[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]





                  THE AGING OF AGRICULTURE: EMPOWERING


                  YOUNG FARMERS TO GROW FOR THE FUTURE

=======================================================================

                                HEARING

                               before the

                      SUBCOMMITTEE ON EMPOWERMENT

                                  and

                   SUBCOMMITTEE ON RURAL ENTERPRISES,
                      BUSINESS OPPORTUNITIES, AND
                    SPECIAL SMALL BUSINESS PROBLEMS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                    WASHINGTON, DC, NOVEMBER 3, 1999

                               __________

                           Serial No. 106-40

                               __________

         Printed for the use of the Committee on Small Business

                    U.S. GOVERNMENT PRINTING OFFICE
65-504                      WASHINGTON : 2001 ________________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402




                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McCONDALD,
DONALD A. MANZULLO, Illinois           California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN,
DAVID M. McINTOSH, Indiana           Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director
                                 ------                                

                      Subcommittee on Empowerment

                JOSEPH R. PITTS, Pennsylvania, Chairman
PHIL ENGLISH, Pennsylvania           JUANITA MILLENDER-McDONALD,
JIM DeMINT, South Carolina             California
FRANK A. LoBIONDO, New Jersey        DENNIS MOORE, Kansas
EDWARD PEASE, Indiana                STEPHANIE TUBBS JONES, Ohio
                                     TOM UDALL, New Mexico
             Stephanie O'Donnell, Professional Staff Member




                                CONTENTS

                              ----------                              
                                                                   Page
Hearing held on November 3, 1999.................................     1

                               Witnesses

Brown, D. Scott, Program Director, Food and Agriculture Policy 
  Research Institute (FAPRI).....................................     6
Young, John, Farmer, Groffton, NH................................     8
Cornwell, Lynn, Vice President, National Cattleman's Beef 
  Association....................................................    10
Ecker, Terry, Farmer, Elmo, MO...................................    12
Gross, Steve, Farmer, Manchester, PA.............................    14
Cobb, Bruce, Farmer, Bridgeton, NJ...............................    16
Johnson, Baron, Farmer, Johnson Bros., Inc.......................    18
Smith, Gary, Executive Director, Chester County Development 
  Council........................................................    29
Baker, John, Iowa Beginning, Farmers Center......................    32
Offutt, Susan, Administrator, Economic Research Service, US 
  Department of Agriculture......................................    34

                                Appendix

Opening statements:
    Talent, Hon. James M.........................................    39
    Pitts, Hon. Joseph R.........................................    42
    LoBiondo, Hon. Frank A.......................................    46
Prepared statements:
    Brown, D. Scott..............................................    47
    Cornwell, Lynn...............................................    52
    Ecker, Terry.................................................    55
    Gross, Steve.................................................    58
    Cobb, Bruce..................................................    65
    Johnson, Baron...............................................    71
    Smith, Gary..................................................    77
    Baker, John..................................................   126
    Offutt, Susan................................................   129
Additional Information:
    Article ``In Consideration of Farming''......................   133

 
  THE AGING OF AGRICULTURE: EMPOWERING YOUNG FARMERS TO GROW FOR THE 
                                 FUTURE

                              ----------                              


                      WEDNESDAY, NOVEMBER 3, 1999

        House of Representatives, Subcommittee on 
            Empowerment, of the Committee on Small 
            Business, Jointly With the Subcommittee on 
            Rural Enterprises, Business Opportunities and 
            Special Small Business Problems, of the 
            Committee on Small Business,
                                                    Washington, DC.
    The Subcommittees met, pursuant to call, at 2 p.m., in Room 
2360, Rayburn House Office Building, Hon. Joseph R. Pitts 
[Chairman of the Subcommittee on Empowerment] presiding.
    Chairman Pitts. Good morning, ladies and gentlemen. Thank 
you for joining us here today for the first joint hearing of 
the Subcommittee on Empowerment and the Subcommittee on Rural 
Enterprises, Business Opportunities and Special Small Business 
Problems. The focus of today's hearing is the aging of 
agriculture: empowering young producers to grow for the future.
    Before I proceed with my opening remarks, I would like to 
note that the Chairman of the Committee on Small Business, the 
gentleman from Missouri, Mr. Talent, is joining us today, and I 
am pleased to yield to him for any opening comments he would 
like to make.
    Mr. Talent. Mr. Chairman, I appreciate that, and I want to 
thank you and Mr. LoBiondo for inviting me to join you in 
welcoming the participants of this joint hearing of the two 
Subcommittees on a subject that is very important. I think it 
is going to become increasingly important for the future of 
agriculture and an opportunity for people in agriculture. The 
trend towards an agricultural system with the average age of 
the operators of our farms nearing 55 years is of great concern 
to many in the agricultural community. I share the concerns of 
that community and applaud Mr. Pitts and Mr. LoBiondo for their 
willingness and desire to address this issue.
    I am proud of Missouri's agriculture industry and recognize 
the importance of agricultural and agribusiness to the economy 
of Missouri. In fact, Missouri has a large number of farms, 
110,000 of them, making Missouri second only to Texas in states 
with the most farms. As of 1996, more than 400,000 workers or a 
full 15 percent of our labor force back home was employed in 
agriculture. Missouri is also ranked in the top 10 producing 
States of all major crops and livestock except citrus, and we 
are working on that. Along with this accomplishment, 
agriculture contributed over $5 billion in cash farm receipts 
to the economy of Missouri in 1997.
    Unfortunately, 1998 and 1999 have brought low prices and 
adverse production conditions to Missouri as well as all over 
the country. A summer-long drought throughout Missouri 
devastating much of the corn and soy bean crop, combined with a 
strong U.S. dollar, economic turmoil in Asia, and the large 
global grain and livestock supplies, we have the ingredients 
for a recipe for disaster.
    The tillers of the soil and the husbandry of livestock have 
always been honored professions. Thomas Jefferson wrote in 1803 
that agriculture is the first in utility and ought to be the 
first in respect. I agree with that spirit and admiration for 
the profession of food and fiber production. In my years of 
interaction with Missouri's farmers and ranchers, I have 
learned that agriculture, specifically production agriculture, 
is much more than just an occupation. It is a way of life from 
which much satisfaction is gained from the creation of 
something of value from the tiniest of seeds. American 
producers take pride in the fact that they provide the most 
abundant, the most affordable, and safest food supply in the 
world.
    Our producers have a long and honorable tradition of 
creating a legacy and way of life for posterity. The 
generational family ownership of the farm, passing down and 
sharing of the family small business from one generation to the 
next is a great source of honor and tradition which has been 
celebrated throughout American history. The University of 
Missouri Agricultural School, arguably the most innovative and 
forward-thinking agricultural school in the Nation, in 1976 
began recognizing farms which had been family legacies for over 
100 years through its Century Farm Program. To date, over 2,800 
Missouri family farm legacies have been recognized as century 
farms.
    The blood, sweat, and tears which have fertilized these 
family legacies are the same stones upon which our Nation is 
built. Yet this great tradition of the continuance of family 
farm legacies has been short-circuited. Last August, the House 
Committee on Small Business held two field events focusing on 
agricultural, tax, regulatory, and trade issues critical to the 
agricultural community. One concern that was voiced at both of 
these hearings was the lack of youth entrance into production 
agriculture. Producers at the hearings told stories of the 
barriers of entry into agriculture for young people, the most 
hated of which was the estate tax. I wholeheartedly agree that 
this tax may be the single most harmful obstacle to the 
tradition of passing the farm down to the next generation. Why 
should producers work to create, sustain, and preserve this 
legacy only to force their loved ones to visit the undertaker 
and Uncle Sam on the same day? Why should the government 
penalize America's original small business owners for wanting 
to pass their heritage and way of life onto their children?
    Beyond this discouraging tax policy, young people have to 
observe the reality that there has not always been a direct 
relationship between the hard work and intelligent management 
of the farm by their parents and the profitability of their 
farm. They realize that Mother Nature is not always 
sympathetic. The world commodity market is well out of their 
control, and even during decent years their parents only made a 
small percentage return on their investment. As a result, young 
people often decide that it would be easier and more attractive 
not to enter the family business.
    In these hearings that we had in Missouri, I looked at 
panels like the ones that we have here--which, by the way, I 
want to say that we have a big sprinkling of young people here 
on this panel, so I don't want to suggest otherwise, but we had 
panels in Missouri on the future of the family farm. A number 
of the witnesses were farmers in their fifties. I wondered at 
the time whether we could have hearings like that 15 or 20 
years from now because as producers leave their farms, their 
children are not going into the farming business, and we might 
not be able to constitute a panel like that in a few years if 
we don't do something.
    Of course, the climate cannot be controlled and the effects 
can only be slightly mitigated, but something can be done to 
provide a brighter outlook on the marketing side of the 
equation. Over and over producers tell me that the key to the 
future of our agricultural legacy is for producers to become 
price makers instead of price takers. They have to be empowered 
to begin finding waysto remove themselves from the oppression 
often of the world commodity market. This will be accomplished through 
the establishment of producer-owned, value-added processing in the 
creation of other alternative marketing systems. We must provide 
producers with the effective technical assistance, engineering, 
business planning, marketing, organizational assistance to begin 
developing their own processing and marketing system.
    We all know the old parable that a farmer once shared with 
me: If you feed a person fish, he will eat once; if you teach a 
person to fish, he will eat for the rest of his life. If we can 
provide our young farmers and ranchers with appropriate 
assistance, then they will have the tools to reach up the 
agriculture value chain. Only when that is accomplished will 
they have the ingredient that is needed to regrow and grow 
again rural America.
    Once again, I am pleased that the House Committee on Small 
Business has the opportunity to listen to the concerns of 
agriculture, America's original small business. I want to thank 
again Mr. Pitts and Mr. LoBiondo and recognize Mr. Phelps also 
for his consistent work and advocacy on this issue. I am 
looking forward to the hearing and thank you, Mr. Chairman, for 
allowing me to participate.
    Chairman Pitts. Thank you, Mr. Chairman.
    [Mr. Talent's statement may be found in the appendix.]
    Chairman Pitts. As Mr. Talent noted, we are here today to 
discuss an issue that is of great concern in the agricultural 
community, the lack of young people entering production 
agriculture. According to the most recent Census of 
Agriculture, the average age of American farmers is 54.3 years 
of age and there seems to be a shortage of young people waiting 
to succeed our aging farmers as they prepare for retirement. 
Unfortunately, this shortage means that many of our seasoned 
farmers with decades of farming experience have fewer people to 
pass on their legacy to and to benefit from their accumulated 
years of agricultural experience. Older farmers who are looking 
towards retirement often find their children are not interested 
in taking over the family farm, or if they are interested, they 
are discouraged by the difficulties inherent in the transfer of 
a farm from one generation to the next.
    I have many farmers in my district, the 16th Congressional 
District of Pennsylvania, Chester and Lancaster Counties. These 
hard-working Pennsylvania farmers farm about 560,000 acres for 
a total of nearly 6,000 farms. Over the years they have given 
me insight into some of the reasons why young people are more 
reluctant to enter farming. Many who grew up on farms are aware 
of the tax burden they will face when taking over the family 
farm. In addition to onerous estate and capital gains taxes, 
the lack of capital is another obstacle facing young people who 
want to go into production agriculture.
    There is no question that farming is a difficult lifestyle 
involving long hours of work, unpredictable weather patterns, 
natural disasters, and fluctuating crop prices. These 
uncontrollable risks are intrinsic to agriculture and a reality 
that farmers deal with daily. However, it is the other 
impediments, the ones that we have the power to change, such as 
taxes, regulatory barriers, global market access, that are most 
discouraging to aspiring producers.
    I expect that some of the witnesses here today will share 
some of the same concerns as my constituents. This hearing will 
allow members of the two Subcommittees to hear firsthand the 
problems facing aspiring farmers in rural America and then 
explore some possible solutions. I am pleased to welcome our 
witnesses. We look to them for insight into the state of 
agriculture today and the outlook of our changing rural 
economy. Young producers like those of our first panel 
represent the future of agriculture, and many are from the 
congressional districts of the Members sitting on this dais. I 
thank them for traveling to Washington, D.C., for this hearing 
and look forward to their testimony.
    Dr. Scott Brown is the program director at the Food and 
Agricultural Policy Research Institute, based out of the 
University of Missouri at Columbia. Mr. John Young is a farmer 
from Groffton, New Hampshire. Mr. Lynn Cornwell is the Vice 
President of the National Cattlemen's Beef Association and is 
from Glasgow, Montana. Mr. Terry Ecker is a farmer from Elmo, 
Missouri. Mr. Steve Gross is a farmer from Manchester, 
Pennsylvania. Mr. Bruce Cobb is a farmer from Bridgeton, New 
Jersey. Mr. Baron Johnson is a farmer from Inman, South 
Carolina.
    Our second panel consists of experts who will share their 
experiences with programs designed to empower young farmers to 
begin and sustain agricultural enterprises. Many of these 
programs give hope to a generation of aspiring farmers while 
providing concrete practical solutions to overcoming some of 
the obstacles existing in agriculture today. I am pleased to 
welcome our witnesses on the second panel, Mr. Gary Smith, who 
is from my district, the executive director of the Chester 
County Development Council; Mr. John Baker, from the Beginning 
Farmers Center at Iowa State University; and Ms. Susan Offutt, 
the Administrator of the Economic Research Service at the U.S. 
Department of Agriculture. So we thank all of you for joining 
us today.
    Small farm and ranch enterprises are the backbone of rural 
America, and it is my hope that this hearing will provide us 
with useful information and recommendations about how to 
sustain this strong segment of our rural economy and to 
preserve the rich American tradition of production agriculture.
    [Mr. Pitts' statement may be found in the appendix.]
    Chairman Pitts. Now I will turn the mike over to the 
distinguished Chairman of the Subcommittee on Rural 
Enterprises, Business Opportunities, and Special Small Business 
Problems, my friend from New Jersey Mr. LoBiondo, for his 
opening comments.
    Mr. LoBiondo. Thank you very much. I would like to thank my 
colleagues, Congressman Pitts and Congressman Talent, for 
helping to arrange this. I am absolutely thrilled to co-chair 
this hearing and to have the opportunity to hear from those of 
you who are in the real world of agriculture every day, to help 
outline for us some of the problems. Hopefully we can share 
this information with a number of our colleagues to let them 
know there is a real problem, that we think it should be 
emphasized so we can look to start to find solutions. And I 
want to thank each of you for being here today, for taking 
valuable time from your schedules to help us better understand 
what you are facing on a day-to-day basis. Thank you.
    Chairman Pitts. Thank you.
    [Mr. LoBiondo's statement may be found in the appendix.]
    Chairman Pitts. Since Mrs. Christensen, the Ranking Member 
of the Rural Enterprises Subcommittee, is unable to join us 
today, I would like to now turn the mike over to my friend from 
Illinois, Mr. Phelps, for his opening comments.
    Mr. Phelps. Thank you, Mr. Chairman, and thank all of you 
for having this hearing and making it available to us, and each 
and every one of the panelists for your participation today. We 
appreciate your input. I know that as a member not only of the 
Small Business Committee but also the Agriculture Committee, I 
am pleased to be able to participate in a hearing that ties the 
two together so well. It is my hope that this hearing will 
allow the Small Business Committee to continue our discussion 
on the future of farms and what we as the small business 
community can do to help.
    My congressional district covers 27 counties in central and 
southern Illinois. Every one of the communities I represent is 
deeply impacted when agriculture experiences tough times. These 
indeed are some of the toughest in recent memory. Today's 
hearing will focus on America's aging farmer population and the 
implications for rural communities and the future of the family 
farm. We will look at some of the roadblocks the younger 
farmers face and what we can do to break down those barriers. 
Some of the possibilities we will be discussing include greater 
access to capital, alternative marketing strategies, estate 
taxes, capital gains taxes, state and local grants, USDA 
programs and the linking of the older producers with younger 
producers.
    Our panel this afternoon includes representatives from the 
Department of Agriculture, farmers, members of the academic 
research community, and farm industry representatives.
    When the future of rural America is threatened, an entire 
way of life is endangered. Our purpose today is to generate a 
discussion about what we can do to keep our heartland alive, 
help it grow and become even stronger. I would again like to 
thank the Chairman for the recognizing the importance of this 
issue, and I look forward to hearing the testimony of our 
distinguished panelists. Thank you, Mr. Chairman.
    Chairman Pitts. Thank you, Mr. Phelps.
    We will now go to the witnesses. Each of you will have 5 
minutes for your statements. We will use the lights for your 
convenience.
    Dr. Scott Brown.

