[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]



                REVIEWING THE STATE OF THE FARM ECONOMY

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                        GENERAL FARM COMMODITIES
                          AND RISK MANAGEMENT

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 9, 2019

                               __________

                            Serial No. 116-5




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov



                               __________


                    U.S. GOVERNMENT PUBLISHING OFFICE

36-460 PDF                WASHINGTON : 2019






                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

DAVID SCOTT, Georgia                 K. MICHAEL CONAWAY, Texas, Ranking 
JIM COSTA, California                Minority Member
MARCIA L. FUDGE, Ohio                GLENN THOMPSON, Pennsylvania
JAMES P. McGOVERN, Massachusetts     AUSTIN SCOTT, Georgia
FILEMON VELA, Texas                  ERIC A. ``RICK'' CRAWFORD, 
STACEY E. PLASKETT, Virgin Islands   Arkansas
ALMA S. ADAMS, North Carolina        SCOTT DesJARLAIS, Tennessee
    Vice Chair                       VICKY HARTZLER, Missouri
ABIGAIL DAVIS SPANBERGER, Virginia   DOUG LaMALFA, California
JAHANA HAYES, Connecticut            RODNEY DAVIS, Illinois
ANTONIO DELGADO, New York            TED S. YOHO, Florida
TJ COX, California                   RICK W. ALLEN, Georgia
ANGIE CRAIG, Minnesota               MIKE BOST, Illinois
ANTHONY BRINDISI, New York           DAVID ROUZER, North Carolina
JEFFERSON VAN DREW, New Jersey       RALPH LEE ABRAHAM, Louisiana
JOSH HARDER, California              TRENT KELLY, Mississippi
KIM SCHRIER, Washington              JAMES COMER, Kentucky
CHELLIE PINGREE, Maine               ROGER W. MARSHALL, Kansas
CHERI BUSTOS, Illinois               DON BACON, Nebraska
SEAN PATRICK MALONEY, New York       NEAL P. DUNN, Florida
SALUD O. CARBAJAL, California        DUSTY JOHNSON, South Dakota
AL LAWSON, Jr., Florida              JAMES R. BAIRD, Indiana
TOM O'HALLERAN, Arizona              JIM HAGEDORN, Minnesota
JIMMY PANETTA, California
ANN KIRKPATRICK, Arizona
CYNTHIA AXNE, Iowa

                                 ______

                      Anne Simmons, Staff Director

              Matthew S. Schertz, Minority Staff Director

                                 ______

      Subcommittee on General Farm Commodities and Risk Management

                     FILEMON VELA, Texas, Chairman

ANGIE CRAIG, Minnesota               GLENN THOMPSON, Pennsylvania, 
DAVID SCOTT, Georgia                 Ranking Minority Member
AL LAWSON, Jr., Florida              AUSTIN SCOTT, Georgia
JEFFERSON VAN DREW, New Jersey       ERIC A. ``RICK'' CRAWFORD, 
SALUD O. CARBAJAL, California        Arkansas
                                     RICK W. ALLEN, Georgia
                                     RALPH LEE ABRAHAM, Louisiana

                Mike Stranz, Subcommittee Staff Director

                                  (ii)




                             C O N T E N T S

                              ----------                              
                                                                   Page
Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................    39
Craig, Hon. Angie, a Representative in Congress from Minnesota, 
  submitted statement; on behalf of Ben Scholz, President, 
  National Association of Wheat Growers..........................    43
Vela, Hon. Filemon, a Representative in Congress from Texas, 
  opening statement..............................................     1
    Prepared statement...........................................     2
Thompson, Hon. Glenn, a Representative in Congress from 
  Pennsylvania, opening statement................................     2

                               Witnesses

Huie, Matthew R., Owner, Huie Farms, Beeville, TX................     5
    Prepared statement...........................................     7
    Submitted question...........................................    45
Peterson, Mike, Owner and Operator, Twin Oaks Farms, Northfield, 
  MN.............................................................    13
    Prepared statement...........................................    15
    Submitted question...........................................    45
Sutton, Daniel J., General Manager, Pismo Oceano Vegetable 
  Exchange, Oceano, CA...........................................    18
    Prepared statement...........................................    19
    Submitted questions..........................................    46
Davis, Jr., H. Bart, Owner and Operator, Davis Family Farms, 
  Doerun, GA.....................................................    22
    Prepared statement...........................................    24
    Submitted question...........................................    47

 
                REVIEWING THE STATE OF THE FARM ECONOMY

                              ----------                              


                         THURSDAY, MAY 9, 2019

                  House of Representatives,
         Subcommittee on General Farm Commodities and Risk 
                                                Management,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Filemon 
Vela [Chairman of the Subcommittee] presiding.
    Members present: Representatives Vela, Craig, David Scott 
of Georgia, Carbajal, Peterson (ex officio), Thompson, Austin 
Scott of Georgia, Crawford, Allen, and Conaway (ex officio).
    Staff present: Carlton Bridgeforth, Emily German, Isabel 
Rosa, Mike Stranz, Bart Fischer, Ricki Schroeder, Patricia 
Straughn, Trevor White, Dana Sandman, and Jennifer Yezak.

  OPENING STATEMENT OF HON. FILEMON VELA, A REPRESENTATIVE IN 
                      CONGRESS FROM TEXAS

    The Chairman. This hearing of the Subcommittee on General 
Farm Commodities and Risk Management entitled, Reviewing the 
State of the Farm Economy, will come to order.
    Good morning and thank you for joining us as we look into 
this critical aspect of our economy. Every one of us seated up 
here has heard from farmers in our districts about the bad farm 
economy. Commodity prices are low, input costs are rising, and 
financial pressure is mounting on farmers across this country.
    While we hear so much about the booming state of the 
overall economy, our rural and farm economy continues to 
struggle. We cannot have a successful national economy when 
such a vital component hurts the way our farmers are currently.
    The numbers paint a rough picture. USDA forecasts net 
farming income level for 2019 to be only 77 percent of the 
annual average for 2000 through 2017. It is down 50 percent 
from 2013 alone.
    Inflation-adjusted farm debt is the highest it has been 
since 1980, and the debt-to-asset ratio for farmers is rising 
steadily.
    This hearing offers a glimpse into how the economy has 
affected four particular farms in different parts of the 
country. These are four stories about what the downturn in the 
farm economy means to them.
    The 2018 Farm Bill provided certainty for farmers by 
reauthorizing commodity programs and continuing crop insurance. 
The farm economy is better off because the farm bill passed, 
but is that enough to fix the downturn in the agricultural 
economy?
    In agriculture policy circles, we are always hearing about 
the 1980s. Is the farm economy just as bad as the 1980s? That 
is what we are here to find out.
    We should not stand down just because economic indicators 
today don't look exactly like the run up to the 1980s. We are 
here to consider what can still be done to help struggling 
farmers and truly make this an economy that works for everyone.
    Thank you to all of our witnesses today for sharing your 
perspectives, and I look forward to your testimony.
    [The prepared statement of Mr. Vela follows:]

 Prepared Statement of Hon. Filemon Vela, a Representative in Congress 
                               from Texas
    Good morning, and thank you for joining us as we look into this 
critical aspect of our economy. Every one of us seated up here has 
heard from farmers in our districts about the bad farm economy. 
Commodity prices are low, input costs are rising, and financial 
pressure is mounting on farmers across the country.
    While we hear so much about the booming state of the overall 
economy, our rural and farm economy continues to struggle. You cannot 
have a successful national economy when such a vital component hurts 
the way our farmers are currently.
    The numbers paint a rough picture: USDA forecasts net farm income 
level for 2019 to be only 77 percent of the annual average for 2000 
through 2017. It's down 50 percent from 2013 alone. Inflation-adjusted 
farm debt is the highest it has been since 1980 and the debt-to-asset 
ratio for farmers is rising steadily.
    This hearing offers a glimpse into how the economy has affected 
four particular farms in different parts of the country. These are four 
stories about what the downturn in the farm economy means to them.
    The 2018 Farm Bill provided certainty for farmers by reauthorizing 
commodity programs and continuing crop insurance. The farm economy is 
better off because the farm bill passed, but is that enough to fix the 
downturn in the ag economy?
    In agriculture policy circles, we're always hearing about the 
1980s. `Is the farm economy just as bad as the 1980s?' That's what 
we're here to find out.
    We should not stand down just because the economic indicators today 
don't look exactly like the run-up to the 1980s. We're here to consider 
what can still be done to help struggling farmers and truly make this 
an economy that works for everyone.
    Thank you to the witnesses today for sharing their perspectives, 
and I look forward to their testimony.

    The Chairman. I recognize Ranking Member Thompson for his 
opening statement.

 OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN 
                   CONGRESS FROM PENNSYLVANIA

    Mr. Thompson. Chairman, thank you very much. And thank you 
for holding this important hearing to highlight the state of 
the farm economy.
    It doesn't seem like all that long ago we were in the midst 
of the great recession, but the agricultural economy was 
booming then. Unfortunately, as those involved in agriculture 
know all too well, markets are cyclical and Mother Nature is 
unpredictable.
    Now the rest of the economy is booming, but for our 
farmers, prices have fallen lower and have stayed there longer 
than anyone could have predicted.
    To add insult to injury, over the past couple of years, 
almost every region of the country has seen its share of 
widespread devastation of natural resources, including 
hurricanes, floods, fires, droughts, and even volcanic 
eruptions, just to name a few.
    It was against this backdrop, and in the face of the 
extraordinary budget challenges, that we wrote the 2018 Farm 
Bill. One of those challenges came in the form of our friends 
in the United States Senate who proposed to spend $700 million 
less on farm safety net than proposed by the House, and I was 
proud of the work House Republicans did to finalize a 
conference report that not only protected the farm safety net 
but actually made improvements to farm policy.
    Despite these successes, the current recession in the 
agriculture economy is a sobering reminder that farm policy, 
while incredibly helpful, does not make our farmers and 
ranchers whole.
    In talking to many folks in my district, there are a lot of 
farmers who are either already getting out of the business or 
one bad crop away from being forced to call it quits.
    Now, while there are many factors plaguing our producers 
that are well outside of Congress's control, there are some 
things that we could do now that might provide a modicum of 
relief.
    For example, our friends in the Southeast who were impacted 
by hurricanes and other disasters in 2018, including one of our 
witnesses here today, anxiously await a sign that assistance 
might be on the horizon.
    Congress needs to quickly act to reach a compromise to help 
address the devastating losses so many experienced last year.
    Also, this Congress needs to ratify USMCA, the United 
States-Mexico-Canada Trade Agreement, which would provide some 
certainty for our farmers that are neighbors to the North and 
South who remain the two largest customers of our agricultural 
products. It is now up to Speaker Pelosi to allow ratification 
to move forward, and time is of the essence.
    And finally I want to say a sincere thanks to the witnesses 
who are here today. I know this is a busy time back home for 
all of you, but it is invaluable for Members of this 
Subcommittee to be able to hear your perspectives as we 
consider policies that directly impact you, your farm, your 
families.
    Mr. Chairman, I very much look forward to working with you 
this Congress as we use this Subcommittee to highlight the 
issues that are of vital importance to farmers and ranchers 
across the country. And thank you again for convening this 
hearing, and I yield back.
    The Chairman. Thank you. The chair would request that other 
Members submit their opening statements for the record so the 
witnesses may begin their testimony and to ensure that there is 
ample time for questions.
    I would like to welcome our witnesses. Thank you for being 
here today.
    At this time I will introduce our first witness, Mr. Matt 
Huie, owner of Huie Farms in Beeville, Texas.
    Mr. Matt Huie is the owner of Huie Farms in Beeville, 
Texas, and is my constituent from the 34th District of Texas. 
Mr. Huie farms cotton, corn, and sorghum, and raises livestock. 
He has a degree in agricultural development from Texas A&M 
University, and currently serves as the President of the 
Southwest Council of Agribusiness. Mr. Huie is also an active 
member of the South Texas Cotton and Grain Association. Thank 
you for making time to testify about this very important topic.
    I would now like to recognize Mrs. Craig for an 
introduction of our second witness.
    Mrs. Craig. Thank you, Mr. Chairman. I would like to 
introduce to everyone Mike Peterson, a farmer from my district 
in Northfield, Minnesota.
    Mike farms about 800 acres of corn and soybeans with his 
wife Kay and his two sons Blake and Shane. They also finish 
1,200 hogs a year.
    In addition to their farming operations, the Petersons also 
have a welding and fabrication business and a golf driving 
range on their farm.
    Each year, Mike and his family play host to the Dakota Rice 
Corn and Soybean Growers Annual Plot Tour, giving area farmers 
a chance to learn more about new corn hybrids and soybean 
varieties.
    He is helping his son, Shane, start out his own operation 
with a focus on growing corn and soybeans at the highest levels 
of environmental stewardship.
    Mike is a proud fourth-generation farmer and has previously 
been recognized as a Rice County Farm Family of the Year. Mike 
is an alum of Randolph FFA, is a past President of Rice County 
Farmers Union, and is a member of Minnesota Corn Growers.
    Mike, thank you so much for being here.
    The Chairman. Now I would like to recognize Mr. Carbajal 
for an introduction of our third witness.
    Mr. Carbajal. Thank you, Mr. Chairman. It is my pleasure to 
introduce Dan Sutton.
    Dan is the General Manager of Pismo Oceano Vegetable 
Exchange, POVE, located in Oceano, California. He is my 
constituent from my California district, the 24th Congressional 
District.
    Dan has worked for POVE for the past 18 years. As General 
Manager, Mr. Sutton oversees the day-to-day operations of POVE, 
including sales, marketing, accounting, operations, and food 
safety.
    Currently he is the board member and past President of the 
San Luis Obispo County Farm Bureau. He has currently been 
selected as Chairman of the California Leafy Greens Marketing 
Agreement Advisory Board.
    As you can see from his past and current experience, Mr. 
Sutton has played an extraordinary role in our local economy by 
working to represent our Central Coast growers and producers.
    I am glad to welcome Dan to Washington, D.C. Welcome, Dan.
    The Chairman. I now recognize Mr. Austin Scott for an 
introduction of our fourth and final witness.
    Mr. Austin Scott of Georgia. Thank you, Mr. Chairman. It is 
my honor to introduce a friend and farmer from my district, Mr. 
Bart Davis. He grew up in Doerun, Georgia, in Colquitt County, 
home of the Sunbelt Ag Expo, North America's premiere farm 
show.
    He attended high school in Worth County. When he was 18, he 
and his sister, Vickie, lost their mother and father. They 
decided to stay in the family home, and while Vickie took care 
of the house, Bart took over the 500 acre farming operation 
that produced cotton, peanuts, wheat, soybeans, hogs, and beef 
cattle.
    Today, still in Doerun, they farm over 5,000 acres. 
Approximately 3,100 acres of cotton, 1,600 acres of peanuts, 
300 acres of corn, along with hay and cattle.
    Bart has the pleasure of working alongside his family 
daily. The family farm today consists of Bart and his wife, 
Paula, their sons Trey and Jed, and their daughter, Lakin.
    Bart is part owner in Doerun Peanut Buying Point. He has 
served on the Georgia Cotton Commission Board of Directors, 
serving as Chairman since 2017. He is the Director of the 
Southern Cotton Growers, and he also serves on the county 
committee for the local Farm Services Agency Office in 
Moultrie, Georgia.
    He has a tremendous amount of knowledge about agriculture 
and I look forward to his testimony.
    The Chairman. Thank you all for introducing our witnesses.
    Before we begin testimony I would like to thank the 
Chairman of our Full Committee, Mr. Peterson, for being with us 
today.
    Each witness will have 5 minutes. When 1 minute is left, 
the green light will turn yellow as a signal for you to start 
wrapping up your testimony.
    Mr. Huie, please begin when you are ready.

