[Congressional Record Volume 144, Number 114 (Wednesday, September 2, 1998)]
[Senate]
[Pages S9834-S9837]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       THE CRISIS IN AGRICULTURE

  Mr. HARKIN. Mr. President, I know a lot of us were out in our States 
during the August recess. I was too. I had a series of meetings around 
the State with farm families and people in small towns and communities 
and rural areas. Quite frankly, what I found was more than just 
disturbing. What I found was that there is a looming crisis in 
agriculture and in our farm economy.
  For some time I and a number of my colleagues have been trying to 
call attention in this body to the very serious situation in the farm 
economy. The livelihood and the life savings of hundreds of thousands 
of farm families are in jeopardy. The economic underpinnings of many 
rural communities are also at stake. In mid-July, the entire Senate 
went on record noting the existence of the serious farm economic 
problems and calling for immediate action. But later on, just before we 
broke for the August recess, this Senate rejected an amendment that 
Senator Daschle and I offered to restore farming protection that was 
taken out in the 1996 farm bill.
  All we wanted to do in a very modest attempt was to take off the caps 
that were put on the loan rates in the 1996 farm bill. We did not in 
any way want to attempt at that point to change the farm bill. We just 
simply wanted to remove the caps. The loan rates were still there. They 
were just capped at the 1996 level. All we wanted to do was remove 
those.
  As I listened to the debate on that amendment, it seemed clear to me 
that many of my colleagues doubted the seriousness of the problems in 
the farm economy. I heard statements that if we just let the market 
work, if exports would just get back on track, the situation would turn 
around, or so the argument went.
  So, I went out to my State to have some meetings in August to sort of 
take the temperature and gauge just how serious the situation was. In 
the intervening time since we left here, the situation has become, I am 
sad to say, far worse. The bottom literally has dropped out of 
commodity prices. I point out that the falling commodity prices cover 
both livestock and crops. Often, at least in my State, if the commodity 
price of a crop was low, the livestock prices might be up a little bit, 
and the farmer would at least have something to sell to make some 
money. Now all of the major commodities--corn, soybeans, pork, and 
beef--are all deeply in the red.
  So at this point I don't see how there can be any doubt that we have 
an economic disaster in the farm sector.
  I have some charts that will show just what happened over the last 6 
weeks since the Senate considered this amendment that Senator Daschle 
and I offered on July 17.
  Here are central Illinois, corn prices. Here is where they were when 
we debated the amendment. Here is where they are now--a 21 percent 
decline in 6 weeks in the corn prices.
  Here is central Illinois, soybean prices--again, a 21 percent decline 
in the past 6 weeks.
  Here is Kansas City, hard red winter wheat prices--down 13 percent in 
the past 6 weeks, and headed south. There is nothing to indicate that 
it is going to come up.
  Since July 16, the day the Senate passed its version of the 
agriculture appropriations bill, the following market prices declined:
  Dodge City, KS, wheat--down 20 percent;
  North central Iowa corn--down 26.1 percent;
  North central Iowa soybeans--down 20.7 percent;
  South Iowa and Minnesota hogs--down 11.5 percent;
  Billings, MT, feed barley--down 20 percent.
  That is just since the middle of July.
  Here are the charts that I used in July to show what was happening to 
commodity prices, going clear back to 1990. It sort of drifts along, 
and we had a big spike in here from 1994 up to 1996. Then, after the 
1996 farm bill was passed, the prices have been coming

[[Page S9835]]

