SECTION: PREPARED TESTIMONY

LENGTH: 4741 words

HEADLINE: PREPARED TESTIMONY OF TOM STENZEL PRESIDENT AND CEO UNITED FRESH FRUIT AND VEGETABLE ASSOCIATION
 
BEFORE THE HOUSE AGRICULTURE COMMITTEE
 
SUBJECT - REGARDING THE REVIEW OF FEDERAL FARM POLICY

BODY:
 Good Morning Mr. Chairman and Members of the Committee. My name is Tom Stenzel and I currently serve as President and CEO of United Fresh Fruit & Vegetable Association (United). I greatly appreciate the opportunity to testify this morning on several of the challenges and key public policy issues facing the fresh fruit and vegetable industry.

As the national trade organization representing the views of producers, wholesalers, distributors, brokers and processors of fresh fruits and vegetables, United has provided a forum for the produce industry to advance common interests since 1904. Over the years, the produce industry has gone through tremendous changes in an effort to remain profitable, satisfy consumer demands, conform to new technology, and compete in an increasingly global market place. While the perishable nature of our products present unique challenges and highly volatile markets, the industry has not relied on traditional farm programs to sustain the industry. Rather, we have relied on the economics of supply and demand. However, many of the economic stresses inherent to other commodity sectors are impacting the fruit and vegetable sector as well as other issues unique to our industry. With the combined fruit, vegetable industry in the United States representing over 22 percent of the nation's total crop value, it is extremely important that all issues affecting our industry be laid on the table for consideration and appropriately acted on. While the rest of the U.S. economy enjoys unprecedented growth and success, much of agriculture, particularly the fruit and vegetable sector is mired in a deepening crisis. Commodity prices for many produce crops are below the cost of production and increased federal regulations, such as the scheduled phase out of methyl bromide as a fumigant, is expected to result in losses of $500 million while impediments to trade are stagnating the industry. Such challenges, coupled with threats from exotic pests, loss of important pesticides under the Food Quality Protection Act (FQPA), increased buyer leverage caused by retail consolidation, and shortages of labor, are putting increasing economic pressures on industry operations both large and small.

While it is apparent that many of the issues facing the produce industry today have only worsened over the years, I call to the Committee's attention language contained in the 1990 Farm Bill -- the only Farm Bill to contain a fruit and vegetable title. A key section of this legislation found that fruit and vegetable crops were "a vital and important source of nutrition for the general health and welfare of the people of the United States" and integral part of the nation's farm policy. The Act directed the U.S. Department of Agriculture (USDA) Secretary to conduct a study how the industry could benefit from existing market assistance programs and to look at additional programs that could be developed to assist producers in expanding domestic and foreign markets for their products. Today, some 10 years later, that study has yet to be released.

As Congress begins to examine how our present farm policy should be reviewed and modified in this new era of global markets, it is critical that long and short-term solutions be considered that will help the U.S. agriculture industry to remain world leaders in food production and competitiveness. For the produce industry, issues surrounding pest exclusion, disaster assistance, food safety, nutrition policy, retail trade practices, technology and research, international trade barriers and promotion, risk management tools, produce inspection activities and the current prohibition on flex acres are critical to the future viability of the fruit and vegetable industry.

Prohibition on Contract Acres

In the 1996 Federal Agriculture Improvement and Reform Act (FAIR), Congress sought to provide planting flexibility for producers who historically participated in farm programs. While this was a worthwhile policy objective, fruit and vegetable growers were extremely concerned that, if it were applied to fruit and vegetables crops, they would be forced to compete in the marketplace with subsidized producers. Fruit and vegetable organizations across the country argued successfully for language included in Sec 118 of the FAIR Act that prohibited the planting of fruit and vegetables on contract acreage.

The market conditions and potential for disruption that led to the industry's concern in 1996 over planting flexibility have not changed. If anything, they have worsened. Traditional fruit and vegetable producers in recent years have switched acreage between different crops, particularly vegetables, in order to find profitable niches. Federal incentives for program crop participants to plant fruit and vegetable crops would likely exacerbate an existing over-supply situation for those commodities, and cause significant injury to growers. Non-subsidized fruit and vegetable producers should not have to compete in the marketplace with producers who are receiving direct government payments.

