•

ECONOMIC SITUATION FACING U.S.
AGRICULTURE AND RURAL AMERICA

(Secretary Mike Espy)

Y 4. AG 8/1: 103-1 ^=- ^^=

Econonic Situation Facing U.S. Agri

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

FIRST SESSION

FEBRUARY 3, 1993

Serial No. 103-1

?/j

Printed for the use of the Committee on Agriculture

U.S. GOVERNMENT PRINTING OFFICE
65-825 WASHINGTON : 1993

For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328
ISBN 0-16-040604-8

*

ECONOMIC SITUATION FACING U.S.
AGRICULTURE AND RURAL AMERICA

(Secretary Mike Espy)

Y 4. AG 8/1: 103-1 =^=— ==

Econonic Situation Facing U.S. A§ri...

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

FIRST SESSION

FEBRUARY 3, 1993

Serial No. 103-1

Af>* 2 7 *,

Printed for the use of the Committee on Agriculture

U.S. GOVERNMENT PRINTING OFFICE
65-825 WASHINGTON : 1993

For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP. Washington, DC 20402-9328
ISBN 0-16-040604-8

COMMITTEE ON AGRICULTURE
E (KIKA) de la GARZA, Texas, Chairman

GEORGE E. BROWN, Jr., California,

Vice Chairman
CHARLIE ROSE, North Carolina
GLENN ENGLISH, Oklahoma
DAN GLICKMAN, Kansas
CHARLES W. STENHOLM, Texas
HAROLD L. VOLKMER, Missouri
TIMOTHY J. PENNY, Minnesota
TIM JOHNSON, South Dakota
BILL SARPALIUS, Texas
JILL L. LONG, Indiana
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
JAY INSLEE, Washington
THOMAS J. BARLOW III, Kentucky
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
CYNTHIA A. McKINNEY, Georgia
SCOTTY BAESLER, Kentucky
KAREN L. THURMAN, Florida
SANFORD D. BISHOP, Jr., Georgia

PAT ROBERTS, Kansas,

Ranking Minority Member
BILL EMERSON, Missouri
STEVE GUNDERSON, Wisconsin
TOM LEWIS, Florida
ROBERT F. (BOB) SMITH, Oregon
LARRY COMBEST, Texas
DAVE CAMP, Michigan
WAYNE ALLARD, Colorado
BILL BARRETT, Nebraska
JIM NUSSLE, Iowa
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
JOHN T. DOOLITTLE, California
JACK KINGSTON, Georgia
BOB GOODLATTE, Virginia
JAY DICKEY, Arkansas
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida

Professional Staff

Dianne Powell, Staff Director

Veknie Hubert, Chief Counsel and Legislative Director

Gary R. Mitchell, Minority Staff Director

James A. Davis, Press Secretary

(II)

CONTENTS

Page

de la Garza, Hon. E (Kika), a Representative in Congress from the State of

Texas, opening statement 1

Prepared statement 2

Kingston, Hon. Jack, a Representative in Congress from the State of Georgia,

prepared statement 9

Roberts, Hon. Pat, a Representative in Congress from the State of Kansas,

opening statement 15

Prepared statement 3

Smith, Hon. Robert F. (Bob), a Representative in Congress from the State of

Oregon, prepared statement 7

Witnesses

Buntrock, Grant, director, Washington office, National Farmers Organization . 54

Prepared statement 116

Dunn, Michael V., vice president, government affairs, National Farmers

Union 52

Prepared statement 107

Eckel, Keith W., president, Pennsylvania Farmers Association, on behalf of

the American Farm Bureau Federation 57

Prepared statement 121

Espy, Mike, Secretary, U.S. Department of Agriculture 17

Prepared statement 81

Huber, Stewart G., president, Farmers Union Milk Marketing Cooperative 50

Long, Hon. Jill L., a Representative in Congress from the State of Indiana 12

Prepared statement 75

Merry, Marcia, agricultural editor, Executive Intelligence Review 70

Prepared statement 153

Mitchell, Larry, acting national director, American Agriculture Movement,

Inc 59

Prepared statement 124

Rohland, Curt, president, National Family Farm Coalition 61

Prepared statement 131

Wynn, Vivian Lucas, director, United Church of Christ, Commission for
Racial Justice's Office, Rural Racial Justice, on behalf of the Southern

Rural Development Initiative 67

Prepared statement 135

Submitted Material

Crane, Avi, vice president, California Avocado Commission, letter of February

2, 1993 163

Georgia Healthy Farmers Project, statement 164

National Milk Producers Federation, statement 166

Stewart, Lonnie C, producer, George West, TX, letter 170

(HI)

ECONOMIC SITUATION FACING U.S.
AGRICULTURE AND RURAL AMERICA

WEDNESDAY, FEBRUARY 3, 1993

House of Representatives,
Committee on Agriculture,

Washington, DC.

The committee met, pursuant to notice, at 10:05 a.m., in room
1300, Longworth House Office Building, Hon. E (Kika) de la Garza
(chairman of the committee) presiding.

Present: Representatives Brown, English, Glickman, Stenholm,
Volkmer, Penny, Johnson, Long, Condit, Peterson, Clayton, Minge,
Hilliard, Inslee, Barlow, Holden, McKinney, Baesler, Thurman,
Bishop, Roberts, Emerson, Gunderson, Lewis, Smith, Combest,
Camp, Allard, Barrett, Nussle, Boehner, Ewing, Doolittle, Kings-
ton, Goodlatte, Dickey, Pombo, and Canady.

Staff present: Vernie Hubert, chief counsel and legislative direc-
tor; Fred J. Clark, deputy chief counsel; Gary R. Mitchell, minority
staff director; William E. O'Conner, Jr., policy coordinator; John E.
Hogan, minority counsel; Dale Moore, legislative coordinator;
Glenda L. Temple and Jan Rovecamp, clerks; and Howard Conley.

OPENING STATEMENT OF HON. E (KIKA) de la GARZA, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

The Chairman. The committee will be in order.

We meet today for the first time in the new Congress in the
Committee on Agriculture. Unfortunately, there are other meet-
ings going on today. There is a meeting of the Steering Committee
from which I have just come; there will be a meeting of the Demo-
cratic Caucus, and we have a couple of regional meetings. Our first
witness, the distinguished Secretary of Agriculture, is running a
trifle late as he came in early this morning from Washington
State. So we are going to have to improvise as we go along.

Fortunately, the second witness this morning was to be our dis-
tinguished colleague and the chairwoman of the Congressional
Rural Caucus. She is agreeable to proceed with her statement at
this time.

I had a prepared statement, which I will submit for the record at
this time.

Likewise for our distinguished ranking minority member, Mr.
Roberts, and for any other member who may wish to submit a
statement for the record at this point.

[The prepared statements of Mr. de la Garza, Mr. Roberts, Mr.
Smith, and Mr. Kingston follow:]

(1)

Opening Statement by Rep. Kika da la Garza, D-Texas
Chairman, House Agriculture Committee

Hearing on Economic Situation Facing

U.S. Agriculture and Rural America

Wednesday, Feb. 3, 1993

Today we kick off our public hearing schedule for the 103rd
Congress by focusing our attention on the economic health of the
U.S. agricultural sector and the rural economy in general.

Much of what this Committee has jurisdiction over revolves
around the central question: how should government respond to
the economic needs of farmers, ranchers and rural residents. To
begin to answer that question, we must seek input from the
Administration and all who are share our interest in this area.

So we extended an open invitation to the Secretary of
Agriculture and for any individuals or organizations to present
their views on this question today. This is merely the start of
a hearing process that we will continue at the full Committee and
Subcommittee levels throughout this year and next.

We are pleased and honored to have our former colleague, Mr.
Espy, with us today. He is making his inaugural appearance
before the Committee as our distinguished Secretary of
Agriculture. I would like to say publicly what I have told him
privately: as Chairman of this Committee, I look forward to
working with the Secretary to improve the agricultural and rural
economy and in helping shape and achieve the President's goals on
areas within our jurisdiction.

One of the issues that this Committee is very interested in
are proposals to reorganize and streamline the U.S. Department of
Agriculture. I believe the time has come to seriously consider
reform of the organizational structure at USDA. However, we must
approach this subject thoughtfully, deliberatively and with great
sensitivity to its impact on the people served by USDA programs.

Since Secretary Espy has had only two weeks on the job to
consider this issue, I have invited him to appear before the
Committee again later in the month to discuss the
Administration's views on USDA reorganization. After this next
hearing, the issue will be pursued through our Department
Operations subcommittee chaired by Mr. Stenholm as well as the
other subcommittees in their respective areas of jurisdiction.

Today's hearing is focused solely on the issue of the
economic situation facing U.S. agriculture and rural America. I
would suspect that most of the people in this room today agree
that all is not well out in farm country or on the Main Streets
of our rural communities. Where we disagree is on what the cause
of the problems are and what the solutions should be.

Hopefully, today's hearing will serve to help the Congress
and the Administration set our priorities for action on issues
that affect the economic health of agriculture and rural America.

#

The Honorable Pat Roberts
Statement: Economic Outlook Hearing
February 3, 199 3

Thank you Mr. Chairman. Mr. Secretary, welcome back. Rest
assured, we will keep a seat warm for you anytime you would like to
visit. I said warm, not hot.

We look forward to your initial assessment on the state of
Agriculture at today's hearing.

In that regard, we have had change since November to be sure
but there are constants that are self evident.

First, the deficit remains our number one policy
consideration. This is not only true here in Washington where farm
program, rural development and administrative policy decisions will
be deficit directed, but also throughout rural and small town
America where getting our economic house in order should be and is
the priority issue.

Every farmer, every rancher, every small business person,
every citizen concerned about the continued loss of essential
services that we must maintain to remain economically viable, also
knows we in rural America must do our part in helping to reduce the
deficit, that it is in our best interests.

But, Mr. Secretary and Mr. Chairman, we should make clear to
the new administration that our economic situation in farm country
is precarious at best. We may be in pretty good shape for the
shape we are in, but there are obvious reasons for legitimate
concern:

First, I can report to you that in Kansas we have a bumper
crop of wheat under snow cover. The same is true for other
commodities and our competitors world wide. I have often made the
point in this committee that we have impossible task in trying to
meet our budget responsibilities when our actual outlays are
determined by such uncontrollable variables as the weather,
infestation, value of the dollar and other foreign currencies,
foreign policy and trade negotiations.

Now, due to world wide crop prospects and problems on the
export front, we apparently face the challenge of dealing with a $7
billion increase in CCC outlays for federal farm programs for
fiscal year 1993.

Mr. Secretary, add on to that the commitment by the
administration to invest $20 billion annually into our nation's
infrastructure as we work to enhance and restore the economic
viability and vitality of rural America.

Roberts, 2-3-93, page two

Yet, unless we can convince a majority in this Congress and
those on the Budget Committee, that these are priority national
needs and we can obtain the funds from someone else's budget
pasture, the money is not there and we will again be faced with
very difficult choices.

We have already mandated cuts in program payments to hard
pressed producers. I want to serve notice that any attempt to fund
additional programs at the expense of producer income will be
opposed.

Since the mid-1980' s, the Chairman has stressed over and over
again that we in agriculture have taken the often bitter but
necessary medicine of deficit reduction. We have done our share.
As the Chairman has pointed out by use of his well recognized
budget chart, they waste more in other federal agencies than we
spend in agriculture.

Let everyone understand we will continue to do our part. If
this Congress enacts a freeze or decides to exact budget cuts, rest
assured we will meet our responsibilities but we will not shoulder
the budget problems alone. We will fight to make sure budget
freezes and cuts apply to all federal outlays.

In addition, the 1990 farm bill put in place several
innovative programs to provide income assistance to farmers,
provide incentives to enhance the performance of conservation
provisions and re-emphasized the need for USDA research efforts to
focus on farm management methods that met both economic and
environmental goals.

Because we have been forced over the past few years to make
real, binding cuts in outlays, the viability of the 1990 farm
bill's provisions are clearly threatened. Simply put, we do not
have the funds to back up what we said we should do in the farm
bill not to mention funding any partnership efforts to assist farm
country work through all of the mandates within the farm bill.

Mr. Secretary, we also face egually difficult challenges in
regard to our exports and trade negotiations. There is much
disagreement on what constitutes a good GATT or NAFTA treaty. But
the fact remains we must make progress on these trade agreements if
there is to be any hope for producers to compete on the so-called
level playing field in world commodity and high value produce
markets. The alternative is to continue down the road to being a
residual supplier and that is a dead end trail.

The most immediate challenge regarding export policy however,
is what the Administration will recommend to deal with the Russian
credit problem.

Roberts, 2-3-93, f>°^e 3

There is the matter of late payments and the bleak prospect of
no additional shipments of U.S. commodities to Russia before the
end of the wheat marketing year, depressed prices at the country
elevator, increased budget exposure, and a further deterioration of
the Russian economy. We must develop new options and we look
forward to working with you.

One final point. We have all been closely watching and
studying the efforts to "restructure" the USDA. This issue must be
approached with common sense and with facts — and to date, with
all due respect to some of my colleagues here and more especially
in the Senate — much of the commentary and criticism has simply
not been factual. We must be resolute in our position to ensure
that the USDA can continue to fulfill its mission: helping
agriculture feed and clothe this nation and a troubled and hungry
world.

Our goal should be to strengthen USDA's ability to accomplish
its mission, not subservient to other departments, agencies and
committees who place farm income and the economic viability of
rural America far down their priority lists.

(Attachment follows:)

2ft ft "V 4.

And in that regard, we should all take note of yesterday's
public release by EPA of a list of 35 pesticides that might be
subject to sanctions under the Delaney Clause. This action,
which could lead to the effective commercial withdrawal of these
valuable input chemicals, was not mandated by law or logic and
was done without consultation with the Congress. My question is:
Did EPA act alone or was USDA consulted before this major step
was taken?

I hope the Department entrusted with the responsibility of
assuring an affordable and abundant food supply for this nation
would not have agreed with this precipitate and unnecessary
action. If USDA was not a part of this decision, can we be
assured that the Secretary will act in the future to protect the
interests of farmers and consumers in this type of situation?

Mr. Chairman, we are here today to discuss the economic
state of agricultural America. We will hear talk of loan rates,
target prices and the importance of expanded trade, but all of
this will mean nothing if farmers lose the means to produce their
crops. This Committee and Secretary Espy are apparently going to
have to devote a significant portion of our energies to
maintaining some sense of balance in the activities of our
friends in the regulatory community.

STATEMENT OF ROBERT F. SMITH

BEFORE THE

HOUSE COMMITTEE ON AGRICULTURE

FEBRUARY 1, 1993

Mr. Chairman, I'd like to thank you for calling this hearing to discuss
economic conditions for agriculture and rural America.

It is appropriate at the beginning of each Congress to pause a moment in
order to take stock of current conditions and to consider our objectives. And
while much of today's hearing will doubtless focus on problems, I would like
to be more positive.

I would like to talk about the Importance of exports to American
agriculture and I will use the beef industry as my example.

Domestic demand for beef has flattened. From a high in 1976 of 88.8
pounds per capita, domestic consumption has stabilized at around 64 pounds per
capita. While some of the stabilization comes as a result of the checkoff and
promotion, it is clear that exports present our best opportunity for growth.
This growth is helping to eliminate the traditional cycles that have
threatened our Industry for so long.

The US exports about 5.1 percent of our production. From a value of
$500 million in 1980, exports have grown to about $1.7 billion today. If we
can sustain this level of international market penetration, beef exports are
projected to grow to $4.75 billion by the year 2,000.

The Japanese Beef & Citrus Agreement taught us the value of export
markets in a dramatic way. From being virtually shut out, the US now relies
on Japan to purchase 62X of its beef exports. We have achieved the $1 billion
mark and are driving towards a $2 billion market share.

April 1st will mark the beginning of the 6th year of the Beef & Citrus
Agreement. Tariffs on beef imports will fall from 70 percent to 50 percent.
It is anticipated that negotiations about future tariff discussions will start
sometime this year and industry representatives are hopeful that these will
prove fruitful.

The beef agreement negotiated with South Korea in 1989 set import quotas
of 52,000 metric tons in 1990, 56,000 metric tons in 1991, and 60,000 metric
tons in 1992. They have exceeded this greatly each year, with over 100,000
metric tons for 1992.

Consumer demand has been very high as a result of exposure to American
product and domestic production remains inefficient. South Korea remains as a
tremendous potential for growth. Talks are scheduled for next month to try to
obtain a truly free market.

8

Currently, Importers have to market through their domestic co-op. Also,
the Koreans have not officially accepted GATT rules of trade for beef. In any
event, prospects for keeping and expanding this market are extremely
favorable .

The success stories of Japan and South Korea hold for other Pacific
markets such as Malaysia, Thailand, Philippines, Singapore and Hong Kong. The
region Is experiencing strong growth in both economic and population.

However, one of the greatest potential markets Is right at our back
door. I am speaking, of course of Mexico.

The proposed North American Free Trade Agreement will prove valuable to
the livestock industry generally, and the beef industry specifically, for a
number of reasons.

It will eliminate the potential for tariffs on US beef like the ones
imposed by Mexico in December. Our competitors In Europe, Australia and New
Zealand will not have this advantage.

When Mexico's economy grows so does their beef consumption. Mexican
beef consumption expanded 60 percent from 1986-89 as per capita GNP Increased
35 percent. This, coupled a population growth has dramatic consequences.
Mexico's population Is expected to go from 84 to 102 million by the year 2000;
that's quite a market.

A cross-border market leads to a more efficient industry. By improving
carcass utilization, one USDA economists suggests we could see a 3-5 percent
price increase.

And, while all this Is happening, It Is important to remember that
Mexico will have to improve its infrastructure to increase beef production
while we're ready to go right now. Our cattle industry is ten times the size
of Mexico's.

I'm regarded as a shameless advocate of the beef industry, and I'm
comfortable with that role. However, my colleagues should understand that the
health of the beef industry has Implications for all of agriculture. Its
Important to remember that beef exports represent a value-added commodity, a
very popular concern these days.

The 100 million head of cattle In this nation have to put on weight to
be profitable to their owners. They eat grain. When the beef Industry gets a
chill, the rest of agriculture gets a cold.

Over 22,000 feedlots and 4,300 packing plants are backed by almost a
million cattle operations. The beef industry involves countless others In
transportation, retail marketing at home and, as I've mentioned, our export
sector.

When we examine the full plate of Issues before us this year; FIFRA
reauthorization, Department reorganization, food safety, conservation
compliance, export credit guarantees, and all the others, we must keep one
critical thought In mind. The future of agriculture In America Is exports.

We need to resolve GATT. We have to finish NAFTA. We need to keep EEP,
GSM 102 and 103, and MPP healthy. We must examine every policy decision
effecting agriculture with an eye towards international competitiveness.

To do anything less is to undermine the future economic health of
agriculture and rural America.

Opening Statement

Honorable Jack Kingston

Flouse Committee on Agriculture

Wednesday, February 3, 1993

Mr. Chairman:

Thank you for arranging this hearing today, and for allowing us to
get an early start in examining the outlook for agricultural programs
under our committee's jurisdiction. It is also vitally important that we
begin the monumental task of examining the various suggestions for the
1994 Federal Budget, and the role of agricultural programs as a part of
that budget process.

Before coming onto the committee, Mr. Chairman, I attempted to do
some research into these matters. I was impressed by the fact that
agricultural programs require such a very small portion of the overall
Federal budget, and even more with the fact that you have been able to
guide this committee in a way which has dramatically reduced the costs of
the farm programs over the past six or seven years. To read the popular
press accounts, the average American would think that current farm
programs are outlandishly expensive, and that agricultural producers are
nothing more than a bunch of lazy bums demanding a "handout" from the
U. S. Treasury.

10

Honorable Jack Kingston
House Committee on Agriculture
Wednesday, February 3, 1993

My research revealed quite the opposite, Mr. Chairman. With 1992
costs of operating the farm programs at less than eight-tenths of one
percent of the total budget, I have concluded that American consumers are
really the true beneficiaries of these efforts which ensure an abundance of
the world's most healthful foodstuffs at prices far below those paid by the
consumers in any other country in the world.

Let me close these brief remarks by saying that I will work
enthusiastically with my Colleagues on the committee in those areas where
we can identify costs which can reasonably be reduced even further. But,
we should let the American public know the real truth about U. S.
agricultural programs. We should make them fully aware that even if we
totally dismantled the Department of Agriculture, there would be no
significant cost savings to the taxpayer -- in fact, increased costs to
American consumers would likely be far higher than the paltry budget
savings we would accomplish.

We should insist that our agriculture budget not spend one dime
more than absolutely necessary to effectively and efficiently operate the

11

Honorable Jack Kingston
House Committee on Agriculture
Wednesday, February 3, 1993

farm programs and the soil and water conservation mandates entrusted to
the department. There are minor savings which can reasonably be
accomplished over a period of years by adopting portions of former
Secretary Madigan's proposal regarding county Field Service Offices.

However, I think we must be careful to move with caution as we
examine such proposals. We must not succumb to a "knee-jerk"
temptation which will make producers less efficient or add significantly to
the already heavy burden of record-keeping and reporting required under
modern farm legislation.

0-

12

The Chairman. With that, I am happy — and this is her first ven-
ture as chair of the rural caucus — to welcome our distinguished
member, our colleague, Jill Long, from Indiana. We will be happy
to hear from you at this time.

Your full statement will appear in the record and you may pro-
ceed as you see fit.

STATEMENT OF HON. JILL L. LONG, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF INDIANA

Ms. Long. Thank you, Mr. Chairman. I believe I will just sum-
marize my remarks.

We are obviously, as a government and as a Congress, going to
be moving forward on economic development and growth. I think it
is very important that in the Agriculture Committee we do every-
thing we can to ensure that rural communities are served well in
any policies we move forward.

I would like to just make several points before the committee,
one of which is that the poverty rate is higher in rural areas than
in urban regions. In fact, at the end of the 1980's, rural poverty
was still higher than in 1972. A higher percentage of kids and el-
derly in rural areas are poorer than in urban areas. Since 1980,
rural residents have been faced with higher unemployment rates
than their urban counterparts. And during the 1980's more than
half of all nonmetropolitan counties lost population.

It is very important that in developing an economic growth strat-
egy for the future that rural America must be a full partner in re-
building our country's greatness.

We must begin by examining current policies that either inten-
tionally or unintentionally disadvantage rural areas. Let me give a
few examples of what I'm talking about.

Currently, many of the Federal programs are uncoordinated and
very complex. With 90 percent of the towns outside of metropolitan
areas having populations of less than 5,000, these smaller areas, by
and large, don't have the staffs or the people with the experience
and expertise needed to advance and sustain innovative types of
economic development.

We must also recognize and respond appropriately in our policy
to the fact that rural areas are unable to fund a local share for
many projects due to their low population density. It is also tough,
if not impossible, for many rural communities to comply with cer-
tain mandates. When we reauthorize the Elementary and Second-
ary Education Act I think we need to make sure that we change
the provisions which currently give a funding advantage to more
urban school districts.

As we are moving forward on economic growth strategy and
policy, because of fiscal constraints I think we're going to have to
look to be more innovative and to look for additional sources of
funding. I think innovation is going to be a key.

We have to recognize that a strong rural economy is going to be
dependent upon more than just a strong farm sector. I think we
need to rebuild our economy and make sure that we don't forget
our rural areas. We need to make sure that we are working to
expand local industries with an understanding that the informa-

13

tion age and better education can have a very significant and
transforming impact on rural communities.

With that, I will close my testimony.

[The prepared statement of Ms. Long appears at the conclusion
of the hearing.]

The Chairman. Thank you very much.

I must commend you for the excellent and very accurate presen-
tation of the problems of rural America. I am so happy to see that
you, as a leader not only in our committee but in the Congressional
Rural Caucus, are going to focus on education. I like your theory
that periodically our schools should be laboratories rather than
just factories pumping out someone with a little paper that says
"diploma." This should be emulated not only in the rural but the
urban areas as well.

Your statement is true that we in rural America have the same
problems as urban America but suffer a much larger consequence
with unemployment, lack of infrastructure, and all the benign ne-
glect that we have had to live under. Hopefully, this new beginning
and this changing of the course might help in that endeavor.

I commend you for this excellent statement. We look forward to
working with you not only in our committee but in your position as
leader of the Congressional Rural Caucus.

We know that the economics — on which we will be delving
today — as it relates to money infusion from Washington to the
rural areas is a major problem. Unfortunately, there are still those
that at the first indication of need for cut they point at agriculture
and rural America. I am not going to bother you with my chart at
this time. [Laughter.]

But there isn't any more room on that chart to go down. Not
that we haven't shared our responsibility. In the last 12 years we
have reduced outlays by $57 billion from the agricultural budgets.
We're not given any credit for that. But we are willing to do the
responsible thing and help meet the appropriate needs of the coun-
try. We will share in sacrifice with our responsible allocation. But
pointing fingers at this program or that program is not the answer.
Maybe I shouldn't even mention it, but there was this investigative
reporter whose first question asked of me was, "How dare you use
taxpayers' money."

I said, "There is no taxpayers' money involved. The money comes
from a duty on imports." They said, "I didn't know that."

So from the beginning, there seems to be this mindset: How do
we bash agriculture? They pick a program that sounds like a sexy
issue for an expose and they begin not even knowing that it wasn't
taxpayers' money.

Maybe we need to look at the program. Maybe there is stream-
lining necessary. Maybe there are areas we need to look at. But
also I think we have another major responsibility: The education of
those not acquainted with the plight of rural America. We must
educate our brethren.

We thank you for your excellent statement.

If any member has a question or a brief statement, our next wit-
ness is here.

Ms. Long. Thank you, Mr. Chairman.

Mr. Roberts. Could I ask a question, Mr. Chairman?

14

I would simply like to make an observation and associate myself
with the remarks of the chairman in reference to your fine work
on the committee and how happy we are that you are now heading
up the Congressional Rural Caucus.

On page 5 of your testimony, you talk about health care. Mr.
Stenholm and I are the cochairmen of an outfit called the Rural
Health Care Coalition. There are 175 of us who are worried about
really preserving whatever is left of the rural health care delivery
system as we look at the possible alternatives in regard to national
health care.

It just struck me that perhaps in your position you could encour-
age all members of the caucus to join the Rural Health Care Coali-
tion, and then we in turn could encourae them to take part in the
caucus. We could then work out a better bipartisan team effort to
do what we would like to do.

I am also very happy you mentioned the Clean Water Act and
the Clean Air Act. Many small communities are now getting dic-
tates in regard to a new yardstick the EPA is using on parts per
million in regard to nitrates.

A small community in my district was instructed to completely
build a new waterworks for $600,000. They don't have the money.
Nobody is sick. Nobody locally had a problem with it. So if we have
solutions, hopefully we need to hear from them and the Rural
Caucus will be most important in that effort.

I thank the gentlelady and encourage her to head up the Con-
gressional Rural Caucus posse in the right direction and give us
some help in this regard.

Thank you so much.

Ms. Long. Thank you very much.

The Chairman. Thank you very much.

If any members have any questions to direct to Ms. Long, I know
she will be agreeable to answer them in writing if you will submit
them for the record.

Otherwise, we thank you very much. We wish you luck and we
look forward in working with you in your other job. But we want
this to be your main committee, as it has been in the past.

Ms. Long. Thank you, Mr. Chairman.

The Chairman. We now have our next witness. It is my personal
privilege and high honor to welcome back to our committee Secre-
tary Mike Espy, a colleague who has done yeoman work in his own
right in this committee. It is said that when one of your own is
honored, the honor is shared by all who served with him.

That is the case today. We are very fortunate that the new ad-
ministration has chosen one of our members to be the Secretary of
Agriculture. We all wish you well, Mr. Secretary. We want you to
know that on the Hill this is your home and we are here to work
with you — shoulder to shoulder — to counsel with you when you
may need it, to run down rumors if you have any you want us to
run — [Laughter.]

To work with you in every way possible so that the honor which
you have brought to us may be enhanced and that we together
might make you the best we have had as Secretary of Agriculture.

I know that all the members, including the new members, are
very proud of the fact that you, who come from rural Mississippi,

15

have been chosen. We know of your expertise. We know of the
areas where you may need our support and counsel. We will be
here at all times.

I might mention also that we wanted you to be the first to
appear here. The forum today, of course, is going to be the econom-
ics of agriculture and rural America as it impacts directly on us.
But you are the Secretary for all Americans and we, the commit-
tee, for all Americans, urban or rural.

The urban areas would be in very difficult circumstances were it
not that we have producers of food and fiber in rural America. We
share that responsibility with you.

I know that you will come back later this month for a more
formal meeting in relation to the Clinton administration's agenda.
We will not bother you at this point or expect to hear from you in
the finite areas related to the Clinton administration's proposals or
agenda for rural America.

Basically, we wanted to welcome you, to have you come to the
Hill and your first appearance after your nomination would be at
this committee. Mainly, I want to tell you that we are proud of you
and that we look forward to 4 years of working together to make
America better from the perspective of the responsibilities that you
have as Secretary of Agriculture.

Mr. Roberts.

OPENING STATEMENT OF HON. PAT ROBERTS, A REPRESENT-
ATIVE IN CONGRESS FROM THE STATE OF KANSAS

Mr. Roberts. Thank you, Mr. Chairman.

Mr. Secretary, welcome back. Rest assured that we will keep a
seat very warm for you any time — I said warm and not hot.
[Laughter.]

We look forward to your assessment on the state of agriculture
at today's hearing.

We have had a lot of change, Mr. Chairman, since November to
be sure, but there are several constants. You have already gone
over the deficit as our No. 1 policy consideration. I think that is
shared by every person throughout our rural areas. We know we
have to do our part.

But Mr. Secretary and Mr. Chairman, we should make clear to
the new administration that our situation in farm country is pre-
carious at best. We may be in pretty good shape for the shape
we're in, but there are obvious reasons for very legitimate concern.

We have a bumper crop under snow cover in Kansas, and that
bumper crop situation is true for many of our major commodities
and also our competitors worldwide. I have often said to the com-
mittee, "I wonder how we can set any budget priorities when you
have things like the value of the dollar, the weather, and some
kind of major infestation throughout the world, or the value of for-
eign currency, or any kind of a trade negotiation." But we have to
do that.

Now with the worldwide prospects in terms of crop production
and also with some real challenges ahead on the export front, we
are looking at a $7 billion increase in CCC outlays for Federal farm
programs for fiscal year 1993.

16

I know the transition team advising the President had hoped we
could spend $20 billion a year in regard to infrastructure. We
would all hope that would be the case. I know Ms. Long just indi-
cated that in her statement increases.

But we have already mandated cuts not increases in the farm
program payments. The chairman has stressed over and over
again, ever since the mid-1980's, that we in agriculture have taken
the often bitter but necessary medicine of deficit reduction. We
have done our share. The chairman has pointed out — I don't have
his chart as of this morning — I wish I did have his now infamous
and well-recognized chart. He is now looking for it. [Laughter.]

Secretary Espy. I have that chart memorized, Mr. Roberts.

Mr. Roberts. We will do our part. But if this Congress does enact
a freeze or decides to exact some budget cuts, rest assured we will
meet our responsibilities, but we will not shoulder the budget prob-
lems alone.

I also want to say that the 1990 farm bill put in place several
programs in regard to conservation, research efforts, farm manage-
ment methods that we have to have, and we simply do not have
the money to go ahead and do what we wanted to do with the farm
program.

I think the one thing that I want to tell people here, at least in
terms of our side and in terms of my personal opinion, we have al-
ready mandated the program cuts to producers. When we go
through the additional budget cuts, I know Republicans are going
to look very, very skeptically on any kind of add-ons to other pro-
grams that would take away from the hard-pressed producer.

We also have challenges in regard to GATT, NAFTA, and export
policy, but in the interest of time, I am not going to go into that
this morning.

A final point. We have all been closely watching and studying
the efforts to restructure the USDA. I know you have a meeting
scheduled for Friday and I will be a party to that. We want to work
with you.

My goodness, this issue must be faced with some common sense
and with some facts. To date, with all due respect to some of my
colleagues here and more especially in the Senate, much of the
commentary and the criticism has simply not been factual. I will
repeat that a lot of it has not been factual. We must be resolute in
our position to ensure that the USDA can continue to fulfill its
mission in helping agriculture feed and clothe this Nation and a
very hungry and troubled world.

Our goal should not be to have the USDA be subservient to other
Departments and agencies and committees who place farm income
and the economic viability of agriculture far down the priority list.
In this regard, Mr. Chairman, I am a little concerned that the EPA
yesterday made public a list of 35 pesticides that might be subject
to sanction under the Delaney clause. 9m

This action, which could lead to the effective commercial with-
drawal of these very valuable input chemicals, was not mandated
by law or logic. My concern is that while we all want to see some
legislative progress in the food safety arena, and more especially
reform of the Delaney clause, I think this is a poor way to go about
it.

17

I guess my first question would be — and this is a little unfair be-
cause you haven't had your statement yet.

The Chairman. I would hope that the gentleman would withhold
his questions.

Mr. Roberts. I think you see where I am headed. There are two
chemicals on rice, five on wheat, five on corn, five on cotton, et
cetera, et cetera. What happens when those particular chemicals
are listed in this fashion could be very counterproductive.

I am saying that we will work with you and hopefully we will
have a partnership effort with EPA so that this kind of action
wouldn't be necessary in the future.

With that, welcome back, Mike. [Laughter.]

Secretary Espy. Thank you, Pat.

The Chairman. You didn't have to unload the whole wagon.
[Laughter.]

This is the first appearance of our colleague. We want him back.

Mr. Roberts. Mr. Secretary, I have a whole bunch of wagons.
That was just the first. [Laughter.]

The Chairman. Mr. Secretary, as I stated before, we welcome
you back in your new position. We look forward to working with
you.

We know that your tenure thus far has been of such short a
period that you may not be able to address many of the questions
that we have in mind, but there will be other days and other hear-
ings.

For now, we welcome you here for your initial statement as the
new Secretary of Agriculture.

STATEMENT OF MIKE ESPY, SECRETARY, U.S. DEPARTMENT OF
AGRICULTURE, ACCOMPANIED BY KEITH COLLINS, ACTING AS-
SISTANT SECRETARY, ECONOMICS; RON BLACKLEY, CHIEF OF
STAFF; JOE O'MARA, ACTING UNDER SECRETARY, INTERNA-
TIONAL AFFAIRS AND COMMODITY PROGRAMS; AND ROBIN
RORAPAUGH, ACTING ASSISTANT SECRETARY, CONGRESSION-
AL RELATIONS

Secretary Espy. Mr. Chairman, I appreciate the opportunity of
being here as your second guest on the first hearing of this new
congressional session. I appreciate the warm words and I accept
the challenge both you and Mr. Roberts have outlined.

I want to let you know that these challenges are community
challenges. The USDA does not operate in a vacuum. As a member
of this committee for the last 6 years, a committee in which I cut
my teeth in agricultural policy, I remember very clearly that this
was not a highly partisan committee. Yes, we had our problems
over the range of commodities, but not over the range of parties.

I would like to extend my hand to you and to Mr. Roberts and to
each and every member of this committee to tell you that when it
comes to regulations," policies, and practices I will be working with
you, talking with you, consulting with you as we undertake the
broad range of responsibilities that we have.

Mr. Chairman, I have a long statement here. It is submitted in
writing. It is about 12 or 13 pages with all of the appendages apper-

18

taining thereto. It reads very well. But I don't want to impose on
this committee by reading it.

The Chairman. Without objection, your prepared statement will
appear in the record.

Secretary Espy. I would relate what Alice Rivlin said the other
day. She said that oftentimes she would sit here and wonder, as
you would wonder, why those of us on this side of the table would
give these long, boring speeches. She said, "Now I know."

And so do I.

[Laughter.]

President Clinton, I am sure, perhaps more than any predeces-
sor, believes in free speech. Although we love, revere, and respect
Leon Panetta, a former member of this committee and now Direc-
tor of OMB, let me tell you that after 13 days in office, I have come
to the conclusion that OMB is OMB is OMB is OMB. [Laughter.]

So they have approved this statement. It reads very well. I will
just let you have it. [Laughter.]

I would like to repeat a couple of promises that I made to the
confirmation committee.

The Chairman. If I might interrupt you at this point, I look for
prepared statements that say, "Not cleared by OMB." Then I feel
more comfortable.

Secretary Espy. You won't find that.

Thank you, Mr. Chairman.

I would like to take it in three parts and try to be quick about it.
One is to make some promises and to repeat some promises that I
made to the Senate Agriculture Committee during my confirma-
tion proceedings. They apply just as well to this committee as to
that committee.

The second is that there are some pretty important areas out-
lined in the prepared statement. I would like to pick through it and
highlight some of the areas.

Then I would like to make two requests from you and from the
relevant subcommittee chairmen. There have been breaking events
in agriculture over the last 13 days. I just returned this morning at
2 a.m. from a trip I made to Washington State, Olympia, to meet
with the senate committee there to address this problem of food-
borne illness and the outbreak of the E-coli pathogen.

I have directed members of the FSIS staff at USD A to present to
me this Thursday, tomorrow, certain options that we have with
regard to that. I would like to right away come to you, Mr. Chair-
man, and come to the subcommittee chairmen to talk about these
options. I would like to do so next week, if possible. I would like to
respectfully request that you make a hearing available to us for
that purpose.

Also, we have done some work on the reorganization of the
Washington bureaucracy. As Pat mentioned, we have been doing a
lot of work early on that. I have some ideas, some of which Dan
has worked on. I would like to share some of those with you, in a
very informal session, Friday morning and to try to set up a very
quick hearing on that so that we can get moving further.

I come before this distinguished committee, Mr. Chairman, to
ask for your support, your help, and counsel as I undertake this
tremendous task. In order to successfully execute the duties of the

19

Secretary of Agriculture, I will need your assistance on a biparti-
san basis, and I will need the help of the thousands of dedicated
employees at the Department.

As Secretary of Agriculture, I want you and each member of this
committee to know that I will dedicate myself and this agency to
the economic health of rural America. I agree with just about ev-
erything that Jill Long said with regard to the health of rural
America.

I want to help to provide basic services which other areas of the
country take for granted, including them fully in President Clin-
ton's strategy for economic revitalization, the encouragement of
capital investment, and the promotion of job growth.

Mr. Chairman, there is a hearing right now in the other body
before the Banking Committee chaired by Senator Riegle. I have a
statement there. I had asked to appear there because there was a
bill that I had introduced before I left this body with regard to
community development banks in the rural areas of our Nation.
That bill has been accepted and I can say that it fit well within the
campaign focus of the President-Elect, at that time. I hope that bill
will be moving forward in that body.

I will seek to reach out to all USDA constituents and to become
an honest broker for their responsible concerns inside the agency.
To the American farmer, and to the family farmer in particular, I
will dedicate myself. I will promote farm income, seek to cut un-
necessary regulation, streamline expenses at the local level, and
guard against Government-generated overhead expense.

Mr. Roberts, we will aggressively seek out new international
markets and insist that our export competitors comply with trad-
ing rules that are fair and equitable. I will ensure that agricul-
ture's voice is heard on trade matters, on food safety matters, on
the environment, and on other areas.

This Department is huge. It has the fourth largest budget of any
Federal agency, with over 14,000 offices within our country and
abroad. The best estimate is that there are 112,000 employees with
a portfolio of about $62 billion. If the Department were a bank, it
would rank first in U.S. loan assets above Chase Manhattan, above
Bank of America, and above CitiBank.

