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We as farmers don't have the luxury to see that change occur without being impacted. We are impacted each time the President, Secretary of State, the Secretary of Defense, and all the other Secretaries make a statement as to what we should be doing on an international scene.
With the elevator in Hughes we then have a series of bankruptcies based on Government policies, both ours and foreign, an economic situation world-wide where economic policies have come home to roost in the local community, and probably some bad business calls based on the way we have always done business.
But as you know and everyone in the room knows, we're now a great deal smarter than we have been at any time in the past. Interestingly enough, I remember an economic lecture where a gentleman who is well-known throughout the world said we'll never have another depression.
Politically we're too smart. I always ascribed to that theory, but we were wrong. We have another depression. In the current economy then, we have to think in terms of how do we best survive. We have an excellent vehicle in the payment in kind or the crop swap program. It seemingly could be expanded with little effort to cover these gentlemen.
We have in the local community multiple millions of dollars that are going to be taken out of the community in an already depressed economy. We're not simply talking about the farmers who are involved being taken out of business. We're talking about the employment picture, including West Memphis, even though we have business people here like myself in distribution, marketing, banking, et cetera.
If Hughes goes down, West Memphis goes down, Memphis goes down, et cetera, et cetera. So, we're into a tightening circle situation. If we take these grain elevators out, our employment suffers, our distributors in chemical and farm implement businesses suffer, our local merchants suffer, our bankers suffer, our Government suffers with the PCA and FmHA bankruptcies that they will have to swallow.
Our land values are impacted. It's an ever-tightening circle. So the question then becomes, “What now, what shall we do?” We are smarter but we have still got to survive the current situation.
With the PIK program, the crop swap in place, it seems the most expeditious way, even though it's not going to be a 100 percent solution, would be to allow the PIK program and the crop swap to be expanded to include these elevators, and keep our economies operating.
Senator PRYOR. I really appreciate your comments this morning. Thank you so much.
Mr. BERNARD. Next is Davis Biggs, a farmer from Hughes.
Mr. Biggs. Well, I want to congratulate the Senator on the good job that he's done first, as everybody else has.
Senator PRYOR. Well, thank you.
STATEMENT OF DAVIS BIGGS Mr. Biggs. I just came up with some thoughts the other day that are probably very much just farmer talk. But I was watching the television and I saw where in Memphis they unloaded several train loads of commodities to give out.
I had the thought that I was very proud of the fact that agriculture in this country has a surplus to divide for the needy. Which I think it is a good thing that we do have a surplus to provide the needy. School lunches all over, things that happen.
I think that the time has come when the provider needs some help. These farmers that have been hurt over the country in these grain elevator deals. So now I think the time has come that we put this PIK program back to work and try to put the farmer that has lost these things, that has produced this surplus for us where we can put it out to the poeple who need it.
I want to put those people that are producing this crop back in a taxpaying bracket. That's all I have to say.
Senator PRYOR. Thank you very much, Mr. Biggs. On several of these statements later on, I think in a little final summary I may just touch on some of the comments that each of you have made, I may save those up until the end if I might because we do have some other witnesses.
Any other comments from this particular panel? Steve, we thank you very much.
Mr. BERNARD. Thank you, sir.
Mr. BERNARD. If you would like, I can recognize some of the people from Corning, Biggars, New Madrid, Mo., Hartville, Mo., and Humboldt, Tenn. They're all here. Any of you gentlemen like to stand? These people are all farmers from other areas and they, too, have lost grain in these elevators and are very concerned about this.
Senator PRYOR. Well, we're honored to have these people from other States and other areas joining us this morning. Steve, thank you very much.
Mr. BERNARD. Thank you; appreciate it.
Senator PRYOR. Our next witness on our official list, I believe, is David Owen Burton, with the Arkansas Farm Bureau of Jackson County. David, will you please come forward?
You have a statement that you submitted and I appreciate that. We would love to hear your statement at this time.
STATEMENT OF DAVID OWEN BURTON, MEMBER, BOARD OF
DIRECTORS, ARKANSAS FARM BUREAU, BELLEVILLE, ARK. Mr. BURTON. First of all, Senator, I do appreciate the opportunity to make this statement. As you said, my name is David Burton. I'm a farmer from Belleville, Ark., and a member of the Arkansas Farm Bureau board of directors.
I am reading and making comments on the position of the Arkansas Farm Bureau on the creation of a Federal Grain Storage Insurance Corporation. We, in the Arkansas Farm Bureau with over 115,000 member families, many of which live in a cropping area of
eastern Arkansas are quite concerned with what has happened in the bankruptices within the grain industry in recent years.
We are aware that this is not just a problem characteristic of Arkansas agriculture, but that bankruptcies have been commonplace in all industries. However, elevator bankruptcies are far more serious to a great many more people when they occur than most other types of bankruptcies.
We sincerely appreciate you and your staff for putting this proposal before the Congress and trying to help solve a very complicated problem. We are generally opposed to the establishment of the Federal guaranty funds to provide payments to producers of bankrupt elevators.
The national policy as passed by our delegates attending the American Farm Bureau convention is: “We oppose the establishment of Federal Guaranty Funds which might be used to pay producers for losses suffered for nonpayment of grain.” If Federal guaranty funds legislation is enacted it should require approval by producer referendum before it is instituted.
As farmers we are concerned about having to finance yet another program run by Government to protect ourselves against some dishonesty, poor management, and perhaps our own poor choice in selecting who we do business with.
While this may be something to be considered in the short run we are leery of adding still another expense to farming that always will be there. We regret that the bill does not include provisions for reducing or preventing bankruptcies. Perhaps this asks to much.
But for elevators and warehouses just to go out of business and pass the loss onto customers they were promising to serve, just doesn't make farmers feel good about such a system.
