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only 3 cents. A certain celebrity's picture was on the front of a cereal box for advertising purposes, it is reported that the celebrity received 10 cents per box of cereal sold. And I remind you, the farmer only got 3 cents. Someone earlier said we are in an upside down world. I think maybe we are.

Farmers could actually give their product to the manufacturers and it would not change the cost of the final product. On the other hand, the farmers could be paid twice as much for their product and it still would not change the price of the box of cereal except for 3 cents. Now I know that we are not going to be able to force manufacturers to pay twice as much, but the consumer could pay twice as much through our Federal Government in subsidies, export enhancement programs, and safety nets. And by the way, I had not heard Mr. Jeter's idea before today, but I liked his idea. In the midst of a booming U.S. economy, U.S. agriculture has experienced a full-blown depression for the past 4 years. In the 1930's, the Agriculture Adjustment Act defined a set of basic commodities and set parity prices for them. These types of programs were essential to the Nation's wellbeing and the AAA programs were a boom to the U.S. economy. The 1996 farm bill, however, was designed to be a 6-year transition to eliminate the old farm programs. Congress and some farm leaders failed to see how brutal a free market can be. Most major commodity prices are now below production cost levels. Congress has responded with supplemental appropriations to prop up financially strapped farm operators. Farm payments were a record $22.7 billion in 1999, far above those levels of earlier farm programs. Farm lenders report many loan repayments were made with Government payments to farmers.

Abraham Lincoln once said, "In all that the people can individually do for themselves, the Government ought not interfere." I agree with this statement. When given a chance to compete with other producing nations on an equal basis, U.S. farmers can hold their own and then some, but as long as Federal monetary policies tend to push up the prices of American commodities in foreign currencies and producers elsewhere are allowed to get away with subsidizing their exports, U.S. agriculture will suffer.

I consider myself a realist and I do not think we can compete with the rest of the world unless we are on a level playing field. At this point, we are playing with a different set of rules that handicaps our competitiveness. Our trade negotiators gave away agriculture in order to promote other industries. Why must we eliminate our import quotas, export enhancement programs, price guarantees, and other programs at American agriculture's expense? We should first bring all countries to our level and then negotiate from there. With carefully planned promotion and marketing programs, U.S. agriculture can reclaim some lost export markets. We can grab a share of the new business that will unfold as the economies of developing countries improve and provide them with the money needed to buy more agricultural products.

In my area of the country, two programs that have worked well are the tobacco and peanut programs. The tobacco and peanut programs provided stability for its farmers. The farmers could make long-term decisions. With the Freedom to Farm Act, farmers can only plan 1 year at a time, which leads to stress and uncertainty.

Both programs need to be kept to assure economic viability in those areas of the country where these commodities are grown. However, both programs have major problems that need to be addressed.

The question is simple: Do the American people and you, as their Representatives, want to keep family farms healthy and thriving? The options are:

1. Get us on a level playing field so we can compete on the world market.

2. Stay with the old farm programs with subsidies and target prices.

3. Depend on other countries for our food.

I feel that agriculture is a national security issue. We must maintain a strong national defense and be willing to maintain our agriculture. It is vital to our national security to be able to feed our own people. An oil embargo would be nothing when compared to a food embargo.

I plead to you; take our case to the American people. You have the forum to do this. This is a national emergency going unnoticed. I pray that this Nation will see the wolf before it is too late for America's family farmers.

Thank you.

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

The CHAIRMAN. Mr. Owens.

STATEMENT OF MIKE OWENS, TOBACCO AND PEANUT

PRODUCER, LENOX, GA

Mr. OWENS. Dear Honorable Members, I am grateful to be here today. Really, to be honest with you, I am here about my life. How am I going to live in the future and about my kids that I care very much about and other people's kids.

My name is Mike Owens, I am 44 years old and I have an 18year degree in in agriculture. I am an all American, very hardworking farmer. I like to make my own way in life.

There are two very important issues in agriculture and that is farm families are losing their lives; and how important farmers are to our country.

