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.

Mr. Ambrose.

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 con

sumer.

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 32 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

would strongly encourage, however, long-term solutions which pursue market access and expanding world demand. Thank you.

[The prepared statement of Mr. Ambrose appears at the conclusion of the hearing.]

Mr. COMBEST. Thank you very much.

Mr. Peterson.

Mr. PETERSON. Mr. Chairman, I have a statement from the Minnesota Association of Wheat Growers, a letter from their president. Mr. COMBEST. Certainly, it will be a part of the record.

Mr. Boswell.

Mr. BOSWELL. No questions.

Mr. COMBEST. Mr. Stenholm.

Mr. STENHOLM. Thank you, Mr. Chairman. Just some interesting numbers regarding what has happened to agriculture since 1995. In light of the previous panel's discussion regarding land values and some discussions regarding land values, it is fascinating to look in the Agricultural Outlook Economic Research Service and see 1995 real estate assets of all farms and ranches in the United States have increased by $134.3 billion, real estate debt has increased by $6.9 billion. When you look at total farm equity, total farm equity has gone up $129.5 billion.

So something all farmers understand: If you own land, that is what is keeping you in business because of your net appreciation in asset value. We are not making any money. At least we are not adding it to our asset columns on the average in the United States in the production of grains or livestock, on the average. That does not mean that there are not some making money, some are losing money. But it is fascinating when you look at that in light of the discussion that we have had today.

My question to all of you: On a scale of 1 to 10, how helpful do you expect the advance of AMTA payments to be on October 1with 10 being very helpful-compared to improvement in insurance, IMF, et cetera, et cetera? Mr. Kleckner.

Mr. KLECKNER. I wish I could pop out with a number, but it surely depends on how bad off that individual is. Some will take it and some will not because of the tax implications. I suppose when you compare it to IMF, fast track or tax reform, reg reform, which are way, way more important long term-but this is short term, you said 10 is high-I suppose I would give it a 3 or 4. We do support it.

Mr. NORTHEY. Mr. Stenholm, I think certainly October 1, it seems like a 10 to producers, those that are having real concerns, and of course it is just moving payments ahead. And a lot depends on what happens from then on. It will allow producers to get to the other side of harvest and to see if prices respond after that. Of course, it is just bringing money forward, it is not new money. And the other things that we are talking about, IMF and fast track and other trade things are.

Mr. STENHOLM. Including supplemental insurance payments in light of the Senate that's all. Thank you. I just wanted to get a little feeling, if any of you had one.

Mr. MCLAIN. We think that it is important that we have those payments, but that is a short-term fix. We need long term to get

the health and viability back to wheat farmers, but we certainly believe that is necessary at this time.

Mr. WINTER. Mr. Stenholm, Mr. Chairman, 3. Long term it doesn't impact the price crisis that is facing farmers today. It allows them to have the money so they can pay their bills, but it does not impact the price of every bushel of wheat and corn that they sell off their farms. If you want to help farmers, take the caps off the loan rates and allow the price to move up so they can garnish a little more money out of those commodities, and the payments early will help shore up some cash flow needs. But in the long term it will not fix the price problem that they face today. So, 3.

Mr. STENHOLM. I put it at 3. I intend to support it. I think it is a tool that we can do at minimal cost, and I personally would give it a 3 also. I have no further questions. I thank the indulgence of the panel for an extra long day.

Mr. COMBEST. Thank you, Mr. Stenholm. Mr. Lucas.

Mr. LUCAS. An observation coming from a line of Okies that picked some peaches in California and cotton, and worked in a Kaiser shipyard in the 1930's and 1940's but came home to Oklahoma and an appreciation for the soil and land. Not many days ago, the State president of the bureau and the union, the cattleman's executive director, the State president of the Wheat Growers Association, came to D.C. to see the Oklahoma delegation, and they made it clear that with the drought coming across the line from the Red River and the price conditions that we were facing, that they needed something to, as Phil said that day, happen now.

