Copyright 2000 Federal News Service, Inc.
Federal News Service
February 29, 2000, Tuesday
SECTION: PREPARED TESTIMONY
LENGTH: 6122 words
HEADLINE:
PREPARED TESTIMONY OF AUGUST SCHUMACHER, JR UNDER SECRETARY FOR FARM AND FOREIGN
AGRICULTURAL SERVICES UNITED STATES DEPARTMENT OF AGRICULTURE
BEFORE THE SENATE APPROPRIATIONS COMMITTEE SUBCOMMITTEE ON
AGRICULTURE, RURAL DEVELOPMENT AND RELATED AGENCIES
BODY:
Thank you, Mr. Chairman. I am pleased
to appear before you and members of the Subcommittee to talk about the
Administration's budget proposals which assist farmers and ranchers. I would
like to thank my colleague Keith Collins for his opening statement. I have with
me today Keith Kelly, Administrator of the Farm Service Agency, Ken Ackerman,
Administrator for the Risk Management Agency, Tim Galvin, the Administrator of
the Foreign Agricultural Service, and Richard Fritz, the Department's General
Sales Manager.
As Keith Collins indicated, and as you are all aware,
this will be yet another challenging year for America's family farmers.
Last year, U.S. farmers experienced the lowest wheat prices in 8 years;
the lowest corn prices in more than a decade; the lowest soybean prices in 27
years; the lowest hog prices since the Great Depression; and the steepest
decline in milk prices in history. Even cranberries, where they're known in my
home state as the Massachusetts mortgage lifter, have plunged from
$65.90 a barrel in 1996, to $38.80 a barrel in
1998 -- down some 37 percent. And, to make matters even worse, Mother Nature has
added to farmers' problems with continuing bad weather in broad areas of the
country, including hurricanes, tornadoes, and the recent drought that plagued
virtually the entire East Coast.
This situation has put USDA and its
support programs in the spotlight. As you are aware, domestic farm commodity
loan and income support programs are administered by the Farm Service
Agency(FSA) and financed through the Commodity Credit Corporation (CCC), a
government entity for which FSA, as well as certain other agencies, provides
operating personnel. The CCC is also the source of funding for the Conservation
Reserve Program (administered by FSA) as well as many of the conservation
programs administered by the Natural Resources Conservation Service (NRCS), and
it funds many of the export programs administered by the Foreign Agricultural
Service (FAS). When called upon, CCC also finances various disaster assistance
programs authorized by Congress. Funds are borrowed by the Corporation from the
Treasury to finance CCC programs. Commodity support operations, handled
primarily through loans, payment programs and some limited purchase programs,
currently include those for wheat, corn, soybeans, minor oilseed crops, cotton
(upland and extra long staple), rice, tobacco, milk and milk products, barley,
oats, sorghum, peanuts and sugar.
Fiscal year 1999 CCC net outlays
totaled over $19 billion, and net outlays in 2000 are expected
to reach an all-time high of $27 billion. The historical CCC
outlay trend is shown on the following graph: (Graph not transmittable)
When you look at these trends, they are particularly ironic, especially
given that the thrust of the provisions of the 1996 Farm Bill was aimed at
distancing government from providing disaster assistance. In an effort to
address a looming farm crisis, Congress has had to provide ad-hoc assistance,
time and again.
But why is the farm economy in crisis? Can you lay all
the blame on the Federal Agriculture Improvement Act and Reform of 19967 No, in
large part, the crisis is being fueled by four consecutive years of record
global grain production and weak export demand-both of which are beyond the
scope of the 1996 Act. U.S. agricultural exports are projected to be only
$49.5 billion this fiscal year after reaching a record high of
nearly $60 billion in fiscal year 1996. Large global
production, the Asian and Russian economic crises, and a strengthening dollar,
have all contributed to a weakening in our exports.
The more appropriate
question is: Is the 1996 Act doing what farm policy should to help deal with the
problem and help with the recovery? Clearly the answer to that question is no.
President's 2001 Budget Proposals for American Agriculture
Last
month, in his State of the Union Address, the President made clear his
commitment to this country's farmers. The President said "We must work together
to strengthen the farm safety net, invest in land conservation, and create new
markets by expanding our program for bio- based fuels and products." This
Administration has put forward a set of proposals that will address the
shortcomings of the 1996 Act directly.
