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October 20, 2000

Swinford pushes ag
development concept

By Mike Barnett
Editor

Talk to Rep. David Swinford, chairman of the Texas House Agriculture and Livestock Committee, and his passion and concern for agriculture and rural Texas are undeniable.

The problem facing agriculture today, the chairman says, is producers are long on land, long on commodities and short on capital. Even in good years, he maintains, farmers and ranchers use their extra earnings to get bigger and more efficient so they can ward off the bad times that always seem to be right around the corner.

In addition, Swinford said the big multinational companies have producers locked in the middle. Those companies provide the feed, seed, fertilizer, insecticides and herbicides to the farmer and rancher. They then take the product and process it. Producers are caught in a vicious circle.

"I know in my area we grow a lot of corn," Swinford told a large crowd of Texas Farm Bureau leaders at the recent Legislative Conference in Austin. "We ought to be able to do something with it. We feed it to cattle, naturally. We sell some to make tortillas... But in both cases, we're relinquishing the right to our product before it's processed. Whenever the cost of the wrapper on bread costs more than the wheat in the bread, we understand that the processing side is a little more lucrative than the growing side."

Rebuild rural Texas

Swinford believes value-added processing will help rebuild agriculture and rural Texas. To that end, he said he will introduce a bill this next legislative session to help producers fund agriculture development districts to facilitate their ability to add value to raw commodities.

Swinford's bill will be modeled on legislation passed last session that allowed the formation of an agriculture development district in Chambers County. The new legislation would make it easier for farmers and rural communities to raise capital to start value-added businesses statewide. Texas Farm Bureau currently has no policy on ag development districts.

Under Swinford's plan, farmers and/or rural communities would lure industry by creating something similar to a water district. Unlike the water district, however, the ag development district would simply be an agreement "that you come together to do something."

"You would go to the county commissioners in the county where the plant would be located and you would petition them to hold an election among the folks in the ag district," Swinford explained. "And you would identify, for example, an ethanol plant or anything else...you guys decide. The only people who can vote are people who are members. I think we're going to win that vote."

According to Swinford, that vote would establish a governmental entity that is tax-free to the district.

"Then, you go out and you can issue—because you're a governmental entity—you can issue tax-free revenue bonds to get the capital to build it," he continued. "It will be based on the processing of that plant and it will be backed by potential assessments on producers. Now that scares some producers, but I didn't promise you a free lunch.

"Then what you do, the same people create a co-op. And you sign a contract with this plant. The first thing you do in your co-op is make sure you don't get an assessment," he said. "But this co-op is free of franchise taxes and other things that ADM (Archer Daniels Midland) would not be free of. So we've created more or less a tax-free co-op owning a plant financed by tax-free revenue. There's your capital."

Swinford admits the plan may not work for every community.

"I don't know," the Dumas-based legislator said. "I think it will work for my community. I think it will work for the people that will come together and package peanuts. I think it will do something for the fish farmers in Wharton County, too. I believe they can put in a processing plant. I believe we can do a lot of stuff and we need to be doing it ourselves."

Opportunities abound

The opportunities for the ag development districts could be limited only by farmers' and ranchers' imaginations. For example, Swinford there is great opportunity for a Texas wine industry.

On a recent fact-finding trip to the Napa Valley in California, Swinford witnessed a small wine operation of 35 acres. "A mother, two daughters and a son grossed $1 million off that, and put $250,000 net profit in their pockets. We have all kinds of areas in Texas that can do that," he said. "We could have a Napa Valley anywhere."

Something that could benefit the entire state would be the production of ethanol. Swinford would like to see the reformulated gas additive MTBE—which he considers a danger to people and the environment—replaced with corn-based ethanol.

"I believe the federal government's going to ban it," he said of MTBE, used to produce a cleaner burning fuel. "Ethanol is better and you put in half as much."

Swinford said it would take only 250 million gallons of ethanol to replace the 550 million gallons of MTBE used annually in Texas. "And it will be safe and it will require two-thirds of the total feedgrain crop in Texas to produce it," he added. "It will add 35 cents a bushel to your price."

Ethanol opens up opportunities for many areas of the state, Swinford said, as it can be made out of peanut hulls, rice straw, forest tops, corn and milo...it can even be made out of damaged fruit.

"It's a statewide issue," he said. "It gives us a golden opportunity at the expense of a bad chemical that is poisoning our water. We need to take advantage of it."

Local decisions

Swinford said a poor agricultural economy should be incentive enough for farmers and ranchers to start adding value to their commodities. He hopes his proposed plan will be the catalyst.

"What we need to do is give our Texas producers the opportunity to receive some of the money that people are getting for producing our products," he said. "I cannot tell you, the State of Texas cannot tell you what you need to be doing. This will come from local people in their local areas deciding what they have, what they produce, and decide how to come together and process it."