U.S. farm policies that provide for planting flexibility on subsidized or contract acres now and in the future should specifically prohibit the planting of fruits and vegetables. Significant penalties must remain in place to ensure that there is an effective deterrent to violations of the planting prohibition. If, in the future, Congress elects to provide payments to farm program participants, and allows them to grow fruits and vegetables on those acres, then traditional fruit and vegetable producers should have equal access to those payments.

Pest Exclusion and Detection

Increased importation of agricultural products into the United States has also increased the risk of the introduction of plant pests and diseases that threaten domestic production. Fruit imports increased from 1.35 million metric tons in 1990 to 2.82 million metric tons in 1999. Imports of fresh citrus products alone increased from 101,000 metric tons in 1990 to 348,000 metric tons in 1999. Vegetable imports increased from 1.90 million metric tons in 1990 to 3.73 million metric tons in 1999. Fresh tomato imports have doubled during that period as well.

In addition, states such as California and Florida are seeing record numbers of tourists and other visitors arrive each year. Some 330 million visitors entered California and Florida through airports, seaports and highways in 1998, a combined increase of over 4.5 percent over the previous year. These growth statistics only exacerbate the problems surrounding efforts to control and eradicate invasive pests and disease.

Increases in tourism and legitimate trade aren't the only culprits. Smuggling of prohibited host materials is also a significant problem, and is no doubt a major pathway for medfly, citrus canker, and other pests and diseases. During blitzes conducted by Federal/State interdiction teams, officials intercepted numerous illegal shipments of fruits and vegetables that were later found to be infested with pests not known to occur within Florida.

Recognizing the need to address this serious situation, United and the produce industry have been strongly committed to working with Congress and the Administration to find the tools they need to more effectively protect American agriculture from destructive pests and disease.

With the passage of H.R. 2559, the Plant Protect Act of 1999, USDA will now have the improved means to protect our nation's agricultural crops from invasive pests being transported into this country. Additionally, USDA's Animal and Plant Health Inspection Service (APHIS) report, Safeguarding American Plant Resources -- A Stakeholder Review of the APHIS-PPQ Safeguarding System which was compiled in coordination with the National Plant Board contains over 300 recommendations for preventing the further spread and future outbreaks of exotic disease and pests in the future. Expeditious implementation of the Plant Protection Act, in coordination with the recommendations included in the Safeguarding Report, are imperative to preventing future losses and maintaining stability within the produce industry.

Finally, in September 1999, a diverse group of agricultural industry representatives met to assess the interest in organizing a coalition to advance plant safeguarding issues. Based on that meeting and subsequent discussions, the group decided to pursue a coalition named the Plant Safeguarding Alliance. The Plant Safeguarding Alliance is an industry coalition organized to support implementation and cooperative action for the advocacy of protecting plants from invasive pests, diseases and weeds. This new coalition will facilitate and respond to broad issues, priorities, and policies designed to improve the safeguarding system of plant-based industries while ensuring that USDA's commitment to implementing the Safeguarding American Plant Resources review does not waiver.

Increased funding Needed for USDA's Pest and Disease Exclusion and Detection Capabilities

While trade in agricultural products has increased significantly in the past 10 years, USDA/APHIS' total budget has risen only slightly. The portion of the APHIS budget funded from appropriations has actually declined during the past seven years, from $440 million in 1993 to $347 million in the 2000 budget. User fees during that period increased from $25 million in 1993 to $141 million in 2000. The bottom line is that the financial resources allocated to APHIS have not kept pace with the increased pest and disease pressure brought on by the rapid growth of imports and tourism.

In 1997, the General Accounting Office confirmed this in a report, Agricultural Inspection -- Improvements Needed to Minimize Threat of Foreign Pests and Diseases. The report pointed out that despite changes to USDA/APHIS' funding and programs, inspectors at the ports are struggling to keep pace with the increased workload. Heavy workloads have led to inspection shortcuts, which raise questions about the efficiency and overall effectiveness of these inspections.

Ultimately, more resources and personnel will be needed to fight this battle. We recognize the difficulty in increasing government spending in a period of fiscal restraint; however, in this case, increased spending makes good sense. Strengthening and improving our pest exclusion and detection systems would result in fewer and less expensive eradication programs. This will require additional resources to hire more inspection personnel and fund increased research to improve exclusion, detection and eradication methods.