Let me be clear today, the
President's proposal reaffirms that Government farm policy cannot simply keep
lurching from one expensive bailout to another. Ad-hoc assistance is expensive;
it's inefficient; it's hard on our farmers; its hard on our over- worked USDA
staff; and it's hard on the taxpayers. It is time to move beyond annual "damage
control," and to a stable policy that helps farmers prepare for disasters and
price downturns, invest in long-term market development and export promotion
programs, and gives them the tools they need to thrive-not just survive.This set
of proposals will focus the spotlight on our mission area --Farm and Foreign
Agricultural Services. The Farm Service Agency, Risk Management Agency, and the
Foreign Agricultural Service will have the lead in administering the President's
package.
When I've spoken with various farm groups, I've likened this
proposal to the solid kitchen chairs that my family used to have at the farm
house, with four firm legs and a well-built back.
- The first leg is a
counter-cyclical income support for the basic program crops -- which we estimate
at approximately $6 billion over three years.
- The
second is the reformed and broader risk management/crop insurance package.
- The third leg is a creative conservation package
($4.8 billion through 2005) that expands CRP to 40 million
acres, provides for a conservation security reserve investment, and provides for
farmland protection cost sharing.
- Leg four is an expanded trade
initiative that aggressively uses all of our export programs and in addition
requests authority to use any unobligated Export Enhancement Program (EEP)
funding for long-term investment in trade promotion as well as for food aid.
- Equally important is the back of the chair, which supports the farmer
when the farmer leans back on the back legs of the chair. This chair back
includes proposals for stabilizing the crucial USDA workforce that has become
over-stressed the past three years, farm loan programs, a bio-fuels initiative,
the freezing of loan rates, and an extension of the dairy program.
The Administration package has a number of benefits: it is
flexible; it benefits farmers in all regions; (of vital importance following
1999 eastern droughts and floods and California freezes); it is targeted; it
continues to provide planting flexibility; it has conservation initiatives
benefitting all farmers in all regions; it is on budget and funded within the
President's balanced budget that preserves the Social Security surplus; it is
consistent with our trade commitments; and most importantly, it provides some
stability -- and a consistent framework -- for a new farm bill in 2002.
Counter-Cyclical Income Support
It seems like a pretty
common-sense notion - that those who are straggling the most deserve the most
help. But the AMTA formula that we've been living by for nearly four years, with
its fixed payments, has no such logic. Thanks to AMTA, recent supplementary farm
payments haven't been tied to need, to size, or to current production.
The Administration proposes supplemental income assistance for crop
years 2000 and 2001, to eligible producers of wheat, feed grains, rice, upland
cotton and oilseeds. The payments would be made only if projected gross
income--including other Government payments--from the crop falls below 92
percent of the preceding 5-year average. These payments would be crop- specific
and would be based on actual production rather than some historical base. The
proposed program will provide payments only to current producers of those crops
with low prices and income. It is estimated that $600 million
in assistance will be provided in fiscal year 2000, $2.5
billion in fiscal year 2001 and $2.5 billion in fiscal year
2002.
Still, we're not looking to replace AMTA with our plan. We are
letting the basic principles of the FAIR Act live on through the life of the
bill. The new income assistance will come on top of- not in place of - AMTA
payments and other 1996 Farm Bill payments. AMTA participants would continue to
receive their full payments, and 98 percent of them would also be eligible for
an additional check under this proposal. However, we believe this
counter-cyclical method of income assistance should form the basis for how the
next farm bill proposal should be structured.Crop Insurance Reform Even with
such improvements in our farm programs, we know that we will continue to need
strong risk management programs. That brings me to our efforts to reform our
crop insurance programs. Crop insurance is and will continue to be USDA's
primary means of helping farmers survive major production losses. In 1999,
American farmers purchased some 1.3 million crop insurance policies covering 196
million acres. Liability coverage rose from just $14 billion in
1994 to more than $30 billion in 1999, with indemnity payout in
1999 at $2.2 billion.
Past reform of the crop insurance
program was made in the context of an agricultural program that no longer
exists. Plunging prices, the effects of multiple years of crop losses, and
under-insured farmers have prompted us to develop an aggressive crop insurance
reform proposal.
While crop insurance hasn't been the panacea for all
our producers' problems, there is a certain irony about the crop insurance
program: When people say the system is broken, what they mean is there isn't
enough crop insurance coverage.
Today's crop insurance program was
designed to work in tandem with our farm programs. We need a program with sturdy
underpinnings, solid, steady, reliable legs, that can withstand price and
weather volatility.
