[Congressional Record Volume 141, Number 1 (Wednesday, January 4, 1995)]
[Extensions of Remarks]
[Pages E23-E24]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                               FARM PRICES

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                       Wednesday, January 4, 1995
  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, November 9, 1994, into the Congressional Record. 
                              Farm Prices

       The United States is in the middle of the greatest harvest 
     ever. The corn crop could be 50% higher than last year, and 
     soybean production will exceed the historic 1979 crop with 
     excellent weather across the farm belt. The yields this year 
     are simply phenomenal, as farmers continue to astound us with 
     their productive capacity.
       The downside to this record production is lower prices. 
     Steps are being taken, and others are under consideration, to 
     help the farmer. In the long run, exports are the remedy, as 
     consumers around the world demand high-quality American 
     agricultural products. Ultimately, net farm income is 
     projected to grow from $43 billion in 1993 to as much as $51 
     billion this year.


                                 Prices

       Corn prices declined from a nationwide average of $2.61 per 
     bushel in June to $2.09 per bushel in September. Some local 
     elevators are currently reporting prices of less than $2.00 
     per bushel. Prices normally decline at harvest time, but they 
     are unusually low 
     [[Page E24]] this year because of the record 1994 crop, 
     projected at 9.6 billion bushels. The U.S. Department of 
     Agriculture (USDA) has been criticized in some corners for 
     setting the 1994 Acreage Reduction Program (ARP) at zero 
     percent.
       Soybean prices have also declined, from an average of $6.72 
     per bushel in June to $5.31 per bushel in September--and less 
     than $5.00 per bushel at some local elevators. This decrease 
     was fueled by the highest-ever national soybean yields, 
     producing a record crop of between 2.3 billion and 2.5 
     billion bushels. Demand is expected to increase next year 
     from greater exports and more livestock feeding, but not 
     enough to compensate for the record crop. Low soybean prices 
     are particularly damaging for Hoosier farmers because Indiana 
     is the only major soybean state where the crop is projected 
     to be lower than 1993.


                       Options for Raising Prices

       I have urged the Department of Agriculture to consider a 
     number of options to boost corn and soybean prices. 
     Possibilities include:
       Increase corn ARP: USDA recently announced a preliminary 
     1995 corn Acreage Reduction Program of 7.5% below the 
     established base. This would take land out of production and 
     improve corn prices for the coming year.
       Raise corn support loan rate: Some farm groups have called 
     for an increase in the 1994 Commodity Credit Corporation 
     (CCC) loan rate from the current. $1.89/bushel to as high as 
     $2.40/bushel. They claim this would have a direct impact on 
     prices in the near future. USDA is considering an increase in 
     the loan rate for 1995.
       Allow 1994 corn crop entry into Farmer--Owned Reserve: The 
     President has allowed farmers to place 1994 corn in the 
     Reserve when their CCC loans mature after 9 months. It is 
     unclear what impact this would have on short-term prices.
       Soybeans on ``flex'' acres: If USDA determines that the 
     price of soybeans next year will be below 105% of the loan 
     level, it can prohibit program participants from planting 
     soybeans on their optional flex acres. This would reduce 
     production and increase prices.
       Export Enhancement Program (EEP): EEP has been used in the 
     past to help export soybean oil. If world prices continue to 
     fall, USDA could increase EEP support of soybean oil to 
     maintain America's competitive position.
       Ethanol and other alternative products: As of January 1, 
     about 30% of the U.S. gasoline market will be required to use 
     ethanol in reformulated gasoline. Over time, corn prices may 
     rise as much as 20 cents per bushel because of this rule. 
     Congress is also examining ways to encourage the use of soy 
     ink and other non-food uses for American agricultural 
     products.


                           The 1995 Farm Bill

       The effectiveness of these measures to support prices will 
     also be addressed in the 1995 farm bill. Government commodity 
     support programs must be reauthorized next year. The 1990 
     farm act made farm programs more market-oriented, giving 
     farmers more flexibility in choosing which crops to plant. A 
     provision known as the Madigan amendment gave the Secretary 
     of Agriculture more flexibility in setting loan rates and 
     set-asides to maintain competitiveness in world markets. I 
     expect this trend towards market flexibility to continue in 
     the 1995 farm bill. Program flexibility puts more decisions 
     in the hands of farmers rather than government bureaucrats, 
     but it can also lead to greater price fluctuations for 
     farmers.
       The farm bill should also address the hidden costs of 
     farming. First, participating in crop support programs should 
     be less complicated. The paperwork for program participation 
     should not be a burden to farmers. Second, government 
     regulations should be flexible at the local level. It is not 
     possible to set detailed and comprehensive guidelines from 
     the top, and major regulations should be evaluated on a case-
     by-case basis, using risk assessment and cost-benefit 
     analysis.
       Some of the biggest issues in the 1995 farm bill will be 
     environmental issues, including wetlands policy, and renewing 
     the Conservation Reserve Program (CRP). Current wetlands 
     policy that restricts farming on wetlands makes no 
     distinction between wetlands that are environmentally 
     important and those that are not. I am supportive of efforts 
     to narrow the definition of wetlands.
       CRP has been successful at boosting prices and preserving 
     valuable resources. Because of our terrain, the average 
     Southern Indiana farmer receives even more in CRP payments 
     than in deficiency payments, and I support the full 
     reauthorization of CRP. In addition, the 1995 farm bill 
     should make CRP flexible enough to distinguish between more 
     and less environmentally important lands. The program should 
     remain completely voluntary.


                               Conclusion

       I recognize the great risks in the farming business. The 
     risks involved in farming are greater than in most 
     industries, and Congress should continue to provide some 
     stability to agriculture and assure that farmers can maintain 
     a decent living and have a reasonable return on their 
     investments. The 1995 farm bill is an opportunity to improve 
     farm support programs and reduce the regulatory burden on 
     farmers.
     

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