The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“PRICE SUPPORT PAYMENT LIMITATIONS” mentioning the U.S. Dept of Agriculture was published in the House of Representatives section on pages H733-H735 on March 6, 2002.
The publication is reproduced in full below:
PRICE SUPPORT PAYMENT LIMITATIONS
The SPEAKER pro tempore (Mr. Pence). Under the Speaker's announced policy of January 3, 2001, the gentleman from Michigan (Mr. Smith) is recognized for 60 minutes.
Mr. SMITH of Michigan. Mr. Speaker, the agricultural industry in the United States over the last 100 years has contributed a great deal. As we develop this year's farm bill, we are now trying to decide, number one, how much should we pay in terms of tax subsidies to farmers, tax dollars going into subsidies to farmers, to make sure that the agricultural industry in the United States survives.
Farmers are facing record low prices compared to the last 20 years. In fact, in terms of what a bushel of wheat would buy, the wheat price today is much lower than it was 50 years ago.
What kind of policy do we want in the United States? We are now in a subsidy war, if you will, with other countries. Other countries have decided they are going to do anything necessary to keep their farmers operating, so they are subsidizing their farmers in these other countries substantially. Their extra production from Europe, from these other countries, go into what would otherwise be our markets, so the resulting overproduction from all over the world results in low commodity prices, and the low commodity prices today would not keep most farmers in business.
Subsidies in the United States represent about 17 percent of the gross income of the average farm. The average net income of an average farm is around 6 percent. So, again, without the subsidy payments, most farms in the United States would lose money every year.
Now, the irony is that farmers do not like to have this subsidy check coming from the government. They would much rather have a real marketplace, where there was real competition throughout the world, where they could compete and make good money farming. And make no mistake, our farmers in the United States can compete, if you will, excuse the expression, on a level playing field, with any other agricultural producers in the world in most commodities.
Our challenge right now is the Senate has passed one farm bill, and the House has passed another farm bill, substantially different in the concepts of where they want agriculture to go and what they want in the farm bill. That includes rural development, that includes the environment in rural areas, that includes the WIC program for food for infants and pregnant mothers, that includes the Food Stamp program.
Just as a footnote here, let me say how we have changed the U.S. Department of Agriculture over the last 50 years. USDA, that part of USDA that is involved in production agriculture, with farmers, now represents only about 25 percent of the total budget of the U.S. Department of Agriculture.
I am here tonight to talk about payment limitations to some of the huge mega-farmers in the United States. The Senate in their bill had provisions that incorporated a level of payment limitations in the hope that some of the large mega-farms would have some kind of a cap, some kind of limit on the payments they received, so there would be more money for what I would call the average mainstream farmer in the United States and some of the other programs in the agricultural bill.
We passed an agriculture bill back in 1996 that pretty much everybody supported. All of the farm organizations thought it was a good idea. What that was is the Freedom to Farm, and it was a phase-out of government subsidy programs. So over 7 years, the subsidy payments to farmers went down and down, and then in the eighth year farmers were supposed to produce strictly for the market.
What happened is the economy in Asia was tremendously disrupted and their purchases went down, and we had a glut of extra farm production; so prices went down, and even with the one subsidy phase-out payment, farmers were going broke, going out of business, going bankrupt.
Now we are developing this new farm legislation, and the question before us is should we have payment limitations on how much money any one farm operation can receive in payments from the Federal Government.
Let me give you one statistic. Right now, the top largest 5 percent of the farms receive 49 percent of the payments. Five percent almost receive half of all the payments. Some have suggested, look, we do have limits on payments. The fact is that we do not have real limits of any kind on price support payments.
Let me just spend a minute on price supports. In our farm programs, what we have is we say to a farmer that to cover at least their fixed costs, that we will guarantee a certain price, and if the market is less than that particular price, government will make up the difference between the current market price and what the Congress has thought to be a price that will at least cover most of the fixed expenses of that particular farm producing that particular crop.
Just for the record, let me throw in those price support payments. The national average now on rice is $6.50 a hundred weight; cotton is
$52.9 cents a pound; wheat is $2.58 cents a bushel; soybeans are $5.26 a bushel; and corn is $1.89 a bushel.
So for example, on corn, at $1.89 a bushel, if the current market price is $1.79 in that particular county, then the government will come up with an extra 10 cents per bushel for those farmers.
In terms of my interest in this area, I am a farmer from Michigan. I was born and raised on a family farm. I was on the United States Department of Agriculture State Committee in Michigan as its chairman. I came to Washington when Earl Butz asked me to come to Washington to help phase out some of the complicated farm programs in 1970, and we went from a stack about 10 feet high of program regulations for farmers down to maybe a stack a foot high of those regulations for farmers, and sold a lot of the storage bins that the Federal Government had that tended to depress prices for farmers even more.
We did not have problems with the kind of payment limitations in those years because the price of the commodity was higher than the support price. We had crazy programs for diversions and set-asides; and ever since 1934 when we first started farm programs, it has tended to be farm programs that had more benefit for the big, richer, larger farm operations.
{time} 1745
So a big, larger farm operation has a lower per unit cost of production; and, therefore, the difference in price to make it up was a little more beneficial to them in terms of adding to their profit than a small family farm that had a larger unit cost of production.
So what happened from 1934 through the 1960s and into the 1970s is the very small farms went out of business, and the medium-sized farms thought, well, if I buy that small farm and I work maybe another couple of hours a day, I can make a little more money for my family so that my kids have some of the same advantages as my city cousins.