It is a huge Agency, but one with broad and very important re-
sponsibilities which touch and concern almost every facet of Ameri-
can life. Americans need not be reminded that if they eat they are
involved in agriculture. Perhaps we should be reminded, that it is
because of our success in agricultural production that Americans
still enjoy an abundant supply of food and fiber for the least
amount of disposable income. Agriculture contributes over $900 bil-
lion annually to the U.S. economy and is one of the few sectors
that still maintains a positive balance of trade.

There are many who question the effectiveness of the Depart-
ment of Agriculture. The perception — and I hope not the reality —
in many quarters is that it has become an outmoded and unrespon-
sive bureaucracy, no longer considered farmer friendly, or interest-
ed in reaching out beyond the traditional farmer client base to
others, who also have legitimate concerns, who are the recipients of
other USDA programs.

20

We are endeavoring to change that perception, indeed, to change
that reality.

Nonetheless, Mr. Chairman, I am very excited about heading an
agency which does so much good for our country. Each weekday 24
million children have a healthy lunch. Many also have a healthy
breakfast. Infants receive needed formula under the WIC Program.
And millions more benefit from the receipt of food stamps.

As you know, I was the chairman of the Domestic Task Force of
the Select Committee on Hunger. I was privileged to have served
on that committee with Bill Emerson. I know that hungry children
don't just exist in Somalia. They exist in the district I had the
pleasure to represent for the last 6 years. They still exist there.
They exist in Georgia, Alabama, and unfortunately all over the
Nation.

It is incredible to me, Mr. Chairman, that as we approach the
dawn of a new century in just 7 years from now, that people still
don't have running water in our Nation. We simply have to do
something about it. Whether we include it as a facet of REA,
whether we include it as a facet of RDA, I really don't care. I know
that we have to do something about it.

So Mr. Chairman, in conclusion, there are many, many problems
inside of USDA which, with your help, I am eager to correct. But
there are also many positive aspects to USDA services. These re-
sults have not happened by accident. With your help and with the
advice and guidance of the members of this committee, I am going
to try to represent the positive aspects of the Department of Agri-
culture and try to make this Department all that it should be.

Finally, I would like to say three more things. If you will, I will
not read this. I will respond to questions, if you have any, and cer-
tainly to written questions.

I would also like to introduce Keith Collins, the economist at
USDA and Joe O'Mara who is someone I believe you all know.

Joe was the principal negotiator on the GATT and to a great
degree had a lot to do with the NAFTA agreement, such as it is.
Now he is the Acting Under Secretary for International Affairs
and Commodity Programs.

Ron Blackley, is my Chief of Staff. Ron is on board at USDA, al-
though not too many others are.

Mr. Chairman, over in the other body during my confirmation I
talked about my father. My father graduated from Tuskeegee Insti-
tute with a degree in agriculture. He got his first real job in 1937
as an agricultural extension agent in Crittenden County, Arkansas.
At that point they called him the Negro county agent of Crittenden
County, Arkansas and West Memphis, Arkansas.

Since the confirmation hearing, I had a chance to go down into
the bowels of USDA into the archives. I have had a chance to read
his quarterly reports to the USDA as the Negro county agent.

Everything I said over there with regard to his interest in main-
taining the programs of the Extension Service and promoting the
livelihood of the farmers he represented are just tripled and quad-
rupled. He talked about improving farm income. He talked about
reducing overhead. He talked about alternative crop development.
He talked about expanding trade. Of course, at that time he wasn't
talking internationally, rather domestic trade and trade options.

21

And he talked about the budget savings, rural development, and
just improving the quality of life for those he was responsible for.

I would say to you, Mr. Chairman, and to this committee that I
am really going to try to honor his memory. I am going to try to do
in my capacity as Secretary of Agriculture, one with added respon-
sibilities and a little bit bigger budget, everything he tried to do for
Crittenden County and West Memphis in Arkansas. I am really
going to try to do that and I am going to need your help if I am to
achieve that purpose.

Last, let me report on two items and then pause and take any
questions you might have.

I returned this morning from the State of Washington, the first
official trip that I have had a chance to take as Secretary. Before I
embarked on it, I discussed it with President Clinton over the
weekend while we were at Camp David. It didn't take a lot of con-
vincing, but I did talk to him about the importance of the mission
and the critical sense of what we do. Mr. Chairman, 52 percent of
everything we do at USD A involves food and nutrition.

A large part of that involves assuring the American public that
we have an adequate and a safe food supply. Mr. Chairman, you
don't have to raise your charts to talk about everything that we
discussed with regard to Alar in apples. We do not need another fit
of hysteria in this Nation.

It just sent chills down my spine when I learned not too long ago
of the death of a small child, the death of another child, 18 with
critical illness, and perhaps as many as 350 children extremely sick
because of their ingestion of a tainted hamburger from a very pop-
ular franchise establishment. It sent chills down my spine to think
that some way, somehow, along the chain the stamp of the USDA
had been put on those tainted patties.

I impressed upon our President — and again, it didn't take a lot of
convincing — that this was a critical situation and such that the
Secretary should be allowed to go to Washington and do everything
he could do to assure our public that this was not a national inci-
dent and to try to contain it where we can.

I did make that trip. It was upgraded to a Presidential mission. I
had a chance to meet yesterday with some of the parents of those
children and to meet with the Governor and the members of the
State senate.

Let me say two things about that situation. The FSIS, the meat
inspectors, all complied with current law and current authority. As
you know, we operate under the Meat and Poultry Inspection Act
and everything relative to this act and those regulations were fol-
lowed. But I am still concerned that those standards are a little bit
too lax.

Right now, as you know, Mr. Chairman, they relate only to the
organoleptic factors. Those are pathogens of those germs that you
can see, smell, and touch. I am concerned that perhaps we should
do more to begin to move on the path toward more of a microbiolo-
gically based or science-based inspection system.

I will be meeting with FSIS tomorrow. We will be presenting
these options to you. Hopefully you can schedule a hearing early
on, to allow us to present our findings and our recommendations.

22

Second, we have begun to move on the front of reorganization. It
has been reported accurately that we have sort of suspended
former Secretary Madigan's plan to consolidate and to close these
local offices. Not that we won't have a plan very soon, it is just in
my opinion and the opinion of our President that we need to show
the American people that we can get our own house in order first.
I have talked to Mr. Stenholm about this. We will be presenting
these findings hopefully to a hearing he will have very soon to con-
solidate our shop and to get our house in order.

With that, Mr. Chairman, I thank you again for the privilege of
testifying before you. I am open to any questions you might have at
this time.

[The prepared statement of Secretary Espy appears at the con-
clusion of the hearing.]

The Chairman. Thank you very much, Mr. Secretary.

Let me mention that Mr. Stenholm, as you know, will be leading
the effort on the reorganization of the Department, and then the
respective subcommittees within their area of jurisdiction will be
studying that issue. Then we will come back to the full committee.

So from time to time you may be consulted by these subcommit-
tees— principally Mr. Stenholm — for your input at any time.

Secretary Espy. Mr. Chairman, I have been consulted by many
already on the reorganization.

The Chairman. The Food Safety and Inspection Service — Mr.
Stenholm has that responsibility also. He was already working
prior to the incident in Washington State and is working with in-
terested groups and parties. We will continue dedicating our time
to that effort.

I wish that all of the inspection services were at USDA, includ-
ing seafood. We don't know what the end result of our efforts, but
we will continue working in that regard because that is where the
responsibility and expertise should be. That is where the area of
food inspection belongs.

Let me add that we share much together and I knew of your fa-
ther's history, and certainly coming from Tuskeegee he came well-
prepared for that endeavor. I have worked with and visited Tuskee-
gee periodically. I assure you that our effort has been to assist
them. Many great individuals have come from Tuskeegee, most un-
fortunately not receiving the recognition deserved. But maybe you
and I can help in that respect because when you visit Tuskeegee,
when you visit their museum, when you see who has gone through
there and what they have done, you wonder why America hasn't
heard from these great heroes of American agriculture who have
come through the halls of Tuskeegee.

I share with you something of your father's experience, for my
father in his later years, worked for APHIS and worked in a pro-
gram called the Screwworm Eradication Program. It has been prob-
ably the most successful program in APHIS.

What these people were doing was trying to work themselves out
of a job when the pest was no longer. We have rid it from the
United States, we have eliminated it through Mexico. We are in
Guatemala and Belize now and we hope to rid it throughout Cen-
tral America.

23

Unfortunately, I was asked by one of these investigative report-
ers, "Why your commitment to the Screwworm Eradication Pro-
gram? Is it because your father worked there?"

My father has long since departed APHIS and this life, but I
have continued to have a great interest in APHIS.

So together you and I will work to see that these people, unheard
of by most, who have contributed greatly to USDA, that their ef-
forts will be recognized. Certainly, you being where you are and me
being where I am brings some recognition to at least two individ-
uals. But we have to bring it to all the rest.

Mr. Secretary, I am going to give you a copy of my chart. You
have mentioned, almost unthinking, what it does here. I was so
very proud that in your confirmation hearing you mentioned the
story that has been quoted by so many.

Mr. Roberts. What is that story, Mr. Chairman? [Laughter.]

The Chairman. In order to identify the members of our commit-
tee, we have designed a cap for the Committee on Agriculture
which I have bought. These are not appropriated funds, if anyone
would ask. [Laughter.]

But we wanted you to have the first one before we hand them
out to all of the members.

Secretary Espy. Thank you, Mr. Chairman.

The Chairman. You are now a member emeritus. You are the
most important one of the Agriculture Committee.

We have our usual — I don't know how much time you have — but
our usual practice is that those who were here when the gavel
sounded on seniority, and then on time of arrival for comment or
questions.

Secretary Espy. I would like to comment on the budget.

Again, OMB, while approving statements and editing statements,
they also admonish you not to make news. [Laughter.]

If I could then just reflect upon my history as a member of this
committee and a member of the Budget Committee, where I tried
to counsel against wanton budget cuts, particularly with regard to
agriculture, we are only 4 percent of the Federal budget. And 52
percent of that involves money spent surrounding the promotion of
food and nutrition programs.

When it comes to the commodity programs, it has recently aver-
aged only between $10 and $16 billion. So we don't have a lot of
deep pockets there.

I also told them that with regard to our target prices and our
price support levels and what we spend for these programs, I
wanted to make sure that the left hand realized what the right
hand would be doing when it came to international trade. As we
reduce these domestic levels, we should make sure of the ramifica-
tions it will have in the GATT.

I really then expressed doubt that we realized what we had been
doing. I counseled against it.

The Chairman. We thank you very much.

Again, we welcome you and look forward to working with you.

The clerk advises me that since I had not advised her, she did
not note the time of arrival of the members, so we will just go from
right to left. And as is our custom before this session, we will take
one from the Democratic and one from the Republican senior level,

24

and then we will go down to the lower level and take one and one,
and rotate from upper tier to lower tier.

This is democracy to the utmost in this committee, Mr. Secre-
tary.

Secretary Espy. Yes.

The Chairman. Mr. Roberts.

Mr. Roberts. Thank you, Mr. Chairman.

First of all, I want to thank you for this hat on behalf of all the
people who have haircuts like I do. [Laughter.]

The Chairman. Don't say it. [Laughter.]

Mr. Roberts. And I note that it is green in regard to our working
relationship with the Environmental Protection Agency.

The Chairman. No, that is because I am Irish. [Laughter.]

Mr. Roberts. Mike, may the luck of the Irish be with you. You
made a most pertinent and moving statement in reference to your
dad. I would only add that you are following in your dad's footsteps
in example and outstanding fashion. We are all very proud of you.

Mr. Stenholm and I in the last session of Congress went to six
States to ask our farmers, ranchers, and employees with ASCS,
Farmers Home, and SCS what they would like to do to make the
farm program more farmer friendly and in regard to restructuring.
The report we got back was most helpful. I will bring it with me
when we have our meeting as of Friday.

However, there are some States that are pretty hard hit in
regard to some of the recommendations. And in regard to restruc-
turing, Mr. Kingston of Georgia had a specific question or concern,
and I would like to yield my time to him at this particular time.

The Chairman. To whom are you yielding?

Mr. Roberts. To Mr. Kingston of Georgia.

Mr. Kingston. Thank you, Mr. Roberts.

Mr. Secretary, I would like to say thank you very much for com-
ments you made in Yazoo, Mississippi, last weekend and also the
ones you made today about starting at the top and cleaning the
house up there first. I think the farmers in my area certainly ap-
preciate that.

One thing that I wanted to mention to you is that the farmers in
our area are ready to do their part to help increase efficiency in
the Federal Government. We would like you to consider satellite of-
fices in areas where you will be closing offices, or come to the con-
clusion that you have to. In some areas I think you will have to do
that. But if you could consider some satellite offices that are
manned on Tuesdays and Thursdays, or Monday, Wednesday, and
Friday that would serve the farmers.

I just want to thank you for being sensitive to the needs of the
farmers.

Secretary Espy. Thank you.

I appreciate it and that is a good suggestion. We are going to be
moving first, as we have said already, with reorganization at the
Washington level, then the regional level, and then the local level.
I would imagine that once we get to that point we would have
input from many of you on options that we would implement.

Many on this committee have good ideas — Dan Glickman, Pat
Roberts, and others — that we will be reviewing. I am fully con-
scious of the geographic differences between farm service offices in

25

one State as opposed to farm service offices in another State. I am
saying generally that we don't want to have an office located
where farmers no longer exist. But if the farmers exist there in sig-
nificant numbers, we will have an office there.

So we just have to work it out as far as the numbers and the
budget aspect. But we have enough time to do it. We are not going
to rush headlong into any comprehensive cutting of local offices.
We are going to do it deliberately, methodically, and with an eye
toward improving farmer services and streamlining taxpayers ex-
posure.

Mr. Roberts. In reclaiming my time, Mr. Chairman, I would like
to submit for the record a statement of our colleague, Mr. Bob
Smith from Oregon.

The Chairman. Without objection, his prepared statement will
appear in the record at the beginning of the hearing.

Mr. Roberts. I yield back the balance of my time.

The Chairman. Mr. Brown.

Mr. Brown. Thank you, Mr. Chairman.

Mr. Secretary, we are pleased to see you and of course extend
our offer, as the chairman has already done, for full cooperation in
addressing some of those problems which have proven intractable
over the years that I know you are familiar with.

You made some statements about the need for the USDA to
reach out to all of its constituents. I think that is going to involve
some changes. The world has changed a lot since your father was
an agent, the country has, and even the Congress has.

Secretary Espy. Yes, sir.

Mr. Brown. The President has indicated that he wants to have a
government that looks like America and respects the needs of
America. It seems likely that the USDA may not have changed as
much as the rest of the world has. I am rather interested in how
you're going to make the USDA look like America and how you're
going to make it act like we want Americans to act like, which
sometimes it doesn't do.

I don't expect you to spell it out, but I want you to emphasize, if
you can, your commitment to doing that.

Secretary Espy. Thank you for the question.

I would suggest that we have already seen some changes at
USDA in the person of this individual sitting before you. To have
an African-American male as Secretary will be pretty different
over there.

I would endeavor — if you are speaking in terms of construction of
the deputies and the subdeputies, I would say to you that we are
well on the way toward presenting the final list to the President on
filling these very important jobs over at the USDA.

I have to tell you that as he had no quota in mind with regard to
ethnics and minorities and any degree with regard to sex-based
numbers, I don't either. We want to get qualified people. But we
want to make sure that it looks like America. We want to make
sure that the folks who end up occupying these positions don't just
reflect one point of view and that they will reach out to sectors and
constituent groups who have felt left out.

All I can say to you right now is that we're in the final stages of
promoting the top two or three people who, in my consideration,

26

would be qualified for these jobs. Then they have to go through the
FBI check, they have to go through the vetting process, and they
have to pass the veto power of the President himself.

So it may be just awhile before we finish that, but I hope you
will be pleased. I am consulting with members of this committee
with regard to those folks we have put forward.

Mr. Brown. Thank you, Mr. Secretary. That is encouraging, but
changing a large bureaucracy, even when you start at the top, can
be difficult. We wish you well in making those changes all through
the organization.

I have just one additional question.

The impact of reducing personnel and offices around the country
of the Department of Agriculture can be serious. On the other
hand, it can be compensated by the adoption of modern technology.
For example, there is no reason in the world why every county in
the United States can't be connected through regional hubs or
State hubs directly to your office through a video conferencing ca-
pabilities in which you can almost sit face-to-face with somebody
out in a rural county and discuss their problems with them.

That capability is quite feasible today. We would like every
agency of the Government, as a matter of fact — some of them al-
ready do — to recognize that they can achieve great efficiencies —
and we can in the Congress — by using modern technology in ways
we haven't done so before.

I want to just ask you if you may have given some thought to
that as you look at restructuring the personnel and the offices of
the Department of Agriculture.

Secretary Espy. We have certainly done that, Mr. Brown. When
we get to the restructuring concept for the local offices, I hope I
will be ready to also present to this committee a concept of farm
simplification which is going to rest in a large way on increasing
the technology and computer capabilities of these local offices. We
can collocate; we can combine; we can do a lot of these things that
are now within the public domain. We can make farmers comput-
er-literate.

We also have an idea of enhancing the Extension Service and
make them computer-literate.

So the construction of these farm plans can be input into the
computer and the farmer won't have to stand in line at the local
office forever. A lot of this would be in the computer base.

I would like to go back and add to something I said earlier.

Some are frustrated that they have not seen good people behind
their desks over at USDA. Let me tell you that it is a huge agency.
We have been there 13 days. Events are moving rapidly. I want to
take my time and carefully select the best men and women to
occupy these positions.

But we have a significant challenge. Here I am telling you that I
am going to restructure Washington, and some of these offices may
no longer exist. Some of these assistant secretaries structured on
this piece of paper will be obliterated. So I wanted to be faithful. I
want to in good faith conduct these interviews and not interview
someone for a job that may not exist or be merged with another
one.

27

In a lot of that construction and reconstruction this committee
will help because a lot of these divisions are statutorily based. So
just hold on and be patient and I think you will be pleased.

Mr. Brown. Thank you, Mr. Secretary.

The Chairman. Thank you, Mr. Secretary.

Let me mention your statement that you would visit with us.
Without interfering at all in the advice and consent clause of the
Constitution, I think that we have in this committee and in this
House the ability to counsel with you.

Secretary Espy. Yes.

The Chairman. I do hope that you would avail yourself of that
without any infringement on the advice and consent side for we
are coequal partners in this endeavor. We do hope that we can
work with you in that respect.

Now we go to a gentleman that sits where I sat many years ago,
Mr. Bishop.

Mr. Bishop. Thank you very much, Mr. Chairman.

I would like to commend the Secretary for his remarks. I would
certainly like to thank him for the courtesies he has extended to
this Member because I, too, come from Georgia as Mr. Kingston. In
regard to the closing of many of the ASCS and the SCS offices,
there is great concern in Georgia because Georgia was targeted for
the biggest hit.

It helps us to feel a lot more comfortable and the people in my
district are very grateful to you, Mr. Secretary, for your deliberate
fashion in approaching this reorganization.

We would also like to ask the Secretary if he would be sensitive
to the needs of the people in our area with regard to NAFTA and
GATT. There are very serious concerns in the Second Congression-
al District, particularly, and throughout south Georgia about the
ramifications that GATT and NAFTA will have on south Georgia
agriculture and ultimately agriculture for the entire Nation.

We are very concerned about that and would hope that there
would be some dialog, that they would have an opportunity to par-
ticipate in that dialog, and really seriously look at what the ramifi-
cations will be in agriculture in south Georgia and how that will
affect rural development, the quality of life, and how it could possi-
bly devastate the total south Georgia economy.

With that, Mr. Secretary, I am very grateful for your courtesies.
If there is any way we can be of help to you, we will certainly be
available to do so.

Secretary Espy. Thank you, Mr. Bishop. I appreciate the ques-
tion.

We will be sensitive to the impact of NAFTA and GATT on the
economy of your district. Let me say to you that you are aware
that the President has already embraced NAFTA. This was a sub-
ject in the Presidential campaign and it is one that he has talked
about in a little detail since he was sworn in.

NAFTA is going to be good for agriculture in general, particular-
ly cattle, dairy, and corn. It is going to be good for agriculture. I
am aware that when it comes to peanuts and perhaps sugar there
are concerns. Before the election, I had a chance to go up to North
Dakota and talk to the sugar beet farmers about the impact of
NAFTA on their industry. We sat and shared a lot of theories.

28

So I am concerned about that. Even today, there are officials
from the commodity programs and the international affairs divi-
sion in Mexico meeting with them on the impact of NAFTA on the
sugar industry.

I hope that we can begin to resolve these kinds of things.

GATT, of course, is a little more difficult. The authorities and
the negotiations are due in March. We had hoped that there would
have been a successful resolution. March is right around the
corner. I don't think it is going to happen. So we have to sit and
counsel to see where we're going with regard to GATT.

They have made significant progress on reducing the export sub-
sidies and the internal support, but there are some market access
problems that I don't believe will be resolved in a month's time.

Having had a chance to travel with the chairman a couple of
times to Geneva and Brussels to review the discussions on GATT, I
have always had problems with the success of that ongoing negotia-
tion. I have had problems with regard to the seriousness of the EC
negotiators and our Japanese competitors. I hope that we can get
them to become a little more serious than they are right now.

Mr. Bishop. Mr. Secretary, if I might follow-up for just a
moment, the President had indicated that in considering NAFTA
and GATT — of course, more NAFTA because it is now sort of a
done deal, in a sense — that he would explore the possibility of some
side agreements. It is our hope that in approaching the side agree-
ments that consideration will be given to the tremendous economic
impact that will result to our rural areas, particularly the peanut-
growing areas in south Georgia, as a result of NAFTA.

Of course, GATT is still in the negotiation stage and that is still
up for discussion and open. The jury is still out on that, but we
really need some help with those side agreements in NAFTA.

Secretary Espy. The side-bar agreements that you mentioned
have traditionally been considered restricted to environment, labor
areas, and food safety. Perhaps we can expand it. I will look into it.

Mr. Bishop. Thank you very much, Mr. Secretary.

The Chairman. Thank you very much.

Mr. Emerson.

Mr. Emerson. Thank you, Mr. Chairman.

Mr. Secretary, it is a very special privilege to welcome you to
your old home here, back to this committee, albeit you in a differ-
ent capacity than we have come to know each other over the years.

One of the great highlights of the opportunity I have had in serv-
ing in the Congress has been to work closely with you and to get to
know you over the years on this committee and on the Select Com-
mittee on Hunger where you have provided great leadership, and
in our mutual interests relating to the Lower Mississippi Delta
region of our country, and in the House at large.

Throughout our association I have certainly come to know you as
a person of great integrity, competence, understanding, and com-
passion. I know that in your new job you are going to bring all
those qualities to bear in abundance.

So for my part this morning, I just want to say welcome. I am
sure we will have an opportunity for a substantive discussion of
issues down the road, but it is particularly heartwarming to have a
person of your ability sitting where you're sitting. I want to con-

29

gratulate you and pledge to you my desire to continue to cooperate
with you and work with you as we have had the opportunity to do
so many times in the past.

Thank you.

Secretary Espy. Mr. Emerson, thank you for the kind comments.
We have worked together and all the kind sentiments you ex-
pressed are certainly mutual. We have worked together and you
have been an acknowledged leader when it comes to food aid and
food trade programs and streamlining USDA services. You are
famous for one-stop shopping techniques. When it comes to human-
izing the dissemination of food stamps through certain technologi-
cal programs, you have been right on the forefront of that.

I want to continue this with you, particularly as it comes to wel-
fare reform, streamlining, and one-stop shopping, and the WIC Pro-
gram, TEFAP Program, and all of the programs administered by
the USDA. I respect you and I want to continue to work with you. I
do appreciate the kind words.

The Chairman. I thank the gentleman.

Mr. English.

Mr. English. Thank you very much, Mr. Chairman.

Mr. Secretary, I too would like to welcome you home and to ask
you a question with regard to rural development.

We have three different studies that have been recently pub-
lished. One from the Department of Commerce, a second which
came from the Office of Technology Assessment, and the third
from the Aspen Institute. All of these pointed to the fact that if we
are going to have a successful Rural Development Program that
the REA was going to have to play a very major role.

In fact, the Aspen Institute was rather critical of the 1990 farm
bill. I believe the way they described the efforts we put forth was
that we were rather timid in this area, which I have a tendency to
agree with.

But as you know, the last administration and the administration
before that were very critical of the REA, did not really use the
REA, and in fact submitted budgets to eliminate the REA. So we
have a difference on one hand of independent studies and another
seems to be philosophy.

Do you anticipate that the REA under this administration and
your leadership will be much more aggressive and return more to
its traditional role of being a leader in rural development?

Secretary Espy. Let me say that some of those in OMB are still
there. They frown on the existence of the REA.

You are aware of how they prefer that it be abolished. We have
had to fight those inside the Budget Committee and inside this
committee as well. They see this as an agency whose time has long
since gone. Roosevelt provided electricity to rural America and
beyond that they did not see REA having a mission, so therefore it
is an agency with a lot of money in search of a mission.

I disagree with that. I think the REA is a legitimate entity. It
has a mission. Perhaps we can expand upon that mission.

In my opening remarks I mentioned that hopefully we can use
them to provide water services to those in parts of America with-
out water services. We should examine that. Right now, that pro-

30

gram is within the range of RDA programs. We can sit and talk
about it.

But just in general, I can tell you that I believe in the REA. I
believe in the loan guarantee programs of the REA. In many ways
they are legitimate and beneficial and should be continued.

There is a lot within REA that can be changed. I am going to sit
with you and work it out.

Mr. English. Of course, this committee and the Congress both in
1987 and again to a much greater extent in this timid section of
improving rural development, we charged the REA with the re-
sponsibility to become very actively involved in inter-rural develop-
ment. We have not seen that happen.

The real question, I suppose, it comes down to is whether the ad-
ministration, OMB or no OMB, is going to obey the law. That law
is very clear as to what they have been charged with.

The difficulty, it appears, is that we are into some who philo-
sophically don't believe that they should be involved as opposed to
what is mandated by the law. Will you and the administration
follow the dictates of the law in this regard?

Secretary Espy. I think we all have a part to play in the develop-
ment of rural America. The promotion of rural America depends
upon the success and participation of all enterprises under the
broad heading of USDA.

So this is an agency with some money. I think we should not
ignore their tremendous resource base as we endeavor to empower
our regions. We should use REA and RDA and all of them. I would
be in favor of it.

Mr. English. With regard to another area of great concern, deal-
ing with the environment — there has been a great deal of attention
focused in the last few years on agriculture's role in the environ-
ment. We have a number of different practices that were put into
play in the 1990 farm bill. Farmers have to have conservation
plans. Those have to be approved.

There is a growing concern that we had not seen an aggressive
use by the Department of Agriculture's Soil Conservation Service
in helping farmers get those plans in place and get those plans ap-
proved. As you are well aware, if we don't get this done by 1995, we
have farmers that are going to be declared ineligible for the farm
program.

Is the Department now looking at meeting that timetable and
what they can do to assist farmers to make sure that no qualified
farmer is left out because of insufficient personnel or resources in
approving his particular plan?

Secretary Espy. To be honest with you, since I have been there
we have not met on this particular subject. But I would hope that
we could move very quickly to this subject. It is caught up in, as
you know, the establishment of simplified farmer services. I would
hope that we could do that and do that very quickly. I don't want
to be responsible for farmers being left holding the bag on certain
funding mechanisms because they have not complied with certain
conservation practices through no fault of their own.

So if it comes to staffing a local office in the field, if it comes to a
personal message from the Secretary, if it comes to certain funding
of a program, then we will do that.

31

Mr. English. Thank you very much, Mr. Secretary.

The Chairman. I thank the gentleman.

We go to Mrs. Thurman.

Mrs. Thurman. Thank you, Mr. Chairman.

Mr. Secretary, I am from Florida. As you well know, we find that
in Florida agriculture is only next to tourism in our State. Like
Mr. Bishop, there has been a lot of conversation about NAFTA.
Certainly I hope we can extend and talk about that. For many of
us who are freshmen and never having had any input into the
agreement, it becomes a very big issue within the State of Florida.

Our commissioner has been to Washington, D.C. to discuss and
try to get some agreement. I hope we can continue those kinds of
conversations.

Just so you will know, a couple of issues I am very concerned
about are some water issues, not only in Florida but across the
country, and there seems to be more fights going on as Florida
grows between urban and rural, which will certainly have an
impact on our farmers in Florida.

One I believe the President spoke of to the Democratic caucus a
couple of weeks or months ago was the preservation of the family
farms. I hope that as time goes on we will be able to have more
conversations about this and certainly I am looking forward to
helping the Agriculture Department be more friendly to our farm-
ers.

Secretary Espy. Thank you. I appreciate the statement.

Let me say in reaction that there are those who have had the
feeling that in times past the USDA had not been a full partner in
the discussion of the international trade programs and trading
agreements. I am not suggesting whether or not that has been
true, but I know that under this administration USDA will have a
seat and will have a voice in NAFTA and GATT. Ambassador
Kantor and I have already talked about this. We will be there.

The Chairman. I thank the lady.

Mr. Gunderson.

Mr. Gunderson. Thank you very much, Mr. Chairman.

Mr. Secretary, welcome. I offer you both my sincerest congratula-
tions and my deepest sympathies at the same time. I am reminded
of Bob Bergland's story. On becoming Secretary of Agriculture he
got on a plane like you apparently did yesterday and he went to
Iowa to speak to the corn growers, who immediately told him that
unless he raised the price of corn there was no way they could suc-
ceed.

He finished that meeting and got on the plane and went to At-
lanta and spoke to the National Turkey Federation who said that
unless he did something to reduce the cost of feed and corn in this
country, there was no way they could succeed.

He immediately knew that from then on the likelihood of him
being a popular and successful Secretary of Agriculture were not
very good. [Laughter.]

I share that bit of wisdom for whatever it protends for your
future.

I also want to thank you — and I don't think anybody on this side
has done this yet — for your action yesterday. I think your action in

32

regard to the tragedy that occurred in the State of Washington has
been a firm, direct, complete, and most importantly accurate.

Secretary Espy. Thank you.

Mr. Gunderson. You need to know that all of us in production
agriculture deeply appreciate the way in which you have handled
what probably can be termed the first crisis in your administra-
tion.

I think it is essential that we make clear at this point that this is
not a problem with red meat, but rather a problem with the proc-
essing of red meat.

Secretary Espy. Yes.

Mr. Gunderson. We need to take whatever steps are necessary
to respond to that.

I have a suggestion as you seek to reduce the size of your Wash-
ington bureaucracy in USDA that one way in which you could
solve a very difficult and contentious problem is to look at the bu-
reaucracy in the milk marketing agency. There is a way you could
reduce that that I think would be frankly an acceptable way to
people of all regions of this country to solve a contentious problem.

But I would like to asK you — because as I read your statement
and your summary that was attached you even allude to the fact
that we are looking at reduced milk prices in 1993. All the indica-
tions I see are that we are looking at about a 70-cent reduction per
hundred weight.

I don't have to tell you that that is a level of income which most
dairy farmers in this country will not be able to survive at.

As difficult as it is, as you know from your years here, can we
anticipate some kind of a proposal from USDA on dealing with the
milk program? Or do we anticipate that you will look forward to
working with us? What do you see happening in this area?

Secretary Espy. I can tell you that this is one of the areas where
I have been asked not to emit signals very early. [Laughter.]

It is a problem. With regard to marketing orders and with regard
to geographic distinctions within marketing orders, we have a prob-
lem.

If I can just get away with saying that farm income and increas-
ing farm income across the range of commodities and producers is
a goal that we have. I will be sitting down with you to come up
with strategies and mechanisms to do that.

Mr. Gunderson. Once your budget numbers are complete, are
you then open to sitting down and opening up various commodity
programs in a way in which we can increase income within that
budget limitation?

Secretary Espy. Yes. We have already had preliminary discus-
sions with OMB with regard to the budget submission for this year.
We won't see a lot of change, let me say that to you. We won't see
a lot of changes now. But in the future, we have to discuss some
changes.

Mr. Gunderson. By that do I read that you don't anticipate a
number of changes in fiscal year 1993, but that the potential for
changes in fiscal year 1994 could be more significant?

Secretary Espy. That would be a good interpretation of what I
said. [Laughter.]

Mr. Gunderson. Thank you.

33

The Chairman. Mr. Glickman.

Mr. Glickman. First of all, Mike, it is a pleasure to have you
here. You're going to have to put up with Pat Roberts as the rank-
ing minority member of this committee. His bark is really worse
than his bite. He is a very affable soul. As I am going off for 2
years to try to get a little more intelligent so that I can come back
and do a better job on this committee than I have before. But Pat
and I will still be around to monitor this.

One thing we do hope is that you can get out to the Midwest, to
the heartland, as quickly as possible. You may get invitations into
Kansas City or other areas, but we want you out there to talk with
wheat farmers and corn farmers in the heartland. We will be talk-
ing more about that as time goes on.

I would also like to say, just listening to you I am very im-
pressed. I think this Department has needed somebody in the Sec-
retary's office with a big picture view. This is more than just a
farmers' Department, although it is the farmers' Department. But
it is also the consumers' Department and the rural Americans' De-
partment. For some time, I have even thought we need to change
the name of the Agency to the Department of Agriculture and
Food Policy, or the Department of Food and Agriculture.

As the chairman talks about so much, in the submarine story
you can stay on the submarine so long as there is food. I take it
that you have the right perspective on the function of the Depart-
ment.

The Department is an embattled Department. There are an
awful lot of people who would like to minimize its function and
maybe squeeze some of those functions and move them into other
agencies. If we have a Secretary like yourself who shows that he is
a big picture Secretary, and not excessively parochial, even though
you still have to recognize that the farmers' interests are para-
mount— I think that is a real important thing. I am really delight-
ed that you are starting down that road.

Quite frankly, I think that is something your predecessors didn't
do as much as they should have. I think it is an important thing
for you to do. I am glad you said it.

Secretary Espy. Thank you.

I am concerned that there are those who might want to pick this
Department to death and pick off certain parts and certain func-
tions. For instance, yesterday we talked about the food safety as-
pects. There are those who want to pick off our food safety function
and transfer it over to the Food and Drug Administration. There
are some who want to pick off our ability to manage forests and
chuck it off to the Interior Department. There are those who want
to pick off our food nutrition functions and give it over to Health
and Human Services.

We should expect some turf battles and some turf problems as
my predecessors have had to face. But I would say to you honestly
that I had a chance to go to Camp David this weekend with the
rest of the Cabinet Secretaries and the senior White House staff.
We talked about how to operate as a team, how to lay out on a
sheet of paper the top six, seven, or eight of President Clinton's
programs and how to work together to implement these programs
across the range of our Cabinet divisions with less of any chance to

34

discuss turf battles and turf problems because we can say that we
are a member of the team and he is the quarterback.

So I would hope that while I expect some discussion about this, I
would hope that we can retain what we do in total as we move for-
ward to try to implement his programs.

Mr. Glickman. With your public statements about seeing the
function of the Department as manyfold, particularly as it deals
with consumers' interests as well, I think you will help that proc-
ess along.

I have a couple of things on reorganization. I know Mr. Stenholm
is going to be involved with it, but I am going to introduce a bill
similar to what I did last year. This bill consolidates ASCS, SCS,
Farmers Home, and Federal Crop Insurance into one agency, a
Farm Services Administration, so that farmers go to one group to
get their data and their information. I just hope you take a look at
it in this process.

It may not be the perfect idea, but its goal is to make it easier
for farmers go to one office instead of three or four and have one
central place where they deal with the Federal Government.

Secretary Espy. I think that is a good idea.

Mr. Glickman. At one time, I thought there was somebody else
who might be down there. But I think you are the guy. [Laughter.]

Secretary Espy. I reviewed the proposal and I have tried to call
you to discuss it and want to invite you to the same meeting. Your
idea is one with a lot of merit.

Mr. Glickman. And then the final thing is more parochial. Let
me ask you this question on State ASCS farm home Directors State
committees.

A lot of us would like to get those people staffed up in our States.
How should that be done? What is the best way for us to communi-
cate to you those people that we think ought to be in? For example,
the ASCS Directors, particularly, running the farm programs in
our individual States?

I would like to not have hold-overs in that area stay on too long.
What do you suggest?

Secretary Espy. Maybe I should invite the transition Director in
to answer that question.

First of all, we had a change of administration, obviously, so
there will be some changes in personnel both in Washington and in
the field. My concern is that delivery of services would not be nega-
tively impacted out in the field. We are obviously moving forward
in our crop year and loans and payments have to be made. I didn't
want the farmer to suffer because someone was being vetted or
under scrutiny by the FBI.

So right now I have asked the transition officials over at the
White House to implement the status quo, to let those that are
there stay, subject to termination by the Secretary. Some of them
desired not to remain under those circumstances and they have
gone. Some of them have decided to stay.

For those who have gone, I can say to you honestly that the
State delegation should put forward a name because you are more
familiar with the personalities and the circumstances than I am. I
more likely than not will accept that name and put it forward to
the personnel office at the White House.

35

So for those offices where there is no person, you should submit a
name immediately.

Mr. Glickman. And it should be to you?

Secretary Espy. Yes.

The Chairman. The time of the gentleman has expired.

Ms. McKinney.

Ms. McKinney. Thank you, Mr. Chairman.

I would like to first begin by saying congratulations to Mr. Espy.
We are all proud of you.

As you remember America's heartland, I would like you to also
know that Georgia's 11th District, too, has a heartland. It is a
heartland that is poor, that is undereducated, and that is underem-
ployed. The choice, too often, is between no work and work that en-
tails danger to both the environment and to the health of our resi-
dents.

Mr. Secretary, I need your help and I need it in the most desper-
ate kind of way in terms of help for our small farmers but also
help in rural development. So I will be listening to you, talking
with you, and probably bringing some farmers to you to assist in
whatever way you can to help us in rural development.

Secretary Espy. Thank you.

We have discussed this briefly and I would be very eager and
willing to accept whatever delegation you might want to bring to
me at the USDA and give them my time and honestly try to help
you work out the problems that you have in your district.

I will tell you why I am going to do it for you. Where you sit now
is where I sat before during the 6 years I was on this committee.
This seat has the most direct line into this microphone, whoever is
sitting there. The person in that seat can look in the eye of whoev-
er is sitting here testifying more clearly than perhaps anybody else
can, save the chairman — although he is a little further back. So
you can see, hear, and feel the truthfulness coming from whoever
is sitting here.

You have a very valuable seat. I hope you know that. [Laughter.]

Ms. McKinney. Thank you, Mr. Chairman.

The Chairman. That is a very wise statement and I am glad that
she is there because prior to her I had Mr. Sarpalius in front of me
and I couldn't see over him. [Laughter.]

I welcome her to that seat.

Thank you very much.

Mr. Nussle.

Mr. Nussle. Thank you, Mr. Chairman.

First, welcome, Mr. Secretary. I am honored to have the opportu-
nity to have served with you in my first term and look forward to
your work.

There are some, including myself, that would say that President
Clinton's focus on the economy has been anything but a laser. It
has been more like a dim flashlight.

Based on what I have seen from your leadership and administra-
tion, I think I know where the brightness is going to come from in
the future, particularly with regard to rural economic develop-
ment, which is my concern. I know that concern is shared on your
part.