 STATEMENT OF MATTHEW R. HUIE, OWNER, HUIE FARMS, BEEVILLE, TX

    Mr. Huie. Chairman Vela, Ranking Member Thompson, Members 
of this Subcommittee, thank you for this opportunity to be 
here.
    As Mr. Vela so aptly said, I am a farmer and rancher, and 
together with my wife Shambryn and our three children, we live 
near Beeville, Texas, and farm and ranch in five counties of 
the Coastal Bend.
    I am honored to be Mr. Vela's guest. He so ably represents 
the 34th District where I live, and I appreciate him being the 
Chairman of this Subcommittee.
    I am honored and humbled to be in this room and with you as 
the ag leaders following such great traditions, and I know what 
ag policy does and I appreciate the opportunity to be here.
    Along those lines, I would be remiss if I didn't recognize 
the extraordinary leadership of Chairman Peterson, who I have 
known a long time and appreciate everything that he has done 
and continues to do for agriculture, and also Mr. Conaway and 
the work they did in completing the 2018 Farm Bill which serves 
as the groundwork for policy and production agriculture.
    Mr. Chairman, this hearing is timed so well because of all 
the things that you talked about in your opening statement.
    I have written testimony that is long and drawn out. I am 
going to try to shorten that to three things here to be quick.
    One is, the farm economy in the Coastal Bend of Texas is 
lousy. It is bad; 2018 was not a good production year. That was 
compounded by the fact that despite a great MFP Program by the 
Administration, it only paid on production, so if you didn't 
have production it did not pay. I am hopeful that that can be 
addressed here.
    The 2018 issues followed tariff issues from trade disputes 
which drove the price of crop insurance down, and therefore, 
erodes the safety net as we work toward what our ability is to 
borrow and other things.
    For 2019, we look here at likely negative cash flows again, 
unless we make an extraordinarily large crop, because we don't 
have a price market where we can get that done and we have 
enormous exposure based on the value dropping in crop 
insurance. Despite the crop insurance being a great tool, when 
you have a systemic decline in price, we have a systemic 
decline in what we are able to insure.
    The stakes have never been higher than they are right now. 
I didn't farm through the 1980s. I did but I was a very young 
man.
    I did live through the 1990s. That was when I started 
farming. It was miserable, but I was so young I didn't know 
better, and my wife and I, she worked in town as a banker and 
we managed to sneak by those first few years starting in 1998 
and making it through 2002.
    As for 2002, we barely got by. We had to move banks. We had 
to do a lot of different things. As part of the reason I am 
here today, I understand how important farm policy is and I 
appreciate Washington stepping in, in those times and helping 
us, because that is how we survive.
    Historically when we have seen moves like we have now where 
you have a decline in price, you also have a decline, although 
slower, in input costs. That has not been the case in this 
current environment. Input costs have continued to rise. The 
rest of the economy is doing well, so as our input costs have 
risen due to tariffs, due to industry consolidation, due to all 
other things in the economy booming, we are still trying to 
sell stuff for the same price we sold stuff for 30 or 40 years 
ago. None of our input costs reflect that.
    Third, I want to be clear that I think additional action 
will be required from this Committee, from this Congress, and 
from this Administration. If the tariff war, trade war, ends 
tomorrow, this dispute will not be resolved.
    These prices, the bins are full, the warehouses are full, 
there is not a system in place to move that stuff out. We have 
a world glut of grain. Everything about history would tell us 
that this will not be resolved tomorrow. There are things that 
are on the table right now in terms of disaster talk, about 
making some corrections to MFP. That language exists here in 
the Committee. We are hopeful that that can move forward, and 
we need to be talking loudly about another MFP type program, 
whether it is done through the Administration or through this 
Committee, but there are some things about that program that 
need to be made more equitable as we move forward.
    Mr. Chairman, again, the farm economy is complex. Trade 
policy, labor, ultimately this comes down to farm 
profitability, and that is where this Committee has excelled in 
the past.
    I appreciate the opportunity to be here and I appreciate 
the opportunity to visit with you about this. Thank you.
    [The prepared statement of Mr. Huie follows:]

 Prepared Statement of Matthew R. Huie, Owner, Huie Farms, Beeville, TX
    Chairman Vela, Ranking Member Thompson, Members of the 
Subcommittee, thank you for this opportunity to testify concerning the 
state of the rural economy.
    My name is Matt Huie and together with my wife Shambryn and three 
children, we farm and ranch near Beeville, Texas in the 34th 
Congressional District of Texas which is so ably represented by the 
distinguished Chairman of this Subcommittee. We raise cattle, cotton, 
corn, sorghum, wheat, and sesame on our family owned operation.
    I am involved and a part of the leadership in a number of farm 
organizations at the Federal, regional, state, and local levels but 
today I am appearing simply as a relatively young farmer, rancher, and 
rural agri-businessman trying to pass on to my children a tradition and 
way of life that was passed on to me by my grandfather.
State of the Farm Economy in the Southwest and Nationally
    Mr. Chairman, this hearing could not be better timed if the goal is 
to highlight the high stakes and immense challenges of farming because 
the health of the rural economy is, as you know, under a great deal of 
stress.
    This year, we entered into the sixth straight year of recession for 
agriculture, encountering a roughly 50 percent drop in net farm income 
over this period, the largest drop since the Great Depression. This 
long, ongoing recession is taking its toll across the country and 
across all commodities. In South Texas, the stress in the air is like 
the humidity: so thick you can feel it. Few in agriculture are immune.
    However, that is not to say that all of us entered into this 
prolonged recession in the same financial shape. Some farmers were 
blessed with especially strong prices and solid production between 2008 
and 2013--a period heralded by some as a sort of second Gilded Age of 
American agriculture. This helped many producers build up equity and 
cash reserves to better weather tough times ahead. But, this was not 
the case in places like Texas and other states in the southwest region 
of the U.S. where an extraordinary D4 drought gripped virtually all 
parts for some or all of the 3 year period from 2011 to 2013.
    Evidence for this can be found in USDA ERS numbers concerning crop 
production value. I have attached the ERS chart showing the devastating 
slide in net farm income nationally since 2013. Next to it, I go into 
the underlying data to show the gross value of crop sales in three of 
our largest row crop states over three periods: (1) the pre-drought and 
pre-downturn years of 2004-2008; (2) the drought period in Texas from 
2009-2013; and (3) the post-drought downturn that we have experienced 
since 2014. All states show the significant downturn in the most recent 
period due to lower prices, but Texas did not have the big gain in the 
2009 to 2013 period due to the extraordinary drought.

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    I know it will not come as news to the Members of this Subcommittee 
that we as farmers have to deal with extreme weather events--I suppose 
this is part of our job description. But the point is, for farmers in 
this situation, we went into the current recession at a decided 
disadvantage. We had not had opportunity to build up equity or a rainy-
day fund to help see us through to better times.
    In short, while the tremendously adverse impacts of a 6 year 
recession on agriculture, where net farm income collapsed by half, are 
easy to understand, it does not tell the whole story. In fact, it 
actually understates how precarious the agriculture economy is right 
now.
    That said, I want to underscore that the current downturn in the 
farm economy is in no way isolated to a few regions. This is a national 
economic recession for agriculture. For instance, I read recently that 
Minnesota's chapter 12 farm bankruptcies have risen sharply even though 
corn and soybeans experienced a rally in prices prior to the recession 
and our friends in the North Star State have been generally blessed 
with strong production. Despite all of this, our good friends in the 
Great State of Minnesota are also struggling.
    The Members of this Subcommittee are no doubt familiar with the 
excellent work of the Agriculture and Food Policy Center (AFPC) at 
Texas A&M University which analyzes the impacts of Federal policies on 
representative farms located across the country. These are real farms 
that open up their financial books to AFPC so AFPC is able to truly 
gauge the health of individual farms and, thus, the overall health of 
the sector. By doing this, AFPC may not only inform Congress of actual 
conditions on the farm but can also offer analysis concerning the 
likely impacts of policies Congress may consider.
    Early last year, AFPC projected that \2/3\ of its representative 
farms were in marginal or poor health, meaning these farms have a 
significant chance of going under water should current conditions 
persist. A year later, AFPC updated its analysis, concluding that fully 
half of the \2/3\ of farms in question are now in poor financial 
condition, downgraded from marginal, with a 50 percent or greater 
chance of going under water should current conditions continue 
unabated.
    According to the U.S. Department of Agriculture's Economic Research 
Service, ``As farm sector debt is forecast to continue to increase in 
2019 and outpace growth in farm assets, the farm sector's risk of 
insolvency is forecast to be at its highest level since 2002. Likewise, 
liquidity measures that rely solely on the balance sheet are worsening, 
reflecting the same dynamic of debt growth outpacing asset growth.''
    In view of all of this, it should come then as little surprise that 
we read Wall Street Journal reports earlier this year concerning a wave 
of chapter 12 bankruptcies sweeping across rural America, with farm 
bankruptcies in major farm states rising to their highest in at least 
10 years, or CBS News stories such as the one entitled, Farmers in 
America are facing an economic and mental health crisis.
Historical Comparisons to our Current State of the Farm Economy
    I was very young during the 1980s farm financial crisis, and since 
my parents did not farm but raised me in town what I know of this 
period is mainly what I have read and what my grandfather and others 
who farmed at the time told me. A cousin and great uncle of mine did 
not make it through this crisis and this fact left an indelible mark on 
me as a young child. However, I remember well when the bottom collapsed 
on the farm economy in 1998 because I was a farmer in my early 20s and 
just getting started. Fortunately, my wife, Shambryn, worked as a 
banker during the early years of our farming career so we were able to 
survive off her salary. The worst for us was the summer of 2002 where 
the combination of drought and prolonged low prices were not going to 
allow us to get refinanced. We are grateful that Washington responded 
to the emerging crisis quickly and effectively and we along with many 
other farm families managed to recover.
    Mr. Chairman, I recollect these two periods in relatively recent 
history in the context of this hearing because today's conditions may 
not be exactly on all fours with the conditions we knew back then, but 
absent some turn-around in the current farm economy I am deeply 
concerned that there is the real potential for the same kind of 
economic fallout for rural America in the days ahead as there were in 
the mid-1980s and late 1990s. This result would not be good for rural 
America nor would it be good for the national economy and it certainly 
would not be good for farm and ranch families like mine. I fear the 
young, beginning farmers and older farmers trying to make it to 
retirement would be the ones who would suffer most.
    It is worth noting that all three major economic recessions in 
agriculture that I mention--in the 1980s, 1990s, and now--all resulted 
in good part due to a downturn in exports. In the 1970s, farmers were 
told to plant fencerow to fencerow to meet rising export demands only 
to see exports collapse, in part as the result of the Soviet Grain 
Embargo. In the 1990s, exports dove after the Asian Flu depressed 
rising economies of countries that promised to be emerging export 
markets for the United States. And, of course, we know lost exports are 
impacting the agriculture economy today as well.
    While this Subcommittee, the full Committee, and Congress cannot 
control market forces, you can establish policies to provide farmers 
and ranchers with the tools we need to survive the current storm. The 
strong, bipartisan responses to the farm financial crisis of the mid-
1980s and to the collapse in the farm economy in the late 1990s helped 
ensure that U.S. agriculture got back on a road to recovery, helping 
boost the overall economy. Both of these efforts were led by fellow 
Texans, including Chairman Kika de la Garza, Ranking Member Charlie 
Stenholm, and Chairman Larry Combest.
Current Policy Gains in the Face of Down Economy
    In this vein, I would be remiss if I did not express my very real 
gratitude for what has been accomplished and provided in the face of 
these economically challenging times.
    First and foremost, I would like to sincerely thank each Member of 
this Subcommittee for completing your work on the 2018 Farm Bill. While 
it is not a panacea for all that ails American agriculture today, with 
its anticipated investment in the safety net projected to be very 
modest by historical standards, the new farm bill does provide a 
modicum of a safety net and the certainty that goes with it. I am 
grateful that Congress was able to pass this measure by the most 
decisive margins ever obtained in either chamber. As a cotton farmer, I 
am especially grateful that the new farm bill honored the inclusion of 
seed cotton in the commodity title. And for all farmers of all 
commodities, I am grateful that Federal crop insurance was protected--
we simply could not farm without this critical tool in today's high 
stakes environment.
    As Congress considers budget resolutions, appropriations bills, 2 
year spending agreements, debt ceiling increases, and other matters 
involving Federal outlays, I would implore this Subcommittee to 
jealously protect the 2018 Farm Bill because the farm bill and Federal 
crop insurance represent the bulwark of policies designed to help 
struggling farmers and ranchers hang on.
    Second, I think it is very important to acknowledge what was done 
even prior to the 2018 Farm Bill to supplement the 2014 Farm Bill. For 
cotton in 2015, Secretary Tom Vilsack recognized the absence of a real 
safety net for cotton and instituted a ginning assistance program that 
was critical to maintaining cotton infrastructure in rural communities 
throughout the Cotton Belt. Secretary Perdue also recognized the 
problem and continued this vital program in 2017, relative to the 2016 
crop, as a bridge to the 2018 Bipartisan Budget Agreement where this 
Committee was able to create a new seed cotton program beginning with 
the 2018 crop year. Had these actions not been taken, I am not sure how 
many of us would still be farming today.
    Third, it is important to note the disaster bill passed for 2017 
wildfire and hurricane losses, and also the package that is in the 
works right now that will address certain losses in 2018 and 2019. 
Given the devastation caused by hurricanes, wildfires, and flooding, 
and the general state of the agriculture economy, these are very 
important measures and I hope the Agriculture Committee will continue 
to play an active role in their development.
    Finally, I want to extend my gratitude to Secretary Perdue for 
establishing the Market Facilitation Program (MFP) to help farmers and 
ranchers most affected by unjustified retaliation by our trading 
partners. Farmers from my region were first to feel the pain in 
February of 2018 when China levied its bogus AD/CVD case and 179 
percent tariffs against U.S. sorghum. Unfortunately, we had a short 
sorghum crop in 2018 so we did not realize the full benefit of this 
program. This, and some inequities in the distribution of aid among 
crops, is why many of us have suggested needed improvements to the MFP 
model (which are best articulated in an October 29, 2018 letter from 
the Southwest Council of Agribusiness). Nonetheless, we still want to 
express real gratitude as roughly $9 billion injected into the rural 
economy could not have come at a more crucial time.
    However, as vitally important as these efforts have been, I remain 
very concerned that it may not fully address the problem of depressed 
prices and increased costs of production for the 2019 crop year and 
beyond. Based on my conversations with lenders, there has already been 
an uptick in the denial of credit to farmers seeking financing to 
produce a crop and this is expected to significantly increase in time 
for the next planting season unless conditions improve.
    Some Members of this Subcommittee were not here for the writing of 
the 2014 Farm Bill, but it is important to remember that the 
Agriculture Committees at that time were called upon to achieve $23 
billion in savings over 10 years. According to the Congressional Budget 
Office (CBO), this goal would be achieved by the 2014 law. However, in 
subsequent budget baseline updates, CBO now estimates 10 year budgets 
savings to be achieved by the 2014 Farm Bill, and now the 2018 Farm 
Bill, are on the order of more than $100 billion. This is the 
diminished baseline to which the 2018 Farm Bill was written and it 
helps tell the story of why more resources may well be necessary. 
According to the CBO May budget baseline update, for the current Fiscal 
Year (FY 2019), payments to crop farmers are expected to be $15.26 
billion, with virtually all of this already having been paid and the 
majority ($9.56 billion) from the MFP. However, for FY 2020, CBO 
projects that this number will drop to $4.96 billion if nothing is done 
to supplement the 2018 Farm Bill. This amount would compete for the 
lowest amount of assistance since 1995, a year when prices were very 
high relative to the times. In short, unless prices recover rapidly, I 
am concerned that this budget reality will spell economic disaster in 
the countryside.
    While all of these statistics may sound academic, the consequences 
on the ground are very real. And this has a very dramatic impact on the 
local economy. Perhaps the best way to show this is through enterprise 
budgets published by Extension as benchmarks to help farmers plan for 
the year. I have attached the same for corn and cotton in South Texas 
for this crop year, and would note a couple of things. First, you will 
see that both would expect to cover variable costs (i.e., seed, fuel, 
labor, etc.) assuming normal yields, but both would lose money again 
this year once fixed costs, such as machinery and land, are added in. 
This is the sixth year where we see red in these numbers, and this has 
taken an enormous toll on our personal finances even as we have 
continued to produce an abundant supply of food and fiber that the 
world needs.
    But the other thing I really want Members of the Subcommittee to 
appreciate is what we as farmers spend each year. This is a very high 
stakes business. For corn, this enterprise budget estimates $491.09 per 
acre, and for cotton it is $639.18 per acre. For a 4,000 acre farm 
going half and half in Texas (and this is not a large operation in 
Texas--where everything is bigger), that would amount to $2.26 million 
the farmer is spending and turning over in the local economy. I 
earnestly believe this type of economic activity across some 300 
million crop acres across our land is vital to our national economy. 
But I can tell you for certain that without it towns like Beeville, 
Texas, where I live, would no longer exist.
    Therefore, given current economic conditions in rural America, the 
proven cost-effectiveness of the current and previous farm bills, the 
critical importance of the work farmers do, and the extraordinarily 
tight margins that we operate on, I urge you to stand fast in defense 
of the farm bill and Federal crop insurance and to monitor prices and 
disaster carefully and step in and do what is necessary to fill what is 
wanting. Farmers and ranchers and their lenders have made long-term 
decisions based on the promises made by Washington under these 
policies.
Other Factors of Concern to Farmers and the Rural Economy
    Beyond this, I know that farmers and ranchers across the country 
remain extremely nervous but also very hopeful that Congress will 
ratify the new U.S.-Mexico-Canada (USMCA) trade agreement and the 
Administration will successfully conclude U.S.-China trade negotiations 
and vitiate retaliatory tariffs that have exacerbated already bad 
conditions resulting from the grip of a multiple year recession.
    It is impossible to overstate the vital importance of the markets 
made available for our farmers and ranchers under the North American 
Free Trade Agreement and its successor agreement, USMCA, and under an 
agreement with China that reopens the flow of U.S. agriculture exports. 
These agreements do not just affect our ability to export agriculture 
products to these markets. They also affect our ability to import input 
items necessary for production. The effects of ongoing trade disputes 
are not only further depressed commodity prices and lost markets but 
the increased cost of those inputs that are subject to import.
    I would note that there are unique regional impacts to all of this 
as well. For example, we in south Texas usually begin planting grain 
crops in February, with harvest following in mid-June. The ongoing 
trade dispute has, of course, resulted in carryover of crops in 
storage. With the current crop already in progress, there is genuine 
concern that there will not be adequate storage space available to 
receive this year's crop when harvest begins come June.
    I am also encouraged by what I read concerning the House's interest 
in moving forward with legislation which is in part designed to help 
farmers and ranchers deal with a labor crisis. Legislation that would 
adjust the status of existing undocumented workers and their families 
and that would address the multiple shortcomings of the current H-2A 
guest worker program would be extremely meaningful to farmers and 
ranchers who have long sought a solution to this growing problem.
    Continued discussion centering on infrastructure legislation is 
also encouraging. President Kennedy once observed that the farmer is 
the only one in the economy who buys everything he buys at retail and 
sells everything he sells at wholesale and pays the freight both ways. 
Good infrastructure is critical in keeping our costs down and helping 
us earn more from what we sell. It is also one of the few areas where 
the American farmer and rancher enjoys a competitive edge despite 
foreign competition which is awash in high subsidies, tariffs, and non-
tariff trade barriers. Ensuring that rural America shares in any new 
investment in infrastructure should be another priority of this 
Subcommittee.
    One dimension to the infrastructure discussion that might be 
overlooked is the issue of competition at our ports. As you know, Mr. 
Chairman, we have long had two grain terminals at the Port of Corpus 
Christi but we are about to be down to just a single terminal after 
this year. Lack of competition, I fear, is going to hurt farmers in our 
area who depend on this key port. Concentration in the marketplace is 
not, of course, limited to ports. Consolidation in seed and chemical 
companies, as well as equipment manufacturers and retail outlets, have 
left farmers with fewer choices and less bargaining power when 
purchasing inputs. Even as this Subcommittee continues to do the work 
of safeguarding policies that provide an essential safety net for 
farmers and ranchers, the full Committee on Agriculture should continue 
to examine areas where farm and ranch income suffers due to escalating 
costs resulting from a want of competition in the marketplace. Although 
input costs in agriculture have always been sticky, slow to decline 
even as commodity prices decline, the specter of a continuing rise in 
input costs against a backdrop of a long period of depressed crop 
prices underscores a problem that appears to be getting worse.
Conclusion
    To be sure, all of these goals that I have outlined would be 
important wins for rural America where good news has been hard to come 
by lately. However, I remain concerned that even these victories for 
rural America will not prove sufficient under the strain of the ongoing 
recession. To his great credit, Secretary Sonny Perdue recognized the 
stress farmers and ranchers are under when he authorized the Market 
Facilitation Program. The alarm I am sounding today would be much 
louder had the Secretary not shown this kind of leadership. The 
question now, however, is how will the economic health of rural America 
look were the exact same conditions to continue but this time without 
another MFP or a similar program enacted by Congress? Short of a 
significant recovery in prices farmers receive, which would also 
improve the value of the protection farmers can purchase in crop 
insurance, I believe an additional and improved version of MFP or some 
similar package crafted by Congress will be needed. Frankly, I do not 
see a turn-around in current conditions any time soon.
    Mr. Chairman, I strongly urge this Subcommittee to very carefully 
continue to monitor conditions and take action to stave off the kinds 
of economic havoc that really left rural America in tatters in the mid-
1980s and late 1990s.
    In closing, Mr. Chairman, thank you once again for holding this 
extremely important hearing and for your leadership and the leadership 
of the Members of this panel on matters affecting America's farm and 
ranch families. We are certainly grateful to you.

