Date: 1987-12-18
Speaker: DE LA GARZA (democrat)
Chamber: H

Mr. Speaker. I rise today to tell you and the Nation that. in spite of difficulties and setbacks. the American farmer is still the most productive farmer In the world. and that the farm bill which this body fashioned in 1985 has proven to be a good one that has worked to the benefit of the farmers and the consumers of this Nation. Recently we had a visit from several Soviet Union official from their agriculture sector. If you ever had any doubt about the abundance produced by the American farmer. you only had to watch these Soviet agricultural officials as they viewed the amazing breadth of choices available in any American grocery store. Just as these Soviet officials were amazed. I believe every American consumer should be amazed that such quality and variety is available at such reasonable prices. Certainly. food prices have gone up. but as a percentage of takehome income. food prices have been by far the most stable portion of the American familys budget. The next time someone complains to you about high food prices. remind them that even if American food prices were doubled. Americans would still spend a smaller percentage of takehome pay on food than: the average resident of- most nations of the world. While I wanted to remind our consumers of just how lucky we all are. I rsie today principally to provide you with a report on the status of American agriculture. Five recent trends favorable to American farmers demonstrate that the 1985 farm bill is having a positive effect on U.S. agriculture: First. The farm financial crisis is abating. Second. Producer income has increased. Third. U.S. grain surpluses are moderating. Fourth. Demandboth domestic and foreignis responding favorably. Fifth. The farm bill is affecting global production and trading trends. "In -addition. the legislation may be having other beneficial side effects. Recent data show that the farm financial crisis that attracted national media attention in 1984 and 1985 is beginning to ease. Overall farm debt has fallen from a high of $190 billion in 1982 to about $141 billion in 1987. adecline of about 26 percent. The fact that farmers are paying off their loans may also be seen in declining debttoasset ratios. According to USDA. that. number now stands at 19 to 21 percent. That is still too high. but it is down 3 percentage points since 1985. Improving farm income is another sign of the favorable impact of the farm bill. Net cash income in 1987 is forecast to reach a recordbreaking range of $53 to $57 billions of dollars. Because of lower commodity prices. farm receipts are expected to drop $12 billion below their 1985 level. However. the effect of that decline will be more than compensated by lower production expenses and modest assistance from the Government. One of the most important goals of the 1985 farm bill was to bring down the huge commodity surpluses which have overhung the international markets. Through very few people believed us at the time the bill was passed. the bill is working and commodity surpluses are coming down to more manageable levels. This can be seen in production trends and in carryover stocks. Participation in farm programs under the 1985 farm bill has been quite highfrom 69 percent in 1985 to 84 percent in 1987. The acreage reduction program and conservation reserve programs have resulted this year in approximately 70 million acres being taken out of production. Because farmers tend to idle their least productive acres and can increase their yields on remaining acres. this does not translate directlypercent for percentinto cuts in actual output. Still. the most recent USDA estimates show that corn production Is down 19 percent and wheat production is down 13 percent from their 1985 levels. In addition. -ending stocks have fallen in Virtually all of the major traded commodities. This represents a very considerable and very favorable change from only a yearandahalf ago. when grain bins were bulging and corn was being dumped- beside filled elevators. These reductions should continue to translate into higher marketplace prices for farmers and In lower Government storage costs. A third key measure of success of the 1985 farm bill Is demand. Again. the farm bill seems to be hitting the mark. Both domestic consumption and export sales have risen in response to provisions of the omnibus legislation. U.S. grain use has gone up as livestock producers take advantage of rockbottom prices Domestic corn -utilization is predicted to rise by nearly 1.5 percent over its 1985 level. It is distressing to us all that virtually every month brings a new recordlevel trade deficit. We all recognize this as a national problem which requires the attention of both the Congress and the administration. Yet. when those disturbing trade deficit figures come out. no one remembers to point out that. without the contribution of increased agricultural exports. the figures would be much worse. It may require a few more years for the United States to reach the record high of 1981. in which we exported some $43.8 billion in farm commodities. but now. after a 6year slump. real progress Is being made as a result of the 1985 farm bill. Our 1986 farm commodity exports were about $26.3 billion and USDA estimates that figure will reach $28 billion in 1987. The export recovery is also evident in volume increases: Exports should be approximately 129 million metric tons in 1.987. relieving a steady downward trend. USDA forecasts that both the volume and value of farm exports will rise further in the current fiscal year. These encouraging export numbers have also helped the agricultural trade balance. Net exports are expected to reach nearly $8 billion in 1987. That is still a far cry from the $26.6 billion farm trade surplus we enjoyed in 1981. but it is a definite. improvement over .1986. when a strong dollar was pushing our farm trade surplus toward the vanishing point. Although some of the improved export performance may be attributed to an overall increase in world trade. the United States is making progress in recapturing some of the