Mr. Chairman and Members of the Committee, I am pleased to appear before you today to present the 2001 budget and program proposals for the Farm and Foreign Agricultural Services (FFAS) mission area of the Department of Agriculture (USDA). With me this morning are the Administrators of the three agencies within our mission area: Keith Kelly, Administrator of the Farm Service Agency; Kenneth Ackerman, Administrator of the Risk Management Agency; and Timothy Galvin, Administrator of the Foreign Agricultural Service. I am also accompanied by Richard Fritz, the Department=s General Sales Manager, and Stephen Dewhurst from the Office of Budget and Program Analysis.

Statements by each of the Administrators providing details on the agencies= budget and program proposals for 2001 have already been submitted to the Committee. My statement will summarize those proposals, after which we will be pleased to respond to your questions.

Mr. Chairman, there is no doubt that farmers and ranchers have experienced very tough conditions over the past couple of years. For many commodities, prices remain at historically low levels. Under current legislation and programs, net cash farm income in 2000 is projected to be the lowest level since 1986 and 90 percent of the average for the 1990s.

The Administration and Congress have worked together over the past 2 years to provide emergency support for farmers in areas hit hard by declining prices and production losses. However, this emergency assistance has been expensive and not well targeted to those producers who need it the most. Because of current economic conditions in farm country and persistent concerns about provisions of the Federal Agriculture Improvement and Reform Act of 1996 (the 1996 Act), the President and Secretary Glickman have indicated strongly that the farm safety net needs to be reinforced.

The President=s 2001 budget includes several legislative proposals for farm, conservation, and crop insurance programs, coupled with new initiatives to be undertaken using current authorities, which together will provide more than $11 billion in additional assistance to farmers, ranchers and rural communities from 2000 through 2002. These initiatives to improve the farm safety net would provide about $7 billion in additional direct farm income assistance over this period. This includes proposed legislation for the 2000 and 2001 crop years to provide $5.6 billion in supplementary, crop-specific income assistance to producers of wheat, feed grains, rice, upland cotton, and oilseeds suffering from low prices and revenue.

The proposed legislation also includes an extension of the dairy price support program and a new program to fund livestock processing and other cooperatives to improve income opportunities for producers. The Administration=s initiatives under current authorities will include maintenance of maximum levels for marketing assistance loan rates for the 2000 crops, a new program of incentives to encourage increased use of farm commodities for biofuels production, and a new farm storage facility loan program to aid producers to expand on farm storage capacity to be positioned better to market their crops effectively.

Continued efforts to expand and improve programs that help producers manage risk will also be emphasized, and it will be necessary to work with Congress to reform further the insurance programs for crop and livestock producers. Over $1 billion is included for crop insurance and related reforms. This includes a proposal to make noninsured crop disaster

assistance more accessible to producers by replacing the requirements for an area-wide loss before assistance can be made available to producers with a less restrictive disaster declaration.

Enhanced conservation initiatives totaling nearly $3 billion, a $1.3 billion increase over authorized levels for each of 2001 and 2002, are also proposed. This includes a new Conservation Security Program at $600 million per year. The conservation proposals are a critical component of our farm safety net improvements to assist producers in maintaining environmentally sound practices during these economically troubling times. The budget proposes legislation to increase the Conservation Reserve Program (CRP) acreage cap to 40 million acres. It also promotes the continuous, non-competitive signup that has been underway to enroll land in filter strips, riparian buffers, and similar special conservation practices to enhance achievement of water quality objectives by providing additional incentives under current authority to enhance participation.

The proposal also would expand other conservation programs funded by the Commodity Credit Corporation (CCC) but administered by the National Resources Conservation Service (NRCS), including the Wetlands Reserve Program (WRP), the Environmental Quality Incentives Program (EQIP), the Wildlife Habitat Incentives Program (WHIP), and the Farmland Protection Program (FPP).

These initiatives will serve as the basis for more permanent and effective assistance to help producers cope with continuing economic stress at less cost to the taxpayer. Unlike previous ad hoc and off-budget emergency assistance enacted late in the year, the Administration=s proposal is fully paid for in the context of a balanced budget. It is presented as a part of the regular budget process so that Congress can take action early in the year allowing farmers and their creditors to plan ahead. The proposal will enhance and improve the safety net during the remaining 2 years of the 1996 Act and provide a bridge to a new farm program. There also will be continuing efforts by the Department to work to expand opportunities for small farmers and others who traditionally have been under served in our farm programs.