    STATEMENT OF D. SCOTT BROWN, PROGRAM DIRECTOR, FOOD AND 
         AGRICULTURE POLICY RESEARCH INSTITUTE (FAPRI)

    Dr. Brown. Thank you, Mr. Chairman, for the opportunity to 
appear before these Subcommittees to provide information 
concerning the current state of U.S. agriculture. The Food and 
Agricultural Policy Research Institute is a joint project 
between the University of Missouri and Iowa State University. 
Furthermore, we have formal relationships with Texas A&M 
University to examine market and policy changes at the farm 
level, and with the University of Arkansas to analyze the world 
rice market, and with Arizona State University to examine the 
fruit and vegetable sectors.
    During 1999, attention continues to be focused on the 
downward pressure on prices for many of the major agricultural 
commodities. This is occurring at the same time that some 
regions of the country have experienced severe drought 
conditions, with the combination of the two putting even 
greater pressure on some producers. In regards to the lower 
prices, no single cause can be identified, but rather a 
combination of fundamental developments in the supply and 
demands of the commodities.
    World grain and oilseed prices are continuing to be 
pressured by large production levels that would allow stocks to 
rebuild from their very tight levels of 1995 and 1996. The 
higher production is due both to increased area and generally 
favorable yields. In response to the strong price signals in 
1995 and 1996, the area devoted to major crops has shown a 
significant increase. For the 1996 to 1998 period, world wheat 
area averaged 3.4 percent above the 1991 to 1994 period. A 
similar story can be seen in other crops as well. Likewise, 
world red meat production is 14 percent higher over the 1997 to 
1999 period relative to the 1990 to 1992 period.
    Coupled with increased area, world markets have also seen 
generally favorable yields since 1995. World coarse grains have 
seen 3 successive years of above average yields. In the past 30 
years we can find only one example, the 1984 to 1987 period, 
where there were as many consecutive years above trend yields.
    Price pressure due to increased supplies is not isolated to 
the crops markets. For livestock the most notable example is 
pork. After seeing strong prices in 1996 and much of 1997, pork 
producers responded with increased herds and additional 
production. For 1999, pork production is expected to remain at 
historically high levels. As a result the annual average price 
is projected to be as much as 40 percent below the 1997 number.
    Barring any major production problems, crop and livestock 
prices will average substantially lower in 1999 and 2000 than 
what was observed in the 1991 to 1995 period. However we must 
remember that prices in those years were well above historical 
levels. In addition, those prices brought increased area that, 
together with good yields, resulted in more production. The 
additional supplies have fallen upon a demand picture that has 
been weakened as a result of the general economic problems 
centered around the Asian crisis. Both additional supplies and 
weak demand for agricultural commodities are responsible for 
the lower prices we face today.
    Our current estimate of commodity prices through 2005 shows 
continued weakness in many cases. Corn prices, for example, are 
expected to average $2.25 over the next 5-year period, far less 
than 1996 average of $2.71. It should be noted that our 
projections are conditioned on average yields that result from 
normal weather patterns. If yields were to deviate from these 
averages, prices would move accordingly. Wheat and soybean 
prices over the same period are also expected to average far 
below the 1996 level.
    Pork prices are also expected to remain below historical 
averages over the 2000 and 2005 period. FAPRI projects pork 
prices will average slightly more than $42 per hundredweight 
over the period which, would be the lowest level observed for 
many years. Structural change will continue to be one of the 
big drivers in the pork industry.
    Other areas of agriculture are expected to see higher 
prices over the next few years. The beef industry is expected 
to see prices over the next 5-year period that will be near 
those seen during the early 1990s. That is the result of the 
cattle cycle producing less beef production.
    Although many commodity prices are at low levels, 1999 U.S. 
net farm income is currently expected to exceed $48 billion. 
That is $4 billion higher than the 1998 level. Even though some 
commodities like beef are showing higher commodity prices, the 
increase in farm income expected in 1999 can be traced in large 
part to increased government payments occurring as a result of 
the recent agricultural appropriations bill. Farm income in 
1999 is still expected to fall over $6 billion from the record 
level obtained in 1996. Yet it remains above the average of the 
1991 to 1995 period by over $5 billion.
    One crucial point regarding the outlook for farm income is 
that unless additional government payments are legislated for 
2000, our current estimate of farm income would suggest a 
decline of over 15 percent to near $40 billion for next year. 
This decline in farm income would only add to the current 
stress seen in agriculture.
    While the news sounds rather bleak, and certain regions are 
under tremendous stress, the U.S. agricultural economy as a 
whole is still in much better shape than the early to mid-
1980s. Income levels are well above those of the earlier 
period, and debt-to-asset ratios have remained at relatively 
low levels.
    In closing, Mr. Chairman, I would like to thank you for the 
opportunity to address these Subcommittees and welcome any 
questions.
    Chairman Pitts. Thank you.
    [Mr. Brown's statement may be found in the appendix.]
    Chairman Pitts. We will proceed to all of the witnesses 
before the Members ask questions.
    Mr. John Young.

    STATEMENT OF JOHN YOUNG, FARMER, GROFFTON, NEW HAMPSHIRE

    Mr. Young. Thank you, Mr. Chairman. I am a fourth-
generation apple farmer from New England. I have been raising 
apples for 37 years. My great-grandfather established orchards 
in the New Haven area of Connecticut back in the 1880s. My 
grandfather, father, uncles, and cousins had five separate 
orchard operations covering some 600 acres. At this time only 
57 acres remains with only one person making a full-time living 
raising apples.
    Today I will tell you a little bit about the family and why 
I believe that the family farm is on a decline, at least in our 
area of the country. What has happened to these five orchards? 
There are 16 cousins in my generation, and only one is still 
farming full time. My farm, which was the sixth owned by the 
Youngs, has been downsized to the point that I raise apples 
mostly as a hobby and part time.
    My written testimony will give more complete details of 
what has happened, but to summarize quickly, after the death of 
my grandfather, the five heirs could not find a way for either 
party to buy out the other. There was little or no retirement 
fund set aside, so the decision was to liquidate. Low 
profitability, tax laws, and inflated land values made it 
impossible for the younger family members to continue. My 
father's orchard as well as his brother's in New York were sold 
because of a lack of interest in continuing by my brother and 
the cousins of my generation. Long hours caused because of lack 
of availability of farm labor at affordable rates, no guarantee 
of a paycheck because of weather or low prices, the inability 
to secure additional capital to expand, and the need to 
liquidate assets for retirement of the older generation all 
played a part in these orchards closing.
    The one still being operated by my cousin has been 
downsized. By downsizing he has done away with hired labor. By 
selling assets he has done away with the need for bank 
financing. The question is, will this orchard survive into the 
next generation? It will be very difficult to pay inheritance 
taxes to satisfy the two nonfarm brothers with this smaller 
operation.
    My orchards started in 1962, expanded from 35 acres of 
orchard to over 150. We had production at over 50,000 bushels 
of apples. Low profitability and the lack of available credit 
to make major expansion as well as the cost of that expansion 
due to the inflated land values in southern New Hampshire 
forced the sale of that farm rather than passing it on to my 
four sons. Of the 20 offspring in the Young family who could be 
farming today, only one does it full time.
    What is the state of family farms? I think that we need to 
look at the size. In our area of the country, small part-time 
operators, those who are not hiring outside help, are 
increasing in numbers. They sell virtually 100 percent of their 
product directly to the consumers, and they rely primarily on a 
job off the farm to support their families. The farms that fall 
into the middle categories, the medium farms, by that I mean 
farms that employ anywhere from one worker to in the 
neighborhood of 25, are by and large not financially viable--
they are not making it financially, and they are dipping into 
assets yearly in order to stay in business.
    The large family farm, and what I refer to that in the 
orchard industry or in our area is one that has between 25 and 
100 full-time employees, when you get to seasonality, there may 
be anywhere from another 150 to 250 or 300, they may have gross 
sales in the $1 million to the $5 million range. These 
operations are successful. They generally are run by family 
members, and each one of the family members has an area that is 
their expertise: accounting, sales, or production. This group 
of farms is successful as long as they don't need to hire 
outside management. This is the area where more young people 
are going into more than anywhere else.
    Why didn't our young generation go into the farm on the 
Young family? One, lack of profitability. Unlike most other 
businesses, farms produce product without knowing what the 
price will bring. Long hours and seasonal schedules. In our 
case, the lack of available farm labor at reasonable prices 
makes it virtually impossible for employers, the owners of the 
farms, to work 40-hour weeks. No way to pass on the purchase of 
the properties due to the Federal inheritance taxes and no 
retirement benefits. Somehow the coupling of money put back 
into a farm has to be woven into a retirement plan that you can 
draw on the same as a person can draw on a Roth IRA.
    What would I suggest to the Committee? I would suggest to 
the Committee or Congress to expand the availability of 
financing this, an area that is crucial. It is interesting to 
note that traditionally the Farmers Home Administration has 
been the Federal lender to farms. In our area the perception 
that if you get a loan from the Small Business Administration, 
it is a start, it is a wonderful beginning, it is positive. If 
you get a loan from the Farmers Home Administration, it is the 
next step to bankruptcy. It is an odd perception, but it is 
quite prevalent, at least in our area.
    Availability of labor. I would urge the committee and 
Congress to endorse and support legislation which makes 
available seasonal labor through foreign worker programs. 
Changes to inheritance taxes need to be made and control of 
imports. In our industry we are competing in a worldwide 
market. My grandfather used to say that you only needed one 
crop in three to stay in business. That was his advice to me 
when I was first starting. He said, don't expect to get rich 
every year, you only need one crop in three to make a living. 
That isn't true anymore. If we have a crop failure in New 
England generally, and a grower happens to be lucky enough to 
have a good crop, and there is a chance for him to make a good 
profit, the imports take over, and we immediately lose that 
opportunity to make the one in three that my grandfather would 
have referred to.
    Fourth, I would speak to the reduction of the paperwork 
burden. Government continues to pass the burden onto the 
employer. We created an I-9 system which passes the job of 
controlling our borders from the Immigration Service onto the 
farmer. We have created a reporting process for new hires, 
which is a paperwork burden that is collecting minuscule 
amounts of money for the deadbeat dad program. Government 
continues to pass on its job to the employer community, and the 
small employers and the small farmers cannot do that.
    Mr. Chairman, I thank you for the opportunity to testify, 
and I will answer any questions.
    Chairman Pitts. Thank you, and you can enter your full 
written testimony into the record, if you would do that, 
please.
    [Mr. Young's statement may be found in the appendix.]
    Chairman Pitts. The next witness is Mr. Lynn Cornwell, Vice 
President of the National Cattlemen's Beef Association.

