It simply tells you that agriculture is indeed a captive within our economy and it is something that is being manipulated.

More than anything else, that fires me more than anything I have heard.

Let us go to Gary Adam of Fairfield, Iowa.

STATEMENT OF GARY ADAM, FAIRFIELD, IOWA

Mr. ADAM. My name is Gary Adam and I live in Fairfield, Iowa. I raise 400 acres of corn and soybeans and farrow to finish 2,000 head of hogs a year.

On January 30 I was with a 10-man panel representing the American Agriculture Movement who met with Iowa Governor Robert Ray. Governor Ray thought that the pork producer in Iowa ought to be happy with the high hog prices. Governor Ray was right that the hog prices are good in relation to the rest of the agriculture economy in Iowa, but he is wrong that the pork producer is happy.

The hogs have been profitable the last couple of months but only at the expense of corn and soybeans. Pork producers aren't happy because the hog/corn ratio cannot be sustained. Hogs at only 82 percent of parity are profitable because corn is 58 percent of parity and soybeans are at 60 percent of parity. Governor Ray agreed that the cheap corn will inevitably create cheap hogs.

According to a mid-January poll of Iowa pork producers by Wallaces Farmer, 100 percent of the producers polled expect pork prices to be drastically lower by July 1. Sixty percent of the producers expect pork prices to be below the cost of production by July 1. The price outlook beyond July is even worse.

I also recently had the opportunity to address the Joint Senate and House Agriculture Committee in Iowa. Our Iowa legislators were quite concerned about the Iowa enconomy since 80 percent of the jobs in Iowa are dependent on agriculture. With the grain producers and cattlemen already losing money and the pork producers about to join the club, the Iowa economy doesn't look too bright.

A year ago, manufacturers couldn't keep up with farmers orders for new equipment. Today, as you drive through the small towns in Iowa, you see long lines of new machinery sitting on implement dealer's lots. These lines are getting longer and will continue to get longer. These lines of machinery will be having a large impact on our local economy in Fairfield, Iowa. Four of our seven factories in Fairfield, Iowa, manufacture products that are directly related to agriculture. One company produces malleable iron castings, one produces aluminum castings, one produces chains and cables and devices to operate levers, and one produces universal joints and drive shafts. The products these companies produce are purchased by larger manufacturers of agricultural products in the Midwest.

When the farmer is no longer able to purchase the finished product that these manufacturers produce, these large manufacturers reduce their orders with our local factories. When the orders stop coming in, the local manufacturer is forced to lay off his employees. They, in turn, reduce their purchases from the local merchants who in turn reduce orders from their suppliers, and so on.

Each time a farmer spends a dollar with his local businessman, he generates $7 more into the national economy, more economic genera

tion than any other industry in the Nation. Three of those $7 are generated at the local level.

If the farmer doesn't spend that first dollar, the other $7 aren't generated. Since the American farmer consumes 40 percent of the GNP, changing his spending habits greatly effects not only the local and State economy, but also the national economy. If we, the American farmer, had 100 percent of parity, we could have a strong local economy, a strong Iowa economy and a prosperous Nation.

I wanted to inject a couple of other things here. The spending habits of the farmer in Iowa-in 1973, we had a pretty good year. Representative Horace Dagget who is a Congressman in Iowa was on the Ways and Means Committee, and still is, and helped set the Iowa budget up for 1973.

In June of 1974 when the year ended, they had $225 million in excess in the Treasury. They could not figure out how they could have made such a large mistake. That is a lot of money for Iowa to have in excess. Normally, they are in the hole.

They went back and looked to see where the mistake was. They found out there was no mistake. The farmers had a good year. They paid $60 million excess in income taxes and the rest of it came from other taxes like sales and excise tax. If this can happen in Iowa when we consume 40 percent of the gross national product, it ought to have a large effect on the Nation also.

Another thing that I wanted to put in here, I don't know anything about the cattle industry. I am not a cattleman. But since I have gotten involved in this movement, I have read a lot of figures and statistics. I have read where if the beef imports in this United States were totally stopped, the extra ground that would be put into grassland production to raise those cattle here as grazing land, in the ground it would be taken out of production that is producing feed grain and fed to those cattle, would take care of our surplus grain.

