[Senate Hearing 107-746]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 107-746
 
             LIVESTOCK ISSUES FOR THE NEW FEDERAL FARM BILL
=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION


                               __________

                             JULY 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
82-537                             WASHINGTON : 2003
___________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001





           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                       TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont            RICHARD G. LUGAR, Indiana
KENT CONRAD, North Dakota            JESSE HELMS, North Carolina
THOMAS A. DASCHLE, South Dakota      THAD COCHRAN, Mississippi
MAX BAUCUS, Montana                  MITCH McCONNELL, Kentucky
BLANCHE L. LINCOLN, Arkansas         PAT ROBERTS, Kansas
ZELL MILLER, Georgia                 PETER G. FITZGERALD, Illinois
DEBBIE A. STABENOW, Michigan         CRAIG THOMAS, Wyoming
BEN NELSON, Nebraska                 WAYNE ALLARD, Colorado
MARK DAYTON, Minnesota               TIM HUTCHINSON, Arkansas
PAUL DAVID WELLSTONE, Minnesota      MICHEAL D. CRAPO, Idaho

              Mark Halverson, Staff Director/Chief Counsel

            David L. Johnson, Chief Counsel for the Minority

                      Robert E. Sturm, Chief Clerk

              Keith Luse, Staff Director for the Minority

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing(s):

Livestock Issues for the New Federal Farm Bill...................    01

                              ----------                              

                         Tuesday, July 24, 2001
                    STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee 
  on Agriculture, Nutrition, and Forestry........................    01
Lugar, Hon. Richard G., a U.S. Senator from Indiana, Ranking 
  Member, Committee on Agriculture, Nutrition, and Forestry......    02
Crapo, Hon. Michael D., a U.S. Senator from Idaho................    32
Lincoln, Hon. Blanche L., a U.S. Senator from Arkansas...........    30
Nelson, Hon. Ben, a U.S. Senator from Nebraska...................    33
Thomas, Hon. Craig, a U.S. Senator from Wyoming..................    03
                              ----------                              

                               WITNESSES

Caspers, Jon, National Pork Producers Council, Swaledale, Iowa...    05
Davis, Eric, National Cattlemen's Beef Association, Bruneau, 
  Idaho..........................................................    07
Hermanson, Pete, Past NTF Chairman, National Turkey Federation, 
  Story City, Iowa...............................................    15
McDonald, Dennis, Ranchers-Cattlemen Action Legal Fund, United 
  Stockgrowers of America, Billings, Montana.....................    09
Moore, Frank, Vice President, American Sheep Industry 
  Association, Douglas, Wyoming..................................    10
Roenigk, William, Senior Vice President, National Chicken 
  Council, 
  Washington, DC.................................................    12
Rosmann, Maria, Sustainable Agriculture Coalition, Harlan, Iowa..    18
                              ----------                              

                                APPENDIX

Prepared Statements:
    Harkin, Hon. Tom.............................................    46
    Caspers, Jon.................................................    48
    Davis, Eric..................................................    58
    Hermanson, Pete..............................................   108
    McDonald, Dennis.............................................    74
    Moore, Frank.................................................    81
    Roenigk, William.............................................    98
    Rosmann, Maria...............................................   115
Document(s) Submitted for the Record:
    Letter to Hon. Richard Lugar from Chris Campany..............   132
    Statement of United Egg Producers............................   136
Questions Submitted for the Record:
    Question from Sen. Pat Roberts to Eric Davis and Jon Caspers 
      (Answers were not provided)................................   142



             LIVESTOCK ISSUES FOR THE NEW FEDERAL FARM BILL

                              ----------                              


                         TUESDAY, JULY 24, 2001

                                       U.S. Senate,
         Committee on Agriculture, Nutrition, and Forestry,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:06 a.m., in 
room SR-328A, Russell Senate Office Building, Hon. Tom Harkin, 
[Chairman of the Committee], presiding.
    Present or submitting a statement: Senators Harkin, Conrad, 
Lincoln, Nelson, Dayton, Wellstone, Lugar, Thomas, and Crapo.

    STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA, 
              CHAIRMAN, COMMITTEE ON AGRICULTURE, 
                    NUTRITION, AND FORESTRY

    The Chairman. Good morning. The Senate Agriculture, 
Nutrition, and Forestry Committee will come to order.
    For the last several weeks, we have heard from a wide range 
of interested groups about their ideas for the next Farm bill. 
We will continue these hearings today at the full committee and 
then subcommittee levels mostly in August.
    Today, we will hear from the animal agriculture industry 
concerning farm bill issues. Animal agriculture is a very 
important part of our total U.S. agricultural picture. Cash 
receipts from the livestock sector are projected to account for 
53 percent of total cash receipts from production in 2001 and 
nearly $11 billion of U.S. agricultural exports, about 20 
percent of the total. That export total amounts to more than a 
50 percent increase in the last 10 years.
    Livestock also plays an important part in my own State's 
agriculture. Iowa is the No. 1 producer of hogs and eggs and 
has many other animal agricultural products. I believe that 
Iowa's prominence in animal agriculture is reflected by today's 
panel.
    I would like to welcome the three Iowans who are here, Jon 
Caspers, Vice President of the National Pork Producers Council 
from Swaledale, Iowa, Pete Hermanson, who is former Chairman of 
the National Turkey Federation from Story City, and Maria 
Rosmann from Harlan, Iowa, who represents the Sustainable 
Agriculture Coalition.
    Considering the importance of animal agriculture to U.S. 
agriculture overall, I believe it is time our farm policy 
accord animal agriculture the attention it deserves. We should 
craft a farm bill that addresses the concerns of animal 
agriculture across the nation. The next Farm bill needs to help 
livestock and poultry producers meet the challenges they face.
    Just as an aside, I have often said that it seems like 
animal agriculture has always been sort of the stepchild of 
farm bills. We do everything else and it is sort of an 
afterthought in animal agriculture. It is my intention, that 
this next Farm bill will, hopefully, focus more attention on 
animal agriculture. It provides us multiple opportunities for 
crafting support for the animal agriculture industry. We must 
encourage increased research on animal health and diseases and 
new uses.
    The next Farm bill must also provide increased 
opportunities for livestock producers to expand their 
businesses, both domestically and in the United States, through 
marketing, fair trade agreements, and value-added products. 
That means increased funding for cooperatives and other private 
initiatives. I read all the testimony last night and I am 
particularly interested in the testimony of Ms. Rosmann, who is 
here, and their experience on a family farm structure in Iowa 
and what we can do to encourage more enterprises like that, as 
well as a strong export program like the Market Access Program 
and how we can get, if you will excuse the pun, beefed up a 
little bit.
    As many of you know, I believe the Farm bill needs to 
expand the conservation title. We need to strengthen programs 
like EQIP, create new ones like the Conservation Security Act 
and others, to provide incentive payments for farmers and 
livestock and poultry producers to maintain and adopt 
conservation practices, like good manure management.
    We need to make a comprehensive review of EQIP that 
includes looking at the current restrictions on cost share 
assistance for livestock owners. However, we must be careful 
not to go down the road of subsidizing large livestock 
operations unfairly or financing technology, such as manure 
lagoons, that should soon be obsolete.
    Moreover, we must carefully examine the consequences of 
government involvement. The wrong kind of government 
involvement in the name of conservation could actually hurt the 
industry, or at a minimum, distort production decisions or 
markets.
    Again, animal agriculture plays an important role in our 
whole agricultural picture. I look forward to hearing the 
panel's testimony and working with all of you on crafting sound 
and forward-thinking aspects of the Farm bill as it deals with 
animal agriculture.
    [The prepared statement of Senator Harkin can be found in 
the appendix on page 46.]
    I would yield to my colleague, Senator Lugar.

 STATEMENT OF HON. RICHARD LUGAR, A U.S. SENATOR FROM INDIANA, 
                 RANKING MEMBER, COMMITTEE ON 
              AGRICULTURE, NUTRITION, AND FORESTRY

    Senator Lugar. Thank you very much, Mr. Chairman. I thank 
you again for calling this hearing to consider livestock and 
poultry issues in the next Farm bill.
    In recent months, livestock, poultry, and other 
organizations have requested that we consider their requests 
for action on matters related to conservation and environmental 
compliance, on trade promotion, research, and other issues. 
Conservation deserves a new focus in the next Farm bill and I 
applaud your efforts, Mr. Chairman, to bring that about.
    In 1985, 97 cents of every financial assistance dollar from 
the USDA went to working lands. Three cents went to land 
retirement. Today, the situation is nearly reversed, with some 
85 cents going to land retirement programs and only 15 cents 
going to working lands. This funding balance must be addressed 
during our reauthorization of the Farm bill. I do not believe 
we can land idle our way to environmental performance.
    Today's State water quality reports still name non-point 
sources of pollution as the nation's biggest water quality 
challenges. Nutrients and pathogens represent the largest 
environmental challenge confronting most farmers and ranchers 
today, and the ones most likely to result in costly new 
regulation. How we deal with these environmental challenges 
will affect the commercial viability of farming and ranching 
over the next decade.
    In legislation I will soon introduce, a significant 
increase in the EQIP funding would be authorized, and I 
appreciate your mention, Mr. Chairman, of the EQIP program in 
your opening statement this morning.
    In the trade area, there have been calls for increased 
funding in the export enhancement area, such as the Market 
Assistance Program. I would respectfully request that each 
sector represented here today provide us with a written outline 
of their present export strategy, hopefully by the beginning of 
August. We cannot approach the trade title from a perspective 
of increasing funding levels in each existing program. For the 
benefit of producers and taxpayers, a total review of all 
existing programs is essential.
    As this committee considers the trade title of the next 
Farm bill, I remind colleagues of an important issue to 
agriculture outside of this committee's jurisdiction, and that 
is trade promotion authority. We should not have a narrow focus 
on a particular title of the Farm bill without acknowledging 
the consequences for farmers of ongoing Congressional inaction 
on this front. It is also important to note the inevitable 
impact of commodity policy on the livestock and poultry areas. 
During development of the commodity title of the Farm bill, we 
must be mindful of the impact of these sectors. In particular, 
we should avoid interventions in the grain market by the 
Federal Government which would harm the livestock sector's 
international competitiveness.
    Mr. Chairman, on a topic not likely to pertain to the Farm 
bill, although important to agriculture, I would simply say, be 
assured of my ongoing commitment to work with you and Senator 
Daschle and other colleagues on the issue of interstate 
shipment of State-inspected meat, a topic often before our 
committee.
    Again, I thank you for holding today's hearing and I look 
forward to hearing from each of our witnesses.
    The Chairman. Thank you very much, Senator Lugar.
    Senator Dayton.
    Senator Dayton. I will wait for the witnesses. Thank you, 
Mr. Chairman.
    The Chairman. Thank you. Senator Thomas.

  STATEMENT OF HON. CRAIG THOMAS, A U.S. SENATOR FROM WYOMING

    Senator Thomas. Thank you, sir. I am very pleased that you 
are having this hearing today, of course. In Wyoming, livestock 
is our activity. Over 70 percent of our agriculture is there.
    I want to particularly welcome my good friend Frank Moore 
here from Douglas, Wyoming, who is Vice President of the 
American Sheep Council and is a sheep producer and has been for 
a very long time.
    We had recently, during this last recess, a meeting in 
Wyoming that we hosted with the Wyoming Department of 
Agriculture and many of the producers from livestock were 
there, of course. There were a number of things that they 
talked about and emphasized. One is, the Farm bill is not a 
one-size-fits-all and that mentality, we have to be careful 
about. Support for opening markets, export markets, of course, 
was strong, high, there. Increased funding for conservation and 
technical assistance, so that you could talk about grasslands 
and open space and preservation of lands and technical 
assistance. Also, a greater coordination among Federal 
agencies. That, of course, is a broad thing to do, but it 
really has a lot of effect in agriculture in terms of Fish and 
Wildlife Service, EPA, and others, so that is there.
    The cattle industry, of course, is our leading one. They 
don't ask for price supports, but they do think they ought to 
be included in agriculture, and I agree with that, particularly 
in trade and those kinds of things.
    We are particularly interested this morning, Mr. Chairman, 
with our sheep industry. We are second in the Nation for sheep 
and wool. It has suffered the worst price cycles probably in 
history since the Wool Act was repealed in 1966. Prices have 
fallen from 70 cents to about 33 cents a pound for wool, which 
doesn't cover the shearing costs, of course. There are lots of 
factors in that, the Asian financial crisis, competition from 
synthetic fibers, of course, the U.S. dollar, and so on.
    There are a number of proposals they are looking forward 
to. One of them, of course, is the wool program, which we will 
be talking about soon in the supplemental or the ag dollar 
appropriation. There are a number of things that they are doing 
in terms of trying to put together a value-added cooperative so 
that the producers can be involved in the product. That is one 
of the best things we can do.
    Hopefully, and I hear this a lot and I feel very strongly 
about it, that it seems to me in our agricultural farm bill 
considerations, we have to deal with the impacts of where we 
are now, of course, but we ought to make sure that what we are 
doing is going to lead us to where we want to go over a period 
of time. Too often, we end up just dealing with the problem 
that now exists, and I understand how easy it is to do that, 
and you have to do it, but at least a portion of that ought to 
go forward and us trying to visualize how we can get 
agriculture where we want it to be, more self-sustaining and 
those kinds of things.
    At any rate, that is more than I should say, but I feel 
very strongly about it. The Farm bill has traditionally, of 
course, been largely program crops, but now that is a little 
behind us and we are now looking at how we can deal with the 
general concept of agriculture, and in States like ours, that 
means livestock in many ways. Thank you, sir. I appreciate it.
    The Chairman. Thank you very much, Senator Thomas. I tend 
to agree with just about everything you said there.
    Senator Thomas. I am glad I stopped when I did, then.
    [Laughter.]
    The Chairman. I didn't know what was coming. Thanks, Craig.
    The Chairman. We welcome our panel. We will just go down 
the list. First of all, your statements will be made a part of 
the record in their entirety. Rest assured, we have read them 
over. If you could just limit your statement to maybe five to 
seven minutes--we have three, six, seven people--let us say 
around seven minutes or so, and then we can get into questions, 
I would sure appreciate it.
    We will just go down the list. We will start with Mr. Jon 
Caspers representing the National Pork Producers Council from 
Swaledale, Iowa. Welcome, Jon.

