sult is that there will be an increasing build-up of carry-over stocks to depress prices. 1999/2000 ending stocks are currently projected to grow by 79 percent over the last year.

The WASDE report projects prices for the 1999/2000 marketing year as low as $5.80 per hundredweight. This price projection is $3 per hundredweight less than the price for the 1998/99 marketing year and $4 per hundredweight less than the average price for the 1997/98 marketing year. At the same time, over-all costs continue to rise. Rice is one of the most costly crops to produce, especially in California. Land, water, energy and labor costs in California are among the highest in the nation. If the current situation is permitted to continue without government assistance, we will find more and more producers abandoning farming, an occupation in which their families have been engaged for many generations.

As important is the rural infrastructure that has evolved to support the rice industry. It too could suffer without a strong safety net. Consider the impacts to equipment dealers, crop protection and nutrition companies, trucking firms, processors and longshoremen at the Ports of Sacramento and Oakland. In the Sacramento Valley, the rice industry creates $750 million in economic activity annually. USDA programs are the underpinnings for much of that allied business.

RECOMMENDATIONS

We appreciate the chairman's efforts to gain input from rice producers through these field hearings in preparation for the 2002 farm bill debate. We also appreciate the opportunity to comment on the impact of Freedom to Farm on the rice industry and to recommend specific changes that will allow our industry to obtain the highest level of income for a given level of government spending. It is with this objective in mind that we make the following recommendations:

Farm Program Measures: The objective, both today and in the long term must be to significantly strengthen the farm safety net. At this time, based on our experience under the 1996 farm bill, it is imperative that we do not wait until the year 2002 before acting. Immediate changes must be made to protect farm income during the final three crop years covered by the legislation. In the last 2 years, Congress provided much appreciated supplemental income assistance to help farmers through a period of low prices and declining income. Rather than having to enact emergency assistance each year, we would recommend that the law be changed so that AMTA payments and corresponding payment limitations are increased for crop years 2000 through 2002. However, it is important that certain features of current legislation be maintained. Increased planting flexibility that producers have without jeopardizing their payments, and also the ability of producers to produce for the market are extremely important to the U.S. rice industry. However, we understand there has been some discussion regarding coupling payments to production. There is some sentiment in California that if coupling should occur, it should be limited to not more than a 50 percent planting requirement per farm number.

Crop Insurance: Another measure that we support is a modification in the crop insurance law so that premiums are set at more affordable levels and the program expanded, if possible, to provide revenue as well as yield insurance. We believe, however, that crop insurance should be in addition to, not a substitute for, existing farm program payments.

Marketing Loans: Additionally, exports are vital to the U.S. rice industry's_survival. As stated at the outset of this testimony, roughly 40 percent or more of our annual production has been and must continue to be shipped overseas if we are to stay in business. An important tool in meeting competition abroad is the successful operation of the marketing loan program. The loan rate for rice is set in current law at $6.50 per cwt. This rate is below the cost of production for virtually every rice producer in California. Rice marketing assistance loans may be redeemed at the United States Department of Agriculture's (USDA) world market price if the world market price is below the loan rate. USDA has on occasion revised its world market price determinations so the U.S. rice industry could remain competitive in markets abroad with exporters of other countries. However, it should be noted that the U.S. percentage share of world rice trade has declined from 13.3 percent in 1996 to 11.3 percent in 1999. USDA must be vigilant in their management of the world market price if the U.S. rice industry is to remain competitive in the world market

As part of our recommendations, we urge that the loan deficiency payment limitation of $75,000, established in the 1996 farm bill, should be increased or perhaps eliminated. We thank Congress for reauthorizing the use of Commodity Credit Corporation (CCC) commodity certificates, which may be used to redeem loan collateral. At times, such as is the case today, when world prices fall significantly below the loan rate, if the limitation is not removed or significantly increased, producers will

elect to forfeit the collateral under loan to CCC. As a result, CCC, rather than the producer, will become the marketer of the commodity in competition with the private sector.

Export Programs: There are other measures that would enhance rice exports as the new crop comes to market. These include expanded use of USDA's export authorities, such as the export credit guarantee programs, as well as the programs under P.L. 480 and the Department's purchase and donation programs. We commend USDA on their recent inclusion of rice in the Section 416 donation program. We believe that funding must be continued and increased for the Foreign Market Development Program and the Market Access Program. These export programs provide an investment today towards the long-term objective of maintaining or increasing exports.

