[Congressional Record (Bound Edition), Volume 145 (1999), Part 16]
[Senate]
[Pages 22622-22624]
[From the U.S. Government Publishing Office, www.gpo.gov]



RECOGNIZING THE MAY 13, 1999, SPEECH OF HANS W. BECHERER, CHAIRMAN AND 
       CEO OF DEERE AND COMPANY BEFORE THE DES MOINES ROTARY CLUB

 Mr. GRASSLEY. Mr. President, I would like to recognize and 
enter into the Record a recent speech presented to the Des Moines 
Rotary Club by Hans Becherer, Chairman and CEO of Deere and Company. 
His remarks are insightful and provide a long term outlook from one of 
the leaders in our agricultural community. The speech is entitled, 
``All Farming is Global''.

       Today I'd like to discuss some of the major trends that 
     will help shape agriculture as it moves into the new century 
     and millennium. This is of particular importance to Iowa 
     since almost one-fourth of the state's population works in 
     the agricultural complex . . . and 90% of the land area is 
     devoted to farms.
       Farming remains critical to John Deere, as well. Although 
     we've diversified a good deal in recent years, both in 
     product breadth and geographic reach, farm machinery remains 
     our flagship business . . . and the domestic farmer our 
     number one customer.
       Needless to say, the farm sector is struggling right now 
     due to depressed grain and livestock prices. As a result, 
     North American retail demand for farm equipment is expected 
     to be off 25% or so this year with lesser reductions in 
     Europe. Accordingly, we're making aggressive cutbacks in our 
     production in order to adjust inventories and bring more 
     balance to the market.
       One farmer, on an Internet message board devoted to Deere, 
     recently summed it up this way: ``The quality of the green 
     tractor is there,'' he said. ``The quality of the green money 
     to pay for it isn't.''
       Thus far, that seems to be a fair assessment of the 
     situation.
       Of course, the farm economy was in good shape heading into 
     this downturn, from the standpoint of debt levels and land 
     values, and will likely prove quite resilient. There's 
     nothing to suggest this will be a rerun of the 1980s.
       Moreover--the next year or two aside--the future of farming 
     looks extremely promising for the long run.
       That's what I'd like to focus on this afternoon--less the 
     problems of the present, than the promise of the future.
       Of the key forces dictating change in agriculture today, 
     the most important ones concern increasingly open markets and 
     freer trade; the explosive growth in technology, which is 
     transforming the entire economy these days; plus, the 
     continuing importance of environmental issues.
       Let's take a closer look at these issues now.

                           *   *   *   *   *

       As a first point, farming is becoming far more market-
     oriented.
       Most of us, I suspect, believe in free trade and open 
     agricultural markets. We feel farmers in Iowa have a lot to 
     gain from such a situation. We have, after all, some of the 
     world's best farmland literally in our backyards, plus an 
     excellent distribution system for getting crops to market, 
     and access to highly productive farm machinery.

[[Page 22623]]

       Just what does an open market, increasingly free of 
     controls and restrictions, mean to the farm sector?
       Mostly, it will accelerate trends already under way--
     putting a premium on large, efficiently run operations that 
     are able to make the most of today's technology and fast-
     moving markets.
       Less-regulated farming will have a positive impact in terms 
     of overall economic efficiency--and it's likely a plus for 
     the nation's agricultural complex as a whole. It certainly 
     gives U.S. farming a leg-up in a global market, something 
     that works to Iowa's benefit.
       As for the decline in smaller farms, this very definitely 
     marks the passing of an era, which many find a source of 
     regret. But it's a process that has been in motion for some 
     time: Even in the robust economic environment of the last few 
     years, Deere was selling less than half as many tractors and 
     combines to the domestic market as in the early 1970s. The 
     number of U.S. farms has contracted by one-third (from 3 to 2 
     million) over this time, with a similar pattern seen in Iowa.
       I should point out that some small operators will do quite 
     well in tomorrow's less-regulated market. These are the ones 
     who devote themselves to a type of management-intensive, or 
     niche, agriculture, such as growing organic crops. Still, it 
     will take quite an entrepreneurial breed to overcome the 
     economies of scale that are becoming more and more a part of 
     farming.
       Along the same lines, a more open agricultural climate 
     means farming will become more internationally focused and 
     geared to exports. Indeed, the farmer of the future will have 
     to be a man of the world.
       And that's definitely a plus for Iowa.
       Agriculture has always been regarded as the most basic of 
     local enterprises. And rightly so: What could be more a part 
     of our communities than our own soil? Farming, moreover, has 
     constituted the soul of rural life in our country for over 
     200 years, and been widely associated with the virtues of 
     honesty and hard work that built America.
       But in truth, ladies and gentlemen, all farming is global.
       Every ear of corn, or pod of soybean produced in Iowa makes 
     an impact on the world market . . . and affects farmers in 
     faraway places such as Australia and Argentina.
       Similarly, every drop of rain that falls on Brazil's 
     creddados . . . has an effect on Iowa's farms and fields.
       Legislation approved in Berlin and Brussels . . . is felt 
     by farmers in Burlington and Belle Plaine.
       Soybean prices went into a nosedive awhile back . . . not 
     because of a leap in supply or a lag in demand, but because 
     the Brazilian currency lost one-quarter of its value over-
     night. Brazil, of course, is a major soybean producer and 
     exporter. That action alone shaved roughly a dollar a bushel 
     off bean prices.
       Global trade, manifested by exports, has become a mainstay 
     for our nation's farmers. Roughly one-fourth of farm receipts 
     today come from overseas sales. And Iowa is right in the 
     thick of things, being the nation's number-two exporter of 
     agricultural commodities ($4B year) after California.
       Farm exports will drop this year due to the economic 
     travails of the developing world and are down almost 20%--or 
     $10 billion--from their peak. But this is almost surely a 
     short-lived phenomenon . . . and completely at odds with the 
     long-range picture.
       The world's fundamentals--namely, strong population growth, 
     improved diets and more open trade policies--all point to 
     U.S. farming, and Iowa agriculture, being an export-driven, 
     growth-intensive business with solid prospects well into the 
     future.

