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feiture as an option for settling those loans. This action will provide immediate income assistance to producers while ensuring U.S. price competition in export markets. Such a program can also provide part of the leverage necessary to complete successful negotiation to promote free and fair trade by all market participants. While we recognize that potentially higher marketing loans will increase Government outlays, we would point out that those costs are now being paid by farmers, agribusinesses and rural communities through reduced economic activity and increased risk.
Finally, the National Association of Wheat Growers urges Congress to consider providing trade compensation to producers impacted by the continuation of unilateral trade sanctions on agricul. tural products. Currently, U.S. wheat producers are precluded from participating in about 11 percent of the world wheat trade due to U.S. sanctions. Not only do these sanctions reduce U.S. exports at the expense of U.S. farmers, but they also provide an umbrella of market production for our competitors.
Mr. Chairman, for many producers, the 1998 wheat harvest will be their last. The income health of the wheat industry is in poor shape. We encourage the Congress and the administration to work in bipartisan fashion to develop and implement both short- and long-term strategies for addressing this situation.
Thank you for the opportunity to be before this committee and I am pleased to respond to any questions you may have at the appropriate time.
[The prepared statement of Mr. McLain appears at the conclusion of the hearing.)
Mr. COMBEST. Thank you, Mr. McLain.
STATEMENT OF JACK HAMILTON, PRESIDENT, NATIONAL
COTTON COUNCIL OF AMERICA Mr. HAMILTON. Thank you for the opportunity to testify. I am Jack Hamilton, a cotton producer from Lake Providence, Louisiana, and I am president of the National Cotton Council. In addition to producing cotton, I also grow rice, corn, soybeans and wheat, and I operate a cotton gin and a cotton warehouse. I am not going to read the rest of my testimony because it has been said about 10 times today, and I would like to make about 4 comments in 60 seconds.
I have farmed for 44 years, one more than you, Dean, and the best years I had farming were 1986 to 1995. Those were wonderful years in the cotton business. We increased our domestic consumption 100 percent. We went from about 5 million bales to 11, and these were awfully good years for the cotton industry.
The second comment, on crop insurance. Crop insurance in our area would make a very good program for ABC on "Fleecing of America,” because the only people who take crop insurance in our area are people who plan to defraud the Government. That is a broad statement, but I am telling you it is true. The crop insurance would never work in our area unless the premiums and the benefits are designed to attract in the low-risk farmer, and I am one of those low-risk farmers. I would probably never call on it, but no insurance program works unless you get the low-risk people in, and you don't have them in my area.
On taxes, of course, income averaging would be very helpful. One of the best things that was ever done tax-wise in my entire career was investment tax credit, and I am sure that we can't get that back, but that was a good one. It sold farm equipment and it helped us to no end.
My last statement is in my 44 years of farming, it has changed more in the last 4 years than it did the previous 40, and the reason is biotechnology, genetic engineering. We are doing things that I never dreamed of, and there
are two great threats and this worries me very much.
Number one is the monopoly that is being created and was mentioned here earlier today on the part of some chemical companies as they begin to merge and go together; and they do control this situation, and it would be a terrible thing if they made this technology cost us more than it benefits us.
The second great threat to that technology is the FPTA. If we are denied the right to these crop protection chemicals—they told me to say "crop protection products"—if we are denied access to those through FPTA regulation, we have lost the technology that can move us, along with the rest of America, that is getting more production through technology.
I appreciate the opportunity to be here today and we appreciate your efforts and your hearing of all these things which have been said. This has been an interesting afternoon. I didn't know you guys worked so late.
(The prepared statement of Mr. Hamilton appears at the conclusion of the hearing.]
Mr. COMBEST. Thank you, Mr. Hamilton.
NATIONAL CORN GROWERS ASSOCIATION Mr. NORTHEY. Thank you, Mr. Combest. My name is Bill Northey. I farm near Spirit Lake, Iowa. I am past president of the National Corn Growers Association. And thank you for the opportunity to testify on behalf of the NCGA and its 30,000 corn farmer members.
