Dole's bill needed only two votes to pass in 1978, and I believe that had his bill passed, the eighties farm crisis would have been averted. The Food Security and Land Stewardship Act can be the legislation to end the current developing farm crisis.

The Food and Agricultural Policy Research Institute has given a favorable valuation to the act. FAPRI estimates a net farm income under the act to increase an average $5.4 billion each year over the next 8 years. This makes farmers taxpayers rather than tax recipients.

Under the act, farmers will be able to assess and adjust their planting decisions on market demand, giving producers the freedom to manage risk. An overview of this plan is attached to my testimony.

Finally, I would like to address a commonly asked question regarding farm programs containing set-aside acres. The question being, what keeps South American nations and other nations from converting more farm land and producing enough to make up for the United States set-aside?

And to this question I have two answers. The first being, there is no evidence to suggest a correlation between foreign development and U.S. set-asides or domestic high prices for agricultural commodities. In the past 2 years, this has become evident in that the U.S. prices have been below depression-era prices if inflation is factored in. And at the same time, South America has continued to develop farm land.

This leads to the second answer to this question. Why would the United States want to depress our prices to the lowest in recent history in an attempt to curb development in foreign countries and maintain exports? Why would the United States want to destroy its own rural well being in order to maintain exports at a loss?

I believe the United States is a trend setter rather than a trend follower. Our foreign competitors will always trail the United States' lead in the pricing of agricultural commodities.

Global agricultural markets are here whether we like them or not, although we are not under a free market. The United States can either boost its economy, its rural economy, and in turn raise the standard of living in those developing countries, or we can lower our standard of living equal to theirs by continuing policy that promotes the giving away of our resources in the name of competition.

The decision is yours. Thank you.

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

The CHAIRMAN. Thank you very much.

Mr. Mauldin.

STATEMENT OF MIKE MAULDIN, BANKER, IDALOU, TX

Mr. MAULDIN. Chairman Combest, Ranking Member Stenholm, committee members and guests, it is certainly a privilege to have you here today for the first of these hearings. We're excited for what you're doing.

I also want to praise you for the work that you've done and thank you for the crop insurance bill currently on the table and for the past two disaster bills. I can assure you that there are a lot

of good producers out there today that are still going to be producers for next year that would not be there if it wasn't for the disaster bills passed in the past 2 years.

I am Mike Mauldin, an agriculture banker in Idalou, Lubbock County, TX. I have a strong interest in the well being of agriculture in rural America. There are many concepts in Freedom to Farm that are desirable, but there is an inadequate safety net as the law is currently written.

Currently, the safety net provision in Freedom to Farm does not compensate for world governments, economic shortfalls, and weather deviations such as drought, flooding, and other acts of nature. When it became apparent that Freedom to Farm reflected limited safety net ability, the producers whom I come in contact with on a daily basis expressed the desire of the safety net features of the Food, Agriculture, Conservation, and Trade Act of 1990. In other words, the old farm bill. In short, these producers were referring to target price system that was written into the 1990 law.

Like you and many others, we have reviewed a variety of proposals to improve the safety net issue before you today. We have found merit in every proposal. Today we are offering a proposal that can be easy to administer, understand, and to implement. This is so easy that someone even of my knowledge can understand this proposal. You might call it the K-I-S-S system, Kiss Proposal of Safety Net Provisions.

Because of time restraints, we offer a basic outline of our proposal, and with your interest, we will provide you a more structured layout of this program. Today, because of my knowledge in cotton, my remarks will cover this commodity by example only. But this program functioned and will meet the needs of all crops.

In the 1990 law, in cotton, we observed a 72.9 cent payment rate, coupled with the CCC loan and the current market. These were all used to establish a value should a safety net be required. We stress, the basic implementation of this function has been written in the farm law of 1990.

