[Senate Hearing 107-714]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 107-714
 
          THE NEW FEDERAL FARM BILL: FEED GRAINS AND OIL SEEDS
=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION


                               __________

                             JULY 12, 2001

                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry


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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                       TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont            RICHARD G. LUGAR, Indiana
KENT CONRAD, North Dakota            JESSE HELMS, North Carolina
THOMAS A. DASCHLE, South Dakota      THAD COCHRAN, Mississippi
MAX BAUCUS, Montana                  MITCH McCONNELL, Kentucky
BLANCHE L. LINCOLN, Arkansas         PAT ROBERTS, Kansas
ZELL MILLER, Georgia                 PETER G. FITZGERALD, Illinois
DEBBIE A. STABENOW, Michigan         CRAIG THOMAS, Wyoming
BEN NELSON, Nebraska                 WAYNE ALLARD, Colorado
MARK DAYTON, Minnesota               TIM HUTCHINSON, Arkansas
PAUL DAVID WELLSTONE, Minnesota      MICHEAL D. CRAPO, Idaho

              Mark Halverson, Staff Director/Chief Counsel

            David L. Johnson, Chief Counsel for the Minority

                      Robert E. Sturm, Chief Clerk

              Keith Luse, Staff Director for the Minority

                                  (ii)







 
                            C O N T E N T S

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                                                                   Page

Hearing(s):

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

                              ----------                              

                        Thursday, July 12, 2001
                    STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee 
  on Agriculture, Nutrition, and Forestry........................    01
                              ----------                              

                               WITNESSES

Anderson, Tony, President, American Soybean Association, Mount 
  Sterling, Ohio.................................................    09
Evans, Trudi, President, Barley Growers Association, Merrill, 
  Oregon.........................................................    14
Dittrich, Keith, President, American Corn Growers Association, 
  Tilden, 
  Nebraska.......................................................    06
Klein, Lee, President, National Corn Growers Association, Battle 
  Creek, 
  Nebraska.......................................................    03
Kubecka, Bill, Vice President for Legislation, Sorghum Growers 
  Association, Palacios, Texas...................................    16
Miller, John, President, Miller Milling, Minneapolis, Minnesota..    12
                              ----------                              

                                APPENDIX

Prepared Statements:
    Anderson, Tony...............................................    87
    Evans, Trudi.................................................   110
    Dittrich, Keith..............................................    75
    Klein, Lee...................................................    46
    Kubecka, Bill................................................   115
    Miller, John.................................................    95
Document(s) Submitted for the Record:
    American Corn Growers Association: The Family Farm 
      Agriculture 
      Recovery & Maintenance Act.................................   148
    dtp associates, llp, to The National Corn Growers 
      Association; Re: Counter-Cyclical Safety Net Programs and 
      WTO Obligations............................................   138
    World Perspectives, Inc., on behalf of member clients in: 
      Coalition for a Competitive Food and Agricultural System; 
      Re: Farm Policies to Preserve a Competitive U.S. 
      Agriculture................................................   161

                              ----------                              


    HEARING ON THE NEW FEDERAL FARM BILL: FEED GRAINS AND OIL SEEDS

                              ----------                              


                        THURSDAY, JULY 12, 2001

                                       U.S. Senate,
         Committee on Agriculture, Nutrition, and Forestry,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:40 a.m., in 
room RS-328A, Russell Senate Office Building, Hon. Tom Harkin, 
[Chairman of the Committee], presiding.
    Present or submitting a statement: Senators Harkin, 
Stabenow, Nelson, Wellstone, Lugar, and Roberts.

    STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA, 
              CHAIRMAN, COMMITTEE ON AGRICULTURE, 
                    NUTRITION, AND FORESTRY

    The Chairman. The committee will now resume its seating for 
the continuation of hearings on the new Federal Farm bill, and 
I would ask the following people to take the witness table: Lee 
Klein, president of the National Corn Growers Association; 
Keith Dittrich, president of the American Corn Growers 
Association; Tony Anderson, president of the American Soybean 
Association; John Miller, president of Miller Milling; Trudi 
Evans, president of the Barley Growers Association; Bill 
Kubecka, vice president for legislation of the Sorghum Growers 
Association. We will get you all up here at the witness table.
    Today, the committee continues to consider in detail what 
changes should be made to the various titles of the Farm bill. 
Again, just speaking for myself, my aim and I hope others' is 
to develop policies that will help farmers get more of the 
consumer dollar than they are getting right now, which is at an 
historic low. While, obviously, fixing the commodity programs 
is crucial to many farmers' future prospects, other titles of 
the Farm bill are also important, as well as the wellbeing of 
farmers who raise livestock or grow crops other than those 
currently eligible for direct payments.
    The Farm bill also impacts the lives of many others not 
directly engaged in production agriculture through the 
nutrition programs, conservation of natural resources, 
provisions which encourage rural development. The views of 
representatives of those groups will also be solicited as we 
move through the hearing schedule. As I indicated in my 
statement in the previous hearing, I am determined that we will 
pay attention to all titles of the Farm bill as we work through 
the Farm bill process.
    As is the case for most crops grown in this country, prices 
for corn and soybeans and other feed grains and oil seeds have 
fallen far from their mid-1990's peaks and have stagnated at 
relatively low levels for the past 3-1/2 years. Today, we will 
hear from witnesses who represent the interests of the 
producers and processors of feed grains and oil seeds. Their 
output accounts for about a third of the nation's gross 
receipts for crop production and a similar share of U.S. ag 
exports.
    Of course, I am always proud to note that farmers in my 
home state of Iowa remain among the nation's leaders in both 
corn and soybean production. Although this hearing clearly has 
a commodity focus, I have invited witnesses to address all 
other issues of concern, whether or not a given issue falls 
within the purview of the commodity title. Clearly, supply 
continues to outstrip demand, both within the United States and 
globally. Until something happens that alters one or both of 
those components, prices will continue to remain low.
    Beyond the programs that would be contained in the 
commodity or conservation titles, however, it is crucial that 
we devote more of our attention to looking at ways to generate 
greater utilization of our crops domestically. For example, the 
single fastest growing use of corn in this country is the 
production of ethanol. I believe that we are only beginning to 
tap the potential for using grains and oil seeds for energy 
production. To the extent that we encourage such activities, we 
would also create opportunities for farmers to capture 
additional income, and I believe that such an initiative is so 
important that it deserves its own title in the Farm bill.
    Typically, we export about a fifth of our feed grains and 
about 40 percent of our soybeans, either as raw or as product. 
An increasing portion of our feed grains and oil seeds are also 
being exported indirectly because of growth of our exports of 
meat and livestock products. We will also need to look at how 
well our current set of agricultural trade programs are 
performing and also consider what else might be done in this 
area.
    I am determined to include in the Farm bill provisions 
establishing a permanent authority and funding for an 
international food for education program, a bill that has been 
introduced with Senator Leahy and Senator Lugar, myself and 
others in late May. I am convinced that such a program would be 
a winner, both for American farmers and for children and their 
families in developing countries. I look forward to the 
testimony from the witnesses as they address these issues and 
doubtless many other issues as we move through the progress of 
developing the Farm bill.
    With that, I would turn to Senator Lugar for any opening 
statement.
    Senator Lugar. Thank you very much, Mr. Chairman. I would 
affirm your statement. We look forward to ideas from the panel 
today, and from a pre-reading of your testimony, there are a 
number that are very important. It is a timely hearing, and I 
look forward to hearing the witnesses.
    The Chairman. Thank you very much, Senator Lugar. Now, we 
will turn--I have my lineup here--to Mr. Klein.


   STATEMENT OF LEE KLEIN, PRESIDENT, NATIONAL CORN GROWERS 
              ASSOCIATION, BATTLE CREEK, NEBRASKA;

        ACCOMPANIED BY RON LITTERER, GREENE, IOWA
    Mr. Klein. Good morning.
    The Chairman. Mr. Lee Klein; good to see you again. I was 
just with you down in Texas not too long ago.
    Mr. Klein. That is correct.
    The Chairman. Good to see you again, and welcome to the 
committee. All of your statements will be made a part of the 
record in their entirety. I would like to ask if you could each 
summarize your statements in seven minutes or something like 
that. Just give us a kind of wrapup, and then, we will come 
back, and I am sure you can expound on your summaries during 
the question period. I would appreciate that.
    Mr. Klein, welcome.
    Mr. Klein. Thank you, Mr. Chairman, for the opportunity 
totestify here today about the farm economy and the future of 
farm policy. My name is Lee Klein, and I serve as president of 
the National Corn Growers Association, representing more than 
31,000 direct members and the 300,000 corn farmers throughout 
the Nation who make checkoff payments each year. I am joined 
today by Ron Litterer of Greene, Iowa. Mr. Litterer serves as 
vice-chair of our Public Policy Action Team, which is our 
internal working committee working on farm programs.
    Ron is also past-president of the Iowa Corn Growers 
Association. He raises corn and soybeans along with a hog 
finishing operation. I farm near Battle Creek in northeast 
Nebraska. My wife and I raise corn, seed corn, soybeans, rye, 
alfalfa and hay and have a cow-calf operation. We are proud to 
represent two different corn-growing states yet speak with one 
voice.
    What does NCGA want from the next Farm bill? Simply, our 
growers want a farm program that ensures America's farmers are 
globally competitive; market-responsive; and environmentally 
responsible. This program must provide producers with access to 
world markets, access to capital, access to advances in 
technology and risk management in a sustainable and an 
environmentally sound manner. It is our goal to develop new 
uses for corn; to develop and build a renewable products 
industry with corn as the chief feed stock; to increase 
utilization of corn and to increase the opportunity for grower 
profits.
    We need a complete package that provides farmers with 
opportunities in the marketplace with minimal interference in 
production decisions that includes a safety net against those 
economic forces that are beyond producers' control. We believe 
that we have developed a program that will do just that. In 
hindsight, the 1996 FAIR Act provided farmers with many of the 
tools we are looking for, but it was short-sighted in its 
ability to provide a safety net that would be sufficient in 
times of sustained low farm income. It does not include a 
provision to allow producers to weather, for example, the Asian 
flu that seemed to infect many of our international customers.
    After three years of low prices and needed bailouts by the 
U.S. Congress totaling over $19 billion, we now know that an 
additional component is vitally needed. Improving that safety 
net for future farm policy while maintaining the best of 
freedom to farm is at the core of our presentation today. After 
weighing all of the needs and concerns of growers outlined in 
our full testimony, NCGA has surfaced as committed to a 
comprehensive, countercyclical income support proposal. This 
proposal, known as the National Agriculture Security Act, or 
NASA, addresses the inequities in the current Marketing 
Assistance Loan Program; puts U.S. agricultural supports in the 
more favorable green box and is fiscally responsible.
    The countercyclical program that we have developed replaces 
the current Marketing Assistance Loan Program. We have worked 
with economists to flesh out the total impact of this type of 
program on the corn industry as well as other commodities and 
are very confident and pleased with the results. Our proposal 
establishes an annual target income for corn and other loan-
eligible commodities. The target income, which is outlined on 
page 12 of our full testimony, is based on the average crop 
value during the base period and incorporates producer benefits 
from the Marketing Loan Program and the market loss assistance 
payments over that same timeframe.
    This base period average income is adjusted for each year 
of the Farm bill by a factor that reflects projected production 
increases. This adjustment is necessary to ensure that 
producers have adequate income production as crop yields 
increase. In addition to a countercyclical program, our NASA 
program proposal assumes a continuation of production 
flexibility contract or PFC payments at the 2002 level for the 
life of the new Farm bill. Consequently, the PFC payments are 
not included in target income.
    The growers' portion of the countercyclical payment would 
be then based on eligible units from a 5-year average of 
acreage and yields production. This would allow growers to 
update bases and yields for the countercyclical program to a 
more recent practice-reflective yield in planning levels. Each 
year, crop income will be calculated using USDA production 
estimates and the average price during the first three months 
of each commodity marketing year. For corn and other 
commodities with a marketing year that begins September 1, the 
3-month price will be the preliminary estimate as determined by 
the National Agricultural Statistics Service.
    A 3-month price allows payments to be calculated and made 
when they are most needed by farmers. We would anticipate that 
this would allow farmers to have the option of receiving these 
payments either prior to or after December 31 of each year for 
optimal tax management. Whenever the national crop income is 
less than the target income, producers will receive a payment 
based on their eligible bushels. We think a farm program with 
this structure has many benefits. It eliminates the 30-year 
problem of inequity within loan rates. It is non-production 
distorting. It is non-trade distorting, and it provides 
payments when needed to those who need it and pulls valuable 
and needed funds from the amber box into the exempt category.
    Chart B on our page 15 demonstrates how our proposal would 
fare compare to CBO-like baseline. As the chart demonstrates, 
this program would provide $31 billion more in assistance over 
that 7-year period than current CBO-like baseline estimates, an 
average of $5.2 billion more per year without the necessity of 
ad hoc disaster assistance. We clearly demonstrate a need for 
an increase in the agricultural budget baseline. This need is 
justified. When you look at this program, may be a better use 
of taxpayer dollars in the long run.
    We believe that our countercyclical program proposal is a 
safety net that eluded us in the 1996 bill. We asked the 
agricultural economics consulting firm Agrilogic to run this 
countercyclical program on a both CBO-like baseline and their 
own baseline, which allows for more volatility and fluctuation 
in the market and in production. This has allowed us to analyze 
this proposal under alternative conditions and to test the 
sensitivity of our proposal to ensure that we have developed a 
farm policy proposal that is responsive to the changing 
conditions in weather, production, macroeconomic policy and 
foreign trade policies.
    We ran many scenarios under both CBO-like and Agrilogic 
baseline. Under all the options run, the economic models 
demonstrate that this program will provide assistance when 
needed without further Congressional action.
    While the countercyclical proposal will assure grower 
income in times of low prices in amounts comparable to current 
marketing loan benefits, it will not address our goal of a 
policy that provides access to capital, which is why we propose 
recourse loans as part of this program. Recourse loans will 
provide producers with access to capital but should not 
encourage production. Since a producer will be required to 
repay the loan plus interest at the end of the 9-month loan 
program, we view this as only assisting with access to capital 
for short-term cash-flow.
    Our NASA program strengthens the farm safety net by 
providing a more predictable level of income. This program has 
two roles. It serves as a safety net with crop insurance that 
facilitates the ability of farmers to effectively manage their 
individual annual production risk in the private sector, and it 
provides a safety net to the equity base of U.S. farm 
production in a cost-effective, private-public partnership that 
maintains the soundness of the agricultural production system 
for the benefit of U.S. consumers and the national economy.
    In conclusion, we believe that we have identified very real 
problems with today's farm policy and proposed a policy that we 
believe addresses them. We also contend that this policy 
proposal is both less production and trade distorting than 
current policy and offers this country's farmers a real safety 
net when it is needed most. In conclusion, we must all 
recognize, and I hope you agree, that there is a significant 
and important public benefit in the food security, 
wholesomeness and integrity of production resulting from the 
tremendously efficient food and fiber production machine of 
America's production agriculture sector.
    Of equal value and importance to our nation is the economic 
viability and activity of rural communities and the work ethic, 
integrity and commitment to community fostered in the domestic 
food production sector of our economy. In a global market, an 
economy distorted at its best by world political pressures and 
non-production-related economic factors such as exchange rates, 
there is a significant public interest and need to protect the 
viability of agricultural producers in a manner that is market-
oriented, WTO-compliant and environmentally responsible and 
responsive to the vast geographical and economical differences 
faced by our rural farm families and corn grower members.
    Thank you for the opportunity to share the National Corn 
Growers' vision in this important effort.
    [The prepared statement of Mr. Klein can be found in the 
appendix on page 46.]
    The Chairman. OK. Thank you very much, Lee, for a great 
summation of a very long and complex written statement. I can 
just say to you and say to the other ones, too, that we are 
going to be in further consultation and in conversation with 
you as we go along in this Farm bill.
    Mr. Dittrich, American Corn Growers Association, welcome.

