from Government regulation than other sectors in agriculture, but it's coming for everybody else. We've seen some ideas floating around that would put restrictions on runoff for people like us where they graze cattle out in the pasture.

And what I'd really like to know, and you probably can't answer this, is how much does Government regulation now add to the cost of beef for consumers? And if you can't give me that, can you at least give me a feel for how big a deal it is for the cattle feeding industry, for the regulations you've got now and the way it may change in the future?

Mr. HITCH. I certainly can't give you any number on how much it adds to the consumer's cost of beef. I can say that the regulations to date have been difficult, but not unmanageable. The regulations that are being proposed are a nightmare.

So, the proposed AFO/CAFO clean water strategy that's now on the table, to which we have responded, but I guess the EPA has not come out with a final decision on that, will be a catastrophe on, say, manure, for the individual farmer, not the CAFO. But the individual farmer will have to have a comprehensive nutrient management plan prepared by a professional at a cost of several hundred, several thousand dollars, to take animal manure and put it on his land.

We're going to have a mountain of manure at these feed yards because farmers aren't going to take it. It's going to be a major, major headache, I would say, for poultry producers, for beef producers, and for dairies, perhaps less so for pork producers.

Mr. THORNBERRY. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. I thank the witnesses for their testimony.
Yes, sir?

Mr. ARTHO. The last panel made a comment about insurance, that he would have been better off to have collected the insurance instead of harvesting. Remember that that 61 cents was set on last year's market; and, when you're in a down market, that's going to happen under insurance. It can be the other way.

The CHAIRMAN. Right.

Mr. ARTHO. It'll be the opposite in an up market.

The CHAIRMAN. Right, and it is a percentage of that crop rather than the 100 percent, as well.

Mr. ARTHO. That's right.

The CHAIRMAN. Thank you very much to the panel.

I would invite our next panel to come forward, please. Mr. Doyle Fincher, who is a peanut producer from Seminole, TX; Mr. D.A. Harral is a sheep rancher from Fort Stockton, TX; Mr. Carlos Squires, a peanut producer from Carnegie, OK; Mr. Byron Vassberg, a sugar producer from Harlingen, TX.

And I will mention two housekeeping items. Early estimates that we have had about 700 people attending this hearing. I think that's an extremely good turnout.

And, second, I might mention, we intend to work through lunch. Eeverybody runs on a tight schedule. We're not going to break. We are going to feed them.

And I might say, Mr. Hitch, we're going to be fed some beef. We will the Members because they do have planes to catch and they

wouldn't have an opportunity to eat otherwise, and I appreciate your indulgence.

Mr. Fincher, please proceed.

Mr. FINCHER. Thank you, Mr. Chairman.

STATEMENT OF DOYLE FINCHER, PEANUT PRODUCER

Mr. FINCHER. Thank you, Mr. Chairman.

My name is Doyle Fincher. I am a producer of peanuts and cotton and have been engaged in farming for my entire adult life. I appreciate the opportunity to appear before the committee today and wish to thank the committee for reaching out to seek the views of producers on current farm issues.

I would like first to address my comments to the peanut program. In my view, peanut producers have not been subject to the hard times and low prices that have affected producers of so many other commodities. The peanut program has worked well and is responsible for the stability that appears in this industry.

The peanut program provides for a two-price system with an annual quota set for peanuts used for domestic edible purposes. A support rate of $610 per ton is provided for quota peanuts. Some would say that this rate should be higher, others that it should be lower. At this time, I believe the rate is set at a level sufficient to protect the interest of both producers and consumers.

Additional peanuts not subject to the quota may be produced, but they can be sold only for crushing for oil or for export and receive a low support rate. If producers of quota peanuts that meet quality standards should be reduced because of adverse weather or disease, a buy-back program allows additional peanuts to be brought into the edible market and make up the shortfall. The buy-back program is an important safety valve to assure stability in the market and should be continued.

