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Federal Document Clearing House
Congressional Testimony
May 1, 2000, Monday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 5240 words
HEADLINE:
TESTIMONY May 01, 2000 DANA MERRILL CHAIRMAN OF THE BOARD CALIFORNIA ASSOCIATION
OF WINEGRAPE GROWERS HOUSE AGRICULTURE FARM POLICY
BODY:
May 1, 2000 Comments by Dana Merrill,
Chairman of the Board Committee on Agriculture California Association of
Winegrape Growers Thank you for this opportunity to share my thoughts on farm
policy for the future of America. My name is DanaMerrill. As a
seventh-generation Californian I started farming vegetable and row crops 'in
Santa Barbara county prior to graduating from- college. For the past 19 years I
have managed vineyards and today own Mesa Vineyard and Coastal Valley
Management, companies that own and/or manage approximately 11,500 acres in Santa
Barbara, San Luis Obispo and Monterey counties. Currently, I am Chairman of the
Board of the California Association of Winegrape Growers (CAWG) which represents
the growers of more than 60% of the state's annual tonnage of grapes crushed for
wine arid concentrate. CAWG was created in 1974 to be an advocate for California
wine grape growers on state, national and international issues. I am also
Chairman of the Central Coast Vineyard Team, an organization promoting
sustainable agriculture using a vineyard management rating system in Monterey,
Santa Barbara and San Luis Obipso counties. Industry Winegrapes are the ultimate
value-added agricultural crop. According to a report commissioned earlier this
year by Wine Institute and CAWG, wine is California's number one finished
agricultural product. The report by MKF Research established the full economic
impact of the wine industry on the State of California at a total of $33
billion, including direct, indirect, and induced economic benefits. The
winegrape and wine industry contributes to the California economy in diverse
ways. It generates jobs, exports, tax revenues, tourism and, of course,
outstanding Wines! According to the report, 847 wineries and 4,400 grape growers
create 145,000 full-time equivalent jobs for $4.3 billion in wages. The retail
value of California wine is $12.3 billion. Tourism expenditures are $1.2 billion
with 10.7 million visitors. In California, the wine community pays $1 billion in
taxes and makes charitable contributions estimated at $62 million annually.
California enjoys an environment ideally suited for the production of high
quality grapes in terms of climate, soil and weather. Vineyards represent a
long- term commitment with a significant statewide investment by families and
family- owned corporations. Growers and wineries invested $1.89 billion in
Vineyard development 1997-98. In the last ten years grape acreage has 'increased
by 32%, from 324,054 acres to 427,283 acres. Strong consumer demand for
California wine at home and abroad has driven the recent acreage growth.
Winegrapes are a particularly important tool for California's coastal growing
regions as they promote the retention of agricultural operations vs. the
conversion to more urban land uses. Given the lower fertility of the soils in
this region, there are few profitable agricultural crops. While the future for
growth and profitability is bright, we are facing a serious problem caused by
the glassy-winged sharpshooter which vectors the vine-killing Pierce's disease.
- Personally, I have recently had farming operations in Santa Barbara county
dramatically affected by the Endangered Species Act. An Emergency Listing of the
California Tiger Salamander at the urging of the Department of Fish and Wildlife
was carried out in a rapid and arguably secretive manner. We, and a number of
our -fellow growers raising crops ranging from dry beans and vegetables to
winegrapes, now find ourselves in possible violation of the law. This is on land
which has been farmed in some cases dating back 1 00 years. Little detailed
information has been forthcoming from the Department and questionable scientific
methodology appears to support the listing. As a founding member of the Central
Coast Vineyard Team which seeks to promote voluntary sustainable efforts,
including the protection of habitat and species, I can tell you this action has
set back our efforts to get more growers involved. It has also spurred
resentment of the Act itself, which is disappointing. The wine community is also
the center of intense global competition that may seriously affect the benefits
generated by our industry. Our future success will hinge on public and private
policies that facilitate rather than impede responses to new competitive
conditions. As the representative of a crop that traditionally has not been part
of farm bill discussions, I welcome the chance to present our view of what this
country's farm policy should address. The future of agriculture, like every
other element of American business, will be shaped by globalization and with it
the integration of capital, technology and information across national borders.
