like to speak to briefly; the 1990 Farm Program proposal; and how it interacts with what we have now and how it can supersede some of those areas. In the end is a summation or basically a conclusion. First I would like to speak to what the goals of a Farm Program are. I think we are all in agreement with what those are. We want, as farmers and as bureaucrats and congressional Members, I think we all want to produce for the market and not the Government granary. We would prefer to receive our income from the marketplace. We would like to have equal income opportunity with our international brothers. We have examples of what happens in the ECC and Japan, et cetera. Saudi Arabia is a prime example of grower subsidies going on internationally. We all want wholesome, plentiful food at an attractive price.

I was on board as president of the National Association of Wheat Growers in 1984 and had an opportunity to testify before your committee and other various committees about the program. I would like to comment on some of the problems I perceive in that program.

Essentially the Food Security Act of 1985 was driven by a fire sale mentality. We had stocks that we needed to get rid of. It was also linked to a voluntary production control program. Voluntary meaning funding. We essentially bribed people to get into the program so we could control production.

It was designed to wring excess capacity and resources from the agricultural complex. I think we succeeded admirably with the benefit of 2 succeeding years of drought.

The Conservation Reserve Program which I testified in favor of before your committee has had some impacts on rural communities, particularly those that have low production and highly erodible land. It was a big mistake to allow a cap of 25 percent. It should have been lower. It has had some tremendous impacts on those specified areas. I live in one. I know. Our Main Street businesses are practically decimated. It has had a disastrous effect.

I also testified in favor of encouraging rural development and mounting an effort to assist those communities. We are now finally beginning to address this issue belatedly and I think in a very inadequate manner at this point. It is going to take some real thought and work.

The "Mississippi Christmas Tree" triggered voluminous rules out of ASCS. I think it disillusioned not only the farmers but the ASCS local staffs, too. They worked their fannies off out there trying to keep everybody abreast of what was going on. It was really a traumatic experience for all of us.

I think this points up that we need a more simplified program. I hope to present some ideas toward that end today.

Congress needs to reexamine their subsidy programs. I refer to import quota cases. I noticed in reading an editorial by Marshall Loeb who is the managing editor of Fortune magazine, reported that the automobile import quotas saved 55,000 jobs annually. It is costing $5.8 billion to do that, which comes out to $105,000 per job saved.

The carbon steel quota system which we are now readdressing, has run as a 4-year quota system, is calculated to save 9,000 jobs at

an annual cost of $6.8 billion and it works out for a subsidy of $750,000 per job.

How does this square with a $50,000 limitation in the Farm Program? How many agricultural jobs are we saving and how does that figure out? What is the equity there? Have we really stopped to consider what is going on in those quota programs?

I think Congressman Smith would be extremely interested in what's happening with the beef quota system. What it is doing to our own local industry.

We have some other legislative bruises out there. Deregulation, in particular. The transportation industry has allowed the railroads to abandon rural lines almost at will, with no oversight from the ICC. I have personal experience there, too. We were able to turn that around, but I see we were just listed as a category 1 again as a first step toward abandonment again.

Deregulation also increased truck traffic on our rural roads. What we are looking at in our community is a secondary road that was built back in 1939. Deregulation will put more trucks on those roads increasing the expenditures for the secondary roads and which will also be financed through some Federal contribution.

Going further, let's look back at our tax codes which we just restructured recently. It removed the income averaging option from agriculture, which is admittedly, a very cyclical industry. It is abusive in that it is costing us more taxes, a lot of us do not have those extra funds to pay.

We also lost, compared with other industries, in terms of the investment credit phaseout.

I would like to speak to the interstate banking system. We have a bank in our community which is now an interstate bank. Less than 10 percent of their deposits are on loan in our county. We have a local bank and they are up to the limit in terms of their local loan capacity. This points out the difference in interstate and local banks. Interstate banks take those funds to the metropolitan area where they can get a higher interest rate. It is good business for them, but it is poor business for the local community.