Farm Service Agency

The Farm Service Agency (FSA) is the agency that farmers and ranchers interact with most frequently. Producers come to FSA to participate in farm programs, including programs involving production flexibility contract payments, commodity marketing assistance loans, loan deficiency payments, farm ownership and operating loans, disaster assistance, and conservation programs such as the CRP.

Commodity programs administered by FSA are providing substantial support for producers facing declining market prices. As crop prices fell during 1998 and 1999, the extent of assistance provided under the existing farm program authorities increased significantly in 1999. It is projected to be even higher in 2000 and remain high in 2001.

The combination of loan deficiency payments (LDPs) and marketing loan gains emerged as a significant portion of direct government payments to farmers beginning with the 1998 crop. LDP outlays totaled about $3.4 billion in 1999. For fiscal year 2000, total LDP outlays are forecast to rise to $7.2 billion.

Additional farm income support under existing authorities has been provided through production flexibility contract (PFC) payments of $5.5 billion in 1999 and $5.1 billion in 2000. These PFC payments, also known as Agriculture Market Transition Act (AMTA) payments, are authorized by Title I of the 1996 Act. PFC payments were fixed at gradually declining levels for the 7-year period between 1996 and 2002. PFC payments for 2001 are projected to total $4.0 billion. However, substantial additional assistance has been provided by the emergency disaster assistance provisions enacted in appropriations acts for 1999 and 2000.

Emergency Assistance

Farmers received nearly $6 billion in assistance in 1999 under disaster and market loss assistance provisions included in the 1999 Agriculture Appropriations Act. These programs, which were administered by FSA, included a variety of payments for crop losses, market loss assistance in the form of supplemental PFC payments, livestock and dairy assistance. Honey and mohair loans also were provided, as well as substantial additional farm loans.

For 2000, about $9 billion in similar assistance has been enacted. Substantially new provisions in 2000 include a new oilseeds assistance program, cottonseed assistance, and other provisions. In addition to these programs enacted by Congress, the Administration has implemented and is planning to implement additional assistance under current law as noted previously. FSA has delivered a substantial portion of this new assistance already, and most of the remaining provisions are currently being implemented. The agency has over 20 new or additional emergency related programs or activities related to the emergency assistance program in 2000, more than twice the number of such programs it had to deliver in 1999.

Disaster and commodity price and income support programs administered by FSA are financed through CCC. CCC is also the source of funding for a number of conservation programs administered by USDA, and it funds a substantial number of the export programs administered by the Foreign Agricultural Service. CCC borrows funds from the Treasury to finance those programs.

Changes over the last decade in commodity, disaster, and conservation programs have dramatically changed the level, mix, and variability of CCC outlays. CCC net outlays increased from $10 billion in 1998, to $19 billion in 1999, and are projected to increase to a new record high of about $27 billion in 2000. The increase in CCC spending for 2000 is accounted for by much higher loan deficiency payments, higher marketing assistance loan program outlays, expenditures related to various Administration initiatives, and higher emergency spending authorized by the 2000 Appropriations Act.

Projected CCC net outlays for 2001 under current law are estimated at over $15 billion, including nearly $800 million for initiatives planned under current authority. Approximately $4 billion in additional CCC outlays would occur in 2001 based on the proposed safety net legislation.

The 2000 appropriation for reimbursement of CCC=s net realized losses was $30.0 billion, an increase of $21.6 billion above the 1999 level of $8.4 billion. The appropriation to reimburse CCC for net realized losses that Congress provided for 2000 was a current, indefinite appropriation. This provided CCC with the flexibility to request funds as needed from the Treasury, up to the actual losses recorded for the most recent actual year. Without this current, indefinite appropriation, CCC would have been unable to replenish fully its borrowing authority at the beginning of 2000, and timely assistance to producers would have been jeopardized due to insufficient borrowing authority.

