Mr. PETERSON. I should clarify that. In an area where you had a presidential or secretarial disaster declared in your county, that we would throw out any year that you had that happen and that would just leave the years where you had sort of normal production?

Mr. NORTHEY. It certainly seems like something needs to be done, and that might be one criteria that would make sense.

Mr. MCLAIN. What about the areas where you have 2 or 3 years; can you throw all of those out?

Mr. PETERSON. In our area where I think one county we have had 5 years out of 6, and with the 10-year situation, you can imagine what that has done.

If you throw out those 5 years and just use the other 5, we would have a fairly normal yield situation and insurance then would work.

Mr. MCLAIN. We need a fix for crop insurance. We want to be able to operate as other businesses are able to, and we don't feel that we have that tool in crop insurance that we ought to have.

In the Southeast, crop insurance has never worked for us. I have never paid a premium on crop insurance that has helped me a bit. 1986 was the worst year we ever had, and I had crop insurance and it just barely paid the premiums. And so we need to put a lot of effort into crop insurance.

Mr. HAMILTON. I never bought crop insurance until the catastrophic insurance was required in order to receive my AMTA payments, and otherwise I never did, and it is just a contribution now. Crop insurance totally doesn't work in our area. You might as well not have it.

Mr. WINTER. The natural weather disasters that farmers face are out of their control. So when they are stuck in that position where they have a problem, you need to average that out over some way or reduce that out-of-control exposure. And to throw a year out because they have been declared a disaster area, I think makes some sense to farmers because it is not their fault. They can't put a cover over their farm to shield them from the rain. They can't defeat the heat that comes in Texas and destroys their crop. They can't control that.

So I believe there has to be some sense in how you deal with the issue of those natural disasters that people are exposed to that they have no control over.

Mr. KLECKNER. Mr. Peterson, I have never collected on disaster insurance. My poorest crop I have ever had is half a crop. I have done that a couple of years. That is the poorest I have ever had.

You asked a very good question, and that is you need to accommodate it some way. However, as was pointed out by one of the economists on the panel, actuarially it all has to be figured in at some point in some way.

If there are areas of the country-and I could have 5 years of disasters in north central Iowa. Just because I haven't doesn't mean that it is not coming, starting next year.

I ask myself how fair is it for the taxpayer, including the rest of the farmers, to subsidize or pay in some ways the areas that have many more years than normal of disaster.

I wonder if a better idea wouldn't be to take a longer time frame to average it in than 5 years-10 is probably too short-15 minimum, or 20 years, and just keep the disasters in and that wouldn't change. If you have 5 years of disaster out of 20 years versus other areas that have 1 or 2 years, you wouldn't have a lot of variation. I don't know. I would like to see some studies done on that. It is an excellent question.

Mr. PETERSON. Some people think the Government is to blame because they were pushing no-till farming. And I personally think that a lot of this problem is because we gave up mowered plowing, and we have kept the residue and the stub grows in it, and we have people on the television advertising about this and so forth. So it is a really complicated issue, and I was trying to get some information from this other gentleman that has been studying it. But it is a very frustrating situation for our people, and we have got to come up with some solution or we are going to be out of business. They are telling us 60 percent of the producers up north are going to be gone if we don't get something done here. That is seri

ous.

Mr. MCLAIN. Somebody mentioned that we might need some disease insurance for those States having problems with scab. I think that is an interesting idea, too.

Mr. PETERSON. Thank you, Mr. Chairman.

Mr. COMBEST. We are at 8:15. I think this is probably going to be the end of this, but you go ahead.

Mr. MINGE. I would like to thank all of you for coming. Two comments. I understand, Mr. Northey, that the National Corn Growers does support uncapping the loan rates; is that right?

Mr. NORTHEY. We do, and we did in the 1996 farm bill—we support no cap on that-that that be 85 percent of the 5-year moving average, throwing out the high and the low.

Mr. MINGE. Secondly, I have followed over the years, not that many years that I have been here, but the last 2 years, the concerns that agriculture has that some of the other things that should have happened in 1996 have not yet happened-the removal of regulations which handicap the farm economy and so on.

I think it is important that we continue to work on that. However, my impression is that that was not a part of the 1996 farm bill, and I am not quite sure who made the commitment and I am not quite sure how we are going to collect on it.

The one person I know who was here then is not here now, his picture hangs over there, and if there is a way that we can collect from him, I would sure like to do that. So I look forward to working with all of you in that respect. I yield back.

Mr. COMBEST. Thank you, Mr. Minge.

Let me make a couple of comments about some things that you said. Mr. Swenson, you said something that I think was very important, and it is the first time I heard it mentioned, and that is the early AMTA payments. Many of those are going to be committed to credit obligations down the road. That is one of the things that we can do quickly, because it did not have a budget exposure. Nobody ever thought about that being an end-all.

