[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
    DEPARTMENT OF AGRICULTURE BUDGET PRIORITIES FOR FISCAL YEAR 2003
=======================================================================



                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION
                               __________

             HEARING HELD IN WASHINGTON, DC, MARCH 6, 2002
                               __________

                           Serial No. 107-26
                               __________

           Printed for the use of the Committee on the Budget







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                        COMMITTEE ON THE BUDGET

                       JIM NUSSLE, Iowa, Chairman
JOHN E. SUNUNU, New Hampshire        JOHN M. SPRATT, Jr., South 
  Vice Chairman                          Carolina,
PETER HOEKSTRA, Michigan               Ranking Minority Member
  Vice Chairman                      JIM McDERMOTT, Washington
CHARLES F. BASS, New Hampshire       BENNIE G. THOMPSON, Mississippi
GIL GUTKNECHT, Minnesota             KEN BENTSEN, Texas
VAN HILLEARY, Tennessee              JIM DAVIS, Florida
MAC THORNBERRY, Texas                EVA M. CLAYTON, North Carolina
JIM RYUN, Kansas                     DAVID E. PRICE, North Carolina
MAC COLLINS, Georgia                 GERALD D. KLECZKA, Wisconsin
ERNIE FLETCHER, Kentucky             BOB CLEMENT, Tennessee
GARY G. MILLER, California           JAMES P. MORAN, Virginia
PAT TOOMEY, Pennsylvania             DARLENE HOOLEY, Oregon
WES WATKINS, Oklahoma                TAMMY BALDWIN, Wisconsin
DOC HASTINGS, Washington             CAROLYN McCARTHY, New York
JOHN T. DOOLITTLE, California        DENNIS MOORE, Kansas
ROB PORTMAN, Ohio                    MICHAEL E. CAPUANO, Massachusetts
RAY LaHOOD, Illinois                 MICHAEL M. HONDA, California
KAY GRANGER, Texas                   JOSEPH M. HOEFFEL III, 
EDWARD SCHROCK, Virginia                 Pennsylvania
JOHN CULBERSON, Texas                RUSH D. HOLT, New Jersey
HENRY E. BROWN, Jr., South Carolina  JIM MATHESON, Utah
ANDER CRENSHAW, Florida
ADAM PUTNAM, Florida
MARK KIRK, Illinois

                           Professional Staff

                       Rich Meade, Chief of Staff
       Thomas S. Kahn, Minority Staff Director and Chief Counsel











                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, March 6, 2002....................     1
Statement of:
    Hon. Ann M. Veneman, Secretary, U.S. Department of 
      Agriculture................................................     4
Prepared statement and additional submissions of:
    Hon. Adam Putnam, a Representative in Congress from the State 
      of Florida.................................................     3
    Secretary Veneman:
        Prepared statement.......................................     7
        Response to question posed by Mr. Gutknecht..............    23
        Data on government payments to farmers requested by Mrs. 
          Clayton................................................    27










    DEPARTMENT OF AGRICULTURE BUDGET PRIORITIES FOR FISCAL YEAR 2003

                              ----------                              


                        WEDNESDAY, MARCH 6, 2002

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 2:24 p.m. in room 
210, Cannon House Office Building, Hon. Jim Nussle (chairman of 
the committee) presiding.
    Members present: Representatives Nussle, Gutknecht, 
Hilleary, Thornberry, Collins, Hastings, Brown, Putnam, Spratt, 
Clayton, Price, Hooley, Baldwin, and Hoeffel.
    Chairman Nussle. The full committee hearing on the budget, 
Department of Agriculture budget priorities for fiscal year 
2003, is the subject matter of this full committee hearing.
    We have one witness today, and that witness is the very 
Honorable Secretary of Agriculture, Ann Veneman, who we welcome 
back to the committee. The hearing today is intended to examine 
how the President's budget for fiscal year 2003 addresses three 
important issues confronting America's farmers, agriculture, 
and food security in this country:
    Number one is expanding market opportunities for 
agriculture; Two, providing relief to farmers from regulatory 
burdens that they face; And three, maintaining an adequate 
safety net for rural producers affected by unpredictable 
fluctuations in weather or the ag economy.
    Although the President's budget assumes enactment of the 
farm bill which provides for $73.5 billion over 10 years, it is 
likely that while the administration has, in the past, not been 
specifically involved, they are now fully engaged. We are 
interested in hearing today what the outline of the 
administration's farm bill proposal will be.
    In addition to that, we are interested in reviewing the 
budget from the administration. Last year we had some 
discussion over service delivery from the FSA offices, other 
offices that are on the ground floor of delivering services for 
farmers. I want to tell you, just from my own experience in 
Iowa, that there has been a dramatic--well, maybe not dramatic, 
but certainly an appreciable improvement in the delivery of 
service. I want to be complimentary not only of your leadership 
but also of the good people who serve all of us in those field 
offices.
    Then, finally, to talk a little bit about trade. We are in 
an obvious situation where the economy needs a shot in the arm. 
We have always felt--or many of us have felt--that trade at 
least could provide an opportunity in that arena; although 
never perfect, certainly some opportunities that we would be 
interested in hearing from you today.
    Finally, before I turn it over to Mr. Spratt, let me 
suggest what we are hearing from the farm bill conference. 
While the House version of the farm bill is not perfect, and I 
don't think there is anyone, maybe one or two that might be 
willing to come forward and suggest that what the House 
produced is a perfect bill--what we have all learned in the 
agriculture policy is that there is no such thing as perfect. 
Certainly there is no such thing as one size fitting all 
perfectly.
    Let me suggest that the Senate version of the bill, which 
appears to be more of an attempt to get to conference and do 
everything they could to please every interest and provide all 
the money as is humanly possible within some construct, is not 
workable if it provides all of the front-loading of that money 
and leaves no money available in the last 5 years for farmers.
    So I think there is a real deep concern on the part of 
those of us both in ag country, but also for those of us who 
believe in fiscal responsibility, that it is unworkable and 
unrealistic to assume that agriculture is not going to make the 
same demands in the second 5 years that it made in the first 5 
years.
    So we have some real challenges, and that is in part why we 
are very interested in the testimony from the Agriculture 
Secretary today.
    Before she begins, let me also--just for the record--
compliment Rich Meade and Tom Kahn for their work Saturday 
morning in talking about the budget on C-SPAN. It is kind of 
nice to see our staff step forward and do that. They did an 
excellent job, particularly when the minority staff director 
was complimenting the chairman as much as he did. I certainly 
appreciate that. I don't know what he is looking for, but I am 
watching my back, let me just tell you. No, they did an 
excellent job, and I think it does point out that we have an 
excellent staff that serve us in all of our capacities, and I 
think they exemplified that on Saturday morning talking about 
the budget priority and the challenges that face our country. 
With that, Mr. Spratt.
    Mr. Spratt. Thank you, Mr. Chairman. I understand they had 
a good conversation until they had a constituent from Iowa call 
in. The name was Nussle, or something like that, I think.
    Madam Secretary, I will spare you an opening statement. Let 
me simply extend to you a warm welcome. This is an important 
topic--a vitally important topic, and we are looking at a 
substantial increase in the budget for agriculture. We would 
like your viewpoints on the cost to the changes and what the 
agriculture program looks like 5 and 10 years down the road. 
The $75 billion increment, are we adding something that will be 
permanent and likely sustaining, or is this a temporary fix for 
a sector of our economy that sorely needs help?
    Thank you for coming. We look forward to your testimony.
    Chairman Nussle. All members will have 7 legislative days 
to put in an opening statement at any point in the record, 
without objection.
    [The information referred to follows:]

    Prepared Statement of the Hon. Adam Putnam, a Representative in 
                   Congress From the State of Florida

    Thank you Mr. Chairman, and Mr. Spratt for this opportunity to 
review the fiscal year 2003 budget for the Department of Agriculture. 
Welcome Secretary Veneman. I appreciate the diligent work that you and 
your Department have undertaken to address the concerns of farmers and 
ranchers in the State of Florida and across the Nation. However, I am 
sure you would agree there is much work to be done.
    Today I would like to touch upon some of the specifics of the 
Department of Agriculture's Strategic Budget Plan. In particular, I 
would like to address the need to protect U.S. plant and animal 
resources from inadvertent as well as intentional pests and disease 
threats. I would also like to highlight the importance of issues 
related to food safety through enhanced inspection and coordination 
efforts.
    The administration's 2003 budget proposal includes $1.1 billion for 
the Animal and Plant Health Inspection Service (APHIS) reflecting the 
continued and enhanced challenges to protecting U.S. agriculture at the 
borders. I understand that this request will be used to more 
effectively detect and respond to a pest or disease outbreak, enhanced 
monitoring and surveillance for pest and disease outbreaks. Once 
detected, prompt eradication of an outbreak is essential to limit 
damages and reduce overall control costs. The 2003 budget requests $162 
million in appropriations to continue funding several eradication 
programs, including the Citrus Canker eradication program, vital to my 
home state of Florida. I am concerned that the declassification or 
normalization of the eradication program will lessen the urgency to see 
it through.
    Apprehension regarding food safety and proper food inspection 
procedures represent a major area of concern for all Americans. 
Safeguarding our food supply through adequate inspections is the first 
line of defense in establishing a strong and well-fortified agriculture 
infrastructure for homeland security. The Agricultural Quarantine 
Inspection (AQI) program provides the front line of defense against the 
introduction of plant and animal pests and diseases, whether 
unintentional or by terrorist activity.
    Ensuring the continued strength of our Nation's agriculture 
infrastructure requires an investment in services to protect farmers, 
ranchers, and consumers from the threats of crop and animal pests and 
food-born diseases. I understand that a number of steps have been taken 
to safeguard our food supply and ensure the Department has the ability 
to prevent pests and diseases from harming agriculture and the food 
system. As a result of the devastating outbreak of Foot and Mouth 
Disease that hit the United Kingdom and other parts of Europe, the 
Department conducted an intense review of its safeguarding programs. 
Actions have been taken to increase the number of inspection personnel 
at U.S. ports of entry by nearly 40 percent, and double the number of 
inspection dog teams from levels 2 years ago. This is progress but with 
only 700 inspectors the work that remains to be done remains enormous. 
We need to utilize the resources of departments and agencies to work 
together and cover as much ground as possible.
    Last October, at a Government Reform subcommittee hearing on 
Biological Warfare Defense, I raised the need for greater communication 
and coordination between HHS' Food and Drug Administration and the U.S. 
Department of Agriculture's (USDA) Food Safety Inspection Service, 
which hold joint jurisdiction in the protection of our food safety. I 
want to strongly encourage collaborative actions between the two 
agencies, particularly in the coordination of inspection 
responsibilities and the sharing of information.
    I understand that efforts have begun to streamline and consolidate 
inspection capabilities between FDA and FSIS. Currently, one agency's 
inspectors may be present at a site and the other agency may lack the 
resources to provide inspection services. Through cross-deputization of 
agency inspectors, we may improve our inspection capabilities and 
optimize staff resources. Similarly, disparities and overlap between 
agency responsibilities to inspect food products should also be 
reviewed. I wish to encourage concerted and continued efforts between 
Federal and State agencies with the goal of providing more 
comprehensive and efficient safeguarding of our Nation's food supply.

    Chairman Nussle. And with that, Madam Secretary, your 
entire testimony will be made part of the record and you may 
proceed and summarize as you see fit. So welcome.

  STATEMENT OF HON. ANN M. VENEMAN, SECRETARY, DEPARTMENT OF 
     AGRICULTURE, ACCOMPANIED BY: JAMES R. MOSELEY, DEPUTY 
  SECRETARY, DEPARTMENT OF AGRICULTURE; KEITH COLLINS, CHIEF 
ECONOMIST, DEPARTMENT OF AGRICULTURE; AND STEPHEN B. DEWHURST, 
           BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

