Testimony by Oral Testimony of Secretary Dan Glickman Before The House Committee on Agriculture Washington, D.C. -- March 18, 1999 Release No. 0109.99 Testimony by Oral Testimony of Secretary Dan Glickman Before The House Committee on Agriculture Washington, D.C. -- March 18, 1999 Mr. Chairman and Members of the Committee, I am pleased to appear before you today to discuss the Department of Agriculture's implementation of the disaster bill enacted last fall. CRCPlus Before proceeding I want to call your attention to emergency legislation I have just sent to Congress. It deals with Crop Revenue Coverage Plus, a private supplemental policy for rice and other crops sold and serviced by American Agrisurance, Inc. (AmAg). Let me emphasize that CRC Plus is a private policy. It is not a policy USDA reinsures. The policy was marketed in conjunction with insurance we do reinsure, and farmers in many cases bought both private and USDA-backed insurance together as a package. We feel we have the obligation to give those farmers the opportunity to reassess their 1999 crop insurance plans. Because AmAg made changes in their policies after the insurance sales deadline for rice and potentially other crops, many farmers find themselves unable to adjust their coverage. In some cases they risk being caught with no insurance beyond base level catastrophic protection through no fault of their own. USDA does not have the administrative authority to extend the federal insurance sales period without Congressional action. We seek your help in providing a solution for these farmers to get the coverage they need for the upcoming planting season. This bill provides a special period of between 2 and 4 weeks after enactment for farmers who had purchased CRCPlus policies to cancel their current insurance arrangement and obtain which ever federally backed coverage level or plan that they choose from any company they choose. I am taking this opportunity to ask that you give this matter immediate attention. Thank you. DISASTER RELIEF PROGRAM This week while everyone was watching the Dow Jones Industrial Average hit 10,000, new crop soybeans reached $5 up a dime but 30% off the 5 year average. I think that kind of summarizes the dichotomy between the best general economy we've seen in decades -- lowest inflation rate, lowest unemployment rate, highest job creation rate, and now the argument in Washington is how to spend the budget surplus, not how to reduce the deficit for the first time in 30 years. Meanwhile, we have a growing, deepening slump in the farm economy and if you think I'm just being an alarmist, I would refer you to the remarks Fed Chairman Greenspan made on Tuesday. There are three major reasons why this is happening. First, the Asian slump left many of our best customers broke, and then it spread to some other very good customers. And as it spread, the strength of the dollar relative to the currencies of some of our competitors gained, meaning they have been able to undercut us in some key markets. Second, each of the last 3 years set successive records in world grain production. The world is awash in grain, and no one has the money to buy it. Third, last year, natural disasters ripped across the farm belt. I'm proud to say that the response of this Administration has been quick and decisive and we are continuing to help farmers where we can. SHARED APPRECIATION For example, today I'm announcing proposed regulatory changes and an emergency rule that will improve the terms of Shared Appreciation Agreements for farmers. Basically these agreements require farmers who've received debt forgiveness to pay a portion of the appreciation of the value of he property under certain circumstances. Unfortunately, the real effect of these agreements is that farmers are unable to recover from financial setbacks due to factors beyond their control such as natural disaster or damaging market conditions. These proposed rule changes will cut in half the term of these agreements and allow for the deduction of capital improvements such as on barns and silos. For agreements coming due in 1999, I am issuing an emergency rule that would allow for a deferal of up to 3 years based on farmers' ability to pay the recapture payment due. This is an example of how we are working with farmers to meet their needs during these very difficult times. But the increasing stress on farmers is putting added pressure on our folks at the grass roots level. Last Fall, Congress and the Administration put together a $6 billion emergency relief bill. I'm proud to say that, despite the fact that this year's program is far more complex than past disaster relief efforts, it is being delivered in about the same time frame. Despite the added workload on our folks out in the field, we have steadily been getting assistance out to farmers. The chart behind me illustrates how funds have flowed steadily to producers since October. However, we've run into some serious problems in credit and manpower. On Monday, the President restated the importance of acting on his request of $152 million in supplemental funds that will allow us to provide $1.1 billion in additional loans and loan guarantees. This money will also provide funding for additional staff to help meet the demands for delivering program payments to farmers. I will address the work-load issue in detail a little later. I do want to reiterate the President's point that this supplemental assistance will do the most good the sooner we can make it available to farmers. With all that we've done and are doing, I recognize that because of the continued stress on farmers and ranchers, many are asking how much longer will it take to get the rest of the relief into farmers hands. As I said in my letter to each of you last week, I assure you we will get the payments out as soon as possible. But, this is a complex process. The funds must be distributed fairly, and reasonable efforts must be made to prevent fraud and abuse. Seven new programs created by the Omnibus Appropriations Act. A satisfactory answer needs to weigh the complexities of the legislation and the additional requirements it puts on the department, and