan rates induce excess production,

depress prices and increase government outlays.

It ensures that U.S. agriculture remains competitive in world

markets. Decoupled direct payments are green box, ensuring compliance with our WTO obligations. In addition, we hope that the

committee will continue to press for liberalized world trade, including granting trade promotion authority; promote environmental

policies that reward sound stewardship; assist farmers in managing their risks; support development of a sensible energy policy and

increase public investment in research and infrastructure.

Our core belief is that market forces do a better job than government in rewarding efficiency; encouraging productivity; managing

risks; allocating resources; and maximizing net farm income.

Again, thank you for the opportunity to testify today and present

the analysis and recommendations of the Coalition for a Competitive Food and Agricultural System.

14

[The prepared statement of Mr. Miller can be found in the appendix on page 95.]

The CHAIRMAN. Mr. Miller, thank you very much, and again, we

will be continuing our consultation as we move ahead.

Next, we turn to Trudi Evans, president of the Barley Growers

Association.

STATEMENT OF TRUDI EVANS, PRESIDENT, BARLEY GROWERS

ASSOCIATION, MERRILL, OREGON

Ms. EVANS. Thank you.

The CHAIRMAN. Ms. Evans.

Ms. EVANS. Mr. Chairman, it is a privilege to address this committee on the U.S. farm policy and how it affects our nation’s barley producers. I am Trudi Evans, a farmer from Merrill, Oregon

and president of the National Barley Growers Association. The National Barley Growers Association represents the interests of U.S.

barley producers on all issues affecting national agricultural policies.

Barley has become an endangered commodity in the United

States. Barley acres and production have steadily declined from 13

million to 5.8 million over the course of the last 15 years. Barley

production in 1999 reached a 25-year low, and acreage was the lowest in 100 years. Barley is a food crop as well as a feed grain. Currently, about one-half of U.S. barley production is used for malting.

Malting companies pay a premium for this high-quality barley.

Even with the premium price, however, malt barley production is

decreasing due to higher loan rates for other program crops.

The infrastructure of the U.S. barley industry is threatened by

the steady decline in acres. Malting barley demand remains constant at around 150 million bushels per year; yet, national barley

production continues to decline. NBGA is a strong supporter of the

increased planting flexibility provided by the 1996 Farm bill. However, freezing loan rates and tying barley’s loan rate to its feed

value relationship to corn have placed barley production at a competitive disadvantage with other crops.

NBGA wants the next Farm bill to restore equity to the barley

loan rate. Our views on three key areas of the Marketing Loan Program; Fixed and Decoupled Production Flexibility Contract or PFCtype payments; and a countercyclical income safety net program

comprise the balance of my statement. Under the current Farm

bill, the barley loan rate reflects only barley’s feed value relationship to corn. Since the current Farm bill caps the corn loan rate

at $1.89 per bushel, and since a bushel of barley is only 48 pounds

compared to 56 pounds for corn, the barley loan rate is effectively

capped at $1.68. This feed value relationship understates the market value of malting and food barley, which averaged 53 cents a

bushel higher than feed barley over the last 10 years. Over half of

the annual U.S. barley production generates higher value, foodquality barley malt.

The Farm bill should direct the Secretary to calculate the barley

loan rate using 85 percent of the most recent 5-year Olympic average of USDA’s all-barley price instead of only considering the value

of barley’s feed relationship to corn. Furthermore, this loan rate

calculation should be no lower than $2.04 a bushel, derived from

15

85 percent of an average of a recent historical period of years using

the all-barley season average price.

If this committee undertakes a more comprehensive rebalancing

of the loan rates of all loan-eligible crops in the next Farm bill,

NBGA supports increasing the proposed 204 floor level commensurate with the rebalancing ratio used for all commodities. The National Barley Growers support a decoupled guaranteed and fixed

crop payment for the life of the next Farm bill. Similar to the PFC

payments, the crop payment should be extended without regard to

domestic price fluctuations and should be decoupled from current

and future production to avoid influencing planting decisions.

The aggregate level of the annual PFC-type payment should be no less than the $5.6 billion fiscal year 1999 level. The next Farm

bill should maintain the allocation among the seven so-called

AMTA crops: wheat, corn, sorghum, barley, oats, upland cotton and

rice, at the levels established in the 1996 Farm bill. Likewise, the

Agriculture Committee should restore the barley PFC payment for

the period of the next Farm bill to the 27.2 cents per bushel affiliated with the 1999 Agriculture Marketing Transition Act or AMTA

level.

Finally, in the event Congress includes payments for loan-eligible

crops not included in the original AMTA formula, the barley growers support an offsetting increase in total annual funding. Low

commodity prices have brought out the inadequacy of the current

farm program safety net, including AMTA payments and the Marketing Loan Program. Producers of all commodities need an additional program that will provide income support payments when income or the per-acre return of a commodity sector declines. The recent emergency supplemental assistance programs have been extremely helpful, but they provide no long-term protection, which

causes great uncertainty among producers and their lenders.

The barley growers support a countercyclical program proposal

put forth by the National Association of Wheat Growers. The program would trigger commodity-specific payments when market

prices are less than an established market support level for each

commodity. Market support levels are derived by dividing a commodity’s total average productions from the years 1995 to 1999 into

the commodity’s gross income and total support during the same 5-

year period.

Based on this formula, barley’s market support level would be

$2.72 per bushel. After it is determined that a commodity is eligible for a market loss support payment, payments to eligible producers would be based on a farmer’s barley acres and yields during a

decoupled historical base period.

The National Barley Growers Association supports further examination of a voluntary, incentive-based green payments similar to

the Conservation Security Act introduced in the House and by the

chairman of this committee in the Senate. The program would support farm income; benefit the public at large; and would be classified as green box under WTO rules. The barley growers support at

least $1 billion in new annual funding for conservation incentive

payments, although our priorities for new funding center around

improvements to the Marketing Loan Program, decoupled program

payments and funding for a countercyclical program.

16

Finally, it is critical to farmers and the farm economy for Congress to provide economic and income loss assistance for the 2001

crop of not less than the AMTA payment and supplemental economic loss assistance provided for the 1999 and 2000 crops. Without adequate emergency assistance for the current crop year, many

farmers will be out of business before the next Farm bill. We urge

Congress to pass the economic loss assistance for the 2001 crops in

the form of a market loss assistance payment at the 1999 PFC payment rate.

In conclusion, Mr. Chairman, I thank you for this opportunity to

appear here before this committee.

[The prepared statement of Ms. Evans can be found in the appendix on page 110.]

The CHAIRMAN. Thank you very much, Ms. Evans, and we look

forward to working with you and your organization as we continue

the development of the bill.

Now, last, we will turn to Bill—I hope I pronounce that right—

Kubecka.

Mr. KUBECKA. Kubecka, yes, sir.

The CHAIRMAN. Executive vice president for legislation for the

Sorghum Growers Association.

STATEMENT OF BILL KUBECKA, VICE PRESIDENT FOR

LEGISLATION, SORGHUM GROWERS ASSOCIATION,

PALACIOS, TEXAS

Mr. KUBECKA. You make me feel right at home. I come from a

large family. Here, I am sitting on the end of the table.

[Laughter.]

Mr. KUBECKA. Mr. Chairman, members of the committee, on behalf of the grain sorghum producers nationwide, I would like to

thank you for allowing us the opportunity to discuss our proposal

today. My name is Bill Kubecka, and I farm in a family partnership near Palacios, between Houston and Corpus Christi, Texas.

Our diversified operation includes grain sorghum, rice and cotton.

As I come before you today, I know that many of you are not experts on sorghum, and your states do not grow much. However, I

know it can be an important crop to you because of the conservation benefits which it provides portions of the U.S. I encourage the

committee to look at what the government policy has or has not

done for grain sorghum. Our recommendations to you today are focused on the specific needs of grain sorghum producers and center

on correcting the inequities that would genuinely give producers

the freedom to farm any crop that suits their conservation needs

and marketing plans rather than planting those that are most appealing from a government policy standpoint.

The sorghum industry believes that these inequities are greatly

driving cropping systems and cropping decisions. The loan rates for

grain sorghum from 1972 to 1996 were never more than five percent below the loan rate for corn, until 1996, when the loan rate

for grain sorghum began dropping, while the loan rate for other

commodities remained steady.

This ended in a sorghum loan rate today that is 10 percent that

of corn. Additionally, the unbalanced loan rate between the oil

seeds and other commodities, including sorghum, has shifted acres

17

out of sorghum. As a result, we come before you today having harvested the lowest number of grain sorghum acres on record since

1953. This is during a time when we have seen the strongest demand for sorghum in the ethanol industry, to which 13 percent of

our crop goes for the 2000 marketing year and extremely strong export demand from Mexico.

For this reason, our recommendation is that the grain sorghum

loan rate equal with corn and then rebalance all loan rates on all

program crops is a centerpiece of our testimony today. It is our

strongest belief that should the committee choose to follow any of

the Farm bill recommendations that are detailed in our written testimony, such decision will have little or no positive impact on our

industry if we fail to achieve at least an equal loan rate, thereby

increasing options for producers in avoiding further grain sorghum

acreage loss in a time of increasingly limited water supplies and increase irrigation costs.

Producers tell us that they are following government policy signals by planting other feed grains with higher loan rates, better

LDPs and better crop insurance coverage. There are several factors

detailed in our written statement in support of sorghum rate rebalancing, including a stocks-to-use ratio for sorghum that points in

this direction. Had our stocks-to-use ratio been used in the last five

years, sorghum would not have suffered a drop in the loan rate.