We need a strengthened crop insurance program, a
program that provides premium discounts, a strong risk management education
effort, new product development, assists livestock producers, provides
multi-year loss coverage, and lifts the Non-insured Assistance Program (NAP)
area trigger. I understand the Senate Agricultural Committee will conduct markup
on risk management in early March 2000, with the House of Representatives having
already passed its version on voice vote in 1999. Some Senators favor a direct
payment approach, while others like the alternative of enhanced coverage for all
producers. Crop insurance has become a hot political item. There are high
expectations that cannot be met by current resources.The Administration also
proposes to modify the Non-insured Assistance Program area-wide trigger
requirement, so that producers with individual qualifying losses in areas that
have been designated for natural disasters are able to receive program
assistance. This change will provide an additional $110 million
of assistance in fiscal years 2000 and 2001.
Conservation Initiatives
The Administration believes that any reform initiatives should promote
conservation. The 2001 President's Budget seeks an additional
$1.3 billion in budget authority for a Conservation Programs
Initiative. This is a key component of the Administration's Farm Safety Net
Proposal to strengthen farm family income while promoting environmentally sound
land management. Within the $1.3 billion, increases are
provided for five ongoing CCC-funded conservation programs: the Environmental
Quality Incentives Program (EQIP); Wetlands Reserve Program (WRP); the
Conservation Reserve Program (CRP); Farmland Protection Program (FFP) and the
Wildlife Habitat Incentives Program (WHIP). Under current law, an additional
$125 million in bonuses will also be offered to producers who
enroll in CRP through the continuous sign up.
For EQIP, part of the
President's Clean Water Action Plan, the annual authorized funding level would
be increased from $200 million to $325
million. This program provides financial, technical, and educational assistance
to farmers and ranchers who wish to implement conservation practices for land
currently in production.
Under WRP, which offers technical and financial
assistance to farmers who wish to restore and protect agricultural wetlands, the
initiative would remove the current cumulative acreage cap of 975,000 acres and
enroll an additional 210,000 acres in 2001, and an additional 250,000 acres in
each subsequent year.
The Conservation Reserve Program provides farmers
with technical and financial assistance in exchange for removing environmentally
sensitive land from production for a 10-15 year period and implementing
conservation practices. The CRP currently allows for up to 36.4 million acres to
be enrolled. The President's Initiative would increase the enrollment cap by
another 3.6 million acres to 40 million. Bonuses totaling up to
$100 million in 2000 and up to $125 million
each year in 2001 and 2002 would also be offered to producers who enroll land in
CRP through continuous sign up. These bonuses are expected to encourage
enrollment of high environmental-value acreage, and are included in the CCC
baseline. Legislation is also being proposed to provide $75
million in additional technical assistance funding for the CRP and WRP for 2001.
CRP is USDA's largest environmental program. The purpose of CRP,
administered by FSA, is to cost-effectively assist farm owners and operators in
conserving and improving soil, water, air, and wildlife resources by converting
highly erodible and other environmentally sensitive acreage normally devoted to
the production of agricultural commodities to a long-term resource-conserving
cover. CRP participants enroll contracts for periods from 10 to 15 years in
exchange for annual rental payments and cost-share and technical assistance for
installing approved conservation practices. CRP acreage also contributes to the
USDA Conservation Buffer Initiative, the Conservation Reserve Enhancement
Program, and the Administration's Clean Water Action Plan which are estimated to
enroll 4.2 million acres through 2002. Also, in rules adopted after the 1996
Act, USDA reinstated the eligibility of certain cropped wetlands.
In
1999, a general CRP signup was held (signup 18) from October 26, 1998, through
December 11, 1998. Of the 7.1 million acres offered, a total of 5 million acres
were approved for enrollment beginning in 2000. The national average annual
rental payment for this acreage is estimated to be about $46
per acre. Technical assistance for this signup was funded with unobligated
appropriated funds and authorized CCC funds. Rental payments for signup 18 begin
in 2001.
Another general CRP signup began on January 18, 2000, and
continued through February 11, 2000. We are in the process of collecting bid
data from our field offices, and expect to make final enrollment decisions and
offers in April.In 2000, CCC made payments of approximately
$1.450 billion for rental costs and will make payments of about
$124 million for sharing the cost of permanent cover on
replacement acres. For 2001, the Budget projects CCC program costs of
approximately $1.690 billion, consisting of
$1.567 billion for rental payments on previously enrolled and
extended acres and $123 million for cost-share assistance for
permanent cover on enrolled acres.