                           *   *   *   *   *

       Farming will get more competitive, too, as farmers scramble 
     to add value to their crops and gain an edge in productivity, 
     yields and costs.
       Technology--my second point--will help them get there. 
     Technology, of course, has been the story in agriculture 
     since the days of Cyrus McCormick's reaper . . . John Deere's 
     plow . . . and the Waterloo Boy tractor. Forerunners of 
     modern-day combines and cotton-pickers weren't far behind.
       The cultural effect of ever-more productive machinery goes 
     well beyond the farm. It's what transformed our society into 
     an industrial power since it takes so much less physical 
     labor to feed our population today. The average farmer gets 
     as much done by 9 a.m. now as in a full day in the post-war 
     1940s. Over this time, crop production has nearly tripled 
     from virtually the same amount of farmland. Especially 
     noteworthy, farm-labor's role in the agricultural process has 
     dropped by more than two-thirds during this time.
       What accounts for such improvements? Technology, mostly . . 
     . in the form of better seeds and fertilizer, as well as--
     indeed--more sophisticated farm machinery.
       As important as technology has been to farming's past . . . 
     it's fair to say we haven't seen anything yet. Genetically 
     modified seeds . . . plus precision, or satellite-guided, 
     farming and other, almost unimaginable, advances in 
     information technology . . . put farming on a truly exciting, 
     high-tech plain for the new century.
       Going forward, in fact, a farmer's biggest problem will not 
     be having access to technology, but figuring out how to apply 
     it to his best advantage. ``What we're trying to do here,'' 
     one farmer recently said at a precision-farming conference, 
     ``is create knowledge out of chaos.''
       Meeting this need--helping farmers bridge the gap between 
     information and intelligence--may constitute a promising 
     business opportunity in its own right. Deere recently formed 
     a new business unit--John Deere Special Technology Group--to 
     help supply solutions to these challenges.
       One of the unit's most exciting new ventures is the 
     VantagePoint network, a kind of silo in cyberspace. More to 
     the point, VantagePoint is an Internet-based data-warehouse 
     subscription service that allows farmers to collect, store, 
     and reference a full array of data about their farming 
     operation--such as yield and seed population. Subscribers can 
     also see aggregated data from neighboring areas. VantagePoint 
     functions as a server to contain this information . . . and, 
     as an interface, to organize and present the data in creative 
     and useful ways.
       As for the Internet itself, we believe it adds an important 
     new dimension to the selling process, which should work to 
     the benefit of our John Deere dealers . . . by helping them 
     provide even more responsive service and counsel.
       A number of dealers have their own websites. Many more are 
     listing used equipment on a company-sponsored site called 
     MachineFinder-dot-com, launched late last year. Roughly 6,000 
     pieces of equipment, mostly tractors and combines, are 
     presently available over MachineFinder . . . and about 15,000 
     users have registered for the site.
       What ever the future of MachineFinder and other emerging 
     Internet-related services, one can safely assume that 
     technology will play as big a role in the success of 
     tomorrow's farmers as the weather or government policies.