There are a number of other things that we need to continue to do, and I mentioned taxes and some of those other things that we are looking at, as well as potentially some other things.

I think it is important that the committee be willing to look at a variety of different things. I don't know how much of those realistically can be implemented. I don't know how many, budget-wise, can be implemented. We need to look at things creatively. How can we finance them? I don't know that status quo is totally locked in. Also, Mr. Northey, you were talking-and it has been mentioned several times-you said you were the first group that got on board with Freedom to Farm, and I was probably on the last train that got on. And it is like going to a family reunion where you have to kiss that ugly cousin. You can kiss her but you don't have to hug her, and that is sort of what happened. But you are right in terms of the fact that a lot of the discussion during consideration of Freedom to Farm was regulations. It was tax reform. It was a lot of others things that were also going to be a part of agriculture change, as well as—and, Mr. Kleckner, you mentioned regulations as being one of the main concerns that the Farm Bureau has.

Some effort certainly has been made, but we have not seen those, for a variety of reasons, totally implemented, but they are important. And I think it is critical that we continue to talk about the fact that those issues were discussed.

Mr. Minge is right, they were not a part of the farm bill, but they were issues that were discussed because they have impacts. And a lot of the things that impact agriculture today don't even come under the jurisdiction of this committee, and that is a lot of the regulations that are out there, and obviously tax issues and those kinds of thing.

So I think it is important that we look at this as a package, and what can we do in a whole variety of different ways to recognize and see where the problems in farming are today and what we can do to solve them.

I would again say thank you very much for coming and your patience and your understanding of why the hearing was delayed from the earlier set time. I feel quite certain we will be having further conversations about this subject in a ready manner, and I appreciate the willingness of everyone wanting to continue on with this fight because we can be assured that the people on the other sides of the issues are never hesitant to let their feelings be known, and we want to balance that with pro-agricultural arguments as well. Thank you very much.

[Whereupon, at 8:20 p.m., the committee was adjourned, subject to the call of the Chair.1

[Material submitted for inclusion in the record follows:]

STATEMENT OF HON. DAN GLICKMAN

Mr. Chairman and members of the committee, after 2 years of robust strength, critical sectors of the farm economy are undergoing the most severe stress of the decade. The unprecedented strength of the general economy-the prosperity of the big cities, merger mania, and Wall Street-has passed by our farms and the rural Main Streets of many, many parts of our country. There are two fundamental causes for this weakness: first, slumping market conditions, and second, natural disasters.

Having just returned from Oklahoma and Texas, and before that, South Carolina, Florida, and North Dakota, I can report to you that farmers and ranchers will suffer hundreds of millions of dollars in losses this year from natural disasters. That total climbs every day the adverse weather conditions continue. Many of the farmers and ranchers you will visit when you return to your districts next week may not be in business next year because of the weather-related losses they are suffering.

The ones who are able to stay in business, as well as those fortunate enough not to have been hit by natural disaster, face another threat, sapping their finances and undermining their long term viability. After sprinting for two years, setting records by almost every measure-price, exports, and income-today, farm markets are limping. Wheat is off 25 percent from a year ago, as are soybeans, the price of corn is down almost 15 percent, and the turn around the Department of Agriculture has been projecting for beef has itself turned around and prices are now running well below the average for the decade. Overall, USDA's most recent estimate shows net farm income plunging $7.5 billion this year.

I cannot make it rain, but with the help of Congress, I can do more to help the farmers and ranchers fighting the drought and disasters of 1998 stay on the land. I cannot turn the clock back and return to the commodities markets of the last 2 years, but with the help of Congress, I can do more to strengthen the farm safety net and help farmers weather the cruel downturn in the farm sector. Let me emphasize that point: I need help from Congress.

The disaster reserve we have used over the last couple of years to aid ranchers is depleted; without more funds that only Congress can provide, livestock producers will be totally on their own.

I will be the first to acknowledge that we have work to do to strengthen crop insurance, we have twisted and stretched that program as far as we can; without supplemental benefits only Congress can authorize to address this year's problems and the accumulation of several year's worth of disaster whose effects are hemorrhaging parts of the country, conditions over which farmers have no control will force them into bankruptcy.

USDA has been tirelessly promoting exports, opening markets our General Sales Manager is in Asia as we speak scouting new opportunities, for example but trade alone, especially in today's market environment, is not a complete farm safety net; without actions only Congress can authorize, the fates and fortunes of our farmers will ride, by themselves, on what could be an extremely turbulent sea of commodity markets for the next year or two, or longer.

This afternoon, I will give you a thumbnail sketch of the state of the farm economy and the actions the administration proposes to take. Before going into that in more detail, because I know this is a subject of immediate concern to you and your farmers and ranchers, I want to tell you our plans for responding to the ConradDorgan amendment to the fiscal year 1999 Agricultural Appropriations Bill, which the President and I strongly support.