down and coming down. This little red figure shows just what happened 
since we were here in July.
  I dare say if we do nothing, if we sit here and twiddle our thumbs 
and do nothing, that line will continue to go down during the fall 
months.
  That was corn.
  Here is the farm-level soybean price. Again, since the farm bill 
passed, the price has been coming down; now in the last 6 weeks, its 
down even more.
  Here is the wheat price. Again, it spiked up here about 1996, has 
been generally coming down the last 6 weeks--a precipitous drop in the 
price of wheat.
  Again, as I said, Mr. President, I don't think there can be doubt any 
longer that we have an economic disaster in the farm sector.
  In my State, corn prices have fallen to the levels of the farm crisis 
years of the 1980s, and they still remain under downward pressures. As 
I say, there is nothing indicating that it is going to pull these back 
up. The prices have fallen over 25 percent since mid-July and are about 
$1 a bushel below the cost of production.
  USDA's most recent estimation indicates that 1998 net farm income 
will be 20 percent lower than it was in 1996--about $42.5 billion. And 
it was about $53.3 billion in 1996.
  I could go on and on citing more discouraging figures. But it is 
obvious that the numbers tell the story. It is simply no longer 
possible to deny the severity of the problems in the farm economy. 
Those problems are already spilling over into rural economies and into 
our small towns and communities.
  If the situation continues, it will affect our entire national 
economy.
  Let me just, again, underscore the consequences if we do not act. If 
we do not act, we are going to lose thousands of farm families that we 
cannot afford to lose. Many of us here remember the 1980s farm crisis. 
I can just tell you that my State of Iowa can't bear to go through that 
again. Our Nation can't bear to go through that again.
  Farmers are, indeed, resourceful people. Farmers and farm families 
can handle a lot of adversity and survive in business and maintain 
their families on the farm. But when commodity prices fall the way they 
have recently, farmers are at the mercy of the market. If we do not 
have some actions to ameliorate the effects of these low commodity 
prices, we are going to see a lot of farm families forced out of 
business. They will be gone forever and often gone from their community 
entirely. By and large, they will not be able to return when the farm 
economy turns around. Farming is too capital intensive for that kind of 
in and out and in again type of approach.
  Basically, we are talking here a lot about younger farm families who 
have money borrowed and who do not have a lot of equity built up, who 
are the most vulnerable to severe downturns in the farm economy like we 
are now seeing. They are energetic, they are perhaps some of the most 
educated farmers we have ever had in America, but they often do not 
have the financial resources to hang on through the kind of long, 
serious economic downturn that we have now. These younger farmers are 
the ones we can least afford to lose; they are the future of 
agriculture and the future of our rural communities. As they are forced 
out of agriculture, food production becomes concentrated in fewer and 
fewer hands, and this is not a healthy trend for rural communities, 
consumers or our Nation as a whole.
  I just point out that in Russia, the former Soviet Union, they are 
breaking up these old, huge farms because they did not work. I don't 
think we want to go down that path of having larger and larger land 
holdings in this country.
  Now, I just focused my remarks on younger farmers and young farm 
families. I mentioned that, Mr. President, at one of my farm meetings 
in Iowa, and there were a number of older farmers there who jumped all 
over me and said, well, you are missing us. I said, yes, but I want to 
talk about the younger farmers and how they don't have a lot of equity. 
One of the older farmers shook his finger at me and said that is just 
my point. I have built up my equity in my farm. That is my retirement. 
I haven't made a lot of money.
  I am reminded of the old adage: Farmers live poor and die rich. They 
have a lot of land, they have a lot of equity built up, but they have 
never made a lot of money. He said that is my retirement, and I see it 
going away before my very eyes because of these low commodity prices, 
because of what is happening out there, because they are having to 
borrow now, because they are digging into their equity base just to 
stay afloat.
  So it is not just the younger farmers. I think it spreads across the 
whole spectrum.
  I also read in the newspaper a comment made by a certain politician, 
who will remain unnamed, who said basically if farmers are having 
trouble now, it is because they were simply not managing their farms 
correctly; they were bad managers. That is my own words, ``bad 
managers.''
  Well, he mentioned this, and this was, of course, the topic of 
conversation at one of my farm meetings, and several of the farmers 
there pointed to the fact that they had survived the 1980s. And as they 
pointed out, any farmer that got through the 1980s is not a bad 
manager. If they could manage their debt loads and the low prices and 
the shakeout that we had in agriculture in the 1980s, they are pretty 
good managers. But now they can't handle this. Farm debt is now at the 
highest level it has been since 1985, and that was the beginning of the 
washout of a lot of farmers in the mid and late 1980s.
  We can all look to the causes, what causes all this. Well, I don't 
know that they are all that complicated. We have had good crop 
production conditions. We are going to have a bumper crop of soybeans 
this year, the largest production of soybeans this year. We are going 
to have a big crop of soybeans in my State, too. Corn may not have a 
record year, but may be the second largest record year. So we have a 
lot of supplies and a lot of farm commodities in the world market.
  At the same time, the demand has gotten weak for a number of reasons, 
not the least of which has been the economic downturn in Asia. I saw 
some figures--I don't have the charts for them. I will bring them up in 
the next couple of days--which showed our exports to Asia not off all 
that much in terms of quantity but in terms of price. What we are 
getting for what we are selling is way, way down. And so we have a very 
weak foreign market there. They don't have any money in Asia, and so a 
lot of our sales have eroded.
  Now, another aspect is the strength of the U.S. dollar versus the 
currencies of these other countries that compete with us to sell ag 
exports. The weakness of those currencies allows those other countries 
to gain a competitive advantage over us. Now, there isn't a farmer in 
my State that has any ability to control that. If these other 
currencies are weak and they can undercut us in selling their 
commodities to other countries, there is not a darned thing that one or 
ten or a thousand farmers in my State can do about it. But it is a fact 
and that is what is happening. So they have gained competitive 
advantage over us.
  In addition, farmers in several areas of the U.S. have suffered 
severe losses because of weather and crop disease problems. So while we 
have a bumper crop, we have places such as North Dakota and Texas where 
they have had tremendous drought problems and weather problems and they 
don't have a crop at all or they have crop disease problems.
  So you put all this together, and with total freedom to plant and 
then farmers have planted--in fact, I have heard more than one comment 
in my State about how much of the conserved land that we had in the 
past is now being planted, and that farmers are planting them more 
intensely. And again, if you understand ag economics, you understand 
that if you have a fixed base, fixed amount of land, you are going to 
try to get the most production out of that land, even if the prices 
fall.
  That is why I don't think there are a lot of people--I know a lot of 
people understand it. I know the Presiding Officer understands ag 
economics. But a lot of them think that a farmer is like General 
Motors, that if prices fall you can cut back production to meet the 
supply and demand situation. The farmer can't do that. One farmer is 
not General Motors. That one farmer has no control over the total 
supply and the total demand.

