[Senate Hearing 107-254] [From the U.S. Government Publishing Office] S. Hrg. 107-254 AGRICULTURAL AND RURAL COMMUNITY ISSUES ======================================================================= HEARING before the COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY UNITED STATES SENATE ONE HUNDRED SEVENTH CONGRESS FIRST SESSION __________ MARCH 24, 2001 __________ Printed for the use of the Committee on Agriculture, Nutrition, and Forestry Available via the World Wide Web: http://www.agriculture.senate.gov U.S. GOVERNMENT PRINTING OFFICE 77-324 PDF WASHINGTON : 2002 ______________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001 COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY RICHARD G. LUGAR, Indiana, Chairman JESSE HELMS, North Carolina TOM HARKIN, Iowa THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota PAT ROBERTS, Kansas THOMAS A. DASCHLE, South Dakota PETER G. FITZGERALD, Illinois MAX BAUCUS, Montana CRAIG THOMAS, Wyoming BLANCHE L. LINCOLN, Arkansas WAYNE ALLARD, Colorado ZELL MILLER, Georgia TIM HUTCHINSON, Arkansas DEBBIE A. STABENOW, Michigan MICHEAL D. CRAPO, Idaho BEN NELSON, Nebraska MARK DAYTON, Minnesota Keith Luse, Staff Director David L. Johnson, Chief Counsel Robert E. Sturm, Chief Clerk Mark Halverson, Staff Director for the Minority (ii) C O N T E N T S ---------- Page Hearing(s): Agricultural and Rural Community Issues, Lewis, Iowa............. 01 Agricultural and Rural Community Issues, Spencer, Iowa........... 111 ---------- Saturday March 24, 2001, Lewis, Iowa STATEMENTS PRESENTED BY SENATORS Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee on Agriculture, Nutrition, and Forestry.............. 01 ---------- WITNESSES Askew, John, President, Iowa Soybean Association................. 07 Aust, Erwin, Shenandoah, Iowa.................................... 33 Bentley, Rod, President of Pottawattamie County Cattlemen's Association.................................................... 36 Brownlee, Adair County........................................... 37 Carney, Sam, Vice President, Iowa Pork Producers Association..... 11 Duffy, Micheal, Professor of Economics, Iowa State University.... 03 Fox Ridge Farms, Carson, Iowa.................................... 36 Frederiksen, Shirley, Golden Hills Resource Conservation and Development District........................................... 09 Hanson, Jim, New Market, Iowa.................................... 40 Hopkins, Gayl.................................................... 27 Jorgensen, Dan, Farmer, Audubon, Iowa............................ 34 Lehman, Aaron Heley, Iowa Farmers Union.......................... 13 Morgan, Dan, Farmer, Corning, Iowa............................... 39 O'Brien, Denise, Atlantic, Iowa.................................. 23 Ortner, Bill, Farmer, Danbury, Iowa.............................. 38 Shulte, Joyce, Southwest Community College....................... 30 Swanson, Harold.................................................. 28 Williams, David, Farmer and Wallace Foundation Learning Center, Page County, Iowa.............................................. 05 Zellmer, Alan, Farmer/Producer................................... 30 ---------- APPENDIX Prepared Statements: Harkin, Hon. Tom............................................. 44 Askew, John.................................................. 69 Aust, Erwin.................................................. 93 Carney, Sam.................................................. 78 Duffy, Micheal............................................... 45 Frederiksen, Shirley......................................... 76 Lehman, Aaron Heley.......................................... 83 O'Brien, Denise.............................................. 87 Shulte, Joyce................................................ 92 Swanson, Harold.............................................. 91 Williams, David.............................................. 64 Document(s) Submitted for the Record: American Coalition for Ethanol............................... 109 Center for Rural Affairs..................................... 105 Iowa Pork Producers Association News Bulletin................ 106 McGiven, Ed, EJM Farms, Inc.................................. 103 Oswald, Stanley, GMO, Starlink, Surplus Corn................. 107 Vilsack, Thomas, Governor of Iowa............................ 108 Williams, David, Statement Given to the National Research, Extension, Education and Economics Advisory Board.......... 96 Watershed Information Sheet.................................. 101 ---------- Saturday, March 24, 2001, Spencer, Iowa STATEMENTS PRESENTED BY SENATORS Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee on Agriculture, Nutrition, and Froestry.............. 111 ---------- WITNESSES Blundall, Joan, Executive Director of the Seasons Center for Community Mental Health........................................ 117 Hamilton, Mark H., Positively Iowa............................... 122 Harl, Neil E., Professor of Economics, Iowa State University..... 114 Mason, Don, President-Elect of the Iowa Corn Growers Association. 119 Sand, Duane, Iowa Natural Heritage Foundation of Des Moines...... 124 Sundblad, Phil, Iowa Farm Bureau Federation...................... 126 ---------- APPENDIX Prepared Statements: Harkin, Hon. Tom............................................. 154 Blundall, Joan............................................... 175 Hamilton, Mark H............................................. 182 Harl, Neil E................................................. 155 Mason, Don................................................... 178 Sand, Duane.................................................. 193 Sundblad, Phil............................................... 195 Document(s) Submitted for the Record: Bernhard, David.............................................. 211 Biederman, Bruce............................................. 204 Jensen, Carl................................................. 201 Naylor, George............................................... 212 Sexton, Keith................................................ 205 Sokolowsi, Lori.............................................. 214 Tigner, Ron.................................................. 203 Vilsack, Thomas.............................................. 200 HEARING ON AGRICULTURAL AND RURAL COMMUNITY ISSUES ---------- SATURDAY, MARCH 24, 2001, LEWIS, IOWA U.S. Senate, Committee on Agriculture, Nutrition, and Forestry, Washington, DC. The hearing was held, pursuant to notice, at 9 a.m., at the Wallace Foundation Learning Center, Lewis, Iowa, Senator Tom Harkin, ranking member on the committee, presiding. Present or submitting a statement: Hon. Tom Harkin. STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA, RANKING MEMBER, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY Senator Harkin. Thank you very much. The meeting of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry will come to order. I thank you all for being here. I apologize for being just a little bit late, a little bit of headwinds out there this morning. This field hearing on agriculture and rural community issues at the Wallace Foundation Learning Center is the first in a series of hearings that we will be having here in Iowa, in the Midwest, and other parts of the country, in order to get ready for the rewrite of the Farm bill, which expires next year. Some of the work will be done this year. We will be having hearings, getting input, advice and suggestions from different commodity groups and individuals around the country. There was some thought that we might do a farm bill this year, but I do not think that will happen. Senator Lugar from Indiana is the ranking Minority Member on the Committee. As you know, we have a unique situation in the Senate where it is 50-50, but Senator Lugar and I have a good relationship. We are working together to establish an extensive hearing record as to what we ought to be doing in the next Farm bill. We want to cover all aspects of it. This is the first outline. I am going to make a short opening statement and I then am going to recognize the panel of witnesses. I am going to ask them to keep their comments relatively short, 5 to 10 minutes. Their statements will all be made a part of the official record, the hearing record. Then I would like to open it to questions from the audience. We have an official reporter. I would ask you to take the mic, state your name, and if it is a really complicated name like Smith, just tell her so that the reporter can get the accurate name down for the record. I would like to have a fairly open discussion and suggestions from any of you who are here. First, I am told that we have a couple of other public servants here: Bob Anderson, who is a Page County supervisor is here. Please stand and be recognized. Also in attendance is Bob Anderson, Page County supervisor, and Bob Brown Union County supervisor. Bob Brown, thank you for being here. Now, again, are there any other elected officials that I should recognize that we just did not catch when you came in? Clyde Jones, Montgomery County supervisor. Anyone else? OK. I have one other person I will recognize. Secretary of Agriculture Patty Judge could not be here, so she has a staff person here. Mitch Gross who is with Secretary Judge's office is here. I do not know where he is. I will just make a couple of opening statements, and we will sit down for our panel. I am pleased to be holding two hearings in Iowa today--one here, and then another one this afternoon in Spencer--of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry. The testimony from our panelists and from the audience will become a part of the official hearing record. Your comments, ideas, and recommendations will be a great help to me and my colleagues as we work to write new legislation and we hope improve programs affecting agriculture and rural communities. Let me also introduce my staff who is here. On my agriculture committee staff, Mark Halverson, who is my chief of staff on our side, on the Senate Ag Committee, and next to him is Alison Fox. Alison is also on our ag committee. This is her second visit to the Wallace Center here. She was here last summer. Some of you may remember. Also someone who worked on my staff for a long time and for the last 8 years has been the state director of our Farm Service Agency. She is back on my staff doing rural development work, Ellen Huntoon. Ellen is here. A lot of you know Ellen. She has done a great job in rural development and agriculture. Also on my Iowa staff is John Moreland who is working with agriculture and rural development issues as well. John Moreland is back there, and next to him, Pam Ringleb. Pam, hold up your hand so everyone knows you. Those are my staf. If you need to get anything to me as we run out of here to try to get up to Spencer, just speak to them. I am sorry that Congressman Leonard Boswell could not be here; but his staff member, Sally Bowzer is here. Sally, where are you? I just saw Leonard the other day, and he knew about the hearing. He could not make it. As you know, he is one of our great, strong supporters on the House side. Farm families and rural communities in Iowa and across our nation need new directions in Federal policies. They have not shared in our nation's prosperity. Although Freedom to Farm has positive features, it had serious shortcomings that I think are obvious. We have got to learn from this experience and make necessary improvements. We have got to start by restoring a built-in, dependable system of farm income protection that does not require annual emergency appropriation. We must also remember that farmers are the foremost stewards of our nation's natural resources for future generations. We should strengthen our present conservation programs and adopt new ones to support both farm income and conservation. I have authored legislation to create a new, wholly voluntary program of incentive payments for conservation practices on land in agriculture production. That approach-- improving both farm income and conservation--should be at the heart of the next Farm bill. To meet these challenges, the next Farm bill must address the broad range of farm and rural issues. We have got to do more to promote new income and marketing opportunities--whether that is through value-added processing cooperatives, creating new products through biotechnology, developing niche and direct marketing, and, of course, overseas trading. I see tremendous potential for farm income, jobs, and economic growth through clean, renewable energy from farms: ethanol, biodiesel, biomass, wind power, and even down the way, hydrogen fuel cells. We must also ensure that agricultural markets are fair, open, and competitive, and transparent. We cannot have healthy rural communities unless both farms and small towns are doing well. We have to do more in the next Farm bill to revitalize economics and improve quality of life in rural communities. That includes support for education, health care, telecommunications, closing the digital divide, water supplies, transportation, as well as access to investment capital for rural businesses. That completes my opening statement. I thank you all for being here this morning. I will now turn to our panel. Our first witness is Dr. Michael Duffy. I will just go down the line. Dr. Michael Duffy, professor of economics at Iowa State University, Dr. Duffy. Oh, excuse me, before you start, I am sorry, just a minute, Mike. I have got a letter here from Governor Vilsack that I want to be made a part of the record, dated yesterday. The Governor states, ``I encourage you to develop the next Farm bill to help farmers produce conservation commodities, improve their bottom line, and renew the public commitment to agriculture.'' Basically he focuses on conservation, but I just want to make that a part of the record. Thank you. [The prepared statement of Senator Harkin can be found in the appendix on page 44.] STATEMENT OF MICHAEL DUFFY, PROFESSOR OF ECONOMICS, IOWA STATE UNIVERSITY Mr. Duffy. Good morning. I appreciate the opportunity to be here. As an extension comment, you know that five minutes is going to be very hard for me, so I will try to talk as fast as I can. What I would like to do is cover two areas. One is the current situation, as I see it, in Iowa agriculture and to give you what I think are some issues that should be considered in the new Farm bill. First issue with respect to the current situation is with respect to our income. We had the highest net income in 1996. Since then it has dropped every year. In 1999, it was 1.45 billion. In 2000, it appears that it will be up, although this is still preliminary, but I think it is very important for us to realize that the government payments have been the backbone of that net farm income. In the 1990's, net government payments averaged 55 percent of the net, and in 2000, it appears as they will be very close. Second issue that I think is important with respect to the current situation is in our agronomics. We have a very narrow crop and income base in Iowa. Ninety-two percent of the cropland is devoted to just two crops. Two-thirds of the entire state is covered with just two crops, corn and soybeans. Eighty-nine percent of the cash sales comes from corn, beans, hogs, or cattle. This lack of diversity creates problems, pest problems, environmental problems, and so forth. Also in the agronomic area, we have seen a change in production practices that have resulted in more yields, increased sales, but less income for the farmers. Net income as a percent of the gross in the 1950's was 35 percent. Today it is 20 percent, and if we take the government payments out, it drops to 12 percent. That means farms must have three times the sales just to stay even. It is important to note that size and efficiency should not be confused. The cost per bushel dissipates. The lowest cost is about three to six hundred acres. Farms are getting bigger because they have to earn an income, not because they are more efficient. Turn now to the demographics that I think are also important to the current situation. The average age of farmers is 52.4 years old, which is up a full 3 years from just a decade earlier. Today we have more farmers over the age of 65, Twenty-two percent, than we do under the age of 35, at 10 percent. We have more nonfarm rural residents than we do farmers, and I think this is a source of--can be a source of conflict, but I think it could also be a source of benefits, if we choose to move that way. Changing structure of agriculture is another area that we are all familiar with, but I think it is important for us to realize 50 percent of the farmers in Iowa had sales of less than 50,000. Another 37 percent had sales between 50 and 150,000, which means that 87 percent of the farms in Iowa are small farms by the USDA's definition. What is happening now is that we have a few very large farms and a lot of small farms that, in my opinion, we are losing the heart of what made Iowa what it is, and that is the average family size farm. This is happening in all sectors, including processing, retailing, and so forth. Another area is the environment. We continue to have odor, water, soil erosion, a series of problems in spite of the record government payments. What we need to do is address some of these issues, recognize that the current system is seriously flawed. I would like to move on then to some issues that I think need to be considered for the Farm bill. First of these is energy. We have had a serious impact on the cost of production. My estimates for Iowa is that it was a 6-percent increase in 2000 to 2001 for corn, and I concur with what you said, Senator Harkin, about we need to continue to look at alternative uses, alternative crops. We need to look at how on our farms we can make ourselves self-supporting in energy, and I think that what we need to do is to make sure that we continue to look at energy as we move into the future, because it is going to be even more important and we are not going to go back to where we were with the cheap fuel. Second major issue that I think needs to be addressed in the Farm bill is a change in the definition of a farm. The $1,000 of sales is antiquated, and I feel that it hurts everyone. In Iowa, 10 percent of our farms had sales of less than ten--or less than $1,000, and I think that is just ridiculous to call them farms, and then we have programs that are directed and, as I said, I think that it hurts everyone. Payment policies, I think we need to start looking at programs that are going to pay to support people, not commodities. To that end, I support the Conservation Security Act that you put forward. I have also submitted into the record a proposal, a modest proposal that we have, looking at some type of a guaranteed minimum wage for farmers. Regardless, we need to do something to support people and not just commodities. I am very concerned that what we are doing is bickering, and we are going to end up going to the lowest common denominator and not seeing any real changes. I am about out of time, so I will talk fast. Level of payments, I think it is extremely important for us to look at. That 55 percent has been factored into rents, land values, and even the infrastructure. If we go cold turkey, we are going to have a lot of problems, so whatever we do, I hope we proceed with caution. I would also like to encourage you to continue to look at programs for small and beginning farmers, but do not just throw money at them. Look at alternatives and options that concentrate on their resources. For too long we have tried to get rid of people, and now we need to try to help people in agriculture. A lot of people say this is inevitable, but nothing is. We just have to decide what type of agriculture we want and to go for it. More than just raw products should be in our future. Thank you. [The prepared statement of Mr. Duffy can be found in the appendix on page 45.] Senator Harkin. Thank you very much, Mr. Duffy. Great statement. Thank you. Next we will have David Williams, a long-time friend and conservationist and farmer from Villisca, Iowa. Dave. STATEMENT OF DAVID WILLIAMS, FARMER AND WALLACE FOUNDATION LEARNING CENTER, PAGE COUNTY, IOWA Mr. Williams. Thank you. Good morning. Welcome to the Wallace Foundation for Rural Research and Development. I am David Williams, a family farmer from rural Page County. Senator Harkin, I am pleased to have you come to Southwest Iowa to visit us here at the Wallace Foundation. We are proud to host this event here today. For your information, for those of you who have not been here, we have 1,200 members in 19 counties of Southwest Iowa. We house the extension offices here and some other organizations. We are very unique in that we have been able to pull this together to house this in a rural area. Some of our goals are not just research, but also outreach and education and site- specific research that you will see on this farm, so we are very proud of this. I would like to address the 2002 Farm bill and the current Freedom to Farm Bill. The Freedom to Farm Bill, to my way of thinking, from the beginning was a--written by and for corporate agriculture. Simply put, allowing agriculture producers to plant unlimited acres of corn and soybeans without an acreage or bushel limit was a disaster that previous history revealed. The benefits of the Freedom to Farm Bill to corporate agriculture include increased sales of seed, fertilizer, chemicals, and the lower dollar grain prices to the multinational grain traders and lower prices that gave easy access to the grain and livestock producers. Corporate agriculture has welcomed and profited enormously by large supplies of cheap grain. Feed grain, excuse me--corn, soybeans, and wheat--in the Midwest have sold at a price below the cost of production and has allowed the integrators of industrialized agriculture to expand at a rapid rate. The expansion of the large corporate livestock operations has been especially evident in the huge expansion of megaswine farms. There is no way family farmers can survive producing grain and livestock below the cost of production. It is obvious with 50 percent of the total farm income coming from government payments that Freedom to Farm has been a dismal failure. Here are some ideas I would submit for the 2002 Farm bill: Paying farmers who practice sustainable conservation practices would be a first step in protecting our soil and water quality. Monetary incentives would go to farmers who installed specific conservation practices. Those farmers not adopting those government conservation practices would not receive government payments. Paying farmers to manage the resource base will actually do more to improve their income than the current system. Senator Harkin, your Conservation Security Act has really brought that to the attention. We need to target farm programs that benefit medium-sized farms. These are the farms most at risk financially. Failure to do this will be the demise of family farms. The current farm programs follows the rule that the bigger you get, the more money you will receive. Thus, we subsidize megafarms, bringing higher cash rents and higher land prices. We should have a safety net that puts a floor under grain prices. A well-planned, on-the-farm grain reserve would also benefit the farmer and be a cushion for a crop failure. There are other parts of the safety net that I did not mention that I think are important. We need to close payment limitation loopholes. We need to focus the bulk of the support on each farmer's first $250,000 of production. I obtained from the Page County NRCS office the total dollar amount requested for conservation construction practices that are on file for cost-share in our county. We have a county that had a very high percentage of conservation, and we have a 3- to 4-year waiting list. Conservation practices moneys requested in our county for Federal and State government amounts to $4.7 million. Matching that 4.7 million means that we are putting $9.4 million of this conservation in our county in land, and that is to backlog the conservation practices in Page County. Some other comments: Encourage and provide loans to producers who come together in a cooperative to add value to a value-added product. Here in the Wallace Foundation we have got three different groups that we work with on livestock and put together a value-added grain. Pass the Agriculture Revitalization and Enterprise Act. I do not have that with me. It is in the packet, Senator Harkin. It is called ACRE. I will see that you get a copy of that. Enforce mandatory price reporting. That has been--kind of held up, and we need to see that that is happening. Scrutinize and enforce antitrust activities of the food system. This is critical to the independent producers, and I mean that, critical. It seems like we see three, four, five major food suppliers that are trying to control, especially the red meats and grains. We need to revisit the pork checkoff vote overturned by the current secretary of agriculture. In summary, we are at a serious crossroad in the industrialization of agriculture versus the independent farmer. Our farm organizations, commodity groups, our land-grant universities, and our state and Federal Government should draw a line in the sand and decide whether they are going to support independent farmers or corporate agriculture. These groups cannot continue to straddle the fence if independent farmers are to remain viable. To quote Aldo Leopold, this is something in my life that has been a part of my thinking. In fact, Mike and I serve on the Leopold Board at Iowa State. This is a quote that comes from his part of the land ethic, and this is the quote: ``We abuse land because we regard it as a commodity belonging to us. When we see land as a community to which we belong, we may begin to use it with love and respect.'' To me, this speaks to the sustainability of the land and family farms. I appreciate the opportunity to share my ideas and thoughts with Senator Harkin and the Senate Agriculture Committee. [The prepared statement of Mr. Williams can be found in the appendix on page 64.] Senator Harkin. Thank you very much, Dave. Senator Harkin. Next, we will go to John Askew, president of the Iowa Soybean Association. Good to see you on home turf here, John. STATEMENT OF JOHN ASKEW, PRESIDENT, IOWA SOYBEAN ASSOCIATION Mr. Askew. Good to see you too. Senator Harkin. Well, thanks. Mr. Askew. Good morning. My name is John Askew. I am a soybean producer and family farmer from Fremont County, Iowa, and currently serve as president of the Iowa Soybean Association. On behalf of the members of the Iowa Soybean Association, the largest state row-crop association in the United States, I wish to thank the Senate Agriculture, Nutrition, and Forestry Committee and Senator Harkin for the opportunity to testify today on the important topic of the future of agriculture in the United States. As we rapidly approach the 2002 Farm bill, it is important that Iowa soybean producers provide input on many of the critical issues facing agriculture. Iowa is a leader in soybean and agricultural production. The future direction of the agricultural policy is critical for a state such as ours. As a future of agriculture goes in Iowa, so too does the future of our state. Many important decisions must soon be made regarding U.S. production agriculture. These decisions will cover a broad spectrum of issues, from current domestic farm programs to expanded trade opportunities and development. Iowa soybean producers understand that these decisions will have significant budget impacts. We hope these important budget decisions will carefully balance the social and economic needs of the farmer and rural communities and the need of the public for a wholesome, safe, and plentiful food supply. From the perspective of Iowa soybean producers, long-term agricultural policy and budget considerations surrounding the upcoming 2002 Farm bill should focus on the following key areas: First, agricultural policy should focus on enhancing the viability and the long-term global competitiveness of Iowa and U.S. producers. To this end, Congress and the administration should meet the unfulfilled promises of the 1996 FAIR Act. Such promises include the expansion of trade opportunities and markets, policies to increase domestic demand and utilization of agricultural products, increased funding for agricultural research, improvements in river infrastructure, and meaningful tax and regulatory reform. If these promises had been kept, the large government outlays that have been required in recent years to support farm income may not have been needed. Congress must complete the unfinished agenda and provide support to agriculture in the interim. We must address expanding our infrastructure capabilities. The development of local food systems and value-added processing and marketing systems is critical for the continued viability of rural America. Additionally, the establishment of a national energy policy which addresses increased opportunities for biofuel use should be a top priority. Additionally, any decision on the upcoming farm bill should address and work toward improving risk-management tools and subsidies for crop insurance. As an organization, we also believe that efforts underway to establish standards for financial and production systems are critically important. We are convinced that helping Iowa and U.S. farmers gain access to and understand the necessary information regarding their farming operations is a key to leveling the playing field. Second, we believe that soybeans should be treated equitably under the next Farm bill. Agricultural policy decisions must provide improved safety nets for producers. Policy should include the continuation of planting flexibility, maintenance of the current--current marketing loan rates and the loan deficiency payment structure, and the establishment of a counter-cyclical program. Specifically, current loan rate ceilings should be set as floors, including the soybean loan rate of 5.26 per bushel. A third and very important focus of upcoming farm bill decisions should involve land conservation practices and the environmental performance of agriculture. As the front-line stewards of the land, producers are uniquely positioned to work toward increased and improved environmental performance. We support Senator Harkin's leadership in proposing the Conservation Security Act. The Iowa Soybean Association is developing a voluntary, systems-based approach to improved environmental performance called Certified Environmental Management Systems for Agriculture, or CEMSA. We believe CEMSA could be a complimentary ingredient of future conservation programs. In conclusion, the Iowa soybean producers very much appreciate the opportunity to provide these comments. We wish the committee well in important decisions it must work on in the future of American agriculture. We are committed to working together in the 2002 Farm bill debate to develop the best possible farm policy for all Americans. Again, I thank the committee for its time and consideration today. [The prepared statement of Mr. Askew can be found in the appendix on page 69.] Senator Harkin. Thank you very much, John, on behalf of the Iowa Soybean Association. Senator Harkin. Next is Shirley Frederiksen, Golden Hills Resource Conservation and Development. STATEMENT OF SHIRLEY FREDERIKSEN, GOLDEN HILLS RESOURCE CONSERVATION AND DEVELOPMENT DISTRICT Ms. Frederiksen. Thank you, Senator Harkin, for allowing me to speak at the Senate Agriculture Committee hearing. Resource Conservation and Development is a program administered by USDA/National Resource Conservation