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NATIONAL CORN GROWERS ASSOCIATION
Dee Vaughan
HOUSE
AGRICULTURE COMMITTEE
July 18, 2001
PDF
of testimony
Thank you, Mr. Chairman,
for the opportunity to testify here today about future farm policy.
My name is Dee Vaughan, and I serve on the NCGA Board of Directors.
Lee Klein, President
of the National Corn Growers Association, joins me today.
NCGA commends the
Chairman and Ranking Member of the House Agriculture Committee for putting
forth a farm bill concept paper that continues the production flexibility
of the Federal Agriculture Improvement and Reform (FAIR) Act and adds
a decoupled, counter-cyclical program as an income safety net when commodity
prices fall below target levels.
To help NCGA members
evaluate this proposal we applied the concept provisions to the 2000
crop year experience. We looked at both the aggregate effects with regard
to how the proposal would fit within our international obligations and
then, more specifically, how corn farmers might fare under the proposal.
We appreciate this opportunity to share some of our concerns with the
committee.
WTO Compliance
Our foremost concern is that a counter-cyclical payment that is commodity
specific and linked directly to farm commodity prices will not be exempt
from the U.S. WTO commitments to limit domestic farm program spending.
Our analysis suggests that if this proposal had been in place for the
2000 marketing year, our domestic farm program spending would have exceeded
our WTO commitments.
The total level
of support would be almost $22 billion, and would be reported as commodity
specific and would be included in the U.S. Aggregate Measurement of
Support under the Uruguay Round Agreement on Agriculture. Obviously,
the production and price experience of 2000 is not an indicator of future
program outlays, but this committee must weigh the very real potential
that the United States could exceed our WTO obligations.
Further, this approach
could make it very difficult for the United States to advance our trade
liberalization objectives in the ongoing WTO agricultural negotiations.
NCGA has proposed an alternative counter-cyclical mechanism that would
have comparable cost and that we believe fits within the WTO exemption
from reduction. We believe that moving our domestic policies toward
WTO compliance will strengthen our negotiating position and improve
the comfort level with trade reform among U.S. farmers.
Target Price
The draft concept proposes an interesting twist on the old target price
system - the fixed payment is included as part of the target price.
We understand that the target price is the minimum that the producer
would receive per payment bushel. That income will come as an automatic
fixed payment - 26 cents per bushel for corn - plus any marketing assistance
loan benefits plus market returns plus the counter-cyclical payment.
Because the counter-cyclical
payment is calculated only on the commodity price, it may not provide
adequate support in years when national production falls short and prices
rise accordingly. The NCGA counter-cyclical income proposal would provide
better protection in years of low production.
Marketing Assistance
Loan Program
The concept paper includes significant modification of the sorghum,
soybean and minor oilseeds loan rates. NCGA policy does not address
loan rates for other commodities, and we will not comment today on whether
the proposed rates are appropriate.
Our concern with
the draft concept is that it does not address the implementation problems
of the marketing assistance loan program. Many of these loan rates reflect
outdated price relationships, in part, because of the political difficulty
of adjusting the local rates. This antiquated system is tolerable when
harvest prices are strong, but when harvest prices fall below loan rates,
all of the problems become obvious to producers.
As we suggested
in our testimony before this committee last April, NCGA believes that
merely rebalancing the loan rates will not address the underlying dissatisfaction.
However, if the committee decides to retain the marketing assistance
loan, then the following changes should be made to make the loan program
work more equitably for U.S. growers:
- Establish a pre-harvest
LDP.
- Allow producer
choice to have their LDP set in the county grown or marketed.
- And most importantly,
direct USDA to set the Posted County Price as the average of the two
adjusted terminal prices for the county.
Aside from the implementation
problems, many producers have objected that the loan program does not
protect those who may have suffered a natural weather disaster and who
do not have a crop from which to collect an LDP. However, the continuation
of the marketing assistance loan program will prolong the disparity
for those who suffer production shortfalls. The NCGA counter-cyclical
proposal would not link any portion of the payment to current production.
Payment Yields
NCGA proposed a counter-cyclical income program that would use more
recent acreage and production experience to determine the eligible payment
units. We think the counter-cyclical support should reflect the actual
production rather than the outdated bases and yields.
Because corn has
experienced incredible increases in productivity over the 15 to 20 years
that program yields have been frozen, corn producers have great frustration
with the current payment yields. Outdated payment yields effectively
reduce the level of support and threaten to disrupt the balance of support
between commodities.
Program Bases
If soybeans and other oilseeds become program crops, it is necessary
to establish acreage bases for those crops. We believe the committee
concept proposes a reasonable compromise that allows each producer to
decide whether to keep the base they have today or to update their bases
.
NCGA does not support
increasing the acreage cap for the Conservation Reserve Program (CRP).
We believe that given the limited funding available for all programs,
there should be a focus on providing a greater role in voluntary, incentive-based
assistance for making the right management choices on individual farms.
We have adequate resources allocated to existing CRP acreage.
The $1.4 billion
cost of the proposed increase in CRP acreage should be reallocated to
Environmental Quality Incentives Program (EQIP) funding with direction
given to the Natural Resources Conservation Service to include production
practices, such as conservation tillage or timing of nitrogen application,
as well as the broader management and structural options.
Trade
We applaud the committee concept for designating $900 million over 10
years for trade promotion. We believe that the additional funding will
be better utilized if it is allocated between the MAP and FMD programs,
and if the total funding is gradually increased.
Both of these programs
provide invaluable assistance to market U.S. agricultural products,
and are woefully under funded.
In closing, Mr.
Chairman, this is a first step in the farm bill process. I would be
pleased to answer any questions you may have.
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