In his book, The Lexus and the Olive Tree, Thomas Friedman explains the new
globalization system and its conflict with the forces of culture, geography,
tradition and community. The challenge is to find the balance of preserving our
sense of identity and doing what it takes to survive within the new system.
California's high-value, permanent specialty crops, like grapes, have tremendous
potential for keeping land in agricultural production, making agriculture an
attractive career choice for future generations and being the global market
leader in quality, value and customer choice. It is the position of the
California Association of Winegrape Growers that now is the time to invest in
the fundamentals and partner with government to protect and enhance all of
agriculture's ability to compete in the global market. Keys to Success
Resea.rcb. California winegrape growers are 'innovative, adaptive and willing to
meet new challenges. To prosper in the face of strong international competition,
the California wine and grape growing community must lead in the production of
wines with superior quality, excellence and value. Such a formidable task is
extremely research intensive. To remain competitive with foreign producers,
significant additional research investment must be made. Currently, our research
investment and results are not keeping pace with our competitors. Research is
the critical key to maintaining the competitive edge. Funding for research at
the state and federal levels should be increased and private/public partnerships
should make the most efficient use of limited research dollars. The research
community should take care to avoid duplication of efforts while ensuring that
critical needs are met. The grape and wine 'industry initiated the Viticulture
Consortium 'in 1996. It currently receives a Cooperative State Research
Education Extension Service (CSREES) special grant of $1.1 million. Administered
by the University of California and Cornell University, the Consortium has begun
to address the unmet research needs important to our industry. The Consortium is
an active partnership of federal, state, and industryte sources which enhances-
research coordination, and collaboration, improves efficiency and eliminates
duplication of effort. It has catalyzed and is bolstered by explicit matching
funds from both industry and state sources which have increased dramatically in
response to federal support. Research proposals have been received from nearly
20 states, including Pennsylvania, Missouri, Virginia, New York, Ohio, Michigan,
Oregon and Washington and are funded on a competitive basis. Research priorities
are developed by a national network of key industry, research and extension
representatives known as AVERN (American Viticulture and Enology Research
Network). We believe the Viticulture Consortium provides a model for other
commodities to develop a national partnership. Research is a basic part of the
infrastructure on which agriculture can build its future. Whether it's to focus
on health and nutrition, improving quality and taste, increasing efficiencies
and lowering costs of production, or improving our ability to farm in harmony
with nature we need to make up for those years when basic agricultural research
has not been funded adequately. At the same time we must also increase support
for Cooperative Extension Service. Our farm advisors are the transfer agents
from lab to vineyard. Grower outreach, demonstration and education of research
findings is critical to making the research investment an effective tool for the
end users. California winegrape growers are especially interested in seeing
investment in the Agricultural Research Service and Cooperative Extension for
the development of sustainable vineyard practices. Our growers are leaders in
developing alternative pest management systems and adopting irrigation practices
that significantly conserve water. However, we are facing numerous challenges
regarding environmental issues on which we want to create solutions and maintain
our reputation as "good neighbors." We need technical support to help develop
biologically and environmentally sound practices for grape growing so that we
continue to be economically viable. Fair trade. The industry can compete when
competition is fair, but there is no way for private enterprise to compete
against foreign subsidies, inequitable tariffs or untruthful labeling. The EU
program to subsidize its wine industry undermines the commitments it made during
the Uruguay Round to eliminate its subsidies that provide an unfair market
advantage for its producers. -the last several multi-lateral trade negotiations
have hurt this industry. The U.S. was the only country to make significant cuts
in duties in the Uruguay Round. Tariffs faced by U.S. wines throughout the world
act as a barrier to trade. CAWG does, however, support permanent normal
trade relations with China because China has agreed to reduce both
tariff and non- tariff barriers to farm products. The agreement also contains
strong provisions to address import surges and unfair trading practices. Not
only does China represent a huge potential for American wines, but this
agreement provides the chance to enter a tremendous market with a relatively
level playing field. In most third-market countries, American wineries must
fight to overcome the domination of major European producers. This agreement
with China places everyone at the same starting point. Other types of
regulations that restrict or prohibit the sale of U.S. wine range from labeling
regulations to winemaking regulations to sanitary barriers. Additionally, U.S.