Rental payments for 2001 are
not affected by the 20th signup which just concluded, since rental payments are
not due until 2002.
The Initiative proposes a new $600
million Conservation Security Program (CSP), which would provide annual payments
to farmers and ranchers who implement certain conservation practices including
practices related to such matters as nutrient management, grazing, grassed
waterways and windbreaks. Payments would be based on the comprehensiveness of
the farm's conservation plan. Of the $600 million,
$90 million (15% of the program) will be used by the NRCS to
provide necessary technical assistance to farmers and ranchers.
Funding
provided by the 1996 Farm Bill for both the FPP and the WHIP has been exhausted.
Under the conservation initiative, the FPP, which is also part of the
President's Lands Legacy Initiative, would be funded at
$65 million annually. This program provides matching funds to
State, local, and Tribal governments to purchase permanent easements, and
thereby protect farmland which may otherwise be threatened by urban and suburban
sprawl. The initiative also proposes $50 million annually for
WHIP, which offers cost-share assistance to farmers and landowners for habitat
restoration and technical assistance.
Successes in Food Aid, and Export
Promotion
The last leg of our chair will be provided by our initiatives
in food aid, and export promotion.
With domestic supplies high, one can
only imagine how much worse the situation would be if we had not continued the
vigorous use of our long-standing food aid programs. With large surpluses and
rock-bottom prices here at home, we have actively used food aid to move
commodities out of the U.S. marketplace to needy areas around the world. Under
1999 food aid programs, including the President's Wheat Initiative, USDA
programmed nearly 8 million metric tons of U.S. commodities -- close to five
times the previous year's shipments and the largest tonnage in many, many years.
American commodities went to around 50 countries last year -- from the
unprecedented assistance package for Russia to food relief for Kosovo refugees,
famine victims in North Korea, and hurricane victims in Central America and the
Caribbean. Under the authority of Section 416(b) of the Agricultural Act of
1949, as amended, CCC donated nearly $800 million worth of
commodities, including 5.2 million tons of wheat and wheat products, 274,000
tons of corn, and about 23,000 tons of dry milk. These U.S. surpluses were taken
off the market and put to good use, helping to relieve hunger and suffering
abroad.
Our export credit guarantee programs facilitated sales of more
than $3 billion in U.S. agricultural products. Our GSM-102
program helped U.S. exporters overcome disadvantages in Turkey, and make record
sales of over $1.2 billion in Mexico. The program helped U.S.
oilseed exporters sell more than $19 million worth of oilseeds
to Uzbekistan, traditionally a buyer of South American oilseeds. Our GSM-103
program helped U.S. exporters sell over $14 million worth of
wheat to Jordan. The Supplier Credit Guarantee Program was used for the first
time by importers in the Baltic Region, Georgia, and Turkey, resulting in sales
of nearly $1 million worth of meat products to buyers in the
Baltic Region, and nearly $3 million worth of poultry products
and other products to buyers in Georgia and Turkey.
With the aid of the
Dairy Export Incentive Program (DEIP), U.S. exporters sold more than 136,000
tons of dairy products valued at $337 million. USDA awarded
more than $145 million in bonuses to help U.S. dairy exporters
meet prevailing world prices and develop foreign markets.
The Export
Enhancement Program was used only sparingly in 1999 because of market
conditions, with bonuses of about $1.4 million awarded for
sales of more than 2,000 tons of frozen poultry.We continue to stress the
importance of market development. In 1999, we allocated $90
million to 65 U.S. trade organizations, State regional groups, and cooperatives
for export promotion activities under the Market Access Program (MAP), and
approved allocations of $27.5 million for 26 trade
organizations under the Foreign Market Development (FMD) program.
And,
through the Cochran Fellowship Program, USDA introduced nearly 800 participants
from 70 emerging markets to U.S. products and policies in 1999, and plans to
meet and exceed that record this year.
Trade Policy Initiatives
On the trade policy front, USDA worked successfully to open, expand, and
maintain markets for U.S. agriculture. For example, last April, the United
States and China signed the Agreement on U.S.-China Agricultural Cooperation, an
unprecedented step in U.S.-China agricultural trade relations. With this
agreement, China finally removes the longstanding bans on exports of U.S. wheat,
citrus, and meat and poultry to China, and calls for China's commitment to the
application of sound science, a key principle of the Uruguay Round Sanitary and
Phytosanitary (SPS) Agreement. The agreement confirms a U.S.- China agricultural
partnership in achieving some key objectives: resolving trade barriers,
increasing technical cooperation and scientific exchanges and further developing
our agricultural sectors.
