[Congressional Record Volume 148, Number 23 (Wednesday, March 6, 2002)]
[House]
[Pages H733-H735]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   PRICE SUPPORT PAYMENT LIMITATIONS

  The SPEAKER pro tempore (Mr. Pence). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from Michigan (Mr. Smith) is 
recognized for 60 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, the agricultural industry in the 
United States over the last 100 years has contributed a great deal. As 
we develop this year's farm bill, we are now trying to decide, number 
one, how much should we pay in terms of tax subsidies to farmers, tax 
dollars going into subsidies to farmers, to make sure that the 
agricultural industry in the United States survives.
  Farmers are facing record low prices compared to the last 20 years. 
In fact, in terms of what a bushel of wheat would buy, the wheat price 
today is much lower than it was 50 years ago.
  What kind of policy do we want in the United States? We are now in a 
subsidy war, if you will, with other countries. Other countries have 
decided they are going to do anything necessary to keep their farmers 
operating, so they are subsidizing their farmers in these other 
countries substantially. Their extra production from Europe, from these 
other countries, go into what would otherwise be our markets, so the 
resulting overproduction from all over the world results in low 
commodity prices, and the low commodity prices today would not keep 
most farmers in business.
  Subsidies in the United States represent about 17 percent of the 
gross income of the average farm. The average net income of an average 
farm is around 6 percent. So, again, without the subsidy payments, most 
farms in the United States would lose money every year.
  Now, the irony is that farmers do not like to have this subsidy check 
coming from the government. They would much rather have a real 
marketplace, where there was real competition throughout the world, 
where they could compete and make good money farming. And make no 
mistake, our farmers in the United States can compete, if you will, 
excuse the expression, on a level playing field, with any other 
agricultural producers in the world in most commodities.
  Our challenge right now is the Senate has passed one farm bill, and 
the House has passed another farm bill, substantially different in the 
concepts of where they want agriculture to go and what they want in the 
farm bill. That includes rural development, that includes the 
environment in rural areas, that includes the WIC program for food for 
infants and pregnant mothers, that includes the Food Stamp program.
  Just as a footnote here, let me say how we have changed the U.S. 
Department of Agriculture over the last 50 years. USDA, that part of 
USDA that is involved in production agriculture, with farmers, now 
represents only about 25 percent of the total budget of the U.S. 
Department of Agriculture.
  I am here tonight to talk about payment limitations to some of the 
huge mega-farmers in the United States. The Senate in their bill had 
provisions that incorporated a level of payment limitations in the hope 
that some of the large mega-farms would have some kind of a cap, some 
kind of limit on the payments they received, so there would be more 
money for what I would call the average mainstream farmer in the United 
States and some of the other programs in the agricultural bill.
  We passed an agriculture bill back in 1996 that pretty much everybody 
supported. All of the farm organizations thought it was a good idea. 
What that was is the Freedom to Farm, and it was a phase-out of 
government subsidy programs. So over 7 years, the subsidy payments to 
farmers went down and down, and then in the eighth year farmers were 
supposed to produce strictly for the market.
  What happened is the economy in Asia was tremendously disrupted and 
their purchases went down, and we had a glut of extra farm production; 
so prices went down, and even with the one subsidy phase-out payment, 
farmers were going broke, going out of business, going bankrupt.
  Now we are developing this new farm legislation, and the question 
before us is should we have payment limitations on how much money any 
one farm operation can receive in payments from the Federal Government.