     STATEMENT OF LYNN CORNWELL, VICE PRESIDENT, NATIONAL 
                  CATTLEMEN'S BEEF ASSOCIATION

    Mr. Cornwell. Chairman Pitts, Chairman LoBiondo, members of 
the Subcommittee, thank you for the opportunity to share my 
thoughts on the aging of agriculture and the factors that 
currently inhibit young farmers and ranchers from entering my 
profession. Those of us involved in agriculture often overlook 
the important work done by this Committee to ensure the 
viability of America's small businesses, and I commend all of 
you for your efforts to find ways for young men and women to 
succeed in the business of producing food and fiber for our 
Nation and for the world.
    I am Lynn Cornwell, vice president of the National 
Cattlemen's Beef Association. I am a rancher from Glasgow, 
Montana, third-generation, and constituent of Congressman Rick 
Hill. I am excited to be here today. I am on my way back to 
Montana after spending the last few days in New York City at 
NCBA's beef summit, a 1-day summit held for beef marketers, 
which includes retailers, food manufacturers, and food service 
operators. A key aspect of our summit was to review our 
industry's outlook and the economic factors that seemed to 
indicate beef demand might be stabilizing for the first time in 
more than 20 years.
    According to the industry analysts, preliminary beef demand 
data for the first three quarters of 1999 has increased 4.59 
percent during the third quarter of 1999 compared to demand 
during the same period last year. The rate of decline for beef 
demand has been slowing since 1996, according to the Beef 
Demand Index, which is calculated by leading independent 
economics and industry experts using the USDA per capita beef 
consumption data and the USDA choice retail beef prices 
adjusted for inflation.
    In short, for the first time in two decades the light at 
the end of the tunnel is growing brighter for cattle men and 
women. And while we are eager to tackle the challenge of 
increasing demand, our industry also faces the challenge that 
is the focus of today's hearing, an aging population of 
agricultural producers. One needs only to review the average 
age data of the past few agricultural censuses to recognize the 
trend.
    I am not sure there is a clear-cut solution to enable and 
encourage young people to get involved in production 
agriculture. But in reflecting on my own thoughts relative to 
the challenges that those of us currently in the business face, 
I think there are some obstacle issues that certainly pose a 
risk to beginning farmers and ranchers.
    First, there is a constant battle against the loss of 
equity. This is due in part to lack of business opportunity and 
shrinking returns on investment. While we are seeing improved 
outlook on the demand side that will hopefully translate into 
sustained higher market prices, the beef industry has 
experienced nearly $4 billion in lost equity over the last 4 
years.
    As farm and ranch kids finish their education and, speaking 
as a parent, hopefully become smarter, they begin to think, 
``Why would I want to return to a lifestyle that requires me to 
work 16 to 20 hours a day and earn a measly $1,000 a month?'' 
The present net return to investment in the cattle business in 
my part of the country is less than 1 percent.
    In many parts of the country, farm and ranch values are 
doubling or tripling. In the case of ranches at least, this is 
not because their income potential has substantially grown, but 
because folks with the resources are willing to pay handsomely 
for their own isolated corner of the world. For young people 
trying to buy their way in, they must compete against those who 
are not concerned with a ranch's productivity. They simply are 
investing in real estate.
    Speaking of estates, for young men and women facing the 
prospect of inheriting the family operation, the tax 
implications are horrible. Death taxes are one of the leading 
causes of breakups of farms and ranches. NCBA recently 
celebrated its 100th anniversary. As part of that celebration, 
we recognized the industry's centennial operations. One of the 
common costs and concerns of these families, not to mention the 
industry's younger participants, is the prospect of buying 
their heritage back from the Federal government when death hits 
a loved one. Many families are forced to sell out. If the 
operation happens to be located near an urban or suburban area, 
the farm or ranch often ends up in the hands of the developers. 
Open space is lost, habitat is lost, and, worst of all, one 
more agricultural family is forced out of their business and 
way of life. The death tax must go, and NCBA commends Congress 
for the progress it is making in this regard.
    Federal and state regulatory burdens also discourage a new 
generation of producers. Issues such as endangered species, 
clean water, Federal grazing, booming wildlife populations, et 
cetera, all impact livestock operations. Water quality and ESA 
habitat issues are reducing/removing many livestock management 
options and making remaining options increasingly expensive. 
Many operations are choosing to sell out to bigger, more 
diverse corporate holdings.
    Kids see Dad going to public meetings and having to spend 
an ever increasing amount of time, energy, and resources on 
private land issues in local, state, and federal forums just to 
protect what he has. Forget trying to expand. It has gotten to 
the point that you need to have a permit or license to do 
almost anything. Young people need to see a decided decrease in 
the command and control policies of this country.
    Young people also face a daunting choice of opportunities 
off the farm. Corporate America is recruiting hard in rural 
areas to find employees that possess a strong work ethic. The 
lure of salaries and benefits that corporate America can 
provide is strong. Technology also contributes to the view 
beyond the farm gate. The Internet brings the world much closer 
to rural kids at a much earlier age and is having an impact on 
their life's goals.
    Mr. Chairman, I could go on and on but I think my point is 
made. Agriculture needs to find ways to compete for the hearts 
and minds of young people. I am grateful to you for the 
opportunity to share my thoughts and look forward to working 
with you on solutions that will help us achieve our mutual 
goals. Thank you.
    Chairman Pitts. Thank you very much, Mr. Cornwell.
    [Mr. Cornwell's statement may be found in the appendix.]
    Chairman Pitts. Now Mr. Terry Ecker, a farmer from Elmo, 
Missouri.

        STATEMENT OF TERRY ECKER, FARMER, ELMO, MISSOURI

    Mr. Ecker. Thank you, Mr. Chairman. My name is Terry Ecker, 
and I am a fourth-generation farmer from northwest Missouri. My 
family and I raise corn, soy beans, and tend a cow-calf 
operation. My farm is located about 120 miles north of Kansas 
City near the town of Elmo in Nodaway County. I am testifying 
on behalf of the Missouri Farm Bureau, where I am past chairman 
of the State Young Farmer and Rancher Committee. I have also 
served as past vice chairman of the American Farm Bureau Young 
Farmer and Rancher Committee, and I am currently serving on the 
Missouri Soybean Merchandising Council. I would like to thank 
you for this opportunity to share my views on some of the 
challenges facing younger agriculture producers. A special 
thanks to Chairman Talent for his interest in agriculture and 
efforts to focus on restoring profitability to family farmers.
    I am 36 years old, married and college-educated. Upon 
graduating from college, I spent 3 years in the agriculture 
field, and then the opportunity arose for me to purchase a farm 
next to my family's farm. So with the help of my father, I did 
that. My father and I worked out an arrangement in which I 
trade my labor for a share in his equipment. This agreement has 
worked well, and today, 10 years later, my father is nearing 
retirement.
    My father stills owns about 60 to 70 percent of the 
equipment, and at some point I will have to decide whether to 
borrow the money to purchase the equipment or purchase some 
other equipment. This crossroad is familiar to many young 
producers. The decision is even more difficult with low 
commodity prices. It is hard to seriously consider equipment 
purchases with a $1.50 per bushel corn. To put this in 
perspective, trading our equipment for just a new tractor and a 
combine would cost about $120,000 to $150,000, and that still 
wouldn't give us the latest technology.
    Having said that, my reason for turning to farming has not 
changed. Farming is a way of life that I love. There aren't 
many occupations that allow family members to work side by 
side.
    Difficulties in succeeding as a young agriculture producer. 
As a young producer I have made the following observations of 
why it is difficult for young producers to get started. First 
and foremost is capital. It has become virtually impossible to 
enter production agriculture without the assistance of family 
members who are already farming. Young people are long on 
labor, but short on capital. I was the youngest full-time 
farmer in my township 10 years ago when I started farming. 
Today at the age of 36, I am still the youngest farmer in my 
township.
    Land availability. There is only so much land available, 
and it is difficult for young producers to compete with 
established producers. Rental rates may be too high to cash 
flow, or younger producers are often forced to farm land that 
is marginally productive.
    A third area would be risk management. Young producers with 
low equity could be wiped out in a single year. Risk management 
is critical to younger producers who can not afford significant 
income losses.
    I did not expect to get rich when I started farming, but I 
did expect to have a decent standard of living. Today I see my 
college friends doing well in their careers. They have 40-hour 
workweeks, retirement plans and health care packages. They are 
buying homes, cars, and have a sense of financial security. I 
see my prices going down, input cost going up, and equity 
evaporating. So I often ask myself at what point do I become a 
fool and should seek opportunities outside of agriculture.
    Empowering producers to restore profitability. This Nation 
has been blessed with a climate and a natural resource base 
that allows us to feed our population and much of the world. 
Yet it is disheartening to see some of the Nation's brightest 
children avoiding the return to the farm. Today, given the 
weakness of the U.S. farm economy, many parents are 
discouraging their children from returning to the farm, farms 
which have been in the family for generations. Think about it. 
We don't see recruiters at colleges line up students to return 
to farming.
    There is no single action that will brighten the future of 
the family farm, but I would encourage Congress to consider 
actions that collectively could stem the tide for rural 
America. Some of these are tax incentives. State and Federal 
tax codes punish farmers with estate and capital gains, forcing 
older farmers to retain land. Policymakers need to think 
outside the box for ways to use the tax code to assist farmers. 
For example, many farmers and their spouses are forced to work 
at least part-time off the farm. Is there a way to possibly 
provide a tax credit for a portion of this off farm income?
    Adding values to commodities. Missouri now provides farmers 
with a tax credit for participating in cooperative efforts that 
add value to agriculture commodities. This provides an 
excellent example of how we can move toward selling products 
rather than commodities.
    Federal loan programs. The Farm Service Agency operates 
several direct loan guarantee programs that can be helpful to 
farmers. Excessive paperwork and reporting requirements may be 
preventing rural banks from participating in Federal assistance 
programs. To this end it would be helpful for Congress to 
review the requirements placed on banks to participate and 
utilize FSA loan programs.
    Risk management is another area. Congressional actions to 
revise the Federal crop insurance program are absolutely 
critical. The current program simply does not work and results 
in farmers' reliance on ad hoc disaster assistance. As a farmer 
I would rather have access to markets than a disaster payment. 
For example, under the package recently packaged by Congress, I 
will receive $4.70 an acre on some of the farmland that I farm. 
This money would be better spent to help develop markets for 
producers of every size.
    Mr. Chairman, I spend quite a bit of time in the cab of my 
tractor thinking about the future. I continue to dream of 
taking over the family farm. But my fear is that the continued 
low farm economy will force many young producers such as myself 
to take advantages of opportunities off the farm, and from 
where I sit, I hope it doesn't come to that. Thank you.
    Chairman Pitts. Thank you, Mr. Ecker, for that compelling 
testimony.
    [Mr. Ecker's statement may be found in the appendix.]
    Chairman Pitts. Now, Mr. Steve Gross, a farmer from 
Manchester, Pennsylvania.

