I know it's not you gentlemen, but I think there is some people out there that seem to be thinking we can turn agriculture as a whole over to third world nations. I just don't think that's too wise to end up leaving large tracts of this country.

Well, the absence of policies that guarantee a safe food and fiber supply is something we have to have in this country. I would ask that you closely examine domestic manufacturing, foreign and trade policies. To me it's foolish to allow foreign entities to control our food, clothing, and other vital interests as they now do our oil. In effect, OPEC supplying, I think they're use and supply management, we wouldn't want to get into that situation with our food supply here in the United States. At that point, we stop talking about foreign and domestic policy and we start talking about farm policy. Farms and ranches, unlike the oil business, would not have a strategic supply that we can open overnight. It would take us years to get going again.

In closing, thank you very much for coming to Texas, and I stand ready or any of my friends, cohorts, to help implement any of these actions or to answer any questions.

Thank you.

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

Mr. BARRETT. Thank you, sir.

Mr. Squires.

STATEMENT OF CARLOS SQUIRES, PRESIDENT,
SOUTHWESTERN PEANUT GROWERS ASSOCIATION

Mr. SQUIRES. Mr. Chairman and members of the committee, my name is Carlos Squires and I've been farming peanuts in Caddo County, Oklahoma for 33 years. At present, I'm the president of the Southwestern Peanut Growers Association. I appreciate the opportunity to testify and have submitted a full written testimony that I will summarize today.

The 1996 farm bill, GATT, and NAFTA are all intertwined with domestic agriculture policy being largely dictated by trade agreements. These three items promoted as great trade enhancement tools have contributed to the worst agricultural economy since the Great Depression. U.S. farmers, and specifically peanut farmers, have not benefitted from our trade agreements and domestic policy. Since 1996, we've lost an estimated 35 percent of the U.S. peanut farmers, and most of them have either been small farmers or young farmers. In addition, we now receive an inflated adjusted price for domestic peanuts that has been reduced by over 26 percent.

Although I believe there is many changes that need to be made in our domestic policy for peanuts, I firmly believe that the peanut program provides a basis for a solid safety net everyone is seeking. The quota marketing system has stood the test of time and offers producers the stability they so desperately need. And this is the foundation that we must build upon.

The 1996 law which removes some key peanut provisions has shown to be the biggest downfall for many peanut producers. The cost of production support rate adjustment was the one provision that allowed the producers to keep up with inflation. In absence of that provision, frozen loan rates cause producers to be faced with

almost certain failure. Thus, the reactivation of that provision is vital.

We, as peanut farmers, would like to thank you for the market assistance passed last year as part of the fiscal year 2000 appropriations bill. I am hopeful this was a realization by Congress that the loan rate had been too severely reduced. We desperately need this assistance again this year.

We should also reaffirm by law that the buy-back of additional peanuts for domestic edible and seed uses cannot be accomplished through handler-grower contracts. We must reaffirm by law that contracting of additional peanuts is permitted only for additional peanuts that are to be exported by the handler. This was the original intent of the law, and only since 1996 has the USDA permitted the misuse of this provision.

As a no net cost program, it would be beneficial if the peanut marketing assessment could be allowed to accrue within a peanut program account. If a so-called peanut trust fund was created, there could be years when the PMA would not be applied after the trust fund reached a certain level.

We are acutely aware of the high percentage of additional peanuts produced by growers in west Texas and southwestern Oklahoma. We believe that a number of improvements in the marketing of nonquota peanuts are needed in order to bring about increased marketing opportunities for these producers.

On the trade side, before any further reductions occur in tariff rate quotas, an equalization rate system needs to be established to reflect and balance the difference between trading countries in regard to cost associated with production.

Confectionery items such as candy bars containing peanuts must be equated into imported raw peanut poundage. Strict rules of origin should be applied to all products. Access for commodities should be granted only to countries that are directly and historically involved in producing the commodity as determined by rules of origin.

