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Congressional Testimony
May 1, 2000, Monday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3787 words
HEADLINE:
TESTIMONY May 01, 2000 STEVE RYSTROM FARMER / MEMBER OF THE BOARD OF DIRECTORS
USA RICE FEDERATION HOUSE AGRICULTURE FARM POLICY
BODY:
MAY 1, 2000 TESTIMONY OF STEVE RYSTROM,,
CALIFORNIA RICE PRODUCER ON BEHALF OF THE CALIFORNIA CONTINGENT OF THE U.S. RICE
PRODUCERS' GROUP FARM POLICY FIELD HEARINGS U.S. HOUSE COMMITTEE ON AGRICULTURE
INTRODUCTION My name is Steve Rystrom. My father, brother-in-law and I operate a
1,500-acre family rice farm in Butte County. I am a member of the Board of
Directors of the USA Rice Federation and am chairman of the California
contingent of the U.S. Rice Producers' Group. Our group is affiliated with the
California Rice Commission of which I also serve on the board of directors. The
USA Rice Federation is the nation's largest rice organization, representing all
segments of the U.S. rice industry. The Federation's charter members are the USA
Rice council, U.S. Rice Producers' Group., and the Rice Millers' Association.
Through these organizations, Federation membership encompasses U.S. rice
producers who grow 80 percent of America's rice crop; farmer-owned cooperatives
and privately owned mills comprising virtually all of the U.S. rice milling
industry, with members in Arkansas, California, Florida, Louisiana, Mississippi,
Missouri, and Texas; and a wide range of allied businesses in these and other
states. The diversity and scope of this association permits it to provide a view
common to all aspects of the industry, and to the vast majority of its
participants. BACKGROUND Mr. Chairman, and members of the Committee, I would
like to preface my remarks by a few words regarding rice production and use.
U.S. rice production provides a versatile, nutritious food product for people
here in the United States and around the world. Rice is used in everything from
baby formulas to the wide variety of ethnic cuisines enjoyed by many
populations. Rice byproducts are becoming important new sources of energy,
livestock feed and erosion control. In California, for instance, rice hulls are
being used to generate electricity in nearby Williams and we are actively
seeking new uses for rice straw in ethanol' building products, animal feeds and
erosion control materials. From an environmental perspective, rice fields
provide important habitats for wetlands dependent wildlife. Sacramento Valley
rice fields are key winter staging areas for geese, ducks and water birds of the
Pacific Flyway migration. In addition, rice fields provide important habitat for
a number of special status species, some of which are rare, Mr. Chairman, at
this time, prices throughout much of the rice industry are depressed. The
industry needs help and the situation today demonstrates that while there are
provisions in current legislation that we deem beneficial, there are immediate
changes that need to be made if the present structure is to remain. We fully
understand that we will probably be criticized for advocating additional
subsidies for U.S. agriculture; we strongly believe that additional financial
help for U.S. farmers is entirely justified when considered against the backdrop
of the long-standing U.S. policy for low cost food and the fact that our access
to global markets is substantially denied due to trade sanctions and other
barriers. The farm economy problem that has affected many segments of American
agriculture has had an equal and perhaps a more devastating impact on rice
producers of this nation. This year we have harvested an unprecedented rice
crop. According to USDA's most recent World Agriculture Supply and Demand
Estimates (WASDE), the crop has reached almost 211 million-hundredweight (cwt.)
as contrasted with 188 million hundredweight in the 1998/1999 marketing year and
183 million hundredweight in the 1997/98 marketing year. At the same time, the
WASDE report estimates that there will be only a very small increase in rice
exports. The net result is that there will be an increasing build- up of
carry-over stocks to depress prices. 1999/2000 ending stocks are currently
projected to grow by 79 percent over the last year. The WASDE report projects
prices for the 1999/2000 marketing year as low as $5.80 per hundredweight. This
price projection is $3 per hundredweight less than the price for the 1998/99
marketing year and $4 per hundredweight less than the average price for the
1997/98 marketing year. At the same time, over-all costs continue to rise. Rice
is one of the most costly crops to produce, especially in California. Land,
water, energy and labor costs in California are among the highest in the nation.
