For over 10 years now, the Indiana and National Corn Growers Association have been supporting ethanol, both to lessen our dependence upon foreign energy sources and to adopt more environmentally sound sources at home. Both Congress and the President are interested in doing everything possible to preserve our environment. We would propose that the Federal Government enact legislation requiring all federally owned vehicles to use ethanol-blended fuels. In this way the Government can demonstrate its commitment to a "clean-air" policy.

And as a little aside on that particular issue, I would like to add that about 10 years ago when ethanol was first coming into the picture, we made a decision on our farm to try out ethanol which was very new. We tried it out, thought it worked very well, and since that time we have logged somewhere between 450,000 and 500,000 miles of use of ethanol on our farm, and with this kind of background, I think it would be very appropriate for our Federal Government to do something similar.

Along with ethanol, the market for industrial uses of corn has been expanding and this reduces the need for Government price support programs. If we are to be the world leader in industrial research or even keep pace with our competitors, we must commit to a vigorous research program to support and expand new and current industrial uses for corn. This should include the extension of the 6-cent per gallon exemption for ethanol to the Federal excise tax to the year 2010. We must also be mindful that new uses, such as degradable plastics, use only certain components of our crops, so continued research is necessary for a prosperous agriculture.

In closing, I am very pleased to appear before you today and I congratulate you for holding these hearings. It demonstrates to farmers like me that you and your colleagues have a genuine interest in facing corn farmers in Indiana.

Thank you.

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

Mr. GLICKMAN. Thank you, Mr. Eppley very much.

Mr. Pilotte.

STATEMENT OF NORBERT D. PILOTTE, PRESIDENT, INDIANA

SOYBEAN ASSOCIATION

Mr. PILOTTE. I wish to thank you, Mr. Chairman, and your committee, for having this meeting here today. I am Norb Pilotte, a soybean farmer from Brookston, Indiana. I appreciate the invitation to be here today. Mr. Chairman, I must say that Indiana soybean farmers are delighted that Indiana has two such able bodied leaders-Congressman Jontz and Congresswoman Long-on this

important subcommittee.

Soybean farmers are especially concerned about several key titles on the 1990 farm bill, the soybean farm program, conservation and environment, international trade and research.

Farm policy. A group of soybean farms active in the American Soybean Association (ASA), including Tom Milligan from Dana, Indiana, is working to develop policy options for consideration by this subcommittee to be presented this fall.

The majority of soybean farmers want more planting flexibility so they can plant for the market and not for the mailbox. Why can we not make planting decisions based on what is best for our farming operations and what is best to capture market profit opportunities? Now, many farmers are in "base lock," which forces them to plant as much program crop acreage as possible to preserve base and discourage sound rotation practices. More balanced crop rotations mean better pest and disease control, conservative use of fertilizer and chemicals, and lower farm production costs.

Soybean farmers also see the need for soybean income support which is in balance with support levels of other commodities. To give farmers greater planting freedom, it is important that the Government income supports not encourage production of one crop over another so that farmers can make neutral planting decisions between crops.

Environment and conservation. Another top concern of soybean farmers is environmental/conservation policy and its impact on future soybean production. Virtually all soybean farmers believe environmental policy will affect their ability to farm profitably even more than Government farm programs. We need to have balanced environmental policies which protect both the farmer and the environment.

Soybean farmers see an increased need for technical assistance on their farm. Educational efforts through the Extension Service or the Soil Conservation Service are a must to curb possible ground water contamination. Additional research in the ground water and surface water areas is essential to preserve the Nation's water resources. USDA should take the lead in organizing and implementing this necessary research and education.

Soybean farmers support voluntary incentives to improve conservation/environmental practices. For example, since there is some doubt if 40 or 45 million acres can be enrolled in the CRP, soybean farmers think the definition of eligible land should be expanded to include "environmentally sensitive" land.