If we take care of that surplus grain, that will keep my hog price up. That will add a lot to the economy. I think that needed to be injected.

Senator HODGES. Thank you.

For a number of years, we have gone to Iowa pheasant hunting. I actually stay with farmers up there. Their situation has deteriorated in the last 3 years in a very obvious way. I had my staff compute some time ago the difference in income of a State's prices which they received in 1977 as opposed to what would have been received at 100 percent of parity. The difference in State economy would be $3,421 million. I am sure that would go a long way in many of the towns in Iowa.

There is a dramatic difference in what would be received under the two approaches.

In talking with the Congressman from Iowa and in talking with the Senators from Iowa, they indicated one problem with the bill that I am involved with is that the Iowa corn farmers are unwilling to have set-asides.

Is that, in your opinion, correct?

Mr. ADAM. I don't think he is unwilling, but the Iowa farmer is not going to set-aside. There is very little participation to be had in Iowa with the present program. There is no incentive. If we had any

kind of incentive, the Iowa farmers would be tickled to death to setaside. That is what needs to be done if we are going to work with the present program.

Senator HODGES. If you had an across-the-board program, one that controls all commodities, looking at surpluses, and set-aside and insured a price very close to parity, which is the one that we have included in our bill-I cannot remember exactly where the corn is at in our bill, but I will find out in a minute-in your opinion, would the Iowa corn farmer be willing to have a set-aside if there were a surplus of their commodity of corn?

Mr. ADAM. I am sure they would.

Senator HODGES. Corn is set at a loan rate of $3.15 a bushel.

You do not agree with these Senators who say that the corn farmer is unwilling to go for a mandatory set-aside, so long as it is one that applies across the board?

Mr. ADAM. I think they sure were misunderstood. I talked to many. I am sure Horace Dagget testified before you. What was probably misunderstood, the Iowa farmer is not going to set aside without an incentive of some kind, but if we had a $3.15 loan rate, that would be enough to be an incentive. A $2 loan rate is no incentive.

The Iowa land prices inflated greater than most places. He may lose money, $40 an acre with a $2 loan level, but his interest in taxes that he has to pay anyway, would cause him to lose $100 an acre if he planted nothing. Therefore, he will go ahead and plant with the present incentives.

Senator HODGES. Would you agree with my analysis of the 1977 Farm Act that the low-loan rates and low-target rates just trap the farmer even further?

Mr. ADAM. Yes.

Senator HODGES. Those figures put a lid on prices as opposed to the flow?

Mr. ADAM. Yes; they use the wrong terminology.

Senator HODGES. It has also been a concern of mine, in any loan program, that all Government loans have always been on a basis that plays into the hands of the processor. They can sit there knowing the loans are going to terminate and, therefore, they make their buys around loan termination dates and storage termination dates, placing the farmer at a disadvantage.

Would you agree with that?

Mr. ADAM. I agree with that 100 percent.

Senator HODGES. That is why I feel so strongly about long-term loans. It gives the producer flexibility and allows him to determine when to take it out. I think it will change speculation dramatically.

I have come to the opinion and I am asking you this in a sense to see if you share the opinion that a lot of the farm legislation that I see seems to be written more by the processors and by the buyers than it is by the producers?

Mr. ADAM. Definitely; I don't see very many of the producers writing this farm legislation. That is where I think it should come from. The producer is the one who has the effect on the economy. The processors and grain companies and the people at the end are leaching off of us and, in reality, all the American people. If the American

people have to subsidize us with tax money, the larger grain companies or the people with money in the Nation are the people who are benefiting from it, not the individual.

Senator HODGES. Last, let me compliment you if you are raising hogs on realizing that your prosperity is only temporary because. I have said that we have a feast or famine approach in American agriculture. It takes a famine in one phase of agriculture to have a feast in the other, so you may be full one day, but you are starving the next. I appreciate that you are willing to say what is necessary for all of us to do better over a period of time.

Lastly, I could not agree more on the imports. It is astonishing that we let all these people pour things in our country and we cannot send them to their countries. Yet, we talk as if there is a free market. It is not. It is free for America and not free for the rest of the world. You said it, here we are paying the price. I am glad you finally are speaking out.

Mr. ADAM. Thank you.

