[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





        IMPROVING SIZE STANDARDS FOR SMALL FARMERS AND RANCHERS

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

                                HEARING

                               before the

             SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           NOVEMBER 19, 2015

                               __________

     
     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                 

            Small Business Committee Document Number 114-031
              Available via the GPO Website: www.fdsys.gov
              
              
                                  ______

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                         CHRIS GIBSON, New York
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        CARLOS CURBELO, Florida
                          MIKE BOST, Illinois
                         CRESENT HARDY, Nevada
               NYDIA VELAZQUEZ, New York, Ranking Member
                         YVETTE CLARK, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                       BRENDA LAWRENCE, Michigan
                       ALMA ADAMS, North Carolina
                      SETH MOULTON, Massachusetts
                           MARK TAKAI, Hawaii

                   Kevin Fitzpatrick, Staff Director
            Stephen Denis, Deputy Staff Director for Policy
            Jan Oliver, Deputy Staff Director for Operation
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Carlos Curbelo..............................................     1
Hon. Grace Meng..................................................     2

                               WITNESSES

Hon. Mike Bost, (IL-12), United States House of Representatives, 
  Washington, DC.................................................     4
Nicholas D. Paulson, Ph.D., Associate Professor, Agricultural and 
  Consumer Economics, University of Illinois at Urbana-Champaign, 
  Urbana, IL.....................................................     6
Mr. Jeff Beasley, Co-owner, Beasley & Sons Livestock, Creal 
  Springs, IL, testifying on behalf of the National Cattlemen's 
  Beef Association...............................................     7
Mr. Larry Burgin, Owner, Mushkoday Farm, Delhi, NY, testifying on 
  behalf of the National Council of Farmer Cooperatives..........     9
Mr. Robert Guenther, Senior Vice President, Public Policy, United 
  Fresh Produce Association, Washington, DC......................    11

                                APPENDIX

Prepared Statements:
    Hon. Mike Bost, (IL-12), United States House of 
      Representatives, Washington, DC............................    18
    Nicholas D. Paulson, Ph.D., Associate Professor, Agricultural 
      and Consumer Economics, University of Illinois at Urbana-
      Champaign, Urbana, IL......................................    20
    Mr. Jeff Beasley, Co-owner, Beasley & Sons Livestock, Creal 
      Springs, IL, testifying on behalf of the National 
      Cattlemen's Beef Association...............................    28
    Mr. Larry Burgin, Owner, Mushkoday Farm, Delhi, NY, 
      testifying on behalf of the National Council of Farmer 
      Cooperatives...............................................    33
    Mr. Robert Guenther, Senior Vice President, Public Policy, 
      United Fresh Produce Association, Washington, DC...........    37
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.
 
        IMPROVING SIZE STANDARDS FOR SMALL FARMERS AND RANCHERS

                              ----------                              


                      THURSDAY, NOVEMBER 19, 2015

                  House of Representatives,
               Committee on Small Business,
      Subcommittee on Agriculture, Energy and Trade
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2360, Rayburn House Office Building. Hon. Carlos Curbelo 
[chairman of the subcommittee] presiding.
    Present: Representatives Curbelo, Huelskamp, Gibson, Brat, 
and Meng.
    Chairman CURBELO. Good morning. I call this hearing to 
order.
    Next week, Americans will gather around tables across the 
country in an abundance of goodwill for one another to 
celebrate a time-honored tradition, Thanksgiving. America's 
oldest holiday is inextricably linked to American agriculture. 
Approximately 46 million turkeys, 2 billion bushels of wheat, 
and 750 million pounds of cranberries will be consumed. And I 
will note that Florida makes significant contributions to our 
nation's generous bounty that we will all enjoy and share with 
our friends and families over the Thanksgiving holiday. Florida 
is the country's largest producer of squash, fresh tomatoes, 
and fresh snap beans, among a great deal of other fruits and 
vegetables. Obviously, this would not be possible without the 
hard work of our nation's small farmers and ranchers. So I 
think it is a fitting time that this Subcommittee is discussing 
legislation that will help ensure that they have access to 
federal programs and are given appropriate consideration by 
federal agencies.
    Today, the Subcommittee on Agriculture, Energy, and Trade 
will examine H.R. 3714, the Small Agriculture Producer Size 
Standards Improvements Act of 2015, introduced by our 
colleague, Mr. Mike Bost of Illinois. Small business size 
standards are used by the Federal Government to determine 
eligibility to receive certain federal contracts and Small 
Business Administration guaranteed loans. They are also used by 
federal agencies when they analyze the economic impact of new 
regulations on small businesses.
    The existing size standard for agricultural enterprises, 
$750,000 in annual receipts, is established in statute and has 
not been updated in 15 years. It applies to 46 different 
agricultural subsectors from citrus groves to beef cattle 
ranching. In contrast, the size standards for all other 
industries are developed through a congressionally mandated 
rulemaking process that is transparent and allows small 
businesses to provide input. The Small Business Administration 
analyzes a number of factors--average firm size, startup costs, 
and entry barriers, industry competition, and the distribution 
of firms by size--and then proposes changes to small business 
size standards through the notice and comment rulemaking 
process.
    It seems to me that small farmers and ranchers have been 
neglected for too long. The size standards setting process for 
agricultural enterprises needs to be modernized. The existing 
statutory size standard does not account for changes in 
industry structure, cost of production, economic conditions, or 
other factors. That is why I am proud to join Ranking Member 
Meng in cosponsoring H.R. 3714, which was introduced by 
Representative Bost. The Small Agriculture Size Standards 
Improvements Act of 2015 would strike the $750,000 statutory 
size standard and require the SBA to establish size standards 
for agricultural enterprises through the notice and comment 
rulemaking process. It would also require those size standards 
to be periodically reviewed at least every 5 years. This will 
ensure that size standards for small farmers and ranchers are 
up-to-date so that they are able to compete for federal 
contracts, have access to SBA guaranteed loans, and are 
considered when agencies draft new regulation.
    I want to thank Mr. Bost and Ranking Member Meng for their 
legislation and the witnesses for appearing before the panel 
today. I look forward to hearing your thoughts on this 
important legislation.
    With that, I yield to the ranking member for an opening 
statement.
    Ms. MENG. Thank you, Chairman Curbelo.
    Small businesses play a critical role in the American 
economy. They make up the vast majority of employer firms and 
create nearly two-thirds of new jobs. Over the years, Congress 
has created numerous federal program set-asides, tax 
preferences, and SBA loan programs to help these small 
businesses succeed. However, the advantages confirmed by these 
programs have led to heated debate over who is truly a small 
business and acceptable small business size standards to govern 
eligibility.
    Last year, small business were able to access over $28 
billion in capital using SBA loan programs. Many businesses 
used loan proceeds to keep their doors open, retain employees, 
and create new jobs. Small business-oriented tax provisions 
allow firms to write off expenses quickly, putting money back 
in their hands to create new avenues for growth. One of the 
most significant impacts size standards have is on federal 
agency regulatory changes that have the potential to cause 
financial hardships to small businesses. The Regulatory 
Flexibility Act requires agencies to assess whether the rule 
they are contemplating would have a significant economic impact 
on a substantial number of small entities. If a business is not 
considered small, agencies are under no requirement to review 
the impact that regulatory changes would have on small firms, 
nor offer alternatives.
    Generally, SBA is tasked with defining size standards that 
establish eligibility for its programs and the applicability of 
reg flex. While the agency has crafted size standards for over 
1,100 individual industries, agriculture has been exempted. 
Instead, Congress has set a rigid gross revenue base standards 
for all agriculture industries. Unfortunately, the standard has 
not been adjusted since it was statutorily set to $750,000 in 
the year 2000 and is now woefully out of date.
    Since Congress took over setting the standard, agricultural 
production has shifted dramatically. The midpoint for crops has 
grown 88 percent from 589 acres to 1,105, and as of 2011, farms 
with at least 2,000 acres now account for 34.2 percent of crop 
land. Additionally, with the advent of new technologies, many 
operating agricultural businesses have been able to increase 
their production rates.
    Yet, during this time there has also been a reduction in 
the number of small and mid-size farms as crops have been 
consolidated or absorbed by larger farms. According to research 
by the U.S. Department of Agriculture, the number of farms with 
at least $1,000,000 in sales grew from 24 percent of the value 
agricultural production in 1982 to 59 percent in 2007. During 
this period, small commercial farms with $10,000 to $250,000 in 
sales, fell by two-thirds.
    Properly determining small farm size standards is 
particularly important for New Yorkers. Most of the farmers in 
my home state of New York occurs on smaller farms, and this 
discrepancy across the various sectors of the agriculture 
industry limits opportunities.
    The Small Agriculture Producer Size Standards Improvements 
Act introduced by Congressman Bost, Chairman Curbelo, and 
myself, will eliminate the outdated size standard in the year 
2000. The bill gives the SBA the authority to tailor standards 
to the wide variety of agricultural businesses across our 
country. What is small for a cattleman is not the same for 
fresh produce producers or dairy farmers. Our bill will require 
SBA to apply their current methodology, solicit feedback from 
industry stakeholders, and implement specific standards that 
can be tweaked periodically to respond to changes in the 
industry.
    Today, we will examine how the current size standards are 
impacting small farms in the real world. We will discuss how 
H.R. 3714 will help bring agricultural size standards into the 
21st century. It is my hope that H.R. 3714 will give the SBA 
the tools necessary to set size standards for those in 
agricultural production that are reflective of their industries 
while ensuring that adjustments are done with careful 
consideration as to the effects on smaller farms.
    In advance of the testimony, I want to thank all the 
witnesses who traveled here today for both their participation 
and insights into this important topic. Welcome, Congressman 
Bost.
    Thank you, and I yield back, Mr. Chairman.
    Chairman CURBELO. Thank you, Ms. Meng.
    If Committee members have an opening statement prepared, I 
ask that they be submitted for the record.
    I would like to take a moment to explain the timing lights 
for all of you. You will each have 5 minutes to deliver your 
testimony. The light will start out as green. When you have 1 
minute remaining, the light will turn yellow. Finally, at the 
end of your 5 minutes, it will turn red, and I ask that you try 
to adhere to that time limit.
    Our witness for the first panel is someone we know quite 
well around here, the Honorable Mike Bost from Illinois. As a 
member of both the House Committee on Small Business and the 
House Committee on Agriculture, Mr. Bost has worked hard in 
Congress for small and family-owned farms. Last month, Mr. Bost 
introduced H.R. 3714, the Small Agriculture Producer Size 
Standards Improvements Act of 2015 in an effort to ensure farms 
have access to the small business programs that help many of 
them blossom.
    Mr. Bost, we look forward to your testimony. You are now 
recognized for 5 minutes.