                           *   *   *   *   *

       As technology makes farmers more productive, it's also 
     helping them be good stewards of the soil, the air and the 
     water. That's the third area I'd like to touch on today.
       Outside of large hog lots--which is certainly a newsworthy 
     issue in Iowa--the environmental side of farming doesn't grab 
     many headlines. But it's quite a factor in the farming 
     process . . . and seems likely to stay that way.
       Regulation, for one thing, will see to it that farmers 
     remain serious about limiting emissions . . . preserving the 
     soil . . . and controlling the run-off of chemicals and 
     waste. Some of the proposals you hear about would even limit 
     the hours farmers spend in their fields, based on dust 
     restrictions. Noise abatement is an emerging concern. And 
     water quality seems likely to be the next big area of 
     regulatory focus.
       All this, of course, adds cost and complexity to the 
     farming process. But many of the very things that make 
     farmers environmentally sensitive . . . are actually fiscally 
     sensible. That is, they help farmers become more productive 
     and profitable.
       New engines are cleaner-burning and more efficient. 
     Precision farming helps farmers cut down on input costs. New 
     sprayers apply herbicides with laser-like precision, cutting 
     down on waste and over-spray.
       All that's good for the environment, of course. But it's 
     also beneficial for the farmer's bottom line.
       Iowa's farmers are truly among the unsung heroes in today's 
     environmental movement. For without modern fertilizers, 
     herbicides and machinery . . . without high-yield production 
     practices . . . and without the tremendous yield gains we've 
     seen over the years . . . an additional one-million square 
     miles of our nation (all the land east of the Mississippi 
     River, in size) would need to be plowed under and made into 
     cropland, merely to equal present levels of grain production.
       That's no less than three miles the amount of land 
     currently devoted to farming. It's fair to say, moreover, 
     that these new fields would come at the direct expense of 
     forested areas and other land now serving as wildlife habitat 
     or as part of our natural watershed.
       Clearly, farmers have done quite a job of safeguarding our 
     natural resources, while meeting the world's growing need for 
     food. Nevertheless, tomorrow's increasingly formidable 
     environmental pressures will require an even more intensive 
     commitment on their part.

                           *   *   *   *   *

       Regardless of the challenges ahead for agriculture, I 
     assure you that Deere remains firmly committed to providing 
     solutions to our customers' needs and customers in our case 
     go far beyond the farm.
       Over the last several years, John Deere has worked hard to 
     achieve a good deal of diversification in our operations. 
     We've done so not by plunging into altogether-new businesses, 
     but by applying the lessons learned from generations of 
     dealing with farmers to a broader range of customers.
       Our view is that the characteristics of our Waterloo-made 
     tractors, or Des Moines cotton pickers--such as durability 
     and reliability--work just as well for construction 
     equipment, such as Dubuque-made backhoes.
       The same goes for our new skid-steer loaders, Gator utility 
     vehicles, golf and turf

[[Page 22624]]

     equipment or the full range of lawn-care machinery now being 
     offered in green and yellow.
       Similarly, our Des Moines-based credit operation owes its 
     success not to the fact that the money it lends goes farther 
     than anyone else's . . . but because of the integrity and 
     service that has long been associated with the John Deere 
     name. (John Deere Credit, incidentally, is quite a successful 
     enterprise in its own right, normally adding 20% or so to the 
     company's overall net income.)
       Moreover, it is these non-ag operations that have been the 
     focus of major investment programs of late . . . and which 
     we're counting on to help us achieve more consistency in our 
     profits whenever the farm economy weakens.

                           *   *   *   *   *

       None of which, in any way, dampens our enthusiasm for 
     farming.
       Because despite some of the challenges I've mentioned--and 
     the current downturn is very real and painful--the future for 
     agriculture looks good.
       Darned good, in fact.
       Regardless of Indonesia's financial problems . . . the 
     world still has 10,000 new mouths to feed every hour, and, 
     again, will need three times today's grain output within 50 
     years.
       No matter what's ahead for Brazil's real or Russia's ruble 
     . . . a good deal of money will be spent on the increased 
     consumption of meat--which is a primary driver of demand for 
     grain.
       Beyond the Third World's growing pains . . . the global 
     farm population, now over 40%, will shrink as industrial 
     growth creates new opportunities and higher living standards. 
     This will make Iowa's contribution to the world food supply 
     all the more important.
       True, these things may take shape more slowly than we 
     expected, but the fundamental trends are headed in the right 
     direction.
       All point . . . to a promising future . . . for a globally 
     attuned . . . technologically astute . . . environmentally 
     aware . . . agricultural sector--such as exists in Iowa and 
     surrounding states.

                          ____________________