Farm, Nutrition, and Bioenergy Act of 2007

Floor Speech

FARM, NUTRITION, AND BIOENERGY ACT OF 2007--Continued -- (Senate - December 11, 2007)

BREAK IN TRANSCRIPT

Mr. CONRAD. Mr. President, I want to respond to the proposal by Senator Lugar and Senator Lautenberg to substitute the Food and Energy Security Act of 2007 with the so-called FRESH Act.

Senator Lugar and Senator Lautenberg are senior Members of this body, very much respected by Members on both sides. I have enormous respect and admiration, and I even have affection for both of them. But I must say, when it comes to farm policy, we have a stark disagreement. Senator Lugar believes we would be better off if we simply disposed of the current farm safety net in favor of a revenue program with no price floor. Savings would be invested in conservation, nutrition, and specialty crop agriculture. I believe those are good priorities, in terms of where the money would go, but I remind Members of the Senate that the work of the committee--by the way, the bill came out of committee without a single dissenting vote. It is true we didn't have a rollcall, so I don't know how members might have expressed themselves, but nobody asked for a rollcall or asked to be recorded in the negative.

The fact is we increased each of those areas that is addressed in the FRESH Act. We increased conservation over the baseline by $4.5 billion. We increased nutrition by $5.3 billion over the baseline. We increased specialty crop resources by $2.5 billion. Those are all very large increases. The biggest percentage increase went for conservation.

When it comes to investing in the things Senators Lugar and Lautenberg care about, the committee did a good job. So if this is not about investments in those areas, what is the real difference? I don't think this bill is about resources for other areas; I think it is largely about finding a way to gut existing commodity programs.

I have heard statements in support of the FRESH Act that amount to broadsides against existing policy. So let me respond to some of the arguments we have heard from the other side. Let's examine the attacks on the distribution of farm program benefits.

The critics say only 43 percent of all farms received payments. The critics say that 57 percent of farms unfairly operate without a safety net. The critics say the largest 8 percent of all farms receive 58 percent of the farm program benefits. All of those statements have some element of truth, but they don't tell the whole story. They don't come close to telling the whole story. In fact, taken alone, I think they completely misrepresent the reality of the farm program. Let's look at each of these claims in turn.

According to the Economic Research Service, farming operations receiving no Government payments had an average household income of over $77,000 per year. But the farm income portion of that was only $1,000. So when the assertion is made that almost half of the farms get no farm program benefits, guess what. Those people are not farmers. They have an average income of $77,000, and only a thousand of it comes from farming operations. Those people are not engaged in farming in any meaningful way. What this tells me about the 57 percent of farms operating without a safety net is that a big chunk of them aren't much into farming at all. The largest portion of them farmed only marginally, or do so as a hobby.

Our own son is in that category. They have a little farm, with over $1,000 in receipts. So they are counted in all of the statistics as being a farmer, because that is all it takes--$1,000 of receipts--and you are counted as a farmer. But he has a job in town, a full-time job. He is basically a hobby farmer. Yet they are saying he should be getting farm program benefits; that it is unfair because he is not getting farm program benefits. No. That applies to the first argument.

The absurdity of trying to claim that these producers are terribly mistreated is the fact that the FRESH Act's own risk management accounts would not allow them to participate either. So I guess what is good for the goose is good for the gander. That is because the eligible participant is someone with an AGI from farm operations of $10,000 or more. They would not count them as farmers at all. If the proponents do not call the majority receiving Government payments farmers, why should they be clamoring to find support for them in the commodity support provisions?

Part of the problem is the way farmers are defined for statistical purposes. To quote from the Economic Research Service:

Most establishments classified as farms are too small to support a household because the official U.S. farm definition requires only $1,000 of sales to qualify as a farm.

So the first criticism we hear is without merit. I would like to think of farm households as those that actually obtain a significant portion of their income from a farming operation. When you look at those households, you get a completely different picture.

This chart shows where Government program payments go when compared to gross receipts of farming operations. You see a very different reality. If you look at all of the farms with gross farm receipts above $50,000, you will see that only 23 percent of roughly 2 million total farms are responsible for 90 percent of farm receipts. But their share of Government payments is actually somewhat less, totaling just over 81 percent.

So here is the reality. Those with receipts of over $50,000 account for only 23 percent of farms, but they do 90 percent of the business and they get 81 percent of farm program payments. Actually, it is somewhat less than their percentage of actual production.

The group signified on the left, with sales less than $50,000, constitutes nearly 77 percent of farms, but produces about 10 percent of gross farm receipts. Yet their share of Government payments is nearly double their percentage of those gross receipts. Let me emphasize that: 77 percent of farms, as tallied by the USDA, are below $50,000 in receipts. They do about 10 percent of the production and get a disproportionate share of the benefits.

It is amazing what different conclusion one reaches when one actually researches the underlying facts.

I will repeat that first statistic again. Farms with gross receipts of over $50,000 account for only 23 percent of our farms, but they produce 90 percent of the foodstuffs we consume, and they receive 81 percent of Government payments.

When you drill deeper into the data, farms with receipts of less than $10,000 constitute 58 percent of total farm numbers. Yet they produce less than 4 percent of total farm production and still receive 7 percent of Government payments.

So the conclusion one reaches, if one actually examines these data, is totally different than the story being told by the critics. These statistics from USDA's Economic Research Service clearly show how Government payments go to those actually producing the food. That is what is happening. You get farm program benefits roughly in relationship to your share of production. That is the way it is designed to be. That is the way it is. Don't let anyone try to tell you something different.

To the extent there are farming operations that don't participate and yet provide a great deal of sales, this farm bill seeks to help them through investments in specialty crop agriculture and a broad-based disaster assistance program. But to suggest that the vast majority of farms is being mistreated by the farm program is simply false. It is not true; it is not fair; it is not accurate. In fact, the smallest producers get a bigger share of Government payments relative to receipts than do the largest producers.

