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Mr. SOLOMON. You know this situation is very complex. I am a strong supporter of you and your appearance on “60 Minutes" and some of your comments to the simplicity of these things that have been quite admirable. But I don't think also, while I'm on the soapbox, that it's fair for the Government to license International Harvester to go over there and build combines for the Russians, and then embargo our grain to them.
I think something needs to be done. The comment the gentleman from the Agriculture Movement said about someone in the State Department should know something about agriculture. We've got a tremendous selling job that we're going to have to do.
We've got 2 percent of the population farming. We got 98 percent we're going to get out there and convince that we need something done. We got a-a good friend of mine, a farmer here that's donethe only one that's done a good selling job here all morning was Davis Biggs when he said we have surplus we can give to the poor.
We're going to have to hit more upon positive aspects than getting up here and just crying over spilled milk.
Senator PRYOR. Yes.
Mr. SOLOMON. We're going to have to go forward and come up with some positive plans, help from the Government. We can't get the Government out of it to get this thing back on the road. I would like to see you do your best to try to do something positive in addition to helping bail out these people who have lost money in bankrupt grains.
Senator PRYOR. I'm very appreciative of your comment. Thank you so very much.
Mr. SOLOMON. Thank you. Senator PRYOR. Yes, sir, if you will please state your name. STATEMENT OF PAUL HUGHES, PRESIDENT, FARMERS SOYBEAN
CORP., BLYTHEVILLE, ARK. Mr. HUGHES. I'm Paul Hughes, the president of the Farmers Soybean Corp. in Blytheville, Ark., which is a stock company that's been in the grain business for about 32 years, and I'm also secretary of the Mid-South Soybean and Grain Shippers Association.
I just wanted personally to take this time to point out some of the things that we pointed to your then assistant, Dennis Robinson, in July when he brought your bill over to our meeting in Memphis.
But the thing we feel real strongly about is one, that is has got to cover all warehouses. You cannot pick and choose which warehouses are in it unless you take the Agriculture Movement man who advised that they can buy the insurance as they want to or not, but if one warehouse got the choice to use it and the other one has got the choice not to use it, then that might make people go one way or the other.
The other thing we are-and we appreciate it, it is in the bill. That the farmer ought to assume some risk where they trade. Because most time, most elevators going bankrupt throw up some signals of the fact that they are going bankrupt, they start paying too much money for grain, they start paying a little extra money for grain if you wait a week to get your money. And, this type of thing. And, we don't want it to be to the point where a farmer will say well, I think he's going bankrupt but the Government will pay me anyway, so I'll just go ahead and try to get that extra money. And, the other thing that I think that you have done is real well is we've talked about the FDIC.
That cost over $125 million a year to administer. We do—and there's about the same number of grain elevators as there are banks. We do not believe that we need a deal that costs $125 million a year to administer. And, we need to keep this on a low-cost basis if it's possible.
And, then I'm probably wrong and this is probably not the place to bring it up. But I just want to question your figure of $25 billion, and you may be closer to right than I am. But that would be, if 125 elevators are correct, that's
a loss of $200 million in elevators. And, at $4 a bushel for grain, each one of them would have had to have 50 million bushels.
And, so I want to question that.
Senator PRYOR. Mr. Hughes, that may have been a figure that in the entire history of elevator bankrupticies. I don't know whether it was the history, say going back to December 1, 1979, or not. It may have been going back
Mr. HUGHES. But the losses are substantial but I just question if it's been $25 billion of-up to this point.
Senator PRYOR. And, also it could have been the ripple affect through the economy of tax losses and the buying power lost, et cetera.
Mr. HUGHES. But I guess in summation that I would like to say that we do appreciate your effort to give some protection to our customers and some assurance that where they trade they will get
Senator PRYOR. Mr. Hughes, thank you so much. Is there another person that would like to make a comment?
Yes, sir, come right forward please.
Mr. BERNARD. Senator, I think that figure was $24 or $25 million rather than billion. I think that was the thing.
Senator PRYOR. I think that's probably correct. The figure should be $25 million. Yes, sir, would you-STATEMENT OF ELFORD DAVIS, REPRESENTING MID-SOUTH
FARM EQUIPMENT DEALERS ASSOCIATION Mr. Davis. Senator, I'm Elford Davis. I'm a local agricultural dealer here in West Memphis, and I was asked to come forward this morning on behalf of the Mid-South Farm Equipment Dealers Association which consists of the dealers in Arkansas, Mississippi, Tennessee, and the Boot Heel of Missouri.
We just want you to know that we support you wholeheartedly in the two programs that you have going. And, please excuse my throat.
Senator PRYOR. Thank you very much. Thank you so much. Would there be another statement or question? Well, yes, Charles.
Mr. ADAMS. Yes, sir, I want to reiterate what Mr. [inaudible] said in essence. It seems it would only be fair that in order to open a bank you have to comply to certain rules and regulations. The way I understand it now, I could go down the street, put up a sign that I'm in the grain business.
And, should the insurance come into effect, I would not be for a sound elevator subsidizing an inefficient unlicensed elevator. And, I hope out of all this that you may already have it in your bill, is that in order to be a public facility, it must be strict rules and regulations followed.
And, if-as he mentioned in a case of those that are federally licensed there's not been a failure.
Senator PRYOR. You know we're seeing some of that same discussion right now in some of the money market funds of banks and S&L's or credit unions have to go through all sort of regulation, chartering, and all like this. Many of the other funds are not being regulated nor insured. So we're seeing a great deal of that discussion come forward there.