Well, farming involves risk and risk management. We accept some of the risks and we try to minimize some of those risks. One of the areas is trying to minimize price risk. We have marketing tools, hedging options contracts to try to do that. We try to minimize weather and disease risk. We use crop insurance, irrigation and crop rotations. We even join associations sometimes to attempt to reduce our risk by joining together to manage trade disputes and tariffs and regulation and tax policy, or at least to participate in those discussions.
I think there are many factors that have gone together to create the current crisis in the farm community. There have been ravishes of weather and problems with rail and river transportation of grain and declining exports due to the Asian financial crisis. However it started, and it is an amazing difference from 1996, it was an extraordinary year, with record farm income, tight markets, strong worldwide demand, even talk of new plateaus of prices, where we are never going to get back into the areas where we are now, and by 1998 almost every market factor that led to that positive performance has now turned the other way.
These have all changed, but the causes of these and the changes of these was not the FAIR Act, but they do point out that it takes more than a farm program to make a successful farm economy, in that a farm program alone will not cover all of the production costs and other expense, and it is certain you will get the attention of a lot of people when that does happen.
We have very low corn prices. They are above the record lows, but they are very low, especially compared to what they were 2 years ago. The average corn prices for the 5 years of the 1990 farm bill was $2.49 and the average corn price for the last 3 years was $2.44. We are in the low end of that right now, but over the life of these two, it has been actually very similar to FAIR.
But we have had problems with weather, and the ravishes of weather have been reducing individual yields in many areas of the country and the major part of the corn belt there has been excess moisture, leaf spot and green stem. In Texas, of course, it has been very hot weather that has devastated the crops of many of our members there.
And crop insurance is very important to our members to try and indemnify some of those losses, and it does work well for some, but in some cases it doesn't work well.
As was mentioned earlier, when there are problems and those problems are repeated, lower total coverage and higher premiums seem to go along with it and that needs to be addressed. We would just encourage that as well.
Certainly, even the 35 percent level that is subsidized to the greatest extent which encourages producers to ensure to that level is definitely below the cost of production for most producers, and you can't continue to have that kind of loss.
We do believe that along with Freedom to Farm there should be freedom to trade, and the currency devaluations in the Asian countries are causing us severe problems. The financial crisis going along at the same time has actually caused corn prices in some of the Asian countries to be higher now than they were a year ago in spite of the lower prices right now.
NCGA supports the full funding of the IMF. We support fast track negotiating authority. We support sanctions reform and expanding corn exports markets.
We also have a concern about transportation. It has a very significant impact on the farm economy. A transportation system means better prices for corn and other commodities, and certainly a poor transportation system definitely lowers prices.
We know that 1997 was an especially bad fall and there are some indications that this fall looks like there could be some of those same problems.
Well, what is next? The NCGA was the first national commodity organization to embrace the concept of Freedom to Farm during the 1995 and 1996 farm bill debate. Our support was contingent on the Federal Government's support for agricultural research, adequate risk management tools, market expanding opportunities, a fair tax system and relief from excessive regulation, and we still support the concept of "Freedom to Farm." We do believe that farmers will make better production decisions than Washington, but we do need the Federal Government's help to address some of the concerns that are beyond the farmer's control.
We need a commitment to research and we need affordable, effective crop insurance tools. We need a strong global economy and access to markets. We need a tax system that allows us to keep a reasonable portion of what we own. We need a viable, efficient transportation system. And I look forward to working with the committee on furthering this agenda. Thank you.
[The prepared statement of Mr. Northey appears at the conclusion of the hearing.)
Mr. COMBEST. Thank you, Mr. Northey.