During its consideration, Senators called on the Department to provide a comprehensive picture of the extent of the losses in the farm economy; indeed, the amendment itself requires that information. USDA's World Agricultural Outlook Board and National Agricultural Statistics Service releases the next World Agricultural Supply and Demand Estimates and Crop Production reports on August 12two weeks from today. Those reports will contain not only the most current, but also the best assessment we will have produced this year on the prospects for this year's crops crop production estimates will be based on actual, in the field survey data. To meet the requirements of the Conrad-Dorgan amendment, USDA intends to base its estimate of losses on that report.

Using that assessment, USDA intends to develop a proposal for consideration of the Congress building on the proposals I previously outlined in my letter of July 16, 1998 to Senator Conrad. That letter proposed a supplemental crop insurance benefits program, a program to compensate farmers and ranchers for the loss of productive farm and pasture land from standing water, and a program of emergency livestock assistance. USDA will revise its estimate of the costs of those proposals from the August 12 report. In light of my recent trip to Texas and Oklahoma, USDA

currently is reassessing the emergency needs in these States and throughout the country. We will be presenting to Congress the needs, financial and program, resulting from our reevaluation of the emergency situation.

Let me repeat: The President and I strongly support a legislative proposal to address the disasters afflicting the farm economy. We are ready to work with Congress to make sure it is enacted and we respond to those conditions.

A FIRST HAND LOOK

Over the past several weeks, I have traveled to North Dakota, Wisconsin, South Carolina, Florida, Oklahoma and Texas. What I have seen has caused me deep concern, a concern strongly shared by President Clinton. Consecutive years of adverse weather, crop disease and insect outbreaks and now low prices have driven many Northern Plains producers to the brink of financial collapse.

In North Dakota, net farm income fell 92 percent in 1997 compared with 1996, the largest decline of any State. A further decline is expected this year in North Dakota and other Northern Plains States. My trip there raised serious questions about the adequacy of the farm safety net. The current crop insurance program does not appear to provide sufficient protection at an affordable rate to prevent many farm failures in particular circumstances. The combination of weather and low prices is bringing many producers to USDA's door for credit. But limitations on how much we can lend and who we can lend to will result in many being turned away. My trips to the Southern Plains and the Southeast showed the devastating effects of this summer's drought. The April-June period was the driest since 1895, when we began keeping records, for Texas, New Mexico, Louisiana, and Florida. Dryland crops are burning up; for example, some 3 million acres of cotton are estimated to be lost in Texas. High hay prices and the condition of pasture and range, 72 percent of which is rated "poor" or "very poor," are causing producers to have to liquidate their cattle, as they are squeezed by low cattle prices and high forage prices. Even irrigated crops are suffering, and irrigation costs are up sharply. Southeastern field crops, such as corn and soybeans, are generally faring poorly, milk production is down and there are numerous reports of poultry losses due to heat. Everywhere I went, concerns were raised about low prices, the adequacy of crop insurance and the lack of livestock disaster assistance.

The weather problems in agriculture are unusual because they are occurring at the same time that production and stocks are expected to be large and prices declining for most major crops. The crop losses are regional and are not jeopardizing the Nation's food supply or leading to rampant economic problems. The declining prices mean that those farmers facing crop losses are not getting any offset from higher prices that often come when weather reduces production. Even for cotton, where a substantial portion of the national crop is being lost due to drought and cool, wet weather in California, prices have been limited by large expected foreign production. These regional problems are a cause for national concern.

OVERVIEW OF THE STATE OF AGRICULTURE

After generally strong performance in 1996 and 1997 characterized by record agricultural exports and farm prices and incomes, the U.S. agricultural economy is now declining. The Asian economic problems, a strengthening dollar and record-large global crop production have reduced U.S. agricultural exports from the record high of nearly $60 billion in FY 1996 to the current estimate of $55 billion for FY 1998. Falling commodity prices are expected to cause net cash farm income to decline nearly $7.5 billion below last year's record of $60.7 billion.

Despite the decline in farm income, there are several positive indicators. First, net cash farm income for 1998, while down, is expected to be near the average of the 1990's. Second, although farm debt is rising, the average debt-to-asset ratio for all farm operators is expected to remain stable at about 15 percent in 1998, compared with over 20 percent during the farm financial crisis of the mid-1980's. However, this is largely due to the fact that farm land values have appreciated. And third, stable interest rates, low oil prices, low inflation and declining grain and protein prices are helping to contain production expenses, which are currently projected to decline nearly $1 billion in 1998, although expenses will remain above the 1996 level.

However, there are also indications of increasing financial stress for many producers and prospects for more widespread difficulties. First, there have been particularly sharp declines in prices for some commodities, such as grain, oilseeds and hogs, and fed cattle prices have been low for several years in row. Second, feed grain and oilseed stocks are rising, and weather thus far suggests large fall harvests, which, if realized, will drive down prices further. Third, farmers are increasingly