In addition, we negotiated an agreement with
China regarding its membership in the World Trade Organization (WTO).
Implementing that agreement could add an estimated $1.6 billion
annually to U.S. exports of grains, oilseeds and products, and cotton by 2005,
and could grow to nearly $2 billion as the Chinese reduce their
tariffs on other products. These gains will mean higher prices for farmers and,
ultimately, higher U.S. farm income. Of course, the first step toward realizing
these gains would be Congressional approval of permanent Normal Trade
Relationship status for China.
USDA continues to monitor aggressively
foreign countries' compliance with Uruguay Round Agreement commitments. For
example, a WTO dispute settlement panel is examining Korea's import and domestic
support programs for beef. As a result of Korea's failure to meet minimum import
quotas under its Uruguay Round commitment in 1997 and 1998, it became clear that
numerous market access barriers exist, and threaten to inhibit full market
liberalization. We will continue to insist on compliance in this and all cases
where access to US agriculture is at stake.
For example, at 1999
meetings of the Committee on Agriculture, USDA analysts reviewed and raised
questions on over 250 WTO notifications. The value of trade addressed through
U.S. vigilance of commitments is over $500 million. This was
achieved through questioning member's domestic grain purchasing policies that
appeared to violate export subsidy commitments; challenging the discriminatory
issuance of import licenses for dairy products, pork and poultry; questioning
the WTO- inconsistent execution of a preferential trade arrangement that harmed
U.S. apple exports; and questioning low tariff rate quota (TRQ) application for
a range of commodities. These efforts contributed to several members halting
implementation of or modifying WTO inconsistent practices.
Exports have
played, and will continue to play, a key role in the health of our farm economy,
and we intend to step up our efforts in the near future, ensuring that US
agriculture is competitive around the globe.
"The Chair Back"
Mr. Chairman, meeting sharply growing workload demands within existing
resources is having a profound affect on the working environment in my mission
area. FSA is implementing over 20 new or additional emergency related programs
that were enacted by Congress this year--more than twice the number of such
programs it had to deliver in 1999. Unbudgeted costs associated with the Consent
Decree -- which came out of the lawsuit filed by African-American farmers
against USDA-have also added to FSA's administrative expenses and workload in
2000. Similarly, the Risk Management Agency has been undertaking new initiatives
to strengthen our risk management services for producers.In the case of the
Foreign Agricultural Service, its workload has increased dramatically as a
result of record levels of food assistance we are providing. The Agency also is
deeply immersed in a number of critical trade policy matters, including the
accession of China to the WTO, the new round of multilateral trade negotiations,
as well as trade issues related to biotechnology and food safety.
I
point out these workload concerns in order to stress the importance of working
with you and the committee to ensure that adequate resources are made available
to these agencies. It is vitally important that the work of the FFAS mission
area, which is critical to the future of American agriculture, can continue.
I would like to review with you some of our projected outlays, so that
you can fully appreciate the magnitude of the workload.
CCC
Program Outlays
The current 2001 budget estimates largely reflect
estimated supply and demand conditions for the 2000 crop based on November data.
Commodity Credit Corporation net expenditures for 2001, including proposed
"Safety Net" legislation outlays of $3.6 billion, are estimated
at $19.0 billion, down $8.7 billion from a
record high expenditure level of $27.7 billion -- including
$700 million in proposed legislation outlays --- in 2000. The
previous record CCC expenditure level occurred in 1986, when net outlays were
$25.8 billion.
The net decrease of
$8.7 billion in projected 2001 CCC expenditures reflects
decreases which include the ending of the $5.8 billion of 2000
market loss assistance payments, the ending of $1.3 billion in
2000 crop loss assistance, the ending in $210 million of 2000
emergency livestock assistance, a decrease in production flexibility payments of
$992 million, a decrease in commodity net lending of
$595 million, a projected decrease in of $848
million in loan deficiency payments from the huge levels of 2000, a decrease of
$130 million in Section 416 (b) ocean transportation expenses,
a decrease in other direct producer payments and expenditures of
$369 million.