From an economic standpoint, research conducted by FAPRI shows

that equalizing the loan rate would cost only $31 million annually

and increase production just by five percent. However, it would create a 22 percent increase in net returns to sorghum producers.

An analysis of recent ending stocks in total use indicates any additional sorghum acreage generated by an equal loan rate would

generally be nondistortive to grain sorghum supplies. In fact, increased production would allow us to compete in several premium

markets in which we are unable to compete today because of lack

of reliable supply.

Many of the members of this committee are fortunate that their

constituents can rely on Mother Nature for seemingly adequate

water supplies, but in the chief sorghum-growing states, the issue

is not one of water quality as it is quantity. Sorghum has been

called a water-sipping rather than water-guzzling crop. University

studies have compared water savings through alternative cropping

patterns and the use of crops that require less water, such as grain

sorghum. A study ordered by the Texas Legislature found that a

50-year savings for 21 counties in the Texas Panhandle would

amount to 7.63 million acre-feet if producers converted irrigated to

a more resource-conserving grain sorghum.

That is on a yearly average, 147,200 acre-feet. That is enough

water to supply 294,000 homes a year, and as a reference point,

this would be approximately the size of Austin, who has 277,000

homes and a population of 643,000 people. Quite a bit of water savings there.

From a conservation standpoint, the question is simple: how can

a limited resource be more efficiently used? We believe that future

water supplies should be a priority, and an equal loan rate would

give producers the ability to grow a resource-conserving crop such

as grain sorghum. From a producer standpoint, many producers

18

would have welcomed sorghum as a low water use planting choice

on our farms this spring due to the irrigation costs, which have

soared as a result of the energy crisis. However, many did not

switch because of the loan rates.

NGSP is aware that ad hoc disaster assistance legislation will

become increasingly difficult to achieve and defend in the face of

other needs. This points to the need for a countercyclical safety net.

However, we are very concerned that safety nets proposed so far

do not take into account the county and regional production and

marketing anomalies that might not trigger payments or impact

national supplies. The U.S. sorghum industry is primarily spread

out over an arid region of the western plains and can have a total

loss, for example, New Mexico, but have very little impact on overall sorghum production due to the low yield potential and a relatively small number of acres in the state.

On top of this, success or failure of crops in the Midwest drives

the entire feed grain complex, regardless of what happens to production in the sorghum belt. Despite these concerns, NGSP does

have recommendations for a countercyclical program. NGSP proposes basing a commodity-by-commodity countercyclical program

on actual market receipts averaged over a historical base period divided by an average production units over that base period. This

is established as a base price for the 2002–2008 period. To calculate the countercyclical payment, the current price per bushel

must be established. This price would be the current year’s price

as defined by the total current year’s marketing receipts, then divided by the current year production. The current price is then subtracted from the base price. This provides a per-unit payment for

each commodity. At the end of the actual growing year, when an

actual production price has been reported, each producer is then

paid his per-unit share of each unit produced on their farm during

the historic base period.

We support a continuation of AMTA payments, although we recognize the negative impacts on cash rents in the northern sorghum

belt. NGSA believes that the Production Flexibility Contracts

should be extended through the next Farm bill and annual payments frozen at the 1999 level. Providing these payments at the

1999 AMTA levels would require $5.8 billion in annual budget authority or approximately $1.8 billion annually more than the current baseline projection.

Sorghum is a low water use, low input choice for many producers, and conservation needs rather than Federal policy should be

prioritized in determining where and when it is planted. A global

population that benefited the Twentieth Century from the green

revolution led by Dr. Norman Barlow is today facing a future predicted to have 25 percent of the world population experiencing severe water shortages by 2025. However, 50 percent of the increase

in demand for water by 2025 can be met by increasing the effectiveness of irrigation and by growing more water-efficient crops. A

second revolution, or a blue revolution, suggests a combined approach of water savings and appropriate crops such as resourceconserving, risk-tolerant grain sorghum.

Mr. Chairman, we would like to thank you and the members of

this committee for the opportunity to present our ideas today. We

19

look forward to providing you with additional information and continue working together on this process. Thank you.

[The prepared statement of Mr. Kubecka can be found in the appendix on page 115.]

The CHAIRMAN. Thank you very much, Mr. Kubecka, for your testimony. Again, we look forward to working with you and your association as we continue on the Farm bill.

Well, for all of you, thank you very much; good statements; very

concise, and to the best that I have been able to over the last 24

hours to go over your written statements, they are great written

statements also. I just have a couple of sort of general questions

that I would like to ask all of you to get on the record how you view

a couple or three different items. The CRP program, Conservation

Reserve Program, is now capped at 36 million acres. There is going

to be some effort to expand that. What say you? Should we expand

the CRP program? If so, how far? Or if not, say so.

I would just like to get your ideas on what we should do about

the CRP. Should it be expanded? Should it not be expanded? If it

should be expanded, by how much? There may be some nuances in

there that you might want to talk about in terms of how we change

the CRP, but I am just talking about expanding it now, and we will

just start. Lee, can we start with you and just kind of go on down

the line?

Mr. KLEIN. Well, at the present time, we feel like the 36 million

acre cap is fine. We appreciate what you are doing a little more on

the Conservation Security Act type thing. I wear another cap when

I am back home in Nebraska being the treasurer of a natural resource district board, and some of the comments you were making

earlier at the hearing for the gentlemen who are going to be working for the USDA in talking about the waste management thing,

one of the counties that I represent back home on that thing is the

third-largest cattle-producing county in the United States, and they

have a severe problem with getting rid of the animal waste that

cattle produce.

What we like more about your program there also is the fact that

it does not require land idling, and it targets it to the producers

as opposed to the landlords. We think that those two mix together

very well.

The CHAIRMAN. I am going to get into that later, but on CRP,

your organization basically is saying keep it there?

Mr. Keith Dittrich, how about you?

Mr. DITTRICH. Yes, Mr. Chairman, our organization supports an

expansion of the CRP to 40 million acres, and we also in our farm

bill proposal suggest that the Secretary have authority to use a

short-term CRP in the event that grain stocks become excessively

burdensome and using it for the conservation benefits and some

sort of inventory management. Now, keep in mind that our organization strongly supports a farmer-owned reserve that isolates crops

off the market first and would use that first for ending stocks management and then use any supply management later.

The CHAIRMAN. On the CRP, are you saying you would be in

favor of increasing it to 40 million acres?

Mr. DITTRICH. Right.

The CHAIRMAN. Plus a short-term CRP?

20

Mr. DITTRICH. Yes, like a 3-year CRP.

The CHAIRMAN. Thank you very much. Mr. Anderson, how about

the American Soybean Association?

Mr. ANDERSON. Well, No. 1, we would be pretty much in agreement with Mr. Klein on this that the 36 million acres seems to be

adequate. We are not opposed to inclusion of environmentally fragile lands that would need to be included above that, but to utilize

CRP as a supply control program we feel is truly detrimental to a

program that we would represent from a global perspective in trading from a world market price situation, and we would also not be

in agreement with allowing CRP to attract large masses of land

and be a competitor to production agriculture from that respect, to

not have the Government drive the prices of land up from a CRP

supply control program.

The CHAIRMAN. OK; thank you very much.

Mr. Miller.

Mr. MILLER. Yes, Senator, we probably would not support any

expansion of the CRP program. We think that the CRP program

should be used for conservation. We think it is an ineffective tool

for supporting farm prices. We think it has unintended consequences which are very negative for the communities where CRP

reduces production. The financial impact on the towns and the industries that are dependent upon agriculture are unintended victims of a CRP that is used beyond the purpose of idling fragile or

acreage that really needs to be preserved. We think there are much

better tools to be used for farm support than the CRP program.

The CHAIRMAN. Thank you very much.

Ms. Evans.

Ms. EVANS. To make it official, I am not sure our board has actually taken a position on this, but to speak personally, I am tending

to agree with most of the panelists here. I believe that probably the

cap where it is at now is appropriate. I also would not be opposed

to more sensitive buffer strips or enlarging it along that line, but

I also have seen what it does detrimentally to communities such

as grain elevators, milling, maltsters, the brewers, and it has been

used as a determinant of supply and demand. I do believe in our

areas, lands have gone in that probably should not have entered

CRP.

The CHAIRMAN. Thank you very much.

Mr. Kubecka.

Mr. KUBECKA. The official position of our board is that we would

agree with the cap at 36 million. I will make a statement that this

has been very detrimental to the sorghum acres, and that is why

our concern of the cap, of maintaining the cap. We do agree with

soybeans and barley in that we do see that maybe we need to shift

some acres and put them in that need to be in and let some come

out, but we are in agreement that the cap should stay at 36 million.

The CHAIRMAN. Thank you.

There is just one other thing I want to get in here. In the year

2000, direct cash payments were 50 percent of U.S. net farm income. In the previous year, in my state Iowa, it was 130 percent.

In other words, without the direct cash payments, we would have

had a negative net farm income in my state. I guess my question

21

is is this sustainable? Is it desirable? How can we build income opportunities that reduce the need for commodity-related cash assistance? Is a high level of cash assistance the true measure of a good

farm bill?

We can look at all these figures, but if we are truly going to try

to get to something that is more market-oriented, should we just

be looking at the cash assistance as a measure? Or should we look

at something else? It is a very general question.

I guess my basis is how sustainable is this, and how desirable

is this? Again, I know it is a general question, not as specific as

the CRP. I am again thinking about the next Farm bill as moving

in a direction of coming down off of those high cash assistance. I

just do not know that the budget will allow it, and if it will not,

and we want to keep farm income from going down, we are going

to have to do something else. That is my general comment on that,

I would like to go down the row, and if you could respond on that,

I would appreciate it.

Mr. Klein.