Import Access: In the final analysis, the rice industry can prosper only if we have improved access to world markets. We support the goal of free and open trade, devoid of government sanctions. We look forward to the forthcoming multilateral trade negotiations as a means of reducing tariffs on rice imports, and achieving fair access to important rice markets, such as Japan and Europe (EU). At present, except for a minimal tariff-rate quota, the ex-quota tariffs on rice imports are prohibitively high-approximately $3,000 per ton in the case of Japan and over $400 per ton in the case of the EU. Turkey, an important export destination for California, is considering joining the EU. This could have important trade consequences on California rice producers who annually ship 200,000 tons of calrose valued at $30,000,000 to this Middle Eastern nation. Currently, the Japanese trade represents a 250,000 metric ton market with a value exceeding $150,000,000. In Latin America, we seek equal access with other supplying nations that participate in preferential tariff arrangements, and seek elimination of restraints on imports based on licensing restrictions or phytosanitary or bio-engineering standards influenced by public or social policy and not the result of sound science.

The multilateral trade negotiations can only be a success if Congress were to enact fast-track legislation. We hope that this will be achieved in the near future. We also fully support permanent, normal trade relations with China and China accession to the WTO.

Unilateral Sanctions: We support legislation that would exempt food and medicine from unilaterally imposed trade sanctions. In the past, unilateral sanctions have caused the loss of many of our most important markets for U.S. produced rice to our competitors. Over the past 38 years, Iran, Iraq and Cuba each have been top export destinations for U.S. rice. Cuba currently imports about 350,000 metric tons of rice on cash terms from our competitors. This amount is more than all of the rice that the U.S. exports under food aid programs. It is critically important that sanctions relief legislation be enacted this year. It is also important that restrictive licensing requirements not be imposed once sanctions are lifted. For example, food and medicine are currently exempt from the sanction in place against Cuba; however sales must be made to private entities, of which there are none that buy rice. There is little, if any evidence that trade sanctions on food have contributed significantly toward meeting U.S. foreign policy goals. At the same time, sanctions have forced our customers to turn to other suppliers for their rice import requirements. Finally, while not on the agenda of the committee, we also wish to emphasize the importance of other measures that would help sustain a sound rice economy. These include, among others, regulatory reform, implementation of the Food Quality Protection Act based on sound science, and tax reform. Federal support for research should be increased to assist rice producers and others in the rice industry to become more efficient and more competitive in world markets. The rice industry is assisting in this effort through assessments under State research and promotion legislation, funds provided by private industry, and other measures. However, private financing is not adequate and must be supplemented by Federal appropriations.

CONCLUSION

In conclusion, we urge the Congress move quickly to enact legislation so that additional AMTA payments, at the same level as last year, can be made this summer. Future farm legislation must likewise adequately address this issue while maintaining the marketing loan program, increased planting flexibility and freedom from annual government acreage controls that are contained in the current farm law. We note that increased loan rates and counter-cyclical payments have been recently discussed as possible solutions; while there may be some merit to exploring these ideas for a long-term farm safety net fix, we believe that it is paramount that we maintain the consistency of our current farm program with our WTO obligations. We also support enactment of crop insurance legislation that would attract greater participa

tion and increase development of more revenue insurance, but not act as a substitute for farm program payments.

As important as these issues are to the farm community, equally or perhaps more important is the need to open up access to markets abroad. Through tariff reductions and the elimination of unilateral trade sanctions, U.S. rice will be able to compete favorably with other rice exporting countries in world markets.

TESTIMONY OF WILEY MURPHY

Good morning, my name is Wiley Murphy. I produce cotton, wheat, sorgum, and barley in Marana, Arizona. I have been doing so for 26 years. I am also serving as President of the Arizona Cotton Growers Association, which represents nearly 1,000 Arizona cotton producers statewide.

All of us in the West appreciate this opportunity to tell you how important farm programs are and how they work in the West.

Before I begin my discussion of farm policy I did want to thank you and your colleagues for your assistance over the past 2 years. Let me tell you that your support made a major difference in whether we would have a viable cotton industry in Arizona or not.

Unfortunately, we still need your help. Your recognition of that fact in the 2001 budget is greatly appreciated.

Arizona has a very "fragile" cotton industry and the assistance packages the Congress created were both well designed and effective. By "fragile," Mr. Chairman I mean our production costs are the highest in the Belt and when prices drop Arizona is put at risk.

Again, we appreciate your understanding of our plight and your response to our needs. The economic conditions and needs of this industry are plainly unique compared to other American industries. Our condition always pose tough choices. Clearly, America can not do without agriculture and its many contributions to our way of life.

