STATEMENT OF LARRY F. ERB, VICE PRESIDENT, INDIANA NATIONAL FARMERS ORGANIZATION

Mr. ERB. My name is Larry Erb. I farm at Route 2, Box 84A, Remington, Indiana. I am vice president of Indiana National Farmers and a member of the board of the National Farmers Organization.

Mr. Glickman, Chairman, I want to thank you for coming to Indiana. A year and a half ago at the board meeting in Iowa, you promised me you would be here and you are here. You are a man of your word. Last fall, you and Mr. Jontz promised us that you would get a bill through to allow the farmers to prove their yields. You have done that already. You are a man of your word on that. Mr. GLICKMAN. I want you to know this is the man who did it [Indicating Mr. Jontz].

Mr. JONTZ. I helped.

Mr. ERB. So we do have Congressmen that do what they say and remember their campaign promises.

The one thing I want to impress on you today is that the 1985 farm bill is not the answer that some claim it to be. It was a bill that was written by the grain companies, for the grain companies, to benefit the grain companies. It is a bill to subsidize the users of grain, not the growers of grain. The foreign users of grain benefited more than the American farmer. I have seen in the press that Russia bought their first year of supply under the 1985 farm bill wheat, a total year's supply, the average price was $1.37 a bushel. I do not think we can afford a bill like that, that subsidizes the users instead of the growers. First the 1985 farm bill has provided for the U.S. Department of Agriculture to become the major determining factor in setting the price for farm commodities in the market place. Commodity certificates, CCC sales catalogs, direct export subsidies, and the release of farmer-owned reserves have all played a significant role in affecting market prices. Now that these prices have been driven down to a low level, we have to limit the subsidies because of budget considerations.

These lower prices now are the expected prices, for our crop. We now argue over whether to lower to this level or that level, how far are we going to go. The free market people are now calling for flexibility and they forget that the free market can call for more of a crop any time that it raises the price up high enough to entice the farmer into growing it. That is what the free market is all about, enticing the farmer to grow what they want. But instead, these same people seem to want to force the farmers into growing more of these crops without raising the price level.

We need to raise the support level on corn, soybeans, and wheat and lower the deficiency payment so that the market pays for the grain instead of the Federal Treasury. This will solve the budget problem very painlessly for all concerned. At the same time we need to change the farm production base to a farm bushel or poundage base with price supports limited to the established bushel or poundage base for the farm. The farm production base could then be adjusted up or down from one year to another on a national production goal for each of the commodities. This would provide much greater planning flexibility since the producer would not

have the concern of base preservation and the farm's program benefits would not be measured by the number of acres planted. This would cut the incentive to increase average acreage yields through heavy chemical application, thereby giving a favorable environmental impact. The cost would be limited to the price support on the bushel or poundage base for the farm. This will be a much simpler program to administer and understand. What we need is a program to benefit the farmers.

One thing that seems to be out of place is the high storage rate paid to commercial grain farmers. This rate has been raised at the same time that farmers supports have been lowered. This rate should be no higher than the rate paid the farmer. There should be no in or out charge paid to commercial grain handlers unless it is paid to farmers. Farmers have higher costs involved in handling and storing grain than do the bigger elevators, but are paid only one-third as much as the commercials. With this lower rate for storage paid to commercials, maybe the grain and feed dealers would not be as interested in a grain program to raise a surplus of grain for them to store. This lower rate would save a large amount, inasmuch as one-third of the budget for the farm program has been paid to the grain trade, for storing surplus grain and subsidies to export the grain for about one-fourth of the cost of growing it. Also, it has been my experience that this grain spoils much of the time, and after this spotlage, it is blended into the grain that the farmers have taken so much time, labor, and money to grow, thereby ruining all of this effort. I was by one of these temporary grain storage sites as it was being emptied and the stench was worse than any pig lot that you could imagine. This "grain" was being blended into good grant to contaminate all of it. I was by another last week and I smelled worse than any corn that I ever smelled from a farm. I was told that it was only 15 to 20 percent spoilage. Of course, this will be blended into good new corn this fall as it comes in from the Send as perfect as nature can produce it, to ruin it all.