    Secretary Veneman. Thank you, Mr. Chairman. It is an honor 
for me to be here with you and the ranking member, Mr. Spratt, 
and other members of the committee to discuss our 2003 budget 
for USDA, and some of the other important issues that we are 
dealing with this year.
    Here with me today is our Deputy Secretary, Jim Moseley; 
our Budget Officer, Steve Dewhurst; and our Chief Economist, 
Keith Collins.
    I truly appreciate our working relationship with this 
committee and look forward to working with you, Mr. Chairman, 
and all the members of the committee during this budget 
process. I appreciate you accepting my written testimony for 
the record, and I want to provide a few thoughts on some recent 
issues that are important to agriculture, particularly that 
which you highlighted, the farm bill.
    Passage and implementation of a new farm bill is a top 
priority of USDA and of the administration. Both the House and 
Senate have passed separate and different versions of the new 
farm bill. Conference has begun, and the administration is 
working closely with the conferees during this process, and we 
are already working at USDA to ensure an efficient 
implementation process is underway once a conference bill is 
agreed upon and signed by the President.
    We, like you, hope that the conference will move quickly in 
reaching consensus. But I agree with what Chairman Combest has 
said, and I have said it many times before: It is much more 
important that we get it done right. Policies that serve the 
best interests of the farm sector are critical, and this 
administration is committed to that cause.
    Mr. Chairman, you mentioned the issue of funding for the 
farm bill. The President has said that a farm bill should 
adhere to the $73.5 billion in additional spending over 10 
years that was agreed to by the House and Senate Budget 
Committees last year. He has also said that it should be spread 
evenly over that 10 year period. While there has been some 
debate recently on what the 5 year funding number should be, 
the President feels strongly that we shouldn't spend an 
unreasonable amount of money in the early years, which could 
shortchange farmers down the road.
    We think a fair and responsible level of additional support 
for the first 5 years is around $37 billion or about half of 
the 10-year total in the budget resolution. That is much closer 
to what the House has agreed to spend during the next 5 years, 
and doesn't cheat our farmers out of assistance over the long 
term, or open the door to spending in excess of the budget 
resolution. We would strongly oppose any farm bill that exceeds 
the generous budget limits we have outlined, and I would again 
add that the House-passed farm bill complies with these limits.
    The new farm bill must provide adequate support for farmers 
without encouraging them to overproduce, thereby depressing 
prices which, of course, is self-defeating.
    By setting loan rates too high, we could easily further 
reduce producers' return from the marketplace. Loan rates are a 
critical issue, and the new farm bill will determine what 
future rates will be. The administration has been on record as 
favoring the loan rates that are in the House measure. We need 
to make sure that future loan rates don't cause an undue burden 
on any particular sector, yet at the same time move us toward a 
more market-oriented system.
    The House-passed farm bill increases funding for fixed 
decoupled payments for farmers, and continues the current 
marketing loan program for traditional marketing crops. These 
types of programs provide farmers a consistent, predictable 
income safety net, while maintaining market-oriented planting 
flexibility.
    The administration has supported farm savings accounts as a 
way to give farmers and ranchers an additional risk management 
tool that complements our traditional farm programs. Some have 
misconstrued this to mean these savings accounts would replace 
commodity programs. Quite to the contrary. They are proposed as 
an additional resource that could help farmers manage their 
economic risks.
    The Senate measure includes a very small pilot program on 
farm savings accounts, but we would like to see the conferees 
consider a broader approach to this program.
    The President has also said that the new farm bill must 
support trade and be consistent with our international 
obligations. Increased trade is absolutely critical to 
America's farmers. You have an administration and a President 
that feel strongly that a new farm bill should not work against 
our farmers in the international marketplace. Both the House 
and the Senate versions of the farm bill have significant 
increases for conservation programs. That kind of commitment is 
unprecedented.
    We need to make sure that conservation programs give 
farmers and ranchers the ability to better manage their land 
while giving them the utmost flexibility.
    Regarding trade, creating new opportunities for America's 
farmers and ranchers in the global marketplace is a very 
important priority. In the past few weeks, several issues have 
come to the forefront in this regard. Yesterday, Mexico 
suspended the recently imposed tax on the use of high fructose 
corn syrup in soft drinks. This tax, which was the latest in a 
string of trade issues related to sugar and high fructose corn 
syrup, threatened U.S. exports of corn and corn sweeteners. As 
Ambassador Zoellick said yesterday, we welcome this move by the 
Fox administration. Our concerns about Mexico's unjustified 
antidumping duties on high fructose corn syrup have not been 
addressed, and we will continue to work with Mexico to resolve 
the full range of sweetener issues.
    On another issue, last week we learned that Russia 
announced plans to suspend U.S. exports of poultry. The Russian 
market is a very important market to America's poultry 
industry. We export nearly one-fifth of our poultry production, 
and nearly 40 percent of that goes to Russia. So we are very 
concerned about this decision and its potential impact. The 
messages have been unclear from Russian Government officials as 
to the reasoning behind this announcement. However, Ambassador 
Zoellick and I have been very clear. We see no reason for this 
action. We have personally had discussions with high-level 
officials from the Russian Government.
    A joint USDA-USTR-FDA team is scheduled to depart for 
Russia this week to seek a resolution to this critical issue 
that could cause a serious disruption of trade to this part of 
the world.
    As you know, the President just returned from Japan and 
China. In both visits, the President discussed some of the 
problems we are having with regard to agricultural trade. The 
biotechnology regulations proposed by China are of particular 
concern. If implemented as currently announced, they could do 
severe harm to our exports, particularly to our soybean exports 
and our farmers who rely heavily on this market.
    Ambassador Zoellick and I have dispatched Allen Johnson, 
Chief Agricultural Trade Negotiator at USTR, with a team from 
USDA and USTR to China. They are there right now to try to seek 
a solution that allows our exports to continue without 
interruption.
    China is now part of the WTO. That holds great opportunity 
for America's farmers. But China has an obligation to abide by 
the rules of the WTO. We need to hold them to those obligations 
and work to ensure unfair barriers are not put in place that 
hurt our producers. We will continue to keep you and other 
Members of the House and Senate briefed on the status of these 
issues.
    Mr. Chairman, let me conclude my opening remarks this 
afternoon by saying that today, America's farmers and ranchers 
face many critical and challenging issues. We know that the 
current economic climate in the farm sector has been hampered 
by large foreign supplies, various natural disasters, a 
struggling global economy, and a high value of the dollar that 
have slowed growth and demand for agricultural products. We 
have seen commodity prices decline, and without government 
support many in the farm sector could suffer. The events of 
September 11 have further caused additional burdens on the 
agricultural economy.
    However, with all of these circumstances and events, there 
are bright spots in agriculture. As Keith Collins, our long-
time and well-respected chief economist has said, many markets 
have slowly improved since 1999, but there is much work to be 
done to provide assistance to our farm sector, and this 
administration is committed to doing what needs to be done to 
strengthen our farm economy. We hope to do that with a new farm 
bill, increased vigilance on homeland security, securing new 
trade opportunities, additional conservation and land 
stewardship programs, and a commitment to enhancing our rural 
communities, among other priorities.
    The USDA budget submitted by the President moves us in the 
right direction. Our budget protects farm program spending with 
an additional $73.5 billion in support, as agreed to by both 
the House and the Senate budget resolutions. It strengthens 
homeland security and infrastructure protections; that is, pest 
and animal disease prevention and eradication, food safety, and 
the research that supports those activities. Our budget 
promotes trade opportunities for our farmers and ranchers by 
providing tools to help our producers export. It also provides 
a record-level nutrition safety net for families who need 
assistance.
    Our budget promotes good conservation and environmental 
stewardship, so critical to our farmers and ranchers today. The 
budget also invests in our rural communities which often are in 
need of our help, particularly in tough economic times.
    Finally, our budget expands initiatives to make sure that 
we can make government work better for the citizens that we 
serve. Whether farmers, consumers, or low-income Americans, we 
want to ensure that the programs are readily available and 
accessible to the people who come to us for assistance. We 
believe that this is a responsible budget. It funds key 
priorities and programs at USDA.
    I want to thank you again, and we look forward to working 
with you during the budget process to advance the priorities 
that we have outlined. I would now be happy to answer the 
questions from you and members of the committee. Thank you very 
much.
    Chairman Nussle. Thank you, Madam Secretary.
    [The prepared statement of Ann Veneman follows:]

Prepared Statement of the Hon. Ann M. Veneman, Secretary, Department of 
                              Agriculture