Service providing technical assistance to private nonprofit organizations. Golden Hills RC&D is a nonprofit organization that encompasses eight counties in Southwest Iowa. The goals of the Resource Conservation and Development board focus on conserving the Loess Hills, strengthening the agriculture economy, developing small, rural businesses, increasing tourism, and assisting underserved clients. The board's vision is to strengthen and diversify the economy of rural communities in Southwest Iowa. I would like to focus today on some current projects of the Golden Hills RC&D board. First, the Loess Hills and tourism. The Loess Hills National Scenic Byway is a system of more than 220 miles of county and state roads through the Loess Hills, consisting of a main route and excursion loops. This tourism project is an excellent example of rural development for the 18 communities along the byway. Travelers stay at bed and breakfasts, stop at the old-fashioned soda fountains, eat at pie parlors and restaurants, and visit the local artisans. Scenic America, the nation's leading scenic byway organization, named the Loess Hills Scenic Byway one of the ten most outstanding scenic byways in the country. Each year more than one million people travel the Loess Hills Scenic Byway and visit its attractions. Another focus is the small business development. Prairie restoration in the Loess Hills is a project providing cost- share to producers clearing invasive species from their native prairies so they can graze their cattle. Over 99 percent of Iowa's prairies are gone. The Loess Hills contain the majority of undisturbed prairie remnants and comprise the last intact prairie system in Iowa. The prairie restoration project has spurred many entrepreneurs to diversify their existing, traditional agricultural businesses. Some of the developing businesses that they have used as a sideline include: Tree-shearing, native grass seed collection, native grass seeding for hire, prescribed burn business, and other cedar utilization businesses, such as mulch and biochips. Strengthening agriculture is the third area I would like to discuss. Developing our alternative agriculture and local food systems is another developing project. One of the efforts underway by the Golden Hills RC&D board is to revive the grape and wine industry in Western Iowa. At one time Iowa boasted more than 6,000 acres of vineyards, 3,000 of which were in the Loess Hills. This distinct--The distinctive flavor of the fruit grown in this soil made the Loess Hills a perfect location for vineyards and wineries. For growers, the income potential in today's market with conservative figures is approximately $1,800 net per acre for a fully mature vineyard. Adding value to that grape by producing wine increases the profit potential to between $7,000 to $10,000 per acre. Of course, that is using conservative figures, since I am a conservative person. Golden Hills is very proud of the work that they have accomplished over the past 20 years, and with access to resources, project opportunities yet to be explored include: First, local food systems, integrating more locally produced food into the restaurants and food-service industry in Western Iowa. Second, alternative energy. There are a couple of ways to increase profits, and I hope Mr. Duffy will agree with these. One is to increase the prices of products, and two is to decrease purchased inputs. Utilizing alternative energy reduces input costs, thereby increasing net profits for farmers and businesses alike. Golden Hills RC&D would like to investigate wind and solar energy and the use of biomass as alternative energy sources for rural America. Third, is ag tourism. We have a wonderful traditional agricultural system here in Iowa, and by sharing that ag experience with visitors to the state, we can increase our profits again through tourism. In the next 20 years, we look forward to leading in the development of these projects and others. Thank you for the support of the RC&D program, because I know Senator Harkin is a large supporter of that, and for considering a strong rural development component in the upcoming farm bill. [The prepared statement of Ms. Frederiksen can be found in the appendix on page 76.] Senator Harkin. Thank you very much. Appreciate it. Thank you. Senator Harkin. Next, we have Sam Carney who is the vice president of the Iowa Pork Producers Association. Welcome. STATEMENT OF SAM CARNEY, VICE PRESIDENT, IOWA PORK PRODUCERS ASSOCIATION Mr. Carney. Thank you, Mr. Harkin. I am pleased to testify today on farm commodity programs and other policies that will ultimately become part of the next Farm bill. I am Sam Carney, and I produce hogs, cattle, corn, and soybeans with my brother and my son. Our farm supports these three families near Adair, Iowa. I am also vice president of Producer Services for the Iowa Pork Producers Association. My comments today will focus primarily on livestock components of the next Farm bill. While much of the discussion and debate on the next Farm bill will focus on grain production, please keep in mind a substantial portion of Iowa's corn and soybean crops are fed to livestock and poultry. The pork industry represents a major value-added activity in rural America and major contributor to the overall U.S. economy. While the issue at hand today is the future of commodity programs, I believe the next Farm bill must also focus on conservation, trade, market competitiveness, environmental, food-safety, and biosecurity issues. Agriculture is moving from an unregulated to a regulated industry in most aspects of our farming operation. Nonetheless, livestock farmers, except dairy farms, have operated in a marketplace without government subsidies and controls. However, we have a huge stake in the next Farm bill discussion. Approximately 60 to 65 percent of the cost of raising hogs is from feed costs. Corn and soybeans are the major components for our feed rations. Therefore, any changes in commodity programs that affect the price of feed have a profound financial impact on livestock operations. As major users of the grain and oilseed commodities, problems and issues of livestock producers ultimately affect grain and oilseed producer prices. As for conservation and environment, livestock producers in several states face or will soon face costly environmental regulations as a result of state or Federal laws designed to protect water quality. This includes Federal regulations under the Clean Water Act for TMDLs and the proposed new CAFO permit requirements. Federal regulators also are exploring the possibility of expanding Federal regulation of agriculture under the Clean Air Act. Since 1997, EQIP has accumulated a backlog of 196,000 unfunded applications for approximately 1.4 billion in assistance, more than half of which is for livestock producers. Farmers and ranchers are on the verge of a new regulatory era, and it is impossible for us to pass on the costs of regulatory compliance. We are price-takers, not price-makers. While I believe all farmers are true environmentalists, a typical operation like mine cannot afford the investment it will take to comply with new regulations. I urge the committee to provide the assistance necessary to implement sound conservation practices to protect our nation's air and water. I urge the committee to support at least ten billion over the life of the next Farm bill in spending for USDA conservation practices to address livestock's environmental needs, specifically for water and air quality. These funds should be used to provide financial incentives, cost-sharing, and technical assistance to livestock, dairy, and poultry producers to develop and implement manure and nutrient management plans that are built on practices that protect water and air quality. Any successful conservation assistance program must be available to every producer, regardless of the type of production, whether confinement, open feedlots. Of course, payment limitations could apply similar to row-crop payments. I feel it is appropriate and fair that the livestock community be treated in the same manner as the row-crop producers through the use of similar payment limitations. As for trade expansion, U.S. pork producers became net exporters in 1995 for the first time. In order to sustain the profitability of our producers, we must do a better job of product marketing and doing away with market-distorting trade practices. Pork producers believe funding for the Market Access Program should be boosted. Also the trade promotion authority should be renewed and the U.S. position in the next trade negotiations for agriculture should include the total elimination of all tariffs, all export subsidies, and all trade-distorting support for the pork and pork products by other countries. In addition, we believe that the Global Food for Education and Child Nutrition Act should include pork, beef, poultry, and dairy products as well as commodities. As for animal diseases, if the current situation in the UK and Europe has taught us anything, it shows how important biosecurity issues are to U.S. livestock farms. Although the U.S. has not had to face foot-and-mouth disease since 1929, Congress and USDA must be diligent to ensure that all preventive measures are ready--are taken and that our effective and rapid response could be ready when needed. This includes surveillance, increased diagnostic capabilities, and a rapid response plan. While I believe most of these initiatives are underway, Congress should fund 380 million for renovation of the Animal Diagnostic Center in Ames. Quite frankly, this cannot happen fast enough. As for the concentration of livestock industry, while not directly related to farm bill discussions, I want to touch on livestock concentration issues. I have attached a summary of the IPPA activities on captive supplies in the livestock industry, which date back to 1975. Obviously, our work is not finished. Therefore, I urge Congress to continue supporting a free flow of market information, such as the mandatory price reporting legislation. That legislation was an important step in the right direction, and I thank you for helping USDA fund its implementation. I have also attached a bulletin on the pork checkoff, which I am not going in detail at this time. I appreciate the opportunity to be here today. I look forward to working with you, your staff, and your committee as deliberations on the next Farm bill continue. Thank you very much. [The prepared statement of Mr. Carney can be found in the appendix on page 78.] Senator Harkin. Sam, thank you very much for your statement. Senator Harkin. Last we have Aaron Lehman who is with the Iowa Farmers Union in Polk City, Iowa. STATEMENT OF AARON HELEY LEHMAN, IOWA FARMERS UNION Mr. Lehman. Senator Harkin, my name is Aaron Heley Lehman. I am the legislative director of Iowa Farmers Union, and I also farm with my family as the fifth generation on our family farm in Central Iowa. It is a pleasure speaking with you today on behalf of our family farmers. Senator, Freedom to Farm was adopted when commodity prices were high and expectations for agriculture were unrealistic. In reality, the promise of a broad, market-based environment of opportunity for farmers was shattered by an ongoing commodity price collapse. The dream of farmers less entangled in government involvement has turned into a nightmare of government dependency. While the government subsidies have provided relief to farmers struggling to survive, the payments have the side effect of fueling the trend toward larger and larger farms and concentration in agribusiness. We are not asking you to tinker around the edges of a failed policy. We are asking for a return to common sense in farm policy. We believe that a primary goal of the commodity program should be to provide economic stability and opportunity for farmers; a program which recognizes market realities, resource sustainability, and food security and safety issues. We believe that commodity loans should be dramatically modified to better reflect the cost of production for farmers. The current program artificially capped loan rates and ignores the marketplace, ignores the production factors, and ignores the rising costs of crop inputs. Our proposal would place that loan rate as high as possible, but not lower than 80 percent of the 3-year average cost of production. It is time our loan rate reflected economic reality and common sense. We believe that we must take steps to control our inventory. In this regard, no other production industry ignores the marketplace like agriculture currently does. We are foolish to expect a marketplace, foreign or domestic, to blindly comply with our inventory needs. To manage our inventories, we believe we should establish reserves to ensure our commitment to renewable fuels production and to humanitarian food assistance. Finally, we should establish reserves in a limited, farmer- owned reserve program. Participants should receive annual storage payments in exchange for storing crops until prices reach the cost of production. In addition, no industry can expect to continue to produce in a volume that exceeds market demand. We believe the Secretary of Agriculture should have the discretionary authority to offer a voluntary set-aside program. We feel that farmers should be rewarded with a raise in commodity loan rates which reflects the level of their own set-aside. We feel strongly that program benefits need be directed to family size producers. Unrestricted government payments, which the current program effectively provides, leads to large farmers using government assistance to bid up land prices and cash rents to levels completely out of line with commodity prices. If farmers want to farm half the county, let them do it, but do not let them take taxpayer money to help finance it. As farmers, we have a responsibility for sound land stewardship. Farming, as in our family, stretches across generations. We do not own land as much as we borrow from our children and try to make the best use of it as our own contribution. Senator we strongly support the Conservation Security Act and we urge Congress to expand the Conservation Reserve Program. Enhanced rural development programs must be an integral part of the Farm bill discussion, and that enhanced cooperative development should be central in that discussion. Production research should be directed to creating value-- creating value that benefits family farmers, and funding should be targeted to the multi-functional aspects of agriculture, including less capital intensive technologies, alternative value-added products, energy conservation, and renewable energy development. Concentration of market power among a few large and highly integrated agribusinesses has reached an all-time high, and steps need to be taken to address this concentration, and until these steps are taken, a moratorium on agribusiness mergers should be immediately enacted. In addition, discriminatory pricing and packer ownership of livestock should be immediately halted. Checkoff program work should be targeted to the benefit of family size producers and should be accountable to producers. We feel that the producer referendum ballots should be respected and not ignored. In closing, Senator, your work in this next year on agriculture issues will leave a permanent mark on the direction of agriculture in the 21st Century. While I want our policy to make us leaders in production and efficiency, I want more so that our policy points us to a strong, healthy, rural Iowa and rural America. I want to pledge our efforts to help make agriculture policy responsive to farmers and rural communities while providing consumers with safe and secure food. Thank you for your time, and I look forward to answering any questions you may have. [The prepared statement of Mr. Lehman can be found in the appendix on page 83.] Senator Harkin. Thank you very much, Aaron. I appreciate you being here. Senator Harkin. Let me see if I can recap a little bit here some of the things we have heard. Dr. Duffy, you talked about the income of farmers and how it has dropped down considerably since the high in 1996, and made the point that 55 percent of our net income came from government payments and that 92 percent of our cropland in Iowa is devoted to two crops. He said that in the 1950's the net income of farmers was about 34 percent of gross. Now it is down to 20 percent of gross. According to USDA definitions, 87 percent of Iowa farms are small farms with sales less than $250,000, is that correct? Dr. Duffy. Yes. Senator Harkin. Dr. Duffy made the point that we should do some things in the Farm bill, like looking at being self- sufficient in energy on farms. Might want to question you some more about that. The program should support people, not commodities. He made a statement about some form of minimum wage for farmers. I would like to investigate that. It was also pointed out that the level of payments that we have had have been built into land values and rents and things like that and that we just cannot go cold turkey in terms of doing away with those. First of all, I have a question of the Wallace Center. Are you hooked up with the ICN? Mr. Williams. Yes, we are. Senator Harkin. I saw that. I thought that you might be. You have got a cable coming out here. Mr. Williams pointed out that over 50 percent of the payments were from the government. He suggested that in the Farm bill, we have good conservation practices to manage our resource base, and that we target our programs. He mentioned the use of a grain reserve and a safety net, and that we close payment limitation loopholes. Mr. Williams noted that there was a three- to four-year waiting list in Page County for conservation cost-share programs and that we have a long backlog of those. He also mentioned ACRE, which I have to have you explain to me, because I am not all that familiar with it. He mentioned the need for mandatory price reporting, and the need to investigate antitrust activities. Mr. Williams stated. that the pork checkoff should be revisited. Mr. Askew talked about balancing the social and economic needs of farmers and growth in rural communities. He said in the Farm bill that we have to focus on global competitiveness, expanding trade opportunities, research, and tax and regulatory reform. He mentioned energy policy and biofuels in the new Farm bill. Mr. Askew also suggested that we should look at risk- management tools and insurance, and also the information flow to farmers. I assume you mean closing that digital divide, making sure that farmers get adequate information and up-to- date information, and ensuring that soybeans were treated equitably in the new Farm bill. He mentioned the LDP structure, loan deficiency payment structure, and a counter-cyclical--need for some counter-cyclical-type of program. Lastly, Mr. Askew noted land conservation and Conservation Security Act and the program that the Iowa soybean producers have come up with called the Certified Environmental Management Systems for Agriculture, the CEMSA program. Shirley Frederiksen talked about the Loess Hills Scenic Byway, one of the ten best in the United States, and the prairie restoration project. You mentioned a number of different things regarding the grape and wine industry. I can remember as a kid my dad buying Betty Ann Wine. Anybody ever heard of that? You drank that wild stuff? I am not kidding you, there used to be big wineries over in Council Bluffs called Betty Ann Wine, and they had all these--I remember one time as a little kid seeing all those vineyards over there. Ms. Frederiksen indicated that wine could produce $7,000 to $10,000 per acre. She also spoke about local food systems, energy, solar, wind, biomass, ag tourism. Their thrust was really that we have to focus on rural development in our Farm bill. Mr. Carney, with the Iowa Pork Producers, said that we should focus on conservation, trade, market competitiveness, the environment, food safety, and biosecurity. He reminded us, as we always need to be reminded, that any changes in commodity programs do affect livestock operations one way or the other and that always has to be taken into account. Mr. Carney also mentioned that this EQIP backlog of 196,000 is what you mentioned in the EQIP program. Mr. Carney stated that we need a minimum of $10 billion in the Farm bill for conservation over the life of the Farm bill. He indicated that payment limitations could be used also in livestock as we do also in row-crop production. He also mentioned trade and boosting the Market Access Program and including meat products in the Food for Education Program. I assume you mean that that is that new school lunch- type thing we are talking about. Mr. Carney mentioned the need for rebuilding and renovating the National Animal Disease Center at Ames. That $380 million mark, by the way, stands now at 446 million, so the sooner we get it built, the cheaper it is going to be. He indicated that concentration and really enforcing more and getting more enforcing for the mandatory price reporting. Mr. Lehman, representing the Iowa Farmers Union talked about the payments basically has fueled the trend toward larger farms, our goal in the Farm bill ought to be economic stability, opportunity to family farmers, resource sustainability, and food security. He pointed out that the loan rate, ought to be set at the minimum of 80 percent of the 3-year average cost of production, and that we need to control our inventories, like with reserves, renewable fuels, and some kind of humanitarian food assistance. Mr. Lehman indicated the need for a farmer-owned reserve and for annual storage payments for farmers for the reserve program. He said that benefits ought to be targeted to family sized producers. Mr. Lehman also referred to the Conservation Security Act, expansion of conservation programs, rural development, enhancing cooperative developments, and farmer-owned cooperative developments. He said our research should be to create value that would benefit the family farms, enforce antitrust laws, and stop packer ownership of livestock. Does that basically summarize the testimony? Again, I thank you, and what I would like to do is just--I have just a few questions, and then we will open it to the audience. For Dr. Duffy I just want to ask: If there are only modest deficiency payments from increasing farm size above 300 to 600 acres, as your Iowa Farm Business Association data indicates, would you say that government payments which are directly linked to production and acreage might be offering alternative incentives to grow even larger? Dr. Duffy. I want to make sure that we are clear. What I was talking about was the cost per bushel dollars that it would cost to produce it. Senator Harkin. Yes. Dr. Duffy. Then, yes, because the larger you get, the way that the program is set right now, particularly with the LDPs, the more Federal money you get, the more you produce, and so as we move on out, basically what we have in the jargon is an L- shaped average cost curve, so we have initial economies of size, and then those are dissipated, and then it flattens out, and the data for Iowa shows somewhere between three to six hundred acres is that low point, and then people just move along that cost curve. As they move out, the more bushels you produce, the more payment you get. Senator Harkin. What you are saying is there may be kind of a perverse type of an impact. In other words, we have the commodity program, we have the payments, the LDPs. I assume you are including the AMPTA payments on that? Dr. Duffy. Yes. Senator Harkin. Would I be right in saying or assuming that if you are bigger and you get more payments, then you get more money, that might enable you to bid up perhaps your neighbor's land in terms of getting larger? In other words, you get more money, so would it have a perverse impact of actually farms even growing bigger? Let me rephrase that. Do our farm programs today, in your estimation, lead to larger farms? That is about as simple as I can make it. Dr. Duffy. I believe they do, yes. Because, as you move out and increase the payments, the larger you are, that it encourages an increase in size. I also think that when you look, the payments that came out, I remember when the Food Security Act--or the Freedom to Farm was first passed, and I had a landlord call me and was asking about how this worked and so forth, and I said, ``Well, you are under cash rent and so you are not eligible for any of the payments.'' I had to wait until she was done laughing and said, ``Just watch me. I will get them.'' In other words, she just bid up the rent. It works in a lot of different--The programs are exerting all kinds of influences on rents, on land value, on the infrastructure. It is--We need to be very conscious of when we go in and we tinker with, if you will, that that has the intended as well as unintended consequences. The biggest reason farms are getting bigger is because they have to generate an income, and the reason they have to generate an income is because we have developed production technologies where we basically just pass money through the farm. This is a term coined by Lord Cochran about the technology treadmill, where we just--you need more land, so you buy bigger equipment. You buy bigger equipment, and your costs go up, so you need more land. Then you adopt technology so that you can farm more land. You have more equipment so you can farm more land, so you bid up the rent so you can justify the equipment, and around and around and around she goes. There is a variety of reasons, and I would be happy to go into it with you, but the government programs, do they cause per se? Maybe not. Do they not do anything to discourage? Definitely. Senator Harkin. I see what you are saying. In some ways you mean the System. Obviously, a farmer today with the new equipment and new technologies obviously can crop a lot more acres than a farmer could 50 years ago, 30 years ago, 20 years ago. There is no doubt about that, right? The farmer can plant and crop more acres with bigger equipment, faster equipment, better technology, better knowledge, better information on planting, better hybrids, for example. I guess my question is though, and I have often thought about this: Yet an individual farmer, I mean there is only 24 hours in a day, only 7 days in a week, and a farmer has to sleep sometime, and they have to eat. They have to tend to their family. They have to do other things. I mean there is only so much time within that time constraint of a farmer. It seems to me there is just some limit on how much that farmer can actually do. I mean, I do not know where that is, but it may be a range, depending upon the land and the structure of the land and how clear the land is and all that stuff, but it just seems to me that there is some range in there where after you get to a certain point, farmers just simply cannot farm any more land and still be efficient. I guess I am talking about efficiency. Mr. Duffy. That is why occasionally within the data from the Iowa Farm Business Association I believe 7,000 acres is the largest farm that is in there, and we have farms bigger than that here in Iowa, but there is some argument that rather than an L-shaped, we actually have a U-shaped with a very long, flat bottom and then actually you reach a point where your costs start going back up, and you--primarily you are going to exceed your management ability. Senator Harkin. Yes. Mr. Duffy. You also shift from being a family farmer, in my opinion, to being a personnel manager, because you have so many hired men or women, and then you become--you are operating--you are managing people rather than managing the land. Senator Harkin. I see. I am going to throw it up to the panel, because it is general discussion here. You mentioned one other kind of a, if I might use the word ``provocative'' idea, some form of minimum wage for farmers. Do you want to tell me what you mean by that. Mr. Duffy. It was not intended to be provocative. It was intended to--I mean---- Senator Harkin. I mean provoking thing. Mr. Duffy [continuing.] OK. I do not like to cause trouble. [Laughter.] Mr. Duffy. Not too much. Dr. Lasley and I were having a conversation 1 day, and we were talking about the current situation and where we are going and the concern that we have that people are at loggerheads and they are concerned about what is going to be just for them and not really looking at the whole picture, if you will. Senator Harkin. Yes. Mr. Duffy. Then we came up and we decided that--Paul suggested, well, what about if we have a minimum wage for farmers where we were paying people? I worked on and developed a proposal that I included with my testimony, and I have copies of it out there, and I would love for people to look at it. Basically the idea of the proposal is that a farmer would be paid based on the number of hours that they work and up to a full-time equivalent, and then beyond that they would get more payments, and less than that, only get paid based on what they worked. The way that they would get paid, the number of hours would be determined by the number of acres and the crops that they had, the amount of livestock that they had. We have fairly good estimates on the amount of time that it takes per litter or per acre, and then you would just multiply that out. That would give you your number of hours, and if that exceeded--and we used 8-hour days, 7 days a week, 50 weeks a year, and those are things that could be debated. That comes up to 2,800 hours, and so in a nutshell, but that is what we have. Senator Harkin. That is in this paper? Mr. Duffy. In the proposal, yes, sir. I do not know. To me, it is trying to support the labor that is involved. It offers all kinds of neat advantages, in my opinion. It is totally divorced from the market so that I feel that it would be a green box as far as WTO is concerned. You would have total freedom to plant. You could plant whatever you wanted. Offers a lot of different kinds of features. I offer it for yours and the group's consideration. Senator Harkin. That is what we need. We need to start thinking outside of the box, as well as inside the green box. Any other thoughts about--I am also concerned about the whole aspect of trade. Now, when you say ``soybean producers,'' we are in Washington talking about what is happening in Brazil and the expansion of crops here. Last year, for example, I was in China in August and discovered, boy, they have got a lot of land in production, and they actually were exporting corn. We thought there was going to be a market for us. They are actually exporting corn, but I do not know how many good years they have in a row. They are expanding their crop production in China too as well as soybeans. I do not know if they export soybeans or not. I do not know about that. I know they exported corn last year, so I am just wondering what we see in the way of trade overseas. I mean how can we expand trade? We looked at markets, but if Brazil is putting all this practically free land in production, and how do we compete with that? That is what I do not understand. Mr. Askew. Well, first we should look at sanctions' reform. We have sanctions against probably two-thirds of the people out there in this world, that we are not able to deliver food and we can. That is an important thing. Just the other day with Iraq, with one example of one way and then turn right around and go back the other way. It is important because we export half of our soybeans out of this country. Brazil and Argentina are competitors to us. We have to understand that. Are they more efficient than us? No. I mean logically look at this. They are using Case IH