If the current situation is permitted to continue without government assistance,
we will find more and more producers abandoning farming, an occupation in which
their families have been engaged for many generations. As important is the rural
infrastructure that has evolved to support the rice industry. It too could
suffer without a strong safety net. Consider the impacts to equipment dealers,
crop protection and nutrition companies, trucking firms, processors and
longshoremen at the Ports of Sacramento and Oakland. In the Sacramento Valley,
the rice industry creates $750 million in economic activity annually. USDA
programs are the underpinnings for much of that allied business. RECOMMENDATIONS
We appreciate the Chairman's efforts to gain input from rice producers through
these field hearings in preparation for the 2002 Farm Bill debate. We also
appreciate the opportunity to comment on the impact of Freedom to Farm on the
rice industry and to recommend specific changes that will allow our industry to
obtain the highest level of income for a given level of government spending. It
is with this objective in mind that we make the following recommendations: Farm
Program Measures: The objective, both today and in the long term must be to
significantly strengthen the farm safety net. At this time, based on our
experience under the 1996 Farm Bill, it is imperative that we do not wait until
the year 2002 before acting. Immediate changes must be made to protect farm
income during the final three crop years covered by the legislation. In the last
two years, Congress provided much appreciated supplemental income assistance to
help farmers through a period of low prices and declining income. Rather than
having to enact emergency assistance each year, we would recommend that the law
be changed so that AMTA payments and corresponding payment limitations are
increased for crop years 2000 through 2002. However, it is important that
certain features of current legislation be maintained. Increased planting
flexibility that producers have without jeopardizing their payments, and also
the ability of producers to produce for the market are extremely important to
the U.S. rice industry. However, we understand there has been some discussion
regarding coupling payments to production. There is some sentiment in California
that if coupling should occur, it should be limited to not more than a 50
percent planting requirement per farm number. Crop Insurance: Another measure
that we support is a modification in the crop insurance law so that premiums are
set at more affordable levels and the program expanded, if possible, to provide
revenue as well as yield insurance. We believe, however, that crop insurance
should be in addition to, not a substitute for, existing farm program payments.
Marketing Loans: Additionally, exports are vital to the U.S. rice industry's
survival. As stated at the outset of this testimony, roughly 40 percent or more
of our annual production has been and must continue to be shipped overseas if we
are to stay in business. An important tool in meeting competition abroad is the
successful operation of the marketing loan program. The loan rate for rice is
set in current law at $6.50 per cwt. This rate is below the cost of production
for virtually every rice producer in California. Rice marketing assistance loans
may be redeemed at the United States Department of Agriculture's (USDA) world
market price if the world market price is below the loan rate. USDA has on
occasion revised its world market price determinations so the U.S. rice industry
could remain competitive in markets abroad with exporters of other countries.
