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both Houses and forwarded on to Washington to our Washington delegation, in support of that legislation.
From the beginning Senator Pryor's office and his staff have been supportive of this legislation and I certainly appreciate all the help that they have given this program. And, I appreciate their presence here today.
I am here to give my support to this legislation today, and also to thank Senator Pryor for affording the farmers in my area to come here and testify today in their behalf. You know, I'd like to make one statement. There's quite a lot of talk in the papers and on the television today about an economic turn-around in this country.
I want to go on record as saying in my opinion the turn-around will have to take place in agriculture for any substantial turnaround in this country, through improved prices and expanded markets.
I appreciate the attendance today of all of you here. I hope that everyone that wants to testify feels free to come forward. Again, I want to express my deep appreciation for Senator Pryor coming here in this area and affording all of you an opportunity to express your views and your support.
I also would like to thank Representative McGinnis, who has worked very hard with Senator Pryor's staff, and I think he would also like to make a few comments.
Senator PRYOR. Thank you Senator Ingram. Representative McGinnis you are next. STATEMENT OF HON. ROBERT MCGINNIS, ARKANSAS STATE
REPRESENTATIVE Representative McGINNIS. Thank you Senator Pryor. I would like to say amen to what Senator Ingram has said. This did come from-the idea from Steve Bernard, the idea of using the payment in kind to pay back the people who have lost grain and bankrupt storage grain in bankrupt elevators.
I'm a farmer myself and I don't apologize one bit for proposing or trying to get this legislation passed. I've been farming 29 years and I lost money for the first time this past year, in 1982. And, so I put myself in place of Steve Bernard and those people who have lost grain in bankrupt elevators, and I guarantee you, you know, if I had lost grain in a bankrupt elevator, storage grain that was not an asset of the bankrupt elevator, there's no way, you know, that I could make it.
And, that's the posture that these farmers are in. Unless they get some kind of help, you know, from the Federal Government through the PIK program, it's just no way a lot of these people are going to make it.
You know, the biggest bargain that we've got today—that the American people have today-is the price of food. That's the biggest bargain that they've got, and I think Senator Pryor will tell you if you go to Russia, or if you go to any of the foreign countries—to England, or France or just you name it—to Hawaii, or any other country, you know, the price of food is about double what it is in the United States.
And, so if they break the independent farmer and the family farm and do away with it, you're going to see the biggest escalation in the price of food that, you know, that you've ever seen. So, again, I thank you, Senator Pryor, for coming here and supporting this legislation, and I just want to say as a farmer that we appreciate it.
Senator PRYOR. Thank you, Bob. I might ask Bob or Senator Ingram a question. If you don't have specific information, you could certainly feel free to submit that answer in writing in the next several days.
In this general locality of our State, I'm somewhat familiar with the situation at Hughes and other situations. I wonder if you might just like to comment for the record as to what these bankruptcies have done, not only for the individual farmers, but also for the communities in which they live and work.
Representative McGINNIS. Well, I don't mind saying in the Hughes area the farmers that have lost grain in the bankrupt elevator there, there are going to be a lot of them that are just flat not going to make it, you know. Because of the low price of the commodities and the high price of machinery, things that we have to buy, coupled with the fact that they lost grain through no fault of their own.
And, these bankrupt elevators, they are just not going to make it. Along that same line Representative Cunningham and myself introduced two pieces of legislation in General Assembly, and we've gotten it passed. One is House bill 478, and what that does, it allows a person who has stored grain in an elevator to use a scale ticket.
And, that scale ticket, a nonprice scale ticket will become a nonnegotiable warehouse receipt. Most of you, probably the farmers know it, but most of you don't know that when you put grainstored grain-in an elevator, well the elevator—the owner of the elevator has up to 180 days in which he can give you a warehouse receipt.
If the elevator happens to go bankrupt during that interim, during that period from the time you put it in to 180 days, the farmer in the past has had nothing to hang on to and say, look, that is my grain. So, we passed this bill that said that a nonprice scale ticket will serve as a nonnegotiable warehouse receipt.