 STATEMENT OF KEITH DITTRICH, PRESIDENT, AMERICAN CORN GROWERS 
                 ASSOCIATION, TILDEN, NEBRASKA

    Mr. Dittrich. Thank you, Chairman Harkin and Senator Lugar 
and other members of the committee. I am Keith Dittrich. I am 
president of the American Corn Growers Association. Seated with 
me behind me today is Larry Mitchell, our Washington-based 
chief executive officer, and David Center, our director of 
Congressional affairs.
    I would like to say that this day has been a long time 
coming for the American Corn Growers Association. As you may 
know, we were denied testimony in the House even though our 
proposal that we did submit we believed was the most broad-
based comprehensive proposal that was submitted. Again, I thank 
you for our time today and do appreciate it.
    We represent producers from 50 to 15,000 acres in size, and 
they all have one thing in common: they need a fair price for 
what they produce. The American Corn Growers Association is a 
relatively new and rapidly growing organization for a reason. 
We have new ideas that make bridges with other organizations 
and varied interests.
    I would like to say also to Mr. Klein, that although I, as 
a producer, have paid checkoff fees on over 2 million bushels 
of grain in the last 10 years in my farm operation, 
respectfully, he does not represent my interests in farm 
policy.
    Going on to our proposal, I would like to say that our 
proposal is much different than other farm policy and different 
than current farm policy, and there are many inequities in the 
current farm policy structure with the AMTA payments going to 
producers with antiquated crop bases and varied production 
programs which have made this program very difficult and unfair 
in many ways. We look forward to working with the committee on 
improving the system and trying to rectify some of these 
problems.
    I would first like to say that in September 1999, we 
developed a chart called Key Indicators of the U.S. Farm 
Sector, a 25-year history with inflation adjustments. The 
specifics of our bill were then based on this research in the 
key indicators table that is attached to my testimony. I would 
like to touch very briefly on several of the key points that 
the key indicators covered. No. 1 is that real inflation-
adjusted CCC price support loan rates have dropped dramatically 
over the past 25 years, and real farm prices have dropped in a 
similar matter. Second, on average, export volume of all major 
commodities has been virtually static over the last 25 years. 
Regardless of farm price, support policy, trade agreements or 
currency valuations, they have remained static. That is the 
reality.
    Another point is that on the other hand, our domestic use 
of commodities has increased steadily over the last 25 years 
very substantially, and No. 5 is that total use of commodities 
is now at all-time record highs and did not decline during the 
Asian economic crisis, as has been mentioned today.
    In spite of this, farm prices have collapsed, and on a 
historical basis, ending stocks to use ratios or surpluses are 
now tight to modest and have not been high during the five 
years of the Freedom to Farm Act as we have all talked about. 
In spite of increasing yields and government payments, real 
gross income per acre for basic commodities has dropped 40 to 
50 percent over the past 25 years. Finally, with emergency AMTA 
payments included, farmers have received a national average 
equivalent price of over $2.60 a bushel for corn and over $4 a 
bushel for wheat for the past five years.
    I would like to say that these observations are simply the 
facts. This is what we concluded after compiling this data of 
25 years of history. If this has happened, where do we go from 
here in farm policy? I would just like to touch on a few points 
of our Family Farm Act to mention what we are interested in.
    I would say that the overall goal of our bill is to give 
farmers tools to extract profitable farm prices from the 
marketplace with much less reliance on government payments. If 
we do not give farmers tools to increase prices, we will run 
far short of the money required to just maintain current income 
levels, which are still inadequate, given the current budget 
restraints.
    The first part of our legislative bill will contain a 
section called the findings of Congress, which is included in 
our testimony. The intent of this section is to define by law 
why a decentralized, competitive family farm structure of food 
production is desirable to society and also to define why the 
business of farming is unique and why long-term legislation is 
required to allow family farm agriculture to prosper.
    We believe that this family farm structure is desirable to 
society as a whole and also as a national security issue. I 
would like to touch on a few reasons why we believe it is 
unique. First, that farmers have virtually no ability to 
negotiate price with buyers. That is because millions of 
farmers sell to a handful of buyers, which is the reverse of 
most business structures in this country. Second, farmers as 
individuals have no control over their output or inventories 
due to weather, long production cycles and all of the vagaries 
of agricultural production. Third and very importantly is that 
consumers must have a stable supply of food, because it is a 
daily necessity, and food shortages are intolerable. Think of 
the chaos that the California energy crisis and rolling outages 
has caused, and think of that if food was involved.
    I would like to touch on the outline of our bill quickly. 
Concerning price and income support, we propose a new, unique 
CCC market participation loan which would provide the primary 
price and income support to crop producers only. We believe 
that the definition of countercyclical is the loan rate. The 
loan structure is fair and simple and an easily targeted way to 
support family farmers.
    We base our loan rates on an agricultural equity formula, 
which would be established. To set loan rates, we would adjust 
the loan rates annually to reflect inflation and tread line 
increases in yield. Initial loan rates, therefore, would be 
about $3.15 a bushel for corn. When considering this level, 
keep in mind that with current AMTA payments, supplemental AMTA 
payments and loan deficiency payments and market loss gains, we 
have been averaging the equivalent of about $2.60 a bushel for 
corn right now, and we are still facing an economic crisis in 
farm country. This is also very close to USDA's average cost of 
production figures for corn.
    Other crop loan rates would be set at historical price 
ratios. I would like to mention also that this Farm bill 
proposal is very comprehensive. We are not just focusing on 
corn; we are looking at all of the other aspects in agriculture 
and trying to pull those interests together.
    We also support a farmer-owned reserve. This farmer-owned 
reserve could also be working hand-in-hand with the strategic 
energy reserve to protect the interests of the ethanol and fuel 
industry and make sure that we do not ever run out of 
commodities for that. We would support discretionary 
Secretarial authority for short-term acreage idling. We say 
that Generals all use supply management: GE, General Dynamics, 
General Foods and General Motors all use some sort of supply 
management. Although our proposal is primarily a free stocks 
management program, we believe that free stocks can be managed 
in a wide range and still maintain market price if the right 
tools are available. We would maintain planning flexibility, 
and a target price and deficiency payment program would be 
studied for livestock also as detailed in this proposal.
    Concerning market concentration, we would establish a 
maximum level of market concentration for any food-related or 
processing company. We suggest that one company hold no more 
than 15 percent of any related market. Finally, on 
international trade, we believe that trade agreements should 
recognize the uniqueness of agriculture around the world and 
should instead focus on a shared system of international food 
reserves for food security and humanitarian relief and shared 
production costs by exporting nations when world grain stocks 
become burdensome and finally the recognition and limiting of 
world market distortions caused by anticompetitive commodity 
trading and food processing companies.
    In conclusion, considering cost, we believe that our 
proposals can be enacted and administered with reasonable 
government outlays. The Agricultural Policy Analysis Center at 
the University of Tennessee has provided preliminary numbers to 
us. These simulations indicate that we can maintain farm prices 
in ranges that result in modest Government costs using our farm 
bill proposal. Concerning trade rules compliance, Secretary 
Veneman and USDA have classified 1998 supplemental AMTA 
payments as amber box for WTO compliance purposes. This means 
that virtually any action taken by the U.S. to protect its 
farmers could be in violation of current WTO rules. Can we 
realistically protect our national interest under such rigid 
and unrealistic rules?
    Finally, we hope that the Agriculture Committee recognizes 
that based on the facts, current farm policy is not working, 
though many well-meaning members were assured that it would. We 
believe that it is unreasonable to expect different results in 
the future if we do not change direction, and we believe that 
it is unrealistic to expect good farm policy advice from those 
who misadvised Congress so badly in current farm policy. We 
wish to work with this esteemed committee to complete a farm 
bill that fulfills the needs of this great nation, and I wish 
again to thank the committee for this opportunity and would 
answer any questions that you may have.
    [The prepared statement of Mr. Dittrich can be found in the 
appendix on page 75.]
    The Chairman. Mr. Dittrich, thank you very much again for a 
very good summation of a long written statement, and as I said 
to the other witness, we will be, I am sure, following up with 
our questions. As we proceed in the Farm bill, we will look for 
your further input and advice and suggestions as we move ahead.
    Mr. Dittrich. Thank you.
    The Chairman. Next, we turn to Mr. Anderson, Tony Anderson, 
president of the American Soybean Association. Welcome.

    STATEMENT OF TONY ANDERSON, PRESIDENT, AMERICAN SOYBEAN 
               ASSOCIATION, MOUNT STERLING, OHIO

    Mr. Anderson. Thank you. Good morning, Mr. Chairman and 
members of the committee. I am Tony Anderson, a soybean and 
corn farmer from Mount Sterling, Ohio. I serve as president of 
the American Soybean Association, representing 28,000 producer 
members on issues of national importance to all U.S. soybean 
farmers. In additional to the American Soybean Association 
today, I am appearing on behalf of the National Sunflower 
Association and the U.S. Canola Association.
    I would like to commend you, Mr. Chairman, for holding this 
hearing today on policy priorities for the next Farm bill. Oil 
seed producer organizations look forward to working closely 
with the committee to develop legislation that maximizes the 
competitiveness and future opportunities for U.S. agriculture. 
As committee members are aware, the fiscal year 2002 budget 
resolution provides an additional $73.5 billion over the next 
10 years for development of omnibus agriculture legislation. 
However, $66.15 billion of this amount represents a reserve 
fund that could be reduced if projected budget surpluses are 
depleted by a downturn in the economic conditions or spending 
in other programs.
    With estimates of that anticipated budget surplus already 
declining, it is important that Congress enact a new farm bill 
without delay. Before describing our specific recommendations, 
I would like to briefly outline the basic policy objectives 
that oil seed producers have established for the next Farm 
bill.
    The authors of the FAIR Act did not expect U.S. 
agricultural economy transition from government dependence to 
market orientation solely as a result of changes in domestic 
farm policy. They made clear that the overall economic and 
trade environment of U.S. agriculture needed to be changed to 
reduce production costs and enhance the competitiveness of U.S. 
farm exports. Those required changes included agricultural 
trade being given the same weight in U.S. economic and foreign 
policy decisions as accorded by our primary international 
competitors and customers; export assistance and promotion 
programs authorized by the WTO must be fully and aggressively 
utilized as our competitors do.
    Ineffective, unilateral economic sanctions that discredit 
our reliability as a supplier and encourage competitors to 
expand production and exports must be rescinded and prohibited. 
Funding for the U.S. humanitarian assistance programs must be 
increased and maintained at a level that reflects our 
responsibility to enhance societal, economic, political 
stability in developing countries. An effective case must be 
made for modernizing the U.S. transportation infrastructure, 
including the lock and dam systems on the Mississippi and 
Illinois Rivers. Barriers to U.S. farm exports based on non-
scientific standards, including restrictions on biotechnology 
trade, must be challenged and overcome. Funding for 
agricultural research must be restored and increased. 
Unnecessarily onerous regulations that increase agricultural 
production costs must either be compensated or eliminated.
    Unfortunately, few of these needed changes in economic 
environment for production agriculture have been addressed, 
much less achieved, in the last five years. Unless these key 
issues are resolved, it will be difficult if not impossible to 
move farm policy beyond the role of a safety net for producers 
facing disadvantageous conditions, both at home and abroad. Oil 
seed organizations also support the following objectives in the 
next Farm bill: domestic farm programs should be equitable and 
balanced among program crops, defined as all loan-eligible 
crops that can be planted on the same crop land on a farm. No 
program should favor production of one crop over another.
    The primary objective of the next Farm bill is to provide 
adequate long-term price and income support for producers of 
program crops and other crops that have traditionally received 
multi-year support under Federal farm programs. To the extent 
additional funding is available, other priorities that are 
appropriate for omnibus farm legislation should be addressed. 
Additional priorities include providing voluntary incentive 
payments to encourage improved conservation practices. ASA 
helped develop and strongly supports the Conservation Security 
Act as a means to raise conservation standards. However, 
incentives provided under the CSA should not come at the 
expense of price and income supports.
    Other priorities also include increased funding of export 
promotion and assistance programs and of foreign food 
assistance. Food aid should be based on a minimal annual 
tonnage commitment, which should not be subject to variations 
in production and availability of surpluses. Programs 
established under the omnibus farm legislation provide 
multiyear support to crops that are either produced on the same 
acreage or that have traditionally received support. These 
crops are also required to comply with conservation measures, 
including sodbuster and swampbuster requirements. Crops that do 
not meet these criteria should not be included in the next Farm 
bill. Any assistance required by producers of these crops due 
to economic or crop losses should continue to be addressed in 
annual disaster legislation.
    With regard to domestic farm programs, oil seed 
organizations support maintaining key elements of the FAIR Act 
in the next Farm bill. These include full and unrestricted 
planning flexibility; continuation of non-recourse marketing 
loans; no statutory authority to impose setasides and no 
authority to establish Government or farmer-owned reserves for 
oil seeds. In addition, oil seed producer organizations oppose 
any limitations on marketing loan benefits, fixed-income 
payments or any kind of countercyclical income payments.
    I would now like to briefly summarize recommendations on 
the various components of a domestic farm program for major 
commodities. Oil seed producer organizations support 
maintaining current oil seed loan rates for the 2002 crops and 
setting these rates as floors rather than ceilings under the 
next Farm bill. The formula for adjusting loan levels to 85 
percent of Olympic average prices in the previous five years 
should be retained, and the discretion should be provided to 
the Secretary to set loan levels above the floor when prices 
warrant.
    Our written statement provides a number of compelling 
reasons why the current national soybean loan rate of $5.26 a 
bushel has not been responsible for most of the expansion in 
the U.S. soybean acreage since enactment of the FAIR Act. With 
regard to loan repayment rates, our organization supports 
requiring oil seeds to be repaid at the lower of a posted 
county price or an adjusted world price. The adjusted world 
price would be set on a weekly basis in reference to index of 
prices of oil seeds delivered at major foreign markets, 
including freight costs.
    Using an adjusted world price would ensure that U.S. oil 
seeds and oil seed products are competitive in both foreign and 
domestic markets under the next Farm bill. Oil seeds are not 
included in the formula for determining payments under the 
production flexibility contracts. Oil seeds were grown on 31 
percent of row crop acreage last year, and the percentage is 
likely to rise when the final crop is know for 2001. Our 
organizations strongly support expanding the PFC program to 
include oil seeds.
    Oil seed producer organizations support replacing ad hoc 
economic loss assistance payments, which have included an oil 
seed payment, with a countercyclical income support program. We 
propose a program that would offset any shortfall in national 
gross return per acre for a crop in the current year from an 
Olympic average national gross return per acre for the crop 
years during 1993 to 1997. The concept of compensating 
producers for low income based on acres complements the 
Marketing Loan Program under which benefits are tied to actual 
production. It also addresses a perennial shortcoming in the 
Federal crop insurance program. Every year, many producers 
experience losses due to below average yields but not low 
enough to qualify for compensation under crop insurance. This 
low yield gap in income support would be at least partially 
offset by providing payments based on harvested acres rather 
than actual production.
    Additionally, ASA supports increased funding of export 
assistance, market development and food aid programs that are 
critical to expanding demand and improving commodity prices. 
The Foreign Market Development Program should be authorized at 
not less than $43.25 million annually, reflecting 1986 program 
level indexed to international inflation rates over the past 15 
years. The Market Access Program should be restored to its 
previous funding level of $200 million a year.
    Regarding food aid, a commitment should be made to provide 
a minimum of 5.6 million tons of food per year under U.S. 
humanitarian assistance programs to address market access, 
regulatory and marketing issues in agricultural biotechnology. 
ASA recommends establishment of a new biotechnology and 
agricultural trade program.
    That would conclude my statements. Again, I appreciate the 
opportunity to testify today and appreciate the hearing.
    Thank you.
    [The prepared statement of Mr. Anderson can be found in the 
appendix on page 87.]
    The Chairman. Thank you very much, Mr. Anderson. Again, we 
welcome your continued involvement, suggestions and advice as 
we continue development of the Farm bill.
    Next, we turn to Mr. John Miller, president of Miller 
Milling in Minneapolis. Mr. Miller, welcome.