combines that are shipped from here in the United States down there. They are using seed that is very poor. They get so much rain. They have to use so much fertilizer, so many insect problems. It is not that great down there, and we just had a group that came back from Brazil and Argentina, and their first thing was, keep it up, because they are hurting down there, but are we going to run them out of business? We had a group up here this summer that were from Argentina, and we got to talking to them. There is a language barrier there, but you could get a pretty good indication, but you know what? Looking at them is like looking just out here in this group. They have the same concerns we do. They have farming in their blood. They are going to keep going as long as they can until they lose money, and they are losing money down there. The thing is, we bring our soybean prices up and we have that same--there will be land in production. It will take 50 years to get it fully in production, but right now the bulldozers are not moving down in Brazil. They were back in 1995 and 1996, but we had good prices back then. Now we are looking at that we have got to be the Number 1 soybean exporter. We have got to be the dependable source, because, frankly, if we keep these sanctions in place, we cannot be the dependable source for soybeans or corn or anything else. We have got to address the problems inside our own boarders. As for the biotechnology, I think we all support biotechnology to a certain extent. That is going to be the way we compete in the world in the future, but we have got to be able to get by political aspects of biotechnology and look at the positive aspects, especially out there in the countryside where we are using less pesticides and we are doing more out there using some biotech crops than we ever did before. It has increased our production, but our soybean-use rations is tremendous. As we grow those beans, we are using them. We can use a lot more if we use renewable standards. It is very important. Ethanol, I think everybody out here is a big supporter of ethanol. We also have to be a big supporter of biodiesel. Senator Harkin. On the biodiesel, you know this. I might tell the audience. About a week ago I was in Cedar Rapids and poured the first gallon of soy diesel into buses. They have 32 buses in Cedar Rapids now running on soy diesel. It is an 80/20 blend, 20 percent soy, 80 percent regular diesel. The soy diesel is made around Sioux City someplace. If one percent of the diesel market in America were to use this soy diesel, in this 80/20 blend, I think it would take about 300 million gallons. Estimates are that it might boost the price of soybeans as much as 15 cents a bushel. Plus it cuts down on hydrocarbons, it cuts down on pollution, and it cuts down on CO2 emissions. There would be a 70 percent reduction in CO2 emissions if you use soy diesel. I am sorry, Mr. Lehman. Mr. Lehman. Well, in the area of trade too, we feel strongly we need to aggressively pursue trade opportunities. We need to keep in mind that those trade opportunities need to be fair for our producers. I use Monsanto products just like those farmers do in Brazil. They do not pay a tech fee. Senator Harkin. They do not pay what? Mr. Lehman. A technology fee that is attached to products we use, and when we ask why that is, it is because they do not have the same environmental standards for--that we have to have here. That is a cost of production that we face that their farmers do not face. We talked about China now becoming a competitor in--and becoming an exporter of corn. The labor standards for producing corn in China are nearly nonexistent, and if we really want to compare bushels produced in China and bushels produced in the United States, then at the same time we are producing--we are comparing how farmers are being treated in this country to how farmers are earning income in China as well. Those labor standards need to be taken into account too. We need to pursue those trade opportunities. Senator Harkin. Well, I agree with that. While I have been a supporter in the past of what they call fast-track legislation, the President's ability to move trade legislation rapidly through the Congress, I stopped. I stopped being a supporter when the trade agreements carve out any kind of environmental or labor standards. Because it seems to me that that has got to be a part of our trade laws too. I am just telling you what I feel, but they have got to be a part of our trade laws. Otherwise, we let people undercut by using basically slave labor. We allow people to just do environmental pollution, which affects the whole globe and undercut us. I have always said that if we can protect CDs, compact disks, I did not mean certificates of deposits. I mean compact disks. If we can protect the compact disks and take action against any county that would allow the piracy of compact disks, we ought to be able to take action against counties that do not meet certain environmental standards and labor standards. I would hope, and I make this statement forthrightly, I encourage all of the agricultural groups you represent and others that may not be here, that this is one place where I hope the agricultural--agribusiness section, including farmers, will break from the corporate business sector of America, because the corporate business of America is saying they do not want trade--they do not want environmental standards or labor standards in our trade agreements. I mean it is especially important, vital to our farmers, that we have those kind of practices. I encourage those of us involved in agriculture to take a separate stance, and that is just my own feeling. Any other thoughts on this, Sam? Mr. Carney. I do have a few, and as John mentioned, we have two-thirds of our--we have sanctions on two-thirds of the countries, and I guess what kind of upsets me is on our industrial tariffs we average four percent. On the agricultural tariffs, we average around 40 percent. This is a major problem. I am sure people out here have to borrow money, and if anybody had to borrow at 40 percent interest, you just as well walk out the door. You are done. We have got to get this changed. This is a major, major, major issue with agriculture. Senator Harkin. Say that again. Tariffs---- Mr. Carney. OK. Industrial tariffs average about 4 percent. Do not quote me, but that is the average. Senator Harkin [continuing.] Industrial on industry coming into this country? Mr. Carney. Going out to other countries too. Senator Harkin. Tariffs we face on our exports? Mr. Carney. Yes. Maybe I did not explain it right, but as our exports on agriculture, we average 40 percent going out. Senator Harkin. That other countries put on our agriculture? Mr. Carney. Right. The main reason is we put so many sanctions on. This is the thing that we have got to change. To me, we should never have sanctions on a country unless we are outright at war with them. If you want to put sanctions on a country, I do not think it really helps. Senator Harkin. What you are saying, there are countries we have absolute total prohibitions on, but other countries you are saying we have one form or another? Mr. Carney. Correct. You know, we have got certain things, but what I am saying is: We should not use food or medicine. I just do not think that is right, and I do not think that really helps us help with other countries. This is something we should eliminate. Senator Harkin. I agree with you, totally agree with you. A funny little story: I remember once, one of my political heros was Hubert Humphrey from Minnesota. He is now deceased. He was on the Senate Ag Committee long before I got there, and he was talking about selling food to Russia and--during the height of the cold war, and someone said something to Humphrey about selling--selling this food to Russia, and he said, ``Well, I believe we should sell them anything they cannot throw back at us.'' [Laughter.] Senator Harkin. I thought that sounded like a pretty good philosophy to me. [Laughter.] I appreciate that. I am going to open it to the audience now. You have heard a fairly good discussion here. I just want to make one other point here, that the conservation incentive. I appreciate a lot of you looking at the Conservation Security Act. Any further thoughts, refinements, suggestions that you have on that, please let us know. If we do a conservation incentive, it does shift the practices and less to the commodities, which I have heard a little bit of here today. I have got my little chart here. I am sure you can all see this real well. It shows the CCC outlays for the fiscal year 2000. We had $32.2 billion in outlays, but we only had 1.7 billion in conservation, so that gives you some idea of the small amount of money that we put out in conservation. I have always said, that we have got a lot of farmers out there practicing good conservation. I do not mean just CRP or set-aside, but I am talking about practicing good conservation. This takes time. It takes equipment. A lot of times it takes out-of-pocket money, but they get nothing for it. The Conservation Security Act is to convey to farmers, ``OK. Now, we are going to support you in your practices, and if you want to do more voluntarily, we will pay you.'' Mr. Williams. Senator Harkin, there is also a direct long- term societal cost to America in how we take care of our land. Senator Harkin. Yes, and I think that is going to be a good selling point to some of those who are now saying that we should not be putting that much money out in agriculture, that we are already hearing that kind of reaction coming back. OK. I am going to throw it open, and again, I ask you to please state your name so our reporter can get your name correct. STATEMENT OF DENISE O'BRIEN, ATLANTIC, IOWA Ms. O'Brien. Good morning, Senator Harkin. I am Denise O'Brien from Atlantic, Iowa. I can say that 25 years I have proudly been an organic farmer, and about 20 of those years I have given ag testimony within Iowa and Washington D.C. Senator Harkin. I am very appreciative of you. You have been there many times, and I appreciate it. Ms. O'Brien. I keep nagging, but someday something will change, and believe me, I have not got cynical yet. You know, I can still smile. First of all, I would like to make a comment about the lack of gender balance on the program. It is good that Shirley is there, but women do have a voice in agriculture, and to leave out that voice, we leave out---- Senator Harkin. You take that up with the Pork Producers, the Soybean Association, and the Farmers Union. I just asked them to please have someone come testify. Ms. O'Brien [continuing.] I will take that up. It is really good if the organizations would have women represent them on these, because women do add a voice to solutions, so I would encourage all organizations to do that. Senator Harkin. Point well made. Ms. O'Brien. I am representing actually an organization called Women's Food in Agriculture, because we do not have a voice in a lot of organizations, so we have created an organization. Today I am speaking on behalf of organic agriculture, which has not been mentioned at all, and I think there is approximately now in Iowa 170,000 acres of certified organic crops. There is an alternative solution to some of this. It is not everybody's solution. I agree, but these farmers are profitable. They are making it. They are turning a profit, but I also want to say at the time that they are turning a profit, they are in grave danger of losing their economic--or organic status because of the problem with GMOs. We have not talked about GMOs this morning either, genetically modified organisms. When the organic crops get contaminated by genetically modified organisms, they lose their--the farmer who has the organic crops loses their market, and that market has been a market that has been increased, profitability for them. The National Organic Standards Board have made the standards now, and there is zero tolerance of GMO contamination, so I think that we have to consider what we are doing in this process of eliminating--or of contaminating these organic crops. Recently the Organic Farming Research Foundation released a state of the states report, and it is Organic Farming Systems Research at Land-Grant Institutions, so this report has come out about the state of organic research in the United States. I would like to say that because public funds support the land-grant system, we expect it to be responsive to the educational and research needs of the constituents, including organic farmers, and we have been totally left out. I know this from 25 years of experience. We have always--My husband and I have always been left out of any--all of these payments. We have been good stewards of the land. We have had a crop rotation when the set-aside was based on corn base. We never qualified for anything, not that we wanted government payments, but we never qualified for anything because it was really--we were--it was a disincentive for us to do what we did, but we believed in what we were doing. Senator Harkin. Are you suggesting that--and I am just asking, that there should be special provisions made in the next Farm bill that would help encourage organic farmers to give some better support somehow? Ms. O'Brien. You betcha. Senator Harkin. Do you have some ideas on how we do that, Denise? Ms. O'Brien. we have it right in this book here. I have given this book to Ellen, so she has got that. Senator Harkin. All right. Ms. O'Brien. There is no support of organic research. We do have--Iowa State has the only organic specialist in the country, Kathleen Delate, and she has--Mike is raising his hand. Mr. Duffy. I was just going to say that connected with the Armstrong Farm, we also have a long-term research project that is solely devoted to organic production. I thought I saw Bernie here, the farm manager who is running it, so---- Ms. O'Brien. Yes. Senator Harkin. Somewhere here? Mr. Duffy [continuing.] Right back---- Mr. Backhaus. The Neely Kenyon farm. Mr. Duffy [continuing.] The Neely Kenyon farm, which is connected with---- Senator Harkin. Where is it? Ms. O'Brien. Adair County. Mr. Duffy [continuing.] It is connected with this---- Mr. Backhaus. It is part of our farm. My name is Rob Backhaus. I am president of the Wallace Foundation. Ms. O'Brien. To go on with the question you asked me: There is 17 acres under research in Iowa, and many states have zero research going on into organics, and so with Iowa State having an organic specialist, she is totally overworked and totally unaccessible. I try to get ahold of her, and she is just understaffed. I know we have to take this up with Iowa State, and Practical Farmers of Iowa is doing that very thing. Senator Harkin. Now, again, in your practices, I will bet you do not get any kind of payments at all for your practices. Ms. O'Brien. Oh, no. We never ever have. Senator Harkin. Alison just reminded me under the Conservation Security Act you would. Ms. O'Brien. Well, now we changed our farming situation over the years and Larry is working off the farm now, and I do ten acres, so we have got--but that is an encouragement to get back in actually. It would be an encouragement. To continue with my testimony, I just want to say that the good news is that land grants in 39 states have research and/or resource development for organic producers. Land-grant institutions in 19 states reported research acreage net gained in organically, 12 of which have research land that is certified or in transition to certification. The bad news is, is that of the 885,000 available research acres in the land-grant system, only .02, or 150 acres, out of 880,000 acres is devoted to certified organic research. That is a totally unbalanced situation. When we are looking for solutions, I think we ought to think about organic agriculture, and I am really proud to stand here all these years. I know people have thought I am kind of whacked out sometimes about my organics, but I am standing here. The private sector ag has taken on themselves to do the research, and the Organic Farming Research Foundation in California has funded programs in Iowa. I want to point out that the Heartland Organic Cooperative, grain cooperative that is located in Adair County, is now buying the Stuart elevator, and there is going to be access for semi loads of organic produce--or commodities, this is a commodity one, this is corn and soybeans. They are just taking over the Stuart elevator, so I think it is really relevant that--and they have operated 8 years in the black. Compared to other--Mark is telling me that I have to quit. Everyone who knows me knows that I talk too much, but I would just say that organic ag is a growing industry. It is an agriculture that can be a vehicle to help the floundering small- and medium-size farms survive and a vehicle to save our most valuable resource, the land. I would also like to say that a week from today at this very place at ten o'clock is a biomass--the Union of Concerned Scientists is--and Alan Teel, our extension agent in this county, is having a biomass meeting, and it is like from ten o'clock to noon next Saturday morning, so I would like to encourage the farmers to come here and learn about some biomass production. [The prepared statement of Ms. O'Brien can be found in the appendix on page 87.] Senator Harkin. Denise, thank you very much. I forgot to mention that we have a new member of our agriculture committee. Senator Ben Nelson from Nebraska is now a member of our agriculture committee. He could not be here, but his staff member, Sonny Foster is here. Where is Sonny? Thank you for being here, Sonny. If any of you want to get anything to Ben, Senator Nelson, please just give it to Sonny. I just want to followup before you start, sir, on what Denise O'Brien was saying. Maybe what Mr. Duffy was saying, that we have 92 percent in a couple of crops, and, sure, we have moved in that direction. I know that organic cannot be forever. It is not going to replace it all, but maybe there is a lot of other little things like that we can do around the state to help buttress and help provide some really good support and income support and--for rural communities. Organics is one of them. I know around the Washington D.C. area they have got a grocery chain called Fresh Fields. They cannot build them fast enough. People drive for miles to go to them, and they do all this organic food, organic lettuce, organic meats, and all that. Someone told me that they were selling pork, Sam, to this Fresh Fields, organic pork or something, and where was it I read this? Fresh Fields was buying all the organic pork that is being raised today, and they cannot get enough. There are some niche markets out there for operators. There are some niche markets out there. Perhaps we ought to take a look at that in the next Farm bill to see what we can do. I might just mention one other area, and that is energy production. Somebody mentioned biomass. We have a project going on down in Southwest Iowa. Any of you know about the switch grass project that we have? How many of you know about it? The information got out decently anyway. We have about 4,000 acres of switch grass going down there now, and we are burning it in the coal-fired power plant in Ottumwa. We just finished the first run this winter, and all of the results look very good and there is more B.T.U. in a pound of switch grass than a pound of coal. If we can utilize CRP acres for switch grass and use switch grass to provide energy, not going to replace all the coal, but I think I have seen figures that with just a modest use of our CRP ground in Southern Iowa, we might replace about seven percent of the coal coming into Iowa. That translates into several hundred million dollars every year that would stay in the state rather than going outside the state, so I think we have got to start thinking about these kinds of things, aside from wind energy and stuff like that, but I think there is a great potential for biomass. Mr. Duffy. May I interrupt? I am involved with that project down there. I have conducted and done the estimated cost of production of switch grass. Senator Harkin. Yes. Mr. Duffy. That publication, it is in the press right now, but one of the issues and the reason I wanted to bring it up is because right now our costs of production are a little bit higher than the coal that Alliant Energy, they can purchase the coal cheaper, and I guess the reason that I am bringing this up is because this is an area where maybe if we could look at an energy crop subsidy or something like that or definitely more research into trying to get the yields up. Because what we have found is obviously the higher the yields and then the lower the cost would be. Senator Harkin. Sure. Mr. Duffy. This does need more work, but I think it shows a lot of promise. That was what I was going to allude to. I am sorry to interrupt. Senator Harkin. Just a research project then? Mr. Duffy. That is correct. STATEMENT OF GAYL HOPKINS Ms. Hopkins. My name is Gayl Hopkins. I am active in the Iowa Corn Growers and Environmental Issue Team, and before I--I would like to focus my comments concerning the Conservation Security Act, but before I do that, I would like to make just one response to what was said earlier. Their comment was about Dr. Duffy's provocative comments. My personal feeling is that maybe you have understated the importance of management and size, that the management skills I believe are an extremely important issue in size of operations. First of all, I would like to--just getting back to the Conservation Security Act, I would like to, first of all, say that I believe it is the hot issue in agriculture right now, and I would like to talk a little about why I think that is the case, and, second of all, I would like to talk about why we as farmers should support it. Mr. Askew here, his organization has come out in support. The American Soybean Association as well as the Iowa Soybean Association has supported it. The National Corn Growers have endorsed the concept of it. We had a delegation there this past week. The Iowa Farm Bureau had a delegation there this last week. The Farm Ag States Group, which is a group of ag commodity groups in Iowa, have been discussing this issue. Carol Balvanz from cattle has made some inquiries trying to understand what pasture rotation would mean, as far as payments for pasture rotation would mean, what about manure management and livestock. There has been some inquiries. I understand that the EPA has asked for conversations looking at what this would mean environmentally, so I really think this is an issue that is Senator Harkin's bill, our Senator's bill, and I think we ought to look at it hard, and I personally feel supportive. The reasons why I think we should support it is I was in my FSA office yesterday, and I think the LDP on beans was $1.17. There are--I do not want to change the payment--the way the farm program is working, but there are limits to trade-altering payments that a farmer getting $4 for his beans but getting an additional 1.17 from the Federal Government, what that does to trade. We can do some of that. That is built in to our trade agreements, but there are limits to what we can do. In the area of conservation, there are not limits. They talked about a green box earlier. We need to be looking at other alternatives to assist farmers besides these direct payments that we have been doing, or maybe I should say, in addition to them, because I do believe there is some limits, which I think is going to give us some trouble down the road. In our environmental issue team, we have been dealing with impaired waters, TMDL, which is Total Maximum Daily Load, of either phosphorus or nitrogen in streams and who does what and who should do what and things like this, and we have had--the EPA has come--bypassed DNR in Iowa and declared hundreds of water bodies in Iowa as impaired waters. We are facing--to have to deal with this. Now, as an organization, we can say things like, what about the cities? What about the 65,000, excuse me, contractors who in the evening clean gas stations, lots, parking lots, things like this? That all goes into the storm sewers. If we focus upon what is wrong with everybody else and not with what we can do to improve our own situation, we will be looked at like the tobacco industry as being in denial, and I think what we need is some way to assist farmers to make cleaner water and cleaner air, but when they passed the Clean Water Act of 1972, there were billions and billions and billions of dollars spent every year for these municipalities. We have challenges but no money. Senator Harkin. Gayl, I have got to move on. We have got some other people here waiting. Ms. Hopkins. OK. My last two points are: conservation needs broader support--excuse me, agriculture needs broader support if farmers are to receive payments. The public says, ``What is our money being used for?'' The last thing I would like to say is that conservation, or being good stewards of the land, is the right thing to do. Senator Harkin. Thank you. STATEMENT OF HAROLD SWANSON Mr. Swanson. Thank you for the invitation, Senator Harkin. It is nice to see you again. Senator Harkin. Yes. For her. Mr. Swanson. Harold Swanson. I am retired head of the Iowa Western Community College ag department and have a farm and 14 years in ag business, fertilizer, ag chemical, and grain, and we have--so I am a member of Ag Connect Board of Directors, which is trying to connect farmers retiring with the current operators, retirees, and I also am on the--a member of the National Farm and Ranch Business Management Education Association. Senator Harkin. All right. Mr. Swanson. Which was started in 1952, and I was one of the original ones that started it as part of the Minnesota Vo Ag Farm Management Program in Minnesota in 1952. The grain company offered the Minnesota Department of Ag Education a nice grant to start a farm management program, and out of 500 ag teachers who were offered these things, 15 of us took the challenge. I have been with it, and I have a tremendous collection of records, so--but that is just the background. Senator Harkin. Right. Mr. Swanson. Now, I am going to pick a little niche with my discussion today, and I will give you a copy of it. I will just read it so we can get it over with real fast. Maybe Congress can change the LDP system a little this year to a program that will really benefit the small farmer, instead of set-asides that cannot be initiated because of the time factor and the provisions of the 1996 farm law. The regulations for the operation of the LDP program have not been absolutely set. Now, I am--Based on what I have read in the regulations, I do not think the final--because I see there is some changes in the way they have set up the LDP, so I am thinking that for 2001 some things can happen. This is what I am suggesting: Let us set up an LDP so the payments will be made available to bushels produced or not produced based on a formula that calculates the portion of the crop that a farmer would be entitled to if he was producing what was his share of the estimates usage based on the percentage of the expected crop that is calculated in July when the total certified acres are known and the government has made the estimate for the average yield and the estimated usage figure for 2001-2002 period and the expected carryout as of September 1, 2002. This system would be an additional help for the farmers suffering from drought and other disasters. Here is how it would work: The bushels that a farmer would be able to LDP would be based on the percentage of acres needed to produce the usage figure at average national yield developed for the crop in relationship to total acres planted. If the acres needed would be 85 percent of the planted acres, then each farmers' share would be 85 percent of his planted certified acres times the national average yield as his LDP bushels, whether he produced them or not. This method provides some badly needed incentives to let the high-yield producers recognize that they are part of the overproduction problem, and since there is no willingness to set up alternative programs for producers on marginal land who have little chance for profit, even with the very favorable prices, but contribute heavy to the oversupply, this program would help the small farmer. Senator Harkin. Thank you. I have a vague idea. What you are saying is you take what the total national usage would be, you figure the amount of crop acres that would be needed basically on an average basis to produce that, then you get a percentage of what every farmer based upon, I assume, some kind of crop history or something like that, that they would be eligible for as their percentage of that total. The only question I have on that: Does that not still provide the bigger farmers with the bigger payments, and do we not still get back to the same kind of rut that we are in now? Mr. Swanson. No. Because, first of all, you are going to be dealing with the average national, so this guy that has got big acres, big high yields, is only going to get the--his LDP on national--on national yield. Senator Harkin. OK. Mr. Swanson. The guy who is producing 100 bushel on some of the marginal land, he would get the national average times his acres. It would be a very definite payment to the marginal producers, which we need some help. [The prepared statement of Mr. Swanson can be found in the appendix on page 91.] Senator Harkin. Give me that information. I will take a look at it. I do not know that I understand all of it. I am told by Mark we only have about 30 more minutes, and so I am going to try to move as rapidly as I can. STATEMENT OF JOYCE SCHULTE, SOUTHWEST COMMUNITY COLLEGE Ms. Schulte. Greetings, Senator Harkin, Joyce Schulte. Senator Harkin. Good to see you again. Ms. Schulte. Thank you. I am representing community colleges, students, work for a TRIO program at Southwestern Community College. Part of that criteria group are low-income students, many of them needing food stamps. Various things stand in their way. Now, I love to feed the world, but I would like to feed the world starting at home in our colleges. I do not know if there is some way to connect the students' academic success via a TRIO program and food stamps or not. I am going to be real brief and stop at that in contrast to my normal style. Thank you, sir. [The prepared statement of Ms. Schulte can be found in the appendix on page 92.] Senator Harkin. Thank you very much. Food stamps TRIO program. Got it. STATEMENT OF ALAN ZELLMER, FARMER/PRODUCER Mr. Zellmer. Senator Harkin, my name is Alan Zellmer. I am Alan Zellmer. Senator Harkin. Spell that last name for us. Mr. Zellmer. Z-e-l-l-m-e-r. Senator Harkin. OK. Mr. Zellmer. I am a local farmer/producer. I guess the first thing we raise is kids at our place, and then it trickles on down to corn, soybeans, cattle. I am going to come at you from the issue of: I have got involved with a group that produces cattle for a specialty product. It is Wagyu cattle. Senator Harkin. Yes. Mr. Zellmer. I can agree with the 40 percent tariff. Senator Harkin. I am familiar with that. Mr. Zellmer. We ran into that 40 percent tariff, and now the cattle that we do raise are sold domestically here to fine restaurants and markets. Senator Harkin. You have an operation up around Perry? There is somebody up there producing Wagyu. Mr. Zellmer. That could be. Senator Harkin. I just know, and they are doing a good job of marketing. Mr. Zellmer. You bet. I am from Atlantic, is where I am from. Senator Harkin. Where do you market yours? Mr. Zellmer. Ours actually ends up in the finer restaurants now here in the United