[Senate Hearing 106-89]
[From the U.S. Government Publishing Office]


                                                         S. Hrg. 106-89


 
                            THE FOOD SUPPLY:
                      WILL THE CUPBOARDS BE BARE?

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

                                HEARING

                               before the

                        SPECIAL COMMITTEE ON THE
                      YEAR 2000 TECHNOLOGY PROBLEM
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   on

 MOVING TOWARD DISPELLING THE FEARS AND EDUCATING AMERICANS ABOUT WHAT 
                   TO EXPECT LESS THAN 12 MONTHS AWAY

                               __________

                            FEBRUARY 5, 1999

                               __________

                  Printed for the use of the Committee


                               


 Available via the World Wide Web: http://www.access.gpo.gov/congress/senate

                                 -------
                    U.S. GOVERNMENT PRINTING OFFICE
55-219 CC                 WASHINGTON : 1999
_______________________________________________________________________
 For sale by the Superintendent of Documents, U.S. Government Printing Office
                          Washington, DC 20402



                        SPECIAL COMMITTEE ON THE
                      YEAR 2000 TECHNOLOGY PROBLEM

         [Created by S. Res. 208, 105th Cong., 2d Sess. (1998)]

                   ROBERT F. BENNETT, Utah, Chairman

JON KYL, Arizona                     CHRISTOPHER J. DODD, Connecticut,
GORDON SMITH, Oregon                   Vice Chairman
SUSAN M. COLLINS, Maine              JOHN EDWARDS, North Carolina
TED STEVENS, Alaska, Ex Officio      DANIEL PATRICK MOYNIHAN, New York
                                     ROBERT C. BYRD, West Virginia, Ex 
                                     Officio

                    Robert Cresanti, Staff Director
              T.M. (Wilke) Green, Minority Staff Director

                                  (ii)



                            C O N T E N T S

                                 ------                                

                     STATEMENT BY COMMITTEE MEMBERS

Robert F. Bennett, a U.S. Senator from Utah, Chairman, Special 
  Committee on the Year 2000 Technology Problem..................     1
Christopher J. Dodd, a U.S. Senator from Connecticut, Vice 
  Chairman, Special Committee on the Year 2000 Technology Problem     8
Gordon Smith, a U.S. Senator from Oregon.........................     4
Ted Stevens, a U.S. Senator from Alaska..........................     8

                    CHRONOLOGICAL ORDER OF WITNESSES

Hon. Richard G. Lugar, Chairman, Senate Agriculture, Nutrition, 
  and Forestry Committee.........................................     4
Hon. Daniel R. Glickman, Secretary, U.S. Department of 
  Agriculture....................................................    12
Tyrone K. Thayer, Corporate Vice President, Cargill, Incorporated    28
Allen Dickason, Chief Information Officer, Suiza Foods 
  Corporation....................................................    33
Ken Evans, President, Arizona Farm Bureau Federation, on behalf 
  of the American Farm Bureau Federation.........................    35

              ALPHABETICAL LISTING AND MATERIAL SUBMITTED

Bennett, Hon. Robert F.:
    Opening statement............................................     1
    Prepared statement...........................................    45
Dickason, Allen:
    Statement....................................................    33
    Prepared statement...........................................    46
    Responses to questions submitted by Chairman Bennett.........    48
Dodd, Hon. Christopher J.:
    Statement....................................................     8
    Prepared statement...........................................    49
Evans, Ken:
    Statement....................................................    35
    Prepared statement...........................................    50
Glickman, Daniel R.:
    Statement....................................................    12
    Prepared statement...........................................    53
Lugar, Richard G.:
    Statement....................................................     4
    Prepared statement...........................................    58
Smith, Hon. Gordon:
    Statement....................................................     4
    Prepared statement...........................................    60
Stevens, Ted: Opening statement..................................     8
Thayer, Tyrone K.:
    Statement....................................................    28
    Prepared statement...........................................    60
    Responses to questions submitted by Chairman Bennett.........    88

Note: Responses to questions submitted by Chairman Bennett to 
  Hon. Daniel R. Glickman and Mr. Ken Evans were not received at 
  the time the hearing was published.



              THE FOOD SUPPLY: WILL THE CUPBOARDS BE BARE?

                              ----------                              


                        FRIDAY, FEBRUARY 5, 1999

                                       U.S. Senate,
     Special Committee on the Year 2000 Technology Problem,
                                                     Washington, DC
    The committee met, pursuant to notice, at 8:33 a.m., in 
room SD-192, Dirksen Senate Office Building, Hon. Robert F. 
Bennett (chairman of the committee), presiding.
    Present: Senators Bennett, Smith, Stevens, and Dodd.

  OPENING STATEMENT OF HON. ROBERT F. BENNETT, A U.S. SENATOR 
    FROM UTAH, CHAIRMAN, SPECIAL COMMITTEE ON THE YEAR 2000 
                       TECHNOLOGY PROBLEM

    Chairman Bennett. The committee will come to order.
    I apologize for the early morning hour of this particular 
hearing. It was scheduled because we assumed that the Senate 
might be otherwise preoccupied in the afternoon. Due to the 
importance in nature of the year 2000 problem, we did not want 
to delay the hearing because of the Senate's other activities. 
But now the Senate is not in session this afternoon, and we 
could have started at what some would consider a more civilized 
hour. But it may be symbolic of the urgency that we face here. 
We are--what is it?--329 days away now.
    I have been interviewed by Reuters, the news agency, at 
some length on this issue, and we have reported, I think 
accurately, that the securities industry and banking industry 
are ahead of just about everybody else on the year 2000 
problem. I have said all along you do not know where the 
problems are going to hit and you do not know what area that 
you regard as being compliant can do to you. Here is a report 
about the Lippert Company, a subsidiary of Reuters. Part of 
that industry that we have reported as being in the best shape 
missed a particular item in their computer world and suddenly 
discovered with 1999 coming along that they had problems, and 
for some 3 weeks they were giving inaccurate data with respect 
to the tracking of mutual funds. The press, on the reputation 
of this organization, was repeating that inaccurate data. So, 
for a period of 3 weeks before a software patch was sent out, 
people were receiving wrong information with respect to the 
performance of 37,000 mutual funds and presumably making some 
wrong investment decisions. Steve Lippert, a senior vice 
president, put it rather well. He said, ``We goofed.''
    That is the purpose of this committee, that is the purpose 
of these hearings, to get as many people as possible as alert 
as we can to the various problems that can occur. I am 
absolutely convinced that when the year 2000 comes along, there 
will be repetitions of this in areas of very responsible 
people. The Lippert Group is a very responsible group. I want 
to make it very clear I am not singling them out in any way for 
doing anything that is inappropriate. But there was one thing 
that slipped between the cracks, and unbeknownst to anybody, it 
hit. Fortunately, it was a relatively minor issue. It was not 
life-threatening in any way and it was remediated in a matter 
of weeks. This illustrates to me once again how important it is 
for us to focus on these various areas.
    Today, we are focusing on the food industry. This is the 
first hearing of this committee in the 106th Congress. We have 
had ten hearings since--or this is the tenth hearing--the 
inception of the committee last April in the 105th Congress. We 
have been trying to answer the questions that we get everywhere 
we go with respect to the Y2K crisis. Will the lights turn on? 
Will the banks have cash? And will I be able to drink the 
water?
    At its core, the Y2K issue has forced us as a society to 
focus on and confront our vulnerabilities in this computer age, 
vulnerabilities of which the Founding Fathers living in an 
agricultural world had no understanding. We do this as 
individuals and as a nation and as companies and as 
organizations.
    It is ironic that the advent of time- and labor-saving 
technologies that provide us with the comforts and conveniences 
that are beyond the wildest dreams of the Founders--have given 
us a concomitant series of vulnerabilities in the very basic 
human needs: food, water, and shelter, remaining unchanged for 
thousands of years. So we made the food industry the focus of 
today's hearing.
    To put this in perspective, in this land of plenty, we 
manage to feed not only our own population of 260 million 
people--indeed, overfeed in terms of some of the figures on 
obesity--but we export $70 billion worth of food products every 
year. America is thought of as a high-tech exporter; 
agricultural exports are just as important as any other segment 
of our export markets.
    We are not used to food shortages or even the threat of 
food shortages. We take it for granted that our neighborhood 
grocery stores will have the shelves stocked with food products 
that are safe and affordable, and, in addition, we expect 
variety. We demand everything from frozen TV dinners to fresh 
vegetables, all under one roof; live lobster shipped overnight 
from New England, sitting side by side in the supermarket with 
fresh lettuce 72 hours from being picked in California. We 
demand high quality and a choice of different brands.
    Well, in this world, the committee staff is still flooded 
with calls saying, ``Will there be food on the shelves?'' There 
is talk of stockpiling and some concern about the impact of 
panic-induced shortages. It is vital that the food industry 
address this crucial question and that this committee provide a 
platform for people to address this question. This is the 
reason for the hearing today.
    Is there a need to stockpile? And, like the other Y2K 
questions, will stockpiling itself lead to shortages that will 
then create a crisis as bad as the crisis that stockpiling is 
attempting to avert?
    These questions will not be answered definitively here 
today, but they will be addressed. We hope we will get 
information that will move toward dispelling fears and 
educating Americans about what to expect less than 12 months 
away.
    Now, I have more information about the food industry which 
I will put in the record. I will note, for those who would say 
agriculture is pretty basic and it is not high tech, that 
agriculture is very high tech. We could not feed 260 million 
people and produce enough excess food to export $70 billion 
worth if we were going by old agricultural methods. The 
industry has integrated modern information technology into 
processes that increase productivity, yield, and profitability. 
More than 80 percent of American farmers use computers as an 
integral part of their business. A third of those are connected 
to the Internet, and 75 percent of the farmers own a cellular 
phone.
    In 1994, farmers began to use the Global Positioning System 
[GPS] to leverage their capability to pinpoint location 
information about specific field areas. This accurate location 
data eliminates guesswork in determining yield variances, crop 
damage, and soil fertility.
    A century ago, the average U.S. farm output fed eight 
people. Today it feeds 212.
    Now, I talked about farmers. In my formal statement that I 
will file are comments about ranchers, processors, 
manufacturers, others that we will hear from today. The reason 
we have made food the No. 1 issue in this first hearing is that 
in October members of the Gartner Group predicted a 66 percent 
chance that a mission-critical failure would occur within 
farming and agricultural industries, and that is much too high.
    One thing I have learned in these hearings is that whenever 
I use a statistic like that, people on the Internet immediately 
cast it in stone, and it is thrown back in my face 6 or 8 
months later as still being accurate. If there is ever a 
situation that was a moving target and a work in process it is 
the Y2K challenge. Since that assessment in October, the Food 
Supply Working Group, chaired by the USDA, has been working to 
change that number. They do not have a number other than 66, 
but the state of readiness in the food industry they say is 
encouraging. That is a nice word. We want to be a little more 
definitive about it today.
    So we will hold two hearings in the committee. We want to 
check the entire food chain from ``farm to fork,'' if you will. 
Today's focus will be on the farm side, and the second hearing, 
which is scheduled later this month, will be on the fork side. 
Today we will hear from producers and processors; in the next 
one we will hear from manufacturers, distributors, and 
retailers. I hope that as a result of these hearings we can get 
accurate information that will alleviate panic and at the same 
time inform those who have every legitimate reason to be 
concerned.
    [The prepared statement of Chairman Bennett can be found in 
the appendix.]
    Chairman Bennett. With that I welcome Senator Smith, who 
himself is part of this industry in his day job, or previous 
life, or whatever you want to call it, for any opening remarks 
he may have.

   STATEMENT OF HON. GORDON SMITH, A U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman.
    It is a pleasure to be with all of you today. It is always 
my pleasure to be in the company of Senator Lugar, the chairman 
of the Ag Committee and a mentor of mine in foreign policy, and 
the Secretary of Agriculture. We welcome all of you.
    It is true that in my former life I was a food processor. 
Without a doubt, I am the biggest pea picker in American 
politics today. [Laughter.]
    I was just thinking, as I listened to your opening 
statement, Mr. Chairman, that when I was born in 1952, I 
believe frozen peas sold for about 20 cents a pound. Today they 
sell for about 20 cents a pound, and yet they are still 
produced in spite of the lack of inflation in food. The 
increase in productivity has truly been remarkable, and that 
has come about through high technology. That has come about 
through computerization. That has come about through 
efficiencies unimagined--what am I now?--46 years ago.
    I think it goes without saying that that productivity is 
truly in peril if, in fact, the agricultural community is not 
prepared for Y2K. And so I am pleased that so many 
representatives from an industry that I love and care for a 
great deal are here and are taking steps to make sure that the 
food chain is not interrupted.
    So, with that, I turn it back to you, sir.
    [The prepared statement of Senator Smith can be found in 
the appendix.]
    Chairman Bennett. Thank you.
    We will begin with the testimony of Richard Lugar, Chairman 
of the Senate Agriculture, Nutrition, and Forestry Committee.
    Senator we are honored by your presence. We are always glad 
to have your wisdom. I want to take the opportunity to publicly 
thank you and your committee for your efforts in addressing 
this problem. We have had a little bit of difficulty on this 
committee energizing some of the so-called old bulls of the 
Senate who chair the major legislative committees, but that is 
clearly not the case with you, and we are delighted that you 
are here.
    You will be followed by Secretary Glickman, who will give 
us the USDA's assessment, and we think from the two of you 
distinguished public servants we can get a good picture of how 
the government views this.
    So, with that, sir, we are happy to hear from you and look 
forward to what you have to tell us.

     STATEMENT OF HON. RICHARD G. LUGAR, CHAIRMAN, SENATE 
         AGRICULTURE, NUTRITION, AND FORESTRY COMMITTEE

    Senator Lugar. Well, thank you very much, Chairman Bennett, 
Senator Smith. I really am grateful for this opportunity to 
appear before the committee, and I thank you for your 
remarkable and courageous, farsighted leadership in this area.
    The food industry, as you have already pointed out, is vast 
and complex. We are fortunate in America to be able to choose 
from so many food products. In order to make those choices 
available, intricate production processing, packaging, storage, 
and transportation systems must function without flaws. 
Agricultural producers and food suppliers, like many other 
businesses, are heavily dependent on computerized processing 
and information exchange. Our modern and efficient food 
industry, from irrigation and milking equipment to food-
processing assembly lines and refrigeration, faces potential 
year 2000 problems. The food supply chain's year 2000 readiness 
is crucial to the availability of food and to our Nation's 
economy.
    The agriculture sector contributes 13 percent to the gross 
domestic product. Even though the United States has a trade 
deficit of $212 billion currently, we have an agricultural 
trade surplus of $16 billion.
    The Committee on Agriculture, which I am privileged to 
chair, held two Y2K hearings last year. At that time, little 
was known about the potential impact of the year 2000 problems 
on the food supply. At our July 22nd hearing, Dr. Ed Yardeni, a 
respected economist and year 2000 problem observers, said, ``I 
am concerned that no one on this planet is assessing the 
potential negative impact of Y2K on the global food supply.''
    I would add parenthetically, Mr. Chairman, as you are 
aware, Ed Yardeni's report dated January 25, 1999, repeats his 
70 percent recession forecast and finds that much of the 
encouraging talk still, as far as he is concerned, is, as you 
said, not a weasel word but a comforting word, perhaps without 
the accuracy it requires.
    Your letter of invitation indicated the purpose of the 
hearing was to examine how the food industry is responding to 
the challenge from farm to fork. When the President's Council 
on Year 2000 Conversion realized the daunting task of assessing 
the readiness of the food chain, the Food Supply Working Group 
was created. This group, led by officials of the Department of 
Agriculture, is charged with the responsibility for determining 
the year 2000 readiness of the U.S. food industry and how the 
millennium bug problem might affect foreign countries as 
markets for American agricultural products and as suppliers to 
our Nation. I commend them for their work and am delighted to 
have had a chance to chat with Secretary Glickman, and you will 
have that opportunity shortly.
    I am confident the Secretary will testify to the findings 
of the assessment undertaken by the Food Supply Working Group, 
but I want to make a few observations. The group concluded 
recently, ``The state of readiness within the food industry is 
encouraging. An interruption of the food supply so severe as to 
threaten the well-being and basic comfort of the American 
public is unlikely.'' This is welcome news, but as you have 
pointed out, Mr. Chairman, government officials need to be 
cautioned to continue to monitor progress diligently and 
address each problem promptly. In the past, the tolerance of 
the American public for systematic disruptions has been very 
low, and this situation will be no different.
    The group's initial assessment also found that ``. . . the 
key markets of U.S. food will likely have a relatively low risk 
of year 2000 disruptions to their import, processing, 
distribution and retail chains.'' Earlier this month, I 
introduced S. 101, the United States Agricultural Trade Act of 
1999. The purpose of this legislation is to open foreign 
markets for America's agricultural exports and to raise the 
profile of agriculture in our Nation's trade agenda. One of the 
most important things we can give farmers is the ability to 
export products abroad. If the ability to export is affected 
adversely by the year 2000 problem, all involved will feel it. 
Additionally, those countries that rely upon our humanitarian 
food donations will suffer as well.
    In a report commissioned by the Food Supply Working Group, 
the Gartner Group concluded, ``Perhaps the greatest threat to 
the food supply industry comes from the consumers themselves. 
Needless and frivolous stockpiling of supplies can create 
isolated industry shortages.'' The ``just in time'' inventory 
control strategy employed by the food industry could be 
severely disrupted by the stockpiling of food. The Gartner 
Group recommended that USDA embark upon a program of 
information dissemination to inform the public about the 
unlikely potential for serious interruptions in the U.S. food 
supply. And I would strongly endorse that recommendation.
    Mr. Chairman, while the Food Supply Working Group is 
responsible for assessing year 2000 readiness, the ultimate 
responsibility for attaining year 2000 readiness rests with the 
food industry. Open communication and cooperation are crucial 
to the success of this undertaking. It has been noted that the 
larger food companies, as is the case with most industries, are 
more prepared and better financed to address the year 2000 
problem. Some have suggested that those companies should share 
their strategies and methodologies with smaller firms in an 
attempt to ensure that all are successful. One kink in the 
chain could affect the whole system, and I am pleased to see 
that witnesses from the food industry are coming forward today 
to share their successes.
    I am aware that many corporations, in and out of the food 
supply chain, have been reticent to disclose their year 2000 
readiness out of fear of the potential for litigation. In this 
regard, I applaud you, Mr. Chairman, and the cosponsors of the 
Year 2000 Information Disclosure Act of 1998. This law will do 
much to ease the fears of liability lawsuits and promote the 
flow of year 2000 readiness throughout the private sector.
    Mr. Chairman, I will soon introduce the USDA Information 
Technology Reform and Year 2000 Compliance Act of 1999. This 
legislation is similar to a bill that passed the Senate last 
year. It centralizes all year 2000 computer conversion 
activities within the Office of the Chief Information Officer 
of USDA in an effort to ensure that all critical computer 
functions at the Department are operational on January 1, 2000. 
I commend this legislation to the attention of members of this 
committee.
    On May 14 of last year, USDA testified before the Committee 
on Agriculture that 40 percent of its mission-critical systems 
were already Y2K compliant. The Department's January assessment 
shows that 71 percent of the mission-critical systems are now 
compliant. The compliance percentage is improving but it may be 
misleading. In May 1998, the USDA was tracking 1,080 mission-
critical systems. Today, the Department is tracking 354 
mission-critical systems. I would just simply say, Mr. 
Chairman, that I have queried the Secretary of Agriculture here 
today and others about this. This is a source of considerable 
distress for us trying to figure out what is critical. I 
recognize that the Office of Management and Budget revised the 
criteria for reporting mission-critical systems. Further, as 
USDA becomes more sophisticated in its approach, there may be 
changes to the number of systems being tracked. But I am 
concerned that some systems removed from the mission-critical 
category might indeed be vital to USDA's operations and may 
impair the Department's ability to serve the country.
    While the number of USDA mission-critical systems being 
tracked is decreasing, the cost of compliance is increasing. In 
May 1998, USDA's Chief Information Officer testified the 
Department anticipated spending $120 million to address the 
problem. Six months later, OMB reported that USDA spending 
would increase to over $160 million. While the supplemental 
appropriations dedicated to the year 2000 issue that was 
enacted last year will be helpful, additional cost overruns 
bear careful scrutiny.
    Last summer, in that regard, Mr. Chairman, I recommended to 
Secretary Glickman that USDA post a website available to the 
public that shows the Department's monthly progress in fixing 
the year 2000 problems in its priority mission-critical 
systems. I am troubled by the possibility that, in an effort to 
fix everything, some systems having the greatest impact on 
USDA's ability to deliver services might be missed. The systems 
included in the top priority category are those with economic 
repercussions on agricultural markets or trade, impacts on 
individual financial security, and impacts on health and 
safety.
    As of January 29 of this year, USDA reports that 62 percent 
of the priority mission-critical systems are compliant. The 
number of top priority mission-critical systems has remained 
stable since the website was created, so this poses no 
particular concern for me at this time. But the deadline 
imposed by the Office of Management and Budget for 
implementation of all mission-critical systems, not merely 
those in USDA's top priority, is March. In the event it appears 
that some mission-critical systems will not be ready in time, I 
will want to know and I am sure this committee will want to 
know what contingency or triage plans are underway to ensure 
the Department can successfully meets its responsibilities.
    I point out in my statement, Mr. Chairman, that the 
universal resource locator for the website is http://www/
ocio.usda.gov/y2k/critical--syst/priority/htm. The chairman and 
members of this committee, as well as the members of the 
Agriculture Committee, can visit the site daily if they wish to 
observe progress in this effort.
    I am encouraged by USDA's progress toward year 2000 
compliance. Secretary Glickman's personal commitment and 
attention to this endeavor have been very important, and I urge 
him to continue to monitor the matter closely to ensure that 
USDA's computers function properly to serve the American public 
dependent on information and programs of the Department. I want 
to also commend the work of the Commodity Futures Trading 
Commission, the commodity exchanges they regulate, and the Farm 
Credit Administration and the farm credit system banks for 
their attention to these important projects.
    I visited personally with each of these officials, Mr. 
Chairman, about their trial runs, about the programs that they 
have, because, clearly, the commodity futures system is dead if 
it does not work, and that system is on track. At least, 
assurances are given to us frequently that that is the case.
    I thank the committee for inviting me to present this 
statement. I am confident that if we, the public and the 
private sector, work together we will succeed in continuing to 
assure an adequate and reliable food supply in spite of the 
year 2000 challenge. I would be pleased to respond to questions 
that you and the Senators might have.
    Chairman Bennett. Thank you very much. We appreciate your 
courtesy in being here and your leadership on your committee in 
helping to keep some pressure on in some vital areas.
    We have been joined by Senator Dodd, the Vice Chairman of 
the committee, as well as Senator Stevens, who is an ex officio 
member of this committee and, arguably, the most powerful 
member of this committee by virtue of his assignment on the 
Appropriations Committee.
    Following the rule of those who arrive, Senator Dodd, if we 
could let Senator Stevens go first?
    Vice Chairman Dodd. Absolutely. No question about it.
    Chairman Bennett. We will hear any opening comments Senator 
Stevens may have.

   STATEMENT OF HON. TED STEVENS, A U.S. SENATOR FROM ALASKA

    Senator Stevens. Well, I do not want to delay the hearing, 
Mr. Chairman. I do think this is an issue that is of vital 
concern to our State. We import 95 percent of our food. We only 
produce 5 percent of our food. We are very vitally interested 
in the impact of Y2K on our food supply. I am pleased to be 
with you.
    Chairman Bennett. Thank you.
    Senator Dodd.