36

When Iowa farmers asked me, Who is this Mike Espy that has
been appointed to this slot and what is he like? I tell them that
there is good news and bad news. The bad news is that he is not an
Iowa corn grower. But the good news is that he shares our con-
cerns about rural economic development, and that was demonstrat-
ed early on in your administration with the help you provided with
regard to the ethanol issue.

Based on your statements here today, including the statement
you have prepared where your first item and goal is economic de-
velopment in rural areas — that demonstrates to me and demon-
strates to the people I represent that this is going to be your big-
gest concern.

You are our advocate in the Cabinet meetings and in the admin-
istration on behalf of those of us who represent rural areas to
make sure that rural economic concerns are brought forth to the
new administration. I encourage you to continue that advocacy be-
cause it is already showing itself in the kinds of policies and the
words that have been used in addressing some of the new goals
from the administration. I hope that continues.

Secretary Espy. Thank you, sir. I really do appreciate it.

Let me assure you that any brightness I have, any light I can
give, is intensified by the shower of light coming on me by Presi-
dent Clinton. And I say that honestly. He chose me for certain pur-
poses. One objective, of course, is to include rural America in the
economic life of this entire Nation, to bring into the formula cer-
tain areas which have historically been left out.

Yes, I am a deep and strong advocate for rural development
simply because I come from rural America. But so does this Presi-
dent. He was the Governor of Arkansas. So he is most familiar
with rural economic strategies.

So you don't have to shout as loud. You don't have to scream and
plead as much because he is already disposed to understand the
problems of the region. He is more adept at understanding how we
can resolve it.

All you have to do is pick up a book called "The Lower Mississip-
pi Delta Development Commission." This was a Commission cre-
ated in 1988 or 1989. I was an author of it along with Senator Dale
Bumpers on the Senate side. It simply said that America is a great
chain and in order to make the chain stronger we have to focus on
the weaker links. A weak link in this national chain is the 9 or 10
States bordering the Mississippi River which have similar econo-
mies that are the weakest and most impoverished in the Nation.

So we created this law, Ronald Reagan signed it into law, and we
created this Commission. Governor Clinton was the chairman of
the first ever Delta Development Commission. They produced a
book, "400 Reasonable Ways to Improve the Quality of Life in
Rural America." They cut across the whole scope of transportation,
agriculture, water, rural development, and energy. Now all we
have to do is to flip through the book and see which ones we can
enact quickly, which ones will take a little bit more time, which
are inexpensive, and which will take a little bit more money.

That is why I am so eager to get on with this job.

Second, let me say to you that I am not a corn farmer, but I am
the Secretary of Agriculture for all commodities across the Nation.

37

Some have associated me with cotton, soybeans, and certainly cat-
fish. But let me tell you that I don't want to be regional in scope or
commodity specific. I want to be one who is concerned across the
broad range of commodities.

Mr. Nussle. I understand that and I respect you for that.

In conclusion, let me just say that you are very correct that we
are going to have in rural America the chance to have the ear of
our new President, because of the fact that he comes from rural
America. But as I have learned, being in Washington the brief time
I have been here, the longer you are here the easier it is to forget
where you came from. Having you in there reminding him where
he came from I think is going to bode well for us in the long run.

Secretary Espy. I will certainly do that.

Mr. Nussle. Thank you.

Secretary Espy. Thank you.

Mr. Nussle. Thank you, Mr. Chairman.

The Chairman. I thank the gentleman.

Mr. Secretary, we know that you have a constraint on time, and
I would like to have every member that remains to at least wel-
come you, so if there is no objection I am going to ask the members
to limit their questions or comments to 2 minutes so that we can
accommodate the rest of the members that would have an opportu-
nity to visit briefly with you.

Mr. Stenholm.

Mr. Stenholm. Thank you, Mr. Chairman.

Secretary Espy, welcome to the committee. I will very quickly
say, in the area you have already discussed, that our subcommittee
looks forward to working with you on the reorganization question.
As you and I have discussed, I think you're going to find that there
is a substantial amount of agreement on this committee working
with you and expediting this matter. This is a very timely issue as
we look at the budget problems heading our way.

I also serve on the Budget Committee, and know that we are
going to have to make some changes on this committee, as every
other one will. Your timeliness on this is going to be appreciated by
all by the end of this year.

With regard to the Food Safety and Inspection Service, Mr. Volk-
mer and I will be sitting down and working with you on that. I
commend you for your statement yesterday.

My frustration today has been that we have been unable to make
the changes that you are suggesting we ought to look at. We should
have done it 5 years ago, but the reorganization will allow this to
happen.

In the area of nutrition, the hunger question, this committee
needs to do more. We will be doing more. We are already reaching
out to the various groups involved in looking at how we can better
coordinate this effort. We look forward to working with you in this
area also.

My final comment is in the area of research. An overview is way
overdue. I have been discussing this issue with Mr. Brown and we
have some ideas when you get your appropriate people into place.
We will look forward to sitting down and sincerely starting to
prioritize in regard to our research efforts. When you look at what
we're doing and then the real needs, like you pointed out in your

38

statement yesterday concerning the most unfortunate E-coli out-
break out in the West, we need some research in some of these
areas. We need to find out the answers to these questions.

So all in all I welcome you here. We look forward to working
with you. I couldn't agree more with your comments on rural elec-
trification, the water corporations, and even with Ms. Long's testi-
mony in the area of health care reform. Rural America is unique
and must be looked at. In doing so, I believe you're going to find
that rural electrification can play an extremely important part in
seeing that health care delivery is there, foreign to most people
that don't understand the uniqueness of rural electrification or the
uniqueness of rural America.

I look forward to working with you.

Secretary Espy. Thank you, Charlie. I do appreciate the state-
ment. I look forward to working with you as well.

On the research aspects of the statement, let me say that I agree
with you. I think that research from the Department, and perhaps
even from this committee, takes on the character more of dispensa-
tional pork rather than prioritization of programs. Where do we
need to go in the out-years on agricultural research?

It came to me clearly yesterday in the State of Washington when
we endeavored to ask whether or not there was a test to isolate
this E-coli culture in a timely way such as not to frustrate the in-
spection of the carcasses down the line. If you try to inspect every
carcass, that is very tough to do and I doubt that we could ever do
it. But we can take samples. But while we're sampling the car-
casses trying to find this culture, how long can you hold it before
you do it?

So there is such a study that identifies this E-coli culture within
24 hours, but this research had not been funded by USDA. I may
stand corrected on that. I don't think it was. I think it was funded
by a private group, an industry and trade group.

We should be doing that. We shouldn't have to respond and react
so. We should target and we ought to identify these emerging prob-
lems and then the best university, we ought to go for it.

The Chairman. I thank the gentleman.

Mr. Holden.

Mr. Holden. Thank you, Mr. Chairman.

Mr. Secretary, I am from Pennsylvania, and I am the first Penn-
sylvanian to serve on this committee in almost 20 years, I am very
pleased to be a member of this committee because agriculture is
the No. 1 industry in the Commonwealth of Pennsylvania. It is also
the No. 1 industry in my congressional district.

So Mr. Secretary, I would just like to say to you that I look for-
ward to working with you and with this committee to see that
Pennsylvania has a voice in this Nation's agricultural policy.

Secretary Espy. Thank you. It does and it will.

Mr. Holden. Thank you, Mr. Secretary.

Thank you, Mr. Chairman.

The Chairman. Mr. Doolittle.

Mr. Doolittle. Thank you, Mr. Chairman.

Mr. Secretary, I am new to the committee and didn't have the
pleasure of being acquainted with you on this committee when you
served here. I appreciate very much your open and fair approach to

39

these important issues. Your focus on the condition of the rural
communities I think is very important. Many of us across the coun-
try are concerned about this.

I represent a facet of it that I would be interested in hearing
your views concerning the rural timber communities in northern
California. My district is northeastern California along the Nevada
border. We have a great deal of timber and we are heavily impact-
ed now by issues concerning the California spotted owl.

I was pleased to hear your reference defending your jurisdiction.
I would hate to see the Agriculture Department lose jurisdiction
over the forest. I think it is important to be maintained and I think
it is important that this committee maintain a role in that area.

I am very concerned about the tremendous acreage set-aside that
is now being recommended by the Forest Service concerning trees
where the California spotted owl is felt to be nesting. I believe it is
300 to 400 acres per tree. We talk about the problems of the rural
economy, and this will be economically devastating.

As you know, in northern California and throughout the Pacific
Northwest we have suffered about a one-third reduction from his-
toric average yields in the 1980's down to the point where what
we're cutting today is about one-third of what used to be cut.
People and whole families are thrown out of work. They are
moving out of the area. These areas are devastated.

This is one of the last great manufacturing industries in the Pa-
cific Northwest. We can have healthy forests. My question to you
is, What plans do you have to help us in this area so that we don't
basically devastate completely the economy?

Secretary Espy. I appreciate the question.

You are from a very important State, some think the most im-
portant State when it comes to the breadth and range of agricul-
tural production. I am out to California a great deal. I graduated
from law school there and I get out there often meeting with vari-
ous producers and growers.

As you know, I was in the State of Washington yesterday. And
although my subject wasn't the spotted owl and timber sales, let
me tell you that certain groups approached me wanting me to
make a statement on those subjects.

It is a very controversial subject. I hope this is one of the areas,
frankly, where I can be considered as an honest broker between
unemployment concerns, job growth and protection concerns, agri-
cultural production concerns, and concerns of environmental qual-
ity.

President Clinton, as candidate Clinton, talked about a timber
summit somewhere in the great Pacific Northwest that would be
held soon after he had been sworn in. I would like to discuss this
with him very soon because we don't really have a lot of time to
waste. I would like to talk to him about it, get a good date, and
convene such a summit very, very quickly. We're going to be
moving on that front.

I am concerned about it. It is a controversial issue and we will be
moving to resolve it.

Mr. Doolittle. Thank you. I look forward to working with you
on it.

The Chairman. Mr. Volkmer.

40

Mr. Volkmer. Thank you very much.

Mike, I, too, wish to add my congratulations to everybody else
and wish you well. I know that your time is very pressed right
now.

You mentioned the electrical cooperatives in national rural elec-
tric and how much they can help in rural development. We have
an instance where that is just what has happened in my district.

We had a coal mine that was furnishing coal for our rural elec-
tric generating plant. They had used Wyoming coal because of
clean air, et cetera. So the mine is closing down. The rural develop-
ment people from the University of Missouri have now set up an
office in that area because you have about 450 miners and it has a
big impact on the whole economics of the whole area.

This is not the farm now. This is people putting together — like
job training, everything else — into one office and trying to work it
out. The funding requirements are going to be difficult. Associate
Electric is going to fund it for a while.

I need to discuss that with you and perhaps with the Appropria-
tions Committee later on to see if we can't continue that. I see this
as a way that in the future we can maybe stop some of this decline
in rural areas.

As you know, we have communities out there that are dying on
the vine. I think agriculture, which has been a mainstay in our
past history — we have fewer and fewer farmers and you have fewer
and fewer people in the communities. We need to work on that and
I would like to discuss that with you.

I appreciate what you said to Dan Glickman. Would that apply
to my State? I don't have an ASCS State Director. We're going to
have sign-ups come up. I know we have good people on the staff in
the State office and we have good people out in the county, but we
would like to have a new Director overseeing it and getting it going
for this spring when the sign-ups come about.

Secretary Espy. If I can meet with you after this session, then I
will take your ideas.

Mr. Volkmer. I will stick around. I want to talk to you about it.

Secretary Espy. I would be glad to.

Mr. Volkmer. Best wishes to you. We will work with you all the
way.

And I am not for moving the Forest Service over to Interior any
time.

Secretary Espy. I need your help. Thank you.

The Chairman. Mr. Barlow.

Mr. Barlow. Thank you very much, Mr. Chairman.

In the interest of time you don't need to respond to these com-
ments, right now, Mr. Secretary. But I want to second what Mr.
Brown said about the video conferencing.

I have seen this working in western Kentucky. As you may
know, in western Kentucky we have a network already working
with the colleges and the high schools. I am very interested about
getting this technology into the USDA offices. I think it will save
time and travel out there in the western end of the State. When
people have to go to Lexington and Frankfort from the Federal of-
fices they are gone for 1 or 2 days for a meeting. I think this can
save time and budget.

41

I also think that as farming becomes more technical all the time,
farmers can come into these centers and be brought up to date on
ideas. Also, if they're looking to move into other areas of farming,
they can get engineering education which can help them develop
alternative crops. This is an area that is just waiting for some cre-
ative money to be put into it. USDA can do it. I think we can see a
great benefit for rural America in helping people feel that they
have many options and opportunities to improve their circum-
stances.

Second, are you going to give the Inspector General in USDA tar-
gets on areas of savings that can be made in such things as travel
and moving expenses? These budget items can be quite large
within the agency's budget but often get overlooked from up here. I
hope you do that.

One other thing. The Department of Natural Resources in our
State has come down on concentrated animal facilities with the
possible requirement of putting in test wells. I would just like to
compliment the Soil Conservation Service for having stepped for-
ward quickly and worked with farmers to come up with artificial
wetlands as a much less expensive and practical way to get at
water pollution problems and head off this financial trouble that
the Department of Natural Resources had proposed with these test
wells, which as you know are after the fact testing of a problem
that we want to be heading off in a practical cost-efficient way
before it even comes up. SCS has done a good job there.

Thank you very much.

Secretary Espy. Those are three good questions and three good
statements.

If I could respond quickly to at least two of them, when it comes
to restructuring and cost savings and those types of things, of
course the Inspector General will be involved and the recommenda-
tions of that office will be taken very seriously. There are some
clear targets. If you have been over there even the briefest of
times, you can see very quickly that they have a lot of different
divisions. Each division has a press secretary and a press office.
There are at least 55 or 56 press officials over there.

When it comes to lawyers, each division has a bank of lawyers.
There are probably 150 or 160 lawyers over there.

Personnel offices. Each division has its own personnel office.

I hope that these are some areas that we can consider for consoli-
dation first. We can see some cost savings immediately and in the
near future. We should operate down the line by function and
maybe consolidate these areas.

Also when it comes to economic development in the rural areas,
in my confirmation proceedings I was impressed with a Senator
who told me how much the Prodigy software costs to use in an
urban area of a State and how much more it costs in a rural area
of a State that was about 12 miles away because the infrastructure
is not there. The computer capability is not there. The telephone
lines are not there.

It doesn't take a genius to see that because of the economies of
scale and because these areas are less dense, they have suffered
from not having the same kind of technology of the future that the
urban areas have.

42

If I can do anything as Secretary of Agriculture, it is just to
bring to the attention of our President something that I am sure he
already knows. If you are talking about enterprise zones, computer
technology, information, or other capabilities, the rural area ought
to be treated just like the urban area. And I think we can do that.

The Chairman. If members will bear with me, Mr. Secretary, we
are pleased to have visiting with us a group of members of the
Polish Senate and the Polish House. They are here to learn more
about agricultural cooperatives and agricultural policy. We wel-
come them to this committee.

[Applause.]

The Chairman. Mr. Goodlatte.

Mr. Goodlatte. Thank you, Mr. Chairman.

Mr. Secretary, I regret that the overlap of our service on this
committee was only a few days, but I welcome you in your new ca-
pacity and look forward to working with you.

The one concern or complaint I receive from farmers and others
in agribusiness in my district is the overregulation of the farm
economj7, as they perceive it, by this Federal Government. I wonder
if you have any comments in that area. It seems that the impact is
greatest on those who can least afford it, the small family farmers
that are confronted with enormous amounts of paperwork, equip-
ment they need to purchase, their economies of scale being so
small that it has a tremendous impact, but it affects the profitabil-
ity of all agribusiness. And it affects food prices in this country as
well.

Do you have any thoughts on how you would proceed with that?

Secretary Espy. I have a few thoughts I could relate to you.

Part of our mission, an essential part of our mission, would be to
improve farm income and what the farmer can keep. Part of that
has to concern reduction in overhead expenses. A lot of that we
have no control over, but some of that we do. What we have con-
trol over would relate to regulation, redtape, communication with
ASCS, and all the other farm service organizations.

If we could minimize the contact — make sure it is of the same
quality or perhaps improved quality — so that the farmer can
remain on the field doing what he or she is supposed to do and not
be in the Farmers Home or the ASCS office waiting in line.

I would hope, as has been suggested here today, that a lot of this
can be done with computer technology and improved training at
the service level on the part of USDA. Perhaps I am speaking
ahead of myself, but there are certain parts of this that we can
change. The farm plans are submitted with regularity. We should
computerize these farm plans. Perhaps the USDA can be the first
point of contact, sending the farm plans of last year to the farmer
and asking if there are any changes. If there are no changes, you
don't have to come in as much as you do now.

I hope that — maybe it isn't that simple. Perhaps it is a lot more
complicated. But then perhaps it is not. I think we ought to consid-
er these kinds of farm simplified changes. With an emphasis on
technology, with an emphasis on education, and with an emphasis
on outreach, we can make sure that we can continue down that
path.

43

Mr. Goodlatte. I hope also that we can work well with this com-
mittee in enacting new legislation and in implementing the regula-
tions from that legislation that will take into account the cost/ben-
efit analysis of some of the things we impose on farmers. Certainly
we do need to protect the environment, but I don't think anybody
is more dedicated to doing that than the American farmer. They
have the clearest interest in being sure that the land is properly
preserved for their future use and that some kind of review mecha-
nism that is independent of those who are imposing the regulations
can be put in place to again see that sensible regulations are im-
posed that do not add unnecessary costs.

Thank you, Mr. Chairman.

The Chairman. Ms. Long.

Ms. Long. Thank you, Mr. Chairman.

Let me extend a welcome to you, Mr. Secretary, and tell you how
good I feel about you serving in this capacity, not just as a Member
of Congress who represents a rural district, but as someone who
lives on a farm and whose family derives their income from farm-
ing. I think your commitment to rural development is a very im-
portant commitment for this country, particularly at this point in
our economic crossroads.

I would like to ask you a question about the Rural Development
Administration. When we established the RDA in the 1990 farm
bill we gave the administration quite a bit of latitude in an at-
tempt to allow it to consolidate various economic development pro-
grams and make it more cost-efficient in delivering those pro-
grams, but also to make it easier for the rural communities to
access the programs that are available.

We are attempting, I think, to move in the direction of one-stop
shopping for the rural communities since they don't have the same
kinds of professional resources, the many individuals they can
employ with expertise, and a whole variety of areas including
working with Federal programs.

I wouldn't expect, certainly, that in the less than 2 weeks you
have been in this position you would have had any time to work on
that consolidation yourself, but do you know what kind of progress
has been made in the Department, and then specifically in the
Rural Development Administration, in consolidating the various
Federal programs?

Secretary Espy. Thank you for the question, Jill.

Let me first congratulate you on assuming the helm of the Con-
gressional Rural Caucus. That is a very important position. You
are highly qualified for it and I congratulate you for taking it.

I want to work with you in that. I was the vice chairman of the
Congressional Rural Caucus, so I know the importance of your
task.

I have been here for 13 days. I have not specifically reviewed the
programmatic relationship between Farmers Home and RDA. As a
Member of Congress, I know that the establishment of the relation-
ship is problematic. You have Farmers Home with the farm loan
and housing function and the RDA, a new agency without a lot of
money at this point, but with the business and industry and the so-
called rural economic development, water, and sewer loan function,
which is very important as well.

44

We had a staff-sharing program between the Farmers Home and
the RDA where the Farmers Home would detail staff members to
staff up the RDA. We have had a significant transfer of employees
just since President Clinton has been sworn in.

I am not prepared at this moment to go into any great detail
except that it was a good move on our part to create the RDA.
They have a function and they have a significant mission. They
should get the resources they need to enable them to carry out this
function. They ought to get qualified staffpersons who consider
themselves dedicated to RDA and not surrogates from Farmers
Home.

Ms. Long. If I could just follow up, I think it would be a good
way to serve the rural communities. The better we are able to con-
solidate the various efforts and programs targeted to rural econom-
ic development, the easier it is going to be for those out in the
rural communities and also the more cost-efficient we're going to
be able to deliver those services.

I know that you are very committed to that, but I just want to be
on record as stating that position.

Thank you, Mr. Secretary.

The Chairman. Mr. Inslee.

Mr. Inslee. Thank you, Mr. Chairman.

Mr. Secretary, I am from the State of Washington, and I want to
tell you that your red-eye flight had great dividends in building
confidence levels to stop repetition of this problem. It was well
worth it.

I would like your comments on the Delaney clause and what you
think the Department could do in helping us fashion a solution to
this anomaly in the law that does not add anything to food safety
and yet could prevent us from using useful tools. How can you help
us in that regard?

Secretary Espy. Thank you for the question.

First, let me say to you that I appreciate your statement on the
Washington visit. It was an incredible visit for me. I would have
hoped that my first visit could have been to the Midwest. I had
planned for my first official visit as Secretary of Agriculture to
have been into corn and wheat country — and I will be doing so
very soon.

I talked to Tim Penny about where I should go and I am relying
upon him to help prepare the itinerary for this visit I am going to
take.

But this was a very important issue. It was a breaking issue, if
you will. Some here today called it a crisis. We had to move very
quickly to assure the public that we continue to have a safe food
supply. They should not be fooled, though. We will never be able to
get down to the level of zero pathogens in hamburger, for instance,
but we can do more in identifying and in educating the public on
safe cooking methods. If this particular hamburger had been
cooked perhaps a few seconds longer, then these children would
have never become ill.

But at a point along the chain, it was stamped USDA. Although
they were stamped in full compliance with the meat inspection
laws, I think we can do better. As I said, we will be proposing these
improved regulations for you and for this committee.

45

When it comes to the Delaney clause, let me tell you that this is
also a breaking issue. I have had a chance to talk to Carol Browner
of the EPA about this. I am slightly concerned about the timing of
this release and the nature of this release. We realize that we
should communicate a little bit better in the future on these types
of things.

Let me just say that I will be talking to her today about what we
can do to make sure that we can jointly assure America that there
are certain categories of chemicals that are injurious, but there are
certain others that should continue to be considered for use and
not harmful to the American public. We can be a little bit more
careful about which ones we identify and which ones we don't.

The Chairman. The gentleman's time has expired.

Mr. Dickey, the gentleman from Arkansas.

Mr. Dickey. Mr. Secretary, I represent the most important dis-
trict in the United States, and I want to know what you plan to do
to help the people of the Fourth District of Arkansas in the next 30
days.

The Chairman. The gentleman's time has expired. [Laughter.]

Secretary Espy. I guess Arkansas is almost a protected State
now. [Laughter.]

Seriously, I am going to help the constituents of your district as I
will help the constituents of the various districts sitting at this
table, no better and no worse. But certainly to the extent of my ca-
pability I will.

The Chairman. Mr. Pombo.

Mr. Pombo. Mr. Secretary, I won't ask you a big, long question. I
do appreciate you being here and all the time you have spent with
this committee. It does me a lot of good to see a person of your
background and your integrity sitting in your position. I was one of
those that psked Jim Nussle about who this Espy guv was because
I didn't know you before.

I can give you the assurances that every member of this commit-
tee that I asked about you gave you glowing remarks. That is a
good compliment coming out of a committee such as this.

I came out of production agriculture directly into the House. A
year ago, I was on a cattle ranch when I decided that I was going
to run for Congress. The concerns of protecting agriculture as an
industry is what is important to me because I believe the industry
has been under attack for a number of years and that one of the
most important things we can do to protect it as an industry is to
protect the property rights and to protect the water rights that
these farmers and ranchers so desperately depend on in order to
make a living.

In terms of the Delaney clause that was brought up a few times
this morning, those of us in production agriculture are counting on
you to be that voice, that commonsense voice and that voice of
saneness, coming out of the Agriculture Department in trying to
protect us and in trying to protect agriculture as an industry.

Thank you.

Secretary Espy. Thank you. Thank you for the question.

All I can say is that I will be that common sense voice, but also
an honest broker between the differing groups. I have always felt

46

that if we sat down a little bit longer we would find that the divi-
sions are far fewer than we would otherwise think.

Yesterday, one of the more important witnesses before the Wash-
ington State senate committee was a very astute woman from the
trade group promoting meat. If you would compare our statements,
they were almost the same. I would think that there were others
that wouldn't have believed that that would have happened. It is to
all of our benefits to assure Americans that it is a safe, quality food
supply.

When it comes to your statement of who I am, I am who I am. I
am someone who cares — from a cotton, soybean, rice, and catfish
region — but someone who has participated across the range of com-
modity discussions as we crafted the last farm bill, and somebody
who knows now that I have to protect all the farming income of all
the farmers whatever they grow, whatever they raise, and what-
ever they produce. And I am going to do that.

I am someone who traveled with the chairman and others to
these important international trading discussions, someone who
cares about GATT and NAFTA, and knows that if agriculture is to
be more successful in the future, we have to consider the opening
of new markets as the strength and the area in which we must
move more strongly than we have heretofore.

Agriculture is going to be all about market development, wheth-
er it is multilateral or even bilateral. I am all about that.

And then I am all about rural development. You have heard
here that I am responsible for a bunch of different things promot-
ing rural economies and I am going to continue to do that.

I am all about hunger. I am also a bipartisan person. I come
from a district with many different types of folks. I have been able
to represent them all adequately while I was here and I will repre-
sent you and your interests as well as others.

The Chairman. The Chair will recognize very briefly, because of
the constraint on the time of the Secretary, Mr. Allard and Mr.
Penny.

Mr. Allard. Thank you, Mr. Chairman. I appreciate that.

I would like to congratulate the Secretary on his appointment
and say that I do look forward to working with you. I would like to
spend my time, as brief as it is, to invite you to come to visit the
district that I represent, particularly Colorado. We have a lot of
dryland farming there and we have a lot of issues that are very
special. You don't really appreciate the significance until you get
on the farm, put your foot on the soil, and see what is happening
as far as soil conservation issues, for example.

We also do a lot of irrigated agriculture, so that does bring up a
lot of water issues — Clean Water Act — and how you're going to
manage those farms, as well as the Endangered Species Act and a
lot of other issues related to irrigated farming.

Again, I would hope that you would take time to visit districts
such as I represent because until you are right there and see the
problems, it is pretty difficult to understand exactly what they're
talking about. Obviously, I am delighted to hear your comments on
rural economic development. I agree that rules and regulations are
disproportionately affecting small communities in rural areas.

47

Again, I congratulate you on your appointment and I look for-
ward to working with you.

Thank you.

Secretary Espy. Thank you. I appreciate those comments and I
accept your invitation to come and see your district. Let's find a
good date to do it.

The Chairman. Mr. Penny.

Mr. Penny. Thank you, Mr. Chairman.

I want to take this opportunity to officially congratulate you on
your appointment and to wish you the very best.

I have noted in the last few weeks that you have repeatedly
made reference to your desire to reorganize and restructure the De-
partment and want to make an offer to you that you have at least
one very strong and willing ally on the committee as you start
down that path. I think it is an undertaking that certainly poses
great challenges but we can do a lot more for agriculture if we get
our own house in order.

I applaud your commitment to that goal.

I want to be a bit more parochial, in terms of a couple of pro-
grams in which I have a direct interest. In the 1990 farm bill we
created the Ag Research Commercialization Program. As we talk
about rural development, new uses for farm crops is certainly a di-
rection we need to pursue. I urge your close attention to that and
would like to see you make that one of President Clinton's invest-
ment priorities.

The second area is the beginning farmer bill, which we passed as
part of a major Farm Credit Act last year, which will take some of
the existing money at Farmers Home and dedicate it to down pay-
ment, loan assistance, and other help for beginning farmers. I
think a very ambitious attitude on the part of the Department of
Agriculture will be critical if we're going to make that program
work out there in farm country.

And last but not least, I chair the Foreign Agriculture Subcom-
mittee and value-added exports are where it is at. Your attention
to that as a priority for our farm producers in the next several
years I think will pay tremendous dividends.

Any reactions you might have? I just wanted to share those view-
points with you.

Secretary Espy. I agree with you on all three counts. When it
comes to value-added exports, the statistics reflect that they have
now exceeded bulk products when it comes to the balance of trade
item. That is the wave of the future and that is how it looks. It
looks good. We will continue to emphasize that, Mr. Penny.

Also, we do have a problem when it comes to our GSM Program
and the integrity of these programs with regard to the extension of
credit to the former Soviet Union and the now-CIS States. We
have a real problem there. As you know, we will be meeting soon
and talking with them about restructuring, if possible, and where
we go. We in the Department have now received claims by certain
banks that have extended funds to these new democracies under
our Credit Guarantee Program. It is a big problem.

We have to move with all deliberate speed to try to make sure
that we can have a viable program, one that promotes these new
democracies, but also one that has integrity where we are able to

48

receive repayment from those new nations. We will be talking
about that.

Sure, President Clinton will have an economic short-term strate-
gy and economic stimulus package. I am not privy to all the de-
tails, but we have already discussed with OMB the inclusion of the
one that you mentioned in that program. We have to get the appro-
priate dollar figure and attach that to it, but I am in favor of that
as well.

Mr. Penny. Thank you, Mr. Chairman.

I do look forward to pinning down a date when we can get you to
the upper Midwest and get you introduced to our farmers up there.

The Chairman. Mr. Secretary, we have covered a lot. The mem-
bers have been able to express some of their concerns and some of
their ideas. Your contribution has been tremendous. I thank you
very much. We look forward to working with you.

I might add as a final word, aside from thanking you for coming
here and being so patient and listening to all our members, is that
as far as budget is concerned, we have always contributed our fair
share. Our commitment is to continue that. We do hope that
within the administration you see that we are not overburdened
because it is very popular in 30-second bites to aim at agriculture.

We have done our part. We will continue to do our part. We hope
that you assist us in that respect.

We do hope that we will have joint meetings periodically to en-
lighten the members between you and Ambassador Kantor, you
and Secretary Ron Brown, all of the Secretaries that impact on ag-
riculture, so that we might have some communal endeavor with
the other Departments.

And there's the issue of health. My chart shows that 52 percent
of USDA is nutrition-related including WIC, school lunch, feeding
the elderly, and food stamps. I have a different idea that is not
being presented on this issue. All I hear about health care is cost
containment. I haven't heard much yet about preventive health
measures. There has recently come from the new administration
an idea about the vaccines. I think this is good.

But the prevention of health problems begins with nutrition,
with diet, and I hope they recognize that. I put in a call to Mrs.
Clinton's office, as she will head the group looking at that issue.
They very graciously returned my call. Unfortunately, I wasn't
here. I look forward to visiting with her or pertinent staff.

I do hope that you are a part of that endeavor. If you're not, we
hope that they listen because the best way to save money on health
care is to have people be healthy and not get sick. We are now
living longer, thanks to nutrition, diet, and alternative medicine,
the cost of reforming health care is going to be tremendous. I don't
think we can handle it solely under cost containment without caus-
ing injury to someone or some place.

So the best way to contain costs is to see that we begin prevent-
ing. Preventive nutrition begins with agriculture and farmers.
They now have the ability to genetically engineer fruit or vegeta-
bles that may well be an antidote for some illness. I do hope that
as we're moving into the next century that the focal point will be
how we keep people healthy and prevent disease. That is the best
way to save the cost out there.

49

I do hope that you, working with us and the other committees of
jurisdiction, will take a major or at least educational stand to see
that we keep our people healthy. I think we are missing the boat if
we think we're going to solve the health care problem solely with
new taxes or containing the cost of the doctors or the hospitals.
That isn't going to do it.

As for all the reasons that we live longer, I think we should have
people who live longer in a healthy and contributing manner. That
is going to be your responsibility. It begins with 50 percent of your
budget. We hope to work with you in that respect.

Secretary Espy. If I can summarize, are you saying that we are
what we eat? [Laughter.]

The Chairman. You are right. Sometimes we outdo ourselves be-
cause of the availability, thank God, in this country.

We could stay on this subject forever, but remember what hap-
pened in the Soviet Union, what happened to our brethren in
Poland and Hungary when agriculture failed everything else went
down. Now that they have the ability to use a democratic process, I
think they will be able to get back on their feet.

We will be working with them, but we begin here with the Amer-
ican people.

We thank you.

Mr. Volkmer. Mr. Chairman, are you starting a new phrase like
"An apple a day keeps the doctor away"?

The Chairman. It goes much further than that now. A genetical-
ly engineered onion from south Texas or something like that.
[Laughter.]

Mr. Secretary, very seriously, we hope the good Lord has His
hand on your shoulder as you carry out the responsibility of your
office.

Secretary Espy. Mr. Chairman, thank you for being here today.
Let the record reflect that I leave here with three items. One is a
green cap, another is your chart which has been personally auto-
graphed and handed to me, and the last is a lot of good will. I hope
that I continue to earn your trust not just because I am a former
member of this committee but because you know we have our pri-
orities straight.

I promise to you in return that I will consult with you and Pat
Roberts and all the other members of this committee on a very reg-
ular basis on policies, procedures, and programs that we will insti-
tute in USDA.

The Chairman. We will be here for you.

If there is no other business at this point, and it will not disac-
commodate any of the other witnesses, we will stand recessed until
2 p.m.

[Whereupon, at 12:30 p.m., the committee was adjourned to re-
convene at 2 p.m. the same day.]

AFTERNOON SESSION

The Chairman. The committee will be back in order.

I apologize to our witnesses. The best laid plans often go astray
and we had a series of votes. I am informed here that someone
needed to leave promptly after 2 p.m., Mr. Huber.

50

Is he still here?

Would you like to submit your statement for the record and then
tell us what you can within the available time? I apologize but it
was beyond our control.

STATEMENT OF STEWART G. HUBER, PRESIDENT, FARMERS
UNION MILK MARKETING COOPERATIVE

Mr. Huber. Thank you very much, Mr. Chairman.

Members of the committee, my name is Stewart Huber. I am a
dairy farmer in Wisconsin. I am also president of the Farmers
Union Milk Marketing Cooperative. I appear here today on behalf
of that membership of 10,880 in eight Upper Midwestern States.

We appreciate the opportunity to appear here today. Unfortu-
nately, I do not have written testimony to distribute. My remarks
are going to be off the cuff. We will provide the committee later
with testimony.

At the outset, let me say that the dairy situation in the Upper
Midwest as the price situation has deteriorated dramatically in the
last 9 months. The cheese price has fallen out of bed. It has gone
down dramatically. The milk price, the M-W price for March is ex-
pected to be at the 10/30 level with some people predicting it going
all the way down to the support level.

Many good farmers who have done very well in past tough times
are in tough shape. They have gone to their lenders and have been
told that under the pricing situation their situations will no longer
cash flow. They are very disturbed and angry. They want some-
thing to get done.

Obviously, if we're going to deal with price it seems that there
are three areas you have to deal with: Supply, demand, and exter-
nal forces. I know the committee does not deal very often with the
demand side. It is a little bit out of your purview. It is primarily
the responsibility of farmers themselves. We have allowed dairy to
be pictured as an excessively expensive farmer-monopolized com-
modity that is highly subsidized and maybe even dangerous to your
health. That is too bad because the truth could have been our very
best public relations.

But of some concern to this committee I would think would be
the effort to recall the National Dairy Board. There is a petition
going around to get that job done. I would not speculate at this
time if there was a referendum of how it would come down. If a
check-off program is to continue, however, we would suggest to the
committee that you investigate the possibility of assessing imports
on the same basis that our domestic producers are assessed.

We would also suggest that you also look at possibly revising the
generic program for advertising to also include dually funded
branded advertising. We think the search should go to looking to
the desires and needs of a newly ethnic public population that has
not been too well served by our programs in the past.

Let me say that the Dairy Export Incentive Program that was
initiated by the former Secretary in the last days of the past ad-
ministration has alleviated some of the pressure on the supply side.
Maybe a little bit of it will help the supply side. We know that that
is not a long-term fix, but we did appreciate it because the situa-

51

tion on the supply side in dairy has in the past months surprisingly
grown. The growth in the dairy section has happened basically in
parts of the country that have not traditionally been in the manu-
facturing milk business.

We are thinking that that may have some real long-term effects
on the supply side that will be detrimental. I think most dairy
farmers recognize that it no longer makes any sense to produce 100
percent product if it only takes 96 percent to supply the market
and let the 4 percent take the price.

The committee will recall that in the last session in 1991 you did
try to help us put in an inventory control program. When it
became clear that neither target price nor two-tier was going to be
put into effect, we all signed onto the Leahy bill, which was a re-
vised diversion-type program. As you know, at the very last hour
before the vote, National Milk withdrew its support. So today, we
end up with only a purchase program and also a producer assess-
ment program, neither of which are working.

We think — although I know there are probably some reluctance
on the members of the committee — we have to go up to the Hill
one more time and try to put together in this session another in-
ventory control program. I know it won't be easy. If we can't get
that job done, then we have to look at a surplus disposal program.

Finally, I would like to say to the committee that we want you to
take a hard look at the upcoming GATT and NAFTA things that
you will be reviewing, particularly on the side of the dairy issues.
We're almost ashamed to bring this to your attention because our
information certainly on NAFTA is to support any effort that will
open the market up between Canada, Mexico, and the United
States.

Unfortunately, looking at the fine print of the dairy section, we
find it seriously flawed. Let me just outline a couple of our major
concerns.

The first is what we call the Canadian exclusion. Canada will be
able to retain its article XI exclusion under GATT while our sec-
tion 22 was traded away. That means that the Canadian producers
will be assured $22 per hundredweight for as far into the future as
we can see while our producers are going to have to struggle to
maintain even 10/10 price support levels.

It also means that dairy products produced in the United States
are going to be shut out of the Canadian market to protect the
quota system that is in place in Canada. That, of course, seems
upside down to the intention of the whole NAFTA agreement.

They say, "Maybe we are locked out of the Canadian market, but
look at the potential in the Mexican market. Here we have 90 mil-
lion new customers just waiting to gobble up our dairy surplus."
But some of the research that has been done and been analyzed by
Dr. Larry Hamm of Michigan State University suggests that short-
term and intermediate-term prospects for exporting to Mexico of
dairy are very limited indeed, with the exception of nonfat dry
milk.

Here Dr. Hamm says the Mexicans, however, will be served by
the lowest cost producer in the world, and that is New Zealand. As
it turns out, however, Mr. Gunderson of your committee has point-
ed out that it is actually the high cost producer in this hemisphere,

52

Canada, that is supplying the Mexican with nonfat, 76 percent.
That is going to be locked in under GATT for the foreseeable
future. This means that our limit in the next 15 years into the
Mexican market is going to be held to 40,000 metric tons.

We also have concerns about Mexico becoming a staging area.
We think the rules of origin need to be looked at very critically for
export into our country because milk is a very fungible product
and some of the multinationals may look at subsidized nonfat to be
reprocessed and shipped into our market.

We are concerned about one other thing, and that is the food
safety angle. On poultry and beef they have agreed between Mexico
and the United States on cross-border inspections. There is no
agreement in this area in terms of dairy at all. It should be ad-
dressed.

And certainly the access into NAFTA of the other hemisphere
countries, including nonhemisphere countries of New Zealand and
Australia are also of concern to us. We certainly hope that you will
ask the Clinton administration to look favorably to an agreement
in agriculture and to deal specifically with the very issue.

We thank you very much for the time.

The Chairman. Thank you very much, Mr. Huber. Your re-
marks, of course, are being transcribed. If you care to make any
additions and you can get it to us within the next 72 hours we will
be happy to incorporate them as additions to your oral testimony.

We thank you for being here.

Mr. Huber. Thank you very much.

The Chairman. I thank the other witnesses for allowing us to go
out of order.