States. There is enough Oriental people that travel here and live here that they are looking for the product. Senator Harkin. Interesting. Mr. Zellmer. The product in Japan sells for around $64 an ounce, and when they come over here, we can kind of sell it to them at a bargain rate. I have worked with an investor that ventured into this, and there is a potential to bring a premium to just area cattle producers. They do not have to change anything in their operation other than the semen that they are actually using with these cattle, and where the potential top is on this, we do not know. We are going to let the market dictate more so than we do in the corn and soybean part of our operation. Now we started a feedlot to work into this project, and now actually when we started in the project, we had an engineer come out and tell me, what do I really need to do as far as manure management and things like this. There was some pretty basic and simple things that we had to manage. Now I had my DNR visit, and it is my understanding that the EPA was sued and, in turn, put pressure on the DNR to bring this Clean Water Act up to date. Senator Harkin. Right. Mr. Zellmer. I agree that there are places that we need to change and fix things, but we also need a lot of time and a lot of definition as to actually what we have to fix. Senator Harkin. Yes. Mr. Zellmer. Because just being one producer, I cannot really get a straight answer from anybody. Senator Harkin. How many head of production do you have, how many cattle? Mr. Zellmer. I work 1,600 right now. Senator Harkin. You are over the 1,000 cap? Mr. Zellmer. Right. I hate to get into all those abbreviations, because I have not been involved with them enough to know them. Senator Harkin. Not all of that is Wagyu? Mr. Zellmer. Yes. Senator Harkin. You have got 1,600 of Wagyu. Is that right? You have got a market for all of that? Mr. Zellmer. Yes. The thing that--I am all for Southwest Iowa every way, shape, or form. It does not have to be just my operation, because there is other area producers that are saying, ``I will just shut down versus comply.'' Senator Harkin. Yes. Mr. Zellmer. We are looking at $100 to $150 a head per pen space to get up into compliance and then we have operational costs besides, and everything that goes in the front of those cattle comes off the land, and everything that goes out the back---- Senator Harkin. This is one area where we cannot forget about our livestock people in Iowa, this is both pork and cattle, for our value-added products. We have to recognize that we have to now meet some of these environmental standards. We have to recognize that. Mr. Zellmer. Sure. Senator Harkin. You cannot just dump it all on the individual producers. Just like I am talking about my Conservation Security Act, I think what we have got to do is figure out some way--now, I am looking for suggestions on this--on how we help people like you to meet these things without, you say $150 a head. I mean you cannot do that. We have got to figure out some way of coming in with some supportive mechanism both on the national and the state level-- -- Mr. Zellmer. Yes. Senator Harkin [continuing.] Here in Iowa to keep you in business and keep our cattle producers in business and yet meet these more stringent environmental standards we have to meet. Mr. Zellmer. I would love to be involved with it. Senator Harkin. I am looking for suggestions, so if you have got any thoughts and stuff on that, I am open for anything that we can start building in, as I said, both national, but something has got to be done at the state level too. There has got to be two ways on that. Mr. Zellmer. I will stay in touch with you on what I can find. Senator Harkin. Any suggestions you have got on that, because I recognize we have got to do this. We have got to help producers meet these standards. Mr. Zellmer. Sure. OK. Thank you. Senator Harkin. Thank you. Mr. Askew. We need to be on the front line of this as for working out systems to document what we are doing out there. What we are trying to do is associate--and as we talked to you a little bit about the CEMSA program, but we are looking at environmental management systems for all of agriculture, so for the pork producer, for the cattle producer, also to have a framework out there to show--to be able to assess your own-- what you are doing on your farms, to look at what practices you can do, and then use these before regulations come out. Because with production agriculture, they will be coming, so we have to be on the front line of this, and we will work with you on that to help develop those processes. Senator Harkin. That is good. You are right. It is coming, so we better get on the front end of it. Actually, we should have gotten on the front end of the livestock situation some 20 years ago. We did not do that then either. Yes, go ahead. STATEMENT OF ERWIN AUST, SHENANDOAH, IOWA Mr. Aust. Thank you, Senator Harkin. Glad to have this opportunity. I am Erwin Aust that lives in Shenandoah, Iowa. I am an assistant commissioner with the Page Soil and Water Conservation district along with Dave Williams up there, and also I am a board member of the Iowa Watershed. Our organization supports the planning and treatment of conservation needs of soil and water resource development-- watershed bases, and--because of conservation needs cannot be often solved on the individual farm. We certainly support or appreciate the support you have given to the conservation efforts, Senator Harkin. I would like to address primarily the Iowa Watershed Organization's supports project like the PL566, Little Sioux Water Quality Project, Hungry Canyons, and those type of programs. Today I would like to primarily address the 566 program. It is operated in about 36 counties in Iowa, and currently there are projects authorized in about 22 counties. Funding nationally was cut in half in 1993, and that was primarily to shift the money in the direction--the emergency Midwest flood that we had in 1993 with the intent we were told to restore 1994, 1995, and which has never happened. The program in Iowa had operated by a four, five million dollar level. Recently they have gotten about a million dollars a year. This year only $360,000 was allocated to Iowa. Back in the Page district, we do have the Mill Creek watershed. It was receiving some pretty good funding, and there is a lot of interest in the county, and it was helping with the land treatment work and so on and helped quite a bit in terms of trying to relieve some of the backlog of individual farmers that wanted to apply practices. Mr. Williams well-documented in his remarks kind of the backlog of interest that exists among individuals. This program, like the Mill Creek has not received any funding or very little in the last several years, since the 1993 cutback. To wrap it up, there is over--like over 50 projects in Iowa that have made a large impact on rural development, meaning flood control, erosion control, water supply, recreation, wildlife improvement needs, and that sort of thing. I will wrap it up there to save some time, and mainly our comments address supporting the existing programs and--as well as addressing the new aspects, and that is one area of existing program that is successful, like to support. Senator Harkin. I appreciate it. We have got, I forget, how many small watersheds that we have got now that over the years have basically filled up, and they need to be cleaned out and refurbished. Several thousand in the state of Iowa, if I am not mistaken. Mr. Aust. In the neighborhood of 1,500 structures in Iowa, and there is probably hundreds of those that are approaching a 50-year life, and some legislation was passed a year ago to allow funding to help local communities restore those, and that is part of that package also. Senator Harkin. Yes. 1,187 in Iowa, and there is 2,200 that need immediate rehabilitation. 284 in Iowa that need immediate rehabilitation. Thank you. Mr. Aust. Thank you. [The prepared statement of Mr. Aust can be found in the appendix on page 93.] STATEMENT OF DAN JORGENSEN, FARMER, AUDUBON, IOWA Mr. Jorgensen. Senator Harkin, glad to have this opportunity, and please bear with me. I have never done anything like this before. I am Dan Jorgensen. I am a farmer from Audubon County. I would like to address two issues, one is our energy issue, and as you see from my shirt, I am a Tall Corn Ethanol, building a plant at Coon Rapids, Iowa, and--as a value-added project for agriculture. This is a very important project, so I think whatever help you can give us in value-added projects as far as in the fuels, I think that is very important as far as less dependence on foreign oil, and then we develop a better market for our own commodities. It is a real plus, and I have been involved in this, and we hope we can make an impact on our area economically. The other area I would like to address, maybe I would like to put this in quotes. Maybe I am one of those ``evil, large farmers.'' We farm 4,000 acres. There are two husband-and-wife teams directly involved in management and ownership of this farm. Senator Harkin. Yes. Mr. Jorgensen. We impact six families. We rent from I think eight retired farmers. We rent from two investor farmers, and then we own a little bit of land ourselves, so I think as we talk about changing this, it does have a lot of economic impact on Iowa and on different farms. You know, we cannot just go in and cut everything down and say we are only going to help out that 300 acres. Maybe that is not a--Maybe that is a pipe dream of the past to some extent. Our economics have gone beyond that. I do not think--You cannot afford a $150,000 combine on 300 acres. It is--It just does not work out, and so the economics have driven this. As Dr. Duffy said, we cannot just go in and wipe everything out. We have to be very careful, and hope we can make these changes, and hopefully we can make some improvements on this. The idea of the minimum wage, just that struck me as, I would not want to pay the people that work for me minimum wage, and so often minimum wage gets tied to substandard living, and I do not think that is what we are looking for in agriculture. We need to--Just like when we are developing jobs, we do not want those as poor jobs. We want them as good jobs. I am not saying Dr. Duffy's idea does not have some merit to look at, but that to me is a little bit of a scary possibility. As we look at minimum-wage jobs in our society, they cannot support a family, and we are about---- Senator Harkin. That is true. Mr. Jorgensen [continuing.] I enjoyed the fellow's comments about raising kids. I just had my granddaughter here this last week, and I still have her tape in the car, and we need to have good economic stability too. We cannot just cut everything off, and it would be a train wreck, and we went through that in the 1980's. Senator Harkin. OK. Mr. Jorgensen. Thanks for your time. Senator Harkin. Two things I would just say on that, Dan: First of all, one on ethanol. One of the things we are looking at is changing some of the tax structures. The cooperative building of ethanol plants is kind of what we are looking at, what we are seeing happening out there, but you do not get the kind of tax advantages that, say, a private entity would get, so we are trying to figure out how to change the tax structure to give the same tax benefits to cooperative owners as to, say, the bigger, privately held ones, and so I think there may be some changes in that regard. Mr. Jorgensen. That is very important, because there are 442 member--investor members, and the bulk of those are producer members in this cooperative, and so that is important to get that--some of that help, and also if--put in a plug maybe for the--I do not know the number of the bill or whatever it is, but on the Commodity Credit Corporation's reimbursement to--like the increase grind or increased usage of corn and feed grains. Senator Harkin. Yea. Mr. Jorgensen. We hope that may be expanded or extended, the time period on this, because that would be a real help in developing value-added projects in your grains. Senator Harkin. Exactly. I just want to make sure, I have never said this, that larger farmers are evil. Mr. Jorgensen. No. I use that--Like I said, I put that in quotes. Senator Harkin. The only questions we are asking basically and from the farm policy standpoint is: Do the programs, the Federal programs that we have now, does it tilt the playing field, and if it does, do we want to do that or do we want to do something else? I am just sort of asking those questions. Mr. Jorgensen. Yes, I would have never dreamed 15 years ago that we would farm that number of acres. It does tilt that playing field, to be honest about it. Senator Harkin. Yes. Mr. Jorgensen. I have never went out and asked anybody to rent their farm. To some extent some of those people--We did rent one other farm this year, and that guy came and said, I do not think--I am going to rent it out now so I can start selling some of my equipment because I cannot replace it with new stuff. Because the economics he was farming 300 acres, and the economics were not that we could pay--He is 62, and he was going to work for us part-time, to help us out part-time, which we were grateful for, so there is a lot of things involved. I just never would have dreamed that our farm would have got to be that many acres either. Senator Harkin. Thank you very much. Mr. Jorgensen. Thank you very much. Senator Harkin. I appreciate it. STATEMENT OF FOX RIDGE FARMS, CARSON, IOWA Fox Ridge Farms. Fox Ridge Farms, Carson, Iowa. I am one of those 13 percent, or we are, that--of the top dollar amount on it. I can remember farming, and I was in it when it was all organic. I have been around that long. As I listened here to all the discussion, it is all economics. Our operation, which is cattle and hogs, corn and soybeans, and alfalfa on it, we do it with two boys and myself on it. I would like to say that our income is not the 55 percent that we get from the government. There is evidently somebody getting a lot of money that we are not getting from the government, but I want to reiterate, we have had a livestock operation that has been very profitable, up until a few years ago. We dropped the hog operation, approximately 4,000 head at one time, because of the environmental people and things like this and cost, what we have to do to keep the operation going. Two weeks ago we sold our last cattle. Well, we got one head left, last cattle, on it, and we--in farming it seems like we have to deal with many government agencies on it, and we are getting to the point that we do not feel like we want to fight it anymore. We have to spend so much money to keep this operation going. We have personally put out--and we have terraced all of our ground and put out approximately $120,000 of our own money on it to do this in order to farm. Now in order to raise cattle, we are going to have to spend a lot more money, and at my age and my boys' age, I do not feel that we want to do this. This is--all these government agencies is going to close down many of the livestock organizations in this state, and it already has in the hog operation, and it is going to do it in the cattle operation on it. I would like to see, and I think the answer to your problems in agriculture is the overseas market. We do not have it. Like when Russia invaded Afghanistan and Carter shut down shipping agriculture products over, that cost me a lot of money when he done that, because I had a lot of beans on hand which was going to be shipped on it. You know, I would like to see what they can do to get our products overseas, and I do not know how you are going to do it, because their cost of operation is much cheaper than ours, and I think we are pretty efficient too on it. Thank you. Senator Harkin. Thank you very much. Appreciate that. Yes, sir? STATEMENT OF ROD BENTLEY, PRESIDENT OF POTTAWATTAMIE COUNTY CATTLEMEN'S ASSOCIATION Mr. Bentley. Hello. My name is Rod Bentley. I currently serve as president of the Pottawattamie County Cattlemen's Association, and on the pollution thing, we are very concerned about clean water. We want our kids and grandkids to have clean water. Senator Harkin. Sure. Mr. Bentley. The zero run-off 100 percent containment thing for most of us is going to make it very financially difficult to stay in business, as some of the other guys have said. We think filtration, sediment control and filtration, would be a viable project. We need more engineers to help design things. Senator Harkin. Yes. Mr. Bentley. That is---- Senator Harkin. You are saying that the zero tolerance is going to be detrimental for you? Mr. Bentley [continuing.] It will put probably 90 percent of the cattle feeders out of business. Senator Harkin. Again, what I am looking for is--I am not certain I can overcome that, but what I am looking for is: How do we provide the necessary support? Because obviously it is a societal benefit. If we are going to start the project, everybody benefits, so why should the burden just be on you? Why should we all help in some ways to help build these structures or tanks or lagoons or whatever you need and to help support the proper application of that on land as a fertilizer? Mr. Bentley. Exactly. Senator Harkin. That is what we are trying to do, so if there is any advice you have on that or any ideas, I am looking for it, OK? Mr. Bentley. Well, I think filtration---- Senator Harkin. Well, what we are talking about is better filtration strips and buffer strips and things like that, sure. Mr. Bentley [continuing.] Yes. The 100 percent containment thing is just you are going to put lagoons all over the country that have the possibility of busting---- Senator Harkin. Yes. Mr. Bentley [continuing.] Possibly causing a lot of trouble. Grass filter strips, those things I think are just something that would be a better deal. There are places where there is feedlots that are not where they should be. We all know that. Senator Harkin. True. Mr. Bentley. Some of them need to move. Senator Harkin. I understand. Mr. Bentley. It is going to cost us a lot of money. We are the medium size I guess, and I have a son that farms with me, and we want to keep farming. Senator Harkin. Again, we have got to take a look at farming animal waste. You know, I never called it ``waste'' when I was a kid. Anyway, we never called it that, but anyway, we looked upon that as a pretty valuable resource. Mr. Bentley. Exactly. Senator Harkin. With some jiggling of the System and System supports it could be used once again, as we did in the past. Mr. Bentley. Sure. Senator Harkin. Absolutely. Mr. Bentley. Thank you. Senator Harkin. Thank you. Yes, sir? This is it. OK. STATEMENT OF RON BROWNLEE, ADAIR COUNTY Mr. Brownlee. I am Ron Brownlee from Adair County. I am on the Soil Conservation Board, and I am also a farmer in Adair County. One thing I think we forgot here is health care for farmers. I know in the last few years mine has nearly tripled. Mine went up 32 percent last year. That is a lot of increase. That is one thing I think we need to look at. Another thing, your conservation act. I have been excited about that ever since I heard about it. I was at the summit meeting in Ames last year, and I think this is the right direction for family farms to go, to give the money to the people that are doing the good job out here instead of rewarding the people that are causing the problem. Senator Harkin. Exactly. Mr. Brownlee. Another thing that I am concerned about is pasture land going into CRP. If we put pasture land into CRP, it has to be cropped two years, so we are encouraging people to raise a crop that we already are overproducing, so why are we doing that? If we are going to put pasture land in CRP, why do we not just put it into CRP? It is rough ground, probably should not be tilled anyway. Another thing is, we are not getting enough money for conservation. In our county, we probably--our REAP applications, we maybe get 5 to 10 percent of the applications approved because there just is not enough money for them. As far as value-added, I think soy diesel, our ethanol is the right way to go. We need to be processing more of our products here in our own state, instead of--we ship out 80 percent of what we grow. We need to process it here and then ship it out. That would bring in employment into the state and would help our own state. Senator Harkin. Absolutely. Mr. Brownlee. Thank you. Senator Harkin. Thank you very much. You are right about health care issues. It did not come up here, but I hear a lot about it. I get a lot of letters and calls on the health care costs for farmers and their families. You are right about the pasture and the CRP. This is another one of the things we are looking at. We have for the about 34 million acres in CRP right now, and the authorized level is 36 million, 36 point something, but when the initial bill was passed, and I was involved in that in 1985, we authorized 40 million, and it was dropped down to 36. There are some people pushing that the CRP thing ought to be raised. Again, a lot of the wildlife people and the hunters and that type of thing are pushing for 44 million acres of CRP, and I do not know. I am kind of thinking that may be a bit much, because maybe we could boost it to 34 million, up some closer to 40 million. I do not know. I do not know how people feel about that. STATEMENT OF BILL ORTNER, FARMER, DANBURY, IOWA Mr. Ortner. It hurts young farmers. Bill Ortner, Danbury, Iowa. My brother and I farm 4,000 acres, and we have two young sons that are trying to start farming, and our land around Danbury is very hilly, but we use good conservation practices. Our land is about all no-tilled or otherwise terraced, one or the other, and we have got two sons that are trying to start farming. As you talk, increasing the conservation program, it sounds very good to the public, but all it does is encourage outside investors to come in and buy our land and raises our land prices so we cannot start--I have got the only son here I think that is 20 years old that wants to farm, and I have been sitting here and listening to a lot of the rigamarole, and we have got to get back to the basics. We have got to be able to get young people. Mr. Duffy said it, we have got more farmers over 62 years old than we have got under 35. I am also a local Pioneer sales rep, and I have got 100 customers. I lost nine customers last year. I will lose another ten this year. This thing is as serious as it was in the 1980's, and nobody realizes it. You can tell by my voice I am upset, because this is so important right now. What you decide in the next 5 years on this farm program, in my belief, will decide whether we have corporate farming in this country or whether we have family farms. We need--we need a grain reserve program so bad. Because another thing that is so unbelievable is that we keep trying to raise Federal crop. That is the wrong thing to do. When you raise Federal crop subsidies up and you make 85 percent Federal crop, it lets the large farmers--I have got farmers in my area farming 17,000 acres, gives them the ability to go out and borrow the money and rent the land away from even us. I mean you are talking about 300 acre farmers. That is in the past. They all have full-time jobs, because Mr. Duffy said it: You make 20 percent return on equity. OK, an acre of corn, if you can produce $300 off of that is fabulous, but 20 percent is only $60 an acre. 300 acres is $18,000. No family can live on $18,000, because the man said, his health insurance went up. Most of our health insurance is between $5 and $10 thousand a year. I cannot believe it. We have all come here and talked, but we have really never said the true problem, and I would like to talk to you personally. I could talk a long time, or my brother has been calling you. Cannot think of your name. Mr. Moreland. John Moreland. Mr. Ortner. John Moreland, about once a month because we are so concerned, and I can see things changing so fast, and it is just a vital concern, but getting back to the CRP, I am sorry---- Senator Harkin. What if most of that CRP was in the buffers? Mr. Ortner [continuing.] Well, that would be a good point, but, see, do not make it as CRP, because he has got to rent land. He cannot afford to buy it, so what we need is more set- aside. Then--I know all of the Soybean Association, they do not want set-aside, but we have got to have it, because then the set-aside--and pay us for the set-aside to make buffer strips and to take the worst 10 percent of our soil out of production, because then he benefits from it and not the landlords. Otherwise, if you talk CRP, the landlord gets all the money, not the young person trying to rent the farm. Senator Harkin. Fair enough. Mr. Ortner. Thank you. Senator Harkin. I cut someone off. STATEMENT OF DAN MORGAN, FARMER, CORNING, IOWA Mr. Morgan. My name is Dan Morgan. I farm in Corning, Iowa, member of the Wallace Foundation for 10 years. I agree with a lot of what people said today. I disagree on a few things. I like the LDP program because it ensures me there is never going to be a surplus. I know 4th of July that I better have my grain sold because it is probably going to be cheaper. A few things: CRP program he is talking about, two-year history on CRP: I was paying $35 an acre two years ago for pasture. Last year it cost me 83 cents per cow/calf unit per day, $25 a month. That is what it figures out to. What they are doing in Southwest Iowa is taking the two- years, getting it into the CRP, taking it away from myself and the young son I am trying to bring into farming. Exactly what he says. When young people--you start farming, they get the marginal land. The marginal land is now in CRP. What I rented for $35 an acre two years ago is 90 bucks an acre CRP now. No fool would rent it to you for that. Senator Harkin. Yes. Mr. Morgan. The second thing is: Don Stenholm the other day was having a hearing with the National Wheat Growers Association, and they said to him: ``We need more money.'' He says to them, ``There is no more money.'' ``If they cut the budget,'' he said, ``the only place that money will come from is Social Security and Medicare.'' I know damn good and well that two percent of the farmers are not going to be able to take on the aging population and take away their Social Security and Medicare. I agree with that. Third thing is, I think the LDP program works, but I think there needs to be a cap on the amount of bushels you can collect per year, and the reason I am saying that is because a year ago they had a drought in Indiana. Those guys raised 35, 40 bushel an acre of corn some places. They do not get any LDP. We are raising a good crop. We get a big LDP. We need to take care of everybody, but we need to do it equitably. Senator Harkin. Make it a bushel-based program? Mr. Morgan. Right, exactly. The other thing is: I will seed down some of my land if you will give me the LDP I have had for the last two years. Senator Harkin. Yes. Mr. Morgan. I will not raise any corn or beans on it, and I will raise hay and pasture on it. Senator Harkin. Continue based upon what your history has been for the last couple, three years? Mr. Morgan. Right. It looks like to me it would be an economic incentive because you are guaranteed you are not going to get any of that--any more corn and soybeans from me, but if you will give me the average LDP. Thank you. Senator Harkin. I like that. That is a provocative idea. [Laughter.] They are trying to get me out of here. I have got to get to Spencer. STATEMENT OF JIM HANSON, NEW MARKET, IOWA Mr. Hanson. I just wanted to make one comment to the gentleman, concerning that. You mentioned something about the buffer strips. We have seen this. Buffer strips has gotten a lot of publicity, but in a lot of cases though we are reestablishing buffer strips where a few years previous were naturally established, but producers have come in or people have bought this property and stripped them out, so we are paying for the raping of a land literally that should not have happened in the first place. I have never been a real--It took a long time for me to be a proponent of CRP. I realize all the good that has come up out of it, but in my county, a lot of the CRP did not--where we-- this was ground that would be farmed by the young farmers, as the gentleman said, and what happened, it became--the landlords and the people instead of passing it on just kept on and saw the availability of utilizing this to their benefit, and you cannot blame them, but a lot of them potential young farmers have left. Whatever program or however we develop a program, there is going to be some way that someone is going to find a way to counteract it. Senator Harkin. Well, we certainly know that. Mr. Hanson. Excuse me, my name is Jim Hanson. I am from New Market, Iowa. Senator Harkin. Never underestimate the ingenuity of farmers to beat this farm program. [Laughter.] Senator Harkin. Any other concluding statements before we take off from any of the panelists who are here? Mr. Duffy. I would just like to say thank you very much for the opportunity. You and your colleagues have a tremendous job in front of you, and I agree wholeheartedly. What you decide here is going to decide the fate of agriculture and which direction we want to go, and so I wish you well and God's speed. Senator Harkin. It is a heavy load. Mr. Williams. We have to look at the state of Iowa, the individual farms, and land we are on. We have to look at watershed. I was talking about a small stream runs through my farm, and I think the biggest thing that is happening right now in society is that the money that we have got to put in buffer strips, the filter strips, and I think we can do a tremendous job of cleaning up that water. Senator Harkin. All right, Dave. Mr. Askew. Yes. Thank you for the opportunity to speak to you. I know I cannot let you go without talking about our river infrastructure and support for the locks and dams on the Mississippi, and also we have the small river on the west side of the state, the Missouri, which we need to make sure with the plans that are coming out that we have--to use sound science. We have to understand that and realize that those river systems are vital to our exports and also just to our internal ability to market our grain. Thank you. Senator Harkin. I understand. I am glad you brought that up. I support that wholeheartedly. In order for us to get our grain to the ports, we have got to have our river traffic. We have got to upgrade those locks and dams. Quite frankly, to those on the environmental side that are opposed to that, I say that is the most environmental thing that we can do. If we do not repair those locks and dams and utilize the natural flow of water to haul our grain down to New Orleans, it is going to require I think a couple of million more trucks a year up and down those highways just to carry that grain, and that is environmental pollution. That beats up our highways. That tears things up. I mean this is probably the most environmental benign thing that they can do. Ms. Frederiksen. Just a comment about adding value to our crops here. That is very important, and anything we can do to streamline things such as soy diesel or ethanol or the alternative energy sources I think would be a great benefit to make it easier to adopt those items. Senator Harkin. I am looking again for these like niche little things. If there is something that people can start growing grapes or something again in the Loess Hills, there ought to be some way to really help them to promote that. I mean if they can provide some income for a couple, three families or half a dozen, that is good. We have to look at things. Mr. Carney. Senator, I want to thank you. I guess we have touched on conservation, trade, market, environmental, food safety, biosecurity today. I realize that new markets are important. Everything we talked about today is important. Personally, I figure the environmental and the new regulations that are coming and trade is probably our huge, top priorities, but good luck and if you ever need any help, call. Senator Harkin. Thank you, and I appreciate all of the input from the different associations, the Pork Producers, the Farmers Union---- Mr. Lehman. I also want to thank you for coming today, and I hope to encourage you to do more and more of these meetings around the state. Senator Harkin [continuing.] This is the first. We have another one today in Spencer. Believe me, we are going to be having more of these kinds of hearings. I need all the input we can get before we start hammering down this Farm bill. I thank you all, some of you coming a great distance. Please feel free to either e-mail me, write, call. Some of you said you have been calling Moreland. Any thoughts, suggestions you have for input on this Farm bill, please let me know. Again, I thank you all for being here. 