[Senate Hearing 107-932]
[From the U.S. Government Publishing Office]
S. Hrg. 107-932
IMPLEMENTATION OF THE FARM SECURITY AND RURAL INVESTMENT ACT OF 2002
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 17, 2002
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
Available via the World Wide Web: http://www.agriculture.senate.gov
______
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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
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Page
Hearing(s):
Implementation of the Farm Security and Rural Investment Act of
2002........................................................... 01
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Tuesday, September 17, 2002
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
Cochran, Hon. Thad, a U.S. Senator from Mississippi.............. 12
Leahy, Hon. Patrick, a U.S. Senator from Vermont................. 09
Lincoln, Hon. Blanche, a U.S. Senator from Arkansas.............. 35
Stabenow, Hon. Debbie, a U.S. Senator from Michigan.............. 28
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WITNESSES
Veneman, Hon. Ann M., Secretary, United States Department of
Agriculture, accompanied by Dr. J.B. Penn, Under Secretary,
Farm and Foreign
Agricultural Service, Dr. Keith Collins, Chief Economist and
Bruce Knight, Chief, Natural Resources and Conservation Service 02
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APPENDIX
Prepared Statements:
Harkin, Hon. Tom............................................. 52
Crapo, Hon. Michael.......................................... 58
Leahy, Hon. Patrick.......................................... 53
Lincoln, Hon. Blanche........................................ 60
Stabenow, Hon. Debbie........................................ 56
Veneman, Hon. Ann M.......................................... 62
Document(s) Submitted for the Record:
Baucus, Hon. Max............................................. 74
Request from Senator Harkin regarding information on how
states define a dairy operation............................ 77
Questions and Answers Submitted for the Record:
Harkin, Hon. Tom............................................. 84
Lugar, Hon. Richard.......................................... 89
Baucus, Hon. Max............................................. 109
Breaux, Hon. John and Hon. Mary L. Landrieu.................. 112
Cochran, Hon. Thad........................................... 113
Conrad, Hon. Kent............................................ 115
Crapo, Hon. Michael.......................................... 118
Daschle, Hon. Tom............................................ 129
Fitzgerald, Hon. Peter....................................... 130
Leahy, Hon. Patrick.......................................... 91
Lincoln, Hon. Blanche........................................ 133
Miller, Hon. Zell............................................ 136
Murray, Hon. Patty........................................... 138
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IMPLEMENTATION OF THE FARM SECURITY AND RURAL INVESTMENT ACT OF 2002
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TUESDAY, SEPTEMBER 17, 2002
U.S. Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC.
The committee met, pursuant to notice, at 10:04 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, Leahy,
Conrad, Lincoln, Miller, Stabenow, Wellstone, Lugar, Cochran,
Fitzgerald, Thomas, Hutchinson, and Crapo.
STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA,
CHAIRMAN, COMMITTEE ON AGRICULTRE,
NUTRITION, AND FORESTRY
The Chairman. The Committee on Agriculture, Nutrition, and
Forestry will come to order on the hearing on the
implementation of the new Farm bill.
The Farm Security and Rural Investment Act of 2002 was
passed with solid bipartisan majorities in both Houses of
Congress and was signed into law with a strong statement of
support by President Bush. It is a balanced and comprehensive
bill that restores farm income protection, boosts conservation
more than any previous bill, helps rural communities build
economic growth and create jobs, and promotes farm-based
renewable energy. It strengthens our support for trade,
nutrition, food aid, and agricultural research.
Implementing this new legislation properly is, of course,
of critical importance to rural America. The committee is
pleased to welcome Secretary Veneman; Under Secretary J.B.
Penn; Bruce Knight, chief of the Natural Resources Conservation
Service; and Keith Collins, USDA's chief economist. We look
forward to a progress report on carrying out the Farm bill and
addressing issues and questions that have come up in that
process.
At the outset, I want to thank the many conscientious
employees at FSA, NRCS, Rural Development, and other USDA
agencies for all their work toward making the promise of the
new Farm bill a reality. I know in Iowa there have been a good
number of informational meetings thanks to the USDA, the Iowa
State University Extension and Farm and Commodity Organization.
It all comes down to developing reasonable and workable rules
and regulations and getting clear, consistent information out
to those who need it. USDA must also have open lines of
communications for listening, responding to suggestions, and
answering questions.
As I see it, we have a shared interest and responsibility
to work together cooperatively to ensure that the Farm bill is
implemented well, maximizing its benefits for our Nation. One
of the reasons for this hearing is that I have heard in Iowa--
and I have talked with other members of the committee on both
sides of the aisle, and we have been getting certain
conflicting reports back from the field about how it is being
implemented--a lot of questions. Now, some of those were
cleared up in the last couple of weeks with a letter from the
Secretary's office, but I felt it was important for us to have
an open session with you, Madam Secretary, to go over the
implementation of the Farm bill and perhaps respond to some of
the questions that we are hearing from some of our constituents
in the respective States.
I would like to recognize Senator Lugar for a brief opening
statement, and with the indulgence of the committee, I would
like to then just go right to the Secretary. I would ask that
if Senators have opening statements, just incorporate it with
your first round of questioning.
With that, I would recognize Senator Lugar.
[The prepared statement of Senator Harkin can be found in
the appendix on page 52.]
STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR FROM
INDIANA, RANKING MEMBER, COMMITTEE ON
AGRICULTURE, NUTRITION, AND FORESTRY
Senator Lugar. Well, thank you very much, Mr. Chairman. The
advice you have given to all of us is sound. We really want to
hear from the Secretary, and so I will reserve my questions
until the normal round. I appreciate the courtesy of your
introduction, and we welcome the Secretary and all of her
valued associates from USDA. We appreciate you very much.
The Chairman. Madam Secretary, welcome to the committee.
Your statements, all of them, will be made a part of the record
in their entirety, and please proceed.
STATEMENT OF HON. ANN M. VENEMAN, SECRETARY, UNITED STATES
DEPARTMENT OF AGRICULTURE,
ACCOMPANIED BY DR. J.B. PENN, UNDER SECRETARY, FARM AND FOREIGN
AGRICULTURAL SERVICE; DR. KEITH COLLINS, CHIEF ECONOMIST;
AND BRUCE KNIGHT, CHIEF, NATURAL RESOURCES AND CONSERVATION
SERVICE
Secretary Veneman. Thank you, Mr. Chairman and Senator
Lugar and members of the committee. I thank you for the
opportunity to appear before you today to discuss the
implementation of the Farm Security and Rural Investment Act of
2002.