Mr. KLEIN. Well, first of all, we have just come through five

years of above trend-line yields around the world in coarse grain

production, and it has had a major effect on all of us. One of the

things that our organization has always represented is a long-term

approach, like you mentioned ethanol being a fast-growing thing,

and we have worked very hard on that as have you, and I appreciate the help from this committee on the California waiver for the

second time. You did not have to sit on a box this time, Mr. Chairman, but I am sure you had something to do with it.

At any rate, we feel that we need that supplemental income this

year. I would like to see it back at the 5–5, or I am going to be

going back to practicing my auction chant again this fall, because

we are going to be using it, because the bankers are going to be

requiring this payment to come, and I hope we can get this committee to move on that rapidly, and maybe we can work something

out with the House.

The CHAIRMAN. We are going to move fairly rapidly on this.

Mr. KLEIN. I appreciate that.

At the present time, there is just no choice for us but to have the

extra income, so, is it sustainable? Probably not, but the only alternative that we have is to come up with more uses. As our yield

curve moves up, obviously, we have grown the domestic use. We

have grown the export use. You mentioned it yourself before, if we

consider what goes out in animal production. That was close to

what? 450 million bushels last year of corn got exported in meats.

These are big moving targets.

We need to do better, and some of your comments earlier from

the committee were talking about more money going into research,

and obviously, that is extremely important to us for long-term. We

have to look at both the short-term and the long-term. Short-term,

we need the money. Long-term, we need money put into the research so that we can sustain our own viability without coming to

you yearly.

The CHAIRMAN. Mr. Dittrich, you pointed out—and I am not verifying it; I am just saying you pointed out—that basically, our trade

has remained static over the last 25 years, if I am not mistaken.

22

Mr. DITTRICH. Yes, sir.

The CHAIRMAN. Then, again, in terms of the cash assistance and

payments, again, my question is is it sustainable? Desirable? Or

not?

Mr. DITTRICH. Mr. Chairman, this committee faces a real dilemma. Last year, we spent $30-some billion in farm assistance,

and the current 10-year budget suggests $17 billion a year. Keep

in mind the $30 billion that was spent last year left farmers with

still inadequate incomes, still losses. The question here today lies

here on are we going to continue a system such as that that disregards the uniqueness of agriculture and the market realities of

the business of farming, or are we going toward a system that tries

to improve market prices and sustains family farmers through fair

market prices? That is, of course, what we are suggesting. Our

Market Participation Loan is a hybrid loan that attempts to drive

market price and improve market prices with other tools and mechanisms such as a farmer-owned reserve which isolates commodities

off the market until market prices recover and protects consumers

and industries, processing industries. At the same time, our hybrid

loan can make sure that we are competitive in world markets. It

allows for the reduction in market price or support levels to a certain level in the case of extremely burdensome stocks.

That is really the question we have here today, and looking at

the key indicators, we understand that over the last 25 years, exports have not improved, even though we have drastically cut

prices, and we have lost a lot of farmers, and there has been a lot

of hardship in the farm countryside trying to chase this theory that

has not come to be true.

The CHAIRMAN. Thank you, Mr. Dittrich.

Mr. Anderson.

Mr. ANDERSON. Yes, sir, it is an arguably tough question to come

to an answer on. That was part of the reason that I did want to

make sure that we included the unfinished agenda from the FAIR

Act in the testimony. We do not know how much more competitive

we can be in the world market if the lock and dam infrastructure

is repaired. We do not know how much more competitive we can

be in the world market with unilateral sanctions removed.

There are so many other currencies, inequities out there that are

driving this program much more than our domestic policies. Our

domestic policies, however, drive production efficiencies or activities in so many other countries. Supply control, we can see no benefit to it. With the low prices we have had, South America continues

to expand, however at a slower rate, however, we have only seen

that through setasides previous to the last Farm bill. We saw expansion go tremendous in South America. We have seen a loss of

infrastructure of oil seed crushing capacity in the United States

due to the lack of research in the Southeast of varieties that no

longer are competitive for the land costs over there.

We are seeing in Wilmington, Delaware an import terminal being

built to bring meal in from South America to provide the rail grain

providers with products that we could easily supply from here. Our

efficiencies have never been maxed out. We have never finished

that agenda and before I would become so confused by the current

question, I would go back and try to finish the previous agenda

23

that would have helped us weather through a shorter term than

what we are currently dealing with and have a different outlook for

tomorrow.

The CHAIRMAN. You can bring soybean meal into Wilmington,

Delaware cheaper than you can get it from the heartland of America?

Mr. ANDERSON. Well, fortunately or unfortunately—I am not

sure which way to say it—but the Fayetteville area is a primary

source of delivery for Southwest Ohio, from which I come today,

and yes, according to the rail grain receivers, due to all of the inefficiencies in the transportation system here within the borders of

our own United States, their claim is they can bring it in. They will

not share the numbers with us, but they claim that they can bring

it in for less money than what we can produce it in the great State

of Iowa or the great State of Ohio or Indiana and bring it in for

less.

The CHAIRMAN. We have got to look at that.

Mr. Miller.

Mr. MILLER. Sustainable, that would seem to be a political question. I do not know how long the people in the country are going

to be willing to continue this level of transfer of funds. Obviously,

they are willing to do it today. I do not know of any farmer who

wants to get a check from the Government rather than from me as

a flour miller or from one of the companies that we represent. They

would rather work for the market.

Sustainability? I do not know; a political question. Is it desirable?

I certainly think not. Our position would be that the free market

is always going to be a better customer to U.S. farmers than the

Government; that we have, when the efficiency of U.S. farms are

allowed to operate in a free market system that there will be transitions, as there always are in industries, but ultimately, the best

return to those farmers are going to come from the free market.

The degree of dependence that U.S. farmers currently have on the

U.S. Government is not good for them, and it is not good for us.

Any policies—we certainly recognize the need for transition and

support, but we would beg for policies whose aim eventually is to

get us to a market oriented supply demand situation rather than

a Government-determined supply demand situation.

The CHAIRMAN. Thank you very much. Two more.

Ms. Evans.

Ms. EVANS. I guess for barley, I would have to say that it would

almost mandatorily have to be sustainable. Barley is a crop that

ended up competing with the EU subsidies for all of our foreign

markets to the point that we have eroded to nothing. There is a

huge south and central malting barley market down there that by

all rights, U.S. barley should be getting. We are getting none of it

by fighting EU. Until, in the long range, we get something done

with these trade factors in the new WTO round, I do not know how

barley could be sustainable without it in all fairness.

The CHAIRMAN. Thank you very much, Ms. Evans.

Mr. Kubecka.

Mr. KUBECKA. Our board is somewhat divided on this, and we

have had a lot of discussion on it, and I guess the biggest discussion, I will bring it up here, and I do not know if this is proper

24

or not, but it seems to be the biggest concern of these payments

have been that they are just a transfer to the landowners. Be it

right or wrong, it is a reality. That is an issue that certainly needs

to be looked at and addressed.

You know, is it really helping the producer? From many of our

board members, they say not, so in my forum as a producer, I do

not personally have that problem, because it is different. It differs

on our board. We have members that have a very big problem with

it. They say it is really not helping us. We have to look at this and

look at some more creative ways to possibly shore up our producers.

The CHAIRMAN. Thank you.

Thank you all very much, and now, I would turn to our distinguished ranking member, Senator Lugar.

Senator LUGAR. Well, thank you very much, Mr. Chairman.

I just wanted to use my time making several comments that I

hope may bring additional testimony from each of you or many of

you that will supplement what you have to date. I would just observe that, as many of you pointed out, the budget provides for

$73.5 billion above the baseline, and $66 billion of that, you have

identified in a couple of your papers as a part of a reserve. The

suggestion is that we need to act quickly, some have suggested, because the reserve also provides the money for prescription drugs for

the elderly or reform of Medicare or shoring up of Social Security.

Now, I am not sure I have understood the argument for acceleration of the Farm bill on that basis, because it would appear to me

that each Congress could, in fact, pass another farm bill. We pass

one of these things with the thought that it will last for five, seven

years as we have currently. It could have been amended anyplace

along the line. In other words, it is not engraved in the Constitution, and the thought that somehow, we provide a bill that spends

the $73.5 billion, and it remains, even though our constituents

come in and say we want prescription drugs more than we want

a farm bill; they are going to get their prescription drugs in a democracy if, in fact, that is the gist of what they want to do.

I mention that at the outset, that what we put together here has

got to have a pretty good political base in the total Congress and

with the country; that it is a sound program that should not really

be tampered with unduly, so that there is some certainty for planters and producers all the way through.

Now, having said that, let us say for hypothetical reasons we had the whole $73.5 billion to deal with and really fill out all the

squares. The question then, it seems to me, is competing elements.

Now, some of these are not represented here today and maybe will

be in further hearings, but in addition to a safety net, countercyclical, income support, however one defines that, there are many

people coming in and saying that that ought to be expanded to socalled specialty crops, to a whole list of things.

Now, we got into that in a big way last year, not through a formal Farm bill but through legislation we passed, and even around

this committee table, we have heard about the need for strawberries to get some consideration or cranberries. The wool and mohair people are back; a long, long list which there is no 5-year crop

history. In an ad hoc way, essentially, people were saying what you

25

are really doing here is trying to supplement actual farm income

to get it back up to about $45 billion. Why $45 billion? Because

that was net farm income about three years ago. Each of our attempts has been made to plug in enough money to get back up to

about $45 billion. That is a gain, not a loss, but for the whole country.This is on the basis of about $1 trillion of the net worth of all

farms. The agate type of USDA’s report which reviews at the beginning of each year to try to find out how to get to 45, you find out

everybody has got about $1 trillion. That is about 4.5 percent return on invested capital or at least what is estimated it is all

worth. I mention all of that because many people are saying if that

is really what you are up to, we are not dealing with the New Deal

any longer, with the row crops that were a part of those programs.