                                     Projections for Planning Purposes Only
                                    2019 Estimated Costs and Returns per Acre
                     Corn--GMO Seed, Conventional Till--12 Row, Dryland, 100 bu. Yield Goal
                                       Coastal Bend Extension District 11
                                                 Crop Acres 500
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
              Revenue                  Quantity        Units          $/Unit           Total        Enterprise
                                                                                                       Total
----------------------------------------------------------------------------------------------------------------
Corn                                      100.00          Bushel           $3.80         $380.00     $190,000.00
                                                                                 -------------------------------
  Total Revenue                                                                          $380.00     $190,000.00
----------------------------------------------------------------------------------------------------------------
           Variable Costs              Quantity        Units          $/Unit           Total        Enterprise
                                                                                                       Total
----------------------------------------------------------------------------------------------------------------
Production Costs:
  Herbicide:
      Glyphosate (Generic)                     2           Quart           $3.38           $6.76       $3,380.00
      2, 4D Amine                              1            Pint           $2.07           $2.07       $1,035.00
      Atrazine 4L                              2           Quart           $3.00           $6.00       $3,000.00
      Corn PreEmerge Herbicide               2.1           Quart           $9.62          $20.20      $10,101.00
      Corn PostEmerge Herbicide                1           Quart          $16.24          $16.24       $8,120.00
  Seed:
      Corn                                    25        Thousand           $3.20          $80.00      $40,000.00
  Fertilizer:
      24-8-0                                0.25             Ton         $264.00          $66.00      $33,000.00
  Custom:
      Custom Grain Haul                       57             CWT           $0.35          $19.95       $9,975.00
  Miscellaneous:
      Crop Insurance--Corn                     1            Acre           $8.39           $8.39       $4,195.00
      G&A Overhead                             1            Acre          $10.50          $10.50       $5,250.00
  Insecticide:
      Cutworm Control                       1.25           Ounce           $0.70           $0.88         $437.50
  Other Chemicals:
      Crop Oil                               0.5            Pint           $1.85           $0.93         $462.50
  Other Labor:
      Hand Labor                            0.21            Hour          $16.00           $3.36       $1,680.00
  Machinery Labor:
      Tractrors/Self-Propelled              0.67            Hour          $19.50          $13.07       $6,532.50
  Diesel Fuel:
      Tractrors/Self-Propelled              8.09          Gallon           $2.46          $19.90       $9,950.70
  Repairs & Maintenance:
      Tractrors/Self-Propelled                 1            Acre          $23.42          $23.42      $11,707.91
      Implements                               1            Acre          $16.14          $16.14       $8,071.48
  Interest on Credit Line                                                  6.75%          $11.06       $5,530.30
                                                                                 -------------------------------
        Total Variable Costs                                                             $324.86     $162,428.89
                                                                                 -------------------------------
        Planned Returns Above                                                             $55.14      $27,571.11
         Variable Costs:
                                    =============================
        Breakeven Price to Cover           $3.25          Bushel
         Variable Costs
----------------------------------------------------------------------------------------------------------------
            Fixed Costs                Quantity        Units          $/Unit           Total        Enterprise
                                                                                                       Total
----------------------------------------------------------------------------------------------------------------
  Machinery Depreciation:
      Tractrors/Self-Propelled                 1            Acre          $25.34          $25.34      $12,669.09
      Implements                               1            Acre          $18.80          $18.80       $9,399.74
  Equipment Investment:
      Tractrors/Self-Propelled           $193.73         Dollars           6.00%          $11.62       $5,811.87
      Implements                         $107.85         Dollars           6.00%           $6.47       $3,235.47
  Management Fee, Owner/Operator               1            Acre          $19.00          $19.00       $9,500.00
   Labor
  UCB--Land Charge                             1            Acre          $85.00          $85.00      $42,500.00
                                                                                 -------------------------------
        Total Fixed Costs                                                                $166.23      $83,116.17
                                                                                 -------------------------------
        Total Specified Costs                                                            $491.09     $245,545.06
                                                                                 -------------------------------
        Returns Above Specified                                                        ($111.09)    ($55,545.06)
         Costs
                                    =============================
        Breakeven Price to Cover           $4.91          Bushel
         Total Costs
----------------------------------------------------------------------------------------------------------------
                                                                                     Example Breakeven Prices
----------------------------------------------------------------------------------------------------------------
                                                   Example Yield   Example Yield     To Cover     To Cover Total
                                                      Percent         Bushel      Variable Costs       Costs
----------------------------------------------------------------------------------------------------------------
                                                             75%           75.00           $4.33           $6.55
 
                                                             90%           90.00           $3.61           $5.46
 
                                                            100%          100.00           $3.25           $4.91
 
                                                            110%          110.00           $2.95           $4.46
 
                                                            125%          125.00           $2.60           $3.93
----------------------------------------------------------------------------------------------------------------
Developed by Extension Economists, Texas A&M AgriLife Extension Service, [email protected].
Information presented is prepared solely as a general guide and not intended to recognize or predict the costs
  and returns from any one operation. Brand names are mentioned only as examples and imply no endorsement.


                                     Projections for Planning Purposes Only
                                    2019 Estimated Costs and Returns per Acre
         Cotton--Genetically Modified Seed, Conv. Till--24 Row, Dryland, 800 lb. Yield Goal--Lower Coast
                                       Coastal Bend Extension District 11
                                                 Crop Acres 500
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
              Revenue                  Quantity        Units          $/Unit           Total        Enterprise
                                                                                                       Total
----------------------------------------------------------------------------------------------------------------
Cotton Lint                               800.00           Pound           $0.66         $528.00     $264,000.00
Cottonseed                                  0.58             Ton         $125.00          $72.50      $36,250.00
                                                                                 -------------------------------
  Total Revenue                                                                          $600.50     $300,250.00
----------------------------------------------------------------------------------------------------------------
           Variable Costs              Quantity        Units          $/Unit           Total        Enterprise
                                                                                                       Total
----------------------------------------------------------------------------------------------------------------
Production Costs:
  Custom:
      Fertilizer Application                   1           Ounce           $0.15           $0.15          $75.00
      Pick and Module                        800           Pound           $0.14         $112.00      $56,000.00
      Ginning--Picker                        800           Pound           $0.13         $100.00      $50,000.00
  Fertilizer:
      24-8-0                              0.1665             Ton         $266.00          $44.29      $22,144.50
  Herbicide:
      Glyphosate                               1           Quart           $5.50           $5.50       $2,750.00
      Trifiuralin                             32           Ounce           $0.19           $6.08       $3,040.00
      2, 4D Amino                              2            Pint           $2.07           $4.14       $2,070.00
      Cotton Early Season Herbicide            2           Quart          $16.24          $32.48      $16,240.00
  Insecticide:
      Fleahopper, Control LC                 1.6           Ounce           $1.08           $1.73         $864.00
  Miscellaneous:
      Boll Weevil Program LC                 1.6            Bale           $3.50           $5.60       $2,800.00
      Crop Insurance--Cotton LC                1            Acre          $12.08          $12.08       $6,040.00
      Pickup Mileage Charge                    1            Acre           $3.88           $3.88       $1,940.00
Seed:
      Cotton Seed--B2RF                       40        Thousand           $1.84          $73.60      $36,800.00
      Cotton Seed--Insect Treatment           40        Thousand           $0.17           $6.80       $3,400.00
      Tech Fee--B2RF                           1            Acre           $0.00           $0.00           $0.00
  Other Chemicals:
      Generic PIX                             32           Ounce           $0.06           $1.92         $960.00
      Defoliants--Picker                       4           Ounce           $1.05           $4.20       $2,100.00
      Ethephon                               1.6           Ounce           $0.15           $0.24         $120.00
  Other Labor:
      Hand Labor                            0.08            Hour          $16.00           $1.28         $640.00
  Machinery Labor:
      Tractrors/Self-Propelled              0.51            Hour          $19.50           $9.95       $4,972.50
  Diesel Fuel:
      Tractrors/Self-Propelled              6.49          Gallon           $2.46          $15.97       $7,982.70
  Repairs & Maintenance:
      Tractrors/Self-Propelled                 1            Acre          $16.36          $16.36      $8,179.501
      Implements                               1            Acre          $13.96          $13.96       $6,979.24
  Interest on Credit Line                                                  6.75%          $10.93       $5,466.19
                                                                                 -------------------------------
        Total Variable Costs                                                             $483.13     $241,563.63
                                                                                 -------------------------------
        Planned Returns Above                                                            $117.37      $58,666.37
         Variable Costs:
                                    =============================
        Breakeven Price to Cover           $0.51           Pound
         Variable Costs
----------------------------------------------------------------------------------------------------------------
            Fixed Costs                Quantity        Units          $/Unit           Total        Enterprise
                                                                                                       Total
----------------------------------------------------------------------------------------------------------------
  Machinery Depreciation:
      Tractrors/Self-Propelled                 1            Acre          $22.22          $22.22      $11,110.45
      Implements                               1            Acre          $18.71          $18.71       $9,356.08
  Equipment Investment:
      Tractrors/Self-Propelled           $170.64         Dollars           6.00%          $10.24       $5,119.13
      Implements                          $80.88         Dollars           6.00%           $4.85       $2,426.34
  Management Fee, Owner/Operator               1            Acre          $30.03          $30.03      $15,012.50
   Labor
  LCB--Land Charge                             1            Acre          $70.00          $70.00      $35,000.00
                                                                                 -------------------------------
        Total Fixed Costs                                                                $156.05      $78,024.49
                                                                                 -------------------------------
        Total Specified Costs                                                            $639.18     $319,588.12
                                                                                 -------------------------------
        Returns Above Specified                                                         ($38.68)    ($19,338.12)
         Costs
                                    =============================
        Breakeven Price to Cover           $0.71           Pound
         Total Costs
----------------------------------------------------------------------------------------------------------------
                                                                                     Example Breakeven Prices
----------------------------------------------------------------------------------------------------------------
                                                   Example Yield   Example Yield     To Cover     To Cover Total
                                                      Percent          Pound      Variable Costs       Costs
----------------------------------------------------------------------------------------------------------------
                                                             75%          600.00           $0.68           $0.94
 
                                                             90%          720.00           $0.57           $0.79
 
                                                            100%          800.00           $0.51           $0.71
 
                                                            110%          880.00           $0.47           $0.64
 
                                                            125%        1,000.00           $0.41           $0.57
----------------------------------------------------------------------------------------------------------------
Developed by Extension Economists, Texas A&M AgriLife Extension Service, [email protected].
Information presented is prepared solely as a general guide and not intended to recognize or predict the costs
  and returns from any one operation. Brand names are mentioned only as examples and imply no endorsement.