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The committee met, pursuant to notice, at 1:35 p.m., at The Hotel, Spencer, Iowa, Hon. Tom Harkin presiding. Present or submitting a statement: Hon. Tom Harkin. STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA, RANKING MEMBER, COMMITTEE ON AGRICULTURAL, NUTRITION, AND FORESTRY Senator Harkin. Thank you all for coming here today. I guess I am supposed to gavel this thing to order or something like that. I really appreciate you being here. Can you hear in the back all right? If I do not see any heads nodding, I am going to be worried here in a second. Can you hear me in the back? Can you hear in the back? You cannot hear in the back. If you cannot hear, raise your hands. [Laughter.] Senator Harkin. It is an old joke. I do not know what we are going to do if we do not have any loud speakers back there and you cannot hear. This is not acceptable. This goes back quite a ways. Do you suppose there is any way of getting any speakers back toward the back so people can hear? Because you have got both of them up here. I do not want to disrupt everything. We have got a limited amount of time. Audience member. We are OK now. They have improved it a little bit. Senator Harkin. Somebody has turned it up a little bit? Audience member. Yes. Senator Harkin. If you can hear me back there, raise your thumb, give me a thumbs up. OK. That is good enough. Anyway, thank you for being here today. I guess all of us better just drive these things and speak into them so everybody can hear. We just had a great hearing, not quite this big. It was pretty big. I thought it was big, but this outdoes that. We just had one down in Lewis, Iowa at the Wallace Foundation Center. We had a great turnout down there and a lot of good suggestions, good testimony. We will do the same thing here. I am going to make a short opening statement and recognize some people. I am going to turn it to the panel, go down the list, ask them to make a short, concise summary of their statements. I might have a few questions and interaction. Then I would like to turn it open to the audience. We have a standing mic somewhere, I hope. Back in the center someplace there's a mic that I cannot see back there. You have got a roving mic. OK. Good. Then I will just ask you since this is an official hearing, I am going to make sure you state your name for the reporter who is taking it down. If it is a difficult name like Smith, please spell it out, will you? Let me recognize some people who are here, some public officials. Iowa State Senator Jack Kibbie is here. Jack, where are you? Senator Jack Kibbie is here. Iowa State Representative Marcie Frevert is here. Kossuth County Supervisor Don McGregor is here. Don, thank you for being here. Clay County Supervisor Joel Sorenson is here. Thank you for being here. Clay County Supervisor Sylvia Schoer is here. Thank you for being here. Our soil commissioner for Cherokee County, Tom Oswald, is here. Tom is here. Thank you for being here. Buena Vista County Supervisor Jim Gustafson is here. Way back in back. All right, Jim. We have Dick Drahota, rural development from Storm Lake. Thank you for being here, Dick. Gene Leners, treasurer of Palo Alto County. Gene is here someplace back there. Tom Grau who is deputy undersecretary of USDA. Where is Tom? Thank you for being here, Tom. Did I miss anyone? Are there any public officials here that somehow slipped under the radar screen? I thank all of you for being here. If I did miss anyone, I sincerely apologize. Today I am pleased to be holding two hearings of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, in Iowa. The testimony from our panelists and from the audience will become a part of the Committee's official hearing record. Your comments, ideas and recommendations will be a great help to my colleagues and me as we work to write new legislation and improve programs affecting agriculture and rural communities. Again, let me introduce someone else to you just to make sure you know who everyone is here. My chief of staff on the Agriculture Committee is Mark Halverson right behind me. Many of you have worked with him in the past. Allison Fox is also on my Agriculture Committee and works mostly with conservation issues. Let us see. Where is Claire Bowman? Claire Bowman is also on my Ag Committee staff and is here today. Maureen Wilson, I want to make sure you know Maureen. She runs all of my Iowa offices out of Sioux City for western Iowa. Maureen is here. Right back there, Maureen Wilson. Farm families and rural communities in Iowa and across our nation need some new directions. They have not shared in our nation's prosperity. That is clear. Although Freedom to Farm had its positive features, it had some serious shortcomings which are now obvious. We have to learn from experience and make the necessary improvements. We have to start by restoring a built-in, dependable system of farm income protection that does not require annual emergency appropriations. We must also remember that farmers are the foremost stewards of our Nation's natural resources for future generations. We should strengthen our present conservation programs and adopt new ones to support both farm income and conservation. I have authored legislation to create a new, wholly voluntary program of incentive payments for conservation practices on land in agricultural production. That approach, improving both farm income and conservation, I think should be at the heart of the next Farm bill. Now, to meet the challenges, the next Farm bill must address the broad range of farm and rural economic issues. We must do more to promote new income and marketingopportunities, whether that is through value-added processing cooperatives, creating new products through biotechnology, or developing a niche and direct marketing. I see tremendous potential for farm income, jobs and economic growth through clean, renewable energy from farms: Ethanol, biodiesel, biomass, wind power and even, on down the line, hydrogen for fuel cells. We must also ensure that agriculture markets are fair, open and competitive. We cannot have a healthy rural America and rural communities unless both the farms and the small towns are doing well. We must do more in the next Farm bill to revitalize economies and improve the quality of life in our rural communities. That includes support for education, health care, telecommunications, water supplies, transportation, as well as access to investment capital for rural businesses. That completes my opening statement. I also have a letter from Governor Tom Vilsack to be made part of the record. I will not read the whole thing. He said, I just encourage you to develop the next Farm bill to help farmers produce conservation commodities and improve their bottom line and renew the public commitment to agriculture. I just ask that that be made a part of the record in its entirety. [The prepared statement of Governor Vilsack can be found in the appendix on page 108.] Senator Harkin. With that, again I welcome the panel, and I thank many of you for coming a great distance and for more than one time being witnesses for the Senate Agriculture Committee. Some of you have been there many times before. It has always been valuable input from all of you, and I appreciate you being here. We will just go down the line. I will start with someone who whenever I mention his name in Washington, everybody knows immediately who I am talking about. He is Perhaps the foremost agriculture economist in the United States today. We are just proud to have him here in Iowa and at my alma mater, Iowa State. If the Iowa State women just do half as good against Vanderbilt tonight as Neil Harl has done in his lifetime, we will blow Vanderbilt away tonight. Neil Harl, thank you for being here. [The prepared statement of Senator Harkin can be found in the appendix on page 154.] STATEMENT OF NEIL E. HARL, PROFESSOR OF ECONOMICS, IOWA STATE UNIVERSITY Mr. Harl. Thank you, Senator. I appreciate the opportunity once again to be before the Senate Agriculture Committee, and I will try to keep my remarks brief. I am always reluctant to be critical of the handiwork of the U.S. Congress, but I want to-- -- Senator Harkin. Why should you be different? Mr. Harl [continuing.] Make it clear that I do think that the 1996 Farm bill has failed spectacularly. Let me just quickly mention why, and let me then follow that with some commentary as to what I think we might want to do. The legistion was supposed to reduce government outlays and phaseout subsidies, and it has not done that. We have reached record levels this last Federal fiscal year, $28 billion plus. I'll Return to that point in just a moment. It was supposed to produce increased exports. It has not done so. In fact, we have dropped about 18 percent. It was supposed to slow the land clearing process in South America. Instead more land entered production in Brazil and Argentina in the years since 1996 than in the 1990 to 1996 period. It was supposed to reduce distortions and economic decisionmaking. It has not. It has produced probably greater distortions than we had prior to 1996. One item, we are consistently producing commodities below the cost of production, distorting the cost of commodities as inputs to others. It was supposed to keep government out of agriculture, get government out of agriculture. Instead government is probably playing a greater role than ever. Why did it fail? First of all, it substituted an adjustment model based on economic pain for a model of relatively painless adjustment. Farmers do not like economic pain and Congress does not either. At the first turn, when economic pain began to be obvious, farmers started receiving funds from Washington so that the adjustment process built into the bill really did not operate. I do not think politically it could operate. I do not think in an open, democratic system we can expect an adjustment model based on economic pain to work very well, and it has not. I remember in testimony both before the Senate and the House, on both sides of the aisle, in 1998 they showed great reluctance for economic pain to be the adjustment mechanism. Export projections were quite unrealistic. We were told we were going to hit $80 billion within a few short months, and it dropped instead. We forgot the lessons learned about 70 years ago that it takes a ton of money to replace lost income when you have inelastic demand. Once you let commodity prices fall, it takes an enormous amount of funding to replace that lost income. Agriculture is the only sector expected to produce flat out. Deere does not. Intel does not. Boeing does not. No one else except for agriculture. It is vital we recognize that some of the voices active in debate in 1996 now profit from all-out production. Those who are involved in handling, shipping, storing, exporting and processing all like flat-out production. Farmers need to begin marching to a drummer they have bought and paid for, not a drummer bought and paid for by someone else. As an example, if Deere had been operating under Freedom to Farm principles for the last three years, there wouldn't have been enough parking lots to hold the equipment. You could have bought a new tractor for less than my dad bought his first John Deere B in 1946 for $1,365. Of course, Deere did not operate that way. They slowed down the assembly line and eventually shut it off when they were in overproduction. What is the problem? In a word, it is production. Too much. Technology is marching us down the road faster than we can get it sold. If you think back over the last 70 years, what if we had had no technology in agriculture since 1930? What would corn be worth? A lot more than it is today. Would farmers be better off? Probably not. Because, as the world's best economic citizens, they would have long ago bid it into cash rents and bid it into land values. Land values would be a lot higher. There is an interesting link there. We anticipate that at some point funds may not be there. Let me talk about our three options, Senator. The first option is we can go back to Congress year over year and ask for funds. As long as we can get funding, then we can limp by. Loans will stay current. Lenders will be happy. It still leaves trauma. No doubt about it. What if we get an economic downturn? We are in the early stages probably of one now, although there is some difference of view. We may not have so much money sloshing around Washington as we have had in the last five years. Dealing with that second outcome is the second option. Another possibility is we could encounter a shift in priorities. What I was hearing from the administration until just the last few days was maybe we should reassess funding for agriculture. I hope that is not the case. Let us assume that we cannot get the funding and funding declines. What is likely to happen? We would see a decapitalization of land values because the evidence is clear. We have capitalized a very substantial part of our benefits into land values and into cash rents. We could see--with a cold turkey withdrawal of funding a 50 percent decline in land values. That is awesome. That destabilizes lenders. It destabilizes the entire rural community. It sucks a lot of equity out of the sector. I do not know of anyone in or out of Washington who wants to preside over that kind of an outcome. We are very vulnerable. We have become hooked on payments. That is a dangerous situation to be in. The farther we go, I fear the more the danger. Because we are building up larger and larger expenditures. The second option is one that would be very painful. If we can get the funding, which is No. 1, then start suffering a reduction, No. 2. No. 3, begin a shift toward less dependence on subsidies and modest efforts in other directions. Let me mention, first of all, an emphasis on conservation. I commend you, Senator, for the conservation security program. That is one of the bright spots. I am supportive of CRP expansion. I would support 40 million acres. I would even support 45 million acres. That in conjunction with your program is an important part of this. Second, I really believe firmly that we need to return authority to the secretary of agriculture that was swept away in the brief euphoria of 1996. I would specifically mention the farmer-owned commodity reserve. It worked better than we give it credit for. It could work even better if it were fine-tuned. I do believe that is one important element in addition to emphasis on conservation. No. 2 also, in terms of authority of the secretary, I think we need to have some modest effort, on a market-oriented basis, to begin to try deal with our oversupply in years when our weather is so very good, as it has been. There are a number of good proposals. I have reviewed a large number. I like the so- called flexible fallow program because it is market-oriented. It leaves the decision with the farmer. Each producer looks at their costs and bid in their land to a retirement program. It is likely to be more attractive in the periphery than it would be in the core area of production. That is what we should do rationally. I like that, and there are some other possibilities as well. We should also focus on the structural transformation of agriculture. I have circulated today copies of a paper I am giving next Tuesday at a seminar at the National Press Club. I will have the pleasure, Senator, of introducing you at that event. We really need to look very closely in addition to the traditional side of farm policy to start thinking about this structural transformation of agriculture, what I call the deadly combination of concentration in input supply, output processing and output handling, coupled with vertical integration from the top down. I consider that to be a deadly, deadly, deadly situation. We should do what is necessary to assure meaningful, competitive options for producers. For if you do not have meaningful, competitive options as a producer, you are going to get squeezed and you are going to end up being a serf. I do not use that term just to be inflammatory, but we have enough experience in the broiler industry to know where we are headed unless something is done. I would put a high priority on trying to maintain meaningful, competitive options. If you come to the end of a 5-year contract to produce hogs in Iowa and you do not like the replacement contract, you say, ``I cannot live on that''. Sorry. That is the best we are doing this year. You look around. If the nearest competitive option is 900 miles away and there is local dominance by the packer, then you know what is going to happen with the disparate bargaining power you have. I really would emphasize that. Let me just mention one other thing and then I will close. Senator, I think we need to start thinking about a global food and agriculture policy. We are in roughly the stage we were about 70 years ago when we were arguing, is there a place for a national forum policy? We went through the 1920's, a painful decade. We argued, is there any role for the Federal Government? The decision was, no, there is not really a role for the Federal Government in forum policy. We since have decided there is, and we operate under that assumption today. We are about the same position in terms of a global policy. Let me mention some of the components in a global food and agriculture policy. Leading the list is boosting Third World economic development. That is the last frontier for increasing food demand. The potential is awesome. I do not hear voices supporting Third World development where there could be a genuine increase in the demand for food as their incomes rise. There is almost universal support for that. Second is food safety. We are probably going through the period of greatest concern in my lifetime about food safety. This should be a front burner topic as part of a global food and agriculture policy. Food security is another one. We have not known hunger in our lifetime in this country, but that is not true elsewhere in the world. We need to assure people that there will be food security and that we will take the necessary steps. They still remember the 1973 embargo under the Nixon administration. Equitable sharing of germ plasm is another possible feature of a global food and agriculture policy. There is a lot of worry about that, especially in the Third World countries and in the tropics. Trade obviously must be a part of a global food and agriculture policy. Finally, inventory management. If we have to do something on the downside, then we should have commitments that they will do likewise. I do not believe, however, that what we do modestly on the downside has very much to do with South America. I honestly believe that there is no empirical evidence to support the assertion that modest efforts on the downside induce land clearing in Brazil. As said earlier, we have actually had more land entering production since 1996 in those countries than we had in the period 1990 to 1996. I thank you for the opportunity to appear. I would be happy to take questions down the road. Thank you. [The prepared statement of Mr. Harl can be found in the appendix on page 155.] Senator Harkin. Thank you very much, Dr. Harl. As usual, a very excellent statement. Senator Harkin. Next we turn to Joan Blundall who is the executive director of The Seasons Center for Community Health in Spencer. Joan. STATEMENT OF JOAN BLUNDALL, EXECUTIVE DIRECTOR OF THE SEASONS CENTER FOR COMMUNITY MENTAL HEALTH Ms. Blundall. Thank you. I appreciate the opportunity to present testimony to you today. Frankly, if we had a farm bill that was working, I would not be at this table today. The things that I will report on are things that usually are not discussed in meetings relating to agricultural policy, but they are critical because what happens with agriculture policy ultimately comes back and impacts every farm and rural family in Iowa. I am not pleased to report that as executive director of Seasons Center for Community Mental Health in this corner of Iowa we have a 17.3 percent suicide rate which is six points higher than the national average as of a year ago. This year it will be even higher. Senator Harkin. Say that again How much was that, Joan? Ms. Blundall. 17.3. That is--and the national average is 11.2. Suicide is just another indicator of other underlying mental health problems. At Seasons Center for Community Mental Health every day we hear scenarios from families where the consequence that the way that we live in rural America is not working for families. It was not too long ago that an honor student was referred by her school. At 17 she was suicidal, was unresponsive when the therapist asked questions until the therapist said, I hear your father is a farmer. Then the girl broke down about how difficult things had been within the family for years. We were able to avoid hospitalization by giving sample drugs and counseling. The family had no ability to pay for their services, did not fit into any category for services. The farmer sold the family antique china cabinet to pay for services. I wish he had not paid for services. We had a child this week at the age of 14 who was--who came in suicidal. The bills to take care of this child will be $200 per week between medication, visits to the psychiatrist and therapy appointments. The family was ineligible for the State Medicaid program. They were $12 over the limit for state- supported insurance program, and there is no mechanism to assist them. The family has decided to drop out of treatment and just seek services from the psychiatrist and get medication. This family unfortunately is in a situation where the choices that they have are either to give up the job in the grocery store, which is necessary income for the family, divorce or play Russian roulette with which part of medical care they can afford at the time. The categories we have to help farm families with different types of assistance are based on urban models. They do not fit the realities of our people. We have had a 12 percent increase in service as well as a 25 percent increase in emergency calls. On average we have 140 emergency calls a month for a population base of 108,000 people. We class emergencies as a call where the individual is at risk to themselves or another person. The state hotline has also experienced an increase in mental health calls though they may not be classified as emergency calls. The families who seek services at Seasons often seek them for problems of marital discord. What we found when the family comes in, the family is a healthy family, but one of the members is severely depressed. If we can treat the depression, the family can remain whole. Our greatest increase in services in the area is between 13- and 15-year-olds. Children are the symptom bearers. Mental health concerns that are not taken care of at this age will crop up later on. We are creating an inventory of expenses for the future related to human costs. At a meeting just a week ago here in Spencer sponsored through a Federal program that I think is very effective we had well over 100 farm families attend. One of the things that is of major concern to me and something that I would not have predicted, in the survey that was given to the families we found that the major concern they had in one of the survey categories which was stress. I would have predicted that as being first. The second concern area for adults was mental health problems Farm families and rural people do not admit to mental health problems. It does not fit our culture. It does not fit with the realities that we have about stigmatization of care. This says to me that it is a red flag that we need more and more help. For children the health concern that was greatest had to do first with abuse, and second it had to do with lack of insurance or coverage for health care. If we look at what we can do about the situation and even if we can create a farm policy that is going to lead us to the stability that Dr. Harl talked about, we have a period of time where folks are hurting that are going to call for immediate attention. One of the things that we have to consider is what the consequences have been of not having cost-based reimbursement for mental health services as is done in rural health clinics. We have almost been crippled--and I say almost because we will not be crippled--in our response to the needs of our rural families in this part of Iowa. We have almost been crippled because of the adjustments that we have had to make because of the inadequate financial support for Medicare and Medicaid population. In a 14 county area we can document that we had to make $467,158.14 worth of adjustments because income from Medicaid and Medicare and the waiver program were inadequate. We would have been able to serve everyone who had a problem and do a lot of prevention if the basis was there. Second, I think that some of the requirements that are necessary regarding having physicians present in a clinic create barriers to access to care. We are in a health shortage area. We do not have those professionals there, and, therefore, we can get severe waiting periods. Tax relief and loan repayment for physicians who go through the national service corps can be helpful. We do not have enough psychiatrists and mental health professionals in the state of Iowa to assist with the needs that are coming. Rural health network grants and outreach grants have been a lifeblood in our being able to respond even though we do not have resources. I hope that continuation of these programs is something that can be worked toward. We need that kind of basis if we are going to be able to respond to the emergent needs that are coming now. Thank you very much. [The prepared statement of Ms. Blundall can be found in the appendix on page 175.] Senator Harkin. Thank you very much, Joan, for an excellent statement and rundown on what's happening here. Senator Harkin. Now we have Don Mason, president-elect of the Iowa Corn Growers Association. Don. STATEMENT OF DON MASON, PRESIDENT-ELECT OF THE IOWA CORN GROWERS ASSOCIATION Mr. Mason. Good afternoon. Thank you, Mr. Chairman, for offering my organization this opportunity to testify in front of your committee to present our views on the direction of American farm policy. Again, my name is Don Mason. As you well know, I farm about 800 acres of corn and soybeans about 45 minutes south of here in the little town of Nemaha. In my spare time my partner and I also raise about 5 to 6,000 head of hogs per year. I am the president-elect of the Iowa Corn Growers Association, a farm organization that represents over 6,000 growers in Iowa. I am a former Peace Corps volunteer. I worked for four years in South America and have seen a good share of the world. When I came back to Iowa--as soon as I got back to Iowa, I seized the opportunity to get my hands into the Iowa soil and work the soil. It is my goal in the position that I am to make sure the young men and women in Iowa, my potential replacements, if you will, have the same opportunity to get their hands into Iowa soil and work the land. I am reminded of a comment I heard some time ago with regard to farm policy that I think is very applicable in this situation. A former secretary of agriculture asked a group of farmers what direction they hoped Congress would go with the Farm bill. A farmer stood up and said, Mr. Secretary, I would like you folks to work together to create a farm bill that will allow me to thrive rather than just survive. That is very aptly put, Senator Harkin. I would sure like to see a program that encourages Iowa's farmers to thrive, not just to survive. I believe that the process that you, Chairman Harkin, and your counterparts in the House have laid out and have embarked on will bring all commodity groups to the table to have some fruitful and honest discussions of where we go next. Last year U.S. farmers experienced the lowest corn prices in more than a decade, the lowest wheat prices in 8 years, the lowest soybean prices in nearly 30 years, and the steepest decline in milk prices in history. Just two and a half years ago as a pork producer, I saw the lowest hog prices since the depression years. Why is the farm economy in crisis? Can you lay the blame entirely on the Federal Agriculture Improvement Act and Reform of 1996? Probably not. In large part the crisis is being fueled by four consecutive years of record global grain production and combined with a weak export demand, both of which are beyond the scope of the 1996 Act. U.S. ag exports are projected to be lower again this fiscal year after reaching a record high of nearly 60 billion in fiscal year 1996. Large global production, the Asian and Russian economic crises, and a strengthening dollar have all contributed to a weakening of those exports. We do support some of the underlying principles of the 1996 Farm bill. We like the ability to plant what we choose and what the market demands, to let the market help us make decisions on the farm rather than Washington bureaucrats. A more appropriate question is: Is the 1996 act doing or is it capable of doing all that farm policy could and should do to help deal with the problems we face now and to help with recovery? Clearly the answer to that is no. Now, I will not delineate all of the supplemental emergency titles that Congress has had to enact since passage of the 1996 bill except to comment on a fundamental shift that we find quite troubling, and that is the amount of our net farm income that comes directly from the government. Dr. Harl has already alluded to this. Our chart, shows very graphically the amount of government assistance as a percentage of U.S. net farm income. It has risen dramatically over the last four years. If you talk to most farmers, certainly not just corn growers, they will tell you that we would rather make our income from the market and not from the government. Having said that, I would like to quickly summarize our vision for agricultural policy. Our discussion of farm policy is guided by eight fundamental principles: First, that agricultural policy should not artificially impact land values and stimulate overproduction around the world. The Federal Government should not and cannot guarantee a profit, but it should help producers manage risk. Ag policy should continue and expand environmental programs such as CRP. Payments for conservation practices should be fully supported and liberally funded. Policies should promote value-added processing of commodities--example, ethanol