 STATEMENT OF THE HONORABLE MIKE BOST, UNITED STATES HOUSE OF 
                        REPRESENTATIVES

    Mr. BOST. Thank you, Chairman Curbelo and Ranking Member 
Meng. Thank you for inviting me to testify here today on the 
Small Agriculture Producer Size Standards Improvement Act. My 
comments will be brief for the sake of everybody's time and so 
that we can begin hearing from the panelists that are behind us 
and that are on the next panel.
    President Eisenhower once said, ``Farming looks mighty easy 
when the plow is a pencil and you are a thousand miles from a 
corn field.'' Unfortunately, the quote is accurate for 
describing the statutory established size standard for 
agriculture producers.
    Agriculture production is an important contribution to the 
American economy. According to the USDA, the total value of 
farm products exceeds $390 billion, and the agricultural 
industry supports 16 million domestic jobs. Farmers and 
ranchers provide the food, fiber, and fuel that is critical to 
our daily lives.
    Family-owned farms will account for the majority of farms 
and ranches in the United States. However, the event of new 
technology has greatly increased productivity, leading to a 
lower price for many commodities. This pressure on commodity 
prices is expected to grow as newer technologies are adopted. 
Farming and ranching are a low margin industry. This has led to 
a consolidation of many single-family owned operators and 
operations into larger, multifamily-owned operations, but these 
operations remain small businesses.
    Unfortunately, the current small business size standard for 
agriculture has been set in statute and is outdated. The 
standard is too low for a vast majority of farms and ranches to 
participate in potential government contracting and 
subcontracting opportunities. In addition, the stationary 
standard has no rational basis. It appears that the numbers 
were just picked out of the air by some previous Congress.
    In the 30 years since its enactment, the statutory size 
standard, the Small Business Administration has significantly 
improved its process for determining small business size 
standards. This should address whatever issue previous 
Congresses had when it established the statutory size standard.
    I believe it is important that Congress and the federal 
agencies promote consistency in policymaking. My legislation 
will help to ensure that consistency.
    Once again, Chairman Curbelo and Ranking Member Meng, I 
want to thank you for holding today's hearing and for being 
original cosponsors of the bill. I also want to thank and 
welcome your questions now, and I will be glad to answer any 
questions.
    Chairman CURBELO. Thank you, Representative Bost. I have a 
long list of questions.
    Mr. BOST. Oh, good. I was looking forward to those.
    Chairman CURBELO. But I understand you have another 
important meeting----
    Mr. BOST. I do.
    Chairman CURBELO.--that you have to get to. Is there 
anything else that you have for the record?
    Mr. BOST. No. I want to thank you for bringing this up 
before the Subcommittee, and I would encourage everybody for an 
aye vote to try to move it on to the Full Committee. Thank you.
    Chairman CURBELO. Again, I would like to thank 
Representative Bost for testifying before the Subcommittee this 
morning, and now we will pause for a moment to have the second 
panel seated. Thank you.
    [Recess]
    Chairman CURBELO. Welcome to all of you. Our next witness 
is Dr. Nicholas Paulson, associate professor of Agricultural 
and Consumer Economics, at the University of Illinois at 
Urbana-Champaign. Dr. Paulson's research interests include 
agricultural finance, farm, and risk management and crop 
insurance. Dr. Paulson received his Ph.D. in Economics from 
Iowa State University.
    Our second witness is Mr. Jeff Beasley, co-owner of Beasley 
and Sons Livestock in Creal Springs, Illinois. Mr. Beasley's 
business is located in Mr. Bost's district. This morning, Mr. 
Beasley will be testifying on behalf of the National 
Cattlemen's Beef Association.
    The next witness is Mr. Larry Burgin, owner of Mushkoday 
Farm in Delhi, New York. Mushkoday Farm is a fifth-generation 
family-owned dairy farm. Today, Mr. Burgin will be testifying 
on behalf of the National Council of Farmer Cooperatives.
    And now I yield to our ranking member for the introduction 
of the next witness.
    Ms. MENG. Robert Guenther is a senior vice president of 
Public Policy for United Fresh Produce Association, 
representing the fresh fruit and vegetable industry before 
Congress, the administration, regulatory agencies, and the 
media. Prior to United Fresh, Robert's political career spanned 
the halls of Capitol Hill and federal agencies, working for 
former Representative Gary Condit and at the Environmental 
Protection Agency. Highly regarded for his bipartisan approach 
and strategic advocacy initiatives, Robert has been appointed 
to numerous prestigious positions, including the Board of 
Directors of the North American Dispute Resolution Corporation, 
the Minor Crop Farm Alliance, the USDA Agriculture Policy 
Advisory Committee on Trade for Fruits and Vegetables, and the 
Food and Drug Policy Forum Editorial Advisory Board. Welcome.
    Chairman CURBELO. Thank you all for being here.
    Dr. Paulson, you are recognized for 5 minutes.