    Mr. Chairman, members of the committee, it is an honor for me to 
appear before you to discuss the fiscal year 2003 budget for the 
Department of Agriculture (USDA). I have with me today Deputy Secretary 
Jim Moseley; our Chief Economist, Keith Collins; and our Budget 
Officer, Steve Dewhurst.
    I want to thank the committee again this year for its support of 
USDA programs and for the long history of effective cooperation between 
this committee and the Department in support of American agriculture. I 
look forward to working with you, Mr. Chairman, and all the members of 
the committee during the 2003 budget process.
    As you know, the President's budget was released on February 4. 
Total USDA outlays for 2003 are estimated to be $74.4 billion. This is 
an increase of $11.1 billion above the level requested in 2002, and it 
is only slightly below the 2002 enacted level.
    The Department is addressing the Nation's new priorities in light 
of the September 11 events in a fiscally responsible manner. This 
requires recognizing our priorities and making difficult funding 
decisions. I can assure you that USDA has done just that in preparing 
its 2003 budget proposals.
    We have also taken actions to assure that the $328 million of 
emergency supplemental funds made available to USDA for security needs 
in 2002 will be invested in ways to meet high priorities, particularly 
to improve USDA's biosecurity operations for the long term. We are 
working closely with the Office of Homeland Security and we have 
established a USDA Homeland Security Council to coordinate our security 
efforts and track progress in using those funds to ensure that priority 
needs are met. The Council will play a significant role in establishing 
the final plans for use of those funds.
    For 2003, this budget supports the administration's principles for 
the 21st Century as stated in our report, Food and Agricultural Policy: 
Taking Stock for the New Century, issued last fall. Specifically, the 
budget does the following:
    Ensures that the new farm bill will be generously funded by 
providing an additional $73.5 billion in mandatory funding over the 
200-11 period to develop sound policies for farm commodity and income 
support, conservation, trade, food assistance, research, and other 
programs.
     Supports the administration's goal of opening new markets 
overseas and expanding U.S. agricultural exports by providing over $6 
billion in export program support.
     Provides the largest increase ever for the Special 
Supplemental Nutrition Program for Women, Infants and Children (WIC) 
thereby supporting 7.8 million program participants.
     Provides support for over 20 million food stamp 
participants including legislation to allow more legal immigrants to 
participate and other changes to simplify complex rules, support 
working families and improve program delivery.
     Protects agriculture and our food supply from potential 
threats--intentional or unintentional--and requests more than $146 
million in new spending for food safety, pest and animal disease 
prevention, and research.
     Improves the Department's management of its delivery of 
programs.
     Improves the stewardship of our soil, water and forests by 
making more resources available for conservation uses with less money 
spent for overhead expenses.
     Maintains funding to support loans, grants, and technical 
assistance to address a diversity of rural development needs including 
financing electric and telecommunications systems, water and waste 
disposal systems, rural housing, and business and industry.
    With this as an overview, I would now like to discuss the details 
of our budget proposals for each of the Department's mission areas.
                 farm and foreign agricultural services
    The farm sector in recent years has experienced lower market 
returns for several major commodities and losses from various disease, 
pest and other natural disaster-related causes. Supplemental assistance 
has been enacted to prevent farm income declines. While the situation 
is improving for some commodities, market returns in other areas of the 
farm economy are still low. The President's budget for 2003 provides 
for an additional $73.5 billion in direct spending over the 2002-11 
period to fund new legislation to replace the expiring 1996 farm bill. 
This level is consistent with amounts contained in the Congressional 
Budget Resolution. We will work with Congress to develop a bill which 
contains sound policy consistent with the principles we have laid out 
for 21st Century agriculture.
    The new farm bill should be generous but affordable. It should 
provide a reasonable safety net without encouraging overproduction and 
depressing prices, establish farm savings accounts to help manage risk, 
support our commitment to open trade, offer incentives for good 
conservation practices on working lands, and enhance nutrition 
programs.
                          international trade
    In conjunction with the new farm bill, it is essential that we also 
lower trade barriers and open new markets overseas since trade is 
critical to the long-term health and prosperity of the American 
agricultural sector. Enhancing the competitiveness of U.S. agriculture 
in the world marketplace must also be one of the primary objectives of 
our farm policy.
    One of the most important strategies for enhancing trade is 
continuing the liberalization of global agricultural trade. America's 
farmers and ranchers stand to gain a great deal from further trade 
reform through increased access to markets overseas and a reduction in 
unfair competition in those markets.
    The new round of multilateral trade negotiations is at the center 
of our trade liberalization efforts. Our agenda for agricultural reform 
negotiations includes substantial reductions in tariffs and increased 
market access, elimination of export subsidies, reform of State trading 
enterprises, and tighter rules on trade-distorting domestic support.
    We also are pursuing trade liberalization through both regional and 
bilateral negotiations, and we are closely monitoring existing trade 
agreements to ensure that our trading partners comply fully with the 
terms of those agreements and do not institute technical barriers to 
trade that run counter to their spirit.
    Another strategy laid out in our review of 21st Century agriculture 
is ensuring we have the proper tools needed to expand exports in an 
increasingly competitive environment. This starts with the granting of 
Trade Promotion Authority (TPA) to the President so that we can 
demonstrate to our trading partners that the United States is serious 
in our pursuit of free trade objectives and in our negotiating 
proposals. We urge the Congress to enact this important legislation 
early this year. We also very much want to work with the Congress to 
craft provisions of the trade title of the new farm bill so that they 
are consistent with the principles we have established for 21st Century 
agriculture.
    Our work in the international area begins with the Foreign 
Agricultural Service (FAS), the Department's lead agency in 
implementing many of our international activities, and which plays an 
absolutely critical role in our trade expansion efforts. For 2003, the 
budget provides $140 million for FAS, an increase of $10 million above 
the 2002 level. Included in the FAS request is much-needed funding to 
support an e-government initiative that will upgrade the agency's 
information technology (IT) resources and capabilities, and modernize 
its business practices and operations. Over the last year, FAS has 
faced a series of computer-related crises that have threatened to 
cripple agency operations and communications. This is a particularly 
serious problem for an agency that has offices throughout the world and 
must work closely on a daily basis with many different agencies, such 
as the State Department and Office of the U.S. Trade Representative.
    The FAS proposals also include increased funding for the Cochran 
Fellowship Program. This is a highly successful program that has 
provided training and helped to establish positive linkages with many 
agriculture officials throughout the world. The additional funding will 
expand programming in a number of important areas, including 
biotechnology, food safety, and World Trade Organization accession 
requirements.
    Another key to having the proper trade expansion tools is to ensure 
adequate funding for the Department's export promotion and market 
development programs, which our budget proposals are designed to do. 
For the CCC export credit guarantee programs, the largest of our export 
programs, the budget includes a program level of $4.2 billion. This is 
an increase of $300 million above the projected 2002 level, reflecting 
continued very strong growth in the supplier credit guarantee program. 
For the Foreign Market Development (Cooperator) Program, Market Access 
Program, and Quality Samples Program, the budget includes a total 
program level of $120 million, unchanged from this year's level, and 
$63 million for the Dairy Export Incentive Program, a slight increase 
over the current estimate for 2002.
    As the committee is aware, the administration has undertaken a 
review of U.S. foreign food assistance activities in order to reform 
and rationalize their implementation and to strengthen their 
effectiveness. Among the results of that review is the decision to 
provide a more secure and predictable foundation for our overseas food 
aid activities by reducing their reliance on the year-to-year 
availability of surplus commodities. At the same time, these activities 
will largely be funded through discretionary sources, subject to 
Congressional review and approval, and with reduced reliance on 
mandatory CCC funding. Accordingly, the budget provides increased 
funding for food aid donations under the P.L. 480 Title II program, 
while donations of commodities under section 416(b) authority that rely 
on the purchase of surplus commodities by CCC will not be continued in 
2003. The budget includes a total program level of $1.35 billion for 
P.L. 480 in 2003. Based on current price estimates, total commodity 
shipments under P.L. 480 programs in 2003 should reach 3.7 million 
metric tons.
                         farm program delivery
    Farm Service Agency (FSA) salaries and expenses are funded at $1.3 
billion in 2003. This would support continuation of staffing levels at 
the current 2002 levels of about 5,800 Federal staff years and 11,250 
county non-Federal staff years, including about 2,000 temporary staff 
years. We expect the workload for FSA to remain relatively heavy in 
2002 and 2003.
    In order to help FSA meet this workload challenge, improve service 
to farmers and enhance operating efficiency, the budget provides 
increased funding of $56 million for FSA's information technology 
efforts related to the Service Center Modernization Initiative. This 
includes an acceleration of geographic information systems and other 
common computing environment initiatives to help move the delivery 
system into the e-government era. The budget presents these funds as 
well as funds for the other Service Center agencies under the Common 
Computing Environment appropriation to ensure that these activities are 
well coordinated.
    Management initiatives to modernize farm credit program servicing 
activities and to review the Service Center office processes and 
structure of FSA, Natural Resources Conservation Service (NRCS) and 
Rural Development (RD) will also be undertaken in an effort to improve 
our ability to provide services at less cost.
                                 credit
    We have also included in the budget a program level of about $4 
billion in farm credit programs to assure that farmers have access, 
when necessary, to federally supported operating, ownership, and 
emergency credit. No additional funding is being requested for the 
emergency loan program. Based on current estimates, the budget assumes 
that carry-over funding in the emergency loan program will be 
sufficient to meet demand in 2003.
                             crop insurance
    The budget for this mission area also includes full funding for the 
crop insurance program. The budget includes such sums as necessary to 
meet producers demand for the program given that participation in the 
program is voluntary on the part of producers. The program is delivered 
by private insurance companies, and the Federal Government reimburses 
the companies for their delivery costs. The companies also receive 
underwriting gains on policies for which they retain the risk of loss. 
In 2000, Congress substantially reformed the crop insurance program, in 
part, by providing for substantial increases in the premium subsidy 
available to producers, especially at higher levels of coverage. As a 
result, participation in the program increased substantially. With the 
increase in business, private insurance companies have received a 
windfall as underwriting gains have increased about 400 percent from 
the levels of the early 1990's. This budget includes proposed 
legislation which would cap underwriting gains at 12.5 percent of the 
retained premium.
                   marketing and regulatory programs
    Marketing and Regulatory Programs agencies provide basic 
infrastructure to protect and improve agricultural market 
competitiveness for the benefit of both consumers and U.S. producers.
                           pests and diseases
    Helping protect the health of animal and plant resources from 
inadvertent, as well as intentional pest and disease threats from 
terrorists, is the primary responsibility of the Animal and Plant 
Health Inspection Service (APHIS). The importance of this 
responsibility was recognized by the inclusion of $119 million 
specifically for APHIS in the Homeland Security Supplemental funding 
for 2002. These funds will be used to: improve effective border 
protection, in part through the purchase of equipment and the hiring of 
anti-smuggling personnel; work with the States to expand survey efforts 
for plant and animal pest and disease detection; and meet enhanced 
building security and other needs. Of the total, $14 million will be 
used to relocate certain biohazard laboratory facilities to a facility 
on the National Veterinary Services Laboratories campus in Ames, IA.
    For 2003, we are requesting a net increase of about $120 million 
over the regular 2002 appropriation for APHIS salaries and expenses 
which consists of over $262 million in increases partially offset by 
$142 million in decreases. While we have successfully kept foot-and-
mouth disease and bovine spongiform encephalopathy (BSE) out of the 
United States, our inspectors remain highly vigilant, in part, because 
of bioterrorist threats. The $1.1 billion 2003 budget request for APHIS 
reflects continued and enhanced efforts to protect U.S. agriculture at 
the borders, and also to promptly detect and respond to a pest or 
disease outbreak, among other activities. An increase in total program 
level of about $19 million is devoted to enhance Agricultural 
Quarantine Inspection, and an increase of another $48 million is 
devoted to enhanced monitoring and surveillance for pest and disease 
outbreaks.
    Once detected, prompt eradication of an outbreak is essential to 
limit damages and reduce overall control costs. The 2003 budget 
requests $162 million in appropriations to continue funding several 
eradication programs that had been started with funds transferred from 
CCC. Such continuing activities can no longer be considered 
``emergencies.'' These funds will be used to combat species such as the 
Asian Long-horned Beetle, citrus canker, Mediterranean fruit fly, 
chronic wasting disease, plum pox, rabies, scrapie, and tuberculosis. 
For any new emergency pest and disease outbreak, our legal authority to 
use CCC funding would be relied upon. However, the administration is 
concerned about rising Federal costs of emergency pest and disease 
control and expects to seek public comment on flexible criteria to 
share the financial burden with cooperators who receive benefits from 
program activities.
                               marketing
    Another important proposal in this area involves the Grain 
Inspection, Packers and Stockyards Administration (GIPSA). The budget 
includes a total program funding level of $43 million to help ensure 
efficient market functioning. Included within this total is about $2 
million being requested for improved enforcement of anti-competitive 
laws and monitoring the use of new technologies to evaluate livestock 
carcasses. Another $450,000 is requested to expand the newly 
established biotechnology program to keep pace with the rapid 
introduction of new products and the need for commodity certifications. 
A further $3.4 million is requested to enhance the ability of GIPSA to 
electronically provide and receive data and information. The GIPSA 
budget also proposes user fees to recover costs of the U.S. grain 
standards program, as well as license fees to recover costs of the 
Packers and Stockyards program.
    For the Agricultural Marketing Service (AMS) the budget includes an 
increase of $1 million to expand international market news reporting in 
Central America, South America, and Asia and increase the availability 
of accurate, timely, and unbiased international market information. 
This type of real time market information is required for American 
producers to be competitive in a global economy. The budget also 
requests an increase of $1.6 million to implement improvements to the 
Pesticide Data Program and the Federal Seed Act Program. Improvements 
to the program infrastructure for these programs are necessary to 
ensure effective delivery of program services to American agriculture.
                              food safety
    A safe food supply is one of the foundations of a successful food 
and agricultural system. As we have witnessed, highly publicized 
outbreaks of food-born illness have demonstrated how important 
safeguarding public health is to both consumers and producers. With the 
threat of terrorism, we must be even more vigilant in safeguarding the 
Nation's food supply. USDA plays a critical role in safeguarding the 
food supply and its policies have contributed to the recent decline in 
pathogenic contamination of meat and poultry products. This 
administration believes that continued investment in the food safety 
infrastructure is necessary to ensure that the appropriate personnel, 
tools, and information are available to address the emerging food 
safety hazards that threaten public health and the viability of our 
agricultural system. Therefore, the budget includes record funding for 
the Food Safety and Inspection Service (FSIS).
    For 2003, the budget proposes $804 million, an increase of about 
$28 million over the 2002 current estimate. Funds are requested to 
cover the costs of Federal inspection and for maintaining Federal 
support of State inspection programs. This includes resources necessary 
to maintain approximately 7,600 meat and poultry inspectors which will 
ensure the uninterrupted provision of inspection services.
    In addition, the budget requests an increase of $14.5 million to 
improve FSIS' information technology infrastructure. FSIS' existing, 
disparate information systems will be replaced by a new system with 
enhanced data sharing capabilities. Upgrading these important 
information systems will lead to improved science-based decision-making 
for risk assessment and risk management functions, as well as improved 
resource management.
    The budget also requests an increase of $2.7 million to conduct 
slaughter epidemiological surveys and risk prevention activities for 
small and very small establishments. These surveys will improve the 
quantity and quality of data available to FSIS for use in evaluating 
the effectiveness of inspection strategies to detect animal disease 
outbreaks and the food safety guidelines to limit the impact of those 
outbreaks.
    The 2003 budget includes a commitment to review the current 
overtime fee structure for meat, poultry, and egg products inspection, 
including an analysis of the manner in which fees are assessed and the 
underlying statutory basis for those fees. There is no budget impact in 
2003 as a result of this action, however, the analysis of the current 
fee structure will begin immediately. The budget also proposed a new 
annual licensing fee that will make funds available, beginning in 
fiscal year 2004 and in subsequent years, to invest in food safety 
inspection technology and other Federal programs that directly benefit 
the industry.
                 food, nutrition, and consumer services
    The budget includes $41.9 billion for USDA's domestic nutrition 
assistance programs, the highest request ever, targeted to help 
Americans in need. This request reflects our commitment to the 
nutritional safety net, and to helping participants find and retain 
jobs, and move toward economic self-sufficiency.
    A major component of the nutrition safety net is the Special 
Supplemental Nutrition Program for Women, Infants and Children (WIC). 
The budget requests a record level of $4.8 billion for WIC, almost 10 
percent above the 2002 appropriation. The request funds average annual 
participation of about 7.8 million participants, and it provides an 
additional $150 million contingency reserve should additional demand 
for WIC appear. This request reflects the growing demand for WIC and it 
also reflects a firm commitment by this administration to ensure that 
resources are directed to programs that make a real difference in 
peoples lives. WIC is just such a program. Ensuring funding for WIC is 
one of our major priorities and is critical to the administration's 
goal of guaranteeing stable funding for this important program.
    The Food Stamp Program is funded at $26.2 billion, an increase of 
almost $3.2 billion above the 2002 level. The increase would cover a 
projected 2-percent increase in food costs with average participation 
of about 20.6 million people. This is an increase of about 2 million 
participants over the most current month reported, November 2001. The 
request also includes a $2 billion contingency reserve, in case it is 
needed to support a higher than expected level of participation.
    Also of great importance is reauthorization of the Food Stamp 
Program. The budget contains several legislative proposals for food 
stamps that are consistent with the principles we have laid out for 
21st Century agriculture. These proposals would:
     Allow legal immigrants who have resided in the U.S. for 5 
years or more to apply for food stamps. This is consistent with welfare 
reform as it would bring the Food Stamp Program into conformity with 
other public assistance programs such as Medicaid and the Temporary 
Assistance for Needy Families programs that work in concert together at 
the local level. This change provides a nutritional safety net for 
these legal immigrants while maintaining requirements that they look 
first to their earnings, resources and the support of their sponsors to 
meet their needs.
     Index the standard deduction to a percentage of poverty, 
