Unfortunately, since the demise of sugar on that island, nothing has replaced sugar as a viable agricultural crop and the former cane lands remain idle, overgrown with weeds.

Unemployment is high and the drug problem has increased, as have the social problems of dealing with these issues. There is a great deal of concern that both Maui and Kauai will see the same occurrence should we lose our sugar industry.

We, in Hawaii, like all fellow American sugar producers, are extremely concerned at the misrepresentation often directed at us by the opponents of U.S. sugar policy. Clearly, Hawaii has not received the congressionally-approved returns from the sugar program, nor have many U.S. sugar farmers whose livelihoods are being threatened by the dramatic fall in prices over the past 7 months.

In fact, because of Hawaii's isolation relative to our market, the mainland U.S.A., Hawaii produces at high freight costs which puts us at a disadvantage relative to other U.S. shipper producing

areas.

American sugar farmers are efficient by world standards. Twothirds of the world's sugar is produced at a higher cost than the United States. However, American sugar farmers, like many other farmers around the country who grow other crops, are struggling this year. Oversupply and loss of market confidence in the ability of the USDA to maintain a viable program have resulted in severely depressed producer prices for raw and refined sugar.

The U.S. raw sugar price has plummeted about 25 percent since July 1999. Raw cane sugar prices have fallen from about 22 and a half cents per pound to a low recently of 17 cents, the lowest level in 18 years. Given current production estimates, this represents a $400 million drop in the value of the domestic cane sugar crop.

As of April 26 this year, the Commodity Credit Corporation has a substantial amount of sugar on the loans, 848,000 tons of cane sugar and 771,000 tons of beet sugar with a value of about $656 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 to 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. sugar farmers, diminish the threat of sugar-loan forfeitures, and save the Government money relative to the cost of accepting and storing 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 lessening the beet and cane sugar price crisis, as this financial relief enables many farmers to invest in new or additional beet and cane sugar production.

Furthermore, sugar has been overlooked in Government market loss assistance efforts during the farm crisis of the past several years. Net CCC outlays for other program crops exceeded $10 billion in fiscal 1998 and $19 million last year. Yet sugar revenues total $30 million in 1998 and $51 million last year. Nearly $30 billion is budgeted for other program crops this year. Sugar farmers are hurting, too, and should be included.

Short-term solutions: For prices to recover this year, removal of significant quantities of sugar from the market must occur immediately. This would involve purchasing sugar for sale or donation abroad or for non- food or non-sucrose use.

Long-term solutions: The U.S. Government should negotiate with Mexico to reduce the threat of Mexico sugar destroying the U.S. market. The U.S. Government should seek a legislative remedy to address sugar syrups, commonly known as "stuffed molasses" that is circumventing the tariff code. Congress should abolish the 1-cent forfeiture penalty on sugar, should eliminate the debt reduction provision for sugar, should make all sugar loans non-recourse loans, and through a technical correction measure, should reinstate the no-cost provision that was eliminated in the drafting of the 1996 farm bill.

I would like to thank you, Mr. Chairman and members of the committee for allowing me to testify before you today. Sugar farmers want what all other program crops want, a fair opportunity to farm and make a reasonable living.

American sugar producers' competitiveness and their disastrously low prices parallel the plights 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 are, just equally. Thank you.

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

STATEMENT OF JAMES NILSSON, PRESIDENT OF CALIFORNIA BEET GROWERS ASSOCIATION, SUGAR BEET, TOMATO, AND WINEGRAPE PRODUCER, STOCKTON, CA

Mr. NILSSON. Thank you. My name is Jim Nilsson; I'm currently serving as president of the California Beet Growers Association and I'm here representing over 500 farm families that grow approximately 110,000 acres of sugar beets in the State of California.

My farming operation is east of Stockton, where I live, and I'm a diversified farmer. I also grow tomatoes, winegrapes, walnuts, cabbage, some bell peppers, and whatever else I think that I can make money on. Each one of my crops is being squeezed by a poor farm economy. I am amazed each day, as the California and U.S. economies are booming but agriculture is being bypassed in these good times.

The beet sugar industry in California at this time is in a major crisis. Since 1993, four of the eight sugar beet processing plants in California have closed. This year, Imperial Sugar Company announced that the Woodland and Tracy factories will be permanently closed this fall unless sugar beet growers purchase these

plants. With market prices as such low levels, there's not enough revenue to sustain the growers and processor as two separate and independent entities. Our association has been checking every avenue to see if there is a way for growers to own and operate these two facilities.

Sugar beets are the primary crop for many growers and they will be hurt by the closures. Because of low sugar prices, we are having problems figuring a way to purchase the plants and operate them successfully. The association estimates that there are nearly 600 direct jobs at these two plants with a payroll of over $17 million. These two plants contract a total of over 60,000 acres. The value of these beets is nearly $80 million. Without sugar beets, growers will be planting other crops, most of which are already in oversupply and the local economies will suffer. Since last Christmas, sugar prices in California have declined by nearly 15 percent. This is the reason that the closure of these plants was announced. The reason for the sugar price decline is several fold.

First of all, there is a tariff schedule loophole that allows a product called stuffed molasses to circumvent the sugar import quota of the United States. It is estimated at well over 125,000 tons of this stuff enters the country annually under this loophole.

The second problem is that, when the North American Free Trade Agreement was negotiated, the Mexican sugar industry did not produce sufficient sugar for its own country's use. The Mexican industry has been privatized and, today, they are a net export country to the United States. About 50 percent of the sugar production facilities in Mexico are inefficient and of high cost. In order for the Mexican Government to recover their costs in the switch-over to privatization, they subsidize these inefficient plants. The U.S. sugar industry will suffer until our Government takes action to protect its producers.