Your continued recognition of our place in America is most gratifying. I don't envy your task in trying to assess the Freedom to Farm Act. I am sure there are voices counseling you to stick with the plan to end Federal farm program subsidies if not all farm program benefits as was envisioned by the Freedom to Farm Act. There are others who believe that the economic crisis facing the farm country is proof that the economic assumptions of the Freedom to Farm Act have been proved dead wrong by the results of the last 3 years and two major economic assistance packages. Clearly, your task is not an easy one in terms of choosing a total free market as some would want or a partnership with Federal Government.

I hope that my comments here will be helpful in guiding you in that decision. When the Freedom to Farm Act was enacted in 1996 I think all of us had high hopes for its objectives and even for its economic assumptions of steady but growing prices and expanding markets. We also had high hopes for the promises made to us about enacting better trade policies, deregulation of onerous policies such as FQPA, which can increase the cost of production, tax relief, and crop insurance reform.

We believed that such a package of reforms might give us the opportunity to move forward without large Federal subsidies although we were skeptical whether it could work.

Nonetheless, American agriculture stepped off in a new direction. While we still sing the praises of flexibility as created under the Freedom to Farm Act the rosy economic scenario's painted by the advocates of the Freedom to Farm Act just didn't fit reality. Even though we experienced higher prices in the first 2 years of the Act the bottom fell out requiring additional economic assistance.

In addition, the Congress has failed to keep its commitment to pass effective trade legislation, that is trade policies that will permit us to be competitive and will expand our trading opportunities as well as necessary changes in FQPA, tax relief, and crop insurance reform.

Any policy that proposes to "phase out" Federal farm support without addressing trade issues, regulatory reform, tax relief, and crop insurance will hardly help us to overcome economic disaster when it occurs. Whatever you decide to do I hope you will keep in mind that a Federal Farm Policy is not just about direct economic assistance it is also about the whole range of policies that affect us.

Now let me turn to the economic crisis in Arizona, which is rather easy to describe; low prices, lower prices, and even lower prices. For those who suggest that we rely on market prices alone, 44-cent cotton doesn't help in an environment when it costs nearly 70 plus cents to grow it. Arizona has the highest cost of production

per acre in the cotton belt. Irrigation and pest control costs have always placed Arizona growers at the margin of profitability.

Mr. Chairman, Arizona farmers are doing their part to reduce their costs; we eradicated the boll weevil in 1990, eliminated the whitefly as a primary economic pest but not before it devastated our fields in 1992, are using Bt cotton to reduce the cost of fighting the pink bollworm, Arizona's most persistent pest, and we are on the verge of removing aflatoxin from our cottonseed to increase our seed profits. We have done much of this on our own; using our own funds with the exception of the boll weevil program in which the Federal Government contributed 30 percent of the costs.

If we are to survive, however, Federal farm policy should promote profitability. In this connection those of us in the West are very dependent on sound trade policies since nearly 90 percent of Arizona's crop is exported to the Far East. When trade stumbles the effect is felt at home. Relative exchange rates put us at a severe disadvantage when trying to sell cotton to our overseas customers.

Finally, Mr. Chairman, let me discuss one of the most serious problems that we face in the West in the current farm policy as well as previous farm programs; namely payment limitations.

Most farms in the West are large and getting larger simply because of the economies of scale. Because of the high costs associated with cotton production you need commercial sized operations. Let us not be confused by the term "corporate farms." Some of our farms in Arizona are large; the vast majority of which are family operations, however.

The current payment limits bears no relationship to the economics of Western cotton production. Western cotton is high yielding and because payments are made on the basis of yield western cotton production is penalized because the limits are set so low. Payment limits ought to reflect in some form the realities of western commercial farming operations. Currently, payment limits impairs effective economic assistance and should be eliminated.

Mr. Chairman, I would like to conclude my testimony by discussing what changes should be made in the current farm bill and what we should do at the expiration of the Freedom to Farm Act.

First, we want to recommend that for the balance of this Farm Program that you maintain the existing structure of flexibility, the AMTA payment delivery system as originally conceived and the cotton competitiveness provisions. We see no point in substantially changing the Freedom to Farm Act at this point with its expiration so near at hand.

Although you are making progress on some trade issues such as CBI and crop insurance reform we still need legislation to adjust FQPA and substantial tax relief whether it is estate taxes, health care costs, or FAARM accounts.

As for the future, I believe that the Federal partnership with American agriculture is essential to America and its ongoing prosperity. The concept of a "cheap food" policy has given America its best days, its prosperity, and the hope for even better days ahead. To squander the contribution of American agriculture for the notion of deregulating farm policy in its entirety is simply foolish.

