management system. Farmers should always be striving to use the least amount of inputs that provide for both the immediate and long-term profitability while conserving our natural resources. The 1990 Food Security Act is not the place to use the LISA concept as a baseline management. We have a responsibility to adequately reserach this concept one project at a time to determine its benefits. Striking a balance between conservation and profitability is imperative to our food supply. The bottom line is that sustainable agriculture must be profitable. We are concerned that some environmental groups will be using LISA as leverage to accomplish their goals which are purely detrimental to production agriculture. Ultimately, there are too many hidden agendas under LISA's skirt to know her true intentions. Thank you for allowing us to share our views with you today. We appreciate the interest that you and your colleagues have in knowing the concerns of Indiana corn farmers. Thank you. [The prepared statement of Mr. Nidlinger appears at the conclusion of the hearing.] Ms. LONG [acting chairman]. Thank you, Mr. Nidlinger. That was very good testimony. Mr. Hadley. STATEMENT OF ROGER W. HADLEY II, INDIANA SOYBEAN GROWERS ASSOCIATION Mr. HADLEY. Thank you, Congresswoman Long, Congressman Jontz and Chairman Glickman. I am Roger Hadley II, a soybean farmer along with corn, wheat, and hogs from the Woodburn, Indiana area. It is an honor to come before you today. The soybean farmers appreciate your coming to the county to meet with those of us who are directly affected by the important decisions that you make. From what I have heard, you were very closely involved in the disaster bill just passed by Congress last Friday. While I do not have a serious disaster situation on my farm this year, I could next. Just as farmers in the South and the western Corn Belt needed assistance this year, I may sometime in the future. There is a parallel here for the coming farm bill. It may be tempting in the farm bill debate for one region to turn a deaf ear to the interests of another. Yet the needs of all regions are valid and must be considered. For soybeans, it is important to explore ways in which regional concerns can be addressed in an overall Farm Program. The two most important parts of the 1990 farm bill for soybean farmers are the domestic Farm Program and environmental policy. That is not to say that international trade and research are not important, because they are. I hope Congress writes a farm bill based on what is good policy rather than trying to conform to what might develop through the GATT negotiations underway. As for the Soybean Farm Program, over the years soybeans have had a nonrecourse loan program. It worked well until foreign production expanded and farm programs started encouraging production of program crops over nonprogram crops. An unanticipated consequence of the 1985 farm bill was to skew net returns in favor of program crops away from soybeans and other nonprogram crops. The planting signals sent by each farm program affects the entire crop production mix since most farmers produce several crops. Simply put, despite the market price, it is more lucrative for me to maximize my production of corn due to the target price return. and the need to preserve base rather than plant soybeans. Foreign competitors now enjoy the benefit of a world soybean price supported by nonrecourse loan, and are expanding soybean production in response to the relatively higher market price for soybeans compared to other feed and food grain crops. Many farmers would like to get out of "base lock" so that they can plant soybeans without penalty of losing base. They want to get back to a more balanced crop rotation, which means better weed control, less use of fertilizer, chemicals, and insecticides. But many bankers understandably discourage farmers from planting less corn and more soybeans because it would devalue their farmland because of base loss. As I mentioned earlier, the target price for corn also offers a better return than the soybean market price. Consequently, increased farmer freedom to plant to capture market opportunities and improve agronomic practices is a step in the right direction for soybean policy. However, soybean returns must be somehow brought in balance more consistently with those of other crops. As for environmental policy, it is true that most farmers will use fewer chemicals if it is to their economic advantage to do so. Many farmers today are experimenting with reduced application rates. Farmer education about improved production practices with sound use of ag chemicals and other "success stories" will go a long way to encourage farmer concern and action on the environment. Farmers do not need more regulations, more paperwork, or sanctions resulting from new environmental or conservation laws from environmental policy. Mandatory well-testing, recordkeeping, and the like will only create a negative mindset among farmers on the environment. You have an important job ahead of you in the coming year. Decisions you make will chart the course of U.S. agriculture into the next century. Thanks for coming to Indiana and thanks for the opportunity for me to be here. [The prepared statement of Mr. Hadley appears at the conclusion of the hearing.] Mr. GLICKMAN. Thank you very much. Mr. Lozier. STATEMENT OF ROBERT D. LOZIER, MEMBER, BOARD OF Mr. LOZIER. Thank you, Chairman Glickman, and Members of Congress and committee members. I am Bob Lozier, a farmer from Warsaw, Indiana, a member of the board of directors of Associated Milk Producers, Inc. I appreci ate this opportunity to comment on the factors to be considered in shaping the 1990 farm bill. While I do produce grain, my farm operation centers on the dairy enterprise. As a dairyman, I have been concerned that the grain policies of the 1980's have often resulted in market prices at less than the cost of production. This has encouraged livestock production, including an expansion of milk output. This has reduced income to dairy farmers. It has also distorted regional production patterns by reducing feed costs in areas where dairymen purchase most of their feed supplies relative to areas such as ours where we raise a substantial portion of our needs. While Associated Milk Producers, Inc., does not make specific recommendations on grain policy, we do support the strongest possible grain program as we recognize the need for grain producers to earn a reasonable return on their operations. Many dairymen are grain producers. More importantly a strong dairy industry can only exist within the framework of a healthy agricultural economy. We do not believe the answer to dairy farmers' problems can be found in cheap grain. Looking at the overall agricultural policy, we feel the work of the National Commission on Dairy Policy created by Congress as a part of the 1985 farm bill provides a sound basis for the 1990 farm bill. Specifically, the Commission called for continuing the purchase-type price support program which has served well since 1949. It recommended establishment of some type of index as a means of establishing the price support level. Finally, the