STATEMENTS OF NICHOLAS D. PAULSON, PH.D., ASSOCIATE PROFESSOR, 
AGRICULTURAL AND CONSUMER ECONOMICS, UNIVERSITY OF ILLINOIS AT 
  URBANA-CHAMPAIGN; JEFF BEASLEY, CO-OWNER, BEASLEY AND SONS 
    LIVESTOCK; LARRY BURGIN, OWNER, MUSHKODAY FARM; ROBERT 
 GUENTHER, SENIOR VICE PRESIDENT, PUBLIC POLICY, UNITED FRESH 
                      PRODUCE ASSOCIATION

                STATEMENT OF NICHOLAS D. PAULSON

    Mr. PAULSON. Thank you. Good morning, Mr. Chairman, Ranking 
Member Meng, Subcommittee members, staff, and observers. I 
would like to thank you for the invitation and opportunity to 
address the Subcommittee as part of this hearing. My testimony 
today will focus on the Small Business Association's current 
size standard for agricultural businesses and the 
appropriateness of adjusting those standards as outlined in 
H.R. 3714.
    Given my background, I will be addressing this issue from a 
commodity crop farm perspective and will include some specific 
examples for a corn and soybean farmer.
    I would first like to comment on commodity prices and the 
current size standard of $750,000 per year. This standard is 
fixed by statute and has not been updated for the past 15 
years. Over that time period, the average price received by 
farmers for many major commodities has increased dramatically. 
For example, the national average price received for corn from 
2010 to 2014 was 149 percent higher than the average from 2000 
to 2004. Average soybean prices have also increased by 123 
percent. Average barley, oat, rice, sorghum, and wheat prices 
have all also increased by over 100 percent over that time 
period. For the producers of these crops, higher price levels 
have increased sales values even if no real changes have been 
made to the scale of their farm operations.
    Consider a representative corn and soybean farmer in the 
U.S. The current standard would have implied a maximum small 
farm size of nearly 3,000 acres when the standard was initially 
established. Over the next 5 years, using projected corn and 
soybean prices, the maximum size for a small corn and soybean 
farmer will have fallen to just under 1,450 acres, or roughly 
half the size of what was considered a small farm when the 
standard was established.
    While this example is specific to a corn and soybean farm, 
there would be a similar impact for producers of all other 
crops whose prices have increased over the past 15 years.
    The increase in sales levels can also be illustrated 
nationally for all farms. The 2012 Census of Agriculture 
reports that the number of farms with at least $500,000 in 
sales increased by more than 38,000 operations, and the number 
of farms with at least $1,000,000 in sales increased by more 
than 24,000 operations since 2007.
    These figures suggest a significant number of farms have 
shifted beyond the current size standard, losing eligibility 
status for SBA programs with higher price levels and natural 
responses that these farms must be generating more income and 
have less need for SBA programs. However, production expenses 
have also increased dramatically. According to USDA data, total 
expenses have increased by 97 percent for all farms and by over 
200 percent for grain farms in the U.S. since 2000.
    While U.S. farm income has been higher in recent years, 
current baseline projections provide a short-term outlook with 
price levels below what has been experienced recently for most 
major commodities. With higher production costs, this implies a 
return to much lower income levels for producers of many of 
these crops.
    Again, a specific example of a corn and soybean farm may 
help to illustrate crop budget data from my colleagues at the 
University of Illinois shows a significant increase in 
production costs, and the average farmer returns for corn and 
soybeans were negative in 2014 and are currently projected to 
be negative for this year and for 2016. As production costs 
have risen, the working capital and credit needs of farmers has 
also increased. Debt use in terms of total dollars has 
increased significantly over the past 15 years. The average 
current or short-term liability balance per U.S. farm has 
increased more than 90 percent, while noncurrent liabilities 
have increased by 50 percent. The increase in debt use on U.S. 
grain farms is even more pronounced with an increase of over 
200 percent since 2000. This provides yet another reason to 
carefully consider the size standard as the current definition 
can severely limit eligibility for SBA programs during a time 
of critical need for a significant number of farm operations.
    Finally, I would like to make the Committee members aware 
of the precedent for adjustments to sales-based size 
definitions used in agriculture. In 2010, the USDA revised the 
definitions of their size typology categories to reflect the 
structural changes which had occurred over the preceding 15 
years. The large family farm threshold was increased to 
$1,000,000 per year in sales, shifting more than 64,000 
operations into the small farm typology category. The main 
justification cited for this revision was a significant 
increase of 41 percent in the producer price index from 1995 to 
2010. The PPI for farm products has further increased by more 
than 16 percent since 2010.
    I hope the points that I have outlined and that are 
included in my written testimony have convinced the 
Subcommittee members that sales-based size standards for 
agriculture should, at a minimum be periodically considered for 
adjustment. Higher commodity prices have significantly 
increased sales levels for U.S. farms, and production expenses 
and debt needs have also been on the rise. Thus, it is critical 
to have an appropriate definition in place for small 
agricultural businesses to ensure continued access to and 
eligibility for SBA programs.
    I urge the Committee to carefully consider this issue as 
deliberations proceed. Thank you again for the invitation to 
address the Committee, and for your time as part of this 
hearing.
    Chairman CURBELO. Thank you for your testimony, Dr. 
Paulson.
    Now, Mr. Beasley, you are recognized for 5 minutes.

                   STATEMENT OF JEFF BEASLEY

    Mr. BEASLEY. Good morning, Mr. Chairman, Ranking Member, 
and members of the Subcommittee. My name is Jeff Beasley from 
Creal Springs, Illinois, and I am the co-owner of Beasley and 
Sons Livestock. It is my pleasure to be here today on behalf of 
our family farm and the National Cattlemen's Beef Association.
    Nearly a century ago, my great grandfather and his siblings 
purchased land that remains the core acreage of the Beasley 
Farm in Southern Illinois. The farm was passed down to my 
grandfather and my father, and over 20 years ago, I joined the 
family farm. Raising beef cattle is a way of life that we love, 
but we must also be financially successful to continue our 
family's legacy.
    Our farm has grown and expanded significantly over the 
years. De pending on the year and circumstances, we have been 
caring for anywhere between 2,000 to 4,000 head of cattle per 
year on several hundred acres of our own land, in addition to 
leasing and managing two other farms.
    The changes to agriculture in my lifetime have been 
overwhelming and hard to fathom to say the least. As any 
business, I must accept the reality that we are in a family 
business, and to sustain the business, we have to earn a profit 
on what we have invested. I truly believe that farming and 
ranching is the quintessential ``small business,'' and we 
should be recognized as such in regard to business regulations 
that can greatly impact us.
    The amount of capital that we are required to manage these 
days is almost mindboggling. Costs of production have soared. 
It takes a good amount of equipment and facilities to manage 
and care for the cattle, and that comes at a hefty price tag. 
Feed costs, grass and crop seedings, fencing, equipment, 
maintenance and labor costs all add up significantly, not to 
mention the cost of purchasing cattle.
    While I consider a cattle operation the size and structure 
of ours as a small business, the dollars that we must spend and 
manage far exceed what Congress considers an agricultural small 
business. The current definition is not reflective of today's 
agricultural industry and limits our ability to operate on a 
level similar to other nonagricultural businesses. For us to be 
able to pass along the family farm, we need regulations that 
are modernized, fair and equitable, and that is what I am 
seeking today.
    The outdated size standards of the Small Business Act 
clearly do not reflect modern agriculture. An average farmer in 
1987 would have been eligible for a loan through the Small 
Business Administration by not exceeding the statutory limit of 
$500,000. However, the average farm value in 2012 would vastly 
exceed the current statutory limit of $750,000. The Small 
Business Administration should have the authority to adjust 
statutory limits on a regular basis by using data from the 
Census of Agriculture, as well as other data provided by the 
U.S. Department of Commerce.
    American agriculture is a prime example of an industry that 
has evolved to meet market demands by embracing technology, 
making necessary investments, overcoming natural disasters, and 
becoming more efficient than previous generations. Most of our 
international competitors also face similar risk but the one 
advantage American agriculture has had over the years has been 
our access to credit. The majority of agricultural financing is 
conducted through private local banks, the Farm Credit System, 
USDA-backed credit programs, and other government loans. Our 
industry appreciates access to these credit opportunities, but 
it is important to realize that agriculture has evolved over 30 
years into businesses that are more diversified in order to 
face less volatility on the balance sheet.
    Agriculture is a unique industry because we provide a basic 
necessity--food. History is full of stories of nations rising 
and falling by not having access to basic needs. The United 
States has seen its population of farmers fall from 16.5 
percent of the total population in 1950, to 1 percent of the 
population in 2012. At the same time, U.S. agriculture 
production has grown exponentially from $109 billion in 1950 to 
$279 billion in 2012.
    Unlike previous generations who had very little job options 
other than the family farm, today's agriculture industry 
primary consists of an educated workforce that wants to engage 
in agriculture. Due to the enormous startup and operational 
costs, it is very difficult for new people to enter the 
agriculture industry. Even though UDA has programs to assist 
young farmers and new farmers, many times those loans are not 
great enough to cover the necessary cost. There is no silver 
bullet that can solve this problem. A common sense approach 
should be applied to small business loans to provide the 
agricultural sector greater access for small business programs.
    I appreciate the Subcommittee's interest and time to have 
this hearing today on how small businesses like our family's 
cattle farm could accurately be represented within the 
definitions of the Small Business Administration. Enacting the 
Small Agriculture Producer Size and Standards Improvement Act 
is a step in the right direction to recognize small 
agricultural businesses.
    Thank you for inviting me to be here today, and I look 
forward to your questions later on.
    Chairman CURBELO. Thank you very much, Mr. Beasley.
    Mr. Burgin, you are now recognized for 5 minutes.