   STATEMENT OF MIKE PETERSON, OWNER AND OPERATOR, TWIN OAKS 
                     FARMS, NORTHFIELD, MN

    Mr. Peterson. Thank you, Chairman Vela, Ranking Member 
Thompson, and Members of the Subcommittee. Thank you for the 
opportunity to testify here today.
    The last 5 years have been incredibly challenging on our 
farm and on farms across the country.
    In 2018, median net farm income in Minnesota was at its 
lowest level in the past 23 years. In southern Minnesota we are 
entering our sixth consecutive year of growing corn at or below 
the cost of production.
    Strong soybean yields and fair prices had kept many farmers 
profitable until the trade disputes with China took its toll on 
the markets last year. Now our problem with oversupply is only 
getting worse.
    With the continuing slump in commodity prices, financial 
stress continues to grow. Farm debt is at an all-time high and 
most farmers I know have burnt through their equity that they 
built up in the good years leading up to 2014.
    We are now seeing a big increase in the number of Chapter 
12 bankruptcies in Minnesota. Unless we get our markets back 
and the prices rebound, I feel many more farmers will be forced 
out of business.
    In addition to our current challenges with low prices, 
market consolidation and the increase of monopolies on the 
supply side has caused input costs to rise dramatically. The 
cost of seed corn, soybean seed, and fertilizer, even when 
adjusted for inflation, have each doubled since I started 
farming full time in 1996.
    While we are more productive now than we have ever been, 
the increased input costs has outpaced the gains we have made 
in productivity. On our farm we have adopted methods to cut our 
input costs usage to levels that puts us on par with the most 
efficient operations. We plant cover crops, use no-till and 
zone-tillage practices which reduce weed pressure and cut down 
chemical costs and usage. We pair that with precision 
fertilizer application which helps further reduce fertilizer 
costs and cuts down on fuel usage. We also don't grow late-
season hybrids to keep our drying costs low on our corn herb--
or corn hybrids. Excuse me.
    Altogether, these practices reduce our carbon footprint and 
put us in a better position to survive in this tough farm 
economy. However, we simply don't have the cash flow we need to 
install practices that will further improve our productivity, 
efficiency, and stewardship.
    The reality is, despite all we have done to adjust to tight 
margins and low prices, there is just no way to be profitable 
with the market scenarios facing the American farmer today.
    I am currently enrolled in a farm business management 
course at South Central College. Our advisor provides us data 
and management assistance so we can find the best economic 
scenarios. Even with his guidance and expertise, we are faced 
with an economic scenario that is hard to present to a lender.
    Like most farmers, I prefer a fair price in the market, but 
during periods of low prices, I am grateful that we have a farm 
safety net to fall back on. For the last 5 years I have been 
enrolled in the ARC-County program which at least offsets some 
of our losses.
    I am not only at the mercy of the markets, but I am at the 
mercy of the weather. The Federal Crop Insurance Program is 
critical in helping me manage risk on our operation.
    Last year a tornado and strong straight-line winds came 
through and knocked down about 85 percent of our corn crop. 
Without crop insurance indemnity, that loss would have been 
devastating to our operation.
    As farmers we can handle a slump in commodity prices and 
volatile weather, but we can't prepare for the situation that 
was brought on by our trade disputes last year. I will be the 
first to admit that I originally supported the effort to secure 
better trade agreements and to hold bad actors accountable, but 
the approach to these trade disputes has caused damage that I 
am afraid will take us decades to overcome.
    The Market Facilitation Program payments helped last year, 
but I feel if policy makers are going to continue to affect our 
markets, we may need to look at some sort of supply management.
    We have just started our spring planting without any 
assurance that we are going to have an opportunity to lock in a 
feasible price for our production. If our markets don't come 
back and we don't have any additional support, we would be 
better off not producing.
    The bottom line is there is no way to make a profit if we 
don't have markets for our product.
    I want to close by saying that I have a 23 year old son who 
is purchasing his own 80 acre farm a few acres from ours. I am 
doing everything I can to prepare him for the challenges I have 
discussed here today, but it is hard to be optimistic about the 
future.
    Rural America embodies the character and skill sets that 
have always made America the greatest country in the world to 
live in. I want my son to have a reason to apply his energy and 
skills into the family farming tradition. If we want the next 
generation to get into farming, we have to at least give them a 
fighting chance. If it is not his generation, maybe we can all 
try to tell ourselves, or you can tell me, who we think will be 
running these farms next.
    Thank you again for the opportunity to testify, and I look 
forward to your questions. I really appreciate it.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Mike Peterson, Owner and Operator, Twin Oaks 
                         Farms, Northfield, MN
    Chairman Vela, Ranking Member Thompson, and Members of the 
Subcommittee, thank you for the opportunity to testify today. My name 
is Mike Peterson. Along with my wife and two sons, I farm about 800 
acres of corn and soybeans near Northfield, Minnesota. I am also a 
member of Minnesota Farmers Union, which represents 13,000 family 
farmers, ranchers and rural members across Minnesota.
    In addition to our corn and soybean production, my family also 
operates a number of entrepreneurial enterprises. We finish about 1,200 
hogs a year and do some custom work for other farmers in our area. We 
also have a golf driving range and a welding and fabrication business. 
To help make ends meet, my wife also works a part-time off-farm job.
Overview of Financial Stress
    The last 5 years have been incredibly challenging on my farm and on 
farms across Minnesota. In 2018, median net farm income in the state 
was at its lowest level in the past 23 years.\1\ In southern Minnesota, 
corn prices have been at or below the cost of production for 5 
consecutive years.\2\ Strong soybean yields and fair prices had kept 
many farmers profitable until the trade dispute with China took its 
toll on the market last year.
---------------------------------------------------------------------------
    \1\ University of Minnesota. Minnesota farm income hits historic 
low. (March 25, 2019). Retrieved from: https://twin-cities.umn.edu/
news-events/minnesota-farm-income-hits-historic-low.
    \2\ FINBIN (2019). Center for Farm Financial Management: University 
of Minnesota. Retrieved from http://finbin.umn.edu (originally created 
May 5, 2019).
---------------------------------------------------------------------------
    With the sustained slump in commodity prices, financial stress 
continues to grow. In the fourth quarter of 2018, the Federal Reserve 
Bank of Minneapolis reported lower repayment rates across the Ninth 
District, indicating growing financial stress.\3\ In real terms, 
national farm debt is at its highest level since the 1980s,\4\ and many 
farmers continue to burn through the equity they built up in the 
profitable years leading up to 2014. These financial challenges 
contributed to a significant increase in Chapter 12 Farm Bankruptcy 
filings in Minnesota last year.\5\
---------------------------------------------------------------------------
    \3\ Federal Reserve Bank of Minneapolis. ``Throwing in the towel'': 
Another high production-low price year. (February 14, 2019). Retrieved 
from: https://www.minneapolisfed.org/publications/agricultural-credit-
conditions-survey/another-high-production-low-price-year-for-farmers.
    \4\ United States Department of Agriculture, Economic Research 
Service. Farm Income and Wealth Statistics. Data as of March 6, 2019.
    \5\ https://www.fb.org/market-intel/farm-bankruptcies-in-2018-the-
truth-is-out-there.
---------------------------------------------------------------------------
    The financial challenges we face are due to a number of factors. 
Market consolidation and the increase of monopoly power has caused our 
input costs to rise dramatically. Overproduction has driven commodity 
prices low--a situation that is further exacerbated by the impacts of 
ongoing trade disputes. Our current environment is unsustainable. 
Unless we get our markets back and prices rebound, I'm worried that 
many more farmers will be forced out of business.
Market Consolidation and Input Costs
    Over the last 30 years, major agribusiness companies have been 
acquiring small companies, consolidating the marketplace and increasing 
their market share. From 2000 to 2015, the market share of the four 
largest companies increased from 60 percent to 85 percent for U.S. corn 
seed.\6\ Over the same time period, the CR4 for soybean seed sales 
increased from 51 to 76 percent.\7\
---------------------------------------------------------------------------
    \6\ MacDonald, J.M. (2016) Mergers and competition in seed and 
agricultural chemical markets. Retrieved from: https://
www.ers.usda.gov/amber-waves/2017/april/mergers-and-competition-in-
seed-and-agricultural-chemical-markets/.
    \7\ Id.
---------------------------------------------------------------------------
    Diminished competition has left farmers with few options when 
purchasing seeds, allowing suppliers to charge higher prices. When I 
began farming in 1996, the average cost of corn seed per acre was 
$28.53 and the average cost of soybean seed per acre was $14.98. Today, 
those costs have increased to $113.31 and $56.28 respectively. Even 
when adjusted for inflation, the cost for both corn seed and soybean 
seed has more than doubled since 1996.
Seed Cost Per Acre
Southern Minnesota Corn and Soybeans 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The fertilizer market is also highly concentrated with two 
companies controlling 93% of the world potash market and significant 
concentration in the phosphorous and nitrogen markets.\8\ This has 
caused the average farm price of fertilizer to increase 
significantly.\9\ Since 1996, the amount an average farm in southern 
Minnesota spends on fertilizer for each acre of corn produced has 
nearly doubled.\10\
---------------------------------------------------------------------------
    \8\ Taylor, C.R., & Moss, D.L. (2013) The fertilizer oligopoly: The 
case for global antitrust enforcement.
    \9\ USDA, Economic Research Service using data from USDA, National 
Agricultural Statistics Service, Agricultural Prices. Retrieved from: 
https://www.ers.usda.gov/data-products/fertilizer-use-and-price.aspx.
    \10\ FINBIN (2019). Center for Farm Financial Management: 
University of Minnesota. Retrieved from http://finbin.umn.edu 
(originally created May 5, 2019).
---------------------------------------------------------------------------
    The advances made in the agricultural input industries have helped 
farmers become far more productive. However, the increase in input 
costs has outpaced gains in productivity. The real total direct expense 
per bushel produced has increased by $.40 for corn and $1.05 for 
soybeans in southern Minnesota.\11\
---------------------------------------------------------------------------
    \11\ Id.
---------------------------------------------------------------------------
Improving Operational Efficiency
    To improve our ability to operate on tight margins, we've adopted a 
number of conservation practices and production methods that reduce our 
input costs and usage to levels that put us on par with the most 
efficient operations. We plant cover crops and use no-till and zone 
tillage practices that reduce weed pressure and improve soil health. 
Together these practices help reduce chemical and fertilizer costs. We 
couple those practices with precision fertilizer application, which 
helps further reduce fertilizer costs and cuts down on fuel usage. We 
also don't grow late season hybrids, which helps keep our drying costs 
low.
    Altogether, the practices we have adopted reduce our carbon 
footprint and put us in a better position to survive in a period of low 
prices. However, with commodity prices as low as they are currently, it 
is still a challenge to break even. Because we have so little cash 
flow, we are not able to afford the costs of installing practices that 
will improve our position in the long term.
    Despite all I have done to adjust to tight margins and low prices, 
there's just no way to be profitable with the market scenarios facing 
the American farmer today. I'm currently enrolled in a Farm Business 
Management course at South Central College. Our advisor provides us 
data and management assistance, so we can identify the scenarios that 
will maximize our profitability. Even with his guidance and expertise, 
we're faced with a financial situation that is hard to present to a 
lender.
Farm Safety Net
    Like most farmers, I would prefer to get a fair price from the 
market. However, during prolonged periods of low prices, I am extremely 
grateful that I have a farm safety net to fall back on. For the last 5 
years, I've been enrolled in the Agricultural Risk Coverage (ARC) 
County program, which has at least offset some of my losses.
    While ARC-County has been helpful to me, we have also experienced 
challenges with the program. I'm grateful that the 2018 Farm Bill 
includes improvements that will smooth disparities in payment rates 
between counties. We are also grateful for the opportunity to make a 
new election between ARC and the Price Loss Coverage program for 2019 
and 2020 and on an annual basis starting in 2021. While we have not yet 
determined which program I will enroll in for the next 2 crop years, 
the increased flexibility will help me better respond to my operation's 
needs as the economic situation evolves.
    Crop insurance has also been an essential risk management tool on 
our operation. Last year, a tornado struck our operation, knocking down 
about 85 percent of our corn crop. While we were able to salvage some 
of the crop, the damage was significant. Without our crop insurance 
indemnity, the losses would have been devastating to our operation.
Trade Disruptions
    With the support of the programs mentioned above, we can handle a 
slump in commodity prices and volatile weather. However, we had no way 
to prepare for the significant disruption to our markets that was 
brought on by trade disputes last year. While I originally supported 
the goals of securing better trade agreements and holding bad actors 
accountable, the approach to these trade disputes has caused damage 
that I'm afraid will take us decades to overcome.
    The Market Facilitation Program (MFP) payments provided last year 
helped but didn't make up for what we lost. The program also contained 
a number of flaws, including wide disparities in payments for each 
commodity. The MFP also failed to provide payments for several 
commodities, such as canola and other minor oilseeds, that have been 
impacted by decreased overseas demand.
    We just began spring planting without any assurances that we are 
going to have markets to sell to when harvest comes around. Without 
markets to sell into, the only way to keep farmers afloat is to provide 
them with an additional round of payments. The bottom line is, there's 
no way to make a profit if we don't have markets for our product. If 
our markets don't come back, and we don't have any additional support, 
then we would be better off shutting our farm down for the year.
Conclusion
    I want to close by saying that I have a 23 year old son who is just 
starting out on 80 acres a few miles from our farm. I'm proud to say 
that he's the fifth generation to carry on our family's farming 
tradition. I'm doing everything I can to prepare him for the challenges 
I've discussed here today, but it's hard to be optimistic about what 
the future holds. If we want to get the next generation into farming, 
we have to at least give them a fighting chance.
    Thank you for the opportunity to testify. I look forward to your 
questions.

    The Chairman. Thank you. Mr. Sutton.

 STATEMENT OF DANIEL J. SUTTON, GENERAL MANAGER, PISMO OCEANO 
                 VEGETABLE EXCHANGE, OCEANO, CA

    Mr. Sutton. I would like to start by thanking Chairman 
Vela, Ranking Member Thompson, and Members of the Subcommittee 
for having this hearing today. I would also like to thank my 
Congressman, Congressman Carbajal, for representing our 
district and our industry of specialty crops in Congress.
    Our business is a cooperative located on the Central Coast 
of California. We are comprised of five family farms that 
collectively market our products through the co-op. We have 
been in existence since the early 1920s and we currently have 
our fourth generation of growers coming back into the co-op.
    Much like the others that have testified before me, there 
are significant management decisions that we have to make, and 
things that we have to manage day to day to keep our 
cooperative continuing for the next generation.
    To give you a little bit about what we grow, we grow napa 
cabbage, bok choy, baby bok choy, leafy greens comprising of 
iceberg lettuce, romaine, green leaf, endive, escarole, red 
cabbage, and green cabbage.
    Our crops are very timely. We need to harvest our crops and 
get them out to market usually within 3 to 5 days of harvest, 
as they are perishable.
    Seventy-five percent of the nation's leafy greens comes 
from the Central Coast of California, which is also known as 
the Salad Bowl.
    There are three major things that I would like to talk 
about today that make our production on the Central Coast 
challenging. The first is water. We have two main water systems 
in California. There is the state water system and private 
wells.
    Our farms are on private wells, but in order to get that 
water from our aquifers to our crops, it takes electricity to 
do that. The electricity costs over the years have increased 
the cost of our water to get to our crops.
    For those in our state that use the California Water 
System, they have seen allocations reduced and our 
infrastructure for storing water in California is outdated.
    The second is labor. We are very dependent on labor in our 
industry, and as you all know, immigration reform is something 
that is extremely important to agriculture and something that 
we are watching very closely.
    A lot of people say, ``How come you just don't raise 
wages?'' Well, we have. Our employees are currently earning 
anywhere from $14 to $16 an hour on the farm, and much like the 
prices we are getting today are not that much different from 
the prices we were getting back in the early 1990s. And the 
labor shortage continues to increase, and yet we are still 
unable to get employees to work on our farms.
    We are needing to utilize the only option available to us, 
and that is the H-2A program. The H-2A program is very costly, 
but it is an opportunity for us to get the labor we need to get 
out crops to market.
    The only thing I would like to discuss really quick is in 
our industry we are very concerned about food safety. As you 
may be aware, last November in 2018, the romaine industry was 
shut down, and there was no romaine on the shelves. I doubt 
that you found romaine here, and we were impacted by that in 
that we had romaine in the ground but we could not get it to 
market because of the advisory.
    All of us in the specialty crop production in California 
take food safety very seriously. It is something that we have 
to do day to day. It is an investment we make in our crops. 
Through programs like the California Leafy Greens Marketing 
Agreement, we are placing upon leafy greens growers in 
California some of the most vigorous and strict food safety 
rules that we have to comply with, with production of our 
crops.
    I have a rule in our house that if I grow it on the farm, 
my wife is not allowed to buy the same products in the store. 
Now, she understands that rule, but I get in trouble a lot 
because I forget to bring it home. But the point I want to make 
here is that the products we grow I feed to my family, I feed 
to my three young children. The products we grow go to your 
families. They go to our consumers and the people in the 
nation, and food safety will be something that we continue to 
address, moving forward.
    I would like to thank the Committee again for having this 
hearing. The issues facing agriculture, not only in California 
but across the nation, are significant and the fact that you 
are here allowing us to speak today is very much appreciated 
and I am grateful for this opportunity.
    Thank you.
    [The prepared statement of Mr. Sutton follows:]

 Prepared Statement of Daniel J. Sutton, General Manager, Pismo Oceano 
                     Vegetable Exchange, Oceano, CA
    I would like to start by thanking Chairman Vela, Ranking Member 
Thompson, and Members of the Committee for hosting this important 
hearing. I also want to thank my Congressman, Congressman Carbajal for 
inviting me to testify before the Subcommittee, and for making sure our 
specialty crop producers are represented in Congress. I serve as 
General Manager of the Pismo-Oceano Vegetable Exchange, a multi-
generation grower-shipper family business going back to the 1920s.
    We are located along the Central Coast of California. We farm 5,000 
acres annually specializing in the production of Asian vegetables, 
leafy greens, and herbs. Our production line up consist of Napa 
Cabbage, Bok Choy, Shanghai Bok Choy, Broccoli, Romaine and Iceburg 
Lettuce, Green Leaf, Endive, Escarole, Kale, Cilantro, Parsley, and 
Italian Parsley.
    I have recently been selected as Chairman of the California Leafy 
Greens Marketing Agreement Advisory Board. The California leafy Greens 
Marketing Agreement (LGMA) is a food safety program representing 99% of 
the leafy greens growers in California. The LGMA requirements meet or 
exceed the Produce Rule requirements within the Food Safety 
Modernization Act (FSMA). Members of the LGMA have met PSR requirements 
for 11 years now.
    I have also been extensively involved with Farm Bureau. Farm Bureau 
represents more than half of growers and producers within California 
amongst all agricultural commodities. I have served as Past-President 
of San Luis Obispo County Farm Bureau, and still am on the Board of 
Directors. I have also served the California State Farm Bureau 
Federation as an alternate delegate to national conferences, as a 
delegate to the state conferences, and as Chairman of the Federal Poly 
Issues Advisory Committee (IAC).
    So that we're all on the same page, specialty crops are defined 
under Federal law as ``fruits, vegetables, tree nuts, dried fruits, 
horticulture, and nursery crops.'' All types of agriculture are 
important, but specialty crops account for more than 25 percent of the 
value of U.S. crop production and do so on a relatively small amount of 
land (USDA).
    The issues I want to discuss today will not be a surprise to many 
of you. The three greatest challenges that specialty crop producers 
face are water, labor and food safety.
    Before we dive into these, I need to explain how significant 
specialty crops are to our local community, to the State of California, 
and to the United States.

   Of the $924 million annual agriculture sales in San Luis 
        Obispo County, $860 million comes from specialty crops (SLO 
        County).

   75 percent of America's lettuce and leafy greens are grown 
        in California, and the vast majority come from the six counties 
        that comprise California's Central Coast region (LGMA).

   California is the top producer of nearly every specialty 
        crop commodity in the nation (USDA).

   California has more specialty crop farmers than the next 
        four largest states--Florida, Texas, Washington, and 
        Pennsylvania--combined (USDA).

   California alone accounts for $30 billion of the $83 billion 
        U.S. specialty crop market (USDA).

