Copyright 2000 Federal News Service, Inc.
Federal News Service
April 12, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 1628 words
HEADLINE:
PREPARED TESTIMONY OF JOHN R. BLOCK PRESIDENT OF FOOD DISTRIBUTORS INTERNATIONAL
MEMBER OF THE STEERING COMMITTEE THE COALITION FOR A COMPETITIVE FOOD AND
AGRICULTURAL SYSTEM
BEFORE THE HOUSE AGRICULTURE
COMMITTEE
SUBJECT - FARM POLICY ISSUES
BODY:
Good morning. I am John R. Block,
president of Food Distributors International and a member of the steering
committee for the Coalition for a Competitive Food and Agricultural System. I
appear before you on behalf of the Coalition which represents a broad range of
interests working for market-based policies designed to benefit all 21 million
people working in the U.S. food and agriculture industries. The Coalition
consists of over 120 trade associations and agribusiness companies.
Over
the past few years, the Coalition has actively participated in discussions
regarding the 1996 farm bill We have noted the attempts of some to blame the
farm bill for today's current economic climate in agriculture. Since the
Coalition believes the market-based farm policies adopted by Congress in 1996
have benefited U.S. agriculture, we recently commissioned several papers to
review whether freedom and flexibility have indeed been good or bad for U.S.
farmers and agriculture businesses. I am pleased to share the highlights of
those papers with you today.
We live in an interconnected world where
demand is growing but competition is fierce. To succeed in today's environment,
farm policy must (a) allow producers to compete in world markets, (b) support
incomes without interfering in markets and (c) give farmers flexibility to make
their own production decisions. So is Freedom to Farm working to help achieve
these three goals? The answer is yes. As we all know, four years of favorable
growing conditions along with increased production that followed the
historically high prices of 1995 and 1996 have resulted in larger grain
supplies. At the same time, demand from Asia began to slide. The effect of
higher supplies and lower demand has been to keep prices far lower than any of
us would like. I should point out that those of us involved in agriculture
beyond the farmgate typically suffer reduced earnings too when supply and demand
are realigning. It is our experience, though, that market forces do a better job
than government in rewarding efficiency, encouraging productivity, managing
risks, and allocating resources. We believe that government programs to support
farm income should minimize market distortions.
The 1996 farm bill's
combination of substantial direct payments along with marketing loan and loan
deficiency payments have stabilized U.S. farm income and minimized market
distortions. Including the emergency payments passed by Congress, 1999 was
actually the highest cash income year in U.S. history, despite low prices. And
even without emergency payments in 1998 and 1999, average net cash income would
still have been $55.4 billion, or $1.7 billion
greater than the average under the 1990 farm bill.
The structure and
payments under the 1996 farm law have provided real strength to land values.
Land values, rather than dropping as economics would suggest with lower crop
prices, have remained surprisingly strong. The February 2000 newsletter from the
Federal Reserve Bank of Chicago noted that land values in the Seventh Federal
Reserve District rose by one percent in 1999. That is a far cry from the huge
devaluation of land assets that took place in the mid-1980s.
I have
heard my friend, Agriculture Secretary Dan Glickman say it is more fun to be
Secretary when prices are stronger. That is certainly true. But, I can tell you
from experience it is absolutely no fun to be Secretary of Agriculture when !and
values in some areas fall by one-third.
Although some opponents of the
1996 farm bill have suggested that a more "countercyclical" income support
policy is necessary to help alleviate periods of low prices, we would note that
the combination of marketing loan and loan deficiency payments - payments to
producers during periods of low prices - reached $6.9 billion
in 1999 and a projected $7.9 billion in 2000. Based on those
figures, we would suggest that the 1996 farm bill provides significant benefits
to producers during times of low prices.
As the Committee reviews the
1996 farm bill, we hope you will take a hard look at the consequences of going
back to the policies of the past. First, farmers would risk losing the planting
flexibility and production freedom they so recently gained. Although the critics
of Freedom to Farm claim they do not want to take away this flexibility, if they
succeed in tying program benefits to market prices and current production once
again, powerful incentives will exist for the government to limit its cost
exposure by reducing production and limiting farmers' planting alternatives.