Of course, the one thing that could really help family farmers would be a Secretary of Agriculture that is an advocate for them instead of an adversary. Every time that the price of grain starts to mike something happens, like a report that is very disruptive to the markets. Maybe this is just coincidence, but farmers have had an ewillin of coincidences the last few years. The enclosed editorial by Zack Anderson helps explain what I mean.

Last year when supply was being curtailed very sharply by the rough in late June the CBOT raised the margin requirements twice in 1 day and then removed the limits for the grain contracts on the same day. This signaled the markets that this was as high Bs the price would be allowed to rise. After this the market varied but never went any higher. This year when the price started to rise because of demand, and Ferruzzi bought grain to fulfill demand, they could not get them to sell as easily as they had as much moner as the other traders and could not be forced to liquidate

the usual maneuvers, they just called for them to liquidate their contracts to break the market, which it did. To add insult to jury Secretary Yuetter applauded the action immediately. The seling of future contracts by the large grain companies who offset Ferraz s position is negative to the market and if companies can

do this without having the grain and without the threat of having to deliver it, they will have a foolproof method of deflating the markets so they can purchase supplies cheaper. The only way to keep commodity exchanges fair to both buyers and sellers of futures contracts is to have sellers first fully understand they must be able to deliver the product. The unchecked short selling of grain on the CBOT makes the supply limitless. The Board can only be an effective determinant of prices if the Board supply is proportional to the actual supply. Ferruzzi is not the bad guy here. The short sellers and the CBOT, by virtue of their actions, are the real culprits and should face the situation squarely.

I want to bring up the fact that the family farm is the most productive system ever devised and we want to preserve it. The U.S.S.R. has destroyed their system and they are paying for it over and over. The enclosed story from the Farm Journal very adequately describes their situation. I think that is something to ponder.

And another thing I wanted to bring up. I did not get this in time to get it into my written testimony. I just found out what it was and called for it. Tom Bius got it to me in a week which is very fast. It is the cost of production in 1987 from USDA and it is ordered to be printed by Congress with the facts in here to completely refute all these stories about how high farm income is. We heard a story about we had record high farm income, from the dean of Purdue, in 1987 and yet I go through here and the farmer lost money on corn, he lost money on oats, he lost money on wheat on the average acre produced. These are the figures. He made $10 an acre on soybeans. Well, I do not know how you get record income, on $10 an acre on soybeans. What he is using is a net cash income figure. This is a very specious figure. We do not know what is put into it for the cash income but we do know that the cash expenses are all that is taken out. Cash income can be the grain, it can be sometimes they use the figure for the use of the house on the farm, the use of the garden, the use of the wood lot, animals slaughtered. I do not use any of these and I pay for my own house. But the cash expenses, we do know when they only take out the cash expenses, that is only 60 percent of the actual expenses according to these USDA figures, it ranges between 60 and 65 percent. The other 30 to 35 percent or 35 to 40 percent is the cost of replacement of tools that you were asking about, Congressman Jontz, and the cost of the land and they are not including this in. When you include this in, there is no profit. You go into a loss. And they called this a net cash income at first, then it becomes net income, and then it becomes income. And the papers are calling that income now of $57.7 billion of record income. Where does it come from? It is printed in red because everything in here is a minus figure.

Thank you.

[The prepared statement of Mr. Erb appears at the conclusion of the hearing.]

Mr. GLICKMAN. Thank you very much. Mr. Plank.

STATEMENT OF ALBERT DWIGHT PLANK, DIRECTOR, STATE EXECUTIVE COMMITTEEMAN, INDIANA STATE GRANGE

Mr. PLANK. Mr. Glickman, Ms. Long, and Mr. Jontz, the sentiments of the Indiana State Grange.

The farm bill should not wait till after the Uruguay Round as farmers should know what directions farm programs are going, so they can plant crops accordingly. We recommend to keep the 1985 farm bill with these changes.

Small farmers say it is not right to not have more than one small set-aside plot less than 5 acres. This penalizes the small farmer because if he has small fields and may have wheat and corn planted, he would not be able to set aside in each field even if these are across the fence from each other. But a large farmer takes his fences out and can have his plot anywhere. Some think the Government should ease out of ag as exports increase the farming industry receives 1 percent of the Federal budget. The farmer spends much more than they receive compared to the other government subsidized businesses.