I think there was someone else that may have wanted—yes, sir, come forward.
Mr. LEWIS. My name is Larry Lewis, Senator. As a farmer and as a member of the American Agriculture Movement, we appreciate your listening and what you're doing for us. Due to recent bad publicity I would like the record to state that members, farmers here that are members of the American Agriculture Movement conducted themself in an attentive, undisturbing manner.
And, the presentation by Mr. McKnight, who is national vicechairman, was in no way radical or undisturbing to our wants and needs. Thank you.
Senator PRYOR. Well, thank you. Thank you very much.
Mr. LEWIS. And, a little bit of addition. We know that you are listening to us now. We're not radical any more, and the more members we have the better you'll listen, right?
Senator PRYOR. Well, listen, I'm not saying that you ever were radical, but I'll just say this. I've always listened to you. I haven't done everything maybe that you wanted, but I've always listened
Mr. LEWIS. Contrary to popular belief then. Thank you.
Senator PRYOR. Well, thank you so very much. Thank you for that statement.
Any other comments or statements?
VOICE. I don't want to come up there, but all due respect to Mr. Burton, who was he speaking for? Was it the Arkansas Farm Bureau, or his chapter or-
Senator PRYOR. Well, now that gentleman was-Mr. Burton was with the Jackson County Farm Bureau, and I don't know-
Mr. BURTON. Arkansas Farm and American Farm Bureau.
Senator PRYOR. Well, I'll tell you, that's what's good about this country. You know you don't have to agree all the time with each other and it's good to have meetings like this where you can come and discusss some of these differences in a legitimate fashion.
If there are no other comments I, at this time-is there any other thought that I might have? If there are any of you on the panels who would like to supply any information or facts and figures about more specific numbers that we requested, we'll leave this hearing record open for about 2 weeks.
We'll make certain that those written statements will be incorporated into the final hearing transcript. This has been a very, very fine hearing this morning and we're-yes, sir-
Mr. BERNARD. What would be the procedure if someone wanted to respond to what you've just mentioned? Say if we have a specific case that someone would like to get into the record or tell you about-should they write you or they should leave it with me?
Senator PRYOR. If they would write me a letter, what I will do is just include that letter into the official transcript. It probably should be requested that it be included in the transcript, and we'll certainly do that. That's a great idea, Steve, should they—the Government printing costs are not going to be all that high on this one. This is a short hearing.
Thank you very much for coming each and every one of you.
Whereupon, at 10:52 a.m., the committee adjourned, subject to call of the Chair.]
[The following material was furnished by Senator Pryor:)
(Floor speech of Senator Pryor concerning S. 550)
FEDERAL GRAIN STORAGE INSURANCE ACT OF 1983 Mr. PRYOR. Mr. President, I want to take this opportunity to address the Senate on an issue that has, unfortunately become a factor in the lives of American farmers. This subject has captured regional and national headlines and has generated discussion at all levels of Government and within the agricultural community. Farmers, already plagued by high interest rates, high fuel costs, and high seed and fertilizer costs, have now been hit by still another problem-bankruptcies and failure of grain elevators.
More than 110 elevators have failed in the United States in recent years, leaving in the lurch at least 3,200 farmers with over $25 million in grain. While the number of occurrences of grain elevators is relatively small compared to business failures in general, few other types of bankruptcies can have such a devastating effect on farmers who, in effect, are innocent bystanders. We have heard far too many stories of financial failure.
On April 7, 1982, the 20-year old Coast Trading Co. filed to reorganize under chapter 11 of the Federal Bankruptcy Law. Coast had a six-State chain of 22 grain elevators, feed mills, barge facilities, and other related services. The debt includes $14 million to secured creditors and $20 million to an estimated 200 unsecured creditors—mostly farmers and local elevators that sold Coast Trading.
In Stockport, Iowa, an elevator collapsed 2 year ago where too much grain was delivered without receiving a check, too little warehoused grain was secured by a warehouse receipt, and too much grain was delivered to be paid for later. This is really a farmer's unsecured loan to the elevator-and then the sudden, unexpected bankruptcy.
In Montana, North Dakota, Kentucky, Louisiana, Missouri, and Arkansas, similar stories have unfolded.
While it is understood that farmers themselves need to become alert to such danger signals as an elevator that offers a higher price if the farmer agrees to wait a few days, or offers to store grain at a cheaper rate, or even fails to give proper warehouse receipts, the time has come for the Congress to offer the farming community some statutory protection.
More and more State legislatures are recognizing their role and responsibility in developing sound criteria upon which to audit and regulate grain elevators. Additionally, as Paul Hughes, a constituent of mine, said recently in the Delta Farm Press, “As long as you make it possible for someone to succeed, then it also will be possible for them to fail.” However, State and Federal Governments must not ignore this critical situation and it is important for the Congress and the State legislatures to take seriously the duties of Government in these situations.
Legislative reforms are under consideration that would change bankruptcy laws, increase oversight of warehouse operations by the Federal Government, and insure farmers against losses.
For farmers and other individuals and businesses caught with assets in a bankrupt elevator, the issue can be extremely frustrating. Those with warehouse receipts or, in some cases, scale tickets marked for storage, will be among a preferred group of creditors and generally have a good chance of recovering a large percentage of the loss. But farmers who have sold grain to a failing elevator under a deferred payment arrangement fall into a nonpreferred class of general creditors and may recover little of their loss. And, in either case, the claims process can take months or possible years to complete.