SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 2527 words

COMMITTEE: SENATE AGRICULTURE, NUTRITION AND FORESTRY

HEADLINE: 2002 FARM BILL

TESTIMONY-BY: CHUCK HASSEBROOK

AFFILIATION: CENTER FOR RURAL AFFAIRS WALTHILL, NEBRASKA

BODY:
August 2, 2001

Testimony of

Chuck Hassebrook Center for Rural Affairs Walthill, Nebraska On Rural Development in the Farm Bill

Mr. Chairman and members of the Committee, thank you for the opportunity to testify on how the new farm bill can create genuine opportunity in the farm and ranch communities left out of the nation's prosperity.

The farm and ranch communities of the nation's heartland are in the midst of an opportunity crisis. Our study, Trampled Dreams, analyzed income and opportunity in the farm and ranch counties - those with more than 20 percent of income earned from farming or ranching - in the states of Iowa, Kansas, Minnesota, Nebraska, North Dakota and South Dakota.

We found that poverty rates in farm and ranch counties exceeded those in the region's metropolitan counties by 50 percent. Incomes were 17 percent lower than in metropolitan counties. Over 1/3 of households had incomes below $15,000. Those problems persist. In 1999, half of the nation's 20 lowest income counties were farm and ranch counties in Nebraska and the Dakotas. (Four of the Dakota counties also included reservations.) The nation's two lowest income counties were Nebraska farm and ranch counties. Nationally, 243 of the 250 poorest counties in the nation are nonmetropolitan.

These low-income rural areas - particularly low-income agricultural counties - are suffering continuous population loss. There is a near continuous streak of decreasing population from the Canadian border of Montana and North Dakota south through Texas in addition to areas in the Mississippi Delta, Appalachia and northern New England.

Most troubling, there is growing momentum for this rural population loss. According to Census Bureau data, 600 nonmetropolitan counties lost population from 1990 to 1995; from 1995 to 1999, 855 nonmetropolitan counties - a 42.5 percent increase - lost population.

Roots of the Problem

The growing concentration of the nation's lowest income counties in agricultural areas reflects several facets. First, these areas remain agricultural because non-agricultural development strategies have not worked for them.

They lack the natural environmental amenities to become tourist or retirement economies. They are too remote to become manufacturing centers. Their only natural economic asset is their agricultural land base and by and large, their fortunes have risen and fallen with the contribution of agriculture to the rural communities.

The contribution of agriculture to these communities is falling. The farm and ranch share of profit in their food system and the role of farmers and ranchers and their communities in food production is shrinking. The role and profit share of other sectors of the food industry - especially the farm input sector - are growing. Were the farm and ranch share of food system profit to continue falling at historic rates, it would reach zero by 2030, according to research by Stewart Smith, agricultural economist at the University of Maine and former senior economist with the Joint Economic Committee of the United States Congress.

This decline stems from several sources. Both public and private agricultural research have focused on developing expensive new products and production systems that enable the input sector to sell more to farmers and ranchers to enable farmers and rancher to do less. The input sector does more to control weeds today and farmers do less. Thus, the input sector gets paid more to control weeds and farmers earn less. Largely, those products are produced and profit captured not in the rural community but in larger population centers or distant metropolitan areas.

Changing structure also threatens the contribution of agriculture to rural community development. The age distribution of farmers and ranchers is a ticking time bomb for rural communities. In 1978, there were about 350,000 farmers and ranchers 35 years or younger in the U.S. In 1997 there were fewer than half - 150,000.

Historically in the nation's heartland, agriculture was a source of middle-class self-employment opportunity. But today, the industrialization of agriculture is replacing self-employment opportunities with low wage labor.

In a background paper for the former Congressional Office of Technology Assessment, University of California-Davis anthropologist Dean MacCannell summarized the research on the implication of that change for life in the rural community.