[[Page H734]]

  Let me give you one statistic. Right now, the top largest 5 percent 
of the farms receive 49 percent of the payments. Five percent almost 
receive half of all the payments. Some have suggested, look, we do have 
limits on payments. The fact is that we do not have real limits of any 
kind on price support payments.
  Let me just spend a minute on price supports. In our farm programs, 
what we have is we say to a farmer that to cover at least their fixed 
costs, that we will guarantee a certain price, and if the market is 
less than that particular price, government will make up the difference 
between the current market price and what the Congress has thought to 
be a price that will at least cover most of the fixed expenses of that 
particular farm producing that particular crop.
  Just for the record, let me throw in those price support payments. 
The national average now on rice is $6.50 a hundred weight; cotton is 
$52.9 cents a pound; wheat is $2.58 cents a bushel; soybeans are $5.26 
a bushel; and corn is $1.89 a bushel.
  So for example, on corn, at $1.89 a bushel, if the current market 
price is $1.79 in that particular county, then the government will come 
up with an extra 10 cents per bushel for those farmers.
  In terms of my interest in this area, I am a farmer from Michigan. I 
was born and raised on a family farm. I was on the United States 
Department of Agriculture State Committee in Michigan as its chairman. 
I came to Washington when Earl Butz asked me to come to Washington to 
help phase out some of the complicated farm programs in 1970, and we 
went from a stack about 10 feet high of program regulations for farmers 
down to maybe a stack a foot high of those regulations for farmers, and 
sold a lot of the storage bins that the Federal Government had that 
tended to depress prices for farmers even more.
  We did not have problems with the kind of payment limitations in 
those years because the price of the commodity was higher than the 
support price. We had crazy programs for diversions and set-asides; and 
ever since 1934 when we first started farm programs, it has tended to 
be farm programs that had more benefit for the big, richer, larger farm 
operations.

                              {time}  1745

  So a big, larger farm operation has a lower per unit cost of 
production; and, therefore, the difference in price to make it up was a 
little more beneficial to them in terms of adding to their profit than 
a small family farm that had a larger unit cost of production.
  So what happened from 1934 through the 1960s and into the 1970s is 
the very small farms went out of business, and the medium-sized farms 
thought, well, if I buy that small farm and I work maybe another couple 
of hours a day, I can make a little more money for my family so that my 
kids have some of the same advantages as my city cousins.
  Well, it tended to be progressive; and, pretty soon, what was 
considered a large farm was considered a small farm and the larger 
farms bought out those smaller farms. Now, over the last 60 years, we 
have gone from an average of about 40 acres, 50 acres per farm to 460 
acres per farm.
  Let me just give my colleagues a report from the Environmental 
Working Group that went to the U.S. Department of Agriculture and got 
all of the payments to all of the farmers and the farm operations in 
the United States. As my colleagues will recall, I mentioned earlier 
that 5 percent of the farms are now receiving 49 percent, almost 50 
percent of farm payments that go out. If we were to have the kind of 
payment limitations that are in the Senate bill, it would save between 
$2 billion and $3 billion.
  I am going to move away from the mike and just write these numbers 
in. According to the Environmental Working Group, these are the top 
recipients of farm program payments between the years 1996 and 2000. I 
think everybody that is watching might be able to see that. They are 
Riceland Foods, $49 million; Farmers Rice Corporation, $38.2 million; 
Harvest States Co-op, $28.1 million; Tyler Farms, $23.8 million; 
Producers Rice Mill, $19 million. These are the mega farm operations. 
These are the huge landowners. These are not the 400 or the 500 or the 
1,000 or the 2,000 or the 3,000 or the 4,000 acre farms. These are the 
40,000, 50,000, 60,000, 70,000, 80,000 acre farms.
  What I am suggesting in this short debate this evening is that my 
colleagues work to have a farm program that is more fair to the 
mainstream farmers of our country and to limit the kind of payments as 
we have a limit in the Senate bill. Some of the pressures, of course, 
come from the big operations that are getting these large payments.
  Bear with me a minute and let me just go through a scenario of why 
there is no cap or limits on farm payments, and that has disturbed me 
quite a lot over the years, because we sort of fool people into saying 
there is a limit on price support payments. Because, in the law, it 
says there is going to be a limit on price support payments of $150,000 
per farmer. That is what the law says. So a lot of organizations have 
tended to say, well, we have payment limits on price support.
  Here is what happens. It is a little complicated. But once we hit the 
$150,000 limit, then we have another program that is called a 
Nonrecourse Loan Program. So any farmer can take his rice, corn, wheat, 
cotton, soybeans in and give the government the title to that crop. The 
government will give him a loan that is equal to the price support 
payment, and then that farmer has the option of forfeiting on that loan 
and keeping the money, which gives that farmer exactly the same benefit 
as the price support payment in the first place. So it is sort of one 
can do an end run and still collect millions of dollars in price 
support payments.
  I would just urge my colleagues and I would urge the conferees from 
the Senate and the House to look at the kind of payment limitations 
that still can be fair to farmers, that still offer some loan 
provisions to those farmers so that we do not have to glut the market 
at harvest time.