I am pleased that you called this hearing to provide USDA
an opportunity to share our hard work and progress on
implementation of the new Farm bill. As you indicated, Mr.
Chairman, we have with us today our Under Secretary for Farm
and Foreign Agricultural Service, Dr. J.B. Penn; our chief
economist, Keith Collins; and our chief of Natural Resources
Conservation Service, Bruce Knight; and as well, we have a
number of our other members of our USDA team with us today, all
of whom have been very, very active in the implementation of
this Farm bill.
Mr. Chairman, what I would like to do today is summarize my
formal statement and then respond to questions.
As you know, this new law contains many complex issues and
new programs that require a great deal of work to implement.
This includes writing new computer programs, implementing new
regulations, a massive updating of bases and yields, extensive
training for USDA employees, working with producers to make
sure they understand the changes in the new law so that they
can best utilize and receive the programs and the benefits.
USDA has had very short time frames to meet in terms of
putting these new programs into place. Even with all of these
challenges, I have to say I am very pleased and proud of the
progress that the Department has made thus far in implementing
the new Farm bill. The implementation planning that we did
prior to the bill being passed has helped in that regard, and
as soon as the Farm bill was signed by the President, USDA went
into high gear to implement it. We will get checks to farmers
on time.
All this progress could not have been accomplished without
the dedication and the hard work and the commitment of USDA's
employees at every level around the country, and, Mr. Chairman,
I appreciate you recognizing our USDA employees around the
country in your opening remarks as well.
Many times over the years our employees have been called
upon to assist our Nation's farm economy. What we have seen
during these past few months of the Farm bill implementation is
no different. USDA employees around the country have worked
tirelessly to implement the new Farm bill, and they deserve a
great deal of praise for their efforts thus far.
I also want to thank all the members of this committee as
well as Chairman Combest and Congressman Stenholm and other
members of the House Agriculture Committee for their continued
interest in our work during the past few months. We have
conducted several member and staff briefings and appreciated
your input and suggestions as we have moved forward.
We also appreciate the input from the farm community,
particularly our farmers and ranchers who have made their views
known on implementation. We have a lot of suggestions, and we
have conducted listening sessions around the country, which has
been helpful to make sure that we were acting in the best
interest of our Nation's farmers as a whole, but at the same
time taking into account regional considerations.
We have been listening, and our recent announcement to
provide clarification regarding bases and yields is just one
example of our flexibility and desire to make the best
available decisions as we implement the many changes required
in the new law.
As soon as the new Farm bill was enacted, we moved quickly
to set up an internal structure for implementation, and we did
this with a two-pronged approach. We established our sub-
Cabinet as the Board of Directors, and then we created a
working group which was chaired by three people: Keith Collins,
who is here with us, our chief economist; Hunt Shipman, our
Deputy Under Secretary for Farm and Foreign Agricultural
Service; and Scott Steele, who is a senior person in our budget
office and very knowledgeable with farm programs. This group
has coordinated the Department-wide implementation process, and
they, along with all of the people they have worked with, have
done a tremendous job.
I issued delegations of authority assigning the program
responsibilities to various Under Secretaries and agency
administrators to ensure that quick actions would be taken, and
we have developed a Department-wide tracking system for all
farm bill actions so that we know the up-to-date status for
each requirement under the law.
A top priority during this time has been to keep Congress
and the farm sector informed of our actions. As I said, we have
held many briefings with members and staff, over two dozen; we
have held at least 44 press briefings as well as farm bill
implementation meetings with producers throughout the country.
As well, we immediately established a farm bill website that
has a myriad of information, questions and answers, and program
details available for producers wanting to know more about the
new law.
In addition, we have undertaken one of the most thorough
training programs the Farm Service Agency has ever had,
including a train-the-trainer session in Chicago last July and
another session in New Orleans just last week. Training is
critical to farm bill implementation, and we have made it a
very top priority from the beginning.
Regarding the specific titles, we are very pleased with the
overall progress that we have made so far in implementing Title
I. In August, we announced the sign-up for the Direct and
Countercyclical Payment Program will begin on October 1st, with
payments starting soon thereafter. In order that producers can
receive their payments, we are working closely with our State
and local FSA offices and eligible producers to update acreage
bases and yields.
This will be the first time since 1985 that producers will
have had a major opportunity to update program bases and
yields. In this regard, we have recently issued special
provisions for livestock producers who graze their crops or
harvest grain, silage, or hay for feed.
Another new program we are working hard to move forward is
the milk income loss contract which provides countercyclical
support payments to dairy producers. Thanks to the hard work by
USDA staff in DC and in the field, sign-up began on August
13th, and payments are scheduled to start early next month.
The Peanut Program has gone through a historic overhaul.
The market quota system, in place since the 1930's, has been
replaced with a Direct and Countercyclical Payment Program.
Peanuts are also eligible for the Marketing Loan Program, and
we established a national weekly market price for loan
repayment purposes.
Peanut producers may sign up for the peanut quota buyout
during the September 3rd through November 22nd time period.
Payments will begin as soon as the rule is issued. All of these
changes will make peanuts a more market-oriented commodity and
help the industry become more competitive while easing the
transition for peanut producers.
Sugar is another very complex program, and I am pleased
that we are able to move forward quickly in implementing the
new provisions. In August, we published a final rule on program
details and also announced the 2002 crop marketing allotment
quantities for beets and cane sugar.
Other implementation actions are moving along on schedule,
with final rules in various stages of clearance. We are working
very closely with OMB to ensure timely review and
implementation.
Turning to conservation, we are pleased with the strong
conservation emphasis contained in Title II. The changes in the
conservation policy supports the administration's commitment to
a voluntary approach and provides the Nation's producers with a
true portfolio of conservation options, including cost-share
incentives, land retirements, and easement programs.
We are now moving in a deliberate manner to continue those
conservation programs which were re-authorized in the Farm
bill, such as the Wetlands Reserve Program, the Wildlife
Habitat Incentive Program, and the Farmland Protection Program.
We are also revising those programs with major changes, such as
the Environmental Quality Incentives Program and the
Conservation Reserve Program, and we are initiating rulemaking
on new programs, such as the Grasslands Reserve Program and the
Conservation Security Program.