  STATEMENT OF JON CASPERS, NATIONAL PORK PRODUCERS COUNCIL, 
                        SWALEDALE, IOWA

    Mr. Caspers. Thank you, Mr. Chairman. I am Jon Caspers. I 
am a pork producer, as you mentioned, from Swaledale, Iowa, and 
I serve on the Board of Directors of the National Pork 
Producers Council.
    Mr. Chairman, the country's pork producers are extremely 
pleased that the 2002 Farm bill debate is focusing on 
conserving working agricultural lands, keeping them productive, 
profitable, and at the same time, enhancing the environmental 
benefits that they provide. Your bill, the Conservation 
Security Act, is one of the big reasons that the debate has 
turned in this direction and we welcome your efforts and 
commend you for them. We also note that the committee's ranking 
member, Senator Lugar, is working on a conservation bill with 
many valuable policy proposals.
    As we have stated before, livestock and poultry producers 
face or will soon face costly environmental regulations as a 
result of State or Federal law designed to protect water and 
air quality. In addition to the State requirements, the 
regulations will come from the Clean Water Act TMDL program, 
the proposed CAFO permit requirements, and the Clean Air Act. 
While producers have done a good job environmentally on their 
operations in the past, we want to continue to improve, but in 
many cases, the costs are simply prohibitive.
    A $1.2 billion a year increase for the EQIP program, which 
50 percent would go to livestock and poultry producers, is a 
historic step forward. However, as previous testimony from NPPC 
and other groups has demonstrated, $1.2 billion is needed 
annually for livestock and poultry producers alone. We, 
therefore, respectfully request that the committee take full 
advantage of any opportunity that may exist to expand EQIP 
funding further in order to meet the pressing conservation 
assistance needs existing in all agricultural sectors.
    There are several specific issues that we would like to 
address as you prepare legislative language for the 
conservation title of your farm bill. We feel strongly that 
livestock and poultry producers must be eligible for 
conservation cost share assistance regardless of the size of 
their operations. Family-owned or operated livestock operations 
come in all sizes, and all of these need cost share assistance 
if they are to remain economically viable while providing the 
public with the environmental benefits they obviously seek.
    For example, the EPA's analysis for the proposed CAFO rule 
assumes it will cost a 3,400-head farrow to finish swine 
operation in the Midwest $332,000 in capital costs to comply 
with the proposed rule. It will also cost approximately $26,000 
a year for annual recurring activities for this operation to 
operate and to maintain its new system.
    Any EQIP provision that excludes operation simply on the 
basis of number of animals will end up excluding thousands of 
family-owned operations struggling to remain as independent as 
possible. The unintended consequences of a size cap is rapid 
consolidation of the pork industry, and something, I am sure, 
this committee does not want. It is our view that a payment 
limitation schedule comparable to that used in row crops is far 
more appropriate except that payment should not be limited by 
year but by needs of the overall EQIP contract.
    Second, protecting air and water quality as it relates to 
livestock and poultry manure management must be national 
priorities for EQIP. While EQIP can provide benefits to 
wildlife, the Wildlife Habitat Incentives Program, or WHIP, is 
the program for encouraging wildlife conservation on working 
agricultural lands and we support increasing WHIP funding.
    It is important to ensure that the program allows for the 
participation of third-party, private sector, certified experts 
to supplement the technical assistance to be provided by USDA. 
We note that your CSA and Senator Lugar's concept paper provide 
for the use of such persons and we support your efforts. A 
voucher system is one way that could be used to meet this need, 
but there are several others.
    We also feel that EQIP needs to be able to meet 
conservation priorities that are not defined on the basis of 
small geographic areas, like a watershed, and that existing 
provisions of EQIP that add considerable administrative burden 
with little associated environmental benefit should be 
scrutinized.
    We also believe the new Farm bill should provide incentives 
to help livestock producers fully develop the value of their 
nutrients. One of the most promising possibilities for small 
and medium-sized operations involves capturing methane and 
producing electricity. Harnessing the energy from swine 
nutrients can meet farm electricity needs, provide added income 
as excess capacity is sold to other power generators, enhance 
odor control, spur rural economic development, and help reduce 
our nation's dependence on foreign oil.
    Pork producers also support legislation that would grant 
tax credits for the generation of electricity through the use 
of swine nutrients and other agricultural by-products. Mr. 
Chairman, we understand that you are developing farm-to-energy 
technology provisions for the Farm bill. We are ready to work 
with you and others like Senators Crapo and Grassley, who 
recognize the value and promise of farm-to-energy initiatives.
    We have also long supported increasing the authorization of 
the Market Access Program, or MAP. At least a doubling of the 
current authorization, from $90 to $180 million per year, is 
warranted. MAP and the Cooperator Program have been 
instrumental in helping boost U.S. exports.
    Thank you for allowing us to testify today and we look 
forward to working with your committee in the future.
    The Chairman. Jon, thank you very much for your testimony. 
I look forward to working with you and the National Pork 
Producers Council on these issues.
    [The prepared statement of Mr. Caspers can be found in the 
appendix on page 48.]
    The Chairman. Next, we will move to Mr. Eric Davis of the 
National Cattlemen's Beef Association from Bruneau, Idaho.

STATEMENT OF ERIC DAVIS, NATIONAL CATTLEMEN'S BEEF ASSOCIATION, 
                         BRUNEAU, IDAHO

    Mr. Davis. Thank you, Mr. Chairman, Senator Lugar, members 
of the Senate Agriculture Committee. It is a pleasure to be 
here today to give this testimony on behalf of the National 
Cattlemen's Beef Association.
    I am a fourth generation rancher from Bruneau, Idaho. My 
family has been on the place we are on now for about 50 years. 
On behalf of NCBA and my lifetime and my dad's and some others 
ahead of me making what we think are ecologically sound and 
economically viable uses of renewable resources, I am happy to 
be here to present NCBA's views on the Farm bill development.
    I will mention only broad topics in my oral testimony. My 
written testimony goes into greater detail in all these areas, 
and, of course, I would be happy to address specifics later, 
should there be questions.
    Chairman Harkin, the beef industry, NCBA, and NCBA's 
predecessor organizations have traditionally taken the position 
of wanting less Federal intervention in farm policy. 
Nonetheless, the members of NCBA understand that farm programs 
are a major component of U.S. domestic policy and will remain 
so for the foreseeable future. Therefore, NCBA will continue to 
focus on ensuring that farm policy does not benefit one part of 
agriculture at the expense of another. NCBA will not consent to 
U.S. farm policy that is financed out of the pockets of the 
beef industry.
    With that in mind, we will be keeping a close eye on the 
following areas: Mandatory set-asides, acreage reduction 
programs and production controls, farmer-owned reserves, non-
recourse loan forfeiture, flex fallow type programs, and any 
Federal dairy buyout, herd reduction program, or mandatory 
dairy supply management program. Should proposals such as these 
become part of the Farm bill discussion, NCBA will seek to 
mandate by USDA and the recognized research community the 
complete impact study of these proposals on the beef industry. 
I would reiterate, NCBA opposes any Federal farm program that 
has a negative impact on the beef industry.
    Now, with that said, Mr. Chairman, this committee's 
commitment to conservation and the environment are of 
particular interest to the cattle industry. There are a whole 
host of conservation initiatives that have been proposed for 
this Farm bill and we are encouraged that the initiatives 
proposed all place an emphasis on helping producers keep their 
operations and productive lands working and profitable while 
they move to the next level of conserving the natural resources 
on these lands.
    We appreciate this opportunity to provide you with our 
views and observations as you craft the details of these 
provisions for your farm bill package. NCBA wants to stress 
that whatever form the final package takes, it is critical that 
the 2002 Farm bill make a major new commitment to providing 
livestock producers with conservation cost share and incentive 
payments assistance in the context of voluntary incentive-based 
programs. This must be done if we are to keep economically 
viable producers on the land, be able to conserve our natural 
resources for future generations, and provide the environmental 
benefits being demanded from American agriculture by the 
public.
    Some specific priorities for NCBA are, No. 1, $1.2 billion 
per year for EQIP or a new program similar to EQIP to assist 
producers with the costs of Federal, State, and local mandatory 
manure management and water and air quality protection 
requirements. Producers must be eligible for this assistance 
regardless of the size of their operations. A payment 
limitation system comparable to that used in row crops should 
or could be adopted.
    No. 2, EQIP's effectiveness could be enhanced by 
establishing priorities based on geographic and non-geographic 
parameters.
    No. 3, the Conservation Reserve Program should be amended 
to make it a priority to keep working lands working. This means 
that emphasis must be placed on enrolling buffers. Whole field 
enrollment in the CRP program should be substantially limited.
    Mr. Chairman, as you know, NCBA represents that segment of 
agriculture that owns and manages our nation's private grazing 
lands. They contribute significantly to the quality and 
quantity of water available for all of the many land uses and 
they constitute the most extensive wildlife habitat in the U.S. 
Our next generation farm bill must continue to recognize the 
contributions these grazing lands make to a healthy environment 
by providing financial and technical support for grazing lands 
and grasslands conservation programs.
    Specifically, we support reauthorization of the Grazing 
Lands Conservation Initiative. We also support passage of the 
Grasslands Reserve Program. Traditionally, farm bills have not 
recognized the importance of grasslands. The Grasslands Reserve 
Program would allow ranchers to continue economic activity 
while protecting natural resources.
    The National Cattlemen's Beef Association is currently 
preparing comments on environmental regulations that will 
impact all segments of the industry. These regulations will add 
tremendous costs to doing business and important modifications 
need to be made to Federal programs to assist the beef industry 
in maintaining the highest standards of resource protection.
    Mr. Chairman, I thank you for the opportunity to comment 
here today and look forward to any questions that may follow.
    The Chairman. Thank you very much, Mr. Davis.
    [The prepared statement of Mr. Davis can be found in the 
appendix on page 58.]
    The Chairman. Now, we will turn to Dennis McDonald, 
Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of 
America, from Billings, Montana, R-CALF. Welcome.

 STATEMENT OF DENNIS McDONALD, RANCHERS-CATTLEMEN ACTION LEGAL 
                 FUND, UNITED STOCKGROWERS OF 
                   AMERICA, BILLINGS, MONTANA

    Mr. McDonald. Thank you, Mr. Chairman. I am a rancher from 
South Central Montana, the small town of Melville. My wife, 
Sharon, of 25 years, and our four children operate a cow-calf 
operation. We breed 850 or so mother cows. We background our 
calves, sometimes finishing the steers to slaughter weight. We 
breed 100 or so quarterhorse mares annually for working cow 
horses.
    I am here on behalf of R-CALF, an organization dedicated to 
representing grassroots cattle producers around the country. We 
have members in 38 States. I serve on the Ag Trade Advisory 
Committee and had the opportunity to speak before this 
committee a month or so ago when you were focusing on trade 
issues.
    The light cattle prices at the ranch presently, I am 
pleased to report, are strong. I am optimistic our industry can 
remain vibrant, provided we have the basic tools that will 
allow us to market our end product at home and abroad. To that 
end, we are urging that a cattle chapter be written into the 
new Farm bill.
    Mr. Chairman, I heard your comments loud and clear about, 
often, livestock being the stepchild in previous farm bills. 
That thought occurred to me several months ago and I thought 
maybe a solution might be to designate a cattle chapter or 
livestock chapter within the Farm bill that would focus 
attention on the issues peculiar to our livestock industry.
    With cattle in all 50 States generating $35-plus billion 
annually, it seems a cattle chapter is needed. We have over one 
million producers contributing to our rural communities and, I 
believe, providing a cultural foundation for our nation.
    The viability of our industry is challenged on several 
fronts. Concentration in the marketplace is one such area, with 
four major processors ultimately slaughtering 80 percent of the 
finished cattle. As a result, the reduced leverage in the 
marketplace have, in recent years, caused the elongation of the 
down wave of the cattle cycle. R-CALF is convinced that a 
cattle chapter within the Farm bill could help restore greater 
equilibrium to pricing and, thus, help the market function in a 
more rational manner.
    We are aware of legislation supported by both parties that 
addresses some of these issues. One such issue is the 
cattlemen's fair share of the retail dollar. In 1970, cattle 
producers enjoyed approximately 70 percent of the retail 
dollar. That shrank to 50 cents by 1996, and that trend is 
continuing. Obviously, we are experiencing a shrinking share of 
that retail dollar.
    R-CALF is convinced this trend might be reversed if the 
Farm bill contains provisions addressing some of the issues I 
have outlined in my written testimony. Those include speaking 
to the issue of unfair contract prices, a call for enforcement 
of antitrust laws, as well as enforcement of the Packers and 
Stockyards Act. Further transparency in the marketplace is of 
vital importance, and we have taken a major step with the 
mandatory price reporting legislation and the recent rule 
changes that will help implement that legislation. Country of 
origin labeling and restriction of our USDA grade stamp, and I 
will return to those subjects in a moment.
    Senator Lugar, you mentioned the interstate shipment of 
inspected beef, a critical issue to cattlemen around the 
country, particularly as we attempt to add value to our product 
and attempt to take our product directly to the ultimate 
consumer.
    The only funding request that R-CALF is suggesting is an 
experimental fund that would help fund those efforts as we form 
co-ops around the country to attempt to get into that retail 
market. We are asking for a $200 million fund for that purpose.
    Country of origin labeling, we would hope would be 
addressed in the Farm bill. R-CALF strongly supports Senator 
Tim Johnson's proposal, the Consumer's Right to Know. A strict 
labeling law will allow producers to differentiate our product 
from all of the other beef products that are imported from 
around the world. For beef to carry the USA label, it should be 
processed from a calf born, raised, fed to finished weight, and 
processed in this country. Any deviation from that definition 
should be labeled as such.
    Likewise, with the USDA grade stamp. That is a mark of 
excellence that the cattle producers of this country have 
awarded themselves over the last century by producing the best, 
most nutritious, healthiest product in the world. That USDA 
Choice grade stamp is seen as a fairness issue among producers 
across the country. It should be our brand, a brand of 
excellence that will help differentiate our product from the 
other products around the world.
    Finally, to compete, we as producers need to own our cattle 
from the gate to the plate, from the ranch to the restaurant. I 
had made reference earlier to an experimental fund, moneys that 
could be used to promote co-ops and to allow us to market our 
product directly into the marketplace. Hopefully, I have 
delineated that thought with more particularity in my written 
submission.
    Finally, I just want to say on behalf of all grassroots 
producers across the country what an honor to be invited to 
speak before you. I thank you for that opportunity.
    The Chairman. Mr. McDonald, we are honored to have you here 
and your organization, which I know is growing very rapidly all 
over the Western part of the United States.
    [The prepared statement of Mr. McDonald can be found in the 
appendix on page 74.]
    The Chairman. Next, we turn to Mr. Frank Moore of the 
American Sheep Industry Association, previously introduced by 
Senator Thomas, from Douglas, Wyoming. Welcome.