   STATEMENT OF STEVE GROSS, FARMER, MANCHESTER, PENNSYLVANIA

    Mr. Gross. Thank you, Mr. Chairman. First, I would like to 
say it is an honor to be here, and I appreciate the opportunity 
to give my testimony. I am a 31-year-old farmer from 
Manchester, Pennsylvania, which is just due north of Baltimore. 
My brother and I are involved in a partnership and work closely 
with my father. We farm about 1,200 acres. We raise cattle and 
hogs. We recently opened a store due to the declining prices we 
were receiving from our cattle and our hogs. We tried to sell 
our own beef and pork through our store to recapture some of 
the profit which we have seen decline over the past 3 years, as 
stated by some of the earlier people. The costs of--the average 
price per year that we receive for our steers has gone down 
every year, yet our costs have continued to rise.
    There are many barriers that we face as a young agriculture 
producer. One is the estate tax. My family and I worked hard to 
build an operation. We paid taxes as we were building it. And 
then when someone dies, we are punished again. A lot of that 
land, especially in our area, the reason that it is assessed so 
high is due to causes outside of agriculture, development 
pressures like was stated here. Farms are stated--the estate 
tax is based on what the farm is worth, and the value is raised 
on outside pressures.
    The capital gains ties closely into that industry. A lot of 
older farmers, especially in our area, that would like to sell 
some of their farmland or assets to beginning farmers have to 
consider the capital gains when they sell their farms. My 
brother and I, for example, were negotiating with an older 
gentleman on purchasing his farm. When he figured the capital 
gains cost and what he would need for his health and retirement 
in case he would go into the nursing home, it made it 
infeasible for both him to sell it to us and for us to afford 
it.
    Another dilemma I see in agriculture is the need for health 
insurance deduction. People that I went to school with and 
worked with professionally all have health insurance as part of 
their package. They don't pay tax on that. The farmer, being 
self-employed, they only get to deduct a third of our health 
insurance every year. I understand that is to be phased out 
over the years, but that is costing me $4,500 a year right now, 
and I am only deducting a third of it. I would urge you to 
think about immediate fully deductible health insurance 
premiums paid by the young farmer.
    Another problem that I perceive in agriculture is financial 
assistance. I understand there is going to be some talk here 
about aggie bonds here later. I myself looked into aggie bonds 
in our State several years ago, and there is a very good 
program there. However, because my father had a farm and I had 
some cattle and some farming experience, I was told that I did 
not qualify, which I thought was unfair.
    When I look around my local community, I hear about 
different industries and how--I will use Starbucks Coffee as an 
example. They got low-interest money from our State and from 
the county development authorities because they were going to 
build in a new area and expand. Yet myself, I wasn't eligible 
for that. So I looked at FHA for a loan, and as an earlier 
person stated, it was one step away from bankruptcy. The 
paperwork to get a low-interest loan states that you have to 
first prove you have been turned down by other lending 
institutions. Yet when I look at my competitors, other 
industries such as Starbucks Coffee, they do not have to prove 
that they have been turned down by other industries to receive 
low-interest loans.
    So this needs to be looked at a little bit. Instead of 
providing low-interest loans to someone who is already in 
trouble, maybe we should be rewarding people who have already 
managed their assets properly.
    Another thing that is really big in our area is farmland 
preservation. However, the objective of farmland preservation 
should not be just to preserve land, but to preserve farming 
businesses and maintain characteristics that are ensured to 
continue the economic development of farming.
    Just in closing I would like to touch a little bit on the 
trade issue. I spoke earlier in my testimony that I had opened 
a store and we were selling our meat locally. One reason we did 
that was because our local grocery store was advertising 
Argentina beef and putting it on sale. From my reading and 
research, they use practices there that have been outlawed and 
regulated in this country for years, certain medicines and 
feeding practices that we don't allow here. That ties into a 
little bit of the trade issue that needs to be looked at. Yet 
where is free trade necessarily fair trade? If I have 
regulations and restrictions that prevent me from being the 
cheapest producer of a product, of course it is going to be 
produced overseas where it is cheaper.
    I would like to thank you for the opportunity to testify 
today.
    Chairman Pitts. Thank you, Mr. Gross. Again we will enter 
your whole written statement into the record.
    [Mr. Gross's statement may be found in the appendix.]
    Chairman Pitts. The next witness is Bruce Cobb, a farmer 
from Bridgeton, New Jersey.
    I would like to recognize Congressman LoBiondo.
    Mr. LoBiondo. Thank you. I would like to take the 
opportunity to introduce our next panel member. It is Mr. Bruce 
Cobb from Shiloh, New Jersey. Bruce is in the 2nd Congressional 
District, which I represent. I am pleased that he is here 
today.
    Bruce owns and manages ARC Greenhouses, which is located in 
Shiloh, and his business is unique in that he produces 
hydroponically-grown herbs and specialty grains for 
professional chefs and cooks. Bruce is a member of the 
Cumberland County Board of Agriculture, the New Jersey Farm 
Bureau, the Agricultural Development Corporation, the 
Cumberland County Community Agriculture Advisory Board. And I 
would like to add that not long ago I had the opportunity to 
visit and see Bruce's operation firsthand. I was both delighted 
and amazed to see how innovative Bruce has been with his 
operation. He is very dedicated and a committed member of our 
agriculture community. I want to thank you for being here 
today.

     STATEMENT OF BRUCE COBB, FARMER, BRIDGETON, NEW JERSEY

    Mr. Cobb. Thank you for having me. I would like to tell you 
a little bit more about what we do than Mr. LoBiondo just said. 
I think it would put my testimony in perspective. We are a 
business that is 15 years old. It is a first-generation farm. 
It is a small farm. Our revenues are between $1 and $1.5 
million a year. We grow specialty lettuces. We grow with 
recirculating hydroponic systems. There are four or five things 
that we try to do, and that is grow in a protected environment. 
We actually add sunlight. We light our greenhouses all year-
round so that we have a reliable supply week in and week out. 
We schedule our crops so that we harvest daily, weekly, so that 
we can have our product picked fresh to fill that day's orders. 
We recirculate all of our nutrient solutions so we don't have a 
negative impact on the environment. Our business philosophy in 
a nutshell is just to be a consistent supplier of high-quality 
product.
    We employ a tremendous amount of technology. We have to 
move millions of gallons of water each day. We generate all of 
our own electricity. We use the hot water from the cooler 
generators to heat our greenhouses. We use electricity to light 
our greenhouses and run the pumps. We use hundreds of computers 
that we have designed and built. Our intensive methods produce 
a very high quantity of food in a very small area. For example, 
our 2 acres of greenhouses in southern New Jersey produce about 
the same amount as 23 acres of prime land in the Imperial 
Valley.
    What I have understood that we have been asked to respond 
to the questions is why are not more young people attracted to 
agriculture, and what can be done to attract more young people 
to agriculture, and what can we do to help the people that are 
in agriculture continue to be successful or make them 
successful?
    I think that simply the economics of the reality of farming 
today keep people from entering agriculture. The ultimate 
consideration from one who puts money up to go into a business 
is are they going to get a fair return on their investment and 
sweat equity. A typical business model today for farming, you 
buy some land, you buy a tractor, and you raise some animals, 
and you sell them to someone else who does the work of 
packaging, marketing, and does all of the sales work. The 
farmer raises a commodity and the marketer essentially picks 
the price. So the marketer can always find someone else either 
here or in another country willing to grow the product for 
something less. That is the job of the buyer, and they do it 
well. In other words, on the average, commodity farming will 
always be a marginal business; therefore, young people who 
decide not to enter this type of business are making a wise 
decision.
    I think to attract more people to agriculture, people have 
to have a higher regard for agriculture in general. Then a 
higher percentage of entrepreneurs would enter agriculture. 
Young people start farms, software companies. Both businesses 
are hard. Both require brains, motivation, luck, ability, the 
whole gamut. All businesses are hard. But people don't 
understand that there are somany opportunities in farming and, 
therefore, aren't attracted to farming. People having attributes to run 
a successful business are attracted to other types of companies. So I 
think it is a communications problem.
    I think it is something that you could help us out with, 
and that is to get the word out that there are lots of 
opportunities in farming, and the government can use your 
communication and your abilities to get that word out.
    There has been a lot of talk about capital. All new 
businesses require capital. It takes convincing people to 
obtain capital. So part of being able to run a successful 
business is also being able to obtain that capital. I don't 
know if we need a whole lot of programs because I believe that 
a person who is capable of running a business can also get the 
necessary capital because they can prove to somebody that they 
are going to get a good return on their investment, not 
marginal return on their investment.
    The biggest thing that you can do is--the elimination of 
the inheritance taxes. I think the family farm, most farming 
entrepreneurs are funded by family funds. I think that is the 
most important thing you can do. If you would really like to 
promote agriculture entrepreneurship, then only eliminate 
inheritance taxes on farms. That would really help.
    I would like to hit a couple of things that you could do 
for us right now. I see I am running out of time. One is the 
Social Security test. We have a lot of older people that work 
for us that get upset when they get their Social Security wages 
cut; people that have worked for other companies for 35 years 
and want to be productive a little bit more into their 
lifetime, and they feel they are being cut by the government so 
that they get taxed at a higher rate.
    The INS. We have many workers from Mexican descent, and we 
are always scared there is going to be an INS raid. We don't 
want our employees lined up against the wall and quizzed. We 
want them treated like the human beings that they are, and we 
want to have regulations that allow us to have a good reliable 
work force. So let's get these regulations for the INS so it is 
off the back of the people.
    Minimum wage I won't hit on. I think that we need to reduce 
the wage taxes on people entering agriculture, young people 
right now. They are just paying--the 15 percent on the little 
bit they make is too much.
    I would have one suggestion that I would like to spend a 
little bit longer than I have, but that is product labeling. As 
you already understand our business, we try to have a 
relationship with our customer. They know where our product was 
grown that they buy from us.
    One of the problems right now there is no truth in 
labeling. My herbs are up against somebody else's herbs, and by 
reading both people's packages of herbs, you would think that 
they said ``packed by,'' that implies that it was grown by, and 
that is not true. Packed by and grown by. It is the person that 
grew the product that has all of the sweat equity and all of 
the hard work and all of the risks into that product, not the 
person that bought it and packed it. They only had title for it 
for a very short period of time.
    So product labeling would help us with the negative effects 
that the FQPA is going to have on the U.S. farmers. Product 
labeling in a nutshell will help farmers with the costs 
associated with FQPA; promote free trade, because people will 
know what they are buying. It will educate consumers to buy 
local. It will let the marketplace push down the amount of 
pesticide use, and not costly regulations because people will 
know that if it was grown in the United States, it has less 
pesticides on it. It will increase opportunities for 
entrepreneurs and attract investment in U.S. agriculture. It 
will give farmers the help they need in moving from a commodity 
to a brand name. It will give the farmers the power to fight 
the large corporations that control the whole retail food 
distribution in this country. And product labeling will benefit 
all farmers and all consumers, and product labeling will 
release a wave of farmer entrepreneurship in this country. 
Thank you very much.
    Chairman Pitts. Thank you, Mr. Cobb.
    [Mr. Cobb's statement may be found in the appendix.]
    Chairman Pitts. Mr. DeMint.
    Mr. DeMint. Thank you, Mr. Chairman. It is my pleasure to 
introduce a constituent from my district, Mr. Baron Johnson, 
who has come here today from Inman, South Carolina. Mr. Johnson 
is a peach, apple, and small fruits grower in my district, and 
he is a fourth-generation farmer, so he knows something about 
transferring of farms from one generation to the next.
    South Carolina has the best peaches in the world, and Mr. 
Johnson is a big part of making that happen. We thank you for 
being here and look forward to your testimony, Mr. Johnson.

