STATEMENT OF

THE AMERICAN FARM BUREAU FEDERATION

TO THE

SENATE COMMITTEE ON AGRICULTURE, NUTRITION

AND FORESTRY

REGARDING THE ECONOMIC CHALLENGES FACING AGRIUCLTURE

Presented by

Mary Kay Thatcher

Deputy Director, Governmental Relations

Mr. Chairman, we appreciate your efforts to consider this important issue. My message is not a new one. On July 8, the American Farm Bureau Federation announced its AgRecovery Action Plan. A complete copy of the plan and supporting information is attached. It calls for $9 billion of spending on agricultural policy programs and $5 billion to decrease the cost of government regulations on farmers and ranchers. Twenty-three state Farm Bureau presidents served on a farm economy committee to develop this plan and the American Farm Bureau Federation board approved it in late June.

Much is being made of the improved general economy in the 1990s. The value of production for the U.S. economy has grown by 65 percent over the decade. Corporate pretax profits are up by 130 percent. Personal income has grown by 67 percent.

Agriculture has had a much more difficult time in the 1990s, particularly over the past two years. Net cash income (gross cash income minus cash expenses) has increased by only about 2 percent for the 1990s and will be lower in 1999 than in 1996 and 1997. Net farm income is down slightly from about $45 billion in 1989 to a projected $44 billion in 1999. Without increased government payments in 1998 and expected increases for 1999, both measures of farm income would be markedly lower.

Farm Bureau has proposed a four-pronged approach to deal with the current low-income situation.

We have called for at least $4 billion in additional Agricultural Market Transition Assistance (AMTA) payments for 1999. Others have called for even higher payments. Given the price and weather developments over the past month, we believe these are reasonable responses. We have also called for advancing the 2000 crop AMTA payment to October 1, 1999, for those producers who need the payment earlier than current law allows.

The important point is that additional direct assistance is needed. We believe the additional AMTA payment should not subject to the payment limit and that the payment limit for loan deficiency payments (LDPs) and marketing loan gains (MLGs) should be abolished.

The second part of our plan is to move more products out of the country into world trade. We urge Congress to allocate an additional $2 billion in funding for concessional sales and food assistance, adequate funding for the cotton Step 2 program and competitive funding for other USDA export programs. Trade sanctions should be removed and export regulations should be streamlined. We are pleased to see that the Administration has recently taken steps to accomplish this and that Congress is working on additional legislation. We are also pleased that the House of Representatives rejected efforts to deny China normal trade relations standing.

Third, we recommend an additional $2 billion for risk management programs. Current programs need to be made workable for more crop producers and new programs need to be developed for fruits, vegetables and livestock. We also request funding for disaster assistance where producers lack other risk management options.

Fourth, we seek a reduction in the costs associated with increased government regulations. Farmers and ranchers have been promised reduced regulatory costs for years only to see those costs keep going up. It is time for the president, Congress and the federal government bureaucracy to recognize the ever-higher costs that federal agencies impose on farmers and ranchers.

We do not claim that our plan is perfect or that it will make all farmers and ranchers financially whole. We do believe, however, that all four of these areas must be addressed quickly to lessen the financial burden on farm and ranch families.

The one thing we do not want the federal government to do is to use the current farm economic difficulties as an excuse to reduce planting flexibility with supply controls and give our markets to foreign producers by providing higher loan rates and storage programs.

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