There is nothing sacrosanct about program crops; that was the old

program.

The new program deals with everybody, livestock producers as

well as fruits and vegetables and anything else that occurs on the

farm. Now, nothing in the programs that were discussed today

really incorporates all of that, but I would just say to each one of

you a good number of folks are knocking on the door, and they are

seeing inequity. This is what we actually do on our farm. Unless

you are going to adopt a total farm income picture, do not just pick

and choose with corn and beans and rice and cotton and wheat, of

course.

Senator ROBERTS. Wheat.

Senator LUGAR. You mention sorghum and barley, and they come

into the picture today in some of these charts, but help us try to

think through that. Where do these competing elements come out?

Now, what about conservation? A good many people would say

and have said to me—may say it in private or in public testimony—that in our state, as a matter of fact, we would do better

if there were conservation payments to each farm than we now do

with regard to the row crops. In other words, we do not have very

much of the so-called program crops in our state, and as a matter

of fact, we have got real problems with soil and water.

As a matter of fact, we would like to see, if you are going to divvy

up $73.5 billion, a good bit of that in conservation, with payments

pretty liberally over everybody who comes up with a plan to indicate how soil and water in the country might be improved. That

comes in. Some of you have hedged by saying OK, sure, conservation, a great idea, but not at the expense of the safety net and the

income.

Others would say that is not the way we look at it; as a matter

of fact, not much income is coming to our state, to our district from

these plans as they stand. A lot more might come if you adopted

a very different formula involving conservation payments, for example.

Now, finally, there is the problem some of you have addressed:

should there be limits to some of these payments? Some have said,

as a matter of fact, that if you have as a spark, as people pointed

out, 8 percent, 0–8 percent of the farmers in America doing 72 percent of the business, essentially, about three-quarters of the payment go to the 8 percent. Another 10 percent do another 15 percent

26

of the business. Eighty-two percent do 13 percent. Eighty-two percent of the 2 million farmers is 1.6 million. Now, sometimes a size

fitting all does not work out for this, so some have suggested that

the payments ought to be smaller or only so many bushels covered.

Well, others of you have rigorously disagreed with that idea, noting, of course, if three-quarters of the business is being done by

eight percent of the people, that is where the Farm bill really is,

with the producers who are producing it.

That is an issue that when you get down to divvying up the

money is going to have to be discussed and probably be rigorously

discussed. Now, finally, this is an argument that is sometimes almost theological: do the current programs we have simply stimulate more supply, and in a world in which we have all noticed the

trade thing is not moving very fast, and we are still dealing with

ourselves domestically, therefore, price inevitably goes down. For

example, in the corn growers’ testimony, there was a very important figure that acreage increased during the last five years for

corn by 4.5 percent. However, the amount of corn was 17 percent

up each year.

Now, this is in the face of charts that show the price going down

for five years, Government payments going up for five years. Why

would 4.5 million acres of additional corn be planted in the face of

declining prospects? Well, some would say, well, because prospects

were declining. You have to plant more just to get the income that

you need, and if you have an individual farm—but this is aggregate, over all of American agriculture. In other words, even in the

face of declining prospects, for some reason, we were producing

more.

Now, the 17 percent increase, of course, came because of good

weather, good research, better production situations, and in the

face of all of this adversity. Some would say the Crop Insurance

Program keeps in play marginal lands or even induces people to

plant who would not be planting. Others say that is not so. That,

we have really got to weigh. In other words, do the policies that

we have now exacerbate the problem simply by encouraging people

to plant more even in the face of very heavy oversupply with the

hope the Lord will provide; that the catastrophe will come in Asia

or something of that sort and sort of move the crop.

Now, these are questions that are on my mind, and that is why

I share them publicly with you. Because at some point, the committee will have to resolve, under the guidance of our chairman, the

allocation of the money: how we sort these priorities in a rationale

that will make sense to a large majority of the body that is now

a part of this committee and to the public, hopefully, that will support this idea.

Finally, I suppose we have to decide do we do a 5-year bill, as

some of you have suggested? A 10-year bill to fill out the squares

of the budget? How sustainable is an idea over 5 years, 7 years,

10 years? A good number of people after every farm bill in which

I have been involved would say after about the third year, it does

not work. It was a terrible idea. What were you thinking of in that

particular year?

Senator ROBERTS. One year.

Senator LUGAR. In one year maybe.

27

[Laughter.]

Senator LUGAR. There you are, sort of back to that once again.

I come to all this with biases, which I freely admit; namely, I

want to maximize farm income in my home state and hopefully in

my country. I am a bean farmer and a corn farmer. I am very interested, intensely interested, in the price of both of those commodities and how it goes. I have just said to farm audiences in Indiana

as I would say to you: over the 45 years that I have been responsible for operating a farm, we have got an average of about four

percent return on invested capital, just 4. Some people hearing that

story would say that sounds too high. Well, it is in terms of the

market. As we have all heard today, Senator Harkin’s situation,

the whole four may have come from the Government last year. In

my case, it was more like two in Indiana, but still, that is a very

low return. That is over 45 years. That is over a whole lot of farm

bills, by some calculation, 10 or 11. It has not changed a whole lot,

really.

What we are faced with at the end of the day is this is a tough

business. It is very difficult for the average person to make money

doing farming, to get a middle class income, to have money to send

kids to college and do the things that Americans do. Therefore, I

am not unsympathetic to putting money into the situation if it just

gets us up to a minimal return. At the end of the day, we still have

to think about are we stimulating oversupply? Is conservation better than income support? What about everybody else in agriculture

who now sees we are trying to sustain income, not particular row

crops or things that might have been a part of the New Deal program.

I do not ask any of you for comment except to say that if you

could extend and revise your testimony and give us some clues

about that, it would be very helpful to me at least and perhaps to

the chairman and the rest of the committee.

I thank you, Mr. Chairman, for allowing me to indulge in all of

these reflections.

The CHAIRMAN. Well, they were very eloquent reflections and the

kind of reflections that make us think about just what are we

doing, and have our past policies done the opposite of what we

thought we were doing in terms of helping farm families and rural

communities?

The only observation I might add, Dick, to what you just said

was that I believe it is true; I have been told this, and I have

looked at the figures. You know, you can always get different kinds

of figures but that the farm share of the consumer dollar is at the

lowest point ever right now.

Senator LUGAR. That is true.

The CHAIRMAN. That is true.

If that is the case, then, if we do not want the consumer to be

spending a lot more on food, it seems to me there has to be a rebalance between the farmer and everything from the farmer to the

consumer in terms of where some of that money goes. If the farmer

can get more of the consumer dollar, it would seem to me that

would help farm income without impacting upon the kind of outlays that we have here from the Federal Government. Now, how

28

that is done, good luck. I do not know. Hopefully, we are going to

be discussing and debating that as we go through this Farm bill.

I am going to recognize Senator Roberts, who has been here since

the beginning of the committee, and I am going to try to keep to

that kind of thing, that those who came here first will be recognized.

Senator Roberts.

Senator ROBERTS. Well, you stunned me. I dropped my pen, and

I cannot even grab my microphone, not that I need one.

Ben, if I give you my time, will you give me 17 points when the

Wildcats play up—— [Laughter.]

Senator NELSON. I hope you are going to need them this year.

[Laughter.]

Senator ROBERTS. I would like to agree with the distinguished

chairman about the excellent statements you have all provided.

This takes an awful lot of time and effort for you and your staff

and your boards to meet, thrash through the very difficult challenges as described by Senator Lugar, our esteemed former chairman, and I want to thank you for that. I want to thank you for

taking time and effort to study through this and to work with your

folks and to bring us your suggestions and your advice.

I agree with the chairman. I have just been making some notes

here. This has been a very interesting hearing a very pertinent

hearing. I do not think these cash payments, the LDP, the AMTA

payment, the double-AMTA payment, whatever we want to call it,

I do not think they are sustainable over the long term, and I certainly do not think they are desirable. It was probably Tony who

said that no farmer whom I have ever visited with, dating back to

all of the days that I have had the privilege of representing farmers

and ranchers, ever said that he wanted a check in the mailbox as

opposed to the marketplace.

I do not know: maybe cash assistance is not the most important

thing in regards to how we measure the success of a farm bill or

in terms of a policy, but today, folks, it is way ahead of whatever

is in second place, because I made a sort of a belt-tightening devil’s

advocate speech to one of our major farm organizations earlier this

year, and after saying we had some budget problems, and let us

take a look at the real problems and the unfinished agenda of the

last Farm bill, if we could ever put it together, one old boy came

up to me and said well, Pat, that is fine, but if those payments had

not come, I would not be here, and you would not be speaking here,

and he was right.

I have had the privilege of working on six farm bills from my

time as a staffer on the House Ag Committee, a bucket-toter for the

Honorable Keith Sibelius, up to my time as the chairman of that

committee, and that is really not true either, I would say to Senator Lugar and Senator Nelson, because there have been nine technical corrections in the past 10 or 12 years, and when we say technical correction, you are talking about a major rewrite of whatever

has happened in a farm bill that does not fit the roller coaster we

go through and the dynamic conditions we have in agriculture. We

do not call them new farm bills, but we call them technical corrections with the hope that nobody will get on the floor and introduce

29

amendments that could cause great damage, because when you

open up a farm bill, you can lose as much as you gain depending

on your point of view.