The 2001 budget includes a request to provide once again appropriation language to eliminate the requirement that only allows reimbursement for actual realized losses recorded in CCC books as of the end of the preceding year. Our request is that Congress provide a current, indefinite appropriation to reimburse the Corporation for all actual net realized losses, even if incurred during the current fiscal year.

The President=s budget also addresses problems with section 11 of the Commodity Credit Corporation Charter Act, which limits total allotments and transfers to State and Federal agencies for administrative support services to the 1995 expenditures level, and section 4, which caps CCC expenditures for computer equipment and related costs. The former provision imposes significant restrictions on the availability of CCC funds for transfers and reimbursable agreements used to fund conservation technical assistance and other support services for the conservation, commodity, and export programs. The budget proposes an adjustment to the limitation to permit additional funds for the technical assistance needed to carry out the conservation programs authorized in 1996 as well as newly proposed programs.

The amount available under the section 4 computer cap was fully exhausted earlier this fiscal year, precluding further CCC funding of data processing and related activities needed to support efficient and timely delivery of CCC programs. A portion of the appropriated funds for salaries and other expenses has had to be diverted to maintaining legacy systems, thereby impacting staffing levels. The loss of CCC funds for information technology and data processing also will impede needed investment in streamlining and Service Center modernization initiatives, restricting the Department=s investment in much-needed technology to implement ongoing business process reengineering efforts. USDA needs these investments to improve service to its customers and reduce program delivery costs, but the high cost of operating and maintaining the current legacy systems that serve our customers precludes investment in modernization without additional funding.

The budget for 2001 includes a legislative proposal to raise the limit on CCC expenditures for computer equipment by $35 million per year for the period 2001 through 2002. The increase in the multi-year cap is essential if CCC is going to meet its most basic ongoing computer operations and maintenance costs for the farm programs.

FSA maintains an important role in ensuring that our Nation=s farmers and ranchers have adequate credit. Although the Department holds less than 5 percent (about $10.4 billion) of total debt outstanding, it also has guarantees outstanding on about $7.3 billion in farm debt held by private lenders. Throughout the 1990s, FSA=s portfolio of direct farm loans has declined, while

that of guarantees has increased. There are a number of reasons for the decline in the portfolio of direct loans, including more rigorous lending standards imposed by the 1996 Act.

In 1999, FSA made about $1.3 billion in direct farm loans, which was a substantial increase over the approximately $700 million in direct loans made in 1998. Guaranteed loans also increased, from about $1.4 billion in 1998 to $2.5 billion in 1999. These increases were made possible by an emergency supplemental to the 1999 Agriculture Appropriations Act, and reflected increases in demand for FSA loan assistance due to low commodity prices and numerous natural disasters.

For 2000, FSA has funds available to make an estimated $1.8 billion in direct loans and to guarantee an estimated $4 billion in farm loans made by private lenders. Together, this represents an increase of almost $2 billion over the 1999 level. This increase was also made possible by additional funding added through emergency supplemental appropriations.

The 2001 budget includes funding for about $1.1 billion in direct loans and $3.5 billion in guarantees. Although these levels are down somewhat from 2000 total funding, they do not reflect any change in policy. The Administration continues to support providing sufficient credit for our Nation=s farmers and ranchers. The baseline for developing the 2001 budget did not include the additional funding for farm loans that was provided in emergency supplementals for 1999 and 2000. Rather, it includes only the amounts that were provided through regular appropriations, and on this basis represents a $1.5 billion increase over 2000.

Commodity prices are projected to increase somewhat and land values seem to be holding up, which should improve prospects for farmers and ranchers to qualify for farm loans from private lenders without a guarantee from FSA. The demand for FSA direct loans may vary depending upon several factors, including the number of new entrants into farming and the willingness of private lenders to service beginning and socially disadvantaged farmers and ranchers. FSA is now busy making loans for planting the 2000 crop. Once that is completed, we will have a better feel for whether there will be any 2000 funds available for carryover into 2001 and what we might expect to see in terms of demand for loans in 2001.