STATEMENT OF BARON JOHNSON, FARMER, JOHNSON BROS., INC., INMAN, 
                         SOUTH CAROLINA

    Mr. Johnson. Thank you. I want to thank you, especially 
you, Mr. DeMint, for this opportunity to appear before you 
today. I am a 24-year-old peach, apple, and small fruit grower 
from upstate South Carolina located between Atlanta, Georgia, 
and Charlotte, North Carolina. I am a fourth-generation peach 
farmer, but we found it increasingly difficult to keep on doing 
what my family has done for so many years. Because it is more 
difficult to commercially farm peaches, we have gone from 600 
acres total down to less than 200. I am attempting to diversify 
by trying to start a small berry farm with blueberries, 
blackberries, and raspberries. I farm peaches and apples with 
my family full time and farm my berries at nights and on 
weekends.
    My comments today are developed with my particular farming 
expertise in mind, but in talking with other people, they have 
some of the same problems as I do.
    A farm is just like any business with inputs and outputs. 
In order to stay in business, the cash coming in has to exceed 
the expenses. With peaches, the cost of all inputs has gone up 
consistently year after year; however, what the farmer gets 
back for his crop has not gone up in as many as 15 to 20 years. 
We can't set the prices, we have to get what we are given. The 
cost of land, equipment, labor and chemicals has continued to 
increase, making it virtually impossible to start a new farm 
from nothing.
    To get into farming you either have to be born into it, 
marry into it, or inherit it. A young person coming out of high 
school or college wanting to start farming probably has no 
collateral to put down on the loan, and that makes it difficult 
to get a loan at all or at a decent interest rate.
    Currently, I am paying 10 and 15 percent interest on a line 
of credit and loan, which makes it very hard to pay anything 
toward principal to start getting out of debt. Because it takes 
3 to 5 years with tree crops to get a good first crop, you have 
to have a second job that can sustain you for the first 3 to 5 
years when have you zero cash flow in. In the fruit business, 
we have found that you must start out small and build over 
time. However, in many of the row crop operations in the State, 
the narrow profit margin has accelerated the trend for those 
farms to become larger to take advantage of the economies of 
scale. This trend helps lower cost of production, but it makes 
it even more difficult for young farmers to get started.
    We produce a crop that is extremely labor-intensive. We 
also live in an area that has a low unemployment rate, and we 
need programs to help us gain access to additional labor 
supplies at no additional cost. We don't need additional 
regulations to add costs without adding any benefits. There is 
enough of those already.
    The agricultural economy is also increasingly dependent on 
world markets and international trade. It is virtually 
impossible to compete with imported crops. It seems common 
sense not to import a commodity while they are fresh and in 
season here to compete with our own local growers. We need 
means of praising farmers and the safest food supply in the 
world. We need to encourage the public to support local farms 
rather than tell them if they eat fresh fruit, they will be 
exposed to pesticides. The public needs to be educated about 
pesticides, what they are, why we need them, and the realistic 
probability of residues, and realistically how much residue it 
would take to actually make somebody sick.
    Let me close with a few comments that come from experience. 
In commercial peach packing, the broker, freight company, 
grocery store warehouse, and grocery store all make money. Why 
can't the farmer make a profit? The gap between what the farmer 
gets and what the grocery store gets is too big. For instance, 
if the grocery store is asking $1.59 a pound, this equals $40 a 
box. The farmer probably gets 40 to 45 cents a pound, which is 
$10 a box. Most other countries spend 30 to 60 percent of their 
disposable income on food, and we spend 10 to 12. The farmer 
has got to be able to grow his product, manage his farm and 
realize a profit in the end, and it is just not happening.
    Federal, state, and local governments compound the 
frustration that farmers feel by providing incentives for other 
businesses to locate next to our farm, drive up land prices, 
but will not consider the same incentive package for the start-
up of a small agricultural business. BMW came in 20 minutes 
down the road from us. South Carolina Port Authority bought the 
land and leased it to them for $1 a year. We can't compete with 
that.
    The bottom line to getting young people into agriculture 
comes down to making a profit. If young people cannot find a 
way to make a profit in agriculture, they will find other 
professions. The net result will be the loss of thousands of 
small businesses and no young people replacing these lost 
farmers. If this continues to happen, we will be importing more 
and more food of sources of unknown origin and unknown 
production practices. Thank you.
    Chairman Pitts. Thank you, Mr. Johnson, for that excellent 
testimony.
    [Mr. Johnson's statement may be found in the appendix.]
    Chairman Pitts. We thank all of you for your testimony. It 
has been extremely informative.
    Now, if you will indulge the Members, we would like to ask 
the panel some questions. We will limit each Member to 5 
minutes per round.
    I will start with a question for Dr. Brown. Dr. Brown, it 
is obvious from the testimony from the panel that farm income 
has been static or greatly reduced. Yet I haven't noticed my 
grocery bill getting any lower. What is happening to the profit 
margin that the producers are receiving? If the money isn't 
going to the farmers' pocket, where is it going, and what can 
be done to increase the profit margin?
    Dr. Brown. One of the things that we need to look at is how 
productive we have been in agriculture over the past several 
years. That is one of the reasons that I do think when you look 
at many agriculture commodities, the prices have remained 
fairly constant. We have been very good at producing an ample 
supply of food and have kept prices fairly flat in nominal 
terms.
    When you look at what is happening when we go to the 
grocery store, yes, we do see prices over time have crept up. 
Part of that can be associated with some of the additional 
costs that must be borne by other players that are in that food 
chain. Wages for the folks to transport that food, to put it on 
the shelf, all have increased over time. So we have seen some 
costs for those additional players in the system increase.
    Whether or not the kinds of margins that we see in place in 
some commodities today more than take care of that additional 
cost is a question that should be addressed.
    Chairman Pitts. Mr. Young, you mentioned off-the-farm 
income, to maintain the farm. Is it often necessary for you or 
your spouse to hold a second job to make ends meet? Is this a 
common practice for young farmers?
    Mr. Young. Well, in New England and New Hampshire, the only 
segment of the agricultural industry that is increasing in 
numbers are people that really earn their living off the farm, 
and they are doing their agriculture, farming, as a part-time 
operation, and they are doing it because they love to farm. 
They can't really afford to do it, but they are really earning 
their living on the outside.
    Also the other component that makes that work, is that they 
have taken the middleman out. They are into some niche or some 
retail area in which they can deliver their product directly to 
the consumer. Those are the people in our area that are 
successful. The ones that are in the middle category in size of 
farming are the ones that are really hurting and really 
declining.
    Chairman Pitts. Mr. Cornwell, you and several other 
panelists mentioned estate taxes, the death tax. We have a bill 
introduced in Congress that would provide for the elimination 
for both estate and capital gains tax if a farm pledged to stay 
in farming, if they were in a state program, or if they would 
sign an affidavit that the farm would stay in farming. What is 
your opinion of this type of approach for some kind of tax 
relief?
    Mr. Cornwell. That would be great, Mr. Chairman. I know the 
National Cattlemen have worked hand in hand with a lot of 
Members of this Committee to see that that gets done. We were 
disappointed that we didn't get the bill signed, but at any 
rate, I think that would have a direct impact on the livestock 
industry. I know it would have. If those ranchers were just 
allowed to stay in business, that would be great.
    I will give you an example. There was a ranch that was a 
neighbor to our family operation in northern Montana that sold 
about 2 months ago just because the younger generation couldn't 
pay--I think the ranch was valued at about $8 million. It was a 
fairly large operation, and the taxes were over $3 million, and 
so the people that were operating the ranch were my age, two 
brothers. They liquidated the cow herd and at an auction sold 
the ranch because they couldn't pay the taxes. That ranch had 
an annual operating budget of about $800,000 and employed about 
eight family members. So that operation is gone, and I don't 
know what is going to happen to it.
    Chairman Pitts. One other troubling aspect of the death 
taxes is that when you liquidate assets, when you have to sell 
assets to pay death taxes, there is a limit then to what you 
can borrow when you have to go to the bank to borrow; is that 
correct?
    Mr. Cornwell. That is correct.
    Chairman Pitts. Mr. Ecker, you suggest that tax credits 
should be developed to aid young farmers. What are the best 
structured tax incentives that would benefit young farmers, in 
your opinion?
    Mr. Ecker. Well, if there would be something on payroll 
taxes that a spouse or the young farmer pays in connection with 
his off-farm job, some type of tax credit that he could apply 
fromhis off-farm job to his farm income would be one way. 
Another way is, just like I mentioned, on our new generation 
cooperatives in Missouri. We are now getting a tax credit. If you 
invest in that cooperative, you are going to get a tax credit of 50 
percent, that is what it looks like it is going to be now, of what your 
investment was that you can carry forward I think it is 5 years, or you 
can even carry it back a few years, which is a good benefit.
    Chairman Pitts. Thank you. My time is up.
    Mr. LoBiondo.
    Mr. LoBiondo. Thank you. I have just a couple of questions. 
We talk about the product labeling. Let me just explore that 
for a moment. You were running out of time when were you 
talking about that. Are you finding that beside the problem of 
folks not realizing that maybe the product wasn't grown by the 
people who are sort of portraying it that way--when we get into 
this area of EPA and labels and the pesticides, do you find 
that at this stage of the game what EPA is looking to do is 
going to further hurt your ability to grow and produce?
    Mr. Cobb. Absolutely. It is going to be a real detriment to 
the average U.S. farmer. We try not to grow with pesticides, 
but that is for a marketing thing, not because I am against 
pesticides. However, buyers, their job is to buy at the best 
price. They will just buy from people that are able to use 
those pesticides in Mexico or Israel or wherever, and they will 
get better quality, and it will be shipped in overnight. We 
will not be able to play on the same playing field.
    Mr. LoBiondo. So basically what would happen--correct me if 
I am wrong--is that our farmers would be denied the use of 
certain labels; the same chemical manufacturers here in the 
United States would ship and sell those labels to Argentina, 
Chile, wherever it may be; our farmers will have a difficult 
time staying in business; and people will be getting more 
pesticide than they would have if they were eating American-
grown food?
    Mr. Cobb. That is absolutely correct.
    Mr. LoBiondo. Kind of insanity, isn't it?
    Thank you, Mr. Chairman.
    Chairman Pitts. What would you put on the label?
    Mr. Cobb. Years ago when you bought strawberries in a 
quart, you knew that Mr. Jones down the street had the best 
quality strawberries, so you bought Mr. Jones' strawberries. So 
you should put down the name of the person that grew that 
product and the farm. With the Internet, everybody has more 
information nowadays. So why shouldn't they know exactly where 
their product came from? They would give people real faith in 
what they ate.
    We are going to promote open houses. If you want to come 
see our operation, you can come visit us one Saturday every 
quarter. I think people would like to do that. They like to see 
where their food came from.
    Mr. LoBiondo. Let me just take off on that for a minute, 
too. Right now nothing stops you from putting your name on your 
label and selling it, but is the problem that somebody either 
cross-country or down the street can, in fact, put a label on 
the product that is somewhat misleading or downright 
misleading?
    Mr. Cobb. Absolutely. Two issues. One is where the product 
was grown, and the other is improper labeling or truth in 
labeling, as I will put it. A lot of packages--you can go out 
and look at tomatoes. A lot of specialty things say, ``Packed 
by ABC Company.'' You would think that the ABC Company was the 
person that grew it, not it came from Chile.
    So yes, there are two issues there. We do label all of our 
products that go out the door. We think that is important. But 
I think other farmers should do that as well because that 
builds a strong farming industry, and that is important to me.
    Mr. LoBiondo. So in our supermarkets a consumer can go into 
a produce aisle and find a container that is labeled ``Packaged 
by ABC Corporation'' and think that it is grown by ABC 
Corporation in Hometown, USA, and actually that product could 
have been imported from Argentina, Bolivia, Colombia, or 
wherever it may be.
    Mr. Cobb. Almost all of competitors in the herb business 
you could find will say that is true.
    Mr. LoBiondo. Thank you.
    Chairman Pitts. Mr. DeMint.
    Mr. DeMint. I will direct my question to Mr. Johnson, but I 
would like comments from some of the rest of you, too.
    Congress is considering raising the minimum wage. I would 
just like to know if that is going to be a help to you, Mr. 
Johnson.
    Mr. Johnson. It is going to cut into a profit margin that 
is not there now. Labor is our biggest thing. We have several 
guys that stay year-round. You have to prune peach trees, thin 
them, spray them. There are things to be done all year long. If 
the price of labor went up, that would cause our payroll to go 
up, the taxes to go up and everything. Not just that, but the 
products that we buy in, they will have more in them, and they 
will go up. The price of what we get back for our commodity has 
not gone up in years and years. So it would not help us at all.
    Mr. DeMint. Any other comments about minimum wage?
    Mr. Cobb. May I respond to that? I hope you understand that 
if you raise minimum wage, you reduce the number of jobs for 
minimum wage for low-skilled people. That is what you do, 
because as I put up greenhouses,--if the minimum wage goes up 
$1, I will spend money, capital, to reduce the labor input that 
I need. So the only people that lose in minimum wage jobs are 
the people that you are trying to help in the first place.
    Minimum wage jobs teach people. They give them the 
opportunity to teach people how to show up for work everyday, 
which is a skill that, unbeknownst to me, a lot of people don't 
have in this world. They give people pride. They let people get 
off the public welfare rolls. We have three people that are 
now--have started the minimum wage job, have now moved up to 
becoming U.S. citizens. They are making considerably more than 
the minimum wage. If they didn't have that opportunity 5 or 6 
years ago, they would not be productive citizens now.
    You are hurting the people that you are trying to help. We 
don't expect people to stay on minimum-wage jobs around our 
place. We expect them to get trained and move on and move on up 
the ladder, because that is what America is about. Any increase 
in minimum wage will increase capital input, which will reduce 
the number of jobs.
    Mr. Cornwell. Minimum wage would have a pretty minimal 
effect in the livestock industry. Most of our people are 
individual family operations, and a lot of them don't hire 
help. But even in the feed yards, a lot of the feed yards have 
indicated to us that they don't have a lot of people at those 
levels now. I would say that it would have minimal effect.
    Mr. Gross. Minimum wage in my area is more of a training 
wage. I do not have migrant laborers like the other two, but 
high school children or people that attend my church ask for 
their children to have a job on my farm when they are in high 
school, 16 or 15 years of age.
    The whole theory behind the minimum wage, my understanding 
is that is a training wage. That essentially--not only do they 
get the minimum wage, but they get a little responsibility, 
learn to show up to work on time, like he referred to. They 
don't stay full-time, they move on and leave my farm and go to 