There have been three emergency bills, and we have literally rewritten the 1996 act in these emergency bills as the Senator has

described. We have not gone back to supply management. That is

the basic tenet. We have not taken away the flexibility to producers, but many of the programs that were not there in 1996 are

there now again. By the way, I am for wool, and I am certainly for

mo’ hair.

[Laughter.]

Senator ROBERTS. During the time of these six farm bills, we

have debated everything from flexible parity—do you remember

that?—and marketing loans and setasides, two-tier, two-tier is a

good program; I supported that one time; we almost passed that

one time; came within about 15 votes—and price controls to coldturkey free markets. We have discussed them all; we probably

cussed them all, and we have always managed, however, to protect

our farmers and ranchers.

I know that this Farm bill has been much pilloried. No farm bill

is perfect; none is set in stone. At least the commitment of this

committee and the House committee and people who are privileged

to represent our farmers and ranchers is there. Sure, we make mistakes, and sure, we could do better, but that commitment remains.

I hope—I stated before when we had another excellent panel that

we can continue the much-discussed back-to-the-future debates

that we have had over the past six Farm bills I have been associated with, what I call the oldies but not necessarily so much the

goodies, and sometimes, it gets rather partisan. We can talk about

loan rates; we can talk about AMTA payments; we can talk about

two-tier; we can talk about all of that. If you give the global market

realities and the new buying patterns that are happening and the

WTO problems we face with our competitors and all of that, the

value of the dollar, the sagging export picture, we have to think

outside the box, and I was struck by the chairman’s comment that

maybe we should not measure the Farm bill in terms of cash assistance.

I would say that, however, Bill, that I know that those payments

have gone into Texas and all throughout farm country, and many

have gone to the land owner. I understand that. I know that these

payments have been capitalized into the land value, and I know

that Senator Lugar has pointed out that when you are having a

farm crisis, and you see at least with the Federal Reserve in Kansas City saying that farm land in Ben’s country and my country

has gone up seven percent, what is going on here? Is that good?

In other words, think what would happen with the country—I

am not saying we are in a recession, but I do not think the economic situation—well, it is a little dicey; let us just say that. Do

we want to see the land values come down? Whoa, wait a minute.

Who owns that land? I can name you a bunch of folks in Ford

County who are very elderly and living on single income that you

have got to stop and think about that a little bit.

I would like to think a little bit outside the box. I would like to

work together to come up with something. It seems to me that we

30

are a little short on long-term policy and a little long on short-term

fixes. We talk so much about prices—I am giving a Roberts version

of the Dick Lugar—what is it?—seminar here, but at any rate—— [Laughter.]

Senator ROBERTS [continuing]. They did not turn the light on for

you. I do not understand why that happened.

[Laughter.]

Senator ROBERTS. We talk about high prices, price, price, price,

price, price. Why can we not talk about farm income, farm income?

Price does not mean anything if a producer does not have a crop

to sell. That was one of the tenets of the current Farm bill. I have

urged our farm and our commodity organizations to think out of

the box, and the chairman has really hit it. We unfortunately see

an awful lot of testimony, and I know it is understandable, from

all of you focused primarily on specific dollar amounts: in other

words, how much can we get when we are facing a difficult time

with price and with our competition overseas and the lack of a consistent and aggressive export market?

We sort of say OK, here is our countercyclical payment; not very

happy with LDPs and all of the vagaries that that had, and Mr.

Chairman, I would say that when we put together the Farm bill,

we never even thought we would need LDPs. That is not a startling, I guess, admission. Then, you go ahead, and you say all right,

we want a different countercyclical payment; we want the LDPs or

something like it, and then, we want an AMTA payment and a

double-AMTA payment, and then, there is a third one in there

somewhere.

We give a little nervous glance to the budget. Well, I can tell you

I share the concern of the chairman. I did not pay much attention

when I was in the minority over in the House Ag Committee about

the budget concerns. You know, Kika did; staff did. We in the minority sort of just said, well, that is nice, but let us move on and

gave our speeches.

Then, all of a sudden, I became chairman, and we were in the

business of trying to balance the budget, and we had a specific

number to work with, and Dick and I sat down together and said

this is not going to work. How are we going to do this? Welcome

to the club, Mr. Chairman. It is not exactly a pleasant club.

[Laughter.]

Senator ROBERTS. We have got to look at the budget about what

is real. Then, in terms of long-term policy, what is the law of unintended effects here? Where are we headed?

I want to mention two groups who are here today who have

made their willingness to maybe break with some of the prevailing

thinking. I want to applaud the sorghum folks and the National

Corn Growers for their efforts. Sorghum growers have indicated let

us take a hard look and come to the realization with our budget

situation and world trade commitments. They still support the concept of a regional-based program, but as Tony indicated, they do

not list or demand—that is the better word—a countercyclical program as a top priority, and I have got the statement here that says

better than I can: given the Federal Government’s budget concerns

and the WTO requirements, it will be difficult for the committee

to construct a meaningful program. We are also concerned that a

31

countercyclical program could lead to planning decisions based on

government policy such as the current crop insurance and loan rate

programs do.

I take a little issue on the crop insurance, since it was Kerrey

and Roberts who tried to put that together, but you are right: in

lieu of the above issues, we believe a farm account would be likely

the best countercyclical program of all. We have tried for five years

to get that dadgum thing passed, and why we cannot get that done

in the tax bill is a little bit beyond me, both Republicans and

Democrats. I certainly applaud your thinking.

Then, you have presented a proposal with the Corn Growers that

is certainly out of the box and a different way of thinking than anything we have seen around here in awhile. It is interesting; something new, warrants our careful review and consideration. That is

a nice way of saying I like it, but I do not want to condemn it by

sponsoring it, see?

[Laughter.]

Senator ROBERTS. I do think it is worth a good, hard look, and

I really appreciate that.

Finally, I would suggest to all of the organizations before us

today and who will come before us in the coming weeks: it is time

to determine what our priorities are. Now, we go through this; it

is like a ritual, and each of us have our own pet speeches that we

give on farm program policy, and we have seen those this morning.

Sooner or later, we have got to get to the priorities. That was

when, on the House side, we would put you in 1338-A and get you

there, and I would close the door or Kika would close the door or

Foley would or Pogue would or whoever it was and say all right,

you ain’t coming out until you make your priorities. Sometimes,

you stayed in there for days. We had to send in sandwiches.

We have got to start to think about it: what are your priorities?

Now, I am going to ask you just a couple of questions: if you had

to make a decision, where do you think that your board would go?

I want to thank you, Mr. Chairman. I want to thank these people. I apologize for taking so much time. I had some other pet

things I wanted to say, but under the circumstances—oh, one other

thing.

[Laughter.]

Senator ROBERTS. Dick, one of the reasons we have more corn is

that our Kansans went down about 20 percent in wheat acreage

and decided to plant corn, and the weather was pretty good, and

we did not have to irrigate, and we knocked your socks off.

[Laughter.]

Senator LUGAR. That is the answer.

Senator ROBERTS. Yes; but the farmers made that decision. Now,

did they make the decision because of the payment? We could get

into that on LDPs and how that has been very market distorting,

and in terms of overall acreage, yes, corn is up. Soybeans are up.

The overall cultivated acreage and Mike, you correct me if I am

wrong: is it 365 to 369, or is it 2? I am talking about million acres

total. We have not really planted fencerow to fencerow. Farmers

made different decisions. The yield went way up, and the world

glut came on us, and we have not sold as much, and the value of

the dollar has really knocked us in the head. I understand that.

32

The farmers have not done that, and that was the whole design

of the bill: let the farmers make the decision instead of us, because

we are always days late and dollars a whole bunch or months late

and dollars a whole bunch.

I am done; thank you.

The CHAIRMAN. Thank you very much, Senator Roberts.

Now, Senator Nelson?

Senator NELSON. Thank you, Mr. Chairman. I apologize for being

late here. I had to preside over the Senate between the time of 9

to 10, so I was a little bit delayed in getting here, so I did not get

to hear the comments of my friends from Nebraska. I want to commend both Lee and Keith for being the chairs of their respective

organizations. They are both from Nebraska, but I know that they

have as many different views about how to deal with this as they

may have some things in common, and I am proud of both of them

and glad to be their friend. As a matter of fact, I would like to say

that for a brief period of time, I had the pleasure of having appointed Lee to the Legislature in Nebraska to fill an unexpired

term, and during that time, Keith had to have him as his Senator.

[Laughter.]

Senator NELSON. I know that they, too, are good friends, and it

is good to have them here.

I want to thank all of you who have testified here today. I agree

that it does involve a great deal of time and commitment to be able

to do this, but it also helps bring together the ideas and helps formulate opinions and positions of your respective organizations, and

while they may be different among you, it is important at least to

have those differences refined and identified and articulated as you

have, because that clearly can be very helpful to us.

There do seem to be some areas, or there does seem to be an

area or two where even across the different sectors of agriculture

and the different areas of our country that there might be some

broad consensus; for example, that agriculture is the backbone of

rural America, and agricultural programs and rural development

do have something in common. If the CRP program is too extensive, it can be detrimental to the rural communities within our

rural areas in the country, and likewise, if an agricultural commodities program or some other program helps sustain income, that

may be the only thing that saves rural America right now.

There is also an opportunity for individual producers through

value-added enterprise, and the Federal Government can play an

important role in assisting in that area. Farmers can also provide

solutions to our energy problems across our country, from ethanol

to biodiesel to wind power, and it certainly is worthy of consideration. Conservation on private farm land does provide a public good

and is far less expensive than conservation on public land when it

is done in an appropriate fashion. Finally, there is a consensus that

family based agriculture has been and continues to be good for

America, and it has made us the strongest agricultural country in

the world.

