Mr. Chairman, members of the Committee, I welcome this opportunity to meet with you to discuss pressing transportation issues facing agriculture.
Mr. Chairman, no matter how hard our farmers work, no matter how high quality their product, if they can't move it, they can't sell it.
A reliable, affordable transportation network is a critical, indispensible ingredient in the future strength and competitiveness of American agriculture. Our farmers and ranchers have a huge stake in an efficient transportation system. And, with agriculture delivering a $20 billion trade surplus and food and fiber accounting for 20% of our nation's gross domestic product, I might add that all of America has a huge stake in a competitive U.S. agriculture.
A New Era for U.S. Agriculture
With the Freedom to Farm bill, farmers face more risks in domestic and
global markets. To succeed in this new environment, our producers need
access to markets unfettered by artificial barriers -- including those
caused by an inadequate transportation infrastructure.
Right now, it is not clear that they will have that access in the future. The Department of Transportation estimates that 25% of our nation's bridges are structurally deficient; 1/3 of our roads are in poor or mediocre condition; the decay of roads and bridges in rural areas is even worse, and our 60-year-old locks and dams have long passed their original lifespan. These transportation systems are the primary arteries of American agriculture. If they are not healthy and strong, neither is U.S. agriculture.
Complicating our transportation challenge further are changing modern circumstances. In agriculture today, we see hog operations moving East, requiring more feed grain shipments East ... We have Freedom to Farm -farmers can plant what and however much they want. This has meant larger grain crops, and more geographically dispersed grain production, all needing to move to market ... We also see more farm communities involved in processing and niche marketing which requires not large bulk shipments, but segregated smaller shipments.
Outside of agriculture, we have a strong U.S. economy. Consumers are buying more. At the wholesale level, we also see a shift to just-in-time' inventories, or rolling stock. Buyers don't want to pay for products to sit in wharehouses. They want to make a purchase, and move the product. The trucking industry is stretched to the limits trying to meet these rapid-fire shipping demands. During the first quarter of this year, purchases of large trucks were twice what they were last year. It will take you eight months to buy a big semi right now.
So a booming economy, a productive, diverse agriculture, and an overwhelmed infrastructure are combining to deepen and complicate agriculture's transportation challenges.
My written statement reviews each link in our transportation system. I should point out that my staff is working closely with Secretary Slater and his team as they conduct their year-long review of U.S. transportation systems. We are also working closely with the Army Corps of Engineers' as they prepare to recommend improvements to our nation's locks and dams. In both cases, we will make sure that agriculture's needs are adequately addressed.
But I would like to focus my remarks here today on the portion of transportation which is most distressing to me, and that is the performance of the major railroads serving agriculture today.
No industry is is more dependent on an affordable, reliable railroad system than agriculture. Approximately 40% of all grain moves to market by rail -more than 4.7 billion bushels a year. And, agriculture's need for quality, reliable rail service will only increase in the years ahead.
Yet, what we see now is an erosion of quality and quantity of service. Members of this committee are well aware of the problems that arose last fall with the near paralysis on the Union Pacific and Southern Pacific (UP/SP) lines in Houston. This gridlock on the tracks cost farmers millions of dollars as grain piled up across the midwest -- unable to move to market.
Ask the producers, shippers, feeders, or millers who were waiting to move or receive some of the 93-plus million bushels of grain stored on the ground, and you will hear them time and again use the word crisis.' Mr. Chairman, these are not folks bent toward hyperbole.
They have every reason to be worried. The strength of American agriculture in the world is built on our reputation as a reliable supplier. We deliver a quality product, on time, for a good price. If we let any segment of that promise slip, we will lose market share to competitors nipping at our heels.
I'll give you one example: Recently, a U.S. grain elevator made a rare purchase of subsidized barley from the European Union. Although the reported purchase is fairly small, this is upsetting for U.S. producers because they have barley to sell, yet our own elevators are buying from the EU and barging it all the way around to California. I have here a news report with the buyer's explanation. Why'd he do it? Due to, and I quote, pathetically terrible' domestic rail service.
Mr. Chairman, we cannot allow America's farmers and ranchers to lose their competitive edge in world markets due to circumstances far beyond their control, but certainly well within ours. Abraham Lincoln, once said that the legitimate object of government is to do for the people what needs to be done, but which they cannot, by individual effort, do at all, or do so well, for themselves.' Mr. Chairman, there are few more legitimate objects of government than building a strong, competitive transportation infrastructure.