  STATEMENT OF HON. CHRISTOPHER J. DODD, A U.S. SENATOR FROM 
CONNECTICUT, VICE CHAIRMAN, SPECIAL COMMITTEE ON THE YEAR 2000 
                       TECHNOLOGY PROBLEM

    Vice Chairman Dodd. Well, thank you, Mr. Chairman. And let 
me begin by again commending our distinguished chairman of this 
committee, Bob Bennett, who has done a terrific job on 
tirelessly trying to bring the attention of the country and 
others to this important issue. As he properly points out, one 
of our strongest allies in all of this from the very beginning 
has been Senator Stevens of Alaska, who has consistently 
reminded our colleagues of the importance of this issue through 
his contacts and communications with people in the high-tech 
industry and others about the importance of this question. And 
to Senator Lugar, I have had the pleasure of serving with him. 
He has been my chairman on occasion in the past of the Foreign 
Relations Committee, but his views and thoughts on agriculture 
all of us listen to with a great deal of interest and 
attention.
    I was, Mr. Chairman, thinking that about 60 years ago, when 
we talked about the breadbasket of America and the problems 
that might confront it, we would talk about the dust bowl and 
the boll weevil, I guess, were the threats to America's food 
supplies.
    Obviously, in this day and age, it is a different story. 
Information technology and embedded systems are almost as 
critical to the food supply chain as photosynthesis was and is. 
From the germination of the seed until the time the product 
arrives on the consumer's plate, technology plays an ever-
increasing role in our food supply. If left unchecked, this 
digital pestilence, if you want to call it that, could 
needlessly gnaw away at corporate competitiveness and consumer 
confidence.
    The food industry as a whole has remained largely silent on 
the Y2K issue, but has quietly expressed confidence in their 
ability to supply, process, and sell products. Some consumers 
have interpreted the chilling corporate silence as inactivity. 
In an attempt to avoid being associated with the Y2K issue, the 
food industry may have inadvertently contributed to some of the 
public fear. One way we think to ameliorate concerns 
surrounding this issue and its impact on food supply is to 
share information with the public about the preparations that 
are underway.
    According to a Time/CNN poll published in Time's January 
18th issue, 59 percent of those polled in the country indicated 
they were somewhat or very concerned about this Y2K problem. 
When asked if they would stockpile food or water as a 
protection, some 33 percent said that they might do so.
    Retailers and manufacturers are extremely concerned that 
these fears could cause a surge in demand by late summer. 
Preparing to meet the sudden increase in demand takes 
approximately, we are told, 6 to 9 months of lead time. They 
must start making decisions now to avoid possible shortages. If 
they miscalculate and are unable to meet such a demand, this 
could flame public fears as we move toward December 31, 1999. 
It is increasingly apparent that a national public information 
campaign is needed--and I think these kinds of hearings 
contribute to that--to address the public and business fears by 
providing recommended guidelines for individual preparedness.
    I would like to point, if I could, that the committee tried 
to have a hearing this past October, but we couldn't find 
anybody to testify at that time. There were reasons they gave 
which were not entirely illegitimate reasons that deal with 
their own products lines and so forth and given the fragile 
nature of brand names and what it can mean to a business. But I 
would like to note that the witnesses before us today have 
willingly come to share their information, and I applaud them 
for doing so. It takes some courage, but I think a sense of 
civic responsibility to step up on an issue like this and offer 
the kind of confidence I am sure they can provide to us that we 
can avoid the problems that some have raised.
    So with that, Mr. Chairman, again, I thank you immensely 
for your leadership on this issue and am anxious to hear what 
our other witnesses have to say, but, again, my thanks to 
Senator Lugar for his advice and counsel this morning.
    [The prepared statement of Vice Chairman Dodd can be found 
in the appendix.]
    Chairman Bennett. Thank you very much. One of the delights 
of serving in this assignment is the fact that I have Senator 
Dodd to serve with on the other side. We hear so much talk in 
the media about how we are bogged down in partisan fighting and 
snarling and no one can get along. I invite those who feel that 
way to come check this committee and see that across partisan 
lines we are about as united and in lock step as I think it is 
possible to be. That is a tribute to you, sir, and your 
willingness to see to it that the minority and majority lines 
get very blurred as we focus on the issues. We are grateful to 
you.
    Senator Lugar, do you think there is any merit in the 
Gartner Group's suggestion that USDA should mount a public 
awareness program? We have heard SBA talk about their public 
awareness program. We have had a Y2K Week sponsored by the 
Small Business Administration trying to reach their 
constituency. What about USDA's activities in that regard?
    Senator Lugar. I believe that they should have a very 
strong program, and in our oversight capacity, we will work 
with Secretary Glickman to find the efficacy and the way of 
doing that.
    I would just say that he and the Department are faced, just 
as this committee is, in asking about farm to fork, that there 
are a great number of facets of the food industry, and glib 
reassurance to consumers that it will all be there are 
unjustified unless there is some credibility at each stage. For 
example, Senator Stevens has mentioned the Alaska problem, but 
it is not unique in some vulnerability to shipments. We would 
just note that at least in our research for this hearing, at 
this point the readiness level for U.S. motor carriers was 2 on 
a scale of 1 to 6, for example, and at foreign ports it was 
only 3, on foreign distribution, 2. This affects the supply 
particularly of perishables, of fresh fruits and vegetables.
    So this is why we ought to try to encourage people to 
retain a sane view, but at the same time, we really stretch our 
public service credibility by being too glib about that. And I 
think what we are doing now is probably the most reassuring, 
that it is testing out the transportation system, 
refrigeration. We have vast stocks, obviously, of pork, now 
encouraging people to slaughter more at the slaughterhouses, to 
eat more and what have you, very good supplies of the basic 
grains, but then they have to be processed into the particular 
things that people buy at the retail level.
    So this is a long answer to an obvious question. Sure, a 
great deal more awareness, but I think some more education as 
to where the whole food supply is and the various vulnerable 
parts of it.
    Chairman Bennett. Well, I appreciate your pointing it out 
the way you did because I wanted to note why OMB and Mr. 
Koskinen are working so hard to have agencies meet the March 
deadline, and March is only 1 month away, at least on the 
calendar, 6 weeks away to the end of the month. People say, 
well, March is awfully early, isn't it, for something that is 
not going to hit us until the following January?
    March is about right because it leaves you with nine months 
to test across industry lines. It would be tragic if we said to 
ourselves, well, the food processors are just fine, the 
shippers are just fine, the retailers are just fine, everything 
is just fine, and then we discover that the interconnections 
between those break down. This is one of the problems that we 
are finding in the early testing in the financial area, that 
one agency or one entity, rather, can be in good shape but they 
are all connected. Of course, if the telecommunications system 
does not work or, heaven forbid, the power grid does not work, 
then it all breaks down.
    We need at least nine months to test across organizational 
lines, and that is why I applaud what you have been doing in 
your Agriculture Committee to get people ready in this time, 
and we are going to hear from Secretary Glickman about how he 
can meet the March deadline.
    I get distressed when people say, well, OK, we will not 
quite make March, but we will do it by June, and we have still 
got six months so why are you worried? Well, I am very worried 
because of the interconnections that have to be tested, and 
your answer was very responsive to that problem.
    Senator Lugar. Mr. Chairman, may I add parenthetically that 
I mention in my testimony they are looking at 354 critical 
systems on the website, and I cited that. But only two-thirds 
of these apparently, more or less, are ready with the March 
deadline approaching. Now, Secretary Glickman might have a more 
up-to-date account today, but even if you are watching the 
paint dry, that is, tuning in every day to see how it is going, 
the fact is it is not there. This is just the 354 remaining 
from the 1,000 earlier with some hope that there is something 
not lost in the 600-and-some left by the wayside.
    So I would stress the triage problem at USDA or anywhere 
else, and this is not the whole food supply, but if USDA is not 
up to speed on this, heaven help us in monitoring all the rest.
    Chairman Bennett. Senator Smith.
    Senator Smith. Mr. Chairman, you have already said it and 
so has Senator Lugar, but I can tell you from firsthand 
experience that in order to survive in the food-processing and 
farm industry, you have to be on the cutting edge of 
technology. And so the equipment utilized today in food 
production is of the most recent vintage and, therefore, is 
unlikely to have Y2K problems.
    But as you have pointed out, the difficulty is the food-
processing and farm industries are related industries, energy 
specifically, transportation specifically, and the danger to 
our country and other countries who rely upon us for food is 
with those areas of energy and transportation.
    I think it is a fact--and I will ask the Secretary, and 
maybe the chairman can tell me. But I think most cities only 
have about a 72-hour food supply within their borders. And so 
were there to be a terrible disruption, people would feel it 
very directly.
    I don't know if you have a comment on my comment, but I 
think it has probably been said several times.
    Senator Lugar. I would say, ``Amen.''
    Chairman Bennett. Senator Stevens.
    Senator Stevens. Well, I am concerned primarily about the 
transportation system. I think most individual farmers are 
going to understand the problem for their own systems and the 
supply will be there, but importing so much of our food supply 
from overseas and really the logistics of transportation are 
really the genius of our food supply system. And if there is a 
glitch anywhere, you know, Seattle or Portland, our food is 
going to be sitting on the dock and spoiling, and we are going 
to have to figure out how to go back and steal the reindeer's 
food.
    I don't know that we have done enough about the 
transportation system, Senator. My feeling is perhaps we should 
ask you and Senator McCain to hold a joint hearing of 
Agriculture and Commerce and find out if the transportation 
system and the food suppliers are really coordinating their 
testing of the integrated system and not just testing the 
separate portions of the system. What do you think about that?
    Senator Lugar. I think that is a very constructive 
suggestion, and, in fact, much of the testimony in other times 
before the Ag Committee has expressed great reservations about 
the transportation, the railway system of the West in 
particular, with regard to grain shipments in elevators.
    But I think that coordinated focus of this committee 
indicating that these are integrated systems is very important. 
I have already cited what I think is a lower level of readiness 
for a good number of systems that will affect your State, and 
maybe some others, and in this Y2K Committee surveillance, this 
has to be a big part of it.
    Senator Stevens. Well, Senator, that is Paul Revere, but we 
have to have some troops behind him if people are going to 
really hear this again and again.
    Thank you very much.
    Chairman Bennett. Thank you.
    Senator Dodd.
    Vice Chairman Dodd. I think these are critical questions. 
What I was thinking of, when Senator Stevens said that, is Alan 
Simpson the other night had the line that this could be ``the 
herd shot round the world'' if we are not careful here with the 
Y2K issue, speaking of the agricultural issue. But I am anxious 
to hear we have got our very fine Secretary of Agriculture here 
with us this morning as well, and I am anxious to hear what he 
has to say.
    Thank you very much, Dick.
    Chairman Bennett. Thank you, Mr. Chairman. We appreciate 
you and your committee and all you have done and your testimony 
here today.
    [The prepared statement of Senator Lugar can be found in 
the appendix.]
    Chairman Bennett. We next welcome Secretary Dan Glickman. 
He will provide testimony on USDA's assessment of the food 
industry, their Y2K preparedness, and, Mr. Secretary, you have 
been very patient to sit through the opening statements as well 
as the testimony of Chairman Lugar. So I think you already know 
what we have on our minds.
    We welcome you and your associates here today, if you would 
like to introduce them so that their names can go in the 
record, and then at any time during the presentation you want 
to call on them, of course, they would be welcome. But we want 
to thank you for being here. We want to thank you for your 
efforts, your leadership, and your awareness to this. We wish 
that all public officials were equally as concerned as you are.