These are important items of agreement and they can help me

focus on what we can do to help build on in this new Farm bill.

I thank all of you for coming and for offering your testimony and

being committed on behalf of your groups, and I hope that we will

33

have many other occasions to share views and certainly to receive

your thoughts about what it is that we ultimately propose together

to assist agriculture at a very difficult time.

I want to say one thing, and this is not critical, Mr. Miller, I

mean, but when you say that adjusting farm programs and perhaps

eliminating the farm income that we are able to provide at the moment to help out agriculture can create some transitions. I keep

worrying about my good friend, Senator Lugar, who is living on one

of these transitional farms. I keep asking is he transitioning up or

transitioning out? I worry a great deal about words that seem so

sanitized when we say that there will be some dislocation, some

transition if we were to pull out of providing this kind of income.

My fear about that kind of transition is that it will transition us

away from what we currently have in family based agriculture, and

I hope that as we work together, and I am not suggesting that you

necessarily mean that, but if we permit market forces under the

current circumstances to prevail, I am not sure that I want to see

the results, because I can predict them.

That is why we have to have a farm program in some fashion

to be able to support and build rural America and our family based

agriculture, but it must, in fact, be sustainable. I agree with you

and agree with all of you who are suggesting that we ought to get

to a market-based price for agriculture. That is why I hope that

what we put together will be not simply a short-term fix; we will

be doing that between now and the fall to get through where we

currently are but something that is more longer-term in thinking

outside the box that will be designed to cycle us into the right kind

of price. The $1 million question, of course, is going to be what are the

elements of that program? How will they work? Can they work in

today’s world economy, where we have sanctions, unless we remove

the sanctions that always involve food? Will they work unless we

are able to apply appropriate pressure on the EU to accept our

products instead of having these barriers that they put up always

in the name of food safety or some other category rather than just

admitting what they are, market barriers? Will it be possible to do

this even if we put together the world’s best farm program if we

have the differential created by the strong dollar? I am not advocating that we weaken it, but these are all things that we have to

keep in mind: that we are still going to be facing some forces that,

at the present time, seem to be a little bit beyond our control? Getting rid of the sanctions may not; getting the European Union to

accept our products does not seem very hopeful in the short-term

or the long-term and to be able to expand our exports without some

subsidization through either a market assistance program or export

enhancement program to really expand those programs to get our

products in the world market when we have the high dollar; that

we have got a lot of work ahead of us that will be a challenge to

overcome no matter what we do in terms—and I see my red light

is on——

The CHAIRMAN. Do not worry about that.

[Laughter.]

Senator NELSON. I am about to stop in any event, because that

we are all committed to getting the same result. There may be a

34

lot of different avenues to getting there, but I hope we will be able

to work with one another and be not only respectful but supportive

of ideas that may be different from our initial thoughts as we try

to put something together to know that the final conclusion must

be that we sustain agriculture in our country today and that we

do so in a responsible way that gets us to a sustaining way of being

able to do it.

I am fearful that we cannot sustain the payments that are going

on today over the long-term or over the intermediate term, but we

must, in fact, do something that is responsible. As good stewards

of the policy, I hope we are able to come together. I know that we

are certainly committed to working together.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator Nelson.

I do have just one other question that I would like to ask mostly

to Mr. Dittrich and Mr. Klein, but you can come in also with oil

seeds, too. I am just wondering: in your view, is the current Marketing Loan Program actually depressing prices to some extent?

Here is what I mean by that: a farmer who is correctly positioned

in the market will get more money if the price actually goes down,

because their LDP will be greater. Then, they get a bigger LDP

payment. Then, if they are correctly positioned in the market, they

can then sell in a higher market and get the best of both possible

worlds.

I am wondering if, to some extent, the Marketing Assistance

Loan Program actually is helping—maybe not overall but somewhat—to depress prices? Any comments on that?

Mr. LITTERER. If I could, Mr. Senator, I would like to respond to

that. I am with Mr. Klein today. I am his sidekick, and we worked

on the policy side, and that is why I am here today. To address

your question, there is an impact with the marketing loan driving

production in some areas, and ERS has actually done a study that

has said that is the case. That is one of the reasons that our policy

group looking at loan rates—and as you could see today, the discussion between all of the groups focused on loan rates and how do

we rebalance, or do we raise those loan rates?

Our public policy committee spent a lot of time looking at this

and felt that it was a very complicated issue that we could not deal

with, and that is why we decided to propose a policy that was a

little different, where we look at revenue instead of loan rates. We

have problems with loan rates between commodities, because one

might be relatively higher than another and driving production in

that commodity. We have differences in loan rates between counties and states in those regional differences and how do we design

a loan rate that fits every region?

It is a very complicated issue, one that we thought would be best

addressed to look at a different approach, and that is why we have

proposed the revenue-based, changing to looking at a revenuebased by crop program and doing away with looking at loan rates

in particular.

The CHAIRMAN. Now, I looked at those formulas last night when

I was going over this at home. I am not certain I understand them

all, but that is one of the things that I want to continue to work

with you on, try to figure out how those work. I will look at it.

35

What you are saying is that the marketing loan may indeed depress prices.

Mr. LITTERER. Right; in our proposal, going to a revenue that is

totally decoupled we think will be less market-distorting and tradedistorting.

The CHAIRMAN. Mr. Dittrich.

Mr. DITTRICH. Mr. Chairman, we do believe that the LDP program is a price-depressor. It does encourage lower prices for farmers. Our Market Participation Loan is a hybrid loan, as I suggested. It is a nonrecourse marketing loan. It limits how far below

the loan rate farmers can market their products and capture a

market loss gain. The question of loan rates and their effects on

farmers, I would suggest that if we try to use some type of formula

such as has been suggested that just looks at a 5-year average

market price and tries to make up the difference in payments on

a rolling average and do not do something to try to drive market

prices up, we will see a downward spiral of prices and downward

spiral of income at the same time as we see inflation increasing our

costs. We are pretty soon rapidly coming to a situation where support levels are real problematic and even worse than they are

today.

I would like to make a comment very shortly concerning Mr. Miller’s statement. We have to be very aware that I as a farmer am

a seller. Mr. Miller is a processor and a buyer. Our interests are

different. When I try to sell to Mr. Miller, I try to get the highest

price I can from the marketplace. Mr. Miller, of course, his interests are to get the lowest price; buy it from me as cheaply as possible. I can understand Mr. Miller’s interest in the farm policy position he takes today.

The CHAIRMAN. Anyone else on the LDP situation? Yes?

Mr. ANDERSON. Yes, sir, they of right opportunity here. I wish I

could give you a very direct answer that would make the decision

much easier. The reality that I see is that there are so many market forces affecting the price that is received by the farmer. It could

be the fact that for delivering in different-sized units; we are delivering to different-sized elevators; we are further from the river; we

are closer to the river; we are closer to a processor; the rail line

only handles so many sized cars or so big cars or comes whether

you are on a short line or a full line.

The business demands; the profit potential that the businesses

on that rail line or river, they have different profit levels that they

care to work at. I cannot agree that the marketing loan is the only

reason that it would depress prices. There are just too many other

market forces at play here.

The CHAIRMAN. If I just might jump in, Mr. Anderson, your countercyclical proposal suggests using a base period of 1993 to 1997.

The National Corn Growers is saying 1996 to 2000. Is there any

reason for that difference at all that I do not know about, or is that

just——

Mr. LITTERER. We just had to pick a number someplace, Mr.

Chairman, and that was the last five years of the present Farm

bill.

Mr. ANDERSON. That we tried to move back far enough in time

that we would not come up with a distorted picture that would

36

hopefully be WTO-compliant, which many of the indications now

are that they will not be, but that just leads to more discussion.

The CHAIRMAN. I am glad that most of you, in your testimony,

mentioned the Foreign Market Development Program and the Market Access Program. We have very little power on this committee

in terms of our trade. That falls in the purview of the Finance

Committee. There are a couple things that we can do, and both of

those, in my own view, have been underfunded and have not been

used to the best benefit of our farmers. We will be looking at ways

of beefing those up, and again, if any of you have thoughts or suggestions on that, please let this committee know down the road.

That really does conclude all of the questions I have. Senator

Lugar.

Senator LUGAR. I would just like to follow through, Mr. Chairman, talking about the LDP for a minute. One of the pieces of testimony we have had, and I just want to test this out and the validity of it, is that all of those—take the corn LDP, $1.89 generally.

A good number of people have testified that the marginal cost of

an additional bushel of corn production comes in at much less than

$1.89. As a result, if you are a very efficient farmer, and you have

got a cost structure of that variety, there is some incentive to plant

more.

Now, this is even at the $1.89, as Pat Roberts had pointed out

when we first thought of this; at the time of the Farm bill five or

six years ago, most people felt we would not be hitting that, but

as you have pointed out in your testimony, we have hit that and

hit some others, and you have got an LDP payment of $3 billion

for all crops 1 year; $5 billion and $7 billion this year, so that is

a big component right now of the spending. It leads many farmers

to say well, obviously, the price is going down sort of in a secular

way. However you express the overproduction situation, that is

part of it if you have a static foreign trade business.

I am just wondering how the use of the LDP, even though it has

certainly been an important safety net feature, affects the planning

decisions and the continual erosion of the price? I appreciate the

work put in the Corn Growers’ paper trying to rationalize or rebalance the equities through a revenue base as opposed to trying to

pick each country elevator, and you have highlighted a technical

point which is very important. All of these county decisions, the difficulty of USDA working through that history which may lead to

considerable inequities for farmers who are in the wrong place at

the wrong time and go two counties abreast to try to find a situation that is a better one for them; you sort of got rid of that.