    These statistics are even more impressive when you consider the 
daunting challenges our farmers face to supply the three most essential 
inputs in specialty crop production--water, labor, and food safety.
Water
    California actually has enough water to meet the needs of its 
people, for wildlife habitat, and for agriculture, but we refuse to 
make balanced, reasonable policy decisions to let farmers access it. 
Even as we make investments to grow crops ``drop by drop'' in the most 
sustainable way in human history, misguided regulations and demands of 
a growing population have forced more farmers to fallow their fields 
and cut back production.
    Climate change is a very real factor in California agriculture, and 
we know our water crisis has no easy solution. But if we continue to 
reduce agricultural water sources, specialty crop production will 
largely disappear from California, and from the United States. Ask 
yourselves this question: Do we want to depend on foreign nations to 
grow all of our food?
    In California, there are two major water systems. Water that is 
provided and allocated through the State of California and water that 
growers have ``rights'' to from underground sources. California's water 
infrastructure is old and outdated. As we look for ways to improve the 
state water system, difficulty lies in finding a solution that is 
acceptable to all parties. Water storage is imperative in our state 
water system to get our state through years of drought. Rehabilitating 
old reservoirs and dams is difficult through our state policies. 
Creating new opportunities with reservoirs and dams is even more 
difficult. Being smart with our state's water infrastructure will allow 
for the continued success of the abundance of specialty crops our state 
grows.
    This past winter we were pleased and grateful that we had above 
average rainfall. When our creeks flow, we re-charge our aquifers where 
private water sources are used. Above average rainfall does not occur 
every year. In an effort to manage our private water supply, the best 
technology and practices are used. Our water supply is so important to 
the success and production of our specialty crops. Several current 
pieces of regulation within California are limiting the ability of 
producers to effectively manage their valuable resource.
Labor
    Even if we are lucky to get enough water for our crops in a given 
year, chances are we can't find enough workers. Just last month, a 
study conducted by the University of California, Davis and the 
California Farm Bureau Federation found that 56 percent of farmers were 
unable to hire enough workers at some point during the past 5 years 
(CFBF). And things are getting worse; of the farmers reporting employee 
shortages, 70 percent had more trouble hiring people in 2017 and 2018.
    We're often asked in agriculture, ``Why don't you just pay higher 
wages?''. Well, we have been. 86 percent of farmers with labor 
shortages increased wages, but to no avail. Our employees currently 
earn at least $2 above our state's minimum wage requirement. Even while 
increasing wages, we are still not able to achieve our workforce needs. 
In California, our minimum wage will be $15.00/hour in 2022. While our 
minimum wage increases by a $1.00/hour every year, our AG overtime is 
decreasing by 30 minutes per year or 25%. In California, agriculture in 
the past has had an overtime exemption where farm workers are allowed 
to work for 10 hours prior to receiving overtime. In our peak seasons, 
these workers depend on the fact that they would work 60 hours per 
week. With wages increasing and overtime going down, we are having to 
make very difficult business decisions that reduce the number of hours 
worked by our employees.
    In many California communities like San Luis Obispo, the local cost 
of housing is so expensive, that the H-2A Guest Worker Program's 
requirement for employers to provide housing makes using the program 
unpractical. Our broken immigration system is well known to everyone 
here, but I doubt you can appreciate the frustration farmers feel when 
we have a willing workforce in neighboring countries, but a Federal 
Government that can't figure out how to get them here.
    The H-2A program continues to be the only option we have to fulfill 
our labor requirements. This year, our company will utilize the H-2A 
program more heavily than ever before. Our produce still requires a 
``personal touch'' when harvested. This year 85% of our harvest labor 
needs will fall under the H-2A program. As part of the H-2A program, 
the Adverse Effect Wage Rate (AEWR) wage, currently at $13.92/hr., 
transportation, and housing must be paid by the holder of the contract. 
With all of these costs factored in, the rough cost per H-2A employee 
is $16.24/hr.
    With the H-2A program being costly, but our only option at this 
time, we are looking very intently into mechanization for our harvest 
and other processes involved in our growing program. This is a very 
rapidly expanding area in our industry that is quite costly. The cost 
of this equipment provides us with a barrier into this area. I imagine 
that the price point will eventually come down for this technology, but 
how long will it take? Can we wait that long?
Food Safety
    We know too well that a food safety incident on a single farm can 
shut down an entire commodity. In December of 2018, the discovery of E. 
coli on Romaine lettuce effectively shut down all Romaine lettuce sales 
in the nation. In time, the economic impact of the Food and Drug 
Administration's (FDA) Romaine advisory in November of 2018 will be 
estimated. Without an exact dollar amount available the impacts were 
significant. Many farms in California that had to cease operations. 
Harvest crews were not working, investments in the crop were lost, 
trucks were not carrying our products to markets, processors of these 
products were not operating, rural communities suffered, and ultimately 
our nation was not seeing the healthy consumer choice of romaine on the 
store shelves. California produces 90% of the nation's romaine. In 
another way of explaining the significance of that statistic, there are 
130 million servings of leafy greens coming out of California every day 
to the nation.
    Recently, our leafy greens community in California came together to 
update more stringent water standards for the growing of leafy greens. 
After the two outbreaks related to romaine in 2018, we realized that 
reviewing and revising the use of our water was the place to start. 
After discussions with FDA, FDA's investigation reports, the academic 
community, and growers, the most stringent water standards have been 
approved and will be in use shortly. I mention this because I am so 
proud to be part of a farming community that puts the safety of our 
products at the forefront. Through the LGMA, we able to update the food 
safety requirements as new science becomes available. We are also able 
to do this very quickly. Other food safety programs are unable to 
change as quickly as the LGMA.
    As growers of specialty products, especially leafy greens, we 
realize the importance and necessity of producing and providing a safe 
food to our nation and consumers. My family consumes the produce we 
grow at home. I want what I bring home to be safe for my family, I also 
want the same products I'm consuming to be safe for every family in our 
nation. Most companies now employ food safety staff who help that 
ensure that best practices are followed from germination to the 
shipment of our product distributed to our customers. Food safety 
programs like the LGMA have raised the standard in regards to food 
safety. Under the LGMA, we undergo 5-6 government audits each year to 
ensure we are adhering to the science based requirements of the 
program. In addition, the LGMA requires a traceback program requiring 
all of its members be able to track their produce back to the farm 
level.
    As a grower of leafy greens, I am subject to third party private 
audits, customer audits, government audits, and now FSMA inspections. 
Recently, FDA has recognized the LGMA inspections as demonstrating 
compliance with Produce Rule requirements. This is a start, but finding 
solutions to relieving the audit fatigue of our specialty crop 
producers, will become increasingly more important in the future.
    Food safety, labor and water are not just issues faced by large 
farming businesses. Our community is blessed with a variety of farming 
operations, both big and small. I hope you understand that these 
challenges are shared by specialty crop producers who farm on 5 acres 
as well as for those with 5,000 acres. We accept that our farms are 
held to a higher standard because of the number of families we feed, we 
know the stakes are high. But please respect the essential role larger 
farming businesses like ours play in the vitality of local economies 
and in preserving the food security we are blessed with in this nation.
    Thank you for the opportunity to submit this testimony. I am 
honored to testify and hope my comments have raised awareness of the 
significance and challenges the specialty crop industry faces in 
California.
            Regards,

Dan Sutton,
General Manager,
Pismo Oceano Vegetable Exchange.
Works Cited
    SLO County--County of San Luis Obispo County. ``2017 Annual Report 
County of San Luis Obispo Department of Agriculture/Weights & 
Measures.'' Online at: https://www.slocounty.ca.gov/getattachment/
597e9e60-dc50-4d7e-9fe0-d2f8a80f88
74/Crop-Report-2017.aspx.
    USDA--United States Department of Agriculture. ``2012 Census of 
Agriculture Specialty Crops.'' Online at: https://www.nass.usda.gov/
Publications/AgCensus/2012/Online_Resources/Specialty_Crops/SCROPS.pdf.
    LGMA--Leafy Greens Marketing Agreement. ``A look at year-round 
lettuce production--from California's Leafy Greens Marketing 
Agreement.'' Online at: https://californiaagnet.com/2017/11/03/a-look-
at-year-round-lettuce-production-from-californias-leafy-greens-
marketing-agreement/.
    CFBF--California Farm Bureau Federation. ``Still Searching for 
Solutions: Adapting to Farm Worker Scarcity Survey 2019 California Farm 
Bureau Federation and UC Davis.'' Online at: www.cfbf.com/2019survey.

    The Chairman. Thank you, Mr. Sutton.
    Mr. Davis.

  STATEMENT OF H. BART DAVIS, Jr., OWNER AND OPERATOR, DAVIS 
                    FAMILY FARMS, DOERUN, GA

    Mr. Davis. Good morning, Chairman Vela, Ranking Member 
Thompson, and Members of the Subcommittee.
    Thank you for the opportunity to provide a perspective on 
the current economic condition for farmers in southwest 
Georgia. I believe this situation reflects what crop producers 
across the Southeast are currently experiencing.
    Our family farm raises cotton, peanuts, corn, along with 
hay and beef cattle in Doerun, Georgia.
    South Georgia is one of the leading regions for both cotton 
and peanut production. The price outlook for these commodities 
is bleak and the economic climate in agriculture makes it 
difficult for crop producers to remain viable.
    This economic situation is the result of multiple factors 
that have combined to create almost a perfect storm for farmers 
in most parts of the country.
    First, commodity prices have generally been flat and 
trended downward due to global supply-demand situation, trade 
policy uncertainties, and strong crop yields and large 
production in other countries.
    Second, most major crop producer regions in the U.S. have 
been hit with severe natural disasters in the past 2 years, 
hurricanes in the Southeast, drought in the Southwest, and 
flooding in the Midwest.
    Third, the trade uncertainty and export market disruptions 
caused by tariffs are harming exports which are critically 
important for most commodities.
    Last year's hurricane caused $600 million in cotton and 
seed cotton losses in Georgia alone, plus $74 million in 
indirect losses. Across the Southeast Region, estimates range 
between $700 and $850 million in cotton and cottonseed losses. 
While some of last year's crops were salvaged, production was 
down 40 percent statewide, and many fields suffered a complete 
loss.
    Since the hurricane struck the Southeast last fall, my 
fellow producers and I, along with our lenders, thought Federal 
assistance would be made available to help offset this 
historical loss we experienced.
    Beyond traditional lenders, most of our seed chemical 
fertilizer equipment lenders have also extended credit where 
repayment could be dependent on getting a disaster bill passed. 
We never anticipated that 7 months post-hurricane we would 
still be left waiting and wondering what will happen.
    I am very grateful for the House passing disaster 
assistance. I want to recognize the leadership and support on 
this issue by Representative Austin Scott, David Scott, Rick 
Allen on this Committee, and Chairman Bishop on the 
Agricultural Appropriations Subcommittee.
    On behalf of my fellow producers, our families, and the 
rural communities across the Southeast where agriculture is the 
backbone of the local economies, I implore Congress and 
Administration to resolve their remaining differences to ensure 
a disaster bill is passed this month.
    The 2018 Farm Bill provides a strong foundation for farm 
safety net, but these policies are not equipped to adequately 
respond to the losses when catastrophic natural disasters hit. 
Coupled with the lost exports due to ongoing trade disputes, it 
is clear that supplemental assistance is needed across the 
agricultural sector for producers to withstand the economic 
pressures we are facing.
    The China trade dispute with tariffs on cotton are 
increasingly harming our industry. U.S. cotton market share in 
China is down 75 percent, while Brazil has quadrupled its 
market share. Farmers cannot continue to withstand the economic 
impact of the trade dispute on our bottom line.
    The MFP provided by the Administration last year has helped 
partially offset our market losses. Those of us that suffered 
crop losses due to last year's natural disasters were unable to 
fully benefit from the MFP.
    For prospects for increased production this year, U.S. 
cotton must have increased access and market share in China. 
The cotton industry also strongly supports approval of the 
U.S.-Mexico-Canada Agreement.
    I believe it is critical for the House Agriculture 
Committee and Congress to take action by providing the much-
needed assistance that will help producers withstand the 
economic downturn occurring in our sector.
    Thank you for supporting U.S. agriculture, and I would be 
pleased to respond to any questions.
    [The prepared statement of Mr. Davis follows:]

  Prepared Statement of H. Bart Davis, Jr., Owner and Operator, Davis 
                        Family Farms, Doerun, GA
Introduction
    Good morning, Chairman Vela, Ranking Member Thompson, and Members 
of the Subcommittee. Thank you for holding this hearing and for the 
opportunity to provide a perspective on the current economic conditions 
for farmers in southwest Georgia that I believe are reflective of what 
crop producers across the Southeast are currently experiencing. I 
especially want to thank Congressman Austin Scott, who represents the 
district I live and farm in, for the invitation to be here today.
    My name is Bart Davis and my family, and I farm in Doerun, Georgia, 
where I was born and raised. Our family farm began with 500 acres 
producing cotton, peanuts, wheat, soybeans, hogs, and beef cattle. 
Today, Davis Family Farms includes my wife Paula, our sons Trey and 
Jedd, and daughter Lakyn. We farm approximately 3,100 acres of cotton, 
1,600 acres of peanuts, 300 acres of corn, along with hay and beef 
cattle.
    We all know and appreciate that agriculture is a highly cyclical 
business, more so than most other industries, due to the impact of 
Mother Nature on our productivity and the global commodity markets 
where we sell our products. It is this cyclical nature of farming that 
has driven the evolution of farm policy over the decades and the need 
for Congress to maintain an effective safety net for family farms 
through the farm bill and crop insurance. I would like to thank you and 
the other leaders and Members of the House Agriculture Committee for 
the work done over the past 3 years to address the immediate policy 
needs of cotton producers by bringing cotton more fully into the safety 
net for 2018 under the previous farm bill and then protecting that 
policy as part of the new farm bill for the next 5 years.
Economic Conditions
    South Georgia is one of the leading regions for both cotton and 
peanut production. The current price outlook for these commodities is 
bleak, just as is the case with many major crops including corn, rice, 
sorghum, soybeans and wheat. The current economic climate in 
agriculture makes it difficult for crop producers to remain viable and 
service our debt, much less earn a positive margin. This economic 
situation is the result of multiple factors that have combined to 
create almost the perfect storm for crop producers in most parts of the 
country.
    First, commodity prices have generally been flat to trending 
downward due to multiple factors including the global supply/demand 
situation, trade policy uncertainties, strong crop yields and large 
production volumes in other major producing countries. Cotton prices 
are projected to decline for the 2019 crop year back to the average 
level observed for the 2014 through 2017 crops. In addition, cottonseed 
prices are continuing to decline, averaging less than $150 per ton in 
most areas. Lower cottonseed prices reduce revenue for producers, and 
at these price levels, likely result in out of pocket costs for ginning 
expenses paid by the grower. Second, most major crop producing regions 
of the U.S. have been hit with severe natural disasters the past 2 
years--ranging from the hurricanes in the Southeast and south Texas to 
drought in the Southwest to wildfires in the West and flooding in the 
Midwest. Third, the trade uncertainty and export market disruptions 
caused by retaliatory tariffs are stifling exports, which are 
critically important for most commodities.
Natural Disasters and Disaster Assistance
    As you know, portions of Alabama, Florida, Georgia, North and South 
Carolina were struck by devastating hurricanes and flooding last fall. 
Hurricane Florence hit the Carolinas followed by Hurricane Michael that 
hit south Alabama, the Florida panhandle, and my region of Southwest 
Georgia, which was in the heart of the devastation.
    The magnitude of these storms was so severe that we had wind speeds 
never experienced before as far inland from the coast. The timing of 
the hurricanes could not have been worse, striking just as most of our 
crops were ready to harvest and the most exposed to damage and loss. 
This was especially true for our cotton, which was expected to be one 
of the best yielding cotton crops in the history of Georgia. The 
University of Georgia, Georgia Department of Agriculture, National 
Cotton Council, American Farm Bureau Federation, and others have 
developed estimates of the crop losses of approximately $600 million in 
cotton and cottonseed losses in Georgia alone, plus $74 million in 
indirect losses. Across the Southeast region, estimates range between 
$700 and $850 million in cotton and cottonseed losses.
    Since the hurricanes struck the Southeast last fall, producers and 
their lenders across the region have been agonizing over how to move 
forward with the 2019 crop. While some of last year's crops were 
salvaged, production was down 40% statewide, and many fields suffered a 
complete loss. Some of what was salvaged was such poor quality that the 
cotton could not be ginned, or if it was ginned, the poor lint quality 
resulted in heavy price discounts. For months my fellow producers and 
I, along with our lenders, thought Federal disaster assistance would be 
made available to partially offset the historic losses we experienced. 
We never anticipated that now, 7 months post-hurricanes, we would still 
be waiting and wondering what will happen.
    I am encouraged by the recent reports of progress toward resolving 
the disagreements that have held up Congressional passage of a disaster 
bill that can be signed by the President and enacted into law. I am 
very grateful for the House passing several disaster assistance 
packages and want to recognize the leadership and support on this issue 
by both Representative Scott and Chairman Bishop on the Agriculture 
Appropriations Subcommittee.
    Given the uncertainty around an agriculture disaster assistance 
package, some lenders have not provided operating loans and credit 
lines to producers to put in a crop this year. Other producers have 
been forced to seek alternative or more expensive financing options. 
Producers and lenders were counting on a Federal response, just like we 
have always seen by Congress any time a natural disaster of this 
magnitude has struck any part of our country. On behalf of my fellow 
producers, our families, and the rural communities across the Southeast 
where agriculture is the backbone of the local economies, I implore 
Congress and the Administration to resolve the remaining differences to 
ensure a disaster bill with agriculture assistance is enacted in the 
coming days. Otherwise, many producers will likely not be able to 
remain in business.
Farm Bill and Crop Insurance
    The Agriculture Improvement Act of 2018 (2018 Farm Bill) and 
Federal crop insurance provide a strong foundation for the farm safety 
net and risk management. The 2018 Farm Bill included important updates 
and refinements to the policies included in the 2014 Farm Bill. These 
include an optional yield update beginning in 2020, greater flexibility 
to select between ARC and PLC coverage during the years covered by the 
farm bill, enhancements to crop insurance, and greater customization of 
risk management tools for cotton by selecting between ARC/PLC, STAX, 
and SCO coverage.
    However, these policy tools are not equipped to adequately respond 
to the losses producers suffer when catastrophic natural disasters hit. 
Coupled with the lost export markets from the ongoing trade disputes, 
it is clear that supplemental assistance is needed across the 
agriculture sector for producers to withstand the economic pressures 
they are currently facing.
Trade Policies and Negotiations
    U.S. agriculture generally, and the cotton industry specifically, 
are heavily reliant on robust export levels. For cotton, more than 80% 
of the crop is exported as baled cotton lint and most of the remainder 
is exported as cotton yarn and other textile products produced by the 
U.S. textile industry. The industry's top export markets are Vietnam, 
China, Indonesia, Pakistan, Turkey, and Mexico.
    The cotton industry strongly supports Congressional passage of the 
U.S.-Mexico-Canada Agreement (USMCA). The agreement continues duty free 
access for U.S. cotton and cotton products and maintains a yarn-forward 
rule of origin for textile/apparel products. USMCA also includes a 
specific textile chapter that helps close existing loopholes in the 
rules of origin while improving customs enforcement to address 
transshipment of apparel goods that do not qualify for preferential 
access to the U.S. market.
    The current trade dispute with China and the resulting retaliatory 
tariffs on U.S. cotton and cotton yarn are increasingly harming the 
U.S. cotton industry and our long-term market share in China. The 
immediate impact has been roughly a 75% decline in market share in 
China, while Brazil has quadrupled its market share in the market. This 
lost market share has reduced overall export sales and shipments, 
further depressing U.S. cotton prices. While it is important to act to 
address China's policy abuses and the impacts on our trading 
relationship, U.S. farmers cannot continue to withstand the economic 
impact of the trade dispute on our bottom-line. The Market Facilitation 
Program (MFP) provided by the Administration for cotton and other 
commodities produced in 2018 has helped partially offset our market 
losses. However, those of us that suffered either total or partial crop 
losses due to last year's natural disasters were not able to fully 
benefit, or some not at all, from the MFP.
    Our industry urgently needs a resolution to the trade uncertainties 
with China. With prospects for increased production in 2019, U.S. 
cotton must have improved access and increased market share in China. 
Otherwise, we are likely to experience further declines in market 
prices and increased economic pressure on cotton producers. Among 
agricultural commodities, cotton is unique since the only markets for 
the crop are in countries where a textile industry exists, so finding 
and opening new markets is relatively limited for cotton compared to 
most other commodities that are either food and/or feed crops.
Conclusion
    As the agriculture industry continues to struggle with depressed 
commodity prices; trade disputes, retaliatory tariffs, and lost market 
share; and crop losses and infrastructure damage from hurricanes and 
other natural disasters, I believe it is critical for the House 
Agriculture Committee and other Members in Congress to take action by 
providing the much-needed assistance that will help producers in the 
near term withstand the economic downturn occurring in our sector.
    While the farm bill and crop insurance continue to serve as the 
foundation of agriculture's safety net, these policies are not designed 
to adequately respond to the losses created by historic natural 
disasters, trade disputes, and punitive tariffs in multiple, top 
markets critical to U.S. agriculture exports.
    Thank you for taking the time to examine the state of the farm 
economy and to hear directly from producers being impacted across the 
country. I also want to thank you for being advocates of U.S. 
agriculture. I would be pleased to respond to any questions.