The next panel is Michael V. Dunn, vice president for govern-
ment affairs, National Farmers Union, Washington, D.C.; Grant B.
Buntrock, director, National Farmers Organization, Washington,
D.C.; Keith W. Eckel, president, Pennsylvania Farmers Association,
on behalf of the American Farm Bureau Federation, Washington,
D.C.; Larry Mitchell, acting national director, American Agricul-
ture Movement, Washington, D.C.; and Curt Rohland, president,
National Family Farm Coalition, Washington, D.C.

I would invite you all to the witness table. Since we have been
delayed throughout the process first by the very good and extended
visit of the Secretary, which was his first visit to our committee as
Secretary, and then the delay on the vote, I would hope that the
witnesses will submit your prepared statements for the record and
then try to summarize briefly your concerns and your information
to us if you can do it within 2 or 3 minutes.

But proceed as best you can so that you can get your point across
and into the record. We will have the opportunity to review it at a
later point.

We will begin with you, Mr. Dunn.

STATEMENT OF MICHAEL V. DUNN, VICE PRESIDENT,
GOVERNMENT AFFAIRS, NATIONAL FARMERS UNION

Mr. Dunn. Thank you, Mr. Chairman. We appreciate you hold-
ing these hearings and we are indeed honored to be here at the

53

first full meeting of your committee. On behalf of the 250,000 mem-
bers of the National Farmers Union, I thank you.

You will notice in my testimony that I go through and do a recap
of what came out of the 1993 Outlook Conference represented by
USDA. They are showing that next year, 1993, farm income would
drop to a range of $42 to $48 billion. This will be about a 12-percent
drop from this year or a 17-percent drop if we have the worst case
scenario.

Dr. Donald, who predicted this, also said there will be a decline
to $41.5 billion in 1993 in exports. Other economic indicators report
that the record for 1992 production would lead to lower prices in
1993 and again reiterating the $42 to $48 billion of net farm
income.

The change in inventory — the carryover stocks will have a tre-
mendous impact on that.

Expensewise, farmers' costs will rise about $3 billion in 1993.
That is a gain of 2 percent. We are anticipating planted acreage to
be less in 1992, but higher costs will offset the reduced rate of
input use. There will be a continued trend to use reduced tillage
and to use less large equipment.

Energy prices for 1993 will be a large factor. We are seeing an
increase in crude oil of 6.5 percent. Diesel increase of around 5 per-
cent. In 1993, seed use is expected to increase by 1 or 2 percent.

U.S. fertilizer prices declined in 1992. It will be a slight increase
in 1993 as a result of the surge in natural gas prices. Pesticide costs
will rise about 4 to 6 percent. However, pesticide use may decrease
by 3 percent from the 1992 rate.

The high crop production in wheat and feed grains in 1992 will
remain. There will be a large carryover stock, which will keep
prices low and will affect the livestock and dairy industries. We are
looking at a $1 to $2 per hundred weight drop in 1993 for pork and
about $1 per hundred drop in milk prices.

Past and present situation — Mr. Chairman, if you will look at my
testimony, there are some charts in there. Figure 1 shows a snap-
shot of what has been happening in the farm sector since 1988.
Even though net cash income is rising, the real net cash income is
declining. Net income is showing a decline in both the net farm
income and real farm income.

Farm assets in both real estate and nonreal estate are remaining
somewhat constant. Farm debt is showing a mild rise in the real
estate sector and a somewhat higher increase in the nonreal estate
sector. Cash receipts are declining and most disconcerting to us is
the Government payment which after 6 years of decline has begun
to increase. In the charts it shows an increase of about $13 billion.
Since the time this chart was developed it is now projected to be
$17 billion.

This chart shows an increase in Government spending at abso-
lutely the wrong time.

If you will look at the next chart on page 5, Mr. Chairman, you
will see what has happened to top entitlements. Of the 12 entitle-
ment programs, the farm program ranks No. 12. It is the only one
that has had a decline in the average percent between 1985 and
1991. And worst of all, it shows from 1991 a projected decline while
all other entitlement programs are going to have an increase.

54

I do make reference there on page 6 to the chairman's favorite
charts — his most famous charts that we have talked about earlier
this morning. Mr. Chairman, this is of great concern for us because
every time we talk about budget cuts, agriculture is the first on the
chopping block, as your charts well point out.

Let me jump to page 7 with the charts. On figure 3 you will
notice that although it is showing somewhat of an increase in the
balance sheet for the agricultural sector, in real terms we see that
equity has declined from the $636 billion in 1988 to somewhere pro-
jected between $570 to $580 billion in 1993.

This is a very bad trend for our folks. Many of them think they
are working harder and not seeing any increase in their income.

If you will drop down to the bottom chart on that page, it looks
at who is making agricultural loans. You will see that short-term
loans with the commercial banking institutions are going up. You
will see a slight increase in individuals and others. That is primary
suppliers offering operating loans to producers. Usually that is at a
much higher rate of interest than what they might get from the
old production credit associations or a commercial bank.

Probably the worst figure on that is the Farmers Home Adminis-
tration role. You will see that it is declining there at a time when
Farmers Home should be getting in to help beginning and younger
farmers increase. Farmers Home has sent out some 31,579 notices
of service to its borrowers. Only 7,952 of those have responded.
That is, 75 percent have not responded. So we are going to see
them getting foreclosure notices and we're going to have another
go-around, Mr. Chairman.

Finally, the marketing loan program that has been developed as
a part of the Snap Act provision without the GATT is not going to
be workable in our estimation. We don't think the loan rate is high
enough. If it was high enough to actually operate, the cost would
be tremendous.

Mr. Chairman, as I looked at your committee this morning, I saw
a lot of new faces. There has been change; there is a new adminis-
tration; the American voters have asked for change. If we do not
see a change, Mr. Chairman, we think the outlook is bleak for agri-
culture. We at Farmers Union stand ready to work with you and
the new Secretary of Agriculture to help develop that change for
the good of all America.

Thank you, sir.

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

The Chairman. Thank you very much. We appreciate your excel-
lent testimony. It will be very helpful to us.

Mr. Buntrock.

STATEMENT OF GRANT BUNTROCK, DIRECTOR, WASHINGTON
OFFICE, NATIONAL FARMERS ORGANIZATION

Mr. Buntrock. Thank you, Mr. Chairman.

On behalf of the National Farmers Organization, I too want to
commend the chairman and vice chairman for allowing us the op-
portunity to appear before you today.

Based on USDA projections that Mr. Dunn just pointed out to
the committee, but in addition to that some specific discussions
with members of the National Farm Organization, I think we can
all agree that the economic outlook in agriculture is at best very
fragile.

As I am sure the chairman and the vice chairman are aware,
many of these midrange and even some of the larger farms that
survived this recession of the mid-1980's have never really fully re-
covered from that period. A few cents a bushel or pound difference
one way or the other will literally make the difference between
survival for a lot of these farming operations or being around next
year.

I also think it is important to point out to this committee that
the circumstances between many of these midrange producers will
vary considerably, depending upon their individual circumstances.
I am talking about circumstances on their land costs, the type of
commodity they happen to produce, et cetera. All these factors
make a big difference.

I also want to make it clear that many of these producers to
which I am referring — I am not comparing the efficiencies between
producers. I am basically talking about good efficient farmers that
are still hanging on and farming out there today. I think possibly a
good way to illustrate this and bring it a little closer to home is to
use an example of our family farm in South Dakota, which is ap-
proximately a 2,000-acre farm operated by my brothers.

The farm is diversified. It raises beef, hogs, some row crops, and
small grain. The debt-to-asset ratio on that farm is about 55 to 60
percent. Whether that is representative I wouldn't say. But in any
case, I think it is an illustration. I also wanted to point out that
they are renting some land where they pay $40 to $50 per acre for
rent.

That rental charge on rented land is pretty close to what it costs
them to service their debt with a 55 to 60 percent debt-to-asset
ratio in that area.

The major cash crop on the farm is wheat. Their production cost
on wheat is approximately $3.50 a bushel. Mr. Chairman, 40 per-
cent of that production cost is land cost with interest, taxes, and so
on.

The 1992 wheat crop in our area, was very good. However, the
protein was a little less than what it normally is. As a result of
that, we fall below the line on protein content. The price drops
rather significantly. The average price for wheat in that area today
is about $3.30 a bushel based on 14 percent or less protein.

The ASCS yield is about 30 bushels. The payment yield on the
farm is a little less. Their actual yield in recent years is about 15 to
20 percent higher than that. When you subtract 15 percent flex
acres, and take the difference in the disparity between the yield,
you come out with about 60 to 65 percent of their production that
is actually covered by deficiency payments. This would net them
about $3.74 per bushel across the board on wheat with the $3.30
market price. The bottom line is that they will net about $10 per
acre for their wheat.

In the case of cattle, the picture looks much brighter, at least
today. Feeder cattle are bringing 80 to 85 cents when they put

56

them into the feed lot to feed them. The value of the corn in that
area, because of the lightweight and so on, sells for about $1.70 per
bushel. Using that factor, their cost per pound of gain on those
feeder calves will run about 35 to 40 cents. With 76 to 78 cents per
pound, they will show a good profit on backgrounded or finished
cattle, they are making money today in livestock.

Unfortunately, the major reason that they are is because it is at
the expense of their feed grain production. The price is simply too
low for feed grain. Our national vice president, John Garland, who
farms in Indiana in the Corn Belt tells me that his cost of produc-
tion for corn is running about $2.50 a bushel.

In the case of hogs, they are at about a break-even price today.
They are selling for 40 to 41 cents per pound. I talked to my broth-
ers this morning. They are about 42 cents. Again, a lot of that cost
of production is related to the cheaper feed. Using a study that re-
cently came out with somewhat higher corn price cranked in, the
University of Iowa and the University of Nebraska came out with
about $44.23 per hundredweight for finished hogs.

I also want to talk a little bit about the production costs referred
to earlier that are going up. Many of these production costs are at-
tributable to factors that farmers really have no control over. Real
estate taxes on the farm. As a result, a loss of tax base in many of
these communities. The real estate taxes on most farms in this
area are going up. On the home quarter where the buildings are
located, taxes went up 34 percent last year. They have been going
up 10 to 15 percent per year on the unimproved land.

Another cost factor involved, of course, are some of the environ-
mental requirements. I talked to some of the Midwest farmers
today and they say that in the case of corn they have approximate-
ly 25 cents a bushel for conservation and environmental standards
that they must maintain.

Farm equipment is another factor. There has been some upgrad-
ing in recent years. However, a lot of them have delayed purchases
of farm equipment. If you go in to replace machinery or buy ma-
chinery today, it just simply won't cash flow with the projected
prices we're looking at.

In summary, Mr. Chairman, the good news is that we're close in
some of these commodities. A 15- to 20-percent increase in price on
some of these commodities would make a world of difference. I am
talking in terms of 40 to 50 cents a bushel would make a tremen-
dous difference in the outlook.

The down side of it is that if prices drop by even as much as 5
percent, it will literally make the difference between survival and
being able to continue farming for several of these farmers, par-
ticularly the ones who are more dependent upon cash grain.

I know the chairman and members of this committee, the new
administration and new Secretary are going to be dealing with a
lot of important issues that will affect these things. The manner in
which the budget is handled will have a very large bearing on the
outcome and the way it is handled in the commodity programs, the
Russian credit problem, the final outcome of some of these interna-
tional trade agreements — all of these obviously will have a direct
bearing. It doesn't have to have too much of an impact to tip that

57

scale one way or the other. We are literally running that close for
a lot of these farms.

Again, I will close by commending again the chairman and the
committee for allowing us the time to speak today.

Thank you.

[The prepared statement of Mr. Buntrock appears at the conclu-
sion of the hearing.]

The Chairman. Thank you very much. We appreciate your con-
tribution.

Mr. Eckel.

STATEMENT OF KEITH W. ECKEL, PRESIDENT, PENNSYLVANIA
FARMERS ASSOCIATION, ON BEHALF OF THE AMERICAN FARM
BUREAU FEDERATION

Mr. Eckel. Mr. Chairman and distinguished members of the
committee, my name is Keith Eckel. I serve as president of the
Pennsylvania Farmers Association and serve on the board of direc-
tors and executive committee of the American Farm Bureau. Today
I present the testimony of the American Farm Bureau Federation,
representing in excess of 4 million members.

I make my living as a farmer. I am a tomato and grain producer
located near Clarks Summit, Pennsylvania and farm in partner-
ship with my brother. I will attempt to summarize, Mr. Chairman,
in the interest of time, the concerns I would raise.

Obviously, most agricultural outlook sessions focus on the tradi-
tional issues of supply and demand for agricultural products, world
trade developments, agricultural credit, and availability of the
input. These are absolutely important parts that need to be exam-
ined. I am confident that the people who have testified previously,
including USDA, will provide and have provided sufficient informa-
tion to the committee as far as agricultural outlook in those terms.

As a farmer, I am always optimistic. We wouldn't sow seed this
next spring if we didn't have some optimism about crop or about
price. But today I come to you to raise not a new issue but I believe
raise an issue to you at a higher level than the American Farm
Bureau has ever done before.

I report to you today, Mr. Chairman, that in that optimism that I
have I must confess that I, along with my colleagues, face a grow-
ing pessimism across this country amongst our farmers. The root of
it is the regulatory constraints that continue to infringe on private
farm activities.

I would indicate to you, Mr. Chairman, that I fully recognize that
the greatest challenge facing American agriculture today is to
achieve our environmental goals and maintain our competitiveness
in this global economy. And yet I would be remiss to you if I did
not report that I have strong concerns as far as how much of an
economic burden American agriculture can continue to bear with
the regulations we currently face and are currently increasing.

A recent economic study indicated that as much as 10 percent of
the gross domestic product of this country is devoted toward regu-
latory compliance. I think that is a growing pressure that agricul-
ture certainly is facing the burden with today.

58

I would point out to you that I was extremely encouraged with
Secretary Espy's testimony this morning reminding us of President
Clinton's commitment to the encouragement of private investment
for economic growth here in this country. But gentlemen, I raise a
flag of caution. Those of us in the private sector, not understanding
where the regulatory requirements will take us, are going to be
hesitant to make that investment. It is a concern that I share with
the committee today.

The Secretary also indicated that a farmer should have the op-
portunity to stay in the field and be productive. I can tell you gen-
tlemen and the lady member of the committee that that is prob-
ably where I would prefer to be today. Unfortunately, the regula-
tors do not allow us to do that.

We could touch upon the wetlands issue. We could touch on
scenic rivers. We could touch on endangered species. We could
touch on seasonal farm labor regulations. And we could give in-
stance after instance where farmers continue to exhibit and use a
disproportionate share of their time in complying with regulations
instead of enhancing productivity.

Our delegates at our immediate past meeting concluding in Los
Angeles just a couple of weeks ago adopted the following guidelines
that we would urge this committee and the Congress and the ad-
ministration to look at as they look at the regulatory maze we have
created.

Our delegates said, "New regulations should adhere to the fol-
lowing important principles:

"The regulations are based upon sound scientific data, which has
been subject to replication and peer review;

"The costs as well as the benefits of the regulation have been
carefully weighed;

"The regulations have been subject to independent analysis and
public scrutiny;

"Alternatives to regulation have been considered, especially the
provision of market-based incentives; and

"The regulations respect the practicality of doing business in the
industry being regulated."

The adoption of a policy framework such as this would allow
Congress to know what it is mandating for production agriculture.
It would guide the executive branch in implementing congressional
intent and ensure producers that regulation is well thought out, de-
signed to achieve policy goals set by Congress, and respect the
rights of individuals to use their private property.

Gentlemen, I would urge you as you sit on this committee to take
a look at the cost of regulation that is being imposed upon Ameri-
can agriculture today. If we are going to consider a successful eco-
nomic enhancement program for the future, part of that package
has to be regulatory review and responsible consideration of the in-
dividual expected to comply.

Mr. Chairman, I appreciate the opportunity to testify on behalf
of the American Farm Bureau Federation before your committee.

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

59

The Chairman. Thank you very much. We appreciate you bring-
ing us the views of the American Farm Bureau Federation and cer-
tainly your personal comments are very much appreciated.

Mr. Mitchell.

STATEMENT OF LARRY MITCHELL, ACTING NATIONAL
DIRECTOR, AMERICAN AGRICULTURE MOVEMENT, INC.

Mr. Mitchell. Thank you, sir.

Thank you, Mr. de la Garza and the members of the committee. I
appreciate the chance to appear before you today to discuss the
economic situation facing U.S. agriculture and how best Govern-
ment policies can respond to these situations. The economic situa-
tion in rural America is critical, as you know. There are isolated
spots of moderate prosperity, but they are few and far between. A
good indicator of how rural America perceives its own economic sit-
uation could be summed up in this past November's Presidential
election.

People tend to vote their pocketbooks. According to Sharon
O'Malley, the Washington correspondent for the Texas Co-op
Power, concerns about economy and health care costs caused tradi-
tionally conservative rural Americans to vote Democratic this past
fall for the first time in nearly 30 years. In the Presidential elec-
tion, Bill Clinton received 43 percent of the rural vote to President
Bush's 38 percent and Ross Perot's 19 percent.

Agriculture is the life breath of the rural economy. It has been
through some tough times over the past 10 years. We saw U.S.
farm policies abandon self-sufficiency in favor of selling more for
less overseas. The export-driven farm policy has been an all-or-
bust, all-the-eggs-in-one-basket scenario which has driven down
prices for farmers to historic lows in real dollars.

We were told in the early 1980's that the reduction in these
prices would be paid back to farmers and made up of Federal
Treasury dollars in the form of deficiency payments, but those pay-
ments have been severely reduced with increased budget problems.
That export-driven policy has caused as many as 800,000 farmers to
leave the land in the last decade. Those who are left have been
forced to use up all available capital reserves and mortgage their
futures in order to survive financially.

Now when natural disasters have come along — and they have
been brutally frequent lately — there is nothing left in the rainy
day accounts to cover the shortfalls. This committee has been very
helpful in obtaining Federal disaster aid for those situations, but
now we're experiencing appropriation problems where we have one
season's appropriations being spread or prorated over two seasons
and now maybe three seasons. Again, we can't really depend upon
the Federal taxpayer dollars to bail us out of these situations.

In addition, the recession has not been kind to rural America.
The recession has resulted in lower demand for many of our prod-
ucts. The recession has also affected off-farm jobs that farmers and
their families have been forced to take in order to survive. After
all, net farm income today now includes about 60 percent or more
of off-farm sources. The results of these many economic problems
has resulted in economic carnage in the heartland.

60

The answer to all the aforementioned and to this committee's
question of the day, How well are current programs and policies
meeting their intended objectives? Not very well at all today.

As I alluded to before, the citizens of rural America voted for a
change last November. I feel it is our duty to fulfill that mandate.
We should start by restoring the buying power of rural America.
We must raise prices at the farmgate. The only mechanism for
doing that is raising the support prices. There are no other viable
options that we can see at this time because we can no longer
depend upon Federal taxpayer dollars to support farm income, and
we never should have. To do so would be foolish on our part and
unfair to America's taxpayers.

It now appears that there will not be a solution to the trade
problems facing agriculture for some time to come, with rumors of
trade wars dominating the news. And we cannot depend on only an
export-driven program.

Most of you have noticed some better economic news in the past
few days. Economic indicators are up. We also realize that the pro-
grams and policies of this brand new administration probably had
little to do with that. It had a lot to do with consumer confidence.

What caused the turn-around? People feel better about the
future. Let me offer you an example.

I have a friend who sells automobiles for a living in a large met-
ropolitan area. He sold three cars for the entire month of Septem-
ber and one in October. But he sold three cars on November 4 and
sold seven more before Thanksgiving.

That is not a great success story, but it does have a point. People
are feeling better about the future. They are satisfying pent-up
demand. Nowhere in the U.S. economy is there more pent-up
demand than that on the farm. America's farmers are attempting
to make a living with worn-out equipment. Some surveys show the
average age of the newest tractor on the farm today is over 12
years old.

Do you realize that many of the tractors that graced the Mall
around the Washington Monument 14 years ago today are the
newest ones on those farming operations if they haven't already
been foreclosed on and sold? But to get to the optimism, and to get
people to purchase those tractors, if every farmer were to buy a
tractor, we would need assurances of higher prices supported by
higher loan rates.

Has anyone pondered what would happen to the Nation's econo-
my if every farmer replaced just one wornout tractor or one worn-
out pickup truck? If nothing else, it would make President Clin-
ton's economic recovery program much easier.

AAM has asked Secretary Espy to increase loan rates since it is
within his discretional jurisdiction. We are now asking this com-
mittee to make those higher support levels law.

I want to thank all the members of this committee who have
fought for fair prices for farmers and for better programs. Your
help has not gone unnoticed.

Thank you again for this opportunity to present our views.

[The prepared statement of Mr. Mitchell appears at the conclu-
sion of the hearing.]

61

The Chairman. Thank you very much. We appreciate very much
your contribution.
Mr. Rohland.

STATEMENT OF CURT ROHLAND, PRESIDENT, NATIONAL FAMILY

FARM COALITION

Mr. Rohland. Thank you very much. I, too, thank you for the
opportunity to speak today, Mr. Chairman.

I am here representing the farmers of the National Family Farm
Coalition, a coalition of otherwise independent organizations from
around 30 States across the country. We appreciate the theme or
subject of this hearing today. That is, it strikes at the heart of
what must be addressed: The state of the rural economy.

On a personal note, I might say that I began farming on my own
approximately 17 years ago. In fact, my first 4 years of farming
were the last 4 years of a Democratic administration until now. I
might say that even as a relatively young and inexperienced
farmer, those first 4 years were the best years in my farming life.
It has been more or less a misery ever since.

For these last 12 years, and today, as the other speakers have
pointed out, with whom I concur in the statistical material they
have provided — and I will try not to repeat any of that — prices
have been on the decline. Dairy prices are again going down. Corn
farmers have had the lowest harvest price on record. Wheat farm-
ers are facing record low net farm income. We, the Nation's food
producers, are indeed troubled.

Current programs and policies are certainly neither meeting the
needs of family farmers nor those of the citizens of our rural com-
munities and, as it has been pointed out, are not even meeting the
real needs of the American citizens whether as consumers or tax-
payers. They are paying too much for their groceries compared to
what we, the farmers, are getting for those groceries. They are
paying too much to keep a faulty food production system in exist-
ence through tax-paid subsidies. Neither are necessary if the situa-
tion were corrected.

If the intended objectives of the current farm policies are to
produce an abundant crop without regard to the producers, then
they have succeeded with this year's 9 billion bushel corn crop. But
the benefits of our productivity as farmers are lost when our prices
continue to fall below the cost of production. And farmers must
constantly ask ourselves why we struggle to remain in a business
that is void of any financial reward.

The only beneficiaries of this policy are the grain companies, the
processors, the food industry conglomerates who continue to reap
record profits both here and abroad, again through a faulty policy
and a false ideology or philosophy of what food production and
farming is all about.

The real impact of both these trading practices and the implica-
tions of the 1990 farm bill here in 1993 cannot wait until 1994 on
the way to 1995, but can and must be addressed and reexamined
closely right now.

Our time is short and so much of what needs to be said has been
said by the previous speakers. I would like to speak, perhaps both

62

reading my submitted written testimony and some off the cuff com-
ments about what this is doing to rural America in particular and
by implication what the lack of a farm economy is doing to the
U.S. economy as a whole.

You can see this if you read such studies as the Purdue Universi-
ty's "Ag 2000" which tries to plot the trends between now and the
year 2000, a very short 8 years, what is happening to agriculture
and to our rural communities.

They have been and they continue to crumble. In our relatively
lowly populated townships in northern Wisconsin, all of us as citi-
zens of a township have a pretty good working knowledge of what
happens to our local government. We in our township government
have foregone taxing ourselves so that we can keep up, not to add
to but simply to maintain our own local township roads and
bridges.

We're having a harder and harder time doing it and our roads
are deteriorating. What is going to happen to the mail trucks, the
school buses, and all the rest of the economy that depends on a
workable road, a transportation system?

The same can be said of our schools. In my lifetime I attended an
eight-grade country rural school. That was closed down in the con-
solidation a number of years ago and we all went into town. Now
the talk in Wisconsin is to close down these consolidated school dis-
tricts and move into even larger ones because the tax base isn't
there. In some cases even the school population isn't there.

So much of this is a result of a faulty farm policy at the producer
level. Is this what the country wants to continue, the depopulation
of rural America until we get to the point of what we see in the
Third World with all the attendant social, political, and even mili-
tary unrest and violence it involves?

This vicious cycle cf being trained in a very efficient university
and extension service and so forth, year by year, to produce more
and more, and yet for lower and lower prices that have nothing to
do with our cost of production — the cycle being that farmers are
leaving the land, businesses are leaving our rural communities and
going to cities where the jobs are already scarce and moving some-
body else out of a job, let alone the ones that are fleeing south be-
cause of what corporate America sees as the lure of lower wages
and cost of production in our trading partners.

This cycle must be broken in order to achieve real economic revi-
talization in this country. That revitalization can only occur on the
basis of a vital rural economy, one in which farmers begin to re-
ceive a more equitable share of the value of the commodities we
produce. Frozen and even declining farmgate prices and target
prices are compounded by increasing costs for all of our purchase
inputs which continue to jeopardize our survival in our communi-
ties where we live and do business.

We face the same problems with inadequate health coverage and
weakened infrastructure as the rest of the country is right now.

Something is fundamentally wrong when Kellogg's and General
Mills can implement — and I am not picking them out in particular
because it is true of the whole industry — but when they can put
across a 3-percent increase on every box of cereal while the farm

63

share continues to decline and the consumer's purchasing power is
not keeping pace as well.

Kraft, Incorporated, big in the dairy industry, controls the Green
Bay Cheese Exchange. There is no doubt about that, as recently
documented in the Milwaukee Sentinel investigative report. Mr.
Chairman, if you want a copy of that report, ask me and I will see
that a copy of that report by the Milwaukee Sentinel is sent to
your office.

The Chairman. We would appreciate that.

Mr. Rohland. I will see to it that you get one.

This imbalance in where the consumer's dollar is going in agri-
culture directly impacts the consumer and the producer in every
place we live. The dairy prices — I am, of course a dairy farmer —
are again dropping and the existing Dairy Program as well as the
other commodity programs need emergency attention. The squeeze
continues to be on us both as farmers and as consumers.

But where are we today, then? The subject of this hearing —
again, as has been mentioned, I am more optimistic now than I
have been for 12 years — it will provide Congress a new and re-
newed USDA with a unique window of opportunity to develop ac-
tions and to push policies to change the face, the structure, and the
basis of rural America. Change it not in some sort of radical, wild-
eyed sense of the term, but to change it back to where we were
when the agricultural economy was solid and stable and was the
basis for a solid national economy.

There needs to be a new commitment in leadership by the Agri-
culture Committee. Real issues, trends, and changes in the country-
side need to be dealt with and not ignored or left to some illusory
free market.

We urge review of congressional oversight and investigative
hearings that have exposed and documented the myriad of agency
problems. These concerns range from low farm income, lack of civil
rights enforcement within USDA, lack of enforcement of the Pack-
ers and Stockyards Act, failure of the USDA appeals process,
among a myriad of other concerns.

For farmers and farm advocates, these hearings have been an op-
portunity to state the problems, yet the solutions have been con-
sistently ignored. I am referring to the hearings that have been
held over the last number of years. Attention has been called to
these things and we know what this committee was up against
when it came to trying to find out what was really going on in the
implementation of the laws and the programs that you put togeth-
er with a lot of difficulty.

There is now a chance to put these reams of hearings into action
and see improvements in the delivery of existing programs and
new programs that have been consistently ignored. We urge the
House Agriculture Committee to join with us in urging the new
USDA — perhaps I should say that we will join with you, sir — to im-
plement policies that begin to revert the devastating losses facing
our Nation's farmers and rural communities.

Some of the specific suggestions we have made are in an attach-
ment to my testimony, sir.

The first challenge is to use the discretion within the 1990 farm
bill to provide flexibility that will start to promote changes for

64

family farmers and their communities. We also urge the committee
to consider new initiatives and policies to accelerate the progress
that is so critically vital to our future.

The Tashkent hit is great for us to sustain our lives and our live-
lihood as a farm-based agriculture, and I feel very deeply a farm-
based agriculture and an economic democracy.

Mr. Chairman, earlier today you referred to the collapse of agri-
culture in the former Soviet Union and made mention of the fact
that we certainly don't want to go in that direction. I would say
with perhaps some slight hyperbole that where we have been going
in these last 12 years is in fact in the direction of a command-and-
control farm economy from which the former Republics of the
Soviet Union are now trying to extricate themselves. We still have
time to avoid that problem.

You and we share in the responsibility to reclaim the direction of
our farm and food policy. As family farmers, we have lost a great
deal over the past decade. Our farm-based rural communities have
been depopulated. If this trend is not reversed, the entire economy
and the entire country will be paying the price and the social costs
of these shifts. I might say that it already is.

There is something else that I am seeing. I am 51 years old and I
am starting to look around at my community and how people live
and deal with each other and in my State of Wisconsin especially. I
see a crumbling, a breakdown, and a weakening of the moral struc-
ture— in this case, I want to make an illustration specifically of the
dairy situation in Wisconsin.

In the State of Wisconsin for the last 2 years the State govern-
ment has held hearings on the legitimacy for above border premi-
ums that dairy plants, processors, and co-ops are paying to farmers.
It has come out in investigation and in testimony that these premi-
ums have little to do with the — there is little economic justification
for some of the premiums that are paid for volume and so-called
quality in milk, but are in fact a subterfuge on the part of the proc-
essors, the buyers, to subsidize at the cost of the average dairy
farmer those farms that are very much larger or have given indica-
tion that they are willing to expand and produce even more milk
and are given free televisions, free hauling, premiums that are way
above any economic justification for the value of the milk in terms
of the natural market.

When the co-ops and the farmers themselves are asked about
this, they say, "What can we do? It's a new day."

In effect, not to quote anybody in particular, but in effect they
are saying that it is dog-eat-dog. It's every person for themselves.

That is not the way it used to be in rural America. Perhaps that
is the way it was and is on Wall Street. Perhaps that is what hap-
pened in the savings and loan industry. That is not the way it was
in rural Wisconsin, but that is what we're seeing happening now. It
doesn't have to be that way.

I can tell you personally and representing family farmers in
rural communities across the country, that there is once again a
glimmer of optimism with the arrival of this new administration.
This optimism must be translated, however, into real changes and
a commitment toward rebuilding our chances for economic surviv-

65

al, for economic prosperity, and to provide the rest of the country a
basis on which true prosperity can be built.

I would suggest to you, Mr. Chairman, that this committee can
and must take back leadership of farm policy from those who have
controlled it these past years. We look forward to working with the
committee both here in Washington and around the country to
forge a common sense workable approach to solving our current
problems and creating new policies and programs that will restore
prosperity to farmers and therefore an economic recovery for us
all.

Thank you for this opportunity to present our concerns. I don't
believe there will be questions.

[The prepared statement of Mr. Rohland appears at the conclu-
sion of the hearing.]

The Chairman. Thank you very much.

I thank all of you for your contribution. This is our beginning
process to document the economic situation in agriculture, rural
America, how it impacts on our urban brethren also. At further
hearings we will continue adding to what you have contributed
today, and then begin the process of considering some of your rec-
ommendations. The solutions won't be easy, if there are solutions.
But we need to document as accurately as possible the technical
aspect and then hear from the people, which is what you have
brought us today.

Hopefully, we can put all that together and see where we go
from there. The fact is that I sense in this committee with 17 new
members that they are eager, willing, and certainly appear to be
very knowledgeable with the problems that we face.

As you know, many of the concerns you have, like Mr. Eckel and
Mr. Rohland, are beyond the shores of this Nation and beyond our
ability to control, such as the value of the dollar, the value of the
Deutschmark, the weather, and all of those areas that we can't di-
rectly address.

But if there is a niche for governmental policy and/or legislation,
I assure you we will endeavor to find it. There are other uncontrol-
lables that we can't address — not here in this committee, not in the
Congress, and maybe not even as a nation. The way the world lives
now is certainly in most parts of the world contrary to that prom-
ise of the future that all of us look to. We may have to turn the
world around.

You mentioned the former Soviet Union. That is exactly what
happened. We were way over in Tashkent in the west and they had
this beautiful cotton about 8-feet high. I asked them how they were
going to pick it because it was almost beyond someone reaching up.
They said, "We have machinery. We're going to pick it by ma-
chine."

I said, "It's too high for your machine."

They said, "We think we may cut it down and then run the ma-
chine over it to pick it up."

So I asked the obvious question, "Why didn't you plant seed that
will give you cotton for the height of your machine?"

He said, "This is the seed they sent us."

Someone had made the decision some other place. I don't know
that we are at that stage or that we would be close to that stage,

66

but certainly someone had made that decision away from the needs
of that sector of agriculture. This may well happen to us here when
other agencies of Government bypass agriculture and the Congress
and impose on us some of the problems that we now face.

We will work at it, I assure you.

Mr. Eckel, you mentioned that you wished you were back on the
land. There is an old Spanish saying in my area, "If you go on the
land and you don't feel the vibration inside of you, then you don't
belong and it's not going to work for you." Those are the ones that
we want to keep on the land. Certainly, Government has some re-
sponsibility to see that those people are kept on the land.

Mr. Roberts.

Mr. Roberts. Thank you, Mr. Chairman.

I want to associate myself with your remarks, but more especial-
ly I want to thank the witnesses for persevering here on a long
afternoon and for your patience and perseverance.

Mr. Eckel, I want to compliment you on a very fine statement.

Mr. Chairman, my staff has brought to my attention a letter that
I wrote to President Bush about a year ago, warning that "Federal
redtape and overregulation are hurting ag profits and will threaten
America's ability to defeat a hungry world by the end of the centu-

ry."

I pointed out at that particular time that the cost of Federal reg-
ulation hit a high of $5,800 per household in 1977, was cut to $4,100
in 1988, and then we lost control and the cost is climbing again to
$4,300 this year, $4,500 by 1996. Mr. Eckel mentioned many of the
things that I mentioned to President Bush such as wetlands, pesti-
cides, endangered species, USDA, redtape, and bureaucracy as
problem areas for the Nation's farmers and ranchers.

I went on, but I am not going to read the whole thing. I wanted
the panel to know in regard to really trying to get a hold of the
regulatory overkill, which is a real cost to the producers. You have
a yield that you expect and a price. Obviously your cost factor is
another part of that equation.

As a consequence of Mr. Stenholm and myself traveling to six
States to try to improve the farm program and make it more
farmer friendly, the chairman instructed us on this committee to
take a good hard look in regard to the oversight responsibility we
have in terms of the legislation we passed a decade ago. We made
mention to years past as a yardstick. That farm bill was 25 pages
long. It was 750 pages long in 1990 with 4,000 report pages full of
mandates.

The chairman, in a fit of responsibility, accountability, honesty,
and candor, has warned all of us on the committee that what we
would like to do is to legislate, but there is a cost to that.

So as we go down the road here in this session, part of our re-
sponsibility here will be that we will work for rural development,
but we want to prevent rural dismantlement from the mandates
that are coming down from the Federal Government. I am not
saying, by any means, that I am opposed to the Federal Govern-
ment. They have a very important role to play.

Thank you for your perspective, Mr. Eckel.

Again, I want to thank all the people on the panel.

67

•

The Chairman. We thank all of you for being here. This is to be
continued.

Thank you very much.

Our next panel is Ms. Vivian Lucas Wynn, director, United
Church of Christ Commission for Racial Justice's Office for Rural
Racial Justice, Rocky Mount, North Carolina, on behalf of the
Southern Rural Development Initiative; and Ms. Marcia Merry, ag-
ricultural editor, Executive Intelligence Review, Washington, D.C.

STATEMENT OF VIVIAN LUCAS WYNN, DIRECTOR, UNITED
CHURCH OF CHRIST, COMMISSION FOR RACIAL JUSTICE'S
OFFICE, RURAL RACIAL JUSTICE, ON BEHALF OF THE SOUTH-
ERN RURAL DEVELOPMENT INITIATIVE; ACCOMPANIED BY
KATE McKEE, SELF-HELP DEVELOPMENT BANK AND DOLLIE
B. BURWELL, PRESIDENT, FRANKLIN CENTER, INC.

Ms. Wynn. Thank you very much for the opportunity to speak
with you today. I am here on behalf of the Southern Rural Devel-
opment Initiative. Frankly, we represent 27 different organizations
which are community-based. This initiative is made up of funders
and organizations working together to try to bring about social and
economic change in poor and disenfranchised communities
throughout the rural South, a little bit different from some of the
people I have talked to today in that the organization is in the
process of trying to bring forth recommendations and hopefully
new policy which will have the cohesive and hopefully comprehen-
sive plan to suggest in terms of rural development.

We have submitted to you a policy paper and it is in the blue
cover. We also submitted to you some major recommendations that
we would like for you to look at as short-term considerations. I
won't go through all of that, but I do want to say that this initia-
tive is made up of community economic development corporations,
funding organizations, and private and public philanthropy as well
as land-based institutions throughout the rural South.

One of the things that is unique about this organization is that
we are trying to partnership to bring more resources into the
South. We are interested in the rural community throughout the
United States, but we find that within the 12-State area of the
rural South there is a disproportionate number of people who are
in poverty.

For example, we have found that there are about 9.1 million poor
people living in the United States, but more than half of those
people live in the South, about 5 million out of that 9.1 million.
Out of the 242 rural counties which have been reported by USDA
as being the most persistent poverty-stricken counties in the
United States, 223 of those counties are in the rural South. As a
region of the United States, the South is 34 percent of the popula-
tion. However, we have a disproportionate number of poor people.

We are submitting to you, hopefully, a plan which will address
the needs of poor people in the South and all over the United
States of America. Our mission is to call greater attention to the
critical needs in the southern region and to place rural develop-
ment issues on par with prevailing public and private philanthropy
that is seen in the urban areas.

68

Economic development on a national level will not happen until
the development and recovery happens in poor rural communities.
Our rural communities have just as many young people as there
are in the urban areas. Historically, the members of the Southern
Rural Development Initiative have a record for significant accom-
plishments which have achieved relatively great impacts. There
has been more "bang for the buck" considering the amount of re-
sources being made available in the rural South.

Southern people seem to feel that we have been forgotten. Some-
times, we feel like we have been forsaken by many of our Nation's
policies. There is more substandard housing, poor access to health
care, lower educational attainment, deeper problems of job growth
and creation, capital development and technology transfer, we have
greater outmigration, more family incomes, weaker infrastructure
development, tougher environmental threats, and generally more
severe societal problems in our rural communities than our Nation
as a whole.

We have submitted to you some specific short-term recommenda-
tions that we would like you to look at. Also, we have submitted to
you some general principles and practices that we would like to see
considered as you consider the development in the rural United
States, particularly the rural South.

Rural America, especially the rural South, involves more than
agricultural America. While farming is very critical in rural life,
agriculture directly provides less than 20 percent of all rural jobs.
Programs and policies to rebuild rural America must address the
range of needs which cut across environment, jobs, health, trans-
portation, education, labor, commerce, and other sectors.

Ultimately, we also believe that it is the rural people who are
committed to improving the jobs and quality of life in their commu-
nity who will make the difference for rural America. Strategies for
rebuilding rural America must be built with citizens' involvement
at every level and driven by community leaders with the skills and
resources to create jobs and develop their communities.