The farm loan programs are limited to family farmers who cannot obtain credit elsewhere. They provide credit for farm operating, farm ownership, and emergency purposes. The performance of these programs has been remarkably high over the last few years, especially in light of the economic crisis farmers and ranchers are experiencing. For example, delinquency rates have actually gone down, from 26.1 percent of principal and interest outstanding at the end of 1992 to 14.2 percent at the end of 1999. We soon will be proposing legislation to adjust the eligibility limits on emergency loans to make certain that no producers are inadvertently denied assistance by our programs or those of the Small Business Administration.

FSA recently revised its regulations for guaranteeing loans in order to streamline the process. For example, the new regulations allow private lenders more flexibility to service guaranteed loans in the same manner as conventional loans, which makes it easier for them and better for the U.S. Government because private sector expertise is being put to use.

The 2001 budget also includes $100 million in direct loans for the boll weevil eradication program and $2 million in direct loans for Native Americans for land acquisition. Overall the 2001 budget for the farm loan programs would cost $186 million in budget authority, which is the estimated cost to the Government for the proposed $4.6 billion loan level.

Conservation program outlays account for about 14 percent of the CCC expenditures in 2001. The 1996 Act authorized direct CCC funding for the CRP administered by FSA and several new conservation programs administered by NRCS. It also authorized CRP through 2002 and set enrollment in the program at 36.4 million acres. As previously mentioned, the

budget proposes to expand enrollment to 40 million acres as part of the Administration=s farm safety net proposals.

At the end of 1999, about 30.2 million acres were enrolled in CRP. The increase in enrollment to about 32.2 million acres at the end of 2000 reflects a combination of expiring acres, acres enrolled under the 18^th signup, and enrollment under the continuous, non-competitive signup. Total enrolled acreage was projected in the budget to increase to 35.7 million acres by the end of 2001, reflecting the combination of additional expirations, acres enrolled in the 20^th signup, and an additional 1.0 million acres enrolled under the continuous signup and the Conservation Reserve Enhancement Program. Under our proposal, total enrollment would reach 40 million acres by 2003. Total CRP outlays will be about $1.6 billion in 2000 and $1.7 billion in 2001.

The weakened farm economy has challenged our efforts to improve customer service while improving efficiency in the FSA and the other county-based conservation and rural development agencies. The increasing demand for CCC marketing assistance loan programs and disaster assistance has dramatically increased workload and placed new burdens on county office staff. The higher workload, particularly for the marketing assistance loan programs, is projected to continue into 2001.

FSA Federal and county staffing since 1993 has declined by about 5,400 staff years, from over 22,500 staff years at the end of 1993 to about 17,200 staff years at the end of 1999. Additional funds appropriated in 1999 and 2000 have allowed the agency to avoid reductions-in-force and to hire and maintain additional temporary staff to meet pressing workload needs.

The proposed 2001 program level for salaries and expenses of $1.1 billion is estimated to support a ceiling of 5,901 Federal staff years, and 10,766 non-Federal county staff years, and assumes proposed legislation is enacted allowing CCC to cover a portion of FSA=s computer operations and maintenance costs for the CCC farm programs. The workload requirements to deliver projected current programs and proposed new programs in 2001 are expected to require over 16,600 staff years as well as continued investment in modernization of the delivery system. As recommended in the Civil Rights Action Team report, legislation will be submitted to convert all FSA employees to Federal status this year.

Another important part of our effort to deliver improved, more efficient services to rural customers is the initiative to streamline and modernize the field offices and create Service Centers. While we have physically established these Centers, we still have much work to do to make the promise of better service a reality. A key ingredient for providing well-coordinated, quality assistance at USDA Service Centers is the replacement of separate-agency, aging information technology systems with the common computing environment along with reengineered business processes. The President=s budget proposes $75 million for this effort in appropriated funds under the Office of the Chief Information Officer. The Rural Development mission area, NRCS, and FSA will provide additional funding, as necessary, to support the modernization plan and Service Center initiative.

Another important part of efforts to modernize field operations is the streamlining of the administrative services for FSA, NRCS, and the Rural Development agencies. By conserving resources in this area, each agency will be in a better position to provide greater program support. We would like to work with you to see that these administrative services can be consolidated.