    The Chairman. Thank all of you for your testimony.
    Members will be recognized for questioning in the order of 
seniority for Members who were here at the start of the 
hearing. After that, Members will be recognized in order of 
arrival.
    I recognize myself for 5 minutes.
    Mr. Davis, thank you for your testimony regarding the 
disaster relief. I am hopeful that our next hearing in June 
will be focused on that issue and we will do a much deeper dive 
into it. I am hopeful that by then we will have the disaster 
relief that we so sorely need in Florida, Georgia, and along 
the Missouri-Mississippi River.
    Most of us on this Subcommittee represent pretty large 
swaths of land, and I can't go to any farmer in the 270 mile 
stretch of south Texas that I represent without hearing about 
how difficult it is for farmers to get loans and financing and 
things like that.
    What I would like to hear from each of you is, given the 
geographic diversity that is represented here today, what you 
are seeing and what your fellow farmers are seeing on that 
front.
    Mr. Huie?
    Mr. Huie. Thank you, Mr. Chairman. As you said, credit is a 
challenge right now. A couple of fundamental reasons that that 
is a problem relate directly to the market.
    The first is that most credit in our area is calculated 
based on your historical production times a given price, and 
that is what the beginnings of loans are built out of, and as 
those prices decrease, so does your ability to finance up to 
that level.
    Second, as crop insurance values decrease and the ability 
to collateralize crop insurance therefore decreases, that 
changes your ability to borrow, and so both of those have put a 
squeeze on.
    And the third, which is the one I guess I didn't anticipate 
individually, is that I am grateful that thus far my lender has 
been supportive, although we have had to refinance some things, 
I have some fellow peers who have not been as fortunate as I 
have. And in scenarios where they owe money that is unsecured, 
for example, I picked cotton for a neighbor last year who could 
not afford his own $\3/4\ million cotton picker, I moved across 
the road and picked his cotton with the expectation that he 
would pay me. He has not been able to get refinanced and so he 
owes me about $100,000, and I guess I am not going to see that 
again, so there is a third tail to that thing that I did not 
anticipate. We have sort of three different issues there in my 
mind related to just sort of the total shrink in what has been 
able to be borrowed from credit.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Peterson.
    Mr. Peterson. Yes. The current lending situation, we bank 
at the Main Street Bank in Northfield. Happens to be the same 
one Jessie James tried to get money out of, but anyhow, they 
have been supportive and they are a small-town lender. As I 
said, we have been there forever. It is basically on equity of 
past generations, our diversification in our livelihood, and 
their ability to believe in us. We can't present them with 
favorable numbers. We are trusted friends, I guess, because the 
numbers aren't working and in years past there has been a 
little bit of a--my wife does a lot of the marketing and there 
has been a little bit of a burp in the market or a positive 
where we could forward contract.
    We are an older established farm and we have on-farm 
storage, so we can bridge into carrying the market and things 
like that, but as we plant our crop this year, I don't see a 
lot of positive frontiers in the markets. It is really hard to 
price a commodity that we are growing, and it is hard to ask 
this of our trusted lenders, so I guess what I am trying to say 
is, is if we were across the desk, we would either have to 
believe in the individual or we would have to make the decision 
from some other means, because we just don't have the numbers 
before us to present positive cash flow.
    The Chairman. Well, thank you.
    And in the interest of time, I will go ahead and move on to 
my colleagues.
    I recognize the gentleman from Pennsylvania, Ranking Member 
Thompson, for 5 minutes.
    Mr. Thompson. Mr. Chairman, thank you so much.
    Thank you to each of you gentlemen for being here taking 
time away from your farms and your families. I hope you know 
how incredibly valuable that is to us. We recognize your 
sacrifice to come here, but giving us your personal experiences 
is so important.
    Mr. Davis, good to see you again.
    Mr. Davis, you mentioned the need for Congress to pass 
disaster assistance. I certainly agree with you. It is 
unfortunate that it has taken this long, but given what is 
being considered legislatively is very similar to what Congress 
passed to address the 2017 losses, also caused by hurricanes in 
the Southeast, would there be any changes in how the WHIP 
program (Wildfires and Hurricanes Indemnity Program) is 
designed either legislatively or administratively that would 
help the program operate better for producers?
    Mr. Davis. Yes, sir. In 2017 one of our challenges with the 
WHIP program was the signup process was very time consuming. 
They had to manually calculate all the math due to software 
issues, and one thing was when the producer signed up he could 
only get 50 percent of his eligible payment at that time and he 
had to wait until the end of the signup to get the remaining 50 
percent, and that sort of hurts.
    And another thing we have asked, to increase the coverage 
from a 70 percent to a 90 percent loss so you would trigger 
payment quicker, and a lot of people that had losses in 2017 in 
my area did not qualify. Even on my farm, we had a loss but it 
was a shallow loss and we didn't qualify.
    We would also ask that we would like to just, instead of 
deducting the gross indemnities from your payment, just to 
deduct net indemnities. And what I am saying there is, on gross 
indemnity they consider your insurance premium in there, so 
that way a guy would be getting benefit from what he has paid 
for insurance, if you follow what I am saying.
    Mr. Thompson. Yes, thank you. Thanks for the concrete 
recommendations.
    This question is really for anybody on the panel that would 
like to address it.
    I know when I visit my producers in my area, crop insurance 
really is critical, and for the most part lenders require 
farmers to carry insurance and generally it works well most 
years.
    Could each of you briefly comment on your experience with 
crop insurance, what type of policy you typically carry, and 
are there any changes or improvements that we could be working 
with the Administration on to better provide risk protection?
    Mr. Huie.
    Mr. Huie. Yes, sir, and thank you for letting me speak to 
that.
    I was also part of the WHIP program after Hurricane Harvey 
and the way crop insurance interacted with the WHIP program was 
not particularly positive. He hit on a couple of those things 
already.
    As far as improvements to crop insurance, my recommendation 
would be to have a discussion about what happened in our area 
during Harvey was that we had a giant crop in the field, much 
larger than what our historical production was, and if any 
portion of that was harvested, then it ruled out crop 
insurance, and therefore, ruled out the WHIP program. There was 
no system in place to get any assistance, as evidenced by the 
fact that it didn't spend any money. I mean, it was 
appropriated at $2.6 billion and spent $1 billion. All that 
money, still it didn't go out into the countryside in my part 
of the world.
    Mr. Davis. I would like to make a comment on crop 
insurance.
    As you all know, crop insurance on our crops, it is unlike 
homeowners or car insurance. With crop insurance, the highest 
coverage we can normally afford to purchase is 80 to 85 
percent, so we are left to incur significant deductible 
ourselves before crop insurance coverage triggers to help 
offset our losses.
    With the losses from the hurricane last year, crop 
insurance would not cover the magnitude of losses we 
experienced, and it does not take into account the crop 
potential before the storm hits.
    Where insurance is based on historical yields, it don't 
always keep up with the pace of production due to improved 
practices and farming technology. What I am saying is, we had 
to work off of APH, which is a 10 year average, and that always 
is not really fair because we are continuously making better 
and more production as time goes by.
    You can spend whatever you want. You can spend from $15 to 
$60 a acre. If you insure to the max on irrigated which your 
premium is based on how much revenue you can collect. In other 
words, the higher the yield you have and the higher the price 
is set, the more it costs us. Therefore, you have to use good 
management to decide getting more bang for your buck. You are 
going to have a 20 percent, normally, risk out there if you 
collected the full insurance. You can still lose $100 to $200 
per acre on irrigated cotton.
    Mr. Thompson. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. And I recognize the gentlewoman from 
Minnesota, Mrs. Craig.
    Mrs. Craig. Thank you.
    The Chairman. Five minutes.
    Mrs. Craig. Thank you, Mr. Chairman.
    I would like to start by submitting for the record a 
written testimony from the National Association of Wheat 
Growers, please.
    [The document referred to is located on p. 43.]
    Mrs. Craig. First of all, I really want to start my 
comments by saying that I am going to focus on the effect of 
the Administration's efforts on trade for most of my questions.
    To me it is just undeniable that this Administration has 
continuously used our family farmers as political bargaining 
chips in a senseless trade war.
    When I talk to farmers in my district, the notion that this 
is short-term pain for long-term gain is getting old. As our 
farmers are planning for the year ahead, the threat of 
withdrawing from NAFTA continues to loom and there is still no 
resolution with China.
    Just this week we saw the impact of the Administration's 
trade actions play out in real-time. Ahead of negotiations with 
China, the President in a Tweet threatened a new round of 
tariffs on China, going as far as to say that these tariffs 
are, ``Partially responsible for our great economic results.'' 
This Tweet sent soybean futures plunging to record lows, all 
part of a sustained period of market volatility and sharp 
decline of soybean prices over the last year.
    Even if the Administration reached a deal tomorrow, we may 
never regain our international market share for U.S. crops.
    If we don't reach an agreement quickly, stocks will 
continue to grow and prices will continue to fall. This market 
volatility is threatening to change the makeup of rural America 
for years to come.
    Farmers are resilient and hardworking people who just want 
a fair shot at a market and a fair price.
    So with that, I do want to start with you, Mr. Peterson.
    You mentioned in your testimony that you originally 
supported the goals of securing better trade agreements to hold 
China accountable. I, too, supported that.
    Do you feel our rural communities, places like Northfield 
and those surrounding Rice County towns and townships, have 
received the great economic results that the President claims? 
And how has the Administration's trade war impacted your life, 
Mr. Peterson?
    Mr. Peterson. Just to be kind of humorous, the trade war 
impacted steel, aluminum, and soybeans. Well, we run a welding 
and fabrication shop that deals in steel and aluminum and we 
also grow soybeans, so it really didn't affect me much, right?
    Anyhow, on a serious note, it all comes down to markets, 
and you mentioned our community. Our community is pretty 
diversified and resilient, kind of its own economic engine.
    But if we go farther out into rural America, there is my 
concern. It is about the communities. It is about the farmers 
that can spend money in those communities. That keeps schools 
open. That keeps the medical industry open. That keeps 
infrastructure, even fire departments and things like that 
open. It keeps up roads and bridges. It is just commerce.
    And rural communities, smaller towns, are so vital to our 
whole demographic and our ability to keep family farmers on 
farms and keep our cropland from being owned by corporations, 
which in turn I feel would turn into a foreign investment in 
farmland and eventually possibly some of the loss of our own 
food supply or control of our food supply, excuse me.
    To answer your question, and put it into numbers, I am not 
going to speculate or guess, when farmers don't have money they 
can't spend it in town and not having the markets that are 
checkoff dollars and all of our negotiations in the past have 
negotiated for, we need to get ships tied up to docks in 
foreign countries. That is just the way it is and I don't think 
we can accomplish that by telling our customers how to act.
    Mrs. Craig. Thank you.
    I just want to follow up on one other topic real quick, and 
that really is climate change. There is a lot of talk here in 
this town about climate change, and I believe our farmers are 
really on the frontlines of conservation in this country.
    What role do you believe farmers can play here in 
addressing climate change and what should the Agriculture 
Committee do to continue to promote conservation practices?
    Mr. Peterson. I believe that on our farm I want to be 
proactive. The soil carbon sequestration thing is intriguing to 
me, and I am going to morph, further morph our production 
practices into building healthier soils, primarily from a me-
first standpoint.
    I want to create healthy soil, reduce inputs, and keep the 
thin layer of topsoil we have in place. That is what I feel a 
lot of farmers can do on climate change, and it would be a 
cooperative venture, whether it is through supply management 
and we do a short-term, set aside program where we could amend 
soils.
    We are in the northern portion of the Corn Belt and it is 
really hard for us to get a window to grow cover crops or 
anything outside of corn and soybeans. Those two production 
crops take 100 percent of our growing season.
    If we need to answer to some sort of a climate change 
initiative, I would appreciate the ability to move a portion of 
my production acres into soil stewardship applications.
    Mrs. Craig. Thank you, Mr. Peterson.
    I yield back.
    The Chairman. I now recognize the gentleman from Georgia, 
Mr. Scott, for 5 minutes.
    Mr. Austin Scott of Georgia. Thank you, Mr. Chairman.
    And just briefly, while Texas and Georgia were both hit 
with hurricanes, what happened in Texas is the crop was already 
harvested. It was just still sitting in the field because you 
didn't have time to get it out of the field before the storm 
came in. Sir? Both? But a lot of your crop was harvested?
    Where in Georgia our crop was still on the stalk and that 
is where the difference when crop insurance pays and doesn't 
pay makes such a big difference.
    The storm hit us mid-October and I was at the Sunbelt Ag 
Expo, as I know Bart Davis was. Others in this room may have 
been there. I know some of the other people in this room were 
there.
    The Vice President, who I know and I like, flew in there 
and gave a speech, and I would like to read part of his speech. 
He says, ``Let me say to all the farmers gathered here today in 
the wake of Hurricane Michael, we are with you and we will stay 
with you until we rebuild and recover better than ever 
before.'' There was as big an applause as I have seen in a 
long, long time when he said that.
    And he talked about Decatur County, which is in Congressman 
Bishop's district, not in my district. Georgia farmers and 
producers lost up to 75 percent of their fall vegetables, 90 
percent of their sweet corn, 95 percent of the unharvested 
cotton crop, 95 percent of poultry, 100 percent of the pecan 
crop, and in fact many of them lost the whole pecan orchard.
    Those of us in the House worked pretty hard in putting a 
disaster package together, and we were able to move up to $3 
billion, the number available for crop losses. The losses in 
Georgia alone are better than $2 billion, and we are talking 
about $3 billion for the whole country for all of the 2018 
storms, not just Hurricane Michael. The $3 billion number is 
still short.
    But, I want to read the Statement of Administrative Policy 
that the Office of Management and Budget put out, ``Crop and 
Livestock Losses. The Administration does not support the $1.1 
billion,'' again, we through work in the House got it moved to 
a more reasonable number, ``provided for crop and livestock 
losses. Existing USDA safety net programs including crop 
insurance can provide this assistance to producers.''
    I appreciate the Vice President's comments and I appreciate 
the President's favorable comments about agriculture and the 
agriculture community.
    But when things were then handed off to people at Office of 
Management and Budget, who consider the American farmer and the 
American farm family nothing but subsidy-sucking freeloaders, 
then there is a disconnect in what is actually coming out of 
the Administration and what the Administration is telling us 
they are going to do.
    Mr. Davis, can you explain to us why existing crop 
insurance programs just won't do it in the case of an event 
like Hurricane Michael?
    Mr. Davis. Yes. Like I said a while ago, 80 to 85 percent 
is the most you can insure your crops for.
    When I started farming in 1982, Austin, you could take 
$100,000 and work a lot of land. I borrowed hundreds of 
thousands of dollars. Now we borrow millions of dollars.
    Virtually, our operation has to feed three families. I 
don't really like having to farm 5,000 acres. That is what it 
takes. The profit margin is so thin, that is the acres it takes 
for us to make a living for three families.
    And with insurance like it is, it is costing so much to, 
the cost of production has gone up so dramatically the last 
several years, it is costing me on my farm between $900 and 
$1,000 an acre to grow an irrigated acre of peanuts or 
irrigated acre of cotton, so you see the risk there. And when 
you see there that 80 to 85 percent is the most I can insure 
for, you do the math. You see what is left.
    That is what happened to me last year. We had the maximum 
insurance and I am not going to say the figure here, but it was 
several hundred thousand we still lost on our farming operation 
last year.
    Mr. Austin Scott of Georgia. I appreciate all of you being 
here.
    I will tell you one of the things; and this is true in 
Colquitt County. If you go into the northwest portion of 
Colquitt County, the loss is totally different than the losses 
in the southeastern portion of the county, the way that storm 
came through. And as this Committee looks into crop insurance 
and how we handle the losses, it is very clear to me we are 
going to have to figure out what happens in the event of these 
catastrophic losses where you have a 100 percent loss and how 
that is calculated into base figures and other things, going 
forward.
    Mr. Chairman, I know my time has expired, but I appreciate 
the Members of this Committee helping to pass disaster relief.
    My colleague David Scott has been a big help in that as 
well, and I sure hope we get something done before Memorial 
Day.
    The Chairman. And I recognize the gentleman from 
California, Mr. Carbajal, for 5 minutes.
    Mr. Carbajal. Thank you, Mr. Chairman.
    First, a question for Mr. Sutton. As you stated in your 
testimony, access to labor is one of the most essential inputs 
in specialty crop insurance. Labor shortages continue to 
challenge your Central Coast operations due to impracticalities 
of our current immigration system.
    Can you please explain the challenges Central Coast farmers 
are seeing due to the lack of access to a sustainable 
workforce? What do you predict your industry will face if the 
ongoing labor issue is not resolved?
    Mr. Sutton. Thank you, Congressman Carbajal.
    Yes. Labor is one of the most concerning issues that we are 
facing day to day, 10 years ago we had the ability to access 
domestic labor and pay those folks that worked on our farms the 
current wage.
    What has happened here in recent years is that domestic 
labor pool has gone away, and please understand our operation 
is one of several hundred in California that are working in the 
specialty crop industry. And our labor needs are pretty 
intensive because no one likes a head of romaine that doesn't 
arrive to your refrigerator that doesn't look good, and so our 
crops take that personal touch. It takes hand labor to get that 
crop as it is out on our farm to your dinner table.
    Because of the shortage of labor, we have had to start 
using the H-2A program more extensively. I will estimate this 
year that with all of our harvesting crews, 85 percent of the 
labor that we need is coming from the H-2A program.
    The H-2A program gives us the labor we need to get our 
crops out of the ground, but it is extremely expensive. It is 
not only the adverse effect wage rate, the A word, that has to 
be complied with, it is also the California laws with minimum 
wage increasing, ag overtime decreasing. We have to provide 
housing for these H-2A workers, we have to provide 
transportation, and all those costs that go in, and we look at 
things at a per-box rate. When we factor all the costs that go 
into that one box of production, at times that doesn't pencil 
out, and then we have to make the decision of do we harvest 
this crop or not.
    Without consistent and eventual stability in our labor 
force, the H-2A program will continue to be used, but we are 
also being looked to go in--we are trying to look to go into 
mechanization, and there are barriers to going into 
mechanization. One of them being the pure cost. If there was a 
machine that could do what 12 farmworkers do, we would 
definitely be interested in looking at that and then we would 
have to look at the price tag to see if we could make that 
happen.
    Having a stable workforce for our industry is extremely 
important to us.
    Mr. Carbajal. Thank you, Mr. Sutton.
    To all the witnesses, in addition to the pressure felt by 
the farmers during NAFTA renegotiations, the President has 
stated that he might fully close the southern border for an 
unspecified period of time.
    Can you describe the impact that such a closure would have 
on your operations?
    Starting with Mr. Sutton, if we could?
    Mr. Sutton. Thank you, Congressman. Our southern neighbors 
to our southern border are one of the largest recipients of our 
products, and not only that but in the specialty crop industry 
our market is a global market, and Mexico is definitely part of 
that global market.
    One of the effects, one, it is not good for U.S. farmers, 
it is not good for U.S. businesses, and it is not good for the 
U.S. economy.
    Immediately after the announcement was made that that may 
happen, the price of an avocado went up 34 percent. That is how 
significant our neighbors are to the South and to part of the 
global economy. Closing the border to the South of us would 
have drastic effects on the ag economy.
    Mr. Huie. Thank you, Mr. Carbajal.
    I am in a close proximity and Mr. Vela's district goes all 
the way to the Mexican border, and for years that has been an 
incredibly important part of our trade. In fact, all of my 
sorghum last year was shipped across the border and into 
Mexico.
    The importance of that has been further compounded by other 
trade barrier issues that are currently in play, so it has made 
NAFTA even more important, and therefore, passage of USMCA even 
more important, those concerns for us all over the country but 
especially in proximity to the Mexican border and the Canadian 
border where we need a home for those products.
    We in America think we are and believe with all our hearts 
that we are the best producers and most efficient producers and 
safest producers in the world, and we need trade for that, for 
those markets, for those products. We need stability in that 
system.
    And I appreciate your----
    Mr. Carbajal. Thank you. My time has run out.
    I yield back, Mr. Chairman.
    The Chairman. I now recognize the gentleman from Arkansas, 
Mr. Crawford, for 5 minutes.
    Mr. Crawford. Thank you, Mr. Chairman.
    Mr. Davis, you made the comments about consolidation. I am 
not sure which one of you addressed this. But how consolidation 
is impacting input costs and so on. You want to weigh in on 
that, how that is affecting your operation?
    Mr. Davis. Okay. What is the question again?
    Mr. Crawford. Consolidation and how that is affecting your 
input costs.
    Mr. Davis. It is affecting our input costs. It causes 
things to go up. I guess the question you asked is about the 
tariffs?
    Mr. Crawford. No. I am talking about, and I may need to 
direct this question to Mr. Huie. Maybe you are the one that 
might have addressed that.
    Mr. Huie. Yes, sir. I will take a run at that.
    Part of the free market economy that we believe is 
necessary in agriculture is competition, and as competition has 
shrunk in the marketplace both where we buy and where we sell, 
our ability to both sell products and buy products at a 
reasonable cost has changed. This has been further exacerbated 
with tariffs from China which have again shrunk our ability to 
bring things in from other companies.
    There have been some major consolidations recently, the 
Bayer-Monsanto merger and a couple of others, that have just 
taken competition out of the marketplace for things like 
technology and seed. They are all selling the same products and 
that is part of what has held our input costs high because 
there isn't really a great option out there in competition to 
lower our input costs.
    There are a bunch of different things related to that that 
are holding input costs up, even as our ability to sell 
declines, but consolidation is certainly a component of that in 
the major companies.
    Mr. Crawford. Thanks.
    Mr. Davis, I am going to go back to you because disaster 
relief is, obviously, front and center for you right now.
    I have been working on this particular issue, what I would 
consider probably like an HSA account for farmers, that is to 
allow farmers to essentially fund their own disaster relief 
while they await either a crop insurance payment or a 
supplemental appropriation or whatever. In many cases it could 
make the difference in folks being in business today and making 
it another year or not.
    Let me ask you this: If you had such an account, if you had 
access to a tax-deferred account that you could deposit with up 
to $50,000 a year and be able to draw on for operational use in 
the time of a disaster, is that something you find would be 
beneficial to you?
    Mr. Davis. Yes, sir, it could be beneficial if the farmers 
have the money, can make enough profit to put that money in 
there every year.
    Mr. Crawford. It is really kind of a tough scenario right 
now because now is the time you need it.
    Mr. Davis. Right.
    Mr. Crawford. Congress is historically not proactive. 
Sometimes you could say the ag industry in general, and I have 
been in the ag industry most of my adult life, is sometimes not 
proactive and we don't go where we need to be, but rather wait 
until circumstances dictate that we act a certain way. We can't 
turn back the clock; but, if 5 years ago we had an account like 
this, you would be fully funded right now, potentially.
    Mr. Davis. Yes.
    Mr. Crawford. And could mitigate the losses you are 
suffering right now.
    My point is this, that we have limited authorities here in 
the Agriculture Committee. We have wrestled with this, because 
there is obviously a tax component here, so we have to rely on 
people outside of the Agriculture Committee who really kind of 
lack the understanding of why that is important.
    We are asking folks in committees like Ways and Means who 
may not have the same understanding of agriculture to 
understand why we are making these suggestions for you.
    Can you kind of envision an account like that being 
beneficial to keep you in business another year while you are 
waiting on a disaster supplemental or possibly a crop insurance 
adjustment?
    Mr. Davis. Yes. I mean, it would be according to the way 
this thing is set up. I mean, would this be something that we 
would get a tax credit for?
    Mr. Crawford. Certainly that is, yes?
    Mr. Davis. Instead of paying taxes, put a certain amount of 
your tax money, if you made money, put that money in there, 
because you are going to have to make a profit before you are 
able to fund that account.
    Mr. Crawford. That is exactly the point, and rather than 
when you have a good year go out and invest in another combine 
because you are trying to reduce your tax liability, you put 
that same amount into an account that can be used to mitigate 
disaster on your farm.
    Mr. Davis. But, we work toward disaster to try to prevent 
disasters, we put money in center pivots for drought and we put 
money in crop insurance for other losses that we just have. I 
mean, I have been paying crop insurance for several years and 
hardly ever collected.
    Mr. Crawford. Yes.
    Mr. Davis. I got a lot of my money back this year. I mean, 
if you look at it in certain ways, that sort of works sort of 
like what you are saying, but it wasn't enough to fully get me 
out.
    Mr. Crawford. Right.
    Mr. Davis. But I paid premiums for years and never 
collected. It paid off when Hurricane Michael come.
    Mr. Crawford. I appreciate that.
    Mr. Davis. I guess that is a possibility. I mean, that is 
the first I have heard about that. I mean, that is something we 
would have to--the cotton industry would have to look at and 
talk about and see how it would work for us.
    Mr. Crawford. I appreciate it. I apologize for going over.
    The Chairman. I now recognize the gentleman from Georgia, 
Mr. Scott, for 5 minutes.
    Mr. David Scott of Georgia. Thank you very much, Chairman 
Vela. I really appreciate you holding this hearing. It is very 
timely. The state of our nation's farming and agricultural 
economy has to be and should be and must be the number one 
agenda that we in Congress get forward to and resolve.
    Foremost is the fact that we have not treated our farmers 
right. I mean, we have had time after time needs expressed to 
us from our farmers. They have suffered through hurricanes 
after hurricanes, wildfires after wildfires, lava spewing up. I 
mean, the damage is there and yet not one dime has this 
Congress given down to help our farmers.
    Many of our farms are hanging on by their fingernails. They 
are losing their farms. The suicide rate of farmers is second 
only to our veterans, which is both shameful.
    Now we have a bill. We are supposed to vote it in today or 
tomorrow and I just hope that this House will stand up and 
unanimously pass this, get it over to the Senate, and then let 
us hope that our Republican colleagues who have a problem with 
our Puerto Rican fellow Americans put it behind them and put 
the interests of our farmers foremost.
    Agriculture is the single-most important industry we have. 
You can do without a lot of things, but you cannot do without 
food, you cannot do without clothing, and we cannot do without 
shelter, but yet we are treating our farmers like second-class 
citizens.
    I hope the message goes out and I also hope, and I want to 
get y'all's opinion on this, we have to figure out a way that 
this will never happen again.
    I have farmers in Georgia who haven't had a crop since 
2015, and if we can learn from this inability of Congress to be 
able to appropriate and get money down through the normal 
appropriations way in the time of these great damaging natural 
disasters, then we may have to look at another way. Because if 
every time we get a bill going, my colleagues on this Committee 
and Congressman Austin Scott and I, Sanford Bishop in Georgia, 
Senator Perdue and so many of us have been working, working 
trying to get it done through the appropriations processes 
there.
    But maybe we need to examine another way where we can have 
money set aside that doesn't have to go to the rigors and the 
give and take of politics. It is absolutely shameful that we 
have not responded to our own farmers because of some 
disagreements or differences or disdain even for our Puerto 
Rican citizens.
    I want to ask you, I have a question here. Given the 
current market conditions, has it been difficult to access 
credit? Would you all answer that for me?
    Mr. Davis. Yes, sir, Mr. Scott.
    Not only with it being a bad year and losing part of your 
crop, but when you go to borrow money to make an operating loan 
every year, the cheaper the prices the harder it is to borrow 
the money.
    I mean, you got to do a cash flow.
    Mr. David Scott of Georgia. And why is that? Why is that?
    Mr. Davis. Because a bank, which to start off with, to 
borrow money to farm you got to have an ag bank or ag lending 
institution. A lot of banks don't even understand farming. They 
look at it and say, ``This ain't going to work,'' from the get-
go. I mean, they got to be sort of willing to help like they 
have.
    A lot of banks and lenders have stuck their neck out to 
help keep farmers in business now because they know rural 
economies are important, but they have done it banking on this 
disaster is coming. If this disaster don't come, we are going 
to have more problems. But when you do a cash flow every year 
you figure your average yields times what you think you are 
going to get for that crop or what you got contracted, or 
whatever the market price is, to figure your income versus your 
expenses. The cheaper the prices every year on cotton the 
harder it is to make your cash flow.
    Mr. David Scott of Georgia. Do we have any idea, any of you 
have any figures or numbers on how many farms have closed down 
as a result of our inability to get aid to them?
    Mr. Davis. I don't. I know there are some out there still 
open. If this disaster bill would get passed, there are some 
that bankers are still holding up. They would go ahead with it 
even though they know the money is going to be a month or so 
getting there. I think they would go ahead and pull the trigger 
and help the people out.
    But as far as a number, I do not know.
    Mr. David Scott of Georgia. That is good. God Bless our 
farmers for sticking in there.
    Thank you, Mr. Chairman.
    The Chairman. I now recognize the gentleman from Georgia, 
Mr. Allen, for 5 minutes.
    Mr. Allen. Thank you, Mr. Chairman, and I want to thank all 
of you for being here today and sharing a little bit.
    I just wanted to thank you, Congressman Scott, to kind of 
piggyback on some of the things that he was talking about. But 
obviously because of the fiasco in 2008, the banks have been 
heavily regulated. That had a huge impact on farm credit now.
    I can tell you, I had a meeting with lenders the other day. 
They are all still being stared down by the Federal Government, 
but they have said and promised me that they are going to do 
their best to fund a crop, obviously with the disaster issue, 
and it needs to be solved and it needed to be solved yesterday.
    When I came to Congress in 2014, in my first term ag income 
was already down 55 percent from the farm bill that was 
written. That was in 2014.
    In 2016, Secretary Perdue sat right there where you all are 
and I asked him, I said, ``What do we do about commodity 
prices,'' and his response was, terrible trade policy. We are 
getting killed on trade because we are a so-called developed 
nation and our competition is called undeveloped, so WTO, we 
lose everything with those folks. And so I said, ``Well, we 
need to fix that.''
    Since being in Congress I have voted for multiple disaster 
relief for Louisiana, Texas, North Carolina, just to mention a 
few, within a week of the disaster.
    Since 2018, we have been sitting here for what, almost 6 
months, and people say why is this place so dysfunctional, that 
we can't do what is right for the American people, particularly 
for our farmers that are so critical. Not only is it the 
largest industry in the State of Georgia, it is the largest 
industry in my district. It is sad, truly sad. And hopefully we 
can fix that this week, but then of course we got to get it 
through the Senate, but, it is----
    And then on the labor issue we were 20 votes short of true 
immigration reform, of fixing our labor problems in 
agriculture. Twenty votes would have fixed everything, and that 
is what is sad, and this place has to get its act together or 
we are going to have problems with our entire economy.
    As far as the farm bill goes, I think you covered all the 
questions I was going to ask.
    If we can get the disaster thing done, and of course the 
farm bill is the hardest thing that I have ever worked on in my 
life. I mean, I couldn't convince colleagues on both sides of 
the aisle. I mean, I am an investment return. I believe in you 
can't operate with an empty wagon. I was taught that early in 
life. My dad was a farmer. You got to invest money to make 
money.
    I see the farm bill as an investment so that we can have a 
robust agricultural economy, which the payback is enormous. And 
then you have the national security interest. I mean, 42 days 
your grocery stores are empty. That is not going to be pretty.
    The bottom line is we get through disaster, and I just open 
this up for comments. As far as the farm bill, how is it going 
to work as far as with commodity issues like we have and how do 
we fix this?
    And I will just start. You all, we have a minute, I am 
sorry you only have a minute to answer this, so you have to be 
quick.
    Mr. Huie. First I want to say thank you and say for the 
farm bill, that provides the baseline, the underpinning. We 
understand that.
    I don't believe the farm bill was designed to address how 
much prices have fallen and this idea that there is not any 
real light at the end of the tunnel right now.
    The tension in the farm community because you can't look 
out and see a profit a year or 2 or 3 from now is palpable, and 
so the question becomes--the Administration saw that last year. 
Secretary Perdue did MFP. There are some ways to do that that 
would be much better, but we are grateful that it was done.
    There is something along those lines. We have this sort of 
fiscal cliff that we have looked at from Fiscal Year 2019. We 
are including MFP. Agricultural outlays are more than $15 
billion. And for 2020 the CBO projection is $5. That is a huge 
change that this Committee has some jurisdiction over, and 
there are some things that we need in production ag to address 
that.
    Mr. Allen. Well, I am out of time and I hope that, like I 
said, people here, your Representatives, can come together and 
end this dysfunction and do what is right for the American 
people, particularly as far as national security and ag is 
concerned.
    Thank you very much and I yield back.
    The Chairman. I would like to first of all thank the 
Ranking Member of the full Committee, Mr. Conaway, who with Mr. 
Peterson helped steer this Congress towards a successful 2018 
Farm Bill, and recognize him for 5 minutes.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS


    Mr. Conaway. Well, I thank my fellow Texan for those kind 
remarks. It was a group effort and I appreciate us getting that 
done.
    And I just want to thank you for coming up again.
    I just have a couple of this and that, to ask because most 
everything else has been covered.
    You were talking about the impact of having fellow farmers 
around you go out of business or whatever, actually made a poor 
credit decision on your own with the neighbor across the 
street, but what impact does that have on land values and 
equipment values and others in terms of collateral value for 
against your loans and your banker?
    What is the impact there?
    Mr. Huie. Thank you, Mr. Conaway.
    The impact, we haven't seen a dramatic fall in land values 
yet for which we are incredibly grateful, because ultimately 
that is part of what we use as collateral. And in this 
environment there is no liquidity without some of those pieces 
of collateral.
    The problem is equipment costs continue to go up and used 
equipment prices continue to go down and we are in this 
scenario.
    I chuckle about this. I was fighting sand Easter morning, 
so for those of you who know what fighting sand means, we had 
cotton up and a whole group of us that are having a text chain, 
we are fighting sand on Easter morning, and one of my fellow 
friends chuckled to another one. He said, ``Well, my farm is 
for sale for $15.'' He farms about 10,000 acres. He said, ``My 
farm is for sale for $15. I am tired of this.'' And the other 
one responds, ``You would have to pay me to take it.'' And 
that, what that does in the long-term is none of those things 
have, other than land, have value, right? I mean, you have a 
farm auction or two and you saturate the market with equipment 
and all of this stuff will disintegrate.
    It is going to be a snowball effect and I think that is 
what the bankers are trying to figure out how to mitigate when 
they look at how they are going to do loans now, because they 
are already starting to shrink the value of equipment that is 
sitting on your asset list in order to deal with those 
discussions.
    Mr. Conaway. Secretary Perdue and I were in your part of 
the world relatively soon after Harvey hit and still remember 
the rotting cotton which doesn't smell very good.
    Mr. Huie. No, sir.
    Mr. Conaway. It leaves a lasting impression on you.
    There was a question at that time as to you had cotton that 
had not been harvested yet, you had others that had been 
harvested and it was in modules, had tarps on it, destroyed in 
the field, and then you had modules that had been moved to the 
gin.
    At that point in time there was a question as to who owned 
the cotton and whose insurance would pay for it. Has that been 
cleared up as a result of actually having to live that 
experience?
    Mr. Huie. It has somewhat been cleared up, but in terms of 
financially how it was all rectified, some of those answers are 
still out there.
    As you know, because you saw it, the cotton that was 
harvested, once it has a tarp on it, theoretically is owned by 
the gin or is part of the gin's insurance so long as the gin 
has insurance, which is a whole other issue for hurricanes.
    However, if you have cotton sitting out in the field that 
is part of the field is harvested and part of it belongs to the 
gin and the rest of it still belongs to the farmer and part of 
it goes against crop insurance and part of it doesn't go 
against crop insurance, those are where you run into all these 
issues with WHIP and it is why WHIP under-performed so badly.
    And any of that cotton that didn't get harvested, or didn't 
get ginned, didn't turn into production whether it was because 
it was on the plant or whether it was because it rotted in the 
module and you weren't able to get it through a gin, none of 
that is eligible for stuff like MFP because it doesn't turn 
into production. It is another reason why this MFP fix is so 
important.
    In terms of who owns what, there were probably some answers 
that everybody worked through as best they could.
    In terms of getting made whole by WHIP, that didn't happen, 
and I think that as we go forward with this disaster package to 
address other places, we need to understand that; first, it 
doesn't matter what kind of disaster it is, whether it is a 
hurricane or a wildfire or a drought, it is still a disaster; 
and second, crop insurance in this environment is not going to 
make you whole.
    Best case scenario in Texas is you buy 70 percent crop 
insurance and if your breakeven is 110 percent of your actual 
production history and you buy 70 percent crop insurance and 
you collect on it, then you have a 40 percent loss, and that is 
a pretty tough pill to swallow.
    Mr. Conaway. All right. Again, thank you, gentlemen, for 
coming up and testifying today. I appreciate that.
    And, Mr. Chairman, I yield back.
    The Chairman. Mr. Huie, since you are my constituent, I 
don't think I would remind you of that decision quite the same 
way, but before we adjourn I would like to invite the Ranking 
Member, Mr. Thompson, to make any closing remarks he might 
have.
    Mr. Thompson. Well, Mr. Chairman, first of all, thanks to 
you. Thank you for this, for your leadership with this hearing.
    Looking at our farm operations, our commodities, how we 
mitigate and manage risks, there is, I mean, every, all parts 
of life have risks, but agriculture is one of the more 
difficult places to manage risk because of what we deal with.
    And I thought the issues that were touched on, gentlemen, 
thank you for bringing your life experiences, your expertise to 
the table.
    The trade issues we know. Every day that the Chinese are at 
the trade table, when I see that in the morning, that is a good 
day for me because I know conversations are going forward. I 
certainly support that tariffs were a tool, but it has gone on 
long enough. It is time to get this done.
    Disaster relief, which is long overdue, I thought that was 
a solid message here about people waiting for disaster relief. 
They have been waiting way too long, and we need everybody 
onboard.
    Agriculture needs a lot of farm hands, House, Senate, and 
the White House, and it is time for everybody to come together.
    There were some great insights on crop insurance, some 
pearls of wisdom as we go forward, the labor issues touched on, 
and I just appreciate your hosting this hearing.
    There are things that, hopefully, we can in the future 
continue to talk about.
    I notice there is some stuff that is impacting our 
soybeans, how we look at this African Swine Virus that the 
Chinese aren't real forthcoming on how many hogs they have 
lost, 10, 20. Some people think it may be up to 60 percent by 
the end of the year. Well, that has implications for obviously 
hog production here but also for markets for soybeans, and the 
sooner we can figure that out, probably the better. We figure 
out where those hogs that will replace that market will need to 
be fed by soybeans.
    And so just a lot of moving parts here and I appreciate 
your leadership on this.
    The Chairman. Well, thank you.
    Last week we were in Kansas City and had the privilege of 
talking to farmers from Iowa, Missouri, and Nebraska, and heard 
what they are going through with respect to the flooding.
    Mr. Davis, rest assured, hopefully by the time we have our 
next hearing on disaster relief we will have fixed it. But this 
Subcommittee will certainly take a very close look at that in 
June.
    And with that, I may say under the Rules of the Committee, 
the record of today's hearing will remain open for 10 calendar 
days to receive additional material, and supplementary written 
responses from the witnesses to any questions posed by a 
Member.
    This hearing of the Subcommittee on General Farm 
Commodities and Risk Management is adjourned. Thank you for 
your time.
    [Whereupon, at 11:28 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
 Submitted Statement by Hon. Angie Craig, a Representative in Congress 
     from Minnesota; on Behalf of Ben Scholz, President, National 
                      Association of Wheat Growers
    Chairman Vela, Ranking Member Thompson, and Committee Members, I am 
Ben Scholz, a wheat farmer from Lavon, Texas and President of the 
National Association of Wheat Growers (NAWG). NAWG represents wheat 
growers across the nation and works with a team of 21 state wheat 
grower organizations to advocate for the wheat industry. Thank you for 
the opportunity to submit testimony regarding the current state of the 
farm economy.
    Wheat growers across the country have experienced a multitude of 
challenges the past couple of years. U.S. wheat export markets are in 
turmoil due to uncertainty and unfair trading practices. Countries like 
China have support systems for their farmers that distort trade, and 
uncertainty in current and new trade agreements with top destinations 
for U.S. wheat like Mexico and Japan have caused strain on an already 
low-price wheat environment. The continued years of low prices have 
placed significant stress on wheat farmers. Programs authorized in the 
2018 Farm Bill have and will continue to play a critical role in 
helping farmers make it through the low-price environments.
    U.S. farmers aren't competing on a level playing field, with major 
wheat producing countries like China violating WTO trade commitments in 
how they support their farmers and not fulfilling their tariff-rate 
quota (TRQ) commitments. We recently secured two big victories at the 
WTO on these issues, and continued engagement will be necessary as 
China may appeal those decisions. In addition, since last March there 
have been almost zero purchases of U.S. wheat to China due to the 
retaliatory 25% tariffs on wheat and wheat products.
    More so, two top markets for U.S. wheat have instability in as 
trade agreements linger. The United States-Mexico-Canada Agreement 
(USMCA) would enhance our already strong trading relationship with 
Mexico and Canada while also maintaining duty-free access for U.S. 
wheat that began with NAFTA. The United States also faces uncertainty 
with Japan, another top market for U.S. wheat. With the Comprehensive 
and Progressive Agreement for Trans-Pacific Partnership (CPTPP) moving 
forward, top competitors like Australia and Canada have a growing price 
advantage in the Japanese market, while the U.S. just beings bilateral 
negotiations with Japan. A stable and predictable international 
marketplace is critical to helping grow demand for U.S. wheat, 
especially given that 50% of what is grown is exported.
    Wheat farmers have seen several years of continuous low commodity 
prices. The drop in commodity prices have been much faster than the 
change in cost of production. The expectation of continued low prices 
has contributed to some of the lowest wheat acreage in U.S. history, 
with only 39.61 million acres of harvested wheat expected in the 2018/
2019 marketing year, a drop from 47.32 million acres just 4 years prior 
during the 2015/2016 marketing year.\1\ Additionally, with a wet fall 
last year impacting winter wheat seedings and difficult weather 
conditions impacting spring wheat seedings this year, we anticipate 
there could be further reductions in production. The market year 
average price for wheat continues to trend downward, having fallen to a 
low price of just $3.89 per bushel in 2016. While the price has come up 
to $5.15 per bushel in the 2018 marketing year, the average price over 
a 10 year period is still trending down significantly.
---------------------------------------------------------------------------
    \1\ Source: USDA, National Agricultural Statistics Service, Crop 
Production, Agricultural Prices, and unpublished data; and USDA, World 
Agricultural Outlook Board, World Agricultural Supply and Demand 
Estimates.
---------------------------------------------------------------------------
Wheat Market Year Average Price 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          https://quickstats.nass.usda.gov/, *(P)= projected value by 
        USDA.