Our initial focus has been on getting the additional fiscal
year 2002 funding authorized by the Farm bill into the system.
Funding has been made available for EQIP, WRP, WHIP, and FPP as
warning letter as for ground and surface water conservation.
Funding for these conservation programs will exceed $750
million for the year 2002. We are also moving aggressively
ahead with the expansion of direct technical assistance to
producers from the private sector, the nonprofit sector, and
State and local government sources to supplement technical
assistance provided by NRCS. As we look ahead, we have
scheduled the publication of proposed regulations in the near
future for EQIP and FPP, for the 2003 programs, and an interim
final rule for third-party technical service provider
certification.
We are also making steady progress toward the proposed
rules for the Conservation Security Program, ensuring that this
newest policy initiative is implemented properly. We are
finalizing the delegation of authority for the Grassland
Reserve Program.
For other titles of the Farm bill, we are also making
progress. While the time pressure is not as immediate as for
Titles I and II, we are still working aggressively in these
other areas. A detailed outline on progress for the other
titles is in my prepared statement, but I want to briefly
highlight a few areas.
We are moving quickly ahead with implementing the
provisions that bolster our market development efforts
overseas. On August 12th, we announced the allocation of an
additional $10 million made available for the Market Access
Program for fiscal year 2002. On September 10th, we published
regulations for the new Technical Assistance for Specialty
Crops Program and requested proposals for fiscal year 2002
funding.
For the nutrition title, implementing memoranda were sent
to all the States in June so that the food stamp provisions
could be put into effect according to statutory requirements.
Also in June, we announced the award of farmers' market grants
to States through the WIC Farmers' Market Nutrition Program and
the Seniors Farmers' Market Nutrition Program.
The rural development title included a wide range of
funding and new authorities to improve the economic prospects
and quality of life in rural areas. One of the most important
features of this title is to provide funding for the backlog of
water and waste projects. This funding has already been awarded
to 377 projects in 47 States and Puerto Rico, totaling more
than $700 million. In addition, we expect to award $33 million
in value-added grants in the near future.
Numerous other provisions of that title that expand our
authority for financing telecommunications, renewable energy,
business and community projects are in the process of being
implemented through the regulatory process.
Under the miscellaneous title, we are developing voluntary
guidelines for country-of-origin labeling that will be released
in the near future. Also under this title, we are moving
forward to appoint a new Assistant Secretary for Civil Rights.
Mr. Chairman and members of the committee, before I
conclude, let me discuss another issue of significant
importance to our Nation's farmers and ranchers who have been
stricken by severe drought conditions in many States around the
country. This administration supports helping drought-affected
farmers and ranchers who are most in need, particularly our
livestock producers who do not have risk management tools to
protect them during these difficult times. While the Congress
has not completed work on a disaster assistance package for the
President to consider, the administration has laid out its
priorities for additional relief and is utilizing every
available tool and program to help farmers and ranchers in need
within our existing authorities.
Through the heavily subsidized Federal Crop Insurance
Program, the Congress has already provided tools for drought
relief for our crop farmers. The crop insurance subsidy was
increased dramatically in the year 2000 to avoid the need for
disaster payments. The vast majority of crop acreage in the
drought regions is covered by crop insurance. Almost 80 percent
of the insurable acreage in the U.S. is covered. Based on
current crop conditions, our preliminary estimates indicate
that the program will provide $4.1 billion in indemnity
payments for 2002 crop losses compared to $2.9 billion for 2001
and $1.5 billion for the 1990's.
We have also responded swiftly and worked with States to
expedite approval processes for declaring emergency disaster
areas so that farmers can receive low-interest emergency loans.
We have expanded CRP haying and grazing eligibility nationwide
and are working to get Non-insured Crop Disaster Assistance
Program payments out to farmers and ranchers.
Yesterday, we announced that $10 million of EQIP funding
will be directed to States severely impacted by the drought.
The Emergency Conservation Program will also help landowners
deal with drought-related problems. Concerning livestock
producers, we announced a $150 million Feed Assistance Program
to help cow-calf operators in Colorado, Nebraska, South Dakota,
and Wyoming. In these States, at least 75 percent of the
pasture and range crop is currently rated as poor or very poor.
We also need to be concerned about the long-term implications
of the current drought situation and efforts to cope with it.
First and foremost, we should not do anything that w be a
disincentive for producers to participate in the Crop Insurance
Program. Further, we need to continue working to improve and
expand the program particularly with respect to forage and
rangeland livestock insurance products.
The Agricultural Risk Protection Act was an important step
in the right direction. It provided a substantial increase in
Federal funding for the Crop Insurance Program and important
new authorities for improving the program. We have made
substantial progress toward implementing this legislation. For
example, two new livestock products were recently approved and
are being pilot tested. However, much more needs to be done not
only by USDA but also by the private insurance industry and
producers groups to ensure that new and better insurance and
other risk management products are developed and brought to the
market. Producers should not have to wait for emergency
appropriations for relief from natural disasters. They should
have assurance of protection against risk before it occurs
through their participation in the Crop Insurance Program. That
is the goal that we are working toward.
Mr. Chairman, that concludes my overview of where we
currently stand on implementing the new Farm bill. Our team at
USDA has worked hard to implement the new Farm bill in an
efficient and expeditious and responsible manner to best help
our farm and food sector receive the intended programs and
benefits. We are committed to continuing to do the very best
job we can to deliver the programs.
We are also committed to continuing to work with Congress
and other stakeholders to ensure that legislation in
implemented fairly and properly.
Again, thank you for having us here this morning, and we
would now be willing to respond to your questions. Thank you
very much, Mr. Chairman.
The Chairman. Thank you, Madam Secretary. I will turn first
to Senator Lugar, and we will start this with 5-minute rounds
first.
Senator Lugar. Thank you, Mr. Chairman.
Madam Secretary, I would like to mention that in Indiana I
visited with John Nidlinger, who is our Indiana Director of the
Farm Service Agency, and he has conducted over 140 meetings
attended by over 17,000 Indiana farmers, and the information
that you have suggested today and the network that you have
talked about, I simply want to make that report from the
grassroots. It has been very helpful in terms of mitigating all
the questions that would have come to our office otherwise, and
that has been minimized by this good process.
You mentioned that Congress provided authorization for USDA
to use the private sector for conservation technical
assistance. You mentioned in your opening statement work on
that is continuing. You may not know the date at the moment
that the regulations for the new authority will be ready, but
if you could give me some notice after the meeting, I would
appreciate it. There are many in our State who are eager,
really, to proceed, and you are eager to help them.