In 1999, the crop insurance program provided more than $30 billion in protection. That is about one-third of the gross value of the Nation=s crop production. Almost 200 million acres were insured. The level of coverage of these acres varied considerably. At the catastrophic level of coverage, producers were insured for 50 percent of production and 55 percent of price at no premium cost. Producers seeking higher levels of coverage could Abuy-up@ to 85 percent of production and 100 percent of price.

Program participation in 1999 was dramatically increased by the Administration=s decision to discount premiums, using $400 million of the funds that were provided in 1999 emergency supplemental appropriations. Producers responded by buying higher levels of coverage, thus offering more reasonable protection. Emergency funding is also available to discount premiums in 2000, and the results should be even better with more familiarity and time for producers to respond to the offer. Evidence to date shows that producers will continue to purchase additional coverage and become steady customers.

For 2001, the same discount of premiums is included in the Administration=s legislative proposal for improving the farm safety net. The proposal includes $640 million in mandatory funding for the budgetary impact of the discount B $400 million in premium discounts, $200 million in reimbursements for program delivery expenses and other related costs, and $40 million for a reserve for potential additional participation. The Administration=s farm safety net proposal also includes $100 million for establishment of multi-year coverage; $100 million for a pilot program for livestock; $40 million for risk management education; $30 million for research and development; and $110 million for modification of the area-wide loss trigger for the noninsured crop disaster assistance program.

The 2001 budget requests an appropriation of Asuch sums as necessary@ as mandatory spending for all costs associated with the program, except for Federal salaries and expenses. For salaries and expenses of the Risk Management Agency (RMA), $68 million in discretionary spending is proposed, an increase of $4 million above 2000. At this level of funding, RMA will be able to maintain products and services at current levels.

Foreign Agricultural Service

Strong exports remain an essential component of the farm safety net, and our aggressive efforts to develop and expand overseas markets are key component of the Administration=s strategy for improving the safety net. Our latest projection for the value of U.S. agricultural exports in 2000 is $49.5 billion, an increase of $500 million above last year. Although our export performance remains somewhat sluggish, there are now signs of improvement in world economic conditions that make the outlook for exports more positive than it has been for several years. For example, Southeast Asia is showing signs of economic recovery and several Latin American countries that have been in recession are forecast to have positive growth in 2000.

Improvement in the export picture is likely to be gradual, however, so we continue to employ our export program authorities aggressively to help bolster our agricultural export performance. Beginning in 1998, the Department greatly expanded the availability of CCC export credit guarantees in response to the financial crisis in Asia and elsewhere in order to assist countries that required guarantees to secure financing to purchase needed imports. Sales registrations under the program exceeded $3 billion in 1999.

Last year, the Department programmed just under 8 million metric tons of food assistance under our various program authorities, the highest level in recent memory. Included within the total were over 5 million metric tons of wheat and wheat products donated under the Food Aid Initiative announced by the President in July 1998, and assistance provided under a special program for Russia. For this year, we expect the level of food aid programming under the Department=s programs will again be substantial, including approximately 4 million metric tons of wheat, rice, soybeans and soybean products, and milk powder to be donated under the authority of section 416(b) of the Agricultural Act of 1949.

The Administration also has taken a series of steps to minimize the negative effects of unilateral economic sanctions on our farmers and ranchers. Last April, the President announced that the United States would exempt commercial sales of agricultural products, medicines, and medical equipment from future unilateral sanctions, unless the President finds it is in the national interest to include such items. Further, he announced that the new policy would extend to existing unilateral sanctions to permit case-by-case review of specific proposals for commercial sales. This policy change is important as it gives U.S. producers and exporters an opportunity to compete in additional markets and, since the change was implemented, sales of corn to Iran have been reported, as well as sales of durum wheat to Libya.

Several other actions taken by the President to ease the effects of sanctions on U.S. producers include the approval of waivers that have allowed CCC export credit guarantees to be extended to Pakistan and India, the approval of case-by-case licensing of food and agricultural exports to independent, non-governmental entities in Cuba, and the easing of certain sanctions against North Korea, which now allow most consumer goods to be available to export to that country.

