THESE TWO AGENCIES HAVE PROGRAMS AIMED ONLY AT INDIVIDUALS WHO HAVE
SUFFERED SIGNIFICANT LOSSES; WHO HAVE EXHAUSTED EVERY CONVENTIONAL
SOURCE OF RECOVERY CAPITAL--APPLICANTS FOR WHOM FEDERAL LOANS ARE
A LAST RESORT BEFORE BANKRUPTCY PROCEEDINGS.

REPRESENTATIVES OF OREGON FINANCIAL INSTITUTIONS--THOSE SPECIALIZING IN AGRICULTURAL CAPITAL--AS RECENTLY AS LAST WEEK HAVE TOLD US THAT SUCH LOANS DO LITTLE TO ASSIST IN RECOVERY, BECAUSE THOSE FEW APPLICANTS ABLE TO QUALIFY AND RUN THE GAMUT OF ELIGIBILITY REQUIREMENTS ARE SO FAR GONE THAT THEY HAVEN'T ENOUGH OF THEIR OPERATION LEFT TO PAY BACK A LOAN.

THE BANKERS PAINT A VERY GRIM PICTURE FOR THE INDUSTRY DURING
THE NEXT SEVERAL MONTHS.

SOIL MOISTURE TO A FARMER IS LIKE MONEY IN THE BANK.
THE SOIL IS
DRY, AND BANKERS IN OREGON ARE RELUCTANT TO EXTEND LOANS THIS FALL
ON NEW CROPS. THE BANK REPRESENTATIVES ESSENTIALLY SAID THAT
THEIR INSTITUTIONS ARE MOST UNWILLING TO TAKE ANY CHANCES ON CROPS
THIS YEAR.

THE IMPACT ON AGRICULTURE--IF THESE PREDICTIONS BEAR OUT--WILL BE
ONE WHICH MUST SERIOUSLY BE CONSIDERED BY FEDERAL AGENCIES PLANNING
NEW DROUGHT-RELIEF MEASURES.
GUARANTEED LOANS TO ASSURE RECOVERY

AFTER ANTICIPATED LOSSES ARE ESSENTIAL.

VIEW SUCH A PROGRAM AS PREVENTIVE MAINTENANCE OF A RESOURCE, IF
EVERY LOAN PROGRAM--WHETHER EXISTING OR DEVELOPED IN

YOU WILL.

THE FUTURE--NEEDS A TOTAL OVERHAUL OF ELIGIBILITY REQUIREMENTS.

CURRENT LOW-INTEREST OFFERINGS BY SBA AND FARMERS HOME COME WITH A
MAZE OF ELIGIBILITY REQUIREMENTS WHICH HAVE CAUSED NOT ONLY LOSS
OF CONFIDENCE BY THE BORROWER, BUT BY THE BANKER, AS WELL. SOME
BANKS SIMPLY HAVE REFUSED TO PARTICIPATE IN THE PROGRAMS BECAUSE
OF BUREAUCRATIC COMPLEXITIES AND REQUIREMENTS THAT FAR EXCEED
THOSE OF CONVENTIONAL FINANCIAL INSTITUTIONS.

WE HAVE REACHED A TIME WHEN WATER IN THE GROUND IS BETTER THAN MONEY IN THE BANK. IN FACT, WATER IN STORAGE--ANY STORAGE--IS IN CRITICALLY SHORT SUPPLY. OREGON'S WATERWAYS OFFER VAST POTENTIAL

FOR ADDITIONAL AND ESSENTIAL STORAGE OF WATER.

INCESSANT DEMAND ON AQUIFIERS FOR IRRIGATION WILL NOT EASE IN OREGON--NOR WITH THE DEMAND FOR POWER AND DOMESTIC WATER SOURCES.

THE DROUGHT SHOULD TEACH US THAT THE NORTHWEST AND ITS HISTORICALLY ABUNDANT PRECIPITATION NO LONGER GUARANTEE ENOUGH WATER FOR EVERY NEED.

NEW, INTENSE ATTENTION MUST BE PLACED ON ADDITIONAL WATER STORAGE CAPABILITY IN SEGMENTS OF OREGON WATERWAYS WHERE NEW CONSTRUCTION IS ENVIRONMENTALLY SOUND.

AS AN EXAMPLE, SENATOR, THE MISSOURI RIVER'S STORAGE CAPABILITY, AS I UNDERSTAND, IS FOUR TIMES THAT OF ITS AVERAGE ANNUAL RUNOFF.

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YET THE COLUMBIA RIVER'S PRESENT STORAGE CAPACITY IS ONLY ONE-THIRD OF ITS ANNUAL RUNOFF CAPABILITY.

MR. HAWKINS OF THE CATTLEMEN, AND I'M SURE OTHER WITNESSES AS WELL,
HAVE ADDRESSED THE NEED FOR THIS SORT OF LONG RANGE RESOURCE
AND PROGRAM DEVELOPMENT TO DEAL WITH DROUGHT IN THE WEST.