We are not sure that this would lead to reducing the instance of bankruptcies among licensed elevators. We wonder if the funding provisions will not prove to be unrealistically low. Earlier experience with the FDIC program in 1934, indicated a substantial borrowing when the value of money was much higher it was necessary before there was sufficient moneys to make the program solvent.
Farmers are not so concerned about the small initial expense per bushel of financing the program. We are more concerned that money collected creates still another entity of Government, which has the potential of becoming another large nationwide bureaucraсу.
The increased administrative cost to the elevator collecting and handling the checkoff that provides still another regulatory effort. The expense of which will be transferred to farmers storing grain.
There are several technical areas of the bill that need to be clarified before it becomes law. They include: (1) Which grain delivered to the warehouse is actually covered; (2) should other farm commodities besides grain, be included; and (3) which Under Secretary or Assistant Secretary in the USDA would be responsible for the program.
Mr. Chairman, once again we appreciate the efforts on the part of you and your staff in trying to help us work our way out of this devastating and sometimes frustrating problem of grain elevator and grain warehouse bankruptcies.
We particularly favor the producer referendum of the bill should our deficits and the bill be worked out, and then become law. Payment in kind for bankruptcies loss—we have received very preliminary copies from your staff of a draft bill to provide payment in kind, PIK commodities to farmers who have experienced a loss due to a bankruptcy of an elevator or warehouse.
This may have merit; we are not sure. So many bills and ideas are being advanced in addition to the current program announced by USDA that we aren't sure whether the farmer will be growing for the PIK program or for the market in the next few years.
In face of the uncertainty of the availability of grain at the current PIK program, we would like to reserve comment until after the current sign up is complete.
Senator PRYOR. Mr. Burton, thank you for your comments and in expressing your concern or opposition to the insurance program which would be in prospective bankruptcies, in prospective losses, in the future.
I did attempt last year to come up with some language that would get something on the table for us to look at in the Senate or in the House. I do note your concerns and I think you have some justifiable questions about the program, but I guess I have a question for you.
If this program is not enacted what sort of a program are we going to have? There's no other game in town. It's sort of like the PIK program. I didn't understand the PIK program totally, but I supported it 100 percent because I thought it was the only truck leaving the station.
Mr. BURTON. Well, first of all, Senator, I think Arkansas has taken the lead in providing some relief for-it doesn't return commodities or money for previous bankruptcies but our warehouse grain law, as we're now looking at it, does provide relief and it is designating who owns the grain.
This has been a big question among the bankruptcies. In allowing this grain to become an asset of the corporation, which in the first place it should not be. Something that doesn't belong to them, so how can it be an asset?
So, I think we in Arkansas are taking steps to solve part of this problem. The thing that concerns me about this-your bill, is the fact that it does create another bureaucracy and will it relax an elevator operator or owner's attitude about going bankrupt.
Senator PRYOR. In other words, you think that they might have a tendency to be more lax and fall into a bankruptcy situation?
Mr. BURTON. Yes; I understand your bill does provide some provisions for punishment, but I often wonder sometimes if an elevator operator getting away with $1 million is not willing to pay $20,000 and 3 years imprisonment, and then later on still have the money available to do as he pleases.
Senator PRYOR. Well, the other thing, just so I can stress for the record and for the audience today, we did because we knew it would be a controversial issue, I knew it would be. I felt like we have to address the issue somewhere down the line and I must say that I don't think we're addressing it at this point adequately.
But we did provide, of course, a referendum for the farmers themselves to vote as to whether they wanted to participate
whether they wanted to have such a program and one, would they be willing to pay a small fee for the safety of their grain.
I stopped just a little while ago to have a cup of coffee with some farmers a few miles from here, about 30 miles from here. One or two in the crowd told me that they did not like the idea of having to pay an additional fee. So, that's exactly why we have these hearings and why we get an opportunity to participate in listening to people like yourselves to hear your concerns about it.
Your concerns will be noted and I really appreciate your comments.
Mr. BURTON. I would like to ask one other question.
Mr. BURTON. Some gentlemen have mentioned the fact there's no cost involved in this bill. I can't see where there's no cost.
Senator PRYOR. It probably was in refernce to the bill compensating those farmers who have already lost grain. We're talking about
parate peices of legislation here. The bill where there's no cost would be the legislation compensating the farmers.
Mr. BURTON. Is this the payment in kind?
Mr. BURTON. Well, there's got to be a cost to someone when you relay those commodities back to the affected person. There's got to be some cost involved.
Senator PRYOR. Well, there's already been the cost. And--
Senator PRYOR. We're just trying to get the money where the losses were, and that's the purpose of that legislation.
Mr. Burton, we appreciate your comments this morning, and do you have any further statement?
Mr. BURTON. Thank you, sir I do not have any more.
Our next witness this morning and our final witness before we have public comment, is Deloss McKnight. Deloss is, or course, the president or chairman, I guess, of the American Agriculture Movement in Arkansas. What is your title, Deloss? You've gone up in the world since we were in law school.
STATEMENT OF DELOSS McKNIGHT, NATIONAL VICE CHAIRMAN,
AMERICAN AGRICULTURE MOVEMENT, INC. Mr. McKNIGHT. Senator Pryor. I'm a rice farmer from Cross County, Ark, appearing here today on behalf of the American Agriculture Movement, Inc., as it national vice chairman.
Senator PRYOR. Very good.
Mr. McKNIGHT. And, we're here to speak in favor of both pieces of legislation which you have offered. It is our national policy to support these and our people throughout the Nation will be offering you every support that we can in favor of both of them.
Senator PRYOR. Thank you, sir.
Mr. McKNIGHT. We appreciate, of course, you coming here and taking your time. We realize that you're extremely busy and we always hate to impose on your time, but we are grateful for you appearing here today.