MR. McDONALD: Thank you, Bruce, and thank you distinguished panelists. My name is Dennis McDonald. I, along with my family, operate a cow/calf operation near Melville. And as Bruce has indicated, I'm a representative of R-CALF. I appreciate the opportunity to speak with you today. It's especially rewarding to have this opportunity at a time when there's a real crisis in the agriculture sector. Hopefully, without being labeled a whiner, I can describe the perils that the cattle industry is in, fairly succinctly.

You might recall in 1972, that, by the way, was the date that we negotiated the Canadian Free Trade Agreement, that year, for the first time in history, the Dow Jones industrial average broke 1,000. At that time, we were selling finished cattle ready for slaughter in excess of 70 cents. This year, the Dow Jones for the first time in history broke the 11,000 barrier. This morning we were selling finished cattle ready for slaughter at 63 and 64 cents. R-CALF has brought to light the problems that imported cattle and beef are having on our industry. Most economists have calculated that imports are now costing our industry in excess of a billion dollars annually. Last year we saw a 1,600,000 head of cattle come south across the border from Canada. We saw another 700,000 head of feeder calves coming north across the border from Mexico. This year, Mexican imports are up 21 percent, Canadian imports are down slightly. How has this affected our market?

You know, we've reduced domestically here in this country our cow herd by approximately 2 million head since the highs of 1995. We weaned the smallest calf crop last year since 1951. And, yet, our industry continues to operate at a loss. Now, I know it's axiomatic that we will have free and open trade as we go down this global trading economic path. Further, neither myself nor producers that I know want to be labeled protectionists. But the reality is, as the US enters this next round of trade negotiations, the very viability of our industry is going to be in the hands of our trade negotiators. Our industry, our way of life is at stake.

The first priority of our negotiators should be to find a way in these negotiations to restore profitability to the American family farm and ranch. Presently, we don't have much hope. My daughter is a junior here at MSU and an Ag student. She and her three siblings want nothing more than to come home and operate the ranch. They won't have that opportunity unless our negotiators resolve some of these issues.

To successfully achieve some advantage in our negotiations, we must take a realistic look at where this industry stands. For example, in Argentina, it costs $70 to maintain a cow annually. USDA reports our average cost at an excess of $340. A 750 pound feeder steer in Argentina yesterday sold for 35 cents. USDA reports our nationwide average cost of production for a similar critter at 76 cents. Presently, the cost of gain of a calf in a Brazilian feed lot is 17 cents. I called to Nebraska yesterday, and our average cost for a similar animal, per pound of gain, is 40 cents. Brazil ranks third in the world in terms of corn production, behind ourselves and China. So it is clear that we cannot compete despite the fact that our domestic industry is the most efficient and produce the best product in the world.

We have seen the ITC making a preliminary ruling in January that imports were having a material detrimental effect on our industry. And I see I'm out of time so I'll cut this short. We recently, as well, observed the Department of Commerce's recent ruling that live cattle were being brought into the country at below Canadian cost of production. We're hopeful that the margins placed on those cattle in the preliminary ruling will assist in solving some of our marketing problems.

One last thought. One of the most difficult items in bringing that antidumping petition was the definition in NAFTA, like kind. It prevented producers in R-CALF from looking at beef imports, which obviously are having a significant impact on our market. The like kind definition, vis-a-vis live cattle, prevented us from reaching those issues.

MR. NELSON: Thank you, Dennis.

MR. GALVIN: Thanks, Dennis. Could you describe for us what you view as the Canadian subsidies that are in place for their cattle producers?

MR. McDONALD: I guess, I should say initially, you know, the Department of Commerce issued a preliminary ruling a month or more ago now indicating that the Canadian subsidies were diminimous in their effect on our market. We were surprised by that. Our research seemed to indicate that just the barley subsidy that the Canadians enjoy allows them to finish a steer at $60 under our cost. And although that was a preliminary ruling, it is a concern. Hopefully, Commerce, when they make their final determination in the next couple of months, will get it right.

MR. GALVIN: But you don't have any of your own views as to what subsidies they may have in place in Canada?

MR. McDONALD: Again, the barley subsidy was the biggest single subsidy that we were concerned with. And many of their subsidies, as I understand it, are camouflaged a bit. For example, investment tax credits on machinery, favorable depreciation schedule; a tax structure, maybe I should say, overall, that is advantageous. Subsidies on fuel and transportation and trucking, when we looked at all those items, we were quite surprised that the Department of Commerce didn't come to a different conclusion on their preliminary determination.

MR. SCHROEDER: Just a general comment. When we enter these negotiations, believe me, that none of us have any interest or desire to do anything negative to America's producers and industries. We try to do the best we can to achieve positive outcomes. But we're still talking trade agreements here. And your phrase, you hope that we can "restore profitability to the American family farm." There's no way we can do that.

We have to have domestic farm policies that provide a solid support for America's family farmers. But that's another question. I think these trade agreements have been oversold, frankly, by both sides. If you go back to debates on NAFTA and on the Uruguay Round, the detractors said that these agreements were going to be the end of America as we know it. Ross Perot predicted a million jobs and all our factories were going to move across the border. Well, that didn't happen. And on the other hand, the proponents said we're going to create hundreds of thousands of jobs in the United States and this is going to be the salvation and all that stuff.

So both sides have oversold these trade agreements. They're very important, they're crucial, and we're going to try to help you all by making them positive and beneficial and so the conditions will improve. They're not the answer, and we can't tell you that there's some trade agreement which is going to restore profitability to America's family farms. We've got to look at our domestic farm policies, what kind of support systems, safety nets, whatever you want to call it, that has to be the principle bull work for our farms.

MR. McDONALD: Certainly, what you're saying is true, and often times, I guess, it depends on what part of the elephant you happen to be touching. If our economists are accurate and the imports this last year cost our industry over a billion dollars, that's not diminimous. That's up to $80 a calf. Just that, in and of itself, would make a great difference in our operation.

It kind of leads into -- I'm quite aware, I know our negotiating team has absolutely the best motives in mind. I looked at the membership on the Senate Ag Advisory Committee for trade, and you know what's not there, Jim? You just don't have much representation from the small family cow/calf producer out in the country. Why? Why don't we have some grassroots cattle producers on that committee that could talk as you and I are? It's dominated by big industry, big feedlots, and probably for a variety of reasons, much what we're responsible for. I often think that our trade team is out of tune with the grassroot guy out here in the sagebrush that's earning a living with these cattle or are trying to. That's a little off point, but....