We believe with existing technology, this section of the 1990 farm law could easily be structured into working harmony with the FAIR Act. We offer the above to you as a safety net for producer protection that would function as a section of the FAIR Act, offering an extended time span to let the free market system adjust. Implementation of this program should eliminate future disaster declaration.

Once again, thank you for these hearings and for listening to our producers' concerns and solutions.

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

The CHAIRMAN. Thank you, Mr. Mauldin.

Mr. Melton.

STATEMENT OF WELDON MELTON, CORN PRODUCER

Mr. MELTON. Thank you, Mr. Chairman. As evidenced by these hearings, Freedom to Farm is obviously not American agriculture's final answer. Unfortunately, the number of friends the agriculture sector can call on is dwindling every day.

This committee is one of our most powerful friends, and we in agriculture appreciate your concern for our problems. We also appreciate Mr. Combest and Mr. Stenholm and the rest of the committee for asking for producers' input as you search for better solutions. It is doubtful, however, that the final answer will ever be forthcoming for American agriculture.

A change in the credit policy set forth in the 1996 farm bill that would help many farmers in my area would be to lengthen the amount of time a farmer is eligible to participate in the guaranteed loan program. This would greatly aid many beginning farmers and those that have suffered recent disasters.

In our present economic conditions, it does not make sense to arbitrarily force a farmer who is making good economic progress out of a program which costs the Government very little, if anything, before he is eligible for conventional financing. The time that a farmer can be eligible for the guaranteed loan program should be lengthened to reflect the difficult economic conditions farmers are facing today.

Sanctions such as those leveled at Cuba and threatened for China are counterproductive and accomplish nothing in the end. The current strength in the soybean market is in large part due to China entering that market as a buyer rather than a seller.

China needs to view the United States as a dependable supplier of her commodities. The granting of permanent normal trade relations to China would improve our image in China and around the world as a dependable supplier of those commodities.

The doubling of the LDP limits and the approving of the use of generic certificates this past year was greatly appreciated and certainly have kept many family farms in business. Payment limits should continue at these realistic levels.

The administration's proposal and Mr. Stenholm's proposal to add supplemental income protection to the present bill would certainly help. However, the payment limit that it applied to the program makes it useless to myself and other farmers that are the true family farmers that the administration claims to try to help. The program that is being proposed by the administration will primarily aid the hobby farmer that produces less than 15 percent of the Nation's produce. Payment limits must be set at reasonable economic levels, not politically acceptable ones.

If current payment limits are maintained, the safety net for myself and other farmers will not work during depressed commodity prices such as we have seen in the past year. One of the farmers main safety nets that was established in the 1996 farm bill is the marketing loan for our commodities.

Secretary Glickman recently announced that he had frozen those marketing loans. That action should have been taken in 1996. Marketing loans, in order to be an effective safety net, should have had a frozen floor, not a frozen ceiling. Marketing loans also should have been set at a more realistic level in relation to actual cost of production. That part of the safety net needs to be changed.

Inherent in the bill was the need for the American farmer to compete on the world market. No provision was established in that bill for adjustment of the marketing loan in relation to changing world conditions that drastically affect our access to world markets.

In order to connect in the marketing loan, our safety net, the world conditions that affect our trade in the world, marketing loans need to be tied to the strength of the dollar in 1996, when the bill was written. A benchmark of what the dollar was worth in comparison to the yen, mark, pound, and other major currencies in 1996 should be established.

If the dollar goes up 10 percent in relation to that benchmark, then the marketing loan should increase 10 percent as well. This would help the American farmer when one of our major competitors devalues their currency with the end result of undercutting our price and result in loss of sales.

It would also inoculate us from financial woes such as the Asian flu that resulted in loss of sales to that vital area. This would also assure that when the rest of our Nation's economy booms as it is today, the rural economy would enjoy similar prosperity.

When the current farm bill was passed, the farmer was promised that the United States would work to ensure that he would compete on a level playing field. One area of great concern to the American farmer that has not been addressed at all is the unlevel playing field of production costs. Our foreign competitors are buying inputs from U.S. companies at much lower prices. This places the American farmer at an economic disadvantage.

