NATIONAL BARLEY GROWERS ASSOCIATION

2215 Russell Road, Alexandria, VA 22301

Testimony of W. Craig Corbett

Before the U.S. Senate,

Committee on Agriculture, Nutrition, and Forestry,

Lewiston, Idaho

August 13, 1998

Mr. Chairman, my name is Craig Corbett. I'm a barley, wheat and canola farmer in southeast Idaho and I am past president of the National Barley Growers Association. I appreciate the opportunity to speak with you today about the pressing issues facing farmers all along the northern tier of the United States.

As we all know, the drastic drop in grain prices in recent months has caused many producers and some Members of Congress to begin questioning the relative merits of the FAIR Act of 1996, or "Freedom to Farm." Clearly, there are changes that must be made to provide the US farmer with a sufficient safety net and a more open market for his production, but I think it is wrong to lay the blame for the current farm crisis on the FAIR Act changes to US farm policy.

This does not mean that the US farm policy cannot be improved. Clearly, some changes should be made to fill the holes in the farm safety net, particularly with regard to the failure of the current crop insurance program to adequately address the impact of successive losses due to disease. Actual production histories are lowered and rates are increased as a result of disease problems that are beyond the control of the producers, putting the hardest hit producers in a risk management vise in which he receives less from the market and less risk-coverage from the government at a higher price.

The NBGA is working with USDA's Risk Management Agency on a new income protection pilot program for barley producers, one that we believe could be an important improvement in risk management options for barley producers. This income protection program, which should be available on a pilot basis in selected areas in 1999, could be a useful tool to many barley growers in the Pacific Northwest that have not previously participated in USDA's crop insurance program.

Another farm policy change that NBGA would like to see is an increase in the loan rate for barley. Mr. Chairman, as you know, the barley loan rate is not capped by the FAIR Act but is established by the Secretary of Agriculture based on an analysis of the feeding value of barley versus corn. At present, the barley loan rate is approximately 6 cents per bushel under the fair loan rate value if one assumes that barley's feeding value is equivalent to corn's. NBGA has begun compiling analyses (see attachments) that show that barley's feeding value is equivalent to corn. We will be providing this information to the Secretary along with our request for him to make the necessary corrections for the 1999 crop year. Obviously, barley producers would appreciate your help in stressing the importance of this appropriate change to the barley loan rate.

Even if we do everything possible to improve on domestic farm policy, US growers cannot compete with foreign governments. US policymakers have failed to account for the market distortions resulting from the tremendous subsidies used to flush European grain surpluses into the world market, and from the Canadian Wheat Board's efforts to compete with Europe in those markets. Further, we have failed to consider the new realities in the former Soviet republics, where nascent governments desperately in need of hard currency are dumping large volumes of feed grains into world grain markets.

The point is that the US has no 'safety net' to insulate US farmers from these governmental actions. Obviously, the $150 million in the Export Enhancement Program can only serve as a limited weapon against the billions being spent by the European Union, perhaps in the manner of last spring's barley EEP in retaliation for the dumping of subsidized European barley in the US feed market. Until some more effective trade policy tool is crafted, or multilateral negotiations are held to address the government-driven distortions in the world grain markets, this will continue to be a large hole in the US farm safety net.

Approval of IMF funding is clearly the most immediate way to keep markets open for US agricultural products. Eliminating the devastating impact of ill-considered economic sanctions against our trading partners is also a way to help build confidence in the US as a reliable supplier of those products. Resolving the TCK Smut dispute with China as we bring that important nation and market into the WTO would have a dramatic impact on the marketing of US barley through the PNW.

The agricultural community must also acknowledge that US trade negotiators do not currently have the tools to force trading partners to the bilateral trade negotiating table. Whether discussing the market-distorting practices of the Canadian Wheat Board or the huge grain stockpiles and high export subsidies of the European Union, we simply do not have any leverage to force our trading partners to the negotiating table.

While I appreciate the frustrations expressed by Members and farmers who have been burned by previous trade agreements, I know of no one who wants to simply accept the status quo. We cannot alter the current situation without pushing our trading partners to the negotiating table and the only way they will negotiate with us is in multilateral negotiations (WTO and FTAA). Fast-track authority has become a pre-condition for US participation in those negotiations.

We simply must have fast-track negotiating authority to begin to address our trade problems with Canada, Europe and others. Congress, the Administration and farm organizations such as ours must do a better job in explaining to the public that approving fast-track does not mean that we will automatically approve of any trade agreement brought back to Washington, DC. Fast-track only allows negotiators to try to improve on the current situation. If they fail to do so, we will do whatever it takes to ensure that the US does not accept another faulty agreement.

Transportation may be an area most in need of changes. The consolidation in the western rail systems has been an abysmal failure in almost every conceivable way. We've all heard the horror stories from last year's harvest, where grain was left on the ground for lack of railcars and engines, and the warnings that things will be even worse this year but no one, least of all the Surface Transportation Board, seems to be interested in addressing the problem.

With limited exception in the southern part of our own state, the major US barley production area has become captive to one railroad and the largest domestic market for feed barley has become captive to another. The Union Pacific railroad has virtually locked up the region stretching from the midwestern corn belt to the California dairy markets and has initiated a practice of linking 100 rail cars of corn together to send from the corn production areas in the east to the feed markets in the west. Feed mill operators are reportedly given significant rebates for buying the large corn supplies when they arrive in California's dairy markets. Is this the free market at work or is it a rail monopoly tossing market signals out the window and forcing corn into the largest domestic market for feed barley by virtue of its control over the rail system? From our perspective, it looks like the latter.

What can farmers and grain merchandisers do to counteract this rail situation? At present, very little. While Burlington-Northern-Sante Fe freight rates to Portland are dramatically less than rates into the California dairy markets, raising the possibility of shipping the barley from Portland down the coast and through the San Francisco Bay to the feed millers up-river, this is not an option due to the Jones Act requirement that intra-national shipping be limited to US-flagged vessels manned by US personnel. As a result, it is cheaper to ship barley from Vancouver, British Columbia to California than from Portland. We understand that there is a bill introduced by Senators Brownback and Helms that would make changes to the Jones Act to allow for greater competition for coastal shipping. If this legislation preserves provisions requiring competing ships to use US crews, this would seem to be an excellent compromise that would preserve jobs for US shipping personnel while keeping US farmers competitive in domestic markets.