growers are put at a competitive disadvantage if there is not a system in place
to prevent mislabeling and consumer fraud. Labels on imported wine may not
always accurately reflect the contents with regard to the variety or origin
(appellation) and it is not always possible to verify this information if the
country does not have a system similar to the regulations administered by the
BATF. Many developing wine-producing countries have very limited official
oversight of those industries and are not able to protect U.S. consumers from
fraud. The fact that a foreign producer may be able to label any wine with any
varietal of appellation and export it to the U.S. provides an unfair competitive
advantage for the foreign producer over the U.S. producer. Investment in
marketing and promotion. The industry must continue its investment in market
development. CAWG strongly supports the Market Access Program (MAP) which
provides funding for USDA matching grants to help the industry develop new
markets. In a competitive world market, where governments provide strong support
to their nation's winegrape growers and exporters, the United States cannot
afford to lag behind. Competition from wine-producing countries in Europe, as
well as Australia, Chile and Argentina continues to intensify. We are feeling
that competition not only in this country but in other markets. European wine
producers, mainly France, Italy, Germany, Spain and Portugal, have lost share in
the past several years but are very interested in getting it back. Despite the
fact that EU wine production is stronger than ever, the EU Commission continues
to provide support for domestic wine production and export promotion. In
addition, individual member states, specifically France, Italy, and Spain
continue to provide millions of dollars more for their individual wine
industries. The. continued high level of subsidization for the EU wine industry
remains an obstacle to the development of new markets for U.S. wine. Although
the U.S. is the fourth largest wine producer in the world, U.S. wine represents
just a fraction of the world total. The 15-tnember nations of the EU make up
over 60 percent of world production, while the U.S. represents about 6 percent
of production. California has the water, the soils and the climate to produce a
broad range of wine styles to please any preference. We can compete but we need
continued Congressional support for the Matching funds provided through MAP to
help us break into heavily subsidized markets. Protection from invasivepests and
& diseases. In a world with free and easy movement of people, products and
plant materials, we increase the chances of exotic pest and disease infestations
that could potentially devastate out agriculture and environment. In a
borderless global economy, there has been a measurable increase in new intrusive
pests entering the U.S. and California. The constant threat of the introduction.
of invasive pests demands that we be prepared to respond immediately to new
infestations and, more importantly, be proactive with research and planning to
detect and prevent new infestations. Exotic pests and disease have been an
important concern for California because of its natural resources and
multi-billion dollar agriculture industry, but the problem is more urgent and
complex than ever before. Since 1992, according to the California Department of
Food and Agriculture (CDFA), 67 new pest invaders have become established in
this state. Eradication and ongoing suppression programs are expensive. APHIS
must be fully funded to protect agriculture and its export markets. Through port
inspections, quarantine treatments, detection surveys and eradication efforts we
can prevent the introduction of new invasive species and the spread of existing
ones. It is critical that our nation's agriculture be protected from foreign
countries' pests, even though we favor free trade. We need state and federal
governments working closely together to eliminate conflicting actions and to
assure a rapid response when new pests are introduced. We also need to invest in
research and technology to establish basic scientific knowledge about invasive
pests and our ecosystems. With the requirement of the WTO system for all member
countries to treat all trading partners equally and the same as domestic
producers, it is critical that we develop state-of-the- art science to apply to
pest risk assessments and analyses in order to comply with international
standards and still protect our agriculture and natural resources. Other tools -
crop insurance. Competitive global markets, falling commodity prices and higher
U.S. production costs are driving changes in the rural landscape. More and more
states are looking to high-value specialty crops to keep ag land in production.