     STATEMENT OF JOHN MILLER, PRESIDENT, MILLER MILLING, 
                     MINNEAPOLIS, MINNESOTA

    Mr. Miller. Good morning. I am John C. Miller, president of 
Miller Milling Company. My company is headquartered in 
Minneapolis, Minnesota, with U.S. plants in Fresno, California 
and Winchester, Virginia. Today, I am representing the 
Coalition for a Competitive Food and Agricultural System, of 
which Miller Milling is a member. CCFAS is comprised of more 
than 120 companies and organizations representing a broad range 
of agricultural interests. We are committed to working for 
market-based policies designed to benefit all 21 million people 
working in the U.S. food and agriculture industries.
    First, I would like to briefly summarize the strengths and 
weaknesses of the current law. The FAIR Act gives producers 
freedom of choice and allows them to respond to market signals 
while providing income support to farmers. These are positive 
things that should be continued in any new legislation. 
However, income support payments have not been completely 
decoupled from production. The current Marketing Loan Program 
distorts farmers' planning decisions by making some crops more 
profitable than other crops due to Government payments.
    As Congress debates the next Farm bill, there are some 
fundamental policies that should not be changed. CCFAS 
recommends keeping the following features with some 
modifications: first, continue PFC payments for current 
commodities and add a direct payment for oil seeds. PFC 
payments should continue to be decoupled from actual plantings. 
Payments should be based upon existing contract acres for the 
grains and cotton and the most recent 3-year planted acres for 
oil seeds. The additional payment acreage for oil seeds should 
not reduce payment acreage for grains and cotton.
    Second, continue the Marketing Loan Program but allow loan 
rates to adjust to changes in average market prices by 
eliminating the discretion of the Secretary to freeze loan 
rates. Utilize the current formula of 85 percent of the 5-year 
average market price excluding the high and low years but limit 
the yearly adjustment up or down to no more than 10 percent. 
Third, continue flexibility provisions that allow producers to 
increase income by planting crops that receive more returns 
from the market and encourage soil conservation practices.
    We oppose the inclusion of the following features: do not 
add any supply management features in any form to current 
policy. Do not create new inventory management programs such as 
a farmer-owned reserve, energy reserves or hunger reserves, and 
do not add any new countercyclical payment program. The 
Marketing Loan Program is a countercyclical program with loan 
deficiency payments and gains on marketing loans increasing or 
decreasing as market prices change.
    In order to put these recommendations to the test, CCFAS 
commissioned a study by World Perspectives Agrilogic, 
Incorporated to look at several policy proposals now under 
consideration by Congress. The analysis compares a policy of 
all direct payments; one of direct payments combined with 
flexible loan rates; and a third policy in which direct 
payments are eliminated, and existing loan rates are subjected 
to a one-time increase of 16 percent and maintained at that 
level throughout the analytical period.
    The third policy stimulates the guaranteed rate of return 
proposed in most countercyclical programs. Overall, the 
analysis shows that a policy of all direct payments or direct 
payments combined with flexible loan rates provides farmers 
with the highest net farm income delivered in the most 
efficient manner and least distorting manner. In stark contrast 
is the high loan rate policy that results in lower average 
annual net farm income and generally lower average farm prices.
    The high loan rates are driving the planting decisions of 
farmers as much or moreso than market signals. Farmers actually 
receive more money from the market when loan rates are lower. 
CCFAS believes that a policy based on all direct payments or 
one based on a formula loan plus direct payment is the best and 
most efficient way to deliver support to farmers because it 
provides a more efficient means of enhancing farm income with 
farmers receiving more profits from the market; high loan rates 
induce excess production, depress prices and increase 
government outlays.
    It ensures that U.S. agriculture remains competitive in 
world markets. Decoupled direct payments are green box, 
ensuring compliance with our WTO obligations. In addition, we 
hope that the committee will continue to press for liberalized 
world trade, including granting trade promotion authority; 
promote environmental policies that reward sound stewardship; 
assist farmers in managing their risks; support development of 
a sensible energy policy and increase public investment in 
research and infrastructure.
    Our core belief is that market forces do a better job than 
government in rewarding efficiency; encouraging productivity; 
managing risks; allocating resources; and maximizing net farm 
income. Again, thank you for the opportunity to testify today 
and present the analysis and recommendations of the Coalition 
for a Competitive Food and Agricultural System.
    [The prepared statement of Mr. Miller can be found in the 
appendix on page 95.]
    The Chairman. Mr. Miller, thank you very much, and again, 
we will be continuing our consultation as we move ahead.
    Next, we turn to Trudi Evans, president of the Barley 
Growers Association.

      STATEMENT OF TRUDI EVANS, PRESIDENT, BARLEY GROWERS 
                  ASSOCIATION, MERRILL, OREGON

    Ms. Evans. Thank you.
    The Chairman. Ms. Evans.
    Ms. Evans. Mr. Chairman, it is a privilege to address this 
committee on the U.S. farm policy and how it affects our 
nation's barley producers. I am Trudi Evans, a farmer from 
Merrill, Oregon and president of the National Barley Growers 
Association. The National Barley Growers Association represents 
the interests of U.S. barley producers on all issues affecting 
national agricultural policies.
    Barley has become an endangered commodity in the United 
States. Barley acres and production have steadily declined from 
13 million to 5.8 million over the course of the last 15 years. 
Barley production in 1999 reached a 25-year low, and acreage 
was the lowest in 100 years. Barley is a food crop as well as a 
feed grain. Currently, about one-half of U.S. barley production 
is used for malting. Malting companies pay a premium for this 
high-quality barley. Even with the premium price, however, malt 
barley production is decreasing due to higher loan rates for 
other program crops.
    The infrastructure of the U.S. barley industry is 
threatened by the steady decline in acres. Malting barley 
demand remains constant at around 150 million bushels per year; 
yet, national barley production continues to decline. NBGA is a 
strong supporter of the increased planting flexibility provided 
by the 1996 Farm bill. However, freezing loan rates and tying 
barley's loan rate to its feed value relationship to corn have 
placed barley production at a competitive disadvantage with 
other crops.
    NBGA wants the next Farm bill to restore equity to the 
barley loan rate. Our views on three key areas of the Marketing 
Loan Program; Fixed and Decoupled Production Flexibility 
Contract or PFC-type payments; and a countercyclical income 
safety net program comprise the balance of my statement. Under 
the current Farm bill, the barley loan rate reflects only 
barley's feed value relationship to corn. Since the current 
Farm bill caps the corn loan rate at $1.89 per bushel, and 
since a bushel of barley is only 48 pounds compared to 56 
pounds for corn, the barley loan rate is effectively capped at 
$1.68. This feed value relationship understates the market 
value of malting and food barley, which averaged 53 cents a 
bushel higher than feed barley over the last 10 years. Over 
half of the annual U.S. barley production generates higher 
value, food-quality barley malt.
    The Farm bill should direct the Secretary to calculate the 
barley loan rate using 85 percent of the most recent 5-year 
Olympic average of USDA's all-barley price instead of only 
considering the value of barley's feed relationship to corn. 
Furthermore, this loan rate calculation should be no lower than 
$2.04 a bushel, derived from 85 percent of an average of a 
recent historical period of years using the all-barley season 
average price.
    If this committee undertakes a more comprehensive 
rebalancing of the loan rates of all loan-eligible crops in the 
next Farm bill, NBGA supports increasing the proposed 204 floor 
level commensurate with the rebalancing ratio used for all 
commodities. The National Barley Growers support a decoupled 
guaranteed and fixed crop payment for the life of the next Farm 
bill. Similar to the PFC payments, the crop payment should be 
extended without regard to domestic price fluctuations and 
should be decoupled from current and future production to avoid 
influencing planting decisions.
    The aggregate level of the annual PFC-type payment should 
be no less than the $5.6 billion fiscal year 1999 level. The 
next Farm bill should maintain the allocation among the seven 
so-called AMTA crops: wheat, corn, sorghum, barley, oats, 
upland cotton and rice, at the levels established in the 1996 
Farm bill. Likewise, the Agriculture Committee should restore 
the barley PFC payment for the period of the next Farm bill to 
the 27.2 cents per bushel affiliated with the 1999 Agriculture 
Marketing Transition Act or AMTA level.
    Finally, in the event Congress includes payments for loan-
eligible crops not included in the original AMTA formula, the 
barley growers support an offsetting increase in total annual 
funding. Low commodity prices have brought out the inadequacy 
of the current farm program safety net, including AMTA payments 
and the Marketing Loan Program. Producers of all commodities 
need an additional program that will provide income support 
payments when income or the per-acre return of a commodity 
sector declines. The recent emergency supplemental assistance 
programs have been extremely helpful, but they provide no long-
term protection, which causes great uncertainty among producers 
and their lenders.
    The barley growers support a countercyclical program 
proposal put forth by the National Association of Wheat 
Growers. The program would trigger commodity-specific payments 
when market prices are less than an established market support 
level for each commodity. Market support levels are derived by 
dividing a commodity's total average productions from the years 
1995 to 1999 into the commodity's gross income and total 
support during the same 5-year period.
    Based on this formula, barley's market support level would 
be $2.72 per bushel. After it is determined that a commodity is 
eligible for a market loss support payment, payments to 
eligible producers would be based on a farmer's barley acres 
and yields during a decoupled historical base period.
    The National Barley Growers Association supports further 
examination of a voluntary, incentive-based green payments 
similar to the Conservation Security Act introduced in the 
House and by the chairman of this committee in the Senate. The 
program would support farm income; benefit the public at large; 
and would be classified as green box under WTO rules. The 
barley growers support at least $1 billion in new annual 
funding for conservation incentive payments, although our 
priorities for new funding center around improvements to the 
Marketing Loan Program, decoupled program payments and funding 
for a countercyclical program.
    Finally, it is critical to farmers and the farm economy for 
Congress to provide economic and income loss assistance for the 
2001 crop of not less than the AMTA payment and supplemental 
economic loss assistance provided for the 1999 and 2000 crops. 
Without adequate emergency assistance for the current crop 
year, many farmers will be out of business before the next Farm 
bill. We urge Congress to pass the economic loss assistance for 
the 2001 crops in the form of a market loss assistance payment 
at the 1999 PFC payment rate.
    In conclusion, Mr. Chairman, I thank you for this 
opportunity to appear here before this committee.
    [The prepared statement of Ms. Evans can be found in the 
appendix on page 110.]
    The Chairman. Thank you very much, Ms. Evans, and we look 
forward to working with you and your organization as we 
continue the development of the bill.
    Now, last, we will turn to Bill--I hope I pronounce that 
right--Kubecka.
    Mr. Kubecka. Kubecka, yes, sir.
    The Chairman. Executive vice president for legislation for 
the Sorghum Growers Association.