     STATEMENT OF HON. DANIEL R. GLICKMAN, SECRETARY, U.S. 
                   DEPARTMENT OF AGRICULTURE

    Secretary Glickman. Thank you very much, Senator Bennett, 
Senator Dodd, Senator Smith. It is an honor for me to be here. 
I also want to compliment Chairman Lugar, who has a lot to do 
with our Department, for basically keeping his watchful eye on 
us on this matter as well as others.
    I would introduce the folks who are with me. Cathy Woteki 
is our Under Secretary for Food Safety, and she has been in 
charge of the working group here that you have referred to. 
Anne Reed is our Chief Information Officer. Mike Dunn is our 
Under Secretary for Marketing and Regulatory Programs, all the 
inspection of foods coming in and going out. Gus Schumacher is 
our Under Secretary for Farm and Foreign Agricultural Programs, 
so both the production side as well as the export and import 
side. So there is the right team here who can work on these 
particular problems.
    Last month I was home, and my parents--I am very fortunate. 
My parents are in their eighties and are both alive and in good 
health. And my mother says to me, she says, ``I don't know 
about this problem I keep hearing about, but are your father 
and I going to have enough food and prescription drugs next 
year?'' So it struck me that, you know, it is getting through, 
this particular issue.
    Agriculture is a very complicated mix of low-tech and high-
tech businesses together. Certainly as Senator Smith knows, 
some production agriculture side is not particular high-tech, 
to the marketing and distribution of agricultural products, 
which is very high-tech, and more and more traditional 
production agriculture is becoming very, very high-tech.
    Agriculture is also, as Senator Stevens talked about, 
extraordinarily dependent upon transportation, rail, highway, 
and particularly shipping in a globalized economy; also on a 
utility network, a grid system that works. I mean, every aspect 
of the American economy is similarly part of a big mix of 
things, but agriculture particularly is affected by this 
movement of product.
    Fifty or a hundred years ago, when most products grown were 
sold within 50 miles of where they were produced, it was a 
different world. But now it is not that way. Very few things 
are produced near where people live. They have to move. And 
with the globalization, this is really a very significant 
problem.
    So we at USDA, under the leadership of the folks that I 
just mentioned, are working on this problem. The President's 
Council on Year 2000 Conversion, you have had Mr Koskinen in 
before. You have talked to him. This is an issue that they drum 
in on us all the time, I mean OMB, Koskinen personally: What 
are you doing? Why are you behind? What is your grade? You 
know, we get graded all the time, graded by the Congress, 
graded by OMB. You know, we are not as high as some and not as 
low as others. Part of the problem is the complicated nature of 
the food supply.
    But we get also questions from citizens, and more and more 
all the time, who are concerned that food may not be available 
on January 1, 2000, because of computer malfunctions.
    Now, our preliminary studies show that that will not 
happen. Nonetheless, they raise an important issue which 
deserves our attention. Working with the private sector--and I 
am delighted that you have put together a group today of more 
production agriculture side, but I understand you are going to 
have the retailing side as well. I really do believe the food 
industry is taking deliberate steps to make sure that these 
fears do not become reality.
    We recognize that Government cannot solve the Y2K problem 
alone. The fact is the food moves through the private sector. 
Agriculture by and large, even with the Government's 
involvement on the production side, is still largely a private 
sector operation. But we can play an important role by, one, 
raising awareness of the problem, as you just talked about, so 
that farmers, ranchers, food processors, and distributors can 
take steps to ensure that their computers are Y2K OK, as we 
would say.
    I passed out--I only have one of these things, but this is 
a document called ``The Year 2000 Program Toolkit'' that is put 
out by the Extension Network. As you know, this is the largest 
methodology in the United States by the Government to try to 
give information to people. And this is a document largely that 
we use through the land grand colleges and our extension 
offices to help small businesses, agriculturalists, and others 
deal with the problem, become aware of it, figure out what they 
have to do to fix their computers or upgrade them. And so this 
whole idea of educating people I think is a major role we have, 
and very few agencies of Government are positioned like USDA in 
terms of letting people know what is out there.
    We also have to assess the state of readiness of the food 
sector so that industry can know whether they are lagging 
behind and so consumers can have reliable information and 
confidence in the safety of our food supply.
    Finally, we have got to conduct prudent emergency 
contingency planning to address any problems that might occur. 
Because no matter what you do, there will be some glitches, and 
you have got to have some contingency planning out there. I 
don't think that they are going to be widespread, but there 
will be some, probably.
    The Food Supply Working Group is committed to ensuring that 
everyone involved in food supply production and distribution 
understands and is aware of the potential problems, understands 
the importance of acting now, and knows where they can go for 
help. Our goal is to do whatever we can to prevent disruption 
in the food supply chain.
    I am pleased to report that based on the information we 
have collected to date, the Food Supply Working Group does not 
believe the Y2K problem will cause widespread or severe 
disruptions in the food supply in this country. It is most 
likely that any effects from the Y2K problem will be minor and 
localized by region or particular food product, and we can talk 
about some of this in the question and answer period.
    The state of readiness within the food industry is 
encouraging and is getting better. I am not sure 2 years ago I 
would have been quite as encouraged, but really, people are 
focused on this, particularly in the food industry.
    The Food Supply Working Group's initial analysis suggests 
the American public can be confident that the major domestic 
companies, which provide most of the key foods, will continue 
to operate irrespective of the Y2K problem. An interruption in 
the food supply so severe as to threaten the well-being and 
basic comfort of the American public is highly unlikely.
    Assessing the Y2K state of readiness of the Nation's food 
sector is a daunting task. We have many USDA agencies involved 
to conduct our initial assessment. In addition, as was referred 
to by Senator Lugar, we hired the Gartner Group, a worldwide 
business and information technology advisory company noted for 
its expertise in the Y2K problem. Our assessment is not 
complete. It will be updated quarterly throughout the year. It 
shows that there is still much work to be done, but it also 
shows that, by and large, our Nation's food supply will remain 
reliable.
    Let's first talk about farmers and ranchers, the production 
agriculture side. Our survey results show that production 
agriculture is, by and large, in good shape. Other studies show 
that suppliers of farm input, such as seeds and fertilizer, 
appear to be well prepared as well. While nearly a third of 
those farmers surveyed used computers for record keeping, only 
a fraction of all farmers, less than 3 percent, rely on 
automated systems in the production process. Those that do are 
aware of the Y2K threat and are taking steps to address the 
problem. This is an issue that particularly affects the dairy 
industry, and it is something that we may want to talk about a 
little bit afterwards.
    I know that there is a lot of fear and uncertainty out 
there. However, I want to make it clear there is no reason to 
anticipate any decline in the productivity of American 
agriculture, at least not due to Y2K problems that may occur on 
the ranch or the farm.
    After harvest, farm products enter a much more mechanized 
world of processing and distribution, so our assessment also 
covers food processors and distributors. Our initial focus has 
been on industry leaders who collectively control over 50 
percent of the market of 19 key food groups, including milk, 
meat, bread products, fruits and vegetables, and infant food, 
as well as major wholesalers and retailers. The study concluded 
that these companies are making satisfactory preparations and 
should be well prepared to sustain operations despite any 
interruptions caused by the century date change. And while few 
of these companies will be immune from any interruptions, it is 
unlikely that these interruptions will be much more than minor 
that will be resolved within a few days' time.
    We are also focusing on two other critical links in the 
food supply chain: utilities and transportation.
    Some of the utility issue is beyond our scope. The electric 
grid problems are much greater and affect the entire country. 
But in February 1998, the Rural Utility Service within USDA, 
which basically manages the entire rural electrification 
system, started surveying its telecommunications and electric 
borrowers to determine their preparedness. As of January 6, 
1999, the Rural Utility Service received responses from over 50 
percent of their total borrowers, and most indicated full 
compliance or specific plans for full compliance by January 1, 
2000.
    We are following up with those companies that are not as 
far along, and USDA is working with the Department of Energy to 
ensure that rural America does not lose power on January 1.
    Transportation is a major link. And I agree with what 
Senator Stevens says. Given the globalization of agriculture, 
given the massive movement of foods between and among nations 
of the world, it is critical that the transportation sectors, 
particularly the shipping sector, be actively addressing the 
Y2K problem.
    As is apparently the case with most industries, the study 
found that smaller companies, such as independent truck owners, 
freight forwarders, and short-line railroads, are further 
behind in addressing the Y2K problem. The larger firms are 
obviously further ahead of the smaller firms. However, these 
smaller firms, too, appear to be taking necessary steps to stay 
in business come January 1. I do not believe the Gartner Group 
spent a lot of time dealing with international shipping issues 
because, again, a lot of these are beyond just traditional 
agricultural issues. But I want to reiterate what Senator 
Stevens says. The movement of food in this world is 
increasingly globalized, and if the shipping industry is not up 
to speed, then we will suffer. And I think that his idea of 
providing additional focus on that is a useful one.
    Y2K preparations overseas generally lag those in the United 
States. As the world's leading food exporter and importer, this 
is important to us because it could mean a disruption in the 
U.S. food imports and exports. Some of this, again, is 
shipping-related. Some of it, again, is technology-related, 
particularly with less developed countries.
    The Foreign Agriculture Service, under the leadership of 
Mr. Schumacher, reports that key foreign markets for U.S. food 
products will likely have a relatively low risk of Y2K 
disruptions due to their import, processing, distribution, and 
retail chains because they are not automated to the same degree 
as we are. Potential problems, as I said, in the shipping 
industry are our greatest concern.
    There is some risk of short-term Y2K-related disruptions to 
U.S. imports of food, especially perishable commodities. 
However, should there be a disruption of imports, domestically 
grown fresh fruits and vegetables will continue to be 
available, although with less variety and possibly at somewhat 
higher prices than usual. Much of that is not as greatly 
shipping-related because much of that is hemispheric and the 
goods can move through other forms. But I thought it was 
important to at least mention this particular problem.
    I also want to mention briefly the state of affairs with 
respect to the food assistance program--food stamps, WIC, 
commodity programs--which are vital to the availability of food 
for millions of Americans. Over 20 million people are on food 
stamps.
    USDA's Food and Nutrition Service has been working to 
remediate the critical systems that support these nutrition 
programs and expects to be fully compliant by the 
governmentwide deadline of March 31, 1999. We are tracking and 
reporting Y2K progress from our State partners for the Food 
Stamp Program and the WIC Program. As you know, those programs 
are largely managed by the States. Not every State is ready 
yet, but the reports so far as promising. More and more food 
stamps are being done through computer cards, the EBT card, and 
so it is important that those systems be ready.
    In conclusion, as I said earlier, any effects from the Y2K 
problem I believe will be minor and localized by region or 
particular food product. In the unlikely event that there are 
food shortages in any area, USDA has standing plans to address 
intermittent food disruptions which occur during any emergency. 
We are working with FEMA and the Emergency Services Working 
Group of the President's Council on Y2K Conversion to adapt our 
plans for any Y2K-related contingencies.
    Mr. Chairman, I would like to conclude my testimony on this 
reassuring note: Our farmers and ranchers are the most 
productive in the world. Our food supply is safe, affordable, 
and reliable. I am thinking about the peas that Senator Smith 
talked about.
    Senator Smith. Oh, my.
    Secretary Glickman. Yes, 20 cents a pound 45 years ago, 20 
cents a pound today. And you know what? When you look at other 
agricultural commodities, it is the same. It is extraordinary. 
When you consider everything else in the world that has gone up 
so dramatically in price, food is the greatest bargain in the 
world. And now I will get off that horse for a moment and just 
say that I am confident that our food supply will remain safe, 
affordable, and reliable, but still, even with the 
encouragement, there is still a tremendous amount to be done by 
the food industry in general, by agribusiness, and by USDA.
    As I said before, there will be some glitches, but as long 
as we are vigilant and continue to monitor this, especially as 
Mr. Koskinen is pushing us every moment, I am confident that 
the food supply will work well. Confidence is the key. As long 
as people have confidence that we are doing our best, the 
systems will work, the problems, if any, will be minor, then I 
think we will be OK.
    There are some fear mongers out there, and it is being 
encouraged. I even saw it on television this last weekend by a 
lot of folks who are scaring people as to the nature of these 
problems. And I can report to you that, with respect to at 
least the food supply, I think things are working very well.
    Thank you, Mr. Chairman.
    Chairman Bennett. Thank you very much, Mr. Secretary. We 
appreciate it, and again, as I said in my introduction, we 
appreciate your leadership on all of this.
    At the risk of becoming one of those sources of scaring 
people--and I guess I have done that in the past 
inadvertently--there is one area about which I continue to be 
concerned, not only in agriculture but across the whole nature 
of this problem. That is the source of the information on which 
we rely.
    Now, let me give you an example. The Gartner Group has 
assessed 100 major businesses, and they have taken the four 
biggest producers in 25 different sectors, which is the right 
kind of sampling, I think, to do. This is their methodology to 
reach their encouraging conclusion.
    We all live in a world of public opinion polls. Every 
politician up here has gotten here by virtue of a pollster, or 
at least the pollster tells him that that is how he got here.
    So you focus on the sample and whether or not this is a 
statistically significant sample or a random sample that is 
reflective of the entire universe that it is trying to project 
and so on.
    Now, Gartner developed this information, according to our 
staff interviews, by looking at SEC disclosures, shareholder 
notifications, and press articles for 85 of those 100 
companies. In other words, the information on which they based 
their sample from which they extrapolated an opinion for the 
entire industry is 85 percent self-reported.
    I do not mean to suggest that self-reported information is 
automatically wrong, because it is not. In many, many 
instances, self-reported information is reliable. But we found 
in this committee that self-reported information that does not 
get checked on tends to be overly optimistic in almost every 
circumstance.
    We use the General Accounting Office [GAO] as our auditor, 
our outside auditor, if you will, to go into an agency that is 
reporting things are just fine. GAO invariably comes back and 
says, well, the self-reported information is a little bit rosy. 
The most dramatic example of that was in the Department of 
Defense where the Defense Department self-reported figures 
looked much, much better than the GAO figures when they got 
through with their audit.
    That is, of course, the idea behind the President's very 
wise decision to appoint Mr. Koskinen and to have him in your 
face monthly asking you these kinds of questions so that we 
hear from Mr. Koskinen and not just from you. It does not mean 
that we do not trust you, but it means that there with an 
outside auditor there is a degree of accountability.
    So as we look at the Gartner Group--which, again, I salute 
as one of the premier organizations that has helped us as a 
nation in getting ready for Y2K. As we look at their 
methodology, 85 percent of the information that they give us 
that leads us to the encouraging report comes from sources that 
have not had an outside audit.
    I simply lay this out and ask you to respond. Do you have 
any concerns about it? Does USDA have any independent ways of 
dealing with some of this information? What is your reaction to 
the circumstance that I have just outlined?
    Secretary Glickman. I recall when President Reagan was 
dealing with the Russians back in the days of the cold war with 
respect to counting nuclear weapons, and he paraphrased in 
English a Russian phrase which was, ``Trust, but verify.'' And 
I think that is applicable here.
    Let me make a couple of comments. No. 1, I think that the 
idea of having these report cards by Congress and the GAO and 
even OMB on our performance have been healthy. We hand them 
out, and I can then say to certain of our mission areas, you 
flunked or you are months behind, because otherwise, the 
natural order of things is to put the best light, the best face 
forward.
    Now, saying that, I would have to say that you do have to 
get the basic data from the people who are working on the 
particular problem. But one of the reasons why they want us to 
have these mission-critical systems done by March 31 of this 
year is so we can have an extensive enough period of time to 
validate them, to test them.
    We will have most of them done. We were just talking 
whether we will have all of them done by that date. And Anne 
Reed, our Chief Information Officer, says we are going to try, 
and she says, ``I don't think I can say to Senator Bennett 
today that 100 percent we can absolutely guarantee are going to 
be done.'' But the fact is that we have outside groups watching 
us and grading us, I think actually puts the Government a 
little bit ahead of maybe some people in the private sector who 
don't have that.
    Chairman Bennett. I agree with that. Let me just make a 
comment. Some people in the press have said to me, well, why 
doesn't your committee issue a report card? And I have said, 
No. 1, I don't want to get into the business of having the 
press say, well, the House gives them a B-minus and the Senate 
gives them a C-plus and we'll justify the discrepancy, because 
that ends up in activity that is not very productive. We 
probably would be issuing a report card if Congressman Horn 
were not; and if Mr. Koskinen did not have his first-tier, 
second-tier, third-tier reporting relationship, we would 
probably do that. But other people are doing it. They are 
people whom we trust, and we see no reason to duplicate that.
    Second, we are trying in this committee to look across 
organizational lines, and we have had that conversation here. 
We are trying to look horizontally. The report card, by 
necessity, looks vertically at one organization after another. 
So we are trying to be a complementary rather than a 
duplicative effort to that.
    With respect to your being ready on time, I accept your 
assessment of where you are, and I hope you can come up and 
surprise us all with being 100 percent.
    Secretary Glickman. Perhaps Anne Reed, our Chief 
Information Officer, just may want to comment on that.
    Ms. Reed. As you might imagine, we have been tracking this 
very, very closely. The reports for this past month's activity 
are coming into my office now.
    My sense is that most of the incomplete systems are 
incomplete because we want to do more testing to give 
reassurance so that when the executive sponsor for that agency 
or mission area certifies to me that it is, in fact, compliant, 
they are doing so with a reasonable degree of assurance. So in 
those cases, it does not particularly concern me that they have 
chosen to take a little bit of extra time before issuing that 
certification.
    There are a couple of instances where our ability to become 
compliant was reliant upon the supplemental funding resources 
which we did just recently acquire. That money is at work. The 
people are working feverishly, very, very hard, to make the 
deadlines. So I am reasonably optimistic of where we will be by 
March 31, but not yet prepared to say with 100 percent 
assurance.
    I think it is also worth noting that we will continue to 
test. There is end-to-end testing that needs to be done, that 
will go on beyond that March 31 date. We know that we are in 
the process of deploying a large number of personal computers 
where, again, part of the resources to do that came from that 
first supplemental. And that deployment process, because of its 
nationwide nature, is going to take us past March 31. So while 
large numbers--most of our systems will be certified by that 
time, there is still going to be a substantial amount of 
activity that will take place throughout the rest of the year.
    Chairman Bennett. Oh, of course. We understand that, and 
that is why, as I said earlier, the March 31 date is so 
important so that you have time to do all those things.
    One other comment. I am assuming that your conversation 
about the percentage that will be ready, and you are going to 
get them all done as quickly as possible after March 31 and so 
on, is still focused in the mission-critical band.
    Ms. Reed. Yes, sir, though many organizations--most 
organizations are also working just across the board, 
understanding how interrelated many of these things are. But 
the focus of my office and oversight and management is really 
on those mission-critical to make sure that that is where we 
will--that the appropriate resources are applied to those 
first.
    Chairman Bennett. As, indeed, it should be, but let me give 
you this anecdote that demonstrates that mission-critical 
sometimes can be deceiving.
    In one of my other assignments in the Senate, I am Chairman 
of the legislative branch Subcommittee of the Appropriations 
Committee, and it occurred to me it would be very embarrassing 
if the entire nation worked on January 1, 2000, and the Senate 
did not.
    Vice Chairman Dodd. The country might like that.
    Chairman Bennett. The country might like that just fine. 
[Laughter.]
    So I got a hold of the Sergeant at Arms here at the Senate 
who is in charge of the computers. By virtue of that other 
chairmanship, he has to come to me for his money, therefore I 
am in a position to get his attention. And I said I want to 
know where we are with respect to Y2K in the U.S. Senate. The 
answer was not encouraging. As a matter of fact, the answer was 
really kind of frightening.
    So we had exactly the same process, an identification of 
mission-critical systems, and at the next hearing I held, the 
Sergeant at Arms assured me that all the mission-critical 
systems were going to be all right. Then I said to him, Give me 
an example of a non-mission-critical system in the U.S. Senate. 
And he said, Well, the copier in your office we don't think is 
mission-critical.
    A Senator who is up for re-election seeking to send out 
multiple copies of press releases will consider the copier the 
most mission-critical system in his office, and yet the 
Sergeant at Arms decided that that was not mission-critical.
    I don't want to dilute in any way your focus because I 
think your focus is exactly where it should be. But when the 
time comes that you heave a sigh of relief that Congressman 
Horn has now given you a B-minus or an A on your mission-
critical systems and you say we have got all summer now to do 
our end-to-end testing, remember the copier that the Secretary 
will absolutely have to have that you have put in the non-
mission-critical system category and realize that your problems 
are not over.
    Ms. Reed. I think that is absolutely an excellent point, 
and I use similar examples myself when talking to people to 
make it clear that the person who makes the determination of 
what is mission-critical has to understand what the mission is. 
The mission is not about the system being compliant. It is 
about your ability to deliver service and to conduct a 
business. In fact, we have instituted a--our contingency 
planning and continuity-of-business planning process is geared 
in exactly that way so that the program administrators are 
thinking through all of the things that have to work in order 
for them to deliver the service and program, not just as early 
on we were looking at specific information systems. So your 
point is absolutely well taken.
    Secretary Glickman. If I just may add--you talked about, of 
course, the Senate. One of the things we do, and not very well 
publicized, is that the Department of Agriculture is basically 
the managing agent for the Thrift Savings Plan of the United 
States of America. So, you know, I was in it when I was over 
there, and I am in it when I am over here. And I don't know how 
many Federal people rely on that system. We are also the 
payroll agent for a big chunk of all civilian Federal 
employees, the Department of Agriculture. We run something 
called the National Finance Center in New Orleans. Many 
people----
    Chairman Bennett. How did that happen?
    Secretary Glickman [continuing]. Will say to me, ``I get my 
check from you.'' And I have said, ``Well, you ought to act 
like it.'' [Laughter.]
    And, in fact, this system has been a big part of the entire 
Y2K problem within USDA because it relates to, you know, all 
the employment, the Forest Service issues, the food safety 
issues. They are all kind of related there, and it has made our 
job even more complicated than just focusing only, let's say, 
on the production agriculture side of the picture.
    Chairman Bennett. Senator Smith.
    Senator Smith. Thank you, Mr. Chairman.
    Mr. Secretary, I have always believed that one of the 
evidences of the miracle of the United States is to walk into a 
grocery store, and few things give me more satisfaction than to 
go into a grocery story, say, in Bethesda and look at a bag of 
peas and find the code, and it came from my plant in the Blue 
Mountains of eastern Oregon. And even more satisfying was a few 
years ago going to a Sabu store in Osaka, Japan, and finding a 
bag of peas that were produced in eastern Oregon.
    That brings me to a comment I would like to make. I think 
there are few agricultural products right now in this country 
that aren't in oversupply right now. And yet much of that, if 
it is to be eaten as opposed to stored, goes overseas. And I 
wonder if much of your focus perhaps should not be on making 
sure that other countries are also stepping up to the plate. 
Because if they can't operate, there is going to be a lot of 
every commodity backing up in this country, to the great lament 
of rural Oregon. I don't know what your focus is on overseas. I 
think we are getting it together here, but I really do worry 
about what Sabu stores will still be pushing peas.
    Secretary Glickman. Well, perhaps either Mr. Schumacher or 
Mr. Dunn may want to comment on that particular issue.
    Mr. Schumacher. Senator, thank you. I visited the area in 
Oregon, and it is a really vibrant area in exports. So I think 
one of the things is to keep those exports moving.
    I think on our assessment, we are going to be releasing 
later on an assessment of the year 2000 on the international 
food industry that gives us an interim assessment of where we 
are. I think our largest export markets--Canada, Japan--are in 
reasonably good shape. I think we have--we are cautiously 
optimistic overall in terms of our major trading partners in 
Europe, the UK, Japan.
    On Mexico, they are beginning to come into compliance. That 
is a big source of our winter vegetable imports in Latin 
America. They have a little more work to do. Of course, we have 
wonderful things coming in. As the Secretary said, if there are 
some glitches there, Florida and California and others will be 
able to in that process make those adjustments.
    So I think one of our major concerns, of course, is on the 
export side, and that seems to be moving along by and large OK 
except for those countries, for example, in Russia that either 
are--in the newest modern systems we are going to want to be 
very careful in terms of our food aid. So we are concerned 
there. We are going to work really hard on the food aid 
situation. By and large, our major trading partners and our 
major ports are in reasonable shape. Smaller importing 
countries that send stuff to us, especially in fruits and 
vegetables, we are monitoring that very carefully.
    Mr. Dunn. Senator, I think a good part of being able to do 
that exporting is ensuring that we have the transportation 
system in place that gets it there. Secretary Glickman asked us 
last year to put together a long-term agricultural 
transportation strategy to look at the overall transportation 
system. The Secretary is fond of saying if we can't move it, we 
can't sell it. And we held a transportation summit last July in 
which we began broaching the subject of Y2K with a whole myriad 
of spectrum of transportation systems.
    What we find is there are two major areas in 
transportation. One is containerized transportation, which is 
all the perishable goods, getting those peas to the right place 
at the right time in the right condition. The second is the 
bulk commodity, which is the heavy grains and those things.
    Because of the juxtapositioning of the harvest season, what 
we find on the bulk side, what may be at risk would be some 
soybean exports at that time, and also getting by rail some of 
the wheat out.
    What we have greater concerns about are those containerized 
shipping and what happens there, because that has a very, very 
high magnitude and a very, very high vulnerability in there.
    The containerized shipping is just growing in leaps and 
bounds as far as technology, and today the buzz word is to have 
controlled atmosphere in there. This is very, very reliant on 
high technology to do it. The good news in that is much of that 
technology is recent development, so it is Y2K compliant.
    What we have greater concerns about are some of the other 
containerized shipments and getting those out in time. Most of 
the transportation in the United States now relies on truck, 
and that trucking system is very, very diffuse across the 
Nation. We go from everything from very large trucking firms 
that are very much on top of their Y2K problems, logistics in 
moving things, those that are store-owned, to those individual 
private companies that distribute, and we don't have enough 
information on that. That is one of the weakness areas that we 
have of getting that information on the small trucking. The 
good news is they are very diversified. There are a lot of 
them, so somebody may be able to step up if there is a problem.
    For export shipping, the Coast Guard is working very, very 
closely to ensure that ships, vessels that come into the United 
States, if they are not Y2K compliant, they are not going to be 
here at the beginning of the millennium.
    We had a lot of problems in that area, but I think there is 
a lot of focus going on in that direction at this time.
    Ms. Woteki. Senator, if I might interject here as well?
    Chairman Bennett. Yes.
    Ms. Woteki. Senator Bennett's opening question also got to 
the issue of how reliable is this information. Are we relying 
on only one source or are we relying on multiple sources for 
the information that we are providing to you? And I think on 
these issues that your question just got to, they are really 
good examples of the fact that the assessment that we have 
gotten from the Gartner Group and the independent assessments 
the Foreign Agriculture Service has done of our import and 
exporting partners and that the Agriculture Marketing Service 
has done of transportation issues are all leading us to the 
same conclusion about where we can be secure about the 
situation and where we need to continue to focus our activities 
over the coming weeks and months.
    In addition, we have gotten information from trade 
associations representing the large processing organizations as 
well as retailers that are also part of this, another 
independent source of information that is providing a similar 
type of assessment.
    So I would like you all to know that there are multiple 
sources of information that are essentially providing the basis 
for the testimony that the Secretary has provided today.
    Senator Smith. Just one more comment?
    Chairman Bennett. Surely.
    Senator Smith. I would like to make a statement that you 
can respond to, Mr. Secretary, and I make it by way of comfort 
to anyone in this country who may be listening to this.
    I always, as a food producer, viewed USDA standards or 
requirements as a floor. They were the basics. I never tried to 
pack to USDA standards. I tried to pack to Campbell's Soup, 
Cisco, or Safeway standards, which are much higher.
    I think it should be a comfort to everyone out there that 
this is a very self-regulating industry because I don't know of 
many industries more price-sensitive with slimmer margins, with 
a hypersensitivity to anything that would disrupt it, because 
the motive of a food producer isn't to sell you once, it is to 
sell you every day. And so if it is going to be a Y2K problem, 
if it going to be transportation, electricity, or whatever, 
they are looking to satisfy some of the toughest buyers with 
the toughest standards in the world.
    So what I want the public to know is that you represent the 
threshold. You do catch some bad actors occasionally, but I 
would like to know your feeling. I think it is the exception, 
not the rule, where you run into problems or find resistance to 
the food industry doing everything it can to stay in business 
because they want to produce affordable, nutritious, and safe, 
ultra-safe food products.
    Secretary Glickman. I agree In the food safety area, for 
example, you know, while we do go after some bad actors, 
generally speaking, anybody who sells rotten food, rotten 
hamburger, rotten vegetables are out of business 
instantaneously. And they might have also caused some grief 
with some families that might have ingested that improperly. 
And so there is a very good incentive for people to want to do 
the right thing, not only out of the goodness of their heart 
but also for economic purposes as well.
    The complicating thing is the globalization of the economy 
and the interconnectedness of agriculture, which has changed a 
lot in the last three or four decades, and that is why we do 
have to kind of be involved to watch the whole thing, not just 
USDA but the rest of the Government together, under the 
leadership of the Congress. But that is one of the reasons why 
underlying all this is my belief the food industry will ensure 
that the problems, to the extent they exist, are minor.
    Senator Smith. Wouldn't it be a fair request on our part, 
then, to say whatever the impact of Y2K on food that we import, 
we need to be especially vigilant to make sure that safety and 
other qualifications are met if it is coming in here? And might 
we urge you to shift resources, ask for resources, whatever, 
perhaps even more than we are doing right now, to make sure 
that what is coming in is compliant in every respect and is not 
disrupted because of Y2K?
    Secretary Glickman. That is not an unfair request at all. 
This is our food safety guru right here. The truth of the 
matter is, while our food supply is very safe, the level of 
observation is, by nature of the resources, much greater for 
home-grown food than it is for outside-grown food. Not that it 
is not safe, but given a lot of the complicating issues of Y2K 
and the globalization of the world, I frankly think she 
deserves more resources to keep that confidence up. Because if 
something outside is not safe, it is going to affect 
domestically produced food as well.
    Senator Smith. Well, I hope you will lean on the Congress 
to make sure that what we are importing meets USDA standards.
    Chairman Bennett. Thank you.
    Senator Dodd.
    Vice Chairman Dodd. Thank you very much, Mr. Chairman.
    Let me begin by thanking you, Mr. Secretary, and your 
staff. It comes as no surprise to those of us who have known 
you for many years that you are doing a fine job here and your 
team is as well, and I have a high degree of confidence that 
USDA will do everything possible to see to it that our food 
supplies are going to be safe and they are going to reach 
people in a sound condition.
    I wanted to pick up on Senator Smith's point. In fact, I 
have it in my notes to ask that question. We have heard from 
the FAA about how we are sending people--I think it is six 
different countries where there is the maximum travel, business 
and tourism, to make sure that airports are going to operate 
safely in these high-density areas where there is a great deal 
of U.S. traffic. I was looking over the information from the 
Foreign Agricultural Service reports, and I apologize for my 
ignorance in this area.
    But if you could--I don't know if you know the answer to 
this off the top of year head, but to what extent--of the 
amount of food we consume, what percentage of the food that 
Americans consume comes from offshore, roughly?
    Secretary Glickman. Gus?
    Mr. Schumacher. About 300--well, it is actually more in 
terms of value, but about $38 billion is what we are importing 
currently, and I think the farm gate value is about $300 
billion, so double that, 600. So about $38 billion out of $600 
or $700 billion.
    Secretary Glickman. So 5 to 6 percent, 7 percent.
    Ms. Woteki. But it varies very much by commodity. About 60 
percent of the seafood that we eat is imported, approximately 
40 percent of fruits are, and a much, much smaller proportion 
of vegetables, I think it is about 10 or less.
    Vice Chairman Dodd. So fruit is about 40?
    Ms. Woteki. Yes, and most of that is bananas.
    Vice Chairman Dodd. Yes. You know, that is one of the best 
packaging jobs in the world. [Laughter.]
    God is responsible for that one. He did a tremendous job in 
packaging a product, I tell you.
    Now, give it to me again. You said 40 percent for fruit, 
mostly bananas.
    Ms. Woteki. Yes.
    Vice Chairman Dodd. Now, tell me the other areas you 
mentioned.
    Ms. Woteki. Seafood, about 60 percent is imported, and 
vegetables, I believe it is somewhere between 6 and 10 percent. 
It is very small.
    Vice Chairman Dodd. Whereas, beef products would be much 
lower.
    Secretary Glickman. Very small. Poultry is very small. 
Grains, very small.
    Vice Chairman Dodd. How about packaged products in terms of 
coming in? What you are talking about are fresh products, 
pretty much, but are there products that are canned or 
packaged, competitors of the peas out of eastern Oregon, for 
instance?
    Senator Smith. Especially important.
    Vice Chairman Dodd. Are they imported?
    Senator Smith. Important.
    Vice Chairman Dodd. Important, yes. [Laughter.]
    I know about important, yes. I have a new heightened degree 
of interest in peas.
    Can you give me some sense of that?
    Ms. Woteki. Well, I can't off the top of my head give you 
statistics, but certainly there are a lot of processed foods, 
specialty foods, that are imported. I think the important 
point, though, with respect to our assessment of the food 
supply is that, you know, the basic foods that Americans expect 
to be in their grocery store in mid-winter will be there: meat, 
poultry, bread, milk, infant foods, infant formula, baby food. 
Those are produced here, and those will be available.
    Secretary Glickman. You might want to talk about dairy for 
a second because dairy is perishable, fresh milk, fluid milk, 
and there has been a lot of discussion about that. Maybe 
somebody might want to----
    Chairman Bennett. The next witness is from the dairy 
industry, too.
    Secretary Glickman. Oh, OK.
    Chairman Bennett. I mean, go ahead, but understand that we 
do have another witness.
    Secretary Glickman. I am sorry. I just----
    Vice Chairman Dodd. That is all domestic. Right? Cheeses 
would not be, necessarily, but----
    Secretary Glickman. Some cheese.
    Mr. Schumacher. Very small.
    Mr. Dunn. On dairy, we had a roundtable discussion to meet 
with the processors, the large processors, so that we could get 
that verification of what is going on.
    Vice Chairman Dodd. Yes.
    Mr. Dunn. And, again, what we found is that the large dairy 
co-ops, the large dairy industry, private sector, they are on 
top of their Y2K problems.
    To go back to the source, on the farm, most of the milk 
producers out there are going to a computerized system, but 
those are very easily overridden so that they can actually get 
the raw milk, get it to the processing plant, and, again, the 
distribution system really is what is getting it to the store, 
and it is all on a just-in-time inventory basis. But that dairy 
industry has done very intensive surveying and appears to be 
very much on top of their concerns.
    Vice Chairman Dodd. OK. I just want to underscore the point 
that Senator Smith was making. From a producer's standpoint in 
this country, the notion of getting paid and being disruptive 
in terms of our major exporting countries--Japan, Canada, Latin 
American countries, Mexico particularly--I think that would 
be--that could be disruptive if that product is sitting there 
and can't move. I am looking at the Foreign Agricultural 
Service assessments, for instance, of Japan which only has them 
in the awareness phase in Japan. You are dealing with consumer-
ready food products, about $1.2 billion. They are only in the 
assessment phase.
    So here is Japan, a nation that I would have thought 
certainly would be almost at parity with us, given the 
technology and so forth, and it is very far behind. And if they 
are, I can see our exporters having a real problem, thus 
creating problems here.
    Secretary Glickman. I think that is a very good point. 
Japan is a risk, and I don't know, Gus, whether you can comment 
on what we might be doing to help them.
    Vice Chairman Dodd. Let me just finish the point with you 
here because I think that is a side we need to get a good 
reading on. And then, legitimately, those countries that export 
to us, as you mentioned here, processed foods and others, some 
assessment so that we can be of assistance as we are with the 
FAA. It seems to me where those major suppliers are coming 
here, maybe to provide some assistance to those countries to 
see to it that the products--and, again, I don't want to dwell 
on it, but I think it is an important issue.
    Do you want to comment on this?
    Mr. Schumacher. I think you put it--the key one in Japan is 
they have thousands and thousands of these small, small shops, 
and they have been trying to modernize those. We have looked at 
that. We have done studies, in all, in about 80 countries.
    The distribution internally in Japan, Senator Smith, that 
may be a problem that they are not quite as up to speed on that 
one as well, and we are looking at that very hard in terms of 
onward. Our major exports to the ports will probably be fine, 
but it is when we have these smaller commodities, you know, 
especially from the west coast of the United States, the fruits 
and vegetables, as they get inside Japan and move into the 
system of all these very small shops, they are not, I think, as 
ready as some of the people would like to see them in Japan.
    Vice Chairman Dodd. I would underscore again--I don't want 
to bog you down in this, but this is a time when we ought to 
know this. We are going to have some requests. We have already 
got one based on the problems of potential nuclear issues in 
Russia. They are asking us, a $3 billion request coming over 
the transom here. This would be the time, Dan, to sort of let 
us know on this so that we can go to bat for you up here if it 
is necessary. I will end that point her.
    The last one I want to make, because we have another panel 
to go to here, but I want to jump to this question of the Food 
Supply Working Group. I gather you are the person here I ought 
to----
    Ms. Woteki. Well, actually, I----
    Vice Chairman Dodd. Is it Woteki?
    Ms. Woteki. Woteki. It is Polish.
    Vice Chairman Dodd. Sorry.
    Ms. Woteki. But I actually co-chair the working group with 
Mr. Schumacher and Mr. Dunn.
    Vice Chairman Dodd. Well, I just was alarmed. We had a 
problem earlier when we had some companies--on the issue of 
supplies, medical supplies and so forth--that weren't exactly 
forthcoming to Government agency requests as to where they were 
on the Y2K issue. And I was told, according to some staff 
interviews, that you mailed surveys in late 1988 to some 500 
trade associations associated with the food industry in an 
effort to gather assessment data on their Y2K problem, and that 
as of January you had received three responses from 500 of 
these trade associations.
    Now, again, I don't want to start all over with this again. 
We have published names and so forth in the past, but this is 
not helpful. I gather maybe some here in the audience, this is 
disturbing to me. This is not information that is in the public 
domain. It is going to you or going to your working group. But 
it seems to me this is a very important issue to people.
    You know, this is the kind of story we are going to get no 
credit if this thing works and everyone does their job. This is 
going to be a story where--in fact, the only stories will be 
you guys were crying wolf. If it doesn't go right, people are 
going to be pointing to a lot of us as to why we didn't do 
more.
    I would just ask briefly here if you could give us some 
assessment as of February now, have you had a better response 
from these trade associations? And if not, how can we help you 
other than say today that I am going to ask pretty quickly, in 
another week or so, for the names of the ones that haven't been 
forthcoming in this area?
    Ms. Woteki. Well, Senator, I think you are helping us 
already by holding this hearing and by raising the visibility 
of this issue.
    I think you used the term ``reticence'' on the part of the 
industry, and I think that was the case through the end of last 
year. We through the working group have been conducting a 
series of roundtable discussions with the trade associations, 
and as Mr. Dunn referred to, the dairy associations were very 
forthcoming with information in follow-up to that.
    These roundtables are really focusing on what we have 
identified as being the most vulnerable commodities, those that 
are fresh and perishable, and they could be more vulnerable to 
the Y2K problem.
    I just held a similar roundtable with the meat and poultry 
industry a week ago. At this point, their awareness is 
heightened. I think that we are going to get a much more 
positive response.
    Vice Chairman Dodd. How many more have you heard from? You 
had three as of January.
    Ms. Woteki. I cannot give you an exact number, but I don't 
think it is many more than that.
    Vice Chairman Dodd. So we are still----
    Ms. Woteki. But some of the trade associations are very 
actively now going out to their membership, and I do understand 
as well that some of the larger associations representing both 
processors and retailers have been very actively now polling 
their membership and providing assessments.
    Vice Chairman Dodd. You are being kinder than I would be at 
this juncture, but if it is around three still and it is 
February, and you are going to make an assessment to us in 
March, about a month away, there is really an awful lot of work 
to do in the next few days.
    Secretary Glickman. I think that what we need to do in the 
next week is to reaffirm our interest in getting this 
information back and letting them know of your concerns here. 
We will keep you up to date.
    Vice Chairman Dodd. All right.
    Chairman Bennett. We thank you very much. We held you a 
little longer than we anticipated, but I think we got good 
information. We are very grateful to you. We will ask questions 
in writing and would appreciate your responses to that.
    [The questions and responses can be found in the appendix.]
    Secretary Glickman. Thank you very much.
    Chairman Bennett. Thank you again, Mr. Secretary, and the 
excellent team you brought with you.
    [The prepared statement of Secretary Glickman can be found 
in the appendix.]
    Chairman Bennett. Our next panel is the representative of 
the preprocessor industry, and we have with us Mr. Tyrone 
Thayer, who is the corporate vice president and president of 
Cargill Foods, Cargill, Incorporated. Cargill is not 
necessarily a household name, but it is a well-known name in 
American food preprocessing and, Mr. Thayer, we are very 
grateful to you, appreciate your patience, and look forward to 
hearing what you have to say.