Other Initiatives
Fund
Cooperative Development Initiatives
Total funding proposed for
cooperative development for new livestock and other processing cooperatives
includes $80 million in 2001 and $50 million
in 2002. These fund would be used to provide equity capital for new livestock
and other cooperatives to help finance, for example, the construction of
cooperative-owned, value-added, meat processing facilities that would help
counter concentration and retain income in rural areas.
Extend the Dairy
Price Support Program
The Administration also proposes the extension of
the dairy price support program. Current appropriations language extended the
dairy price support to December 1, 2000; however, this proposal further extends
the dairy price support program to December 2002. Under this proposal,
$150 million is estimated to be needed to support dairy prices
in each of fiscal years 2001 and 2002.
CCC Automated Data Processing Cap
In April 1996, a cap of $275 million for CCC-funded
automated data processing (ADP) obligations for 1997 through 2002 was mandated
by the 1996 Act. Subsequently, the Agricultural Research, Extension, and
Education Reform Act of 1998 reduced the CCC ADP cap to $193
million. Finally, the fiscal year 1999 Agriculture Appropriations Act (P.L.
105-277) again reduced the CCC ADP cap to $188 million. As last
year, legislation is again proposed to provide annual funding of
$35 million in 2001 and 2002 for Farm Service Agency computer
systems to ensure essential system availability and continued ADP services in
headquarters and field offices at bare minimum levels. This funding is critical
because such expenditures were formerly made using the CCC's general funds
subject to the mandated ADP limit. The funds available under that limit were
depleted in early FY 2000. Without further new funding, Mr. Chairman, it will be
virtually impossible for FSA to adequately respond to the thrust of Service
Center Modernization or to ensure the continuity of uninterrupted program
delivery.
Reimbursement for Realized Losses
Mr. Chairman, the
1999 appropriation for reimbursement of CCC net realized losses was
$8.4 billion. This appropriation reflected reimbursement for
net realized losses which covered the actual amount of unreimbursed losses
incurred two years earlier.
The 2000 appropriation for reimbursement of
net realized losses was $30.037 billion, an increase of
$21.637 billion from the 1999 appropriation of
$8.4 billion. The appropriation reimbursed CCC for the
remaining unreimbursed net realized losses for 1997 and 1998, and all of 1999
actual losses. The appropriation to reimburse the Corporation for net realized
losses enacted by Congress for 2000 was a current, indefinite appropriation.
This provided CCC with the flexibility to request funds as needed from Treasury,
up to actual losses recorded for the most recent actual year. Without this
current, indefinite appropriation, CCC would have been unable to fully replenish
its borrowing authority at the beginning of 2000, and timely assistance to
farmers would have been jeopardized due to insufficient borrowing authority. Mr.
Chairman, we appreciate your help in providing that critical funding authority.
The 2001 budget reflects a request to once again enact appropriation
language to eliminate the requirement that only allows reimbursement for actual
realized losses recorded in CCC books as of the end of the preceding year. Our
request is that you provide a current, indefinite appropriation to reimburse the
Corporation for all actual net realized losses, even if incurred in the current
fiscal year.
Farm Loan Programs The loan programs funded through the
Agricultural Credit Insurance Fund (ACIF) provide a variety of loans and loan
guarantees to farm families who would otherwise be unable to obtain credit. In
times of economic stress, access to adequate farm credit is often the only way
for some farmers to continue their operations.
As a result of the
continuing financial hardship in much of the agricultural sector, the demand for
Farm Service Agency loans and loan guarantees remains very high in 2000.
However, the 2000 subsidy funding provides loan levels totaling a record
$5.8 billion that are expected to meet the strong demand
including 2.5 billion through emergency funds. The 2001 budget likewise responds
to an anticipated high demand by providing a total program level of about
$4.6 billion in loans and guarantees, an increase of
$1.6 billion excluding emergency funds The largest segment of
FSA lending is carried out in partnership with private lenders through the
guarantee programs, and this budget continues strong support for guaranteed
loans, with a proposed program level of nearly $3.5 billion.
For direct farm ownership loans we are requesting a loan level of
$128 million, a decrease of $22 million from
the 2000 appropriated level (including supplemental funding). The proposed
program level would enable FSA to extend credit to about 1,250 small and
beginning farmers to purchase or maintain a family farm, about 500-fewer than
estimated for the current fiscal year. The agency has established annual county-
by-county participation targets for members of socially disadvantaged groups,
based on demographic data. Also, seventy percent of direct farm ownership loans
are reserved for beginning farmers, and about 35 percent are made at a reduced
interest rate to limited resource borrowers, who may also be beginning farmers.