IT IS SIMPLE FOR VICTIMS OF THE DROUGHT AND OBSERVERS ALIKE TO PORTRAY THE PHENOMENON AS JUST THAT--A FLUKE CLIMATIC CHANGE THAT WILL--BY MAGIC--EVENTUALLY DISAPPEAR AND NOT RETURN.

I DON'T BELIEVE THAT GOVERNMENT SHOULD VIEW THE DROUGHT IN THAT WAY, INSTEAD, WE IN GOVERNMENT SHOULD INTENSIFY OUR EFFORTS TOWARD THE FUTURE. WE SHOULD PREPARE FOR THE WORST AND HOPE IT DOES NOT

HAPPEN.

CONGRESS SHOULD IMMEDIATELY MANDATE EVERY FEDERAL AGENCY INVOLVED TO DEVELOP A COMPREHENSIVE CONTINGENCY PACKAGE WHICH COULD EFFECTIVELY DEAL WITH DROUGHT IF THE CONDITION CONTINUES INTO THE NEXT YEAR, OR SURFACES AGAIN IN FUTURE YEARS.

WE ALREADY HAVE SEEN THE MISTAKES, THE WEAKNESSES OF ASSISTANCE
PROGRAMS AND THE INABILITY OF THE U.S. GOVERNMENT TO RESPOND IN
THE TIME AND MANNER REQUIRED TO ASSIST WESTERN STATES IN À DROUGHT
WHICH HAD BEEN DEVELOPING FOR SEVERAL MONTHS.

I WOULD URGE THAT CONGRESS SET A DEADLINE FOR THE BUILDING OF AN EGGECTIVE EMERGENCY PACKAGE. FEDERAL AGENCIES SHOULD DEVELOP

RECOMMENDED FUNDING AND AUTHORITY REQUIREMENTS AND IT SHOULD BE DONE WITHIN THE SHORTEST POSSIBLE TIME FRAME.

STATES THROUGHOUT THE NATION ARE FACED WITH ECONOMIC AND PHYSICAL DISASTER BY THE SHIFT IN WEATHER PATTERNS.

SPEAKING FOR OREGON, I BELIEVE THE IMPACT OF A SECOND CONSECUTIVE DROUGHT YEAR WOULD CRIPPLE AGRICULTURE, INDUSTRY, AND EVEN OUR WAY OF LIFE IN THE NORTHWEST.

IT'S SERIOUS NOW.

IT'S DISASTER NEXT YEAR.

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Senator PACKWOOD. Jim Cody, representing Farmers Home Administration.

STATEMENT OF JIM CODY, DISTRICT DIRECTOR, FARMERS HOME ADMINISTRATION, PORTLAND, OREG.

Mr. CODY. Senator Packwood, my name is Jim Cody, I am the district director of Farmers Home Administration. My area is eastern Oregon. I am here today because our State director, Ken Keudell, found out last night that he couldn't attend.

The drought assistance programs of the Farmers Home Administration, including loans and grants, focus on individual and community problems. Programs for individuals include the following loans: Farm emergency, emergency livestock, farmownership, operating, soil and water, and irrigation and drainage. Communities can seek relief through loans and grants for community water and waste disposal systems.

Other community facilities may also be funded through this program. Farmers in 17 Western States can participate in a $3 million interest free loan program to develop, expand and improve irrigation systems. Farmers Home Administration is administering the program through a memorandum of understanding with the Bureau of Reclamation.

A summary of the programs for individuals this fiscal year through July 1977 include emergency loans in the United States totaling the number 29,027. The amount was $921.2 million.

Emergency drought loans made during fiscal year 1977 through July 22, 1977, coded "D" totaled 2,300 loans in the amount of $70.2 million. Emergency loans are without a doubt the Agency's most active drought assistance program. Over $921.2 million advanced through July 22, with more than $670.2 million or about 72.8 percent going to solve drought related problems of individual farmers in designated areas. The interest rate has been reduced to 3 percent on loss loans up to $250,000. This lower interest rate, effective August 4 through September 30, 1978, is also retroactive to July 1, 1976. Loans are scheduled for repayment within the shortest period of time consistent with the borrower's ability to pay.

A few problems encountered and how they were handled: Farmers qualifying for emergency production loss must show at least 20-percent loss in crops. Current regulations have been revised, however, to permit a calculation of physical losses without waiting for harvest time to determine actual production losses. The Agency makes a concerted effort to explain "test for credit" provisions of the law, but it still encounters applicants who are confused. Some applicants, for example, fear they must swear a "pauper's oath," before assistance is extended. When it is explained, however, borrowers and bankers alike understand that Farmers Home Administration supplements, not supplants, conventional sources of credit.

Special irrigation loans are available through a memorandum of understanding with the Bureau of Reclamation. Farmers Home Administration is administering an interest free loan program designed to help farmers develop, reestablish, improve or expand irrigation sys