Until 1996, it was not possible to transfer a quota to producers outside the county to which it was allocated. In 1996, FAIR Act amended this restriction to permit the sale or leave of peanut quotas outside the county, but the transfer was limited to 40 percent of the county quota.

This has allowed peanut quotas to be transferred to counties that are most productive of high-quality agriculture peanuts. The demand for such transfers by producers in both the originating and receiving counties has far exceeded the 40 percent limit, and this limitation should be eliminated in any new farm legislation.

In contrast to peanut producers, there has been no stability for the cotton producers under the Freedom to Farm. Cotton prices have dropped to the lowest level in my entire career as a farmer. In these times, the Freedom to Farm Act has not provided an adequate safety net. If not for the additional payments provided by the appropriation act in the last 2 years, many of us would not have been able to survive.

Lots of unseen problems have come up at the same time. The Asian meltdown and sanctions on sales to many countries that have been historically markets for U.S. farm products have helped to kill or severely limit our exports.

We need sanction reform so that the President cannot impose unilateral sanctions on exports of food and medicines without

Congress's approval. We also need some changes in the current program. A portion of the AMTA payments should be adjusted so that when prices are low, as they are today, payments should be increased, and when prices are high, they should be reduced.

We appreciate the administration's action in implementing the generic certificate program to alleviate the restrictions of the payments limitation on marketing loan payments. This program should be continued in any new legislation. Without this action, the payment limit on loan deficient payments would impact a family farmer such as myself.

When cotton prices are as low as they are today and have been for some time, I would find myself caught up with a payment limit with only a few hundred acres of cotton production.

In addition, the eligibility limitation under the disaster program is based on the wrong factor and should be changed. Current legislation excludes producers with over two and a half million in gross income, a level that has been unchanged for over a decade. One can have a gross income at that level and barely net out enough money to meet everyday living expense. Disaster program limitations should either be based on net income or the current figure should be increased.

In conclusion, the Nation needs a strong farm economy. Everyone benefits from it. I hope that these hearings will provide guidance to the committee in drafting legislation to achieve these results. Thank you, Mr. Chairman.

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

The CHAIRMAN. Thank you, Mr. Fincher.

Mr. Harral.

STATEMENT OF D.A. HARRAL, SHEEP RANCHER

Mr. HARRAL. Thank you, Mr. Chairman. I appreciate all committee members coming to Lubbock today.

My name is D.A. Harral. Our family has been in the ranching business in Pecos County 250 miles south of here for four generations, raising cattle, sheep, and goats.

Our family came to Texas from Tennessee after the Civil War, couldn't find the type of sheep that we needed. So, my great-uncle rode horseback back to California, he bought the Spanish Merinos and trailed them back to Texas. This was a 2-year trail drive. I say this so you don't know just history, but that you'll realize that we're serious about this business and we're serious about staying in business.

I have a rather lengthy statement before you all. I'm going to summarize this as rapidly as possible. I've broken it into five different areas, the first area being what I call increased cost of operations.

Since 1992, we've been experiencing a severe drought. This has greatly increased our cost of operations. Your assistance that you provided to us through various feed programs has made a huge difference.

As I understand various farm programs, I think there is probably more assistance available to what I would call the row crop people than the livestock people in disaster type of situations. And I think

what I'm talking about is some type of crop insurance program for livestock. I think that's what I'm talking about.

I've heard some of my cohorts cuss it, and I've heard some of them think it's a good idea. I know from a fact when I have a load of lambs on feed, and earlier I said, "Well, I couldn't pay a premium like this" and then the price drops 25 cents just while we're sitting there in the feed lot, well, that premium would have really been cheap.

So, I'm wondering if that is something maybe we need to look at. In the sheep business, I can't go hedge my lambs. So, that's one thing that I'm looking at.