  I spent 5 years as a deputy administrator for farm programs with Earl 
Butz, and then went back home to the farm. Anyone that thinks that it 
is not tough, making money on a farm, has not spent a lot of time on 
the farm. Farmers put in those 14- and 15-hour days. They work very 
hard. They are desperate to try to have the kind of provisions and 
services and piano lessons and the ability to send their kids to 
college. They are trying hard in working those extra hours to try to 
accommodate their family in the same kind of living as their city 
cousins. It has been very tough.
  So we are losing a lot of our farmers, and we continue the trend of 
farmers and farms getting bigger and bigger.
  I want to make it clear that the limitation amendment will only 
affect the very largest of recipients. For instance, the average 
acreage that would have to be taken in the last 2 crop years to reach 
the limit that the payment limitation sets was over 6,000 acres of 
corn. So, again, the average farm is 460 acres, but to reach the 
payment limitation in relation to the price over the last 2 years was 
6,000 acres of corn, almost 5,800 acres of soybeans, almost 2,000 acres 
of cotton and 13,000 acres of wheat, 17,000 acres of rice.
  I would note that the average farm size again is 450 acres. So these 
are very large farms to reach that limit.
  Mr. Speaker, I would ask all Americans to work with us in terms of 
supporting American farmers. I have suggested that, number one, we want 
to try to talk these other countries into reducing their subsidies, 
because subsidies tend to encourage overproduction that has a chain 
reaction of extra supply, lowering the price, and so farmers end up 
receiving that much lower price from the markets. So we need to work 
together cooperatively with other countries.
  But I think it is very important that we keep our agriculture 
industry, we keep and we do what is necessary in these farm programs 
that we are going to develop over the next several weeks to make sure 
we have a strong agricultural industry that can continue to provide the 
highest quality food in the world at the lowest percentage of take-home 
pay of anyplace in the world.
  Again, we produce the highest quality of food at the lowest 
percentage of take-home pay of anyplace in the world. That efficient 
production in agriculture has allowed so many people that used to work 
on the farm producing food to try to survive to go into

[[Page H735]]

industry and manufacturing and now into the new information technology. 
So the agricultural industry that has been the most efficient of any 
industry; if we take the automobile industry or computers or anything 
else, the increase in productivity of American agriculture has 
surpassed almost every other industry.
  In conclusion, I would say, Mr. Speaker, that I ask all of my 
colleagues to join with me when they talk to conferees and encourage 
them to come up with a payment limitation that is fair to all farmers, 
but not to give in to some of the pressure groups and the large, huge 
mega farm operations that are trying to put pressure on our conferees 
to continue unlimited payments without restrictions. Of course, let me 
add to that the grain marketers who tend to make a certain profit per 
unit of production also gain from having large volumes produced. So 
those industries, the grain industries, the cotton, rice, et cetera, 
those industries do not want the kind of payment limitations that is 
going to result in fewer bushels or pounds being produced because that 
is where they have their margin and markup on profits.
  Mr. Speaker, it is going to be a challenge. I hope we can overcome 
that challenge, and I hope we can have the kind of payment limitations 
that helps make sure that we do not have a nation of huge mega farms.

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