                   STATEMENT OF LARRY BURGIN

    Mr. BURGIN. Chairman Curbelo, Ranking Member Meng, and 
members of the Subcommittee, my name is Larry Burgin and I am 
honored to be here today.
    Among with my two oldest songs, I milk 150 cows in Delhi, 
New York. We also grow corn for silage, hay, and other crops on 
our 300 acres.
    I market my milk through Dairy Farmers of America, a 
national milk marketing cooperative. DFA is a proud member of 
the National Council of Farmer Cooperatives, who I am 
representing here today.
    Farmer coops handle about 80 percent of the nation's work 
production.
    New York is a diverse agricultural state, and is the 
nation's third largest producer of milk behind California and 
Wisconsin. New York's dairy industry is also diverse in both 
farm size and management style. It has approximately 5,600 
dairy farms that range from 10 cows to several thousand cows.
    In the last 5 years, New York's milk production has 
increased about 10.5 percent compared to 8.8 percent growth 
nationally. Milk cow numbers, however, have declined by 
approximately 1 percent. Since 2008, New York dairy cows have 
increased their individual milk production from under 20,000 to 
over 22,000 pounds per cow. Producing more milk with less cows 
is due to better herd management and efficiencies gained 
through better genetics and feed rations. This is a trend we 
have experienced on our dairy over the past several decades, as 
well as nationally.
    USDA's average milk production numbers demonstrate the 
industry's increased efficiency. In 1970, the U.S. dairy herd 
of 12 million cows was spread across nearly 650,000 dairy 
farms. That herd produced approximately 10,000 pounds of milk 
per cow per year. In 2012, 9.2 million cows residing on less 
than 60,000 dairy farms produced more than double that amount. 
This increase in productivity means that farms that were once 
considered small may be too large to qualify for Small Business 
Administration loan programs.
    The dairy industry and my farm's success year over year are 
dependent upon a number of factors I have outlined in my 
written testimony, but I would like to note that increased 
production costs over the past 20 years have been driven by 
higher input, labor, and land costs. Because of those varied 
factors, on-farm income varies from year to year. In 2009, the 
dairy industry went through a period of historic low milk 
prices. Dairy farms struggled and a farm my size would have 
qualified for SBA benefits. Jump to 2014. Record-high milk 
prices would have pushed my farm above the SBA threshold. In 
comparison with farms in New York and other parts of the 
country, my dairy would be considered a smaller operation. But 
the growing efficiency of the dairy herd and volatility of milk 
prices would sometimes skew my farm's status with the SBA.
    USDA's average all-milk price for 2009 was $12.81 per 100 
weight. An average producing dairy in New York could have had 
up to 260 cows before it breached the SBA threshold of 
$750,000. In 2014, when the average milk price was almost $24, 
140 cows with an average production would have likely have been 
too big.
    Mr. Chairman, in 2009, a Florida dairy farm with about 280 
cows would have been considered small by the SBA, but by 2014, 
that number would have decreased to about 150. Farming can 
change dramatically from year to year and generation to 
generation. Therefore, federal programs meant to support an 
industry need to be revised periodically in order to 
appropriately reflect those changes.
    Through the years, my farm has grown in size. It has grown 
to allow me to spread out expenses and to allow for more family 
member involvement. It has also helped to ensure my wife and I 
were able to provide for our family, but the growth in size was 
not directly commensurate with the growth in income. Like other 
businesses, input costs always seemed to rise and margins to 
shrink. SBA programs should acknowledge these unique aspects of 
agriculture in order to be a partner in our success.
    I appreciate the House Small Business Committee taking 
interest in this issue. I support the Small Agriculture 
Producer Size Standards Improvements Act of 2015 introduced by 
Mr. Bost and supported by members of this Committee. The 
dynamics of today's farms and farmers, especially those who 
farm as their sole source of income, have changed dramatically. 
I believe the SBA size standards should reflect those changes.
    Thank you for allowing me to be here today. I would be 
pleased to take any questions.
    Chairman CURBELO. Mr. Burgin, thank you very much for your 
testimony.
    Votes have been called, but what we are going to do is take 
Mr. Guenther's testimony. Then, we will recess the Committee 
and we will reconvene it at the conclusion of votes.
    So Mr. Guenther, you are now recognized for 5 minutes.