so it adjusts both to reflect household size and changes in living 
costs. This, along with standardized medical and dependent care 
deductions (and several other program simplifications) will allow 
States to focus more on helping households get back on their feet, and 
less on complex and error-prone details.
     Exempt one vehicle per work-able household member from 
being counted as an asset to facilitate participant efforts to seek and 
retain employment.
     Eliminate the requirement that 80 percent of the 
Employment and Training funds going to childless unemployed adults so 
that States can more flexibly direct these resources to help those most 
likely to use them.
     Reform the Quality Control System to focus on recurrent 
error problems. Although error rates are at their lowest level ever, 
States issued nearly $1.3 billion in overpayments and underpaid 
eligible households by nearly $460 million. This is just too high. The 
proposed changes would allow States to receive meaningful incentive 
awards for good performance and only sanction States with two 
consecutive years of error rates exceeding the 75th percentile for all 
States. Enactment of these changes will help all stakeholders to strive 
for even better performance.
    The Child Nutrition Programs are budgeted under current law at 
$10.6 billion. The request anticipates an increase of about 2 percent 
in food costs, growth in the programs due to the increased number of 
school aged and younger children, and some expansion in the breakfast 
and child care food programs. Program integrity will continue to be a 
focus for these programs, not only to ensure the proper allocation of 
Child Nutrition funds, but also because far larger sums of Federal and 
State education money are targeted to low-income schools based on free 
and reduced price lunch data.
                   natural resources and environment
    The Natural Resources and Environment mission area promotes 
conservation and sustainable use of natural resources on the Nation's 
private lands through education, technical and financial assistance. 
The mission area is also responsible for meeting public demands for 
recreation, timber and other goods and services through management of 
approximately 192 million acres of National Forests and grasslands. The 
budget includes approximately $6 billion in budget authority for the 
Natural Resources and Environment agencies.
    The importance of conservation programs has grown well beyond their 
historical purpose of protecting productive topsoil for the purpose of 
food production. We are now realizing the significance of agriculture's 
impact on other areas of the environment such as water quality. In 
addition, public awareness and concern for the Nation's natural 
resources have continued to grow as we gain a better scientific 
understanding of soil and related resource problems and how best to 
address them. The 2003 budget request in the conservation area 
recognizes these developments, as well as the need to protect the 
conservation partnership that has evolved over the years between the 
Department and conservation districts and farmers.
    The budget request for the Natural Resources Conservation Service 
(NRCS) for 2003 proposes $1.2 billion in appropriated funding, and 
assumes $1.0 billion in mandatory funding for the Environmental Quality 
Incentive Program (EQIP) within the Commodity Credit Corporation (CCC) 
baseline, including estimated spending in the new farm bill. The 
appropriated request includes $787 million for conservation technical 
assistance (CTA) which represents the foundation of the Department's 
conservation partnership, as well as the primary means by which the 
Department implements many of the critical natural resource programs 
such as the Conservation Reserve Program (CRP) and the conservation 
initiatives that will be called for in the new farm bill.
    Addressing the problems associated with polluted runoff from animal 
feeding operations (AFOs) remains one of the most critical challenges 
and continues to be a high priority within the Department. To help AFO 
operators develop and implement nutrient management plans, NRCS will 
increase the level of technical assistance funding in 2003. Financial 
assistance that AFO operators might need to implement the plans will 
come from the EQIP.
    The Department's 2003 budget request maintains funding for the 348 
Resource Conservation and Development (RC&D) areas now authorized and 
will also be sufficient to support any new areas authorized in 2002. 
The ongoing program will continue to improve State and local leadership 
capabilities in planning, developing and carrying out resource 
conservation programs.
    While maintaining and strengthening those conservation programs and 
activities that are vital to a healthy natural environment, the 2003 
budget ceases funding those programs that have not performed well, that 
have a limited scope, or that have goals that can be better addressed 
through other programs. The Forestry Incentives Program falls in this 
general category and is not to be continued. In addition, all non-
emergency watershed planning and operations funding will be redirected 
to other higher priority work within NRCS. Although support for regular 
watershed operations and planning is being terminated, the 2003 budget 
does propose to fund the Emergency Watershed Protection (EWP) program 
at an appropriated level of $111 million, which is an amount equal to 
the 10-year average for EWP spending. This would provide an important 
level of security to rural areas in the event of sudden and unforeseen 
natural disasters, and would enable the Department to respond to these 
disasters in a much more timely manner.
    Under the Common Computing Environment budget an increase of $13 
million is included for NRCS activities for telecommunications costs, 
GIS implementation, cyber-security initiatives and enhanced access for 
customers.
    The budget requests almost $4.9 billion in budget authority for the 
Forest Service (FS). The budget includes management reforms to increase 
resources directed to the field to achieve more on-the-ground work, 
continues the administration's commitment to the National Fire Plan, 
and emphasizes tangible contributions toward sustainable resource 
management.
    To ensure that the public gets the most value for its tax dollars, 
the Forest Service will become more efficient and streamline to 
increase funding at the field level, and continue to improve agency 
accountability. FS has developed an initial workforce restructuring 
plan that includes significant management reforms which will reduce 
layers of supervision and administrative support.
    The Department recognizes the importance of the continued 
implementation of the National Fire Plan. The budget includes 
approximately $1.5 billion in funding for the National Fire Plan. The 
budget maintains funding for priority activities and is faithful to 
commitments made to increase efforts to fight wildfires, reduce the 
risk of fire, and assist communities, and includes approximately $235 
million for hazardous fuels reduction; $627 million for fire 
preparedness; and $443 million for fire suppression activities.
    Funding for the National Forest System is increased $36 million. 
This includes an additional $15 million to expedite endangered species 
consultations, $5 million to assist in implementation of the National 
Energy Plan, and $7 million to expand recreation, heritage and 
wilderness management.
    State and Private Forestry programs are funded at approximately 
$282 million. This includes a new $12 million emerging pest and 
pathogen fund to respond to new introductions of non-native or invasive 
pests or pathogen. In addition, the budget includes full funding of the 
Forest Service portion of the Land and Water Conservation Fund (LWCF), 
including an additional $5 million in the Forest Legacy program to 
protect against the loss of forests from development.
    The Forest Research budget is proposed at $254 million. This 
includes an additional $5 million for bio-based products and bioenergy 
research and an increase of $20 million to fully implement the Forest 
Inventory and Analysis program to provide timely information on the 
status and trends of the Nation's forest resource conditions.
                           rural development
    The administration's principles for rural development are to 
recognize the diversity of rural America and the importance of the non-
farm economy to rural communities; to create an environment that will 
be attractive to private investors to rural areas, encourage greater 
education and technical skills for rural residents, and capitalize on 
rural America's natural resource base; to protect lives and property 
against certain hazards, such as forest fires; to expand rural 
infrastructure, and to serve as a coordinator among the various levels 
of government and private sector stakeholders in rural development 
activities.
    USDA's rural development mission area has the primary 
responsibility for administering programs to meet these principles. The 
2003 budget includes over $1.9 billion in budget authority for rural 
development programs that would provide almost $11 billion in loans, 
grants and technical assistance for a variety of purposes, including 
the financing of electric generation and distribution systems, 
telecommunications, water and waste disposal and other essential 
community facilities, rural housing, and business and industry. The 
2003 budget also includes a request for about $685 million for the 
administrative expenses for these programs.
    The total amount of budget authority for Rural Development is $2.6 
billion, which is approximately at the 2002 enacted level. However, the 
budgetary resources have been realigned so that the 2003 budget allows 
USDA to efficiently and effectively meet the needs of rural America. 
Most programs are funded at approximately the 2002 enacted levels. 
About 60 percent of the program decreases are due to reductions in 
demand. The 2003 budget also reflects the annual changes in subsidy 
rates due to different technical and economic assumptions. Funding for 
Round II Rural Empowerment Zones and Enterprise Communities Grants and 
Multifamily Housing loans for new construction has not been requested.
    The telecommunication programs are funded at program levels of $495 
million in direct loans for the regular programs, $50 million in direct 
loans and about $25 million in grants for the distance learning and 
medical link program, and $80 million in direct loans and $2 million in 
grants for the broadband and internet services program. These are the 
same levels as appropriated for 2002 except for distance learning and 
medical link direct loans, and broadband and internet services grants. 
For the past few years, USDA has requested and received program level 
funding for $300 million in direct loans for the distance learning and 
medical link program. Unfortunately, there have been very few 
applicants because
    potential applicants are more interested in the grant program. The 
reduced level of funding for 2003 is expected to fulfill actual demand.
    As for broadband and internet services, the program was established 
on a pilot basis in 2001. The $2 million in program level funding 
available for grants in that year was targeted to a few small 
communities that could not qualify for loans due to a lack of repayment 
ability. While there is no lack of demand for grants for this purpose, 
the Department believes that communities should bear a substantial 
portion of the cost of such services, which means the program should 
focus on loans rather than grants, as reflected in the budget request 
for 2003. Further, the Department is again proposing that no funding be 
provided for Rural Telephone Bank (RTB) loans. The RTB is fully capable 
of obtaining funds to make loans through commercial channels which 
would encourage privatization.
    The water and waste disposal program would be funded at a level of 
$814 million in direct loans, $75 million in guaranteed loans and $587 
million in grants--the same as appropriated for 2002. This program 
provides safe drinking water and waste disposal for rural residents and 
encourages business and industry to locate in rural areas which means 
more jobs and a more diversified rural economy.
    The business and industry guaranteed loan program is funded at a 
program level of $733 million. This is the same amount that will be 
available from the 2002 appropriations.
    The single family program levels for 2003 would support $957 
million in direct loans and nearly $2.8 billion in guaranteed loans--
enough to provide about 50,000 home ownership opportunities.
    The rural rental housing program would be limited to a program 
level of $60 million in direct loans for repair and rehabilitation and 
related purposes and $100 million in guaranteed loans for either new 
construction or repair and rehabilitation. The Department is concerned 
about the substantial cost to the government for rental assistance 
payments to support its existing portfolio of about 17,800 existing 
projects. These projects have an outstanding balance owed of close to 
$12 billion. Many of these projects are over 20 years old and in need 
of repair or rehabilitation. The Department has already initiated a 
review of alternatives for servicing the portfolio. This review will 
also consider options for making loans for new projects at less cost to 
the government.
                   research, education, and economics
    To maintain the unparalleled success of U.S. agriculture, it will 
be necessary to make investments in research, education, and economics 
as new challenges confront the agricultural sector. Continuing to 
provide a secure food supply and maintaining and strengthening U.S. 
farmers' competitive advantage in world markets within a restrained 
budget will require a close assessment of priorities.
    The 2003 budget for this mission area totals $2.3 billion. For 
ongoing programs, there is an overall net increase of $15 million. 
There are increases for critical intramural and grant programs, 
decreases for less critical projects--many of which were specific 
congressional earmarks for projects that could be funded through 
competitive programs--and a reduction of $102 million in the 
Agricultural Research Service (ARS) buildings and facilities account 
following the large appropriations in 2002.
    The 2003 budget for ongoing research and information activities in 
ARS is $1.014 million, a net increase of 3 percent above the 2002 
enacted level. The budget includes an increase of $13 million for 
emerging, reemerging, and exotic plant and animal diseases, such as BSE 
and Food and Mouth Disease (FMD), to protect the U.S. food supply and 
increase the product longevity and market quality of agricultural 
commodities; an increase of $9 million for bio-based products and 
bioenergy from agricultural commodities, two initiatives that are 
supported by the President's national energy policy; an increase of 
$6.5 million for global climate change to improve our understanding of 
carbon sequestration and support other aspects of the administration's 
climate change research initiative; an increase of $5 million to 
develop advanced pathogen detection capabilities needed for homeland 
security; and several other critical initiatives.
    We are pleased that Congress has responded positively to the urgent 
need for a modern animal health facility in Ames, Iowa with combined 
appropriations of $113 million in the regular and supplemental 
appropriations acts in 2001 and 2002. In this regard, we are in the 
process of preparing a report at the request of the Appropriations 
Committees on our estimates of costs for the entire project, the 
planned construction schedule, and our plans for managing this major, 
multiagency undertaking.
    The 2003 budget proposal for the Cooperative State Research, 
Education, and Extension Service is just over $1 billion. The National 
Research Initiative (NRI) is funded at $240 million, representing an 
increase of $120 million from 2002. The Federal Government plays a 
unique role in its support of the basic research needed to maintain the 
technology-based competitive advantages we currently enjoy in so many 
segments of the economy. In recent years, there have been especially 
large increases in Federal commitments for research in support of 
medicine and national defense. Unfortunately, commitments for 
agricultural research have not kept pace and opportunities to take 
advantage of some of the Nation's best university-based scientific 
talent are being lost. The budget proposal for the NRI will enhance 
agriculture as a scientific discipline; it will provide opportunities 
to partner with other Federal agencies and bring an agricultural 
perspective to topics of mutual interest; and it will make a 
contribution toward encouraging and training the next generation of 
agricultural scientists. Formula-based programs for research and 
extension are continued at the 2002 level, and the budget provides an 
increase of $2.4 million for higher education programs.
    The 2003 budget for the Economic Research Service (ERS) is $82 
million which supports the ongoing program of work and provides 
increases for two initiatives. An increase of $2.7 million will support 
the ERS share of the joint effort with the National Agricultural 
Statistics Service (NASS) to improve the Agricultural Resources 
Management Survey, known as ARMS, generating more dependable and 
statistically defensible results and making results available through 
web-based dissemination. This national survey of farms provides data 
and analysis to characterize the economic conditions and rapidly 
changing structure of the agricultural sector. ARMS is the primary 
source of information about the financial condition, production 
practices, use of resources, and economic well being of America's 
farmers. As the principal source of data, ARMS makes it possible for 
ERS to answer key questions from USDA policy officials, Congress, 
Executive Branch officials, and other decision makers about the 
differential impacts of alternative policies and programs across the 
farm sector and among farm families.
    An increase of $2 million will support the second initiative on the 
effects of invasive pests and diseases on the competitiveness of U.S. 
agriculture. The results of this initiative will provide information 
that can be used to help guide resource allocation for efforts to 
exclude and control invasive species. A major portion of this work will 
be to assess cost effective means of the public sector in reducing 
economic risks to U. S. agriculture from invasive species while 
preserving economic gains from trade and travel.
    The budget for NASS is $149 million which includes an increase for 
four initiatives. An increase of $15.5 million is requested for the 
cyclical change in statistical activities associated with conducting 
the 2002 Census of Agriculture, with 2003 being the peak in the 5-year 
cycle. NASS's portion of the initiative to improve ARMS is $4.6 
million. In addition to improvements discussed previously, this funding 
will support research efficiencies to integrate the ARMS program with 
other data collection efforts. The NASS request also includes about $5 
million in increases for additional computer security, for development 
costs to move to electronic collection of data, and for development of 
an annual locality based county/small area estimation program to 
provide statistical data below the State level.
                        departmental management
    The Departmental staff offices provide leadership, coordination and 
support for all administrative and policy functions of the Department. 
These offices are vital to USDA's success in providing effective 
customer service and efficient program delivery. Salaries and benefits 
often comprise 90 percent or more of these offices' budgets, leaving 
them little flexibility to reduce other expenditures needed to continue 
their operations. The 2003 budget proposes funding needed to ensure 
that these offices maintain the staffing levels needed to provide 
management, leadership, oversight and coordination.
    These offices also have key responsibilities related to the 
President's Management Agenda and other departmentwide and agency-
specific management reforms, which are crucial to making the Department 
an efficient, effective and discrimination-free organization that 
delivers the best return on taxpayers' investments. The 2003 budget 
requests funding to achieve the following management priorities:
     As a direct result of the events of September 11, the 
budget request includes specific changes to increase the level of 
security and emergency planning for the Department.
     We will continue to streamline the Service Center agencies 
(FSA, NRCS and RD) to improve efficiency and customer service. We will 
also continue our efforts to provide electronic services to USDA 
customers. A key element in these plans is the completion of a common 
computing environment for the Service Center agencies and acceleration 
of our efforts to acquire and use geographic information systems.
     We will continue efforts to process employment and program 
civil rights complaints in the Department in a fair and timely manner 
and promote a working environment in which discrimination against 
employees or customers is not tolerated.
     We will continue to develop departmentwide administrative 
information systems so that decisionmakers can receive timely and 
reliable information on the Department's finances, people and 
purchases. These systems will also make the Department's administrative 
operations more efficient by eliminating redundant, stove-piped and 
aging information systems. They are critical to the Department's 
ability to achieve and maintain a clean opinion on its financial 
statements and adequate computer security.
     We will continue to strengthen our information security 
program to better protect USDA's valuable information assets from 
intrusion and theft. We will also develop an Enterprise Architecture, 
which is a key planning and risk management tool for information 
technology investments.
     We will put more of the Department's work up for 
competition and increase the use of performance-based contracting to 
generate savings and efficiencies.
     We will continue renovations of the South Building to 
ensure that employees and customers have a safe and modern working 
environment.
     We are proposing to fund rental payments to the General 
Services Administration (GSA) in the budgets of agencies occupying GSA 
space instead of a central account in order to hold USDA managers 
accountable for the full cost of their programs.
     The budget also provides increased funding for the Office 
of the Inspector General to help it address an expanding workload and 
provide active assistance to USDA agencies. It also provides for re-
engineering audit and investigative activities, streamlining 
operations, and increasing office efficiencies.
    That concludes my statement. I look forward to working with the 
committee on the 2003 budget so that we can better serve those who rely 
on USDA programs and services.