   STATEMENT OF FRANK MOORE, VICE PRESIDENT, AMERICAN SHEEP 
             INDUSTRY ASSOCIATION, DOUGLAS, WYOMING

    Mr. Moore. Thank you, Chairman. I appreciate the 
opportunity to be here. I am a fourth generation rancher from 
Douglas. I have been in the sheep and cattle business all my 
life, as our family has for over 100 years.
    I had the fortunate experience of traveling with the 
Senator yesterday and sitting on the ground waiting for planes 
for quite a while, so we visited a little bit about the Farm 
bill and what you need to do.
    The Chairman. In Chicago?
    Senator Thomas. Denver.
    [Laughter.]
    Mr. Moore. I am going to deviate a little bit from my 
statement. We have our written testimony that should 
specifically talk about the issues that we think need to be 
covered and go into detail about how we feel the sheep industry 
should be included in this Farm bill. I certainly agree with 
your opening statement, as several of the Senators have said, 
that livestock needs to be included.
    The wool and lamb markets are way down. Our wool is at a 
30-year low. Thirty-three cents last year was the average price 
for wool. It has been 1971 since we have seen those prices. 
That is not including anything for inflation. That is just your 
basic price. That is a significant decrease. Obviously, it is 
pretty tough to compete in today's market and be stable when 
you have got prices like that. The lamb markets are currently 
down.
    Those of us that are left in the sheep business, we believe 
in the sheep business. We intend to stay in the sheep business. 
We think that the ones that are left are the ones that have the 
true heart for the business, are the efficient producers, the 
ones that are able to compete in the world market.
    What we want to do is remain in business and we are tied to 
government. We are tied to government. All of agriculture is 
tied to government, whether we are receiving any programs or 
not. We have got our cheap food policies. We have got 
endangered species regulations. We have got environmental 
regulations. We have got a strong dollar that significantly 
impacts us when imports start coming into this country. Our 
high standard of living--we want to maintain that high standard 
of living.
    In the European Union, they have a $2 billion support and 
subsidy program for their sheep industry over there. That is 
billion with a ``b''. In a lot of cases, that is 50 percent of 
their revenue from their sheep industry, from the sheep 
enterprise.
    Australia and New Zealand, Australia's currency has been 
devalued by over 40 percent in the last five years compared to 
the strong dollar. We appreciate the fact that we have a strong 
dollar, but it gives them a significant import advantage when 
they bring products into this country.
    When we are competing on a world market, we can compete in 
production, we can compete in efficiency, but it is pretty 
tough to compete against subsidies such as those and the strong 
dollar. What we are asking for in this Farm bill is to be sure 
that we are included, be sure that we have some kind of floor 
and safety net so that there is a little bit of stability.
    We appreciate your concerns with conservation. We are very 
confident that the sheep industry is an environmentally 
friendly animal and we don't have any problem with conservation 
and the environment. We are comfortable in those areas.
    We are making changes. We have been working significantly 
over the last few years and since we lost the Wool Act in 1993. 
For those of us that remained in the business, we have made 
significant changes to become better producers, to provide more 
value-added products. We are doing a lot of cooperative type of 
efforts, and I agree with what Mr. McDonald said. We need to 
make sure that those cooperatives have a chance to get up and 
running and be efficient.
    We are working on scrapie eradication and some other 
programs to make our product as healthy and as health conscious 
as possible. We are doing a lot of quality improvements.
    One thing I want to make sure that everybody understands, 
what we are asking for with our assistance program that is in 
the Farm bill, we are not talking about going back to the old 
National Wool Act. This is a modest safety net, a floor, just 
to make sure that there is a little bit of stability in the 
industry.
    We have a couple of other issues with the U.S. Government 
that are important that we need to get off the ground so that 
our industry can get going. We have had a program for a 
promotion program at USDA since February of 2000. We need to 
get that up and running. That the industry, once it starts 
putting some money into self-help, will make some progress. We 
need your support in getting that up and running as quickly as 
possible. We expect to see that out any day.
    Mandatory price reporting, we hope that issue can be taken 
care of. We think that is one of the problems we have had in 
the last few months with our decreased lamb prices. Since the 
mandatory price reporting went into effect, we have had 
virtually no lamb market reports. We need to make sure that 
there are some changes made there so that the price reporting 
comes out and helps us and gives us some significant 
information that we can use.
    The Market Assistance Program that we have been included in 
in the last couple years has been what has cash-flowed a lot of 
sheep operations. We appreciate your support on that and we 
want you to know that that has been a help. It has kept a lot 
of people in business and it keeps them moving forward.
    We will work with you in whatever way we can. As the 
Senator and I talked about yesterday, we are trying to fit into 
the Farm bill as you have it right now. We will work with you 
in whatever way you want to go to make sure that our policies 
are looking to the future.
    I appreciate being here, and thanks for all you guys are 
doing.
    The Chairman. Mr. Moore, thank you very much for your 
testimony. Rest assured, we recognize the importance of the 
sheep industry and the wool and mohair industry in this 
country. We will get into that more in the questions.
    [The prepared statement of Mr. Moore can be found in the 
appendix on page 81.]
    The Chairman. Mr. William Roenigk, National Chicken 
Council, Washington, DC, Mr. Roenigk, welcome to the committee.

 STATEMENT OF WILLIAM ROENIGK, SENIOR VICE PRESIDENT, NATIONAL 
                CHICKEN COUNCIL, WASHINGTON, DC

    Mr. Roenigk. Good morning. Thank you, Mr. Chairman, Senator 
Lugar, members of the committee. The chicken producer/
processors appreciate this opportunity to present our 
recommendations and comments on the important issue of poultry 
fundamentals for the next Farm bill. The National Chicken 
Council appreciates the chairman's invitation to be part of 
this very vital discussion.
    I am Bill Roenigk, Senior Vice President of the National 
Chicken Council. I concur with the chairman's opening comments 
this morning. I also concur with Senator Lugar's comments on 
the export and international trade situation. They are of great 
interest to us and we would be pleased to submit our export 
strategy program to you as you requested.
    The National Chicken Council represents the vertically 
integrated companies that produce, process, and market about 95 
percent of the young meat chicken in the United States. Both 
the domestic and international marketplaces are of great 
importance to our industry. The industry's long tradition of 
being market-oriented has served consumers, taxpayers, and crop 
farmers, as well. Being focused on the market provides a better 
opportunity to meet the dynamics and challenges of the changing 
market for food and, thus, grow our business.
    Accordingly, we strongly support Federal farm commodity 
programs and policies that are not only market-oriented, but 
encompass the capacity to take full advantage of future market 
opportunities, both here in the United States and overseas.
    The National Chicken Council supported the 1996 Farm Bill 
and continues to believe the principles and objectives of the 
FAIR Act provide the best path to pursue. In the long-run, 
market-based policies help make American agriculture stronger. 
To have policies and programs that are otherwise, at least for 
those of us who must market a substantial portion of our 
production in a global marketplace, means our fundamental 
competitiveness is jeopardized.
    The National Chicken Council is a member of the Coalition 
for the Competitive Food and Agricultural System, CCFAS. Like 
the other 120 members of this coalition, we are committed to 
having a farm bill that is based on market-oriented policies 
and programs. We believe in this commitment because, given the 
proper operating environment, U.S. agriculture can grow, which, 
in turn, will stimulate the farm economy and provide increased 
employment across the United States, especially in smaller 
towns and cities.
    Earlier this month, CCFAS presented its statement to this 
committee regarding policy fundamentals for the next Farm bill. 
I will not repeat all the points and issues addressed by that 
statement, but I will emphasize certain aspects that are of 
particular interest to our segment of agribusiness.
    The National Chicken Council believes it is especially 
important that the Marketing Loan Program provide for 
adjustments in loan rates that better reflect average market 
prices and that producers be allowed to continue to benefit 
from crop planting flexibility provisions. At the same time, 
our organization does not support any further supply management 
measures, nor the creation of a new inventory management 
reserve.
    Further, while the concept of countercyclical income 
provision may sound good in theory, it is very difficult to 
properly execute in practice. Thus, the countercyclical payment 
programs beyond certain provisions in the current law that 
provide for this type of income balance are not supported by 
the National Chicken Council. We recommend a market-oriented 
farm program because, as the economic analysis conducted by the 
CCFAS has found, both commodity producers and users benefit and 
benefit more than supply management policies and programs.
    The growth market is not the mature U.S. marketplace, but 
the global marketplace. Furthermore, a robust international 
market allows U.S. poultry processors to better balance supply 
and demand for the various poultry parts. Thus, being able to 
compete in the global market allows U.S. poultry producers to 
better balance supply with a broader range of consumer demand. 
In world markets, no animal protein has a better competitive 
price advantage than U.S. chicken leg quarters.
    Basic to being competitive in the world market is the 
ability of the U.S. poultry producers to purchase corn, soybean 
meal, and other feed ingredients at costs that are not 
artificially above world levels. The FAIR Act helps to provide 
the opportunity to be competitive.
    During the 1990's, U.S. poultry producers benefited from a 
tremendous growth in exports. Chicken export volume increased 
nearly fivefold over the decade that just ended. Last year, 
well over 18 percent of U.S. chicken production was sold in 
international markets. Currently, U.S. chicken exports are 
running 20 percent ahead of last year. Future increases in 
world consumption of poultry are predicted to be truly 
significant. The potential for U.S. poultry producers to supply 
a part of this substantial increase in global demand for 
poultry is tremendous, if given the competitive opportunity to 
do so.
    Your support, however, is needed to help us increase these 
exports, along with other farm exports. The United States must 
continue to work aggressively and boldly for more liberalized 
world agriculture trade. All countries must be challenged if 
they do not live up to their trade agreements. Renewal of the 
President's trade promotion authority would be a good first 
step.
    Devoting more resources to value-added agricultural exports 
to a level that at least matches the percentage used by the 
European Union and other major competitors would be a prudent 
investment by the U.S. Government. The next Farm bill provides 
an excellent opportunity to help put the United States in a 
leadership position for value-added exports.
    Turning to conservation and environment, as agricultural 
production expands, the challenge of protecting soil, water, 
air, and other natural resources becomes greater. Farm policy 
that provides incentives promoting sound stewardship for the 
environment is a positive approach. Conservation measures to 
protect the environment and environmentally sensitive lands 
are, of course, appropriate. However, it would not be 
appropriate in the name of conservation to restrict good, 
productive farmland, especially in times when the market 
signals are calling for more supplies. Locking away cropland in 
the Conservation Reserve Program to manage supply is 
counterproductive. Enrolled acres in the CRP should be truly 
environmentally sensitive, with the emphasis on the benefits to 
natural resources.
    An important part of the environmental protection and 
conservation practices is the sound scientific handling of 
agricultural animal wastes. The Environmental Quality 
Incentives Program, as mentioned by at least one or more of the 
speakers this morning, is an important part of helping poultry 
and livestock farmers to meet their responsibilities with 
respect to the Clean Water Act, CAFO, and Clean Air Act. 
Authorizing adequate funding for EQIP and designating at least 
50 percent of the annual funding for animal agriculture would 
be important for these producers to continue to be good 
stewards of the environment.
    As more attention is focused on the next Farm bill, it is 
clear that we are at a real crossroads in agricultural policy, 
where a continuation on a road toward market-oriented farm 
programs and not a return to the road that guarantees 
government price supports, coupled with restrictive measures to 
manage supply. While the government-guaranteed road has greater 
appeal because it may have fewer bumps and turns, it is a road 
that provides all who travel it with few rewards in the end.
    The next Farm bill should be designed and written to take 
full advantage when a healthier world demand for food occurs. A 
farm bill that does not anticipate and encompass the expanding 
international opportunities for the American farmer is a farm 
bill that will miss a golden opportunity.
    The National Chicken Council looks forward to working with 
the committee to assist in crafting a new farm bill that allows 
market forces to reward efficiency, encourage productivity, 
improve risk management, better allocate resources, and 
maximize net farm income.
    Thank you, Mr. Chairman, for the opportunity to present our 
statement.
    The Chairman. Thank you very much, Mr. Roenigk.
    [The prepared statement of Mr. Roenigk can be found in the 
appendix on page 98.]
    The Chairman. Now, we turn to Mr. Pete Hermanson of the 
National Turkey Federation from Story City, Iowa. Pete, 
welcome.

STATEMENT OF PETE HERMANSON, PAST NTF CHAIRMAN, NATIONAL TURKEY 
                  FEDERATION, STORY CITY, IOWA

    Mr. Hermanson. Thank you, Chairman Harkin, Senator Lugar, 
and members of the committee for the opportunity to discuss the 
impact of the upcoming Farm bill, it will have on the turkey 
industry and to present the industry's suggestions for the 
bill.
    My name is Pete Hermanson. I am part of a family farm 
operation in Story City, Iowa, where we raise 200,000 turkeys 
each year and grow corn and soybeans. In the last few years, I 
have become involved in turkey processing, as well. I am a 
founder and board member of the Iowa Turkey Growers 
Cooperative, which owns and operates West Liberty Foods, one of 
the nation's top 20 turkey processors. I want to thank Chairman 
Harkin for the vital support he gave the cooperative during the 
creation of West Liberty Foods. We will talk more about its 
progress a little later.
    I am here today on behalf of the National Turkey 
Federation, NTF. NTF represents 95 percent of the U.S. turkey 
industry, including growers, processors, breeders, hatchery 
owners, and the allied industry. I am proud to be a past 
chairman of the organization. The committee is to be commended 
for conducting this hearing. Today, I would like to look at 
three ways the bill could significantly affect the turkey 
industry in Iowa and around the country.
    One of the biggest challenges facing the turkey industry in 
my area is the cost of complying with environmental 
regulations. The current rules and the ones we expect soon from 
EPA could cost producers with more than 50 animal units a 
combined total of $12 billion or more for the next 10 years. 
The National Turkey Federation advocates increasing funding for 
the Environmental Quality Incentive Program, EQIP, to $2.5 
billion annually in the next Farm bill, with the money split 
evenly between crop and livestock producers.
    Additionally, EQIP should be expanded so that USDA can 
assist producers with single-year projects and can cost-share 
on planning activities, like drafting of comprehensive nutrient 
management plans. EQIP should no longer be restricted to 
producers with fewer than 1,000 animal units, which is equal to 
55,000 turkeys. A turkey grower in Iowa who produces 55,000 
turkeys is not a big farmer or a rich farmer. Rather than limit 
participation by farm size, it would be better to set a 
limitation on the payments any producer can receive in a single 
year.
    NTF recognizes much of the Farm bill debate will revolve 
around the commodity title. We also know that many on this 
committee have been critical of the market-oriented reforms in 
the 1996 Farm bill. I would like, though, to talk about how the 
previous Farm bill affected Iowa turkey growers and West 
Liberty Foods.
    The Iowa Turkey Growers Cooperative was founded in 1996 
when the turkey industry was in the midst of a slump, having 
lost money for 30 consecutive months. The turkey plant in West 
Liberty, Iowa, had closed, and the livelihoods of many turkey 
producers and plant workers were at risk. Thanks to strong 
guidance from Chairman Harkin and his staff and a loan 
guarantee from USDA, our co-op was able to purchase the plant 
and create West Liberty Foods. It has gone on to become a real 
success story. If a different type of farm bill had been passed 
in 1996, we might not have survived. Let me explain.
    Feed accounts for 70 percent of the cost of turkey 
production. By late 1995, the country's historic policy of 
propping up farm prices by controlling production was harming 
turkey producers and others who raise livestock and poultry. 
Demand for feed grains here and around the world was 
increasing, yet U.S. stocks were declining. In the midst of 
these soaring grain prices and depressed turkey prices, West 
Liberty Foods was struggling to make a profit. As Chairman 
Harkin knows, we were in bad shape in 1997.
    Turkey prices began to strengthen in 1998, but the price 
increase alone wouldn't have made us profitable. We needed 
grain prices to reflect world markets, and the 1996 Farm Bill 
accomplished that goal. If grain prices once again fall out of 
line with world supply and demand, as they did in the mid-
1990's, the future of many Iowa turkey growers and of West 
Liberty Foods will be in jeopardy. Also in danger will be the 
jobs of the 1,100 workers we employ at our plant and the 200 
other workers we employ at a further processing plant we just 
purchased.
    I want to make it clear that neither NTF nor I are here to 
advocate a cheap grain policy. I am a grain farmer, too, but I 
want grain prices to be strong because of the global market, 
not artificial domestic programs dictate strong prices. West 
Liberty Foods would not have struggled as badly in 1997 if $5 
corn had been the world price, but we were feeding our turkeys 
$5 corn and competing against foreign competitors who are 
paying far less for their grain.
    Therefore, the National Turkey Federation believes it is 
important to avoid market-distorting programs in the next Farm 
bill. The planting flexibility of the last Farm bill is 
critical to farmers being able to respond to market demand for 
feed grains.
    NTF is sensitive to the committee's desire to protect 
farmers during periods of low prices. We know many want a 
countercyclical program in the next Farm bill. Beyond adjusting 
in the loan program, creating a countercyclical program that 
maintains market flexibility is probably not practical. A 
better solution is to ensure that the AMTA-style payments are 
at a level that provides farmers sufficient income protection 
during the widest possible range of economic conditions. The 
NTF would support payments in the range of combined AMTA and 
market loss assistance payments for fiscal year 2001.
    Finally, an appropriately crafted farm bill can boost farm 
income by increasing the competitiveness of U.S. poultry in the 
international markets. It takes about 2.5 pounds of feed to 
raise a pound of turkey. Every additional pound of turkey we 
can produce for the overseas markets increases demand 
domestically for feed grains, oil seeds, and similar feed 
ingredients.
    The NTF strongly recommends the next Farm bill bolster 
funding for value-added export promotion. The United States is 
lagging further and further behind our competitors in promoting 
these products. New Zealand reinvests in market promotion five 
cents for every export dollar it learns, while we invest less 
than one penny. The next Farm bill must structure our export 
promotion program such as the Market Access Program and Foreign 
Market Development Program so that our spending levels are 
comparable to our foreign competitors.
    In summary, we recommend providing the financial assistance 
necessary to help poultry and livestock producers comply with 
the environmental regulations. Maintaining the market-based 
farm policy will help farmers during periods of low prices and 
bolstering commodity prices by ensuring a stronger commitment 
to value-added export promotion. The National Turkey Federation 
and its many members appreciate the opportunity to share our 
concerns and recommendations with you. Thank you.
    The Chairman. Mr. Hermanson, thank you very much for your 
testimony, and thanks for your great leadership on West 
Liberty. They are doing great.
    [The prepared statement of Mr. Hermanson can be found in 
the appendix on page 108.]
    The Chairman. Now, we come to Ms. Maria Rosmann, 
Sustainable Agriculture Coalition of Harlan, Iowa. We welcome 
you here. I remember being on your farm a few years ago. I 
haven't been there lately, so I will have to go out.
    Ms. Rosmann. You are always welcome.
    The Chairman. Reading your testimony yesterday, it looks 
like you have made quite a bit of progress, so welcome to the 
committee.