         STATEMENT OF BILL KUBECKA, VICE PRESIDENT FOR 
   LEGISLATION, SORGHUM GROWERS ASSOCIATION, PALACIOS, TEXAS

    Mr. Kubecka. You make me feel right at home. I come from a 
large family. Here, I am sitting on the end of the table.
    [Laughter.]
    Mr. Kubecka. Mr. Chairman, members of the committee, on 
behalf of the grain sorghum producers nationwide, I would like 
to thank you for allowing us the opportunity to discuss our 
proposal today. My name is Bill Kubecka, and I farm in a family 
partnership near Palacios, between Houston and Corpus Christi, 
Texas. Our diversified operation includes grain sorghum, rice 
and cotton.
    As I come before you today, I know that many of you are not 
experts on sorghum, and your states do not grow much. However, 
I know it can be an important crop to you because of the 
conservation benefits which it provides portions of the U.S. I 
encourage the committee to look at what the government policy 
has or has not done for grain sorghum. Our recommendations to 
you today are focused on the specific needs of grain sorghum 
producers and center on correcting the inequities that would 
genuinely give producers the freedom to farm any crop that 
suits their conservation needs and marketing plans rather than 
planting those that are most appealing from a government policy 
standpoint.
    The sorghum industry believes that these inequities are 
greatly driving cropping systems and cropping decisions. The 
loan rates for grain sorghum from 1972 to 1996 were never more 
than five percent below the loan rate for corn, until 1996, 
when the loan rate for grain sorghum began dropping, while the 
loan rate for other commodities remained steady.
    This ended in a sorghum loan rate today that is 10 percent 
that of corn. Additionally, the unbalanced loan rate between 
the oil seeds and other commodities, including sorghum, has 
shifted acres out of sorghum. As a result, we come before you 
today having harvested the lowest number of grain sorghum acres 
on record since 1953. This is during a time when we have seen 
the strongest demand for sorghum in the ethanol industry, to 
which 13 percent of our crop goes for the 2000 marketing year 
and extremely strong export demand from Mexico.
    For this reason, our recommendation is that the grain 
sorghum loan rate equal with corn and then rebalance all loan 
rates on all program crops is a centerpiece of our testimony 
today. It is our strongest belief that should the committee 
choose to follow any of the Farm bill recommendations that are 
detailed in our written testimony, such decision will have 
little or no positive impact on our industry if we fail to 
achieve at least an equal loan rate, thereby increasing options 
for producers in avoiding further grain sorghum acreage loss in 
a time of increasingly limited water supplies and increase 
irrigation costs.
    Producers tell us that they are following government policy 
signals by planting other feed grains with higher loan rates, 
better LDPs and better crop insurance coverage. There are 
several factors detailed in our written statement in support of 
sorghum rate rebalancing, including a stocks-to-use ratio for 
sorghum that points in this direction. Had our stocks-to-use 
ratio been used in the last five years, sorghum would not have 
suffered a drop in the loan rate. From an economic standpoint, 
research conducted by FAPRI shows that equalizing the loan rate 
would cost only $31 million annually and increase production 
just by five percent. However, it would create a 22 percent 
increase in net returns to sorghum producers.
    An analysis of recent ending stocks in total use indicates 
any additional sorghum acreage generated by an equal loan rate 
would generally be nondistortive to grain sorghum supplies. In 
fact, increased production would allow us to compete in several 
premium markets in which we are unable to compete today because 
of lack of reliable supply.
    Many of the members of this committee are fortunate that 
their constituents can rely on Mother Nature for seemingly 
adequate water supplies, but in the chief sorghum-growing 
states, the issue is not one of water quality as it is 
quantity. Sorghum has been called a water-sipping rather than 
water-guzzling crop. University studies have compared water 
savings through alternative cropping patterns and the use of 
crops that require less water, such as grain sorghum. A study 
ordered by the Texas Legislature found that a 50-year savings 
for 21 counties in the Texas Panhandle would amount to 7.63 
million acre-feet if producers converted irrigated to a more 
resource-conserving grain sorghum.
    That is on a yearly average, 147,200 acre-feet. That is 
enough water to supply 294,000 homes a year, and as a reference 
point, this would be approximately the size of Austin, who has 
277,000 homes and a population of 643,000 people. Quite a bit 
of water savings there.
    From a conservation standpoint, the question is simple: how 
can a limited resource be more efficiently used? We believe 
that future water supplies should be a priority, and an equal 
loan rate would give producers the ability to grow a resource-
conserving crop such as grain sorghum. From a producer 
standpoint, many producers would have welcomed sorghum as a low 
water use planting choice on our farms this spring due to the 
irrigation costs, which have soared as a result of the energy 
crisis. However, many did not switch because of the loan rates.
    NGSP is aware that ad hoc disaster assistance legislation 
will become increasingly difficult to achieve and defend in the 
face of other needs. This points to the need for a 
countercyclical safety net. However, we are very concerned that 
safety nets proposed so far do not take into account the county 
and regional production and marketing anomalies that might not 
trigger payments or impact national supplies. The U.S. sorghum 
industry is primarily spread out over an arid region of the 
western plains and can have a total loss, for example, New 
Mexico, but have very little impact on overall sorghum 
production due to the low yield potential and a relatively 
small number of acres in the state.
    On top of this, success or failure of crops in the Midwest 
drives the entire feed grain complex, regardless of what 
happens to production in the sorghum belt. Despite these 
concerns, NGSP does have recommendations for a countercyclical 
program. NGSP proposes basing a commodity-by-commodity 
countercyclical program on actual market receipts averaged over 
a historical base period divided by an average production units 
over that base period. This is established as a base price for 
the 2002-2008 period. To calculate the countercyclical payment, 
the current price per bushel must be established. This price 
would be the current year's price as defined by the total 
current year's marketing receipts, then divided by the current 
year production. The current price is then subtracted from the 
base price. This provides a per-unit payment for each 
commodity. At the end of the actual growing year, when an 
actual production price has been reported, each producer is 
then paid his per-unit share of each unit produced on their 
farm during the historic base period.
    We support a continuation of AMTA payments, although we 
recognize the negative impacts on cash rents in the northern 
sorghum belt. NGSA believes that the Production Flexibility 
Contracts should be extended through the next Farm bill and 
annual payments frozen at the 1999 level. Providing these 
payments at the 1999 AMTA levels would require $5.8 billion in 
annual budget authority or approximately $1.8 billion annually 
more than the current baseline projection.
    Sorghum is a low water use, low input choice for many 
producers, and conservation needs rather than Federal policy 
should be prioritized in determining where and when it is 
planted. A global population that benefited the Twentieth 
Century from the green revolution led by Dr. Norman Barlow is 
today facing a future predicted to have 25 percent of the world 
population experiencing severe water shortages by 2025. 
However, 50 percent of the increase in demand for water by 2025 
can be met by increasing the effectiveness of irrigation and by 
growing more water-efficient crops. A second revolution, or a 
blue revolution, suggests a combined approach of water savings 
and appropriate crops such as resource-conserving, risk-
tolerant grain sorghum.
    Mr. Chairman, we would like to thank you and the members of 
this committee for the opportunity to present our ideas today. 
We look forward to providing you with additional information 
and continue working together on this process. Thank you.
    [The prepared statement of Mr. Kubecka can be found in the 
appendix on page 115.]
    The Chairman. Thank you very much, Mr. Kubecka, for your 
testimony. Again, we look forward to working with you and your 
association as we continue on the Farm bill.
    Well, for all of you, thank you very much; good statements; 
very concise, and to the best that I have been able to over the 
last 24 hours to go over your written statements, they are 
great written statements also. I just have a couple of sort of 
general questions that I would like to ask all of you to get on 
the record how you view a couple or three different items. The 
CRP program, Conservation Reserve Program, is now capped at 36 
million acres. There is going to be some effort to expand that. 
What say you? Should we expand the CRP program? If so, how far? 
Or if not, say so.
    I would just like to get your ideas on what we should do 
about the CRP. Should it be expanded? Should it not be 
expanded? If it should be expanded, by how much? There may be 
some nuances in there that you might want to talk about in 
terms of how we change the CRP, but I am just talking about 
expanding it now, and we will just start. Lee, can we start 
with you and just kind of go on down the line?
    Mr. Klein. Well, at the present time, we feel like the 36 
million acre cap is fine. We appreciate what you are doing a 
little more on the Conservation Security Act type thing. I wear 
another cap when I am back home in Nebraska being the treasurer 
of a natural resource district board, and some of the comments 
you were making earlier at the hearing for the gentlemen who 
are going to be working for the USDA in talking about the waste 
management thing, one of the counties that I represent back 
home on that thing is the third-largest cattle-producing county 
in the United States, and they have a severe problem with 
getting rid of the animal waste that cattle produce.
    What we like more about your program there also is the fact 
that it does not require land idling, and it targets it to the 
producers as opposed to the landlords. We think that those two 
mix together very well.
    The Chairman. I am going to get into that later, but on 
CRP, your organization basically is saying keep it there?
    Mr. Keith Dittrich, how about you?
    Mr. Dittrich. Yes, Mr. Chairman, our organization supports 
an expansion of the CRP to 40 million acres, and we also in our 
farm bill proposal suggest that the Secretary have authority to 
use a short-term CRP in the event that grain stocks become 
excessively burdensome and using it for the conservation 
benefits and some sort of inventory management. Now, keep in 
mind that our organization strongly supports a farmer-owned 
reserve that isolates crops off the market first and would use 
that first for ending stocks management and then use any supply 
management later.
    The Chairman. On the CRP, are you saying you would be in 
favor of increasing it to 40 million acres?
    Mr. Dittrich. Right.
    The Chairman. Plus a short-term CRP?
    Mr. Dittrich. Yes, like a 3-year CRP.
    The Chairman. Thank you very much. Mr. Anderson, how about 
the American Soybean Association?
    Mr. Anderson. Well, No. 1, we would be pretty much in 
agreement with Mr. Klein on this that the 36 million acres 
seems to be adequate. We are not opposed to inclusion of 
environmentally fragile lands that would need to be included 
above that, but to utilize CRP as a supply control program we 
feel is truly detrimental to a program that we would represent 
from a global perspective in trading from a world market price 
situation, and we would also not be in agreement with allowing 
CRP to attract large masses of land and be a competitor to 
production agriculture from that respect, to not have the 
Government drive the prices of land up from a CRP supply 
control program.
    The Chairman. OK; thank you very much.
    Mr. Miller.
    Mr. Miller. Yes, Senator, we probably would not support any 
expansion of the CRP program. We think that the CRP program 
should be used for conservation. We think it is an ineffective 
tool for supporting farm prices. We think it has unintended 
consequences which are very negative for the communities where 
CRP reduces production. The financial impact on the towns and 
the industries that are dependent upon agriculture are 
unintended victims of a CRP that is used beyond the purpose of 
idling fragile or acreage that really needs to be preserved. We 
think there are much better tools to be used for farm support 
than the CRP program.
    The Chairman. Thank you very much.
    Ms. Evans.
    Ms. Evans. To make it official, I am not sure our board has 
actually taken a position on this, but to speak personally, I 
am tending to agree with most of the panelists here. I believe 
that probably the cap where it is at now is appropriate. I also 
would not be opposed to more sensitive buffer strips or 
enlarging it along that line, but I also have seen what it does 
detrimentally to communities such as grain elevators, milling, 
maltsters, the brewers, and it has been used as a determinant 
of supply and demand. I do believe in our areas, lands have 
gone in that probably should not have entered CRP.
    The Chairman. Thank you very much.
    Mr. Kubecka.
    Mr. Kubecka. The official position of our board is that we 
would agree with the cap at 36 million. I will make a statement 
that this has been very detrimental to the sorghum acres, and 
that is why our concern of the cap, of maintaining the cap. We 
do agree with soybeans and barley in that we do see that maybe 
we need to shift some acres and put them in that need to be in 
and let some come out, but we are in agreement that the cap 
should stay at 36 million.
    The Chairman. Thank you.
    There is just one other thing I want to get in here. In the 
year 2000, direct cash payments were 50 percent of U.S. net 
farm income. In the previous year, in my state Iowa, it was 130 
percent. In other words, without the direct cash payments, we 
would have had a negative net farm income in my state. I guess 
my question is is this sustainable? Is it desirable? How can we 
build income opportunities that reduce the need for commodity-
related cash assistance? Is a high level of cash assistance the 
true measure of a good farm bill?
    We can look at all these figures, but if we are truly going 
to try to get to something that is more market-oriented, should 
we just be looking at the cash assistance as a measure? Or 
should we look at something else? It is a very general 
question.
    I guess my basis is how sustainable is this, and how 
desirable is this? Again, I know it is a general question, not 
as specific as the CRP. I am again thinking about the next Farm 
bill as moving in a direction of coming down off of those high 
cash assistance. I just do not know that the budget will allow 
it, and if it will not, and we want to keep farm income from 
going down, we are going to have to do something else. That is 
my general comment on that, I would like to go down the row, 
and if you could respond on that, I would appreciate it.
    Mr. Klein.
    Mr. Klein. Well, first of all, we have just come through 
five years of above trend-line yields around the world in 
coarse grain production, and it has had a major effect on all 
of us. One of the things that our organization has always 
represented is a long-term approach, like you mentioned ethanol 
being a fast-growing thing, and we have worked very hard on 
that as have you, and I appreciate the help from this committee 
on the California waiver for the second time. You did not have 
to sit on a box this time, Mr. Chairman, but I am sure you had 
something to do with it.
    At any rate, we feel that we need that supplemental income 
this year. I would like to see it back at the 5-5, or I am 
going to be going back to practicing my auction chant again 
this fall, because we are going to be using it, because the 
bankers are going to be requiring this payment to come, and I 
hope we can get this committee to move on that rapidly, and 
maybe we can work something out with the House.
    The Chairman. We are going to move fairly rapidly on this.
    Mr. Klein. I appreciate that.
    At the present time, there is just no choice for us but to 
have the extra income, so, is it sustainable? Probably not, but 
the only alternative that we have is to come up with more uses. 
As our yield curve moves up, obviously, we have grown the 
domestic use. We have grown the export use. You mentioned it 
yourself before, if we consider what goes out in animal 
production. That was close to what? 450 million bushels last 
year of corn got exported in meats. These are big moving 
targets.
    We need to do better, and some of your comments earlier 
from the committee were talking about more money going into 
research, and obviously, that is extremely important to us for 
long-term. We have to look at both the short-term and the long-
term. Short-term, we need the money. Long-term, we need money 
put into the research so that we can sustain our own viability 
without coming to you yearly.
    The Chairman. Mr. Dittrich, you pointed out--and I am not 