However, it should be noted that the U.S. percentage share of world rice trade
has declined from 13.3 percent in 1996 to 11.3 percent in 1999. USDA must be
vigilant in their management of the world market price if the U.S. rice industry
is to remain competitive in the world market As part of our recommendations, we
urge that the loan deficiency payment limitation of $75,000, established in the
1996 Farm Bill, should be increased or perhaps eliminated. We thank Congress for
reauthorizing the use of Commodity Credit Corporation (CCC) commodity
certificates, which may be used to redeem loan collateral. At times, such as is
the case today, when world prices fall significantly below the loan rate, if the
limitation is not removed or significantly increased, producers will elect to
forfeit the collateral under loan to CCC. As a result, CCC, rather than the
producer, will become the marketer of the commodity in competition with the
private sector. Export Programs: There are other measures that would enhance
rice exports as the new crop comes to market. These include expanded use of
USDA's export authorities, such as the export credit guarantee programs, as well
as the programs under P.L. 480 and the Department's purchase and donation
programs. We commend USDA on their recent inclusion of rice in the Section 416
donation program. We believe that funding must be continued and increased for
the Foreign Market Development Program and the Market Access Program. These
export programs provide an investment today towards the long-term objective of
maintaining or increasing exports. Import Access: In the final analysis, the
rice industry can prosper only if we have improved access to world markets. We
support the goal of free and open trade, devoid of government sanctions. We look
forward to the forthcoming multilateral trade negotiations as a means of
reducing tariffs on rice imports, and achieving fair access to important rice
markets, such as Japan and Europe (EU). At present, except for a minimal
tariff-rate quota, the ex-quota tariffs on rice imports are prohibitively high -
approximately $3,000 per ton in the case of Japan and over $400 per ton in the
case of the EU. Turkey, an important export destination for California, is
considering joining the EU. This could have important trade consequences on
California rice producers who annually ship 200,000 tons of calrose valued at
$30,000,000 to this Middle Eastern nation. Currently, the Japanese trade
represents a 250,000 metric ton market with a value exceeding $150,000,000. In
Latin America, we seek equal access with other supplying nations that
participate in preferential tariff arrangements, and seek elimination of
restraints on imports based on licensing restrictions or phytosanitary or
bio-engineering standards influenced by public or social policy and not the
result of sound science. The multilateral trade negotiations can only be a
success if Congress were to enact fast- track legislation. We hope that this
will be achieved in the near future. We also fully support permanent,
normal trade relations with China and China accession to the WTO.
Unilateral Sanctions: We support legislation that would exempt food and medicine
from unilaterally imposed trade sanctions. In the past, unilateral sanctions
have caused the loss of many of our most important markets for U.S. produced
rice to our competitors. Over the past 38 years, Iran, Iraq and Cuba each have
been top export destinations for U.S. rice. Cuba currently imports about 350,000
metric tons of rice on cash terms from our competitors. This amount is more than
all of the rice that the U.S. exports under food aid programs. It is critically
important that sanctions relief legislation be enacted this year. It is also
important that restrictive licensing requirements not be imposed once sanctions
are lifted. For example, food and medicine are currently exempt from the
sanction in place against Cuba; however sales must be made to private entities,
of which there are none that buy rice. There is little, if any evidence that
trade sanctions on food have contributed significantly toward meeting U.S.
foreign policy goals. At the same time, sanctions have forced our customers to
turn to other suppliers for their rice import requirements. Finally, while not
on the agenda of the Committee, we also wish to emphasize the importance of
other measures that would help sustain a sound rice economy. These include,
among others, regulatory reform, implementation of the Food Quality Protection
Act based on sound science, and tax reform. Federal support for research should
be increased to assist rice producers and others in the rice industry to become
more efficient and more competitive in world markets. The rice industry is
assisting in this effort through assessments under state research and promotion
legislation, funds provided by private industry, and other measures. However,
private financing is not adequate and must be supplemented by federal
appropriations. CONCLUSION In conclusion, we urge the Congress move quickly to
enact legislation so that additional AMTA payments, at the same level as last
year, can be made this summer. Future farm legislation must likewise adequately
address this issue while maintaining the marketing loan program, increased
planting flexibility and freedom from annual government acreage controls that
are contained in the current farm law. We note that increased loan rates and
counter-cyclical payments have been recently discussed as possible solutions;
while there may be some merit to exploring these ideas for a long- term farm
safety net fix, we believe that it is paramount that we maintain the consistency
of our current farm program with our WTO obligations. We also support enactment
of crop insurance legislation that would attract greater participation and
increase development of more revenue insurance, but not act as a substitute for
farm program payments. As important as these issues are to the farm community,
equally or perhaps more important is the need to open up access to markets
abroad. Through tariff reductions and the elimination of unilateral trade
sanctions, U.S. rice will be able to compete favorably with other rice exporting
countries in world markets.
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