This would hurt U.S. farmers and rural communities while providing a tremendous
advantage to our competitors.
Second, going back on Freedom to Farm
would mean government programs would again affect production and pricing.
Consider livestock and poultry producers. Corn, soybean meal and other
feedstuffs are major components of their production costs. If acreage set-aside
programs short the market and prices rise artificially, then the government has
in effect taxed cattle, pork and poultry producers. All in all, farmers and
ranchers will be better off if the market - rather than the government - sets
ices.
However, after all the data is reviewed and all the economists
have spoken, probably the best way to assess the performance of U.S. farm policy
is to examine the response of our competitors to our new, market-oriented farm
program. Data already suggests that Freedom to Farm has discouraged overseas
acreage expansion, encouraged importing countries to rely on trade rather than
domestic production and encouraged increased overseas demand for U.S.
agricultural products.
The numbers tell the story. Since the 1996 farm
bill was passed, harvested area for grains and oilseeds outside the United
States has fallen a whopping 35 million acres. In short, foreign farmers -
rather than only U.S. farmers - are adjusting to the reality of international
competition, and the reality that when demand decreases, like it did in Asia,
they and not only U.S. farmers will face reduced exports. We believe that the
vehement opposition to Freedom to Farm from farmers in Brazil and the European
Union should tell us that this farm bill is making U.S. agriculture more
competitive in world markets.
On the demand side of the equation, we
believe the 1996 farm bill has encouraged importing countries to rely more on
trade. Outside of the countries affected by economic crises (the former Soviet
Union and the Asian crisis countries), total grain consumption is now more than
25 million metric tons higher than the 10-year pre-Freedom to Farm trend
predicted.
In evaluating current farm policy, it is important to
recognize that not all U.S. farmers have benefited from the payments provided by
the 1996 farm law. Direct payments reach only 36 percent of the nation's
farmers. They do not extend to livestock, poultry, fruits or vegetables. The
solution to this issue is not to change the entire policy structure, but to
recognize there is more to farm policy than commodity programs. Positive
incentives are more effective than punititve sanctions in encouraging sound
environmental stewardship. The diversity of rural America highlights the need
for a range of polices that go beyond commodity programs, from estate tax reform
to infrastructure improvements to Internet access.
In some circles,
Freedom to Farm has become a convenient scapegoat for other policy failures.
Remember that the Freedom to Farm law was just one of the commitments made to
farmers. Congress provided farmers with more flexibility to meet market
conditions; but in the promised trade and regulatory relief Congress and the
administration have both been slow to act.
In trade in particular much
more could be done, and should be done, to grow our markets abroad. The fast
track authority, so essential to capturing added market share has, on more than
one occasion, been rejected by the Congress. Trade sanctions on food products
continues to deprive American farmers of billions of dollars of exports. Passage
of PNTR for China is one of the highest priorities for the
America farmer. Attention to these impediments to trade cry-out for immediate
action in the face of todays farm crisis. Agriculture needs further trade
liberalization through a comprehensive WTO agreement that insists on meaningful
reform in agricultural trade.
I urge Congress to put your politics aside
and clear the trade channels for American farm products. I urge President
Clinton to bring the power and force of his office to help lower trade barriers.
In closing, commodity programs alone cannot address all the problems of
the farm sector. The Coalition would make the following recommendations to help
promote prosperity in both agriculture and rural America: Preserve the 1996 farm
bill. Continue to press for new customers for U.S. farm products through various
trade initiatives. Promote tenets of the science-based environmental policies
that reward sound stewardship. Encourage farmers to manage their risks. Reduce
the tax burden of farming by repealing the estate tax and enacting Farm and
Ranch Risk Management accounts.
- Increase public investment in research
and infrastructure, especially our nation's transportation systems that are
critical to U.S. competitiveness, and telecommunications systems that will allow
farmers to benefit from revolutionary progress made possible by the Internet.
Attached to our statement is a set of the policy papers the Coalition
commissioned to look at the effects of market-based policies. We would ask that
you give the findings careful consideration as you proceed with your discussions
on the future of U.S. farm policy.
Thank you.
END
LOAD-DATE: April 13, 2000 