Finally, the Freedom to Farm Program removed our Government's ability to manage domestic sugar production and gave growers of our commodities the ability to receive payments on some crops and the flexibility to grow alternative commodities like sugar beets and sugarcane. With the sustained collapse of other commodity prices, farmers across the country turned to sugar production because of its history of stability. The combination of tariff, tariff circumvention, a bad NAFTA agreement, and the depression in commodity prices now forces the Government to take immediate and essential measures to help our industry survive this crisis.

We have a fourfold action plan we would like the committee to consider.

First, is to support legislation to stop stuffed molasses and like products designed to circumvent the sugar quota from entering our country. The legislative fix is a part of the sub-Saharan/CBI Parity bill now in conference committee, and this committee's support would be helpful.

Second, the U.S. Government must negotiate a comprehensive agreement with Mexico to reduce the threat of Mexican sugar access to the United States. The administration, with the support of this committee, must use all available authorities to resolve this problem.

Third, we urge the Government to purchase excess supplies of sugar for non-use domestically or removal from our borders. This action would avoid much more costly sugar loan forfeitures and protect the incomes of our family farmers. Farmers should not have to bear the economic burden of the mistakes made in our trade policy.

Finally, in previous farm programs, there have been bankruptcy provisions that protected growers in the event of a processor's failure or other insolvency. Since sugar prices have dropped to disastrously low levels, this policy should be made applicable to the current farm bill so that growers can be assured of receiving at least the minimum benefits intended under current sugar policy.

I want to thank you, Mr. Chairman, for this opportunity to express our concerns and we look forward to working with you on these immediate issues and designing long-term sugar policy in the next farm bill.

Thank you.

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

STATEMENT OF TED D. SHEELY, ASPARAGUS PRODUCER,

LEMOORE, CA

Mr. SHEELY. Mr. Chairman, my name is Ted Sheely; I've farmed on the west side of the San Joaquin Valley for the past 25 years. I grow cotton, tomatoes, garlic, pistachios, and chick-peas.

I appreciate the opportunity to communicate my view on the future of American agriculture with this committee. As you know, the primary task of the farmer today is to manage effectively two principal business risks, commodity price risk and production risk.

I wish to focus today's testimony on the Government's role in assisting farmers to reduce production risk by fostering the adoption of new technologies, the reduced input costs, and boost yields. These new technologies have the promise to spread farm income net margins, making growers more self-sufficient and profitable. With the availability of remote sensing and other technologies, precision agriculture holds a promise of correctly measuring inputs to needs. It enables farmers to adapt production methods in order to enhance the capability of the plant to grow and to get the most out of available inputs. In short, precision agriculture is economic efficiency and conservation. We need a lot of both of these in U.S. agriculture today.

We need efficiency to enhance our competitiveness and we need conservation in order to protect our environment and extend the capacities of our scarce resources.

Mr. Chairman, I'm not a lazy man, but I don't like doing things I don't need to do. With variable-rate applications and with variable-rate application technology along with remote sensing, I'll no longer fertilize land that doesn't need it. Using spray and no-spray zones within fields, I will not have to treat an entire field when a limited, targeted application is really all that I need.

Some demonstration projects have shown a potential for a 30 to 40 percent reduction in the use of crop protection products through the application of precision agriculture. Precision agriculture enables me to enhance water utilization efficiency through the use of

remote sensing technology, verified by in-field use of pressure bombs, we can discover leaf water potentials. This capability will help me know where moisture deficiencies are and make it possible to concentrate resources where they are needed the most.

Technology is commercially available today that can optimize equipment loads to tractor horsepower, therefore, conserving fuel, reducing emissions, and significantly improving tractor use. New guidance systems such as the Beeline Navigator, which I'll be using on my ranch, make it possible for me to perform critical operations day or night. This will reduce the number of tractors and implements I need to farm the same acreage simply because now I can work an extra 12 to 14 hours a day. The same technology enables tractor wheels to use the same path each time through the field. By establishing permanent traffic paths, we can eliminate soil compaction where the plants are being grown.

It is compelling that, by simply automating the steering of the tractor to drive a straight line, I can reduce the cost and improve yields while, at the same time, reducing the load my farm places on the environment.

Congress needs to get behind these new technologies and help ensure that farmers are able to utilize precision agriculture and the foundation technology. Some suggestions would include tax incentives for the implementation of these technologies, accelerated depreciation schedules for investing in precision agricultural equipment, and additional incentives to reduce the financial risks associated with moving small-scale tests from experiment stations to large-scale testing on individual farms.

I've noticed that Congress is working on legislation making loans available to provide local TV broadcast signals via satellite to rural areas. I would encourage you to consider whether similar Federal assistance could be explored to help rural areas install the necessary satellite reception facilities for remote sensing and machine guidance capabilities. This assistance will provide real bottom-line return to agriculture and the taxpayer.

Specifically, Mr. Chairman, the Ag20/20 program is a powerful new concept that teams researchers with growers to address specific needs. In this process, we get more for every research dollar. I strongly urge the committee to do all that it can in supporting and developing the Ag20/20 program. This important groundbreaking enterprise, established as a result of cooperation between major commodity groups, the Department of Agriculture, and NASA, can help take precision agriculture off the drawing board and into the field.

These two agencies are establishing the framework to combine expertise from many sources, enabling this technology to make huge strides forward. Ag20/20 needs a broader base of funding in order to significantly impact U.S. agricultural production. Under the auspices of the Ag20/20 program, I hosted 30 researchers and agency administrators from the USDA, NASA, Cotton Incorporated, National Cotton Council, the University of California, and private agronomists at my farm March 1st of this year. We brainstormed ways of using these new technologies to address the needs on my farm and, in particular, my desire to reduce input costs. Though funds are very limited, this group will provide me with the oppor