production, which we have got quite a bit of going on in Iowa, particularly where the value- added is captured by farmers. Just an aside here, I would mention that in efforts to promote value-added projects by farmers we have to be careful not to penalize farmers because the value-added enterprise that they develop happens to have the wrong legal structure or happens to be a few million gallons of ethanol too big or something like that. Let us be careful in developing programs. Policies should retain the planting flexible of Freedom to Farm. Policies should make a commitment to reducing trade barriers and sanctions. As the Senator well knows, I have spent some time lobbying for improved relationships with Cuba and trading relations with Cuba and so on. We made some ground, headway last year. I would say that we have got to remain vigilant so that the intent of that legislation is carried out and that we do not slam that door shut again. Policies should be directed to improving our infrastructure such as upgrading the lock and dam system on the Mississippi River. Finally, policies should support research, development and marketing programs for commodities. After weighing all of these needs and concerns including addressing the need for a safety net to deal with price downturns and disasters, we also believe that an integral component of the new Farm bill should be some kind of a system of counter-cyclical payments. Our group is currently considering a proposal to create such a payment, and we are hopeful that our national president will be able to present the National Corn Growers Association's findings on this proposal to the House Ag Committee and, of course, to this committee as well by the end of April. We have noted with great interest a lot of proposals out there, and we look forward to presenting a very novel approach to counter-cyclical payments in the very near future. The Iowa Corn Growers Association believes that any reform initiatives should promote conservation. We also see considerable promise in the Conservation Security Act. We think it is a great effort. We are committed to the voluntary nature of conservation programs, and we applaud your efforts to reward producers for the conservation practices that they have undertaken or intend to undertake on their own initiative. In trade policy we also believe that we should continue our efforts to eliminate trade barriers, to honor our commitments to WTO negotiations. Therefore, we oppose policies that would continue to directly interfere with our WTO obligations and stimulate overproduction. In conclusion, given various proposals presented by farm organizations to address the problems of the farm economy, we understand that it is going to be a little bit difficult and it is going to be quite a job to reach consensus on a farm bill. I remain hopeful that we can do that. To paraphrase Robert Frost, we have miles to go before we sleep. I am also hopeful that a farm bill process continues to be conducted in such a way as to promote a very thoughtful dialog about where we need to go next. Senator Harkin, I look forward to working with you to define proposals in a farm bill that will help Iowa's farmers to thrive and not just survive. I commend your work on this committee, and I appreciate this opportunity to express the Iowa Corn Growers Association's views. I will be happy to answer any questions that you might have. [The prepared statement of Mr. Mason can be found in the appendix on page 178.] Senator Harkin. Don, thank you very much for a very strong and forthright statement. I appreciate it very much. Senator Harkin. Next we turn to Mark Hamilton with Positively Iowa. Mark is also the publisher of the Times- Citizens newspapers of Iowa Falls, Iowa, and he is secretary/ treasurer of Positively Iowa. STATEMENT OF MARK HAMILTON, POSITIVELY IOWA Mr. Hamilton. Thank you, Senator. It is an honor to be here today. I want to discuss a serious threat to agriculture's future and to Iowa's future that goes well beyond farming. Rural Iowa as a whole is dying. There is a relentless geographic cleansing that is going on in more than half of Iowa that not only threatens the existence of communities, but also endangers Iowa cities and farming as an industry. Demographic trends tell us that mathematically the rural Iowa population base cannot sustain itself. The farming industry and Iowa cities seriously underestimate the damage to their interests if rural communities are allowed to decline. In agriculture, where off- farm income is becoming a more necessary component to financial success, rural nonagricultural jobs are becoming fewer and further from the farm. Cities, which sometimes view rural communities as unworthy competitors for development resources, fail to recognize the traditional source of over half of their growing labor needs. Clearly, the demographics of the existing indigenous rural population dictate depopulation. A resettling of rural Iowa must occur. The question is under what set of policies and goals will that resettlement take place. The current policy record has produced a low-skill, low-wage resettlement result-- jobs our own state college graduates do not find acceptable. Different initiatives can drive a more attractive and more acceptable route to resettlement. I have four suggestions I would like to briefly bring to your attention. No. 1, we need a support system for competent professional developers at the local level. I submit that the National Main Street and Main Street Iowa model has been, by far, the most effective program for rural Iowa communities that I have seen in the last 20 years. It saved downtown Iowa Falls and has saved many other Iowa downtowns as well. The model requires local financial and human commitment and leverages that with State and Federal training, expertise and matching financial support. It also requires the local communities to follow tested development models if they want to participate. I suggest you look to that model in the area of rural economic development. No. 2, when we talk about rural problems, we often hear about rural poverty. What is more crucial to this discussion is the staggering level of rural wealth. Sixty percent of Iowa farm land is debt-free. That translates to $35 billion in unencumbered assets. There must be incentives to move just a small portion of those assets into a pooled, risk-shared system to resettle rural Iowa with good high-skilled jobs. You need financial and tax experts to take a look at this. I am certainly no expert. Local banks are required to invest locally through the Community Reinvestment Act. Why not farmers as well? We offer farmers incentives to treat their land in the public interest. Why not expand that concept to the use of their government-created wealth for the greater public good? No. 3, one of the most difficult hurdles for local communities is to overcome the 150-year-old definition of community boundaries that were made for a horse and buggy economy. The state of Iowa and its neighboring states may suffer in much the same way. Regional coordination of state and Federal laws and regulations could be improved among the north central states in a number of areas. A joint effort among neighboring states pointing to a reduction of jurisdictional barriers would be productive and worthwhile for rural revitalization. We ask communities to look beyond their boundaries for improved alliances and economies of scale. The states in the region should do the same thing. Northern Great Plains, Incorporated, a five-state regional nonprofit rural development organization, which I believe, Senator Harkin, you were instrumental in creating back in 1994, is bringing out recommendations on such a project next week I think it will be worthy of serious Congressional consideration. No. 4, how do you coordinate a sensible, efficient approach to resettlement of rural Iowa? This is where I think real, effective, affordable progress can be made immediately. Our organization, Positively Iowa, has led a private sector, grass- roots issue development process for the last 6 years. Our single goal now is the creation of a Center for Community Vitality for Iowa. The Iowa 2010 Strategic Planning Council proposed this idea. Iowa State University Extension and the College of Agriculture have endorsed the concept. The center can be modeled after the Leopold Center for Sustainable Agriculture. It would be unique in that rural leadership that is actually working in the rural development trenches will guide it in concert with existing academic and development organizations. I am suggesting a decision making body that might be called the Rural Regents. It could direct and coordinate rural research and communication and really offer rural areas the information and resources needed to make better decisions as they chart their own routes to diversification beyond agriculture. This center could lead research, dialog and deployment of resources to make better and more coordinated decisions. I believe an appropriation of no more than $1,000,000 could establish this center The Iowa legislature is currently considering a resolution of support. I hope you will give this final recommendation your careful consideration. The job of bringing back rural Iowa gets harder with each passing day. The Center for Community Vitality is an idea whose time has come today. Thank you for your consideration. [The prepared statement of Mr. Hamilton can be found in the appendix on page 182.] Senator Harkin. Well, Mark, thank you very much. That was excellent. We will get back to that. I have got some questions for you on this one. Senator Harkin. Next we will go to Duane Sand, who is with the Iowa Natural Heritage Foundation of Des Moines. STATEMENT OF DUANE SAND, IOWA NATURAL HERITAGE FOUNDATION OF DES MOINES Mr. Sand. Thank you, Senator Harkin, especially for this invitation to speak about conservation needs and farm policy. We are grateful for your long history of conservation leadership, Senator. We hope the Ag Committee will work with you to better balance conservation programs and farm subsidies in the next Farm bill. We ask the committee to address both needs in the same bill. Last fiscal year Federal farm support payments were about ten times greater than USDA conservation payments. Farm subsidies enable the cultivation of some highly erodible lands, flood plains and grasslands that would not be cultivated in the absence of subsidies. Congress and USDA should do more to prevent and mitigate subsidized environmental degradation. We strongly endorse the Conservation Security Act as a means to help balance conservation and farm support. Senator, your sponsorship, leadership and staff support for the Conservation Security Act is greatly appreciated. Farmers and taxpayers can get more benefit from farm policy if CSA is enacted. The 1996 Farm bill did little to correct unsustainable farmland uses. Billions of dollars in production subsidies only encourages more cheap grain. CSA can help farmers transition to sustainable land uses and conservation practices. Farm policy can buy soil, water, air and wildlife benefits in addition to food security. We think CSA has three major improvements for farmers. First, the public pays more of the farmers' cost of providing conservation benefits. Too many farmers cannot afford to do conservation. The public should pay a hundred percent of real costs of many practices. Second, it can apply to all agricultural lands. Stewards of the land are eligible, and a history of environmental abuse is not needed to make the land eligible for incentives. Third, it is readily available and well funded. Conservation payments will become as accessible and dependable as farm subsidy payments. We also think CSA has four major advantages over current farm policy. First, conservation payments are not considered distorting of free trade and are not subject to the subsidy limits set by World Trade Organization. Second, more producers will voluntarily sign up, thus agreeing to the conservation compliance requirements for wetlands and highly erodible lands. By the way, Senator, we especially appreciate your efforts to strengthen conservation compliance and Swampbuster by restoring the ties to crop insurance and revenue assurance. Senate support is even more important now because of the recent Supreme Court ruling on Section 404 wetland regulations. Third, there will be more urban support for farm programs because CSA will benefit the environment in large parts of the Nation that historically have not participated in farm subsidies. Fourth, CSA is a legitimate alternative to the Freedom to Farm promise that farmers would transition to market prices and farm subsidies would end in 2002. CSA is a sustainable agriculture transition program that can provide help if Congress no longer supports market transition payments. I will take a couple minutes to give an example what CSA can do for Iowa. The map on display is the watershed for the Iowa Great Lakes complex. This 62,000-acre watershed which is partially in Minnesota provides drinking water for several thousand residents, provides recreation for roughly one million visitors annually. This area has growing small communities because of high quality natural resources. It shows that water quality contributes to rural development because people move to attractive recreation areas. Agricultural runoff is a great concern to local citizens and their water utility managers. Sediment, phosphorous, pesticides, and microbiological contaminant problems require much more work for water protection. Best management practices and wetland restorations to filter farm pollutants are greatly needed to prevent lake pollution. Phase one incentives under CSA would greatly expand nutrient management, manure management, integrated pest management, and conservation tillage practices on the 37,000 acres of cropland in the watershed, which is gold in color on that map. Phase two incentives would help adjust land use on targeted soils. It would pay for buffer strips, cover crops, conservation crop rotation, establishment of pastureland, or for the restoration of wetland prairie or other wildlife habitat. The small dark blue spots and lines are areas that deserve those kinds of land use changes in order to protect the lakes which are the large blue areas. Phase three incentives would help pay for on-farm research, demonstration, and establishment of whole farm conservation systems. Such systems might include organic farming transitions, the building of soil quality through carbon sequestration, better manure management using alternative livestock systems, the control of invasive exotic species that affect wetlands or natural areas, and the comprehensive pollution prevention for farmsteads and feedlots. Farm conservation programs are now used in the watershed, but progress is still too slow. The Conservation Reserve Program, the Wetland Reserve Program, the Environmental Quality Incentive Program each make important contributions to this watershed and deserve much greater Federal support. However, a Conservation Security Act is needed to supplement these efforts. CSA creates the means for serious planning and serious funding to support sustainable systems on working farms. We urge the Senate Ag Committee to authorize CSA to enable major new spending for the conservation of America's natural resources. Thank you for the chance to comment. [The prepared statement of Mr. Sand can be found in the appendix on page 193.] Senator Harkin. Duane, thank you very much for giving me a good rundown on the CSA. That is pretty good. Senator Harkin. Now we turn to Phil Sundblad with the Iowa Farm Bureau Federation from Albert City, Iowa. Phil. STATEMENT OF PHIL SUNDBLAD, IOWA FARM BUREAU FEDERATION Mr. Sundblad. Thank you, Senator Harkin. As you said, my name is Phil Sundblad. I live near Albert City with my wife, Brenda, and our two children. I farm with my father. We have about a thousand acres of corn and soybeans. I appreciate the opportunity to be here today on behalf of 155,000--plus members of the Iowa Farm Bureau. Farm Bureau members from across the country debated the future of farm policy at our annual meeting in January. Based on that debate Farm Bureau supports maintaining the basic concepts of the 1996 FAIR Act including direct payment program and planting flexibility. In addition, we are seeking an additional $12 billion to accomplish our goals within the farm program of an improved safety net, expanded conservation programs and more funding for trade promotion activities. We are very concerned about the approach taken by the House Budget Committee to provide this funding. The budget resolution provides for additional money for farm program, but makes it available contingent on passage of the Farm bill by July 11. The next Farm bill will have long-term implications for the future economic health of agriculture as well as our rural communities. Good policy takes time to develop. If this trigger is maintained in the budgeting process, it is likely that only the commodity titles will be addressed. The Farm bill is about more than program crops. It is about trade, conservation, rural economic development, risk management and credit. The program crops comprise only 22 percent of the gross cash receipts in agriculture. A farm bill that addresses only those program commodities ignores the majority of agriculture. We cannot support this approach. We urge the Senate to provide this funding without a contingency to ensure adequate time for debate on a farm bill that includes all titles, not just commodity titles. Farm Bureau's proposal for the next Farm bill includes these components: The next Farm bill should be WTO compliant. Our participation in the World Trade Organization's agreement on agriculture is critical to allow our producers access to foreign markets. Ninety six percent of the world's consumers live outside the United States. We cannot afford to shut the door on those markets. We support continuation of a direct payment program based on current payment rates and base and yield calculations We ask that oilseeds be added as a program crop, making permanent the assistance that Congress has provided over the past 2 years for oilseed producers. Rebalancing loan rates to be in historical alignment with the soybean loan rate. In addition, we support flexibility in the loan deficiency payment program to improve its usefulness to producers as a marketing tool. Implement a counter-cyclical income assistance program to provide an additional safety net feature for producers. Conservation programs should be expanded in the Farm bill. Producers are facing increased pressures from Federal regulatory programs such as the EPA's animal feeding operation rules, water quality standards and total maximum daily loads. Voluntary, incentive-based conservation programs are proven to work, but these programs have been significantly underfunded and targeted primarily to row crop producers. We support an additional $3 billion investment in conservation programs to expand the Environmental Quality Incentives Program and to establish an environmental incentives program similar to the Conservation Security Act which you proposed, Senator Harkin. Congress should increase funding for trade programs including market access development and Foreign Market Development cooperator program. Removing barriers to trade is only the first step. We must then convince the consumers in those countries to buy American agricultural commodities. In addition, we must fully utilize the Export Enhancement Program and the Dairy Export Enhancement Program to the fullest extent allowable under the WTO agreement. We are unilaterally disarming ourselves against our competitors if we do not use these programs. In conclusion, farmers look forward to working with you and the Senate Agriculture Committee as we develop a new Federal farm program. I believe we have proposals that take the best features of the 1996 FAIR Act and combine them with some additional income safety net protection and expanded conservation and trade programs to help agriculture share in the economic success that this country has felt over the last several years. We cannot design a successful farm program isolated from other policy considerations. Congress must recognize that farm policy is about more than just the program crops. Our success or failure on the farm is dependent on many factors including market exports, Federal monetary policy, corporate mergers and acquisitions, tax and regulatory policies and transportation to name a few. Thank you for the opportunity to testify today before the Senate Agriculture Committee. [The prepared statement of Mr. Sundblad can be found in the appendix on page 195.] Senator Harkin. Phil, thank you again Thank you very much for a very good statement, Phil. Senator Harkin. Thank you all. These were good, concise, straightforward testimonies. I am going to do a quick run- through to make sure that I heard you clearly. Then we will try to open it up for some questions Basically to recap, Dr. Harl said that he felt that the bill had failed. Last year there was over $28 billion in subsidies and no increase in exports, which were in fact, down 18 percent. The land clearing process in South America did not stop. In fact, we have even greater distortions and more production now. It did not help in getting government out of agriculture. He asked the question why. Because Congress does not like economic pain. Boy, is that a truism. We forgot the lessons that as income falls, it takes a ton of money to replace it. He basically said that the essence of it is that overproduction is the problem. Technology is increasing at a rapid pace Dr. Harl, basically you said that we had three options. First, just to keep up the annual payments, just keep them going and get by. You also raise the question, what if we have an economic downturn? Is Congress just going to give us the money? Second, a reduction of payments. Then you point out what that might do to land values if we do that. The third was a shift to less dependence on direct subsidies and a shift to something else. You mentioned the CSA, raising the CRP perhaps to 40 or 45 million acres which was in the initial legislation we passed in 1985. You said the authority of the secretary of agriculture to do other things like the Farm Loan Reserve. It needed to be fine-tuned. To deal with oversupply you mentioned the flexible fallow program and some structural changes might be needed in terms of concentration of the inputs and the output end along with vertical integration. You were suggesting by that that ought to be something that we look at in the Farm bill. We need to basically have meaningful, competitive options for farmers. You mentioned that we should to now be thinking of a global food and agricultural policy rather than just a national one. You mentioned some of the elements that that would entail. Joan Blundall reminded us all of what happens to policies that we enact. It has human dimensions to it. Things happen as a result of these. It was quite shocking to learn that the suicide rate is 17.3 percent and that is just in this area, I assume, in your area, which is well over the national rate. She related some stories of families under stress selling their family heirlooms to pay for health bills. That we have a problem in that--and I have to look at this--that a lot of our assistance is based on urban models and is not applicable to rural areas. I will take a look at that, and I need some more information on that. Just the lack of insurance for health care that we have in rural America and the need for mental health professionals in rural America and that we just do not have them. We need more rural health outreach grants. Don Mason with the Iowa Corn Growers, you basically said that we need a policy that makes us thrive and not just survive. That is good. He Talked about getting all the groups to the table. Again, Mr. Mason went through the lowest corn prices in a decade, wheat in eight years, soybeans in 30 years, and milk. Four years of record production globally and the strengthening of the dollar. Saying that there is a lot of dimensions to why we are in this problem. Mr. Mason said he liked the flexibility of the 1996 Act to make their own decisions, but the amount of net income from farming is disturbing. He had the chart to show that. Basically Mr. Mason said that in the policy--and I wrote these down as fast as I could, we should not inflate land values artificially. We should not guarantee a profit. We should expand environmental programs. He mentioned the CRP. We should do more to promote value-added products, retain the flexibility of the Farm bill, reduce trade barriers and sanctions and mentioned research programs and the river problems that we have with our locks and dams on the Mississippi. You also mentioned that we need a counter-cyclical payment. You said that the Corn Growers would be presenting this to us by the end of April. I look forward to a novel approach as you said. I am looking forward to that. Then also mentioned the Conservation Security Act in promoting conservation. Mark Hamilton with Positively Iowa talked about rural Iowa dying and resettling must occur. How do we do that? What policies? He had four suggestions. To support a system for local developers. He mentioned National Main Street and Main Street Iowa. Something that I had not thought about, he talked about the rural wealth that we have. We always talk about the problems, but we have $35 billion in land that is debt-free in Iowa. Then you talked about incentives for people that have this wealth to invest in rural Iowa. I would like to examine that more. That is an interesting, provocative idea. I do not know how we do it, but that is a lot of assets. Third, he mentioned that 150 year old definition of community boundaries and mentioned the Great Plains Initiative that we started. The Great Plains was to try to start breaking down some of the those old, artificial boundaries. Last you said, how do we coordinate this resettlement? Talked about creating a Center for Community Vitality, requesting a million dollars to establish the center. I understand that the Iowa legislature, you say, is also looking in to assist in this, as I understand it. Mr. Hamilton. Although they are not considering funding at this point because of the states--they are right now considering endorsement of the concept and hoping that funding will come from elsewhere. Senator Harkin. Like us? Mr. Hamilton. Yes. Senator Harkin. All right. I understand that. I got that picture. Duane Sand talked about that Federal payments were ten times greater than our conservation. In fact, I have a little chart which I am sure all of you can see quite well. All this shows is that the CC outlays for last year, $32.2 billion total and only 1.74 billion for conservation. You said ten times. More than 10 times. Fifteen maybe, sixteen times. Mr. Sand. I included some conservation operations, some personnel in my figure. That is all. Senator Harkin. This is just CCC outlays. You can see it is quite distorted. He mentioned the need to balance conservation and commodity needs in the Farm bill. Strong endorsement of the CSA and the fact--he gave a good description of what CSA would do, that there would be three major improvements. The public would pay more for conservation; it would apply to all ag land; and it would be readily available. He mentioned how it would be within the green box of the WTO, voluntary. Would help us get more urban support and mentioned those aspects and then had an example of how it might work in the Great Lakes complex here and ran through the three levels that we have in the CSA, the three different levels of participation. Phil Sundblad with the Iowa Farm Bureau mentioned that the National Farm Bureau wanted to continue the direct payment program and flexibility in any new bill. There was a concern about the House Budget Committee that said we had to have a farm bill by July 11. He said that was not time enough. I can assure you that is not time enough, Phil. He went on to say that the Farm bill is broader than just a commodity program. We have to think about trade and conservation and rural economic development, risk management and credit within a farm bill. He said there were six things we had to keep in mind in a farm bill. It should be WTO compliant. We need a direct payment program, and you said we should include oilseeds with that. We have to rebalance the loan rates to get them more in line again with the soybean rate. There should be a counter-cyclical program. Conservation programs need to be expanded. You say they are underfunded. You mentioned the need for $3 billion for the EQIP program, for example, and then talked about the Conservation Security Act. Then mentioned the need for funding for the Market Assistance Program, for the Foreign Market Development Program and the EEP, the Export Enhancement Program, that we need. He said keep the best features of the 1996 Act and combine with the above recommendations for a new farm bill. Again closed by saying that the farm policy is about more than just program crops. Again, all great testimony, and I appreciate it very much. What I would like to do is just ask a couple of questions. Then I am going to open it to the audience for suggestions and comments. First I want ask to Dr. Neil Harl and the rest of you, I heard some talk this morning about CRP. Now, again you mentioned--in the 1985 Farm bill when we first started the CRP program, we authorized 40 million acres. Then that was cut back to 36 million acres. We got about 34 million acres in right now. Now, I have been getting a lot of input from a lot of sectors, wildlife, sportsmen, people like that, others and some farm groups and others saying we need to expand the CRP program to 40 to 45 million acres. Now, I heard this morning from some people saying that, well, that would not be wise because what about the availability of land for young farmers, that this bids up the rental value. If there are young farmers who want to farm, this hurts them especially, I guess, in southern Iowa where I was this morning. I do not know about this area. I just wonder if you have any thoughts about that and how careful we have got to be and how concerned we have to be about that aspect. Mr. Harl. I am very sensitive to the plight of the young farmer, and I think we should continue to be sensitive. However, as I was saying, if we have income, it is going to get capitalized into land values. The more income we have, the higher land values are going to be because farmers bid it in every time. They always have. The only way you can keep land values low is to (a)reduce government payments or (b)shrink margins even more which would be exceedingly difficult to do because there is very little to capitalize in land values right now. While I am very sensitive to it, I really think that that should not be a determining factor here. We are dealing with trying to boost farm income. That will necessarily provide some buoyancy in land values. Senator Harkin. If farm payment programs were geared more to the producer and production practices of that producer rather than tied to a commodity, would that be a divorce that we might want to look at in terms of worth of land values? Mr. Harl. It would a separation. I am not sure it would be a divorce, if you can permit me that distinction. Senator Harkin. OK. Mr. Harl. The problem we have is this: Let us say that we have a program in place that targets the more erosive land, the marginal land as CRP does, and we double the payments on those for practices. You have to use those practices on that