OPENING STATEMENT OF SENATOR RICHARD G. LUGAR, CHAIRMAN COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

JANUARY 30, 2001

Good morning. Today we meet to review the final report of the Commission on 21st Century Production Agriculture. The Commission was created by the Federal Agriculture Improvement and Reform (FAIR) Act of 1996 to identify the appropriate role of the federal government in production agriculture following expiration of the FAIR Act in 2002.

In many respects, today's hearing and the public release of the Commission's final report marks the beginning of the 2002 farm bill process. I want to welcome Commission chairman, Dr. Barry Flinchbaugh, and Commission members, Bruce Brumfield, John Campbell, Donald Cook, James Dupree, Charles Kruse, William Northey, Ralph Paige, Bob Stallman, Leland Swenson, and Don Villwock. The Commission has taken its assignment seriously and has worked hard to produce a substantial final report which contains a great deal of information. Achieving a consensus view on this issue is no easy task. I would note that all eleven Commission members signed the final report, subject in some cases to minority views. We look forward to hearing the Commission's findings and recommendations.

With respect to the 2002 farm bill process, I look forward to working with Senator Harkin and all Committee Senators, including our many new members on both sides of the aisle. A good place to begin is to try and gain a better understanding of the basic structure of farming. Sparks Companies, Inc. recently completed an analysis on this subject based on the 1997 Census of Agriculture. The Census defines a farm as any operation with annual farm sales of $1,000 or more. The Sparks analysis found that of the Nation's 1.9 million farms, only 157,000 farms (about 8 percent) with annual sales of more than $250,000 account for 72 percent of food and fiber production. These commercial farms rely primarily on income earned from farming, with only 28 percent of their total income, on average, coming from off-farm sources. A second group of 189,417 farms (about 10 percent of all farms) have annual sales ranging from $100,000 to $250,000 and account for 15 percent of production. About 57 percent of this group's total income, on average, comes from off-farm sources. The remaining 1.57 million farms (82 percent of all farms) account for 13 percent of production and, on average, earn 100 percent of their total income from off-farm sources.

Virtually all agricultural economists tell us the benefits of production-based farm support and risk management programs are capitalized into the value of farmland. The most recent evidence of this is our experience in the last three years. During that period, farmers' returns from the marketplace have fallen sharply, yet agricultural land prices and rental rates have continued a steady rise as regular FAIR Act programs and supplemental farm assistance from the Congress have provided farmers with increasingly large amounts of government assistance. The impact of this assistance on individual farmers, however, can be very different depending on whether a producer owns or rents the land he is farming. Without doubt, our recent policy has helped to keep many farmers in business, but increasingly asked is the question as to whether many farmers are being hurt in the process.

We need farm programs that will build the international competitiveness of American agriculture and will help provide both producers and the general public with increased environmental benefits. Our farm programs exist because of resources provided by the Nation's consumers and taxpayers. We have a responsibility to provide farm support in ways that are as economically efficient as possible. Though the direct cost to taxpayers of recent farm support is quite high, a new analysis by University of Maryland agricultural economist, Bruce Gardner, concludes that the combination of regular FAIR Act programs and supplemental market loss assistance is a relatively efficient way of supporting farmers' incomes, particularly when compared to pre-FAIR Act farm programs which relied heavily on annual acreage reduction programs which realize $4 billion in dead losses.

Following opening statements from Senators, we will hear background testimony from Agriculture Department Chief Economist Keith Collins on recent policy and market developments. He will also be available during the discussion portion with Commission members who will be part of the second panel, to provide additional economic information as needed. I want to remind Senators that Dr. Collins is here to provide information, not to comment on the Commission's policy recommendations.

Chairman Flinchbaugh will testify today summarizing the Commission's findings and recommendations detailed in full in its final report. Senators may engage all Commission members in discussion following Dr. Flinchbaugh's testimony. I also want to recognize Commission staff, Mechel Paggi, Matthew Howe, and Timothy Peters, all of whom provided the Commission with invaluable assistance.