a college or another profession. So it would hurt me, as he 
indicated. I will use more technology if minimum wage is 
raised.
    Mr. Young. I think, speaking from my industry in New 
England, there are very few minimum wage earners in the apple 
industry in the Northeast. But you can believe that if a person 
is being paid $7 an hour, and minimum wage goes up 50 cents, he 
is going to expect a raise. So there is going to be an effect, 
but there is not going to be many people that are going to 
directly receive it because they are earning the minimum wage 
now.
    I think it would be a significant cost that would impact 
the industry, another one that we probably don't need, because 
what we are trying to do is raise the bottom, and the bottom is 
not who is going to be raised, but somebody significantly above 
the bottom.
    Mr. DeMint. Thank you, Mr. Chairman.
    Chairman Pitts. Mr. Sweeney.
    Mr. Sweeney. Thank you, Mr. Chairman. I want to thank you 
and commend both you and Mr. LoBiondo for conducting these 
hearings, and the panelists for participating with your very 
compelling testimony.
    I also want to apologize. I have been running in and out 
because I am in the middle of a Banking Markup. It is kind of 
an interesting day for me because the banking hearing is about 
debt relief for foreign nations, about a billion and a half 
dollars. As I sit here representing a district that is 
substantially agricultural--and the hub of our economy is 
really agriculture--and I go through the pain and the anguish 
of the family farmers in my district every day talking about 
how we overregulate, how we overtax, and the Catch-22 that you 
all have done a better job talking about it than I could. It 
really has an effect on you.
    I would ask first if I could submit a formal statement to 
the record and ask a couple of questions, if I might.
    Mr. Young, I am from your part of the world. Upstate New 
York is not dissimilar from New Hampshire. You spoke about the 
need for family farmers to seek outside income. You said in 
response to a question from Congressman Pitts that it was now 
more the trend that the family farm income really wasn't from 
the farm as much as it was from the outside income.
    What kind of effect, and other panelists might want to 
answer this as well, what kind of effect does that have on 
production and on our guarantee that we are going to have fresh 
viable products and produce or whatever for the areas that we 
live in, or does it have an effect?
    Mr. Young. Well, we are having an increase in numbers of 
farms, but they are small farms. They probably won't 
necessarily stay in business forever. These are not the kinds 
of operations that can be passed on to family members. They are 
the kinds of operations that are relying on their living, and 
they are only doing it because they love farming.
    It is interesting. Before we downsized my farm, and 
basically I am just doing it as a hobby now, we went out and 
started a travel agency so my wife would have a place to go to 
work, because she had worked the 25 plus years that I had been 
on the farm. Today my oldest son who was on the farm with me 
manages a travel agency. My youngest son, who never actually 
worked on the farm, is actually working as an agriculture 
consultant for one of the grower organizations in New England. 
So we are staying in agriculture to some degree, but we are 
relying on income off the farm.
    Mr. Sweeney. I presume when we are dealing with perishable 
goods, as dairy are and other products are, it is going to have 
a negative effect both for the consumer and for the community 
at large to not be able to ensure that you can purchase or buy 
those products freshly locally. Would you agree with that?
    Mr. Young. Well, to some degree the importation of things 
such as apple juice concentrate from China has taken the bottom 
out of the market. Over the years when we have had crop 
failures, we could generally get 4 to 5 cents a pound for juice 
apples. This year the top you can get is 3\3/4\ because of the 
importation of foreign concentrate.
    It is very difficult to maintain an industry when we lose 
the basic financial structure under it due to imports that are 
coming in that are being grown differently.
    Mr. Sweeney. As I believe Mr. Cobb pointed out, there are 
different rules in trade policy. We could have a long 
discussion on that. I will try to get to some more here. I have 
a lot of them.
    For Steve Gross, I just wanted to ask you, you mentioned 
that you are in partnership with your brother and your parents. 
Have you thought about what is going to happen to the land once 
your parents retire, what the implications are? Have you done 
those kind of calculations?
    Mr. Gross. I can't give you the hard figures or the number, 
but I will just speak from my mind. Due to the development in 
our area, increasing in industry and in housing, land prices 
have skyrocketed, especially in the last 10 years since I have 
been out of college. We have done some preliminary estate 
planning, and we have transferred some farmland. My grandfather 
did transfer a farm to my brother and I, which we purchased. 
However, the bulk of our family assets, which my father and 
grandfather owned together, would have an assessed value in the 
millions.
    The estate tax from just when my grandfather passes away to 
my father and mother's share, we have had some preliminary 
meetings with consultants, accountants and everything, and it 
is going to be about $57,000 that we have to come up with in a 
year just to pay the tax after we have a funeral when my 
grandfather passes away. So how are we going to transfer our 
largest asset then from my mother and father to my brother and 
I? We are not sure yet. There are a number of tools at our 
disposal, but it is something that is going to have to be 
worked at. If something would happen to them, if they were to 
precede my grandfather in death, we would be in real trouble.
    Mr. Sweeney. I see my time is up. I just wanted to say that 
I think one of the most important things we need to do in 
Congress is to get the story that each of you have told out to 
America so they understand your plight as well.
    Thank you, Mr. Chairman.
    Chairman Pitts. Thank you.
    Mr. Thune.
    Mr. Thune. Thank you, Mr. Chairman and members of the 
panel.
    How many on the panel here participate in Federal farm 
programs? A couple. If we had to look at things that we could 
change in the Federal farm policy that we have today, what 
would those things be, in your estimation? Mr. Ecker or Lynn, 
if you want to--either way.
    Mr. Ecker. When we passed Freedom to Farm Act, which I am 
for Freedom to Farm Act, there were promises made that we would 
open markets, regulatory reform and such along those lines, and 
it really hasn't happened. I would a lot rather sell my product 
for a reasonable price than receive a government payment. And 
so I think that we need to look at opening our marketsand just 
regulatory and tax reform, which would help lower our cost of 
production so we would be more competitive with other countries.
    Mr. Cornwell. Thanks, Congressman.
    I think that we need to keep government involvement to a 
minimum. It sends out mixed signals to a lot of producers. And 
when you have support prices for a lot of commodities, it makes 
a lot of lazy farmers out of some people, and it actually 
guarantees some people to be in business that shouldn't be.
    But I guess what I am saying is we ought to be kind of 
careful on these government programs.
    Mr. Thune. The reason that I ask that is there is a lot of 
discussion going on. I serve on the Agriculture Committee, and 
there are hearings scheduled after the first of the year which 
would examine the wide range of Federal farm programs as to 
what changes or improvements might be made. It seems to me at 
least today that there are a lot of problems in creating 
additional surpluses and it is aggravating a problem that we 
already have, which further depresses prices.
    I look at my area of the country, and we are predominantly 
a lot of small towns. I have 200 or thereabouts towns with 
fewer than 200 people. As all of those towns and the population 
base shrinks, there are fewer and fewer farmers and ranchers on 
the land, less population, which impacts education, which 
impacts health care and all of these other things. What we are 
seeing is the family farm goes by the wayside, and so does the 
community that it supports. There are a lot of sociological 
implications that go along with that.
    But if there were things that we could do to keep young 
people in farming--and some of the things that had been 
mentioned, getting rid of the death tax, obviously, to allow 
those operations to be passed on. But say, for example, you are 
a farmer, somebody who wants to get into the business, and you 
don't have the benefit of having a family that is currently 
farming that can pass on that estate. What are the barriers to 
entry, and what could we do to remove them?
    Mr. Cornwell. The cost of capital is too high for young 
farmers that want to get in the business. I think there ought 
to be some kind of incentive or form of a low-interest loan or 
things to good qualified borrowers that would allow people to 
either expand their operations or get into the business.
    Mr. Thune. To what degree--go ahead.
    Mr. Gross. Farming is very unique. It is capital-intense 
with little return on the investment. Terry alluded to earlier 
a new combine at $120,000 or a used one, whatever, he would 
only use that machine 6 or 8 weeks out of the year. If he was 
going to spend that money in industry where he would run that 
machine and use that $120,000 for 365 days a year and put two 
or three shifts on it, it would be a lot different. So the 
capital intensity is there. We need some kind of break. There 
are things to do.
    Mr. Thune. Let me, if I--I know, at least my understanding 
is, Mr. Ecker, that you are associated in some way with value-
added-type enterprises. That to me, again, seems, from my point 
of view--and where I come from, we are a long way from terminal 
markets, and anything that we can do to add value to the 
product along the way. What things could we do in terms of 
incentives? Is there a role for us to play to encourage or 
stimulate or in some way enhance value-added agricultural 
opportunities out there?
    Mr. Ecker. In the state of Missouri, two ethanol plants 
broke ground, costing me $13,000. As a young producer I cannot 
take that out of my budget. But this year the Missouri General 
Assembly passed tax incentives. So if I invest this $13,000, I 
am going to get $6,500 back in tax credits. Now, I can justify 
that because it is reducing my costs, so therefore I am going 
to gain on the other end because as I sell my corn through this 
ethanol plant, I am going to get a better return on my 
investment because I am going to get a value-added product sold 
that way.
    Mr. Thune. That is something done by the State of Missouri?
    Mr. Ecker. Yes.
    Mr. Thune. If I might have one additional question, and Dr. 
Brown, this might be a question to you, too, or others who 
would care to comment on this. One of the things that people in 
my region of the country are honing in on right now, in terms 
of the issues that are impacting agriculture, is the whole 
issue of concentration. And to what degree does--those of you 
who sell your products, you have fewer and fewer buyers, it 
seems like, at every level up the chain. What is your 
assessment as to what degree that impacts the future prosperity 
of agriculture?
    Dr. Brown. I think we are going to see a lot of debate 
about concentration in the coming year. We at FAPRI, as you may 
know, are in the business to try to evaluate alternative 
policies. We will stand ready if there is any kind of movement 
to curb concentration or so forth to try to help to analyze 
what that may mean to producers. Take hogs, for example. A lot 
of these smaller mid-sized producers are going to continue to 
find markets very hard to come by. This concentration is going 
to make those markets even less available than they are today. 
So one of the things that producers are going to have to look 
at very hard is where the market will be a year or two down the 
road. Ten years ago I may have had three or four options of 
where I am going to sell my hogs. Today I may have one. We want 
to make certain that producers are in the position that 2 or 3 
years down the road, those markets are still there.
    Mr. Cobb. May I respond to that as well? I was just reading 
on the front page of The Packer or The Produce News that eight 
companies, food distribution companies, Safeway one of the 
examples, eight of those people now control 40 percent of the 
distribution, retail food distribution, in this country.
    Product labeling will help the farmer have some power 
against the buyer because right now the extra job is to get it 
at the lowest price. If we can't get our name to the consumer 
and we have that roadblock in front of us, we will never make 
it. It will not be possible.
    Mr. Thune. I appreciate all of your answers. I think it is 
true, whether it is grain buyers or meat packers or whatever, 
there are fewer and fewer. That does limit your options, and 
ultimately it has a direct impact on price.
    Incidently, I am very much in favor of your idea about 
labeling. It certainly applies to products that come in my 
region of the country, and I am sure Mr. Cornwell would agree 
that beef would be a good idea to help market our product there 
as well. Thank you for your answers.
    Mr. Cornwell. Price reporting is going to help, too.
    Mr. Thune. Right, and we have made some progress on that.
    Thank you, Mr. Chairman.
    Chairman Pitts. Thank you.
    Mr. Moore.
    Mr. Moore. Thank you, Mr. Chairman.
    I want to apologize to the Committee and to the panel 
members. I was, and, in fact, I am still, in a Banking 
Committee hearing. I have been involved in their markup, and I 
just came in.
    I did want to ask Mr. Gross a question or two. I have 
reviewed your written testimony, sir. You indicate the primary 
issue that always comes to mind is the need to eliminate estate 
taxes. You say in your written testimony, death tax elimination 
is the Farm Bureau's top tax priority. Is that correct, sir?
    Mr. Gross. Yes.
    Mr. Moore. If elimination of death taxes is not in the 
immediate future, not in the foreseeable future at least, would 
you be interested in legislation that would increase the tax 
credit, say, from $675,000 to $3 million? Would that be 
helpful?
    Mr. Gross. Yes, but we would like it to be generated 
towards the family farms. There is some room for negotiation in 
there. Credit should be given to people like myself or Mr. 
Ecker, who are helping the family farm generate that farm, 
build the assets, as maybe opposed to all farm heirs--have 
other jobs.
    Like, for example, I have a sister who is a doctor. She has 
stated that she would not be interested in our farm and the 
assets. However--so if the assets were passed to her,--the 
estate tax could apply. If it stays into farming, then I would 
support that, yes.
    Mr. Moore. But your indication is through your written 
testimony that you wanted the estate tax itself eliminated?
    Mr. Gross. Yes, I think so, yes.
    Mr. Moore. But you would be generally supportive of a bill 
that would increase a credit, say, to $3 million. Wouldn't that 
cover the great majority of farmers in this country, don't you 
think?
    Mr. Gross. Yes.
    Mr. Moore. And small business as well?
    Mr. Gross. Yes.
    Mr. Moore. I have a bill that does that. I may send you a 
copy of that. Thank you.
    Chairman Pitts. I can't resist this question. If you were 
faced with a bill that would raise the minimum wage by $1 over 
3 years, but in that bill also you would repeal the death tax 
and have 100 percent deductibility for health insurance, how 
would you vote? Anybody care to comment?
    Mr. Gross. I would probably vote in favor of it.
    Mr. Thune. Is the Chairman looking for suggestions?
    Chairman Pitts. You have been an excellent panel. We thank 
you for your testimony. We would like to stay here and continue 
with questions, but we have another panel. Thank you very much 
for your testimony. If you would submit your written comments, 
we will enter them into the record.
    I would like to call the second panel to testify. Before 
turning the chair over to Mr. LoBiondo, I would like to 
introduce the first witness. Our second panel is composed of 
Mr. Gary Smith, Ms. Susan Offutt, and John Baker. John Baker is 
from the Iowa Beginning Farmer Center. Susan Offutt is the 
Administrator of the Economic Research Service for the U.S. 
Department of Agriculture.
    The first witness I want to introduce is one of my 
constituents, Mr. Gary Smith. He is the executive director of 
the Chester County Development Council. I think that he has 
served in that position for about 24 years. The Chester County 
Development Council is a private nonprofit economic development 
organization in Chester County, Pennsylvania. He is a cattle 
farmer. He has a great deal of experience and expertise. I 
worked with him for many years when I was in the State 
legislature.
    It is a real pleasure, Gary, to welcome you. At this time 
if you would make your statement, and I will turn the chair 
over to Chairman LoBiondo.