    Another indicator showing the tough economic conditions faced by 
wheat farmers across the nation is a decline in net farm cash income. 
Net farm cash income is the cash available to farmers to draw down 
debt, pay taxes, cover family living expenses, and to invest. According 
to USDA Economic Research Service (ERS) data, net farm cash income has 
been down nearly 70% since 2013 for wheat farmers. Working capital in 
the U.S. Farm Sector has also been on the decline, falling more than 
$100 billion dollars in just 5 years. As farmers income has dropped, 
liquid cash capital reserves have been depleted. Loss of capital 
reserve leads to question as to how to keep the current generation of 
younger or beginning farmers for the future?
Percent Change from 9 year Average of Farm Business Net Cash Income
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Working Capital, U.S. Farm Sector 2010-2018
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: https://data.ers.usda.gov/reports.aspx?ID=17840.

    As the tough economic conditions continue to face farmers, we are 
glad to have a farm safety net in place that was reauthorized by the 
2018 Farm Bill. The Federal Crop Insurance Program has served as a 
critical part in the farm safety net, helping farmers to make it to the 
next year of farming. NAWG will continue to work closely with the USDA 
to fully implement the 2018 Farm Bill and ensure its programs are able 
to deliver the farm safety net effectively.
    Wheat farmers across the nation are experiencing some of the 
toughest economic conditions they have faced in decades and many future 
projections don't show a quick upturn in the farm economy. Experience 
of the 1980s was a good lesson of a long period of low prices due an 
oversupply of commodities caused by embargo. Ensuring fair trade with 
other countries along with maintaining and expanding our current 
international markets will help our U.S. farmers. Additionally, 
ensuring the quick and efficient implementation of programs authorized 
in the 2018 Farm Bill will equip farmers with a strong safety net and 
risk management system.
    We look forward to continuing to work with you to ensure a strong 
U.S. farm economy.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Ben Scholz,
President,
NAWG.
                                 ______
                                 
                          Submitted Questions
Questions Submitted by Hon. Jefferson Van Drew, a Representative in 
        Congress from New Jersey
Response from Matthew R. Huie, Owner, Huie Farms *
---------------------------------------------------------------------------
    * There was no response from the witness by the time this hearing 
was published.
---------------------------------------------------------------------------
    Question. We all know farming is more than a job, it's a way of 
life. In South Jersey many of our farms are multi-generational, for 
example Nardelli Produce has been operated by the same family for over 
100 years.
    How many generations have your families been farming? And looking 
20 years into the future, do you still think farming is a viable option 
for you and your family?
    Answer.
Response from Mike Peterson, Owner and Operator, Twin Oaks Farms
    Question. We all know farming is more than a job, it's a way of 
life. In South Jersey many of our farms are multi-generational, for 
example Nardelli Produce has been operated by the same family for over 
100 years.
    How many generations have your families been farming? And looking 
20 years into the future, do you still think farming is a viable option 
for you and your family?
    Answer. My [son] is the fourth gen[eration] on our farm and started 
in as part of the operation 2 years ago he is 23, corporate greed and 
antitrust policies that do nothing have taken all our margins away in 
input costs, we will have to try and produce in a different way to stay 
solvent. I graduated from high school in 1981 so [I] know what a farm 
crisis does to rural neighborhoods! The families in production 
agriculture are a class of people that contribute to this country on 
the highest levels and are unjustly exploited and monopolized by the 
companies and government that they support! were the best in the world 
at what we do and are willing to do what ever is asked of us in 
exchange for the ability to make a living with our equities and labor. 
It looks to me that Mother Nature is trying to fix our over production 
problem in the short-term but it seems that in normal years the supply, 
processing and distribution chains hold all the margins in the food 
supply. in my opinion in less than 20 years the family farmers will be 
run off the land, the land will be owned by mega banks and corporation 
that will merge with foreign investment companies which will lead to 
the loss of control of our food supply. I think at that point the 
government and the [American] consumer will wonder what the hell just 
happened!

Mike Peterson,
Owner,
Twin Oaks Farms.
Response from Daniel J. Sutton, General Manager, Pismo Oceano Vegetable 
        Exchange, Oceano, CA
    Question 1. I have heard from local farmers from my district, such 
as Tuckahoe Turf Farm, and they expressed their concern with hiring 
farm labor, especially skilled help.
    Mr. Sutton, in your testimony you spoke to this issue and of the 
impracticalities of the guest worker programs. You mentioned 
considering additional harvest mechanization, which sounds like a large 
investment. Given these barriers, what do you see as a best-case 
scenario for fixing these issues related to labor?
    Answer. In order to move us closer to a solution to meet our 
agriculture workforce needs, we must consider a two-prong legislative 
packaged approach, which addresses the domestic workforce and guest 
worker's needs.
    Farmers continue to express the opinion that agricultural workforce 
reform needs to provide existing employees with a legal status and 
allow entry for future guest workers who desire to work in U.S. 
agriculture.
    The current H-2A Visa program must be improved. A reformed program 
must resemble the current labor market by providing portability. This 
would give employers options when hiring guest workers, and not tie 
them into a contractual agreement like the current H-2A program 
currently does.
    Additionally, any action to reform immigration must include a 
smooth transition for existing workers to a legal status and work 
authorization, while removing any vulnerabilities for their immediate 
family members.
    In a recent 2019 Agriculture Labor Scarcity survey conducted by the 
California Farm Bureau, 56 percent of participating farmers reported 
they had been unable to hire all the employees they needed for 
production of their main crop at some point during the past 5 years. A 
survey conducted in summer 2017 showed 55 percent of farmers had 
experienced employee shortages. The 2019 findings show that farming 
operations continue to see a negative trend in employee availability, 
resulting in more challenges and the likelihood of tough business 
decisions in the very near future.
    Farmers have been patiently waiting for solutions. We seek help 
from our congressional members to act on legislation that provides us 
with a secure, flexible, market-based agricultural immigration program. 
That is our best-case scenario.

    Question 2. We all know farming is more than a job, it's a way of 
life. In South Jersey many of our farms are multi-generational, for 
example Nardelli Produce has been operated by the same family for over 
100 years.
    How many generations have your families been farming? And looking 
20 years into the future, do you still think farming is a viable option 
for you and your family?
    Answer. Our families have been farming since the early 1900's. We 
are currently in our fourth generation of farmers. I'm glad you asked 
the question of the direction I see farming going in the next twenty 
years. Looking twenty years into the future isn't something I think of 
every now and then, it is built into the way I manage the farm day-to-
day. I dare say that looking to the future is deeply embedded in the 
DNA of all multi-generational farmers. We want to continue ensuring 
that the soil is properly cared for in order to produce the highest 
quality food to feed the world. We want to ensure a clean water supply 
for ourselves and those at the next farm downstream. We want to produce 
safe food for consumers that depend on that fruit, vegetable, or leafy 
green to maintain a healthy and safe diet.
    The importance of doing all of the above requires that we have a 
long-term plan, a short-term plan, and that we are flexible enough to 
withstand the curveballs farmers are thrown. Not only is the 
uncertainty of weather events an ever-changing issue for us, but the 
regulations imposed by state, local and federal agencies can also be 
helpful or sometimes harmful. The competition in the international 
marketplace coupled with the new norm of tariffs is another curveball 
that will continue to be a factor in the success of farming in the 
future.
    There is no question that agriculture and the way of life on a farm 
will change and evolve over the next twenty years, just as farming over 
the last twenty years has changed significantly. It's impossible to 
ignore the pressures of these real-world events the reduction in 
farming, in farm acreage, and producers of certain commodities, like 
dairy, who are suffering so much that they are losing their very farms 
and production. Farmers know that there is an especially delicate 
balance between many factors that all must be in place in order for 
production to continue into the future. This is what makes the 
discussion around sustainability of farming so critical, because not 
only are the environmental concerns vital for the sustainability of the 
farm with respect to the environment, but also the business, market and 
regulatory factors are important. Should one of those factors change, a 
farm could go under very quickly.
    As I stated previously, I think of the long-term future of our 
farming operation every day. What will the future bring in the next 5 
years, 10 years, twenty years, or even a century from now? That 
question is what drives me to work harder, work smarter, and educate 
myself on the best of farming practices. It also inspires me to take 
time to educate my children of what I do so that they can carry the 
baton themselves and to future generations, if they so choose. It is an 
honor to be a farmer in this day and age and I hope to be part of the 
vast network of farmers who are able to address the many challenges we 
face today in order to take farming into the future.
            Respectfully submitted,

Dan Sutton.
Response from H. Bart Davis, Jr., Owner and Operator, Davis Family 
        Farms *
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    * There was no response from the witness by the time this hearing 
was published.
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    Question. We all know farming is more than a job, it's a way of 
life. In South Jersey many of our farms are multi-generational, for 
example Nardelli Produce has been operated by the same family for over 
100 years.
    How many generations have your families been farming? And looking 
20 years into the future, do you still think farming is a viable option 
for you and your family?
    Answer.

                                  [all]