Please remember that in the policy considerations ranging from the old rigid allotment program and Freedom to Farm, the current peanut program is right in the middle. It is a no-cost program to the Government, a supply management program that avoids a boom and bust market, it ensures against becoming foreign food dependent, it has a strong consumer protection quality provision, and is also market adapted because any farmer can produce nonquota peanuts for the world market.

I would like to thank you for allowing me to visit with you today, and I'm looking forward to working with you as you make the needed changes in the peanut program.

Thank you.

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

STATEMENT OF BYRON VASSBERG, SUGAR PRODUCER

Mr. VASSBERG. Good morning. My name is Byron Vassberg. I would like to thank the committee for coming to Texas and inviting me to testify today.

As a member of the board of directors of the Rio Grande Valley Sugar Growers, a cooperative of 130 cane farmers in south Texas, I am here today to discuss sugar farming.

I have been farming and ranching in the Rio Grande Valley for the past 15 years growing sugarcane, cotton, corn, grain sorghum, and raising registered and commercial Brahman cattle.

As a proud farmer, it is my hope that my children will have the opportunity to live off the land as well some day. But, Mr. Chairman, let's be honest, times are very hard on the farm. I would like to tell you all a little bit about the concerns that me and my fellow sugar farmers around the country share.

American sugar farmers are efficient by world standards. Twothirds of the world's sugar is produced at a higher cost than in the United States. However, American sugar farmers, like many other farmers around the country who grow other crops, are struggling this year.

The problem. Oversupply and loss of market confidence in the ability of USDA to maintain a viable program has resulted in severely depressed producer prices for raw and refined sugar. The U.S. raw sugar price has plummeted 25 percent since July 1999. Raw sugar prices have fallen from about 222 cents per pound to 17 cents per pound, the lowest level in 18 years.

Given current production estimates, this represents a $400 million drop in the value of domestic cane sugar this year alone. A recent sharp drop in refined beet sugar prices, down 6 to 7 cents since July 1999, could cause losses to beet producers exceeding $600 million. Total potential losses to the sugar industry are over $1 billion on the value of the 1999-2000 sugar crop alone.

As of March 1 of this year, the Commodity Credit Corporation has over 1.3 million tons of sugar under CCC loans valued at $524 million. Massive forfeitures are a certainty unless some action is taken immediately to salvage prices. Market prices are several cents below forfeiture levels in every region of the country, producers are placing additional sugar under loan as they continue the harvest, and forfeitures could be even higher.

Aggressive action now to remove and dispose of sugar from the domestic marketplace would relieve the economic hardship on U.S. farmers, diminish the threat of sugar loan forfeitures, and save the Government money relative to the cost of accepting, and storing these larger volumes of forfeited sugar.

Government action to address this problem is appropriate because so many of the factors leading to the price drop are more closely related to Government action and inaction than to producer decisions. Furthermore, the Government has responded to similar price drops for other program crops by providing tens of billions of dollars in assistance over the past several years.

While these expenditures on other crops are appropriate, they have had the unintended effect of worsening the beet and sugarcane price crisis, as this financial relief enables many farmers to invest in new or additional beet and sugarcane production.

Our immediate need for prices to recover this year are the removal of 300,000 tons of sugar from the market. This would involve purchasing sugar for sale or donation abroad or for non-food or non-sucrose use. Sugar purchases may be made with three justifications: To protect sugar producers' incomes; second, to avoid sugar loan forfeitures to the Government; and, third, to minimize cost to the Government.

Longer-term solutions: No. 1, the U.S. Government should negotiate with Mexico to reduce the threat of Mexican sugar destroying the second market.

Second, and very important, is the U.S. Government should seek a legislative remedy to address sugar syrups commonly known as stuffed molasses that are circumventing the tariff code.

Third, Congress should abolish the one-cent forfeiture penalty on sugar. The 1996 farm bill imposed a 1-cent per pound penalty on any producer who forfeits on a Government CCC loan when nonrecourse loans are in effect. While aimed at a continued no-cost sugar policy by discouraging forfeitures, the penalty substantially reduces the income of sugar producers.