STATEMENT OF MARIA ROSMANN, SUSTAINABLE AGRICULTURE COALITION, 
                          HARLAN, IOWA

    Ms. Rosmann. Thank you, and again, you are always welcome 
to visit. Good morning. I thank you again for the opportunity 
to testify this morning. My name is Maria Vakulskas Rosmann. I 
am from rural Harlan, which is West Central Iowa. I am 
testifying today on behalf of the Sustainable Agriculture 
Coalition. It is a network of organizations who represent 
farmers, environmentalists, and rural people who come together 
to formulate practical, effective approaches to agricultural 
problems.
    My husband, Ron Rosmann, and I farm a certified organic 
farm. It is a 600-acre operation, both grain and livestock. Our 
crops and livestock include corn, oats, barley, soybeans, 
turnips, alfalfa. We raise beef, we raise pork, we raise 
poultry--no sheep, no turkeys yet. We have a cow-calf herd 
which numbers 100 cows. We feed out all our calves. We raise 
farrow to finish about 400 hogs annually. I raise about 400 to 
500 chickens annually, as well.
    Two years ago, I left my position in rural school 
development to begin the marketing of Rosmann Family Farm's 
labeled meat and poultry. Neither my husband nor I have any 
off-farm employment, which is important to share with you 
today. We employ one full-time hired person, and during the 
summer months, we are assisted by our three teenage sons, two 
of whom are in high school, the third a student at Iowa State 
University.
    Our crops have been certified organic since 1994. The beef 
operation was certified in 1998, and we have been farming what 
I consider sustainably since 1983. My husband has been farming 
since 1973, following his graduation from college and return 
home to the family farm.
    Recently, my husband was elected President of the Board of 
Directors of the Organic Farming Research Foundation based out 
of Santa Cruz, California. The mission of this foundation is to 
sponsor research related to organic farming practices, to 
disseminate this research appropriately, and to educate the 
public and policymakers, such as yourselves, about farming 
issues related to organics.
    In one year, one year alone, from 1999 to the year 2000, 
the number of certified organic growers in the United States 
increased 18 percent, from 6,600 to 7,800. A recent survey by 
the National Marketing Institute estimates that 43 percent of 
our population has used organic foods or beverages in the past 
year, and those figures are high.
    A study by OFRF indicates that the nation's land grant 
universities, however, are failing our organic farmers and 
ranchers. Of the 885,000-plus acres available for research in 
the land grant system, only 0.02 percent, 151 acres, is devoted 
to certified organic research. An earlier study by this 
foundation found that less than 0.1 percent of Federal 
agricultural research dollars were being spent on organic 
farming research.
    The coalition supports the continuation of competitive 
grant funding through the Initiative for Future Agricultural 
and Food Systems and the coalition also supports the addition 
of either a specific category for organic farming research or a 
directive that a percentage of initiative funds be targeted to 
organic research. We also contend that the certification fee 
structure must continue to be weighted in a manner that allows 
family farmers, such as myself, to compete in the organic 
marketplace. The coalition also strongly urges the committee to 
expand USDA's recent announcement of cost-share assistance for 
organic certification, and our farm is being certified at this 
hour at home, pursuant to the crop insurance bill, from the 15 
pilot States to the entire country.
    In 1998, we did something very, very unusual for us. We 
added value to our livestock. Currently, all of our livestock 
is sold on the organic market. However, we had made the 
decision to go with our own business, our own marketing, and 
become our own middleman. Our product is a certified organic, 
boneless, dry-aged, frozen packaged product available in 
grocery stores in Des Moines and Ames, Iowa, available through 
private sales from people primarily in Central Iowa, numbering 
currently over 110 folks, currently available through the Food 
Systems Project at Iowa State University through Practical 
Farmers of Iowa, whereupon all Iowa meals are part of the large 
catered events in the Des Moines and Ames area.
    We also serve or make available the larger amounts for 
homes, and it is being served this weekend in California at a 
large event. When I get home, I will be shipping out a 
substantial amount of steaks to be served at the Claremont 
Hotel in San Francisco. You can also see who our clients are, 
what kind of meat that they prefer, and why they prefer it, and 
that is part of the testimony.
    We believe that the new Federal Farm bill needs to include 
a program that focuses on production ag as a basis for rural 
development, and we believe strongly that ACRE serves that 
need. ACRE proposes that a relatively modest proportion of 
mandatory Federal agricultural funding be dedicated to 
research, training, and business and marketing assistance, such 
as what we undertook by ourselves, that it work for both the 
farm and ranch income. What is really neat about ACRE is that 
it is a competitive collaborative grants program that can 
mobilize existing organizations and agencies to provide 
coordinated assistance in direct response to the needs of 
agricultural producers.
    I have a letter to support this in my testimony, but I wish 
to strongly state and add our strong support for the inclusion 
of a competition title in the new Farm bill. Our farm, you can 
pick out on the flight pattern from Omaha to Minneapolis. I saw 
my farm yesterday when I flew in, and it was important to say 
that because I can see the diversity from the airplane, looking 
down to see the various crops, and it is sad to say that 
government programs, we feel, have failed miserably to foster 
good stewardship of the land. They have done the opposite. They 
have encouraged over-production. They have discouraged crop 
diversity. They have discouraged crop rotations.
    We strongly support the Conservation Security Act 
introduced by Senator Harkin and Senator Gordon Smith. We also 
included our recommendations for existing conservation programs 
in my testimony. However, I strongly, strongly encourage that 
all farm and conservation programs in this new Farm bill 
include payment limitations, include stripping all loopholes, 
and include the increased fraud and abuse penalties.
    Finally, I would like to address, if I may, please, the 
idea of fewer and fewer farmers. Who will farm the land? Who 
are around anymore to farm the land? The new Federal Farm bill 
needs a beginner farming and ranch development program, and I 
have detailed it in my testimony.
    Again, I invite you strongly--Senator Harkin, you are 
welcome anytime on our farm to see organics that work. I would 
strongly encourage each and every one of you to find the 
organic, certified organic farms in your area and see that 
they, indeed, work, and they work for the betterment of our 
society. Thank you very much.
    The Chairman. Thank you, Maria.
    [The prepared statement of Ms. Rosmann can be found in the 
appendix on page 115.]
    The Chairman. Thank you all very much for your testimonies. 
I am going to be in Iowa in August. Maybe I will stop by. Like 
I said, I have been on your farm before, but it has been a long 
time; I would like to see your latest development. Please give 
my best to Ron and the family.
    You said you now direct market your own beef and stuff. 
That is something new that I didn't know about. Who slaughters 
it and who prepares it?
    Ms. Rosmann. This is done at Amend Packing in Des Moines. 
It is a federally inspected plant. Kent Weis is a fourth-
generation butcher. It is done--we are taking animals on Friday 
of this week, so it is all done in Des Moines and stored in Des 
Moines. What it does, it is aiding another group. It was very 
difficult, sir, to find a federally inspected plant that wanted 
to do work with a smaller producer. We have been with them now 
three years.
    The Chairman. You said that organic growers increased by 18 
percent last year?
    Ms. Rosmann. Again, certified.
    The Chairman. Certified.
    Ms. Rosmann. Certified, the third-party agency coming in to 
prove what you have claimed.
    The Chairman. You said that only one-tenth of a percent of 
Federal agricultural research money goes to organic systems 
research?
    Ms. Rosmann. Yes, sir.
    The Chairman. Well, if that is growing that rapidly, maybe 
we ought to take a look at that, too, and see about that.
    Ms. Rosmann. What might be interesting, we have compared 
our yields, our proven yields on the grain end of it for the 
past 10 years with Iowa State University Extension. We match in 
Shelby County the corn yield, 135 bushels an acre. We match 
that average yield. We are down one bushel for soybeans, 43 
versus 44.
    If I may take the opportunity to say, when discussing about 
the livestock as part of a farming program, livestock need to 
be part of the total systems approach to agriculture. It is a 
vital part. It can't be just corn and beans, beans and corn.
    The Chairman. What do you do with all your manure? You have 
got chickens, you have got hogs, and you have got cattle. What 
do you do with all the manure?
    Ms. Rosmann. Manure is spread. In fact, we have to seek 
other sources for our manure for fertility.
    The Chairman. You do apply it all?
    Ms. Rosmann. Oh, yes. It all gets applied. We compost it 
and apply it. We do not have confinement systems, but we still 
obviously have the manure.
    The Chairman. How many acres are you farming now?
    Ms. Rosmann. Six hundred.
    The Chairman. Both you and your husband, and you have one 
full-time hired person?
    Ms. Rosmann. Three. God bless them, boys.
    [Laughter.]
    Ms. Rosmann. It is labor intensive, of course, it is, and 
right now we are in the middle of oats and barley harvest. It 
is labor intensive. We are fully employed.
    The Chairman. I also appreciate what you said about the 
need for USDA to provide assistance to develop direct marketing 
and value-added enterprise. It sounds like you have done very 
well, but most people who farm, I mean, direct marketing, that 
takes time. Not too many people have marketing degrees or know 
how to market and that can be a real problem. When you started 
doing this, did you get any assistance at all from USDA for 
marketing?
    Ms. Rosmann. No, sir.
    The Chairman. None whatsoever?
    Ms. Rosmann. Each of us had taken a marketing class in 
college, which does not make a marketer. We intentionally 
started slow. We intentionally started small so that we could 
learn as we went along. We do not need--we hardly advertise. 
The advertising that I provide is to let clients know when I 
will be in Des Moines and when they can place their orders, and 
our clients are broad.
    It is a broad base. It is a broad economic background. They 
are people who want not only organic product, they want a 
hormone-free. We have a lot of cancer, radiation, and 
chemotherapy patients who are able to digest our meat--their 
claim, not mine--and they are able to tolerate our meat. For 
whatever reason, we feel fortunate. On the other hand, we are 
dealing with people of all economic backgrounds and people who 
want to support family farms.
    The Chairman. Thanks. I will get back to you.
    I have one question for all of you, basically. I want to 
talk about the EQIP program, because this is vital to all of 
you. Many of you specifically mentioned the need to eliminate 
caps on the level of payments a producer can receive and to 
eliminate the restriction that prohibits cost-share money for 
the larger livestock operations.
    Again, we have got to look at all of the aspects of EQIP. 
First of all, I agree that we have got to get more money into 
EQIP, and we are going to do everything we can to do that.
    However, I am concerned about creating a program that would 
unfairly subsidize large livestock operations. Now, we have 
seen how large payments to program crop producers have gone 
predominately to large farms and helped them grow larger. There 
are enough studies to show that maybe what we have done 
inadvertently, not just in the last Farm bill but for farm 
bills going back for a long time, is that by supporting every 
bushel, bale, and pound that is produced, obviously, always the 
bigger get more. The bigger you are, if it is every bushel, 
pound, and bale, then the bigger you are, the more you get, and 
that widens the gap all the time, because the percentages will 
widen that gap.
    We see that, for example, in terms of land prices, by some 
of the things we have been doing, the bigger you are, the more 
money you get, and the bigger land owners can then out-bid the 
price of land so that younger people can't get involved. They 
can't get into that bidding process. The bigger you are, you 
can bid up the price of land, and we have discussed this a lot 
here in this committee about how we have maybe inflated land 
prices through some of these programs that we have had.
    Again, maybe we see the same thing happening now with 
larger feeding operations. On the other hand, we want the 
larger feeding operations to be environmentally sound. I am on 
the horns, if you will excuse the pun, of a dilemma here. I 
want to help the larger operations to meet environmental 
concerns because that is of a societal benefit. On the other 
end of that horn is if we provide EQIP money without any caps, 
more will generally go to the larger producers. Because they 
are bigger, they will consume more, and, therefore, it will 
give them a competitive advantage.
    How do you do this and make sure that the EQIP money is 
distributed fairly? I see it as a great dilemma, and I am not 
sitting here telling you I have the answer. I don't know. We 
are going to try to figure it out, and any suggestions and help 
that you have would be most welcome. How do we provide for an 
equitable distribution of EQIP payments for livestock owners? 
If we don't have caps, how do you keep it all, most of it, from 
generally going to the larger producers?
    Do you understand what I am saying, and what my problem is 
in wrestling with this? We want to help the larger producers 
because I want to help them meet environmental problems, which 
helps us all, but not to the detriment of the smaller producers 
who also need that help. I don't know how we do that, and any 
thoughts or suggestions any of you have, Jon or anyone else, I 
would be more than welcome to take any advice or suggestions. I 
didn't mean to pick on you, you were just first in my eyeline 
of sight there, Jon.
    Mr. Caspers. I will be picked on. I will go first. What I 
suggest in my testimony and what we have suggested in the past 
is that we would support a payment limitation of $200,000 per 
contract and then the elimination of the size test.
    The Chairman. You are saying a cap not on the size, but on 
the money.
    Mr. Caspers. Right, but just on the money. I guess the 
current program----
    The Chairman. That might work.
    Mr. Caspers [continuing]. I see eliminating too many of my 
neighboring producers from participation in the program at that 
cap. To address your question further, and I would like to talk 
specifically about some of the rules and regulations that are 
coming fairly quickly to our industry and across agriculture, 
specifically EPA's CAFO regulations, the cost of implementing 
those regulations as proposed by EPA is going to be 
substantial, and I take some numbers from EPA in the Midwest.
    They are anticipating for some different sized operations 
the 10-year costs of operation for a 1,460-head swine operation 
of $281,000, 10-year cost. Now, as you go higher in numbers, 
they have got a 3,400-head operation, the cost of almost 
$600,000 over a 10-year period, and a 13,800-head operation, 
which would be a large operation, of almost $2.2 million.
    Now, if those operations all had access to $200,000 in 
assistance for a contract to help implement, to install and 
implement and operate those systems, obviously, you could bring 
all those operations under that program and the public could 
gain the environmental benefits. Certainly, $200,000 is going 
to represent certainly a much larger benefit for the smaller 
operation than it does the bigger operation. At the same time, 
you include them in the program, so you gain the environmental 
benefit.
    The Chairman. Did you have an idea of how much that might 
cost us? Maybe you put that in your testimony, I don't know. If 
you did a $200,000 amount, what would that be over 10 years? We 
will figure it out.
    Mr. Caspers. Yes. I guess what we have called for is $1.2 
billion to be put into the program for livestock and poultry.
    The Chairman. Per year for 10 years?
    Mr. Caspers. Yes.
    Senator Thomas. Mr. Chairman, are you talking about 
confined feeding regulations, is that it?
    The Chairman. Yes.
    Mr. Caspers. We are talking about, yes, the CAFO 
regulations that EPA has promulgated.
    The Chairman. Concentrated animal feeding operations.
    I will yield to my colleagues now, but I want to get back, 
John, and talk about the methane that you have talked about, 
and perhaps some of the others, also, want to talk about 
methane production and energy, that type of thing that I am 
interested in, also, perhaps including in the Farm bill. I will 
yield to my ranking member, Senator Lugar.
    Senator Lugar. Thank you very much, Mr. Chairman. I just 
jotted down, as you did, that the payment limits issue is 
clearly one that we have to come to grips with. The $200,000 
limit is probably a good idea, but I suspect that this is very 
different from the sorts of limits that we have had in the past 
and I am not certain where this leaves everybody with regard to 
the types of operations they have.
    You have the problem with all of our programs, whether it 
is the commodity title or the EQIP situation with livestock, 
where there has been great debate in the Congress in the past 
about payment limits. Essentially, the trend has been to raise 
those in recognition of larger operations that are efficient in 
the country and I have supported that. I appreciate the 
opposing point of view, which says, essentially, that it does 
mean a larger amount of Federal money goes to larger farmers.
    The Sparks report that we often cite indicates that eight 
percent of operations in the country are doing about 72 percent 
of the business, whether it is livestock or commodities. We 
have a pretty high degree of concentration in American 