How about the LDP as a concept? Is it encouraging overproduction and deliberately, as a policy, depressing price? Does anybody

have a view on that?

Mr. LITTERER. Well, I agree. It does to a degree, and I do think

the loan rate variability between commodities, and I guess I am

picking on soybeans a little bit here their rate is relatively higher,

and so, it probably does drive a little more production to them is

our view.

You know, to say that it is the only factor that is driving production, I do not know that I would go that far, but it is one of the

things that we were looking at and, again, trying to look at a difVerDate 11-MAY-2000 14:17 Nov 08, 2002 Jkt 082204 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 82204.TXT SAG1 PsN: SAG1
37

ferent way of handling some kind of a support for farmers without

encouraging production of one particular crop over another by those

rates.

Senator LUGAR. As I understand it, you sort of meld together revenue from every source, whether it is barley or sorghum or what

have.

Mr. LITTERER. Right.

Senator LUGAR. A 5-year average of some sort comes into play,

a fairly recent average as opposed to the seventies or what have

you, as I understand it.

Mr. LITTERER. Well, we are using both. We are suggesting a continuation of an AMTA payment based on the 2002 year as one payment, as a PFC payment, and then also updating the base and

yield history for the countercyclical proposal, which then, we think,

would be fully decoupled.

Senator LUGAR. You have an AMTA payment in there.

Mr. LITTERER. Right.

Senator LUGAR. That remains. At what level?

Mr. LITTERER. At the 2002 rate in the present Farm bill.

Senator LUGAR. 2002 is sort of straight-lined out for 10 years

or——

Mr. LITTERER. Five years, whatever the——

Senator LUGAR. Whatever the length of the Farm bill. Then, on

top of that, this countercyclical payment that is based essentially

on the market prices of five years.

Mr. LITTERER. Plus that supplemental AMTA portion or the market loss payments in addition to the marketing loan or LDP rates

that were paid in over that 5-year period.

Senator LUGAR. You have estimated now over the 10-year period

or the 5-year period, this comes out to about $36 billion more or

about $7.2 billion a year.

Mr. LITTERER. Yes.

Senator LUGAR. I do not know—the 10-year projection, whether

that takes you out to $7.2 billion or——

Mr. LITTERER. Actually, the projection that Agrilogic did shows

that our costs are substantially below some of the other proposals

at about $5.2 billion, and we think that allows for some funding in

other programs: conservation, rural development those kind of programs which we think are also an essential part of a comprehensive farm bill.

Senator LUGAR. Yes, but that is where we get into this competition that we were discussing earlier on as to——

Mr. LITTERER. Right.

Senator LUGAR [continuing]. How your proposal works out. I am

just trying to think aloud. Let us say that we were to accept theoretically your idea, but at the end of the day, well, we said there

is $73.5 billion, and we have already used X for conservation; a little bit for rural development; research, and we have got some other

crops involved, too. Instead of $36 billion for five years, we are

down now to $27 billion or something like that.

Now, to what extent, using your formulas, can you begin tweaking the system so that you pick up the general concept of parity

or fairness among everything——

38

Mr. LITTERER. Well, I guess what you are asking is would we be

willing to accept a much lower income threshold?

Senator LUGAR. Well, I am not really asking that, because you

would have to say no, but on the other hand—— [Laughter.]

Senator LUGAR [continuing]. All I am saying is at the end of the

day to some extent, I suppose the chairman and I and other members of the committee, there is nothing sacred about $73.5 billion;

why not go for $100 billion? In essence, after all, it is just a transfer payment from one set of taxpayers to another, albeit from 250

million to 2 million, say, but why not? Try it out for size.

Mr. KLEIN. I would like to just comment a little bit. As Mr. Harkin said before—or Mr. Chairman, I guess; I am sorry; you were

19 days, and then, you quit for awhile, I remember that.

The CHAIRMAN. Right.

[Laughter.]

Mr. KLEIN. Anyway, if we do rural economic development correctly, we will be picking up some of that profit in the ag sector,

and then, we do not need as much. This whole thing goes handin-hand. If we have something where the facilities that process the

grain or whatever we raise into the finished product to get us closer to the grocery store shelf for the consumer, the profit comes from

that. Then, we do not need as much to come from this committee.

That is the long-term goal of our organization is to get us to that.

It is just like——

Senator LUGAR. It is the moving parts philosophy that this thing

has dynamic aspects, not fixed, but you get some success, and it

helps you somewhere else.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you. It sounds like both of your goals are

the same, American Corn and National Corn. You both say your

goals are the same. It is just that the pathway of getting there is

different.

Mr. Dittrich wanted to say something. Go ahead.

Mr. DITTRICH. Yes, Senator Lugar; to answer your question about

loan rates and LDPs and whether or not they increase production,

I would refer back to our document the Findings of Congress,

which says that the realities of the marketplace are that individually, farmers have no ability to impact supply. Therefore, they attempt to maximize output regardless of price, regardless of loan

rates. They maximize output at all times.

To look at ending stocks and surpluses, our key indicators points

out that in the 1980 to 1984 period, ending stocks as a percentage

of usage were at 29 percent, and average farm price, non-inflationadjusted, was $2.83. Inflation-adjusted was $4.83. Today, the 2001

projections are that ending stocks percentage of use at 17 percent,

and that will increase some because of USDA’s productions in exports going back down to the average of 1.8 to 1.9 billion bushels

a year that they have been for the last 25 years, and we have an

average U.S. farm price of $1.90 a bushel.

That is a very interesting situation, where we have ending stocks

substantially lower than we did in the 1980–1984 period, but inflation-adjusted, our price is less than half. I would tend to say that

there are other things driving market price.

39

The CHAIRMAN. Yes; let me see if I understand. You said that our

ending stocks are lower now?

Mr. DITTRICH. Yes.

The CHAIRMAN. Than they were 15 years ago?

Mr. DITTRICH. As a percentage of usage.

The CHAIRMAN. As a percentage of usage?

Mr. DITTRICH. Yes; in 1980 to 1984, that 4-year period, ending

stocks were at 29 percent of usage, and the average U.S. farm price

was $2.83; inflation-adjusted, $4.83. Today, the 2000 projections— these are USDA projections—are at 17 percent, but they will increase more than that, because USDA has revised their export projections downward, and our average U.S. farm price is $1.90 a

bushel.

We have half the ending stock supply—or not half, a little less

than that.

The CHAIRMAN. Yes.

Mr. DITTRICH. A dramatically lower price. Obviously, supply and

demand is not functioning properly. We would contend to look at

price support loan rates and how they have helped encourage market prices and driven market prices.

The CHAIRMAN. You said it was $1.90. I am sorry; I have got to turn to Mr. Roberts, but $1.90, what was it when the ending stocks

were an average of 29 percent?

Mr. DITTRICH. $2.83.

The CHAIRMAN. $2.83?

Mr. DITTRICH. Yes, and inflation-adjusted, $4.83, and our exports

that year were within averages. They were around 2 billion bushels. They average over the years 1.8 billion to 2 billion bushels over

the last 25 years.

The CHAIRMAN. That is interesting. Thank you.

Senator LUGAR. Can I just rebound? We need to analyze carefully—and you made a very interesting point, although there are

a lot of reasons for inflation in the world outside of agriculture in

that period, and likewise, different changes in the use of things,

but the basic point, though, that you made to begin with is that

farmers do not control, obviously, the price, and so, they maximize

planting, and that is an important point, because they would probably be right with many farm operations.

Now, another thing you could do without suggesting that people

follow one of the plans that I have had for my farm is as opposed

to planting additional acreage that I gather would be marginal in

terms of corn and soybeans, why, we planted walnut trees, or we

have gone into other alternative situations. Now, that is a different

time dimension in terms of income. Some farmers would say well,

I cannot wait for 60 years for that veneer market to come along.

I have got a more short-term problem with the next 60 days.

I mean, there are alternative ways of doing this as opposed to

planting more corn and beans. My point is just simply that we are

into a situation in which we are attempting to support income; trying to contrive, whether it is an LDP or something better than this,

some way of shoring this up. In doing so, if we increase production

well beyond any known markets for it, granted, we might get bonanzas tradewise or some other thing breaks through, and more

ethanol in California and the rest, why, that will work out.

40

Absent that, people have to make decisions not to allocate their

resources to something that is likely to be less profitable. The question is how do we construct the incentives so that those sorts of decisions are more likely to be made? I will study, as will the chairman, very carefully all of the testimony again. I have read it with

great profit last evening and once again today as you spoke.

The CHAIRMAN. Thank you very much, Senator Lugar.

Senator Roberts.

Senator ROBERTS. Both of my colleagues have asked most of the

pertinent questions that I had on my mind. I want to ask a little

question about our efforts to achieve some progress, any progress,

in the WTO, and there has been a lot of talk, a lot of discussion,

a lot of rhetoric, about the green box, amber box commitments. I

have always been one who, gosh, I do not know how many speeches

I have made on behalf of a consistent and aggressive export policy;

then, you try to define what that is, our market share, which has

fallen rather dramatically.

The President’s trade initiative; sanctions reform; the value of

the dollar; certainly, increasing the budget for FAS and getting us

much more aggressive; as a Dodge City farmer told me one time,

we have got to start taking a gun to a knife fight. Then, you get

into all sorts of problems with the alleged free market. Then, the

distinguished chairman will point out that you cannot do it all by

trade.