                  STATEMENT OF ROBERT GUENTHER

    Mr. GUENTHER. Thank you, Chairman Curbelo and Ranking 
Member Meng. My name is Robert Guenther. I am the senior vice 
president of Public Policy for United Fresh Produce 
Association.
    As you know, United Fresh is the national trade association 
representing the entire distribution chain of fresh fruits and 
vegetables production, including growers, shippers, wholesale 
distributors, processors, and retailers. Since 1904, United 
Fresh has worked with Congress and the administration to help 
shape legislative and regulatory policies, to provide strong 
business climate for our members that encourages growth and 
development. We thank you for the opportunity to address an 
issue that impacts the ability of many of our United Fresh 
members to utilize key programs designed to assist small 
businesses as they seek to develop and diversify their 
operations. As you know, United Fresh provided testimony last 
year when this Subcommittee looked at the issue of the size 
standards used by the Small Business Administration. We would 
also like to commend Representatives Bost and Meng, along with 
Chairman Curbelo, for introducing H.R. 3714, to modernize the 
small business size standards for farmers and ranchers by 
permitting SBA to update methodologies in setting size 
standards.
    For a variety of reasons, such as changes in the economy or 
fluctuation in commodity prices, the number of agriculture 
producer operations classified as small businesses has been on 
a continual decline, even though many of these operations made 
no significant changes that would otherwise justify a 
reclassification. Taking into account the current agriculture 
business models, a standard many times higher than the current 
$750,000 in annual receipts would be the norm in today's 
agriculture community. More importantly, fruit and vegetable 
producers, like producers of other commodities, will tell you 
that annual gross receipts are not a reliable indicator of an 
operation's size. Nor is it a good indicator of profitability, 
in light of the cost of inputs and labor, which in fruit and 
vegetable production is significant.
    In addition to being an unrealistic representation of many 
agriculture operations, the current SBA standards put 
agriculture small business operators at a disadvantage in their 
ability to avail themselves of assistance that they could 
utilize to grow and adapt their operations. The current 
$750,000 size standard applied to agriculture operations limits 
small agriculture producers' access to SBA assistance programs 
and federal contracting preferences for small prime and 
subcontractors. Key SBA programs that may prove useful to 
produce operations include loans to start, acquire or expand a 
small business or loans that provide long-term, fixed-rate 
financing for assets such as land or buildings, among others.
    As you are aware, in the United Fresh testimony from 2014, 
we suggested that Congress and the administration consider 
alternatives that would eliminate the current standard and 
allow SBA to review industries currently considered to be small 
agriculture producers. Following that review, SBA could then 
propose new size standards through the normal regulatory 
process which would allow agriculture operators to comment and 
provide recommendations for a new standard. United Fresh 
believes that such a proposal would allow SBA to routinely 
review and update the standard and keep pace with the 
variations in the agriculture community such as changes in the 
commodity markets. As a result, the correct and appropriate 
size standard will be in place, better allowing producers to 
have access to SBA programs and ensure agriculture producers' 
needs are better reflected in a variety of regulatory 
initiatives. In addition, in 2014, we also suggested, and still 
believe, that it would be very helpful if there was greater 
harmonization of standards used by SBA and the U.S. Department 
of Agriculture. For example, USDA uses acreage as a 
determination factor of how an operation is categorized. We 
believe that is a more accurate indicator of whether a business 
can be considered small and should be incorporated in any 
determination of what category an agriculture operation should 
be included.
    While we still believe that such an initiative by SBA would 
bring about needed changes to size standards that apply to 
farmers and ranchers, we also believe that H.R. 3714 would also 
result in a much-needed modernization of agriculture size 
standards that reflect present-day farm operations and the 
current farm economy, and we support its passage. We also 
estimate that approximately 10 to 15 percent of our members 
would have better access to SBA programs if this legislation 
were enacted.
    Again, thank you, Chairman Curbelo, Ranking Member Meng, 
for holding this hearing and for allowing me to share United's 
position with you today. We look forward to working with you, 
and I will be happy to take any questions.
    Chairman CURBELO. Thank you very much, Mr. Guenther, for 
your testimony, and all of you for your testimonies and for 
sharing your personal stories. After votes, we will open it up 
to member questions. I assume we will be back sometime around 
11:20 perhaps. 11:20, 11:30 at the latest, hopefully.
    So with that, we will adjourn, and we will reconvene after 
votes.
    [Recess]
    Chairman CURBELO. The hearing is called back into order. 
Thank you all for your patience, and I thank my colleagues for 
their cooperation.
    I have a question. Mr. Guenther, in June, the Subcommittee 
held a hearing that focused on current challenges affecting 
small citrus growers, including a bacterial disease called HLB 
or citrus greening. The cost of producing an acre of citrus 
have increased from $850 to $2,250 due to the cost of treating 
trees to fight HLB. It seems to me that if size standards were 
periodically reviewed by SBA, they could account for the 
increased cost of producing crops. This is a major concern in 
my area. Do you agree?
    Mr. GUENTHER. Definitely, Chairman Curbelo. I mean, I think 
this is a huge issue down in Florida, and as you know, and from 
the hearing you did this summer, it is spreading to Texas, 
California. I mean, this is a widespread issue that is really 
affecting the country's citrus industry in particular.
    I will give you a personal perspective that I mentioned 
earlier to some folks. My family is a small citrus farm in 
Florida. I talked to my parents just in the last week and my 
father is kind of, you know, he has got greening and he has 
decided to probably try other products, like peaches and 
persimmons because it is just not viable right now because of 
the increased costs in terms of keeping a citrus operation 
running. So, I mean, I just had that conversation.
    Chairman CURBELO. And you view this legislation as a 
potential solution for those growers?
    Mr. GUENTHER. Exactly. Exactly. Because it gives them more 
diversity in terms of potential programs. It helps them keep 
those crops viable.
    Chairman CURBELO. Thank you very much.
    I would like to now recognize the ranking member for 
questions.
    Ms. MENG. Thank you, Mr. Chairman.
    I had a question in general. Well, one of Mr. Guenther and 
then anyone who would like to answer.
    One of the major advantages of having SBA set size 
standards for the agriculture industry is increasing 
eligibility for the agency's 7(a) and 504 loan programs. Is 
access to capital something small produce farms or any farm 
struggles with? And how can SBA's program fill the gap in the 
USDA loan programs?
    Mr. GUENTHER. Very good question. I think where there are 
opportunities that a vast majority of farmers use a lot of the 
different programs at USDA. But there are, you know, kind of 
those areas where the Small Business Administration or the 
Small Business loan and grant programs that they have can also 
supplant kind of infrastructure investments and things like 
that that potentially can help them build and increase 
infrastructure areas that potentially USDA cannot apply for.
    So I think, again, to the point we were just talking about 
this legislation, provides, you know, if it was passed and put 
into law, it provides opportunity for a much broader set of 
agriculture, small agriculture producers to benefit from SBA 
that really cannot right now. They are limited in terms because 
of the size issues related to that.
    Ms. MENG. Thanks. Anyone else?
    Mr. BEASLEY. I would address that. In my statement, I 
mentioned that we have access, all in agriculture, to private 
local banks--Farm Credit, and USDA, for example. However, this 
would give us an alternative, an additional option. One thing 
that we have found--and we deal with local banks, local 
community banks--access to financing is more difficult now than 
it used to be, and that is primarily because of federal 
regulations on the banking industry affecting the smaller 
banks. So because their hands are, I will say ``tied'' to some 
extent, and they have trouble dealing with the regulations, 
that is sort of passed on to the farmers like myself, and 
Larry, in having to deal with these banks. So not that we still 
do not have that opportunity, but being able to work with the 
SBA would give us an additional option. And I think could prove 
to be very beneficial.
    Mr. BURGIN. I would like to comment on that as well. I 
think the SBA would be able to offer producers help in 
developing business plans and such for expansions or moving 
into on-farm processing or on-farm marketing as well.
    Ms. MENG. The last time SBA was in control of agricultural 
size standards it tried to reduce the definition to just 
100,000 in revenue, which promoted Congress to step in. What is 
your level of confidence that the SBA will do a better job this 
time around? And if you had a wish list, what is your advice to 
give them to ensure that your industries are accurately 
assessed?
    Mr. BURGIN. I would like to speak to that. I believe that 
each one of the agricultural industries is very unique in its 
scope and size of operations and therefore, the standards 
should be reviewed for each one of those industries to give 
each producer in each one of those industries the access to the 
SBA funding and counseling that is available.
    Mr. BEASLEY. I would agree with the statement. What we see 
is that we just have so many restrictions now. For example, 
let's say that we wanted to diversify our family operation. If 
we want to go through Farm Credit, they are focused on 
agriculture only. But let's say that my family wanted to take 
its beef operation and expand, maybe do retail, restaurant, 
grocery, whatever. Through Farm Credit, that might not be a 
possibility. With SBA, we could possibly work with them. So 
that, again, gives us more opportunities to diversify and have 
additional finance. So, again, I just think that would be truly 
a good benefit for us.