Also, I seriously question how replacing the marketing loan, countercyclical, and direct payment programs with area and farm revenue programs would change how payments are distributed.

In fact, these free ``revenue'' programs would almost certainly follow production, and they don't have any internal payment limitations or adjusted gross income limitations provided in the titles being eliminated. They would concentrate payments even more.

The PRESIDING OFFICER. The Senator has used 11 minutes.

Mr. CONRAD. I ask to be alerted when I have taken another 5 minutes.

The PRESIDING OFFICER. The Chair will do so.

Mr. CONRAD. The FRESH program would actually concentrate payments even more. Wouldn't that be ironic? The proponents of the bill are trying to make the case that the policy contained in the committee bill violates our trade commitments. All of this talk of trade violations or potential actions against the United States on trade can be a bit confusing for Members. Let me attempt to reduce the confusion.

First, the current WTO rules limit our trade-distorting domestic support to $19 billion a year. The Congressional Budget Office says payments under this farm bill will be less than that. When it comes to potential actions against the United States by countries such as Brazil and Canada, it appears they are throwing the kitchen sink at us, hoping to make something stick. It has gotten so ridiculous that Brazil even claims that excise tax exemptions on off-road fuel are a trade violation. You have to admire them for their creativity. We cannot write a farm bill based on some agreement that has yet to be written. Sometimes we do a pretty good job of predicting the future here, but I don't know how we can direct what a future trade agreement might look like. To say we are violating an agreement that has not been written, made, or passed is an empty exercise. It is our responsibility to write a policy for agriculture that is in the best interests of America, not in the best interests of those who want to be critics.

The reductions in support to crop insurance that are contained in this alternative proposal could destroy the program. Cutting $25 billion from the crop insurance program will lead to companies simply walking away and crop insurance not being available when it is desperately needed.

I believe crop insurance needs a serious look, needs reform, but taking an axe to it is simply, I believe, simplistic and counterproductive. I would rather we do a serious study on how to reform crop insurance and follow those results, rather than an ad hoc vote here on the floor.

I want to direct colleagues' attention to the potential catastrophic impacts this bill would have on farm income if this amendment were adopted.

Texas A&M did an analysis by actually going to farms across America and looking at their books and records and determining the effect of this amendment on those farms and their incomes.

Twenty-four of the twenty-five representative crop farms would see more than a 25-percent reduction in their cash income. Seventeen of the representative crop farms would experience more than a 25-percent decline in ending net worth by the end of the period.

With lower commodity prices the ``provisions do not come close to providing the same amount of support as the programs in the 2002 farm bill, and should such a low price scenario occur in the future, most of the farmers and ranchers would not be able to survive the erosion in farm income without some additional Government support.''

This is a bankruptcy proposal for rural America if prices turn down. Let's be clear about the consequences of this amendment. It can be summed up in two words: mass bankruptcy. That will be the result if a proposal such as this is adopted and, God forbid, prices decline, and decline sharply, and we have seen that repeatedly in agriculture.

Essentially, what this study says from Texas A&M is, if prices remain high, the impacts of this bill would be substantial, but when low prices return--and they have a bad habit of returning in agriculture--proposals such as the FRESH Act would pull the rug out from under our producers and result in financial ruin for them. That is what the experts at Texas A&M have concluded.

I don't think the American people are interested in mass bankruptcy in rural America. For those who would like you to believe that our farm policy has not benefited the people of our country and, indeed, the people of the world, I will leave my colleagues with the words of a recent Wall Street Journal article.

I ask for an additional 5 minutes.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. CONRAD. This is what the Wall Street Journal said:

The prospect for a long boom is riveting economists because the declining real price of grain has long been one of the unsung forces behind the development of the global economy. Thanks to steadily improving seeds, synthetic fertilizer and more powerful farm equipment, the productivity of farmers in the West and Asia has stayed so far ahead of population growth that prices of corn and wheat, adjusted for inflation, had dropped 75 percent and 69 percent, respectively, since 1974. Among other things, falling grain prices made food more affordable for the world's poor, helping shrink the percentage of the world's population that is malnourished.''

We never hear it from the critics, but the Wall Street Journal is reporting that one of the key reasons for the economic boom in the world is the increase in productivity in agriculture led by the West, led by our country. That amazing increase in productivity has in real terms dramatically reduced the cost of corn and wheat by 75 percent and 69 percent since 1974. I think those words should be taken to heart.

U.S. agricultural policy has provided enormous advantages to all of our citizens and to the world. I cannot imagine what would happen without it.

I conclude by reviewing the distribution of funding for this package and the investments made in nutrition and conservation.

Under the bill proposed by the Senate Agriculture Committee, the amount for commodity programs is reduced more than 11 percent, to 13.6 percent of total outlays, while establishing many new programs to benefit speciality crop producers.

Spending for nutrition programs remains at about two-thirds of total outlays. Let me repeat that. Where is most of the money going in this bill? Where is most of the money going? It is going to nutrition. That is the bill that came out of the committee. Sixty-six percent of the money is going for nutrition. We don't hear that from the critics, but that is a fact. Less than 14 percent is going for commodity programs, and that is an 11-percent reduction from the previous bill.

This bill, the bill out of committee, represents a significant redirection of resources in areas we all know is necessary. And we didn't need to gut farm programs to make these investments.

I hope my colleagues will reject this proposal and support the committee package that is before us. It is responsible, it is good for taxpayers, it is good for farmers and ranchers, it is good for the economy, it is good for nutrition, it is good for conservation. It deserves our support.

BREAK IN TRANSCRIPT

Source