   STATEMENT OF TYRONE K. THAYER, CORPORATE VICE PRESIDENT, 
                     CARGILL, INCORPORATED

    Mr. Thayer. Thank you very much. Mr. Chairman and members 
of the committee, good morning. As was stated, my name is 
Tyrone Thayer, and I am corporate vice president of Cargill, 
Incorporated, and the worldwide manager of Cargill Foods. With 
me today I have Mr. Gary McGee, who is Cargill's worldwide Year 
2000 Project office manager.
    We want to thank you for inviting us to appear before you. 
The work of this committee is doing very important things to 
smooth the transition for the United States into the next 
millennium.
    To begin with, I will give you a brief description of 
Cargill. I then will describe the structure we are using to 
address the year 2000 technology problem, give you a brief 
description of our activities and the status of our efforts. I 
would also like to suggest some particular areas of focus for 
the committee.
    As some of you know, Cargill is an international marketer, 
processor, and distributor of agricultural and food products. 
Our headquarters are in Minneapolis, Minnesota, but we employ 
approximately 80,000 people in plants and facilities in 65 
countries and have business activities in 130 more countries. 
We at Cargill process more than 200 food products and food 
ingredients. We obtain these raw materials for these products 
from farm and livestock producers who are also our suppliers 
and our customers. We transport our products through the use of 
ocean freight, inland barge, rail, and truck transportation 
services.
    We at Cargill expend more than $385 million annually in 
information technology services, and this excludes voice 
communications. Every year we spend between $80 and $100 
million in capital investments in information technology. We 
have 27,000 connected desktops with complex business 
application, infrastructure, and corporate systems.
    In our Cargill plants, computers are used to control the 
temperature of our products as they are being processed, to 
analyze product samples, and to open and close valves as 
products flow from one process to another. These systems are 
also found in our scales and in time clocks--equipment that 
every food processor uses in day-to-day operations.
    Our business systems, of course, are also affected. 
Throughout Cargill, we monitor our inventories and manage our 
day-to-day business transactions such as those with the Chicago 
Board of Trade. Invoicing and payroll systems already have been 
updated so that customers get billed in a timely manner and our 
suppliers get paid.
    We believe the biggest impact of the Y2K situation lies in 
the potential disruption of the supply chain, most of which is 
external and out of Cargill's or any other company's direct 
control. Our primary concern is in four areas: utilities, 
transportation, telecommunications, and financial.
    If these areas do not function, then neither can we. And 
neither can the rest of American business, especially the 
American food industry. The loss of basic utilities--
electricity, water, sewer, or natural gas--would cause our 
plants to shut down.
    Our approach to Y2K began in June 1996 with an assessment 
of all of our business systems. Cargill's goal is to implement 
reasonable procedures in order to eliminate as much risk as 
reasonably possible to Cargill, our customers, and our 
suppliers.
    The Cargill Project Office provides overall direction and 
consistency in our approach, suggests policy, and submits 
regular progress reports to senior management. We have two 
corporate executives who were appointed as sponsors to oversee 
our entire project. They provide quarterly updates to the 
Cargill Board of Directors.
    When evaluating our plant and business systems, we focused 
on systems and equipment with embedded computer chips or 
software that could cause either a slowdown, a shutdown, a 
safety problems, or an environmental problem. We also are 
focusing on business and plant systems and infrastructure. We 
are working with our customers and key suppliers, and we are 
doing contingency planning. Finally, we are hiring external 
auditors to conduct random checks of our business and our plant 
systems.
    Cargill's Y2K international operations are organized very 
much like our domestic organization. Each operating division 
has a plan of action with a predetermined timetable.
    In the United States, 65 percent of our key plans and 70 
percent of our business systems have already been updated. We 
plan to finish our remaining projects and complete our 
contingency planning. We will have people at our key plants and 
administrative offices on December 31, 1999, to ensure a smooth 
transition. We are confident that our worldwide business and 
plant systems will be in good working order by the year 2000.
    However, as has been mentioned earlier today also, we may 
expect imports or exports in various locations to be affected 
in some way. Consequently, we are putting together a 
contingency plan that includes investigating transportation 
alternatives if railroads or trucking companies are unable to 
deliver or ship our products. Consideration is also being given 
to finding back-up suppliers of energy and products we use in 
the day-to-day operations of our business that we consider 
strategic.
    I trust that I have provided you with some insight as to 
how one major food supplier, Cargill, is handling the Y2K 
situation, and I am confident that Cargill will be ready to 
meet the challenges that lie ahead.
    Again, if I may, I want to compliment your work in 
addressing the Y2K issue. We believe the American public can 
best be served if the committee directs its attention to the 
four areas I mentioned previously: utilities, transportation, 
telecommunications, and finance.
    Thank you. I look forward to questions.
    Chairman Bennett. Thank you very much. Your priority list 
is the same as this committee's. Our first hearing was on the 
power grid as we tried to make sure that power was there. We 
have talked about transportation, telecommunications, and 
finance. We will continue to monitor that because we agree with 
you absolutely that if those things fail, nothing else will 
work.
    Your testimony is useful and it is encouraging. It 
demonstrates a pattern that we have had in these hearings 
before, which is that the largest organizations, the industry 
leaders, are stepping out and doing what needs to be done, 
giving us reassuring information. The concern we have is that 
smaller organizations who are in the preprocessing phase of 
food, who may not have risen to the level that you have, may 
not have the resources that you have put into this problem, 
and, therefore, something can happen from a less significant 
player but nonetheless a key player somewhere in the overall 
scheme of things.
    One of the issues that we addressed in our opening 
statements, and briefly with the USDA witnesses, that I think 
you could comment on very usefully has to do with the impact of 
stockpiling and the disruptions that could occur as a result of 
stockpiling.
    People ask me, What are you going to do? And I tell them 
bluntly, I am going to have some extra food on hand, not 
because I think there is going to be a nationwide problem. But 
we have seen here in the Washington area when we have been here 
in an ice storm that the 72-hour figure that Senator Smith 
referred to is probably pretty correct. And when they are 
giving you warnings don't drive, or a few years ago a major 
snowstorm where trucks wouldn't move, the food disappears off 
the shelves of the supermarket really very rapidly. It wasn't a 
Y2K glitch, but it was a serious disruption.
    Just as an aside, one of the indications of the way we live 
as Americans, Blockbuster Video recorded a tremendous run, and 
people would come in and rent four and five videos and bring 
them all back the next day and rent four or five more because 
they couldn't move around.
    So I think a modest preparation for any kind of disruption 
is probably a prudent thing to do. But when I say that, people 
panic and say, well, then, we have to have a huge supply of 
food for a major disruption. I think if a large proportion of 
the population were to do that, it would create serious 
planning problems for you.
    Now, am I right or wrong, and have you given any thought to 
what might happen if there was such a demand?
    Mr. Thayer. If I may, I think you made a very good 
correlation of taking the ice storm. And if the committee can 
do things to address information, raise awareness, get consumer 
confidence that the need for overstockpiling is not prudent and 
how it would just disrupt not only before but potentially the 
marketplace after, because it takes time to put the things back 
into effect.
    The reason I mentioned the ice storm is because if you look 
at a disruption that would be similar to the 72 hours of the 
ice storm and what is prudent in that type of thing rather than 
pushing the panic button, then it could make, as what you 
suggested, maybe prudent sense. But to have overstockpiles at 
every chain in the food process does not make sense.
    Chairman Bennett. What kind of an impact would it have on 
your company if, say, next September there was a sudden surge?
    Mr. Thayer. Well, I think in our particular case, where we 
are the supplier of raw materials and ingredients to many of 
the food processors and food distributors and retailers and 
bakers, our planning with our customers goes on and we are 
doing so many things with them today.
    We are working with our customers and our suppliers of 
looking at the key strategic processes that may be a problem. 
And so instead of looking at the total processes, as I say, 
repeating myself, looking at the strategic ones so we can 
center in on where those are and eliminate them, so we together 
with our customers and our suppliers face that far before the 
time of what you are mentioning.
    Chairman Bennett. You have quite an overseas presence, and 
you have heard the conversation here today about overseas. My 
own sense of the Y2K problem is that it will hit with greater 
impact outside our borders than it will inside.
    Have you made an assessment as to what the overseas Y2K 
difficulties will do to your company and taken steps to deal 
with that?
    Mr. Thayer. Well, we, of course, have concern as to what 
the U.S. Department of Agriculture and the Secretary of 
Agriculture mentioned. In our plants that we have overseas, 
again, we have the same processes that we have here. 
Approximately 80 percent of our overseas plants are ready 
today. As we look at the exports and imports that we are 
involved in, we again stress the real concerns of the 
transportation and like that. So we rely on some of the 
information that we can get in working with the various 
customers abroad, directly from Cargill, but we rely on a great 
deal of information that we can get from, again, the Secretary 
or the USDA and the Gartner Group and others.
    So the sources of the information and the accuracy of that 
information, as you mentioned earlier, is very important, and 
the more that that can be shared across the public and private 
sectors, the better off we are all going to be.
    Chairman Bennett. You talk about infrastructure problems, 
the four areas: utilities, transportation, telecommunications, 
and finance. Have you made any assessment of those 
infrastructure problems overseas? In other words, if the 
telephone system breaks down in another country--I do not 
expect it to break down in the United States--or the banking 
system collapses in another country where you have a major 
presence, No. 1, have you done any assessment of that in those 
countries? And, No. 2, do you have any contingency plans in 
case it does, in fact, go sour?
    Mr. Thayer. Let me turn to my assistant for 1 second.
    [Pause.]
    Mr. Thayer. I wanted to just talk with my fellow 
compatriot, Mr. McGee.
    Chairman Bennett. Yes.
    Mr. Thayer. As I mentioned earlier, we have the same 
processes in our foreign countries as we are using here. We are 
interviewing and working with specific companies in the foreign 
countries, the non-U.S. locations. We also, and especially in 
Latin America, are now instituting ways that we can also 
communicate to the best of our abilities with the Government 
agencies that we do business with. So that is the work in 
progress.
    Chairman Bennett. I have said before in these hearings that 
I think Y2K will have a major structural impact on the world 
economy in that it will cause a flight to quality and people 
will pull out of situations that are risky for them and go in 
the direction of those things where they can have some 
stability and some assurance that things will work.
    Without disclosing any corporate secrets, obviously, have 
you given any thought to pulling out of any particular foreign 
situation because of their inability to provide the 
infrastructure support that you have got?
    Mr. Thayer. Not at this time, we have not.
    Chairman Bennett. OK. Well, it has been very reassuring to 
have you here, and you fill a very vital niche in this whole 
chain. Senator Smith grows peas, a pea-picker kind of thing, 
and then packs them, while you are in the preprocessing niche 
and the largest player in that group. I think in our effort to 
get accurate information out to consumers as to where we are in 
this whole situation, it has been very useful to have you here 
and have your testimony. We are grateful to you and to your 
corporation for making you available.
    We may have some written questions for you, but we are very 
grateful, and thank you for your appearances here today.
    Mr. Thayer. And thank you for your kind comments, and we 
look forward to further cooperation with you.
    Chairman Bennett. Thank you.
    [The prepared statement of Mr. Thayer can be found in the 
appendix.]
    Chairman Bennett. We now go to our final panel, which is a 
group of processors, and we are going to hear from Mr. Allen 
Dickason, who is the Chief Information Officer of Suiza Foods. 
And I believe, for those who do not find Suiza Foods a national 
household name, you are one of the largest dairy processors in 
the country. Isn't that right?
    Mr. Dickason. That is correct, sir.
    Chairman Bennett. OK. Then Mr. Ken Evans, who is president 
of the Arizona Farm Bureau, of course, we all know about the 
Farm Bureau and the role that they play. So you two represent a 
step up, not in quality or value, of course, but in the food 
chain, from farm to fork, from the testimony that we have just 
heard. We are grateful to have you both here.
    We might as well go alphabetically, Mr. Dickason, we will 
hear from you first.

 STATEMENT OF ALLEN DICKASON, CHIEF INFORMATION OFFICER, SUIZA 
                       FOODS CORPORATION

    Mr. Dickason. Thank you. Good morning, Mr. Chairman. I am 
Allen Dickason. I am the chief information officer for Suiza 
Foods Corporation. Thank you for inviting me to appear before 
you today to discuss the efforts Suiza Foods has undertaken to 
address the year 2000 problem. I would first like to commend 
the committee on its efforts to investigate the potential 
effects of the millennium bug and to broaden the national 
awareness of this potentially serious problem.
    As you may know, Suiza Foods is a leading processor and 
distributor of fresh milk and related dairy products, shelf-
stable and refrigerated food and beverage products, frozen food 
products, coffee and plastic containers.
    Chairman Bennett. I apologize for mispronouncing the name.
    Mr. Dickason. That is fine, sir.
    Suiza Foods' products are distributed throughout the United 
States and Puerto Rico.
    As members of this committee know, the complexity of 
analyzing and quantifying the scope of the Y2K problem and then 
implementing comprehensive and proven solutions is a huge 
undertaking. The so-called Y2K bug may potentially affect 
software application programs, computer operating systems, and 
any other program that processes dates. At Suiza, we have 
concentrated our efforts on ensuring that all programs used in 
our nationwide operations will operate properly when we 
transition to the next millennium.
    About a year ago, we began our efforts with the objective 
of ensuring that Suiza was 100 percent Y2K compliant by June 
30, 1999. We established a Y2K Project Management Office, which 
is responsible for all internal and external Y2K activities. 
This office has put into place a structured approach that lays 
the groundwork for us to meet the Y2K challenge. That approach 
has five key steps which I will speak to briefly this morning.
    Our first step was to make all our employees in the company 
aware of the Y2K problem as it relates to us and to involve 
each corporate division in the process. As you may know, our 
family is comprised of three core divisions: the fluid dairy 
processing division, the Morningstar dairy foods production, 
and Continental and Franklin Plastics' container manufacturing. 
Each division has a Y2K team, including an information 
technology person and a manufacturing person. We hold weekly 
conference calls to track our progress, and monthly Y2K status 
and financial reports are developed. This continual monitoring 
has assisted us in becoming Y2K compliant.
    We have also issued a number of compliance guidelines to 
assist our field units, and we have assembled and distributed 
Suiza's Y2K project manual to all field and corporate 
coordinators. As a result, many of our regional operators have 
made significant progress and have gained great knowledge that 
we have been able to leverage across our system.
    We are also publishing a Y2K newsletter throughout Suiza 
that goes to all of our employees. It is designed to maintain a 
high level of awareness of our Y2K efforts among our employees. 
We have also prepared a Y2K website, which is up and running. 
And, by the way, that is y2k.suizafoods.com. So it is fairly 
easy to get to.
    Our second step was conducting a company-wide assessment of 
our Y2K readiness, as well as a Y2K review of all our potential 
mergers and acquisitions. We contacted the hardware vendors 
directly to assure that each piece of equipment was Y2K 
compliant, and we are in the process of starting to test the 
software and embedded systems ourselves to identify any date 
problems.
    We then established five criteria to determine business 
criticality of our systems and brought in two independent 
companies to test and double-check those systems. Both 
companies have been conducting random audits in all of our 
plants, and we will complete the necessary changes as they are 
discovered.
    We are also visiting with our major suppliers and reviewing 
their Y2K programs, as well as writing to our other vendors 
asking if they are Y2K compliant. We have received answers from 
about 90 percent of those to date, although most of them are 
the form letter that you have seen throughout the industry.
    Although our testing is in the early stages, it will cost 
less and take less time than originally anticipated. While the 
dairy industry is a very capital-intensive industry, we are 
fortunate that Suiza, like a number of companies, uses standard 
testing equipment and operational equipment like Allen Bradley 
controls. Moreover, because many dairy operations were formerly 
family-owned and operated and still are, there is relatively 
low turnover in our organization. Thus, we are fortunate to 
have a good corporate memory of what has been done in the past. 
This includes skills and expertise in plant managers, IT 
directors, all the way down to our electrical technician level.
    Our final step will be implementing the necessary changes. 
While we will be engaged in contingency planning from June to 
October of this year, we are confident that all of our systems 
will be Y2K compliant by our June 30th deadline.
    Suiza is extremely proud of its approach and the progress 
it has made to date on the Y2K problem. Our Y2K readiness 
efforts are 50 percent complete, and while the task is a 
challenging one, we are confident we will succeed. Our 
livelihood depends on the complete confidence of our consumers 
and customers, and we want to ensure that they continue to 
enjoy uninterrupted quality and service in the new millennium.
    The work of the committee is really critical to the overall 
preparedness of our Nation in dealing with the Y2K problem. 
Please continue to make every effort to increase the awareness 
of Y2K and to work with other congressional committees in their 
efforts to assist small- and medium-sized companies to address 
the problem.
    Since many of our operations are located in rural areas, it 
is extremely important that rail transportation and smaller 
utility companies be Y2K compliant or be prepared to deal with 
any problems that exist.
    Again, Mr. Chairman, I want to thank you for the 
opportunity to appear before you today. I will be happy to 
respond to any questions you have.
    Thank you.
    [The prepared statement of Mr. Dickason can be found in the 
appendix.]
    Chairman Bennett. Thank you very much. We appreciate your 
presence and your testimony.
    I am impressed, Mr. Evans, that you are high-tech enough to 
have your testimony on a laptop.