    Ms. MENG. Thank you. I yield back.
    Mr. GIBSON. Well, thank you. I will yield myself 5 minutes 
and say that I really appreciate this hearing. Thank you very 
much for the testimony. I think it has been very informative.
    And I want to say to Mr. Burgin, who is a constituent of 
mine, how proud I am of him and also his family. I think 
farmers represent all that is good in our country, and I think 
you made a very compelling case why sticking with $750,000 does 
not make sense. Just because, as you pointed out, just given 
the business cycle of what the 100 weight is going for, you 
will either be eligible or not eligible potentially several 
times in one year. So that is really not the level of certainty 
that we want to have for our business plans going forward.
    My question is, for the record, I would love to hear from 
Mr. Burgin and Mr. Beasley to talk about how you leverage 
federal programs in general because I think this is very 
important for the American people to hear the public-private 
partnership. I think it is very important that an independent 
nation needs to be able to grow and consume ideally locally, 
but certainly, produce its own food. And that is one of the 
reasons why we work so hard on a farm bill which we do in 
collaboration with small business, but I think it will be 
worthwhile to hear from both of you how you engage federal 
programs to ensure the viability of your programs.
    We will begin with Mr. Burgin, and then Mr. Beasley.
    Mr. BURGIN. Well, our farm accesses federal programs mainly 
through the MPP program at this point. It provides us with an 
insurance for our business. Over the past several years, we 
have done quite a bit of reinvesting in our business, and 
investing in new technology, and the MPP program allowed us to 
have an insurance, so to speak, that if milk prices took a 
severe downturn, or the margin caused by milk prices being 
reduced, if those margins decreased, that we would have enough 
cash flow in our operation to cover our commitments to the 
financing required for those assets. We also do participate in 
the countercyclical programs through USDA as well for the row 
crop portion of our operation as well.
    Mr. BEASLEY. We, likewise, utilize a lot of USDA services. 
Primarily, we have worked with FSA, Farm Service Agency. They 
helped administer the drought--the Disaster Assistance Program. 
Probably more so, we work with NRCS, National Resource 
Conservation Service. They have been valuable because one thing 
that is important to farmers and ranchers is to conserving the 
soil, the land. That is what we make our living off of. We 
certainly do not want to abuse it and there are some good tools 
working within RCS to help us make it more sustainable. So I 
think it is great that we have those options and there are some 
good programs. I guess while I have the opportunity, I will say 
there is a bit of a downside and sometimes working through the 
federal agency there are a lot of hoops to jump through. Time 
is not always of the essence seeming with them, whereas it may 
be of the essence with the farmer to try to get something 
accomplished. So make it more user friendly, for lack of a 
better term, I think would be helpful to farmers like 
ourselves. But certainly, they play a role in helping our 
operations. NRCS has been out at my farm several times this 
year as we are implementing some conservation practices that 
are vital to the long-term future of our farm. So I think that 
is very important.
    Mr. GIBSON. I appreciate the testimony of both you 
gentlemen, indeed. It echoes or mirrors some of the things I 
hear when I am out there all the time, mentioning on 
conservation, how important these programs are. They are 
incentivizing to make these practices that are good for our 
business plans and also good for the earth. And I think it also 
showcases farmers who are premier conservationists, and I think 
that helps us when we get into conversations about, as you 
indicated or alluded anyway, Mr. Beasley, sometimes when 
government may be very aggressive or looking to move down an 
angle, say with like Waters of the U.S. And when I engage on 
your behalf, I say, ``Look, no one is a stronger 
conservationist than farmers because they know that if they 
ruin their land, they basically ruin their business plan. So 
thank you for making that testimony for the record.
    And Dr. Paulson, can you give me an example of some factors 
present today that were not present 15 years ago when these 
standards were set in stone that have significantly impacted 
prices and how these changes have affected financial reporting 
for small farms?
    Mr. PAULSON. So I would say maybe the biggest factor from 
the price perspective is just the amount of volatility that 
exists in the market, and this is kind of echoing some of the 
statements that were made and some of the other panelists' 
responses. I covered how price levels have increased for many 
major commodities, but it is really the level at which we can 
see those prices vary. And your comment about how dairies may 
move in and out of the standard within a year, that is very 
true for crop producers as well.
    Some of the market factors that I think have been big for 
crop production would be some areas of additional demand that 
have been created, both on the export side and for some 
alternative domestic uses for crops, and that has created 
higher competition for land across all commodities and just 
increase that volatility factor in addition to moving market 
prices up.
    Mr. GIBSON. Well, I thank you. And before we close, what I 
would like to do is give each of you an opportunity to have a 
moment for the record. I mean, we have already got good records 
of what you have said so far, but this is going to be shared 
far and wide, not only within the Committee and the 
professional staff, but it is available then for colleagues as 
we move bills towards the floor.
    So really, I want to start with Mr. Guenther, and just 
allow you to make any closing remarks that can be germane to 
this bill or anything else you think you would want to share to 
members of Congress.
    Mr. GUENTHER. I usually have a lot to share with members of 
Congress. I do want to thank the Committee for allowing us to 
testify, allowing to hear from producers across the country, 
different parts of agriculture to, you know, this issue is very 
important to a lot of producers and a lot of people within the 
agriculture community. You know, trying to make sure good, 
common sense legislation is passed that helps our federal 
regulatory agencies really address key issues that are 
important to us. So, again, we want to thank you for the 
opportunity to do this as always and we think this bill is 
extremely important to move forward through the House and 
hopefully through the Senate to be implemented in near future.
    Mr. GIBSON. Thanks, Mr. Guenther.
    Mr. Burgin?
    Mr. BURGIN. I would echo what Mr. Guenther has said in 
terms of the importance of this SBA legislation. I think from 
the perspective of our farm, the thing that is most concerning 
to us right now is the Waters of the U.S. that the EPA is 
imposing upon us, and quite frankly, I do not know about Mr. 
Beasley, but on our farm, that scares us half to death because 
of what it could do to our operation.
    I would like to thank this Committee for allowing me the 
opportunity to testify here today as well. Thank you.
    Mr. GIBSON. Thanks, Mr. Burgin.
    Mr. Beasley?
    Mr. BEASLEY. I will agree with him on the WOTUS comment. I 
think this legislation that Mr. Bost has put forward is very 
important.
    If you were to come to our farm, you would see that it is a 
small business. It is myself, my father. We have two full-time 
employees, one part-time employee. But we are, as I mentioned 
in the statement, the quintessential small business by all 
means. The $750,000 threshold, however, is way below the level 
of business that we do. So this has definitely got to be 
addressed. I think it has got to be raised significantly 
because to think that I would not fall under the category of a 
small farmer I think is ridiculous. So that definitely needs to 
be given consideration, raised substantially, and to make 
farmers like Mr. Bergen and myself eligible for SBA 
consideration.
    So I want to thank you all for hearing our testimony. It 
has been an honor to be here today, and I appreciate your time 
and consideration.
    Mr. GIBSON. Thank you. And well said.
    Dr. Paulson?
    Mr. PAULSON. So again, I will maybe try to give a crop 
producer's perspective on this. In addition to working with 
crop producers in Illinois and throughout the Midwest, I also 
grew up on a corn and soybean farm. And as I was preparing some 
of the numbers in my testimony, I found it kind of coincidental 
how well my family farm kind of fit into that acreage example 
that I showed where in 2000, my father would have been 
considered a small farm. His farm has not changed, but because 
of what we have seen with commodity prices, he would no longer 
be considered a small farm by the definition under statute. So 
I would just like to reiterate some of the point that have 
already been made, but just the fact that we have had 
increasing prices but on also the expense side, the need, the 
sheer volume that farmers need in terms of working capital, 
farmers are literally working with twice as many dollars, and 
in the short-term it looks like we are back to very low 
margins. So just the need for access to credit is very 
critical. So I think it is a very important time to reconsider 
this definition and set it at an appropriate level.
    Thank you.
    Mr. GIBSON. Thank you, Doc. Before we close, does the 
ranking member have any final comments?
    Ms. MENG. No. I just want to thank all of you for being 
here, and obviously, to Congressman Bost and Chairman Curbelo 
for pushing this and supporting this important piece of 
legislation. As a New York City member, I obviously do not have 
farms in my district, but as a New Yorker, and as a mom of two 
children, I thank you for your work.
    Mr. GIBSON. Well, that is awesome. And we appreciate that 
very much that we show a united front on all of this.
    I want to thank all the witnesses for taking time away from 
their businesses to participate in today's hearing. It was, 
indeed, very informative. I am proud to be a cosponsor as well, 
and I know the chairman and the ranking member will be 
recommending to Chairman Chabot that the Committee on Small 
Business markup H.R. 3714 as soon as possible.
    And I ask unanimous consent that members have 5 legislative 
days to submit statements and supporting materials for the 
record.
    Without objection, so ordered.
    And I would also like to wish all the panelists here a very 
Happy Thanksgiving. We certainly are very thankful for you. And 
with that, this hearing is adjourned.
    [Whereupon, at 12:04 p.m., the Subcommittee hearing was 
adjourned.]