Competitors Are Moving Ahead with Investments
The longer we wait to make these vital investments, the more we stand to
lose. Rest assured, our competitors are not hesitating to build up their
future exporting prospects.
In Argentina, the government has completed a $650 million dredging project which allows large ocean-going vessels access to their export elevators.
Argentina also is spending tens-of-millions of dollars on their inland river system for moving agricultural and other commodities. They have even invested in the inland systems of neighboring countries.
Argentina and Brazil recently privatized their rail operations. Brazil is undergoing port privatization and improvements, and has invested in floating export elevators on the Amazon River.
China, a major competitor for corn markets in Southeast Asia, is upgrading its ports, as well as its inland grain collection and transportation systems to enhance their ability to export.
With these sizable investments, competition for international grain markets can only intensify. This should make one thing crystal clear to all of us: we cannot rest on old investments and accomplishments, if we expect to succeed in a new world. We cannot watch competitors whittle away at our global market share, while our own farmers struggle just to get their grain to market.
USDA's Plans for the Future
Over the past year, USDA has become increasingly involved in the railroad
congestion. When the UP/SP imposed its embargo on agricultural rail
traffic to Mexico through Laredo, Texas, USDA helped diffuse the immediate
stand-off and secure the timely lifting of that embargo.
We have made our grain inspections more efficient, so they don't contribute to delays. And, we have successfully pushed the Surface Transportation Board to take stronger actions to ensure that railroads provide the level and quality of service that American agriculture deserves. For example, following on our recommendations, the STB now seeks detailed information on rail rates, access, market dominance, and competition to ensure that farmers and rural communities are treated fairly, and the rates they pay are reasonable. These assurances are critical to agricultural shippers, in particular, the smaller operations that tend to get squeezed the most as competition disappears through mergers.
I opposed the UP-SP merger. I am concerned about concentration in agriculture -- whether it manifests itself in the disappearance of small family farms, or Class-1 railroads. In 1982, there were 33 Class-1 railroads in the United States. Today there are nine -- just 3 West of the Mississippi. I opposed the UP-SP merger out of concern that service to farmers, ranchers and rural communities would suffer. Quite frankly, I've seen no reason yet to doubt my original thinking.
These folks have a lot to prove to all of us in the coming months.
The tracks are mostly clear now, but I am concerned about harvest time. There are large stocks of grain still in storage from the 97 crop. There are strong prospects for an ample 98 crop. The ingredients are present for another pileup as we head into the summer and fall periods of peak export demand.
USDA is working with the STB to develop an Early Warning System' to alert shippers and carriers to potential surges in demand for rail cars or unexpected problems moving grain. Our goal is to be as proactive as possible in preventing traffic jams. But our success will depend on the commitment of the UP-SP to vastly improving its service to agriculture and our rural communities.
I believe they owe our farmers that much. This Administration has no intention of allowing grain on the ground as a regular part of each year's harvest. Nor will we tolerate the transportation needs of agriculture and rural America receiving second-class status.
Late this summer, I will head out to the heartland to hold a national agriculture transportation summit. This will build on the listening sessions USDA has held with producers across the country. It will provide a chance for the agriculture and transportation communities to come together, and make an eyes-wide-open assessment of where we are today, of how adequate our transportation systems are -- from rails to roads to rivers -- and what our future needs will be. All of this, will feed into USDA's efforts to develop a long-term transportation strategy for agriculture in the 21st century.
As our nation heads into a new century, it's worth a moment's reflection on how we got where we are today. Underneath the rise of American agriculture and industry was a passionate commitment to physically connecting our nation, and linking us up to the world. Back in 1869, when the Union Pacific and Central Pacific crews met at Promontory Summit in Utah, forever uniting the American east and west via the continental railroad, their effort was called the grandest enterprise under God.'
Those visionaries recognized that on those tracks moved not just our people and our goods, but the U.S. economy and the progress of our nation. They were not wrong in their assessment. Now, we, too, must look ahead, and make the bold choices that will pay off not just tomorrow or next year, but 10 and 20 years from now. It is my hope that as we make these decisions, we hold true to the basic promise of America's great transportation systems: uniting our people across geographic boundaries, and bringing opportunity to every American community -- urban, suburban and rural.
Thank you, and I'd be glad to take your questions.
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