highly erosive type land. On the other hand, let us say we reduce payments on the best land that has no erosive capability. What will we see? We will see the value of the best land fall. We will see the value of the erosive land rise Senator Harkin. That is right. Mr. Harl. That even though we separate those, as long as it is tied to land, to a specific type of land, it is going to have the same effect basically. It is going to get capitalized into those values. You will find people bidding up. We saw that with the CRP. In southern Iowa where I am from in some of our counties down there, Decatur, Wayne, Appanoose, and Davis, actually that program raised the bottom end of the land values because there was an assurance of income. Now, there is one other argument that I think is a potent one. That is, it hurts input suppliers. There is no question about that. You do not sell machinery. You do not sell fertilizer. You do not sell chemicals. Senator Harkin. That is right. Mr. Harl. Those areas are hurting anyway. They are going to hurt no matter what. What we are dealing with here is the potential over the next several years of seeing what I call the core of production for corn and soybeans actually shrink because we are not able to sell our products as rapidly as we are increasing yields. If you look at the current yields that are being reported by some of the contest participants like Mr. Childs from Delaware County, we know that it is possible, physically, to produce over 400 bushels to the acre. Senator Harkin. That is right. Mr. Harl. Everybody will slowly march in that direction. Unless we can increase the demand for corn at that rate, we are going to see a shrinkage of the cornbelt. What we need to do is be sure we have in place programs to encourage the idling peripheral land. hat is the most rational economically, to encourage the peripheral land to shift. That is what Freedom to Farm would have done had we stayed the course, but nobody likes that because it squeezes everybody. In the process of squeezing the peripheral people enough that they go out of business or shift to another crop, it squeezes even those on the best soils. No one likes that. We have to take that lesson, I think, and see if we cannot encourage that land to shift. Especially where it is erosive I think the CRP program is a very good program. It has proved that since 1986 when the first bidding occurred. Senator Harkin. Any thoughts on this, Don? Mr. Mason. I was going to just make one quick comment. That is that one of the great attractions to CSA is the fact that it does make that separation between the land and the payment and apply it more to a practice. Not only that, but as I understand the provisions of CSA, it would be available to folks in prime farm country as well as marginal areas. It would be less likely to cause that distortion there between those areas. Senator Harkin. Thank you for mentioning that. Thank you for telling me about my own bill. I forgot that. Because he is right. Don is right, there are also other things in CSA, like water quality, for example, that is taken into account rather than just erosion. Mr. Harl. Relatively speaking would an owner of relatively flat Clarion-Webster silt loam be getting as much or be eligible for as much relative to what they are now getting? Would those who have the erosive land probably be eligible for more than they are presently getting? I would say that is probably the case. Senator Harkin. That is probably the case. That is true. It still would be open. Mr. Harl. It would have to be attractive to the people who have the best land who do not have the erosion problem, typically. They have other problems, runoff, nonpoint source, all kinds of other things. It is a question of the detail. As the old saying goes, the devil is in the details. Senator Harkin. I can see someone on that kind of flat land that might say, ``Gee, they would like to put in some buffer strips, maybe even a few windbreaks''. Pretty the countryside up a little bit. Just for things like that that just might help and that they get a nice payment for those practices that they are engaging in. Then they might want to say,``Well''--on tier one there are still farmers on that kind of soil that are not doing conservation tillage. Mr. Harl. It is true. Senator Harkin. They could do that. That is tier one there. They get in that tier one. Mr. Harl. It is a question of the attractiveness, the feasibility and the attractiveness to the individual as a practical matter. Senator Harkin. That is true. That is true. Mr. Harl. I am not saying---- Senator Harkin [continuing.] There will be some who will say to heck with it. I know that. It is Better to go the voluntary route and to get people to think about it. Hopefully they will be more community-minded and they will think about it. These payment levels would cover more than their cost of complying or doing that, at least in the first tier anyway. Well, rental rates. If we do get set asides or flex fallow, do we need to be concerned about the impacts on feed costs and livestock industry? I am constantly reminded by my cattlemen and my pork producers that do not forget about us. It is not just a commodities program. Mr. Harl. The answer to that is clearly yes. It would increase the cost of feed. Cost of feed is now below cost of production, so we have a distortion occurring. Generally the livestock industry will adjust. If you have cheap grain, that normally leads eventually to cheap livestock. The livestock industry can adjust to slightly higher feed prices. What they find difficult is great volatility in feed price. I would agree that it would raise the price of feed, I think fairly modestly, but it would raise the price of feed compared to the ultra-low levels existing now. There probably would not be any $1.30 or $1.40 cent corn, for example, if you had some buoyancy built in there with some provisions to reduce supply. What we are after is to try to get those prices up. Senator Harkin. You are arguing for a balance. Mr. Harl. That is right. Exactly. Senator Harkin. Arguing for a balance. What should we do about South American land, anybody, coming into production? does anyone have any thoughts about that? We have looked at the same data, and we see the same thing. It just comes into production. I do not know what we do about it. Mr. Harl. Senator, there is a book out, a very good book, published by Iowa State University Press 1999 by Philip Warnken, The Growth and Development of the Soybean Industry in Brazil. It cites the reasons why that country essentially forced the development of the soybean industry. I have pulled out from the book several factors that were involved. No. 1 was the embargo of 1973 that sent a clear message around the world, including Brazil, that we are not a dependable supplier. That was a niche for them. No. 2, we supplied them with varieties of soybeans that were appropriate for their climate. No. 3, we trained plant breeders. No. 4, they plowed about $4 billion U.S. dollars between 1970 and 1990 into the soybean industry in Brazil. No. 5, had subsidies on inputs for a while. They had preferential tax policies. There is not one mention, not one mention in the entire book, about U.S. farm policy. Not one mention. There were other factors, I think, that were clearly responsible. My own assessment is, Senator, I do not think that what we do modestly on the downside is going to have much effect. They are going to continue developing that land. I do not think there is much that can be done about it. We just simply have a huge competitive problem on our hands. Their variable costs are a little lower than ours. Some argue our land values are too high. Remember, we learned about 160 years ago that land values are not price determining. They are price determined. We capitalize into land values whatever there is in expected profitability. There really on a competitive basis, is no necessary relationship between land values and perceived competitiveness. There is for individual producers, but not on a competitive basis between the two countries. Mr. Sundblad. Senator. Senator Harkin. I am sorry, Phil. Mr. Sundblad. Just as a comment, recent groups have come back from South America. We probably lost our No. 1 status in the world as soybean producer to them, but also there is a fair amount of corn being grown down there. The original thinking was that the climate was not very good for growing corn, but not the case. That is also a concern that we need to have. Their corn production can be very high also, and they have the acres to do that. Senator Harkin. I was in China in August and they are producing a lot of corn in China too. In fact, last year they exported corn from China. I do not know what is happening this year, but last year they did. We thought they were going to be buying stuff from us. I have never been to Brazil, so I do not know what is going on there. I see the data and I see the figures, and you are right. Mr. Sand. Senator, I have a quick comment about what do we do about South America and their land use decisions. I would say we set a good conservation policy and ask the rest of the world to become good conservationists like we are after we get a real conservation program in place. We still have issues of what about U.S. policy and the amount of land we are bringing into production. With wetland regulations we now have reduced net loss to agriculture, net loss of wetlands to cropland, to only about 30,000 acres a year. It is still net loss in spite of everything that the government is doing to restore wetlands. Likewise on grasslands we still have a net loss of grasslands because more land is still being brought into production in spite of what we are spending on CRP and our other conservation programs. I would just go back to the point we have got to bring conservation programs into balance with the subsidy programs because we are distorting our land use decisions too. We do not yet have a good system when a farmer says, I am throwing good money after bad to continue to farm these flood plains and to continue to farm these eroded, poorly productive hillsides, to give them the ability to put that land back into grass where it is a sustainable use. That is why we are so supportive of Conservation Security Act. Senator Harkin. I appreciate that. Again I say to all of you on this Conversation Security Act, we introduced it, but we are reworking it. Again, any suggestions and advice--any of you in the audience, please take a look at it. If you need it, you can get it from my office. I am getting more and more co- sponsors for it. I hope to make it the heart of the Farm bill and sort of build the other programs. We have to have some counter-cyclical programs, direct payment programs and things like that involved also, but to make this conservation one that we can hinge it around. Because as you point out, we do tend to get some urban support for that. One other aspect of the Farm bill I want to mention--and I am really glad Mark Hamilton is here--that we have got to focus on, and that is this whole area of rural economic development and how we get more funds. I am looking at things like digital device, how we get broadband access into small communities, any kind of tax proposals that would help us in that regard, also new funding mechanisms to get capital here. Mark, have you heard about this proposal from the Federal Home Loan Bank Board which would issue CDs, certificates of deposit, not the other little CDs--based on a Standard and Poor 500 index? It is an interesting proposal. I am going to get it to you. You take a look at it. It is a way that they think of getting money to small rural banks. For example, like those of us who live in small towns, I mean, you do not get much return on a CD. If that bank could take that CD and tie it to a Standard and Poor's 500 stock index so that you would benefit on the upside, but you would never lose more than what you have got in it, but you could gain on the upside. That this might help get some money down to some of our smaller rural banks for the purpose of investing locally. I want you to take a look. I am going to get it to you. I want you to take a look at it. It is an interesting proposal, sort of just kind of new, just started. I want you to take a look at it. Some things like that we have just got to deal with in this Farm bill. I know that, Joan, like you say, a lot of this is tied to policy, but it all works together. If we are going to resettle rural America as Mark Hamilton says, we ought to be doing it. I believe that. I believe there is a role for that. I believe that people would live here if, in fact--as long as we got--I do not want to get on my soapbox. If we have got the best schools for their kids anywhere in America, that is economic development. That is economic development. Think about that. That brings people here. People will give up a lot if they know their kids are going to get the best education anywhere in America. Second, if we have--if we have not the low wage, but some different types of job opportunities for people here. That means if they can get on broadband and they can become part of this new economy, why not live here rather than live someplace else? They do not have any traffic problems and things like that. To the extent that we can get continuing education from our universities and our community colleges around the state of Iowa and more fully utilize the Iowa Communications Network for that so that people can continue lifelong education. These are the kind of things that tend to bring people to Iowa. That has got to be a part of this Farm bill mix in some way. Any further suggestions I would appreciate it. I am going to open it to the audience unless someone has some other things that you want to bring up or mention or hit me with here at all. No. I am going to try to open it up to the audience here. What I need to have you do is, like I said, just say your name. If it is difficult, just spell it out so the reporter can get the proper spelling. We have a mic that Claire, I guess, is going to pass around. Here is a man right here already. Mr. Rose. My name is Frank Rose. I live in Spencer, Iowa. I am not a farmer. I am a farm owner, but not a farmer. I am concerned about the farmer. You are talking about a farm bill that is in the future. We need something now. We have just gone through eight years where there was not a policy for the fuel and whatever. It has lacked that. As a consequence, we are paying for it with higher fuel prices, higher fertilizer prices, things of this nature which is a determining factor for the young farmer. I believe that the Federal Government caused this, so they should take the responsibility. I believe that they should take what the average cost would be for the farmer in a normal year, what it is going to be for this year, and I think immediate payment should go to the farmer for this. Senator Harkin. Are you talking about energy costs? Mr. Rose. Yes, sir. Senator Harkin. I see. Mr. Rose. The energy costs--because the past 8 years Clinton did not have an energy program. It has an effect on it. Neil Harl made the statement that the Freedom to Farm did not have the exports. Two years ago I went across the street to Tom Latham's office, and I talked to him about this. He brought out the fact that three years in a row in Congressional records they voted additional money for the Clinton administration to use for export enhancement and the Clinton administration did not use one dime of it. Senator Harkin. Export enhancement? Mr. Rose. That is right. Senator Harkin. Export Enhancement Program. Mr. Rose. That may be what happened to our exports deal. We need something immediate. Thank you. Senator Harkin. You are right about the Export Enhancement Program. It was not fully utilized under President Bush or under President Clinton. Keep in mind the Export Enhancement Program--and the one problem I have had with it is it has mostly gone for wheat. We did not get much help in corn on that. Plus we had problems with Europe on the Export Enhancement Program because we ran into problems on the WTO compliance nature of the Export Enhancement Program, so we have had some problems with it. That is no excuse. It is just to say that there have been some real problems with it. It needs to be geared more toward corn. My staff says virtually no corn has been used under the Export Enhancement Program. It is been all wheat, and that is not right, that is not fair. On energy though, I really take to heart what you say about energy. Someone mentioned this morning in the hearing--and I bring it up for your thinking--that we who are charged with the responsibility of developing the Farm bill, and by the way, it is not too far in the future. We are talking about this next year--is that we got to start looking at some things that we can do on energy in agriculture. How can farmers become more energy self-sufficient, for example? Well, we know that the most plain ones are ethanol. We mentioned soydiesel. If we could just get 1 percent of diesel to be soydiesel, that is about 300 million gallons. That would boost soybean prices by at least 15 cents a bushel. Last week I was in Cedar Rapids and poured a gallon of soydiesel into a bus. There are 32 busses in Cedar Rapids running on soydiesel. It works just fine. They have solved all the problems in it. Now we just have to make sure that we try to get it used nationally. How can farmers themselves become more energy self- sufficient? There are proposals for wind energy which you are familiar with in this area. Solar. Biomass. Of course, that is more applicable to CRP land. We have that project ongoing now in southeast Iowa where we have 4,000 acres of CRP land growing switchgrass, and the switchgrass is being burned in a boiler in Ottumwa, the Ottumwa power plant. Some of the initial results were pretty good, again depending upon the yield of the switchgrass itself. That is a possibility. There is a lot of different possibilities like that that we ought to be looking at. Mr. Rose. May I just say one other thing? Senator Harkin. Sure. Mr. Rose. In 1996 Congress voted to drill oil in Alaska, and Clinton vetoed it. OK. That would put out a million barrels a day. What would that do to our farm economy had he not vetoed it? Senator Harkin. I do not know a heck of a lot. I do know that you are talking about the Arctic National Wildlife Refuge up there. To access oil would supply about as much as we use in six months plus it would take over seven years to get it to market. It would not be available for seven years. Ninety-five percent of Alaska's north slope is already open for exploration. Ninety-five percent is already open. The natural gas that is there cannot get here because we do not have a pipeline for it. Quite frankly, I think the only reason they want to drill in ANWR is so they can get the oil to sell it to Japan. It is not going to help us one bit. I will say this: We need natural gas. Canada has more natural gas than they know what to do with. We are supposed to have a free trade agreement with Canada. What I do not understand is why we are not getting more Canadian natural gas down here. That is why two months ago I asked for the GAO to do an investigation. I want to find out what happened. We were told a few years ago we had a couple hundred years of natural gas, not to worry. We had more natural gas than we knew what to do with. All of a sudden we have one winter that is a little colder, and all of a sudden we have no natural gas. Something is not ringing true here. I want to find out what happened to the natural gas. Why are we not getting natural gas from Canada? What happened to all that natural gas they told us a few years ago that we had in abundant supplies for the next foresee--for as long as our lifetimes and our grandchildren's lifetimes? Something funny is going on out there, and I would like to get to the bottom of it on natural gas. Yes, ma'am. Ms. Sokolowski. Hi. I am Lori Sokolowski from Holstein. I would like to express a thank you to you, Senator Harkin, for allowing local farmers to give our input into the new Farm bill. The program that I am going to talk about today most people do not know about because it is a new program that we are starting in Iowa. I will give just a brief history and where we are up to date. It is a local food connection farm to school program. I introduced a new project on local food connections in the Iowa Farmers Union. The background for this program started in 1999 when I started networking with a group of local producers marketing our own food products together. Our organization is called Northwest Iowa Meat and Produce. Last summer we started developing an institutional market in the Cherokee County community. We began working with the Sioux Rivers RC and D on our rural supermarket project. Northwest Iowa Meat and Produce became a test program for their food project. This past November the food service director from the Cherokee County school and I attended a local food connection farm to school conference in Ames. We were recognized as being the first local food connection in the state for providing ground meat products in a local school system. Senator Harkin. Good. Ms. Sokolowski. I learned from that conference that Iowa has been approached to join a Federal school lunch program along with nine other states. In January of this year I put together a group of people who could create a new program for the development of a statewide institutional market. This is a way for producers in Iowa to be able to network together. In the two months since we have had our meeting each agency and organization has found ways to make changes in the current programs and be able to collectively work together on being one team for this initiative. We will meet together again on March 30. Iowa is now a pilot project program for the Federal school lunch program. We will be introducing a complete food nutrition package offering both meat and produce from local farmers. Senator Harkin. That is good. Ms. Sokolowski. Iowa has the oldest population age in the United States. However, our state is rich in resources. We need to take steps to turn this State around in agriculture and to help farmers find other alternatives in their current farming operations. We need to find alternative markets for their food products. It is time for local farmers to take control of marketing their own food products. It is time for producers to have more input on the current agricultural programs in our state. It is time to have programs that support local producers, not large corporations. It is time for local farmers to keep the retail share of our products and to share those profits in our communities. It is time for us to stop the importing of food products into our state, especially the items that are not labeled with the country, state of origin. I would urge everyone to support the program that we have started. It is a challenge that we face. Sometimes we have to buck the system to get this started, but we have a lot of support out there. After March 30 we will have a new update on our new development. Senator Harkin. I commend you. this is the type of out-of- the-box kind of thinking and little things that we can do in the state of Iowa. It was said this morning that 92 percent of our productive land in Iowa is for two crops, soybeans and corn. Maybe we ought to be thinking more about livestock production, how we do different types of livestock production, different types of livestock. Again, this is not going to replace it all, but little niche markets, little things that are going on around. I met a producer this morning who was producing Wagyu beef. I do not know. It is expensive. He has got a market for it. Not everybody can do it, but I am just saying there may be things like that. What can we do to promote that and help take away some of the economic disincentives for doing things like that? Organic farming. We are getting more and more organic. What was that mentioned this morning? A hundred and some thousand? I forget. 140,000 acres in Iowa right now to organics. Evidently it is growing. There is more and more of a demand for that. Again, it is not for everybody, but, gee, if this helps bolster some local income. We had a thing about what do we do to help people if they want to get involved? The CSA, by the way, Conservation Security Act, will help organic farmers because they will be able to do some conservation practices and get paid for it. Otherwise they would not get anything. I just ask you to start thinking about things like that, some of the things that came up this morning. I am sorry. Yes. Go ahead. Mr. Rohwer. A Chinese proverb says, unless we change our direction, we are likely to go where we are heading. [Laughter.] Mr. Rohwer. I used to think it was a joke. They say the way we are heading pretty soon there will be one farmer per county and his wife will have to work in town to put groceries on the table. Mr. Rohwer. The relevance of this can be seen in the Economic Research Service finding that the top 10 percent of the farm subsidies get 60 percent of the subsidies. The top 10 percent nationally get 60 percent. In Mississippi 83 percent, and even in Iowa it is most of 50 percent. I propose that, as one gentleman said, we disconnect the subsidy from commodities and direct it toward people. If that is done, it can be done in a number of ways. One way would be to have a limitation that amounted to something. Incidentally, do not leave that limitation to the discretion of the current secretary of agriculture. That would not work at all well. Flexible fallow will be the same thing without a limitation. It will again exacerbate the bulk of the benefits going to those who are already the wealthiest. Of course, the two of the biggest difficulties with the 1996 bill is that there is no provision for beginners whatsoever, and there was provision for people who were not even farming anymore. That is not good. The idea of urban support, every farm bill has in the preamble that this is for the family farmer, and then the benefits go to the top 10 percent again. We could get some significant urban support. Now, I should not say this because I have talked to the devil. I visited with Larry Bohlen at the farm forum who is the man that started the StarLink fiasco. He says that his supervisor wants him next to work on family farm issues. Well, if all that political generation of power could be devoted to family farm issues, think what we might have. My plea is that we have a limitation on the subsidy per farm household. There are a number of possible ways that that could be done that I will not go into. I am sorry. I am Robert Rohwer from Paullina, Iowa, an active farmer and a landowner. Senator Harkin. I am sure that we will have a debate once again on payment limitations. We do. Sort of as day follows night we will have a debate on it. I do not know where it is going to go, but we keep having a debate on that every time we come around. I do not know. Neil, do you have any observations on his---- Mr. Harl. Let me just add this: Under flexible fallow the benefits would go to those who would enjoy the better prices, including the ones who did not bid their land into the program. Plus there would be a higher loan rate for those who did. Now, to the extent that that benefit falls unevenly, it would do as Mr. Rohwer says. The problem that we face is, is it politically feasible to impose tough limits? In 1999 we had a $40,000 limit. In 2000 it was raised. The sum today of everything you could collect would be something over $400,000, from all the programs. We have a limit, but it is not a very effective one. That is a worthy objective. With each passing day it becomes less and less possible because of the growth of the supersize operation. Senator Harkin [continuing.] If anything I think--and again, this is my sixth or seventh farm bill--it comes up every time. Now I recognize more of a support or at least thinking that we do not need to subsidize every last bushel and every last bale of cotton. We just do not need to. [Applause.] Senator Harkin. I sense this more and more, that it is just leading to all kinds of distortions. Obviously if you subsidize every last bushel and every last bale, then it does, of course, I should not say this in front of an economist, it does seem that it really promotes larger farming operations because the bigger you are, the more money you get. Then you can outbid someone else for land. Therefore it just promotes getting bigger. Our farm policies basically have the perverse kind of an effect. It is really actually promoting larger farmers if we subsidize every last bushel and every last bale. Mr. Harl. Senator, in my view this is one of the threats to continued subsidization in agriculture. The nonfarm world is very supportive of funding if they think it is going to family farmers in trouble. The polls have shown for years that 60 to 65 percent of the people, uniformly, regularly indicate that. If they think it is going to the huge operations, that support drops and drops sharply. we do have a threat here that we need to deal with in terms of maintaining a flow of funding for family size operations. Senator Harkin. Absolutely. Yes. Back here. We have a whole lineup of people back here. Go ahead here, and there are a whole lineup of people. Mr. Solberg. My name is Linus Solberg, and I am from Cylinder, Iowa. Senator Harkin. Hi, Linus. Mr. Solberg. It gives you that they let radicals in here, does not it, Tom? They did not frisk me or anything. I want to thank you for having these hearings out in the country and testimony from farmers and not lobbyists. I would like to talk about a lot of things, but I am just going to talk about the pork checkoff. I am just going to talk about only the Farm bill. In America it seems that you can only get as much justice as you can afford. When Congress debates the next Farm bill, family farmers will not be able to afford much justice, but corporate America will. Why do we continue to force family farmers to subsidize corporate America with overproduction? In 1996 I told my Congressman, Tom Latham, that Freedom to Farm would be a disaster. Any farm program that forces farmers to plant fence row to fence row so that corporate giants can purchase cheap grain for export and cheap feed for the industrial livestock operations is doomed to fail. Forcing farmers to produce as much grain as possible in order to milk the government out of deficiency payments is ridiculous. Never in U.S. history have farmers been forced to maximize their government payments by predicting when grain prices will reach an annual low. The new Farm bill needs to give our new secretary of agriculture the authority to manage grain supplies. For decades we have received ridiculous promises of increased exports. Farmers have heard all the propaganda. Corporate America brainwashed many of us into believing that GATT, NAFTA, WTO and Fast Track will save the family farm. Every farmer and rancher supports more exports. However, we need to face the facts. Most industrial nations have their own overproduction problems, and the poor nations that need our food cannot afford it. If the Ford Motor Company operated like the American agriculture, it would run all its assembly lines at full capacity 24 hours a day while actively seeking technology to produce even more cars. Rather than reducing output and meet demand and make a profit, they would continue to overproduce even though they were losing thousands of dollars on every car they make. If Ford executives behaved this way, they would be asking their stockholders to subsidize the company's losses on their cars. That