                            A P P E N D I X


     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Chairman, Ranking Member, and members of the 
subcommittee, my name is Jeff Beasley and I am the co-owner of 
Beasley & Sons Livestock from Creal Springs, Illinois. It is my 
pleasure to testify before your subcommittee to discuss my 
family's beef cattle operation. Nearly a century ago my great-
grandfather, along with his four siblings and families came 
together to purchase the land that remains as the core acreage 
of the Beasley Farm in Southern Illinois. Times were really 
tough then for my family and the older children worked for 
friends and family to earn enough money, over time, to fulfill 
their hope of farming their own land. The siblings worked 
together to grow crops and hay, raising cattle, hogs, horses 
and mules. Over the next several decades, they were able to 
scratch out a living and provide for their families, but had 
achieved what they set out to do, and that was farm the land 
they owned and raise livestock. My grandfather, his brother and 
cousin helped work the farm, and eventually the farm was passed 
down to them. Then my grandfather and father became proprietors 
of the farm together. I remember helping work on the farm as a 
boy, then as a teenager and then as a young man. More than 
twenty years ago I joined my father in working and managing the 
farm. Our dream of raising beef cattle and crops is now a 
reality; we pursued the goal of living the life and work that 
we loved, yet knowing that it was a business that must be 
financially viable to survive.

    Our farm has grown and expanded significantly over the 
years. Depending on the year and circumstances, we have been 
caring for anywhere between 2,000-4,000 head of cattle per year 
on several hundred acres of our own land in addition to leasing 
and managing two other farms. Because of our love for raising 
cattle, well over ninety percent of our farm income is derived 
from cattle sales. We are focused on growing grass, raising and 
feeding beef cattle that we know consumers around this country 
and the world need and desire as their delicious and healthy 
source of protein.

    The legacy of the Beasley's cattle raising continues, but 
the changes to agriculture in my lifetime have been 
overwhelming and hard to fathom to say the least. Living and 
working on a cattle farm is a wonderful way of life, and a 
great place to raise a family. You must have a strong desire, 
passion and good work ethic to accept this challenge of raising 
livestock. I've never had anyone tell me they got into 
agriculture to get rich, but rather because they loved doing 
this work. However, we in agriculture can't live solely on 
dreams. We must accept the reality that we are in a business, 
and to sustain the business we have to profit on what we have 
invested I truly believe that farming and ranching is the 
quintessential ``small business''. We should be recognized as 
such and we need to be treated as such, in regard to business 
regulations that can so greatly affect us.

    The amount of capital that we are required to manage these 
days is almost mind boggling. Costs of production have soared. 
It takes a good amount of equipment and facilities to manage 
and care for the cattle, and that comes at a hefty price tag. 
Feed costs, grass and crop seedings, fencing, equipment, 
maintenance and labor costs all add up significantly. This 
doesn't even take into account the cost of purchasing cattle.

    So while I consider a cattle operation the size and 
structure such as ours as a small business, the dollars that we 
must spend and manage far exceed what Congress considers an 
agricultural small business. The current definition is 
restrictive and limits our ability to operate on a level that 
other non-agriculture businesses operate. For us to be 
sustainable, to expand and profit in order to pass along the 
family farm, or for young persons to enter and start their own 
farm or livestock enterprise, we need regulations that are fair 
and equitable, and that is what I am seeking today.

    The Small Business Act of 1953 authorized the Small 
Business Administration to establish the standards for 
determining the financial eligibility assistance of small 
businesses. The definition of a small business has been 
somewhat subjective over the years and varies by industry. 
Under the Small Business Act, a small business is determined by 
number of employees, dollar volume of business, net worth, net 
income, a combination thereof, or other factors. The definition 
is meant to be relative to each industry and reflect the 
differing characteristics among industries.

    In effort to keep up with an evolving economy, the Small 
Business Administration has proposed comprehensive size 
standards reform on five different occasions--three of which 
have occurred since the last revision to the agriculture 
standards for SBA loans. In 1984, the Small Business 
Administration proposed changing the definition of `small' to 
farms with cash receipts less than $100,000. Congress responded 
in 1985 by removing SBA's ability to establish a small business 
size standard for agriculture by enacting a statutory level of 
$500,000 that was later increased to $750,000 by Congress in 
2000. The authority to update the standards has not been 
transferred back to the Administrator of the Small Business 
Administration. The Small Agriculture Producer Size and 
Standards Improvement Act is a bill I support to amend the 
Small Business Act and return the authority to the Small 
Business Administration to establish size standards for 
agriculture based on the same process as other small 
businesses.

    Agriculture is one of the oldest industries in the world, 
and many of our daily concerns haven't changed: weather, soil, 
the health of my farm animals, debt, natural disasters, and 
taxes are still my priorities. As a cattle farmer, I adjust to 
the daily challenges and try to be successful given the 
conditions I face. The cattle operation my family owns today 
looks very different from how it started when you consider the 
market conditions and cost of production have changed 
significantly over time.

    The outdated size standards of the Small Business Act 
clearly do not reflect the needs of modern agriculture. Here 
are some comparisons from USDA's 1987 Census of Agriculture and 
USDA's 2012 Census of Agriculture for my state, Illinois (see 
attachment).

 
------------------------------------------------------------------------
                                           1987               2012
------------------------------------------------------------------------
Total Number of Farms                          88,766             75,087
Average Farm Size                           321 acres          359 acres
Farms owned by families                           85%                86%
Farmer as primary occupation                      64%                50%
Average Age of Farmer                  50.4 years old     57.8 years old
Average Value of Farm                        $402,970      $2.26 million
Average Value of Farmland                 $1,262/acre        $6,305/acre
Avg. Value of Farm Equipment                  $60,935           $203,192
Total Farm Expenses                     $4.56 billion     $13.46 billion
Market Value of Products Sold           $6.37 billion     $17.19 billion
------------------------------------------------------------------------


    You can see that many farm operations, like mine, are still 
family owned and operated, but the cost of doing business has 
increased tremendously; as has the average age of the farmer 
has also increased. By this account, an average farmer in 1987 
would have been eligible for a loan through the Small Business 
Administration by not exceeding the statutory limit of 
$500,000. However, an average farm value in 2012 would vastly 
exceed the statutory limit of $750,000 established in 2012. The 
Small Business Administration should have the authority to 
adjust statutory limits on a regular basis by using data such 
as the Census of Agriculture that is conducted every five 
years, as well as other data provided by the U.S. Department of 
Commerce.

    Throughout America's history, our economy has been 
resilient due to our willingness to take risks seeking success 
when previous attempts have failed. In spite of the increasing 
regulatory and tax burdens and the frivolous abuse of the legal 
system, American continues to be a fertile ground for the 
entrepreneurial spirit and multi-generational, family-owned 
businesses. For many Americans, including myself and my family, 
this is our pursuit of happiness and it is the foundation of 
the American Dream; something that each generation has fought 
to protect.