I would say that the bloom is off the lily, really, in farm country

with this trade. I do not think they have any problem with the

goals of a strong trade policy, but how many years has it been now

that we have been on the decline, and they think it is sort of a

siren song; when are we going to get there from here, Pat? You

know, you have been talking about this for a long time. It does not

mean that we do not try, and we do not try to piece together a

much better program. Senator Nelson indicated the Export Enhancement Program. His predecessor’s predecessor was the one Ed

Jurinsky was the one who was so instrumental in the Export Enhancement Program. Now, we do not think that is the proper tool

to play.

Having said all of that, do you think when Congress is crafting

the commodity title of the Farm bill, and you had to choose between a priority, would you put as much money as you could into

the commodity title as possible, or should we try to fulfill our commitments in regard to WTO and get back to the table and hang

tough and know when to hold them and fold them?

Mr. KLEIN. Our first obligation is to our U.S. producers, and we

are going to stick with that. While we have to look——

Senator ROBERTS. We hope we can do both but——

Mr. KLEIN. Well it is where it fits after the producer viability

comes in. We will fight that battle afterwards. We obviously cannot

create something called multifunctionality here, because the Europeans beat us to it, but, well, that gives a whole new box, does it

not?

Senator ROBERTS. Well, Secretary Glickman, my good friend and

buddy, mentioned that in Seattle, about multifunctionality, that

the Europeans use that, i.e., rural America is a great place to live

if you can make a living and all of the factors that go into that.

41

I do not think it is an either-or argument, but then, on the other

side of it, it seems that we hear this debate. I would hope we could

do both, and I would hope we could achieve some progress. I have

no illusions about that. It is a tough, tough battle.

Yes?

Mr. DITTRICH. Senator Roberts, we suggest that the current

trade negotiations refocus their efforts on shared production cuts if

needed at times, because there is a valid concern that if we cut production here that other countries will expand production, although

Darrell Ray, I believe, has mentioned that South America will increase their soybean production even if the price goes to zero, or

you have to go to zero or below zero to stop the production increases.

We think that redirecting those attempts at world trade to that

of international food reserves and market agreements would be

much more beneficial to agriculture as a whole in this country and

around the world instead of competing in an ever-vicious downward

spiral of price to the last one that stands. The reality is that we

need all the world’s production at this point. We are using most all

of the world’s production. We have some carry-over stocks, but the

reality is most of the stocks are being used, and in a system where

we compete until the last one stands, the reality is the United

States agricultural production is still needed and still used.

We can drive the thing to the bottom of market price, or we can

decide to set up fair market prices that everyone can agree on.

Sure, South America will still cut our price and undercut us on

price and sell theirs as fast as they can, because they do not have

the infrastructure to store, but that being the case, we will still sell

our production.

Senator ROBERTS. I will use you as a lead negotiator with the

French.

Tony.

Mr. ANDERSON. We would have to stand by the safety net issues,

considering that, again, going back to the unfinished agenda. You

know, we are basically a market-oriented group. We want access to

the rest of the global market. We have tried everything under the

sun to fit into the WTO agreements through the sanitary and

phytosanitary fights and all of that. The concern is that if we do

not have a safety net in place, and producers utilize it properly,

that there will be even fewer producers to deal with in the future

than there are today; maybe an economic trend that we cannot stop

nor should we, but that is a discussion for somewhere outside of

these walls.

Again, I do not know that the discussion as you raise here would

have to be mutually exclusive. That there are ways that we can

work to have both.

Senator ROBERTS. We will try to come up with a different crayon,

whether it is amber or green or orange or green, see if we can

maybe work that out.

Mr. ANDERSON. OK.

Senator ROBERTS. Mr. Miller.

Mr. MILLER. We probably agree with Mr. Anderson that both

pieces are necessary; that we certainly see the need for some support; at the same time, we think that the ultimate long-term soluVerDate 11-MAY-2000 14:17 Nov 08, 2002 Jkt 082204 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 82204.TXT SAG1 PsN: SAG1
42

tion is in free trade. We think that U.S. farmers can compete internationally if the playing field is level. We do not think in a lot of

instances it is, and responding a little bit to Mr. Dittrich, who is

involved in this issue, too, nowhere in any submission or discussion

from us will you find us advocating cheap prices on commodities.

I am a processor. I do not make any more money per bushel of wheat that I grind whether it is $5 wheat or $3 wheat. In fact, I

would prefer that wheat prices not be at their current low levels,

because the security of my choice of quality and the reliability and

predictability of that crop is better in a strong demand market

than it is in a weak demand market or one that is unnaturally

volatile because of Government intervention.

To say that I resist paying more than any of my competitors for

wheat, that is correct, but to say that I want cheap wheat is really

incorrect. As a processor, my margin is not different based on those

two different prices of wheat. However, if I am faced with competition from foreign countries, for example, in pasta, where they have

a subsidized rate that I cannot compete with here, then, I have to

try to go into my domestic market and try to make our wheat price

competitive with a subsidized product, be it wheat or pasta, in this

case, from a foreign country; that, I cannot live with.

If the playing field is equal, then, I am actually personally somewhat in favor of a higher wheat price, because it is a healthier supply chain for me. Finally, sometimes in our discussions of these

issues, we try to create good guy-bad guy scenarios rather than recognize the fact that the things we have in common are so much

overwhelmingly more than those things that we do not have in

common.

Our coalition members are supportive, even though prices are

perhaps artificially low right now, we are advocating change and

change that in many instances would raise price to us in the marketplace where we would pay more. We think that some of the policies artificially depress prices. That is not advantageous to us or

the producers.

As we look at these issues, we need to be cautious that we are

not trying to assign blame or virtue on one side or the other but

recognize the commonality of our interest.

Senator ROBERTS. Ms. Evans.

Ms. EVANS. Speaking again for the barley industry, and I do feel

that we are somewhat unique in the situation of our declining acreage and our total competition with the EU subsidies in the barley

world market; I would feel that we would put a priority on sustaining the domestic policy as we have it. One of the concerns as we

have drawn up our policy dealing with the WTO amber versus

green box, one of the concerns that I have personally had is we develop a countercyclical or whatever program we finally come up

with, and it fits into the top level of that box; what then precludes

the EU saying fine, then, we will just develop our program the

same, and we will use $60 billion in our amber box, and barley

would be right back in the same boat we have been through this

whole last series.

That is my concern with it. It is something we have talked about,

but for right now, we are still on the policy that we need to protect

our producers domestically here at home as our priority.

43

Senator ROBERTS. Bill.

Mr. KUBECKA. From sorghum’s position, and we have discussed

this from a board perspective, and our deal is that we have an obligation to WTO, and as long as we are going to participate in that,

we will abide by those rules, although that does not mean that individually, everyone agrees with that, but that is generally our policy statement. We also have, more or less accepted the fact that I

do not know that we are going to have to worry about that anyway

because of the budget.

[Laughter.]

Mr. KUBECKA. That is basically our board’s position and what

our discussion has been on it.

Senator ROBERTS. Mr. Chairman, I did not mean to pose this as

an either-or question. That is sort of how it came out. In today’s

discussion that the flavor of the folks these people represent is important. I know you have experienced this, and I know Senator

Lugar has, that when we discuss whether our colleagues from

other countries, possible solutions in regards to subsidies, unfair

trade competition, boy, it is tough sledding.

I remember in Brussels and talking to Franz Fischler and the

head of the European Farmers Union trying to get some progress

on the three Bs; biotech and beef and—what was the other one?—

oh, bananas. As a matter of fact, I said could we at least discuss

about the three Bs, and they looked at me and said oh, you are the

guy who was pushing the double-AMTA payments. You know, you

are amber; you are red, as a matter of fact. You are not even

amber.

It went downhill from there and——

[Laughter.]

Senator ROBERTS [continuing]. You know, the French representative of the farmers union group said in France, we only discuss two

Bs, Bridgette Bardot. I told him at her age, she needed a little

biotech help, but that is another—— [Laughter.]

Senator ROBERTS. I am sorry to have done that to you. Go on.

The CHAIRMAN. That is all right.

Senator ROBERTS. I am through.

The CHAIRMAN. Do you have anything else, Senator? Well, if

there is nothing else, any last comment or something before we

hammer it closed here?

It has been a good session this morning. I thought we had a good

exchange of ideas and a good discussion. There are many things

that we have got to consider. As you can see, we have a tough task

ahead of us. Although it is challenging, we might come out of this

with interesting and good policies that will move us forward agriculturally in this country.

I see great possibilities out there. I would close by just saying

that from my standpoint, if, in fact, we have got to look at more

domestic use, we cannot eat much more in this country. In fact,

obesity has become a problem in this country. We must find some

different ways of processing food and different things like that, but

if we are going to have more domestic use, I come full-circle back

and say that, well, why not energy? It seems to me you win every

way on that one. We cut down on foreign imports; it is environVerDate 11-MAY-2000 14:17 Nov 08, 2002 Jkt 082204 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 82204.TXT SAG1 PsN: SAG1
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mentally sound; it cleans up greenhouse gases; provides better

farm income; does not hurt Mr. Miller and the other part of the

food chain that is out there.

It seems to me that the more I hear, the more I am thinking that

we have got to focus on energy and put more of our agricultural

products over a certain amount that has to go for food and fiber

and get it into energy production in this country. That is domestic

use; it keeps our consumers happy in terms of their food dollar and

the amount that they spend; does not add to inflation; in fact, I

would say that it would actually contribute to lowering inflation by

helping to bid down the price of imported energy.

That is just my thinking at this point in time is that we have

to move more in the energy area, and I do not know if anyone

wants to say anything more about that, but with that, the committee will stand adjourned—I thank you all very much—until the call

of the chair next week. When is the next hearing? Next Tuesday

at what time? Nine in this room. Thank you very much.

[Whereupon, at 12:06 p.m., the committee was adjourned.]

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