Next I would like to address the 1990 Farm Program. We are at a moment in history where we have a unique opportunity to do some restructuring of the 1985 Farm Program. We are at a point where we have very low stocks, and we are also at a point where we have a good price structure.

I propose that you consider initiating a production marketing loan for producers of feed grains, wheat, rice, and upland cotton, and maybe even soybeans. This loan would be a 9-month recourse loan, not a nonrecourse loan. The idea being that we are going to move our stocks. We are not going to put them in Government granaries any more. We are going to put them on the international market.

The eligibility for this program would be that you would sign up for the Farm Program. Those not wishing to be in the farm program could go to the local bank and put up their grain for collateral and store it at their own will, so it does not inhibit individual activity.

The loan level would be a function of the commodities international market price, plus an allocation designed to offset producer

subsidy equivalents in other nations. This relates to the fact that we would like to have a level playing field, and would like to have an income not equal but at least equivalent to that of other international producers.

Centrally planned economies and producers served by grain boards and other intervention schemes place our farmers at a distinct disadvantage.

The PML, producer marketing loan, outlays would build a safety net assurance for adequate food supplies, maintain stocks for our food aid commitments, and Public Law 480 programs, and would provide competitively priced commodities for international trade, and contribute toward a positive trade balance.

Obviously the producer marketing loan would replace the Export Enhancement Program. At the same time it would nicely accommodate the GATT objectives because you are not impacting the price of grain as it leaves our borders, which is one of the guidelines in the GATT considerations.

In speaking to the unique time, we have been as high as $26 billion in terms of Farm Program costs. In the last 3 years they will average about $12.5 billion. So we are making progress.

I would like to make some comparisons between the production marketing loan and the current program. This relates in terms of the operational impact. The current target price, deficiency payments, and nonrecourse loan would be obsolete under the production marketing loan. The income supplements to equalize PSE's between competitive trading nations is a complex subject. I do not think we can really address it here, but it can be an element of the PML.

The acreage reduction programs, ARP; paid diversion; Acreage Conservation Reserve; 0/92 and 50/92, would also be rendered obsolete by an annual bid system to retire surplus production acres. From my perspective I think what you need to address is a public bid, an annual public bid on ARP, the Acreage Reduction Program. The function of this would be to estimate and control the supply/ demand in terms of marketing and domestic demand. USDA already does this through their supply/demand projections. We already have in place a facility to implement a public bid system. It would be similar to the CRP. People would present bids and it would be based, practically, on the basis of the production of the land. You essentially go back to proven yields basis.

One of the beneficial points of this is you do not build burdensome stocks. You manage them from year to year based on supply/ demand projections. This proposal gives you a much closer control of the production.

There are immense savings in this approach from my perspective. Program, history will prove that it costs us almost $1 a bushel per year to store our grain in public warehouses that the Government owns by the time you get, handling, storage costs, and opportunity costs combined.

Food security reserves can be established out of our current CCC stocks. Also, it would seem to me that there is a market neutral opportunity when you roll these grains out of Government stocks, if you would buy and sell them simultaneously. It would be market

neutral instead of what has happened in our catalog sales, allowing USDA to influence pricing levels.

The commodity certificates, the PIK and roll, the posted county price, the farmer-owned reserve, and reserve roll over would also be history under this proposal.

Some of the conclusions I would like to speak to is that the production marketing loan concept and the annual individual ARP bidding opportunities for retirement of commodity production acres to avoid excessive market supplies, provides program participants an opportunity to produce for the domestic and international markets at competitive price levels. It allows value added processors to be internationally price competitive. It also contributes to a positive trade balance.

There are substantial program savings inherent in this program. The administrative workloads and costs will be reduced. Producers are the benefactors of what is essentially a two-price system.

There also needs to be some attention paid to the macropolicies that impact trade competitiveness. The monetary and the fiscal measures, the trade agreements that favor nonagricultural sectors at our expense, particularly, this must be given attention now because of the current GATT Round.