agriculture as it stands and probably growing larger as our 
younger farmers rent land from people who are in the States or 
elderly people and so forth, who in effect have larger 
operations, even if they don't have an equity in the land, and 
that is the way to get a middle-class income, essentially.
    At some point, the payments issue is one that has to be 
resolved by the committee and I appreciate your sort of 
highlighting that in your colloquy.
    Another point that three of you have raised, and maybe more 
of you would have if we had sort of raised this as a basic 
issue, is the cost of feed as a part of the picture. As I 
recall with the turkey situation, 70 percent of the cost comes 
from feed, 70 percent of the cost of turkey production. The 
testimony there is that the historic policy, as you have termed 
it, or propping up farm prices by controlling producers is 
doing great damage to turkeys and others who are in the 
livestock and poultry business.
    Others of you may have differing sorts of situations, but 
there is a basic tradeoff here with regard to our attempts to, 
as we do around this table frequently, the low cost of corn and 
wheat and prices for beans and what have you, try to think of 
how we can imagine those going higher. Now, as you imagine them 
going higher, why, this has a very different sort of impact, as 
a matter of fact, if we make a concentrated effort to do that. 
Some would contend the bill the House is considering now with 
sort of a third layer of pricing, with another target price 
situation, really achieves, at least temporarily, a higher 
price, however you get there. That is probably bad news in 
terms of operations if you are a livestock and poultry person.
    At some point, we have to come to grips with the commodity 
title and the livestock titles in some harmony, or some 
wholeness, because they are sort of a part of the same picture. 
Now, most of you are suggesting that the market works and that, 
essentially, you are prepared to see a more market-oriented 
situation governing your feed costs. Perhaps as you think 
through that, you might have further refinements on your 
testimony and maybe some recommendations with regard to the 
commodity titles, because this is likely to be a very large 
issue for the committee.
    Then finally, there is mention in most of the testimony 
about the need for trade promotion authority for the 
administration. There is mention that NAFTA made an enormous 
difference, that huge increases have occurred in poultry, in 
turkeys, in pork, and they have. Of course, that is the ball 
game in terms of the volume and the movement, the dynamics of 
the business. If you can solve somehow the feed problem and 
EPA, in one form or another, these are sort of the parameters 
of having some future, making some money in the prospect.
    My own biases are more toward market solutions in the 
commodity situation, toward fewer limits with regard to 
payments in terms of EQIP or with regard to anything in the 
business, and very strong trade promotion. I mention those to 
begin with so you have some idea of where we are coming from.
    What advice can you give us just off the top of the head 
today, in the time that I have to ask you this question, about 
the commodity title? Really, some of you are involved in 
addition to livestock or poultry, in producing corn or beans or 
wheat or something else in addition. What is the tradeoff here 
and what should we be looking at philosophically as we take a 
look at the commodity title? Does anyone have more testimony on 
that? Yes, sir?
    Mr. Hermanson. If I could just make a comment, I guess my 
concern as we look ahead, I have been in Brazil a couple of 
times, have friends of the family down there, been there a 
couple times in the last three years, and my concern--I love 
the people and I love to see them develop and grow, but I am 
concerned that they will end up with our meat production. I 
mean, they have got hundreds of thousands of acres that haven't 
been developed yet and they are working infrastructure. That is 
what I am concerned about, is that we don't lose agriculture in 
the U.S.
    Senator Lugar. Trace that through. Why does Brazil end up--
--
    Mr. Hermanson. What I am saying is if we have an 
artificially high price of grain here, that will encourage them 
to develop more grain.
    Senator Lugar. I see.
    Mr. Hermanson. If grain is cheaper, which it is, there is 
expansion now in the hog production and turkeys are getting 
down there, too. We have to work in the world arena, I believe.
    Senator Lugar. Well, that is the basic argument of having a 
competitive price, that it doesn't give away either our grain 
exports or our meat production prospects, because if our prices 
for grain are too high, then other countries have lower costs 
and lower prices and take away those markets, and as you are 
suggesting, may also induce a meat production or poultry 
production situation utilizing that differential in world 
price.
    That is a part of our dilemma. There are a good number of 
farmers who come before this committee and they would say, 
well, the world out there is a big place, but I have got a farm 
here now and I want a guarantee of a price that covers my cost, 
whatever it may be. Now, the rest of you folks will have to do 
the best you can, but nevertheless, looking after No. 1, we 
have got to pin this down, all four corners. There are a good 
number of such farmers, as you may have seen in your 
associations.
    I thank you very much----
    Mr. Hermanson. As a grain producer, at that point in time, 
it is nice to have good prices, it surely is.
    The Chairman. Balance, get a balance.
    Senator Conrad.
    Senator Conrad. Thank you, Mr. Chairman, and thanks to this 
panel of witnesses. You have really been excellent witnesses 
and I have enjoyed the testimony.
    I have a series of questions about EQIP and CRP, but before 
I get to that, there is something that is very much on my mind 
that I would like to especially ask the first four witnesses 
about, and that is the question of what we are doing with 
respect to foot and mouth disease and whether or not we are 
providing adequate protection to our industry.
    I was recently in England and literally every day in the 
newspaper, there were scare headlines with respect to mad cow 
disease, with respect to foot and mouth disease, with respect 
to other supposed problems, GMOs and all the rest. I would just 
like your impression at this point, whether or not we are doing 
everything we should be doing to protect our livestock 
industry. Mr. Caspers.
    Mr. Caspers. Well, we have certainly felt the effects of 
that. We canceled our World Pork Expo this last summer due to 
concerns with all the foreign travelers and foreign visitors. 
We have, typically, 1,500 or 1,600 foreign visitors attend 
World Pork Expo every summer, and certainly, we just couldn't 
find any way really to assure that we could guarantee that they 
had the proper separation in terms of time away from animals in 
foreign countries with the potential exposure to animals at 
that show. We had to go ahead and cancel that show this last 
summer.
    Now, I understand the President in his budget has requested 
some additional dollars for the inspections at the ports of 
entry, and that is extremely important that we do that. We, on 
our Swine Health Committee, which I served as chairman up until 
recently, continue to get reports of people traveling through 
ports of entry and really trying to test the system as they 
come through to make sure that they took proper precautions, 
that they disinfected their shoes and went through all the 
proper procedures, and they continue to report, at least at 
that time, that you almost had to be insistent that somebody do 
something or assist you in that process. We were, I guess, a 
little disappointed in that, and hopefully, with some 
additional funding and people, those inspections could be 
beefed up and that will happen if there can be additional 
resources put to that.
    Certainly, it is a concern and it is still a concern. FMD 
is endemic in many parts of the world, in Africa and many parts 
of Asia, Southeast Asia. For some reason, those breaks in the 
past haven't made the headlines like we have seen coming out of 
the U.K. with the break there, but certainly, there is risk 
from many parts of the world.
    Senator Conrad. Mr. Davis.
    Mr. Davis. I guess, basically, I would echo the previous 
witness. Yes, we have to keep in mind that we have not had FMD 
in this country for over 70 years, so what we have been doing 
certainly hasn't been a failure. That is not to say we don't 
need to continue to be concerned, beef up inspections. That is 
part of why we support that.
    Part of our plea for increased research dollars speaks to 
that issue, particularly as it regards the disease research 
center at Ames. It is badly needed. There is still more that we 
don't know than what we know, folks, and we can't afford to get 
behind on doing those things that give us the answers as best 
we know how through sound science to further beef up our 
confidence.
    Senator Conrad. All right. Mr. McDonald.
    Mr. McDonald. Yes. To answer your question, we are probably 
not doing enough. One area of concern to me is the reporting of 
these diseases by our trading partners. I am thinking of the 
incidents last year where Argentina was declared foot and mouth 
free and we started setting up the protocol for importing 
cooked beef from Argentina, and lo and behold, in late summer 
last year, we started hearing rumors of the disease in Northern 
Argentina. Yet, it wasn't reported to the WTO until January. 
That lapse of time potentially, at least, could have caused 
great harm. The same situation occurred with BSC in Europe. 
When I participated in the business forum in Buenos Aires in 
April, I was urging that any trade agreement provide a specific 
protocol for verification and reporting of these various 
diseases.
    The comments earlier about the protocol that we have 
instituted in our airports and travel facilities is good. Does 
it go far enough? I don't know where the good science and 
practicality meet, but it is certainly a potential disaster to 
the live cattle industry.
    Senator Conrad. Mr. Moore.
    Mr. Moore. Thank you. I would agree with the others, that 
it obviously is a real concern. It is a concern for all of the 
livestock industry. We can be very thankful that we haven't had 
it in this country for 70 years. Obviously, we are doing 
something right. Definitely, APHIS needs as many inspectors as 
possible to make sure that they can cover all of the airports 
and other points of entry and that we are addressing the issue 
as a serious potential problem.
    We have a disease in sheep of scrapie that we need scrapie 
eradication. Those rules have been worked on. We need to get 
them published. As Mr. McDonald said, we have to make sure that 
the partners that we deal with around the world are following 
the same protocol as we are as far as reporting the diseases 
and as far as how we accept their statements and they accept 
ours.
    Senator Conrad. I thank you for those suggestions and 
comments. As I have looked at it, the risk that is associated, 
is enormous. I really think as part of our review here we 
should seriously consider strengthening protections against 
hoof and mouth. Being in England and seeing the devastation to 
their industry, it is very sobering, seeing people lose 
everything, and that is what is happening there. It ought to 
alert us all that we have got to take this very seriously. I 
thank the chairman.
    The Chairman. Thank you. Mr. Roenigk, I know that you 
wanted to comment.
    Mr. Roenigk. Senator Conrad, if I could just briefly add, 
fortunately, poultry does not get foot and mouth disease. 
However, USDA is talking about a six-mile quarantine in case 
there is an outbreak. I guess they have different options. If 
poultry is within that six-mile quarantine, we cannot feed our 
birds, we cannot take our birds out, we cannot take our 
products out. I don't think USDA has fully addressed that, and 
it would be devastating for people who don't have the disease 
but at the same time would bear all the burdens of someone who 
did have the disease, and so I would like to bring that to the 
attention of the committee. Thank you.
    Senator Conrad. Thank you for that.
    The Chairman. That is interesting.
    Senator Conrad. I didn't know that.
    The Chairman. I didn't know that, either.
    Senator Thomas.
    Senator Thomas. Thank you, Mr. Chairman.
    Frank, I want to followup just a little bit. I will be 
brief. You, having served in the legislature, know it is 
important to be brief in the answer.
    You pointed out that it is necessary to continue the wool 
payment, hopefully in this $5.5 billion thing. What 
specifically are you doing? I am impressed with what your 
industry is doing to move yourselves forward. Could you recite 
those one more time?
    Mr. Moore. Senator, we have done a lot of things in the 
last few years. We filed the Section 201 case against Australia 
and New Zealand to put in place some kind of relief period so 
that our industry had a little stability. We have worked on 
scrapie eradication. We have got rules at USDA that are just 
about to be published and we are going to get that disease 
under control and that will be a significant step as far as the 
industry and our image is concerned around the world.
    We are working on value-added products. We are working on, 
in the six-State region that Wyoming is included in--Idaho, 
Montana, South Dakota, Utah, Colorado--we are also working on 
what we call a third-generation cooperative, to start a program 
where we are doing what Mr. McDonald referred to. We are taking 
care of our product from the gate, at the ranch, to the 
consumer's plate.
    Some of these issues are going to change the way we market 
lamb and the way we market wool, and these are the kinds of 
things that our industry has been working on for a long time. 
We need stability right now to make sure that we can get these 
things up and running. It is difficult to change an industry, 
but we are working on it.
    Senator Thomas. You are doing promotion and carcass 
classifications and so on?
    Mr. Moore. Yes. What we are working on is a number of 
things. We are trying to go to a grid pricing structure so that 
we have something that the product is sold based on the quality 
rather than just on a commodity price.
    Senator Thomas. It is interesting, the problems that you 
have had with this mandatory price reporting. Why hasn't that 
come out of USDA and what has been the result of it not coming 
out?
    Mr. Moore. Well, for the last three months, we have had 
basically no reports whatsoever. We used to have a voluntary 
program. Now with the mandatory program and then you put in the 
restrictions so that there is confidentiality, with the 
concentration of packers we have in our industry, it is very 
hard for a report to come out under the current formulas that 
doesn't immediately identify which players are in the 
marketplace that day. USDA is trying to address those issues 
and hopefully will come out with some revised formulas for the 
reports in the next few days. Definitely, without market 
reports, we are all kind of working in a vacuum.
    Senator Thomas. That is because there are so few processors 
that if they reveal it, it is an intrusion into private 
information, is that concept?
    Mr. Moore. Yes.
    Senator Thomas. That is interesting.
    Mr. Moore. Three major packers in the industry.
    Senator Thomas. Mr. Davis, I admire your commitment to your 
industry. You said you are going to beef up inspections.
    Mr. Davis. As soon as I said it, I was afraid somebody 
would get that.
    [Laughter.]
    Mr. Davis. Further improve, is that better?
    Senator Thomas. Whatever. It is good. You could turkey them 
up, too, couldn't you?
    [Laughter.]
    Senator Thomas. What would you say, you guys in the beef, 
what would be your first two priorities in this bill for the 
beef industry? Both of you--either one of you.
    Mr. McDonald. I would say country of origin labeling and 
restriction of the USDA grade stamp. That is a cornerstone of 
our ability to be able to compete in this global market. We 
need to distinguish and identify our beef.
    Senator Thomas. Thank you.
    Mr. Davis. I guess those are also policies of ours, but I 
am not sure I would, in the context of where we sit today, that 
I would name them as No. 1 and No. 2., with the backlog in the 
EQIP program and the regulations that are coming down on CAFOs 
or whatever you call them the biggest need for help is there as 
the No. 1 priority, and I go back to our research priorities. 
It is kind of like, in my opinion, maybe more mine than the 
industry's.
    Senator Thomas. Research on land management or on your 
product?
    Mr. Davis. On our--no, as pertains in this bill on disease 
research and food safety and those types of things.
    Senator Thomas. I see.
    Mr. Davis. In the big picture, research has been much like 
livestock has in previous farm bills. It kind of tends to drift 
down, and I guess I would like to see it stay up a little 
higher.
    Senator Thomas. OK. The concentration problem, I wonder, is 
it legitimate to ask the chairman something about jurisdiction? 
The monopoly jurisdiction, does that go in the Farm bill? Is 
that something that ought to be there? Some of the things we 
are talking about here, country of origin, are those things 
that we have jurisdiction over in the Farm bill?
    The Chairman. Some of it has to do with the Justice 
Department's jurisdiction. We can set up some policies within 
the Department of Agriculture to try to address it, but not in 
the legal aspect. The Justice Department has that jurisdiction.
    What was the other one?
    Senator Thomas. The country of origin, those trade issues 
and so on.
    The Chairman. Well, I don't know if we would have the 
jurisdiction for mandating country of origin labeling or not. I 
don't know.
    Senator Thomas. We probably share it with the Finance 
Committee, I suppose.
    The Chairman. If we do it, they would probably ask for 
referral.
    Senator Thomas. Well, we want to have some power there.
    The Chairman. Craig, let me just say this. We are ready to 
break new ground, so----
    [Laughter.]
    Senator Thomas. I am sorry to ask that, but as we talk 
about some of these things, apparently, they don't all go in 
the Farm bill, of course, jurisdictionally, but they should be 
brought out and we can do something with it. Thank you, sir. I 
appreciate it.
    The Chairman. We can always try it.
    In order of appearance, Senator Lincoln.