This morning, I heard a lot about changes that will be going on
from the top. We believe that while those will be helpful, that
there are many, many skilled people in the local communities who
can also be helpful from the bottom up in changing rural America.
Rural America has vast regional differences in geography, re-
sources, and culture. A national, regional, and rural development
program must be sensitive to, and allow for, the regional differ-
ences in its implementation and impact.

I heard many people identify the parts of the Nation that they
are from and they indicate different types of problems. Many of the
States have a high degree of agriculture. In the rural South, while
most people think that we have a high degree of agriculture, we
just have a high degree of poverty.

The national policy agenda for rebuilding rural America must in-
volve major public and private investment. In distressed rural
areas, investment in capital capacity-building and economic devel-
opment and private industry job creation strategies must provide
the stimulus necessary for recovery and revitalization.

Major public investment in distressed rural areas should be in-
corporated into the administration's short-term economic stimulus

69

program. Federal deficit reduction, while critical to the Nation as a
whole, should not be done at the expense of the poorest of the poor
in rural or urban areas. Only by providing a national plan for
rural America to allow rural communities to help themselves can
rural America be rebuilt and revitalized effectively for tomorrow
and for the next generation.

We realize that the Federal Government cannot do this alone.
Within rural America partnerships must be created with religious,
philanthropic, and corporate interests to support rural develop-
ment. Many organizations will need to be activated and involved to
accomplish this task. This third sector must be included as part-
ners with environment, Government, and business to rebuild and
revitalize rural communities.

In the past, resources and capacity of this sector to deliver serv-
ices to rural communities have been seriously underutilized. We
are here as members of many groups which represent many grass-
roots people. We work every day and come across so many situa-
tions that I have heard described.

I can tell you about young A students who live in families with
unpaintable houses and no toilets. I can tell you about families who
have no health care. I can tell you about families who are not able
to feed the children in spite of wonderful programs this country
has.

We are looking at ways to love and to feed the sick, to make the
sick well, to feed the hungry, to put clothes on the naked, and to
bring freedom and liberty to our people who are underutilized and
underappreciated. We come together today to say that we believe
that the best investment is in our people, in developing technical
skills, and developing people who are our resources.

Thank you.

[The prepared statement of Ms. Wynn appears at the conclusion
of the hearing.]

The Chairman. Thank you very much. We appreciate your excel-
lent statement and your written statement. I must tell you that in
seven words you have very eloquently stated what I have been
trying to do with many words for a long time. "Rural is no longer
equivalent to farming." There you said it all. We can't seem to get
that across, but we are going to keep trying because the needs of
rural America, as you stated, are different. Our urban brethren
have the same needs, but if we don't have rural America and what
it supports in the farming sector, then all of us are gone.

We thank you very much for your contribution.

Mr. Roberts.

Mr. Roberts. Ms. Wynn, it may be 4:30 in the afternoon and the
press may have left and the crowd may have left, but you made a
most pertinent and moving and, as far as I am concerned, very val-
uable appearance before this committee.

We have your Southern Rural Development Initiative. I have
been going through it while listening to your testimony. I married
a girl from the South, so in terms of my in-laws — I represent 66
counties out on the prairie — our problems are your problems, al-
though obviously not as severe in some areas.

70

I just want to thank you for a very good statement. You have a
friend in the Secretary of Agriculture without question. You have
heard the testimony today that there will be new directives.

I don't know where we will find the budget money, but I would
say to you that if we do not — let me put it the other way. A dollar
invested in a human life that you have described — it's either invest
now, or pay a whole lot later.

I want to thank you for your testimony, your patience, and your
perseverance to come before the committee. We really do appreci-
ate it.

Ms. Wynn. Thank you.

The Chairman. Thank you very much.

The same goes for Marcia Merry who has waited along with our
other guests. We will hear from you at this time.

STATEMENT OF MARCIA MERRY, AGRICULTURAL EDITOR,
EXECUTIVE INTELLIGENCE REVIEW

Ms. Merry. Thank you, Mr. Chairman and members of the com-
mittee.

I thank the committee especially for having its first hearing of
the year on the topic of the economy. I think that is to be com-
mended because it is a vital question.

What I have to say is not approved, as far as I know, by the
OMB. So I presume I have your attention even though it is late in
the day. And even though I am last, I thank you for giving me the
last word.

As for my own background, I have everything in writing. I would
just like to speak extemporaneously to stress a few points today.

First let me say by background that I, myself, come from many
generations of dairy farming and dairy business in Pennsylvania. I
am familiar with Federal entities because our Merry Dairy was the
first one to have a suit filed against us by the Interstate Commerce
Commission because we were selling buttermilk to the canal driv-
ers coming from Ohio to Pennsylvania. But that seems like a long-
gone innocent age.

What I would like to discuss now is the state of the economy in
general, including agriculture. I have been writing on agriculture
news for the Executive Intelligence Review for about 20 years. I
think the situation we face today in the economy is a catastrophe.
As you see in today's Washington Post, whose business section has
as a front-page article how the economy is going up and that it
looks good — this up-and-down stuff is for the amusement parks.

I think what the committee member said this morning to Secre-
tary Espy about problems in their district adds up to a national
picture where the entire physical economy is in an emergency situ-
ation.

If you figure the actual unemployment as we did in the 1930's is
at least 17 percent overall. Basic industry — aerospace just an-
nounced 31,000 layoffs. That is our most important sector if we're
going to build any capital goods, for example, that are deeply
needed in certain parts of the country.

In agriculture, the average age of the farmer is one way to look
at things. It is approaching 60. We don't have the new farmers.

71

People are being driven off from farming. In fact, if you take the
entire diet spectrum, we are a net importer, in certain respects, be-
cause of the free trade policies of recent years.

There are 26 million people on food stamps. That doesn't even
account for the people who aren't on food stamps. And the food
stamps don't go far enough. Last summer it was announced in the
Georgia food bank warehouse that the USD A didn't have the com-
modities to provide for the needs.

Also, without going into it, urban water, irrigation systems —
there are trade-offs, fights, the systems are breaking down.

We have this E-coli outbreak that was discussed this morning.
We already have cholera, as a matter of fact, in the Rio Grande
River Basin. It's not just on the south bank. It is in Texas. This is
not publicized, but this is just an example of the degree of break-
down that we have in the country.

The point I would like to make about this is that if we continue
any kind of legislation that adjusts for this — in other words, that
accommodates to this — that is madness. So if we have things like
free enterprise zones where we have low input agriculture, low
wage employment, low capitalization, no infrastructure, no sanita-
tion, we're going to get more cholera. We're going to get a bigger
death rate.

In Iowa they just instituted animal enterprise zones. You talk
about E-coli. Watch out.

Another thing, if we think exports are going to do it for us, a
bigger share of the world market that was discussed — the world
market is being crushed. There may be 80 million plus people in
Mexico but they don't have the means to buy the milk powder or
the corn. The market itself — there is a world depression. Let me
leave it at that.

The means to buy abroad is not just being cut in the former
Soviet Union. Look at Africa. After all, people are starving. They
don't have the means to either buy or to produce for themselves. So
much for that.

So what do we do? This is where I think we simply have to
expand agricultural activity, basic industrial activity, infrastruc-
ture building, water — these things. How are we going to do that?

The problem we face is that we are expanding financial activity.
That is the sector that is growing. How does that work? The deficit
was raised here and you provided a chart about the budget. The
real issue with the deficit—and believe me, Mr. Perot never told it
like it is — you have a great deal of debt being generated that
doesn't contribute to any of the agricultural industry or real life
needs.

The Federal Reserve is the institution which is a private institu-
tion. Here is how they contribute to the debt. The Federal Reserve
contributes to money availability by loaning it about 3 percent to
select banks. Then these entities turn around and they buy Gov-
ernment paper and they get 4 to 8 percent. So they get an automat-
ic spread and the deficit increases because we have so much debt in
the Federal Government because we have to pay these entities or
whoever else owns this debt. So this spread is a handout to differ-
ent banks.

72

What else is a handout? You have scams and all kinds of things.
Federal loan guarantees for Farmers Home Administration loans
or the PC A is like in Iowa where there was a big scandal. Federal
loan guarantees now have been routinely brought up by many of
these kind of banks and then there are cases of farmers being fore-
closed on when they shouldn't be. Or perhaps they were put in a
loan situation that their cash flow didn't justify just so the Federal
loan guarantee payout, our taxpayer money, could go to these
banks.

That has been documented in Iowa. There is a foreclosure Febru-
ary 8, next Monday, that I would like to bring to the attention of
the committee named the Zanker family in North Dakota. I will
inform Mr. Pomeroy about it because the paperwork shows that
this was a scam. The farmer was put in indebtedness and there is a
sheriffs sale scheduled. This should be stopped.

But this is a characteristic of the era of this kind of Federal Re-
serve indebtedness. Internationally, Alan Greenspan is already
worried. He has said, "We have derivatives markets. I am worried
about it."

This is the thing I think characterizes the economy that is put-
ting us in the crisis. That is what I put before your committee.

So what should we do? Well, my third point is that that has to be
stopped, that Federal Reserve mechanism that is creating this use-
less debt that is looting the economy. You could say that we should
nationalize the Federal Reserve. Whatever you want, it should be
stopped.

What should be done is that we should resume, as we have done
in past times in history, extending the credit through the Treasury
Department notes — say, at 2 or 3 percent — to the entities that will
do what we need: Capitalize developments in the South. Maybe we
should do it through the Rural Electrification Administration. I am
not an expert on that. We used to have Bonneville Power Author-
ity. We have precedents of many in the past.

But this money could be lent out directly to those kinds of enti-
ties then a ripple effect of purchasing would go through the auto-
motive sector, aerospace, basic industry. And at the same time,
parity prices, or a decent price, were decreed as we did up through
the 1950's for farm commodities. And there was the ability to pay
by farmers. If all these existed, you would get in a situation where
you could bring down the unemployment rate from 17 percent
down lower than 5 percent where it ought to be in a healthy econo-
my.

This is the program I think we ought to have. The projects are
clear. Not small, free enterprise zones that are going to lead like
Mahke Landora in Iowa to cholera and disease, but what we need
is traditional family farming and we need large scale projects such
as water management projects, irrigation, the North American
Water and Power Alliance in the West — I could go through many
others.

In Florida, the energy problem can be solved by various kinds of
electron beam recycling. They are doing it in Miami. That kind of
thing needs to be examined.

What we need in the meantime is a moratorium on any family
farm foreclosure, at least pending investigation. Otherwise we need

73

their ability to produce. We can't have people dispossessed in this
emergency situation.

So that is what I'm recommending. To close, I just want to put to
you that this is not some kind of grand scheme or pie-in-the-sky.
There are initiatives in this direction — even though this is only
February and we have only had a month of 1993, 13 days of Secre-
tary Espy's administration — but there are initiatives.

Here in Congress, your colleague, Representative Gonzalez, intro-
duced on January 5 the Federal Reserve Accountability Act. That
doesn't call for nationalizing but calls for oversight and lets the
sunshine in. I think that is in the right direction. But now we need
the right policy.

Second, on the State level I just obtained and have given to your
committee a resolution that has been introduced in the North
Dakota Legislature calling on Congress and the President to have a
temporary stay on any farm foreclosures and investigation of this
kind of fraud. I give that to you.

I also point out that there are other initiatives. Senator Bennett
Johnston introduced a bill that we should have a trigger price of
$25 a barrel on oil like a parity price for oil to help the domestic
energy system. That is analogous to the kind of thing you could
decree as to the price per bushel of corn or the price for milk. We
need these parity prices. Parity doesn't just apply to farm. It can
be oil or whatever.

These are the initiatives. And the last one I believe you have
seen already in the packet I have given you. This is a personal
appeal by me to you personally. I think we need a lot of leadership.
You may know the famous name associated with my magazine,
Lyndon LaRouche — this gentleman is in prison. He has been there
for 4 years. He is 70 years old. It is a political frame-up.

Many people from abroad, about 1,000 people, signed an ad in
the Washington Post the day Mr. Clinton was inaugurated Presi-
dent that Mr. LaRouche be freed because he stands for economic
development. He has a lot of expertise. I think we need all we can
get. That is why I recommended to you as an important initiative
this year that this man should be freed. We have an emergency to
deal with.

That is how I would like to see this very important committee
proceed in an extraordinary way in this year of 1993.

I thank you for the opportunity to present that to you.

[The prepared statement of Ms. Merry appears at the conclusion
of the hearing.]

The Chairman. Thank you very much for your contribution and
your comments, both in your written statement and your oral testi-
mony. We appreciate very much your being here.

Unfortunately, this committee lacks jurisdiction with the prob-
lems of Mr. LaRouche, but I am sure the appropriate committee
will be very happy to hear from you.

I thank all of the witnesses that appeared earlier and those of
you on the last panel. We appreciate very much your contribution
and your patience. We apologize that things beyond our control
forced us to delay the hearing periodically during the day, but that
is how the legislative process works.

74

We thank all of you and hopefully we will see all of you in better
times in the near future.

Thank you very much.

With that, the committee will stand adjourned, subject to the call
of the Chair.

[Whereupon, at 4:40 p.m., the committee was adjourned, to recon-
vene, subject to the call of the Chair.]

[Material submitted for inclusion in the record follows:]

75

HONORABLE JILL LONG
CHAIRWOMAN
CONGRESSIONAL RURAL CAUCUS

Thank you for allowing me to testify.

I'm here to speak about the future of rural America. Like
many Members of this Committee, I am a resident of one of our
nation's 14,000 rural cities and towns.

Too often in the past, the problems of urban areas have
received the headlines, while the problems of rural America have
been hidden.

But poverty is not just an urban problem. Inadequate
education is not just an urban problem. Unaffordable health care
is not just an urban problem. These are just some of the reasons
that this hearing today is so important — to bring attention to
the conditions in rural America.

Consider this:

— The poverty rate is higher in rural areas than in urban
regions. In fact, at the end of the 1980's, rural poverty was
still higher than in 1972.

— A higher percentage of kids and elderly in rural areas are
poorer than in urban areas.

76

— Since 1980, rural residents have been faced with higher
unemployment rates than their urban counterparts. And,

— During the 1980's, more than half of all non-metropolitan
counties lost population.

Mr. Chairman, in developing an economic growth strategy for
the future, rural America must be a full partner in rebuilding
our country's greatness.

We must begin by examining current policies that

intentionally or unintentionally — disadvantage rural areas.
Here are a few examples of what I'm talking about:

— We must adapt federal programs that are currently designed for
large population centers — ending the "one size fits all"
approach that is generally inappropriate for rural areas.

— We need to ensure that the Rural Development Administration we
established in the 1990 Farm Bill receives the support it needs
to be effective. There is latitude for the Administration to
consolidate rural development efforts under the RDA that will
help streamline operations.

Currently, federal programs are uncoordinated and too complex.
With 90% of the towns outside of metropolitan areas having

77

populations of less than 5,000, these nonmetropolitan areas, by
and large, don't have people with the experience and expertise
needed to advance and sustain innovative types of economic
development. The least we can do is make government more of a
"one-stop shopping" experience.

We must recognize and respond appropriately to the fact that
rural areas are unable to fund the local share for many projects
due to low population density. Likewise, it is tough, if not
impossible for many rural communities to comply with certain
mandates contained in the the Clean Water Act and the Safe
Drinking Water Act, for example.

— When we reauthorize the Elementary and Secondary Education
Act — we need to change provisions which currently give a
funding advantage to more urban school districts.

But, funding alone is not the solution. Investment in bold
educational reforms will have to be at the center of any economic
growth strategy if the U.S. is going to compete in a new global
market .

Our schools should be laboratories, not factories — places of
experimentation and creativity. Innovative ideas — even more
than money — is what is needed to revitalize American education.

78

In Indiana we have a pilot program that links children's homes
with their schools via the phone lines. Students like the
computers as much as Nintendo. They're actually doing more
homework. Parents are more involved in their children's lessons,
and parent-teacher communication has increased dramatically,
thanks to the use of computers.

In this new information age, computers can link rural schools
with research universities; rural hospitals with major medical
centers; and small town libraries with major centers of learning.

These are tangible partnerships we can foster immediately
between rural and urban America.

Our challenge is making the technology available to a
technologically literate public.

Another essential component of our strategy for economic
growth must be the implementation of a universal health care
program.

The Congressional Budget Office estimates that Medicare
funding alone will skyrocket this year by $21 billion, or more
than the cost of the entire farm program.

79

We can no longer afford to do nothing. We have to control
costs and expand coverage. But we've got to organize health care
to help us stay healthy rather than just pay the bills when we
get sick.

To reduce the shortage of doctors and nurses, we need to
reinvigorate the National Health Service Corps to give medical
students scholarships in return for service in medically
underserved communities.

Finally, it is not responsible to talk about these issues
without discussing the budget deficit.

Simply stated, no strategy for economic growth — whether
urban, suburban, or rural — is possible without reducing the
cost and size of the federal government.

We are only going to get a handle on this impending deficit
disaster by taking a critical look at everything government does.

»

That means no more sacred cows. And believe me, that is a
tough thing for someone who grew up on a dairy farm to say.
Everything must be placed on the table and re-evaluated.

80

Mr. Chairman, in summary, the future of rural America needs
more than just a strong farm sector. We need to work to re-build
our economy while not forgetting our rural areas. We need to
expand local industries with an understanding that the
information age and better education can have a transforming
impact on the economies of rural America.

I again thank the Chairman for this opportunity to testify. I
commend him for holding this hearing.

81

STATEMENT OF

SECRETARY MIKE ESPY

D.S. DEPARTMENT OF AGRICULTURE

BEFORE THE

UNITED STATES HOUSE OF REPRESENTATIVES

COMMITTEE ON AGRICULTURE

February 3, 1993

Mr. Chairman and Members of the Committee, thank you for the
opportunity to participate in your first hearing of the new
Congressional session. Your agenda for today is to assess the
economic situation facing U.S. agriculture and rural America.
This information will help us develop policies and programs to
address the needs of life in rural America and the Nation as a
whole.

This Committee and the Department of Agriculture (USDA) face
a broadening array of challenges. These include promoting rural
development, meeting our Nation's diverse food needs, and
protecting our natural resources while continuing to address
important issues concerning commodity markets, international
trade, and farm income.

Today's hearing will provide information helpful in dealing
with these challenges. I would like to emphasize at the outset
that your guidance, expertise and cooperation, Mr. Chairman, and
that of the members of this Committee are absolutely
indispensable, and I will do my best to work closely and
constructively with this Committee, Only together can we succeed
in improving USDA's capabilities to build a sounder rural
economy.

82

2
Overviev of the U.S. Agricultural Economy

The economic situation for U.S. agriculture is predominantly
favorable. While it is early in the year, 1993 is expected to
bring a continuation of the generally stable markets and firmer
returns since 1990.

Since 1990, supplies of the major crops and livestock have
been large enough to meet market demand without unduly depressing
producer prices or escalating consumer costs. This is forecast
to continue in 1993. Gross cash farm income reached a record
$186 billion in 1990 and is expected to achieve about that level
in 1993. Farm production expenses will likely rise only
slightly, and net cash farm income is expected to continue at the
1990-92 level.

Federal outlays for commodity programs are forecast to
increase in fiscal year 1993 to an estimated $17 billion, largely
because of lower corn prices due to the record-large 1992 corn
crop, low cotton prices, and disaster payments. But this outlay
increase should be viewed against a 1990-92 backdrop of sharply
lower program outlays which averaged less than $9 billion
annually. Farm program outlays are projected to decline nearly
$5 billion in fiscal year 1994.

The current situation for U.S. agriculture is a dramatic
improvement over the mid-1980 's when economic stress in
agriculture was far greater. The improvement comes from a change
in supply and demand fundamentals, increasing farm exports, the
successful implementation of the Food Security Act of 1985 and

83

3
the Food, Agriculture, Conservation, and Trade Act of 1990, and
developments in the general economy.
General Economic Developments

Despite the recent recession, general economic developments
have worked, on balance, to help U.S. agriculture so far in the
1990's. Weak economic growth and sluggish employment conditions
restrained consumer incomes and domestic demand for agricultural
products. At the same time, however, lower interest rates and a
lower inflation rate have helped to keep a lid on farm expenses.
Economy-wide, short-term interest rates have declined to near
30-year lows resulting in lower interest rates for farmers. By
some measures, short-term bank lending rates available to
agriculture are at their lowest level since the early 1970 's.

As you know, the Clinton Administration is working on an
economic package. Accordingly, I am not in a position to provide
you with the Administration's position on funding for specific
programs or activities. As soon as the President's fiscal year
1994 budget is released, I will be pleased to provide you with
the Department's views. Clearly the Clinton economic package
will be designed to help solidify the gains the economy has made
during the past few months and to help boost growth in rural
areas. Excess industrial capacity suggests that there is little
chance of rekindling inflation and little change in interest
rates is expected for farm borrowers.

In other developed countries, particularly in the European
Community (EC) and Japan, economic growth is likely to be weak in
1993, limiting expansion in agricultural trade. However, there

84

4
are bright spots. Mexico is generally expected to continue to
grow quickly in response to its liberalization efforts, leading
relatively strong overall Latin American growth. Developing
country growth in Asia is also expected to be strong. These
developing country improvements will help our agricultural
exports.
Commodity Developments

An overall picture of the farm economy suggests that
production and demand in the major crop and livestock markets
have been in approximate balance since 1990. Large, burdensome
domestic supplies have been avoided. Overall crop production was
up 10 percent in 1992 due to excellent weather and record corn,
soybean, grain sorghum, barley, and oat yields. Wheat, rice, and
cotton yields were also high. Consequently, the current stock
levels of major crops are up somewhat from the lower levels of a
year or two ago. Even so, they are on par with longer term,
average levels.

In the livestock sector, total U.S. meat and poultry
production is expected to grow about 3 percent in 1993, following
a 4% percent rise in 1992. The improving economy is expected to
increase meat demand, and expanded meat exports are also likely
to offset part of the supply increase. Exports rose 18 percent
in 1992 and another increase is expected in 1993. The larger
meat production and fairly stable prices coupled with low feed
costs translate into generally favorable news for livestock
producers.

85

5
Export Outlook

Growth in export markets will be vital to improving the
economic situation in agriculture. The value of U.S.
agricultural exports has fluctuated around $40 billion annually
since fiscal year 1990, reaching a high of $42 billion in fiscal
year 1992. This was the second highest level ever and 60 percent
above the lows of the mid-1980's. Exports are forecast to remain
close to $42 billion in fiscal year 1993.

Since 1991, exports of high-value and processed products
have surpassed bulk farm products for the first time in the
Nation's peacetime history. High-value products are expected to
account for the majority of exports for the foreseeable future.

The prospects for grain and oilseed markets depend partly on
our continuing to supply commodities to the Newly Independent
States of the former Soviet Union. Over the last 5 years, grain
imports of the former Soviet Union have accounted for about 20
percent of both world and U.S. grain exports and 7 percent of
soybeans and soybean meal exports. A sustained loss of this
market would mean lower grain and oilseed prices, higher
deficiency payments and lower farm incomes. This Administration
places top priority on assisting Russia and the Ukraine to
resolve their purchasing problems and to resume exports to this
region that has long been a valued customer for U.S. farm
products.

Grain production in the Newly Independent States rose this
year by more than 30 million tons. In addition, reduced meat
consumption and falling animal numbers are expected to dampen

86

6
demand for imported feed grains. Structural adjustment in the
livestock industry has been more rapid and noticeable than in any
other farm sector.

The European Community is another major factor in U.S.
export performance. It is a major market for U.S. soybeans and
is our chief competitor in world grain markets due to its
subsidized sales. However, recent reforms of the EC's Common
Agricultural Policy are expected to reduce their grain and
oilseed production, ultimately providing new market opportunities
for our farmers.

Our market promotion, food aid, credit guarantee, and export
enhancement programs are valued tools for increasing U.S.
exports. More than 20 percent of all U.S. agricultural exports
in the early 1990 's was shipped under one or more of these
programs. While this is well below the levels achieved in the
1950 's and 1960's, it is more than double the share from the
1970's through the mid-1980's. Currently, more than half of this
20 percent comes from the export credit guarantee programs
(GSM-102 and GSM-103) . Programs designed to meet subsidized
competition, primarily the Export Enhancement Program (EEP) ,
account for the next largest share, followed by food aid,
primarily PL 480. Nearly $1 billion was awarded in EEP bonuses
during fiscal year 1992, and programming has continued at about
that rate so far this year. USDA export programs are important
in combating unfair trade, building new markets and helping the
world's needy people. We will work hard to increase the
effectiveness of these programs.

87

7
Trade Agreements

Expanding trade is an important priority to U.S.
agriculture, which exports nearly a fifth of its annual output.
With most of the global population growth occurring outside the
United States, our future market opportunities are clearly
abroad. Reductions in agricultural trade barriers are necessary
for U.S. producers to compete effectively in the global
marketplace. As trade barriers are reduced, trade expansion
results both from greater market access and enhanced income
growth.

The North American Free Trade Agreement (NAFTA) will create
export opportunities in Mexico for U.S. producers. Effects will
be limited for U.S. agriculture at first. After full
implementation, USDA analysts indicate NAFTA is expected to boost
annual U.S. agricultural exports by $2 billion. A Uruguay Round
agreement based on the Dunkel Text and the U.S. -EC agreement
reached in November is projected to increase annual U.S. farm
exports by $4 billion and boost fa.. .■ income by $1 billion per
year after full implementation. In addition, significant gains
are also anticipated early in the agreement period. Although the
U.S. -EC agreement which resolved differences on export subsidies
and internal support is an important step toward moving the
Uruguay Round to completion, there remain important unresolved
issues on market access.
Income and Finance Prospects

Developments in the commodity markets have stabilized
agriculture's income and financial position over the past several

88

8
years and should continue to do so in 1993. Net cash farm income
plateaued in 1988-92 but at a record high $58-61 billion. This
income strength reflected a combination of rising receipts,
relatively stable farm production expenses, and lower but stable
government payments. In 1993, net cash farm income is projected
to be between $58 and $64 billion.

The income and finance picture is incomplete unless we
account for off -farm income. On average, off -farm income has
grown to roughly half of the total farm household income. For
small operations, off-farm income often accounts for virtually
all of their total household income. Off-farm income is also
important for larger operators, although it typically accounts
for a small proportion of total household income. Including off-
farm income, average farm household incomes approximate those in
the rest of the economy.

Agriculture's general financial position reflects the
overall income trends. Total farm asset values and farm debt ,
have changed little since 1990, but remain much improved from the
mid-1980's.

During the 1980 's income and particularly asset values fell
sharply, leaving farmers with large debt burdens relative to the
assets pledged as collateral and to the cash available to service
debt. The proportion of farm borrowers who had their loans
called, who were loaned up to the limit, and who went out of
business or filed for bankruptcy rose. At the peak of the
mid-1980 's financial crisis, USDA estimated that over 10 percent
of all farm businesses were vulnerable to bankruptcy; their

89

9
incomes actually slipped below expenses and their debt-asset
ratios exceeded 40 percent. Using this measure, recent estimates
show less than 5 percent of farms are now vulnerable, half the
level of the mid-1980's.
The Outlook for Food Supplies and Prices

Agriculture's large supplies and stable prices for basic
commodities helped to moderate increases in food prices and the
overall cost of living over the last 2 years. Moveover, the
smaller increases in food prices have also worked to slow growth
in the cost of USDA's food assistance programs. Food prices rose
roughly 6 percent in both 1989 and 1990, less than 3 percent in
1991, and slightly more than 1 percent in 1992.

Expansion in meat supplies and the resulting weakening in
meat prices, mainly pork, were major factors contributing to
1992 's unusually small food price increases. Meat production
began to expand in the second half of 1991 for the first time
since the 1988 drought, bringing forth the record large meat
supplies in 1992. Fruit and vegetable prices were also down in
1992.

Food prices are forecast to rise 2-3 percent in 1993.
Higher personal incomes and consumer demand will cause some
upward pressure on food prices. Ample supplies and stable prices
for farm products will partially offset the rising processing and
distributing costs.
Implications for Food Assistance Programs

Outlays for domestic food assistance are closely tied to
food prices. Each 1-percent increase in food prices translates

90

10
into a comparable increase in the cost of the Thrifty Food Plan
and increases Food Stamp Program costs by $300 million. Outlays
for food assistance programs — including the Food Stamp Program,
the Child Nutrition Programs, the Special Supplemental Food
Program for Women, Infants and Children, and the Commodity
Supplemental Food Program — are currently expected to exceed
$37 billion this fiscal year, more than half the USDA's total
budget .

Smaller food price increases, along with improvements in the
general economy and a resultant stabilization in participation,
may cause food assistance outlays in fiscal year 1994 to rise by
less than the annual increases in recent years.
The State of the Rural Economy

The state of the rural economy is mixed. In 1992, the
average annual unemployment rate for rural areas was 7.1 percent,
lower than the urban unemployment rate for the first time since
1979. Rural employment grew 2 percent, while urban employment
stagnated in 1992. The recession and slow growth of 1990-92 led
to an increase in the urban poverty rate, narrowing the gap
between urban and rural poverty. However, the rural poverty rate
remained 2.5 percentage points higher at 16.1 percent.

As employment in farming has declined, rural manufacturing
employment has grown and absorbed many workers leaving farming.
Currently, twice as many rural workers are employed in
manufacturing as in farming and forestry combined. The economies
of only 20 percent of rural counties are dependent on farming and

91

n

those counties are home to only 10 percent of rural people.
Manufacturing is now the dominant rural goods-producing activity.

Manufacturing growth faltered in the 1980 's. Rural
manufacturing employment grew by only 5 percent in the past
decade after growing by over 20 percent in 1970 's and even higher
rates in previous decades. At the USDA, we will focus our rural
development programs to help rural economies obtain access to and
compete in growing global markets.
Conservation Programs

The state of the farm economy will be affected by the way in
which environmental issues in agriculture are resolved. Many
farmers express concerns that conservation and environmental
responses will reduce their incomes. To assist farmers and
address environmental problems, the 1985 and 1990 Farm Bills
provided for an array of programs, including land retirement,
technical assistance, and cost-share programs.

Of the 54 million acres of land idled in 1992 to limit
surpluses and protect the environment, 35 million acres were
enrolled in the Conservation Reserve Program (CRP) , now in its
seventh year. The CRP converts highly erodible or
environmentally sensitive land to conservation uses. It
addresses tree planting, erosion, water quality and wildlife
objectives. This program currently provides payments to farmers
totaling $1.7 billion annually.
Conclusion

In closing, commodity production and use are generally near
balance; the large troubling surpluses of the past have been

92

12
reduced. Farm prices are above price support levels and the
value of exports is near record high. But slow rural economic
growth, global export subsidies and access to global markets are
continuing problems. Commodity program costs are rising and
cause concern but should decline next year. Viewed against
historical measures, farm income remains strong and steady, while
asset values and eguity have stabilized. Food price increases
are likely to continue to be moderate, helping to slow increases
in both the overall cost of living and the cost of our food
assistance programs.

Mr. Chairman, that completes my statement. I have attached
a short data appendix for additional information.

(Attachments follow:)

93

A-l

APPENDIX TO THE STATEMENT OF

SECRETARY MIKE ESPY

U.S. DEPARTMENT OF AGRICULTURE

Commodity Data (see attached tables)

For the major program crops, the 1993 outlook will be shaped
to a large extent by 1992 's unusually large harvests and record
disappearance levels. Even though disappearance is estimated to
be up in 1992/93 due to higher domestic use and exports, stocks
going into the 1993 season will be higher for most crops.
Average weather in 1993 and yields returning to trend will mean
somewhat smaller crop harvests in 1993.

From the very low levels of a year or two ago, our crop
stocks have risen but not to burdensome levels. In the most
dramatic case, the 1992 record corn crop will cause corn stocks
to about double from a year earlier. But corn stocks as a
percent of total use will be below the average of the previous
10 years: 27 percent compared with 35 percent. U.S. wheat
stocks are tight historically but global stocks are ample.

No major swings in crop prices are expected for the 1993
season. Wheat prices could be marginally lower over the year
ahead given the announced acreage reduction program (ARP) of
0 percent, compared with 5 percent in 1992. And corn prices are
likely to average marginally higher as average yields and a
higher ARP reduce stocks somewhat by the end of the season.

The commodity provisions built into the 1985 and 1990 Farm
Bills helped balance the markets for field crops. Various
planting provisions, notably the flexibility provisions of the
1990 Act, give producers more room to adjust the volume and mix
of products they produce as market conditions change. In 1992,
producers switched about 8 million acres of program crop base to
other program and nonprogram crops. As we look to 1993 in the
case of corn, for example, the increase in the ARP to 10 percent
from 1992 's 5 percent, together with some shift out of corn on
flex acres, will likely lower production and help support
producer prices.

In addition to the flexibility provisions of the 1990 Farm
Bill, frozen program yields since 1985 have also caused producers
to depend more on market developments. Loan rates, greatly
reduced since 1985, have helped our position in world markets.
Also, unlike the mid-1980's, nearly all of the current stocks are
available to the market since they are held in the private
sector. At the start of this fiscal year, Commodity Credit
Corporation inventories totaled $1.7 billion compared with nearly
$6 billion in 1988.

94

A-2

Milk production rose about 2 percent during 1991/92 as a
decline in cow numbers was offset by an increase in production
per cow. Very favorable weather conditions in the Midwest
contributed to an unusually large increase in milk production per
cow. Even so, milk prices averaged well above year-earlier
levels as commercial consumption of dairy products rose slightly
faster than milk production. For the 1991/92 marketing year, the
all-milk price averaged more than $1.30 per cwt. above the
previous year.

For 1992/93, milk production is expected to increase by
about 1 percent as the increase in milk production per cow
moderates and cow numbers continue their long-term decline.
Commercial disappearance is expected to rise about 2 percent
largely reflecting continued growth in cheese consumption. Milk
prices, however, are projected to average somewhat lower in
1992/93. International prices for nonfat dry milk have declined
in recent months, reducing domestic prices for nonfat dry milk.

Fruit and vegetable supplies are also up but consumer demand
is strong and producer returns are generally favorable.
Production of several of the major fruits and vegetables rose in
1992 and large stocks were carried over into 1993. For major
fruit and tree nut crops, the farm value of production increased
an estimated 2.5 percent in 1992. Farm receipts from vegetables
and melons are estimated slightly lower in 1992 but are expected
to increase in 1993 due to higher prices. In 1992, increased
fresh vegetable receipts were offset by reduction in the value of
processing vegetables and dry edible beans. Receipts for
processing tomatoes fell nearly 30 percent in 1992 due to low
prices and large stocks. With overall 1993 production expected
to meet or exceed the 1992 level, supplies will be large enough
to support further gains in per capita consumption.

Sugar production from domestic beets and cane rose in 1991
and 1992 and is forecast to increase further in 1993.
Strengthening demand for sugar linked to the slowing of corn
syrup's displacement of sugar in the sweeteners market is working
to boost consumption. Even so, imports continue to trend down
and are approaching the level that will trigger marketing
allotments.

Receipts from tobacco rose to a record $3 billion in 1992
due to higher production. But production in 1993 is expected to
decline due to reductions in marketing quotas in response to
large tobacco stocks. This will likely lead to decreases in
receipts. Increased leaf supplies, declining cigarette
production, and the substitution of cheaper foreign-grown
tobaccos for domestic leaf will continue to put pressure on the
market.

95

A-3

Aggregate Income Data (see attached tables)

Cash receipts in 1990-92 were in the $167-170 billion range,
reflecting farmers' large crop and livestock marketings and
generally favorable farm prices over the 1990-92 period. Cash
receipts in 1993 are forecast to continue near the $170 billion
record. Direct government payments fell sharply at the end of
the 1980' s, but have been stable in the $8-9 billion range since.
They are expected to rise in 1993. Cash expenses have also been
steady so far in the 1990 's and are forecast to increase
marginally in 1993 by possibly $2 billion, or only 1.4 percent.
This would keep net cash income in the recent $58-61 billion
range in 1993.

Farm asset values have changed little since 1990, averaging
$845 billion. Farmers have also been slow to increase their debt
loads, however, and borrowing has increased only $3 billion so
far in the 1990' s. This translated into small changes in equity
and the pattern is likely to continue for 1993. While less
favorable than the 1970' s when rising asset values overshadowed
larger borrowings and pushed equity up sharply, the financial
situation of farms is much improved compared with the mid-1980's.
Less than 5 percent of farms are now vulnerable or half the level
of the mid-1980's.

96

COMMODITY DATA

Table 1. Wheat: U.S. Supply, Use, and Price

1990/91

1991/92

1992/93F

1993/94F

ARP (X)

5.0

15.0

5.0

0.0

Acreage Planted (mil. ac . )

77.2

69.9

72.3

Yield (bu./ac.)

39.5

34.3

39.4

Production (mil. bu.)

2,736

1.981

2,459

Domestic Use (mil. bu.)

1,375

1.135

1,150

Exports (mil. bu.)

1,068

1,281

1,350

Total Use (mil. bu.)

2,443

2,416

2,500

Ending Stocks (mil. bu.)

866

472

486

Farm Price ($/bu.)

2.61

3.00

3.20-
3.40

Table 2. Wheat: World Production, Use, Stocks and Trade

1990/91

1991/92

1992/93F

Production (MMT)

588

543

556

Use (MMT)

565

557

550

Ending Stocks (MMT)

144

130

136

Exports (MMT)

94

108

103

U.S. Share (X)

30

32

36

97

Table 3. Corn: U.S. Supply. Use, and Price

1990/91

1991/92

1992/93F

1993/94F

ARP (X)

10.0

7.5

5.0

10.0

Acreage Planted (mil. ac . )

74.2

76.0

79.3

Yield (bu./ac.)

118.5

108.6

131.4

Production (mil. bu.)

7,934

7.475

9,479

Domestic Use (mil. bu.)

6.036

6,332

6,685

Exports (mil. bu.)

1.725

1,584

1,650

Total Use (mil. bu.)

7,761

7,916

8,335

Ending Stocks (mil. bu . )

1,521

1,100

2,247

Farm Price ($/bu.)

2.28

2.37

1.90-2.20

Table 4. Coarse grains: World Production, Use, Stocks and Trade

1990/91

1991/92

1992/93F

Production (MMT)

820

799

842

Use (MMT)

807

804

820

Ending Stocks (MMT)

138

133

155

Exports (MMT)

88

94

90

U.S. Share (%)

59

53

57

98

Table 5. Soybean: Supply, Use, and Prlce--1990-92

1990/91

1991/92

1992/93F

Acreage Planted (mil. ac.)

57.8

59.2

59.3

Yield (bu./ac.)

34. 1

34.2

37.6

Production (mil. bu.)

1,926

1,987

2.197

Domestic Use (mil. bu.)

1,282

1.356

1.377

Exports (mil. bu.)

557

685

745

Total Use (mil. bu.)

1,839

2,041

2.122

Ending Stocks (mil. bu.)

329

278

355

Farm Price ($/bu. )

5.74

5.60

5.30-
5.50

Table 6. Soybean: World Production, Use, Stocks and Trade

1990/91

1991/92

1992/93F

Production (MMT)

104

107

114

Use (MMT)

105

110

112

Ending Stocks (MMT)

20

18

20

Exports (MMT)

47

52

52

U.S. Share (X) !'

36

41

42

1/ U.S. exports of soybeans and soybean meal as a percent of world trade of
soybeans and soybean meal, all on a soybean meal equivalent basis.

99

Table 7. Cotton: Supply. Dse, and Prlce--1990-92

1990/91

1991/92

1992/93F

1993/94F

ARP (X)

12.5

5.0

10.0

7.5

Acreage Planted (mil. ac . )

12.4

14.1

13.3

Yield (lbs/ac.)