    Chairman Nussle. Let me turn immediately to the farm bill 
and ask you three general questions: one on timing, one on 
money, and one on just general goals and policy. What is your 
opinion or what is the administration's opinion or advocacy 
with regard to timing of the farm bill? When should the 
conference complete its work, in the opinion of the 
administration?
    Secretary Veneman. Well, I have had conversations as late 
as yesterday with Chairman Combest, and they certainly hope to 
complete the work on the farm bill before Easter. That is their 
goal, and we would certainly agree with that goal and are 
working very hard with the conference to try to make sure that 
that timetable is achievable.
    Chairman Nussle. And in part, I think the reason time is of 
the essence is certainly predictability and planning decisions 
need to be made. But is there a position from the 
administration with regard to the possibility of an emergency 
or emergency payments if, in fact, the farm bill is not 
completed before Easter?
    Secretary Veneman. Well, again, Mr. Chairman, we are 
hopeful that a farm bill will be completed. In the event that 
it is not, we would be certainly willing and able to work with 
the committee and the Members of the Congress to work out an 
appropriate supplemental. As we know, the money has been 
certainly set aside through the budget resolution and carried 
in the President's budget as well, the $73.5 billion over 10 
years; but, again, we are hopeful that an agreement can be 
reached on the farm bill before we would have to make a 
distribution on a supplemental.
    Chairman Nussle. Well, I agree with you. I think it would 
be the height of your responsibility to move directly to a 
supplemental for agriculture when we have had over a year's 
worth of opportunity to begin the debate and the discussion and 
the field hearings and all of the negotiations that need to go 
into a farm bill. This is not news to anybody, particularly 
those of us who, you know, believe that agriculture is pretty 
important to our States and our constituencies. And so, to 
somehow change the focus to a supplemental I think would be 
irresponsible, given the opportunity that a farm bill 
reauthorization brings.
    Second is money. As you noted and I have noted and many 
others have noted, while both bills seem to somehow get under 
the wire with regard to the scorekeeping of $73.5 billion, the 
Senate bill does it in an interesting way, to say the least. In 
other words, it puts all the money in the first 5 years and 
shortchanges the second 5 years in a number of very important 
categories, which is just unrealistic; again, I believe 
irresponsible. Certainly a strategy to get to conference, 
because they were having trouble getting anything passed on the 
floor, so they had to say yes to everybody to get it to 
conference. But do you have a test? Would a good test be that, 
for instance, half the money has to be spent in the first 5 
years and half the money has to be spent in the second 5 years? 
Is there a test that we can use, thumbnail at best, to show the 
Congress, the administration and, for that matter, farmers that 
this is a realistic approach from a budgetary standpoint?
    Secretary Veneman. Mr. Chairman, as I said in my opening 
statement, we believe that the money should be allocated in a 
fairly even manner over the 10 years for which the money has 
been designated, and we believe that if we are looking at a 5-
year number, that ought to be roughly half of the $73.5 
billion. We think that makes sense. We think that gives farmers 
more predictability.
    Our concern about the Senate bill is that by front-loading 
the money in the initial years, that it will shortchange 
farmers in the later years. In fact, in the Senate bill there 
are a number of programs that are funded during a 5-year period 
that are not shown as having money allocated for the second 5-
year period. So in that respect, it would create uncertainty 
for farmers, and I don't think any of us want to create that 
kind of uncertainty for our farmers.
    Chairman Nussle. Or uncertainty for taxpayers who foot the 
bill for this, appropriately so, at least again for those of us 
who support the safety net, but one that would I think fall on 
pretty difficult ears in the future if we don't show a 
responsible fiscal pattern here. I think 50:50, over a 5 and 5 
time span, is at least a good thumbnail beginning of at least a 
tester of a fence.
    And finally, has the administration yet--and you touched on 
it briefly--but could you reexamine what the goals of the 
administration would be generally for a farm bill? What do you 
want to see generally within these parameters as you begin the 
negotiations, as we hopefully complete the negotiations?
    Secretary Veneman. Yes, Mr. Chairman. As I mentioned in my 
opening remarks, we want a bill that fits within the parameters 
of the budget as outlined, one that does not front-load, one 
that provides a safety net for farmers, that is as market-
oriented as possible and does not encourage overproduction, 
which thereby depresses prices and creates oversupply. We would 
like a bill that is consistent with our trade obligations, and 
we would like to see a bill that provides adequate--or 
significantly additional conservation programs, particularly 
for working farm lands.
    As I said, we believe both the Senate and the House bill 
provide significant additional funding for conservation, and we 
think that is a good thing. Obviously, there are a number of 
issues to be resolved in the conference. I would say the final 
issue is a new risk management tool for farmers. A farm savings 
account to help them put away into something like a 401(k) 
account in the better years; money to use in the years that are 
more difficult, giving them an additional tool to manage risk 
on their own account. In talking with farmers and ranchers 
around the country, they like the opportunity to have more risk 
management tools, because farming is such an uncertain 
business.
    Chairman Nussle. Well, as one of the lead sponsors on the 
farm savings accounts, I appreciate that advocacy. I am not 
sure we can accomplish it within the farm bill conference, but 
it is something important for us to consider at Ways and Means. 
You sound as though, just judging from those five goals, we are 
close on four. The biggest challenge, it appears--we are close 
on market. We are close on the production issues. We are close 
on safety net. We are close on compliance with trade. The 
biggest issue here is does it fit within the budget 
realistically, and that one is clearly outside the goal.
    So you may be interested in knowing that one of the 
considerations that is being made at this point in time is that 
a delegation from the Budget Committee be sent to the farm bill 
conference. We are working with the Speaker's office at this 
point in time. No decision, I don't think, has been made yet 
but it would be my intention to go and ensure that farmers have 
a similar safety net in the second 5 years as they do in the 
first 5 years and that it fits within a responsible budget. So 
if we do have the opportunity to go, that will be my advocacy, 
and I am happy that the administration is there as well. So 
thank you for your testimony.
    Mr. Spratt.
    Mr. Spratt. For clarification--you may have said it and I 
may have missed it--does the administration support a 10-year 
extension as opposed to a 5-year period for the farm bill? Have 
you taken a stand on that issue?
    Secretary Veneman. We have not taken a strong stand on that 
issue, though we have said that we have some concerns about 
extending a farm program out 10 years because, like other 
businesses, this is a rapidly changing business environment for 
our farmers and ranchers. There is some concern about locking 
us in for a 10-year period of time.
    On the other hand, as I said earlier, we want to make sure 
that the amount of money that has been designated by the two 
budget committees which is designated for a 10-year period is 
allocated in a way over the 10-year period; regardless of 
whether or not it is a 5-year bill or a 10-year bill, that it 
doesn't shortchange farmers in the longer term for the sake of 
putting more money in the shorter term. So, I think that the 
issue of whether it is a 5 or 10 year bill is not as important 
as how we allocate the money overall.
    Mr. Spratt. How much money do you have in your request for 
homeland security?
    Secretary Veneman. We have added, I think, $142 million 
additional this year. In addition, we got $328 million out of 
the defense supplemental appropriation bill recently signed by 
the President. So we are certainly taking a lot of action with 
regard to homeland security.
    Mr. Spratt. Could you tell us just briefly, a thumbnail, as 
to where that money is going, what you are using it for?
    Secretary Veneman. Just one second. On the 2003 request, we 
have roughly 3,500 agriculture quarantine inspectors currently 
located at U.S. ports and over 7,600 meat and poultry 
inspectors that would be funded through our meat and poultry 
inspection; and major research programs, exotic diseases and 
emerging, that represent threats to the food system.
    In addition, we have research complexes in Ames, IA; Plum 
Island, NY; Athens, GA; Laramie, WY; and Fort Detrick, MD where 
research and diagnostic work is done, where we would want to 
put some additional funding to make sure our laboratories are 
in appropriate condition.
    Our 2003 budget includes increased funding to strengthen 
key elements of our infrastructure, a $19 million increase in 
the AQI program for improved point-of-entry inspection programs 
by providing additional inspectors, expanding canine teams and 
state-of-the-art high-definition x-ray machines at high risk 
points of entry on the Canadian and Mexican borders and Hawaii 
and elsewhere. It would include a $5 million increase to 
strengthen the capability of APHIS, to assess and monitor 
outbreaks of disease in foreign countries that have the 
potential to spread to the U.S. A $48 million increase for 
plant and animal health monitoring to enhance the ability to 
quickly identify and respond to outbreaks that may occur. While 
we have longstanding efforts that have kept FMD or foot and 
mouth disease, and BSE or what is commonly referred to as ``mad 
cow'' disease out of the U.S. Funds would be used to improve 
the emergency management system which coordinates and 
implements a quick response to an animal or plant pest or 
disease outbreak.
    Now, I might add that these are issues, particularly on the 
animal health side, that we have been dealing with extensively 
over the past year because of the outbreak of foot and mouth 
disease particularly in the U.K., the spread of BSE with new 
cases in Japan, and so we have been putting considerable focus 
on these issues even before 9/11, and enhancing our efforts in 
regard to animal diseases. Now, of course, we are putting even 
more emphasis on these kinds of programs with the threat of 
intentional as well as unintentional possibilities of threats 
to our food system.
    We also have a $12-million increase for other APHIS 
programs to expand diagnostic response management and other 
scientific and technical services. We have a $28-million 
increase to provide additional funding for the Food Safety 
Inspection Service, supporting food safety activities including 
maintaining 7,600 meat and poultry and egg inspectors. Within 
the $28-million increase is $14.5 million to improve the 
information technology infrastructure and $2.7 million to 
conduct slaughter epidemiological surveys and risk prevention 
activities for small and very small establishments. There is a 
$34-million increase to support research aimed at protecting 
our agriculture and food system from attack by animal and plant 
diseases, insects, and other pests.
    Mr. Spratt. Are you satisfied at the level of funding and 
with the coverage of all the risk?
    Secretary Veneman. We continue to review and enhance all of 
our programs. We believe that with the $328 million that we got 
through the defense supplemental appropriations, in addition to 
what we have added in 2002 by reallocating resources because of 
things like the foot and mouth disease scares, together with 
our requested increase for 2003, that year we would be 
adequately covered if these requests were funded.
    Mr. Spratt. Switching gears completely, I would just ask 
you kind of a global question. I come from an agricultural 
district; at least half of it is cotton farmers, soybean 
farmers, tobacco farmers. And they are all hurting, every one 
of them. First, with respect to tobacco farmers, is there 
anything being contemplated by the administration for buyout of 
the tobacco program, the quota program, funded, say, by levies 
or some kind of imposition on tobacco?
    Secretary Veneman. First I want to just say that I have 
traveled around the country quite a lot, talking to farmers all 
over the country, and I can tell you that I am hearing the same 
thing you are in terms of farmers that are hurting out in the 
countryside.
    On the tobacco side, there has been some buyout of quotas 
through some of the State programs. I believe Maryland bought 
out quotas with some of their tobacco settlement money. At this 
point, while I have heard some discussion among various 
interest groups about the possibility of looking at quota 
buyouts, we are not currently discussing such a possibility--or 
such a system within the administration.
    Mr. Spratt. Let me ask you about the other commodity 
programs, just broadly and generally. I have read--it may have 
been an exaggeration, but I have read that in recent years, 
last year, a third--$1 out of every 3 earned by large farmers 
came from the Federal Government, particularly if they were 
farming program crops. Is that roughly correct?
    Secretary Veneman. Let me have Keith Collins, our chief 
economist, comment on that quickly.
    Dr. Collins. If you look at U.S. agriculture as a whole, 
out of net farm income, government payments were equal to about 
half of net farm income. If you look at program costs----
    Mr. Spratt. Last year?
    Dr. Collins. That was in 2000.
    Mr. Spratt. Half.
    Dr. Collins. Half. If you look at program crops themselves, 
food grains, feed grains, cotton and rice, government payments 
are equal to about 70 percent of net farm income last year.
    Mr. Spratt. Well, as you look at something like that, you 
have to ask yourself how long can this kind of system be 
sustained? Don't misinterpret this as hostility toward the 
system. I am sympathetic to my farmers, but I have to wonder 
what is the resolution of this. And the generic answer seems to 
be trade. We have got to open up farm markets, because the 
domestic markets are pretty well served already. What is the 
answer, long run?
    Secretary Veneman. Well, I think you are right, sir, that 
we have to look at markets for our ag products overseas. 
Certainly there has been some impact on our ability to export 
from the value of the dollar. We need to maintain the markets 
that we do have overseas. We export about 50 percent of our 
wheat, this year it is going to be 50 percent of our cotton, 
and the list goes on and on. We are a very export-dependent 
industry, and so not only do we need to open up new markets, 
but we need to make sure for the health of our farm economy 
that we keep our markets open that we have for our farm 
products here in this country.
    That concerns me, and that is why I brought up a number of 
the issues in my opening statement about markets we are trying 
to keep open.
    I agree with you that over the long term, as we said, we 
want to have programs that provide a safety net that are as 
market-oriented as possible. Any farmer you talk to would 
prefer to get his or her income from the marketplace rather 
than from the government, and so I think that we need to move 
our programs as much as we can to make sure that they are as 
market-oriented as possible.
    We indicated our concern about getting loan rates too high. 
They are much higher in the Senate bill and we are concerned 
that they may create more overproduction, thereby depressing 
prices and creating even more oversupply.
    Mr. Spratt. Thank you very much.
    Chairman Nussle. Mr. Gutknecht.
    Mr. Gutknecht. Thank you, Mr. Chairman, and thank you, 
Madam Secretary, for coming today. Normally this is a tough 
committee for some of the members of the Cabinet to come to, 
because we are the committee that says no. The good news for 
you is we have already said yes, and we have already agreed in 
the House, and we thought we had an agreement with the Senate 
to a 10-year plan at $73.5 billion. Somewhere between the 
Senate committee and today, they now have a program that looks 
an awful lot different, and it makes it very difficult for us.
    I am concerned and you have already expressed concern about 
the front-loading in the Senate bill. I am very worried about 
what will happen after that 5-year period is over under the 
terms and conditions of the Senate bill. For example, a large 
number of critical programs, like milk price support programs, 
the wetland reserve program, value-added product market, 
development grants, mandatory ag research funding is completely 
eliminated after the first 5 years. Other programs that are 
very important to our environment, like the environmental 
quality incentives program, otherwise called the EQIP program, 
and farmland protection are cut anywhere from 50 to 80 percent.
    I am very concerned about that, and I wonder if you could 
discuss that for a few minutes.
    Secretary Veneman. Well, I am looking at a list that is 
very similar to that which you are going through, and that is 
absolutely true. The Senate bill provides for, for example, as 
you said, a dairy program in the first 5 years that has 
absolutely no funding for it in the second 5 years. Like you 
said, the environmental quality incentives program, a key 
program, particularly for our livestock producers as they work 
to comply with waste disposal and water quality issues, has 
more funding in the first 5 years, but substantially reduced in 
the second 5 years. As you indicated, this is true for a whole 
host of other programs.
    That means one of two things: Either they don't have those 
programs in the second 5 years, or we are looking at additional 
budget authority in the second 5 years if you want to continue 
the programs as they are. I certainly think that that is 
something the Budget Committee would be concerned about.
    As I said, we believe that it is better to have certainty 
in the programs; to have, as the House bill does, more even 
spending over the 10-year period; and that regardless of 
whether it is a 5-year bill or a 10-year bill, we shouldn't 
shortchange farmers over the 10-year period for which the 
budget resolution applies.
    Mr. Gutknecht. If I could add parenthetically, I think one 
of the other concerns if we were to adopt the Senate plan, what 
we would do, Members, during that sixth year is, we would 
clearly be pitting farmers against environmental groups. And I 
will tell you, that is not a fight that is a pretty picture for 
any of us. I think they will be coming back to the Budget 
Committee for more money, and that, in my opinion, is a 
terrible mistake.
    Secondly, though, I want to talk about in terms of the 
front-loading. The Senate continues to say that farmers need 
the money up front, but the independent analysis that I have 
seen done by FMPRI and other groups suggests that in spite of 
the fact that the Senate is spending more money during the 
first 5 years, that eight out of every nine dollars of extra 
money that is going to go supposedly into agriculture will not 
go to farmers. In fact, I think that--and perhaps Dr. Collins 
would want to comment on this--that actually the bipartisan 
bill that passed out of the House actually provides more help 
to farmers during the first 5 years than the Senate plan. Would 
you want to comment on that?
    Secretary Veneman. I would be happy to let Dr. Collins 
comment on that because he has reviewed the FMPRI study.
    Dr. Collins. I am not sure what the origin of that analysis 
was, but from my own rack-up of the numbers, during the first 5 
years, if you just look at the core commodity programs--that 
is, the fixed payments, the AMPA payments, the price support 
loan programs and the countercyclical payments--the House bill 
would spend, by CBO scoring, $22.2 billion, whereas the Senate 
would spend $21.1 billion. So I think that is your point, that 
in fact of the core commodity programs, the House bill would 
spend more.
    If you look at that 5-year period total budget authority, 
the Senate bill spends $9 billion more than the House. So here 
you have the commodity--the core commodity programs, more 
spending in the House bill than the Senate, but the Senate bill 
spends $9-billion more overall.
    Now, your question about every eight out of nine dollars 
not going to farmers. The question is where does that $9 
billion go? Well, it goes all over the place, but part of it 
goes to conservation programs. Part of it goes to other 
programs as well. So I can't verify the 8 out of the $9 
billion, because some of those dollars I think may get back to 
farmers. But clearly you are accurate in saying that when you 
look at the core commodity programs, the House bill does spend 
more.
    Mr. Gutknecht. Well, finally, and my time has expired, I 
want to make just one last comment. In terms of additional 
markets, one of the areas we absolutely have to look at, and it 
is great to look at foreign markets, but there are huge 
domestic markets. If we can convert more of what we grow into 
things like biofuels, and so I hope that as we finish up the 
negotiations sometime this spring on our farm bill, that 
biofuels and other uses of the things that we grow here in the 
United States are a big part of that discussion.
    And one last point and then I will yield back, and this--
perhaps, Dr. Collins, you could just send me a real short memo. 
We have had a heated discussion up in our part of the country 
about what is happening with milk protein concentrates, MPCs, 
and we have had this discussion and one of the reasons you 
adjusted the butter powder tilt was to address that problem. I 
wonder if you could give me privately just a short report on 
how that is working. Thank you.
    Secretary Veneman. We will be glad to do that.
    [The information referred to follows:]