As for LISA-Low Input Sustainable Agriculture-farmer concern for our natural resources and farm economics for our natural resources have already moved farmers in the direction of "low input" practices. Additional funding toward biotechnology research, integrated pest management, and best management practices is a positive approach to further encourage wise use of agricultural chemicals without jeopardizing high quality profitable production.

Agricultural trade. Since half of the U.S. soybean crop is exported, a strong trade title is very important to soybean farmers. The more successful the United States is in exports, the less the income support provisions will be needed. Soybean farmers face extremely tough competition in foreign markets from South American soybeans and soybean products, Malaysian palm oil, Canadian rapeseed, and European Community oilseeds. Much of this foreign production is subsidized.

Important programs for soybeans in the trade title are export credits, Public Law 480, the Foreign Market Development Cooperator Program, and the Targeted Export Assistance Program.

In regard to research, soybean research is very important to future profits. Especially important is authorization for aggressive basic and applied research on production efficiency, soybean quality improvement, new uses, improved use of farm chemicals and biotechnology. A sound agricultural research and information distribution system is very important if agriculture is to increase competitiveness and profits. Otherwise, our foreign competitors will outpace us.

I liked that remark awhile ago about the soybean oil. We could use that in Washington and we could get rid of a ton of soybean oil. I want to thank you for this opportunity to be here today. I will be pleased to answer any questions.

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

Mr. GLICKMAN. Thank you very much.

Mr. Smith.

STATEMENT OF DALE S. SMITH, DISTRICT DIRECTOR, INDIANA CORN GROWERS ASSOCIATION

Mr. SMITH. Good morning, Mr. Chairman, and committee. I am Dale Smith, a corn, soybean, and popcorn and seed corn grower from Rochester, Indiana. As a member of the Dale Smith farming operation, I am very interested in controlling risk and profitability. I would like to address the following inequities of the 1985 Food Security Act and encourage consideration of these suggestions.

The $50,000 payment limitation is probably the most single irritating problem facing family farmers today. The United States recognizes that we must be competitive in the world market. This means selling U.S. commodities below my cost of production. I, as a producer, am compensated by this disparity by a deficiency payment. The 1989 deficiency on corn is projected to be 89.6 cents per bushel. The $50,000 limit means that I cannot raise more than 429 acres of corn with an irrigated yield of 130 bushels. Any economist will verify that very few family farms can survive on 429 acres of corn. Our only alternative to this unreasonable policy is having our family operation running at less than peak efficiency. The end results are the same to USDA at a considerable increase in expense to my operation. Hopefully this serious problem can be rectified in the 1990 Food Security Act.

Flexibility. We have talked about flexibility today, a lot of people, everybody. An effective farm policy must allow farmers to produce the opportunity to produce for the marketplace. To do this, flexibility must be built into the new farm bill. As a producer, I strongly encourage the USDA and Congress to consider the following provisions to be enacted in the farm bill.

Eliminate cross compliance of commodities. Most farms have been combined as a unit to practice better land management. By doing so, our base has also been combined. However, this restricts my planting flexibility. For example, the market today is telling me to plant $3.50 per bushel wheat, while I am required to plant $2 per bushel corn or be out of the 1990 Farm Program.

Proven and new irrigated acre yield recognized. The drought of 1988 forced producers to examine ways to control risk. Irrigation is

the most effective way I know. It not only controls my exposure to loss, it also eliminates the need for the USDA or Congress to be concerned about another $4 billion disaster bill. However, because I cannot prove my yields, I do not receive my irrigated yield thereby discouraging producers from controlling their risk. The end result is that it adds to the cost of farm programs. Proven yields are also recognized as a job well done, through better farming practices. This encouragement reduces USDA's budget outlays over the long term. FmHA and FCS "write-down" programs and additional disaster programs only encourage farmers to wait for a bail-out. Encourage producers to control risks and farm program costs will be controlled.

As a seed corn producer, I am faced with an additional burden regarding yield. ASCS officials have said my yields for crop insurance and disaster payments will be based on actual yields. However, this is not how I am compensated by the company for which I am producing. It would be more realistic for my yields to be based upon my "paid yield" rather than my yield harvested, due to the significant differences between commercial corn and seed corn production.