634

652

700

Production (mil. bales)

15.5

17.6

16.3

Domestic Use (mil. bales)

8.7

9.6

9.7

Exports (mil. bales)

7.8

6.7

6.0

Total Use (mil. bales)

16.5

16.3

15.7

Ending Stocks (mil. bales)

2.3

3.7

4.4

Farm Price (cents/lb.)

68.2

58.3

Table 8. Cotton: World Production. Use. Stocks and Trade

1990/91

1991/92

1992/93

Production (mil. bales)

87

96

86

Use (mil. bales)

85

85

86

Ending stocks (mil. bales)

29

40

41

Exports (mil. bales)

23

22

22

U.S. Share (X)

34

30

27

100

Table 9. Rice: Supply, Dse, and Price

1990/91

1991/92

1992/93F

1993/94F

ARP (X)

20.0

5.0

0.0

5.0

Acreage Planted (mil. ac.)

2.90

2.88

3.17

Yield (lbs./ac.)

5,529

5,674

5,722

Production (mil. cwt . )

156.1

157.5

179.1

Domestic Use (mil. cwt.)

91.7

93.7

98.0

Exports (mil. cwt.)

70.9

66.4

76.0

Total Use (mil. cwt.)

162.7

160.1

174.0

Ending Stocks (mil. cwt.)

24.6

27.3

38.1

Farm Price ($/cwt.)

6.70

7.58

5.85-
6.35

Table 10. Rice: World Production, Use, Stocks and Trade

1990/91

1991/92

1992/93F

Production (milled MMT)

351

348

352

Use (milled MMT)

346

353

355

Ending stocks (milled MMT)

60

56

52

Exports (milled MMT)

13

15

14

U.S. Share (X)

18

14

17

101

Table 11. Dairy: Supply. Use, and Price--1990-92

1990/91

1991/92

1992/93F

Production (bil. lbs.)

148.6

150.9

152.2

Commercial Use (bil. lbs.)

138.7

141.3

144.4

CCC Net Removals (bil. lbs.)
Milkfat Basis
Skim Solids Basis

10. A
4.9

10.3
1.7

8.1-
3.4

All Milk Price (S/cvt.)

11.93

13.26

12.10-
12.80

Manufacturing Price ($/cwt.)

10.67

12.04

11.00-
11.70

Table 12. Livestock Production and Prices

1990

1991

1992

1993F

Production (Mil. Lbs.)

Beef

22,743

22.917

22,993

23,375

Pork

15,354

15,999

17,189

17,850

Broilers

18,430

19,591

20,986

21,780

Prices ($/Cvt.)

Choice Steers

78.56

74.28

75.36

71-77

Slaughter Hogs

55.32

49.69

43.05

39-45

Broilers

54.8

52.0

52.6

50-56

102

Figure

Billion

Farm lnopme

70

60

50

40 —

30

20

10

Net cash farm income

o-

1985

--O'

.0" ^'|

Net farm income

1986 1987 1988 1989 1990 1991

_l_

1992 1993 F

Farm Income Statistics

1990

Cash receipts
Crops
Livestock

169.9
80.0
89.9

Govt, payments 9.3

Farm-related income 7.2

Gross cash income 186.4

Cash expenses 125.2

Net cash income 61.3

Net farm income 51.0

1991

1992

1993 F

Billion

dollars

165 1

167.3

170

:o 172

80.5

84

81

to 86

86.7

86

83

to 87

8.2

8

9

to 13

7.6

7

6

to 8

183.2

185

183

to 191

125.2

124

123

to 192

58.0

60

58

to 64

44.6

51

42

to 4 8

103

Figure 2.

S Billion

Total Farm Debt

180

170

160 —

150

140 —

1985

1986

1987 1988 1989 1990 1991

1992 1993F

Farm Balance Sheet Statistics

1985

1988

1989

1990

1991

1992F

Billion Dollars

Assets (Dec. 31)

773

801

829

847

842

846

Real estate

586

596

616

628

624

623

Other

187

205

213

219

218

223

Liabilities

178

139

137

137

139

140

Real estate debt

100

78

75

74

74

75

Other

78

62

62

63

64

65

Equity

595

662

692

710

703

707

Percent

Debt-to-asset ratio

23

17

17

16

17

17

104

Figure 3.

Percent of Farm Operations in Stress
January 1, 1992

Marginal
solvency (4.4*/.)

Vulnerable (4.6%)

Financial Position of Farms -

Year

Favorable

All Farms

1985

40.8

1986

40.4

1987

41.0

1988

45.3

1989

42.8

1990

43.8

1991

44. 3

1992

44 .3

Marginal
income

Marginal

40.1
38.3
37.0
39.8
43.6
44.0
43.8
46.7

Percent

solvency

Vulnerable

9.2

9.9

11.3

10.0

11.7

9.9

7.8

7.1

6.6

7.0

5.6

6.6

5.6

6.3

4.4

4.6

Farms with Gross Sales > $40,000

1991
1992

68.5
66.9

13. 1
16.9

14.2
11.6

4.1
4.6

- This estimate is based on USDA survey data. The categories of
financial stress are: Favorable — positive net cash farm income
and debt-to-asset ratio of .4 or less; Marginal Solvency —
positive net cash farm income and debt-to-asset ratio above .4;
Marginal Income— negative net cash farm income and debt-to-asset
ratio of .4 or less; Vulnerable--negative net cash farm income
and debt-to-asset ratio above .4.

I

Figure 4.

Dollars/acre

600

580 —

560 —

540

520

500

480 —

460

105

Value of U.S. Farmland

1985 1986 1987 1988 1989 1990 1991 1992

Figure 5. Acres Idled Under Farm Programs

Million ocres

80

60

40

20

Other Programs

1985 1986 1987 19S8 1969 1990 1991 1992 1993F

106

Figure 5.

Outlays on Price Support and Related Activity

Fiscal Years

$ Billion

25 —

20 —

15 —

10 —

1985 1986 1987 1988 1989 1990 1991 1992 1993F

Figure 7.

S Billion

50

U.S. Agricultural Trade

40

30

20 - O--

10

Exports

Trade balance

-© O O

-0 G> O-

t

Imports

G

0 ' L

J 1 1 L

1985 • 1986 1987 1988 1989 1990 1991 1992

107

RRTionnL

FRRITIERS

union

STATEMENT OF THE NATIONAL FARMERS UNION
ON "THE AGRICULTURAL OUTLOOK FOR 1993"

BEFORE THE
U.S. HOUSE COMMITTEE ON AGRICULTURE

February 3, 1993

Presented by: Michael V. Dunn,

Vice President,

Government Affairs

National Farmers Union

600 Maryland Avenue, S.W. • Suite 202W • Washington, D.C. 20024 • Phone (202) 554-1600

108

STATEMENT OF THE NATIONAL FARMERS UNION ON "THE
AGRICULTURAL OUTLOOK FOR 1993" BEFORE THE U.S. HOUSE
COMMITTEE ON AGRICULTURE, FEBRUARY 3, 1993:

Thank you, Mr. Chairman. I am here today on behalf of
the 250,000 farming and ranching families of the National
Farmers Union, and we appreciate this opportunity to
comment on the outlook for agriculture in 1993. We
commend you for holding these hearings on this most
important subject.

I would like to begin with a recap of some of the
information that was presented at USDA's 69th annual
Outlook Conference. I believe that we should take a look
at what has been forecasted for 1993 and then try to
determine what that means to today's farmers and ranchers.

INCOME

Dr. James Donald, chair of the USDA World Agricultural
Outlook Board, estimated that 1993 net farm income would
be in the range of $42 billion to $48 billion, down from
the $51 billion level for 1992. At the midpoint level of
this range, that would be a 12 percent drop in net farm
income. At the extreme, it would be a 17 percent decline.

Donald also predicted that U.S. farm exports could
decline to $41.5 billion in 1993. This would be a decline
of 2 percent from 1992.

Robert G. McElroy, leader of the ERS economic
indicator forecast team, reported that record 1992
production would lead to lower 1993 prices. His forecast
matched that of Dr. Donald, indicating a 1993 total net
farm income of $42 billion to $48 billion.

McElroy said that change in inventories would be a
major factor this year and next in the level of net farm
income. He also stated that farm expenses could rise 1 to
2 percent in 1993.

EXPENSES

Farmers can expect farm input costs to rise about $3
billion in 1993. This is a gain of about 2 percent, ERS
economists Harold Taylor and Marlow Vesterby told the
outlook conference.

Planted acreage may be less than in 1992, but higher
costs will offset the reduced rate of input use. There is
a trend to reduce tillage and % a wst larger and more
durable eguipment.

-2-

109

Energy prices will be a large factor in the higher
input costs, affecting fertilizer and pesticide costs.
Crude oil import prices could increase by as much as 6.6
percent, with diesel fuel costs rising about 5 percent.

For 1993, seed use is expected to increase by 1 to 2
percent, while prices advance up to 1 percent.

U.S. fertilizer prices declined sharply in 1992 but
will increase slightly in 1993 as a result of the surge in
natural gas prices. Pesticide prices will probably rise
between 4 and 6 percent in 1993. However, pesticide use
may decrease 3 percent from 1992 rates.

Demand for farm equipment will probably gain in 1993.
It is anticipated that there will be a price increase in
equipment in the range of 3 to 5 percent.

High crop production in wheat and feed grains in 1992
will mean that there will be large carryover stocks which
will keep prices low. This will affect the livestock and
dairy industries.

The December "Agricultural Income and Finance
Situation and Outlook Report" of USDA's Economic Research
Service said that pork prices will likely to be $1 to $2
lower per cwt in 1993. ERS also expected milk production
to rise, resulting in a nearly $1 per cwt drop in milk
prices .

PAST AND PRESENT SITUATION

The charts in figure 1 show a snapshot of what has
been happening in the farm sector since 1988. Note that
even though net cash income is rising, the real net cash
income is declining. Net income is snowing a decline in
both the net farm income and the real net farm income.

Farm assets for both real estate and non-real estate
are remaining somewhat constant. Farm debt is showing a
mild rise in the real estate sector and a somewhat higher
increase in the non-real estate or short-term debt.

As a result of the record high commodity production,
we will see an increase in government payments for the
1992-93 crop year. Estimates made since this chart was
produced indicate these payments could exceed $17 billion.

This chart which shows an increase in government
spending is very alarming, given the nation's present
budget situation. Farm programs have long been the
entitlement that is most likely to be cut to achieve
budget savings. Figure 2 indicates how farm spending has
fared .

-3-

110

Figure 1

Uvsatock

Cuh Receipts

$ billion

95
90
85
80
75
70

Crop*

Net Cuh Income

f billion

65

60
55
50
45
40

RmI Net Cash lncom«

f billion 1967

65
60
55
50
45
40

Government Payments

f billion

16

14
12
10

e

6

Nat Farm Incoma

$ billion
55

25

Raal Nat Farm Incoma

$ billion 1967

55
50
45
40
35
30
25

Caah Expanaaa

I ballon

135

130

125

120

115

110

105

100

88 89 90
1092-93 foiKiit.

91 92 93

Farm Dabt

• billion
80

75

70
65

60

RmI estate

Nonrsal estate

Farm Aaaata

I billion

700

88 89 90 91 92 93

600
500
400
300
200
100,

Rsal sstate

NonrMl sstete

88 89 90 91 92 93

Agncu&jfal ineom* and RnancWDKambir 1992

Ill

Figure 2

Top Entitlements

Mandatory spending programs account for more than half the federal
budget. Their sheer size makes the biggest of them tempting targets for
budget cutters, but the critical factor is how fast they grow. Medicaid and
Medicare combine size with an explosive growth rate that makes them the
two most serious budget problems in the short run. Social Security will
become a similar problem when the baby boomers begin to retire early in
the next century. The following are the top 12 entitlements, ranked by size.
(By fiscal year, dollar amounts in billions.)

Annual

Average

Actual tl

Penseni

Change

Rank/Propsm

Outlays

1965-91

1991-97

1. Social Security

S267

6.2

5.8

2. Medicare

114

86

11.6

3 Deposit insurance

66

NA'

NA'

4. Meckcatf

S3

150

15.8

5. Federal civilian retirement •

37

6.2

6. Unernptoymant •

25

8.0

7. Miirtsry retJremenl

23

6.6

8. Food Stamps *

20

8.1

9. Supplemental Security Income

IS

9.1

10. Family support

14

7.8

11. Veterans' benefits

14

24

12. Farm price suppers

10

-9.0

-1.4

' It it mulmtnt to aaiaaajtt ate ymmr- a- ymrnr cnanft m aapoal minuet (Utile* TV aavaaji »W Imn mat
Itnti Caajteaj to Kipfitmml ttpemu mwim - aniiAanJ? funSri mltly »y fnmutxm /ram mama)
iaanmiiaae — auk teaj» awa* * iMtpmyw mtmry TV wmI hum « imtmy /u« aaamae en rte
alma M 4 ii ill aahfiaj

•lutludm oimJ otm. fmmtn ma. Caaar OtoW an*) alter namwi ytpili, flm mauUmW teaJU
atflaAu

* t/aaaiatoj— I ■hhi «W fea*° nainat an 'iawM«njtln»/"ar "■iHimetir ataadurr" aajnaj aaMfnee) to

nwucnvt ite a**rU a/ a> nmmmk faaiimm. afuca man Of* aaau «te- nuuymtnu. ctev j»ar-i»- jaw

I ►> ate teailA a/ lite eaaaaay

souscc

OMca

-5-

112

We are very concerned about an increase in the
government payment sector of farm income. We are all
aware of how little the farm support program is of the
total U. S. budget. The chairman with his famous charts
has made us all aware that it is now less than 1 percent
of the total budget. However, when we begin to talk about
saving, it is always agriculture that is first on the
chopping block.

It is not conceivable that in a time of tight budget
constraints that an increase in farm program payments will
be allowed. Quite the contrary, we probably face future
additional cuts in projected outlays for farm programs.

Even with record production, many producers are having
a difficult time continuing to farm. Those who were
unfortunate enough to be in areas hit by severe weather
this year are in particularly bad shape.

We are hearing many horror stories from our membership
concerning the poor quality of grain harvested in some
areas. This has dropped the already-demoralizing low
price that the producer is receiving as a result of the
abundant crop that was produced.

ARI News Service reports that there is an increase in
financial problems in the midwest. Grain producers are
receiving $1 per bushel for their corn, and dairy experts
are warning that milk prices could sag again this year.

There are reports of an increase in calls to rural
"hotlines" to the highest level since 1986, and of a
banker who says that the problems he is seeing now are as
severe or worse than the "farm crisis" of the mid-1980s,
because the impact has been more sudden.

The banker went on to say that in the mid-1980s there
was a string of moderate losses of $10,000 to $20,000 per
year, which eventually led to bankruptcy. Now, he said,
people are losing $75,000 to $100,000 annually.

In addition to these reports, FmHA has sent out
notices of service to 31,579 borrowers. In order to avert
foreclosure, the borrowers are required to contact their
FmHA offices to develop a workout program. Only 7,952
borrowers have responded.

In figure 3, we see that things are not really
improving for farmers and ranchers. There is a slight
improvement in nominal terms; however, in real terms,
there is a decline in the farm balance sheet. We are
hearing from many that they simply are not able to improve
their financial situation.

-6-

113

Figure 3
Fens balance eheet show* alight tayov—ant In noailnal tanas but
alight decline In raal tera».

1980

1969

1990 1991 1992f
• I 1 1 ion current dollar*

828.9 846.5 841.8 846

137.2 136.8 138.8 140

891.7 709.7 703.0 707

•il l ion 1987 dollars 1/

764.0 747.8 714.6 705

126.5 120.8 117.8 116

637.5 626.9 596.8 588

1993F

Assets

800.9

Debt

139.4

Equity

661.5

Assets

770.8

Debt

134.2

Equity

636.7

845 to 855

138 to 144
705 to 715

685 to 695
111 to 117
570 to 580

F ■ forecast. Excludes operator households.

1/ Deflated by the GDP iapllclt price deflator. 1987-100.

Percent

Farm operators exhausted their credit capacity
in the 70's; they can repay additional debt now

50
40
30
20
10

.Maximum debt-to-as*et ratio

Unuaad credit
capacity

Actual debt-to-asset ratio

-i — i — i i i i i i i_

i i — i i i i i i ■ ■ ■

1970

1975

1960

1965

1990

While total debt is relatively stable,

the distribution among farm lenders will continue to

shift; bank lending could increase $2 billion in '93

S billion
70

Commercial banks

i i i i i i i i ) i

J 1 I L

1970

1975

1960

1965

1990

Agricultural Income and Finance/December 1992

-7-

114

There does appear to be a capacity to borrow more, as
the debt-to-asset ratio has improved since the 1980s.
However, this is what got producers in trouble during that
time period.

The last chart shows commercial banks are assuming a
greater role in providing farmers and ranchers credit.
This would be the reason for the increase in the non-real
estate debt of producers that was seen in figure 1.

Commercial banks have historically provided operating
credit for producers. When the producer could not pay off
the operating debt in the 1980s, this was rolled over or
refinanced into long-term debt.

The federal land banks, insurance companies, FmHA, and
sales on contract accounted for the land acquisition or
long-term debt. We are seeing little increase now in
lending by the Farm Credit System, insurance companies and
FmHA. The increase in lending by individuals and others
would account for suppliers who are providing many farmers
and ranchers with operating capital.

We know that the average age of farm operators is
getting higher every year. Young folks are reluctant to
begin farming, and lenders are reluctant to finance them,
with the present outlook in agriculture. The simple fact
is that unless there is adequate income, there will not be
an orderly influx of new producers.

A Western Kansas ASCS office recorded 70 ASCS forms
155-2 "Change of Operator" last year. The majority of
these were not because of new, young operators taking
over. They were the result of old operators leaving
production agriculture for financial reasons and other
established farmers trying to-make-a-go-of-it by getting
larger.

MARKETING LOANS

We do not see the marketing loan programs for wbe'at
and feed grains which were triggered as a result of the
failure to achieve a GATT agreement as being bejreficial to
producers. Of course, it depends on how C^TT^ill be
implemented. However, cotton prices dropped more than 50
percent in the introductory use of marketing loans for
that commodity.

Under the marketing loan system, producers will have
the option of paying back the loan either at the
government-set loan rate or at the current county-posted
market price. This will remove the price support floor
and could increase the cost to the government.

-8-

%s

115

Mr. Chairman, we have a new administration. You have
many new faces on your committee. And, Congress has had
the greatest turnover since World War II. The American
people have voted for a change. It is now time to look at
change in our agricultural policy. It is now time to
begin to design farm policies that will be beneficial to
the family farmer and to the American public.

We commend you, Mr. Chairman, for conducting these
hearings on the outlook for agriculture. The National
Farmers Union believes that the outlook is bleak if
changes are not made. We stand ready to work with you and
the new administration to design the changes that will
benefit everyone.

-9-

116

TESTIMONY OF

GRANT BUNTROCK

DIRECTOR, WASHINGTON OFFICE

NATIONAL FARMERS ORGANIZATION

I am Grant Buntrock, Director of the National Farmers Organization,
Washington Office.

On behalf of the National Farmers Organization (NFO) , I want to
thank the Chairman and Members of the Committee for holding this
most appropriate and timely hearing concerning the economic outlook
for agriculture as the 103rd Congress gets underway.

The NFOs entire membership includes active farm and ranch
operators. We have significant membership in 27 states. The first
priority of NFO is collective or group marketing on behalf of its
members in dairy, livestock and grain.

Mr. Chairman, based on USDA's projections, and discussions with our
members in most of the agriculture states, the overall economic
outlook for production agriculture, as we enter the 1993 crop year,
could best be described as very fragile.

Many of the mid-range and even larger farming operations who
survived the recession of the mid-eighties, have never fully
recovered. For many of these producers, a few cents a bushel or
lb. drop in price will literally make the difference between
survival or loss of the entire farming operation in the coming
year.

117

The economic outlook will vary greatly between producers
depending on their individual circumstances, (land costs, the
commodity that they happen to produce etc) .

I want to be clear that I am not comparing the efficiency or
inefficiency between producers, I am referring to efficient
producers who are involved in different circumstances or different
types of commodity production.

Mr. Chairman, I would like to use a specific example of our family
farm in South Dakota, which is operated by my twin brothers. I
believe that the economic circumstances, while they differ in
numbers, are illustrative of the challenges many farms throughout
the U.S. are facing today.

The farm consists of approximately 2,000 acres and produces beef,
hogs, row crops and small grain. The farm is carrying a debt to
asset ratio on the land of 55 to 60%. I also want to point out
that land costs for their cash rented land is not much different
than land they own with this debt ratio.

The cost of production for wheat, which is the major cash crop, is
approximately $3.50 per bushel; 40% of that cost is land cost
(interest, taxes, etc.). The 1992 wheat crop was very good,
however, because protein is down this year, the average market
price is 3.25 to 3.30 per bushel. The ASCS wheat yield for

118

deficiency payment purposes is less than 3 0 bushels. Although the
actual average yield, in recent years, is 15 to 20% higher. When
you subtract the 15% wheat program flex acres from the planted
acres coupled with the disparity between actual and payment yields
the current deficiency payment will only cover 60 to 65% of actual
production. Including the projected deficiency payment, the
average net price will equal approximately 3.74 per bushel. In
spite of the good crop this year, they will only net a little over
$10.00 per acre.

Feeder cattle are currently bringing .80 to .85 cents per lb.
Using $1.70 corn, which is what low test weight corn is currently
selling for in our area, my brothers tell me .that their cost per
lb. of gain for feeder cattle runs .35 to .40 cents. With fat
cattle prices at .76 to .78 cents per lb., they will show a good
profit on backgrounded or finished cattle. However, unfortunately,
it is primarily at the expense of the feed grain production. Our
national NFO vice president, John Garland, who is a diversified
farmer in Indiana, says his production cost for corn is
approximately $2.52 per bushel.

Hog prices are just about break-even, but again, this is only
because of cheap feed grain. Production cost runs about .40 to .41
cents per lb. , which is about what they sell for. Using somewhat
higher corn. prices than todays market, Iowa State University and

119

the University of Nebraska compute the production cost on finished
hogs at $44.23 per hundred.

Looking ahead, it is very clear that production costs are going to
continue to increase. Most of this increase in production costs
will involve factors that fanners have little or no control over.
The loss of small businesses and resulting reduction in the tax
base in many rural communities has shifted more tax burden to farm
real-estate and personal property. Real estate taxes on the
guarter section where our farm stead is located in South Dakota,
increased by 34% last year. Taxes on the other land in the farm
with no improvements increased from 10 to 15%. Environmental
reguirements will also increase our cost of production. Farmers,
in some areas of the corn belt, estimate a cost of approximately
.25 cents per bushel for conservation and environmental practices.

There has been some upgrading in farm equipment since the mid
1980s, however, there are still many farming operations that have
survived by delaying new purchases and making due with older
equipment. Some of these producers have reached the point where
they will have no choice but to increase outlays to upgrade
existing machinery. Without some improvement in the price outlook,
these new purchases will not cash flow for many producers.

In summary, Mr. Chairman, the good news is that a 15 to 20%
increase in commodity prices would have a very positive effect on

120

the economic outlook for most farmers. On the down side, if the
average season price for grain and several other commodities does
not strengthen, we stand to lose thousands of good efficient family
owned farms in the coming years. The economic margin for survival
for many of these farms is literally that close. Many of these
farms survived the 1992 crop season only because of an above
average crop yield.

I know the Chairman and Members of this Committee, together with
the new Secretary of Agriculture, will be dealing with several
issues in this Congress that will have a very important bearing on
prices and the ultimate well being of our farms and ranches. The
manner in which budget cuts are applied to commodity programs, the
Russian Credit problem, the outcome of international trade
negotiations will all have a very significant impact on the final
outcome .

I again want to commend the Chairman and Members of this committee
for giving us the opportunity to appear before you today. The
National Farmers Organization look forward to working with you in
the coming year.

121

STATEMENT OF THE AMERICAN FARM BUREAU FEDERATION

TO THE HOUSE AGRICULTURE COMMITTEE
REGARDING THE ECONOMIC OUTLOOK FOR RURAL AMERICA

Presented by Keith W. Eckel, President
Pennsylvania Farmers Association

February 3, 1993

Thank you for the opportunity to present testimony on behalf of the American Farm Bureau
Federation. I am Keith Eckel, President of the Pennsylvania Farmers Association and a
member of the Board of Directors and the Executive Committee of the American Farm
Bureau Federation. I produce tomatoes, sweet corn, hay and grains on my farm near
Scranton.

Agricultural outlook sessions have usually focused on such issues as the supply and demand
for agricultural products, world trade developments, agricultural credit and the availability of
inputs. These continue to be areas of concern.

We expect 1993 to be a good year, at least in terms of production, if we can avoid the wide
variance in weather. That's the basic optimism that keeps us motivated to do what we do
day-in, day-out, year-in, year-out Certainly the detailed economic information presented by
USDA and other witnesses today provides you with the statistical data you need.

But, Mr. Chairman, there is a growing pessimism among farmers all across this country. The
pessimism traces its origins to the regulatory constraints on private farm activities. Most of
this burden is coming in the name of environmental improvement.

Farmers have been good stewards of the land for decades. Farmers were pursuing land
conservation practices such as terracing, crop rotation and grass land filter strips 40 to 50
years ago, long before environmentalism became popular among non-farmers. Farm Bureau
supported the sodbuster and Conservation Reserve Program provisions of the 1985 Farm Bill.
There are areas where we can improve our land and water resources. There is a question,
however, regarding how we can go about improving these resources in such a manner that
enables farmers to remain economically viable in a highly competitive global market. The
question is: How do we achieve the sometimes conflicting goals of environmental enrichment
and economic competitiveness?

What farmers now face is uncertainty about how they can manage and efficiently use private
farm resources. When the law is fundamentally altered and future farmer liabilities are
uncertain, risks are high and decisionmaking grinds to a halt. I'm certain that this same
pessimism pervades many other productive sectors of the economy, particularly those sectors
which are natural resource based.

122

Mr. Chairman, the economic impact of regulations throughout the economy has been widely
studied. One credible estimate of the regulatory economic impact puts the cost as high as 10
percent of GDP. The U.S. food and fiber sector represents about 20 percent of GDP. We
must therefore assume that agriculture bears billions and billions of dollars of costs in
complying with regulations.

The real cost of regulatory overkill, Mr. Chairman, is the lost productivity of fanners. Instead
of finding more efficient and productive ways to produce and market a bushel, a bale, a
pound or a hundredweight of food and fiber, we are required to engage in unproductive
regulatory compliance activities.

We must remember that a day spent dealing with four different federal agencies over what is
or is not a wetland on private property is a day lost forever. A day lost to the frustration of
dealing with the federal hodgepodge of farm worker rules and regulations is one less day a
farmer can farm.

Our future is now very uncertain because we simply do not know what is coming next in the
law and how it will affect traditionally protected property rights. The wetlands issue received
much attention over the last few years, but that is only a part of a much larger concern. The
Endangered Species Act is a major uncertainty for many farmers and ranchers. FIFRA
provisions have both direct and indirect costs to farmers. Conservation compliance is also
imposing considerable costs on thousands of farmers.

In addition, there are a tremendous number of regulations and programs contained in current
law that have yet to be fully implemented (i.e., numerous conservation programs including the
wetlands reserve program, water quality incentives and integrated farm management
programs). Many of these programs have never been properly funded to provide producer
assistance in making changes on farms and ranches.

Similarly, federal laws and regulations in the area of finance and marketing are having a
highly deleterious impact on die agricultural sector. Financial institutions must comply with a
variety of environmental checks before making farm mortgages. Potential hazardous waste
sites dictate an expensive and time consuming hazardous waste appraisal on farm and
agribusiness properties. An unbelievably convoluted IRS regulation centering on the
Arkansas Best decision penalizes farmers for using legitimate hedging strategies.

Out of this total regulatory uncertainty will ultimately come a reduction in farm asset values.
When uses of farm assets become more and more restricted, the income potential will be
limited. There will be fewer incentives to produce food and fiber and fewer farmers able to
stay in business.

A large part of the difficulty in getting the U.S. economy on a long-term growth track can
surely be laid at the doorstep of the regulatory entanglements producers of real goods and
services now must confront. Farm Bureau called for a regulatory moratorium two years ago.

123

We supported the Council on Competitiveness review process on the grounds that something
had to be done. We still think a moratorium and "third party" review is a good idea.

We do not expect these issues to be resolved quickly or easily. When the voting delegates of
the American Farm Bureau met last month, they adopted specific language to begin to guide
us out of the regulatory gridlock we now face:

"New regulations should adhere to the following important principles:

a) the regulations are based upon sound scientific data which has been
subject to replication and peer review;

b) the costs as well as the benefits of the regulations have been carefully
weighed;

c) the regulations have been subject to independent analysis and public
scrutiny;

d) alternatives to regulation have been considered, especially the provision
of market-based incentives; and

e) the regulations respect the practicalities of doing business in the
industry being regulated."

The adoption of a policy framework such as this would allow Congress to know what it is
mandating for production agriculture. It would guide the executive branch in implementing
Congressional intent and assure producers that regulations are well thought out, designed to
achieve policy goals set by Congress and respect the rights of individuals to use private
property.

124

American Agriculture Movement, Inc.

agriculture

1 00 Maryland Ave., N.E., Suite 500A, Box 69, Washington, DC 20002

MOVEMENT

INC.

(202) 544-5750
America Needs Parity!

TESTIMONY OF

LARRY MITCHELL
ACTING NATIONAL DIRECTOR

AMERICAN AGRICULTURE MOVEMENT, INC.

before the

House Committee on Agriculture

February 3, 1993

Strength From The Land

125

(AAM 03 FEB 93 page #2)

Thank you. Chairman de la Garza and members of this
committee. I appreciate the chance to appear before you
today to discuss the economic situation facing U.S.
agriculture and how best government policy can respond to
these situations. My name is Larry Mitchell. I was a full-
time farmer in Texas until 1988, and am currently the acting
national director of the American Agriculture Movement, Inc.

The economic situation in rural America is critical. There
are isolated spots of moderate prosperity, but they are few
and far between. A good indicator of how rural America
perceives its own economic situation could be summed up in
this past November's Presidential election. People tend to
vote their pocketbooks. According to Sharon O'Malley,
Washington correspondent for the Texas Co-op Power, concerns
about the economy and health care costs caused traditionally
conservative rural Americans to vote Democratic this past
fall for the first time in nearly 30 years. In the
presidential election Bill Clinton received 43% of the rural
vote to Bush's 38% and Perot's 19%.

Agriculture, the life breath of the rural economy, has
been through some tough times the past ten years. We saw
U.S. farm policy abandon self-sufficiency in favor of selling
more for less overseas. The export driven farm policy has
been an all or bust, all the eggs in one basket situation
which has driven prices paid to farmers to historic lows in

126

(AAM 03 FEB 93 page #3)

f

real dollars. We were told in the early 1980s that the
reduction in prices paid to farmers would be made up by-
Federal Treasury dollars in the form of deficiency payments,
but those payments have been severely eroded by federal
budget pressures. In the meantime, that low price export
driven policy has driven as many as 800,000 farmers from the
land in the last decade. Those who are left have been forced
to use all available capital reserves and mortgage their
futures in order to survive financially.

When natural disasters have come along, and they have with
brutal frequency, there is nothing left in the rain day
accounts to cover the short falls. This committee has been
very helpful in obtaining federal disaster aid in those
situations, but now we are experiencing appropriations for
one season being spread and pro- rated over two and three
seasons. This another example of not enough taxpayer money
available to support farm income.

Low prices and disaster are not the only problems facing
todays agriculture balance sheet. Farmers and ranchers have
experienced higher property and excise taxes, skyrocketing
health care costs, increases in equipment maintenance
expenses, etc. In addition, the recession has not been kind
to rural America. The recession has resulted in lower demand
for many of our products. The recession has also affected
the off-farm jobs farmers and their families have been forced

127

(AAM 03 FEB 93 page #4)

to take in order to survive. After all, net farm income now
includes over 60% from off -farm sources.

The result of all of these problems have resulted in
economic carnage in the heartland. The answer to this
committee's question of the day, "How well are current
programs and policies meeting their intended objectives?" -
not very well at all.

As I eluded to before, the citizens of rural America voted
for change last November. I feel it is our duty to fulfill
that mandate. We should start by restoring the buying power
of rural America. We must raise prices at the farm gate and
the mechanism has to be the raising of support prices. There
are no other viable options.

We can no longer depend on federal tax dollars to sustain
farm income, and we never should have. To do so would be
foolish on our part and unfair to America's taxpayers. It
now appears that there will not be a solution to the trade
problems facing agriculture for sometime to come, with rumors
of trade wars dominating the news. We cannot depend on an
export driven policy to sustain farm income, and we never
should have. Therefore, as I previously stated, if we are to
revitalize the rural economy, we must raise support levels to
increase farm income, we have no other viable options.

128

(AAM 03 FEB 93 page #5)

Most of you probably noticed the better economic news of
the past few days. National economic indicators are up. We
also should realize that the programs and policies of the new
administration could have had little to do with the upswing,
as those policies are still being forged. So what caused the
turnaround. I suggest it is consumer confidence. People
feel better about the future. Let me offer an example. I
have a friend who sells new automobiles in a large
metropolitan area for a living. He sold three on the entire
month of September, and only one in the whole month of
October. But on November fourth he sold three, and sold
seven more before Thanksgiving. Not a great success story,
but one that has a point - people are feeling better about
the future. They are satisfying pent -up -demand.

There is nowhere in the U.S. economy where this pent-up-
demand is more extreme than on the farm. America's farmers
are attempting to make a living with worn-out equipment.
Some surveys show the average age of the newest tractor on
the farm today is over twelve years. Do you realize that
many of the tractors that graced the Mall around the
Washington Monument fourteen years ago are the newest ones on
their operations? That is if they were not sold in
foreclosure. Farmers need the kind of feeling those new car
buyers I talked of earlier. But to get that kind of
optimism, they will need assurances of higher prices
supported by higher loan rates. Has anyone pondered what

129

(AAM 03 FEB 93 page #6)

would happen to the nation's economy as a whole if every
farmer replaced just one worn-out tractor, or a worn-out
pickup truck? It would create jobs and taxpayers from the
local dealership all the way back to the miners who dig the
coal and iron ore out of the earth. If nothing else, higher
farm prices would make President Clinton's economic recovery
programs much easier. Agriculture is the solution, not the
problem, to this nation's economic problems.

AAM has asked Mike Espy, the new Secretary of Agriculture,
to raise loan rates since that is at his discretion under
law. We are now asking this committee to make those higher
support levels law.

AAM also requests this committee, along with your
colleagues, to look at tax incentives such as an investment
tax credit to help the aforementioned equipment purchases
proceed, the return of income averaging, a reduction in the
capital gains tax for long term capital gains, and the Crop
Sharing Hunger Relief Act which gives private citizen
additional tax incentives to purchase surplus agriculture
commodities and donate them to those in need. We urge this
committee to take a vital role in rural health care, and
other rural associated programs too numerous to mention at
this time.

130

(AAM 03 FEB 93 page #7)

AAM wants to thank all of the members of this committee who
have fought for fair prices for farmers and for better
programs. Your help has not gone unnoticed by farmers.

Thank you again for the opportunity to present our views.
I would be happy to answer any questions you might have.

131

TESTIMONY OF CURT ROHLAND
PRESIDENT
NATIONAL FAMILY FARM COALITION

Mr. Chairman, and members of the House Agriculture Committee, I
appreciate the opportunity to testify here today on behalf of the
National Family Farm Coalition (NFFC) an organization representing
family farmers in 30 states around the country. This hearing today
strikes at the heart of what must be addressed - the state of the
rural economy.

All farm prices have been on the decline: dairy prices are starting
to tumble, corn farmers have the lowest harvest price on record,
and wheat farmers are facing record low net farm income. We, the
nation's food producers are in deep trouble. Current programs and
policies are certainly neither meeting the needs of family farmers
nor those of the citizens of our rural communities. If their
"intended objectives" are to produce an abundant crop without
regard for the producers then they have succeeded with this year's
9 billion bushel corn crop. Our productivity is lost when our
prices continue to fall below the cost of production and farmers
must constantly ask themselves why they struggle to remain in a
business void of any financial reward. The only beneficiaries of
this policy are the grain companies, processors, and food industry
conglomerates who continue to reap record profits both here and
abroad, within this country and through international trading. The
real impact of both these trading practices and the implications of
the 1990 farm bill need to be re-examined closely.

Our rural communities are crumbling. Tax revenues are down. Farm
income is so low that farmers cannot replace broken eguipment and
are foregoing other necessary improvements to their operation.
Many are forced to find off-farm employment sometimes displacing
another worker struggling to maintain a basic standard of living.
The real costs of low farm income need to be analyzed and factored
into the eguation. We call on USDA and the Office of Management
and Budget (OMB) to take a broader look at who is currently paying
for the export-driven low loan rate policies of the past decade and
to analyze how much would be saved by increasing loan rates to a
level that more closely meets the actual costs of production.

The current situation is not sustainable. Many farm families in my
area who have been struggling to survive since the mid - 1980 's
will not make it. Some have received FmHA delinguency notices and
are trying to cashflow an impossible situation. A number have been
liguidating their dairy herds. Others have attempted to "diversify"
their operations yet the bottom line is still too low.

This vicious cycle must be broken to achieve real economic
revitalization in this country. That revitalization can only occur
on the basis of a vital rural economy - one in which farmers begin

132

to receive a more equitable share of the value of commodities we
produce. Frozen and declining farm-gate prices and target prices
are compounded by increasing costs for all our purchased inputs
which jeopardizes our survival. We face the same problems with
inadequate health coverage and weakened infrastructure as the rest
of the country. Something is fundamentally wrong when Kelloggs and
General Mills can implement 3% increases on every box of cereal
while the farm share continues to decline and consumer purchasing
power is not keeping pace with inflation. Kraft, Inc. controls the
Green Bay Cheese Exchange, as recently documented in a Milwaukee
Sentinel investigative report; this directly impacts both the
cheese price and our milk price. Dairy prices are again dropping
and the existing "dairy program" needs emergency attention. The
squeeze is on us both as farmers and consumers.

1993 will hopefully provide Congress and the new USDA with a unique
window of opportunity to develop actions and push policies to
change the face of rural America. There needs to be a new
commitment and leadership by the Agriculture Committee. Real
issues, trends and changes in the countryside need to be dealt
with, not ignored or left to the illusory "free market".

We urge review of Congressional oversight and investigative
hearings that have exposed and documented the myriad of agency
problems. These concerns range from low farm income, lack of civil
rights enforcement within USDA, lack of enforcement of the Packers
and Stockyards Act, failure of the USDA appeals process, among a
myriad of other concerns. For farmers and farm advocates, these
hearings have been an opportunity to state the problems, yet the
solutions have been consistently ignored. There is now a chance to
put these reams of hearings into action and see improvements in the
delivery of existing programs and new programs that have been
consistently ignored.

We urge the House Agriculture Committee to join with us in urging
the new USDA to implement policies that begin to reverse the
devastating losses facing our nations' rural communities. The first
challenge is to use the discretion within the 1990 Farm bill to
provide "flexibility" that will start to promote changes for family
farmers and their communities. We also urge the Committee to
consider new initiatives and policies to accelerate the progress
that is so critically vital to our future.