Response to Mr. Gutknecht's Question Regarding Milk Protein Concentrate 
                                Imports

    U.S. milk protein concentrate (MPC) imports grew from slightly over 
7 thousand metric tons in 1995 to 53 thousand metric tons in 2000. 
Major exporters to the United States include the European Union (EU), 
New Zealand, Australia, and Canada.
    In 2001, imports fell to 28,500 tons, as imports from the EU, 
Australia, and Canada dropped. On a monthly basis, the downturn began 
in August of 2000 when imports levels fell from the 5-6 thousand metric 
tons per month to 2-3 thousand metric tons (see attached chart).
    Improved international prices for nonfat dry milk (NDM), which rose 
from $1,600 to $2,200 per ton in early 2000, are generally considered 
to have caused the downturn in U.S. imports. Higher international 
prices for NDM increased the profitability of producing NDM relative to 
MPC, causing milk to be diverted in the major MPC exporting countries 
to NDM.
    The USDA decision to reduce the support price for NDM, effective at 
the end of May 2001, appears to be an important factor keeping imports 
of MPC at a low level. Despite last fall's sharp decline in 
international NDM prices from over $2,000 to below $1,700 per ton, 
monthly imports of MPC have not returned to the early 2000 level.


    Secretary Veneman. If I might just make a comment on the 
value added and particularly the biofuels. I think it is 
extremely important to emphasize that agriculture has 
tremendous potential to provide a renewable source of energy 
both on the biofuels side and the biomass side. There are a 
number of new products that are being produced from 
agricultural products. I just learned about how they are making 
tractor parts from corn and soybean polymers.
    The promise that we will see from new research and 
technology for agriculture is tremendous. I think it is 
important to point out that in the President's energy plan that 
was released last year, there is specific and strong reference 
to the role that biofuels can play.
    It was interesting, I recently went out to speak to the 
Commodity Classic, the corn and soybean folks, and after I 
spoke I met with some of the leadership. And they said, you 
know, ``we are as concerned about getting an energy bill passed 
as we are about a farm bill passed,'' because they see the 
potential for long term for agriculture in the biofuels area.
    Chairman Nussle. Thank you, Mr. Gutknecht.
    Just as one side comment--I don't usually do this, but 
since we are on the topic, and maybe this is news; I hope it is 
not--but $73.5 billion over 10 years is our final offer. I 
don't know how clearly we have had to say this. We have said it 
in the budget. But part of the reason that the Speaker may be 
considering sending the delegation from the Budget Committee to 
this conference is because we can have a lot of discussion 
about what is in the first five, what is in the second five, 
what the policies look like, what is important for trade, what 
is a safety net and what isn't. But what fits within a balanced 
budget and a balanced approach for agriculture has been clearly 
outlined. It is $73.5 billion.
    And to begin the bidding higher than that is irresponsible, 
and that is a message that needs to be delivered, and I am 
happy to deliver it. If we need an additional vote to that, we 
may need to take it, but at least to start with today, that is 
the chairman's position and I intend to enforce it.
    Mrs. Clayton.
    Mrs. Clayton. Thank you, Mr. Chairman, and Madam Secretary, 
welcome to our committee.
    I think all of us who are interested in agriculture will 
probably make comments on the farm bill. I think we have a 
number of interesting decisions to make about the farm bill. 
Will policy drive the allocation? We know we have a cap. I 
think the chairman is correct, the $73.5 billion is probably 
understood by all of us that that is the cap. But still the 
issue for policymakers to make is will policy drive the 
allocation of that $73.5 billion, or will we allocate dollars 
to titles and let them divvy it up?
    The other question, whether we like it or not, is the 5 
year and the 10-year issue. Now, I am not sure, Madam 
Secretary, if you are saying, well, I like the 10-year 
resolution, but I really like 5 years. Take the 10-year 
allocation, divide it in two, and that is where we are. Now, 
that is a different proposition. Maybe I ought to pause and let 
you answer that for me.
    Simply, are you suggesting that you like the idea of $73.5 
billion over a 10-year period, dollar amount in time, and then 
if we take that and divide it, in your response to the 
chairman, that gives you a figure to work with. So if you are 
at that position, we are really at a different stage than being 
at $73.5 billion, if you prefer a 5-year program. It means that 
we will have to make a decision whether you actually have a 5-
year program and allocate that half, or if we have a 10-year 
program we have $73.5 billion for allocation over the period of 
time. Those are different driving figures altogether.
    Secretary Veneman. Well, as I said, Mrs. Clayton, we have 
agreed to in the President's budget--I think it is fairly 
unprecedented to agree in the President's budget before a farm 
bill is passed--to the 10-year figure that the House and the 
Senate budget resolutions agreed to last year, and that is the 
$73.5 billion. We have said that if in fact the conference 
committee agrees on a 5-year bill, then the amount of money 
that should be spent in 5 years is roughly half of that, so 
that you have additional money left for the second 5 years, and 
that farmers and other program recipients from USDA aren't 
shortchanged in the outyears.
    Mrs. Clayton. So you would see that as a reserve, that we 
could have that other 5 years funded by the remainder of that? 
That wouldn't go into the general Treasury, right?
    Secretary Veneman. No. The way I see it is that we have a 
10-year budget resolution that has been agreed to by the House 
and the Senate and the President in his budget that he proposed 
this year. There is the same number for over a 10-year period 
reflected in the President's budget. So we are not talking 
about that money going in reserve, but it is actually in the 
President's budget.
    Mrs. Clayton. OK. I have a couple of areas. First, 
nutrition: I want to thank you for the leadership that the 
Department has made in the area of nutrition, and there are 
some really significant areas, and I certainly want to express 
appreciation for that.
    The index standard deduction, poverty level rates. There 
have just been a number of issues that we are about to talk 
about and express appreciation. However, there is the area of 
transition, and that is the area when you transfer from welfare 
to other areas that you make some assistance for that. In child 
care we have it. In Medicaid we have it. In food stamps you 
don't provide it.
    Can you comment as to how we should make adjustments for 
that? These are otherwise eligible people who are known to be 
eligible, who have to go through extra hoops to get food 
stamps. How can we have that? Despite the good things we have 
done, we haven't taken care of that.
    Secretary Veneman. Well, as I know that we have discussed 
with you and I know you have had several conversations with our 
Under Secretary, Mr. Bost, we are committed to finding ways to 
streamline the food stamp program and, as you say, I think we 
have proposed several positive measures that will help make 
that happen.
    We would be happy to work with you in looking at this issue 
to determine what might be done. I can certainly have Mr. Bost 
work with you to look at this particular issue.
    Mrs. Clayton. I do want to thank you for what you have 
done. We did--as you indicated--have Under Secretary Bost with 
us and Representative Price join us. We had people all over 
North Carolina talking about hunger and what they thought would 
be helpful.
    I see my time has expired, but the able-bodied adults 
without dependents is the area where we do not provide any 
resources. And you know in the authorization of welfare, we had 
a 3-month option. It was optional. In the Senate farm bill they 
had provided at least a 6 month--they extended that to 6 
month's option. Can you comment where the administration would 
be on that? Every 3 months out of 36 months, something right 
on----
    Secretary Veneman. What is in the Senate bill is not part 
of the administration's proposal in terms of what we have put 
forward on the food stamp program.
    Mrs. Clayton. If I can get some additional questions to the 
Secretary, Mr. Chairman, in writing, I would like to do that. 
The area I want to address your attention to is a reduction in 
rural housing and the proposal to contract out the whole 
processing for rural housing. There is a reduction in the 
current budget over last year. So I will write my question to 
you. Thank you, Mr. Chairman.
    Mr. Gutknecht [presiding]. Without objection, we will allow 
members to submit written questions, and with your 
acquiescence, we will expect that they will get answers. Thank 
you.
    Mrs. Clayton. One other question. Did anyone request that 
data that was in response to Mr. Spratt about the allocation of 
funds and--if we could have that written out, the analogy of 
how much other government monies go to--one-half goes to net 
farming. Do you have that analysis you could share with the 
whole committee? That would be extremely helpful.
    Secretary Veneman. We will be happy to do that.
    If I could just make one comment on rural housing. We do 
have a reduction in our rural housing line item for this year, 
and there is a reason for that. In terms of new construction, 
we had an OIG report that said that we really needed to take a 
look at our current inventory and the current state of that. So 
basically, what we have done is we have pulled back on building 
any additional new housing; the multifamily housing, I should 
say--it is multifamily housing--so that we can take stock of 
our inventory and do the necessary repairs that have been 
outlined by a report that says that is necessary.
    Mrs. Clayton. Well, we are suffering in rural housing in 
rural areas, so I just want to----
    Secretary Veneman. We will be happy to respond more 
completely in writing.
    [The information referred to follows:]

GOVERNMENT PAYMENTS AS PERCENT OF TOTAL GROSS INCOME AND NET FARM INCOME
                               [1992-2002]
------------------------------------------------------------------------
                Total                             Government payments as
                gross     Net farm    Government        pecent of:
               income      income      payments  -----------------------
    Year      (billions   (billions   (billions      Total
                 of          of      of dollars)     gross     Net farm
              dollars)    dollars)                  income      income
------------------------------------------------------------------------
      1992        200.6        47.8         9.2          4.6        19.2
      1993        205.0        44.7        13.4          6.5        30.0
      1994        216.0        48.9         7.9          3.7        16.2
      1995        210.8        36.9         7.3          3.5        19.8
      1996        235.8        54.8         7.3          3.1        13.3
      1997        238.5        48.5         7.5          3.1        15.5
      1998        231.8        42.9        12.4          5.3        28.9
      1999        235.3        44.3        21.5          9.1        48.5
      2000        241.5        46.4        22.9          9.5        49.3
     2001f        248.6        49.3        21.1          8.5        42.9
     2002f        240.6        40.6        10.7          4.4        26.4
   1992-01        226.4        46.4        13.0          5.8        28.1
------------------------------------------------------------------------
Source: Economic Research Service, USDA


                        GOVERNMENT PAYMENTS AS PERCENT OF NET FARM INCOME BY SALES CLASS
                                                   [Year 2000]
----------------------------------------------------------------------------------------------------------------
                                                                                 Government
                                                             Net farm income    payments (in       Payments as
                        Sale class                           (in millions of     millions of     percent of net
                                                                dollars)          dollars)         farm income
----------------------------------------------------------------------------------------------------------------
Less than $20,000.........................................          -2,315.5           1,403.6                na
$20,000-$49,999...........................................             955.5           1,524.9             159.6
$50,000-$99,999...........................................           1,796.8           2,756.7             153.4
$100,000-$249,999.........................................           6,725.9           6,633.1              98.6
$250,000-$499,999.........................................           7,822.9           5,527.2              70.7
$500,000-$999,999.........................................           7,047.4           3,239.8              46.0
$1,000,000 or more........................................          24,404.9           1,808.8               7.4
                                                           -----------------------------------------------------
      Total United States.................................          46,443.6          22,896.4              49.3
----------------------------------------------------------------------------------------------------------------
Source: Economic Research Service, USDA


                     GOVERNMENT PAYMENTS AS PERCENT OF CROP SECTOR GROSS AND NET CASH INCOME
                                                   [Year 2001]
----------------------------------------------------------------------------------------------------------------
                                                                                         Government payments as
                                          Gross cash       Net cash       Government           percent of:
                 Crop                     income (in      income (in     payments (in  -------------------------
                                          millions of     millions of     millions of    Gross cash    Net cash
                                           dollars)        dollars)        dollars)        income       income
----------------------------------------------------------------------------------------------------------------
Corn..................................          24,231           9,360           5,217         21.5         55.7
Wheat.................................           7,975           3,300           2,493         31.3         75.5
Soybeans..............................          16,225           7,602           3,794         23.4         49.9
Upland cotton.........................           7,468           2,150           3,605         48.3        167.7
Rice..................................           2,357             825           1,452         61.6        176.1
Sorghum...............................           1,456             390             452         31.0        115.8
Barley................................             763             194             200         26.2        103.0
Oats..................................             192            -152              16          8.4           na
                                       -------------------------------------------------------------------------
      Principal crops.................          60,667          23,668          17,229         28.4         72.8
----------------------------------------------------------------------------------------------------------------
Source: Office of the Chief Economist, USDA


                           GOVERNMENT PAYMENTS AS PERCENT OF NET FARM INCOME BY STATE
                                                   [Year 2000]
----------------------------------------------------------------------------------------------------------------
                                                                                 Government        Payments as
                           State                             Net farm income    payments (mil    percent of net
                                                              (mil dollars)       dollars)       farm income (%)
----------------------------------------------------------------------------------------------------------------
Alabama...................................................         1,196,212           170,852              14.3
Alaska....................................................            13,397             1,672              12.5
Arizona...................................................           616,638           107,066              17.4
Arkansas..................................................         1,578,125           900,648              57.1
California................................................         5,348,996           667,466              12.5
Colorado..................................................           542,652           351,116              64.7
Connecticut...............................................           184,783            18,143               9.8
Delaware..................................................           135,909            25,028              18.4
Florida...................................................         2,712,956            56,741               2.1
Georgia...................................................         1,998,777           380,057              19.0
Hawaii....................................................            63,904            11,927              18.7
Idaho.....................................................           832,094           261,297              31.4
Illinois..................................................         1,561,412         1,943,916             124.5
Indiana...................................................           821,529           938,464             114.2
Iowa......................................................         2,578,305         2,302,094              89.3
Kansas....................................................           956,147         1,231,923             128.8
Kentucky..................................................         1,662,695           448,473              27.0
Louisiana.................................................           488,360           451,831              92.5
Maine.....................................................            96,510            13,851              14.4
Maryland..................................................           409,650            88,470              21.6
Massachusetts.............................................            59,778            10,973              18.4
Michigan..................................................           304,678           381,056             125.1
Minnesota.................................................         1,548,378         1,502,230              97.0
Mississippi...............................................           769,201           463,901              60.3
Missouri..................................................           971,899           869,390              89.5
Montana...................................................           291,794           490,002             167.9
Nebraska..................................................         1,419,762         1,406,971              99.1
Nevada....................................................            88,948             3,918               4.4
New Hampshire.............................................            15,837             4,768              30.1
New Jersey................................................           221,698            22,481              10.1
New Mexico................................................           494,239            79,495              16.1
New York..................................................           609,053           159,876              26.2
North Carolina............................................         3,107,638           447,096              14.4
North Dakota..............................................           749,127         1,170,234             156.2
Ohio......................................................         1,177,321           678,104              57.6
Oklahoma..................................................         1,144,662           439,851              38.4
Oregon....................................................           342,656           137,401              40.1
Pennsylvania..............................................           949,161           147,848              15.6
Rhode Island..............................................            11,300             1,218              10.8
South Carolina............................................           552,169           144,499              26.2
South Dakota..............................................         1,398,608           789,895              56.5
Tennessee.................................................           448,601           298,873              66.6
Texas.....................................................         3,644,154         1,647,066              45.2
Utah......................................................           219,096            36,181              16.5
Vermont...................................................           163,143            26,093              16.0
Virginia..................................................           642,073           152,452              23.7
Washington................................................           796,305           352,503              44.3
West Virginia.............................................            41,469            23,509              56.7
Wisconsin.................................................           347,614           603,213             173.5
Wyoming...................................................           114,239            34,302              30.0
                                                           -----------------------------------------------------
      United States.......................................        46,443,651        22,896,434              49.3
----------------------------------------------------------------------------------------------------------------
Source: Economic Research Service, USDA