verifying it; I am just saying you pointed out--that basically, 
our trade has remained static over the last 25 years, if I am 
not mistaken.
    Mr. Dittrich. Yes, sir.
    The Chairman. Then, again, in terms of the cash assistance 
and payments, again, my question is is it sustainable? 
Desirable? Or not?
    Mr. Dittrich. Mr. Chairman, this committee faces a real 
dilemma. Last year, we spent $30-some billion in farm 
assistance, and the current 10-year budget suggests $17 billion 
a year. Keep in mind the $30 billion that was spent last year 
left farmers with still inadequate incomes, still losses. The 
question here today lies here on are we going to continue a 
system such as that that disregards the uniqueness of 
agriculture and the market realities of the business of 
farming, or are we going toward a system that tries to improve 
market prices and sustains family farmers through fair market 
prices? That is, of course, what we are suggesting. Our Market 
Participation Loan is a hybrid loan that attempts to drive 
market price and improve market prices with other tools and 
mechanisms such as a farmer-owned reserve which isolates 
commodities off the market until market prices recover and 
protects consumers and industries, processing industries. At 
the same time, our hybrid loan can make sure that we are 
competitive in world markets. It allows for the reduction in 
market price or support levels to a certain level in the case 
of extremely burdensome stocks.
    That is really the question we have here today, and looking 
at the key indicators, we understand that over the last 25 
years, exports have not improved, even though we have 
drastically cut prices, and we have lost a lot of farmers, and 
there has been a lot of hardship in the farm countryside trying 
to chase this theory that has not come to be true.
    The Chairman. Thank you, Mr. Dittrich.
    Mr. Anderson.
    Mr. Anderson. Yes, sir, it is an arguably tough question to 
come to an answer on. That was part of the reason that I did 
want to make sure that we included the unfinished agenda from 
the FAIR Act in the testimony. We do not know how much more 
competitive we can be in the world market if the lock and dam 
infrastructure is repaired. We do not know how much more 
competitive we can be in the world market with unilateral 
sanctions removed.
    There are so many other currencies, inequities out there 
that are driving this program much more than our domestic 
policies. Our domestic policies, however, drive production 
efficiencies or activities in so many other countries. Supply 
control, we can see no benefit to it. With the low prices we 
have had, South America continues to expand, however at a 
slower rate, however, we have only seen that through setasides 
previous to the last Farm bill. We saw expansion go tremendous 
in South America. We have seen a loss of infrastructure of oil 
seed crushing capacity in the United States due to the lack of 
research in the Southeast of varieties that no longer are 
competitive for the land costs over there.
    We are seeing in Wilmington, Delaware an import terminal 
being built to bring meal in from South America to provide the 
rail grain providers with products that we could easily supply 
from here. Our efficiencies have never been maxed out. We have 
never finished that agenda and before I would become so 
confused by the current question, I would go back and try to 
finish the previous agenda that would have helped us weather 
through a shorter term than what we are currently dealing with 
and have a different outlook for tomorrow.
    The Chairman. You can bring soybean meal into Wilmington, 
Delaware cheaper than you can get it from the heartland of 
America?
    Mr. Anderson. Well, fortunately or unfortunately--I am not 
sure which way to say it--but the Fayetteville area is a 
primary source of delivery for Southwest Ohio, from which I 
come today, and yes, according to the rail grain receivers, due 
to all of the inefficiencies in the transportation system here 
within the borders of our own United States, their claim is 
they can bring it in. They will not share the numbers with us, 
but they claim that they can bring it in for less money than 
what we can produce it in the great State of Iowa or the great 
State of Ohio or Indiana and bring it in for less.
    The Chairman. We have got to look at that.
    Mr. Miller.
    Mr. Miller. Sustainable, that would seem to be a political 
question. I do not know how long the people in the country are 
going to be willing to continue this level of transfer of 
funds. Obviously, they are willing to do it today. I do not 
know of any farmer who wants to get a check from the Government 
rather than from me as a flour miller or from one of the 
companies that we represent. They would rather work for the 
market.
    Sustainability? I do not know; a political question. Is it 
desirable? I certainly think not. Our position would be that 
the free market is always going to be a better customer to U.S. 
farmers than the Government; that we have, when the efficiency 
of U.S. farms are allowed to operate in a free market system 
that there will be transitions, as there always are in 
industries, but ultimately, the best return to those farmers 
are going to come from the free market. The degree of 
dependence that U.S. farmers currently have on the U.S. 
Government is not good for them, and it is not good for us.
    Any policies--we certainly recognize the need for 
transition and support, but we would beg for policies whose aim 
eventually is to get us to a market oriented supply demand 
situation rather than a Government-determined supply demand 
situation.
    The Chairman. Thank you very much. Two more.
    Ms. Evans.
    Ms. Evans. I guess for barley, I would have to say that it 
would almost mandatorily have to be sustainable. Barley is a 
crop that ended up competing with the EU subsidies for all of 
our foreign markets to the point that we have eroded to 
nothing. There is a huge south and central malting barley 
market down there that by all rights, U.S. barley should be 
getting. We are getting none of it by fighting EU. Until, in 
the long range, we get something done with these trade factors 
in the new WTO round, I do not know how barley could be 
sustainable without it in all fairness.
    The Chairman. Thank you very much, Ms. Evans.
    Mr. Kubecka.
    Mr. Kubecka. Our board is somewhat divided on this, and we 
have had a lot of discussion on it, and I guess the biggest 
discussion, I will bring it up here, and I do not know if this 
is proper or not, but it seems to be the biggest concern of 
these payments have been that they are just a transfer to the 
landowners. Be it right or wrong, it is a reality. That is an 
issue that certainly needs to be looked at and addressed.
    You know, is it really helping the producer? From many of 
our board members, they say not, so in my forum as a producer, 
I do not personally have that problem, because it is different. 
It differs on our board. We have members that have a very big 
problem with it. They say it is really not helping us. We have 
to look at this and look at some more creative ways to possibly 
shore up our producers.
    The Chairman. Thank you.
    Thank you all very much, and now, I would turn to our 
distinguished ranking member, Senator Lugar.
    Senator Lugar. Well, thank you very much, Mr. Chairman.
    I just wanted to use my time making several comments that I 
hope may bring additional testimony from each of you or many of 
you that will supplement what you have to date. I would just 
observe that, as many of you pointed out, the budget provides 
for $73.5 billion above the baseline, and $66 billion of that, 
you have identified in a couple of your papers as a part of a 
reserve. The suggestion is that we need to act quickly, some 
have suggested, because the reserve also provides the money for 
prescription drugs for the elderly or reform of Medicare or 
shoring up of Social Security.
    Now, I am not sure I have understood the argument for 
acceleration of the Farm bill on that basis, because it would 
appear to me that each Congress could, in fact, pass another 
farm bill. We pass one of these things with the thought that it 
will last for five, seven years as we have currently. It could 
have been amended anyplace along the line. In other words, it 
is not engraved in the Constitution, and the thought that 
somehow, we provide a bill that spends the $73.5 billion, and 
it remains, even though our constituents come in and say we 
want prescription drugs more than we want a farm bill; they are 
going to get their prescription drugs in a democracy if, in 
fact, that is the gist of what they want to do.
    I mention that at the outset, that what we put together 
here has got to have a pretty good political base in the total 
Congress and with the country; that it is a sound program that 
should not really be tampered with unduly, so that there is 
some certainty for planters and producers all the way through.
    Now, having said that, let us say for hypothetical reasons 
we had the whole $73.5 billion to deal with and really fill out 
all the squares. The question then, it seems to me, is 
competing elements. Now, some of these are not represented here 
today and maybe will be in further hearings, but in addition to 
a safety net, countercyclical, income support, however one 
defines that, there are many people coming in and saying that 
that ought to be expanded to so-called specialty crops, to a 
whole list of things.
    Now, we got into that in a big way last year, not through a 
formal Farm bill but through legislation we passed, and even 
around this committee table, we have heard about the need for 
strawberries to get some consideration or cranberries. The wool 
and mohair people are back; a long, long list which there is no 
5-year crop history. In an ad hoc way, essentially, people were 
saying what you are really doing here is trying to supplement 
actual farm income to get it back up to about $45 billion. Why 
$45 billion? Because that was net farm income about three years 
ago. Each of our attempts has been made to plug in enough money 
to get back up to about $45 billion. That is a gain, not a 
loss, but for the whole country.
    This is on the basis of about $1 trillion of the net worth 
of all farms. The agate type of USDA's report which reviews at 
the beginning of each year to try to find out how to get to 45, 
you find out everybody has got about $1 trillion. That is about 
4.5 percent return on invested capital or at least what is 
estimated it is all worth. I mention all of that because many 
people are saying if that is really what you are up to, we are 
not dealing with the New Deal any longer, with the row crops 
that were a part of those programs. There is nothing sacrosanct 
about program crops; that was the old program.
    The new program deals with everybody, livestock producers 
as well as fruits and vegetables and anything else that occurs 
on the farm. Now, nothing in the programs that were discussed 
today really incorporates all of that, but I would just say to 
each one of you a good number of folks are knocking on the 
door, and they are seeing inequity. This is what we actually do 
on our farm. Unless you are going to adopt a total farm income 
picture, do not just pick and choose with corn and beans and 
rice and cotton and wheat, of course.
    Senator Roberts. Wheat.
    Senator Lugar. You mention sorghum and barley, and they 
come into the picture today in some of these charts, but help 
us try to think through that. Where do these competing elements 
come out?
    Now, what about conservation? A good many people would say 
and have said to me--may say it in private or in public 
testimony--that in our state, as a matter of fact, we would do 
better if there were conservation payments to each farm than we 
now do with regard to the row crops. In other words, we do not 
have very much of the so-called program crops in our state, and 
as a matter of fact, we have got real problems with soil and 
water.
    As a matter of fact, we would like to see, if you are going 
to divvy up $73.5 billion, a good bit of that in conservation, 
with payments pretty liberally over everybody who comes up with 
a plan to indicate how soil and water in the country might be 
improved. That comes in. Some of you have hedged by saying OK, 
sure, conservation, a great idea, but not at the expense of the 
safety net and the income.
    Others would say that is not the way we look at it; as a 
matter of fact, not much income is coming to our state, to our 
district from these plans as they stand. A lot more might come 
if you adopted a very different formula involving conservation 
payments, for example.
    Now, finally, there is the problem some of you have 
addressed: should there be limits to some of these payments? 
Some have said, as a matter of fact, that if you have as a 
spark, as people pointed out, 8 percent, 0-8 percent of the 
farmers in America doing 72 percent of the business, 
essentially, about three-quarters of the payment go to the 8 
percent. Another 10 percent do another 15 percent of the 
business. Eighty-two percent do 13 percent. Eighty-two percent 
of the 2 million farmers is 1.6 million. Now, sometimes a size 
fitting all does not work out for this, so some have suggested 
that the payments ought to be smaller or only so many bushels 
covered. Well, others of you have rigorously disagreed with 
that idea, noting, of course, if three-quarters of the business 
is being done by eight percent of the people, that is where the 
Farm bill really is, with the producers who are producing it.
    That is an issue that when you get down to divvying up the 
money is going to have to be discussed and probably be 
rigorously discussed. Now, finally, this is an argument that is 
sometimes almost theological: do the current programs we have 
simply stimulate more supply, and in a world in which we have 
all noticed the trade thing is not moving very fast, and we are 
still dealing with ourselves domestically, therefore, price 
inevitably goes down. For example, in the corn growers' 
testimony, there was a very important figure that acreage 
increased during the last five years for corn by 4.5 percent. 
However, the amount of corn was 17 percent up each year.
    Now, this is in the face of charts that show the price 
going down for five years, Government payments going up for 
five years. Why would 4.5 million acres of additional corn be 
planted in the face of declining prospects? Well, some would 
say, well, because prospects were declining. You have to plant 
more just to get the income that you need, and if you have an 
individual farm--but this is aggregate, over all of American 
agriculture. In other words, even in the face of declining 
prospects, for some reason, we were producing more.
    Now, the 17 percent increase, of course, came because of 
good weather, good research, better production situations, and 
in the face of all of this adversity. Some would say the Crop 
Insurance Program keeps in play marginal lands or even induces 
people to plant who would not be planting. Others say that is 
not so. That, we have really got to weigh. In other words, do 
the policies that we have now exacerbate the problem simply by 
encouraging people to plant more even in the face of very heavy 
oversupply with the hope the Lord will provide; that the 
catastrophe will come in Asia or something of that sort and 
sort of move the crop.
    Now, these are questions that are on my mind, and that is 
why I share them publicly with you. Because at some point, the 
committee will have to resolve, under the guidance of our 
chairman, the allocation of the money: how we sort these 
priorities in a rationale that will make sense to a large 
majority of the body that is now a part of this committee and 
to the public, hopefully, that will support this idea.
    Finally, I suppose we have to decide do we do a 5-year 
bill, as some of you have suggested? A 10-year bill to fill out 
the squares of the budget? How sustainable is an idea over 5 
years, 7 years, 10 years? A good number of people after every 
farm bill in which I have been involved would say after about 
the third year, it does not work. It was a terrible idea. What 
were you thinking of in that particular year?
    Senator Roberts. One year.
    Senator Lugar. In one year maybe.
    [Laughter.]
    Senator Lugar. There you are, sort of back to that once 
again.
    I come to all this with biases, which I freely admit; 
namely, I want to maximize farm income in my home state and 
hopefully in my country. I am a bean farmer and a corn farmer. 
I am very interested, intensely interested, in the price of 
both of those commodities and how it goes. I have just said to 
farm audiences in Indiana as I would say to you: over the 45 
years that I have been responsible for operating a farm, we 
have got an average of about four percent return on invested 
capital, just 4. Some people hearing that story would say that 
sounds too high. Well, it is in terms of the market. As we have 
all heard today, Senator Harkin's situation, the whole four may 
have come from the Government last year. In my case, it was 
more like two in Indiana, but still, that is a very low return. 
That is over 45 years. That is over a whole lot of farm bills, 
by some calculation, 10 or 11. It has not changed a whole lot, 
really.
    What we are faced with at the end of the day is this is a 
tough business. It is very difficult for the average person to 
make money doing farming, to get a middle class income, to have 
money to send kids to college and do the things that Americans 
do. Therefore, I am not unsympathetic to putting money into the 
situation if it just gets us up to a minimal return. At the end 
of the day, we still have to think about are we stimulating 