Senator HODGES. Thank you for a very good statement.

Our next witnesses are Mr. Rick Rodgers of Klamath Falls, Oreg. and Tom Cunningham of Broadwater, Nebr.

Mr. Cunningham is not here.

STATEMENT OF RICK RODGERS, KLAMATH FALLS, OREG.

Mr. RODGERS. Mr. Chairman, I have a prepared statement and an attachment of figure sheets. I would like to read most of my statement. To save time, I will leave out the personal stuff and move to the operation*

Senator HODGES. Very well.

Mr. RODGERS. Mr. Chairman, my name is Rick Rodgers and I am from Klamath Falls, Oreg., where I am an active partner in a family farming and ranching operation with my three brothers and father. I am here today to speak for my own operation and for other farmers in the State of Oregon.

I believe our family farm is typical of many farms in our State and is a good example of the agricultural situation in Oregon. My family farms about 2,000 acres of irrigated ground and about 2,000 acres of mountainous pasture land. Our operation is diversified by raising both feed grains and malting barleys, a 200 plus cow-calf herd, a commercial alfalfa hay crop, and a 1,000 to 2,000 animal feedlot.

In last year's operation, we lost over $73,000 in operating that family farm. This is with top market prices and top yielding crops.

With a loss like that, we had to figure out what the trouble was and we looked at our balance sheet.

Looking at our balance sheet, we knew that our operating expenses were in line with what it took to operate properly, and our living expense of $400 per month could hardly be called luxurious. Something had to be done to correct the situation. We either had to get outside jobs, put our wives to work, or get better prices. These were the only things that could help this situation.

*See p. 241 for the prepared statement of Mr. Rodgers.

Beef prices we knew from the experience of owning our own meat stores were set at the consumer level, adjusted according to the various cuts of meat. What this means is that when a steer is killed, you have so many pounds of steak, so many pounds of roast and a large poundage of ground beef. The dollars from each cut is what the price of the steer brings. Ground beef prices are held low by the cheap imported meat being shipped into this country-at about 64 cents a pound. So, in order to get any return for a steer, steaks and roasts have to be priced at a higher than normal average price per pound.

This has done several things to the consumer and the beef industry. First, it has created a society of ground beef or hamburger eaters, simply because of the price of cheap ground beef and the high price of steaks. The ground beef that they eat of which 1,280 million pounds was imported last year-had deprived them of the better eating in life. In the 1978 Food and Agricultural Outlook, Carol Tucker Foreman talks a lot about the nutritional value of food. I wonder if she knows the nutritive difference between the greasy hamburger and a good broiled T-bone steak which the cheap imports make too expensive for many people to eat.

Second, we have bankrupt the meatpacking industry by not allowing them to receive a fair value from the carcass. They cannot compete with the cheap import's price and the additional poundage of ground beef being shipped in. The U.S. meatpackers are under a number of U.S. regulations which all cost a large amount of money in order to protect the American consumer. Foreign imports do not come under these same regulations and therefore compete at cheaper prices than domestic products. Our own State of Oregon used to have a packinghouse in nearly every town, now we are down to three slaughterhouses in the entire State. The people who used to work in these plants are now competing for other jobs or are being supported by the State, and probably don't have the income to buy good beef.

Third, we are breaking the ranchers and feedlots of the State and Nation with the cheap price of beef. Oregon lost 300 ranchers last year and liquidated 20 percent of its cowherds. The reasons are very simple if you will look at the extension service charts attached. No one can continue to run a business when he must sell for a loss.

Approximately 65 percent of all the gross agricultural income comes from livestock and dairy products. We know that agriculture is the economic indicator for this country and that it is the largest source of real wealth in this Nation.

We have an economy that is out of balance and it needs to be readjusted. We need to make raising livestock a profitable business so that we can increase our herds. These larger herds will eat more feed grains, enable our packingplants to reopen and reemploy much of our work force.

This economy has generated a massive unemployed work force which has, in turn, had a direct effect on the amount of meat consumed in this country. The flow of wealth from farms and ranches to the labor force is what determines the amount of income that can be used to purchase goods and services. Unemployed people do not eat much beefsteak. They simply do not have the income with which to buy it. Poor nations have a low meat consumption and rich nations a higher meat consumption level.