Farm families are very good Americans. We work hard. We care about people. We are very proud of what we do for our country, but we are losing our farms, homes, our children's college money, their future and our pride. We are too honest for our own good and we are ashamed of where we have gotten.

The farmers make up 1 percent of the population, but we have no political power, but we are not giving up. We are very concerned about the survival of our livelihood.

Farmers are the first to start the economic train. Our money turns 8 to 10 times in the system. We feed our families, your families, the country and most of the world. We feed our school kids, armed forces and clothe us all. One of the most important things is to make sure that our children and our grandchildren will be able to eat the safest, the best and cheapest food in the future 10 or 20 years from now.

We are the masters of agriculture of the entire world, we are the rule book and we cannot understand why our country wants to

take over 80 years of hard work and technology and taxpayers' money to teach other countries to condemn the American farmer that provides for us all.

Our thoughts on NAFTA:

We cannot compete in the world market. The environmental and health issues cost us dearly for the unions, the labors and the taxes. Most of the other countries do not have any of these to contend with. It costs us 3 to 5 times more to grow our crops than the other countries. In order to have a fair playing field, we need to get our fertilizer, chemicals, seed, insurance, bankers involved in the world market. We are the only business that pays what the companies tell us for their products and only have the choice of what they offer us. We believe that technology has taken off and left us for a purpose.

Tobacco is the crop that we make the most money on. It pays our bills for the money we lose on cotton, peanuts, corn and soybeans. There is no alternative crop for tobacco that makes as much of the return on our investment. Tobacco keeps us alive. We know that tobacco is bad for our health but people still demand it. The tax it produces is unreal. Most of the universities in the East were built with tobacco money. Many a student's tuition was paid with tobacco money. The Tobacco Program is in jeopardy. USDA's best working program is being killed by corporate America. Tobacco farmers have nowhere to turn. Our quota has been cut in half, which means we lost half of our income. The nitrosamine issue is killing us. Tobacco quota is to us what stocks and bonds are to investors. An investor can buy and sell them without worrying about a 50 percent cut in 3 years. If his investment was cut that dramatically, he would be very upset. Let us, the American farmer, get compensated for our losses and our quota. Then the companies could get whoever they wanted to grow tobacco.

On the cotton issue, cotton prices are based on the world market, but our grading sheets look like hospital bills with pages and pages of deductions. Supply and demand is still the name of the game. We need to think about it.

On the hog issue, corporations have took over the operation. Many farmers lost everything they had producing hogs. The prices were cheaper than they were during the Depression.

On the weather issue, weather is the most important issue, as it can make or break us in one year. Due to the prices that we receive for our products, the weather is no worry to many of us.

We, the farmers, take that peanut issue is going to be the same as the tobacco issue. We will wind up growing the crop for nothing and corporations will reap the harvest. Peanuts are one of the healthiest foods in the world, especially when they are produced by the American farmer.

Corn needs to be one of our best crops, but it has turned out to be the worst. OPEC is manipulating our fuel. Corn can be used to produce gasohol, which would allow us to use our product in a different form and not depend on OPEC.

We need to think long and hard about depending on other countries to produce our food supplies for our children, our grandchildren and ourselves. The farmer in the country can rule the world with food.

We, the farmers, are being forced to scam the system for our survival.

Thank you from the bottom of our hearts.

The American Farmer.

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

The CHAIRMAN. Thank you, Mr. Owens. Mr. Shirah.

STATEMENT OF JAMES W. SHIRAH, JR., COTTON AND PEANUT PRODUCER, PINEHURST, GA

Mr. SHIRAH. Mr. Chairman, I would like to thank you and the Committee on Agriculture for giving me the opportunity to testify today on issues affecting U.S. farm policy. It is not my intent to simply point out what I see is wrong with U.S. agriculture policy, except in context of what I see could improve an issue that needs improving. I am sharing perspective for your consideration as you continue your diligence on such an important mission.