oversupply? Is conservation better than income support? What 
about everybody else in agriculture who now sees we are trying 
to sustain income, not particular row crops or things that 
might have been a part of the New Deal program.
    I do not ask any of you for comment except to say that if 
you could extend and revise your testimony and give us some 
clues about that, it would be very helpful to me at least and 
perhaps to the chairman and the rest of the committee.
    I thank you, Mr. Chairman, for allowing me to indulge in 
all of these reflections.
    The Chairman. Well, they were very eloquent reflections and 
the kind of reflections that make us think about just what are 
we doing, and have our past policies done the opposite of what 
we thought we were doing in terms of helping farm families and 
rural communities?
    The only observation I might add, Dick, to what you just 
said was that I believe it is true; I have been told this, and 
I have looked at the figures. You know, you can always get 
different kinds of figures but that the farm share of the 
consumer dollar is at the lowest point ever right now.
    Senator Lugar. That is true.
    The Chairman. That is true.
    If that is the case, then, if we do not want the consumer 
to be spending a lot more on food, it seems to me there has to 
be a rebalance between the farmer and everything from the 
farmer to the consumer in terms of where some of that money 
goes. If the farmer can get more of the consumer dollar, it 
would seem to me that would help farm income without impacting 
upon the kind of outlays that we have here from the Federal 
Government. Now, how that is done, good luck. I do not know. 
Hopefully, we are going to be discussing and debating that as 
we go through this Farm bill.
    I am going to recognize Senator Roberts, who has been here 
since the beginning of the committee, and I am going to try to 
keep to that kind of thing, that those who came here first will 
be recognized.
    Senator Roberts.
    Senator Roberts. Well, you stunned me. I dropped my pen, 
and I cannot even grab my microphone, not that I need one.
    Ben, if I give you my time, will you give me 17 points when 
the Wildcats play up----
    [Laughter.]
    Senator Nelson. I hope you are going to need them this 
year.
    [Laughter.]
    Senator Roberts. I would like to agree with the 
distinguished chairman about the excellent statements you have 
all provided. This takes an awful lot of time and effort for 
you and your staff and your boards to meet, thrash through the 
very difficult challenges as described by Senator Lugar, our 
esteemed former chairman, and I want to thank you for that. I 
want to thank you for taking time and effort to study through 
this and to work with your folks and to bring us your 
suggestions and your advice.
    I agree with the chairman. I have just been making some 
notes here. This has been a very interesting hearing a very 
pertinent hearing. I do not think these cash payments, the LDP, 
the AMTA payment, the double-AMTA payment, whatever we want to 
call it, I do not think they are sustainable over the long 
term, and I certainly do not think they are desirable. It was 
probably Tony who said that no farmer whom I have ever visited 
with, dating back to all of the days that I have had the 
privilege of representing farmers and ranchers, ever said that 
he wanted a check in the mailbox as opposed to the marketplace.
    I do not know: maybe cash assistance is not the most 
important thing in regards to how we measure the success of a 
farm bill or in terms of a policy, but today, folks, it is way 
ahead of whatever is in second place, because I made a sort of 
a belt-tightening devil's advocate speech to one of our major 
farm organizations earlier this year, and after saying we had 
some budget problems, and let us take a look at the real 
problems and the unfinished agenda of the last Farm bill, if we 
could ever put it together, one old boy came up to me and said 
well, Pat, that is fine, but if those payments had not come, I 
would not be here, and you would not be speaking here, and he 
was right.
    I have had the privilege of working on six farm bills from 
my time as a staffer on the House Ag Committee, a bucket-toter 
for the Honorable Keith Sibelius, up to my time as the chairman 
of that committee, and that is really not true either, I would 
say to Senator Lugar and Senator Nelson, because there have 
been nine technical corrections in the past 10 or 12 years, and 
when we say technical correction, you are talking about a major 
rewrite of whatever has happened in a farm bill that does not 
fit the roller coaster we go through and the dynamic conditions 
we have in agriculture. We do not call them new farm bills, but 
we call them technical corrections with the hope that nobody 
will get on the floor and introduce amendments that could cause 
great damage, because when you open up a farm bill, you can 
lose as much as you gain depending on your point of view.
    There have been three emergency bills, and we have 
literally rewritten the 1996 act in these emergency bills as 
the Senator has described. We have not gone back to supply 
management. That is the basic tenet. We have not taken away the 
flexibility to producers, but many of the programs that were 
not there in 1996 are there now again. By the way, I am for 
wool, and I am certainly for mo' hair.
    [Laughter.]
    Senator Roberts. During the time of these six farm bills, 
we have debated everything from flexible parity--do you 
remember that?--and marketing loans and setasides, two-tier, 
two-tier is a good program; I supported that one time; we 
almost passed that one time; came within about 15 votes--and 
price controls to cold-turkey free markets. We have discussed 
them all; we probably cussed them all, and we have always 
managed, however, to protect our farmers and ranchers.
    I know that this Farm bill has been much pilloried. No farm 
bill is perfect; none is set in stone. At least the commitment 
of this committee and the House committee and people who are 
privileged to represent our farmers and ranchers is there. 
Sure, we make mistakes, and sure, we could do better, but that 
commitment remains.
    I hope--I stated before when we had another excellent panel 
that we can continue the much-discussed back-to-the-future 
debates that we have had over the past six Farm bills I have 
been associated with, what I call the oldies but not 
necessarily so much the goodies, and sometimes, it gets rather 
partisan. We can talk about loan rates; we can talk about AMTA 
payments; we can talk about two-tier; we can talk about all of 
that. If you give the global market realities and the new 
buying patterns that are happening and the WTO problems we face 
with our competitors and all of that, the value of the dollar, 
the sagging export picture, we have to think outside the box, 
and I was struck by the chairman's comment that maybe we should 
not measure the Farm bill in terms of cash assistance.
    I would say that, however, Bill, that I know that those 
payments have gone into Texas and all throughout farm country, 
and many have gone to the land owner. I understand that. I know 
that these payments have been capitalized into the land value, 
and I know that Senator Lugar has pointed out that when you are 
having a farm crisis, and you see at least with the Federal 
Reserve in Kansas City saying that farm land in Ben's country 
and my country has gone up seven percent, what is going on 
here? Is that good?
    In other words, think what would happen with the country--I 
am not saying we are in a recession, but I do not think the 
economic situation--well, it is a little dicey; let us just say 
that. Do we want to see the land values come down? Whoa, wait a 
minute. Who owns that land? I can name you a bunch of folks in 
Ford County who are very elderly and living on single income 
that you have got to stop and think about that a little bit.
    I would like to think a little bit outside the box. I would 
like to work together to come up with something. It seems to me 
that we are a little short on long-term policy and a little 
long on short-term fixes. We talk so much about prices--I am 
giving a Roberts version of the Dick Lugar--what is it?--
seminar here, but at any rate----
    [Laughter.]
    Senator Roberts [continuing]. They did not turn the light 
on for you. I do not understand why that happened.
    [Laughter.]
    Senator Roberts. We talk about high prices, price, price, 
price, price, price. Why can we not talk about farm income, 
farm income? Price does not mean anything if a producer does 
not have a crop to sell. That was one of the tenets of the 
current Farm bill. I have urged our farm and our commodity 
organizations to think out of the box, and the chairman has 
really hit it. We unfortunately see an awful lot of testimony, 
and I know it is understandable, from all of you focused 
primarily on specific dollar amounts: in other words, how much 
can we get when we are facing a difficult time with price and 
with our competition overseas and the lack of a consistent and 
aggressive export market?
    We sort of say OK, here is our countercyclical payment; not 
very happy with LDPs and all of the vagaries that that had, and 
Mr. Chairman, I would say that when we put together the Farm 
bill, we never even thought we would need LDPs. That is not a 
startling, I guess, admission. Then, you go ahead, and you say 
all right, we want a different countercyclical payment; we want 
the LDPs or something like it, and then, we want an AMTA 
payment and a double-AMTA payment, and then, there is a third 
one in there somewhere.
    We give a little nervous glance to the budget. Well, I can 
tell you I share the concern of the chairman. I did not pay 
much attention when I was in the minority over in the House Ag 
Committee about the budget concerns. You know, Kika did; staff 
did. We in the minority sort of just said, well, that is nice, 
but let us move on and gave our speeches.
    Then, all of a sudden, I became chairman, and we were in 
the business of trying to balance the budget, and we had a 
specific number to work with, and Dick and I sat down together 
and said this is not going to work. How are we going to do 
this? Welcome to the club, Mr. Chairman. It is not exactly a 
pleasant club.
    [Laughter.]
    Senator Roberts. We have got to look at the budget about 
what is real. Then, in terms of long-term policy, what is the 
law of unintended effects here? Where are we headed?
    I want to mention two groups who are here today who have 
made their willingness to maybe break with some of the 
prevailing thinking. I want to applaud the sorghum folks and 
the National Corn Growers for their efforts. Sorghum growers 
have indicated let us take a hard look and come to the 
realization with our budget situation and world trade 
commitments. They still support the concept of a regional-based 
program, but as Tony indicated, they do not list or demand--
that is the better word--a countercyclical program as a top 
priority, and I have got the statement here that says better 
than I can: given the Federal Government's budget concerns and 
the WTO requirements, it will be difficult for the committee to 
construct a meaningful program. We are also concerned that a 
countercyclical program could lead to planning decisions based 
on government policy such as the current crop insurance and 
loan rate programs do.
    I take a little issue on the crop insurance, since it was 
Kerrey and Roberts who tried to put that together, but you are 
right: in lieu of the above issues, we believe a farm account 
would be likely the best countercyclical program of all. We 
have tried for five years to get that dadgum thing passed, and 
why we cannot get that done in the tax bill is a little bit 
beyond me, both Republicans and Democrats. I certainly applaud 
your thinking.
    Then, you have presented a proposal with the Corn Growers 
that is certainly out of the box and a different way of 
thinking than anything we have seen around here in awhile. It 
is interesting; something new, warrants our careful review and 
consideration. That is a nice way of saying I like it, but I do 
not want to condemn it by sponsoring it, see?
    [Laughter.]
    Senator Roberts. I do think it is worth a good, hard look, 
and I really appreciate that.
    Finally, I would suggest to all of the organizations before 
us today and who will come before us in the coming weeks: it is 
time to determine what our priorities are. Now, we go through 
this; it is like a ritual, and each of us have our own pet 
speeches that we give on farm program policy, and we have seen 
those this morning. Sooner or later, we have got to get to the 
priorities. That was when, on the House side, we would put you 
in 1338-A and get you there, and I would close the door or Kika 
would close the door or Foley would or Pogue would or whoever 
it was and say all right, you ain't coming out until you make 
your priorities. Sometimes, you stayed in there for days. We 
had to send in sandwiches.
    We have got to start to think about it: what are your 
priorities? Now, I am going to ask you just a couple of 
questions: if you had to make a decision, where do you think 
that your board would go?
    I want to thank you, Mr. Chairman. I want to thank these 
people. I apologize for taking so much time. I had some other 
pet things I wanted to say, but under the circumstances--oh, 
one other thing.
    [Laughter.]
    Senator Roberts. Dick, one of the reasons we have more corn 
is that our Kansans went down about 20 percent in wheat acreage 
and decided to plant corn, and the weather was pretty good, and 
we did not have to irrigate, and we knocked your socks off.
    [Laughter.]
    Senator Lugar. That is the answer.
    Senator Roberts. Yes; but the farmers made that decision. 
Now, did they make the decision because of the payment? We 
could get into that on LDPs and how that has been very market 
distorting, and in terms of overall acreage, yes, corn is up. 
Soybeans are up. The overall cultivated acreage and Mike, you 
correct me if I am wrong: is it 365 to 369, or is it 2? I am 
talking about million acres total. We have not really planted 
fencerow to fencerow. Farmers made different decisions. The 
yield went way up, and the world glut came on us, and we have 
not sold as much, and the value of the dollar has really 
knocked us in the head. I understand that.
    The farmers have not done that, and that was the whole 
design of the bill: let the farmers make the decision instead 
of us, because we are always days late and dollars a whole 
bunch or months late and dollars a whole bunch.
    I am done; thank you.
    The Chairman. Thank you very much, Senator Roberts.
    Now, Senator Nelson?
    Senator Nelson. Thank you, Mr. Chairman. I apologize for 
being late here. I had to preside over the Senate between the 
time of 9 to 10, so I was a little bit delayed in getting here, 
so I did not get to hear the comments of my friends from 
Nebraska. I want to commend both Lee and Keith for being the 
chairs of their respective organizations. They are both from 
Nebraska, but I know that they have as many different views 
about how to deal with this as they may have some things in 
common, and I am proud of both of them and glad to be their 
friend. As a matter of fact, I would like to say that for a 
brief period of time, I had the pleasure of having appointed 
Lee to the Legislature in Nebraska to fill an unexpired term, 
and during that time, Keith had to have him as his Senator.
    [Laughter.]
    Senator Nelson. I know that they, too, are good friends, 
and it is good to have them here.
    I want to thank all of you who have testified here today. I 
agree that it does involve a great deal of time and commitment 
to be able to do this, but it also helps bring together the 
ideas and helps formulate opinions and positions of your 
respective organizations, and while they may be different among 
you, it is important at least to have those differences refined 
and identified and articulated as you have, because that 
clearly can be very helpful to us.
    There do seem to be some areas, or there does seem to be an 
area or two where even across the different sectors of 
agriculture and the different areas of our country that there 
might be some broad consensus; for example, that agriculture is 
the backbone of rural America, and agricultural programs and 
rural development do have something in common. If the CRP 
program is too extensive, it can be detrimental to the rural 
communities within our rural areas in the country, and 
likewise, if an agricultural commodities program or some other 
program helps sustain income, that may be the only thing that 
saves rural America right now.
    There is also an opportunity for individual producers 
through value-added enterprise, and the Federal Government can 
play an important role in assisting in that area. Farmers can 
also provide solutions to our energy problems across our 
country, from ethanol to biodiesel to wind power, and it 
certainly is worthy of consideration. Conservation on private 
farm land does provide a public good and is far less expensive 
than conservation on public land when it is done in an 
appropriate fashion. Finally, there is a consensus that family 
based agriculture has been and continues to be good for 
America, and it has made us the strongest agricultural country 
in the world.
    These are important items of agreement and they can help me 
focus on what we can do to help build on in this new Farm bill. 
I thank all of you for coming and for offering your testimony 
and being committed on behalf of your groups, and I hope that 
we will have many other occasions to share views and certainly 
to receive your thoughts about what it is that we ultimately 
propose together to assist agriculture at a very difficult 