    STATEMENT OF KEN EVANS, PRESIDENT, ARIZONA FARM BUREAU 
  FEDERATION, ON BEHALF OF THE AMERICAN FARM BUREAU FEDERATION

    Mr. Evans. Thank you, Mr. Chairman. I appreciate that.
    I guess as I looked around the room and saw so many 
pictures today, I thought about those pictures and what they 
represent, and then as I sat here before you trying to make 
some adjustments to my speech so that it wasn't redundant with 
what has been said earlier, I had to look back and think about 
the years that I have worked in the industry. Over that half-
century, these bruised and calloused and scarred hands have had 
to do a lot of different tasks. I have mended fences and fixed 
diesel engines, and I have actually built computers, in fact, 
owned a company that built computers, PC's, in the 1978 to 1983 
era, have maintained a----
    Chairman Bennett. So did I, and I was very glad to get out 
of the business. [Laughter.]
    Mr. Evans. Yes, barely in the nick of time in 1983.
    Never has a task that I have faced in my life been as 
challenging or potentially challenging as the one that we face 
today. I would say that to you as someone who has put a lot of 
thought and effort into this. We have heard from some very 
large entities here today who have talked about--like the 
Department of Agriculture, which has 130,000 employees, and 
Cargill.
    I actually started in 1988 with, because of my background, 
an awareness of what the potential problem was, looking at and 
worrying about the potential millennium bug. Interestingly 
enough, as we went into that time period, our operation in 
Yuma, Arizona, was already--you mentioned earlier in your 
testimony a date. You might want to amend that. But we were 
actually using GPS systems in 1988 and had them integrated into 
our operation in a very extensive way by 1990. By 1994, I 
appeared before a House committee back here with my laptop and 
a cell phone and turned the laptop around and allowed those 
Congressmen to actually see a time-real photo of what was being 
viewed by a tractor operating in Yuma, Arizona, 2,500 miles 
away from here.
    So I would suggest to you that in the production realm 
there are farmers who are and have integrated substantially the 
businesses that they are in with technology that permeates 
virtually everything they do.
    Big Bertha is--how do I describe Big Bertha? She is a story 
and a half high. She belches fire and smoke, burns diesel, 
cranks out about 400 horsepower, can pull a 26-foot disk at 
over 8 miles an hour, fully down. But that is not really what 
is most impressive about this piece of equipment. And there is 
a picture of the manufacturer in the room. That will give you a 
hint who makes it.
    Neither is the fact that it has got six computers on board, 
nor that it costs $280,000 for that particular tractor, the 
most impressive part. I think one of the most impressive parts 
is the fact that this particular unit has the ability to know 
within 6 feet where it is at anywhere on Earth at any given 
time. But, more importantly, knowing that, as important as that 
might seem, the most important part is the fact that it 
communicates that information with our office on a time-real 
basis using cellular burst mode technology.
    Second, and what catches the attention of many people, this 
particular unit, its maintenance is entrusted to my tractor 
driver, Jose, who gets $8 an hour. The systems monitor 
themselves. And when there is a critical system failure--and 
you talked about critical systems earlier. When there is a 
critical system failure, it doesn't have a red light flash on. 
It calls up the local dealer and says, This is Case 003, I need 
my filter serviced. Or it calls up Case and says, I have got X 
parts per million chromium in my oil, I need to be checked. 
Amazing what technology has done.
    Recently, we had a field day with this particular unit 
called a Quad-track, and the equipment dealer was there and was 
demonstrating to some neighbor farmers why they ought to buy 
one of these units as well. And so to demonstrate its ability 
to self-monitor and to fix its own problems, why, he put a bag, 
a plastic bag over the filter, and Jose drove the tractor out 
in the field one round, and, lo and behold, it didn't stop and 
it didn't call the dealer.
    One thing I need to tell you. Yuma has two prefixes, 726, 
627, same numbers, different order. Somebody had programmed it 
wrong. The dealer got up there, and we were all standing there 
looking over his shoulder as he plugged on two little jumper 
cables to listen to the phone, and the phone rang. And, lo and 
behold, when it rang, a woman's voice was at the other end of 
the phone. And the Case tractor responded by saying, This is 
Case, I am at 19th and 21st, I need to be serviced. And this 
shrill voice at the other end of the phone said, Listen, you 
pervert, I don't care who you are, you call wanting to be 
serviced again and I am going to call the sheriff. [Laughter.]
    It might seem, you know, a little bit funny, but as a 
practical matter, we face a technology for which many of us in 
the farming business are ill-equipped to react. The 
complication of that piece of equipment is incredible.
    A question was asked of me as I talked with your staff: 
What about new equipment? Isn't it immune from this bug? And I 
would say to you that if that new equipment were in its 
original factory condition, it probably would be.
    My grandfather's generation of farmers were looked at with 
their straw hats and bib overalls and straw, and my dad has his 
pliers and his screwdriver and his baling wire, and my 
generation has to have their computers. It is amazing to me 
that we simply will not allow that piece of equipment to just 
continue to operate in its original form. We have to take our 
baling wire and our pliers and go add something to it every 
time it comes on the farm. And that is where our vulnerability 
comes.
    I have a number of examples on my operation where our Y2K 
successful, quote-unquote, compliance monitoring triggered 
massive management problems. To my right is a picture of a 
center pivot. We did our compliance testing almost a year ago 
now. Interestingly enough, the crops, thank goodness, were in 
about that same state.
    We got a clear bill of health from the consultant that came 
in and said our computers were compliant, our IRS forms and our 
Department of Labor forms and everything were up to date, were 
all compliant.
    Two days later, my farm manager comes in and says, I can't 
get these three center pivots to run. We found, after an 
exhaustive study, that it was our Y2K testing program that had 
fried the IC boards on the control panels. Those are common 
control panels across much of America. And our replacement cost 
for burning up one little chip that was non-compliant in that 
panel was something about $3,000 per unit to replace.
    So are we compliant in the ag sector? I would say even 
those of us that you have referred to as being on the cutting 
edge of technology probably can go through all of the maneuvers 
of determining that we are compliant, and we still will not 
know until that clock turns over, until we have had a response 
out there. And we know how many embedded chips are there.
    The Secretary Secretary Glickman, this morning talked about 
the rural electric associations [REA's] and the potential for 
loss of power in rural America--Utah, Arizona, many of the 
Western States that are very remote. And that passing comment 
left me with the impression that everything was OK. But I would 
suggest to you that, after having reviewed this and talked to 
those who are not responding to his survey, as you adeptly 
pointed out this morning, what we found were those who are 
least compliant are those who have the least amount of money to 
become compliant.
    Now, the dilemma you face is, What happens if not one but 
multiple of those REAs fail simultaneously? Do they have the 
power, do they have the draw or the interconnectivity of the 
regional grid network to bring down an entire region? And I 
would suggest to you that a computer analysis shows that they 
not only have that potential, they have a very high probability 
that, if they fail, they will bring the network to its knees.
    I would be happy to answer any questions you have, Chairman 
Bennett.
    [The prepared statement of Mr. Evans can be found in the 
appendix.]
    Chairman Bennett. Well, there has been an interesting 
pattern developed in the ten hearings we have held. It is 
always the last witness who seems to get everybody's attention. 
Mr. Evans, you fit into that pattern. You weren't deliberately 
placed last with that in mind.
    We have you as a panel. Mr. Dickason, do you want to 
respond to some of the comments that Mr. Evans has made about 
vulnerabilities?
    Mr. Dickason. Well, I think, as I highlighted in my 
testimony, that rural electric cooperatives are our biggest 
concern, then transportation, because we do have a number of 
plants throughout the country located outside major cities. I 
am not sure there is enough electrical power in terms of 
bringing in generators by trucks, Senator Bennett, to be able 
to actually bring our plants up. So we are going to have to 
require those electrical grids to be up.
    Second, from a transportation standpoint, we feel pretty 
good about the ability of the farmers to get milk to us, but 
the rail transportation is required to be able to get resin, 
for example, to our plastic plants and, second, to be able to 
get coal to power stations as we have a high concentration of 
plants up and down the east coast. As I flew into Ronald Reagan 
airport yesterday, we passed a power plant and there were 
several many cubic tons of coal sitting out there and four rail 
lines coming in with trucks unloading out of rail cars. And if 
those trains can't get through here, we won't have power to run 
our plants.
    Chairman Bennett. Yes. Well, I am satisfied that the large 
power producers will be all right. I have been in a number of 
power plants myself. I have stood in the control room of a 
power plant in Utah where they turned the clock ahead, and I 
watched it switch from December 31, 1999, Friday, to January 1, 
2000, Saturday. It is very important to say Saturday because 
January 1, 1900, was a Monday. If it were to say 00 Monday, you 
know you have got a real problem. But it went properly.
    I did say to the people who were doing it, you have done 
this before, and they said, yes, we did it before you came to 
make sure that it would work. [Laughter.]
    Frankly, it didn't work in every aspect. They said, It 
worked here but it didn't work over there, and so we fixed it 
before you came so we can now show you that it will work.
    They were very confident that in their service area there 
would be power, but this is a very large power organization. 
And it is not an REA.
    So what you are saying is that even if the large ones work, 
the REA can trigger a brownout?
    Mr. Evans. They could trigger a brownout, and worse. If 
that brownout were regional in nature, that brownout could 
trigger a blackout.
    Chairman Bennett. And how long do you think it would last?
    Mr. Evans. Well, the dilemma is how long it would take to 
manually go switch off the current computer-controlled network 
switching. You see, the very thing that has been focused on to 
breed security into our network has been the ability to quickly 
react and feed power the opposite way. And that security is not 
only our security blanket, it is our greatest point of risk. 
Because if multiple entities were to suddenly go down and draw 
off the network, they could pull a sufficient load to first 
cause, as you pointed out, a brownout and then begin to trigger 
selective--which is now programmed into the network system, 
selective blackouts. So the system, rather than blow up the 
Palo Verde nuclear generator, would begin to selectively shut 
off sections, and we are talking about a half-million people at 
a time who would selectively no longer have power.
    Now, how long would it take to get that power back on? It 
would depend in large measure on how many REA's could be 
isolated, could be turned off of the grid. It would depend on 
how quickly we could get them back on and what kind of a load 
that would put on them.
    Some of the switching, like the center pivot switching that 
I was talking about here, it is only one chip out of 80 chips 
on an IC board that caused the problem. But the ability to 
isolate, identify, and correct that chip is more expensive than 
throwing the stupid board away and putting another one in. And 
those REA's have little expertise and little ability--even 
though they have forced their end users, the farmers, to put 
those kind of control panels in, they have little ability to 
look at those and determine what kind of impact that is going 
to have on them 330 days from now.
    Chairman Bennett. Going back to your piece of equipment, 
which piece of equipment was it?
    Mr. Evans. Case Quad-track, like a big----
    Chairman Bennett. That is Big Bertha?
    Mr. Evans. Well, no, actually Big Bertha would dwarf that. 
That is a combine. It is a tractor that has got quad tracks, 
like the old Caterpillar wheels, only they are rubberized and 
there are four of them, one on each corner.
    Chairman Bennett. But that is the system that shut down 
several days after you did the testing?
    Mr. Evans. This is the system that shut down.
    Chairman Bennett. Oh, this is the system that shut down 
several days after you did the testing. The first reaction is, 
well, then, don't test.
    Mr. Evans. Exactly. In part of my written testimony, I said 
that. We have determined, along with a group of industry folks, 
that kind of like former Secretary Earl Butz said one time, you 
know, what a cockroach eats isn't near as important as what he 
messes up. And to some extent, the cost of what our technicians 
are fixing may not be the real cost associated with trying to 
attack this Y2K bug. It is what the silly--you know, cost of 
doing all the testing is generating.
    I gave an example in my written testimony about an 
insurance company that did a test after spending over $5 
million upgrading their computers. Test one grade on Saturday 
or Sunday. They did exactly what your power company did. They 
figured, OK, Saturday, Sunday, we are off, we will roll the 
date forward. We will see if it works. It worked like a champ.
    The following Tuesday, they started getting irate phone 
calls from their customers who were saying, How come our 
insurance was canceled? A thousand of them, in fact.
    What happened was that nearly a decade earlier, the State 
of Arizona had required the insurance company to notify the 
State Motor Vehicle Department when an insured's policy lapsed. 
That system, the insurance company determined, they didn't want 
to have live so that somebody could break into their computers, 
so they created a firewall, a system where their mainframe 
computers, millions of dollars worth of computers, you know, 
sent a message over to a little probably $2,000 PC sitting 
there that had been programmed to simply report anybody whose 
policies lapsed to Motor Vehicle. No one stopped to think that 
that system was built by the lowest-cost vendor and was plugged 
into their system and communicated to the Motor Vehicle 
Department.
    Now, you talked about mission-critical problems. When it 
comes to transportation, my truckload of lemons has to cross 
six State lines, on average, to get to its end destination. If 
Motor Vehicle pulls his registration, I guarantee you, he won't 
get out of the State of Arizona, let alone across those over 
five State lines.
    So there are so many intertwined business relationships 
that for us to say--I went out and tested my truck, Jose tested 
it, and it is not going to die at midnight on January 1st. On 
the other hand, if Motor Vehicle pulls the registration on 
January 1st, who cares whether the truck runs? It doesn't get 
its job done.
    That is the kind of mission-critical evaluation that I hope 
your perception in pushing this committee's work forward will 
cause to occur in America.
    Chairman Bennett. We are trying to be the entity that looks 
horizontally rather than just vertically at a truck or a motor 
vehicle system it is on, but sees how the things interact. But 
you are the first witness I have heard who has indicated that 
testing itself can be dangerous.
    Mr. Evans. Testing itself can create a problem.
    Chairman Bennett. Are you advocating, then, that they don't 
test?
    Mr. Evans. No. I am suggesting the alternative is worse, 
because if I test now and cause the problem--for instance, with 
the three center pivots, the $10,000 damage we did, we were 
able to find a solution within the last 4 or 5 days. It took us 
3 months to do it, but we were able to find a solution. The 
solution was to put a filter on the system that prevented our 
main computer from sending a date calculation to a chip that 
didn't have the capacity to handle that calculation and would 
get into a loop.
    Now, what we found was that only a third of the 
subsequently tested machines would actually fail. They look the 
same. They have the same manufacturer's name. They were bought 
within a 3- or 4- or 5-year period. Some of them fail, some of 
them don't fail.
    Chairman Bennett. We have run into that phenomenon in the 
Defense Department where you have two pieces of equipment with 
identical model numbers from the same manufacturer, and on 
testing, one fails and one does not. The reason is they bought 
the chips from different batches.
    Mr. Evans. Absolutely, and that is what I started to say. 
What we found was that we had a Korean chip of one particular 
vendor number that apparently did not have a subroutine that 
would cause it to bail out if it got into a loop. In other 
words, if it said line 15 of code, go to line 300 of code, line 
300 of code says go to line 15 of code, and it just sits there 
and goes around and around, and because of the nature of the 
chip, it can't get out of that loop.
    There were apparently some of those chips on some of those 
machines; even the serial number sequencing and everything 
seemed to be the same. As they pulled them out of their batch 
bag, some of them were bad, some of them were good.
    Mr. Dickason. I would certainly echo what he has to say in 
terms of testing. You know, we are testing heavily right now, 
Senator, and we will continue to test. That is the only way to 
find out beforehand what the problem is.
    We haven't seen the same conditions occur, and we may be 
just lucky so far. But we have not seen anything break yet. 
Software, you know, has gone bad, and we fixed that. But from a 
hardware standpoint, so far we have been very solid.
    Chairman Bennett. But you haven't seen a situation where 
the testing actually caused a major failure?
    Mr. Dickason. We have not yet. But we are not through our 
testing yet, so I am cautiously optimistic that we won't, but 
we are taking it day by day to be sure.
    Chairman Bennett. We did see some of that in our hearing on 
medical devices. We had a witness--and, again, he was the last 
witness----
    Mr. Evans. Bad timing.
    Chairman Bennett [continuing]. Who came forward and said 
here is a piece of equipment where I had a letter from the 
manufacturer certifying that it was Y2K compliant. We turned 
the clock ahead just to test the certification from the 
manufacturer, and we got the loop that you are describing. So 
we said, OK, we will turn the clock back and fix it, but 
turning the clock back did not fix it.
    Mr. Evans. No.
    Chairman Bennett. They ultimately had to discard the whole 
piece of equipment, just had to throw it away, because they 
were unable to get in to stop the machine from looping.
    Mr. Evans. From looping.
    Chairman Bennett. It is a phenomenon that has occurred in 
other areas, but this is the first time I have heard of it 
occurring in agricultural equipment.
    Mr. Evans. One thing--and I hope the very suggestion of it 
to you, Senator, won't destroy its effectiveness. But under 
mission-critical scenarios, we have talked about--and I did not 
conspire with Cargill or with the Secretary or with your 
committee to write this report to you, but identify the very 
same order, sequence of risk. No. 1 is the utilities. No. 2 is 
telecommunication. We list No. 3--I did--in our organization, 
No. 3 is the embedded chip problem. And No. 4 would be the 
financial institutions.
    But in that process, it is intriguing to look at it in 
terms of where we are now and what we can do about it over the 
course of the next 330 days. Those problems that we face, we 
are far better off to swallow whatever pain, however painful 
that pill might be, in a period of time that we have between 
now and the millennium bug, that would be a much better 
scenario for me to have a problem and then have a little time 
to try to work it out than it would be for every farmer in 
every part of America that has the same kind of equipment I 
have to suddenly have it fail simultaneously.
    And so can testing cause a problem? Absolutely. Is that 
reason to suggest that we do nothing? Absolutely not. That is 
the worst. I have identified to my colleagues in the Farm 
Bureau that the first and greatest fear that I have is the fear 
of fear, the fear that phobia will run rampant and people will 
do the kinds of things you talked about earlier.
    The second and almost equally great fear is the opposite 
end of that spectrum, and that is apathy; that people will say, 
ah, look, Evans went out there and tested and he blew up three 
of his--I am not going to do that, I will just do nothing, I 
will wait until the year gets here and we will see, you know, 
maybe I will be lucky enough to have the one-third that don't 
crash.
    Chairman Bennett. Let me ask you an unfair question, but it 
is the same unfair question I get asked all the time. What are 
you going to do? Are you going to stockpile any extra food?
    Mr. Evans. Yes, sir. I am going to have fuel. I am going to 
have food. I have a generator sufficiently large to operate the 
critical aspects of my business. We have a 72-hour supply of 
fuel to keep that generator running, thinking that that will 
buy me enough time so that everybody else can figure out what 
is wrong and get back on line.
    Chairman Bennett. You answered my next question. Seventy-
two hours is different than----
    Mr. Evans. Than trying to do a 3-year or----
    Chairman Bennett [continuing]. Going to the hills and 
barricading yourself for 5 years. You don't think that is a 
legitimate strategy?
    Mr. Evans. I think that has fueled a cottage industry in 
America, that it may be generating some additional business for 
us now, but at a tremendous expense down the road in terms of 
credibility.
    Mr. Dickason. And as you know, in dairy we can't stockpile 
milk longer than 72 hours. We have to process it quickly. So 
since we are make-to-stock and a make-to-order operation, we 
will probably stockpile some raw materials, such as resins and 
cartons and cardboard, will continue as normal.
    Chairman Bennett. So you are back to the ice storm analogy?
    Mr. Dickason. Yes.
    Chairman Bennett. Is the Farm Bureau doing anything in 
terms of awareness with its members, the American Farm Bureau?
    Mr. Evans. Yes, we are. We have identified a strategy that 
includes nine specific steps for individuals and organizations 
to take. We believe that they are prudent. We believe that they 
are the kinds of steps that ought to be taken whether you are 
preparing for an ice storm or for a millennial bug or for an 
infestation of beetles. You know, there are certain things that 
we as a society have come to take for granted, and farmers and 
ranchers, by and large, have never had that luxury. We tend to 
be out there on the cutting edge, and so we get isolated, and 
so we have learned to deal with those things.
    Chairman Bennett. You live in a world of disasters.
    Mr. Evans. We live in a world where----
    Chairman Bennett. Whether it is----
    Mr. Evans. Yes, where we do not have control of many of the 
variables that determine our success or failure. So we have to 
become more cognizant of those variables over which we do have 
control. And when it comes to our families and our animals, 
their welfare is a big part of our thinking process. And so we 
are going to have food on hand in my operation. We are going to 
have water. We are going to have supplies so that we could last 
for a few days until problems could correct themselves or at 
least be addressed.
    Chairman Bennett. Would you share with the committee those 
nine steps?
    Mr. Evans. Absolutely.
    Chairman Bennett. You don't need to do it now.
    Mr. Evans. They are in my written testimony.
    Chairman Bennett. Oh, OK.
    Mr. Evans. They are a part of the written testimony.
    Chairman Bennett. OK. Thank you very much.
    Do either one of you, or representatives from Cargill, as 
we wind this down, have any comments you want to make over the 
presentations that were made by Senator Lugar or Secretary 
Glickman and his associates?
    Mr. Dickason. I would just comment that I think they are 
right on target with what we are trying to do. What I heard 
both Senator Lugar say and the Agriculture Secretary say and 
the chairman say that while they are concerned about what is 
out there, they are taking active steps to go after people that 
haven't responded. They are concerned about the numbers that 
they have in terms of surveys and participants, and they are 
going to work hard on that. That is right along where we are 
going, too. So I laud their efforts.
    Mr. Evans. I guess I would have to be the one to be more 
critical, obviously. I think that they are doing much, but what 
they are doing now I wish they had done a year ago. I used to 
fly an airplane, and I don't think I would want to get in an 
airplane that was certified to be 60 percent operational.
    I am in a business that flies by the seat of our britches 
all the time. We operate on very thin margins. And as we saw 
with the hog crisis, a mistake, a calculated misinformation--
whatever it was that misjudged the hog slaughter numbers by 
just 10 percent caused one of the most catastrophic drops in 
hog prices in our lifetime, maybe ever.
    So we are in a business that can't afford substantial 
disaster in terms of information disasters out there. And I 
hope that your efforts and the members of your committee to 
continue to push Secretary Glickman, continue to push the 
process along, will help them to understand the urgency of 
doing this.
    Chairman Bennett. I appreciate that, and I have said 
publicly and here again today that I am very concerned about 
anybody who misses the March 31 deadline because to say, we 
have March, April, May, June, what is the difference when the 
problem doesn't hit us until December, doesn't give you enough 
testing time. You, I think have dramatized that, Mr. Evans, in 
your demonstration that testing alone can produce unforeseen 
problems which then take problems to fix. Even though you 
thought everything was just fine, and at a more rapid 
timetable--it took you what, three months to work out this on 
one piece of equipment?
    Mr. Evans. Right.
    Chairman Bennett. If, in fact, somebody as large as the 
Department of Agriculture they miss their March 31 deadline and 
have nine months, and then they run into some of the kinds of 
things that you have outlined, the nine months is going to go 
by very, very rapidly. So we are doing our very best with every 
Federal agency. I know John Koskinen is from his standpoint as 
the President's Y2K czar going to keep pushing it.
    Well, this has been very helpful, and we appreciate you. We 
appreciate the patience of the three representatives of the 
private industry that sat through the time that we spent with 
the Secretary. The hearing is adjourned.
    [Whereupon, at 11:06 a.m., the committee was adjourned.]
                            A P P E N D I X

                                ------                                


              ALPHABETICAL LISTING AND MATERIAL SUBMITTED

                               __________

            Prepared Statement of Chairman Robert F. Bennett

    Good morning and welcome to our first hearing of the 106th 
Congress. This is the 10th hearing of this Committee since its 
inception in April of last year, and in that time we've attempted to 
answer the questions everyone is asking about the Y2K problem. Will the 
lights turn on? Will banks have cash? Will I be able to drink the 
water? At its core, the Y2K issue has forced us to confront our 
vulnerabilities as human beings and re-evaluate our basic needs, both 
as individuals and as a nation. The advent of time- and labor-saving 
technologies have provided us with comforts and conveniences beyond our 
wildest dreams, but the basic hierarchy of human needs--food, water, 
shelter--has remained unchanged for thousands of years. That is why we 
have made the food industry the focus of today's hearing.
    In this land of plenty, we manage not only to feed a population of 
260 million people here at home, but export $70 billion dollars worth 
of food products each year to people around the world. We are not used 
to food shortages or even the threat of shortages in the United States. 
We take for granted that our neighborhood grocery store will have 
shelves stocked with food products that are safe and affordable. In 
addition, we expect variety. We demand everything from frozen TV 
dinners to fresh vegetables, all under one roof. We demand live lobster 
shipped overnight from New England and fresh lettuce shipped in 72 
hours from California. And we demand high quality and a choice of 
brands.
    Our Committee staff is flooded with calls asking, ``will there be 
food on the shelves?'' It is vital that the food industry address this 
crucial question, and provide us with a realistic assessment of their 
readiness, upon which we may base personal and community preparations. 
In other words: is there a need to stockpile? And like most Y2K 
questions, it leads to another: will stockpiling lead to shortages? 
These questions will not be answered definitively here today, but I am 
optimistic that we can take a step toward dispelling fears and 
educating Americans about what to expect on January 1, 2000 and in the 
weeks and months to follow.
    Comprising 16% of our nation's economy, the food supply industry is 
large, complex and interdependent. Within the United States, the 
industry has integrated modern information technology into processes 
that increase productivity, yield, and profitability. A recent survey 
highlighted that more than 80% of American farmers use computers as an 
integral part of their business; a third of those are connected to the 
Internet and almost 75% own a cellular phone. In 1994, farmers began to 
use the Global Position System (GPS), leveraging the capability to 
pinpoint location information about specific field areas. This accurate 
location data eliminates the guesswork in determining yield variances, 
crop damage, and soil fertility.
    These innovations, along with advances in seed, fertilizer, 
pesticide, and herbicide, have made American farmers the most 
productive in the world. A century ago the average U.S. farm output fed 
eight people. Today, it feeds 212.
    Although I have only addressed farmers in my remarks, ranchers, 
processors, manufacturers, distributors, and local retailers have made 
similar advances that have led to their dependence on high-technology. 
All are important to the food supply chain. Possible Y2K disruptions in 
one can ripple through the chain, affecting all. Like other industries, 
the food industry is critically dependent on the transportation and 
utilities industries, and their Y2K preparedness will directly impact 
the food supply.
    At our October hearing, Mr. Lou Marcoccio of the Gartner Group 
predicted a 66 percent chance that a mission-critical failure would 
occur within the farming and agriculture industries. In December 1998, 
the Food Supply Working Group, chaired by the USDA, issued an initial 
assessment of the food supply's Y2K preparedness. The assessment said 
the public can be confident that the major domestic companies providing 
most of the key foods will continue to operate in spite of the Y2K 
problem. The state of readiness within the food industry is, they said, 
'`encouraging.'' Our information needs to be definitive as long as 
there are gaps in our knowledge.
    Last October, our Committee held a hearing focusing on business and 
Y2K. Not a single major food company was willing to appear to provide 
testimony at that hearing. At that time, I put the food industry on 
notice that we would we hold a hearing early this year addressing their 
Y2K preparedness. I commend those companies that have willingly come 
forward to testify on this critical problem today.
    To address the Y2K issue within the context of the entire food 
chain, from 'farm- to-fork' if you will, it is necessary to hold two 
hearings. Today's will focus on the 'farm- side' of the food chain: 
producers and processors. The second will be scheduled for later this 
month and will focus on the 'fork-side' of the chain: manufacturers, 
distributors, and local grocery and supermarket retailers. I believe 
that these distinguished and credible witnesses will provide excellent 
testimony that will greatly increase the body of knowledge regarding 
the Y2K preparedness of the food industry.
                                 ______
                                 