The American Soybean Association has recently chastised Monsanto for unfair pricing of seed and technology. The Argentinians in 1999 paid $9 a bag for Roundup Ready soybean seed, while American farmers were paying $21.50 a bag for the same seed. This is just one example of the unlevel playing field.

As I said at the beginning, it is very doubtful that a final answer will ever be forthcoming for American agriculture. Help from our friends here on this committee should come in the form of lengthening the time a farmer is eligible for the guaranteed loan program, the elimination of sanctions that deny the American farmer access to markets that was promised him in the 1996 farm bill, and along those same lines, the granting of permanent normal trade relations with China.

Congress should also institute changes in the marketing loan program, our safety net, and make it a true safety net and not just a floor for the American farmer to slam into when he falls on hard times. This would help the American farmer in his quest to compete in a world market against foreign governments and to just be able to stay afloat until next year.

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

The CHAIRMAN. Mr. Oswalt.

STATEMENT OF JERRY OSWALT, COTTON PRODUCER

Mr. OSWALT. Mr. Chairman, other members of the committee, my name is Jerry Oswalt. I'm a full-time cotton farmer near Abernathy, TX, just up the road. I also serve as the chairman of the Panhandle Plains Federal Land Bank Association, a farmer-owned agriculture credit cooperative.

I'm here today as both a farmer and local lender to share with you a proposal to reform the Federal Crop Insurance Program,

what I believe should be an essential part of any serious discussion about improving our Nation's agriculture safety net.

As a farmer, I am vitally interested in ensuring that I have the tools needed to manage the risks inherent in agriculture production. And as a lender, I depend on crop insurance to be a backstop for our borrowers.

In an effort to help develop possible solutions rather than merely point to the problem, several of my peers and I recently developed a proposal that we believe offers a viable alternative to the current approach to Federal crop insurance. I've attached a comprehensive analysis of this proposal and am accompanied today by a representative from the firm AgriLogic, which did most or has done all of the economic analysis of this proposal, and they could help discuss this in detail and respond to questions you have about that part. But I would like to describe the concept in general terms. Today, when I go into my lender to establish financing for the year, we sit down, develope a financial plan. We establish an anticipated price for my commodities, how many units I intend to produce, and an anticipated production yield. From that information, a projected income is established. All things being equal, this is the amount of money my lender is willing to loan.

Under this proposal, an insurance policy covering replacement cost would be purchased at the time the loan is made, just like when someone purchases a home or a car. Approval of the loan is contingent upon proof of insurance. The insurance coverage would be equivalent to an amount necessary to cover the replacement cost; or, in other words, a farmer's cost of production.

Lenders would gladly finance the money required to pay the premium up front because they know the repayment ability of that borrower is protected in the event of a disaster. These premiums then would be forwarded to a Federal fund that would pool them for the purpose of making indemnity payments.

In years when claims are low, the pool would grow and earn interest and serve as a reserve for later years. Although the pool would have to be federally subsidized, just as crop insurance is today, the effect of this type of concept is very compatible with the cooperative principles that governs my lending institution. But instead of farmers pooling their resources for the purpose of creating lendable equity, farmers would be pooling their resources for the purpose of self-insurance.

Under this proposal, if sufficient income is not generated to cover the cost of production either due to lower than expected prices or production losses, an indemnity payment minus the deductible is drawn from the pool and paid to the farmer.

The farmer and his banker are both happy because they know his debt can be repaid either, ideally, of course, through higher prices or more production or by an insurance payment or by some combination. But the bottom line is that if the farmer experiences unusually low prices or production, he can stay in business to farm another day, and that's what insurance programs should be about. This type of program does not create a guaranteed income for the farmer. He has to get that from the marketplace or some other support program. But it serves as a bare-bones safety net to help keep farmers in business during times of disaster. It also helps eliminate