We also are continuing our efforts to improve our access to markets throughout the world through a vigorous trade policy agenda. During the past year, the United States reached two important agreements with China B the U.S.-China Agricultural Cooperation Agreement reached last April and the bilateral agreement on China=s entry into the World Trade Organization (WTO) reached last November. The first of these agreements will remove long-standing technical barriers to imports of U.S. grains, citrus, and meat, and it facilitated last week=s purchase by China of 50,000 metric tons of wheat through Pacific Northwest ports.

Upon China=s accession to the WTO, the second agreement will result in reduced tariffs and enhanced access to Chinese markets for many of our products and will place disciplines on Chinese agricultural policies, which should reduce the possibility of disruptions of world trade resulting from their policies. In order for the United States to benefit fully from the agreement on WTO accession, however, it will be necessary for permanent Normal Trade Relations (NTR) status to be approved. Enactment of permanent NTR for China is one of the Administration=s top priorities this year, and we will be working closely with Congress to ensure a positive outcome on this matter.

We also continue our preparations with the new round of multilateral negotiations on agricultural trade. The Abuilt-in agenda@ for agricultural reform in the Uruguay Round Agreement on Agriculture provides for continuation of negotiations on agricultural trade reform, and they are now scheduled to commence later this month in Geneva. The U.S. objectives for the negotiations will be critical for the achievement of our long-term market expansion and development objectives, and we will be working long and hard to ensure that those objectives are advanced as the negotiations move forward.

The Foreign Agricultural Service (FAS) is the agency that leads the Department=s important efforts to expand overseas markets and assist U.S. exporters. The actions we have taken in recent years to bolster our export performance and advance our trade policy objectives have increased the FAS workload substantially. This has been the case this past year in particular when the level of food aid programming increased so dramatically and FAS was deeply immersed in a number of critical trade policy matters. At the same time, funding for the agency=s salaries and administrative expenses has remained essentially unchanged since 1997, which has required the agency to absorb virtually all pay and overseas operating cost increases within existing resource levels. This year, FAS again faces a tight budget situation and has had to take a number of actions to reduce its operating expenses.

The President=s budget requests increased funding for FAS for 2001, which is intended to expand a number of its important activities, while helping to minimize further reductions in current agency operations. The request provides appropriated funding of $117.9 million for FAS salaries and expenses, an increase of $4.4 million above this year=s level.

The budget includes an increase of $750,000 to enhance FAS= market access compliance and negotiation activities. Implementation of the Uruguay Round Agreement on Agriculture has resulted in a sharp increase in FAS= trade compliance workload. This includes monitoring implementation of the Agreement=s numerous trade liberalization provisions by other countries and ensuring their compliance, negotiating agreements with countries seeking to accede to the World Trade Organization, and developing harmonized rules of origin for customs purposes. The beginning of new multilateral negotiations on agricultural trade is expected to increase FAS= market access workload even further. The increased funding will provide additional staffing to meet the heavier workload and enable FAS to fund the participation of technical experts from other agencies in international consultations, particularly those concerning food safety and biotechnology.

The budget also provides increased funding of $1.5 million for the costs of opening three new Agricultural Trade Offices (ATOs) in markets that FAS has identified as offering significant growth opportunities over the next 5 to 10 years.

Additional funding of $618,000 is provided for the increased costs of maintaining an FAS presence at the American Institute in Taiwan (AIT). Because of budgetary pressures, AIT is proposing to shift the funding responsibility to resident agencies, including FAS, for direct and indirect costs that have been traditionally funded through the AIT contract with the Department

of State. Because these costs will no longer be funded under the State contract, the additional funding will be needed in order to maintain an FAS agricultural attaché office at AIT.

The budget also includes an increase of $1.5 million to meet a portion of projected salary cost increases in 2001. Providing this increase will allow FAS to minimize having to absorb these costs totally from within existing resources and will thereby help to minimize staff reductions and overseas office closures, which impair accomplishment of the agency=s mission.

Finally, the budget again this year includes language that would authorize the establishment of an account to help FAS manage overseas currency fluctuations. Under the proposal, up to $2 million of the FAS annual appropriation would be authorized to remain available to help offset fluctuations in international currency exchange rates in subsequent years. This authority would be extremely beneficial to the agency=s overseas operations in those years when the value of the dollar declines and overseas operating costs increase unexpectedly. FAS staff can provide more information on how the account would operate.