Everyone who has done careful research on farm size, residency of agricultural land owners and social conditions in the rural community finds the same relationship: As farm size and absentee ownership increase, social conditions in the local community deteriorate.

We have found depressed median family incomes, high levels of poverty, low education levels, social and economic inequality between ethnic groups, etc., associated with land and capital concentration in agriculture. . .. Communities that are surrounded by farms that are larger than can be operated by a family unit have a bi-modal income distribution, with a few wealthy elites, a majority of poor laborers and virtually no middle class.

That is not progress. That is social decay.

Strategies for the Future

We must focus on where opportunity will reside in the future.

The day is past in which raw commodity production will provide middle class income and genuine opportunity for enough farmers and ranchers to provide a stable economic base for agricultural communities. However, opportunity is growing for farmers and ranchers to increase their incomes by producing products in ways that meet the unique demands of particular market segments.

In agriculture, there are growing opportunities to tap higher value markets. The nationwide Hartman Survey found that over half of consumers would pay a premium for food produced in an environmentally sound way. A Better Homes and Gardens and Successful Farming survey found that 57% of consumers would pay a premium for pork produced on small family farms and over 70% would pay a premium for pork produced on environmentally responsible farms.

Cooperatives like Oregon Country Beef have demonstrated that family farms and ranches can tap those markets to earn consistent premiums by producing a high quality product in ways consumers support - in their case natural, hormone-free beef produced in humane conditions on environmentally responsible ranches.

Others would pay a premium for meat and livestock products cut in a certain way to meet their cultural traditions. Others will pay a premium for grain with certain milling characteristics.

These markets present an opportunity for farmers and ranchers to add more of the value to agricultural products and capture more of the profit. For the most part, however, we lack the cooperatives and small businesses to link consumers looking for these products with the family farmers and ranchers who have what they want while capturing the profit in the rural community.

The second opportunity resides in the explosion of new knowledge. The actual impact of the knowledge explosion on agricultural communities will depend on our role in it. In a knowledge-based economy, generally only those who apply knowledge enjoy genuine opportunity. Returns to unskilled labor have fallen precipitously.

To the extent that new knowledge is principally embodied in products sold to farmers - rather than applied by farmers - it will simply reinforce the current trend toward a shrinking farm and ranch share of food system profit. But to the extent that we create new knowledge and production systems that enable farmers and ranchers to cut input costs or add value to their products by applying more management and skills we can reverse the farm share trend line. We can restore opportunity in the agricultural community as well as on the farm and ranch, and help raise farm income.

The hoop house for hog production provides an excellent example of how agricultural research and the application of knowledge can enhance producers' returns. It has a four or five foot wooden wall, on which rests a half circle steel hoop, covered by a durable plastic tarp and is deep bedded. Hoop houses require about one-third of the capital of total confinement hog finishing systems. But they require more management. Because they do not provide a controlled environment, they require the daily presence of a highly knowledgeable and motivated manager who understands hogs and is able to exercise judgment. That is the strength of the family farm.

The total cost of hog production in hoop houses is comparable to total confinement, according to Iowa State University research. But there are two key differences. Hoop houses are most cost effectively applied at a very modest scale. Second, when a farmer sells a hog out of a hoop house more of the check remains in his/her pocket to compensate for his/her skills and management; and less goes to pay off the note on the building.

Finally, and perhaps most important, to tap new opportunities - whether in agriculture or in non-farm pursuits - we must do more to support entrepreneurship. Perhaps the greatest asset of agricultural communities is the entrepreneurial bent of their people.

The farm and ranch counties in our study had twice the rate of self-employment as the

metropolitan counties. Over the last decade, 70 percent of the net job growth in Nebraska's farm and ranch counties was in non- farm proprietorships - non-farm self-employment. But in spite of the entrepreneurial sprit of rural people and the importance of new small business start-up rural economic vitality, small entrepreneurship has historically received short shrift in rural development policy. We must change that.