time.
    I want to say one thing, and this is not critical, Mr. 
Miller, I mean, but when you say that adjusting farm programs 
and perhaps eliminating the farm income that we are able to 
provide at the moment to help out agriculture can create some 
transitions. I keep worrying about my good friend, Senator 
Lugar, who is living on one of these transitional farms. I keep 
asking is he transitioning up or transitioning out? I worry a 
great deal about words that seem so sanitized when we say that 
there will be some dislocation, some transition if we were to 
pull out of providing this kind of income.
    My fear about that kind of transition is that it will 
transition us away from what we currently have in family based 
agriculture, and I hope that as we work together, and I am not 
suggesting that you necessarily mean that, but if we permit 
market forces under the current circumstances to prevail, I am 
not sure that I want to see the results, because I can predict 
them.
    That is why we have to have a farm program in some fashion 
to be able to support and build rural America and our family 
based agriculture, but it must, in fact, be sustainable. I 
agree with you and agree with all of you who are suggesting 
that we ought to get to a market-based price for agriculture. 
That is why I hope that what we put together will be not simply 
a short-term fix; we will be doing that between now and the 
fall to get through where we currently are but something that 
is more longer-term in thinking outside the box that will be 
designed to cycle us into the right kind of price.
    The $1 million question, of course, is going to be what are 
the elements of that program? How will they work? Can they work 
in today's world economy, where we have sanctions, unless we 
remove the sanctions that always involve food? Will they work 
unless we are able to apply appropriate pressure on the EU to 
accept our products instead of having these barriers that they 
put up always in the name of food safety or some other category 
rather than just admitting what they are, market barriers? Will 
it be possible to do this even if we put together the world's 
best farm program if we have the differential created by the 
strong dollar? I am not advocating that we weaken it, but these 
are all things that we have to keep in mind: that we are still 
going to be facing some forces that, at the present time, seem 
to be a little bit beyond our control? Getting rid of the 
sanctions may not; getting the European Union to accept our 
products does not seem very hopeful in the short-term or the 
long-term and to be able to expand our exports without some 
subsidization through either a market assistance program or 
export enhancement program to really expand those programs to 
get our products in the world market when we have the high 
dollar; that we have got a lot of work ahead of us that will be 
a challenge to overcome no matter what we do in terms--and I 
see my red light is on----
    The Chairman. Do not worry about that.
    [Laughter.]
    Senator Nelson. I am about to stop in any event, because 
that we are all committed to getting the same result. There may 
be a lot of different avenues to getting there, but I hope we 
will be able to work with one another and be not only 
respectful but supportive of ideas that may be different from 
our initial thoughts as we try to put something together to 
know that the final conclusion must be that we sustain 
agriculture in our country today and that we do so in a 
responsible way that gets us to a sustaining way of being able 
to do it.
    I am fearful that we cannot sustain the payments that are 
going on today over the long-term or over the intermediate 
term, but we must, in fact, do something that is responsible. 
As good stewards of the policy, I hope we are able to come 
together. I know that we are certainly committed to working 
together.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Nelson.
    I do have just one other question that I would like to ask 
mostly to Mr. Dittrich and Mr. Klein, but you can come in also 
with oil seeds, too. I am just wondering: in your view, is the 
current Marketing Loan Program actually depressing prices to 
some extent? Here is what I mean by that: a farmer who is 
correctly positioned in the market will get more money if the 
price actually goes down, because their LDP will be greater. 
Then, they get a bigger LDP payment. Then, if they are 
correctly positioned in the market, they can then sell in a 
higher market and get the best of both possible worlds.
    I am wondering if, to some extent, the Marketing Assistance 
Loan Program actually is helping--maybe not overall but 
somewhat--to depress prices? Any comments on that?
    Mr. Litterer. If I could, Mr. Senator, I would like to 
respond to that. I am with Mr. Klein today. I am his sidekick, 
and we worked on the policy side, and that is why I am here 
today. To address your question, there is an impact with the 
marketing loan driving production in some areas, and ERS has 
actually done a study that has said that is the case. That is 
one of the reasons that our policy group looking at loan 
rates--and as you could see today, the discussion between all 
of the groups focused on loan rates and how do we rebalance, or 
do we raise those loan rates?
    Our public policy committee spent a lot of time looking at 
this and felt that it was a very complicated issue that we 
could not deal with, and that is why we decided to propose a 
policy that was a little different, where we look at revenue 
instead of loan rates. We have problems with loan rates between 
commodities, because one might be relatively higher than 
another and driving production in that commodity. We have 
differences in loan rates between counties and states in those 
regional differences and how do we design a loan rate that fits 
every region?
    It is a very complicated issue, one that we thought would 
be best addressed to look at a different approach, and that is 
why we have proposed the revenue-based, changing to looking at 
a revenue-based by crop program and doing away with looking at 
loan rates in particular.
    The Chairman. Now, I looked at those formulas last night 
when I was going over this at home. I am not certain I 
understand them all, but that is one of the things that I want 
to continue to work with you on, try to figure out how those 
work. I will look at it. What you are saying is that the 
marketing loan may indeed depress prices.
    Mr. Litterer. Right; in our proposal, going to a revenue 
that is totally decoupled we think will be less market-
distorting and trade-distorting.
    The Chairman. Mr. Dittrich.
    Mr. Dittrich. Mr. Chairman, we do believe that the LDP 
program is a price-depressor. It does encourage lower prices 
for farmers. Our Market Participation Loan is a hybrid loan, as 
I suggested. It is a nonrecourse marketing loan. It limits how 
far below the loan rate farmers can market their products and 
capture a market loss gain. The question of loan rates and 
their effects on farmers, I would suggest that if we try to use 
some type of formula such as has been suggested that just looks 
at a 5-year average market price and tries to make up the 
difference in payments on a rolling average and do not do 
something to try to drive market prices up, we will see a 
downward spiral of prices and downward spiral of income at the 
same time as we see inflation increasing our costs. We are 
pretty soon rapidly coming to a situation where support levels 
are real problematic and even worse than they are today.
    I would like to make a comment very shortly concerning Mr. 
Miller's statement. We have to be very aware that I as a farmer 
am a seller. Mr. Miller is a processor and a buyer. Our 
interests are different. When I try to sell to Mr. Miller, I 
try to get the highest price I can from the marketplace. Mr. 
Miller, of course, his interests are to get the lowest price; 
buy it from me as cheaply as possible. I can understand Mr. 
Miller's interest in the farm policy position he takes today.
    The Chairman. Anyone else on the LDP situation? Yes?
    Mr. Anderson. Yes, sir, they of right opportunity here. I 
wish I could give you a very direct answer that would make the 
decision much easier. The reality that I see is that there are 
so many market forces affecting the price that is received by 
the farmer. It could be the fact that for delivering in 
different-sized units; we are delivering to different-sized 
elevators; we are further from the river; we are closer to the 
river; we are closer to a processor; the rail line only handles 
so many sized cars or so big cars or comes whether you are on a 
short line or a full line.
    The business demands; the profit potential that the 
businesses on that rail line or river, they have different 
profit levels that they care to work at. I cannot agree that 
the marketing loan is the only reason that it would depress 
prices. There are just too many other market forces at play 
here.
    The Chairman. If I just might jump in, Mr. Anderson, your 
countercyclical proposal suggests using a base period of 1993 
to 1997. The National Corn Growers is saying 1996 to 2000. Is 
there any reason for that difference at all that I do not know 
about, or is that just----
    Mr. Litterer. We just had to pick a number someplace, Mr. 
Chairman, and that was the last five years of the present Farm 
bill.
    Mr. Anderson. That we tried to move back far enough in time 
that we would not come up with a distorted picture that would 
hopefully be WTO-compliant, which many of the indications now 
are that they will not be, but that just leads to more 
discussion.
    The Chairman. I am glad that most of you, in your 
testimony, mentioned the Foreign Market Development Program and 
the Market Access Program. We have very little power on this 
committee in terms of our trade. That falls in the purview of 
the Finance Committee. There are a couple things that we can 
do, and both of those, in my own view, have been underfunded 
and have not been used to the best benefit of our farmers. We 
will be looking at ways of beefing those up, and again, if any 
of you have thoughts or suggestions on that, please let this 
committee know down the road.
    That really does conclude all of the questions I have. 
Senator Lugar.
    Senator Lugar. I would just like to follow through, Mr. 
Chairman, talking about the LDP for a minute. One of the pieces 
of testimony we have had, and I just want to test this out and 
the validity of it, is that all of those--take the corn LDP, 
$1.89 generally. A good number of people have testified that 
the marginal cost of an additional bushel of corn production 
comes in at much less than $1.89. As a result, if you are a 
very efficient farmer, and you have got a cost structure of 
that variety, there is some incentive to plant more.
    Now, this is even at the $1.89, as Pat Roberts had pointed 
out when we first thought of this; at the time of the Farm bill 
five or six years ago, most people felt we would not be hitting 
that, but as you have pointed out in your testimony, we have 
hit that and hit some others, and you have got an LDP payment 
of $3 billion for all crops 1 year; $5 billion and $7 billion 
this year, so that is a big component right now of the 
spending. It leads many farmers to say well, obviously, the 
price is going down sort of in a secular way. However you 
express the overproduction situation, that is part of it if you 
have a static foreign trade business.
    I am just wondering how the use of the LDP, even though it 
has certainly been an important safety net feature, affects the 
planning decisions and the continual erosion of the price? I 
appreciate the work put in the Corn Growers' paper trying to 
rationalize or rebalance the equities through a revenue base as 
opposed to trying to pick each country elevator, and you have 
highlighted a technical point which is very important. All of 
these county decisions, the difficulty of USDA working through 
that history which may lead to considerable inequities for 
farmers who are in the wrong place at the wrong time and go two 
counties abreast to try to find a situation that is a better 
one for them; you sort of got rid of that.
    How about the LDP as a concept? Is it encouraging 
overproduction and deliberately, as a policy, depressing price? 
Does anybody have a view on that?
    Mr. Litterer. Well, I agree. It does to a degree, and I do 
think the loan rate variability between commodities, and I 
guess I am picking on soybeans a little bit here their rate is 
relatively higher, and so, it probably does drive a little more 
production to them is our view.
    You know, to say that it is the only factor that is driving 
production, I do not know that I would go that far, but it is 
one of the things that we were looking at and, again, trying to 
look at a different way of handling some kind of a support for 
farmers without encouraging production of one particular crop 
over another by those rates.
    Senator Lugar. As I understand it, you sort of meld 
together revenue from every source, whether it is barley or 
sorghum or what have.
    Mr. Litterer. Right.
    Senator Lugar. A 5-year average of some sort comes into 
play, a fairly recent average as opposed to the seventies or 
what have you, as I understand it.
    Mr. Litterer. Well, we are using both. We are suggesting a 
continuation of an AMTA payment based on the 2002 year as one 
payment, as a PFC payment, and then also updating the base and 
yield history for the countercyclical proposal, which then, we 
think, would be fully decoupled.
    Senator Lugar. You have an AMTA payment in there.
    Mr. Litterer. Right.
    Senator Lugar. That remains. At what level?
    Mr. Litterer. At the 2002 rate in the present Farm bill.
    Senator Lugar. 2002 is sort of straight-lined out for 10 
years or----
    Mr. Litterer. Five years, whatever the----
    Senator Lugar. Whatever the length of the Farm bill. Then, 
on top of that, this countercyclical payment that is based 
essentially on the market prices of five years.
    Mr. Litterer. Plus that supplemental AMTA portion or the 
market loss payments in addition to the marketing loan or LDP 
rates that were paid in over that 5-year period.
    Senator Lugar. You have estimated now over the 10-year 
period or the 5-year period, this comes out to about $36 
billion more or about $7.2 billion a year.
    Mr. Litterer. Yes.
    Senator Lugar. I do not know--the 10-year projection, 
whether that takes you out to $7.2 billion or----
    Mr. Litterer. Actually, the projection that Agrilogic did 
shows that our costs are substantially below some of the other 
proposals at about $5.2 billion, and we think that allows for 
some funding in other programs: conservation, rural development 
those kind of programs which we think are also an essential 
part of a comprehensive farm bill.
    Senator Lugar. Yes, but that is where we get into this 
competition that we were discussing earlier on as to----
    Mr. Litterer. Right.
    Senator Lugar [continuing]. How your proposal works out. I 
am just trying to think aloud. Let us say that we were to 
accept theoretically your idea, but at the end of the day, 
well, we said there is $73.5 billion, and we have already used 
X for conservation; a little bit for rural development; 
research, and we have got some other crops involved, too. 
Instead of $36 billion for five years, we are down now to $27 
billion or something like that.
    Now, to what extent, using your formulas, can you begin 
tweaking the system so that you pick up the general concept of 
parity or fairness among everything----
    Mr. Litterer. Well, I guess what you are asking is would we 
be willing to accept a much lower income threshold?
    Senator Lugar. Well, I am not really asking that, because 
you would have to say no, but on the other hand----
    [Laughter.]
    Senator Lugar [continuing]. All I am saying is at the end 
of the day to some extent, I suppose the chairman and I and 
other members of the committee, there is nothing sacred about 
$73.5 billion; why not go for $100 billion? In essence, after 
all, it is just a transfer payment from one set of taxpayers to 
another, albeit from 250 million to 2 million, say, but why 
not? Try it out for size.
    Mr. Klein. I would like to just comment a little bit. As 
Mr. Harkin said before--or Mr. Chairman, I guess; I am sorry; 
you were 19 days, and then, you quit for awhile, I remember 
that.
    The Chairman. Right.
    [Laughter.]
    Mr. Klein. Anyway, if we do rural economic development 
correctly, we will be picking up some of that profit in the ag 
sector, and then, we do not need as much. This whole thing goes 
hand-in-hand. If we have something where the facilities that 
process the grain or whatever we raise into the finished 
product to get us closer to the grocery store shelf for the 
consumer, the profit comes from that. Then, we do not need as 
much to come from this committee. That is the long-term goal of 
our organization is to get us to that. It is just like----
    Senator Lugar. It is the moving parts philosophy that this 
thing has dynamic aspects, not fixed, but you get some success, 
and it helps you somewhere else.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. It sounds like both of your goals 
are the same, American Corn and National Corn. You both say 
your goals are the same. It is just that the pathway of getting 
there is different.
    Mr. Dittrich wanted to say something. Go ahead.
    Mr. Dittrich. Yes, Senator Lugar; to answer your question 
about loan rates and LDPs and whether or not they increase 
production, I would refer back to our document the Findings of 
Congress, which says that the realities of the marketplace are 
that individually, farmers have no ability to impact supply. 