Now, my major question comes down to on the 7th August I
wrote to OMB Director Mitch Daniels regarding food aid, and
that letter was signed by Chairman Harkin, and Senator Leahy
was copied, to you and to Dr. Rice because it expresses concern
over the administration's food policy review. The
administration is supposed to limit the 416, 416(b) Surplus
Disposal Food Program, and rely instead upon P.L. 480, Title
II. The concern has been that there ought to be transparency
and better regulation, and I understand this.
The net effect, however--I look at it now from the
standpoint of the World Food Program, in which a colleague of
mine, Jim Morris, is now the deputy of Kofi Annan, going
through Afghanistan, Pakistan, various places of great interest
to us--has been to drop the U.S. contribution from 6 million
metric tons in fiscal year 2001 to 4 million this year or,
rather, that is the estimate for, I guess, 2003, as we have the
transition of this policy.
That is a dramatic decrease in the face of the African
problems, quite apart from our foreign policy situation in
Afghanistan and Pakistan, and this is why I have asked both
you, Condoleezza Rice, and the powers that be wherever, this is
very, very serious, and we really need to change the policy.
Now I am not certain how you can proceed to do that, but
will you please give me some indication of your first reaction
to this crisis and how we are going to get from 4 to 6, which
we have to do, in one form or another. If we cannot improvise
in this forum, please advise me sort of where, maybe starting
with the President on down, we can do so because the
humanitarian impact of this is very substantial.
Secretary Veneman. Well, Senator, I do appreciate your
concerns that you have raised. As you know, USDA has a very
active role in food aid, but we do not act alone in food aid.
It is an interagency process that includes AID, the State
Department, and the OMB, the NSC, a number of agencies
throughout Government that come together in an interagency
process to make determinations of food aid.
This food aid review group entered into discussions about
how to create more consistent funding of the food aid, and it
was believed that through P.L. 480 that it was a better
mechanism to administer food aid. What the group did, however,
was recognize that because there are emergencies that are
beyond what one can anticipate in any given year, that the 416
authorities would still be available, and so that review
committee continues to meet and look at needs.
I am aware of your concerns about the WFP, and certainly we
are very pleased that Mr. Morris has come into that job and hit
the ground running. We will continue to work with you to look
at ways that we can satisfy the demands of the World Food
Program, particularly during these times where there is a
tremendous amount of need around the world.
Senator Lugar. Well, we are constrained by the time, but
will you please advise me what I can do personally to intervene
because I am prepared to do so at any level. This is really a
drastic problem and which people are going to die out there if
we are not successful, despite our own bureaucracy and however
efficient we thought this might be. Please give the orders.
The last question I have deals with which agency will
administer the McGovern-Dole International School Lunch
Program. USDA and USAID have been suggested, maybe others. How
is that sorting out?
Secretary Veneman. That is another issue that is still
being discussed interagency between whether or not it would be
USDA, who has, as you know, been administering the program, or
AID.
My recommendation of the Farm bill language on the
McGovern-Dole Program, which is the Global Food for Education
Initiative, a replacement, is that the legislation itself did
not specify who should administer the program. That issue is
still in discussion.
Senator Lugar. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Chairman Lugar.
Senator Leahy.
STATEMENT OF HON. PATRICK LEAHY, A U.S. SENATOR FROM VERMONT
Senator Leahy. Thank you, Mr. Chairman. Both thanks to you
and to Senator Lugar for holding this hearing.
I talked briefly with the Secretary before the hearing
started, and I wanted to remind her that in the legislation,
the National Dairy Program was designed to provide dairy
farmers income support payments that are going to be virtually
identical to what, for example, Vermont dairy farmers received
under the Northeast Interstate Dairy Compact. Payments have be
made retroactively, coveringproduction and low prices since
December 1, 2001.
Retroactive to that date, prices for Class I fluid milk
fell below the compact's trigger level, $16.94, which is
identical to this program, but prices have been below that
trigger level ever since, and they continue to fall.
We also note that the prices, as always happens in this,
does not go down at all at the supermarket. What the consumers
pay for milk is exactly the same. The prices drop precipitously
to the farmers, and they are really getting a bad, raw deal. In
fact, the farm level milk prices are at their lowest levels in
over 10 years. In fact, only three times in the last 25 years
have they been this low, and we have had both flood and
drought, the worst combination possible this year. A lot of
farmers have poor crops. They are going to have trouble
feeding.
Now we designed the National Dairy Program to be farmer
friendly. It was designed to be easy to administer. We spent a
lot of time doing that. I believe that the Department of
Agriculture has taken this program that was going to be farmer
friendly, they made it overly burdensome, overly complicated,
overly restrictive. They are basically telling family farmers
you better have a couple of lawyers and a couple of accountants
on staff to help you out through this program. There are some
accountants available right now. This is not what was intended.
Now you and I have known each other for many years. I have
an enormous amount of respect for you, Madam Secretary. I was
going to tell you that during the Farm bill, the Department of
Agriculture fought us on the National Dairy Program every step
of the way in the House, and in the Senate, and during the
committee conference. That is your prerogative. We won, and the
Department lost.
Now I fear what you are trying to do is to undo
administratively what we accomplished legislatively. In effect,
the Department of Agriculture is trying to veto a bill that the
President of the United States signed, and that is wrong. We
wrote a farmer-friendly dairy program. You are making it farmer
unfriendly.
The Department needs to maximize the payments, not minimize
it. You should encourage participation, not discourage
participation. Every dollar is going to pass through the hands
of our farmers. It is going to have a great impact in our rural
communities, and unless changes are made, thousands of Vermont
dairy farmers, but tens of thousands of other dairy farmers
across the country are not going to get what they should.
Let me ask you a couple of questions. Some we will probably
have to put in the record.
I am concerned about your failure to meet the
congressionally mandated deadline for implementation. Congress
mandated that the Department of Agriculture begin entering into
contracts on July 13th, but you did not allow producers to
enter into a contract until August 13th. Then they mandated the
first payments to be made no later than October 1st--less than
2 weeks from now.
Will producers start receiving their first checks by
October 1st?