    Mr. Gutknecht. The Chair recognizes the gentleman from 
Texas, Mr. Thornberry.
    Mr. Thornberry. Thank you, Mr. Chairman. Madam Secretary, I 
think in the last 6 months not only have the priorities of 
government changed, but what the American people expect from 
their government has changed. And while no district is probably 
more affected by the farm bill than mine, all of that in a way 
pales in comparison to the potential consequences of 
agricultural terrorism.
    I was listening very closely to your answer to Mr. Spratt, 
that you think that we have enough money for now. But I am very 
concerned, and I think you make a good point. You got a head 
start in dealing with foot and mouth and mad cow disease, but 
maybe not a head start in dealing with intentional infliction 
of those diseases, which is kind of a whole new ball game. 
Somebody sneaking a small amount of powdery substance here can 
have just devastating consequences.
    I guess I would like to hear a little more from you. You 
used foot and mouth as one example. How far along are we in 
planning for how we would deal with an outbreak of foot and 
mouth disease? I mean, surely we can do better than Britain, 
killing tremendous numbers of animals and having huge areas 
quarantined. I know the Department was reevaluating how we 
would deal with an outbreak. I would like to know how far along 
we are, and I would also be interested in your perspective of 
how we are pumping APHIS up a little bit.
    One brief example in my experience over the past year which 
you are familiar with is an outbreak of a wheat fungus in my 
area, Karnal bunt. You have had experience with it before. I 
have got to tell you that my farmers have not had a lot of 
confidence that the folks that they dealt with knew what they 
were talking about. Their questions weren't answered and the 
rules changed, and this is a quality issue with zero danger to 
human health. If it is something that does affect human health 
and the food supply, I really worry that not only the money 
that we are spending, but the reforms of the Agency and the 
priority we are giving, the seriousness with which we are 
approaching this is not as much as it should be. So I want you 
to make me feel better.
    Secretary Veneman. I will try. Thank you for that question. 
As you indicate and as I indicated before, the whole issue of 
bioterrorism, in some ways we did have a head start; 
particularly when it comes to something like foot and mouth 
disease where we begin to increase our inspection at the 
borders. We started reviewing all of our systems, looking at 
how do we prepare not only to keep the disease out, but how do 
we respond if it were to come into this country.
    One of the things that we did with regard to the outbreak 
in Great Britain is we had over 300 veterinarians and other 
scientists who went to Great Britain from the U.S. to help with 
the control of that disease. I met with the first group that 
came back, and they had been over there about a month. I had 
some of these people tell me that there is no better training 
that they have ever had outside of vet school in any continuing 
education, than what they got in the hands-on experience there. 
That is important, because we now have a whole cadre of people 
who are very much better trained in the detection, control, and 
how to deal with that disease, and I think that is a real plus.
    In addition, we have been working very closely with our 
States, the State veterinarians associations, the State 
departments of agriculture, and reaching out with our State 
partners to the local veterinarians; because as you know, if 
you get an outbreak, it is your first defense that is going to 
make the difference of whether or not you have an outbreak like 
you had in the U.K., or you have one that is contained very 
quickly like it was in France.
    And so we have really been working very, very hard with our 
State partners and with farmers and ranchers and ag groups.
    I have to tell you that the response of the agriculture 
community, particularly on the animal side pre-9/11, was 
extremely helpful in terms of what can we do to help train 
farmers and ranchers on how to protect farms and ranches. Now, 
post-9/11, that is a much broader issue. We are now looking at 
protecting the whole food supply. We are working with the whole 
food chain, from production of everything from fruits and 
vegetables, to animals to growing crops, to processing, to 
transportation, to the retail side, because all of these have 
some vulnerable areas.
    We want to help with best management practices throughout 
the food chain. We are working very closely with our partners 
at FDA and we are working very closely with the Office of 
Homeland Security as we look at the whole issue of protecting 
our food supply.
    I have been asked many times: What are you most afraid of? 
I am probably still most afraid of an intentional introduction 
of something like foot and mouth disease because, while it is 
not a human health issue, we always have to point out that it 
is such a fast moving virus that it could economically 
devastate our livestock in this country. That continues to be 
one of our biggest areas of concern.
    We have increased border inspection from the beginning of 
2001. If we are allocated through the Congress and get the 2003 
appropriation, we will have increased inspection on our borders 
by 55 percent in terms of personnel in about a 2\1/2\-year 
period of time, which we think is very significant.
    So we are being very proactive in this regard and working 
very closely, as I said, with the Office of Homeland Security 
on border issues, on food issues.
    Let me just make one comment about Karnal bunt. As you 
noted, I met Karnal bunt when it was first discovered here, 
because California was one of the first States that had the 
outbreak. I was out there. As you indicated, this is an issue 
that does not particularly pose any human health--it doesn't 
pose any human health threat whatsoever, and it is basically a 
fungus, but nevertheless it does cause problems in terms of 
international trade because so many countries do limit that. 
Basically, many of their systems were based on our own 
regulatory system pre- the discovery of Karnal bunt. But Karnal 
bunt I think underscores, as does foot and mouth disease, the 
importance of animal-plant health inspection issues, whether it 
is Med. flies or citrus canker--which I know is Mr. Putnam's 
great interest--or it is, you know, glassy wing sharpshooter, 
which we now have in California, or Karnal bunt or foot and 
mouth disease or it is various other animal or poultry 
diseases. These are such important programs, because it 
protects the agriculture for basically every one of our 
farmers.
    Mr. Thornberry. And every one of our eaters, too.
    Secretary Veneman. And our eaters. They are all food safety 
issues, but the fact of the matter is it keeps our food supply 
safe and secure. We put out a book last year called ``Food and 
Agriculture Policy: Taking Stock for a New Century.'' This was 
a written pre-9/11. There is a chapter in here talking about 
the importance of the infrastructure that protects our 
agriculture, pest and disease prevention and eradication, food 
safety, and the people that support those. So these are 
extremely important issues.
    I appreciate you and your committee recognizing how 
important these issues are to overall agriculture in this 
country.
    Mr. Thornberry. Thank you, Mr. Chairman.
    Mr. Gutknecht. The gentleman from North Carolina, Mr. 
Price.
    Mr. Price. Thank you, Mr. Chairman. I want to continue Mr. 
Thornberry's line of questioning. I appreciate the Secretary's 
responses. I would like to bring some of this down to specific 
budget numbers.
    I have a shorter question first, though, that I think will 
have a short answer, but it is an issue of major importance in 
North Carolina and other States as well. It has to do with the 
coming regulations of phosphorous standards. Nutrient 
management is a major environmental issue in North Carolina and 
elsewhere. Our 3,500-plus animal operations are going to be 
subject to the USDA-NRCS phosphorous standards this year. As 
one who is not on the Agriculture Appropriations Subcommittee, 
but nonetheless has an interest in this budget item, let me 
just ask you, does the President's budget include an increase 
in the NRCS conservation operations for the next fiscal year or 
subsequent fiscal years that would address the needs of the 
States to provide technical assistance to help farmers meet 
these major challenges? To what extent are you addressing that 
under the budget and do the budget numbers reflect that?
    Secretary Veneman. We are addressing that. We have about a 
$48 million increase allocated for that particular activity.
    But I think that you bring up an issue that is extremely 
important and that is the importance of, as I said in my 
opening statement, of having programs that assist our farmers 
and ranchers with working farm lands. Our farmers and ranchers 
are the best environmentalists there are. They need the land to 
survive. But they also need help meeting all the regulatory 
requirements. We do that through NRCS programs like the EQIP 
program, programs like the CRP program, which are partnership 
programs that help with water quality and a variety of other 
issues.
    So I think that as we move forward, it is extremely 
important that we look at various ways--we have supported that 
strongly in our policy book--ways that we can expand programs 
that help farmers and ranchers with their working farm lands 
and address the regulatory issues that they face.
    Mr. Price. I appreciate that. And let me make certain I 
understand; your answer is that an increase of $48 million is 
included in this budget for technical assistance on the 
phosphorous standard.
    Secretary Veneman. Yes.
    Mr. Price. Thank you. Let me return to the question of the 
importation of animal diseases. This is, of course, not a new 
subject. We had extensive discussions in the House last year 
about the threat of foot and mouth disease, mad cow disease, 
and how we could protect ourselves against this infestation. Of 
course, this discussion has a new dimension since September 11.
    You have proposed an increase of $75 million in pest and 
disease exclusion and monitoring programs to guard against 
foreign animal diseases.
    The fiscal year 2003 budget is also proposing a $175-
million increase to fund ongoing costs of combatting insects. 
That is presented as an alternative to funding through 
emergency requests. Is that right?
    Secretary Veneman. That is correct. The way these programs 
are allocated in the budget is that those programs that have 
initially been determined to be an emergency--I think citrus 
canker is one example--are being moved in this budget into a 
line item funding. After the first year of being an emergency, 
they are requested in the budget, as opposed to keeping them as 
an emergency.
    Mr. Price. Alright. So we have those two items that are 
directly relevant to our earlier discussion.
    Now, last year in April, you released $32 million in 
agricultural quarantine inspection, AQI, user fee funds to 
address the increased need for security and inspections, mainly 
looking at the mad cow and foot and mouth disease threats. The 
supplemental that was passed prior to 9/11. It was a subject of 
some contention here. The Agriculture Department asked for $35 
million of that supplemental. The leadership of the House 
granted only $5 million. I am not quite certain how that 
affected your operations and your planned services prior to 9/
11, but before 9/11, it is safe to say that you were seeking to 
obtain increased funds for these purposes.
    So my question is twofold. How was this changed by 9/11, 
and to what extent does your budget request reflect additional 
measures on top of 9/11? And what more would you want to say 
about the pre-9/11 efforts which, as I said, showed every sign 
last year of falling short of your desired level of support?
    Secretary Veneman. Well, I think, sir, that your question 
really does indicate how we have been dealing with these issues 
through a whole year and not just since 9/11, because we did 
reallocate some funds so we could increase border inspections 
because of our fear of foot and mouth disease particularly.
    In addition, we were seeking additional funding, as you 
said, of $35 million to enhance our overall programs. And we 
did only get a $5 million appropriation. But to some extent, 
all of that was superseded by events of September 11, followed 
by the defense supplemental where we got $328 million, and 
then, of course, the President being willing to looking at our 
budgets now for homeland security purposes.
    Things that have changed, for example, have been in 
addition to increasing border inspections. We are now even more 
urgently looking at how we increase the urgency with which we 
address our laboratory needs, whether it is the Ames, IA, 
laboratory where we assess things like mad cow disease, or what 
we do with the Plum Island facility where we do the testing for 
foot and mouth disease, or Athens, GA which is our primary 
poultry laboratory, all of our laboratories.
    Also we need to make sure that we have adequate laboratory 
capacity because, again, of intentional threats as well as the 
concern about unintentional spread of diseases. So we are 
looking at increasing border measures, new technologies, new x-
ray machines, increased research on detection, for example, of 
diseases. We think technology is going to take us a long way 
with regard to some of this.
    We are also working much more closely now, of course, 
through the Homeland Security Office coordinating with other 
agencies. We are working with all of the border agencies in 
trying to get computer systems that have interconnectivity 
between Customs and USDA, for example, so that you can have 
cross-checking and referencing through our two systems as to 
what is coming in. We believe this is an important part of 
homeland security.
    Let me make one comment also about the mad cow disease BSE, 
which, as you know, unlike foot and mouth disease, is also a 
human food safety issue. We released at the end of November a 
3-year study that was conducted by Harvard University that 
looked at the risk in this country and the likelihood of us 
getting BSE. The study showed a couple of things. One is that 
it showed that the likelihood of having it in this country was 
extremely low, the likelihood of us getting it was very low; 
and, if we were to get it, that the likelihood of it spreading 
because of the measures we have taken is very slight.
    So we have some reassurance but we are not resting on our 
laurels. We are looking at all the recommendations of that 
report to see what additional measures we can take. We are now 
in the process of getting comments on additional measures that 
we can take on things like on farm animals, where there is 
higher risk, as pointed out by Harvard.
    So we have been very proactive in looking at where 
vulnerabilities might be with us and FDA in partnership on 
things like mad cow disease, and we are going to continue to 
look at all of our food safety and our protection systems. 
These issues require constant review and evaluation, and we are 
going to continue to do that. We are going to use our research 
agencies to look at new ways of detection and new technologies. 
And we are very committed to these issues and continuing to 
enhance our structures.
    Mr. Price. Thank you, Mr. Chairman.
    Chairman Nussle [presiding]. Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman.
    Madam Secretary, I had a request from people in the 
agribusiness in Georgia to inquire of Ms. Whitman, with EPA, as 
to some kind of coordinated effort between the Department of 
Agriculture and the Environmental Protection Agency as to the 
drafting and implementing of regs pertaining to farming, 
particularly small farms which seem to get hurt the worst. How 
is that progressing, or is it?
    Secretary Veneman. Mr. Collins, I am happy to report that 
we have a very good working relationship with EPA. Governor 
Whitman has been very responsive to USDA and to the concern of 
agriculture and of farmers. She has for the first time in about 
12 years appointed an agriculture liaison in her Department, 
something that we are very pleased about; a position that Jim 
Moseley, our Deputy Secretary, once held many years ago, and I 
think he was the last one to hold it because it was never 
reappointed.
     We have worked with them on, for example, the regulations 
that I know are of concern to farmers in Georgia, because I 
have been there three times, and that is the AFO-CAFO rules. We 
have worked with them to have them slow down a little bit on 
some of these rules and let us determine whether or not they 
can be complied with by farmers.
    One of the things about regulations is we want to achieve 
the objectives of the regulations--that is, cleaner water--but 
we want to do it in a way that is achievable by the farmers. 
And so I believe that we have a very good working relationship 
with EPA. It is one we continue to keep and will continue to 
keep a very close working relationship. I also believe there is 
a real commitment to really listen to agriculture, the needs 
that agriculture has, to have workable ways to achieve the 
desired objectives.
    Mr. Collins. That is good. I am glad to hear that report. 
You mentioned you have been down to Georgia. You were there 
last fall or last August, I believe it was, for Senator 
Miller's symposium at Athens. I don't know if you heard the 
comment made by one of the leaders of a national ag group. And 
this has been a concern of mine. He stated that the problem 
with the farm bill that was before Congress at that time is 
that it is an incentive to farm the program rather than farm 
the market. And he gave an example. He had been raising wheat 
for years, because wheat was a commodity that best gave the 
best results of subsidy through the program. The Congress 
changed it. He is now raising soybeans because soybeans is the 
best program to farm for subsidy. Do you have any response to 
that?
    Secretary Veneman. Well, there are a couple of things that 
I think we have talked about in terms of the farm bill that we 
want to achieve in terms of desired outcomes. One is that it be 
as market oriented as possible. One of the things that the 1996 