  STATEMENT OF GARY SMITH, EXECUTIVE DIRECTOR, CHESTER COUNTY 
                      DEVELOPMENT COUNCIL

    Mr. Smith. Thank you, Mr. Chairman. Good afternoon,
    Chairman Pitts and also Chairman LoBiondo and members of 
the Joint Subcommittee. It is certainly a privilege to be here 
this afternoon to give you some thoughts and reflections about 
this important issue here facing this country.
    My name is Gary Smith. I am Executive Director of the 
Chester County Development Council. We are a nonprofit 
organization that serves the economic development needs for 
Chester County, Pennsylvania, for the past 40 years. I have had 
the privilege of serving as the executive director for 24 of 
those years and during my tenure have been able to watch a lot 
of corporate investment come throughout Chester County. I have 
also been chagrined that economic development as a profession, 
which I practice on a daily basis, often fails to consider 
agricultural development as an integral part of our economy.
    On a personal note, I have been born and raised on our 
family farm on 111 acres in West Bradford Township, Chester 
County. My father was a fourth-generation dairy farmer that 
immigrated here from northern Ireland. We successfully manage 
today a registered Holstein cattle herd for many years and 
until my father passed away 14 years ago, at which time I have 
managed to maintain a registered herd, polled Hereford cow-calf 
operation, a purebred herd of 50 animals, and also raise 
various crops on our family farm, and continued my occupation 
off the farm as well.
    I have been involved in creating and sitting on many 
agricultural organizations that support and enhance the 
profession of farming within our suburban marketplace. I also 
have had the unique experience to draw on since I work with 
both the economic development and agricultural development 
community on a daily basis. I want to bring to you this morning 
or this afternoon a few of my personal commitments and passions 
that have drawn this committee together in looking at the 
future of farming within this country.
    I believe that we need to integrate economic development 
and agricultural preservation to be incorporated into a 
seamless process. Managing the affairs of our organization of 
12 members, staff members and operating budget of 1 million 
dollars, completely supported by the private sector, I have 
observed that our profession in the general sense of the word 
provides an abundance of economic development services to a 
wide array of companies that are dotted across our landscape. 
Unfortunately, agriculture has been perceived merely as open 
space within the growing suburban community. Many public 
policymakers have considered sound preservation programs in 
order to preserve open space, i.e., farming; however no one is 
paying any attention to preserve the occupation, the 
livelihood, and the professional development of the farmer.
    Chairman Pitts, you and your like-minded colleagues have 
shown tremendous leadership capabilities as an ally of farming, 
particularly in the area of estate planning and reforms that 
minimize inheritance taxes which have been imposed upon passing 
on family farms. This has been a significant step in the right 
direction towards maintaining stability and continuity in 
preserving the family farms.
    Farming is a business. I emphasize it is a business. It is 
a business without walls. Unlike the corner gas station or the 
office building or the industrial factory, it functions as an 
economic unit within itself with certain fixed costs as well as 
variable costs that are beyond the farm entrepreneurs' control. 
We need to deliver a system here in this country that is more 
attuned to helping a farmer with technology improvements, with 
production improvements, and with succession planning as a 
consequence. We in Chester County propose to establish an 
agriculture development council initiative as our response to 
this need.
    Since I have been personally burdened with the farm issues 
for many, many years, I have attempted to create new loan 
initiatives, particularly for Pennsylvania farmers. I currently 
administer over 26 different low-interest loan programs for 
businesses and industries throughout our service area. There 
are no loan programs available for farmers in Pennsylvania, as 
Mr. Gross, a farmer witness, here indicated. With this in mind, 
I became aware of existing Federal legislation that also would 
enable Pennsylvania to create new loan programs and take 
advantage of programs which other States have taken control of. 
I began writing editorials in farm journals to get the 
attention of our Ridge administration, and to his credit, 
unlike the three previous administrations which had deaf ears 
to farming in Pennsylvania, the Ridge administration was truly 
open-minded. They invited me to come and convince senior 
policymakers that there was actually a need to create a new 
program. Now Pennsylvania is proud to offer the Next Generation 
Farm Loan Program, which is being marketed throughout the 
Commonwealth. I am proud to say that we have many projects that 
are being used or are using this program.
    Allow me to update you on farming as we experience it here 
in Pennsylvania. Farming is the number one industry in 
Pennsylvania. Agriculture in southeast Pennsylvania, where 
Chester County is located, is tremendously productive, growing 
42 percent of the State's market value on 23 percent of the 
State's farms, 16 percent of the State's farmlands. Chester 
County is number two in agricultural production after Lancaster 
County, which is also part of Congressman Pitts' constituency. 
Unfortunately, Chester County as well as Pennsylvania as a 
whole has twice as many farm operators over the age of 70 than 
under the age of 35. Since Chester County farms cover about 
175,000 acres or about 36 percent of the land area of our 
county, it has an amassed revenue base of $342 million, 
according to USDA statistics. Despite the importance of 
agriculture in the region, we are losing farms and farmlands at 
an alarming rate. From 1960 to 1992, the region lost 28 percent 
of its farms, and total farm acreage declined by 21 percent. 
Chester County is losing over 8 acres a day in farm ground.
    It is clear that a set of interrelated barriers are at work 
to adversely affect the viability of agriculture. They include 
the following: One, the shortage of beginning farmers to 
replace retirees; two, the increasing valuation of farmlands 
for nonfarming purposes; three, the increasing inability of 
farmers to attract low-interest guaranteed loans; and the 
difficulties with intergenerational farm transfers; five, the 
decline in beginning farmers with the technological knowledge 
to succeed economically and commercially.
    Given these factors, there are three new initiatives we 
would like to talk about: One, the loan issues. Expand the 
funding which is a vitally important issue; two, to permit Farm 
Service Agency guarantees on aggie bonds; three, exempt aggie 
bonds from the volume cap on industrial development bonds.
    Also, there are some other issues I want to talk about, but 
I have written testimony to provide you this, farm succession 
issues which we need: One, provide concerted assistance to 
retiring farmers to facilitate transfer of farms; two, to 
encourage collaboration among farmland preservation 
organizations and agricultural development agencies that 
benefit beginning farmers; and we are looking at beginning 
farmers skills issues, sponsor programs that provide beginning 
farmers with prerequisite skills.
    Today I would like to conclude my comments by just 
suggesting the following. I would like to say in conclusion I 
contend that young farmers need to be encouraged to examine a 
range of succession strategies as they seek the continuation of 
their farm business, strategies that consider less capital-
intensive farming practices and more communication among 
partners upon marketing opportunities, ongoing skill 
acquisitions, and better low-interest loan guarantee programs.
    Thank you for the opportunity and thank you so much for the 
commitment to the future of young farmers in this country.
    [Mr. Smith's statement may be found in the appendix.]
    Mr. LoBiondo [presiding]. We want to thank you very much 
for your testimony, and all of your written testimony will be 
submitted for the record.
    Next we welcome John Baker, Iowa Beginning Farmer Center. 
John, thank you for being here.

     STATEMENT OF JOHN BAKER, IOWA BEGINNING FARMERS CENTER

    Mr. Baker. Thank you. Honorable Members of the House, it is 
indeed a privilege and an honor to appear before you today, and 
I want to thank you for it. I am an attorney, and I work for 
Iowa State University. I work for the Extension Service. I am 
the staff attorney at Iowa Concern Hotline, which is an 
information and referral hotline open to all Iowans. I answer 
the legal questions that come in. I am also the administrator 
of the Beginning Farmer Center, which is a legislatively-
created center to look at the issues surrounding helping young 
people get into agriculture. It was created in 1994. It was the 
first beginning farmer center in the Nation. Other States have 
had some success in passing out legislation. And it was funded 
by the Iowa Legislature.
    In addition to my duties, I am also the coordinator for the 
National Farm Transition Network. It is a network of some 20 
organizations. The purpose of the network is to support 
programs that foster the next generation of farmers and 
ranchers. We cover about 25 different States. There is a 
program in Pennsylvania, the Pennsylvania Farm Link, that has 
been in existence for several years that is a member of the 
national network.
    I believe the most important question facing American 
agriculture today is whether or not there will be another 
generation of independently owned and operated farms and 
ranches. We will solve the problem that we have in the farm 
economy. We always have, and we will again. But if we only 
solve that problem for the immediate short term, and we don't 
look to the next generation, I would argue that we have 
accomplished very little.
    I think this is an issue that is coming to the fore, and it 
is being recognized by many American farmers. Certainly in Iowa 
we have had an increase in the average age of farmers with a 
decrease in the number of farmers. In 1980, we had about 
120,000 farms. We are down to about 96,000, and there is some 
estimate that we will lose about another 6,000 within the next 
1 to 2 years. So it is a big issue.
    I would also like to commend to you an article written by a 
farm wife, Ms. Allison Berryhill. I provided that in my written 
material to you. It was in the Sunday Des Moines Register. It 
was called ``In Consideration of Farming.'' She concluded, she 
lamented the fact that her children probably won't farm. She 
related the tale of a number of farmers in their community, 
nearAtlantic, Iowa, in southwest Iowa, who are no longer 
farming. She wound up this poignant article with a statement that said, 
``We are still farming the land, but we have altered our production. I 
don't think we are raising farmers anymore.''
    [The information may be found in the appendix.]
    Mr. Baker. I think that is something that many farmers feel 
today.
    The Beginning Farmer Center is engaged in a variety of 
activities to assist beginning farmers. We conduct seminars 
around the State. We have developed a Farm Savvy manual. I have 
provided you with an outline of that manual. We have done 
research into issues surrounding farm business succession 
plans, and we are going to in January of next year start a 
longitudinal study of several hundred Iowa farmers about their 
farm business succession planning, and if funds can be found, 
we hope to replicate that study all across the Nation.
    I work more on the micro level with existing farmers, 
trying to figure out how to bring people into their farm 
businesses. So I would like to spend a little bit of my time 
talking about that, and then I would also like to make a few 
recommendations.
    I think there are several issues barriers facing young 
farmers. I think number one is the insufficient farm exit 
strategies of existing farmers. I have the opportunity to put 
on several seminars every year on farm business estate planning 
and business succession planning. The average age of the people 
that show up at those are probably 60 plus years old, and they 
have no estate plan and no business succession plan.
    The other phenomenon that I see out there is called 
``farmer boy.'' Farmer boy is that 55-year-old farmer who has 
no managerial authority on the family farm, that is still under 
the control and ownership of the 80-year-old father.
    So those are the kinds of exit strategies: Insufficient 
entry strategy; two, overreliance on borrowing money to buy 
your way into farming. If you want to get into farming quick, 
borrow a lot of money, and if you want to get out of farming 
quick, borrow a lot of money; three, difficulty in obtaining 
appropriate financial, managerial, and production assistance; 
four, lack of community support. As my previous speaker Mr. 
Smith mentioned, we don't look at agriculture as an economic 
opportunity; five, difficulty in identifying entry points into 
farming unless, as one of the previous speakers said, you are 
born into it; six, the inability to acquire capital. At least 
in Iowa we still have a very active agriculture lending in our 
banks.
    If I may be so bold, I would recommend to you several 
different recommendations. Unlike some of the previous 
speakers, these will not deal with Federal gift and estate tax, 
nor with capital gains tax. They deal with the income tax. In 
Iowa we have a standing joke that an Iowa farmer would rather 
die than pay taxes, so they do. And we don't bring young people 
in. I think that we could use the Income Tax Code to incent 
that. For instance, we could provide a $20,000 income tax 
credit on the first $20,000 of income for the lease or sale--or 
lease of farm business assets to a beginning farmer; likewise, 
a tax credit to the beginning farmer.
    In terms of value-retained or value-added closely held 
enterprises, I think we should provide low-interest loans or 
no-interest loans to them, provided they make an opportunity 
for a young farmer.
    Finally, I think that it would be appropriate for the USDA 
to provide matching grant funds to organizations such as Farm 
Link of Pennsylvania or the Beginning Farmer Center or any of 
these other programs to help link aspiring beginning farmers 
with landowners, farmers, and ranchers.
    Thank you for your attention to my remarks, and I would be 
happy to answer any questions.
    Mr. LoBiondo. Thank you very much.
    [Mr. Baker's statement may be found in the appendix.]
    Mr. LoBiondo. Since the vote is in progress, we are going 
to have to take a recess. Our best guess is that we have 
probably three votes. I apologize for the delay. This is 
something that is sort of out of our control, but we will be 
back as soon as we can.
    [Recess--4:25 p.m.]
    Mr. LoBiondo [presiding]. All right. We will come back to 
order and, once again, apologies for some of these things are 
out of our control.
    Next we will hear from Susan Offutt who is the 
administrator for Economic Research Service for the U.S. 
Department of Agriculture. Welcome.