   STATEMENT OF HON. BLANCHE L. LINCOLN, A U.S. SENATOR FROM 
                            ARKANSAS

    Senator Lincoln. Thank you, Mr. Chairman, certainly for 
your leadership, and also you have set this committee on a very 
aggressive schedule to review our current farm policy and to 
look at what we can do in a positive way to work with our 
producers. Certainly with what the House is doing, they go to 
markup later this week, perhaps, to mark up their farm bill 
proposal, so it is entirely possible that we will see the 
completed House bill by the time we leave on the August recess. 
That means we have got a lot to do and I know that we can do it 
and that is all the more reason why it is so important to have 
you all here to work with us. We appreciate the witnesses' 
participation. The commodity group was here last week. We 
appreciate that.
    I come from a State where I do try to balance very much 
because we have great pork producers, our cattlemen's 
association, obviously poultry, and certainly a great group of 
turkey growers in Arkansas, balancing with the commodity groups 
that we represent.
    I just would like to put a plug in, as well, that there are 
some short-term needs that we are addressing more immediately 
here. We are very anxious, all to put together an emergency 
market loss assistance package that will respond to the 
immediate needs of our farmers and our rural communities, and, 
ultimately, the clock is ticking on that because September 30 
is rapidly approaching. We are going to be working with the 
chairman. I appreciate his leadership in pushing the committee 
toward a resolution on this and I hope that we will come up 
with something that can be very beneficial to everyone, because 
short-term is obviously very essential to all of our producers.
    Beyond the short-term, however, we do need to look at farm 
policy and a new farm bill that responds to all of agriculture, 
both producers and livestock producers. Our farmers, our 
livestock farmers particularly are an essential part of the 
agricultural community that produces the safest, most abundant, 
and affordable food supply in the world. I say that regularly 
because I like the way that it sounds and I want more and more 
people to understand that. Coming from a seventh-generation 
Arkansas farm family, I have lived it and breathed it all my 
life.
    As we look at the issues that we are faced with, and I know 
that Mr. Hermanson brought up some of it in terms of balancing 
the interests against the row crops and the row crop farmers as 
well as the livestock producers, I would certainly be 
interested--Senator Lugar mentioned it a great deal, as well, 
but if you all have recommendations of how we can better 
balance.
    I know for us, you mentioned Brazil. For row croppers, the 
fact that we have exported a great deal of technology and 
allowed those row croppers down there to be very efficient, not 
to mention the investment we have made in infrastructure that 
allows them to get their products to that global marketplace 
that we have talked about. I have to say that, Senator Conrad 
is not here, but he always puts up an unbelievable chart that 
indicates the amount of subsidies, export subsidies 
particularly, that the governments of the EU provide their 
producers, which put us at a tremendous disadvantage in that 
global marketplace when you take into account the input costs, 
the increased input costs particularly that we have seen over 
the last couple of years and our costs of production through 
environmental regulations and others.
    Is there anybody on the panel that has a good suggestion to 
how we balance between our row croppers and our livestock 
producers? I have got a vested interest in this.
    Ms. Rosmann. Make them all organic.
    [Laughter.]
    Ms. Rosmann. Your prices, ma'am, will increase. The prices 
for our grains and our--why are we able to sustain otherwise a 
family of five and a full-time hired help just doing it the way 
we do? Multiply that by many, many people. Multiply that by the 
people whom you hope will replace us in the next generation and 
maybe you will have the beginnings for a very sound answer to 
this dilemma.
    Senator Lincoln. Well, I do believe that it is important to 
recognize the sustainable farming and the organics that are 
involved there and what the marketplace can sustain. No pun 
intended, Mr. Hermanson, but I don't think we can go cold 
turkey. I have got way too many----
    [Laughter.]
    Senator Lincoln [continuing]. In terms of the producers 
that are out there and the elements that we face, particularly 
in the area of the country that we farm, with unbelievable 
pests, not to mention the humidity, the moisture, sometimes the 
drought, other factors that we have to take into consideration 
in the capital-intensive crops that we grow. They are very 
different, and the perspective that we have to take sometimes 
has to be somewhat different.
    I do agree that there is a place and that there is room for 
us to begin to look at more in terms of that, but in terms of 
balancing that?
    Mr. Hermanson. It is a challenging opportunity that this 
committee has because I don't think there is an easy answer. 
The thing that you need to have at least a safety net for the 
crop farmers. I mean, we need that, and obviously if you are 
only in crop production, if you could have $10 soybeans and $5 
corn, you think you would be happy, but it doesn't work in the 
whole balance and, of course, we have to work with this global. 
I don't believe we can build a wall around the U.S.
    We have to be in the world market, but by the same token 
what we have been doing has been some benefit as far as there 
has been--if a farmer in Iowa grows a crop, with the transition 
payments and the LDP, there has been cash-flow for him. Feed 
costs, it has been very beneficial, of course, to the turkey 
industry because we have had economical feeds and it has given 
us an opportunity in this co-op that we have, that we have 
gotten on our feet and we are doing well.
    Again, it is not an easy thing, but we have to recognize 
that there are parts of the world that are just waiting to 
develop. Of course, I don't think the European common market, 
even though they subsidize a lot, I don't think that is where 
our competition will come from. It is the area that they 
haven't developed yet.
    Senator Lincoln. That may go to a lot of what you have 
already commented about in terms of making sure that our 
playing field is fair and certainly to the jurisdiction of 
trade issues. It is going to be critical. I know for us, in our 
State, the catfish issue that we have got in terms of labeling, 
misleading labeling that is coming from the catfish production 
or the basafish production out of Vietnam, the problems we are 
having with our poultry industry in Africa, South Africa, in 
terms of the dumping cases that they are claiming, we have got 
some real concerns there and we have got to be able to stand up 
for our producers. I do it at the risk of being called the 
``fish woman'' and a few other things, but it is very 
important.
    Any other comments about our trade issues there or your 
perspectives of whether we can see more clearly or not whether 
there is going to be this robust growth in global demand for 
U.S. agricultural exports that we kind of based the original 
Farm bill on in 1995? I mean, we instituted that farm bill with 
the basis that there was going to be this international 
marketplace and this robust growth in demand.
    Mr. Roenigk. Senator, if I could address that. Yes, I 
agree, the 1996 Farm bill was based in large part, or some 
part, that there was going to be this robust growth in 
international trade for basically all U.S. farm commodities, 
and to some extent, that happened, but to a large extent, it 
didn't. I don't think the next Farm bill should say, well, it 
didn't happen, therefore, it can't happen. It has a more likely 
chance of happening now. We have seen it already in poultry. As 
China comes into the WTO, as people's income around the world 
increases, the first thing they turn to is animal protein, 
whether it is poultry or some other animal protein, so we need 
to give ourselves an opportunity to really take advantage of 
that.
    It goes back to the words we were using this morning about 
balance. Senator Lugar used the word ``harmony.'' I don't know 
that we will ever achieve harmony, but the balance is 
difficult. I don't have an answer other than to say if prices 
are too high for grains, it jeopardizes our competitiveness, 
but also, too, those higher prices get worked into the price of 
farmland so that larger farmers see higher prices coming, they 
go out and perhaps bid on this land and bid it up, and pretty 
soon, whatever price corn is, it is still not high enough 
because the corn land costs so much.
    At the same time, sometimes users are accused of wanting 
prices too low for grains, and that is not true because if 
farmers are not rewarded for their work and their risk, then 
they go out of business and it is certainly not something we 
want. We want a good, steady, adequate supply of all feed 
ingredients and just give us a chance to compete in the world. 
I appreciate the question. Thank you.
    Senator Lincoln. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Lincoln.
    Senator Crapo.

 STATEMENT OF HON. MICHAEL D. CRAPO, A U.S. SENATOR FROM IDAHO

    Senator Crapo. Thank you very much, Mr. Chairman. 
Unfortunately, I am going to have to leave in just a couple of 
minutes to a live interview that starts right at 11 o'clock, so 
I am not going to be able to ask the questions I had. I did 
want to introduce my constituent and good friend, Eric Davis, 
who is here representing the National Cattlemen's Beef 
Association. He is representative of all the cattlemen that we 
have in Idaho, and I suspect across the nation. He runs a cow-
calf operation and feedlot and runs cattle on State, private, 
and Federal land in Owyhee County and his family, I believe, 
has been in business, your operation, over 50 years. When we 
talk about environmental regulations and the other impacts that 
people in the livestock industry face and who is helped by our 
conservation programs and the like, we are talking about Eric 
Davis.
    I told him beforehand that I was going to grill him with 
questions. Really, what I had was a bunch of softballs to throw 
at you, so if the chairman would allow, I would like to submit 
those questions in writing and have them responded to.
    The Chairman. Whatever your desire is.
    Senator Crapo. I will do that, and I just want to also say 
before I conclude here that I have reviewed all of the 
testimonies. I particularly focused on yours, Eric, since you 
are a good friend and constituent, and I want to thank you not 
only for your testimony, all of you, but for your testimony 
that focuses on the importance of maintaining free and fair 
markets. As we develop the farm policies of this country, 
domestically as well as internationally, we need to recognize 
that we will get the greatest benefit by focusing on markets 
and helping them to work effectively. I thought it was truly 
refreshing to see that kind of testimony and that perspective 
on how we approach our farm programs.
    With that, I am going to have to run or else they are going 
to start the program without me, but I do have a series of 
questions, Mr. Chairman, that I will submit for the record and 
for written answers.
    The Chairman. Thank you very much, Senator.
    Senator Crapo. Thank you.
    The Chairman. Senator Nelson.