Fourth, Congress should eliminate the debt reduction provision for sugar. A marketing tax paid by sugar producers to help eliminate the Federal budget deficit was increased by 25 percent in the 1996 farm bill. So since there is no longer a Federal budget deficit, sugar producers would like to keep this $40 million they pay annually.

Fifth, Congress should make all sugar loans non-recourse. Though most farm programs retain marketing loan and non-recourse loan programs, traditional non-recourse loans are no longer assured for America's sugar producer.

Sixth, Congress, through a technical correction measure, should reinstate the no-cost provision that was eliminated in the drafting of the 1996 farm bill. In the 1996 farm bill, the provision was inadvertently removed during the bill drafting process.

In conclusion, thank you, Mr. Chairman, and members of the Agriculture Committee for allowing me to explain my concerns as a sugar farmer from south Texas. Please remember that sugar farmers want what all other programs want, a fair opportunity to farm and make a reasonable living.

American sugar producers' competitiveness and their disastrously low prices parallel the plight of other American farms; but, because of sugar's unique characteristics, policy solutions may have to be different from those for other commodities. Sugar farmers do not want to be treated more favorably than other farmers, just equally. Thank you.

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

The CHAIRMAN. Thank you. I just want to note for the record, Mr. Vassberg, our lunch here has sugar in it, real sugar.

Mr. VASSBERG. Thank you.

The CHAIRMAN. One of the things that over the years I've found to be interesting, I've kind of come up with with a statement that I always say a lot of times, that people don't have to know anything about a subject to form an opinion.

And sometimes that's a little concerning because here represented at this table, particularly three out of the four of you have are from programs that have probably come under as much attack as any other programs, the peanut and the sugar programs.

I'm not trying to cast disparaging comments about my colleagues who go after those. But I think so many times when you talk through these issues, they don't understand them. And I find that's also true in a lot of other agricultural commodities that we are dealing with, that people really don't understand the program and they don't understand the difficulties that agriculture faces.

Certainly when we're talking about payment limitations and some of those things, you deal with our colleagues that come from congressional districts where the average income is, $20,000, $25,000; and, it's a little difficult for them to understand the limitation thing. Part of that is an educational process, but part of it is just a recognition of reality.

The comment that I want to make in this, and that I think has been successful, is that I think I can say this with true sincerity, that they don't grow any cotton in John Boehner's district. I doubt if they grow any cotton in Leonard Boswell's district. They may grow a little bit in Frank Lucas's district, but they probably shouldn't be in Nebraska, and that goes throughout whatever.

But agriculture as a whole has had a good, I think, relationship within the industry. We wouldn't pass a cotton program or feed grain program or a peanut program or a sugar program or a corn program or anything else if all you got was the support of just the people that represented the areas of the country that just grow that crop.

And that is something that we've always encouraged agriculture to work as an industry together in recognizing how successful it's been in the past. It has been what has kept us from losing a lot of programs that individually many of us may not have total close ties with, but as a whole is important to agriculture.

I wanted to ask this question and, Mr. Fincher, I may be asking you some questions you may not know the answer to, and that's fine and understandable.

But Gaines County, where you're from, is Gaines County still the No. 1 peanut producing county in Texas?

Mr. FINCHER. That's true.

The CHAIRMAN. And about how much of the peanut, percentagewise, of the peanut acreage in Gaines County is quota and how much of it is additional?

Mr. FINCHER. We don't have those figures yet, but it's going to be roughly 30 percent quota and 70 percent additionals.

The CHAIRMAN. Of the 30 percent quota, about how much of that has come in since leasing has been allowed?

Mr. FINCHER. I'm going to say 15 to 20 percent of that.

The CHAIRMAN. In your area of Oklahoma, is that area what we would consider traditionally a quota area?

Mr. SQUIRES. Yes, sir, it's probably 90 percent quota.

The CHAIRMAN. Has there been much interest and activity in the quota holders in your area selling or leasing to nonquota holders outside of the area?