Secretary Veneman. I believe, Senator, that we will get
checks out during October. I am not sure about exactly on
October 1st, but I am going to ask Dr. Collins to talk just
briefly about how we implemented this dairy program, and how we
implemented it in a way that we feel was fair to the most
number of----
Senator Leahy. Well, if we are going to do that, then let
us also go into the question of the beginning month for the
transition payments because that has wiped out, wiped out, the
way you are doing it, a whole lot of dairy farmers.
I want to know, in answering that, did officials in the
White House Office of Management and Budget direct you to limit
payments to dairy producers, either directly or indirectly, did
anybody? Doctor, be very careful in your answer on this because
if it is not accurate, you are going to have a chance to
discuss this again before another committee that I am on.
Did anybody in the White House direct you, directly or
indirectly, to limit payments to dairy producers?
Mr. Collins. Senator Leahy, no one directed me, personally,
to limit payments to dairy producers.
Senator Leahy. I am not talking personally. To your
knowledge, did anybody?
Mr. Collins. Nor to my knowledge do I know of the White
House directing the Department to limit payments to dairy
producers. What we have done here is implement----
Senator Leahy. Well, then why did you take a plan that was
very clear in the legislation, change it all around to do
something entirely different than what we intended?
Mr. Collins. The plan was far from clear in the
legislation. To start with----
Senator Leahy. It is a heck of a lot less clear now.
Mr. Collins. When you look at the dairy language, you have
to understand that you provided very complicated overlapping
requirements. There is a transition period, and there is a
contract period, and both are variable. The dividing line
between the two is any time between May 13th, 2002, and 2005,
depending upon the choice of the producer, and then over the
top of these two variable periods which you constructed in law,
you require us to implement an eligibility cap of 2.4 million
pounds per producer on what they can receive payments, and you
further require that eligibility cap to be enforced on a fiscal
year basis, even though neither the transition period, nor the
contract period, are on a fiscal year basis.
I disagree with you if you think that that is abundantly
clear and easy to implement.
Senator Leahy. Well, but you are not allowing the producers
to select the beginning month for the transition payments, and
they could have.
Mr. Collins. That is correct. We did not.
Senator Leahy. I do not think you are following the law in
that regard.
Mr. Collins. Well, there are grounds for discussion here.
When we first looked at the law, it was our belief that the law
said the transition period started in December, and then the
contract period, having an enforceable 2.4-million pound
eligibility cap on a fiscal year basis, we figured the contract
period and the 2.4 cap would start on fiscal years in October.
When we first designed this program, we were going to have
producers enroll in this program beginning in December 2001 for
the transition period, get payments until they hit the 2.4-
million-pound cap. Then, the following October, and each
October after that, start the clock again with a 2.4-million
cap. That way producers would not have had any choice
whatsoever to pick a month.
We think that is consistent with the law, and it could have
been implemented that way. However, we chose not to implement
it that way. We chose to give producers the flexibility to pick
the month from 2003 on through 2005. We went beyond what a
straight reading of the law could have implied by giving
producers that flexibility.
It is true we did not give them the flexibility during the
transition period. We said the transition period would start in
December 2001, and the reason we did that was to provide, we
think, consistency with all of our other programs, where once a
price has been established, we do not allow producers to look
back and pick a month to maximize a payment. We do not do it on
LDPs for corn or wheat or anything else.
Senator Leahy. There are a lot of things you did not do. I
mean, you did not allow the sign-up time on the specific time
that the statute required. You were a month late on that.
Mr. Collins. We were a month late on that, and for that I
can say that having been at USDA for many, many years, and
having had to sign off on every significant, economically
significant and major regulation of the Department, I can tell
you, with a law passed on May 13th, having a regulation out by
July 13th or July 12th is almost impossible.
Every regulation that you put out under the Administrative
Procedures Act or under various Federal Executive Orders
requires a cost-benefit analysis, possibly an environmental
assessment, possibly a risk assessment, an unfunded mandates
assessment, a Small Business and Regulatory Flexibility Act
assessment, a civil rights impact assessment and possibly an
energy assessment.
That all flows from the fact that Congress did not want
Federal departments to regulate willy nilly and impose lots of
requirements on us to be sure that when we put out a
regulation, when we put out decisions, they are sound and well
thought out.
Unfortunately, it took us until July 12th to come to that
conclusion on dairy, and we regret that, but we still think
that we got it out in a fairly timely way by getting the sign-
up period beginning in August. In fact, even though we do not
have our computer software done for the dairy program yet, we
have started sign-up with manual sign-up in order to get as
close as we could to the July 12th date.
Senator Leahy. Mr. Chairman, I, obviously, disagree, and I
will submit a number of questions to the regard because we have
a situation where medium-sized farms did not do as well as
large farms or small farms. They have left a huge gap in here.
Thank you.
The Chairman. Thank you, Senator Leahy.
[The Statement of Senator Leahy can be found in the
appendix on page 53.]
Senator Cochran.
THE STATEMENT OF HON. THAD COCHRAN, A U.S. SENATOR FROM
MISSISSIPPI
Senator Cochran. Mr. Chairman, thank you very much.
Madam Secretary, welcome to the hearing.
First of all, I want to commend you and your staff for the
hard work that you have turned in implementing this farm bill.
It was a huge undertaking, very little time available to you
between the enactment of that legislation and the sign-up
periods that were going to be occurring for this crop year. I
commend you. You have done an excellent job.
I happened to run into Mr. Penn the other day at the
airport, and we talked about some of the practical problems
that were confronted, and the enormous burden that was really
imposed on the Department by the Congress to do this in a very
short period of time.
I know there are going to be some difficulties encountered,
one of which you mentioned in your statement on Page 3. You
talk about the fact that you have a schedule for sign-ups,
announcements, payments to farmers. I wonder whether you can
share with us what the schedule is. We are asked by producers,
when we go back to our States when can payments be expected,
when will all of the sign-ups be scheduled. Is there anything
you can tell us that we can pass on to our producers in that
regard?
Secretary Veneman. Well, we did announce last month that we
would begin sign-up on October 1st, with payments to be
distributed shortly thereafter, and we continue to stand by
that time line, and we will be able to get payments out shortly
after people sign up, on or around October 1st. We are on
schedule and that we will get the payments out to farmers on
time.
Senator Cochran. Well, that is good news, and I commend you
for that. I hope that we can cooperate with you if there is any
way that we can be helpful.