Another item that has been very helpful to us in the sheep business and also in our cattle business also is your assistance that you provided to us through the animal damage service control group. They provide a lot of assistance. We've appreciated the funding that you provided in the past and we hope that you'll provide in the future. We do not want to solely rely on you all. We have our own tactics that are working on our ranches, and it's a dual effort. The second item that I'm talking about is what I term as international monetary events and their impact on the sheep industry. I've broken this out wool and mohair first. The high value of the U.S. dollar, the high value of currency, puts a strain on us when we start trying to sell an export into foreign markets. It makes our products very expensive compared to that of our competitors.

Second, in recent years the Australian Government has decided to dispense or do away with their stockpile of wool they have down there. Certainly in the long run, that's good for markets. In the short run, it has created a problem for us.

Third, Pacific Rim has experienced a financial crisis the last 2 years. The reason that's become such a bearing on us in the wool business is, that's where so much of our textile business now takes place.

And lastly in this list of items, we experienced here in the United States the exit of the textile industry to foreign areas where they have lower operating costs, so that forces us, then, to almost an export environment, period.

On the meat side, over the past 4 years the U.S. exchange rate has allowed domestic importers to purchase cheap lamb overseas and flood the U.S. market with the imported product. In some cases the prices have been 40 percent below the domestic products. In very simplistic terms, importers can buy almost one and a half New Zealand lambs for every one lamb they bought over here, and this is what happens.

Third, I have listed how the U.S. sheep industry has been trying to adjust to these challenges. We in the wool and mohair business have formed recently here in Texas, or really started about 3 years ago, a co-op. You-all have always been into this in the cotton business. We were slow catching up, I guess you could say. But some of us have been processing our clips, taking them on to what I would call a top level.

Also, we've been selling them collectively in groups. There are various ranchers coming together to sell on the lots based upon coring of our different wools. And everybody that has a similar lot has

been trying to sell together. That has been a change that we've undergone the last few years.

On the meat side, 200 of us banded together, put in the money, built a packing plant in San Angelo, TX. Three months ago we started building a fabrication plant. We hope that by this fall we'll have a case-ready product ready to go into the grocery stores here in Texas also. Trying to move to a higher retailing level with our product, those are the efforts that we've undergone.

I say all this to indicate to you that we in the sheep industry we've been trying to take care of ourselves. We haven't tried to run to Washington every time we've got a problem.

I want to thank all of you-all for the support that you gave us in the 201 action that we had before the International Trade Commission. This has helped as far as putting a restraint on imported lamb coming into the United States. Our markets are starting to

recover.

Next item I have listed is national sheep improvement center. The 1996 farm bill allocated $50 million for this, seems to be some problems there in the Office of Management and Budget. We've received $20 million so far, and we're still waiting on $30 million.

As far as lamb and goat meat, things that we think that you might be able to help us as we prepare the next farm bill, and we've reviewed GATT, we feel it is important that some type of formula or indexing system be implemented to put the various currencies on some type of level playing field for all crops, whether they're raised here in the United States or manufactured, because we're operating on a global environment all the time.

And, lastly, on our wool and mohair side, an area where I think you-all could help us tremendously, is help us get a non-recourse marketing loan program, an efficiency payment in there for our wool and mohair. We're trying to meet in the world market. It would help us in an orderly marketing process and just make the whole system easier on us, as some of the other commodities have right now.

What I list as another item, another area where we feel like that you might be able to help, this will be on the next to last page, the current drought, of course, has impacted a lot of the ranches here in Texas and farms, but I know a lot of the urban areas and towns, they're having problems with their water supplies and so forth. There is lots of discussion about recharge, where we're going to get this water. Some type of cost-share program between some of the ranchers, farm managers say a large cost-share program, and some around municipalities down here possibly say and the Federal Government might be behoove everybody. Because this water problem has turned into a big problem here in Texas.

In conclusion, what I list as No. 5 on the last page, long-term policy, I am concerned about what is going to happen in the sheep business when this 201 phaseout is complete after 3 years. Be assured we're going to tell everybody our lamb is better, that our lamb is cheaper.

The problem is, they can still produce it cheaper than we can produce it. In the long run that creates bad competition, and I have a feeling there are others that are in the same shape as we are.