[[Page S9836]]

  Secondly, it is counterintuitive. You would think if prices would 
fall, for example, in corn, a corn farmer would say, well, if the 
prices are down, I am not going to plant corn; I will plant something 
else. We heard a lot of this during the debate on the farm bill. Well, 
quite frankly, what happens, if the price drops, the farmer looks at 
his fixed base and says, gee, you know, the marginal cost of planting 
an extra acre or 2 or 5 or 10 acres of corn is almost nothing, and 
maybe I can plant more intensively and I can get more out of that fixed 
unit that I have. And therefore, even if the prices drop, I will have 
more production out of that unit and that will cover the lower prices. 
Therefore, low prices don't lead to decreased production of crops. It, 
in fact, can lead to increased production of a crop.
  That is what we are seeing right now--simple, basic farm economics. 
And so you put all these forces together, and what we have is the 
disaster we are having right now. But again, keep in mind these are 
forces beyond the control of a farmer. The farmer is at the mercy of 
weather, at the mercy of world commodity surpluses, at the mercy of 
economic problems, and they are at the mercy of other foreign 
currencies and their values, all of which are things that conspire 
together to ruin our markets.
  It is because of these forces that are beyond the control of farmers 
that we in our country have traditionally had in place a system of farm 
income protection. Certainly, we want to let the market work, but we 
also recognize that when the market turns around, or when disaster 
strikes, or when things intervene to skew the market, that it should 
not wipe out farm families who have done everything within their power 
to produce and to meet the demands of the market. These farmers should 
not be forced out without any protection against events beyond their 
control.
  Again, a lot of people say, Why should we treat farmers differently 
than any other business? The reason we have always had these policies 
in place is because farming is not like any other business. As Neil 
Harl, the distinguished professor of agricultural economics at Iowa 
State University, has said repeatedly, farmers are not like General 
Motors. Farmers are uniquely vulnerable to forces over which they have 
no control.
  The 1996 farm bill greatly pared back protections against forces over 
which farmers have no control. The 1996 farm bill said to farmers: 
Produce all you can and export all you can. That is fine until foreign 
markets turn sour. That is fine until other countries' currencies are 
able to beat our own and they can get a competitive advantage over us 
because of the competitive value of their currencies. That is fine 
until other governments intervene, in terms of their support and their 
control of their own agricultural commodities. When foreign markets 
turn sour because of these events, like we are now seeing, the 1996 
farm bill basically leaves American farmers to bear the brunt of these 
powerful world economic forces that are totally beyond their control.
  Basically, the 1996 farm bill put farmers on a high wire and then 
took away the safety net. Again, I will keep reminding my colleagues 
that under previous farm policies farmers got a lot more help in 
contending with those world economic forces beyond their control. There 
were deficiency payments that compensated for low prices. There was the 
Farmer Owned Reserve which paid farmers to pull grain off of the market 
in times of surpluses. There were not artificially low caps on 
commodity loan rates. There were paid land diversions and acreage 
limitations to keep production in line with demand. So there were all 
kinds of policies in place to help farmers weather these powerful 
economic forces over which they have no control. But the 1996 farm bill 
took that all away.
  Now, again, we have to ask ourselves, are we so ideologically rigidly 
attached to the 1996 farm bill that our hands are so tied that we 
cannot respond to these low farm prices and to the disaster that is 
facing us in rural America? Ideology is fine, but let's be practical 
about it. Let's use some common sense here. I do not mind if people 
have an ideology they want to pursue. That is fine. I think there is a 
lot of ideology in the 1996 farm bill. Those who had that ideology won 
the votes, won the bill and got it through. But, as President Clinton 
said when he signed the bill into law, that it is seriously flawed 
because there is not an adequate safety net there to help farmers 
through these kind of times that we will see in the future.
  I think what we need is to set our ideology aside and come together 
here to recognize that we have a disastrous farm economy out there 
right now. I might also say to my colleagues and friends who want to 
see the 1996 farm bill continue, that if we do not take some modest 
steps now to make some minor fixes in the 1996 farm bill, then there 