Therefore, I think the Congress should undertake to create a new farm program with the expiration of the Freedom to Farm Act, which should include the following: 1. Continuation of an AMTA type payment

2. A counter-cyclical payment when necessary

3. Continued flexibility

4. The cotton competitiveness provisions

5. Elimination of the payment limitation provisions

6. Continue to develop effective and affordable crop insurance

Mr. Chairman, members of the committee, I thank you for the opportunity to share my views with you.

TESTIMONY OF THOMAS W. ELLIS

I am Tom Ellis. I farm 1,000 acres in southern Colusa County and northern Yolo County on the west side of the Sacramento River-about a thirty minute drive straight north of this hearing room. I am very pleased to have this opportunity to talk with you and sincerely appreciate your committee coming to Woodland today. I also want to emphasize that I am speaking only for myself as an individual farm

er.

On my operation, I grow wheat, rice and alfalfa. Since alfalfa is my main crop on seven hundred acres of my farm, my comments today will be addressed towards issues affecting that crop. In addition to my acreage, I handle alfalfa for some of

my neighbors. We normally produce 8,000 tons of alfalfa cubes and some baled hay each year. About 60 percent of our cube production was sold to Japan-a market we enjoyed for over 20 years until 1998 when sales dropped from 5,000 tons per year to 900 tons due to drastic economic problems experienced in that country. That hurt! In 1999, we hoped for some recovery but shipped tonnage was about the same as 1998, and we experienced continued downward pressure on price and volume. Japanese buyers were very price conscious and looked north to Canadian producers who seemed willing to sell for less. Part of the reason, I believe, is the Canadian Transportation Subsidy which helps offset the cost of shipping alfalfa and grain products to western Canadian ports. The result is a significant price advantage for the Canadian producers. I realize Midwest interests don't want Canadian grain delivered into the middle of the U.S., so they see the transportation subsidy as a benefit. But, how about alfalfa and forage products? Could we ask the Canadian government to end the subsidy to these products? We alfalfa producers in the West feel it would strengthen our position when we try to export our products to all Pacific Rim countries.

Another area of concern is risk management. I am in full support of HR 957, The Farm and Ranch Risk Management Act of 1999 which would create FARRM accounts. Current crop insurance and recent disaster payment programs have not been very successful in addressing the needs of hay and forage producers. I think the idea of pre-tax savings accounts, which is my understanding of how HR 957 works, represents sound fiscal policy, is easy to understand, would be easy to administer, would be fair to all producers and would encourage savings while providing farmers with added income stability. I talked with my lender about the idea (I use the Farm Credit System) and he was very supportive of the program. I think lenders would welcome the measure as an additional tool available to farmers to help them through tough years. And, best of all, the savings account is under the control of growers themselves. I feel such a program would lessen the need for disaster assistance which is difficult to pass, difficult to implement, never entirely fair and seems that someone is always left out. The latter category is where hay and forage producers usually find themselves.

Your consideration of these ideas would be appreciated and I sincerely thank you for coming to Woodland today. If you haven't toured the museum, be sure to do so and make sure you see the Harris Harvester display. These machines were the backbone of the Čentral Valley grain industry from the mid-teens to the late 1940's and early 1950's.

TESTIMONY OF DAVID WEISS

Good morning Mr. Chairman and members of the committee. My name is David Weiss and I reside and farm in Lake County, California, in the 1st Congressional District where, I am proud to say, we are very well-represented by Congressman Mike Thompson. As a producer, I manage an agricultural operation comprised of 320 acres of Bartlett pears, 55 acres of winegrapes, and a commercial pear packing operation. Also, I am a partner in an additional 93 acres of pears and 108 acres of winegrapes. I appear today as a grower on behalf of the California Pear Growers Association specifically, and on behalf of the California pear industry in general. For your information, California Pear Growers is a bargaining cooperative whose main purpose is to negotiate commercial cannery prices for Bartlett pears grown in California.

While there are many issues of concern to the California pear industry that deserve to be heard by policymakers, I have chosen to elaborate on the following four points for your consideration today. They are:

Maintaining an adequate and affordable supply of farm labor

• Leveling the playing field with regard to foreign trade

• Revamping the Federal Crop Insurance Program for pears and winegrapes • Continued support of IPM research and implementation for pears and apples

FARM LABOR

The crops I grow are among the most labor intensive of any in modern agriculture. Planting, pruning, training, and harvesting are all done with manual labor in pears. Unfortunately, most of this type of work does not appeal to the majority of Americans, regardless of the national unemployment rate. Growers must therefore look to Mexico for the workers we need to complete these tasks. Suffice it to say that were it not for our Mexican neighbors, pears and many other tree fruits would not be viable crops in California.