Now I know that a lot of these programs were changed in
some fundamental ways. Farmers have the option, for example, of
providing information on yields, past production of lands. Some
of them are confused by what their options are and what the
implications are. I know a lot of the Farm Service Agency
offices are wrestling with how to answer the farmers'
questions. I know one farmer told me he wished somebody could
make that decision for him, that he does not know how it is
going to turn out. He might want to change it, as a practical
matter, later on, and would that be possible?
These are some fundamental difficulties that producers are
encountering, and I know the employees in the Farm Service
Agency offices are encountering as well.
Is there anything that you can tell us that we can pass on
to the employees at the local level or the producers to help
them address this situation more effectively?
Secretary Veneman. Well, Senator, you are absolutely right
when you say that this has been very complicated to implement,
and because we knew it was going to be complicated, because
there were so many changes, we did several things.
First, we had a website up and running the first week, and
we keep adding questions and answers that come up to that, as
well as program decisions, time lines and so forth, and we hope
that this is not only helping producers, but people in our Farm
Service Agency county offices and anyone who wants information.
We have conducted training sessions for FSA, knowing that
they need to get the up-to-date information. We are doing a lot
of joint training with NRCS and FSA to make sure that people in
the county offices have the same information because so many of
this contact you should be able to get some general information
from any USDA employees in the field.
Of course, we have done, and I, personally, have
participated in several of these, but we have counted up all of
the media briefings we have done through farm broadcasters,
particularly, who are a wonderful source of getting information
out to farmers and ranchers, and we have done, among all of our
staff, 44 briefings on farm bill implementation with the press,
trying to get the word out on how we can do some of these
things because we know it is complicated. We are trying every
way that we can.
For those farmers that do not want to go log on the
website, they can listen to the radio. We are doing radio spots
through our USDA all of the time to try to get word out to
farmers. There are a lot of complicated questions, and we are
doing everything we can to try to get people educated about
what they need to do to sign up, what kinds of information they
need to bring in, and when they can expect to have the final
sign-up and their payment.
Senator Cochran. I know there is one difficulty that has
developed between your department and the Office of Management
and Budget with respect to a portion of the funds for technical
assistance for conservation programs. I joined with Senator
Herb Kohl of Wisconsin in signing a letter yesterday--he is
chairman of the Appropriations Subcommittee for the Department
of Agriculture--suggesting that it would be inappropriate to
deny the use of CCC funds for technical assistance for these
conservation programs, as OMB apparently is proposing without a
reprogramming.
We provided funding that we thought would be useful for the
Department to carry out the conservation programs in the area
of Conservation Operations. That is the name of the account.
The funds that were included in that were to be used for
operations. The technical assistance funding could come from
CCC funds.
I hope that you are able to renew your discussions with OMB
and figure out some way to persuade them. I would hate to see
us have to go back through this and figure out a way to
legislate an answer to this problem.
Can you bring us up-to-date as to what the status of that
disagreement is, and is there any hope for resolving it?
Secretary Veneman. Well, Senator, there has been a
difference of legal opinions, in terms of the new law and
whether or not it superseded Section 11 of the old law, as I
understand it. The lawyers have been at complete loggerheads
about how this particular provision has been interpreted, and I
know that some of the committee members have specific ideas on
how it should be interpreted, as well as the appropriators, and
we appreciate that fact.
We have our staff, particularly, Under Secretary Mark Rey,
has worked to try to come up with a short-term resolution for
the 2002 year because we were coming upon the deadline, as you
know, with regard to the 2002 fiscal year, and we will continue
to work through this issue for the subsequent years, but we
have worked on a compromise for the 2002 year, which I can have
our administrator talk about or our chief, I should say--
sorry--talk about for a moment, if you would like.
Mr. Knight. Well, in brief, we have come to some form of
resolution that will allow us to be able to move forward with
implementation of the two programs that it was most important
that we get the money out and implemented. Those are the
Wetlands Reserve Program and the Farmland Protection Program.
We announced each of those, the allocations out to the States
on both of those programs, two Fridays ago and are proceeding
ahead very, very rapidly on implementation of that so that we
can get the actual funds on the ground for the conservation for
the needs of the Wetlands Reserve Program and be able to
achieve the objectives of both of those before the end of the
fiscal year, and we will proceed with further discussions for
2003.
Senator Cochran. Thank you very much, Mr. Chairman.
The Chairman. I have refrained from asking questions, but I
want to pick up on this that Senator Cochran brought up.
OMB released $5.9 billion, if I am not mistaken; is that
right?
Mr. Collins. In technical assistance, that is correct.
The Chairman. My information is that that is not going to
cover the need. I do not know how far you expect that to go,
but that if your lawyers were to contact on both sides of the
aisle, in the Senate and the House, you would find that there
is a clear agreement on both sides to supersede the 1996 bill
by providing that, under mandatory programs, technical
assistance could be used out of those mandatory programs.
The only thing that we allowed to continue under 2701(b)
was for transfers from CCC. That would still be subject to the
Section 11 cap, but for the mandatory programs that we put in,
it was very clear.
I have been befuddled, Senator Cochran, by why it seems to
be confusing to lawyers. I have read it over. I know the
problem. I have asked my staff to give it to me. We have read
it over, and we have read it over, but as far as the mandatory
programs go, I thought it was very clear, and that we left only
Section 11 caps on the transfers from CCC.
Do you have anything to say about that?
Mr. Knight. The most important thing for us, sir, was to be
able to move forward with providing the services on the ground
this year for Farmland Protection and the Wetlands Reserve
Program. We have a compromise worked out for 2002.
The Chairman. Well, our problem is with OMB and not you, I
assume. Senator Lugar and I have written twice to them
informing them what we intended to do and repeating the
appropriate section of the bill on Section 2701(a) as it
provides that the Secretary shall use the funds, and that
2701(b) was simply to keep the Section 11 cap on the transfers
from the CCC.
We still need $20 million for the Wetlands Reserve Program
technical assistance. Where is that money? USDA asked for that
and OMB denied it. Where is the money, Madam Secretary? Or
anybody, where is the money? I mean, you asked OMB for it. They
denied it. We still have a problem with the Wetlands Reserve
Program.
Secretary Veneman. Well, again, Mr. Chairman, as I
indicated, there has been a difference among lawyers on this
issue, and in order to resolve it, to the maximum extent
possible, to be able to get some of this technical assistance
done before the end of the fiscal year, we did reach this
compromise.