    American agriculture is a prime example of an industry that 
has evolved to meet market demands by embracing technology, 
making necessary and often times risky investments, overcoming 
natural disasters and becoming more efficient than previous 
generations. Most of our international competitors also face 
similar risks, but the one advantage American agriculture has 
had over the years has been our access to credit. The majority 
of agricultural financing is conducted through private local 
banks, the Farm Credit System, USDA-backed loans and other 
government loans. Our industry appreciates access to these 
credit opportunities, but it is important to realize that 
agriculture in the 21st Century has evolved over 30 years into 
businesses that have diversified in order to face less 
volatility on the balance sheet.

    Agriculture is a unique industry because we provide a basic 
necessity--food. History is full of stories of nations rising 
and falling by not having access to basic needs. The United 
States has seen its population of farmers fall from 16.5 
percent of the total population in 1950, to one percent of the 
population in 2012. At the same time, our production has grown 
exponentially from $109 billion in 1950 to $279 billion in 
2012. Imagine that, less than two percent of the U.S. 
population is engaged in agriculture and yet we are able to 
feed America and many other nations. We provide stability that 
most people take for granted.

    Unlike previous generations who had very little job options 
other than the family farm, today's agriculture industry 
primarily consists of an educated workforce that wants to 
engage in agriculture. Even still, the average age of farmers 
continues to increase, and we face a growing trend of 
urbanization that continues to draw the next generation away 
from the farm. Due to the enormous startup and operational 
costs it is very difficult for new people to enter the 
agriculture industry. Even though USDA has programs to assist 
young farmers and new farmers, many times those loans are not 
great enough to cover the necessary costs. So how do we feed 
the entrepreneurial spirit of those who want to stay involved 
or become involved in food production?

    There is no silver bullet that can solve this problem alone 
but one thing our industry has learned over the years is when 
we are confronted challenge we can work together to find a 
reasonable solution. That same common-sense approach should be 
applied to small business loans to provide the agricultural 
sector greater access for small business loan programs. 
Improving the existing tools available through the Small 
Business Administration to modernize definition of a small 
agricultural business. I appreciate the subcommittee's interest 
and time to have this hearing today on how small businesses 
like our family's cattle farm could accurately be represented 
within the definitions of the Small Business Administration. 
Enacting the Small Agriculture Producer Size and Standards 
Improvement Act is a step in the right direction to recognize 
small agricultural businesses. Thank you for inviting me to be 
here today.


     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Thank you Chairman Curbelo and Ranking Member Meng, I am 
Robert Guenther, Senior Vice President of Public Policy for the 
United Fresh Produce Association. As you know, United Fresh is 
the national trade association representing the entire 
distribution chain of the fresh fruit and vegetable production 
including, growers, shippers, wholesaler-distributors, 
processors and retailers. Fruit and vegetable farms account for 
nearly 10 million acres of production with a $57 billion market 
value and nearly 80 percent of fruit and vegetable farms are 
family owned. Since 1904, United Fresh has worked with Congress 
and the Administration to help shape legislative and regulatory 
policies to provide a strong business climate for our members 
that encourages growth and development. We thank you for the 
opportunity to address an issue that impacts the ability of 
many of our United Fresh members to utilize key programs 
designed to assist small businesses as they seek to develop and 
diversify their operations. As you know, United Fresh provided 
testimony last year when this subcommittee looked at the issue 
of the size standards used by the Small Business Administration 
(SBA). We would also like to commend Representatives Bost and 
Meng for introducing H.R. 3714, to modernize small business 
size standards for farmers and ranchers by permitting SBA to 
updated methodologies in setting size standards. And on a 
personal note, I grew up on a small family farm which is 
located in North Central Florida and has focused on citrus and 
nursery production for over 100 years. So this issue does take 
on a personal appeal for me.

    For a variety of reasons such as changes in the economy or 
fluctuations in commodity prices, the number of agriculture 
producer operations classified as small businesses has been on 
a continual decline, even though many of these operations made 
no significant changes that would otherwise justify a 
reclassification. Taking into account current agriculture 
business models, a standard many times higher than the current 
$750,000 in annual receipts would be the norm in today's 
agriculture community. More importantly, fruit and vegetable 
producers, like producers of other commodities, will tell you 
that annual gross receipts are not a reliable indicator of an 
operation's size. Nor is it a good indicator of profitability--
in light of the cost of inputs and labor, which in fruit and 
vegetable production, is particularly significant.

    In addition to being an unrealistic representation of many 
agriculture operations, the current SBA standard puts 
agriculture small business operators at a disadvantage in their 
ability to avail themselves of assistance they could utilize to 
grow and adapt their operations. The current $750,000 size 
standard applied to agriculture operations limits small 
agriculture producer's access to SBA's assistance programs and 
federal contracting preferences for small prime and 
subcontractors. Key SBA programs that may prove useful to 
produce operations include loans to start, acquire or expand a 
small business or loans that provide long-term, fixed-rate 
financing for assets such as land or buildings, among others.

    More importantly when you look at the wide variety of 
programs available at the U.S. Department of Agriculture to 
help fresh produce operations including farm loan programs, 
market promotion and export assistance, technical assistance 
for conservation compliance, nutrition programs, rural and 
infrastructure development, new and beginning farmers, or 
organic programs, we believe it is important to ensure that 
there is a level of consistency between USDA and other federal 
agencies when it comes to a small business definitions.

    Finally, among the most significant challenges that 
agriculture operations face, like any business, is compliance 
with government regulations. Some agencies use SBA size 
standards to assess the impact of their proposed regulations in 
accordance with the Regulatory Flexibility Act. However, the 
current standard for agriculture operations to qualify as a 
small business of annual receipts of no more than $750,000 was 
set by Congress in 2000. As discussed earlier, given the 
enormous changes in agriculture since that time, a review of 
the small business standard, which would provide agriculture 
producers with justifiable regulatory relief, is long overdue.

    As you may be aware, in United Fresh's testimony from 2014, 
we suggested that Congress and the Administration consider 
alternatives that would eliminate the current standard and 
allow SBA to review industries currently considered to be small 
agriculture producers. Following that review, SBA could then 
propose new size standards through the normal regulatory 
process, which would allow agriculture operators to comment and 
provide recommendations for a new standard. United Fresh 
believes that such a proposal would allow SBA to routinely 
review and update the standard and keep pace with variations in 
the agriculture community such as changes in the commodities 
markets. As a result, the correct and appropriate size standard 
will be in place, better allowing producers to have access to 
SBA programs and ensure that agriculture producers' needs are 
better reflected in a variety of regulatory initiatives. In 
addition, in 2014 we suggested and still believe that it would 
be very helpful if there was greater harmonization of the 
standards used by SBA and the Department of Agriculture (USDA). 
For example, USDA uses acreage as a determining factor in how 
an operation is categorized. We believe that is a more accurate 
indicator of whether a business can be considered small and 
should be incorporated in any determination of what category an 
agriculture operation should be included.

    While we still believe that such an initiative by SBA would 
bring about needed changes to size standards that apply to 
farmers and ranchers, we also believe that Reps Bost's and 
Meng's legislation would also result in a much-needed 
modernizing of agriculture size standards that reflect present-
day farm operations and the current farm economy and we support 
its passage. We also estimate that approximately 10 percent of 
our members would have better access to SBA programs if the 
Bost-Meng legislation were enacted. As has been noted, the 
standard for agriculture producers has been updated only once, 
in the year 2000; a review is long overdue. We agree with the 
statement made by the National Council of Farmer Cooperatives 
that Representative Bost and Meng's legislation means that 
``...farmers, ranchers and growers have greater access to the 
SBA's programs and expertise and it will help promote economic 
activity and job growth across rural America.''

    Again, thank you Chairman Curbelo and Ranking Member Meng 
for holding this hearing for allowing me to share United's 
position with you. We look forward to working with you and I 
will be happy to take questions.

                                 [all]