Therefore, they attempt to maximize output regardless of price, 
regardless of loan rates. They maximize output at all times.
    To look at ending stocks and surpluses, our key indicators 
points out that in the 1980 to 1984 period, ending stocks as a 
percentage of usage were at 29 percent, and average farm price, 
non-inflation-adjusted, was $2.83. Inflation-adjusted was 
$4.83. Today, the 2001 projections are that ending stocks 
percentage of use at 17 percent, and that will increase some 
because of USDA's productions in exports going back down to the 
average of 1.8 to 1.9 billion bushels a year that they have 
been for the last 25 years, and we have an average U.S. farm 
price of $1.90 a bushel.
    That is a very interesting situation, where we have ending 
stocks substantially lower than we did in the 1980-1984 period, 
but inflation-adjusted, our price is less than half. I would 
tend to say that there are other things driving market price.
    The Chairman. Yes; let me see if I understand. You said 
that our ending stocks are lower now?
    Mr. Dittrich. Yes.
    The Chairman. Than they were 15 years ago?
    Mr. Dittrich. As a percentage of usage.
    The Chairman. As a percentage of usage?
    Mr. Dittrich. Yes; in 1980 to 1984, that 4-year period, 
ending stocks were at 29 percent of usage, and the average U.S. 
farm price was $2.83; inflation-adjusted, $4.83. Today, the 
2000 projections--these are USDA projections--are at 17 
percent, but they will increase more than that, because USDA 
has revised their export projections downward, and our average 
U.S. farm price is $1.90 a bushel.
    We have half the ending stock supply--or not half, a little 
less than that.
    The Chairman. Yes.
    Mr. Dittrich. A dramatically lower price. Obviously, supply 
and demand is not functioning properly. We would contend to 
look at price support loan rates and how they have helped 
encourage market prices and driven market prices.
    The Chairman. You said it was $1.90. I am sorry; I have got 
to turn to Mr. Roberts, but $1.90, what was it when the ending 
stocks were an average of 29 percent?
    Mr. Dittrich. $2.83.
    The Chairman. $2.83?
    Mr. Dittrich. Yes, and inflation-adjusted, $4.83, and our 
exports that year were within averages. They were around 2 
billion bushels. They average over the years 1.8 billion to 2 
billion bushels over the last 25 years.
    The Chairman. That is interesting. Thank you.
    Senator Lugar. Can I just rebound? We need to analyze 
carefully--and you made a very interesting point, although 
there are a lot of reasons for inflation in the world outside 
of agriculture in that period, and likewise, different changes 
in the use of things, but the basic point, though, that you 
made to begin with is that farmers do not control, obviously, 
the price, and so, they maximize planting, and that is an 
important point, because they would probably be right with many 
farm operations.
    Now, another thing you could do without suggesting that 
people follow one of the plans that I have had for my farm is 
as opposed to planting additional acreage that I gather would 
be marginal in terms of corn and soybeans, why, we planted 
walnut trees, or we have gone into other alternative 
situations. Now, that is a different time dimension in terms of 
income. Some farmers would say well, I cannot wait for 60 years 
for that veneer market to come along. I have got a more short-
term problem with the next 60 days.
    I mean, there are alternative ways of doing this as opposed 
to planting more corn and beans. My point is just simply that 
we are into a situation in which we are attempting to support 
income; trying to contrive, whether it is an LDP or something 
better than this, some way of shoring this up. In doing so, if 
we increase production well beyond any known markets for it, 
granted, we might get bonanzas tradewise or some other thing 
breaks through, and more ethanol in California and the rest, 
why, that will work out.
    Absent that, people have to make decisions not to allocate 
their resources to something that is likely to be less 
profitable. The question is how do we construct the incentives 
so that those sorts of decisions are more likely to be made? I 
will study, as will the chairman, very carefully all of the 
testimony again. I have read it with great profit last evening 
and once again today as you spoke.
    The Chairman. Thank you very much, Senator Lugar.
    Senator Roberts.
    Senator Roberts. Both of my colleagues have asked most of 
the pertinent questions that I had on my mind. I want to ask a 
little question about our efforts to achieve some progress, any 
progress, in the WTO, and there has been a lot of talk, a lot 
of discussion, a lot of rhetoric, about the green box, amber 
box commitments. I have always been one who, gosh, I do not 
know how many speeches I have made on behalf of a consistent 
and aggressive export policy; then, you try to define what that 
is, our market share, which has fallen rather dramatically.
    The President's trade initiative; sanctions reform; the 
value of the dollar; certainly, increasing the budget for FAS 
and getting us much more aggressive; as a Dodge City farmer 
told me one time, we have got to start taking a gun to a knife 
fight. Then, you get into all sorts of problems with the 
alleged free market. Then, the distinguished chairman will 
point out that you cannot do it all by trade.
    I would say that the bloom is off the lily, really, in farm 
country with this trade. I do not think they have any problem 
with the goals of a strong trade policy, but how many years has 
it been now that we have been on the decline, and they think it 
is sort of a siren song; when are we going to get there from 
here, Pat? You know, you have been talking about this for a 
long time. It does not mean that we do not try, and we do not 
try to piece together a much better program. Senator Nelson 
indicated the Export Enhancement Program. His predecessor's 
predecessor was the one Ed Jurinsky was the one who was so 
instrumental in the Export Enhancement Program. Now, we do not 
think that is the proper tool to play.
    Having said all of that, do you think when Congress is 
crafting the commodity title of the Farm bill, and you had to 
choose between a priority, would you put as much money as you 
could into the commodity title as possible, or should we try to 
fulfill our commitments in regard to WTO and get back to the 
table and hang tough and know when to hold them and fold them?
    Mr. Klein. Our first obligation is to our U.S. producers, 
and we are going to stick with that. While we have to look----
    Senator Roberts. We hope we can do both but----
    Mr. Klein. Well it is where it fits after the producer 
viability comes in. We will fight that battle afterwards. We 
obviously cannot create something called multifunctionality 
here, because the Europeans beat us to it, but, well, that 
gives a whole new box, does it not?
    Senator Roberts. Well, Secretary Glickman, my good friend 
and buddy, mentioned that in Seattle, about multifunctionality, 
that the Europeans use that, i.e., rural America is a great 
place to live if you can make a living and all of the factors 
that go into that. I do not think it is an either-or argument, 
but then, on the other side of it, it seems that we hear this 
debate. I would hope we could do both, and I would hope we 
could achieve some progress. I have no illusions about that. It 
is a tough, tough battle.
    Yes?
    Mr. Dittrich. Senator Roberts, we suggest that the current 
trade negotiations refocus their efforts on shared production 
cuts if needed at times, because there is a valid concern that 
if we cut production here that other countries will expand 
production, although Darrell Ray, I believe, has mentioned that 
South America will increase their soybean production even if 
the price goes to zero, or you have to go to zero or below zero 
to stop the production increases.
    We think that redirecting those attempts at world trade to 
that of international food reserves and market agreements would 
be much more beneficial to agriculture as a whole in this 
country and around the world instead of competing in an ever-
vicious downward spiral of price to the last one that stands. 
The reality is that we need all the world's production at this 
point. We are using most all of the world's production. We have 
some carry-over stocks, but the reality is most of the stocks 
are being used, and in a system where we compete until the last 
one stands, the reality is the United States agricultural 
production is still needed and still used.
    We can drive the thing to the bottom of market price, or we 
can decide to set up fair market prices that everyone can agree 
on. Sure, South America will still cut our price and undercut 
us on price and sell theirs as fast as they can, because they 
do not have the infrastructure to store, but that being the 
case, we will still sell our production.
    Senator Roberts. I will use you as a lead negotiator with 
the French.
    Tony.
    Mr. Anderson. We would have to stand by the safety net 
issues, considering that, again, going back to the unfinished 
agenda. You know, we are basically a market-oriented group. We 
want access to the rest of the global market. We have tried 
everything under the sun to fit into the WTO agreements through 
the sanitary and phytosanitary fights and all of that. The 
concern is that if we do not have a safety net in place, and 
producers utilize it properly, that there will be even fewer 
producers to deal with in the future than there are today; 
maybe an economic trend that we cannot stop nor should we, but 
that is a discussion for somewhere outside of these walls.
    Again, I do not know that the discussion as you raise here 
would have to be mutually exclusive. That there are ways that 
we can work to have both.
    Senator Roberts. We will try to come up with a different 
crayon, whether it is amber or green or orange or green, see if 
we can maybe work that out.
    Mr. Anderson. OK.
    Senator Roberts. Mr. Miller.
    Mr. Miller. We probably agree with Mr. Anderson that both 
pieces are necessary; that we certainly see the need for some 
support; at the same time, we think that the ultimate long-term 
solution is in free trade. We think that U.S. farmers can 
compete internationally if the playing field is level. We do 
not think in a lot of instances it is, and responding a little 
bit to Mr. Dittrich, who is involved in this issue, too, 
nowhere in any submission or discussion from us will you find 
us advocating cheap prices on commodities.
    I am a processor. I do not make any more money per bushel 
of wheat that I grind whether it is $5 wheat or $3 wheat. In 
fact, I would prefer that wheat prices not be at their current 
low levels, because the security of my choice of quality and 
the reliability and predictability of that crop is better in a 
strong demand market than it is in a weak demand market or one 
that is unnaturally volatile because of Government 
intervention.
    To say that I resist paying more than any of my competitors 
for wheat, that is correct, but to say that I want cheap wheat 
is really incorrect. As a processor, my margin is not different 
based on those two different prices of wheat. However, if I am 
faced with competition from foreign countries, for example, in 
pasta, where they have a subsidized rate that I cannot compete 
with here, then, I have to try to go into my domestic market 
and try to make our wheat price competitive with a subsidized 
product, be it wheat or pasta, in this case, from a foreign 
country; that, I cannot live with.
    If the playing field is equal, then, I am actually 
personally somewhat in favor of a higher wheat price, because 
it is a healthier supply chain for me. Finally, sometimes in 
our discussions of these issues, we try to create good guy-bad 
guy scenarios rather than recognize the fact that the things we 
have in common are so much overwhelmingly more than those 
things that we do not have in common.
    Our coalition members are supportive, even though prices 
are perhaps artificially low right now, we are advocating 
change and change that in many instances would raise price to 
us in the marketplace where we would pay more. We think that 
some of the policies artificially depress prices. That is not 
advantageous to us or the producers.
    As we look at these issues, we need to be cautious that we 
are not trying to assign blame or virtue on one side or the 
other but recognize the commonality of our interest.
    Senator Roberts. Ms. Evans.
    Ms. Evans. Speaking again for the barley industry, and I do 
feel that we are somewhat unique in the situation of our 
declining acreage and our total competition with the EU 
subsidies in the barley world market; I would feel that we 
would put a priority on sustaining the domestic policy as we 
have it. One of the concerns as we have drawn up our policy 
dealing with the WTO amber versus green box, one of the 
concerns that I have personally had is we develop a 
countercyclical or whatever program we finally come up with, 
and it fits into the top level of that box; what then precludes 
the EU saying fine, then, we will just develop our program the 
same, and we will use $60 billion in our amber box, and barley 
would be right back in the same boat we have been through this 
whole last series.
    That is my concern with it. It is something we have talked 
about, but for right now, we are still on the policy that we 
need to protect our producers domestically here at home as our 
priority.
    Senator Roberts. Bill.
    Mr. Kubecka. From sorghum's position, and we have discussed 
this from a board perspective, and our deal is that we have an 
obligation to WTO, and as long as we are going to participate 
in that, we will abide by those rules, although that does not 
mean that individually, everyone agrees with that, but that is 
generally our policy statement. We also have, more or less 
accepted the fact that I do not know that we are going to have 
to worry about that anyway because of the budget.
    [Laughter.]
    Mr. Kubecka. That is basically our board's position and 
what our discussion has been on it.
    Senator Roberts. Mr. Chairman, I did not mean to pose this 
as an either-or question. That is sort of how it came out. In 
today's discussion that the flavor of the folks these people 
represent is important. I know you have experienced this, and I 
know Senator Lugar has, that when we discuss whether our 
colleagues from other countries, possible solutions in regards 
to subsidies, unfair trade competition, boy, it is tough 
sledding.
    I remember in Brussels and talking to Franz Fischler and 
the head of the European Farmers Union trying to get some 
progress on the three Bs; biotech and beef and--what was the 
other one?--oh, bananas. As a matter of fact, I said could we 
at least discuss about the three Bs, and they looked at me and 
said oh, you are the guy who was pushing the double-AMTA 
payments. You know, you are amber; you are red, as a matter of 
fact. You are not even amber.
    It went downhill from there and----
    [Laughter.]
    Senator Roberts [continuing]. You know, the French 
representative of the farmers union group said in France, we 
only discuss two Bs, Bridgette Bardot. I told him at her age, 
she needed a little biotech help, but that is another----
    [Laughter.]
    Senator Roberts. I am sorry to have done that to you. Go 
on.
    The Chairman. That is all right.
    Senator Roberts. I am through.
    The Chairman. Do you have anything else, Senator? Well, if 
there is nothing else, any last comment or something before we 
hammer it closed here?
    It has been a good session this morning. I thought we had a 
good exchange of ideas and a good discussion. There are many 
things that we have got to consider. As you can see, we have a 
tough task ahead of us. Although it is challenging, we might 
come out of this with interesting and good policies that will 
move us forward agriculturally in this country.
    I see great possibilities out there. I would close by just 
saying that from my standpoint, if, in fact, we have got to 
look at more domestic use, we cannot eat much more in this 
country. In fact, obesity has become a problem in this country. 
We must find some different ways of processing food and 
different things like that, but if we are going to have more 
domestic use, I come full-circle back and say that, well, why 
not energy? It seems to me you win every way on that one. We 
cut down on foreign imports; it is environmentally sound; it 
cleans up greenhouse gases; provides better farm income; does 
not hurt Mr. Miller and the other part of the food chain that 
is out there.
    It seems to me that the more I hear, the more I am thinking 
that we have got to focus on energy and put more of our 
agricultural products over a certain amount that has to go for 
food and fiber and get it into energy production in this 
country. That is domestic use; it keeps our consumers happy in 
terms of their food dollar and the amount that they spend; does 
not add to inflation; in fact, I would say that it would 
actually contribute to lowering inflation by helping to bid 
down the price of imported energy.
    That is just my thinking at this point in time is that we 
have to move more in the energy area, and I do not know if 
anyone wants to say anything more about that, but with that, 
the committee will stand adjourned--I thank you all very much--
until the call of the chair next week. When is the next 
hearing? Next Tuesday at what time? Nine in this room. Thank 
you very much.
    [Whereupon, at 12:06 p.m., the committee was adjourned.]
      
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                            A P P E N D I X

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