Federal crop insurance that provides adequate coverage for permanent, high-value
vineyards is becoming an important risk- management tool for winegrape growers.
Here in California we are fortunate to have a program that is working fairly
well for winegrapes and we appreciate the leadership of the West Coast Director
for the Risk Management Agency in helping to make the winegrape program an
effective one. However, the program needs flexibility to respond more quickly to
changes that occur. After the floods in the winter of 1996, CAWG pursued a
change in the program to close the gap of coverage between the end of harvest
and the beginning of the policy year. It makes no sense to force permanent,
high-value crops to be uncovered for a portion of the calendar year. We finally
were able to get the change through the regulatory process so that it will take
effect for the 2000 policy year. Catastrophic (CAf) crop insurance coverage to
protect farmers against a crop disaster must be maintained. CAWG has
aggressively promoted participation in the program as a critical element in
growers' risk management plans. In the three years that we've been educating our
membership about the availability of CAT, covered acreage has increased from 15%
to over 65% of the state's grape acres. 'Me program is providing about $100
million in liability protection to California's grape growers. Entering the
program at the CAT level is the first step towards a better understanding of
crop insurance and subsequent investments in additional or more adequate levels
of coverage above the CAT level. Our association has been watching the
development of crop insurance reform very closely. Both the Senate and House
versions have several elements we support, including expansion of pilot programs
to help specialty agriculture, a structure in place for premium payments and
incentives to purchase more adequate coverage at higher levels and prerniurn
discounts for good performance. We support efforts to make the program more
market- oriented and incentives for the development of new products by private
industry. Other tools-accelerated register a do not new, soft pest management
tools. As the U.S. EPA continues implementation of the Food Quality Protection
Act (FQPA) it is important that decisions are based upon sound science and
actual use information. The California winegrape industry has just completed a
comprehensive crop pest management profile to provide the agency and USDA with
actual use information. The profile has also helped us assess the impact of the
FQPA review and potential restrictions on winegrape pest management tools.
Fortunately the California winegrape industry does not heavily rely upon any
single pesticide that is potentially vulnerable under FQPA. However, the
continued ability to have these pest management tools available so that they may
be used for control of periodic or sporadic outbreaks could be crucial to the
industry. U.S. EPA must have the resources available to accelerate the
registration of new, softer products to replace chemicals that may be eliminated
because of FQPA. The registration of alternatives is critical for California's
specialty crops like winegrapes. Other tools - estate tax re.Yef CAWG strongly
supports efforts to enact further estate tax relief as a tool to keep family
farms and businesses in the family. Current estate tax laws are extremely
complicated and place in jeopardy many family owned vineyards and wineries by
requiring huge cash payments when that business must be passed to the next
generation. Due to the asset intensive nature of the wine 'industry, estate
taxes derived from winery and vineyard owners are significant. According to
industry analysts, the asset base of the wine industry could be three times
greater than other industries. As a result, estate taxes generated can be
significant. We need further improvement of the laws to facilitate opportunities
for succeeding generations to preserve and grow the equity in these farms and
family businesses. Conclusion California has a rich history of winegrape
production, dating back to 1778 with the Spanish Missions. Despite the
challenges we face today I believe the future of our 'industry is full of
promise. We have enjoyed a steady growth rate, higher profit margins than many
other agricultural products and an increasing demand in the premium wine
category. A study by Information Resources shows wine ranked among the five
fastest growing supermarket categories. Every wine producing country wants a
piece of that market. In the new globalization system, we must be fully prepared
to compete at home and abroad. Our chance to compete successfully will be
greatly enhanced working in partnership with government on those tasks we cannot
do alone -- research, invasive pest exclusion and suppression, development of
new export markets in the face of subsidized competition and the negotiation of
fair trade agreements. Your support for the wine and winegrape community is
appreciated and I thank you for this opportunity to comment.
LOAD-DATE: May 12, 2000, Friday