STATEMENT OF AL AMBROSE, ON BEHALF OF THE COALITION
FOR COMPETITIVE FOOD AND AGRICULTURAL POLICY Mr. AMBROSE. Thank you, Mr. Chairman and members of the committee. I appreciate the opportunity to be here today. I am Al Ambrose, senior vice president of processing for Cenex Harvest States of Inver Grove Heights, Minnesota, one of the Nation's largest farm cooperatives, representing a quarter million farmers and ranchers in 18 States. I also serve as chairman-elect of the board of directors of the National Oilseed Processors Association, and I am here representing the Coalition for Competitive Food and Agricultural Policy. This coalition is comprised of 120 trade associations, companies and farms from across the Nation, working to promote agricultural protocols that will allow U.S. agriculture to compete in growing domestic and world markets.
A few facts. We have not seen a significant increase in per capita food consumption in the United States for a decade. Therefore, the greater opportunity for agricultural growth lies outside of this Nation. We need to access those opportunities, and it requires a 2-step process:
First is to stimulate and encourage economic growth in societies where widespread dietary deficiencies are common.
The second step is to allow the free flow of food from the most cost-effective food supply in the world to that undernourished consumer.
To this end, we should try to help stabilize currencies overseas and to vigorously attack trade barriers. Those of you who have my written text, there are some charts that I would like to refer to, and I don't have anything to put up on the wall so I hope that you can look at them.
In the 1994–95 marketing year, we saw global consumption of oilseeds jump over 11 percent due primarily to rising demand for vegetable oil, protein meal and meat in Asia, most notably China.
As demands in overseas markets increased, the U.S. responded by stepping up production of those goods. That growth is clearly demonstrated in chart No. 1. For what it is worth, between 1985 and 1994 the U.S. soybean crop averaged 2 billion bushels a year. In the last 2 years it has averaged 2.8 billion. That is a 40-percent increase, a monumental increase in that short a time, and it was only possible through growth of demand in Asia.
Chart 2 depicts soybean prices. Note that the soybean price remained above $6.50 for the last 3 years, meaning that high prices can coexist with significant production increases as long as consumption remains strong. Currently prices are declining because of economic stagnation in Asia.
Charts 3 and 4 demonstrate the massive increases in oil and meal consumption in China since 1992 when China adopted market reforms. In the last 4 years, meal consumption in China alone has doubled by 342 million tons and oil consumption has gone up threefold.
Another fact. The least Government-supported crop grown in America is soybeans. In 1985 we opted out of help. The 3-year average farm price for soybeans is $4.84. The 5-year is $6.48. Call any farmer today and ask him how we would like $6.48 soybeans.
There are tools available to us. Normal trade relations with China becomes essential. IMF funding to stabilize economies and reinvigorate demand. Fast track, we have to negotiate in good faith and make the people on the other side of the table believe us. And sanctions reform is absolutely essential if you believe in the future of farming in America. We ship half of our goods outside this country. Farmers are going to continue to increase production, and it is up to us as policy makers and marketers to access the demand that already exists in the world by opening up those markets and assuring those people that we will supply their food.
Who among us would want to become dependent for our food supply on a party who has demonstrated a tendency to withhold food based on moral value differences? Sanctions do not work. They do not stop the free flow of food. You simply alienate your potential customer and you inspire doubts in the minds of your existing customers. Would it not be better to try to meet the other's needs? Chances are he will become more open to your needs in the process. Positive, mutually rewarding terms builds bridges across chasms of disagreements.
It is imperative that we do not resort to supply restricting policies to either reduce production or artificially stimulate hoarding. Market access is a code word for demand. Farmers will create the supply. It is up to us to access the demands. We have the tools available to us if we have the political will to employ them. Interestingly, three of four of these tools employed together will be far less effective than the 75 percent that they represent numerically. We need all four. You have to convince the world that you will be a reliable supplier and not use food against them on your basic points of disagreement. It is not only ineffective, it is immoral.
We respectfully ask that your efforts be directed towards accessing existing global demand as well as providing short-term help for producers which you deem appropriate. However, it is imperative that such relief does not distort markets.
If we are ever to expect import-market nations to lower their import tariffs and barriers, we must provide them with food security, guaranteeing the prohibition of future food embargoes and sanctions. We believe that short-term relief is appropriate for the farmers. Research and education and risk management are in order. We