I have enclosed a brief review of the most important issues that we
feel need to be addressed by USDA. These are all areas where the
Congress can play a major role in ensuring true economic
development to our rural communities. This commitment involves
both changes in domestic policy and a re-examination of the
implications of the NAFTA negotiated agreement and the ongoing GATT
negotiations.

Conclusion

The task ahead is great for us to sustain our lives and livelihood

133

as a farm-based agriculture and economic democracy. We share in
the responsibility to reclaim the direction of our farm and food
policy. As family farmers, we have lost a lot over the past
decade. Our farm-based rural communities have been de-populated
directly threatening their future. If this trend is not reversed,
the entire country will be paying the price and the social costs of
these shifts.

I can tell you personally and representing family farmers in rural
communities across the country, there is once again a glimmer of
optimism with the arrival of a new Administration. This optimism
must be translated into real changes and a commitment towards
rebuilding our chances for economic survival.

We look forward to working with the Committee both in D.C. and
around the country to forge a common-sense, workable approach to
solving our current problems and creating new policies and programs
that will restore prosperity to farmers, therefore an economic
recovery for us all. Thank you for this opportunity to present our
concerns. I will be glad to answer any guestions.

(Attachment follows:)

134

agra

National Family Farm Coalition

110 Maryland Avenue, NE, Suite 307 • Washington, DC 20002 • (202) 543-5675 • Fax: (202) 543-0978
NATIONAL FAMILY FARM COALITION TRANSITION ISSUES AT USDA: December 20, 1992

True economic development in rural areas is achieved through a new farm and food policy that enables
farmers to receive a fair price in the marketplace that restores profitability and sustainability to our rural
communities. The quality of our food supply and environment is best secured when food and fiber are
produced on diversified family operated farms. Domestic farm policy needs to be determined by Congress
to meet the needs of farmers and consumers, not limited by international trade agreements that will eliminate
effective farm programs both in this country as well as around the world.

Short-term Farm Income and Farm Program improvements using Secretarial discretion:

-increase loan rates to a level that increases net farm income and reduces government expenditures by
reducing deficiency payment levels; urge a fair analysis of the budget savings from higher loan rates
-Activate the Farmer Owned Reserve (FOR) for immediate entry with farmers earning the commercial rate,
-useexisting authority to increase dairy support price and avert any discretionary dairy assessments, re-open
the input process for 1990 Farm Bill inventory management options that were ignored in 1991; and implement
Section 102 of the Farm Bill to provide equity for California dairy farmers

-Implement 1990 Farm Bill programs for the 1993 crop year including demonstration programs for bushel-
based supply management and the Targeted Options Program; change sign- up process for IFMPO program.
-Evaluate the Integrated Farm Management Program Option (IFMPO) that has less than 100,000 acres enrolled
out of a possible 5 million by convening a farmer meeting on the program in Spring 1993.
Minority Farmer Concerns: Commitment to civil rights compliance and delivery of programs to minorities.
-Immediate response to the September 1992 petition for rulemaking presented to USDA on discriminatory
practices; develop an overall restructuring of USDA programs serving minority farmers.
-Urge funding and implementation of the 1990 Farm Bill programs including $10 million for minority outreach
and education program, improve targeting of FmHA direct loan programs, and conduct 1990 farm bill studies.
Access to Credit: Reassert FmHA's mission to assist family farmers.

-Family farmers need access to timely and affordable financing to maintain their farming operations. With
commercial credit evaporating, access to FmHA direct loans becomes even more critical.
-Take immediate action to ensure that 30,000 FmHA delinquent borrowers receive their rights. This includes
a moratorium on pending foreclosure actions to allow time for review of pending interim final regulations
and determination of how to better comply with the existing law -including the basic premise of the 1987
Agricultural Credit Act which ensures debt restructuring when it minimizes losses to the government.
-Overhaul of training and education efforts; training of FmHA employees and County Commitee members,
and printed materials, handbooks, and accessible outreach to farmers.

-Fix illegal inaccuracies in FmHA's DALRS computer program that determines whether a farmer receives
debt restructuring options under existing law. Farmers are currently being denied due to computer errors.
-Halt USDA office closing proposal until important policy issues and program delivery issues are resolved
including impact on farmers and workers. Restore authority of county supervisors and review of current
contracting out practices despite the availability of qualified employees to conduct the job.
USDA Appeals: Restore integrity to the system.

-Appoint new FmHA Appeals Director who is truly independent of FmHA to carryout the intent of the 1987
Agricultural Credit Act including enforcement of decisions

-Support congressional efforts to enact new USDA-wide independent appeals system to ensure farmers their
rights under all USDA agencies and improve delivery of the appeals program.

Trade: Ensure that trade agreements do not dismantle US farm programs forcing farmers out of business.
-Reassess the impacts of the NAFTA and GATT agreement on family farmers using realistic projections. The
jobs lost in farming and related small businesses needs to be analyzed with the ripple impacts on the health
of rural communities. Examine the budget costs of the Export Enhancement Program (EEP) and the Dairy
Export Incentive Program (DEIP) and the farm income impacts and profits by grain companies or processors.
Packers and Stockyards Administration: Strengthening its effectiveness.

-With corporate concentration in the meatpacking industry and contract labor problems in the poultry and
hog industry --there is a vital role for a strengthened Packers and Stockyard Administration and Justice
Department action to enforce antitrust laws to protect packers, feeders, poultry and livestock producers.

135

SOUTHERN RURAL DEVELOPMENT INITIATIVE

A PROJECT OF THE FUNDERS WHO FUND IN THE SOUTH
THE NATIONAL NETWORK OF GRANTMAKERS

Alan McGregor, Co-coordinator
Implementing Committee for SRDI
Sapelo Island Research Foundation
507 Ocean Boulevard - Suite 101 B
St. Simons Island. Georgia 31522
(912) 638 - 6265

Frank Williams. Co-Coordinator
Implementing Committee for SRDI
Boggs Rural Life Center, Inc
4729 Quaker Road
Keysville, Georgia 30816
(706)554-0110

RURAL DEVELOPMENT RECONSIDERED
A PERSPECTIVE FROM THE SOUTH

SPECIFIC RECOMMENDATIONS FOR IMMEDIATE ACTION BY USDA

SUBMITTED TO THE

COMMITTEE ON AGRICULTURE

U.S. HOUSE OF REPRESENTATIVES

ECONOMIC OUTLOOK HEARING

FEBRUARY 3, 1993

136

SPECIFIC RECOMMENDATIONS FOR IMMEDIATE ACTION BY USDA

1 . Re-examine the current use of $1 45M in Rural Rehabilitation Corporation Trust Funds to
assist low income rural people. Encourage national revision of existing "use agreements"
to enable states to establish innovative revolving loan and grants programs for new style
rural economic development. Special attention should be given to the State of Minnesota
which amended its Rural Rehabilitation Corporation Trust Fund "use agreement" in 1 989
and has since leveraged its initial $6M principal into a $30M community based
public/private partnership model that has helped to build 700 rural industries and small
businesses, created 3,700 jobs in communities with populations of 2,500 - 10,000 people
and leveraged another $87M in additional private investments over the past four years.

2. Implement and enforce the recommendations of the 1982 Report of the U.S. Civil Rights
Commission entitled The Decline of Black Farming in America," and the July 25, 1990
report of the U.S. House of Representatives, Committee on Government Operations, with
regard to equitable treatment of Black and other farmers of color by the Farmers Home
Administration(FmHA) and other USDA agencies.

3. Fully fund Section 2501 of the 1990 Food, Agriculture, Conservation and Trade (FACT)
Act providing for a $1 0 million "Outreach, Education and Technical Assistance Program."

4. Fully implement the sustainable agriculture, integrated farm management, water quality
and soil conservation programs specified in the 1990 Food Agriculture, Conservation and
Trade Act.

5. Fully fund Section 2347 of the 1990 FACT Act to provide $50 million annually for Rural
Cooperative and Technology Centers. This would provide the applied research, training
and development infrastructure to assist communities to plan and activate their own self-
help development cooperatives and credit union strategies.

6. Expand the Farm Ownership and Operating Loan programs and enforce the targeting of
FmHA farm ownership and operating loans to Black and other farmers of color to redress
past patterns of discrimination.

7. Research and study the most effective ways to utilize USDA agencies and programs to
assist rural families and family farmers. Research is needed on diversification of crops,
marketing, cooperatives, added value processing, new product development, international
trade and in other areas in context of sustainable and renewable production practices.
Many meaningful studies of USDA activities in agriculture and rural development were
authorized in the 1990 FACT Act but never implemented for budgetary and staff reasons.
This list of studies and reports should be catalogued, analyzed and placed in priority order
for implementation by the Clinton-Gore Administration.

8. Encourage USDA to participate in new inter-agency initiatives to establish a leadership
and training program for rural youth and adults in economic and community development,
job creation, civic participation, literacy, entrepreneurial and technical training in
cooperation with the Fund for the Improvement of Post Secondary Education, the

137

Department of Education, Department of Commerce, EPA, etc.

9. Expand the size and effectiveness of the Fanners Home Intermediary Relending Program.
Intermediaries have knowledge of the community, lower overheads, and streamlined
financing procedures. They achieve greater "bang for the buck" with federal dollars.
Increase funding levels, select intermediaries on a competitive basis, and base follow-up
support on performance. Consider converting all or part of loans to grants as
intermediaries meet and exceed high performance standards. Remove loan-by-loan
approval requirements for intermediaries with a proven track record.

1 0. Increase the effectiveness of the Rural Business Enterprise Grant program by eliminating
the set-asides for "Congressionally-Designated Projects." Promote multi-county revolving
loan funds and multi-jurisdictional lending consortia as a means of serving smaller
businesses in rural areas. Many small communities and counties do not have adequate
staff capacity nor large enough loan demand to justify creation of a loan fund for their own
area.

1 1 . Make the Farmers Home B&l guarantee program work better for rural and small firms by
streamlining loan approval, disbursement, procedures, and documentation. Create more
effective incentives for lenders to make smaller guaranteed loans by extending approval
authority for loans under $50,000 to all B&l lenders who meet and sustain certain
minimum loan volume and portfolio performance standards. The requirement that
borrowers have audited financial statements also makes the program unworkable for most
small businesses. Open up the B&l program to qualified non-bank lenders. Encourage
the creation of statewide providers and packagers of guaranteed loans where needed to
serve underserved rural areas.

12. Include $500M in the proposed Economic Stimulus Package for the backlog of Farmers
Home home-ownership and rental housing programs. The backlog of approved FmHA
Section 515 Rental Loans stands at more than $1 billion. Set-aside money for nonprofits
should be continued and expanded.

13. Expand and refine the 502 Home Mortgage Guarantee Program so more lenders use it.
County level sign-off and proposed auditing requirements are problems. To make it
easier to guarantee purchase of existing homes, FmHA could fund county offices to
obtain inspections and subsidize part of the upfit. The subsidy component is far too small
to meet the need; to optimize allocation, allot subsidies to nonprofit housing organizations
for distribution.

1 4. Continue FmHA's Title V Direct Loans to meet the needs of very low-income households.
Although this program serves poor households, the 90-day delinquency rate is only 2.4%.
The Deferred Mortgage Program, which helps households below 50% of median income,
needs to be expanded.

1 5. Fully fund the $500M backlog of approved RDA/FmHA rural water-sewer projects as part
of the administration's economic stimulus package.

138

SOUTHERN RURAL DEVELOPMENT INITIATIVE

A PROJECT OF THE FUNDERS WHO FUND IN THE SOUTH
THE NATIONAL NETWORK OF GRANTMAKERS

Alan McGregor, Co-coordinator
Implementing Committee tor SRDl
Sapelo Island Research Foundation
507 Ocean Boulevard - Suite 101 B
St. Simons Island, Georgia 31522
(912) 638 - 6265

Frank Williams. Co-Coordinator
Implementing Committee lor SRDl
Boggs Rural Life Center, tnc
4729 Quaker Road
Keysvttle, Georgia 30816
(706)554-0110

RURAL DEVELOPMENT RECONSIDERED
A PERSPECTIVE FROM THE SOUTH

TESTIMONY PRESENTED TO

THE COMMITTEE ON AGRICULTURE

U.S. HOUSE OF REPPRESENTATIVES

ECONOMIC OUTLOOK HEARING

FEBRUARY 3, 1993

139
ACKNOWLEDGEMENTS

We are particularly indebted to the Public Welfare Foundation and their staff for providing us with an office
in our nation s capitol to carry out this important public policy research and citizen action. We are also very
grateful to the Mary Reynolds Babcock Foundation, the Bert & Mary Meyer Foundation, the Jessie Smith
Noyes Foundation, the Sapelo Island Research Foundation, the Needmor Fund, and the Rockefeller Family
& Associates for their contiibutions of staff time and financial assistance. In addition, the following
organizations contributed time, knowledge and resources to this endeavor:

ORGANIZATIONS PARTICIPATING IN THE INITIATIVE

Appalachian Community Fund, Knoxville. TN

Arkansas Development Finance Authority Little Rock AR

Arkansas Land and Farm Development Center. Bnnkley. AR

Atlanta Black United Fund. Atlanta. GA

Boggs Rural Lite Center. Inc., Keysville. GA

Calumet Indian Cultural Center. Nashville. TN

Center tor Community Self Help. Durham NC

Commission on Religion in Appalachia. Knoxville. TN

Community Shares. Knoxville. TN

Community Shares of North Carolina. Durham NC

Delta CDC. Bnnkley. AR

DELTA Foundation. Greenville. MS

Federation of Southern Cooperatives Rural Training and Research. Epes. AL

First Nations Financial Protect. Falmouth, VA

Flonda Women's Foundation. Tampa. FL

Foundation tor the Mid South Jackson. MS

Franktinton Center Inc. at Bocks Enfield NC

Fund tor Southern Communities. Atlanta. GA

Highlander Research and Education Center. New Market. TN

Human/Economic Appalachian Development Corp Benaa. KY

Mississippi Action tor Community Education. Greenville, MS

North Carolina Association of CDCs. Raleigh. NC

North Carolina Indian Cultural Center, Pembroke. NC

Penn Center. St Helena Island. SC

Southeastern Reinvestment Ventures, Atlanta. GA

Southern Development BanCorporaoon, Arkadelphia. AR

Southern Development Cooperative Development Fund, Lafayette LA

OTHER ORGANIZATIONS

American Forum. Washington DC

Council tor Community Based Development. Washington D.C.

Association tor Community Based EducaDon. Washington D.C.

Center for Community Change. Washington DC

Center tor Literacy Studies. Knoxville. TN

Center tor Demographic Policy. Institute tor Educational Leadership. Washington D.C.

Housing Assistance Council. Washington DC

The Institute for Southern Studies. Durham, NC

MDC Inc.. Chapel Hill. NC

National Commission on Economic Conversion and Military Disarmament

National Finance Development Corporation

National Rural Housing Coalition, Washington DC

National Rural Health Assoaaoon. Kansas City. MO

Rural CoaliDon. Washington DC

Southeastern Regional Vision tor Education. Tallahassee. FLA

CONTENTS

£) OneStep'

140

Introduction *

Strategic Planning and Program Practices ^

Demographic Trends Impacting Southern

Rural Development ~

Rebuilding Rural America:
An Agenda for the Year 2020 m

How Do We Get There?

Appendixes

141

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

Bill Clinton and Al Gore both come from njral communities. They know it's
time to invest in the rural economy so rural Americans will have the same
opportunities that other Americans enjoy... We must have a rural America
where young people can cany on the values and traditions taught to them by
their families without leaving their rural communities. Our rural communities
cannot afford another tour years of neglect. (From the Clinton/Gore Plan on
Rebuilding Rural America)

I. INTRODUCTION

Economic recovery on a national level will not happen until recovery happens tor poor
people in the poorest communities both in our inner cities and our rural areas.

More than half of all of the nation's rural poor live in the South (5 million of the 9.1 million
rural poor). Yet, rural people and their problems have been neglected.

There is a higher incidence of poverty and working poor people in rural America than in
any other region of our nation. Two hundred and twenty three (223) of the 242 rural
communities with the most "persistent poverty" are in the rural South according to USDA
data. And these counties have consistently reported high poverty rates for four decades.
The poorest group in the nation is rural Black women in the South who are single parents.
An incredible 78% of their children are in poverty. In addition, counties with a significant
Native American population are in the persistent poverty grouping. All of these trends are
accentuated in the rural South by the lingering history of racial divisions.

Rural people, especially the distressed rural poor, black, white and Native Americans
have been forgotten and sometimes forsaken by many of our national policies. There is
more substandard housing, poorer access to health care, lower educational attainment;
deeper problems of job creation, capital development and technology transfer; greater
outmigration; lower family incomes; weaker infrastructure development, tougher
environmental threats and generally more severe societal problems in our rural
communities than in our nation as a whole.

During the 1980s while most of the nation experienced a recession, there has been a
depression in rural America. International pressures for lower wages have led to plant
closings in rural communities as manufacturers exported jobs. Agriculture and tax
policies worked to benefit large and corporate owned farming operations, driving many
medium and small family-owned farms into bankruptcy. The cumulative effects of
thousands of farm foreclosures devastated rural towns and communities in much the
same way. And, an already weak tax base in rural communities was further eroded,
shrinking local government efforts for schools, services and infrastructure.

There is a poor rural youth for every poor urban youth in America. This one to one
ratio demands that our government must give as much attention, support and resources
to our rural as our urban young people. If we are to fulfill the promise of "rebuilding

142

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

America", we must give equal attention and equitable assistance to the future generation
in our rural as well as urban communities.

The Southern Rural Development Initiative, a partnership of 27 community based
organizations and funders working directly with low income people throughout the South,
has prepared this paper based on its experience, to provide some practical policy and
programmatic recommendations for the Clinton/Gore Administration. (More background
information on the Southern Rural Development Initiative may be found in the Appendix).

While we are concerned about the conditions in all of rural America, these
recommendations come from the unique perspective of our experience in working in the
South, many of us in persistently poor counties with large concentrations of people of
color. The people of these communities of Appalachia, the Black Belt, the Carolinas
migrant labor camps, and other small towns and rural places have been left out and left
behind. But, they still have the spirit, strength and hope to build for positive change in
their communities.

We offer these recommendations from a community based perspective. They come from
people at the grassroots level who are trying to change conditions and rebuild their
communities from the bottom up. From this unique view, we know the home grown
solutions that are relevant, flexible, workable, inclusive and democratic which will be most
effective. We need the assistance and resources of our government at all levels to be
supportive, sensitive and responsive to this community process.

These recommendations were prepared not only for the U.S. Department of Agriculture
but for all agencies of the federal government that play a role and have an impact on
people in rural America. We believe our recommendations form a coherent,
comprehensive, and compassionate plan to help rebuild rural America.

143

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

II. STRATEGIC PLANNING AND PROGRAM PRACTICES

There is an urgent need for a National Rural Policy Agenda to rebuild and revitalize the
rural South and other parts of the nation. Such a strategy must recognize the devastation
of rural communities in the 1980s, begin with the realities of rural communities in the
1990s and prepare these communities for renewal, revival and renaissance in the 21 st
Century.

A National Rural Policy Agenda should recognize the following principles:

o Rural America, especially the rural South, involves more than agricultural America.
While farming is critical to rural life, agriculture directly provides less than 20% of
all rural jobs. Programs and policies to rebuild rural America must address the
range of needs which cut across environment, jobs, health, transportation,
education, labor, commerce and other sectors.

o A National Rural Policy Agenda must be long-term and include plans for the next
generation of rural Americans. America's urban problems have rural roots and
cannot be solved without simultaneously addressing rural problems. It is often the
rural poor and dislocated who migrate to become the unprepared, unemployed and
homeless in the cities.

o A National Rural Policy Agenda must be conceptualized, planned, directed,
implemented, coordinated, and evaluated across the many departments of the
federal government. Disparate and disjointed public policies will not be effective
in remedying the deep-seated problems of rural poverty. Coordination of this
agenda must be provided at the White House level through a Special Office of the
Domestic Policy Team.

o While a comprehensive National Rural Policy Agenda is needed, specific agencies
and programs that already exist must strengthen and redirect their efforts on behalf
of rural distressed communities. These include agencies such as the Departments
of Agriculture, Education, Commerce, Interior, HUD, HHS, Labor, Transportation,
SBA and Environmental Protection, as well as more specific programs of the
Appalachian Regional Commission, the Tennessee Valley Authority, the Farmers
Home Administration, Rural Electrification Administration, the Agricultural Extension
Service, and the Rural Rehabilitation Trust Fund.

o An integrated approach to rural America must entail investment not only in the
infrastructure for economic development but also in its people. In distressed rural
communities this will require major public investment and support to organize and
develop the capacity and skills of grassroots people and community-based
organizations.

144

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

o The rural development process can and must be environmentally sustainable and
help to renew rather than deplete the natural resources of rural communities to be
effective in improving the quality of life for rural families.

o The federal government cannot do this alone. Within rural America, partnerships
must be created with religious, philanthropic and corporate interests to support
rural development. Private nonprofit rural community development, education,
environmental, finance, housing and other organizations will need to be activated
and involved to accomplish the task. This Third Sector" must be included as
partners with government and business to rebuild and revitalize rural communities.
In the past, the resources and capacity of this sector to deliver programs to rural
communities have been seriously underutilized.

o Ultimately, it is rural people committed to improving the jobs and quality of life in
their communities who will make the difference for rural America. Strategies for
rebuilding rural America must be built with citizens' involvement at every level and
driven by rural community leaders with the skills and resources to create jobs and
develop their communities.

o Rural America has vast regional differences in geography, resources and culture.
A national rural development program must be sensitive to and allow for regional
differences in its implementation and impact.

o A National Policy Agenda for Rebuilding Rural America must involve major public
and private investment. In distressed rural areas, investment in capacity building,
economic development and private industry job creation strategies must provide
the stimulus necessary for recovery and revitalization.

This public investment is needed to "level the playing field" in ways that will give
rural citizens the skills, funds, and security to participate in long-term rural
revitalization. This also means that farm policies and programs must encourage,
and not discourage, the profitability of medium and small family-owned farms.

o Major public investment in distressed rural areas should be incorporated into the
Admini st ratio ns's short-term economic stimulus program. Federal deficit reduction,
while critical to the nation as a whole, should not be done at the expense of the
poorest of the poor in rural or urban areas. Only by providing a national plan for
rural America, and the floor of support to allow rural communities to help
themselves, can rural America be rebuilt and revitalized effectively for tomorrow
and for the next generation.

Among the practices we feel the federal government should employ in implementing the
National Rural Policy Agenda are:

Build from the bottom up. In general, solutions must be devised and tailored

145

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

largely at the local, multi-county, regional, or industry sector levels;

Clearly focus and target benefits to rural communities, starting with those in
greatest need of assistance;

Emphasize regional (at a minimum multi-county) approaches and provide
incentives for regional collaboration. Many problems cannot be tackled only at the
community level. The success of rural economies is linked to their urban
neighbors. Economic development efforts building these linkages must be
fostered;

Promote local ownership and the building of assets for rural residents to increase
the wealth remaining in rural areas and to give a stake in the local economy to a
broader base of citizens;

Encourage partnerships and collaborations. The more limited institutional base in
rural areas demands greater creativity and the building of new types of
partnerships. Investments must be made in capacity building of rural organizations
capable of undertaking development ( including community development
corporations, networks of firms, etc.) so that long-term investments in restructuring
the rural economy can pay off;

Link the provision of financial capital with resources for building the human
capacity - technical, management, and leadership and planning skills - that are
essential if financial investments are to achieve their intended benefits for rural
communities most directly affected;

Minimize bureaucracy. When using non-profits to deliver capital, training, or other
services, don't overburden them with so much bureaucracy that they lose their
advantages of flexibility, targeting, market-orientation, etc. Rely on performance
measures rather than restrictive regulation to ensure accountability; and

Measure results - evaluate and support programs and local providers based upon
results and tangible progress to reach the goals and objectives.

146

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

III. DEMOGRAPHIC TRENDS IMPACTING SOUTHERN

RURAL DEVELOPMENT

THE STATE OF THE SOUTH TODAY

As the U.S. economy reels from the end of the Cold War and global economic
restructuring of the past two decades, distressed rural areas of the South have been
placed in an increasingly vulnerable position. And, despite the robust economies of the
Sunbelt Metropolitan cities and coastal resort areas, these distressed rural areas of the
South are still the South's poorest counties.

While growth is expected to continue in coastal corridors and major metropolitan areas
of the South, predictions for long neglected and seemingly forgotten rural communities
are bleak.

National rural policy makers cannot afford to ignore the South, a region that includes
nearly half (45%) of the nation's rural population.

Although 90% of the population growth from 1980-1990 in the United States occurred in
the South and the West, and 50% of this growth occurred in only three states(California,
Texas and Florida), distressed rural areas of America lost population, industry, and in
some instances, congressional seats and federal block grant funding tied to population
size.

The 17 states designated by the Census Bureau which make up the South are more rural
than the rest of the country. Nearly 25M Southerners representing 30% of the South's
population live in "non metro" areas. By comparison, only 17M "non metro" residents live
in the Midwest, the next most rural region of the nation.

The South is also the nation's poorest region with the highest incidence of poverty in rural
areas. According to the USDA, 223 of the 242 non metropolitan "persistent poverty"
counties are in the South. Even more startling is the fact that these counties have
reported consistently high poverty rates for four decades.

Southern poverty is pervasive and severe. Over half of the Southern states still fall below
80% of the U.S. per capita income. Eight of the nation's top ten highest poverty states
are in the South.

In 1990, there were more people living in poverty in both "non metro" rural (20%) and
"metro" (13.9%) areas of the South than in any other region in the country. This is
particularly true for poor children of African American single family households, 78% of
whom live in the South.

Levels of poverty in "severely distressed" parts of the South, such as Appalachia, have
risen to heights that now defy previous measures. People's income patterns are not only

147

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

lower, but increasingly dependent on income transfer payments in place of wages and
salaries. The number or working poor is staggering.

Official measures of unemployment are flawed. Reports of unemployment no longer
capture a true picture of the long term unemployed, the discouraged worker or the men,
women and youth who have given up trying to find work out of futility.

Reported "improvements" in "official" unemployment statistics disguise reality. For
example, 11 eastern Kentucky counties with real "unofficial" unemployment rates of 10-
53% are no longer categorized by the Appalachian Regional Commission as "severely
distressed."

CHANGING DEMOGRAPHICS

Demographic trends during the remainder of this and the beginning of the next century
will exacerbate disparities and poverty conditions in the rural South.

Between 1988-2000, the largest amount of population growth in the country (24%) will
occur in the Southeast. Overall, population growth will be concentrated in non-white
populations in the South, the West, and the suburbs of the 40 largest metro areas.

As the 40 largest metro areas continue to attract people and jobs, the viability of rural life
will come into question shortly after the year 2000. Clearly, outmigration from rural areas
will continue at levels that have reached more than 500,000 annually in recent years.

By the year 2000, new entrants to the work force will be an 85% combination of
immigrants, women and minorities. By the year 2010, the job structure in the country will
be even more stratified with about 30-40% of all jobs requiring a college education and
paying very well; 30% or more will continue to be "working poor" jobs for high school
dropouts. The balance will likely be filled by high school graduates with strong
backgrounds in science, math and computer technologies.

Trends indicate there will be one new job for a computer programmer for every seven
jobs for clerk/cashiers. The predominance of lower paying service industry jobs will lead
to widely disparate "information rich" and "information poor" societies.

With higher paying jobs concentrated in large metro areas and the lowest educational
attainments as well as service industry jobs in rural areas, rural and urban/suburban
social and economic disparity will only widen.

By the year 2030, the work force that will be supporting a predominantly white elderly
population will be only about half white, and younger workers will be 60% minority and
female. In many areas of the rural "Black Belt" South, white majorities will be numerically
surpassed by racial and ethnic minorities. More elderly of both races will draw on social
security and live in rural areas supported by fewer and fewer young workers.

148

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

For those who remain in predominantly low wage rural communities, the provision of
medical, educational, and social services to sparse and declining populations will become
as costly as providing the same services to inner city populations. The "rural
underserved" may rival the "urban underserved."

The consequences for rural communities that are suffering declining populations and
major economic shifts to low paying service industry jobs are being felt throughout the
Corn Belt, Great Plains, Mississippi Delta, Appalachian Coal fields and mining areas of
the West. Almost everywhere, rural counties that depended on agriculture are losing
population, and only 20% of all rural employment is any longer directly linked to
agriculture.

A true look at the changing demographics demands a change in traditionally held views
of rural America.

Rural is no longer equivalent to farming. Poverty rates in rural areas now rival those in
central cities. General and persistent poverty rates among African Americans, Native
Americans, and Appalachian Whites are even higher in rural areas than in inner cities.
In 15 Appalachian counties, rates of child poverty are higher than 46.6%, a rate
equivalent to that of the City of Detroit's, reported to be the highest of any American city.

More than half of all the rural poor live in the South. Outside of the South, nearly all of
the rural poor is White. In addition, most rural poor Blacks or Whites live in families
headed by two parents, and most families contain at least one worker. The elderly
comprise an even larger share of the rural poor than the urban poor.

For the remainder of this century, efforts to find solutions to the problems of rural poverty
must respond to major sweeping trends in population growth, composition, and other
demographic factors. But large and significant regional differences will demand different
sensitivities and strategies.

The consequences of trends left unmanaged will mean the end of viable communities in
rural America.

149

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

2
w

4>

c
3

s
c
U

o
o.
c
u

tl

E

e
o
Z

c
e
u

c

i

o

c
u

II

oo

<-
■a
c
u
m

10

150

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

MapB

Projections of U.S. Population

1988-2000

NEW
ENGLAND

Map 2
Percent of Children Under Age 18 in Poverty, 1990

Percent
~jl_e»s than 16

15 to 18

20 to 24

26 or more

Source: Population Reference Bureau. The Challenge of Change What Ihe I990 Census Tells Us Ahoul
Children Center for the Study of Social Policy. 1992.

11

151

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

Map C
Minority Public High-School Graduates, 1995

Projections bv slate of proportions of graduates who are minority -group members

SIX end above
31% io 50%
I I 16%lo30V
I I 0% to 15%

Source: Western Internets Commission
tor Higher Education

MapD

.Project Change In The Number Of High-School Graduates

1989-90 to 1999-2000

r~~l • 11%endeoo»o

r~i o% io • io%

I I Decreases

Source: Western Interstate Commission
tor Higher Education

12

152

RURAL DEVELOPMENT RECONSIDERED: A PERSPECTIVE FROM THE SOUTH

Figure 1

Percentage of Eighth Graders in Low and High

Socioeconomic Groups Who Are Proficient in

Advanced Mathematics, by Race and Ethnicity, 1988

WWVWW

"VVI.T<

WW
\ \ W

iV.y.y>i

iiiiii

\ \| £ 4

i

18

■

rr^

1

-$.2S

§ 21

TTT

40

a-

ASIAN

WHITE

HISPANIC

BLACK

10 20 30 40 50

Percentage at Advanced Level

60

70

TO HI 25% SES

E

WW
■ I I >

LOW 25% SES

Source: Nalional Ccnlcr Tor Education Statistics. National Education
I iingitudinal Study ot 19HH, A Profile of the American Eighth Cruder, 1990

(The complete report is held in the committee files.)

13

153

Executive Intelligence Review

(703 777 9451)

Testimony to the

Committee on Agriculture U.S.

House of Representatives

February 3, 1993 Economic Outlook Hearing

by Marc la Merry
E.I.R. Agriculture Editor

End the Regime of the Federal Reserve;
Institute Economic Emergency Measures

Chairman de la Garza, Ladies and Gentlemen:

The news service I represent was begun in the
mid-1970s by Lyndon LaRouche and associates, and I have
covered agriculture and economic news developments for the
past 20 years. My personal family background includes four
generations in the dairy business in western Pennsylvania.

- Economic Catastrophe -

What we face today is economic catastrophe — not
simply a downturn which can be reversed by some
adjustments here and there. I ask you— the leaders of a
new session of Congress, as a newly-constituted Committee,
with 15 new members, to break with the trend of recent
legislation, and trend of popular opinion that is causing
one disaster after another to occur.

Consider what we face in three ways: 1) the depth of
the depression; 2) the emergency financial measures
required; and the 3) emergency production measures.
Finally, I want to draw your attention to the initiatives
in 1993 that are going in the right direction.

1) WORLDWIDE DEPRESSION. The entire United States
economy is in a depression that is worsening daily, and
part of a world depression. The evidence is obvious in
each of your home districts, but look at it from the
point of view of the overall physical economy:

Basic industry? What capacity that still exists is
rapidly being dismantled. For example, a round of 31,000
job terminations has been announced for the aerospace
sector — the most advanced and essential workforce and
capital stock in the nation.

Infrastructure? Urban water systems,
transportation, energy grid, social infrastructure (health
and education,) irrigation, are all breaking down.

Agriculture? Traditional advanced-technology family farms
are being eliminated. Rural areas are being depopulated.
The average age of the remaining farmers is climbing to
over 60. Considering the entire spectrum of food supplies,
the U.S. is a net importer.

P.O. Box 17390 Washington. D.C. 20041-0390

154

The foodchain is breaking down all along the line.
Thousand of farmers cannot last "another season" to
produce a crop. The processing phase is marked by
sweatshop production, e.g. TB in midwest packing houses.
Independent processors and grocers are being bankrupted.

And people are not able to eat. Unemployment is
running at over 17%. There are 26 million Americans on food
stamps — not counting the millions more who need food aid,
but are not signed up.

These few facts describe the problem. But what do the
opinion-makers from Goldman Sachs, or Cargill or Stanford
University's "Vision 2000" tell you? They demand such
things as:

♦"Enterprise Zones" — where cheap wages, and low level
infrastructure are supposed to solve economic decline,
e.g. "Animal Enterprise Zones" have just been approved in
Iowa. However, the experience of the model "Enterprise
Zones" — the maquiladoras, along the U.S. -Mexico border has
brought cholera to the people in the Rio Grande River
Basin, as Chairman de la Garza has reason to know.

"Global market share" is another goal you are
supposed to support. Congress has been pressured to
approve low prices to the farmer, and export subsidies to
Cargill, ADM, Continental, Louis Dreyfus and the few other
select companies dominating food trade in the name of
making the U.S. "export competitive." But look at the
world: there is no market to share. The world depression
is obliterating national economies. The nations of the
former Soviet bloc are suffering; they need food relief
and cannot pay. Africa is being denied food, and the means
to produce food, on the scale of genocide. In the course
of the collapse, the pre-conditions of World War III are
in the making.

2) EMERGENCY FINANCIAL MEASURES. What is in order is
to declare a state of economic emergency, and take the
financial and production measures needed for a real
recovery. Foremost is that Congress must end the private
operations of the Federal Reserve, and restore control
over money and credit — in effect, nationalize the Federal
Reserve. We must expand the industrial, agricultural and
infrastructure sectors, not the financial sector.

At present, the Federal Reserve System is using its
discounting procedure to provide interest rate spreads,
and other aid to a select number of otherwise bankrupt
banks and financial entities. New York banks and others
borrow from the Fed at the level of 3% interest, then turn
around and loan that fiat money at 4-8% to the Federal
government for Federal paper. So the Federal government is
going deeper and deeper into debt to the commercial
banking system, i.e. the Fed.

This is the core of the financial crisis. When you
are told to cut the budget deficit, and cut the debt, that

is just a prescription for continuing the disastrous
regime of the Federal Reserve for a little while longer.
Meantime, productive activity is starved for credit.

155

Whet is required is to bypass the Fed mechanism. We
have to go back to the Constitution, which mandates that
the government issue money directly, placing it with the
banking system only as a depository instrument. The U.S.
Treasury should issue notes placed for lending at
low-interest rates to designated economic
activities — infrastucture projects, needed heavy industry,
agriculture and essential services. The basic interest
rate to entities in government-mandated activities should
be in the range of 2%, which would mean that the interest
rate to private vendors on key projects (rail, vehicle
assembly, construction) might be in the range of 4%.

To restore the economy, this form of currency
issuance must be on the scale of about half trillion
dollars yearly, which would generate activity
involving 8 million new jobs.

3) ECONOMIC MEASURES t What is required are the
following:

♦Infrastructure: Massive construction of modern
water, energy, transport, and related physical instructure
projects. Among the technologies needed are magnetically
levitated trains and other rapid rail systems;
nuclear-power based energy supplies, water purification
and garbage disposal.

The long overdue continental project — "The North
American Water and Power Alliance" (Nawapa) should
be started immediately — diverting water now going to
the Arctic, southward to the high plains and Great
Lakes watersheds .

♦Health: Massive reconstruction of the hospital
grid as originally conceived in the Hill-Burton Act,
with special facilities for AIDS, TB and all contagious
diseases .

♦Agriculture production mobilization: Declare a
moratorium on family farm foreclosures, reorganize and
re-schedule debt based on re-enacting parity pricing for
farm commodities. Provide low interest production credits
for farmers and independent processors. Investigate,
prosecute and break up the cartel of companies now
dominating trade in food, chemicals, seeds and other
essentials.

♦Science and space drive. Back a Kennedy-era national
science education drive with both basic research and
general education geared to research and development of
advanced forms of nuclear energy — fusion, and all its
applications — biomedical, agricultural, industrial, and
especially space exploration.

♦Foreign policy. End the GATT, NAFTA, U.S. -Canada and
all other forms of foreign policy based on subverting
domestic and foreign economic activity by free trade
swindles .

156

- Initiatives -

Already in 1993, initiatives in the direction
of emergency action have been taken, and show what
can be done:

a) The "Federal Reserve System Accountability Act"
introduced by Rep. Henry Gonzales on Jan. 5, seeks to
establish Congressional oversight on the Federal Reserve.

b) Sen. Bennett Johnson and colleagues have
introduced a measure to set a floor price on oil to induce
domestic production potential again. This is on the same
principle of parity pricing that must be enacted for farm
commodities — as was the law of the land until the 1950s.

c) On the state level, there are actions to stay farm
foreclosures, and to investigate and prosecute the
widespread fraud associated with farm debt and credit
practices under the Federal Reserve System.

I attach the full text of a resolution recently
introduced in the North Dakota legislature that calls on
you in Congress, and on the President, to grant such a
stay and launch investigations . This resolution is
occasioned by the sheriff's sale now scheduled for Feb. 8
in county, North Dakota, against Mr. and Mtb. Laverne
Zenker, which I ask this committee to stay, in particular,
I ask Representatives Earl Pomeroy and Tim Johnson.

d) The final initiative I raise is the international
mobilization of parliamentarians and others' calling on
President Clinton to release from jail the political
prisoner Lyndon LaRouche, whose economic leadership
abilities are so needed now because of the crisis we face.

Appendices t

1. North Dakota Legislative Assembly Concurrent Resolution
on bank fraud on farm loans, and need for moratorium

on farm foreclosures.