    Today's hearing begins with testimony by Senator Richard Lugar, 
Chairman of the Senate Agriculture, Nutrition, and Forestry Committee. 
I want to take this opportunity to publicly thank you and your 
Committee for your efforts in addressing this critically important 
problem as well as preparing for this hearing. We look forward to your 
insight on the Y2K problem within the food supply industry. Secretary 
Glickman will follow, providing testimony on USDA's assessment of the 
food industry's Y2K preparedness and a description of his agency's 
outreach efforts. On the third panel, Mr. Thayer, Corporate Vice 
President and President of Cargill Foods, will testify on the Y2K issue 
from the perspective of food processing and distribution. Finally, on 
the last panel, we will hear from two witnesses that will provide the 
perspective of Y2K impacts and issues for food producers. Mr. Dickason, 
CIO of Suiza Foods, will testify on Y2K within the dairy industry. Mr. 
Ken Evans, President of the Arizona Farm Bureau, will address Y2K 
impacts within the context of `precision farming' and general crop 
farming.
    We welcome today's witnesses and thank them for their 
contributions.
                               __________

                  Prepared Statement of Allen Dickason

    Good morning Mr. Chairman and members of the Subcommittee. I am 
Allen Dickason, Chief Information Officer for the Suiza Foods 
Corporation. Thank you for inviting me to appear before you today to 
discuss the efforts Suiza Foods has undertaken to address the Year 2000 
problem. I would first like to commend the Committee for its efforts to 
investigate the potential effects of the millennium bug and to broaden 
the national awareness of this potentially serious problem.
    As you may know, Suiza Foods is a leading processor and distributor 
of fresh milk and related dairy products, shelf-stable and refrigerated 
food and beverage products, frozen food products, coffee and plastic 
containers. Suiza Foods' products are distributed throughout the United 
States and Puerto Rico.
                            suiza's y2k plan
    As members of this Committee know, the complexity of analyzing and 
quantifying the scope of the Y2K problem and then implementing 
comprehensive and proven solutions is a huge undertaking. The so- 
called ``Y2K bug'' may potentially affect software application 
programs, computer operating systems and any other computer program 
that processes dates. At Suiza, we have concentrated our efforts on 
ensuring that all such programs used in our nationwide operations will 
operate properly when we transition to the next millennium.
    About a year ago, we began our Y2K efforts with the objective of 
ensuring that Suiza is 100 percent Y2K complaint by June 30, 1999. We 
established a Suiza Foods Y2K Project Management Office, which is 
responsible for all internal and external Y2K activities. This office 
has put into place a structured approach that lays the groundwork for 
Suiza to meet the Y2K challenge. That approach has five key steps which 
I will speak to briefly this morning.
                               awareness
    Our first step was to make all employees of our Company aware of 
the Y2K problem as it relates to Suiza, and to involve each corporate 
division in the process. As you may know, the Suiza family is comprised 
of three core divisions: Suiza's fluid milk processing, Morningstar 
Farms' dairy foods production, and Continental and Franklin Plastics' 
container manufacturing. Each division has a Y2K team, including an 
information technology person and a manufacturing person. We hold 
weekly conference calls to track our progress, and monthly Y2K status 
and financial reports are developed. This continual monitoring has 
greatly assisted us in becoming Y2K complaint.
    We have also issued a series of compliance guidelines to assist our 
field units, and we have assembled and distributed Suiza's Y2K project 
manual for all field and corporate coordinators. As a result, many of 
our regional operators have made significant progress and have gained 
great knowledge that we have been able to leverage.
    We are also publishing a new Suiza Y2K newsletter that goes to all 
of our employees. It is designed to maintain a high level of awareness 
of our Y2K efforts among our employees. We have also prepared a Y2K 
Website, which is up and running.
                               assessment
    Our second step was conducting a company-wide assessment of our Y2K 
readiness, as well as a Y2K review of each of our potential mergers and 
acquisitions. We contacted the hardware vendors directly to assure that 
each piece of equipment was Y2K compliant, and are in the process of 
starting to test the software and embedded systems ourselves to 
identify any date problem.
                     remediation and certification
    We then established five criteria to determine business criticality 
of our systems, and brought in two independent companies to test and 
double-check those systems. Both companies have been conducting random 
audits in all of our plants, and we will complete the necessary changes 
as they are discovered.
    We are also visiting our major suppliers and reviewing their Y2K 
programs, as well as writing to our other vendors asking if they are 
Y2K compliant. So far, approximately 90 percent have responded, albeit 
mostly by form letter.
    Although our testing is in the early stages, it will cost less and 
take less time than originally anticipated. While the dairy industry is 
a very capital intensive industry, we are fortunate that Suiza, like a 
number of others in the dairy industry, uses standardized equipment 
like Allen Bradley Controls. Moreover, because many dairy operations 
are family owned and operated, there is low turnover in our industry. 
Thus, we are fortunate to have good corporate memory of what has been 
done in the past.
                             implementation
    Our final step will be implementing the necessary changes. While we 
will be engaged in contingency planning from June to October, we are 
confident that all of our systems will be Y2K compliant by our June 30 
deadline.
    Suiza is extremely proud of its approach and the progress it has 
made to address the Y2K problem. Our Y2K readiness efforts are 50 
percent complete, and, while the task is a challenging one, we are 
confident that we will succeed. Our livelihood depends on the complete 
confidence of consumers and customers, and we want to ensure that they 
continue to enjoy uninterrupted quality and service in the new 
millennium.
                               conclusion
    The work of this Committee is critical to the overall preparedness 
of our nation in dealing with the Y2K problem. Please continue to make 
every effort to increase the awareness of the Y2K problem and to work 
with other Congressional committees in their efforts to assist small 
and medium-size companies address the problem. Since many of our 
operations are located in rural areas, it is extremely important that 
rail transportation and smaller utility companies be Y2K complaint or 
prepared to deal with any problems that may occur.
    Again, Mr. Chairman and members of the Committee, I thank you for 
the opportunity to appear before you today. I will be happy to respond 
to any questions you may have.
                               __________

         Responses of Allen Dickason to Questions Submitted by

                            Chairman Bennett

    Question 1. Do you have any concerns about the readiness of USDA? 
Could you describe how a failure in a mission critical system at USDA 
might impact your business and others in the dairy industry?
    Answer. Based on Mr. Glickman's testimony, USDA has made 
significant, timely progress in identifying Y2K problems in the dairy 
industry and other food industries, implementing educational programs 
for the industry and consumers, contingency planning and assisting 
small and medium-sized businesses in addressing the Y2K issue.
    Question 2. Mr. Dickason, you mentioned in your testimony that 
Suiza's Y2K teams are made up of people with expertise both in 
information technology and manufacturing. Would you say that that 
coupling of IT and embedded systems expertise has allowed Suiza to 
rapidly identify and address its Y2K vulnerabilities? Would you 
recommend this methodology to other companies within the dairy 
industry?
    Answer. The primary reason for doing this is twofold? first, a 
coordinated effort across both areas of expertise is necessary to be 
successful. Both teams have areas of expertise in certain aspects and 
depend on each other to affect a total solution. Secondly, it is rare 
for one individual to have both I/T and Operations (Manufacturing/
Distribution) expertise. I believe this combination of skills has 
helped us accelerate our program and improve our thoroughness. Other 
companies in the dairy industry may be utilizing different 
methodologies that are successful for them.
    Question 3. You mentioned that the Suiza issued compliance 
guidelines to its field operations. Are you aware of similar efforts in 
the dairy industry to equip regional operations with similar tools?
    Answer. No, I am not aware of the efforts of others in the dairy 
industry to utilize similar tools.
    Question 4. Some companies we have spoken with in other industries 
have expressed concern that even though their company is making 
progress some employees believe that the problem remains unfixable. Has 
the Suiza newsletter and corporate communications helped keep employee 
morale high?
    Answer. The corporate communications have certainly helped. There 
is high confidence among Suiza employees that we will complete our 
mission and move into the millennium with minimal disruption. I 
personally get more questions from employees about upgrading their home 
computer systems and what software packages are compliant or need a 
patch to function properly.
    Question 5. How is Suiza Foods addressing business continuity and 
contingency planning for Y2K?
    Answer. Business continuity was initially addressed when we did a 
criticality assessment during the early phases of our Y2K project. We 
will use that information as part of our contingency planning, which 
will be addressed from June to October. Some of our Purchasing people 
are holding on-going discussions with suppliers as they meet during the 
normal course of business.
    Question 6. USDA's initial assessment of the Y2K-readiness of food 
industry companies found that many large companies have yet to address 
key issues such as contingency planning, embedded systems, etc. Based 
on what you have done at Suiza Foods can you comment on the importance 
of examining embedded systems and developing contingency plans?
    Answer. Suiza's Y2K approach has five key steps: (1) build employee 
awareness; (2) conduct a company-wide assessment of Y2K readiness; (3) 
identify criteria to determine business criticality of systems and 
assess Y2K readiness; (4) conduct Y2K-readiness testing and review Y2K 
programs of suppliers; and (5) implement necessary changes. Suiza's 
Y2K-readiness testing includes testing of embedded chips. Embedded 
chips may perform date-dependent functions and therefore it is 
important to test embedded chips for Y2K readiness. The implementation 
step of Suiza's Y2K approach includes contingency planning. While Suiza 
is confident that its efforts will be successful, contingency planning 
is an important aspect of its approach to the Y2K problem. As discussed 
during Suiza's testimony, milk must be processed within 72 hours and 
therefore cannot be stockpiled ahead of time. Therefore, while Suiza 
will be able to stockpile some raw materials, such as resins, cartons 
and cardboard, it is not possible to stockpile milk.
    Question 7. Some people have expressed concern that fear could 
cause people to stockpile food and possibly causing shortages. Is Suiza 
Foods concerned about a potential run on dairy products during the last 
days of 1999? Do you have any suggestions on how to prevent such an 
episode?
    Answer. We refer you to Suiza's testimony from the hearing. As 
noted above, because milk is perishable, it cannot be stockpiled for a 
significant period of time. Suiza's focus is to ensure that its 
customers enjoy uninterrupted quality and service in the new 
millennium. Suiza's success depends on the confidence of its customers.
    Question 8. Gartner Group recommended that the USDA begin a public 
outreach on the safety of the food supply in order to reduce the chance 
of public panic. Would this be any help to the dairy industry?
    Answer. We believe it is the industry's responsibility to reassure 
consumers that the food supply will be uninterrupted. As noted by Mr. 
Glickman, industry groups have the greatest interest in ensuring that 
the public does not engage in unnecessary stockpiling. Of course, if 
USDA plans to begin a public outreach on the safety of the food supply 
in addition to the contingency planning, small business assistance and 
other efforts it is undertaking, that would assist the industry's 
efforts to educate and reassure consumers on the Y2K problem.
    Question 9. How confident is Suiza Foods that businesses on which 
it depends for delivering milk to facilities and transporting and 
distributing products will be ready?
    Answer. Suiza is visiting its major suppliers and reviewing their 
Y2K programs and is writing to its vendors asking if they are Y2K 
compliant. Approximately 90 percent have responded. As discussed during 
Suiza's testimony, Suiza's main concerns are the Y2K readiness of small 
rural utilities and rail transportation.
    Question 10. Are you aware of any examples of systems used to 
ensure the safety of milk that could be affected by the Y2K problem and 
what has or can be done in this area?
    Answer. One of the obvious locations/systems is the quality control 
laboratory. The instrumentation and computer enabled quality control 
systems that assure our customers that we are meeting or exceeding the 
quality standards are subject to the same requirements as the rest of 
our Y2K efforts. Additionally, some of the date coding equipment that 
places the expiration date on the containers may need to be modified to 
achieve compliance.
    Question 11. A Company like Suiza Foods interfaces with many other 
companies on a daily basis in support of its business operations to 
supply dairy products. What steps has Suiza Foods taken to assure 
itself that suppliers and other companies on which it depends will be 
Y2K-ready and will not impact company businesses?
    Answer. Please see response to Question 5. This will be included as 
part of our contingency planning.
                               __________

        Prepared Statement of Vice Chairman Christopher J. Dodd

    Good Morning Mr. Chairman.
    Y2K is an insidious digital pestilence that may threaten aspects of 
our robust food production system. Over 60 years ago the bollweevil and 
the dustbowl wreaked havoc in the low-tech breadbasket of America. Of 
course in those days, I would venture to say that between the shovel 
and the spoon, food production was accomplished with hard work and 
simple machinery.
    Today, however, it is a very different story. Information 
technology and embedded systems are almost as critical to the food 
supply chain as photosynthesis. From the germination of the seed until 
the time product arrives on the consumer's plate, technology plays a 
vital role. If left unchecked this digital pestilence could needlessly 
gnaw away at corporate competitiveness and consumer confidence.
    The food industry, as whole has remained largely silent on the Y2K 
issue. But has quietly expressed confidence in their ability to supply, 
process and sell products. Some consumers have interpreted the chilling 
corporate silence as inactivity. In an attempt to avoid being 
associated with Y2K, the food industry may have inadvertently 
contributed to public fear. One way to ameliorate concern surrounding 
the Y2K problem and its impact on food supply is to share information 
with the public about the preparations underway.
    According to a Time/CNN poll published in Time's January 18, 1999 
issue, 59 percent of those polled indicated they were somewhat or very 
concerned about Y2K. When asked if they would stockpile food and water 
as protection from associated Y2K problems, 33 percent said they might.
    Retailers and manufacturers are extremely concerned that these 
fears could cause a surge in demand by late summer. Preparing to meet 
the sudden increase in demand takes approximately six to 9 months of 
lead-time. They must start making decisions now to avoid possible 
shortages. If they miscalculate and are unable to meet such a demand, 
this could flame public fears as we move toward December 31, 1999. It 
is increasingly apparent that a national public information campaign is 
needed to address public and business fears by providing recommended 
guidelines for individual preparedness.
    I would like to point out that the Committee tried to have a 
hearing like this in October 1998, but no one would testify. I would 
like to note that the witnesses before us today have willingly come to 
share their information. For the record I would like to share the top 
nine reasons why others in your industry have chosen not to attend.
    9. don't want to be associated with a bad news story,
    8. our corporate policy is not to discuss technology or any other 
competitive issues in public,
    7. we have nothing to add that hasn't already been said in other 
industry sectors,
    6. if we testify for your Committee, every Committee will expect us 
to testify,
    5. we have nothing to gain and everything to lose,
    4. brand loyalty is extremely fragile,
    3. the timing is bad, we are too busy,
    2. the cost in terms of time and expense is too high to justify 
coming out to testify (western based companies generally), and
    1. our lawyers advised us not to testify.
    I find it difficult to accept that the big players in the corporate 
food production, processing and retailing have been so reticent to come 
and talk about a shared problem. I am looking forward to today's 
testimony.
                               __________

                    Prepared Statement of Ken Evans

    Good day. My name is Ken Evans and I am the President of the 
Arizona Farm Bureau Federation. I am here today representing the 
American Farm Bureau Federation and will bring you our concerns on the 
potential problems of Y2K.
    The following ``real-life story'' is just a glimpse at how the Y2K 
glitch might impact our economy when the New Year arrives:
Twelve company executives and computer information specialists huddled 
        anxiously as the clock clicked ominously toward midnight. Would 
        the massive network shutdown? Would the mainframe continue 
        normally, but have the workstations lock up? Would the millions 
        spent fixing the bug work, making this test a non-event with 
        everything operating properly? Or would the whole system crash 
        and burn?
Then someone began a count down: five, four, three, two, one. Five 
        seconds, then ten, then a minute and every system seemed to be 
        operating normally. A cheer and sigh went up from the 
        exhausted, anxious executives.
This insurance and financial sector business has been at the forefront 
        of addressing and fixing the Y2K bug, so it probably would not 
        have been a shock to the company executives that their trial 
        run had proven successful.
    It wasn't actually midnight on December 31, 1999. It was 10 a.m. on 
January 9. After all of the exhaustive and expensive fixes, mirrored 
runs and certifications that they were Y2K compliant they had chosen to 
reset their computer's internal clock to 12/31/99 and find out for sure 
that they were ready for the new millenium.
    Several hours later with everything running smoothly, the 
executives went home elated that the system passed the test but 
wondering if it had been worth all of the money, work and worry. By 
noon on Sunday, the computer had been reset to the correct time and all 
systems tested a go. Maybe this Y2K bug mania has really been blown all 
out of proportion?
    There has been much controversy lately about what will happen at 
12:01 a.m. January 1, 2000. Will my pickup start? Will the tractor run? 
Will the electricity on my farm or ranch stay on? Will my phone work? 
Will the computer at the local bank stop running? Will all the farm 
equipment worldwide keep working? Will our Federal Government, 
including the U.S. Treasury and the IRS, shutdown? I'm sure you've 
heard it all and more.
    Everyone who owns a computer, or machinery with a computer chip, 
has probably experienced some sort of ``mechanical glitch'' ranging 
from a mild nuisance to a full- blown catastrophe. But is the biggest 
crash of all (for farmers, ranchers, other individuals and the 
government) set to happen in less than 330 days?
    Back to the insurance story. Proudly announcing to the staff on 
Monday morning their successful ``live run'' over the weekend, the 
executives were totally unprepared for the events of the next few days.
    Within a few days the company phones were lit up with irate 
customers wanting to know why their policies had been canceled. The 
company was sure their computer had not done it, but the calls 
continued.
    It turns out the genesis of the problem was when Arizona state 
passed a mandatory insurance law a decade ago. After a plague of people 
buying insurance, going in and registering their cars and then promptly 
canceling their coverage, the state initiated a notice provision 
requiring insurance companies to notify the Department of Motor 
Vehicles whenever an insurance policy lapsed.
    By the mid-90's they had converted to an e-mail notice process 
directly from the insurance companies computers to the State DMV 
computer. A third party vendor created that software patch. And guess 
what? It wasn't Y2K compliant.
    The add-on software for notifying the state that the insured policy 
had lapsed was triggered when the mainframe was reset to the year 2000 
but the software read it as 1900. For the thousands of insured 
motorists who were notified by the State that their registration was 
being pulled because their insurance had lapsed, assurances that their 
insurance company was Y2K compliant is a bit hollow.
    The term ``Y2K compliant'' obviously is much more complex than most 
have realized, but less catastrophic than many doomsayers predict.
    Just last month, the Federal Government reported that Social 
Security is ``safe from the Y2K bug.'' But, what does this statement 
really mean? I chaired a farmer conference on the future of Social 
Security in Albuquerque last month, and I can attest from the questions 
raised by the thousand or so farmers in attendance, that there is a 
great deal of anxiety in the farm community about the effect of the Y2K 
bug on government services.
    Experts at the Social Security Administration (SSA) have assured us 
that their computers are 100 percent Y2K compliant. This means that the 
computer glitch in reading the year ``2000'' in computer format (as 00) 
has been fixed on the SSA's computers. But a current government survey 
also states that only 61 percent of ``all critical Federal agencies'' 
have been certified as year 2000 compliant. This means that any weak 
link (non-compliant computer program) in the government computer chain 
could still ``undo any progress made at agencies that have been given a 
clean bill of health.''
    For example, the writing and mailing of Social Security checks are 
the responsibility of the United States Treasury Department. Social 
Security payments could still be compromised if non-compliant 
contractors (that share data with the U.S. Treasury) end up causing a 
glitch. In other areas, 39 percent of Federal agencies are still 
directly non- compliant, including energy, defense, transportation, 
justice, education, state and health and human services.
    What ``other facts'' do we know about Y2K and government agencies?
    1) The states of Pennsylvania and Nebraska have declared that their 
government computers are currently over 90 percent Y2K compliant. These 
are the only two states that have a 90 percent plus rating.
    2) The states of Arkansas, Alabama, Oregon, Rhode Island and South 
Carolina are on record stating that ``no work'' has yet begun on the 
Y2K problem (concerning government computer programs).
    3) All other states are at ``differing levels of compliance'' from 
10 percent ready to 80 percent complete.
    In the private sector, these facts are known:
    1) Gartner Group, an information technology firm, estimates that 
industry will spend $300-$600 billion to fix this problem. Telephone 
giant MCI is estimated to spend $400 million alone.
    2) Fixes will include mainframe computers, personal computers, and 
any ``embedded systems.'' The embedded systems (or chips in equipment) 
will be particularly costly to fix.
    3) A recent article in Business Economics (a publication of the 
National Association for Business Economics) states that ``major U.S. 
financial institutions and their related communications, payments 
systems and external support networks are not likely to fail when the 
millennium dawns.'' In other words, your local bank should be OK when 
01/01/00 arrives. (But, keeping some cash in hand for the New Year is 
still a good idea.)
    4) Medium and small sized businesses have reported (via a survey of 
their consultants) that 22 percent are already compliant, with another 
26 percent to be compliant by mid-year. An additional 43 percent will 
be compliant by year-end. This leaves 8 percent that will not be 
prepared by the first of next year.
    From the standpoint of non-government infrastructure, the most 
vulnerability comes from the utility sector--electricity and natural 
gas. The regional and national power grid produces both security and 
risk.
    Security--in that if a small power system fails, the grid will be 
able to pick up the slack and keep them operating.
    Risk--in that if a major power company or several small ones shut 
down simultaneously they could overwhelm the regional grid response and 
pose a serious threat to millions of people.
    Without power, there would be no water, no sanitation facilities, 
no access to gasoline or fuel, no light or heat, no grocery store 
access, no access to banks or ATM's, no airline travel or railroad 
transportation. Cows don't get milked without power and a cow that 
needs to be milked that isn't, is not a happy camper. For that reason, 
this sector has spent billions of dollars to insure that they are 
compliant.
    Unfortunately, small REA's that serve rural America are the ones 
least capable of paying the huge costs associated with insuring Y2K 
compliance. Because of their high dependency on energy, farmers are 
particularly susceptible and vulnerable to massive power failures.
    Telecommunication failure poses the second greatest risk to 
America's farms and ranches.
    A disruption in this infrastructure sector would wreck havoc with 
the billions of dollars a day lost in U.S. and international 
agricultural commerce.
    Farmers would be particularly vulnerable because of the perishable 
nature of some crops and the amount of electronic communications 
associated with daily business activity. This is particularly true for 
the Sunbelt states that are at the peak of commercial activity in 
midwinter. From wiring orders to electronic receipt of funds, 
telecommunications is the fabric that holds agricultural commerce 
together as we enter the next century.
    Equipment failure caused by imbedded chips pose another very real 
but unseen problem for America's farmers and ranchers. We are 
particularly vulnerable because of our remoteness and the lack of 
technical support in many rural communities. Discovering this problem 
also may take much longer on farms because of the seasonal nature of 
the use of some equipment.
    Concerning international business, Europe appears to be the most 
``on top'' of this situation. The most lagging compliance appears to be 
in Japan, Africa and Latin America (especially Chile, Brazil and 
Mexico).
    According to author Michael S. Hyatt, the Millennium Bug is a sort 
of ``digital time bomb'' set to detonate when the clock strikes 
midnight on January 1, 2000, spewing out bad data or stopping work 
altogether. Such problems could last in some rural areas well into 
January, or longer into the New Year. This is a major concern for many 
farmers and ranchers.
    My statements are not meant to scare anyone and hopefully the Y2K 
problem will tend to be more of a mild nuisance, i.e., a cold instead 
of terminal cancer. But, to be forewarned is also to be forearmed, and 
there are many practical things that can be done to protect a family 
farm against this upcoming glitch.
    Here are the best ideas for farmers and ranchers to follow:
    1) Contact your local farm equipment dealer this fall and learn 
what suppliers are currently saying about the problem. Ask specific 
questions concerning your specific purchases. ``Will my tractor have a 
problem? Is it Y2K bug resistant? How do you know?''
    2) Develop a potential alternative source of heat and light over 
the next 300 days. Keep your fireplace, wood stove and flashlights in 
good operating condition. Make sure the diesel fuel tank is full and 
your tractor-powered electric generator is in good working condition, 
too.
    3) Secure and file hard copies of important documents. This list 
includes birth certificates, marriage licenses, religious records, 
social security cards, as well as deeds/titles/mortgages/loan 
agreements.
    4) Ask the Social Security Administration for an official copy of 
your lifetime earnings and payroll taxes paid. This transaction can be 
completed over the Internet with the information sent to your home 
within several weeks.
    5) Retain loan statements showing exactly what you owe, including 
credit card statements and tax returns.
    6) Build-up a short-term supply of water. Not just for drinking and 
cooking, but for ``flushing and brushing'' too.
    7) Stockpile some food and common household goods. Canned and non-
refrigerated food is best since it will last the longest. Also remember 
toilet paper, paper towels, hygiene products, soap, shampoo, batteries, 
matches and candles.
    8) Prepare an emergency medical kit. The basics include aspirin, 
bandages, salve, prescription medicine, etc.
    9) Keep some cash on hand, just in case your credit cards or 
checking account is temporarily unavailable.
    Once again, this analysis is not meant to scare anyone. Farm Bureau 
members are accustomed to asking such questions and purchasing such 
essential items in advance. The idea here is to make sure these 
purchases are done ahead of 01/01/2000 ``just in case.''
    Economist Ed Yardini has predicted that the Y2K problem will bring 
a recession onto the world scene in the year 2000. Farm Bureau has no 
current policy on this situation, but economically, Y2K can be viewed 
as a potential shock to our economic system. A shock which would slow 
the economy--but, hopefully not place it into recession. It could also 
provide the opposite effect if enough people take the threat seriously 
and stockup on food and agricultural provisions.
    In either case, a rational amount of preparedness appears to be in 
order.
    What can U.S. citizens, as well as farmers and ranchers, do to 
prepare? Stay tuned, keep reading and keep asking questions of local 
government officials and suppliers of equipment and services. Remember 
that there are less than 330 days until the truth of the Y2K situation 
becomes reality.
                               __________