In reviewing USDA/APHIS funding, Congress should also ensure that the agency has full access to fees it collects at air and seaports. Section 917 of the FAIR Act authorized USDA to collect user fees for agricultural quarantine and inspection activities (AQI). These fees have been utilized by the Department to bolster its inspection programs at key points of entry for exotic pests. However, Congress required the appropriation of the first $100 million. Since the provision has been in place, the full $100 million has not been appropriated for AQI activities. United strongly urges Congress to ensure the full amount of funds generated from AQI user fees be dedicated for the purposes for which they were intended and allow the appropriation requirement to sunset when the FAIR Act expires in 2002.

Increased Funding Needed for Foreign Market Development

Fruit and vegetable growers in the United States face significant obstacles in the development of export markets for their commodities. Chief among them are non-tariff trade barriers, such as phytosanitary barriers and subsidized competition. The European Union and other foreign competitors outspend the United States by some 20-to-1 in export subsidies and market promotion expenditures. According to USDA, the EU provided more than $15 billion in subsidies to their fruit and vegetable producers in 1997. For example, European tomato growers received nearly $5 billion of that total while citrus producers received well over $1 billion. Domestic produce growers on the other hand, received no comparable support; yet, the produce industry is forced to compete against European and other subsidized producers in world and domestic markets.

The United States must significantly increase its commitment to export market development if the fruit and vegetable industry is to compete in global markets. Funding for USDA's Market Access Program (MAP) should be increased substantially. A direct relationship between MAP funding and the ability to effectively market our products overseas has been demonstrated. Not only has the program helped to capture long-term markets, it has also been critical in moving surplus product and stabilizing commodity prices. However, more and more agricultural commodities including processed products, are benefiting from the program whose funding authorization has been reduced from $200 million in 1990 to its present level of $90 million. As the industry that helped establish the program in the 1985 Farm Bill to meet the specific needs of the fruit and vegetable industry, we strongly support increased funding for this vital trade promotion program.

Legislation has been introduced that would authorize up to $200 million for MAP, which currently is funded at $90 million. It also would provide a minimum of $35 million for the Foreign Market Development Cooperator Program, and allow up to 50 percent of the available funds under the Export Enhancement Program (EEP) to be used for related market development and promotion activities.

The new Farm Bill should further strengthen programs to enhance the fruit and vegetable industry's competitiveness in world markets. Absent aggressive action, U.S. agricultural exports will continue to stagnate, and farm income will continue to fall.

World Trade Organization Negotiations

Without improved international trade policies that advance open and fair trade practices in the global market the U.S. surplus in agriculture trade will continue to decline. United strongly supports the elimination of the trade inequities created by the combination of world subsidies, tariffs, and domestic supports as measured against the current U.S. tariff structure and trade policy. The ongoing multilateral trade negotiations mark a unique opportunity to reexamine present barriers to entry confronting U.S. produce companies in the export of fresh fruits and vegetables around the world. In doing so, we need to ensure more liberalized and predictable access to foreign markets for fresh produce and assurance that trade-distorting subsidies are significantly reduced or eliminated.

Retail Trade Practices

United strongly supports appropriate federal oversight of retail mergers and consideration of the impact of that consolidation on the fruit and vegetable industry.

Fruit and vegetable growers are deeply concerned about the consolidation of retail food marketers in the United States. For example the five largest food retailers in the country accounted for 40 percent of industry-wide sales of $270.7 billion in 1998 compared to five years earlier, when it took the top 20 companies to reach the same percentage.

As buying power concentrates within the retail industry, fruit and vegetable producers have fewer customers to whom they can sell their highly perishable and price sensitive commodities. The net result is continued pressure to reduce prices paid to growers. Unfortunately, consumers rarely see the benefit of these lower producer prices. Recent government surveys confirm a wide disparity and general lack of relationship between farm and retail prices.

In addition to heightened pricing pressures, fruit and vegetable growers and shippers are increasingly being asked to provide trade promotion payments to retailers, ostensibly to support the marketing costs of the grower's crops. In practice, however, growers report that these pay to play payments rarely result in visible benefits, and may only serve to boost profit margins for retailers. Ultimately, the cost of these fees comes from the growers' profit margins, which, in today's environment are very slim, and in many cases non-existent.