   STATEMENT OF HON. BEN NELSON, A U.S. SENATOR FROM NEBRASKA

    Senator Nelson. Thank you, Mr. Chairman, and thank you to 
the panelists for sharing your thoughts with us. Obviously, 
this is a shared adventure that we are on, trying to find some 
of the answers to many of the most difficult problems that we 
are going to face within our economy in the near future. 
Certainly, it has been an adventure over the last four-plus 
years.
    I am pleased that we are taking time to focus on the whole 
question about livestock or animal agriculture, because so very 
often, the discussion seems to be about commodities and other 
issues, not focused specifically on animal agriculture.
    From my perspective in Nebraska, our livestock industry 
accounts for about 60 percent of our cash receipts, so it is an 
extremely important part of what we do in the State of 
Nebraska. Our cattle industry alone is responsible for about 
one out of every eight jobs in our State. At home, we like to 
remind people that we have more cows than people. More than 40 
percent of the feed grains that are raised in Nebraska go into 
feeding livestock, and we call that adding value, so it is 
extremely important as we face the writing of the Farm bill, as 
we move forward, that we keep in mind the relationship between 
animal and non-animal agriculture as it relates to a sound 
program that achieves harmony and balance, if we are 
successful.
    The impact of the Farm bills in the past, I suspect, has 
had some direct impact on agriculture and now it is not just 
simply taking into account the price of feed grains, but also 
the policy that affects conservation practices and other trade 
practice and whatever it is that we do to develop more markets 
for agriculture in general.
    To wed together the importance of animal agriculture and 
our commodities agriculture, I came across an article in Top 
Producer magazine that was timely for this hearing. It is about 
export competitiveness and the new Farm bill. The author, 
Marcia Zarley Taylor, says farm bills can't fix it. That is 
always scary. She argues that the Farm bill has little to do 
with our international competitiveness, but that other policies 
do, EPA, a lot of other issues that affect us, the value of the 
dollar against every other currency in the world, that these do 
have a lot to affect this.
    She says that we really need to embrace livestock. She 
reminded me that the grain fed to livestock is the most 
important use of commodities that we produce, and certainly it 
is when it is such a large percentage. It has also been an 
extremely important component in rural development, especially 
in the South and the Great Plains.
    The article goes on to point out that United States 
companies are already some of the largest poultry and hog 
producers in Brazil, and many of you have already commented on 
Brazil and Argentina as competitors. The point that she makes 
is if we chase more of our processors and livestock offshore 
because of what we do or don't do here at home, no government 
welfare program yet invented will replace corn and soybean 
volume channeled domestically. We cannot afford to drive our 
agriculture offshore. We must, in fact, embrace it. I am very 
anxious to have you help us understand how we bring together a 
policy that will do that.
    We have already had some discussion about how you deal with 
the whole field of livestock in the Farm bill and if we create 
this eligibility for conservation cost share or the incentives 
assistance that we are talking about and that applies 
regardless of size, how we are going to be able to make this 
all come together and balance the dollar against the value that 
we are seeking to achieve for agriculture.
    I leave you with that. I, too, have another obligation, but 
we are going to have to rely on your knowledge, your 
experience, to help us find a way to make all this happen, to 
balance the interests for environmentalism, the interest for 
international trade, the barriers that we face in many corners 
of the world, many of them not that far from here, the 
challenge we have with animal disease and how we bring this all 
together, because if we don't achieve that balance, I can 
assure our ranking member that we won't get that harmony any 
way we try it. He already knows that I am worried that he is in 
a transition period with his farm and I want to make sure we 
are transitioning him up, not out.
    [Laughter.]
    Senator Nelson. I thank you very much, and I will leave you 
with that. We look forward to more input from you as we move 
forward. Thank you.
    The Chairman. Thank you very much, Senator Nelson.
    To all of you, I made my intentions clear to try to include 
an energy title in the new Farm bill. I was picking up some 
interest in various sectors. There has been a lot of attention, 
of course, paid to ethanol and soy diesel, other bio-based 
kinds of lubricants and fuels. I heard in recent weeks about 
the potential for using animal products for bio-fuels. I had 
not thought about that in the past, but obviously, it looks 
very promising. I talked to a group representing some of our 
rendering plants around the country and heard how much can be 
obtained just from the animal fats and by-products that could 
be used in terms of bio-fuels.
    Mr. Caspers mentioned the use of methane. I ran across 
someone the other day who is using, if I am not mistaken, an 
ethanol plant and they are taking methane from both a landfill 
and a large animal feeding operation and they seem to have a 
lot of years of supply of methane for the heat processes that 
they need.
    As I look out around the landscape, especially in our State 
of Iowa, where we have a lot of large hog confinement 
facilities it has been very contentious in terms of the 
environment and how we handle that. They used to be looked upon 
as great energy producers, in terms of capturing the methane 
from those operations, both in swine and in cattle. It is being 
done in some places, but I don't know that we are doing much to 
help assist that from the Federal standpoint. I don't know that 
we are putting much research money into that, either.
    Those are my thoughts on what we might do in the Farm bill. 
If any of you have any thoughts about that, either today or if 
you talk with your organizations, and have some thoughts on how 
we might utilize animal agricultural in energy production, I am 
very receptive to that. Anything you have to add today, I would 
be glad to hear, or anything later on, I would be glad to hear, 
too.
    John, you mentioned it, methane production. Obviously, 
there is a lot of methane in those large confinement 
operations.
    Mr. Caspers. That is certainly possible. With a little help 
and some incentives of some kind, whether it is through some 
additional dollars for research, whether it is for tax credits 
or whatever, that could certainly be encouraged and is 
certainly a ready source. It needs some other environmental 
benefits and certainly can help be one thing that would address 
the energy shortage and our reliance on imported oil.
    The Chairman. If I am not mistaken, help the environment, 
too.
    Mr. Caspers. That is correct. That is correct.
    The Chairman. You get a lot of bounces off that, maybe some 
additional income to the producer. I am looking for thoughts 
and suggestions as you go along. Does anyone else from the 
livestock sector have any thoughts? Pete.
    Mr. Hermanson. Last month, some of the people from the 
turkey industry met with some of your staff members regarding 
burning of poultry litter to create electricity, and they are 
working on something in Minnesota, maybe some possibilities, 
some others. It is a matter in some areas where you can argue 
that there is a better use for that organic nutrient, but in 
some areas, it is a challenge because of a place to get rid of 
it. We would support that continuation of that credit in that 
area as part of a solution, again, of getting some energy and 
taking care of a problem byproduct.
    The Chairman. I was in England a couple of years ago and I 
visited a couple of power plants over there, one smaller one 
that had been operating for some time and a new one that had 
just come online, and that is all they are doing is burning 
chicken litter. That is all they are doing. Well, chicken, 
turkey--poultry litter is what they are burning. I thought they 
built one in Delaware. Do you know anything about that, Mr. 
Roenigk?
    Mr. Roenigk. Yes, Mr. Chairman. There is one proposed and 
it is planning to come onstream.
    The Chairman. In Delaware, isn't it?
    Mr. Roenigk. Yes. If you look at the projects that are 
coming, we have a concentration of poultry production in 
Delmarva, two hours' drive from here, depending on how much 
traffic is on the Bay Bridge. If you add up all the projects 
that are planned, both energy and commercial fertilizer, I can 
see the day when there will be a shortage of poultry litter on 
Delmarva. We are turning a problem into a real asset. People 
are going to have to bid for this material and that is a good 
thing.
    The Chairman. I heard they might be doing something down in 
Arkansas on that, too, but I will have to ask Senator Lincoln 
about that, one of these power plants burning chicken litter. I 
visited the one in England, and it was operating.
    Mr. Roenigk. Yes. It is based on the technology from 
England. The important part is that they be long-term 
commercially feasible. There are some tax breaks needed in the 
beginning to help them get started. I would agree with that.
    The Chairman. Sure.
    Mr. Roenigk. Over the life, they should be commercially 
feasible and we shouldn't ask taxpayers to keep on supporting 
those long-term, but some startup help would be appropriate.
    The Chairman. Again, we can't give tax benefits in the Farm 
bill, but maybe we can promote some things that will get the 
Finance Committee to begin to look at. Maybe there are some 
things we can do here to nudge them a little bit.
    Last, I just wanted to ask Mr. Davis, the National 
Cattlemen's Beef Association, you expressed opposition to 
renewing the farmer-owned reserve. I can tell you, there is 
some support for that. I don't know how widespread it is, but I 
keep hearing more and more that we need some type of a support 
for a farmer-owned reserve, basically to give farmers the 
ability to market grain more orderly over a period of time.
    I hope you take a second look at that, because I can 
remember, and one of the curses of having been here as long as 
I have been on the Agriculture Committee, I remember things 
that went on in the past, and I remember in the 1980's, we had 
a big drought in the last part of the 1980's. We had a farmer-
owned reserve at that time. I remember a lot of my cattlemen 
and pork producers at that time were very happy that we had 
that, because prices spiked very high, but we had that reserve 
that let the grain out to the feeders. That was in the late 
part of the 1980's.
    Again, I just wonder about having a hard and fast position 
about some form of a farmer-owned reserve.
    Mr. Davis. I appreciate your comments, Mr. Chairman. Our 
history has shown that we will work with you and the committee 
all the way through this process and entertain the thoughts 
that come. Yet, we do still have our policies that we have to 
represent, as well.
    If I can expand just a bit on that, and kind of on some of 
the things that have been alluded to all day, we need that 
balance, that harmony. We need to back up a step or two from 
here. I am not as old as I look, but I remember being around, 
not in this town but out where I live, watching some of these 
things happen before. That is why this panel is here today, 
because there have been times in the past when we did not have 
that harmony and it caused great weeping and gnashing of teeth 
out in the places where we live.
    I commend you and the Senate and your predecessors and, 
hopefully, your successors, when that time comes, to keep us 
involved in this process. We intend to stay engaged and work 
with you----
    The Chairman. Good. Well, you will be.
    Mr. Davis [continuing]. To make it a balanced and 
harmonized, hopefully, farm bill.
    The Chairman. Don't worry. We are going to make sure you 
are involved. There is no doubt about that.
    On the topic of exports, the Market Access Program and the 
Foreign Market Development Program are two that we do have 
jurisdiction over, and to varying extents, help different parts 
of the industry. Any further thoughts on either the MAP program 
or the Foreign Market Development Program, the cooperator 
program, and what countries might look promising? Do you feel 
that this should be something that we should also strengthen in 
the next Farm bill? I will just open it up for anyone.
    Mr. Davis. Mr. Chairman.
    The Chairman. Yes, Mr. Davis.
    Mr. Davis. Yes. We would like to see the MAP program, in 
particular, strengthened. We think it has been beneficial to 
our industry and, really, all of the meat industries. At what 
level, as we get into those details, either I am going to have 
to turn around and talk to staff about details, but yes, we 
think that is an important part of remaining competitive in a 
global market with our production.
    The Chairman. The Pork Producers Council?
    Mr. Caspers. Yes. The Market Access Program is probably the 
largest beneficial program that we have. We certainly encourage 
that and we have called for a doubling of the funding in that. 
That program has been around for quite a few years under the 
MAP name, or I can go back far enough when it was called other 
things. Certainly, that is a huge benefit to us and it has been 
extremely successful. It is competitive in nature, and so 
organizations that use the funds effectively are rewarded with, 
hopefully, more funds in the future, and we have gained through 
the U.S. Meat Export Federation a fair amount of funding, but 
there is certainly a much larger need and we can certainly use 
quite a bit more additional funding to promote that and to 
continue to expand pork exports from this country.
    The Chairman. You are asking for a doubling, basically, of 
the MAP?
    Mr. Caspers. Yes. Yes.
    The Chairman. Did you have something, Mr. Roenigk?
    Mr. Roenigk. I believe the current program is funded at $90 
million for MAP, and I recall not too many years ago, it was 
$200 million or even more, and certainly previous levels would 
be easily used. I know there was an issue of big companies/
small companies using these funds. That can be addressed.
    One quick example. In Hong Kong, when they had the chicken 
flu and they had to depopulate their domestic population of 
chicken, the consumer there was confused as to whether chicken 
was wholesome or not, and a little bit of advertising, letting 
them know that U.S. chicken was wholesome, no problem with the 
flu and so on, really paid off in big dividends. It is a kind 
of program you can go in on a long-term basis, but also the 
short problems and address them and it really makes a big 
difference with just a little bit of money.
    The Chairman. Very good. Anything else?
    Mr. Moore. Yes. I would like to add, the U.S. sheep 
industry has expanded our wool exports from 7 percent to about 
30 percent in the last few years, so we have sent a lot of wool 
to the Asian countries. Definitely, the MAP program and our 
export markets are very important to the sheep industry.
    The Chairman. Very good. That is really all I have. Senator 
Lugar, do you have any other followup questions?
    Senator Lugar. Thank you, Mr. Chairman. Let me just mention 
one way of trying to perhaps move along the energy situation, 
whether it is with the livestock producers or grain people, of 
course is through our research programs that this committee has 
fostered. I noted the Senate appropriators have included most 
of the research moneys that we needed, both for the formula 
grants as well as the cutting edge research. Sometimes the 
House appropriators have taken a more difficult view toward 
that. Hopefully, that offers our universities an opportunity to 
try to convert what is actually occurring in the field to 
something that is commercially viable and can stand the test 
without subsidies or pilot projects or what have you, and that 
is really critical for basic ethanol as well as with the 
livestock-based energy.
    I just want to sort of raise a general question. You have 
asked Mr. Davis, Mr. Chairman, about the farmer-owned reserve. 
Let me just say that the farmer-owned reserve, along with set-
asides, 275 marketing loan for corn, and various other things 
bears some reminiscence of policies of the past. Some of those 
provide, at least in the short term, a higher price of corn, at 
least if you had bushels of corn to sell on the acres that you 
hand't set aside.
    I am just curious, from the livestock producers' 
standpoint, and I ask this from my own family's history--
Senator Nelson has alluded to my farm, and I don't want to 
leave in doubt that it is transitional in the sense that we are 
heading out of there. The transitional farms in the Sparks 
report were the farms that come after the leading 8 percent, 
the next 10 percent, and it was suggested there that about half 
of the income for farms that are in that category come from off 
the farm. About half comes from on the farm. Beyond that, 
almost all of it comes from off the farm on a net basis.
    My Dad, who passed away 45 years ago, had this sort of a 
dilemma in the New Deal period. Supply control was the policy. 
As a result, he was forced by the government to plow under 
acres of corn and also to kill little pigs. The supply control 
worked on both sides in those days.
    Now, the harmony of the operation came from the fact that 
he fed the corn to the pigs and some cattle that were on the 
farm. Most farms in those days had livestock and grain 
operations, and the economies came by going in the direction of 
the market. There were times when the corn market or the grain 
markets were stronger than the livestock market, so you fed 
fewer or more or what have you.
    Times have changed in the last 45 years and many people are 
into specialties. They deal just with poultry or just with 
cattle, buy the grain somewhere else, so that we have a problem 
in terms of policy that is a little bit different. In the 
initial New Deal period, supply control was across the board. 
The idea was just simply farmers, if you let them produce, 
would produce too much. Inevitably, the price would go down, 
stay down, and there was no way of ever elevating it without 
getting rid of supply. As a national policy, we did.
    What I am curious, and I ask this of the pork producers and 
the cattle people, over the course of time in the livestock 
industry, farm policy left the supply control situation. In 
other words, although it remained with grain and still does, 
and when we are talking about, whether it is the farmer-owned 
reserve or set-aside or any of these policies, they get down to 
the idea, how do you limit supply and how do you sort of knock 
it down to get the price up in some fashion. On the livestock 
side, things proceeded without these rigorous management tools 
of supply control.
    As a matter of fact, we have some testimony from the 
commission appointed by the last Farm bill, some difference 
even between one of our members and one of the commissioners on 
strawberries. The suggestion was there ought to be a strawberry 
program and a fellow that was on the panel said, not on your 
life. Leave this alone. Essentially, we have got a market out 
there that you haven't fooled with, in the way that you have 
fooled with the grain business.
    Why did livestock proceed on a market situation without 
supply control? You pointed out 53 percent of income in our 
farms come from livestock. This is the majority of dollars at 
this point, in a fairly untrammeled way. Do you want to leave 
it that way, and how did it get that way, or what are the 
values of proceeding that way as opposed to some other? Does 
anybody have any thoughts for the good of the order?
    Mr. Davis. I don't know that I am smart enough to answer 
that question, Senator. In the cattle part of the livestock 
industry, as you know, we have tried to stay as market-driven 
as possible for as long as I can remember. Yes, the programs 
have affected the livestock industry and the way we as 
individual operators pick out the economic things that we think 
are the best economic methods to stay in business.
    We recognize we have cycles. We are not always on the high 
of a cycle, either. We have our good times, we have our bad 
times, but overall, our philosophy, as you know, has been to 
take those, adjust in response to the market signals, try to do 
those things to increase demand, do other things to help take 
the peaks and valleys out of the cycles. We have been 
unsuccessful in doing that since the 1920's. We still have the 
peaks and valleys.
    There is a recognition that that is part of the biological 
systems we work with as well as the human aspects that make 
those decisions, and I guess the bottom line of where we have 
always come down is we understand the importance of those 
various farm programs. We understand that they affect us. We 
understand that most of us do more than one thing and are 
affected directly as well as indirectly.
    Let us let the market work as well as possible, and when we 
do have programs, if it is a conservation program or a 
commodity program, if it is in the public interest to preserve 
or enhance or in some way guide someone to doing a better job, 
then let us do it for that reason. Understand that it has to be 
the public that pays for it, and don't do it on the back of 
another segment of agriculture.
    Senator Lugar. I presume the majority of your members still 
favor that idea?
    Mr. Davis. I believe they do, yes.
    Senator Lugar. Would that be true of the membership of pork 
producers?
    Mr. Caspers. Yes. Our membership is generally supportive of 
participating in the open free market as much as possible. 
Certainly, we have some requests where there is additional 
regulation to be put on our industry, where the public 
benefits, that the public would assist in the cost of that 
regulation.
    Senator Lugar. Well, that gets sort of to the EQIP 
discussion we had earlier on. In other words, let us say you 
folks wanted to continue in the market, so that relieves the 
Federal Government from subsidizing you or somehow propping up 
your prices and what have you. Essentially, you are coming in 
and saying, if EPA or some other well-minded organization of 
the government believes that some things ought to occur for 
other reasons of national policy, namely the good of clean 
water and the environment, then this is where the Federal 
Government ought to intervene in your business in terms of 
providing at least some assistance so that your members can 
meet these requirements. Otherwise, you have a cost factor vis-
a-vis the Brazilians we heard about earlier today or others who 
may or may not have governments that are that equally 
interested in the environment.
    If that is the case, then we talked earlier about the 
limits of this type of thing. If you get into this proposition 
in which we sort of pick and choose what size farms we are 
going to assist with regard to this, that is a difficult 
problem, although one that we talk about all the time, but I 
raised it earlier for that reason. It appears to me there is 
probably legitimacy in a governmental role there that most of 
you support.
    The other side of the thing that you tend to support is as 
a cost comes from the environment, from EPA, cost also comes 
from farm bill policies that deliberately increase the cost of 
feed, because if we intervene while you are in a free market 
and make this a different kind of market, you are likely to 
have a bottom line that is very different, EPA being one 
subtraction and the Farm bill another.
    To the degree you all have grain and livestock, why, you 
can sort of work this out on the farm. To the degree you don't, 
and increasingly, I gather, this is the case with some larger 
operations, why, you have got a problem in which our 
intervention has some direct effects on this thing.
    Does anybody have any comment on that? I will then be still 
and let the chairman adjourn the meeting. Yes, sir?
    Mr. Roenigk. Just a quick comment. I grew up on a dairy and 
poultry farm in Pennsylvania. The dairy price was determined by 
the market order and poultry by the free market order, and my 
father, I never heard him say that prices of either one were 
high enough.
    [Laughter.]
    Mr. Roenigk. I don't have an answer, but I have a comment, 
and I do remember the soil bank and my father did like the soil 
bank, not because we had acres enrolled but because he got a 
part-time job going out and measuring all the neighbors' fields 
to make sure that they were in compliance with the soil bank. 
Just a comment, not an answer.
    Mr. Hermanson. I would just make the comment, I guess, that 
we should help, as part of the EQIP, to keep production in the 
U.S. rather than at least pushing it offshore, as was mentioned 
earlier. Then the other thing that we need to support the grain 
side, the crop production side of it so that the grain is 
produced in the U.S. to feed the meat, and we would like to 
share some of that with the rest of the world.
    That is where the turkey industry is. We just want a--if 
somebody is going to impose some regulations, maybe we need 
some help with that. We would like to have a good supply of 
feed, and obviously if you can do some enhancement as far as 
export, that is good for us, too. Thank you.
    Senator Lugar. I would just add finally, and I will ask Ms. 
Rosmann to comment on this, I have made the observation in 
these meetings and from my own experience that over the course 
of the years, we have gotten about a 4-percent return on 
invested capital on our farm. To many Indiana farmers, that 
sounds too high. We are not sure that we have seen that. The 
others would say, who are not farmers, why are you in the 
business at all? You could have gotten six percent on 
government bonds for the last 30 years without the problems of 
trade.
    I am just curious, even if we got it right, assuming we 
have this market-oriented situation and it is harmonious, is 
anybody making any money in this panel, I mean, not you 
individually, but your clients or the people that you are 
representing today?
    Ms. Rosmann, with your farm, obviously, you have got a 
family. You have 600 acres and you have a very interesting view 
in terms of marketing your product. Do you make four percent or 
more on your invested capital? I am just curious, if not, aside 
from the fact that you love farming, and that is the reason 
most of us are still in it, because we do, why are you in it? 
What is the return that comes from this type of operation?
    Ms. Rosmann. We believe strongly, sir, that sustainable 
agriculture, organic agriculture, not only sustains soil, 
water, and air, but that it sustains people, and the social 
capital that is involved with that is tremendous.
    Why are we in it? I grew up in Sioux City, Iowa. I was not 
raised on a farm. I had this notion of what farm life was going 
to be like when we were married 23 years ago and I found out 
real quickly that it is not that way. I married an individual 
who has a profound love for the land. I married an individual 
whose parents have that profound love and respect for the land 
and commitment to it.
    Again, I call attention that many of us in rural America 
have to have the second or third jobs to support the hobby of 
farming. We, again, do not have off-farm employment. That is 
critical. We are able to use what money we earn--this year, it 
has been poured back into machinery repair because we are not 
able to afford to keep up with the types of machinery that we 
need because it is a diverse operation.
    Why are we in it? We are in it because it is the 
appropriate way to, we feel, raise a family, teach the next 
generation, should they choose to decide farming as a career, 
and because we feel that feeding our clients and our global 
clients. We, too, are involved globally. Our pork goes 
overseas. It is part of the Berkshire program, where it is 
sold, marketed directly to Japan. We are part of a network of 
growers who participate in that. Our soybeans we raise are 
tofu, food-grade soybeans, so they are marketed directly 
through Heartland Organic Marketing Co-op, now out of Stuart, 
Iowa.
    We are intimately involved in this process because we feel 
that small- to medium-sized family farming is the only way to 
secure our future and our community's future.
    Senator Lugar. What sort of a return do you make on this?
    Ms. Rosmann. Do you think I am going to----
    [Laughter.]
    Ms. Rosmann. We, again, make enough, sir, to sustain 
ourselves. We do. We make a profit. We make a--a just wage? I 
don't know. Again, a whole lot of it, when you own your own 
business, it gets poured right back into the expenses. 
Remember--I will leave with that.
    Senator Lugar. That is a very good reason why you are 
farming. I just sort of still have the general question as to 
how we are going to make money in American agriculture, and it 
is not really clear. This is still a low-return business as you 
take a look at the opportunity cost for money. The strategy 
that we try to think of in terms of our Federal legislation 
ought not to make it worse, but we are really trying to make it 
better.
    This is why I asked each of you to think creatively in 
terms of really what kind of a policy would make any difference 
in terms of either return on invested capital in any of your 
businesses, because absent that, eventually, we are going to 
have an erosion of people leaving the business. In various 
ways, we will prop it up, and that has been the policy of the 
committee and the Farm bill, to save every farmer. Eventually, 
not everybody wants to be saved, in the event that the returns 
are very unpromising, and that is sort of a basic question that 
underlies our work here.
    Thank you, Mr. Chairman.
    Ms. Rosmann. If I may, sir, the return on our poultry, the 
return on our pork, the return on our beef is all a premium, a 
premium because it is sold on the organic market. The barley, 
the other small grains that we have, the corn and soybeans, 
again, are all priced above market, traditional market rates. 
We would not be able to survive in a traditional sense of that 
type of agriculture. We are only able to do it because of the 
value-added concept, however, value-added concept with 
appropriate pricing in the organic market.
    Senator Lugar. I am suggesting, just so I am not vague, is 
if you have a 600-acre farm in Iowa, without guessing the land 
values, but it would sound to me like you have a $1 million net 
worth if you own all of that without loans, so four percent on 
that would be $40,000 net profit, say, before taxes. Or if you 
have got more value in it, why, you need more, and that is the 
sort of return I am thinking about, just to quantify it. 
Nevertheless, I appreciate your testimony.
    Ms. Rosmann. Thank you, sir.
    The Chairman. I might add, Dick, that, again, I am hoping 
that in our next Farm bill that we at least try to provide for 
support for this kind of diversity. I mean, there is room for 
all. There are a lot of niche markets out there for 
agriculture. I have seen other farms in Iowa. I have a friend 
who grows Oagu beef up around Penora. He has got a nice niche 
market there. It may not be for everybody, but there are those 
markets out there. To the extent that we can help promote 
those, it just gives us more options, gives us more ways of 
doing things in agriculture to provide more income and keep 
people on the land.
    Obviously, you do have to have a decent return because you 
have got to pay for the capital. If you are going to go into 
it, you have to have a decent return, so you have to be able to 
pay for the capital and improvements and that type of thing, 
plus have enough money to live on and build a house and raise 
your kids and send them to school. Beyond that, there ought to 
be room for people who want to engage in agriculture, as of a 
way of life. They may never get very rich doing it, but they 
can have an enriching life and they can be a good part of our 
rural environment.
    It is not necessarily getting bigger, it is doing things 
differently. The Rosmanns have shown that there are ways of 
doing that, and other farmers are doing it in Iowa. It is not 
just the Rosmanns, others are doing different things. Now, 
again, I am not saying that this is how everything has to 
happen, but at least there ought to be room for that and there 
ought to be support for that type of an endeavor in our 
country.
    If we are only spending one-tenth of a percent on the 
research, maybe there ought to be some more research and 
support. How do you make these kinds of transitions to 
different types of agriculture, for example, the knowledge of 
how to do it and how to transition and do these different 
things. Like I said, there ought to be some support to at least 
enable people who maybe don't want to make immense wealth, but 
they do want to raise a family and have a decent lifestyle and 
at least have some equity later on in their lives. I am hopeful 
that we can at least provide for that kind of support. There 
has got to be room for everybody in this.
    With that, I thank you all very much. It was great 
testimony. Again, I ask you, through your various 
organizations, that if you have any thoughts on the energy 
aspect of it, please give us your thoughts and suggestions on 
that. I would sure appreciate it. Thank you very much.
    The committee will resume its sitting on Thursday at 10:30 
a.m.
    [Whereupon, at 11:33 a.m., the committee was adjourned, to 
reconvene on Thursday, July 26, at 10:30 a.m.]
      