Commission recommended providing standby supply management authority as a permanent part of dairy policy. This authority would be used under stated conditions to prevent the buildup of costly, burdensome surplus milk production capacity. AMPI has long recommended use of supply management as a policy tool which will hold down Government costs and improve farm income. The two-tier price program advanced by AMPI can accomplish these goals while avoiding adverse effects on other producers and other problems claimed under past supply management programs. Thank you, committee for this opportunity. [The prepared statement of Mr. Lozier appears at the conclusion of the hearing.] Mr. GLICKMAN. Thank you, Mr. Lozier. STATEMENT OF MEL A. EGOLF, DELEGATE, MILK MARKETING, INC. Mr. EGOLF. Thank you very much. My name is Mel Egolf, I am a dairy farmer. I live at Churubusco, Indiana. I am a delegate to Milk Marketing, Inc. MMI is a regional dairy cooperative that represents roughly 7,000 dairy producers. We appreciate this opportunity. Mr. GLICKMAN. You notice, by the way, we did have Dairy Queens, at least two of us here. We did that because of you all, not because we were hungry. Mr. EGOLF. Just solely for us, huh. Mr. GLICKMAN. That is right. Mr. EGOLF. We appreciate that. As the discussion begins on the 1990 farm bill, it is important to note that the dairy industry enters this new legislative process in a vastly different position than we did prior to the formation of the 1985 farm bill. Huge surpluses of dairy products in Government storage are gone and along with it the $2 billion price tag of the Dairy Program. Milk production and consumption are now in such close balance that virtually no cheese and nonfat dry milk has been removed from the market by the USDA this year. Much of this balance in the market can be attributed to the Dairy Herd Termination Program which was part of the 1985 act. Frankly, it is our opinion that the program worked. Cow numbers decreased, milk production dropped, and beef markets were not adversely impacted. The bill has performed well. As we look to the 1990 bill, dairy farmers urge consideration of dairy legislation that will provide long-term supply balance and market stability. The framework around which dairy policy should be developed in our opinion has five basic parts. First, the report of the National Commission on Dairy Policy constitutes a workable basis for the 1990 program. Second, the current purchase-based price support program should continue to be a basis for providing necessary stability to the dairy industry. Third, Federal dairy policy should be on a permanent basis to reflect market demand through appropriate signals to producers to adjust production according to the needs of the market. A standby supply adjustment program is a vital part of this objective. Fourth, price supports should be adjusted only as necessary to reflect the overall supply-demand balance in the industry. These adjustments should be made on a total milk solids basis and should be maintained within fixed percentage limits of existing support levels and recent average market prices. Fifth, if dairy support prices become excessive, on total solids basis, then the cost of excess removals should be the responsibility of individual producers. This should only be to the extent necessary to offset these excessive program costs. Dairy producers are also very concerned with the effect of Bovine Somatropin-BST-upon our industry once it is approved by the FDA. We feel the prudent position is to accept the fact that the product will, at some point in time, be accepted by our industry. Consumer education on the facts concerning this product is a must. Our industry could suffer significant damage if consumer confidence is eroded because of false information and inaccurate facts. We feel it is our responsibility as an industry in conjunction with the manufacturers of the product and the Federal Government to work together on a program to relieve consumer fear of this product. The U.S. dairy industry has been, and in our-I got ahead of myself there. Finally, we are concerned about the on-going GATT negotiations. The U.S. dairy industry, in our opinion, should remain a domestic industry. Because of the nature of our product, very little of it moves in international trading circles. Section 22 of the GATT agreement protects our domestic industry against unwarranted and subsidized intrusion from foreign dairy markets. Eliminating this provision of GATT will devastate our industry and destroy the Dairy Price Support Program which serves us well by establishing a floor price for our product. The Dairy Price Support Program cannot function without section 22 protections. This factor alone is reason enough to resist any modifications or eliminations of this vital piece of national dairy policy. I want to thank each and every one of you for this opportunity to make this statement and assure you that Milk Marketing stands ready to discuss with you all of the issues on the proceeding legislative effort. Thank you very much. [The prepared statement of Mr. Egolf appears at the conclusion of the hearing.] Mr. GLICKMAN. Thank you very much, Mr. Egolf. I just have one question of Mr. Hadley. Do you think that soybeans ought to be a full program crop in the 1990 farm bill? That is, should they be subject to not only the loan protection but target price protection as well as the set-aside authorities and theoretically the diversion authorities that corn and feed grains have? That is, as you know-one of the discussion points, you have heard it today, has to do with the corn/soybean relationship and we have never had-soybeans in recent years has not been a program crop. How do you feel about it becoming a full program crop? Mr. HADLEY. I personally do not want to see soybeans become a full program crop, neither does the Indiana Soybean Growers Association and I do not believe the ASA does. What we would like to see though is some provision so that soybeans are not planted as a last resort only after you have complied with a corn program and a wheat program. We would like it setup so that we can have flexibility. A soybean farmer or any farmer, should have the flexibility that if he sees the market developing in such a way that soybeans are more profitable that year, he does not have to plant 100 percent of the corn he was mandated to, or the wheat he was mandated to, but he should be allowed to switch to soybeans or oats if it looks better. We need the flexibility in there and we need some sort of a price support in there different from what it is now, whether it should be based on maybe the carryover supply. Mr. GLICKMAN. But if you get the price support too high on soybeans, the pressure is going to be to bring it into a program and have set-aside authority and supply management authority like you have for the other program crops. That is the danger you face. Mr. HADLEY. That is the danger you face but on the other hand, if you leave soybeans with the price floors as they are today we are helping the foreign competators and U.S. soybean markets dwindle we are just reinforcing soybean markets in Brazil, Argentina and |