Better yet, I feel that maybe seed corn should be reclassified as a speciality crop similar to popcorn. At the very least, a producer should have the option to declare these acres as program acres or not-popcorn or seed corn, or other speciality crops. By doing this, USDA is urging farmers to produce for the marketplace and it would allow producers more flexibility. One of my concerns is that the good rotation practices continue to be hampered by the USDA restriction on seed corn classification.

Some additional things I think should be in the 1990 Farm Pro

gram.

One, paper flow melt-down, multiyear certification, multiyear set-aside, verify it one time and cut down some of the paperwork. Continuance of 0/92.

Maintain support for farm income through target prices and nonrecourse commodity loans.

Four, provide EEP to liquidate CCC stocks at world level prices rather than Government stockpiling. All surplus commodities should be included.

Eliminate disaster payments and make Federal crop insurance both workable and affordable. Coverage should also be expanded to specialties.

Thank you for allowing me to address this committee. Hopefully, you will consider some of these points in your farm act.

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

Mr.

GLICKMAN. Thank you very much, Mr. Smith. It is an excellent statement.

Mr. Kirkpatrick.

STATEMENT OF BRYAN D. KIRKPATRICK, PRODUCER,

GREENTOWN, IN

Mr. KIRKPATRICK. Congressman Glickman, Congressman Jontz, Congressman Long, I thank you for this opportunity to allow me to testify in front of you.

Some of the changes I would like to see in the 1990 farm bill-I have not heard one person say anything about the crowded ASCS offices. I have not heard one person say anything about redeeming certificates. I have not heard one person say anything about accountants who don't believe the farmer or understand when discussing PIK and roll profits from the use of certificates. One-half of the total time spent with the accountant is discussing PIK and roll, therefore, the accountants bill is twice as much as it should be for preparing the farmer's tax returns. That is beside the point.

Mr. GLICKMAN. Maybe it is beside the point but the point is made.

Mr. KIRKPATRICK. I think it is important that we look at the farmers' needs and that farmers' needs in my opinion is higher loan rates. I feel like the 1990 farm bill should be based upon higher loan rates rather than cash payments and certificates to the farmer. How long is it going to be before the people who work in factories are going to say this farmer drew $30,000 from the Government? The Government should raise the loan rates to levels that allow a farmer to earn enough money to survive, he can harvest his crop, go in and get a loan on that crop at a decent price to make a living.

You say, well, we have to get rid of that grain. Right. What you do instead of writing checks to the farmer is if it is necessary, you subsidize the sales of that grain after it becomes Government property. You can subsidize underprivileged nations. And another thing, we talked about foreign aid, there are people in the world. starving to death, and so forth. The best way you can give foreign aid to people who are dying of starvation is give them medical supplies and food. Take that grain and process it into food and give it to the people who are starving.

The 1990 farm bill should be written with the intention of phasing out direct cash payments to farmers if at all possible. In 1984 the loan rate for corn in Howard County, Indiana was $2.55 per bushel. Today that loan rate for the same volume of corn is $1.67 per bushel. In 1984, the loan rate for wheat was $3.30 per bushel. Today, it is $2.13 per bushel. In 1984, the loan rate for soybeans, which was too low, was $5.05 per bushel. In the 1988-89 crop year it was $4.81 per bushel. Soybeans should be raised to no less than $6.50 per bushel. How do you expect farmers to earn a respectable income when the Government sets the pace for lower prices for our products, while all other costs to produce a crop keep increasing. The new farm bill should be written for the farmer and the consumer who pays our taxes, not the middle man.

In 1985 we took a loan on 50,000 bushels plus. We kept the corn, but the Government paid the storage on it until we redeemed or PIK and rolled it. I redeemed that corn a year ago. The storage on that corn loan that was paid to the place where we had it stored by the Government was $1.04. We talk about the cost of our Govern