First let me share with you a brief overview of how I got to this table. In 1996, two congressional initiatives had a major impact on how I pursued my livelihood. First, the Telecom Reform Act contributing to my accepting an early retirement from a 25-year career at BellSouth. Second, the Agriculture Reform Act gave me the freedom to farm. At retirement, I built a small cabin on the family farm in Dooly County, GA. The farm has been in my family for over 150 years. It was farmed through a shared tenant arrangement until 1997. In 1997, the son of the original shared tenant operator was forced to stop farming as an independent operator. The 1996 and 1997 crop years were so devastating to him that he liquidated his farming assets to save his home, even with crop insur

ance.

Utilizing my Malcolm Baldridge training, I felt that I could deploy best practices techniques and have a viable farming operation to contribute to my early retirement. I have now farmed cotton and peanuts for 2 crop years as an owner/operator and, reluctantly, have begun my third year. Even after utilizing the practices of world class farmers and consultants, I still experienced significant farm losses in the crop years 1998 and 1999. Professionals who have assisted me over the past 2 years have advised me that 1997 was an unusual year. They told me again in 1998 that it too was an unusual year. Again, in 1999, the opinion was that it was an unusual year. When does the unusual become the usual? National Weather Service Director John Kelly says due to La Nina, year 2000 is indicating the drought probability to be another unusual, or usual, year, depending on your definition.

My reason for wanting to testify was not because of my expertise in row crop production techniques, but from the experience I have as a businessman in my previous life. I would like to concentrate my thoughts today on four areas of concern. Those are crop prices, crop yields, insurance and succession strategy for domestic agriculture.

Crop pricing cannot remain at a level below the cost of production for very long, especially when amplified by low yields. The loan rate for cotton is 51.92 cents per pound. I assure you that 51.92 cents is below the cost of U.S. production. Crop yields are affected

by practices of the producers, but even utilizing a best practices approach, the producer is paled by the effects of nature. I have watched cotton go from bumper crop yields to disaster level in just 3 weeks time. The efforts of a whole year's work wiped out by heat and drought.

In these two issues, price and yield, lies the heart of the policy issues. If we can solve price and yield, we have solved 90 percent of the problem. The recommendation I support is a counter-cyclical approach to Government support of its agricultural resources. When world prices are down, have a price floor for the producer. When yields are down, have a national yield floor for the specific commodity. We have accountants that can build these models required to determine the specifics of those levels. To survive over time, these models must be indexed. Doan's Agriculture Report, Volume 63, Nos. 6-5 and 6-6 provides tables for these models.

The next issue is insurance. Farmers need an affordable business insurance program that will recover their operating losses when an Act of God occurs. The current insurance programs are woefully inadequate for our industry, especially when compared with other industries. If I have done my part to produce a bumper crop and an act of God; in other words, drought; takes my crop yield below the cost of production, I should be able to buy reasonably priced insurance to protect me.

Finally, risk/reward ratio analysis of farming, to other types of businesses, would not lead to a financial decision to farm. As you know, farming is extremely capital intensive and requires annual operating budgets that cannot be serviced due to events totally out of the operator's control. Even when debt service on operating budgets and capital expense is achieved, it will generally leave a farming operation with a return less than that of a Treasury bond. For all the risk that is borne by the farmer, an annual rate of return in the neighborhood of 16 percent should be minimally expected.

Barriers to entry are extremely high. For this high cost of entry, it should have potential returns consistent with the risk. If we do not fix the previous issues, the succession plan for domestic agriculture will be to the default position, which clearly is not in the national security interest.

The average age of the Georgia farmer is 57 years, so if we want new entrants to transition the aging farmer base to the next generation, we must have a succession strategy. Most businesses have succession planning. I am very interested in the USDA's succession plan for our domestic agriculture program. The plan would need one major concept-profitability. If we show farming to be profitable, it will attract new entrants. You have heard farmers encourage theirs one to pursue other careers to establish a good lifestyle. Whether U.S. agriculture is attractive to a family farmer or to a corporate farm with stockholders, it must be profitable.

Again, I appreciate the opportunity to offer this testimony and will avail myself at any time in the future to assure that I am not part of the problem, but part of the solution.

Thank you.

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

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