The second bill that we passed was House bill 548, which said that when a bankrupt elevator goes—when an elevator goes bankrupt we've authorized the director of the State plan board to receive this stored grain. The stored grain is not an asset of the bankrupt elevator and the director of State plan board will go into the receivership for this stored grain, which is the farmer's grain, and he will market this grain and get the money back to the farmers that had this grain stored.
In the past it's gotten all tied up in the bankruptcy courts and in the State courts, and sometimes its taken from 1 year or 2 years for this grain to get back and to be sold and the money to get back for the farmers. In a lot of instances, it's gotten tied up in the courts and the farmers never got it back.
So we think these two pieces of legislation are going to help a lot in bankrupt elevators.
Senator PRYOR. Would you like to comment Senator Ingram?
Senator INGRAM. I would like to just echo what Representative McGinnis said. Most of our communities in this area are small communities, especially in the Hughes area. In the last 4 or 5 years, whether it be weather conditions or depressed prices, have left our farming community in a precarious close margin operational-type situation.
To put it simply, the losses that have been incurred in these bankrupt-grain elevators is placing the farmers in a near bankruptcy situation themselves, which is no fault of their own. And, when these small communities, the effect that this loss of farm income in a small community, has affected not only the small retail stores but the general trade area within a 40- to 50-mile radius.
So the impact, I would say to put it mildly is not just centered in one small little community but within a geographical area.
Senator PRYOR. Senator Ingram and Representative McGinnis, we know that you have some serious legislating to do in Little Rock and know that you need to get on the road. But, one, I'm very appreciative as a Member of the Senate in Washington, receiving the resolution that you did sponsor. I think that it certainly drew attention to a matter that had I don't want to say had been overlooked, but just had not been tended to.
With the coming into effect of the PIK program, we think it is a perfect example of how we might expand the PIK program, and not only compensate these farmers for their losses, not due to their fault, but also to help ultimately remove some of the grain in surplus stores shown by CCC at this time. We just think that there's just no down side to this legislation, and we're hopeful that it can be passed.
I thank both of you.
Senator PRYOR. Before you leave I would like to insert in the official record of the hearing a telegram received this morning from my colleague, Senator Bumpers, who has endorsed not only this particular legislative, but also S. 596, the Grain Storage Compensation Act of 1983. Both of us are co-sponsoring these two particular pieces of legislation.
I would like to add his telegram as an official part of this transcript. Unless you have something else we'll excuse you and you can go about your duties. [The following telegram was received for the record:)
WASHINGTON, D.C., Feb. 26, 1983. Senator David PRYOR, City Hall West Memphis, Ark. I'm
sorry that I'm unable to attend the very important hearing being held by Senator Pryor today on S. 596, The Grain Storage Compensation Act of 1983. I am proud to say that I am a co-sponsor of S. 596 and am prepared to give it my wholehearted support. Farmers across the Nation have suffered greatly due to elevator failures and S. 596 offers a simple remedy, in conjunction with the announced PIK program, that will provide wide spread relief to many-not just the farmers devastated by elevator failures, but to the entire rural community dependent on these farmers.
Senator Pryor and I have also introduced S. 550, a bill that would establish the Federal Gain Storage Insurance Corporation, that would go a long way in providing a permanent program of protection for our farmers against elevator failures. During the coming year, Congress and the President must join hands in coming to grips with the elevator failure crises before us. I wish to commend Senator Pryor for introducing S. 596 and I urge everyone to give this bill their support.
DALE BUMPERS. Senator INGRAM. We'll try to get back over and see that they don't do anything to us.
Senator PRYOR. Thank you, Kent, so very much, Bob, thanks so very much.
I think, too, it would be a good point in this record to keep the record somewhat intact, to read a recent statement from the General Accounting Office relative to elevators generally in our country.
According to a statement by Brian Crowley of the U.S. General Accounting Office recently, and I would like to make this quote from his statement.