is exactly what is happening in American agriculture. Congress and administration wants taxpayers to put billions of dollars into a system that is producing more grain than the market can handle. Now, you did not write this. OK? No American business operates this way. Freedom to Farm was written by corporate America to sell seed and chemicals and make available piles of cheap grain. Farm Bureau and our commodity groups have been on the bandwagon since the beginning. Supporters of Freedom to Farm promise that the export explosion would keep prices high forever. They lied. Senator Harkin. Linus, how much longer? Thanks, Linus. I did not want to cut you off. I just wanted you to sum it up was all. Mr. Solberg. I would like to have you solve the problem at the end. I will give you a copy. Audience member. Good summary. Senator Harkin. It is a good summary. I just wanted you to summarize it. I did not mean you to sit down. Go ahead. Mr. Nolin. My name is Karl Nolin. I am the president of Nolin Milling, Dickens, Iowa. If there was a Neil Harl fan club, I would have been an original member. I only--I got lots of thoughts, but I only want to talk about one thing. We are going to develop new seeds. I want these new seeds that are going to do wonders for our environment to either be owned by the colleges or by some entity of the government. These new seeds are going to be perennial crops that we plant once and harvest year after year after year. They are going to do wonderful things for the environment. We have to make sure that all the new crops that are going to be developed and all kinds of new traits have some public domain because there is going to be contracts on these crops that you will not own, you will rent the plant. When you rent the plant, I would rather rent it from Iowa State college than a private entity. It is going to happen. It has to happen. It has tremendous things to be said for the environment because we are going to plant that crop. It is going to hold our soil. It is going to keep our water from being polluted. We are also going to have nitrogen fixing so that we do not have to use nitrogen fertilizer which cleans up East Lake Okoboji so it looks like West Lake Okoboji. There is a lot of really good stuff coming down the pipeline, and we got to get in the Farm bill lots and lots of research money so this becomes public domain and we are going to develop all types of specialty seeds. Corn is not going to be corn. Corn is going to be corn with special proteins so we do not have to add any soybean meal to feed. Corn is going to be 35 percent oil corn. Maybe we can raise corn instead of soybeans. We can change anything around. The other thing, we can do this. There is a new corn plant that is a perennial, will grow year after year, that has been found in Mexico. We do not have to use gene splicing. It is just a matter of standard plant breeding. It is going to take us a long time if we do it with standard plant breeding, but we can do these things. Senator Harkin. Corn that just grows year after year? Mr. Nolin. Yes, we just go harvest. Senator Harkin. How does Pioneer feel about that? [Laughter.] Mr. Nolin. Pioneer understands this. Pioneer understands it completely. Pioneer will not sell us seed. You are talking to a man that sells a machine that transfers seed. We are out of business with that machine. Pioneer understands it. They do not have to sell you a bag of seed. They rent you the plant, and you pay an annual fee. We also farm a little bit. I want to pay my annual fee to somebody that is easier to do business with than--well, I just assume Iowa State college--easier to do with than Monsanto. You got the point. I would like to have you look into it. Senator Harkin. Thanks, Karl. I will do as many people as I can here. Mr. Biederman. My name is Bruce Biederman. I am from north Iowa, Grafton area. I have a farm bill that I have been pushing for the last couple years, and I have been working on it for the last 15. It basically addresses what Professor Harl has been talking about. I call it the zero cost farm bill because I go with the loan rather than any subsidy payments whatsoever. Support, not subsidize. What I call it is cost of production loan on all storable commodities, corn, wheat, beans, oats, cotton, anything. It would be set up so that in the fall is when you decide whether you are going to be a participant of the program, and this year's crop would be eligible for the cost of production loan. Then the next spring you determine-- you set aside maybe a small percentage of your land to start with. It would be like conservation reserve acres to start with rather than---- Senator Harkin. Is this a nonrecourse loan? Mr. Biederman [continuing.] The loan would be set up so that when it came due that the price was not at or above the loan rate. It would default into a farmer held reserve. Then once it gets into there, it would have a little bit like Bob Brooklyn's program, like 125 percent release and then 150 percent call rate. Then the size of the reserve would determine how much of that particular commodity would be up for program the next year. Another stipulation would be that it figures out to about like a 1,500-acre farmer would be about the maximum size that you would subsidize or support this way. Once you get certain crop--or commodity up to a certain level, that you would maybe shift to another one or whatever. You do not have to set aside. You would modify the price. It would bolster it to at least the cost of production or above, and you would be guaranteed a good price if it did go on the reserve. It would be self-regulating because the size of the reserve could be determined by the production. Senator Harkin. Do you have some paper on that? Mr. Biederman. Yes, I do. I have several copies. Senator Harkin. Thank you. Thanks, Bruce. If any of the panel up here have any thoughts or suggestions, just yell out. Yes. Go ahead. I am sorry. Go ahead, please. Mr. Wimmer. My name is Perre Wimmer. I am a local livestock broker. Talk daily, weekly with a lot of pork producers in northwest Iowa, southwest Minnesota. A lot of the topic today has been on grain. However, I guess my question is in regard to the pork checkoff recent vote that occurred. In talking to most pork producers they feel and realize they need to promote their product. However, a lot of them very concerned that the recent referendum that was clearly won in the favor of those producers has been circumvented and overturned without any regard to those persons that voted. Just wondering if there is any input from your part on that? Senator Harkin. Well, I was going to ask if that is right. We had the pork producers this morning. Well, if you are asking my view on this, look, we are facing a difficult situation. It looked as though the district court in Michigan was going to throw the whole thing out. I understood that Secretary Veneman had to try to reach some agreement on this and to strike some kind of a deal. I understand that. My only question is why it had to be a two year? Now it goes to 2003. That seems to be way too long. We intend to have her down before the Ag Committee to ask about this. I do not know exactly what the next step is in this. I will tell you one of the things I am thinking about working on in the Farm bill that I have not mentioned here but I would like to have feedback from you on it. The whole checkoff issue as I talked to both sides on this issue, raised a really serious question in my mind as to all these checkoffs that we have. We have corn checkoff, soybean checkoff, cattle checkoff, pork checkoff, chicken checkoff, turkey. We have all these checkoffs. It seems to me that when you have a mandatory checkoff system like that, that periodically it ought to come up for a vote of the producers. [Applause.] Senator Harkin. I am just saying every five years there ought to be a vote among those who participate as to whether they want to keep it or not. That might have a salutary effect. There was some legitimate concern on the part of some pork producers that the council---- Audience member. NPPC. Senator Harkin [continuing.] Yes. The checkoff people were too close together and that they were not separated and they were not really getting value for the checkoff money they were putting in. Well, if a vote has to come up even in court or anything every 5 years, then maybe the people who are handling all that money will be more responsive to the producers and go out and be a little bit more careful. Like anybody here that has got to run for reelection. You pay attention to your constituents. Mr. Wimmer. I guess my concern of the whole thing was that it was a democratic process that was gone through, and that vote was made. Whether NPPC liked it or not, that was the will of the people. Al Gore even got a chance to take his court to the supreme court. It appears to me that the pork producer was just circumvented at that point. Just the principle of it. Whether you are for it or not, the principle of how that was handled is of concern. Senator Harkin. It is of great concern. It was not handled well. Like I said, the court case was one that was hanging over their heads. Perhaps--and I just throw this out--I do not know that both sides like this. I have suggested that maybe we ought to just have another election. Maybe just have another vote out there. Well, those who won the vote said we had the vote. I am not certain that we just cannot--maybe we have to go through that process again. I do not know. Audience member. Vote until you like the outcome? Mr. Christensen. We have another example here that could be stated. Carl Jensen has one. Senator Harkin. We are facing the situation now that I do not know what to do about it other than try to have another vote or have it come up sooner than 2003. That is the only thing I can think of unless somebody has some ideas on this. Yes. Audience member. I think when---- Senator Harkin. You better get a mic so everybody can hear you. Ms. Bowman. We have a couple people waiting for really quick comments. We are running really short on time. Senator Harkin. I will get back to you. Mr. Taylor. I am Steve Taylor from Hartley in O'Brien County. I guess I am maybe one of the dying breeds of farmers that my sole family income does come from the farm. Senator Harkin. You are a young man. Mr. Taylor. I am hoping to keep it that way, I guess. One of my things or thoughts is I do not think you have realized that we have not lost a ton of farmers over the last 20 years with the farm policy, but we have lost a lot of people like me that have solely lived off the farm. If you would take them numbers, you would find that you have maybe errored in your ways. Coming back to the idea of subsidizing production, so it is the fairness issue. When I first got thinking about farm policy, I always thought we needed the government out. Let us work on our own. You know, I am ingenuitive enough I can make it work. When I got to start working and competing with government dollars, it is almost impossible for me to do. The longer I think about it, the more I realize and the more I get involved, we are not going to get the government out. They want their hands in. The way we do that, we have got to change. If we are paying anybody over the cost of living, we are unfairly subsidizing production. Neil Harl talked, if we cut payments altogether, we are going to decrease our values in land and rent. Well, we need to cut them 30 percent to bring them back in line from what we have skewed with what we have done since 1996 I guess my feeling is that we need to look at this--you are never going to make a program fair to everybody. You have to decide which side of the fence do you want to stand on. Do you want to support the rural communities, or do you want to support the guy that is going to grow and grow and grow? I guess that is about as simple and plain as I could put it. I have got a lot of other details, but I could go on and on and on. Senator Harkin. You have summed it up pretty accurately, I think. That is just about the divide right there. Ms. Bowman. We have several---- Senator Harkin. Right here. We had this man right here wanted to say something. Claire, right here. Mr. Braaksma. I am George Braaksma from Sibley, Iowa. I guess I have been taught in this country that our vote should count. In the direction of in the general public's interest that is what America was built on was a vote. When them votes do not count, that creates people to think different about our country. That goes to our election that was last fall, also here in agriculture the same example with the pork issue. That has got to be brought up that maybe this changes people's attitude when it does not count, that we do not have full faith in our country. That is disappointing. Also on an issue with the--I am in a situation with a four- lane road going to go through some of my property. With that in hand, that is in the general public's interest for better roads. I am all for better roads. I am all for issues that is for the general public. It goes back to Mr. Sand over here with conservation matters. I feel strongly with conservation matters, that we look at that as if the water was a road and that we take care of them type of things that human beings need. That is, to survive we need food, we need water. We look at energy as one of the things that is something that is above food and water. We need to exist with food and water. Conservation practices to me in the Farm bill is one of the highest priorities because it is what we need to raise that livestock and all them things. I am going to let that go at this time. Senator Harkin. Good. I appreciate that. We are going to make it, I hope, one of the highest priorities. Mr. Hartman. I am Joel Hartman, a farmer and cattle feeder here in Clay County, Iowa. I served the Iowa Cattlemen's Association as the chairman of their environmental policies committee. I will try to keep my comments very brief here. I have a concern with your farm bill proposal, Senator. It is Section Prime E dealing with annual payments not being able to be used for the construction and maintenance of animal waste storage facilities, as several panelists have mentioned the use of the EQIP program in employing practices to help us protect our water resources. As you know, the EPA is considering some extremely expensive regulations, regulations which will cost us about a billion dollars to comply with. Some that by their own estimates will incur $5 of cost for every dollar of benefit. If the cattle feeding industry is going to be expected to shoulder that kind of a cost, we certainly are going to need some Federal assistance in doing that. The EQIP program right now is part of the current Farm bill and is the only mechanism we have to work with that, but the program is woefully underappropriated. Only about $200 million has been appropriated this year in through the program. Here in Iowa it is about 5.7 million, and yet there was over $15 million in requests made of that program. We need a lot of money in there. There are also some restrictions on that program that make it inoperable for our livestock producers to use, that being in particular, the restriction of the 1,000-animal unit cap. A 1,000-animal unit feedlot is a capital investment approximately equal to 140 acres of Iowa crop ground. The EQIP program does not make a restriction on how large a farmer can be in acres to receive a direct cost share benefit, but they are doing that with the livestock producers and doing it at the very level that EPA is targeting for the most expensive programs to be put in place. That is one problem that we need to have addressed. We really cannot wait for the Farm bill to do it. That is something that could be done right away. The other problem with the EQIP is the prohibition on the use of EQIP moneys for engineering. EPA requires that their NPDS permits be signed off by a licensed engineer. The EQIP program will not cover that expense. For those smaller AFOs that is a major part of the expense. We need to have that issue addressed. With that, I thank you, Senator. Senator Harkin. Just a second. I did not know this about the engineering. I was just asking my experts back here on this. Evidently EQIP covers technical assistance and everything like that, but it does not cover third-party engineering or something like that. This is new to me. Mr. Hartman. No, sir. The word that I have from NRCS is that it will not cover the third-party engineering. The projects are basically pre-engineered by NRCS people. The technicians will come out and help install, but EPA still requires the NPDS permit to be designed by a licensed engineer. The cost of that engineer is about the same irregardless of the size of the operation. If you are looking at 500 head versus 5,000, that 500-head operation will incur a ten times larger engineering expense. We think that could be addressed by simply removing that requirement, or that restriction, excuse me, from the EQIP program along with that thousand animal unit restriction. It is very discriminatory and does not make any sense. Senator Harkin. Right. Both are duly noted. Thank you for the engineering. This is new to me. I did not know about that, obviously about the CAFO limit of a thousand. We are looking at changing that, maybe expanding that somewhat. We do not know where and how much. Also the EQIP program, you are right, we have got three to five times more requests than we have had the money for. We have got to get the money in there, and hopefully we will have room in the budget this year for it. Again, we talked about the budget. It was Phil mentioned something about the budget earlier. I do not know about the House side, but on the Senate side it looks like our budget was proposing perhaps about a seven percent cut in some of our discretionary programs. I do not like that at all. Mr. Hartman. Please be sure that that type of funding will be available under your proposal, Senator. It is a little contradictory between part E and I think an earlier part in your program. Senator Harkin. We were focused only on land. We thought, we will leave the EQIP program to do the facilities, see. That was going to be the dividing point. Maybe there has to be some melding of the two somehow. Thank you. Duly noted. I am told we have three people left. I just want you to know if any of you have any written comments, just please get me written comments any time or you can e-mail me at my offices. This is going to be an ongoing process. I will be having more hearings in Iowa with the Ag Committee, so do not worry. We will be having some more in Iowa here in the months coming up. Who else is left? Here. You have got a young man right behind you. Mr. Meyer. There are three things I have got to address you with. First of all, Don Meyer. I live up by Harris. Anyhow, one is this conservation and CRP ground. I had the very same thing confirmed by a man alongside of me a long distance away. Anyhow, in our area I can point to you farms that were bought and then put the whole farm in and then they go on down to Florida or Texas and were being paid so much for the acre. Actually the Government is buying the farm because they put a down payment in it, and then after that they got so much an acre. After while the thing is paid for. That is one. Then the second is I do not care what direction you go down the highway. You see the monument, the silo, and the empty feedlot and the empty--this Iowa has lost--that is what I would call a monument to a dead industry. Am I right, guys, or not? Then the estate tax. My father bought 240 acres for me back in about 1963, 1964. It worked out he paid 80,000. Then I had to wait for Mother to die in order to inherit that, get it. I had to pay just the amount what Dad paid for it in 1962 or 1963 for estate tax. All of a sudden I owned a piece of dirt if I could pay estate tax of 80,000 on that piece of dirt. Then it would be mine. There is one there, this estate tax. Senator Harkin. We are addressing that hopefully in the tax bill, and we are going to raise some of the levels. Right now it is 675. What is it now? Mr. Harl. It is 675,000. If there is a business involved, it is 1,300,000 including the family on business deduction, plus a special use valuation cuts the value of farmland very, very substantially. Those are doubled for husband and wife together. I have indicated my support for raising that to 2 to 2.5 million per decedent. My concern--and I am opposed to the repeal of Federal estate tax for reasons that we do not have time to go into. I do not think it should impact adversely what I call mere mortals. What I worry about are people up here in the stratosphere in terms of wealth. We need a Federal estate tax. What is more important for agriculture is the new basis of death, a wipeout of the gain at death. That we could lose if we are not careful here, so it is a very complex issue. If you would like to have more information, I do have some publications on the arguments for and against repeal. Senator Harkin. I can assure you that we are going to raise the level of estate tax exemptions for farms and small businesses. That will be raised. I do not know exactly what the level is going to be. It will probably be somewhere in the neighborhood of as much as $3 or $4 million perhaps, somewhere in that neighborhood, which will just about cover everybody. It will be in that neighborhood. I can assure you that is going to happen. Mr. Jensen. Carl Jensen, a cattle feeder from Everly, Iowa and chairman of the marketing committee of the Iowa Cattlemen's Association. I wanted to thank you for holding this hearing. I have written up the comments, and I will hand them in to you. I am just going to summarize real quick what I have got in here. Basically the livestock mandatory price reporting bill has been stolen by the bureaucrats, and it is not the bill that we intended to be passed to put into effect. What has happened to the law because of this 360 Rule, which I am sure you are aware of about the three packers or one packer having more than 60 percent of the business, those figures cannot be reported. While the new mandatory bill gives us more historical information that economists can use, like Dr. Harl and others, to analyze what happened, we are actually going to have less information for cattle feeders to use to market their cattle and know what their cattle are worth. We need to see if there is something that you can do. An example of what happened, the 360 Rule also applies to the boxed beef trade which becomes mandatory. They ran a simulation of Wednesday's boxed beef report that came out. In that simulation by applying the 360 Rule, which takes effect April 2, 40 percent of the items that were reported on Wednesday will no longer be eligible to be reported because of the 360 Rule. This is just ludicrous that this has occurred. We certainly need your input and Chairman Lugar and Senator Grassley and the rest of the Iowa delegation to see what they can do to correct the situation. It is coming up here very fast. I have submitted written copies for you to see more detail, but I just wanted to summarize it. Senator Harkin. Again, I can assure you, Carl, this is something that has not gone unnoticed. I know about it. My staff knows about it. You are right. We have got to get to the department and get that rule changed quickly. Mr. Tigner. My name is Ron Tigner. I am from Fort Dodge, Iowa. I used to milk cows with my dad until milk prices hit about $11 a hundred weight. Now they are about 850. I am sure there is going to be lots of farmers going out of business here soon. In fact, some of the big corporates are hurting bad too. My comments are--I was not going to talk about this at first, but I will now, about the pork checkoff, because you talked about it. A 5-year period between referendums is much too long a period. The corporate integrators are going to put people into contracts, and they are going to put the independents out of business till they get it to a point where they will have the checkoff referendum in their favor, what the vote is. They are going to limit the number of people who are going to be eligible to a small timeframe, which they did in the pork checkoff. It has got to happen within a few years between timeframes. A 3-year timeframe for the pork checkoff is going to be too long. 2003 is going to be way too long. They are going to work their tails off to make sure independents cannot vote in it. Now, my overall comments that I had thinking of coming in here were in asking the question of what new directions we need in Federal farm policies. It seems to me we need to go to the beginning. By this I mean in 1908 a national commission decided that resources, people, money and so on need to be moved from rural areas to urban areas. Prior to those years we had always seen in the United States an increase in the number of farmers. Since then for every year there has been a steady decline. In the 1950's our own government studies said those trends should continue. Even the best known farm organization in the United States's national president said that should continue. We all know that our philosophy is we need the lowest cost of production for food and the fewest farmers farming as possible. That is our national policy, and it continues today. I do not feel we will improve farm communities and bring back more farmers until we have a new national philosophy, a new national policy that says we need more people farming and fair market prices. We need an affordable food policy and a sustainable agriculture and rural community policy. We need to ditch the old philosophy. We also need a moratorium on mergers and acquisitions in the food sector and vigorous enforcement of the packers and stockyards act with improvement in antitrust legislation to reflect its impact on farmers, not just consumers and not just---- Mr. Tigner [continuing.] Not just when it reaches some high threshold of monopolization, rather when the effect in the marketplace by a combination of factors is the same as a monopoly. Thank you, Senator Harkin. Senator Harkin. Thank you. I appreciate it. One more. Mr. Bierman. Thank you, Senator Harkin. I am Tim Bierman from Larrabee, Iowa, farmer, pork producer, also on the board for the Iowa Pork Producers Association. I wanted to talk to you about two things. One of them is last year you appropriated nine million for the funding of the National Disease Center and National Veterinary Services. We need to continue in that so that Iowa State and the USDA facilities can move forward. In lieu of that, as we all know, the European union over there has foot and mouth disease. We need to be more concerned about the foreign animal disease coming into this country, so we need to increase our surveillance. We know there is an increased regulation of producers using human waste products in this country because we know they are coming in on ships and planes and other things. It can come in on those--foot-and-mouth disease can come in on those ships and whatever. This year if it comes into the United States, it will not matter if we have a checkoff because we will not have any hogs to be raising in this country. We will be slaughtering them like the European union. It moves on to the cattle. Then it will affect the grain farmers because how much grain do we eat up? This ought to be No. 1 and then to make sure we survive. We can live if we can keep that out of this country. Thank you. Senator Harkin. Tim, thank you. I am glad you brought that up. I did not mention this earlier, but I went to the National Animal Disease Lab yesterday. I watched the disposal of some of the sheep that was there. It is being done in a very safe manner, humanely. They are now examining the brain tissues of the sheep. It just points up again, I think, what is happening in Europe, the need to rebuild for the next century the National Animal Disease Center at Ames. Now, again, the price tag is high. We are looking at about somewhere in the neighborhood of about $400 million to rebuild it. Keep in mind Europe is losing over $100,000,000 a day in their losses. It has already cost Great Britain $5.3 billion. We need a National Animal Disease Lab that is a actually a world center more than just a national center. We have the basis for it in Ames, but it is 40 to 50 years old. They need new equipment. They need new labs. They need new research components. They need new disposal facilities. Not only for that, but to fight bioterrorism and for food safety. We have to be prepared for this in the future. I am going to do everything I can to ensure that we rebuild and refurnish that laboratory at Ames. I am hopeful that--I mean, no one would wish this. With what is happening now, maybe some of my colleagues now in the Congress who did not think it was a very high priority item now will see that this is a high priority item for our country. We need to rebuild it, so I am glad you brought that up, Tim. It is something that we cannot continue to put off year after year. With that unless there is something else from the panel, you have been very patient and kind to sit there. If there are any last things that any of you wanted to say before we adjourn, I would sure---- Mr. Harl. Could I just add one note? Mr. Nolin made a point about germ plasm in the public domain. Senator Harkin [continuing.] Yes. You talked about it. Mr. Harl. I testified before the Senate Agriculture Committee in October 1999 on that and said we need to fund at least a half dozen plant science centers at state-of-the-art levels, and we need to be sure that the results go into the public domain, not into the hands of the big transgenic hybrid producers. We are down to five of those on a global basis. We will be down to three in about 3 years in my view. That is awesome concentration. We have got to do what Mr. Nolin says. Senator Harkin. Again, that ought to be part of the research component of our Farm bill. Mr. Harl. Exactly. Senator Harkin. Any help, Neil, you can give us on how to write that and what to do with it, I need your help on that. Anybody else? Joan. Ms. Blundall. If I look at one issue that comes up in therapy which is rather surprising from rural populations--it happens over and over again, and I think there is a danger in it. When a populus believes that they have no shot for stability, we are at risk. It is not atypical to hear people talking about concentration in the food industry, about not having access because we do not have the technology or the resources. Somehow we have got to build some bridges for opportunity, and we have got to do something about concentration. Senator Harkin. That is just about the proper note to end on. You are absolutely right. We do have to do something about concentration, and we are going to focus on that. The hour is getting late. You have all been very patient to be here. This has been a great hearing. I have gotten a lot of good information. I can assure you that the suggestions and advice, consultation that I got here today will be part of the record. We will continue to have hearings here in Iowa as we go through this year to develop the next Farm bill. I take to heart everything that I have heard here today. This is just vital to our survival. I take to heart what Phil said from the Iowa Farm Bureau, that this has got to be more than just commodities. You got to look at credit, and you got to look at everything. You got to look at rural development, all these things. You have got to look at all this stuff. We are going to keep that together in the Farm bill I can assure you. Thank you all very much. The hearing will be adjourned. 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