FUTURE ORIENTED PROPOSALS FOR THE FARM BILL

Establish the Agricultural Community Revitalization and Enterprise Initiative (ACRE) to make grants to increase farm, ranch and rural income by supporting market development, research and outreach.

ACRE is designed to promote agricultural-based and entrepreneurial rural development. It is inspired by farmers, ranchers and small business people seeking to earn a better income from the market by applying new knowledge and responding to consumer demand.

Funding would be provided competitively to proposals that offer the greatest potential to increase the farm and ranch share of food system profit, increase self-employment opportunities in agricultural communities, encourage more effective use of natural resources to support genuine economic opportunity while conserving them for future generations and support revitalization of agricultural communities through entrepreneurship.

ACRE grants would be available to cooperatives, universities, producer associations, small business associations, non-profit organizations, community development corporations, and units of government. Collaboration would be strongly encouraged. Grants would range from three to five years in amounts from $250,000 for single entity grants up to $1.5 million for more collaborative proposals. Examples of projects that might be funded under this program include those that:

Support development of cooperatives, networks and associations that enable producers to access premium markets for premium products.

Support cooperative development that helps farmers and ranchers gain control over the processing and marketing of their products.

Provide research that enables producers to increase their share of food system profit by cutting capital and input costs or producing products in a manner that increases their value.

Provide technical assistance, training, mentoring, business incubation and planning for start-up food-related businesses and other enterprises in rural communities.

Funds would be allocated across four regions and grants would be awarded by four regional councils to ensure that the program is responsive to regional needs- from the needs of dairy farmers in Vermont, to corn and soybean producers in Iowa, to fruit and vegetable producers in the South to cattle and sheep producers in the Mountain states.

We propose providing mandatory funding for ACRE. Like the innovative Initiative for Future Farm and Food Systems, we look to mandatory funds because there is simply not adequate funding in appropriated accounts to get the job done. We believe it is entirely appropriate to spend a portion of the farm bill mandatory funding pool on future oriented, forward looking rural and agricultural development. We propose $500 million annually - less than two percent of the amount we spent last year on direct payments to farmers.

The Center for Rural Affairs strongly supports direct payments to farmers for income support. But we must also invest in long term solutions - solutions that enable farmers and ranchers to earn a fairer share of the consumer dollar from the market and that help revitalize rural communities.

Today we under-invest in long term solutions relative to short- term relief. Commitment of a very small portion of the baseline could free up funding for a dramatic increase in support for entrepreneurial initiatives. Shifting two percent of the baseline to long term solutions would create far greater bang for the buck in enhancing farm, ranch and rural community income and opportunity.

Initiatives to Establish a New Generation of Farmers and Ranchers

A new generation of family farm and ranch businesses is crucial to the survival of rural America. Rural communities will survive only if a stable number of people work and live there.

It matters not that the same or that a greater amount of raw agricultural commodities are produced if there are fewer people contributing to the production of those commodities and to the life of our communities. Without a new generation of farm and ranch families, urban areas throughout the nation will become caretakers of vast, empty states.

Establish a Beginning Farmer and Rancher Development Program.

Such a program would support and help fund new and established local and regional training and technical assistance initiatives for beginning farmers and ranchers. Initiatives would include mentoring programs; land link assistance for retiring and new farmers and ranchers; entrepreneurship and business training; financial management training; risk management education; and diversification strategy training.

Beginning Farmer and Rancher Research and Extension Initiative.

A new Beginning Farmer and Rancher Research and Extension Initiative should be established, with resources dedicated to researching, developing, and disseminating farm transfer, finance, development, management, production, and marketing models and strategies that foster new farming and ranching opportunities.

Create a credit access and assistance program that fosters opportunities for beginning farmers and ranchers.

One of the greatest challenges facing beginning farmers and ranchers is access to land and operating capital. Current credit and assistance programs could be amended to promote greater opportunities.



LOAD-DATE: August 8, 2001