will be mounting pressure to make drastic changes in farm policy. In 
other words, if we do not get ahead of the curve, then we may have to 
take very dramatic steps, and those steps could go back to something 
even previous to the 1996 farm bill.
  So all I am saying is that there is no reason to keep the loan rates 
capped. We ought to take the caps off of loan rates. I also believe 
that we need to put into place, at least over the next couple or 3 
years, just for this year, a form of a Farmer Owned Reserve where, as 
we have in the past, we actually paid farmers some up-front money to 
store their grain and then the farmer can decide when to market that 
grain. I call it giving the farmers more freedom to market. Right now, 
farmers have freedom to plant, under the 1996 farm bill. But, because 
of the 1996 farm bill, they are forced to market their grain at the 
lowest possible prices. That is inherently unfair. Let's give the 
farmer some more freedom to market, and that means giving the farmer 
the ability to store the grain, either on the farm or in local 
elevators or the warehouse, and then be able to market that grain over 
the next couple or 3 years, when, we hope, prices will recover.
  If we do fund the International Monetary Fund and they can straighten 
out the Asian economy, it is likely that the Asian economy can rebound 
in the next 12 to 15 months. That would put upward pressure on our 
grain prices. The problem is the farmers won't have the grain then. But 
if we had some system where the farmer could store that, as he could in 
the past under the Farmer Owned Reserve, then the farmer could market 
that grain at the higher prices in the future.
  I think those two items, taking off the loan rate caps and giving the 
farmers the ability to store their grain and to market it when they 
want to rather than dumping it on the market this fall, are the two 
things that we could do to save the 1996 farm bill. They are modest 
steps. They don't take away planting flexibility. They don't take away 
all of the abilities that we gave the farmers. It does not reinstitute 
any kind of set-asides or Government mandates on what a farmer has to 
plant or where they have to plant. All that would stay in place. Those 
were the good features of the 1996 farm bill.
  But, what we need to do in order to save those, I believe, is to take 
a couple of these modest steps. If we do not do that, we are going to 
see a lot of grain dumped on the market this fall. We are going to see 
these prices go down even further, and we will have a full-blown 
depression in rural America. It is almost there right now. It is almost 
there. We are on the brink of it in rural America. Many farmers 
basically see this as their last year if we do not do something.
  So, again, I take this time on the floor to point out to my 
colleagues that we have to address this. I do not believe it is a 
partisan matter. I think bipartisan support is growing all over this 
country. I have seen letters, documents from different places around 
the country that indicate that we ought to do something. North Dakota 
Governor Edward T. Schafer and Republican legislators supported what 
the North Dakota Farmers' Union and the North Dakota farmers both 
embraced in an agreement last week. One of them was a 1-year lifting of 
the loan rate caps. So here we have, I think, some bipartisan support 
for doing this. I do not think it is a partisan effort.
  Again, we have to be practical. We cannot be held prisoner by an 
ideology or blind devotion to every last provision of a farm bill 
passed over 2 years ago, 2 years ago when we saw some of the highest 
prices we have ever seen for crops. That is when the farm bill was 
passed. Now we are in the basement.

[[Page S9837]]

  So let's work for a practical solution that will help our farm 
families and rural communities this fall. Let's take the caps off of 
loan rates. Let's have at least a 1-year provision for a Farmer Owned 
Reserve to give the farmer the opportunity to market when prices are 
high. We must act soon. It is our responsibility. I think it would be a 
dereliction of our duty to leave here in October without passing 
legislation to address the deepening farm income crisis in our Nation. 
I hope and expect sometime within the next several days, perhaps next 
week, Senator Daschle and I and others, hopefully in a bipartisan 
manner, will again be offering an amendment to lift the loan rate caps, 
to get the loan rates up, the marketing loan basis for these farmers 
this fall.
  I am hopeful that our colleagues will really take a serious look at 
this, because we are facing a farm crisis in America unlike any we have 
seen in a long, long time, and we have to act and we have to act now.
  Mr. President, I yield the floor.
  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER (Mr. Gregg). The Senator from Arizona.

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