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These dairymen are going to have to relocate. So, a lot of the cost estimates involving EPA studies and other studies that have been done really do not take into consideration the cost of relocation.
Obviously, many of these people rather than choosing to relocate will simply decide to go out of business. This is a situation facing all types of small farmers, not just dairymen. So, I think that when a dairyman, for example, a small dairyman makes a decision to spend $2,000 to $3,000 to install a new milking system, he is able to recoup perhaps a 30-percent increase in production. But when he makes à decision to spend $2,000 to $5,000 on pollution control he does not see in his own mind any return on his investment and he considers it a dead head cost.
Furthermore, $2,500 is the maximum payment limitation that any individual can receive under the Department of Agriculture programand I would also point out that in many cases because of a lack of funds in most States, the amount of money that an individual can receive under the USDA program would be well under $1,000—so, he is faced with these decisionmaking processes which are of true concern to him.
And we would therefore want to bring this to your attention this morning.
Mr. SMITH. Of course, it would depend a lot on how close he is to a city and the topography of the land and so forth, as to what this pollution control equipment would cost. But, the figures I have heard from some dairymen are much, much larger than the ones you are using here.
You are using a figure of $6,000 for pollution control for 35 cows. I just do not think that will cover it in a lot of situations.
Mr. ADAMS. I think that is a correct evaluation; $6,000 would only cover soil conservation practices necessary to prevent rain water runoff which would cover diversion terraces around the entire farm operation. It would also include catch basins and liquid lagoon systems, and this type of soil diversion terrace. It would not include pipes and pumps for spray irrigation. Once you collect this rain water runoil you must then dispose of it in some acceptable way and many of the cost projections that you have seen do not take into account the extreme cost involved in getting this back out on the land and applied in a reasonably acceptable manner.
Mr. Smith. Now, the only other comment I have is that I noticed you put the cost per cow. Most of our witnesses are talking about the cost per employee, which is, as I calculate it, somewhere around $7,000 per employee.
Mr. Adams. That is correct. We are used to, in our industry, of talking about cost per cow.
Mr. STANTON. Mr. Adams, a couple of weeks ago Congressman Burton appeared before a subcommittee on this legislation and it was interesting to me. I got a letter from him this week.
Are you familiar with his amendment?
Mr. STANTON. I should think the people in the milk business would be interested because when I got it, I got the impression, of course, that he was touching all the bases and certainly not giving up on anyone along the line. But, I am surprised that you people have not been apprised of it.
Mr. STALBAUM. I have not seen it unless it has come in this morning at our office. But, we are interested, I can assure you.
Mr. Stanton. Well, this is a letter that we have got increasing the funds for soil and water conservation to accomplish this purpose.
Mr. ADAMS. I think that I alluded to this in my earlier comments, USDA has announced their soil and water conservation practices program. It is the program that does contain a $2,500 maximum payment limitation to any individual. This is a rather signficant figure when you look at what one individual might incur in meeting these 1973 and 1983, or 1977 and 1983 requirements under the Water Pollution Control Act.
That is essentially a no-discharge requirement. If you want to get technical about it, the livestock industry has been put under a nodischarge requirement by 1977, whereas all other industry segments have been put under a 1983 no-discharge requirement which we think is a rather grossly unfair way of administering the act.
Mr. STANTOx. Tell me, I will be interested to know.
Mr. Adams. Our members operate nationwide. Yes; we have members in every region.
Mr. STANTON. Do you find a consistent universal application of the legislation nationwide or do you find it varies in different parts of the country? Do you find stricter controls, stricter guidelines in certain areas more than others?
Mr. Adams. Yes; this is partly because many States moved out in advance of the development of Federal EPA requirements to establish their own permit programs. This was particularly true in the Midwest and the heavy livestock States.
As a result of the establishment of some of those State permit programs, those States have tended to initiate more stringent standards than some other States. But, now I believe that the last reading I made on the situation as far as the feed lots industry-there was approximately 15 States with approved EPA permit programs in the feed lots category and that would indicate that at least 15 States have met at least minimum Federal requirements.