market share lost in the 1980s. In 1981. the United States sold 48 percent of all grain traded internationally. U.S. grain sales plummeted to 3 1 percent of the world market in 1985. but have now rebounded to an extimated 48 percent in 1987. a remarkable recovery by any standard. A closer look at agricultural exports show progress being made -on all major commodities. not just grains. Wheat exports will rise about 450 million bushels for fiscal year 198788. and corn exports will increase about 200 million bushels over last fiscal year. But also -cotton exports are expected to take a marked upswing. with about 500.000 more bales than last fiscal year. Also. one of our traditionally most controversial programs. the dairy price support program-. appears -to have been stabilized. The changes mandated by the 1985 farm bill have helped lower dairy program outlays from more than $2.53 billion in 1983 to $1.24 billion this year. We have made immense progress in dealing with one of the most troubling problems in our dairy program. that of excessively large stocks and the costs of maintaining those stocks. In the last year. butter inventories have dropped by 58 percent. cheese inventories have dropped by 82 percent and nonfat dry . milk inventories have dropped by 91 percent. In fact. Mr. Speaker. USDA has informed the committee that. at current rates of usage. we may find ourselves short of dairy product for feeding programs by next March. Another point in favor of the farm bill is that global agricultural trends are beginning to respond to program changes. In 1987. world grain production decreased and consumption Increased. for the -first time in this decade. world consumption of all grains and cotton. should exceed production. U.S. farm programs are a major contributing factor here. the pricemoderating influence of the farm bill has helped to put a brake on runaway world grain -production. and has made food more affordable for millions of people. The five trends discussed above can be seen simply by examining raw data. However. the farm bill is likely to have other effects on both the domestic and international agricultural scenes. Such effects cannot always be measured by numbers. but may nonetheless have farreaching implications for American farmers. Many observers have -noted that the gradual lowering of price and income supports mandated by the 1985 farm bill will eventually provide greater market orientation to American agriculture. That movement was strengthened by the introduction of the generic PIK certificate program. Under this program. farmers receive a portion of their direct income support payments in the form of certificates that entitle them to take possession of USDAheld commodities. However. these commodities may also be usedand have in fact been widely usedby farmers to redeem price support loans at more favorable rates (a strategy commonly known as "PIK and Toll"). they may be sold or they may be turned in for cash. The latter two represent the simplest two options for the -farmer. the PIKandroll technique. however. requires the farmer to pay closer attention to the market In -order to maximize his profits. Through the creation of this program. the farm bill will improve the marketing skills of thousands of American farmers. In the area of farm trade. we in the Congress In the 1985 farm bill provided the administration with the necessary tools to respond to unfair trading practices of competing grain produeersespecially the European Community EEC]. The ECs common agricultural policy supports farmers mainly through providing high internal prices to farmers and using export subsidies to dispose of surplus -production. In so doing. the EC has lured away traditional U.S. grain customers. To respond to this practice. the Congress has mandated both lower price supports and the Export Enhancement Program [EEP]. aimed specifically at recapturing former export markets. Both of these -policy tools. along with the cheaper dollar. have made it much more expensive for the EC to dump its surplus grain -on world markets. Eurocrats are now reportedly examining a number of proposed -measures aimed at bringing down the high cost of the common agricultural policy. Such options include reducing -price supports. implementing a. supply management program. and even destroying -surplus stocks. The farm bill thus -shows the U.S. determination to fight back against unfair trading practices. and should strengthen the American position at the bargaining table during the current round -of negotiations on the General Agreement - on Tariffs and Trade [GATT]. Mr. Speaker. I will be the first to admit that the 1985 farm bill has had some disappointing -features. The most obvious one is on the .Government -cost side. ]From a $3 billion annual average cost in the 1970s. Federal outlays on farm programs soared to nearly $26 billion last year. However. -there should be some consolation in the fact .that even that trend has turned around. The most recent estimates by both the Office of Management and Budget and the Congressional Budget Office -show farm program expenditures to be .dropping more swiftly than anticipated -earlier this year. Even with the higher expenditures this year. all of the money spent on agricultural programs amounts to only about 3 percent of our total national budget -of over $1 trillion. Mr. Speaker. 3 percent of our national budget seems like an extremely small price to -pay to keep America the -best fed nation in the world and for our farmers to -at least remain solvent. And we -must also admit. Mr. Speaker. that not all .of the favorable movements mentioned may be attributed solely to programs of the 1.985 farm bill. Traditional factors such as GNP growth. interest rates. inflation. and exchange rates play a decisive role -in the international -trade climate. and are all far beyond the control of those December 1.8. 1987 of us in this body. The 1985 farm bill provided a framework for the longrange recovery of- American farmers and. with a bit of luck and a lot of. hard work. we will continue to make progress on the overall agricultural economy.