bill did is that it gave farmers flexibility to plant non-
program crops on program acres, which I think has been 
something that farmers have appreciated.
    I think one of the things that I know that the committees 
are grappling with is how to create a system of loan rates that 
aren't out of balance so that it encourages the production of 
one crop over another, that those loan rates be in relative 
balance to each other so you don't get the kind of stories that 
you are talking about. There is really much more farming for 
what the market is demanding as opposed to what may be more 
beneficial under a program.
    Mr. Collins. One other area that I want to touch on and 
that is the food stamp program. I have had the question asked 
of me, particularly pertaining to elderly who may have 
something like a 500, 515, $525 a month Social Security check 
coming in--that is their only income. They are eligible for 10 
to $15 a month in food stamps. Oftentimes they will neglect the 
purchase of prescription drugs due to the fact that they have 
to have food and other living expenses out of that Social 
Security check.
    Is there any indication or anything that you are looking at 
that possibly could raise that 10 to $15 of food stamps in 
areas where people are having to make that choice?
    Secretary Veneman. This is an issue that Under Secretary 
Bost has had several discussions about, looking at how we have 
a number of people in the senior ranks who really only are 
qualified for a limited amount of food stamps. We are looking 
to see if there is a way to both streamline and make that 
program so that it is--I don't want to say more accessible, but 
more----
    Mr. Collins. Helpful.
    Secretary Veneman [continuing]. Helpful to seniors who may 
be in need of help. So we are reviewing that. I would be happy 
to have Mr. Bost visit with you about your specific concern.
    Mr. Collins. If I may, Mr. Chairman, I have one other thing 
that I would like to bring up.
    Madam Secretary, how do we answer the questions or the 
concerns that we often hear from, say, a young couple, a young 
family who is a family of four, moderate income, 35, 40, 
$45,000 a year. They have to shop for their groceries based on 
that income. But yet they are in a checkout line with an 
individual who is ahead of them who will maybe have one or two 
full baskets of groceries, and those items will be steaks, 
other foods, shrimp, lobster tails, things of that nature; they 
go through the checkout line and they pay with their debit card 
or with stamps. And yet they are having to shop based on their 
income and buying items that nowhere compare to the individual 
in front of them. How do we answer that question, ``What are 
you doing? What are you going to do about it Congressman?''
    Secretary Veneman. Well, it is a difficult issue. As you 
know, the food stamp program does not limit what you can 
purchase with food stamps as long as it meets the requirements 
of being food. So there is really no way we can police what 
people are buying with their food stamps. However, we do have 
education programs on how to make food stamp dollars go 
further: recipes, buying tips, and so forth.
    But I agree with you, it is a difficult question when you 
have people who are using food stamps and buying things that 
other people feel that they can't afford. I think to try to 
limit what people can buy with their food stamps would be a 
very difficult thing to administer and probably not something 
that we could easily control.
    Our WIC program, on the other hand, as you know, a very 
successful program and one that we put additional funds into in 
this budget, is one that is for pregnant, lactating mothers, or 
small children. That is a program where we do specify what can 
be purchased. That has been a very good program and one that we 
think has provided substantial benefits to a very vulnerable 
class of people in this country.
    Mr. Collins. I know it is a very difficult question. I have 
taped your response so that I can give it to my youngest 
daughter, because the question was not ``Congressman,'' it was 
``Dad, Daddy.'' Thank you, Madam Secretary.
    Secretary Veneman. If I just might comment one more time on 
your question, I was just told that the average monthly benefit 
for food stamps for a family of four is only about $80 a month. 
So there wouldn't be too many shopping trips that that family 
could make buying steaks and shrimp.
    Mr. Collins. We don't know how many were in the family 
where the two buggies of groceries were. I just said the person 
behind them had a family of four. Thank you.
    Chairman Nussle. Mr. Putnam.
    Mr. Putnam. Thank you, Mr. Chairman. Madam Secretary, 
following up on the tremendous amount of interest that this 
committee has shown in our food safety and exclusion inspection 
and detection mechanisms. I recognize that you were very 
involved in this issue prior to September 11; it is an issue 
that I have had a lot of conversations with your Department and 
with Health and Human Services, and that the dirty little 
secret is that the inductions of these invasive pests, plants, 
and diseases are far more frequent than any of us care to 
publicize or admit. Fortunately, because of the strength of the 
system, they are only an introduction and not an establishment. 
But occasionally, and particularly in sentinel States like 
Florida, California, Texas, New York, with high numbers of 
ports of entry, high numbers of travelers, we do have an 
establishment.
    As the world grows smaller through lower-priced air fare 
and increased interest in exotic locations to vacation, as 
international trade agreements continue to open up new markets 
and spread opportunities for these diseases, and as new 
countries that have less of an ability to control these pests 
and diseases become world trading partners, this problem is 
only going to become worse.
    So elaborate, if you would, please, on the new budget line 
item that would, in my opinion, declassify introductions like 
long horn beetle and plum pox and citrus canker and fruit fly 
from an emergency situation to an established situation, and 
what impact that has on the program and what kind of a message 
that sends to the industry.
    Secretary Veneman. Well, I think this is not a question of 
really trying to send any kind of message to the industry. It 
is really the way we budget the money and whether it comes out 
of mandatory funds as an emergency expenditure or discretionary 
funds. The administration believes that after the emergency has 
been funded in the initial year, that it should then be--if it 
is going to be an ongoing program like so many of these are, at 
least for the short term, that it should be funded as a 
discretionary ongoing program.
    Again, it is a budgeting issue and not intended to send any 
kind of message that we believe something is established or not 
established, because, clearly, our goal with most of the things 
that you talked about is absolute eradication.
    Let me just also mention the fact that, you know, we have 
also worked very closely with a number of other countries in 
these programs, these control programs, particularly countries 
like Mexico where we have worked with them on Med. flies, on 
screw-worms, where we have had facilities in some of these 
countries in a cooperative manner that have helped, I know, 
both my home State and your home State.
    In addition, one of the things that we have talked about as 
we have launched a new round of trade negotiations, is the 
ability of the developing world to have the capacity to 
participate in global trade. One of those areas where we 
believe and developing countries believe that they need 
additional assistance is in the area of infrastructure 
programs, of pest and disease prevention and eradication. I 
think as we are able to help other countries, not just the 
U.S., but I mean through international organizations like the 
FAO and so forth, that as we can help countries get these 
systems in place, we can have better global controls on the 
kinds of things that you are concerned about. I think that is 
an important goal as well.
    Mr. Putnam. On that class of multi-year pest introductions 
and these multiyear emergencies, you know I love my 
appropriators and I put a lot of faith in the system, but it is 
not--there is no room for discretion in our commitment to 
eradicate these diseases. And so, regardless of which line item 
we budget for it, do I have your commitment that, by hook or by 
crook, we will maintain our commitment to eradicate these 
diseases like citrus canker, whether it comes out of a 
mandatory account or discretionary account?
    Secretary Veneman. Mr. Putnam, I think you know me well 
enough to know that I am absolutely committed to these 
programs. As I have said over and over again, these programs 
are so critical to the long-term health of our agriculture 
sector, whether it is citrus sanctions or it is the threat of 
foot and mouth disease or it is any kind of poultry disease or 
it is Karnal bunt. There are so many of these different issues, 
and we are absolutely committed to make sure that these 
diseases don't become established because it undermines our 
productivity, our agriculture and our farmers.
    Mr. Putnam. I appreciate your commitment. I look forward to 
working with you on ways that we can strengthen this and 
improve coordination among all the agencies involved. Thank 
you, Mr. Chairman.
    Chairman Nussle. Thank you. Mr. Brown.
    Mr. Brown. Thank you for coming and sharing this 
information with us today. I am from South Carolina. It is not 
a big farming State, but we do have tobacco and peaches and 
some other products. Having heard some of the things that were 
presented to us today about the amount of subsidies the Federal 
Government is actually contributing to the whole process, do 
you ever foresee this as a market-driven system?
    Secretary Veneman. Well, I certainly think that has been 
the goal. It was the goal in the 1996 bill in trying to 
transition. Unfortunately, in the first couple of years of the 
1996 bill, farmers suffered from a variety of low prices and 
other conditions which created the unfortunate circumstances of 
having to do ad hoc supplementals. As a result, I think that 
now the programs that are being looked at in this farm bill are 
looking at trying to give farmers some certainty. On the other 
hand, I think it is very important that we make our ramps and 
our safety nets as market oriented as possible.
    Secondly, it is extremely important that we continue to 
expand market opportunities, whether it is international trade 
or it is new uses for agriculture products here at home and 
expansion of marketing opportunities. But as I said previously, 
any farmer that I talk to would much prefer to get their income 
from the marketplace than from the government.
    So I think that the objective that we should have is to 
move toward programs that, while they protect our farmers 
against unforeseen risks, that we should try to make them as 
market oriented as possible, and that would be the goal. We 
have had crop insurance reform. We have crop insurance now that 
is available to many more people to help them manage risks. We 
have the proposal that the administration has supported for 
farm savings accounts, another risk management tool for farmers 
and ranchers.
    So we believe that we ought to be moving in the direction 
of tools that help farmers manage risks and programs that are 
as market oriented as possible.
    Chairman Nussle. Any other members?
    Mr. Brown. Mr. Chairman, just a follow-up. I also would 
like to thank you for your assistance to the farmers in South 
Carolina for the drought assistance. I just want to thank you 
for that.
    Secretary Veneman. Thank you, sir.
    Chairman Nussle. Mr. Collins, do you have further inquiry?
    Mr. Collins. Yes, sir. I would like to ask a couple of 
other questions, if I may. Going back to the dependence by the 
farmer on the government, on the farm bill, I think one of the 
most concerning questions I had asked to me about the farm by--
was recently at a salt water conservation workshop at Calgary 
Gardens in Georgia. A gentleman came up and said, 
``Congressman, are you all going to pass the farm bill in time 
for us to plant?'' And I commented back, ``Well, we are going 
to pass the farm bill, but I don't know how soon.'' He said, 
``well, we need a farm bill to be able to go to the bank to get 
the funding to plant.''
    Now, you know other businesses--and farming is business, 
many of them small businesses--but other small businesses have 
to have the wherewithal to enter on their own, not some 
guarantee from the government. What are we going to do about a 
situation like that where we have created so much dependency 
that the farmers have to have a farm bill to go to the bank to 
get money to plant?
    Secretary Veneman. Well, I would refer to the answer that I 
just made to the last question, and that is that, as I 
indicated, we should be looking at programs that are as market 
oriented as possible. As I said, farmers would rather get their 
income from the marketplace, and to the extent we can create 
programs that allow them to do that, that allows them to manage 
risks through risk management tools, that is certainly a goal.
    But I understand what you are saying. As I said, I think 
farmers would rather get their income from the marketplace.
    Mr. Collins. I understand that. I understand what you said. 
But I also understood the previous question from the gentleman 
from South Carolina was, do you ever think we will reach a 
point where we will have marketplace performance? He never 
received a yes or no. He received the same answer that I 
received here. Marketplace farming, where farmers can stand on 
their own as all other small businesses in this country do, is 
much in need. I hope that some day you will work toward that.
    One other follow-up question, because we are running close 
on time, I know you probably have a schedule, too. Do you think 
sanctions work? Oftentimes we use sanctions in agricultural 
products as part of a sanction against other countries; naming 
one in particular is Cuba. Do you think sanctions actually work 
to the benefit that they are intended to? And if yes, give me 
the reason.
    Secretary Veneman. Well, sanctions are a very difficult 
question. In many of the sanctions that have been utilized 
around the world, things like food have been excluded. Now, 
Cuba has been opened up to some extent as a result of 
legislation that was passed, I think, a year-and-a-half or so 
ago. We have now seen product moving into Cuba for the first 
time in the last few months. In fact, I think we just had 
additional sales this past week.
    The programs that we have do not allow product to move with 
government assistance, but certainly commercial sales are 
allowed at this point to Cuba. So clearly there are difficult 
issues regarding sanctions. The President has been very clear 
on the fact that he doesn't want any new unilateral sanctions 
that would impact agriculture.
    Mr. Collins. Does the President also support the relaxing 
of sanctions to support agriculture, whether it be a government 
subsidy or what?
    Secretary Veneman. I think that depends on the 
circumstance.
    Mr. Collins. You just said that the President--the previous 
answer to that.
    Secretary Veneman. I said he did not support any new 
unilateral sanctions with regard to food.
    Mr. Collins. OK. No new--but no relaxing of old, depending 
on circumstance.
    Secretary Veneman. It depends on the circumstance.
    Mr. Collins. Well, that is a good middle-of-the-road 
answer. That is OK. No harm done. Thank you.
    Chairman Nussle. Thank you. I think part of the challenge 
here, of course, is that these policies, for better or for 
worse, are not made in a vacuum. Most of my farmers would agree 
that receiving the kind of support that they are getting from 
the government is appreciated, but they would certainly rather 
go to the marketplace to get price for their product.
    But as long as we have a system in the world where we have 
countries that are willing to put in the subsidies that they 
have demonstrated a willingness to put in, we have a choice 
that we have to make. And with the prices that we have seen for 
commodities overall, it has been a tough choice but a choice 
that we have been gladly willing to make.
    The challenge we have got is to rein that in, make it 
responsible within a balanced budget. That is why we are so--I 
think there is so much effort that I want to see us make toward 
making sure that this farm bill stays within the budget fences 
that have been outlined. So while we are all concerned about 
the future of the commodities systems, and I know this 
administration and past administrations have been willing to 
try to negotiate for a better subsidy deal internationally, we 
can't forget our responsibility to food security in this 
country in the meantime.
    So we are in a difficult situation and not in a vacuum. So 
we have quite a bit of work to do.
    Madam Secretary, your testimony is greatly appreciated 
today. I personally look forward to working with you on this 
whole farm bill debate that we have in conference right now. I 
agree on timing. We need to give farmers a decision here 
quickly. It is unacceptable to go through yet another year of 
uncertainty. When we know that there are a number of other 
economic pressures out there and with trade being in a 
difficult situation as it is, to not have a farm bill I think 
would be would be irresponsible; and certainly a farm bill 
within the budget fences that have been provided, which have 
been very generous.
    So I look forward to working with you to put pressure on 
this conference to get their work done in a responsible and 
timely fashion. With that, unless there is any other business, 
do you have any final comments you would like to make, Madam 
Secretary?
    Secretary Veneman. I, too, look forward to working with you 
and appreciate the fact that you will be part of the 
conference. We will work very hard to try to do everything we 
can to make sure we get a farm bill as quickly as possible.
    Chairman Nussle. Thank you. If there is nothing else to 
come before the committee, we stand adjourned.
    [Whereupon, at 4:02 p.m., the committee was adjourned.]

                                
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