But, to answer your question directly; yes, there is quite a bit of variation, yes. In some States, requirements may go far beyond the Federal mandated minimums. And in particular I would mention the State of Pennsylvania, Pennsylvania has moved to implement the Clean Streams Act. As a result, there has been a wide degree of pollution control requirements placed upon farmers in that State.
And in much of the dairy regions of Pennsylvania you have rolling and hilly situations where this becomes very expensive.
In the San Francsico Bay area where you have many of the dairies located on hillsides, we are facing extreme cost of pollution control.
Mr. SMITH. MIr. Corman?
Are you looking for direct loans from SBA or loan guarantees to help solve this problem?
Nr. ADAMS. I think we are looking at the direct loans.
Mr. CORMAN. How much would you estimate it would cost? How much money would SBA need to meet new problems?
Mr. Adams. I have no accurate estimate at this point. I could not make and would not want to make a definitive estimate at this point in time. But, our experience under the rural conservation program and ACP programs of USDA indicate that all funds and all dairymen and livestock producers who have requested funds—those requests were fully committed as far as USDA was able to commit funds. In many cases, as I mentioned, this fell short of the $2,500 limitation.
So, I guess the typical dairyman would be requesting somewhere in the neighborhood of $2,000 to $5,000 initially. And when you consider that roughly 40 percent of our dairymen are facing this kind of cost, you made do a simple calculation by multiplying that figure, 225,000, by 40 percent.
Mr. CORMAN. So, you get 100,000, 40 percent of 225,000 is roughly a 100,000. So, you are talking about a $500 million direct loan program for SBA?
Mr. ADAMS. I would say in that neighborhood, yes.
Mr. CORMAX. I think you might want to see if you have any other solutions because I am afraid that one may not be realistic. Do you anticipate attempting to use tax-exempt bonds to finance this?
Mr. ADAMS. No.
Mr. CORMAN. You are not getting into that business? I think you might want to look at whether or not the SBA loan guarantee program would be of some help to you because I am confident that we are never going to see that kind of dollar volume of direct SBA loans for this kind of problem.
In the milk business is there a thing called a milk shed which is kind of the area that supplies a given consumer market?
Mr. ADAMs. Yes, that is correct.
Mr. CORMAN. Would the cost be relatively uniform among all of the producers in that milk shed!
Mr. Adams. Not necessarily.
Mr. Adams. I think, as the chairman pointed out, your costs really depend upon your location, the amount of rainfall in that area.
Mr. CORMAN. How big is a milk shed ? For instance, what is the Washington milk shed, where do we get our milk?
Mr. Adams. I would say in a radius of 100 miles, such an area would be considered the Washington milk shed.
Mr. CORMAN. Is there a substantial difference in the costs among those producers in that 100-mile radius?
Mr. Adams. Yes, there is.
Mr. STALBAUM. If I could speak to that point, Congressman? Wisconsin is probably a good illustration because it is all fundamentally the Chicago milk shed and yet you get all the variety of land from rather level land in southeastern Wisconsin to the rolling hills over in the Mississippi area. There would be great differences in cost to put this type of program into effect.
And yet, it is all part of the same milk shed.
We have produced milk in the milk shed and they could bring in milk from New York, 75 miles away, cheaper than we could produce it right here—labor, property taxes.
Mr. CORMAN. Property taxes are cheaper in New York?
Mrs. FENWICK. Than they are in New Jersey? You bet. New Jersey is frightening
Mr. CORMAN. Part of that problem is taken care of by some minimum prices that are fixed by law, is that correct?
Mr. STALBAUM. For the entire milk shed, yes.
Mr. CORMAN. Does the milk industry, unlike most industries, have some statutory minimum prices that can be charged?
Mr. ADAMS. Are you talking about the Federal milk order support program?
Mr. CORMAN. No, I am talking about State. As I recollect, there is not total price competition in the milk industry. There is a price below which a man cannot sell a gallon of milk. Is that correct?
Mr. ADAMS. That is correct.
Mr. STALBAUM. That is only in State programs. There is no Federal program on this.