For direct farm operating loans we are requesting a program level of
$700 million, $200 million above the 2000
level, excluding supplemental funding, to provide over 14,400 loans to family
farmers.
For guaranteed farm ownership loans in 2001, we are requesting
a loan level of $1 billion, the same as 2000. This program
level will give over 4,500 farmers the opportunity to either acquire their own
farm or to save an existing one. For guaranteed farm operating loans we propose
a fiscal year 2001 program level of nearly $2.5 billion,
compared to $1.8 billion in 2000 excluding emergency loans.
This level will enable approximately 16,600 producers to finance their farming
operations.The Budget also proposes $150 million in emergency
disaster loans in fiscal year 2001, sufficient to provide approximately 1,800
low-interest loans to producers whose farming operations have been damaged by
natural disasters. We are proposing to close the "eligibility gap" between USDA
and SBA emergency loans, so that in times of natural disaster, every sized farm
and ag businesses have a place to turn to for emergency assistance. These new
loans would be made at higher interest rates than our currently authorized
borrowers. In addition, our budget proposes just over $2
million for Indian tribe land acquisition loans and $100
million for boll weevil eradication loans.
State Mediation Grants
Our request of $4 million for State Mediation Grants
would assist States in developing programs to deal with disputes involving a
variety of agricultural issues -- distressed farm loans, wetland determinations,
conservation compliance, pesticides, and others. Operated primarily by State
universities or departments of agriculture, the program provides neutral
mediators to assist producers, primarily small farmers, in resolving disputes
before they culminate in litigation or bankruptcy.
Mediation, at
about $500 per case, offers significant savings over national
level administrative hearings, which cost about $3,000 to
$4,000 per case in direct costs alone. Authority for State
Mediation Grants expires at the end of 2000. A legislative proposal is being
submitted to reauthorize the program through 2005.
Service Centers
Another important part of our effort to deliver services to rural
customers is the initiative to streamline and modernize the field offices and
create Service Centers. While we have physically established these Centers, we
still have much work to do to make the promise of better service a reality. A
key ingredient in providing well coordinated, quality assistance at USDA Service
Centers is the replacement of separate agency, aging information technology
systems with the common computing environment along with reengineered business
processes. The USDA Budget proposes $75 million for this effort
in appropriated funds under the Office of the Chief Information Officer.Rural
Development will provide additional funding, as necessary, to support the
modernization plan and service center initiative. Additionally, an important
part of the efforts to modernize field operations is the streamlining of the
administrative services for the Farm Service Agency, Rural Development, and
Natural Resources Conservation Service. By conserving resources in this arena,
each agency will be in a better position to provide greater program support. We
would like to work with you to see that these administrative services can be
consolidated.
Conclusion
Over the last 60 years, agriculture has
been dramatically transformed, and yet farm policy has remained relatively
stagnant. People generally do not and cannot farm the way they did in the 1930s
and 40s, so government's role in helping them has to change accordingly.
The days when every farmer could survive by simply bringing commodities
to market are over. That's why a new farm policy must change and improve the
ways the government provides assistance, and highlight new and different ways
for farmers to make money and capture a greater share of the consumer dollar.
That means promoting future access to food systems through improved marketing,
strong farm cooperatives, reinforced direct marketing schemes, innovative use of
the Internet, and farmers markets. It means encouraging the use of crops for
energy and bio-based fuels, encouraging the production of value-added,
consumer-ready goods, organics, aquaculture and so on.
Of course,
traditional row crop farming will continue to be an important part of the
American agricultural portfolio. And the government will continue to support the
people who grow traditional crops. But a new century calls for a more holistic
approach based on the understanding that, even if there are fewer farmers, there
are more kinds of farmers living in more places than ever before.
In
closing, I am reminded of an event at which Secretary Glickman was talking about
helping farmers through tough times - helping them to survive, which is a common
theme these days. All of a sudden a farmer in the front row stood up and
shouted, "Hey, I don't want to survive! I want to thrive!" We are doing all we
can to help American family farmers reach that goal. As we work to pull our farm
economy up from these tough times, I encourage your input and look forward to an
ongoing dialogue with you.
Thank you.
END
LOAD-DATE: March 2, 2000