Being an elected official trying to represent my good constituents, I have been visiting for some time with many of my colleagues in leadership about this concept of advancing the payment. It met the requirement of something that was not economically unreasonable but politically doable, and I think that is how it came about. I wholeheartedly agree with my colleagues. It is not the permanent address to a variety of issues, but it addresses the needs of the constituents in my district, many of whom are part of your organizations, that they needed something to happen now, something with certainty. $8.3 billion as my colleague's chart points out, amounts to a substantial amount, at least on the wheat payment this year. So that is how that came about.

Let me address the question to the panel, I guess. Looking down the road in the direction we are heading, realizing that we don't have that many legislative days left in this session, realizing that this $8.3 billion is an option, can you tell me how aggressively you intend to work in the coming spring session on some of these other issues?

Mr. KLECKNER. $8.3 billion being what?

Mr. LUCAS. The second half of the 1998 AMTA payment, and if you exercise the option on October 1 to take the 1999 AMTA payment, potential dollars that could be available to folks who signed up for the 1996 farm bill of about $8.3 billion this fall.

Mr. KLECKNER. We are strongly in support. We think that for those farmers that are really hurting-not all are, the Red River area and many other areas also this can be very helpful. But as Bill Northey said, this is simply paying ahead. But we are in support of it.

But all of the other things that we talked about longer term, the IMF funding, we are going to work on that; fast track; certainly the tax changes; farm accounts; permanent income averaging; lowering the capital gains tax rate. I think that would be tremendously helpful to many farmers, including those that want to retire and sell it to their children. 15 is probably too high, but a heck of a lot better than when it was at 28. We are going to work very hard on those things and some other.

Mr. LUCAS. But the resources have to be there to put that next crop in the ground. Mother Nature may change, we may have to do whatever we have to do next year for the good of American agriculture, but we have to get to that next year, and this looks like the most practical opportunity out there.

Mr. SWENSON. Congressman Lucas, we also support the AMTA payments. It is critical to look at how much is leveraged or built into cash flows for 1999 that are dealt with within the financial institutions which farmers and ranchers operate under, and to how much then will yet be available to assist with the financial crisis that many producers are facing because of low commodity or the loss of crop in 1998. And so that is a story yet to be unfolded.

But I will guarantee you that we will be here in September when you come back to try to address these problems, because low prices will not go away just because we advance the AMTA payments. In fact, projections are that we will have lower prices in 1999. And if we give up the advanced payments in 1998 for 1999, we are still going to have a major crisis unfolding in 1999, so we will be here to deal with price in September. We will be back in January and February until we get some response.

I also want to take the time, if I may, to say I don't know of anyone, any farm organization, that is advocating going back to the old farm bill. We are trying to look at where some enhancements may be made in the structure of the 1996 farm legislation. And I think the implied aspect of many of those that advocated enhancements are advocating going back to the old way of doing things is a misjustice from the voices of agriculture, and we believe that those elements that we have advocated, many of which we all agree on, IMF and other aspects, are ways to enhance and improve the farm legislation. Thank you.

Mr. LUCAS. Thank you, Lee. Thank you, Mr. Chairman.
Mr. COMBEST. Thank you. Mr. Peterson.

Mr. PETERSON. How many of you would support, as we are going through overhauling the crop insurance system, support throwing out years in which you had a disaster from the formula? It has been brought up to me a number of times by people in my area that when you have that kind of a year, the best thing that we can do is throw those out and consider the years when we do not have disasters, because it gives you a more accurate picture. Can each of you comment on that?

Mr. NORTHEY. Mr. Peterson, I don't know what the criteria should be, but there are problems. Because of repeated crop problems, those yields and the cost of that insurance is getting to the place where producers don't feel that they can afford to buy it and are not getting the coverage that they should be getting, and something has to change. Now, how you decide what a disaster is