2. Letter to President Clinton

3. EIR interview with Lyndon LaRouche, "How to Get
the Economy Moving," Feb. 1, 1993.

157

jiieo.eieo

Lejliutivl Assembly HOUSE CONCURRENT RESOLUTION NO. 3037

of North Dikott

Introduced by

Representative Kerzman

$€*&+*' rVo*rev-

1 A concurrent resolution urging tht President of the United States end

2 Congress to Investigate allegations of fraud and abuse by banks end other

3 credit agendas in the handling of agricultural loans, and to consider a

4 moratorium on farm foreclosures.

s WHEREAS, North Dakota farmers and other state residents have presented

6 evidence of fraud and abuse by banks and credit agencies in the handling of

7 agricultural loans; and

s whereas, existing evidence shows abuse by lenders of the Farmer's Home

9 Administration loan guarantee program; and

10 WHEREAS, this abuse has Injured farmers rather than assisted fanners;
n and

12 WHEREAS, this abuse has resulted in the endurance by farm families and

13 communities of severe hardships and in the erosion of confidence in

14 governmental agencies; and

15 WHEREAS, a healthy and prosperous independent family farm system and an

16 honest and fair credit system are vital to the economic well-being of all

17 Americans;

11 ROW. THEREFORE, IE IT RESOLVED IY THE HOUSE OF REPRESENTATIVES OF NORTH
19 DAKOTA. THE SENATE CONCURRING THEREIN:

30 That the Fifty- third Legislative Assembly urges the President of the

21 united States and the Congress to thoroughly Investigate allegations of fraud

22 and abuse by banks and other credit agencies in the handling of agricultural

Page No. 1 33100.6100

158

Fifty-third
Legislative Assembly

l loans and to offer appropriate compensation for those persons found to be

victims of fraud and abuse; and

BE IT FURTHER RESOLVED, that the President of the United States and the
Congress consider a moratorium on farm foreclosures, particularly 1n
foreclosure cases Involving a Farmers Home Administration guaranteed loan,
until such time as the Investigation Is complete; and

BE IT FURTHER RESOLVED, that the Secretary of State forward copies of
this resolution to the President of the United States and to each member of
the North Dakota Congressional Delegation.

Page No. 2

159

F28 Wednesday, January 20, 1993

The Washington Post

Appeal to President-Elect Clinton

Free Lyndon LaRouche

Dear President-Elect Clinton:

In the course of your election campaign,
and following your election as the Presi-
dent of the United States, you pledged to
bring about a change in American policy.
We welcome this intent and wish you cour-
age and steadfastness for this difficult task.

We call upon you to take a first step in
this direction: To end a crying injustice-
see to it that Lyndon LaRouche is immedi-
ately set free and exonerated.

Lyndon LaRouche, who is innocent, has
been incarcerated as a political prisoner in
the federal prison in Rochester, Minnesota
since January 1989. He committed no
crime; his sentencing and imprisonment
were the result of years-long slanders and
persecutions by forces of the Reagan-Bush
administration, in combination with the
media and private organizations, as well
as forces of the secret services of formerly
communist states.

Over 1,000 prominent jurists from all
over the world have protested publicly
against this abuse of justice, in the course
of which LaRouche and a number of his
associates were supposed to be eliminated
as an undesired opposition. Hundreds of
parliamentarians and other prominent
personalities from all over the world have
joined this protest.

The LaRouche case was presented to the
Human Rights Commission of the United
Nations several times; U.N. Special Rap-

NORTH AMERICA

Jim Albright, past State

Prrs Alabama Bldg

Trades Council
Milton B. Allen. Judge (ret).

Baltimore City Circuit

Court
Ali Baghdadi. Ed. Al-

Bosiaan Journal. Chicago
Almamna Barbour. Esq..

Philadelphia
James Bamett. Chrm .

Coalition Black Trade

Unionists N W. Al.
Rev. Richard Boone, former

SCLC Field Coord .

Alabama Cities Project
Francis Boyle. Prof of Law.

Univ. of Illinois,

Champaign
George Branch, City

Councilman.- Newark
Bernard and Rose Mae

Broussard. Starthrowers.

La.
Frank Caligiuri Jr., Exec.

Bd . UAW. Buffalo
Annie Coleman. Vice Pre* .

Coalition Black Trade

Unionists Ca

Clinton Roberson. Pres .

African American

Lawyers Assn.
William P Robinson. Jr.,

attorney. Norfolk. Va.
Ed Saldana. Mexican

American League Against

Crime. Los Angeles
Greg Schumacher, farm

leader. S D
Rev. Marshall Shepard.

past Pres . Progressive

National Baptist

Convention
John Shike. Ed and Pub .

Voice of Frttdom.

Houston
Barbara Lett Simmons.

Pres . Wash DC Democ.

Women's Club
Rev Glen Staples. Vice

Moderator. Immanual

Missionary Baptist Assn.,

Wash DC
Fr Thomas Tou, Pres..

Chinese Aasn of Montreal
Rev. Wade Watts, past

Pres Oklahoma NAACP
Rev. Hoaea Williams.

Defcaib County

porteur Angelo Vidal d'Almeida Ribeiro in-
cluded the case in his report last year to the
U.N. Commission on Human Rights.

Since then, explosive new material has
come to light documenting the political
motivation behind this persecution. One
U.S. court has, in fact, ruled that the trial
had come into being as a result of "con-
structive fraud" on the part of the gov-
ernment.

We are outraged over the arrogance of
the Bush government, which ignored all
protests and appeals. Yet it was George
Bush himself, who in 1988, i.e., before
LaRouche had been indicted in Alexandria,
Va., declared in public that LaRouche be-
longed behind bars, thus, as Vice President,
anticipating any legal procedure.

We, the undersigned, see ourselves as
members of an international coalition to
free Lyndon LaRouche. We appeal to you,
President Clinton: Give a signal that you
seriously mean to bring about change: Act!
Take the necessary steps immediately to
set LaRouche and his associates free!

I join the international coalition to free
Lyndon LaRouche and endorse the above
appeal. I agree to have my name published
with this appeal in American or European
newspapers.

This appeal has been endorsed by hundreds
of individuals, of whom the following is a
sampling. Titles for identification purposes

only.

Heinz Hildebrandt. Deputy.

Sason-Anhalt Parliament,

Germany
Dr. Ludwig Hoffmann-

Rumerstein, attorney.

Innsbruck
Antonio lodice, Deputy,

Euro Parliament, Italy
Strecko Jurdana, political

journalist. Croatia
V. Kazarian. Yerevan City

Parliament. Armenia
Hrant Kachatnan. Member

of Parliament and

Supreme Soviet. Armenia
Brig Gen Heinz Karst

(ret). Germany
Prof Dr Hans Klecatsky.

former Minister of

Justice, Austria
Prof Dr Hans Kuechler,

Pres.. Intemat'l Progress

Org . Vienna
Dr. Tibor Kovats, Bd

Member, Assn. of Former

Political Prisoners.

Hungary
Prof Dr Stephan Kurowskl,

Catholic Univ., Lublin.

Poland

If. Xavier. Dir.. Home for

Human Rights for Sri

Lanka
H.G Ward. Governor,

Intemat'l Policy Forum,

South Africa

IBERO- AMERICA

Argentina

Arturu Frondizi. former
President of Argentina

Mario Caponnetto.
cardiologist

Sergio Ceron, journalist

Brail

Luiz Carlos Casagrande.

State Legislator. Rio

Grande do Sul
Fernando Correa dc Sa

Benavides. journalist
Dom Manuel Pestana Filho.

Bishop of Anapolis. Brazil
Roberto Saturnine Braga.

City Councilman. Rio de

Janeiro
Col. (ret.) Pedro Schirmer.

Ed.. Ombro a Ombro
Heho Zawatski. Pres . Rio

Grande do Sul

160

imionitu. i_«
David A Collins. City

Council member. Buffalo
Paul Comiskey. SJ., Pres..

Prisoners' Ru Aun.
Sylvia Cox, Exec Vic* Pre*..

Nail Aun of Black ;

Women Lawyers
Gary Daniels. Pre . Int'l

Broth Boilermakers

Local 684. Va.
John W. DeCamp. former

Nebraska Slate Senator
Joacph Lhckson, Pubuaber,

Birmingham World
Msgr David I. Dorsch.

Archdiocese of Baltimore
Don Em. former State

Senator. Ne.
Most Rev. Basil Filevich.

Bishop of Saskatchewan
Rafael Flores, Bd Member.

Hispanics for Life. Los

Angeles
James M Franklin. Past

Pres. AFCE Local 421,

Wash DC
Josip Gamulin. Pres..

Croatian Ctte. for Human

Rights. Toronto
Justice William C. Goodloe

(ret). Wash. State

Supreme Court
lsador Hampton. Pres.,

UAW Local #835. Mt
Ron Hampton. Nat'l Dir .

Nat'l Black Policeman's

Assn.
Henry Helstoski. former

US Congressman. N J.
Fred Huenefeld. past Pres ,

Nat'l Org of Raw

Materials
Rev Robert J.N. Jones.

Pres . Richmond SCLC
Rabbi Gerald Kaplan.

Brooklyn. N.Y.
Kazimierz Kasperek. Ed ,

The Attiancer. Cleveland
Clifford Kelly, former

Chicago City Councilman
Rev Leon G. Lipscombe.

Allen Chapel AME

Church. Wash DC
Rose-Marie Love, former

Cook County

Commissioner. II.
James J Lumpkin. Sec'y-

Treas. ILA Local 1458.

Va.
Rev Eugene Lumpkin.

Ebenezer Baptist Church.

San Francisco
Colman McCarthy.

syndicated columnist.

Wash DC
Art Minson, Chrm.. Pol

Action Ctte.. Akron

NAACP
State Senator Theo Walker

Mitchell.SC.
Valencia Mohammed. At-

large Member. Wash DC

School Bd.
Dr Abdul Alim

Muhammad. Minister of

Health. Nation of Islam
Siah Nyanseor. Chrm..

African Anti-Malthusian

League. Atlanta
George Perdue.

Representative. Alabama

State House
Vel Phillips, former

Wisconsin Secy of State
Rev Reginal Pitcher. Pres .

Baton Rouge SCLC
John Ramsey. Pres.. Asphalt

Workers Local 889,

Newark

Commissioner. Ga
James Wilson. Vice Pre* .

Waits NAACP. Ca
Wyat i Wilson. Pres .

Louisiana Coalition for

Pnson Reform
Nadine Winters, former

Member. Wash DC Ciiy

Council
The Rev Canon Joseph

Francis Xavier, Anglican

Church of Canada

EUROPE

Jean-Marie Alexandre.

Deputy. Euro Parliament.

France
Haik Babookhanian.

Yerevan City Parliament,

Armenia
Roberto Barzanti. Vice

Pres.. Euro. Parliament.

Italy
Prof Giulio Basetti-Sani.

OFM. Trento Cultural

Inst . Italy
Msgr Luigi Betuzzi. past

Pres , Pax Christ i, Italy
Lcszek Bialkowski. adviser.

Trade Union "Solidarity

80*
Jadwiga-Helena Borat,

founding member. Polish

Solidarity movement.

Sweden
Prof Dr. Norbert Brainin.

O.BE., violionist, London
Dr Manjan Brajinovic. Bd.

Member. Austrian-
Croatian Society. Vienna
Ladislav Boucek. journalist.

Ondrejov, Czech Republic
John Bouvin. Member of

Parliament. Sweden
Maria Luisa

Cassanmagnago Cerretti.

Deputy, Euro. Parliament.

Italy
YChernichenku. Nat'l

Deputy. Pres . Farmers'

Paris of Russia
Nicole Delperee.

gerontology law expert.

Belgium
Janos Denes. Member of

Parliament, Hungary
Marie Jo Denys. Deputy,

Euro Parliament. France
Prof. Dr. Jakow Drabkhm,

Dir . Research Or. for

German History. Moscow
Prol Dr Kurt Ebert. Vice-

Dir . Inst for Legal

History. Innsbruck Univ..

Austria
Roger Garaudy. writer.

France
Dr Janos Gojak. theologian.

Budapest
Charles Gray. Chrm..

Int'l of

Local Gov'ts.
Lissy Greener. Deputy.

Euro Parliament.

Germany
Brig. Gen. Friedrich

Wilhelm Grunewald (ret ).

Germany
Francesco Guidolm. Deputy.

Euro. Parliament. Italy
Ludwig Guetller. musician,

Germany
Fand Hanna. Perm Rep. to

U.N Office, Vienna
The Right Rev Michael

Hare-Duke. Bishop of St

Andrews. Perth. Scotland
Fntz Hermann. Chrm..

Mutual Org for Farming

(LFO). Denmark

Viktor Kmm. Chair.

Human Rights

Commission. Moacow

Soviet
Mayor Marcel Le Bihan,

Pompey, France
Use Luebben. Deputy.

Lower Saxony

Parliament. Germany
Carmine Mancuso. Member

of the Senate. Italy
Vladimir Matveev,

Coordinator. Democratic

Union, Moscow
Stefan Metz, Artistic Dir.,

Orlando Festival,

Amsterdam
Raffaele Morini. Pres.,

Ennco Mattei Study

Center. Italy
Pavlu Movchan. Member of

Parliament. Ukraine
Igur Muradian, Member of

Parliament and Supreme

Soviet, Armenia
Prof- Dr. Taras Muranivsky.

Rector. Ukrainian Univ.

in Moscow
Valeria Novodvorskaja.

leader. Democratic Union

party, Moacow
Sergei Pavlov, Deputy. St.

Petersburg Soviet
Nico Perrone, Law Faculty.

Ban Univ., Italy
Flaminiu Piccoli. Member of

the Senate. Italy
Alaxei Pogorilyi. Deputy.

Moscow Soviet
Gen. Jean-Gabriel Revault

d'Allonnes (ret.), France
Brig Gen Jobst Rohkamm

(ret), Germany
Joseph Rozier. Bishop of

Poitiers. Nat'l Pres . Pax

Chnsti. France
Ibrahim Salah. Switzerland
Giovanni Russo Spena,

Member of Parliament.

Italy
Christine Scheel. Deputy,

Bavarian State

Parliament. Germany
Brig Gen. Paul A. Scherer

(ret.), former chief. West

German Military

Intelligence. Germany
Sigrun Steinborn. Deputy.

Berlin Parliamentary

Assembly. Germany
Haroun Tazieff.

volcanologist, Paris.

France
Luigi Vinci, Member of the

Senate. Italy
Vice-Adm. Karl-Adolf

Zenker (ret). Germany

AFRICA. ASIA and

AUSTRALIA

ICassim Ahmad, author,

Malaysia
Denis Collins. Member.

Legislative Assembly. N.

Terr , Australia
Mohidecn Abdul Kader.

attorney, Malaysia
Father Augustine Liu.

Superior. Franciscan

Friars. Taipai. ROC
Joseph Minko. accountant.

African Reconstruction

Forum. Gabon
Gobinda Mukhoty. Pres ,

Confederation Indian

Consumer Orgs
Kuldip Nayar. Chrm..

Citizens for Democracy,

India

Cooperatives Org

Colombia

Ernesto Amezquita. Pres ,

Nat'l Tnai Lawyers Assn
Jorge Camllo. former

Minister of Labor
Apolinar Garcia. Secy Gen .

Nat'l Agrarian Federation

(FANAL)
Eduardo Kronfly. Professor

of Law
Gen Hernando Zuluaga

(ret.)

Mexico

Carlos Rafael Acosta Arvizu.

State Legislator. Sonora
Ocuvio Etizalde. attorney
J J. Gonzalez Gortazar.

Member of Congress
Jesus Gonzalez Schmall.

Nat'l Coord.. Forum of

Democracy and Doctrine
Juan Jaime Hernandez.

Nat'l Exec PARM
Pablo Emiliu Madero,

Member of Congress
Jorge Moscoso. Member of

Congress
Jose Ramirez Yanez. Mayor,

Gomez Farias, Jalisco
Ada I ben u Rosas, former

State Legislator, Sonora
Cecilia Soto. Member of

Congress
Manuel Villagomez

Rodriguez. Pres., Fed. of

Microindusthes

Panama

Elmo Martinez Blanco.

former Minister of

Industry & Commerce
Isabel Corro. Pres., Assn.

Families of Victims of

Dec 20. 1989 U.S.

Invasion

Peru

Manuel German Benza

Ptlucker. former Member

of Congress
Juan Bernaola. Sec'y Gen.,

Con fed Workers of

Peruvian Revolution
Felipe Oswaldu Buckos,

former Member of

Congress
Col. Rodrigo Cordova Saona

<r)
Lino Cema Manhque,

former Member of

Congress
Josmell Munoz. former

Member of the Senate
Msgr Alfredo Noriega Arce

SJ.. Auxiliary Bishop of

Lima
Francisco Palomino Garcia.

former Member of

Congress
Gen. Julio German Parra

Hen-era (ret), former

Minister of

Transportation and

Communications
Juan Rebaza Carpio, former

Minister of Fisheries
Francisco Vidarte Garcia.

Pres.. Assn Nuclear

Professionals, Nuclear

Energy Institute

Venezuela

Emil Guevara Munoz. Secy
Internal 1 Affairs. People's
Electoral Movement

Simon J Pacheco. farm
leader

Commission to Investigate Human Rights Violations

P.O. Box 53£ Leesburg. VA 22073

pad to* Ov rr* Human R^nts Fund

161

February 1. 1993 THE NEW FEDERALIST

LaRouche on How To Get Economy Moving

Special to New Federalist
Jan. 26 (EIRNS>-In his weekly
interview with Executive Intelli-
gence Review's Mel Klenetsky.
on Jan. 18, former presidential
candidate and political prisoner
* - Lyndon LaRouche responded to
a series of questions on how
Clinton really can get the domes-
tic economy going again.

LaRouche first outlined
what's wrong with the current
Federal Reserve System

"Since the formation of the
Federal Reserve System gener-
ally, the way we get money for
our economy, is to go into debt to
private international financial
circles.

"The way it occurs, is the fol-
lowing way. The banking com-
munity, the financial communi-
ty, i.e., in New York, discounts
paper with the Federal Reserve
System. When it discounts, it dis-
counts at a discount rate. The
Federal Reserve System writes
the discounter, or the person
who places the paper for dis-
count, a Federal Reserve check
The Federal Reserve check is
processed for collection in the
normal way. It goes to the Feder-
al Reserve bank. The issuer at
the Federal Reserve bank, puts
new money into circulation-
money which it creates out of
thin air. using the paper dis-
counted as security for this
purpose

"So the banks get money creat-
ed out of tbjn air at, today, per-
haps around 3%. They turn
around and today, they're loan-
ing that chiefly to the federal
government, at between 4.5%
and 8% for medium-term to long-
term bonds, or, in some cases,
shorter-term paper.

"So, every penny that goes into
circulation as new money today,
goes in as the creation of new
debt of the federal government,
to these private interests. What
the world is saying, is that the
process of creating money by go-
ing into debt to private interests,
to allow the private interests to
create money out of thin air and

charge the U.S. population (the gov-
ernment), for that, is not going to work
any more, it's going to be hyperinfla-
tionary. because of the circumstances
in which we find ourselves.

"Therefore, because of tnat »nu«.
tion, which even the New York bank-
ers and the Socialists in Germany, and
so forth, all agree upon: It is a fact that
you can no longer consider the Feder-
al Reserve System as the mechanism
of monetary policy; but rather we must
go back to the Constitution and print
money by authorization of Congress, as
the Constitution requires. And issue
that, not as a debt of the federal gov
ernment, but as loan capital to govern-
mental institutions and to the private
sector at low interest rates on medium-
to long-term to stimulate the economy

'The debt will then be created in
those forms of security provided by
those kinds of investments, for which
the debt is loaned Which means that
the government must restrict its lend-
ing policy generally, except in emer-
gencies, to public utility and related
kinds of things, and to the private sec-
tor, in areas in which physical wealth
is being created, which offers security
for the loan.

"And if you don't do that, there's no
way that you can safely expand this
economy and recover it from what is
in fact a continuing depression— not a
recession

"If you can't get the economy mov-
ing, you're going to have a social disas-
ter in the coming period The massive
cutting of health care, just throwing
people out to die, which is what effi-
ciency means^in health care at this
point— at lea's't in the way it's being
proposed— cutting jobs in industries
massively, which is going on. IBM has
some embarrassing figures to report
on its unprofitability recently. These
kinds of things are going to sink the
economy deeper and deeper. State
governments and local governments
are going to go into a worse crisis gen-
erally, than even the federal gov-
, ernment.

"If we're going to get out of this mess,
and get a recovery going, we're going
to have to scrap the Federal Reserve
System, and go back to the techniques
used by Lincoln or by President
George Washington and so forth,
before

"So, as long as Clinton is committed
to submitting to the bond market and
the Federal Reserve System, and as
long as he's not prepared to take the
measures to bring these boys into line
and get the economy moving in the way
I've indicated, there's no chance of
anything but a failure from Clinton
And that's the crux of the matter
That s the breaking point. That s the
point on which he stands or falls If he
doesn t do as I've recommended, he's
finished— he's finished before he
begins."

162

What Kind of Debt?

Klenetsky then asked LaRouche.
"The national banking system which
you propose to replace the Federal
Reserve creates loans— wouldn't it
•lso put us into debt?"

LaRouche responded:

"No. We're going into implicit debt
because we take full faith and respon-
sibility for the value of our currency,
which we defend in several ways.

"We defend it by trade policy, that
is, by protectionism, which is the
American Way, contrary to some un-
fortunate, miseducaledLueoDle who

think otherwise, and contrary to the
Confederate traitors who also thought
otherwise.

"We also manage our money by good
monetary policy, good fiscal policy;
but essentially, we manage our policy
by limiting the lending and the issue of
this currency to projects which create,
either directly or indirectly, an in-
crease in physical wealth significantly
larger than the amount of credit issued
to cause the creation of wealth.

"What we use, is the factor of pro-
ductivity and technology to invest in
technology and productivity, in order
to get, in effect, a very large gross profit
on the money lent to bring labor and
capacity together to produce wealth.
Whenever you find an investment that
has this technological productivity le-
verage which you can make, where the
productivity payoff is either in the in-
dustry, as, say, a goods-producing in-
dustry, or in the industry through the
benefits of infrastructure, as in the
other case, then you make the invest-
ment, if it's a national need.

"If it is something which is frivolous.
or something which is up in the air.
like financing real estate acquisitions
and secondary real estate markets,
you don't loan for it. You say, 'Sorry,
buddy, go scratch for your money
where you want to. We're not loaning
money for that junk We're not
allowing junk bonds. We won't tolerate

that in our economy.' And so therefore
the difference is that the debt is in-
curred by the utilities and by the pri-
vate industries which borrow the mon-
ey—not by the federal government.
But we restrict the lending to those
utilities and to those private sector un-
dertakings which in general produce
more wealth for the economy, than the
value of the loans issued. And that
way. we ensure that we have no infla-
tion; in fact, we have sort of a deflation,
a decline of prices as a result of the
benefits of productivity increases."

What Scale of Investment?

Later in the interview. LaRouche
specified the scale of investments re-
quired:

"In order to get this U.S. economy
moving, vou have to realize there is a
$1 trillion hole, minimally, per year, in
the U S. economy. This economy has to
have a real GNP approaching around

$7 trillion a year. And until we get to
that we're not going to be in balance
on both private and public account, in
terms that we have to keep the econo-
my stable and meet the needs of our
people.

"So, if you don't spend at least $500
billion a year in terms of lending pow-
er to the public sector for public utilit-
ies, and the private sector for these
kinds of investments, you're just not
going to do the job. You're going to be

a complete failure. It's like the man
who tried to patch his pants, only he
didn't have any pants. The patch is a
good idea; but you've got to have the
pants, too. And Clinton came up with
the idea of a patch, which is not bad,
because the pants are tattered, but he
also has to have the pants. And the
pants are $500 billion a year, and $10-
50 billion a year (what Clinton pro-
posed for infrastructure) is only a
patch on those pants."

163

AVOCADOS

CALIFORNIA A V O" C A I > ( ) COMMISSION

2 February 1993

The Honorable Kika de la Garza

Chairman

House Agriculture Committee

1301 LHOB

Washington D.C. 20515

Dear Congressman del la Garza;

The California Avocado Commission and the 6,500 growers it represents
commends you for holding a hearing on the economic vitality of American
agriculture.

I respectfully submit for your review "Water Makes The Difference —
Agriculture's Important Role In Southern California."

The California avocado industry has been a contributing force of economic stabil-
ity in Southern California. It provides income and jobs for growers, farm work-
ers, farm management companies, tree nurseries, fertilizer companies and pack-
inghouses, etc. It also contributes to a large number of non-agricultural industries
that service the avocado industry. We hope the enclosed information will shows
how important agriculture is in Southern California, and that you may find the in-
formation useful.

Please feel free to contact me for any other information you may need.
Sincerely,

Avi Crane
Vice President

(The report is held in the committee files.)

1211 E Over Road Suite 200 Santa Ana California W05 S60S " H ' SS8-o"6I FAX "1 il(ii\--QH

164

TESTIMONY

Of

Georgia Healthy Farmers Project

for

Hearing of House Agriculture committee

on
"Economic Situation Currently Facing
U.S. Agriculture and Rural Communities"

February 3, 1993

The financial picture of rural communities would be incomplete
without the acknowledgement of health care costs to rural families,
in particular, to farm families. Georgia Healthy Farmers Project
found one out of every three farm injuries uninsured (the general
population experiences one in seven uninsured) . Injury data is an
example only of those coerced to seek care. How many farm families
lack elective medical care? An educated guess would be, many.

The majority of farms in the United states are family owned. This
means the independent, small business man, the family farmer, must
bare the expense of private health care insurance. In Georgia that
can cost from $25o-S750 per month for catastrophic or minimal
coverage for a healthy family of four. This cost is a burden for
any small business, but add to this the lack of access to care in
rural communities and time away from the job due to illness or
injury becomes a viable consideration for all rural business
owners.

Farm wives are the perfect example of a population segment that is
denied the benefit of current health care programs. Too much
income to qualify for free mammograms, but do not have insurance to
cover preventive care.

It is a well known fact that the most effeotive cost benefit ratio
in occupational medicine is in the arena of preventive care. Unless
change occurs, rural populations can anticipate being denied the
obvious advantage preventive care contributes to a community, a
strong and viable work force.

178 Piachusi Sheet, NB / turn 100 / Atlanta, Ceobgia 30309 / 404 694 4293

a c toctAH or tin GwtnciA difauhixt or Himam Inwicti. DrvmoH or runic Kaxi.ni
Vomod it no U.I, Dirxf twixi or Hhith 4 Human Smvich

165

Page 2 of 2

Farming communities are frequently found struggling to retain the
local, financially burdened hospital. That same community, in
turn, then experiences the lack of money to pursue an active
economic development program or to upgrade the educational system.

The impact of health care costs is evident at the level of the
individual, the family and the rural community.

Please consider the economic viewpoint of rural health care costs
both in money and manpower as you develop your perspective of
economic situations facing U.S. agriculture and rural communities.

166

STATEMENT OF THE
NATIONAL MILK PRODUCERS FEDERATION

before the

COMMITTEE ON AGRICULTURE
U.S. HOUSE OF REPRESENTATIVES

ECONOMIC OUTLOOK FOR AGRICULTURE: DAIRY

The National Milk Producers Federation (NMPF), the national farm commodity
organization which represents dairy farmers and the dairy cooperative marketing
associations they own and operate throughout the United States, offers the following
economic outlook for dairy for the information of the Committee.

Overview

The dairy industry in the United States is the nation's second largest agricultural
commodity industry, measured by the value of marketings at the farm level. In 1991,
U.S. milk producers received $18.1 billion from sales of raw milk, representing 10.8
percent of the $167.3 billion in receipts from sales of all commodities in the U.S.
Only cattle and calves, with 1991 receipts at $39.6 billion, ranked higher. In 1990,
cash receipts from milk sales in the U.S. totalled $20.2 billion, which represented 11.8
percent of total commodity receipts.

The U.S. dairy industry is also geographically extensive. In 1991, farm receipts from
milk sales amounted to $200 million or more in fully half of all states, $100 million or
more in more than two-thirds of the states, $10 million or more in 48 states, and $2.5
million or more in all 50 states.

Milk production in the U.S. has been growing slowly in recent years, more or less
commensurately with the growth in commercial demand for milk and dairy products.
Dairy farmers produced a total of 148.3 billion pounds of milk in calendar year 1990,
148.5 billion pounds in 1991, and 152.0 billion pounds in 1992. At this time, NMPF
projects 1993 production to be 154.6 billion pounds.

Milk prices in the U.S. have become more variable in recent years as a result of
substantial reductions in the rate of price support for milk that took place during the
period 1985-90. Average prices received by all dairy farmers in the U.S. for all milk
sold to plants and dealers reached a high of $13.74 per hundred pounds
(hundredweight, or cwt.) of milk in calendar year 1990, then fell to a relative low of

The \ iiion il Milk Pnulw its IVdi-rallou i- .1 farm i'ommiii1il\ org /.allot! markctlns of milk NMI'F's contribution to this polio is aimed al Improvina thr

rrpreseniinj: most ,.l the .kiln k.-liiwuiui.enim.-s.-.mliu: this nation N\U*F economic »clltx-lnS of dalr> fanners thus nssurina this nation:, ronsiunrrs an

. . . . . j . I. .1 t.. .1 ..II .... I , i 111 1 . ,r- I .

ir|IHMIIIIll^lllll>IM MM HillM ll«IIMUIl,l.'"|».'.""--' -

members in.uk.-i .1 maio. il\ nftla- milk proilui i-d In the I S mnkiusthe H-derallon adequate suppl\ »l pure, nholcsomr milk .mil cl.nn pnmu. is

m.-fl.Tl»i-\..i..-.«ni.iti..u.iliss<n-s|.Hiliiinc.«i|.iT;illM-s; k-irdain fanner die pollcicsof tin- Fedora an-iMerniiii.-.1lAiLsiiii-inl»-isfn»ii.irKissUK-n

rherefore. the policy iwsiliuns expressed t» \\ll'K.in-lh.-iinl\ - luunn ate express*

• .- ....j ... .....1.. it. 1 i.iil.li. ii.tlL-t'

It IOI1

mrmhrrc

Il„. iv.lri'.uion prmi-lr- llir I i llinmah uliMi il;nn Milium .mil Mioli irftlnin 1. 11 iihto; ind IhrtrcoitiHTiillxi'KOii iutMi.il puMu |)-»iu\

in»ptT;iti\rs lnnnul.Hf |M)lii \ ,11 m h i-micv lli.il iiflii i id'- pnidui lion .ind

167

— 2 —

$12.24 per cwt. in 1991. According to preliminary estimates, prices averaged $13.1 1
per cwt. during 1992. NMPF, along with most industry sources, is projecting weaker
milk prices during 1993, with NMPF's current projection at $12.60 per cwt.

Information on dairy farm financial conditions is available from USDA only after a
substantial period of time. USDA has reported the overall financial position of dairy
farms with gross sales of $40,000 or more in 1990 to be as follows: 66.9 percent
"favorable", 11.7 percent "marginal income", 16.0 percent "marginal solvency" and 5.3
percent "vulnerable." The percentage of dairy farms in the more negative categories in
this breakdown will doubtless show increases when 1991 figures become available,
since 1991 prices were substantially below 1990 prices in all regions of the country.

Estimates of the number of commercial dairy farmers in the U.S. currently range
between 130,000 and 140,000.

More specific components of the dairy outlook are as follows:

Cow numbers

The nation's milking cow herd started out at the beginning of 1992 over 200,000 cows
lower than a year previously. As the year progressed, however, the size of the herd
stayed quite steady. Since 1 99 1 was a year during which cow numbers dropped
steadily, the gap between 1992 and 1991 narrowed until, at year end, there were only
about 70,000 fewer cows than a year ago. During 1992, cow numbers averaged
9,849,000 in the U.S., down 141,000 cows from 1991. For 1993, the outlook calls for
a resumption of declining cow numbers. For all of 1993, cow numbers could average
9,745,000 in the U.S., which would be a reduction of just over 100,000 from 1992's
average.

Production per cow

Production per cow was up less than 2 percent over the previous year during most of
the first half of 1992, but then jumped to 4 to 5 percent over a year earlier during the
second half. During 1992, milk production per cow totalled 15,437 pounds in the
U.S., up 3.8 percent from 1991. For 1993, the outlook calls for a moderation in the
rate of increase in production per cow, to a rate of increase between 2 to 3 percent
over the previous year. For all of 1993, milk production per cow could total 15,870
pounds in the U.S., which would be an increase of 2.8 percent over 1992's level.

168

Milk production

Milk production was close to its level the previous year during most of the first half of
1992, but then jumped 4 percent over a year earlier mid-year. The rate of production
increase moderated to about 3 percent over the previous year by year-end. During
1992, milk production totalled 152.0 billion pounds in the U.S., up 2.4 percent from
1991. For 1993, the outlook calls for a moderation in the rate of increase in milk
production, to a rate of increase between 1 to 2 percent over the previous year. For all
of 1993, milk production could total 154.6 billion pounds in the U.S., which would be
an increase of 1.7 percent over 1992's total.

Milk Prices

Due to a projected moderate buildup in milk production this year, milk prices can be
expected to be lower this coming year than they were in 1992, at least during the first
part of the year. This outlook will be influenced by the rate of increase in commercial
use of milk and dairy products as well as the level of expected exports this year under
the Dairy Export Incentive Program (DEIP). During calendar year 1992, USDA
accepted bids to export dairy products with a total milk equivalent of 2.65 billion
pounds under the DEIP, for delivery up through June, 1993. NMPF calculations show
that these exports had the impact of increasing average prices received by all U.S. milk
producers by more than $.50 per cwt. during calendar year 1992 and will increase all-
milk prices by an additional significant amount during the first half of calendar year
1993.

In November, 1992, USDA projected total net removals under the dairy price support
program during calendar year 1993 at 4.6 billion pounds, milk equivalent of total
solids. This figure, which is a projection of CCC purchases and DEIP sales combined,
is based upon the following projections of net removals for individual dairy products:

Butter: 300 million pounds,

Nonfat dry milk: 205 million pounds,

Cheese: 60 million pounds.

The following price outlook assumes no major changes in last year's pattern of growth
in commercial use and DEIP exports.

M-W price: The Minnesota- Wisconsin price (at 3.5 percent milkfat) should bottom out
at between $10.30 and $10.40 per cwt. during March, 1993, and begin increasing
thereafter. The M-W could peak well above $12.00 per cwt. during October or

169

— 4 —

November, 1993. For 1992, the M-W averaged $11.89 per cwt., at 3.5 percent, 84
cents above the 1991 average of $11.06 per cwt. During 1993, the M-W could
average $11.40 per cwt., at 3.5 percent, down about 50 cents from 1992.

All-milk price: The average price received by farmers in the U.S. for all milk sold to
plants (the "all-milk" price), figured at the U.S. annual average test of 3.67 percent
milkfat, should bottom out at about $11.70 per cwt. during April, 1993, and begin
increasing thereafter. The all-milk price could peak well above $13.00 per cwt. during
November or December, 1993. For 1992, the all-milk price averaged $13.11 per cwt.,
at 3.67 percent milkfat, 87 cents above the 1991 average of $12.24 per cwt. During
1993, the all-milk price could average $12.60 per cwt., at 3.67 percent, down about 50
cents from the 1992 average all-milk price.

170

BOSTON PUBLIC LIBRARY

3 9999 05018 455 3

US HOUSE AG COritllTTEE
R00H 1301

LOMGUORTH HOUSE OFFICE BLDG.
UASHIHGTON, D.C. 28515

LONHIE STEUART

RT. 1 BOX 212

GEORGE UEST. TX. 78022

RE: HEARING ON ECONOHIC OUTLOOK

DEAR CHAIRNAN DELA GAR2A.

I AN A PRODUCER IN LIVE OAK COUNTY AND GROU 1000 ACRES OF CORN. I
HAUE BEEN IN THE ASCS PROGRAH FOR THE PAST SEUERAL YEARS. THE
INCOHE DERIUED FRON THE ASCS PROGRAH HAS BEEN APPROXINATELY THE
SANE AS NY NET INCOHE. UHENEUER DEFIENCY PAYNENTS ARE LOUERED OR
TARGET PRICES LOUERED. IT AFFECTS NY NET PROFITS.

HAUING STATED THIS, I THINK THAT THE AMERICAN FARNER UOULD BE BETTER
OFF WITHOUT ANY GOUERNNENT SUBSIDIES. I FEEL LIKE THE PRICES UOULD
BE HUCH BETTER UITHOUT GOVERNMENT INTERFERENCE. THE TARGET
PRICES TEND TO SET THE UORLD PRICE AND DEFINITELY SET THE PRICE FOR
THE US PRODUCER.

THE LAST FEU YEARS HAUE BEEN EXTRENELY DIFFICULT FOR FARHERS IN THIS
AREA AS YOU UELL KNOU, BUT I THINK THE FCIC INSURANCE PROGRAH IS
BETTER THAT ANYTHING ELSE. THE INSURANCE SHOULD ALLOU FARHERS TO
GUARANTEE A DOLLAR PER ACRE FIGURE THAT UOULD BE THE COST OF
PRODUCTION. EUERY FARHER HAS A DIFFEREHT COST OF PRODUCTION AND
THIS UOULD ALLOU THE FARHER TO DETERHIHE THE LEVEL OF INSURANCE
THAT HE UANTS TO CARRY. THE CURRENT INSURANCE PROGRAH IS PITIFUL AT
BEST MAINLY BECAUSE IT DOES HOT COUER COST OF PRODUCTION AND THE
PAPERUORK IS HORRENDOUS.

THE CURRENT PROGRAHS AND POLICIES OF THE USDA DOES NOT SUIT RURAL
AMERICA UERY UELL AT ALL. IN THE PAST TEN YEARS, SEUERAL BUSINESSES
IN THE TOUN OF GEORGE UEST HAUE SHUT THEIR DOORS. THE MAIN SOURCE
OF INCOME FOR BUSIMESSES IH THIS AREA IS AGRICULTURE AND AGRICULTURE
HAS NOT HADE ENOUGH HET PROFIT TO ALLOU THEH TO DO BUSIHESS UITH
SMALL RETAIL STORES BECAUSE THEIR PRICES ARE USUALLY HIGHER. UE,
PRODUCERS. ARE HAUIHG TO SEARCH FOR THE CHEAPEST PRICES ON ALL OF
OUR IHPUTS, JUST TO STAY IH BUSIHESS.

THE ASCS OFFICES ARE HAUIHG TO ADD EMPLOYEES BECAUSE THE AMOUNT
OF UORK IS INCREASING. TEN YEARS AGO, I COULD SIGH UP FOR THE ASCS
PROGRAH IH ABOUT TUO HOURS AHD THIS UAS ALL HAHDURITTEH. NOU UE
HAUE COHPUTERS AHD OTHER TECHNOLOGICAL ADVANCES AND IT TAKES HE
ABOUT THREE HOURS TO SIGN UP. THE PAPERUORK HAS BEEN GROUING
EUERY YEAR AT A TREHEHDOUS RATE.

IH CLOSIHG, EUERY PRODUCER THAT I HAUE TALKED TO IS FARHING FROM
YEAR TO YEAR. NOT KNOUIHG UHETHER HE UILL BE ABLE TO FARN THE HEXT
YEAR OR HOT. THE PRICES OH ALL OUR INPUTS HAS TRIPLED OR QUADRUPLED
OUER THE LAST SEUERAL YEARS, UHILE THE PRICE OF OUR COMMODITIES
HAUE STAYED RELATIVELY THE SANE OR EVEN GONE DOUN.

THANK YOU FOR YOUR CONTINUED SUPPORT OF THE AGRICULTURE
COMMUNITY IN UASHIHGTON. AND I HOPE THAT YOU UILL COHVEY MY
FEELIMGS TO THE AG COHMITTEE.

SINCERELY YOURS.
LONNIE C. STEUART

n

ISBN 0-16-040604-8

9 780

60M06041

90000