FAS administers a number of programs that support the development, maintenance, and expansion of commercial export markets for U.S. agricultural products. Under the Foreign Market Development (Cooperator) Program, cost-share assistance is provided to nonprofit commodity and agricultural trade associations to support overseas market development activities that are designed to remove long-term impediments to increased trade. These activities include technical assistance, trade servicing, and market research.

As proposed in last year=s budget, the Cooperator Program is now funded through the CCC. This change was adopted in order to provide increased stability in the level of annual program funding and thereby enhance long-term planning by program participants. For 2001, the budget includes funding of $27.5 million for the Cooperator Program, unchanged from the 2000 level.

The budget also includes CCC funding for the new Quality Samples Program, which is administered by FAS and was implemented earlier this year. Under the program, samples of U.S. agricultural products will be provided to foreign importers in order to promote a better understanding and appreciation of their high quality. On February 9, 2000, Secretary Glickman announced the first funding allocations under the Quality Samples Program. The allocations, which total $1.2 million, were awarded to nine different organizations following a competitive process. An additional $1.3 million remains available for allocation later this year. For 2001, the budget continues funding for the Quality Samples Program at this year=s level of $2.5 million.

For the Market Access Program (MAP), the budget provides funding at the maximum authorized level of $90 million, unchanged from 2000. Under MAP, CCC funds are used to reimburse participating organizations for a portion of the costs of carrying out overseas marketing and promotional activities, such as direct consumer promotions. Historically, more than 80 percent of MAP funding has been building export markets for U.S. high value agricultural products. The program also has been particularly valuable for assisting small and new-to-export businesses enter the export arena.

For the CCC export credit guarantee programs, the budget includes an estimated program level $3.8 billion, which is unchanged from the current estimate for 2000. These are current estimates of the level of sales that will be facilitated by the programs; however, the actual level of programming will be determined by market conditions and program demand. As export markets recover, the level of export credit guarantee activity should pick up and the level of guarantee programming can be increased to meet demand and maximize export sales.

The budget includes funding for both of the Department=s export subsidy programs B the Export Enhancement Program (EEP) and the Dairy Export Incentive Program (DEIP). In the case of EEP, the budget includes funding of $478 million, the maximum level authorized by law and the level that is consistent with the U.S. export subsidy reductions agreed to in conjunction with the Uruguay Round Agreement on Agriculture. Again this year, proposed legislation will be submitted that would authorize the Secretary of Agriculture, in the last quarter of the fiscal year, to reallocate unobligated EEP funds for use in carrying out U.S. foreign food assistance and market development activities. This would be a very valuable tool for ensuring that EEP funds do not go unused, while helping to maximize agricultural exports and assisting other countries meet their food import requirements.

For DEIP, the budget assumes a program level of $66 million for 2001. This is a reduction from recent annual levels and reflects two primary factors. The first is full implementation of the Uruguay Round export subsidy reduction commitments. The second is the phaseout this June of the so-called Arollover@ provision that allows countries under certain circumstances to exceed their annual export subsidy reduction commitments by drawing on unused subsidy quantities from previous years. In view of the constrained level of DEIP programming, we are aware of the need to work with the domestic dairy industry to determine how best to continue to facilitate U.S. dairy exports and maintain efforts to develop long-term markets overseas.

For the P.L. 480 foreign food assistance programs, the budget provides an overall program level of just over $1 billion for 2001. This is expected to provide approximately 2.9 million metric tons of commodity assistance to recipient countries. Within this total, a program

level of $180 million has been established for the P.L. 480 Title I concessional financing program, which is administered by FAS.

Food assistance provided through P.L. 480 programs is expected to be supplemented during 2001 by additional commodities provided under the Food for Progress Act of 1985 and section 416(b) of the Agricultural Act of 1949. The budget assumes that approximately $118 million of CCC funds will be used to support Food for Progress activities in 2001. The level of section 416(b) donations will be determined based on the availability of uncommitted commodity stocks in CCC inventory.

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This concludes my statement, Mr. Chairman. The agency administrators and I would be pleased to answer any questions you and Members of the Subcommittee may have. Thank you.

Last modified: Thursday, October 14, 2004 PM