1. Is there a farm crisis in the US? How bad is it?

Larry Combest, Chairman: The farm crisis is bad enough, and if Congress does not provide meaningful supplemental income assistance, then the crisis will most certainly deepen for thousands of hard-working farm families across this nation. I know that when I was farming, there was just no way I could make it over the long term with cotton at around 50 cents a-pound -- and that was 30 years ago. The fact is, producers are in the second year of seriously-depressed crop prices that are devastating to our rural communities. That crisis is adding a lot of financial stress to farm families. Rather than answering just "how bad is bad," I want to assure producers that they will see Congress stand shoulder to shoulder with them -- just as we did last year with $6 billion in disaster assistance, as well as twice earlier this season to replenish USDA farm loan accounts. Soon, Congress will meet to begin finalizing a short-term assistance package to aid producers this year. The Senate's $7.4 billion aid package, authored by Mississippi Republican Thad Cochran, is the first concrete plan to rally 'round. The Speaker of the House has committed to decisive action again this season. Congress has repeatedly requested the Administration, with its vast USDA resources, to analyze this problem and put forward specific proposals. Unfortunately, nothing has been forthcoming. In the absence of ideas from the President, Congress must act.

Charles Stenholm,  Ranking Minority Member: Yes. Multiple years of natural disasters, low commodity prices, and the lack of an adequate safety net and risk management tools have created an unsustainable situation for many farmers and ranchers.

2. Are today's low prices the result of the "freedom to farm" law? If so, exactly how did "freedom to farm" cause low prices? If not, what's really behind low prices?

Combest: The "freedom to farm" law is no more the cause of low prices now than it was responsible for the high prices in 1996 and 1997. Yet, it would be safe to say that the record net farm income levels we have seen in recent years is a direct effect of "freedom to farm." By empowering farmers to produce for the market, we saw a flurry of economic activity in rural communities throughout the nation. Producers geared-up for expanded trade opportunities, only to have an overseas drop in demand. Today's low prices are the result of lost foreign markets and heavy world-wide production. Economic activity has slacked in the last year-and-a-half as export opportunities have decreased. Almost one quarter of U.S. farm product sales is dependent on export markets. U.S. agricultural exports may drop to $49 billion this year, from $60 billion in the beginning years of "freedom to farm." The freedom to farm your choice of crops was also to have included expanded world trade opportunities. Yet, bound agricultural tariffs remain unacceptably high at 50 percent, while tariffs on industrial goods have been lowered significantly to 4 percent. Troubling trade signals continue in the Clinton Administration's questionable negotiating position for agriculture in the upcoming World Trade Organization ministerial.

Stenolm: Today's low prices appear to be the result of a downturn in exports, in part related to the crisis in the economies of several of our best customers for agricultural commodities as well as continued barriers to fair access for our ag exports. This came at the same time as record or near-record production in many sectors throughout the world. The combination of loss of export potential, at the same time as ample supplies of commodities, has led to prices near or below record low levels.

3. Should the US reinstate some policies from pre-1996 farm policy, such as higher loan rates, production controls and target prices?

Combest: The challenge before us is to create a federal farm policy that assures sufficient revenue -- based on price and production -- for efficient farmers to be able to make it in today's global marketplace. Prior to the current farm bill, producers were locked into growing the same commodity program crops year after year, with little flexibility. USDA bureaucrats dictated target prices that priced us out of world markets. While this policy did offer some security for farmers to go on producing the way they had in the past, it hamstrung our agriculture industry from meeting the needs of a changing world. Government's place in agriculture is to support the producer's opportunities. Producers want to manage their operations, not be managed; they want to control their risk through management tools that government must make available. This year, for example, the House Agriculture Committee passed major improvements to crop insurance. That legislation, H.R. 2559, "The Agricultural Risk Protection Act," offers improved crop insurance premium assistance, favorable treatment of actual production history, and coverage for lost market revenue and livestock losses. For the future, we continue to look at new and innovative ways to help producers manage the revenue risk inherent to farming, while offering the tools to remain the world leader in changing agricultural markets.

Stenholm: I would have to be convinced that programs such as the Farmer Owned Reserve, the six-month loan extension or increasing Conservation Reserve Program (CPP) acreage would have a direct impact on cash prices received by farmers. I'm concerned that the federal dollars that would have to be spent to pay for these provisions might better be used in a program that provides direct cash infusions to crop or livestock producers when prices or revenue drop. I have advocated giving the Secretary the authority to establish a paid diversion program to address disease or pest problems, which I feel would be a better solution than jeopardizing the popularity of the CAP.

4. How much additional money - if any - should Congress provide in direct payments this year? How should these payments be structured if they are made?

Combest: I have said for months that Congress will provide financial aid. The Senate package puts forth a positive legislative proposal structured with direct payments, raising the LDP payment limit, reinstating export program funding, and crop insurance premium discounts. As you publish these answers in early September, Members of the House Agriculture Committee will weigh-in on the amount and structure of the package as it is finalized and tailored more closely to the outcome of the harvest.

Stenholm: It is going to be hard to assess that until we know the extent of the natural disaster losses suffered across the country this year. It is unlikely that Congress will be able to address the low price crisis only without addressing natural disaster losses. We also need to face the reality of haw we pay for agricultural relief assistance. In other words, will it come from Social Security funds or be paid for with cuts in other ag spending. I have introduced legislation, H.R. 2792, that would address the downturn in revenues for wheat, feed grains, cotton, rice and oilseed sectors. My Supplemental Income Payment (SIP) proposal would provide payments to producers when the current year's national gross revenue for a commodity sector falls below 95% of the average national gross revenue of the previous five years for that commodity, adjusted for changes in acreage. A producers' harvested production as well as failed production, based on APH or county average, would be eligible for SIP, if triggered for a commodity sector. The production would not have to be grown on AMTA contract acreage to be eligible. SIP provides a rational, long term basis for providing a safety net to producers in a way that does not influence producers' planting. marketing or risk management decisions.

5. Less than half of US agriculture receives direct payments. Are there initiatives that would help the remainder of producers who do not get payments? What are these initiatives?

Combest: Consideration of a wide range of initiatives rules nothing out for the current crop year at this point. What is most important to producers is that any initiative, or combination of initiatives, must deliver that assistance effectively and timely. As we saw from last season, for USDA to take 8 months to deliver last year's aid this past June was inexcusable, particularly when the Secretary of Agriculture received the amount he requested and control over how to deliver that aid. It does producers little good to receive aid unless it comes to them when and how it's needed. As for initiatives beyond this crop year, the crop insurance legislation passed by the House Ag Committee will be a major initiative for replacement of revenues from weather losses and lost crop values. Improving crop coverage and offering policies for livestock and revenue loss will cover producers who do not receive direct payments. A more comprehensive risk management approach will be the next major initiative of the House Agriculture Committee under my chairmanship.

Stenholm: I believe that the SIP program outlined above could be used as a model for the traditional "non-program " crops like fruits, vegetables, horticulture products as well as livestock. We must also continue to improve crop insurance and related products to ensure that they address the needs of all agricultural producers. I believe that SIP would even be used as a kind of catastrophic version of revenue insurnac eprotection. SIP differs from current revenue insurance products in that it would protect producers from downturns in revenue between crop years, as opposed to products such as Crop Revenue Coverage, which only covers downturns in price within a crop year.