=======================================================================


                            A P P E N D I X

                             July 24, 2001



      
=======================================================================

[GRAPHIC] [TIFF OMITTED] 82537.001

[GRAPHIC] [TIFF OMITTED] 82537.002

[GRAPHIC] [TIFF OMITTED] 82537.003

[GRAPHIC] [TIFF OMITTED] 82537.004

[GRAPHIC] [TIFF OMITTED] 82537.005

[GRAPHIC] [TIFF OMITTED] 82537.006

[GRAPHIC] [TIFF OMITTED] 82537.007

[GRAPHIC] [TIFF OMITTED] 82537.008

[GRAPHIC] [TIFF OMITTED] 82537.009

[GRAPHIC] [TIFF OMITTED] 82537.010

[GRAPHIC] [TIFF OMITTED] 82537.011

[GRAPHIC] [TIFF OMITTED] 82537.012

[GRAPHIC] [TIFF OMITTED] 82537.013

[GRAPHIC] [TIFF OMITTED] 82537.014

[GRAPHIC] [TIFF OMITTED] 82537.015

[GRAPHIC] [TIFF OMITTED] 82537.016

[GRAPHIC] [TIFF OMITTED] 82537.017

[GRAPHIC] [TIFF OMITTED] 82537.018

[GRAPHIC] [TIFF OMITTED] 82537.019

[GRAPHIC] [TIFF OMITTED] 82537.020

[GRAPHIC] [TIFF OMITTED] 82537.021

[GRAPHIC] [TIFF OMITTED] 82537.022

[GRAPHIC] [TIFF OMITTED] 82537.023

[GRAPHIC] [TIFF OMITTED] 82537.024

[GRAPHIC] [TIFF OMITTED] 82537.025

[GRAPHIC] [TIFF OMITTED] 82537.026

[GRAPHIC] [TIFF OMITTED] 82537.027

[GRAPHIC] [TIFF OMITTED] 82537.028

[GRAPHIC] [TIFF OMITTED] 82537.029

[GRAPHIC] [TIFF OMITTED] 82537.030

[GRAPHIC] [TIFF OMITTED] 82537.031

[GRAPHIC] [TIFF OMITTED] 82537.032

[GRAPHIC] [TIFF OMITTED] 82537.033

[GRAPHIC] [TIFF OMITTED] 82537.034

[GRAPHIC] [TIFF OMITTED] 82537.035

[GRAPHIC] [TIFF OMITTED] 82537.036

[GRAPHIC] [TIFF OMITTED] 82537.037

[GRAPHIC] [TIFF OMITTED] 82537.038

[GRAPHIC] [TIFF OMITTED] 82537.039

[GRAPHIC] [TIFF OMITTED] 82537.040

[GRAPHIC] [TIFF OMITTED] 82537.041

[GRAPHIC] [TIFF OMITTED] 82537.042

[GRAPHIC] [TIFF OMITTED] 82537.043

[GRAPHIC] [TIFF OMITTED] 82537.044

[GRAPHIC] [TIFF OMITTED] 82537.045

[GRAPHIC] [TIFF OMITTED] 82537.046

[GRAPHIC] [TIFF OMITTED] 82537.047

[GRAPHIC] [TIFF OMITTED] 82537.048

[GRAPHIC] [TIFF OMITTED] 82537.049

[GRAPHIC] [TIFF OMITTED] 82537.050

[GRAPHIC] [TIFF OMITTED] 82537.051

[GRAPHIC] [TIFF OMITTED] 82537.052

[GRAPHIC] [TIFF OMITTED] 82537.053

[GRAPHIC] [TIFF OMITTED] 82537.054

[GRAPHIC] [TIFF OMITTED] 82537.055

[GRAPHIC] [TIFF OMITTED] 82537.056

[GRAPHIC] [TIFF OMITTED] 82537.057

[GRAPHIC] [TIFF OMITTED] 82537.058

[GRAPHIC] [TIFF OMITTED] 82537.059

[GRAPHIC] [TIFF OMITTED] 82537.060

[GRAPHIC] [TIFF OMITTED] 82537.061

[GRAPHIC] [TIFF OMITTED] 82537.062

[GRAPHIC] [TIFF OMITTED] 82537.063

[GRAPHIC] [TIFF OMITTED] 82537.064

[GRAPHIC] [TIFF OMITTED] 82537.065

[GRAPHIC] [TIFF OMITTED] 82537.066

[GRAPHIC] [TIFF OMITTED] 82537.067

[GRAPHIC] [TIFF OMITTED] 82537.068

[GRAPHIC] [TIFF OMITTED] 82537.069

[GRAPHIC] [TIFF OMITTED] 82537.070

[GRAPHIC] [TIFF OMITTED] 82537.071

[GRAPHIC] [TIFF OMITTED] 82537.072

[GRAPHIC] [TIFF OMITTED] 82537.073

[GRAPHIC] [TIFF OMITTED] 82537.074

[GRAPHIC] [TIFF OMITTED] 82537.075

[GRAPHIC] [TIFF OMITTED] 82537.076

[GRAPHIC] [TIFF OMITTED] 82537.077

[GRAPHIC] [TIFF OMITTED] 82537.078

[GRAPHIC] [TIFF OMITTED] 82537.079

[GRAPHIC] [TIFF OMITTED] 82537.080

[GRAPHIC] [TIFF OMITTED] 82537.081

[GRAPHIC] [TIFF OMITTED] 82537.082

[GRAPHIC] [TIFF OMITTED] 82537.083

[GRAPHIC] [TIFF OMITTED] 82537.084

[GRAPHIC] [TIFF OMITTED] 82537.085

      
=======================================================================


                   DOCUMENTS SUBMITTED FOR THE RECORD

                             July 24, 2001



      
=======================================================================

[GRAPHIC] [TIFF OMITTED] 82537.086

[GRAPHIC] [TIFF OMITTED] 82537.087

[GRAPHIC] [TIFF OMITTED] 82537.088

[GRAPHIC] [TIFF OMITTED] 82537.089

[GRAPHIC] [TIFF OMITTED] 82537.090

[GRAPHIC] [TIFF OMITTED] 82537.091

[GRAPHIC] [TIFF OMITTED] 82537.092

[GRAPHIC] [TIFF OMITTED] 82537.093

      
=======================================================================


                   QUESTIONS SUBMITTED FOR THE RECORD

                             July 24, 2001



      
=======================================================================

[GRAPHIC] [TIFF OMITTED] 82537.094

                                   - 