  STATEMENT OF SUSAN OFFUTT, ADMINISTRATOR, ECONOMIC RESEARCH 
            SERVICE, U.S. DEPARTMENT OF AGRICULTURE

    Ms. Offutt. Thank you, Mr. Chairman. I am pleased to be 
here today, to discuss the aging of agriculture and the 
participation of young producers in farming.
    One of the most remarkable trends in the United States has 
been its transformation from a largely agrarian society with a 
third of the population living on farms in the 1920s to a 
highly urbanized society today with fewer than 2 percent of the 
population on farms.
    At the same time farm numbers have declined by two-thirds, 
the remaining farm population is slowly aging. The most recent 
agricultural census determined the average age of farmers to be 
54.3 years. Because such findings may lead to speculation about 
the future of farming in America, it is useful to look more 
closely at those who farm, those who wish to farm, and to try 
to understand the reasons people enter and leave farming.
    Over the past 4 decades, the average age of American 
farmers has crept up from 51.3 years in 1964. Today's farmer, 
at age 54, is about the same age as most self-employed small 
businessmen in the U.S. The average age has risen over time as 
farmers have decided to work longer, reflecting the fact that, 
like the rest of the U.S. population, they are healthier longer 
than their counterparts decades ago. The average age also rises 
as the composition of the farm population changes, with 
relatively fewer young people than in the past.
    It is also the case that the agricultural census data, 
which are the numbers that the committees had access to, 
overstates the average age of the farmers. The census counts 
one operator per farm, usually the eldest member of a farming 
family. So a father, aged 60, would be counted as the farmer, 
the farm operator; but his son, perhaps 36 years old, expecting 
to take over the farm, would not be counted in the census at 
all. That is appropriate since it is a farm census, not a 
population census, but it does lead to the exclusion of this 
younger group of people who are full-time farmers in the 
calculation of the average. So farmers appear older than they 
probably are.
    The next census is going to count everybody on the farm; I 
can report that to you. But it is the case that the number of 
young entrants has fallen over time. About 10 years ago about 
70,000 people entered farming--not all of them young, by the 
way--and today probably 60,000 do every year.
    And as I said, there are probably more people, young 
people, in farming than the numbers show. We know this because 
the Department of Labor that collects data on participation in 
the labor force finds that many more people report that their 
full-time occupation as farming than USDA counts as farm 
operators. So we don't know exactly the size of that 
difference, but itseems likely that at least some of them are 
this next generation of farming. They are not lost to us, we are just 
trying to count them in a different way.
    But still it is the case that the traditional pool of new 
entrants into farming, white males in their 20s who grew up on 
farms, is declining. It was about three-quarters of a million 
people in 1990; it is probably down to about 365,000-some 
today. And of course this shrinkage is due to the fact that 
there are fewer farms; but also, like everybody else in the 
economy, farm families have fewer children, so the pool is 
smaller. But even so, the typical path to farming is entry 
through the family farm business which was mainly the point of 
the discussions today.
    But there is an alternative path called the agricultural 
ladder in which--people work on farms, become tenants, and then 
turn into owner-operators. There is reason to suspect that path 
to farm participation in farming may make a comeback because of 
the increase in minority farmers. The census counted about a 10 
percent increase in minority farmers over the last one, that 
brings their numbers to about 50,000 and they tend to enter 
farming by starting as hired labor on a farm.
    The net result of entry and exit into the farm sector over 
the decades has, of course, been fewer farmers, although the 
total number has appeared to stabilized; it is about 2 million 
over the last two censuses. What has generally happened is that 
several farmers are replaced by one more productive farmer. 
That is one farmer who produces as much as the others, but with 
lower labor input, just his own.
    Increases in labor productivity have been rapid enough to 
maintain farm output in the face of these fairly steep declines 
in the number of farmers. So what that means is that changes in 
the age composition of the farm population, or its overall 
size, have not and will likely not have adverse implications 
for the Nation's food security. There will always be, we 
believe, enough farmers to produce what we need to eat.
    However, it is the case that these shifts in the nature and 
the age distribution of the farm population raise concerns 
about the structure and composition of farm and rural 
communities. Let me just briefly talk a little bit about the 
barriers to entry into farming.
    You heard a lot about barriers in the first panel and I 
think the story is familiar, but I want to emphasize the 
relative attractiveness of farm versus nonfarm earnings when a 
young person decides what profession to undertake. When the 
nonfarm economy is robust, as it has been for the past 10 
years, young people opt for higher but also more stable nonfarm 
income and employment. That may be particularly true in 
traditional farming regions in the U.S. and the Upper Midwest, 
in the Plains, where the populations tend to be highly 
educated. When the economy puts a premium on highly skilled 
labor, those who are more educated do better. And it seems 
likely in the past decade that has been an added inducement for 
people to choose off-farm employment over farm employment.
    But it is also true that good times in the off-farm economy 
may actually encourage entry into farming. That is because farm 
families, like most families in the U.S., have two earners. So 
it may be the case that when a couple is confident about their 
ability to earn off-farm, they feel they can take on the risk 
of having one of the earners be a farm operator.
    So the impact of the farm economy versus the nonfarm 
economy can cut both ways. But once you decide you want to be a 
farmer, that is not the end of it. As we heard, access to 
capital is the largest barrier. Farm businesses have relatively 
high capital requirements. The estimate is, it takes about a 
half a million dollars in assets to support a farm household. 
That is a lot of capital.
    Where do you get it? You can use your own, it comes from 
your family, you can have it provided by others, or you can 
borrow it. Up to this point you have heard mostly from people 
who enter farming with their own capital; that is, it is 
transferred to them through their family, and those are the 
kinds of farmers that tend to survive and, not surprisingly, do 
better early on.
    There is another class of people, though, who don't have 
very much, if any, of their own capital for farming and they 
have to borrow it or they have to try and acquire it in other 
ways by leasing land, for example, or machinery, but otherwise 
get access. Borrowing is probably the familiar route, but there 
are other ways to get one's hands on the level of assets needed 
to be successful in farming these days. But there are 
considerably fewer people who enter farming with low levels of 
assets, so that is pretty good evidence that it is a 
significant barrier to entry.
    We have already had discussion about the influence of 
federal and state policies on the entry of young people into 
farming. The Taxpayer Relief Act of 1997 was, in fact, a 
significant event. Our analysis shows that the changes do 
indeed make it easier to transfer the family farm across 
generations by reducing the likelihood that the farm or some of 
its assets will need to be sold to pay State taxes. That law 
probably reduced by about 40 percent the number of farmers who 
even had to worry about filing for estate tax. So it did 
already have a significant effect on the burden of inheritance 
taxes, although it but by no means reduced it to zero.
    These people who enter farming without capital from their 
family very often have sources of credit from Federal lending. 
The Farm Service Agency under the Agricultural Credit 
Improvement Act of 1992 created a beginning farmer down payment 
farm ownership loan program, and it required the agency to 
target a percentage of its farm operating and ownership loans 
to beginning farmers and ranchers.
    Over the last 5 years FSA has in fact provided loans 
totalling $2.5 billion to more than 34,000 beginning farmers 
and ranchers and in many regions of the country that is a 
quarter of all small farmers in the region. So these FSA loans 
reach a large audience. And in addition to the subsidized 
Federal loans that you heard about, aggie bonds are then used 
to underwrite subsidized State loans.
    The Secretary, under the 1992 act, has an advisory 
committee on beginning farmers, and they reported to him and he 
is considering their recommendations which go to changes in tax 
law and pick up many of the themes that you heard from your 
first panel.
    Thank you. I would be happy to answer questions.
    [Ms. Offutt's statement may be found in the appendix.]
    Mr. LoBiondo. I think Mr. Congressman Phelps has a few 
questions. I just have one very quick question for both of you. 
And let me say that the other members of the Committee will be 
submitting questions in writing because of the way our schedule 
got so messed up here today.
    But if I could ask you, What is the one most important 
thing that we as a Congress, as Washington, could do for the ag 
community?
    Mr. Baker. In my opinion, it would be to take a look at the 
Federal income tax code and use income tax incentives to bring 
a younger person into a farming business at an early point.
    I get the opportunity to put on farm and estate and 
business planning seminars, and the majority of people that 
come to those seminars are 65 or older. They have no business 
cessation plan, no escape plan. The way most Iowa farmers get 
out of farming, they made that decision within the last week 
because the harvest is over and they want to be out by March. 
They spent 40 years building a business and they want to spend 
4 months moving it. It just doesn't happen.
    And the income tax code, in my opinion, would incent people 
to bring that labor, that young person into the business at an 
early point and cause that transition to take place over a 
period oftime. All of the statistics and studies show that 
small businesses, the sooner you transfer the management, the better 
the likelihood that the business will succeed to the next generation; 
and when you have the 70-year-old farmer that has turned over no 
managerial control to his son, there is a very high probability that 
that farm business will go out of existence.
    Mr. LoBiondo. Thank you. Do you have an opinion on that?
    Ms. Offutt. The research we do, which is based on national 
research about farmers, shows that compared to the 1930s, the 
circumstances of farming today are so diverse and so varied 
that there probably is no one thing that will help everyone.
    Mr. LoBiondo. That is fair.
    Ms. Offutt. I don't mean that to be a nonanswer.
    Mr. LoBiondo. That is okay.
    Congressman Phelps.
    Mr. Phelps. Sorry I had to leave early on, and it is just 
one of those days. In looking at your testimony, I guess try to 
sum up concern of what both of you said--try, and in one 
question, it looks like the large-scale industrialized 
agricultural movement trends of consolidation and those sorts 
of things are--I don't know what your study or recommendations 
or impact showed about the whole rural setting, the problems 
that for every job loss and farm we have, there are those small 
businesses that are impacted, which I think makes it so 
appropriate for us to talk about this in the same setting.
    Do you think the economy of farming will be affected?
    I know you, Ms. Offutt, you mentioned in your statement 
about the productivity and the food is still going to be 
available; but it seems like, if this trend continues, we are 
going to see impact on rural life even being more depressed.
    What is your estimation of what you found in your studies?
    Ms. Offutt. Well, as I said, the census this time showed 
that the total number of farms today in the U.S. is about the 
same as it was 5 years ago. That is really the first time in 
decades that we have seen a level--leveling off of the decrease 
in the total number of farms.
    Now, a very small percentage of those farms produce most of 
what we eat, as you said. But a lot of other people are 
involved in farming for a diversity of reasons, but they are 
successful, and not in the sense that they are all big 
corporations who are sending food overseas, but because they 
found ways to be successful where they live and in the 
communities where they live.
    I will leave for you an article in a periodical we just 
published today about what makes small farms successful in 
every region in the country. There are ways to help people 
succeed on their own terms that will keep them farming on the 
land.
    Mr. Phelps. And, Mr. Baker, I know that you have covered 
your experience in your State and what you supervise on farm 
and other features along that theme. It looks like you have to 
take into account how--the blending of entering and exiting the 
occupation in terms of what is happening today. So how is the 
transfer to the farm in the financial picture arranged?
    Mr. LoBiondo. Excuse me for just a minute, Congressman, we 
have two options here quickly. We are either going to have the 
option of asking you all to wait while we go vote again or we 
can adjourn the hearing and submit questions in writing.
    Mr. Phelps. I think they have waited long enough.
    Mr. LoBiondo. If it is okay with you, Congressman Phelps, 
we will submit the question in writing and ask for a written 
response, so we don't hold our panel members up anymore.
    Without objection, I will leave the record open for 5 
legislative days.
    And with that, I want to thank you very much, and this 
hearing is adjourned.
    [Whereupon, at 4:44 p.m., the subcommittees were 
adjourned.]
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