United believes that implications of the rapid consolidation of food retailers should be thoroughly reviewed by Congress and the impact on fruit and vegetable growers and shippers should be a major component of that review. Ultimately, these types of public forums are useful in better understanding the impact of consolidation and changing food marketing practices. Produce marketing and retail trade practices must be measured against the criteria of whether they add value to the consumer and if produce suppliers and retailers consistently look toward maximizing value and satisfaction to the consumer, all parties can succeed. Improved Fruit and Vegetable Inspection Services

The recent bribery and racketeering scandal at the Hunts Point Terminal Produce Market in New York has severely damaged the fruit and vegetable industry's confidence in USDA's inspection system. Fruit and vegetable growers, and indeed the entire produce industry, depend heavily on the inspection system to provide a credible and consistent third-party analysis of product condition at both shipping point and upon arrival. Without a sound inspection system in place, growers are at the mercy of unscrupulous buyers who would use bogus condition problems to leverage a reduction in the price of the load. That is precisely what happened at Hunts Point. Unscrupulous buyers teamed with corrupt Federal inspectors to defraud growers by estimated amounts of over $100 million.

It is critical that the entire USDA inspection system be overhauled to ensure that this kind of corruption of the system is eliminated. Congress recently approved $71 million to modernize the inspection system across the country, while keeping both inspection costs and PACA license fees to all industry members at current levels for at least the next five years. Reforms as recommended by United's Task Force on Produce Industry Inspection Services should be implemented as a part of this modernization. These recommendations include the establishment of an inspection training center, technological improvements, inspector training modules, implementation of digital imaging, and needed renovations and equipment upgrades. Expeditious implementation of these recommendations is urgently needed so that confidence in the system can be restored. Congress should provide oversight as this process moves forward to ensure appropriate steps are taken to ensure a seamless, transparent, and efficient system is in place as soon as possible.

Restitution Funding for Injured Parties

As a part of legislation approved by Congress to make that improvements to the produce inspection system, USDA was mandated to report to Congress by July 19, 2000, on how restitution might be provided to injured parties as a result of the bribery and racketeering scandal at the Hunts Point Terminal Market. Continued oversight by Congress regarding the consideration of this report and how appropriate restitution can be provided to parties that can prove they were unduly harmed by this incident is paramount to restoring full confidence in USDA produce inspection services.

Farm Policy and Nutrition Intervention and Promotion

Research shows that increased fruit and vegetable intake reduces the risk of cancer and numerous other serious illnesses including heart disease, stroke, and diabetes. According to USDA, better nutrition could reduce the health care costs associated with these diet-related illnesses by $71 billion each year, enough savings to nearly fully fund USDA's entire activities. By increasing fruit and vegetable consumption, it is estimated that up to half of these savings could be achieved. However, accomplishing this will require a coordinated policy effort among USDA and other appropriate federal agencies and an increased leadership and funding commitment by the government and the produce industry.

In this area, the federal government is providing only $1 million per year to educate the general public through the National Cancer Institute's 5 A Day program about the benefits of a diet rich in fruits and vegetables. This is woefully inadequate. For example, according to health experts and government officials, up to $150 million is needed to effectively implement a national intervention program in every state to address illness and disease directly linked to poor nutrition and physical inactivity. While the 5 A Day Program has demonstrated its effectiveness, it is severely under funded.

The industry also challenges the federal government to fully implement the dietary recommendations included the new Dietary Guidelines 2000 and Healthy People 2000 in relation to increasing fruit and vegetable consumption among all USDA feeding programs. Increased availability of fresh produce within these programs - now reaching one-out-of-six Americans each day - is vital to America's health. USDA's Food and Nutrition Service should create and test dietary intervention strategies to improve the American diet, with an emphasis on increasing consumption of fruits and vegetables among targeted population groups, particularly children. With the percentage of obese children doubling over the past two decades, current USDA programs such as food stamps, school feeding programs and WIC should be the initial focus of this effort.

Appropriate research should also accompany such efforts. Presently research specific to promoting overall produce consumption is virtually nonexistent. USDA's Agriculture Research Service conducts human nutrition research with a tradition emphasis on specific nutrients. Future efforts on behavioral research as well as product development that focuses on convenience, storage, transportation, and taste are warranted and much needed.

Food Safety Initiatives

United believes the Federal Food, Drug, and Cosmetic Act (FFDCA) provides ample authority to FDA to assure the safety of fresh fruit and vegetables. Under the FFDCA, FDA is granted wide latitude to refuse food into interstate commerce if it appears from an examination, or otherwise, that a food is adulterated, misbranded, or has been manufactured, processed or packed under unsanitary conditions.