the relationship of these new programs to those already in place. ACCOMPLISHMENTS To give you a clear picture of where we are in the process, I will first discuss some of the things we've been doing under our regular programs. The demand for our commodity loan program is up 25% over 98, to $6.5 billion. To date, we have paid $2.3 billion in marketing loan gains and loan deficiency payments for 98 crops including corn silage and expect to pay out $3.2 billion by the end of the season that's a twenty-fold increase over 1997. In October, we paid out $1.3 billion in CRP payments; on March 4, we completed the most recent sign up and took another 5 million acres into the reserve. We have paid out $1.6 billion in crop insurance indemnities and $10 million in NAP benefits. We have made $4 billion in 1999 AMTA payments, and have another $1.6 billion to go. Loan demand is up 65% this year over last; we have made $1.1 billion in loans thus far this year and will make another $1 billion as soon as Congress passes the supplemental request the President has submitted to Congress. We have made $4 billion in export credit available, 40% more than last year. To meet the crisis hog farmers faced, and are still enduring, we have purchased $150 million in pork for our feeding programs and accelerated our pseudorabis eradication program, spending about $80 million. Finally, this week, we are starting to make payments under the $50 million hog producer assistance program. On top of what we're already doing we needed to address the disaster bill. Seven new programs were created and the most complex to administer is the crop loss disaster. But first let me address what we're doing in relation to income and crop loss programs included in the relief bill. assistance program.  Within 10 working days of the enactment of the 1999 Act, USDA began making income loss assistance payments. By November 21, 1998, USDA had paid 1.4 million farmers more than $2.8 billion, almost half of the money Congress appropriated in farmers' hands by Thanksgiving.  On November 12, 1998, USDA announced the Livestock Assistance Program and started sign-up on November 23, 1998.  On March 4th, we started accepting applications for honey and mohair loans.  On Mar 8, I announced the dairy assistance program farmers can begin signing up for the $200 million on April 12.  On Mar 15, we completed the $400 million program we set aside for the crop insurance premium buy down our down payment on crop insurance reform It is clear just from the volume of activity over the last six months that the combination of sharp increases in workload for the existing programs coupled with implementation of new programs, coming virtually one on top of another, has placed unprecedented burdens on our delivery system in the field offices. Our folks out in the field, who understand how important their work is to the livelihoods of so many, have given 110% and I want to express to you how proud of them I am for all that they are doing. Now I would like to take a moment to introduce you to the woman sitting beside me. Her name is Virginia (Ginny) Haynes and she is a program technician in our Farm Services Agency office in Holt County, Nebraska. I thought it would be helpful for Ms. Haynes to give us a brief grounds-eye-view on what our folks are dealing with. Ms. Haynes. [VIRGINIA (GINNY) HAYNES TESTIFIES] WORK-LOAD As Ms. Haynes pointed out, it's become quite a work-load. And when the additional work-load became apparent, the Farm Service Agency (FSA) sought additional funding to meet this demand. Congress helpfully responded by including $40 million in the 1999 Act. However, more needs to be done. The President's supplemental appropriations request includes $43 million for additional FSA staffing needs in FY99. In addition, USDA is considering a range of options, including simplifying the programs while preserving their integrity and reallocating staff between USDA agencies. This crisis hit during a time of downsizing. So while our folks had to administer 7 new complex programs, we were caught in the middle of modernizing our work force. Frankly, there is more streamlining to be done, such as in offices where we have 1 supervisor and 2 employees. So I'm saying that additional funds are part of the answer, but so is managing our affairs better, such as our proposed support service bureaus. CROP LOSS DISASTER ASSISTANCE PROGRAM Now let me turn my attention to the $2.375 billion in the Crop Loss Disaster Assistance Program. Unlike previous disaster legislation, in this case Congress did not provide specific details of how the funds should be distributed, such as payment levels and loss thresholds. Instead, two different funding sources were provided, with a limited restriction that producers could not receive assistance from both. It would have been easier and faster to administer a bill that prescribed exact program parameters and set up specific eligibility standards. And, while I appreciate the authority, discretion, and flexibility that the 1999 Act provided, with that discretion came the responsibility of working out a compromise that would ensure that disaster assistance would be provided to all producers throughout the nation in a manner fair and equitable to all. A key factor contributing to the complexity of administering the program and consequently the timing of making the payments is that, unlike most earlier disaster programs, USDA will make these payments from a fixed amount of money. In previous programs, the funding was open-ended, and if a farmer met the eligibility criteria, USDA could make the payment as soon as the farmer applied for the benefit. Therefore, no one can receive a payment until the last eligible farmer has applied. SUMMARY Sign-up is currently in full swing for the crop loss program. We were careful to develop a program that maintained the integrity of the crop insurance program. In fact, we reserved up to $400 million to be used as a down payment on crop insurance reform in 2000. USDA is working hard to make payments in a fair and expeditious manner. And, while I have instructed USDA officials to make the payments as quickly as