The best overall and latest available data on past bankruptcies indicate that about 2 percent of the approximately 10,000 grain warehouses nationwide have gone bankrupt since-between 1974 and 1979. To estimate how many warehouses might be in financial trouble we applied certain financial ratios and self-developed criteria to data reported to USDA by a random sample of 400 grain warehouses under Federal jurisdiction.
We found that 19 of these warehouses or 4.75 percent of the sample warehouses met our criteria for being in financial trouble. Based on these results we estimate that about 300 warehouses may be financially unsound.
At the 95-percent confidence level this number could range from 173 to 427 warehouses in some degree of financial trouble. About 36 percent of grain warehouses are subject to only state requirements which range from nonexistence to very stringent.
Senator PRYOR. I thought at that point in the record it might be appropriate to submit that statement from the U.S. General Accounting Office.
Our next witness this morning is Steve Bernard. Steve, would you come forward? And, also John Stipe, our friend from Forrest City.
Mr. BERNARD. Senator, I have another one or two persons here that would like to say a short word or two.
Senator PRYOR. Well, bring them up.
Senator PRYOR. All right. We won't go very much on formality this morning, because what we're after is getting information. So anyway we can get it we're going to try to do it.
STATEMENT OF STEVE BERNARD Mr. BERNARD. Well, the first thing I want to do is thank you for your interest in agriculture, and a special thanks for being here today and for sponsoring this act. I understand that it has been named the Equitable Farm Compensation Act of 1983, and all you people in the audience, that's the name that they've given the bill to compensate the farmers who have lost grain in these elevators with CCC surplus commodities.
I would also like to point out that we have several farmers here from Missouri, Tennessee, and from the northeast corner of Arkansas.
Senator PRYOR. We welcome them here.
Mr. BERNARD. And, they, too, have a special interest in this legislation because they've also suffered a loss. As you no doubt know, this legislation is No. 1 on my list, and I'd like to point out some of the good features that I see in this bill.
But before I do that I want to tell you that I've talked to farmers in several States, and I've yet to find any farmer that's opposed to this legislation. Some of the good features that I see in the bill, it provides immediate relief for a number of farmers that will be forced out of business without its passage or some other miracle happening
Second, there's no cash or credit required on the part of the Government, as payment will be made in surplus grain. Third, it reduces our surplus, and it would help stop our storage expense.
Next, I think it's going to allow the farmers involved to pay off a portion of their carryover debts from PCA, FmHA, private lenders and various suppliers. It creates an income tax base and I think the simplicity of the bill is one of the good features of it.
If you will, I would like to mention each of these just a little bit. First, my knowledge of the loss is rather localized in that we had 10 farmers to lose grain in the St. Francis and Lee and Crittenden County areas. I'd like to follow their path a little bit since this loss occurred in 1979.
We've had one farmer since the 1982 harvest that has declared bankruptcy. He's in the chapter 11. We've had another farmer that's simply given up and knows that he can't continue. He and his employees are now numbered among the unemployed.
We've had two other farmers that are having extreme difficulty in obtaining financing for the 1983 crop, and as of this date haven't obtained operating loans. And, to start out with 10 people, that means 40 percent of them are in serious trouble. The remaining six, myself included, have managed to stay in business and as of today we plan to operate another year.
I've been told by the farmers here from Tennessee, Missouri, and northeast Arkansas that they are experiencing the same results. I have a specific example I want to mention. We had one man that lost $168,000 worth of grain. Unfortunately this loss was combined with the escalating interest rates—and this was in August of 1980, and by August of 1981, he owed $26,000 interest on the $168,000. By August of 1982, he owed $224,000, and by August of this year he'll owe $255,000, with $87,000 of that being interest since 1980.
I know that we have surpluses and there are those people in the country who have made some outstanding crops in the last few years. But I'm sorry to say that these high yields haven't been the rule of thumb in this part of the country. This man has been unable to pay off any of this back debt.
It's sort of like pushing snow, it just keeps getting bigger and bigger, and bigger on him, and I'm sure that's going to come to a halt. As we all know, Senator, it's hard to farm successfully today when you sell your crops, and you can imagine what you do when you lose 100 percent of it after harvest.