Now, I understand the frustration of the committee. There
has been a disagreement about what the language means, and we
will continue to work with the committee to try to resolve this
for the subsequent years.
The Chairman. Well, OK. Again, USDA asked for the $20
million for technical assistance for WRP. OMB denied it.
Senator Lugar, I am sure, wrote representing the Senators on
his side. I wrote representing the Senators on our side. I
believe letters also came from the House committee spelling
this out for them. I don't know why there is any confusion. I
just don't understand that at all. We still are missing the $20
million. That is why I asked about the $5.9 million that was
going out. That is not sufficient. We know that.
I will have some more to say about that after a bit.
Senator Conrad.
Senator Conrad. Thank you, Mr. Chairman, and welcome to the
committee, Madam Secretary and others from the Department. Mr.
Penn, we had a chance to meet last week, and Dr. Collins, Mr.
Knight.
First, I want to thank the chairman for calling this
hearing. It is critically important because there are things
occurring here which I find very disturbing.
Madam Secretary, in our system of government who makes the
law?
Secretary Veneman. I am sorry. I thought there was more to
your question.
Senator Conrad. In our system of government, which branch
makes the law?
Secretary Veneman. Congress makes the law.
Senator Conrad. Congress makes the law. No executive
department makes the law. Is that correct?
Secretary Veneman. Well, the laws are made by the Congress
and signed by the President.
Senator Conrad. Made by the Congress. That is exactly
right. That is not what is happening here. In item after item,
example after example, you and your Department are defying the
law, are defying Congress. I don't know how it could be more
clear.
Senator Leahy gave the examples in dairy. I would turn your
attention first to the minor oilseeds. The statute says the
loan rate for a marketing assistance loan shall be equal--
``shall be equal''--in the case of other oilseeds to 9.6 cents
per pound.
The managers' report says for sunflowers, ``In implementing
the Marketing Assistance Loan Program for minor oilseeds, the
managers expect the Secretary to establish a single sunflower
loan rate.'' A single sunflower loan rate.
That is not what you have done. For the first time ever,
without consultation, without public notice, without a hearing,
you have decided that what Congress said to do, what Congress
put in the law is not acceptable to you, and instead you will
establish a rate for the oil types of 9.15 and for confections,
12.10. You are wreaking havoc on this industry.
That is not what the law is. That is not what the managers
said to do. Why aren't you doing it?
Secretary Veneman. Well, Senator, let me first say that as
we discussed, as Dr. Collins discussed with the Milk Program,
there is a lot in this farm bill that is not abundantly clear
in the law----
Senator Conrad. What is not clear about a statute that is--
I want to know, what is not clear about a statute that says--
this is as clear as it can be. For the other oilseeds, the
marketing loan rate shall be 9.6--not 12.10, not 9.15, 9.6.
What is not clear about that?
Secretary Veneman. Well, I was talking generally about the
Farm bill----
Senator Conrad. I am talking specifically. I have asked you
a specific question.
Secretary Veneman. I am going to get to that, but I would
like to just be able to respond initially, and that we have had
to make a lot of judgments in implementing this farm bill. I
believe that our folks have done a tremendous job, and as I
said in my opening statement, they deserve a lot of credit for
that. The chairman recognized that. Many other committee
members recognize that. They deserve a tremendous amount of
credit. I am going to ask Dr. Penn and possibly Dr. Collins to
comment specifically on how we came to the sunflower loan rate
issue because it is a technical calculation that this group
came together as a committee and made.
Senator Conrad. I am asking you. You are the Secretary. You
run that Department. This statute is as clear as it can be. The
managers' instruction is as clears as it can be, only that is
not what you have done. I want an explanation from you: Why are
you not following the clear intent of Congress?
Secretary Veneman. Again, I would like to let our folks who
have gone through all the calculations respond to this question
as to how we arrived at this.
Senator Conrad. Well, I am interested in your answer. You
are the Secretary. I want your answer. The people that I
represent want your answer. This is a devastating effect out in
the country. Farmers want to know. I mean, it is just as clear
as it can be. The intent of Congress--can you tell me what
could be more clear than a statute that says--and I will repeat
the language. The statute says the loan rate for a marketing
assistance loan shall be equal to, in the case of other
oilseeds, 9.6 cents per pound.
Have you provided a loan rate for sunflowers of 9.6 cents
per pound or have you got a differential rate for confectionery
and oil types?
Secretary Veneman. I am going to ask Dr. Penn to respond to
this.
Mr. Penn. Senator Conrad, you and I have had this
conversation before, but I do think we should respond for the
record. The portion of the statute that you read is very clear.
There are also, I am told by the lawyers, other portions of the
statute that gives the Secretary some discretion to adjust loan
rates by quality and type and other factors. This is a part of
an overall process of establishing loan rates for all of these
commodities in the new Farm bill.
I would point out that we are establishing loan rates for
17 different commodities spread across 3,000 counties in the
country. We are trying to do this to take into account location
and type and different market factors for each one of these
products. It is a very difficult task so that we don't
introduce distortion, so that we don't cause more harm than
good with what we are trying to do here.
In the case of the minor oilseeds, we did try to adhere to
the 9.6 for all oilseeds, but it is part of a broader effort to
try to establish individual loan rates for those commodities
that have their own set of market fundamentals, and
confectionery sun seeds have a different set of market
fundamentals than do oil-type sun seeds. There has typically
been a pretty substantial differential, historically about a $3
a hundredweight differential between the two, and it just seems
to make sense to not cause distortions, not cause farmers to
shift acres, not cause problems in the processing industry, nor
with transportation and storage if you can delineate these.
That is what we have tried to do, not only with the minor
oilseeds but with the pulses and the other crops. We have tried
to make these as fair and as equitable as we can among farmers
and to minimize the distortions and enable farmers to be as
efficient as they possibly can.
Senator Conrad. Let me just say, you have substituted your
judgment for the judgment of Congress. It is as clear as it can
be what Congress said to do, not just there, flaxseed, same
thing, 9.6 percent is what is provided for in the statute. You
have set it at 6.98 percent--6.98 cents, and I can tell you, I
have one farmer who is going to lose $30,000. You announce
without public notice, without hearing, without consultation,
that you on your own, defying the clear intent of Congress, go
out and change the rules in the middle of the game. One farmer
from my State, it is going to cost him $30,000. He acted in
good faith. I don't think you have. It is just incredible to me
that Congress gives you a clear direction and you don't follow
it.