Well, it tended to be progressive; and, pretty soon, what was considered a large farm was considered a small farm and the larger farms bought out those smaller farms. Now, over the last 60 years, we have gone from an average of about 40 acres, 50 acres per farm to 460 acres per farm.
Let me just give my colleagues a report from the Environmental Working Group that went to the U.S. Department of Agriculture and got all of the payments to all of the farmers and the farm operations in the United States. As my colleagues will recall, I mentioned earlier that 5 percent of the farms are now receiving 49 percent, almost 50 percent of farm payments that go out. If we were to have the kind of payment limitations that are in the Senate bill, it would save between
$2 billion and $3 billion.
I am going to move away from the mike and just write these numbers in. According to the Environmental Working Group, these are the top recipients of farm program payments between the years 1996 and 2000. I think everybody that is watching might be able to see that. They are Riceland Foods, $49 million; Farmers Rice Corporation, $38.2 million; Harvest States Co-op, $28.1 million; Tyler Farms, $23.8 million; Producers Rice Mill, $19 million. These are the mega farm operations. These are the huge landowners. These are not the 400 or the 500 or the 1,000 or the 2,000 or the 3,000 or the 4,000 acre farms. These are the 40,000, 50,000, 60,000, 70,000, 80,000 acre farms.
What I am suggesting in this short debate this evening is that my colleagues work to have a farm program that is more fair to the mainstream farmers of our country and to limit the kind of payments as we have a limit in the Senate bill. Some of the pressures, of course, come from the big operations that are getting these large payments.
Bear with me a minute and let me just go through a scenario of why there is no cap or limits on farm payments, and that has disturbed me quite a lot over the years, because we sort of fool people into saying there is a limit on price support payments. Because, in the law, it says there is going to be a limit on price support payments of $150,000 per farmer. That is what the law says. So a lot of organizations have tended to say, well, we have payment limits on price support.
Here is what happens. It is a little complicated. But once we hit the
$150,000 limit, then we have another program that is called a Nonrecourse Loan Program. So any farmer can take his rice, corn, wheat, cotton, soybeans in and give the government the title to that crop. The government will give him a loan that is equal to the price support payment, and then that farmer has the option of forfeiting on that loan and keeping the money, which gives that farmer exactly the same benefit as the price support payment in the first place. So it is sort of one can do an end run and still collect millions of dollars in price support payments.
I would just urge my colleagues and I would urge the conferees from the Senate and the House to look at the kind of payment limitations that still can be fair to farmers, that still offer some loan provisions to those farmers so that we do not have to glut the market at harvest time.
I spent 5 years as a deputy administrator for farm programs with Earl Butz, and then went back home to the farm. Anyone that thinks that it is not tough, making money on a farm, has not spent a lot of time on the farm. Farmers put in those 14- and 15-hour days. They work very hard. They are desperate to try to have the kind of provisions and services and piano lessons and the ability to send their kids to college. They are trying hard in working those extra hours to try to accommodate their family in the same kind of living as their city cousins. It has been very tough.
So we are losing a lot of our farmers, and we continue the trend of farmers and farms getting bigger and bigger.
I want to make it clear that the limitation amendment will only affect the very largest of recipients. For instance, the average acreage that would have to be taken in the last 2 crop years to reach the limit that the payment limitation sets was over 6,000 acres of corn. So, again, the average farm is 460 acres, but to reach the payment limitation in relation to the price over the last 2 years was 6,000 acres of corn, almost 5,800 acres of soybeans, almost 2,000 acres of cotton and 13,000 acres of wheat, 17,000 acres of rice.
I would note that the average farm size again is 450 acres. So these are very large farms to reach that limit.
Mr. Speaker, I would ask all Americans to work with us in terms of supporting American farmers. I have suggested that, number one, we want to try to talk these other countries into reducing their subsidies, because subsidies tend to encourage overproduction that has a chain reaction of extra supply, lowering the price, and so farmers end up receiving that much lower price from the markets. So we need to work together cooperatively with other countries.
But I think it is very important that we keep our agriculture industry, we keep and we do what is necessary in these farm programs that we are going to develop over the next several weeks to make sure we have a strong agricultural industry that can continue to provide the highest quality food in the world at the lowest percentage of take-home pay of anyplace in the world.
Again, we produce the highest quality of food at the lowest percentage of take-home pay of anyplace in the world. That efficient production in agriculture has allowed so many people that used to work on the farm producing food to try to survive to go into industry and manufacturing and now into the new information technology. So the agricultural industry that has been the most efficient of any industry; if we take the automobile industry or computers or anything else, the increase in productivity of American agriculture has surpassed almost every other industry.
In conclusion, I would say, Mr. Speaker, that I ask all of my colleagues to join with me when they talk to conferees and encourage them to come up with a payment limitation that is fair to all farmers, but not to give in to some of the pressure groups and the large, huge mega farm operations that are trying to put pressure on our conferees to continue unlimited payments without restrictions. Of course, let me add to that the grain marketers who tend to make a certain profit per unit of production also gain from having large volumes produced. So those industries, the grain industries, the cotton, rice, et cetera, those industries do not want the kind of payment limitations that is going to result in fewer bushels or pounds being produced because that is where they have their margin and markup on profits.
Mr. Speaker, it is going to be a challenge. I hope we can overcome that challenge, and I hope we can have the kind of payment limitations that helps make sure that we do not have a nation of huge mega farms.
____________________