                Prepared Statement of Daniel R. Glickman

    Mr. Chairman and members of the Committee, thank you for inviting 
me today to talk about the effect of the Year 2000 problem on our 
nation's food supply.
    Almost every day USDA receives questions from citizens concerned 
about the potential effect of the Year 2000 problem on the food supply. 
People want to know whether food will be available on, before, and 
after January 1, 2000. This is a legitimate question to ask and one 
that the Department of Agriculture, which chairs the Food Supply 
Working Group of the President's Council on Year 2000 Conversion, has 
spent a great deal of energy trying to answer.
    The Food Supply Working Group is co-chaired by the Under 
Secretaries for Food Safety, Farm and Foreign Agricultural Services, 
and Marketing and Regulatory Programs. In includes representatives from 
the Departments of State, Health and Human Services, Defense, and the 
Commodity Futures Trading Commission. The working group also includes 
representatives from USDA agencies whose activities sustain the food 
supply. All of our agencies are reaching out to their constituents to 
raise their awareness of the problem.
    I am pleased to report that based on the information we have 
collected to date, the Food Supply Working Group does not believe the 
Year 2000 problem will cause widespread, or severe, disruptions in the 
food supply. It is most likely that the year 2000 problem will result 
in some minor effects, localized by region or by a particular food 
product.
    As part of the President's Council on Year 2000 Conversion, the 
Food Supply Working Group's job is three fold: 1) raise awareness of 
the Y2K computer problem and the threat it may pose to our nation's 
food supply; 2) working with industry, assess the state of readiness of 
the food sector; and 3) conduct prudent contingency planning to address 
any problems that might occur. Most importantly, the Food Supply 
Working Group is focusing on the results it wants to achieve. That is, 
assuring that on, before, or after January 1, 2000, American farmers 
and ranchers continue to have the capability to sustain production and 
move commodities to market and American consumers continue to have 
access to a safe and affordable supply of food.
        y2k state of readiness of the food sector is encouraging
    The state of readiness within the food industry is encouraging. The 
Food Supply Working Group's initial analysis suggests that the American 
public can be confident that the major domestic companies, which 
provide most of the key foods, will continue to operate in spite of the 
Year 2000 problem. An interruption in the food supply so severe as to 
threaten the well-being and basic comfort of the American public is 
unlikely.
    Assessing the Y2K state of readiness of the nation's food sector is 
a daunting task. To make the task more manageable and more meaningful 
to American consumers, the FSWG identified and concentrated on 
production that is ongoing in midwinter, such as fruit and vegetable 
growing and meat and dairy processing; basic foods most frequently 
consumed in midwinter; basic foods most vulnerable to system disruption 
such as perishable products with short shelf life; and food processing 
and distribution industries whose processes are automated or date 
dependent.
                          farmers and ranchers
    To determine whether the Y2K computer glitch will affect our 
nation's food supply, our analysis started on the farm. USDA's National 
Agricultural Statistics Service (MASS) recently completed a survey, 
using a representative sample of approximately 1500 farmers and 
ranchers from across the country, to determine how vulnerable farm 
operators are to the Year 2000 problem. The survey shows that most 
farmers do not use automated systems--those systems which are at risk--
in their farming operations. Most of those that do are taking steps to 
address the Y2K problem.
    The survey results, released by NASS today, show that 81 percent of 
U.S. farmers are aware of the Year 2000 problem. Sixty 8 percent of 
farmers realize that it could disrupt automated farm systems; however, 
only 32 percent of farmers use automated systems--most of these are 
used for record keeping. Only a fraction of all farmers--about 2.5 
percent-use automated Systems such as feeding systems; storage systems; 
milking systems; heating, cooling or ventilation systems for livestock; 
and global positioning systems in the production process. Most of those 
who do use such systems have inventoried their systems for Year 2000 
problems and are in the process of fixing any problems. Of those 
farmers who have either fixed or are attempting to fix their Y2K 
problems, 54 percent estimated that the cost will be less than $1000, 
while 22 percent were unable to estimate their costs.
    Of course, these conclusions assume that other systems on which 
producers and all of us rely, including power, water, 
telecommunications, transportation, banking, and others continue to 
operate without disruptions. However, the Year 2000 news from America's 
farms and ranches appears to be very good--there is no reason to 
anticipate any decline in the productivity of American agriculture, at 
least not due to Year 2000 problems that may occur on the ranch or the 
farm.
                            rural utilities
    With responsibility for rural business and infrastructure 
development, USDA has given careful attention to the Y2K readiness of 
rural utility providers. In February 1998 the Rural Utilities Service 
(RUS) started surveying its telecommunication and electric borrowers to 
determine their level of Year 2000 preparedness. As of January 6, 1999, 
RUS had received responses from 416 electric cooperatives and 457 
telecommunications cooperatives and companies, representing just over 
50 percent of their total borrowers. Eighty percent of electric 
cooperatives and 88 percent of the telecommunications cooperatives and 
companies indicated full compliance or specific plans for full 
compliance by January 1, 2000.
    RUS's field representatives are making personal visits and 
telephone contacts with all electric and telecommunications borrowers 
who did not indicate when they plan to become compliant to determine 
their status and offer assistance. As you know, these utilities are 
also being monitored by the utilities industry and the Energy Working 
Group headed by the Department of Energy.
                          major food companies
    Our assessment also covers food processors and distributors which 
play an important role in getting food grown on the farm into the hands 
of consumers. The FSWG contracted with the Gartner Group, a worldwide 
business and information technology advisory company noted for its 
expertise in the year 200 problem, to assess the sate of readiness of 
many of the major companies that provide consumer-ready food products. 
The Gartner Group study focused on the largest producers and 
distributors of the foods most consumed in the winter months. The study 
examined companies that control significant market share of 19 key food 
groups, including milk, meat, bread products, fruits and vegetables, 
and infant food. In most cases, the companies the Gartner Group 
surveyed collectively account for over 50 percent of the market share 
of their respective food groups. The Gartner Group also collected 
information on agriculture input suppliers--the major seed, fertilizer, 
and feed producers who control 40 to 60 percent of the market these 
products--and data on major food service wholesalers, general line 
grocery wholesalers, and food retailers representing between 30 percent 
and 50 percent of the food service wholesale/retail market.
    The Gartner Group concluded that these companies are ``making 
satisfactory preparations and should be well prepared to sustain 
operations despite any interruptions caused by the century date 
change.'' They point out that ``while few of these companies will be 
immune from any interruptions, it is unlikely that these interruptions 
will be much more than moderately distributed, minor disruptions that 
will be resolved within a few days' time.'' At the same time, the 
Gartner Group did not see evidence that these companies are focusing 
sufficient attention, as yet, on contingency planning which will be 
critical if their remediation efforts are not fully successful.
                        transportation companies
    Because transportation is such a critical link throughout the food 
supply chain, USDA's Agricultural Marketing Service (AMS) studies the 
Year 2000 state of readiness of the transportation sectors affecting 
the U.S. food supply. These included railroads, barges, air carriers, 
motor carriers, U.S. and foreign ports, and container ships. The study 
found that, overall, most of the transport sectors which distribute 
food throughout the United States and to our trading partners overseas 
are actively addressing the Year 2000 problem. As is apparently the 
case with most industries, the study found that smaller companies, such 
as independent truck owners, freight forwarders, and short line 
railroads, are most behind in addressing the Year 2000 problem. 
However, in the transportation sector these firms are increasingly 
being forced to fix their Year 2000 problems because of the assessment 
and remediation work being undertaken by larger carriers who cannot 
operate without them, and who are questioning whether or not the 
smaller companies they interact with are compliant.
                        food imports and exports
    The Food Supply Working Group also assessed the vulnerability and 
readiness of foreign suppliers and markets which are important to U.S. 
consumers and vital to the overall health of the U.S. agricultural 
economy. Attaches of the Department's Foreign Agricultural Service 
(FAS) gathered information from foreign government officials, industry 
associations, and private companies on Year 2000 preparations in 81 
countries which account for roughly 97 percent of U.S. food imports and 
95 percent of U.S. exports during the first quarter of the calender 
year.
    The working group's initial assessment found that key foreign 
markets for U.S. food products will likely have a relatively low risk 
of Year 2000 disruptions to their import, processing, distribution, and 
retail claims. However, some exporting countries have not shown 
significant progress. Consequently, there is some risk of short-term 
Year 2000 disruptions to U.S. imports of food, especially perishable 
commodities. Certain of these supplier countries appear to be 
increasing their preparedness efforts. However, should there be a 
disruption of imports, domestically grown fresh fruits and vegetables 
will continue to be available, although with less variety and possibly 
at somewhat higher prices than usual.
    The Food Supply Working Group will continue to monitor the Year 
2000 readiness of our key foreign markets and suppliers. In addition, 
the working group plans to work with other U.S. government agencies and 
international organizations to take a closer look at the readiness of 
ports and market infrastructure of key recipients of our food aid.
                     working with industry partners
    Mr. Chairman, USDA is also encouraged by the information the Food 
Supply Working Group has received as a result of meetings with industry 
partners.
    For example, the dairy industry appears to be well underway in 
their Year 2000 planning. Because dairy products rank second as the 
foods eaten most frequently by American consumers (nonalcoholic 
beverages are No. 1) and because dairy products have a short shelf life 
and therefore need to be restocked regularly, the working group hosted 
the first of several planned industry ``roundtable'' discussions with 
representatives of the dairy industry in November to raise awareness 
about potential Year 2000 problems facing the dairy industry. Following 
the roundtable, the industry the saw a need to conduct its own 
assessment. The International Dairy Foods Association (IDFA), the 
National Milk Producers Federation (NMPF), and the International 
Association of Food Industry Suppliers (IAFIS) surveyed their members 
to evaluate Year 2000 preparedness. Early results from the surveys 
suggest that most of the processes involving getting milk from the farm 
to the processor have manual overrides. The technology involved is such 
that no interruptions are anticipated in Betting milk to processors, as 
long as electricity remains available. Responses from the major dairy 
processors in the United States indicate that they will be completing 
their critical systems by April of this year; and they plan to complete 
non-critical systems and contingency plans by July. In addition, they 
have also been working with their suppliers to be certain that they 
won't have interruptions due to Year 2000. Equipment suppliers who 
responded to the survey indicate that they are also addressing critical 
and non critical systems, and developing contingency plans.
    A second roundtable discussion was held earlier this week with 
representatives of the meat and poultry industries. Representatives of 
five meat and poultry associations expressed confidence that their 
members are taking steps to address the Year 2000 problem; however, 
they did express concern about utilities and other factors outside 
their members' control. Similar meetings and discussions will be held 
throughout the year with representatives from other food industry 
groups, including wholesalers and retailers, fresh fruits and 
vegetables growers, and small food processors and distributors.
                  there is still much work to be done
    Though the Food Supply Working Group is confident and encouraged 
about the food supply chain, there is still a tremendous amount of work 
yet to do, for the food industry in general, for agribusinesses, and 
for USDA. The initial assessment of the domestic food supply focused 
only on the major companies; the remainder of the market has not been 
systematically studied. Thousands of small and medium-sized companies--
from local grocery stores to independent wholesalers and retail chains, 
as well as restaurants--also play a critical role in providing food to 
millions of Americans. To address this issue, the Food Supply Working 
Group is building cooperative relationships with over seventy trade and 
commodity associations and asking their assistance in assessing and 
reporting on the state of Y2K readiness of their members, particularly 
medium and small businesses.
    I believe that industry groups are increasingly aware that they 
need to provide information to the public about their efforts to 
correct the Year 2000 problem. They have perhaps the greatest interest 
in ensuring that the public does not disrupt the normal demand and 
supply for food by unnecessarily stockpiling, which would disrupt just-
in-time inventory systems.
    Given our confidence that the major players in the food supply are 
adequately addressing the issue, we will encourage these producers, 
grocers, wholesalers, and retailers to issue public statements 
verifying that they will be able to continue operations in spite of the 
Year 2000 problem. If the major players, who in many cases are 
competitors, could be persuaded to issue a joint statement, that would 
be even better.
    With respect to speeding up remediation, we are focusing our 
efforts on smaller and medium-sized companies. We must encourage 
companies involved in the food chain to do what they can to ensure that 
their own systems are prepared so that their businesses and customers 
do not suffer even temporary difficulties. Companies should be 
encouraged to seek immediate assistance if they know now that their 
operations will be adversely affected and they don't have the ability 
to address the problem. This information is also vital so that, if any 
region, locality, or even a particular food appears to be vulnerable to 
potential disruptions, contingency plans can be focused to address the 
particular problems. Having some idea if, or where, problems are likely 
to occur due to Y2K would be invaluable information, and help us direct 
resources to the areas where they will be needed most.
    USDA is working with the Small Business Administration (SBA), the 
Manufacturing Extension Partnership (MEP) of the National Institute of 
Standards and Technology (NIST), and others, to provide technical 
assistance to help small and medium-sized agribusinesses and others 
involved in food and fiber become Y2K compliant. Our plan is to work in 
partnership with the Cooperative Extension System, the Manufacturing 
Extension Partnership, and SBA's Small Business Development Centers to 
train extension agents located in counties across the country to 
conduct risk assessment and remediation training for small business 
owners in rural areas.
          food and nutrition programs are a priority for usda
    I also want to mention briefly the state of affairs with respect to 
the food and nutrition programs which are also vital to the 
availability of food for millions of Americans, especially those who 
are neediest. The Food and Nutrition Service (FNS) has been working to 
remediate the mission critical systems that support these nutrition 
programs. With respect to FNS' own mission critical Internal systems, 
all are expected to be fully compliant by the government-wide deadline 
of March 31, 1999.
    FNS is also tracking and reporting Year 2000 progress from our 50 
state partners, Guam, Virgin Islands, Puerto Rico and the District of 
Columbia for the Food Stamp Program (FSP) and the Supplemental Program 
for Women, Infants, and Children (WIC). (Subsequent references to the 
states include these three territories and the District of Columbia). 
States must certify to FNS that they are Year 2000 compliant in three 
areas--software, hardware, and telecommunications. States reporting 
that they will not be compliant by March 31, 1999 must certify in 
writing that they have a working contingency plan in place that will 
assure the delivery of benefits to FSP and/or WIC recipients. FNS will 
be closely monitoring those states reporting Year 2000 compliance after 
March 31, 1999. FNS will offer technical assistance to those states 
requiring help and FNS will follow up with onsite reviews for those 
states reporting that they will not be compliant until after March 31, 
1999.
    As of the December 1998 report for the state Food Stamp Program, 
thirteen statement have reported that their systems are already 
compliant in all respects. Five of the thirteen states have already 
sent letters certifying that they are Year 2000 compliant. Fifteen 
additional states have reported that they will be compliant by March 
31, 1999. Thirteen states have reported that they will be compliant 
between the April 1999 and June 1999 period and thirteen states have 
reported that they will be compliant during the last 6 months of 1999.
    Twenty two states have reported that their WIC systems are Year 
2000 compliant. ENS has received certification letters from twelve of 
these states. Fourteen additional states have reported that they will 
be compliant by March 31, 1999. Six additional states have reported 
that they will be compliant between the April 1999 and June 1999 
period. Twelve additional states have reported that they will be 
compliant during the last 6 months of 1999. All states are reporting 
that their WIC systems will be Year 2000 compliant by December 31, 
1999.
       usda will have contingency plans for food where necessary
    As I stated earlier, it is most likely that any effects from the 
Year 2000 problem will be minor, and localized by region or particular 
food product. However, in the free market system, commercial 
competition in the vast majority of communities across this country 
will ensure that food remains available even if some companies 
experience Y2K-related problems.
    Also, in the unlikely event that there are food shortages in any 
area, USDA has standing plans to address intermittent food disruptions 
which occur during any emergency. USDA is working with the Federal 
Emergency Management Agency (FEMA) and the Emergency Services Working 
Group of the President's Council on Year 2000 Conversion to adapt our 
plans for any Year 2000 related contingencies.
                                outreach
    Mr. Chairman, overall USDA is very encouraged by the analysis of 
the Year 2000 readiness within the food supply. USDA, working with 
industry partners, is committed to providing the public with reliable 
information about the unlikely potential for serious interruptions in 
the U.S. food supply. The American people need to know that safe, 
affordable food will be available on, before, and after January 1, 
2000.
    In winter months, it's just good sense to keep bottled water, some 
canned food, and candles and batteries on hand because Mother Nature, 
not the Y2K bug, can cause power outages or make a trip to the grocery 
store more difficult. However, unless consumers have confidence that 
food will be available on, before, and after January 1, 2000, there is 
the potential for consumers to cause local shortages through hoarding. 
Needless and frivolous stockpiling of supplies can create isolated 
shortages, and we will embark on a campaign to educate consumers that 
this will not be necessary.
    The Food Supply Working Group will continue to encourage the food 
industry sector to report on Year 2000 readiness and to reassure the 
American public of the readiness of the food supply sector to prevent 
panic or hoarding of food supplies. Each of the studies I have 
mentioned will be posted on USDA's web site at www.usda.gov. The 
working group also plans to update these studies periodically, with the 
next update to be ready at the end of March.
    USDA agencies participating in the Food Supply Working Group as 
well as fourteen other working groups established by the President's 
Council on Year 2000 Conversion, (including education, finance, health 
care, small business, building operations, housing, and transportation, 
energy and emergency services) are taking steps to raise the awareness 
level of their customers and constituents.
    USDA officials are speaking with constituent groups about the 
Y2Kproblem at every opportunity. During National Y2K Action Week, the 
Cooperative State Research Education and Extension Service distributed 
3,100 Year 2000 toolkits to county extension offices. The kits included 
a media plan, public service announcements, brochures, four fact 
sheets, a poster, talking points, and frequently asked questions on 
Year 2000 to equip extension offices with information they need to 
raise the awareness of rural America about this issue. CSREES has 
printed and is distributing over 160,000 Year 2000 pamphlets to county 
extension offices.
    The Farm Service Agency (FSA) is informing farmers and ranchers 
through its newsletters, which are distributed to fanners through FSA 
offices across the country. FSA is also developing public service 
announcements to be aired on television and radio, referring farmers 
and ranchers to USDA's web site for additional information.
    The Agricultural Marketing Service, in conjunction with the 
National Finance Center (NFC), is disseminating Year 2000 informational 
brochures to over 40,000 AMS customers. Other mailings, with Year 2000 
updates, will be provided to customers quarterly. Many of these 
customers include international organizations.
    The Food Safety and Inspection Service (FSIS) has sent letters to 
all plant managers in industries it regulates, and has appointed a Year 
2000 coordinator to provide companies information they need to 
implement Year 2000 plans that are HACCP compliant.
    Finally, USDA's National Finance Center continues to be a leader in 
Year 2000 preparedness, having completed in December 1998 remediation 
of the systems that process payroll for approximately 43 5,000 Federal 
employees, roughly 20 percent of the Federal civilian workforce, and 
that service more than 2.3 million Federal employees with the Thrift 
Savings Plan System.
                               conclusion
    Mr. Chairman, that concludes my testimony. Thank you again for 
inviting me to speak. I will be glad to answer any questions you and 
other members of the Committee might have.
                               __________