possible, I also want to maintain the integrity of the programs so we need to guard against fraud and abuse. LONG TERM What I have outlined here today is Congress and the Administration working together to help farmers and ranchers in a time of need. But we cannot stop here. We all know this is a short-term measure. I believe it is incumbent on all of us, to take a long-term view so we can avoid costly relief efforts in the future that in many instances can and should be avoided. Together, in a bipartisan manner, we need to address a comprehensive farm safety net. I've called 1999 the Year of the Safety Net, because I believe we've had enough time under the 1996 farm bill to determine what is and what is not working. Now is the time for all of us with an interest in agriculture to respond. It is more urgent than ever that we give farmers the tools they need to protect themselves. We have sent you crop insurance legislation that is designed to fill the most glaring crop insurance voids. It will make crop insurance more affordable and more worth buying. It will bring new products to market and provide better information and service to growers. Other crop insurance reform plans have been put before Congress. While those plans may differ from mine in the details, there is a consensus on the need to strengthen the program and make it more accessible. The President and I are committed to working with Congress immediately, to do whatever we have to do to find the resources to fix this problem. But there is no single tool that comprises the safety net. As important as crop insurance is, it is not the silver bullet. There are many other things Congress can and should do to help farmers protect their risk. IMPROVING THE FARM BILL Simply stated, we need to improve the farm bill. I'm not talking about a wholesale rewriting or interfering with the bill's measures that permit farmers the freedom to make their own planting decisions. I'm talking about building flexibility into the safety net after all a safety net has a lot of give and elasticity to it but right now what we have is more like a floor rigid and inflexible. As you will see from the proposals I will outline, we are looking for ways to provide farmers with more choices which in turn gives them more freedom and more tools to manage their risk. I want to avoid situations where the Administration and Congress have to react after the fact with costly disaster bills. That is an expensive, inefficient way to go and I believe that working together, this Administration and Congress can develop a reliable safety net. We are currently reviewing a number of initiatives, but some of the ideas I would like to see included in a farm safety net act are: Farmers will likely need additional income support to get through this period of low prices. Whether we should lift the caps on loan rates to increase LDP payments which I think is fair, or do something else, in the short term, farmers will need our help. Expanding planting flexibility so that producers can elect to plant fruits and vegetables if they choose to do so; Improving marketing flexibility for farmers to go along with the planting flexibility they gained in 1996 by: -- Renewing my authority to extend commodity marketing loans when it is prudent to do so; I would like the authority for USDA to finance construction of on-farm storage facilities; and I would also like to see a short-term, 3-5 year conservation reserve program that will make it financially feasible for farmers to temporarily remove land from production and plant soil-building crops to increase productivity in future years; Improving farmers access to affordable credit: Additional funding is needed for critical programs, especially low-interest loan programs; Congress eased the 1-strike rule, but while it is a step in the right direction, it didn't go far enough; We need more flexibility in moving targeted funds from state to state; Improving USDA's disaster assistance programs: -- Legislative changes are needed to allow us to get NAP assistance and emergency loans to farmers more quickly; -- I believe CRP needs to be modified to predictably allow limited haying and grazing in exchange for reduced CRP rental payments; Allowing producers to better-manage their CRP land through occasional, well- managed haying and grazing can improve wildlife habitat and conservation. I would like Congress to review assistance for livestock feed. I would like to close the gab in eligibility between USDA and SBA's emergency loans so that all ag-related business can qualify for one or the other in time of need. Strengthening our export programs and making them more flexible: -- I would like authority to redirect unused EEP funds for food aid and other programs; Making sure that farmers and ranchers are not disadvantaged by concentration and other structural changes: We want to strengthen the ag fair practices act so that farmers who join Coops are not discriminated against in the marketplace; I want to expand the Packers and Stockyards Act to include poultry; I want mandatory price reporting which will level the playing field for all livestock producers; Again I am proposing legislation that establishes a livestock dealer trust. Such a trust would require livestock inventories and account receivable from the sale of livestock to be held in trust for unpaid cash sellers when a dealer fails to pay for livestock. As you can see, these ideas are designed to give farmers more flexibility and more freedom and more tools to manage risk. I am open to suggestions from anyone with an interest in agriculture on how we can improve profitability for farmers and ranchers. These are some of the ideas I have in mind I am sure others have good ideas too and these should be considered. What's at stake here -- with both our short-term and our long-term challenges -- is nothing less than the future profitability of family farming. I believe we are all on the same page when I say that we are committed to preserve the traditions, values and prosperity for agriculture that helped make this country what it is today. Thank you. I will be glad to respond to any questions you may have.