Despite the recent attention that produce safety issues have received, United is convinced that alarming reports by the media and the fears of some public health officials far exceed the actual risks associated with the consumption of fresh fruits and vegetables. The evidence indicates that in the majority of cases, when the consumption of fresh fruits and vegetables has resulted in an outbreak of illness, the cause is often related to improper handling or cross-contamination with other potentially hazardous foods during food handling and meal preparation.

The produce marketplace is highly intolerant of unsafe food and will react swiftly to outbreaks of foodborne illness. Today, grocery retailers and restaurant operators routinely ask their produce suppliers what measures have been implemented to assure safety. Likewise, insurance carriers ask their grower, packer and shipper clients to take appropriate steps to minimize food safety related risks. The produce industry has made great strides here and abroad to identify potential sources of microbial hazards in fresh fruits and vegetables, and the industry has and is willing to implement prudent measures to prevent the outbreak of problems in the future. United and the produce industry are committed to reducing the risk of foodborne illness, and strongly opposes additional industry wide regulatory and legislative requirements that could be duplicative, unworkable and do not provide for scientific analysis or weigh the risks and benefits of produce consumption to consumers.

Research and Technology Innovation

Continued and increased research targeting specific needs of the produce industry in the areas of pesticide alternatives, new varieties as well as new technology is needed to improve production and processing efficiencies. While the fruit and vegetable industry represents over 22 percent of our nation's total farm receipts, appropriate investments in federal research should be reexamined and targeted to meet the unique research and development needs of the produce industry.

In the area of crop protection tools, such research is imperative. With the full implementation of the FQPA, the produce industry is expected to be disproportionately impacted with a number of crop protection tools being lost with no effective or viable alternatives, for a large portion of the 300 plus produce commodities commercially grown. Additionally, other international treaties such as the Montreal Protocol are further eliminating much needed crop protection tools such as methyl bromide. This elimination, according to growers is a wreck waiting to happen with no effective replacement. United along with Member's of Congress, have voiced their strong concern about the economic consequences due to the unavailability of transitional products needed for the production, shipment and processing of over 100 agricultural crops including major produce crops such as tomatoes, strawberries, beans, potatoes, and watermelons among other important produce commodities. Until effective and viable replacements are available, United strongly supports legislation to extend the phase out period of methyl bromide and other similar crop protection tools that do not have effective transitional products on the market. Moreover, additional research and expedited review of crop protection tools by USDA and Environmental Protection Agency (EPA) is essential to the industry's survival. Additional research targeting domestic and exotic diseases and pests should be funded and expedited as well.

Risk Management Tools

Over the years, little has been done at the federal level to ensure fruit and vegetable growers have access to crop insurance products and risk management tools that are cost -effective and reliable. The lack of available risk management products in addition to affordability issues have been the primary deterrents to participation by fruit and vegetable producers in the federal crop insurance program. Although vast improvements have been made with the recent passage of the Agricultural Risk Protection Act of 1999, many specialty crops are not covered under the Federal crop insurance program. In addition, for many of those crops that are covered, coverage is limited and not cost-effective. In California, where more than half of our nation's fruits and vegetables are grown, less than 30 out of 307 commercially grown crops have access to federal crop insurance products. In other states the picture is just as grim. This is unfair and the full implementation of specialty crop provisions included in the Agricultural Risk Protection Act will go a long way to rectify this situation with the development of crop insurance products and related risk management tools in an efficient and cost-effective manner. Given the many economic related challenges facing farmers today, United strongly supports providing risk management tools that will allow all fruit and vegetable producers enhanced protection against the risks associated with price volatility and unpredictable inclement weather conditions.

Conclusion

Fruit and vegetable growers produce crops that are vital to the health of Americans and represent a significant segment of American agriculture. However, because they are not considered "program crops", fruits and vegetables are often ignored when it comes to the development and implementation of U.S. farm policy. Yet, like producers of program crops, the fruit and vegetable industry faces significant challenges in the production and marketing of their commodities that must be addressed if they are to be competitive in an increasingly global marketplace.

We urge the committee to take these issues, and the many other challenges facing the fruit and vegetable industry, fully into consideration as you move forward in the development of the successor to the FAIR Act.



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LOAD-DATE: July 28, 2000