Marginal ground with erosion-CPR land-should be kept in this program but be allowed to raise timber for pulp wood as there is a shortage of this material on this kind of land.

The Food Security Act of 1985 met its major objectives and should be kept with its current changes.

Swampbuster-wetland. We believe small plots of less than 11⁄2 acres should be allowed to be drained without being penalized. There should be more flexibility in cropping such as planting another crop in demand like tomatoes, pickles, canola, oats, soybeans, and so on without losing your base. At present you are forced to raise a full base with set-aside or lose a percentage of it.

And good old LISA needs more research on perforation rate before the rates of chemical uses can be regulated. I do not believe it is possible to eliminate them completely. We will need more testing of wells and our water source. I think there should be-this is off the record-less scare tactics being used like where was it I was reading where you could eat 28 million bushels or thousands of bushels before you got enough chemical to maybe cause you to have cancer, something like that. I think this is way out of line. I mean they blow it out of proportion, just like the cranberry scare several years ago.

The grange supports the Marketing Loan Program as a replacement for the present Commodity Program. A modified version is contained in the 1985 act for cotton, rice, and honey-also for wheat and feed grains at the discretion of the Agriculture Secretary. We believe this program should be applicable to wheat, feed grains, and soybeans. In fact, it could be more effective as a "pure marketing loan."

The marketing loan is a new concept for the Commodity Loan Program by which farmers who place their crops under loan with the Commodity Credit Corporation would repay their loan at the original loan level, or at a level that has been determined by a set formula of domestic or world market prices, which is lower. The other difference between a "pure" marketing loan and a regular loan program is that a "pure" marketing loan is a recourse loan

that must be paid back whereas a regular loan is a nonrecourse loan that the farmer can repay by abandoning the crop to the CCC as full payment.

Listed below are many of the benefits of the Marketing Loan Program that appeal to the farmers, export interests and the Government:

The formula would allow U.S. commodities to be competitive on the world market.

The repayment formula will maintain an adequate income support for producers.

A marketing loan will allow the market to clear by eliminating the market-interfering aspects of the current program.

It will reduce the need for supply management programs but when such a program is necessary, it removes the incentive for our competitors to expand their production because we will remain price-competitive, thus encouraging our competitors to share in our effort to adjust production when surplus commodities exist.

The marketing loan will avoid the Government's programs of storing surplus commodities which become costly to store which may ultimately reduce prices.

And I also feel like our panel here that the grain terminals should not be paid any more than the individual farmer is paid for grain storage. It is simply not fair to pay different prices for the same services.

Sincerely, Dwight Plank, Indiana State Grange executive committeeman.

[The prepared statement of Mr. Plank appears at the conclusion of the hearing.]

Mr. GLICKMAN. Thank you very much.

I want to thank all the panelists for their excellent statements. I will just make a couple of comments. One, Mr. Fear, I agree with you totally all of the things you said but one thing is this problem with planting alfalfa under legumes and violating sodbusters. This is a problem we need to take care of in the 1990 farm bill. Responsible cover crops ought to be able to be planted without violating sodbusters, you are correct. The ASCS offices have worked with farmers in my state to deal with this problem. I do not know if

Mr. FEAR. Yes, they have worked well with it.

Mr. GLICKMAN. We need to clarify it because it did not make a lot of sense and it has caused a lot of grief.

One point on food safety, a couple of you mentioned it. It is interesting to note that fish is not required to be inspected. We are going to change that in the 1990 farm bill. I want you to know that. We are working on that. Congressman Stenholm of Texas, who chairs the Livestock Subcommittee and I have been working on it. Most Americans do not know-their meat is inspected but they think that their fish is inspected-well, while most fish is safe, it ought to be subject to health and safety inspections like meat is. We are probably going to do that in next year's farm bill as well.

Mr. Erb, I appreciate your testimony too, and I think it offers a good perspective at these hearings. You know a lot of folks do not necessarily agree that the 1985 farm bill was Nirvana, heaven on