Attention must be paid to the crumbling infrastructure of rural America. We must correct the contradicting energy, transportation, and tax policies that are emasculating our rural areas.

One thing I cannot emphasize too much, and that is, we are at a unique point in terms of production and marketing opportunities in this country. If we are to change our Farm Program, now is the time to do it. This is a very important period in our history.

I want to thank you for bringing your committee to Pendleton and allowing me the opportunity to testify. I am pleased to see a lot of my old friends and faces up here on the main platform. Thank you.

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

Mr. GLICKMAN. Thank you very much.

Mr. PRYOR. May I make one parting comment?

Mr. GLICKMAN. Sure.

Mr. PRYOR. In November of this year, the weekend following Thanksgiving, the three States of Oregon, Washington, and Idaho will have a joint convention of wheat growers at which time we intend to address Farm Program issues that are timely, and hopefully submit some consensus statements at that point, if not before that date. You are certainly invited to participate at that time and join us as we interact in reaching more consensus in the North

west.

Mr. GLICKMAN. When is it?

Mr. PRYOR. It begins on the Sunday following Thanksgiving in Portland, Oregon, at the Jantzen Beach Red Lion. November 26-29. We would be glad to have you there.

Mr. GLICKMAN. Let me first of all thank you all for your testimony. It was excellent. I want to ask Mr. Coppock something. Excuse me because I am not familiar with the universal soil loss equation, is this a computation or a method that the Soil Conservation Service has come up with?

Mr. COPPOCK. It is an equation that has been around for quite some time.

Mr. GLICKMAN. It has?

Mr. COPPOCK. Yes. I think it works rather well in the Midwest. But in the Midwest, remember, you have summer rainfalls. The erosiveness of those raindrops coming down dislodges soil particles and they like to wash. This has all been figured in, and I think the equation works rather well in the Midwest. Out here where we have this different rainfall pattern, as is in the one chart, we have a very gentle winter rainfall and not much happens unless we have frozen soil. The equation does not work very good. We need to modify the thing.

However, the Soil Conservation Service was given the job of writing compulsory plans. They used the best thing they had. It was the equation. It is a model. I want to call it a model. So we use it, but we need to get together, and in the 1985 act there are some key figures which come out of this equation that showed up in the writing of the bill. That is why I am saying I have to be specific even though you are writing a general bill.

Mr. GLICKMAN. I understand that, and I think it is most important that you be specific. These are the kinds of problems we can and will address, as long as we know about them in advance. If we do not give the USDA guidance, they will adopt a formula that is good for Kansas and has no relevance for Oregon.

Mr. COPPOCK. That is why I presented the climatic data and gave my comments on the model. We are having trouble with our plans that have to be written from that. I suspect that if I was an SCS technician I would use it. It is the best thing we have right now. Mr. GLICKMAN. This is extremely relevant testimony. On similar issues, I would hope the wheat growers up here could come up with those kind of solutions to problems. Farm policy has historically in this country been skewed to the Midwest, not even so much in Kansas. The Upper Midwest, corn country, has been basically the tail that has wagged the dog on farm policy. That has to do with the way the country was settled. It is not an insidious plot or anything like that. It is just the way it has happened. So it really is important that you get to Bob Smith and others these kind of specifics, particularly on soil conservation and environmental issues. As much as we may or may not like some of these concepts like LISA and others, there is strong public interest in reducing the amount of pesticide contamination in ground water and other environmental concerns. They are not going to die. As long as that is going to happen we have to make sure that we act as sensibly as possible, and that means coming up with the specifics that provide rule of reason. The kind of thing you just talked about is what I call hey, this is sensible what he is saying.

Mr. COPPOCK. I am not trying to say I am not going to do it. I am trying to say let's work out the best plan.

Mr. GLICKMAN. Sure.

I would like to make a point to what Mr. Reeder said. He talked about one of the things has to do with the freedom to farm. I just came back from the Soviet Union, I was there last week with the chairman of the full committee. We met with all sorts of folks. I was there 6 years ago. It is a changed Soviet Union.