            Prepared Statement of Honorable Richard G. Lugar

    Mr. Chairman, thank you for the opportunity to appear before your 
committee to examine the readiness of the food supply chain to manage 
the year 2000 computer problem. I would also like to thank you for your 
leadership in year 2000 issue generally and for holding this hearing in 
particular.
    The food industry is vast and complex. We are fortunate to be able 
to choose from among so many food products. In order to make these 
choices available, intricate production, processing, packaging, storage 
and transportation systems must function without flaws. Agricultural 
producers and food suppliers, like many other businesses, are heavily 
dependent on computerized processing and information exchange. Our 
modern and efficient food industry, from irrigation and milking 
equipment to food processing assembly lines and refrigeration, faces 
potential year 2000 problems. The food supply chain's year 2000 
readiness is crucial to the availability of food and to the nation's 
economy.
    The agricultural sector contributes thirteen percent to our gross 
domestic product. Even though the U. S. has a trade deficit of two 
hundred twelve billion dollars, we have an agricultural trade surplus 
of sixteen billion dollars.
    The Committee on Agriculture, which I am privileged to chair, held 
2 year 2000 hearings last year. At that time, little was known about 
the potential impact of the year 2000 problem on the food supply. At 
the July 22nd hearing, Dr. Ed Yardeni, a respected economist and year 
2000 problem observer, said, ``I am concerned that no one on this 
planet is assessing the potential negative impact of Y2K on the global 
food supply.''
    Your letter of invitation indicated the purpose of this hearing was 
to examine how the food industry is responding to the year 2000 
challenge from ``farm to fork.'' When the President's Council on Year 
2000 Conversion realized the daunting task of assessing the readiness 
of the food chain, the Food Supply Working Group was created. This 
group, led by officials of the Department of Agriculture, is charged 
with the responsibility of determining the year 2000 readiness of the 
U.S. food industry and how the millennium bug problem might affect 
foreign countries as markets for American agricultural products and as 
suppliers of food products to our nation. I commend them for their 
work.
    I am confident that Secretary Glickman will testify to the findings 
of the assessment undertaken by the Food Supply Working Group, but I 
want to make a few observations. The group concluded, ``The state of 
readiness within the food industry is encouraging. An interruption of 
the food supply so severe as to threaten the well-being and basic 
comfort of the American public is unlikely.'' This is welcome news, but 
I would caution government officials to continue to monitor progress 
diligently and address problems promptly. In the past, the tolerance of 
the American public for systematic disruptions has been very low. This 
situation will be no different.
    The group's initial assessment also found that ``. . . the key 
markets of U.S. food will likely have a relatively low risk of year 
2000 disruptions to their import, processing, distribution and retail 
chains.'' Earlier this month, I introduced S. 101, the United States 
Agricultural Trade Act of 1999. The purpose of this legislation is to 
open foreign markets for America's agricultural exports and to raise 
the profile of agriculture in our nation's trade agenda. One of the 
most important things we can give farmers is the ability to export 
their products abroad. If the ability to export is affected adversely 
by the year 2000 problem, all involved will feel it. Additionally, 
those countries that rely upon our humanitarian food donations will 
suffer as well.
    In a report commissioned by the Food Supply Working Group, the 
Gartner Group concluded, ``Perhaps the greatest threat to the food 
supply industry comes from the consumers themselves. Needless and 
frivolous stockpiling of supplies can create isolated industry 
shortages.'' The ``just in time'' inventory control strategy employed 
by the food industry could be severely disrupted by stockpiling of 
food. The Gartner Group recommended that USDA embark upon a program of 
information dissemination to inform the public about the unlikely 
potential for serious interruptions in the U.S. food supply.
    Mr. Chairman, while the Food Supply Working Group is responsible 
for assessing year 2000 readiness, the ultimate responsibility for 
attaining year 2000 readiness rests with the food industry. Open 
communication and cooperation are crucial to the success of this 
undertaking. It has been noted that the larger food companies, as is 
the case with most industries, are more prepared and better financed to 
address the year 2000 problem. Some have suggested that those companies 
should share their strategies and methodologies with smaller firms in 
an attempt to ensure that all are successful. One kink in the chain 
could affect the whole system. I am pleased to see witnesses from the 
food industry who were willing to come here today to share their 
successes.
    I am aware that many corporations, in and out of the food supply 
chain, have been reticent to disclose their year 2000 readiness out of 
fear of the potential for litigation. In that regard, I applaud you, 
Mr. Chairman and the cosponsors of the Year 2000 Information Disclosure 
Act of 1998. This law will do much to ease the fears of liability 
lawsuits and promote the flow of year 2000 readiness throughout the 
private sector.
    Mr. Chairman, I will soon introduce the USDA Information Technology 
Reform and Year-2000 Compliance Act of 1999. This legislation is 
similar to a bill that passed the Senate last year. It centralizes all 
year 2000 computer conversion activities within the Office of the Chief 
Information Officer of USDA in an effort to ensure that all critical 
computer functions at the department are operational on January 1, 
2000. I commend this legislation to the attention of members of this 
committee:
    On May 14th of last year, USDA testified before the Committee on 
Agriculture that forty percent of its mission critical systems were 
already year 2000 compliant. The department's January assessment shows 
that seventy-one percent of the mission critical systems are now 
compliant. The compliance percentage is improving but this is 
misleading. In May 1998, USDA was tracking 1,080 mission critical 
systems. Today, the department is tracking 3 54 mission critical 
systems. I recognize that the Office of Management and Budget revised 
the criteria for reporting mission critical systems. Further, as USDA 
becomes more sophisticated in its approach to the problem, there may be 
changes to the number of systems being tracked . I am concerned, 
however, that some systems removed from the mission critical category 
might be vital to USDA's operations and may impair the department's 
ability to serve the country.
    While the number of USDA mission critical systems being tracked is 
decreasing, the cost of compliance is increasing. In May 1998, USDA's 
Chief Information Officer testified the department anticipated spending 
a total of $120 million to address the year 2000 problem. Six months 
later, the OMB reported that USDA spending would increase to over $160 
million. While the supplemental appropriations dedicated to the year 
2000 issue that was enacted last year will be helpful, additional cost 
overruns bear careful scrutiny.
    Last summer, I recommended to the Secretary that USDA post a 
website available to the public that shows the department's monthly 
progress in fixing the year 2000 problem in its ``priority'' mission 
critical systems. I am troubled by the possiblity that, in an effort to 
fix everything, some systems having the greatest impact on USDA's 
ability to deliver services might be missed. The systems included in 
the ``top priority'' category are those with economic repercussions on 
agricultural markets or trade, impacts on individual financial security 
and impacts on health and safety. AS of January 29?, USDA reports that 
sixty-two percent of the ``priority'' mission critical systems are 
compliant. The number of'' top priority'' mission critical systems has 
remained stable since the website was created so this poses no 
particular concern for me at. this time However the deadline imposed by 
the Office of Management and Budget for implementation of all mission 
critical systems, not merely those in USDA's ``top priority'' category, 
is March. In the event it appears that some mission critical systems 
will not be ready in time, I will want to know what contingency or 
triage plans are underway to ensure that the department can 
successfully meet its responsibility. The universal resource locator 
(URL) for this website is http://www/ocio.usda.gov/y2k/critical--syst/
priority/htm. The chairman and members of this committee, as will 
members of the Agriculture Committee, want to observe progress in this 
effort.
    I am encouraged by USDA's progress toward year 2000 compliance. 
Secretary Glickman's personal commitment and attention to this endeavor 
have been important. I urge him to continue to monitor this matter 
closely to ensure that USDA's computers function properly to serve the 
American public dependent on information and programs of the 
department. I also want to commend the work of the Commodity Futures 
Trading Commission, the commodity exchanges they regulate, and the Warm 
Credit Administration and the farm credit system banks for their 
attention to this most important project.
    I want to thank the committee for inviting me to present this 
statement. I am confident that if we, the public and private sector, 
work together we will succeed in continuing to assure an adequate and 
reliable food supply in spite of the year 2000 challenge. I am happy to 
answer any questions you might have.
                               __________

               Prepared Statement of Senator Gordon Smith

    Thank you Mr. Chairman. I appreciate the opportunity to work with 
you in addressing the important Y2K issues facing the food sector.
    I would like to thank all the distinguished witnesses before us 
today for taking the time to testify, including our distinguished 
Secretary of Agriculture and the Chairman of the Senate Agriculture 
Committee. I am also very pleased to see that many of our major 
national food producers and distributors are participating in this 
important hearing.
    In my former life, before serving as a U.S. Senator, I was a frozen 
food processor. I can assure you that any interruption within the farm-
to-fork chain would result in not only a direct loss to food suppliers, 
but would also cause food shortages and price increases nationwide. As 
with many businesses, food suppliers are increasingly dependent on 
computerized processing and information exchange.
    For example, farmers and ranchers use electronically equipped 
irrigation systems, animal systems and transport systems. Food 
processors rely on automated systems that help prepare and package 
consumer-ready products. Distributors, wholesalers, and retailers 
depend on computer- driven equipment to transport, deliver, store, 
display, and sell food products. Inventory and accounting systems, 
harvesting equipment, grain elevators, refrigeration and security 
systems also depend on the computations of computers.
    And with a finite supply of food, it is my hope that this hearing 
will shed light on not only the major food producers' Y2K contingency 
plans, but also the small farmers' readiness. We need to assure America 
that we will continue to be able to provide the best and freshest food 
products to the dinner table on January 1, 2000.
    I look forward to learning more about the specific Y2K challenges 
facing our entire food sector.
    Thank you Mr. Chairman.
                               __________

                 Prepared Statement of Tyrone K. Thayer

    Mister Chairman and Members of the Committee:
    Good morning. My name is Tyrone Thayer . I am a corporate vice 
president for Cargill, Incorporated and the worldwide manager for 
Cargill Foods, our business unit that brings together the company's 
product lines that serve the food service, food processing, bakery and 
retail grocery industries. With me today is Gary McGee, Cargill's 
Worldwide Year 2000 Project Office manager.
    Thank you for inviting Cargill to appear before you today. The work 
this committee is doing is very important to a smooth transition for 
the United States into the next millennium. First, I will give you a 
brief description of Cargill. I will describe the structure we are 
using to address the Year 2000 technology problem, give a brief 
description of our activities and the status of our efforts. I would 
also like to suggest some particular areas of focus for this Committee.
                                overview
    Cargill is an international marketer, processor and distributor of 
agricultural and food products. Our headquarters are in Minneapolis, 
Minnesota, but we employ about 80,000 people in plants and facilities 
in 65 countries and have business activities in 130 more countries. 
Cargill processes more than 200 food products and food ingredients such 
as salt, cocoa, vegetable oils, flour, malt, juices, corn-based 
sweeteners, starches and citric acid. We are also a leading processor 
of beef, pork and poultry.
    We obtain most of our raw materials for these products from farm 
and livestock producers who are both our suppliers and our customers. 
We develop new fertilizer varieties that farmers can use to grow their 
crops. And we are a leading supplier of animal feed to livestock 
producers.
    We transport our products through the use of ocean freight, inland 
barge, rail and truck transportation services.
    Cargill expends more than $385 million in information technology 
services (excluding voice communications) every year. Of that $80-$100 
million is capital spending. We have 27,000 connected desktops with 
complex business application, infrastructure and corporate systems.
       how does the year 2000 technology problem impact cargill?
    In Cargill's plants, computers and microchips are used to control 
the temperature of products as they are being processed, to analyze 
product samples and to open and close valves as product flows from one 
process to another. These systems also are found in weigh scales and 
time clocks,--equipment that every food processor uses in day-to-day 
operations.
    Our business systems also are affected. Throughout Cargill, we 
monitor our inventories and manage our day-to-day business transactions 
such as those with the Chicago Board of Trade. Invoicing and payroll 
systems already have been updated so that customers get billed in a 
timely manner and suppliers get paid.
    Cargill's focus in dealing with the Y2K situation has been the need 
to avoid any disruption of the supply chain--most of which is external 
and out of Cargill's, or any company's, direct control. Our concern is 
in four areas:
     utilities,
     transportation,
     telecommunications and
     financial.
    If these areas do not function, no business can either. The loss of 
basic utilities--electric, water, sewer and natural gas--would cause 
plants to shut down. With few exceptions, Cargill's facilities do not 
have back-up generators, and we have determined it would not be cost-
effective for us to add that capability.
                 cargill's approach to the y2k problem
    Our approach to Y2K began in June 1996 with an assessment of all 
our business systems. We concluded that Cargill needed to undertake a 
Year 2000 Project, and Ernie Micek, Cargill's President and Chairman of 
the Board, approved setting up a Year 2000 Project Office. (See 
Attachment 1.) Our goal is to implement reasonable procedures in order 
to eliminate as much risk as reasonably possible to Cargill, our 
customers and suppliers. The Project Office provides overall direction 
and consistency in approach, suggests policy and submits regular 
progress reports to senior management. Two corporate executives were 
appointed as sponsors to oversee the entire project. They provide 
quarterly updates to Cargill's Board of Directors. Division Presidents 
are responsible for making sure their equipment and systems are ready 
according to a predetermined schedule.
    Enclosed with this testimony as Attachment 2 is a set of overheads 
that review in detail Cargill's Year 2000 Project. I will comment here 
on just some aspects of our effort.
    When evaluating our plant and business systems, we focused on 
systems and equipment with imbedded computer chips or software that 
could cause either a slowdown, a shutdown, a safety problem or an 
environmental problem. We are focusing on business and plant systems 
and infrastructure. We are working with our customers and key 
suppliers. And we are doing contingency planning. Finally, we are 
hiring external auditors to conduct random checks of business and plant 
systems.
    Cargill's Y2K international operation is organized very much like 
our domestic organization. Every division has a plan of action with a 
predetermined timetable.
                     current status of our efforts
    An overview of the actions we have taken, as well as a copy of a 
brochure we provide to customers and suppliers is attached at Tab 3 of 
this submission. In the United States, 65 percent of our key plants and 
70 percent of our business systems have been updated, tested, installed 
and are running productively. The remaining systems are being tested 
and corrected. These systems will take into account the date change, 
but obviously will not be able to compensate for impacts caused by 
external factors beyond our control.
    We plan to finish our remaining projects and complete our 
contingency planning. We will have people at our key plants and 
administrative offices on Dec. 31, 1999 to help ensure a smooth 
transition. We are confident that our worldwide business and plant 
systems will be in good working order by the Year 2000.
                          plans going forward
    News reports suggest that many countries have only recently started 
their Y2K efforts. While we can not predict exactly how other nations' 
Y2K planning will impact Cargill's food businesses, we expect imports 
and exports may be affected in some way. With this in mind, we are 
putting together a contingency plan that includes investigating 
transportation alternatives if railways or trucking companies are 
unable to deliver or ship product. Consideration is also being given to 
finding back-up suppliers of energy and products we use in our day-to-
day business.
                               conclusion
    I trust I have provided you with some insight as to how one major 
food supplier is handling the Y2K situation. I'm confident that Cargill 
will be ready to meet the challenges that lie ahead.
    Again, we compliment your work in to addressing the Y2K issue. We 
believe the American public can best be served if the committee directs 
its attention to the four areas I mentioned earlier: utilities, 
transportation, telecommunications and finance. We would encourage you 
to continue, and even increase, communications with the public about 
the work and progress of this Committee. We look forward to following 
updates on your progress. Thank you, and I look forward to responding 
to your questions.

    DATE: Jan. 22, 1997

    TO: Operating Comm. & Divisional Managers

    FROM: Ernie Micek

    SUBJECT: Year 2000 Problem

    With the year 2000 less than 3 years away, every Cargill division 
must make sure that its office and plant computer systems are set to 
make the transition to the next millennium. As you may know, 
historically many computer programs used just two digits to record the 
year (for example ``97'' rather than `` 1997'') This causes programs 
that perform arithmetic operations, comparisons or sorting of date 
fields, to yield incorrect results. The dilemma--known as the ``Year 
2000 problem''--is expected to cost the business world perhaps as much 
as $500 billion to correct.

    Some examples of the kinds of problems we could experience at 
Cargill, unless we take action, are: interruption of plant operations 
because a control system would not accept ``00'' as a valid date; 
incorrect position reports because the position dates were sorted in 
the wrong order; or inaccurate financial statements because interest 
was calculated incorrectly by systems that feed the new JDE general 
ledger system. I am told that the ``Year 2000 problem'' has already 
caused some system outages in our office systems.

    Fortunately, many of the potential problems have been envisioned by 
Cargill during the recent installation of the Core Process Redesign's 
new accounting system, as well as the introduction of the Global 
Office, Lynx, COBRA and other computer systems. However, older systems, 
including plant operating systems, may be at risk. I/T estimates it 
will cost Cargill about $21 million to complete the overhaul of our 
office systems to remedy the year 2000 problem. The cost to modify our 
plant systems, which is not included in the I/T estimate, are being 
evaluated.

    To ensure the transition to the year 2000 is made with no business 
interruptions, I want to make sure that each of you understands, that 
you are personally responsible to have your division ready. I urge each 
of you to:

    * Make sure detailed plans to correct the most critical systems to 
your business are in place by May 31, 1997, in order to ensure your 
division is ``year-2000-ready'' by Dec. 31, 1998.

    * Forward all customer and supplier inquiries about the ``Year 2000 
problem'' to the Year 2000 Project Office so a unified response can be 
delivered. The project office will coordinate this effort through Ty 
Thayer.

    * Make sure target dates are met. Your I/T and plant systems groups 
will be asked to report progress monthly. A quarterly report will be 
sent to senior management. These reports are scheduled to begin in 
September 1997.

    The Year 2000 Project Office, mentioned above, has been established 
to coordinate this effort worldwide. If you have further questions, 
contact Gary McGee, Year 2000 Project Manager, @ MTKA, phone 612-742-
6821, fax 612-742-1015. Thanks in advance to each you for making sure 
this important project is carried out smoothly.

    Emie Micek 

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

        Responses of Tyrone K. Thayer to Questions Submitted by

                            Chairman Bennett

    Question 1. I understand that Cargill is assessing key suppliers 
and looking for alternative sources in some instances. As part of your 
contingency and business continuity planning, is Cargill planning to 
stockpile critical supplies? If other companies also are planning to 
stockpile these types of supplies, how might that affect the food 
supply industry?
    Answer. We have and will continue to assess the readiness of key 
suppliers through the Year 2000; however, at this time, we have not had 
to rely on alternative suppliers. Cargill has considered stockpiling 
some packaging material and chemicals used in our processing; however, 
we have not made any decision to do so at this time.
    We can not accurately predict how food supplies might be affected 
should the industry as a whole begin stockpiling; however, it is 
possible that we could see an increase in the prices of their goods if 
demand exceeds supply. The editorial and article in the enclosed copy 
of WorldFood
     magazine also addresses this issue. This publication is mailed to 
the CEOs and purchasing managers of most of the top food companies in 
the world.
    Question 2. You indicated that Cargill expects imports and exports 
may be affected in some way. What are your concerns about imports and 
exports? How do you respond to the assessment of the Food Supply 
Working Group that 1) foreign markets for US food products will likely 
have a relatively low risk of Y2K disruptions and 2) if there are 
import disruptions, will domestic capacity be able to fill the void to 
some extent?
    Answer. We have concerns in three areas: the importation of 
commodities into the United States and our ability to effectively 
complete exports from the United States; the ability for U.S. companies 
to receive payment for their exports; and the inability of some foreign 
governments to manage their export and import process. We are 
particularly concerned about countries that the Gartner Group ranks as 
Severity Categories three and four.
    U.S. exports are probably of lesser concern because North America 
is further along in its preparation for Y2K than most other 
geographies. If there are problems, they may occur where our products 
are imported, and where we have no direct control.
    We import food products--like coffee, cocoa and orange juice--where 
demand in the United States exceeds production. Import disruptions, 
therefore, may cause a disruption in product availability and have an 
impact on prices.
    Question 3. Where do you see the greatest vulnerability of the food 
industry to Y2K problems and why?
    Answer. Our position has not changed since we provided testimony to 
the Senate Special Committee on the Year 2000 on February 5. Cargill's 
overall efforts focus on avoiding disruptions in the supply chain--most 
of which is external and out of Cargill's, or any company's, direct 
control. Our concerns fall into four areas: utilities, transportation, 
telecommunications and financial. If these areas do not function, 
business can not function. However, our sense is that these industries 
continue to make good progress and, in general, are expecting to be Y2K 
ready.
    Question 4. As a leading processor of beef, pork, and poultry, as 
well as a company with an excellent Y2K program, are you aware of any 
examples of systems used to ensure the safety of meats that could be 
affected by the Y2K problem, and what has or can be done in these 
areas?
    Answer. Refrigeration outages could have an adverse effect on raw 
meat. These outages could happen mainly at fixed facilities (production 
and distribution), but could also occur in transportation vehicles if 
fuel for running refrigeration units becomes unavailable. We found that 
some refrigeration units required upgrading so they will work properly 
after the Year 20000.
    These units have been upgraded per the manufacturers' requirements 
to assure that they are Y2K complaint.
    Question 5. Please describe the potential impact of the embedded 
chip problem on food plant processes. Has your company found the 
problem to be better or worse than initially anticipated in this area?
    Answer. We have found and fixed problems that might have affected 
the safety, environmental or production areas of our own food plants. 
However, any problems that remain undiscovered in our plants, or 
elsewhere in the food industry, would have two potential consequences. 
One consequence could be that systems shut down or simply do not 
respond. If that happened, normal control interlocks would ensure that 
plant processes were held in a steady ``safe'' state, or shut down in 
an orderly, controlled manner. A second consequence could be that the 
affected system would not behave according to the expectations of 
operators or engineers. Abnormal readings or confusing alarms might 
trigger incorrect operator actions that could compromise safety, the 
environment or production.
    The problems were not as widespread or significant as we initially 
thought. We have identified 3,010 control and lab computer products in 
use at one or more of our plants. Only 21 products--less than one 
percent--contained problems that would have affected the performance of 
the system or shut it down.
    Question 6. The Food Supply Working Group's initial assessment of 
the Y2K-readiness found that many large companies have yet to address 
other key issues such as contingency planning, embedded systems, etc. 
Based on what you have done at Cargill and its plants as well as other 
companies you work with to what extent, in your opinion, have companies 
been addressing these other Y2K exposure areas? What are some examples 
of problems that Cargill has found with embedded chips? Are you sharing 
information on these issues with other industry companies?
    Answer. Through meetings and interviews with other large food 
companies, we have discovered that most have followed Year 2000 
procedures similar to Cargill's, and they expect their work to be 
completed by June 1999. Like Cargill, most companies have waited until 
early 1999 to formulate contingency plans.
    Embedded chip systems are assessed like any traditional PC computer 
system. Some examples of problems we found include: alarm error 
messages out of sequence, refrigeration units that may go out of 
tolerance and electrical control panels that would shutdown.
    Yes, we are publicly sharing the lessons we have learned. Phil 
Hannay, Cargill's Worldwide Y2K Plant Coordinator, has presented 
speeches and papers at three national Y2K forums, and has had several 
articles published.
    Question 7. Most of your raw materials for your products are 
obtained from farm and livestock producers who are both your suppliers 
and customers. How confident is Cargill that these businesses on which 
it depends that are not yet Y2K compliant will be ready in time, and 
what are some areas of concern?
    Answer. We are highly confident that farmers and livestock 
producers will be able to deliver their products to us. The start of 
the new millennium is positive timing for avoiding problems in the raw 
material supply chain in the United States: 1999's grain crops will 
have been harvested and most crops will not be planted until Spring. 
With regard to other key raw material--livestock--Cargill runs a large 
cattle feeding operation which will be Y2K ready. Feed for the cattle 
may be of concern as we rely on transportation from elevators to 
processing plants.
    Our understanding of the use of computers on farms is that a 
majority of farmers use personal computers and less than half use the 
Internet. Use is primarily for planning and accounting, rather than 
controlling the operation of the farm or for livestock production. Some 
farmers have moved to precision agriculture which is very dependent on 
computers and embedded chips. In either case, we do not see this 
blocking or endangering next year's planting. Farmers--if necessary--
will revert to non-precision methods if problems with precision 
agriculture systems persist.
    Question 8. Most Cargill facilities do not have back-up generators, 
and you have determined that it is not cost-effective to add that 
capability. How long can an average beef, pork, or poultry plant 
survive without back-up power before you would expect to incur a 
significant loss?
    Answer. Production operations will be interrupted during any power 
outage. In rural locations, power outages of one half to two hours 
occasionally occur. Longer outages could cause significant production 
losses. Power outages which impair refrigeration would cause product 
losses in two ways:
    a. If unfrozen product was already stored in the chill coolers as 
carcasses or as chilled product, it could withstand outages of 
approximately 12 to 16 hours without significant problems, provided 
that it remained in the storage rooms at the time of the outage. If 
outside temperatures are at or below 32 F, our window of maintaining 
product quality would be increased.
    Two days of significant thawing on frozen products could have an 
adverse effect on quality.
    We are considering back-up electrical and heat sources to prevent 
potential damage to plants and to protect product and raw materials 
stored in our facilities. Our worst case scenario for plant protection 
systems is one week without power.
    Question 9. In the United States, 65 percent of your key plants and 
70 percent of your business systems have been updated, tested, 
installed, and running. Could you please describe any unanticipated 
challenges and any lessons learned from completing this process? What 
is your timeline for completing the remaining key plants and business 
systems?
    Answer. We have continued to make progress in preparing our plants 
and business systems for the Year 2000. We are pleased to convey our 
current status as of April 30, 1999:
          97 percent of our plants worldwide are complete
          91 percent of our business systems are complete
    The challenge we did not anticipate was the difficulty in obtaining 
Y2K information on embedded systems. This information was not readily 
available until mid-1998 (as compared with information on business 
systems which was generally available much earlier). We also did not 
expect to make as many changes and patches as we had to on operating 
systems software after the vendor declared them complaint. Finally, it 
was difficult or very slow to obtain information about the status of 
suppliers and vendors. Ultimately it was the SEC's ruling and Year 2000 
legislation that helped speed these processes along. At this point, we 
believe we have the information we need to assess our products and 
implement our fixes.
    Cargill anticipates that most business systems and key plants will 
be ready by June 30.
    Question 10. Please give your assessment of the overall readiness 
of the food industry to meet its obligation to the public in the Year 
2000.
    Answer. We concur with the Senate finding that, in general, the US 
food industry will be ready for Y2K. We anticipate only isolated 
problems that will be relatively minor in scope and nature.
    Question 11. As you know there is concern about the possibility of 
food stockpiling and hoarding by consumers; however, many businesses as 
part of their contingency and business continuity planning are also 
considering stockpiling. Are there special activities your corporation 
is taking to address these concerns? If so, what are the general 
milestones for them?
    Answer. We dedicated an editorial and a feature in the enclosed 
copy of WorldFood magazine to the subject of hoarding. Part of the 
contingency planning process to be completed in June 1999 includes 
discussions with key customers. Ty Thayer is a member of the Minnesota 
``Superboard on Y2K Preparedness''. The Board seeks to identify 
potential problems in Minnesota businesses and organizations that could 
impact the success of Y2K, and helps to solve them.
    additional beef and pork supplies on hand during the last months of 
1999 and early months of 2000?
    comprise 38 percent of the retail market. They feel confident that 
the major beef packers will be Y2K compliant; they also feel their own 
company systems will be compliant. Most do not appear concerned about 
deviation in consumer meat buying at the end of the year. However, a 
few of Excel's (a subsidiary of Cargill) ``case-ready'' customers have 
voiced some concern.
    The perishable nature of our raw material and products do not 
easily allow for stockpiling.
                                 
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