Mr. CORMAN. But, most folks buy milk in States.
Mr. CORMAN. I think California does. It seems to me that all of these pollution control problems ought to be paid for either by the people who drink the milk or pay the taxes. I am trying to figure out how small producers could be protected as against the large producers and still have the milk user pay the additional cost of production.
Mr. ADAMS. When you talk about this particular problem in terms of the small versus large producer, the small man right now needs some incentive to begin these practices. He is usually faced with a situation where he could
not install and do all of the work necessary to complete one of these pollution control programs in 1 year. He must begin to do it over a period of years, for example, 3 to 5 years.
He considers this, as I mentioned, a deadhead cost, an overhead cost. If the smaller producer had some incentive or help or assistance in this area he would be inclined to begin to start to make the necessary adjustments in order to comply. But, at the outset without this incentive—and we are suggesting that the incentive provided under the rural environmental assistance program of USDA is not enough in many cases.
Mr. CORMAN. You are suggesting the incentive you need is access to capital?
Mr. ADAMS. That is correct.
Mr. CORMAN. Now, per cow, does that cost any more for the small producer than for the large producer to meet the ÈPA standards?
Mr. Adams. Yes, it does. All studies indicate a much larger per cow cost for the smaller dairymen than for the larger dairymen. As you get bigger you can spread this cost over more units of production. Therefore, your cost per unit of production declines, but it is particularly critical in the smaller herd size categories, ranging from 50 on up to 250 cows.
Mr. CORMAN. You might give some thought to maybe trying for some direct loans for the very small producer but do not anticipate a half a billion dollar's worth. I would suggest
Mr. Adams. Well, we certainly will look into that.
Mr. CORMAN. Thank you, Mr. Chairman.
Mr. GOODLING. I would just like to pursue Congressman Stanton's question in relation to conformity. We find, even within a State, that there is a lack of uniformity. In my business, for instance, if a young chap came out with his book under his arm, page 36 said so and so, and you were fortunate enough to get a more seasoned, commonsense individual, you could get a different reaction to the problem. Do you find that also within a State in your industry?
Mr. ADAMs. We certainly do. And it is not only in this area, but in other areas as well. The individual State programs focused on waste management guidelines—in other words, it was a total package of recommendations issued through the cooperative State extension program; but it was primarily aimed at solid-waste management and management of waste to produce more productive soils, to improve soil fertility, and this sort of thing. And then, along came the EPA program which was aimed strictly at effluent control guidelines in eliminating effluent discharge.
So, we have a situation where many States started in one direction and then had to backtrack and pick up this EPA program. At this point in time, I would say, we are still going through this transition process. And, as a result of that, even within a State, or from county to county, you will find variations. Some people have started to implement construction and others have not.
So, we have quite a degree of variation, even within States.
Mrs. FENWICK. Something occurred to me, that they should not be antithetical at all. They are absolutely complementary. The point is that maybe we can get together here, Mr. Chairman, and because the soil needs could be taken care of by the effluent control-you see, the real point is, do you know what is happening in Iowa? The organic content of the soil is dropping all the time. It used to be 8 percent, and now it is down to 112 or 2 in some areas, and the reason is that they are using fertilizer instead of organic material to fertilize with. It seems to me that the same thing must be happening in New Jersey. I was talking to a man who has been lecturing at the Iowa University over the weekend, and in New Jersey probably the same thing is happening. This would be a way of doing two things at once.
In other words, gather up your manure and liquid effluent for two reasons--one, to put it back in the soil; and the other, to stop it from going into the streams.
Mr. ADAMS. They are complementary, and I just came back from attending an agricultural research conference on research needs. There is great emphasis now on research to establish ways and means by which we can make recommendations on soil application. We do face the situation under the EPA program where we are having to comply with point source discharge requirements.
But, if we are not very careful, then we are also facing a situation where we get into the nonpoint runoff problem by mismanagement of the application of waste back to the land. So, the two are very complementary.
But, our problem at this point in time is that the EPA program is aimed solely at eliminating the discharge, and there has not been