Well, we will have more chance--I have many more examples
that we are going to have a chance to go over before we end
today.
The Chairman. I thank you, Senator Conrad.
Senator Thomas. Thank you, Mr. Chairman. Welcome, Madam
Secretary. I know it must be a terrific job to implement this
bill, and I hope that at least you get an opportunity to
respond here in your own way.
A couple of fairly broad ones. EQIP is very important to us
and designed, of course, to promote production, environmental
quality. There seems to be some confusion with the
implementation. Some States are ahead of the Department in
terms of doing it. Other States are moving forward without the
guidance, apparently.
What is the process the States are following with the rules
of EQIP to get that program into place?
Secretary Veneman. Well, as you know, Senator, the Farm
bill put substantial amounts of new money into EQIP even for
the 2002 year. We moved quickly to announce the availability of
that money so that it could be utilized for projects that had
been applied for and yet funding was not yet available.
I am going to ask Bruce Knight to comment specifically on
your question about how we are implementing it in the various
States.
Mr. Knight. We are using the existing rules and regulations
to a large degree with very few minor--minor modifications for
2002 so that we could implement the additional funding
authority that we have, that you granted us in the Farm bill.
For 2003, we will move forward with a rather robust, open,
rulemaking process that will give us an opportunity for folks
to make further comments on where to move forward on EQIP with
the 2003 process.
Senator Thomas. Grassland Reserve is also one that there
has been some debate and some discussion as to whether that is
going to be done under the jurisdiction of the Farm Service
Agency or whether it is going to be done under NRCS or whether,
in fact, it is going to be divided. Would you comment on that,
please?
Secretary Veneman. There are some programs like the
Grassland Reserve program where we are still working out where
the oversight and where the administration will take place.
What I can tell you is that we have made it a strong policy in
USDA that our agencies should work together because our
constituents need consistency and availability of services from
our people in the field, no matter who they are. Both Jim
Little, who is our administrator of FDA, and Bruce Knight have
been strong advocates of working together, making sure that our
programs are administered effectively and efficiently out in
the field, and that NRCS and FSA particularly are working
together in the administration of these. How we are actually
going to administer the Grasslands Reserve Program we are still
working on, but it is one of these things that we are working
closely in terms of the employees that have jurisdiction or
responsibility for these areas.
Senator Thomas. I have talked about it with some people
before, actually, not during this implementation, but where
Farm Service is doing the rental contract portion and NRCS is
doing implementing the easement portion. Even though I agree
with you they ought to work together, it does make it difficult
when they split the responsibilities between two agencies, and
perhaps it is something that the major responsibility ought to
be with one. They can write the checks, I guess, over in the
other one.
Secretary Veneman. Well, we are trying to bring our
agencies together in terms of computer software and hardware
and programs so that we should be able to take all of these
data bases that have been kept by these agencies on paper, and
as we can bring them together into a common computing data
base, we will be much more able to administer these programs
effectively across agencies.
Senator Thomas. I am sure that is right. Still, the
responsibility needs to lie somewhere. The Rural Marketing
Program, when do you think those assistance loans and
deficiency payments, when will that program be finalized?
Secretary Veneman. I am actually not sure when we are
looking at the implementation of that program.
Mr. Collins. I have to look up the calendar. We have a
timetable here. We can certainly----
Secretary Veneman. We can get that answer to you.
Senator Thomas. I appreciate it.
Just one other final question. In the Livestock Feed
Assistance Program contained in the new drought amendment, will
people be able to use their new payments for feed they have
already purchased here in the past?
Secretary Veneman. In the drought--I am not sure which
drought amendment you are----
Senator Thomas. I am talking about the one that is now in
the process here. Just generally in drought, the payments don't
get there for a good long time, and the operators have had to
already spend the money to feed the livestock and so on. I
presume those dollars will be available for what maybe that
rancher has already spent.
Secretary Veneman. Yes, I--go ahead.
Mr. Penn. It depends on the language that is put in the
final legislation, but I'm told that historically it has been
true that farmers have been allowed to use the payments for
feed that has already been purchased because of the timeliness
of questions----
Senator Thomas. It is pretty important because the critters
are going to be hungry before that allocation of money is made.
All right. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Thomas.
Senator Miller.
Senator Miller. Thank you, Mr. Chairman. Obviously, it is a
very timely hearing, and thank you, Madam Secretary, for being
here with your staff. Thank you for all your hard work. I know
that it has been a difficult task to implement this farm bill.
I guess it will come as no surprise to you. My question has
to do with peanuts. I am about as predictable as Senator Leahy
with his dairy questions.
[Laughter.]
Senator Miller. One of the main thrusts of the Peanut
Program that we worked so hard on was to enhance our peanut
producers' ability to export. If we continue with this formula
that has been set up, it is going to be very difficult to do
that. In fact, it is going to drive U.S. producers completely
out of the export market.
I have two or three questions, but my first question has
two parts. Would someone please explain how this formula for
the loan repayment rate for peanuts is calculated? Does the
administration believe that the process of U.S. competitors
should be used in developing the loan repayment rate?
Secretary Veneman. I am going to ask Dr. Penn, who has been
intimately involved in the Peanut Program, to get into the
technical issues.
Mr. Penn. Well, Senator, first let me say, as Chairman
Harkin indicated in his opening statement about having lines of
communication, this farm bill was passed late in the year, made
applicable to the 2002 crop year. We were given the authority
to go to, as you know, what is called interim final rules. We
didn't have an opportunity to do the normal procedures which
would be to promulgate some draft rules, make them available
for comment, and then revise them and publish them in final
form.
What we have done at the Department is to try to have open
lines of communication. In fact, in my office we have had
meetings with anybody. Any group that has requested a meeting
to give us their views on how these programs should be
implemented, we have certainly met with them. That has been the
case with the peanut industry. I am happy to say they have
taken us up on that, and we have had numerous meetings with all
aspects of the industry trying to get their views on how this
program should be implemented, because as you noted, this is
essentially a brand-new program. I mean, it is an industry that
was in place, had a particular program for almost 70 years, and
then all of a sudden it is changed. It is made into a Marketing
Loan Program just like we have for the major commodities. The
industry itself hasn't made all of the changes.
We quickly got the quota buyout part of the program into
place, and then following that, we started implementing the
Marketing Loan Program. There is a marketing loan rate of $355
a ton for all peanuts that is in the statute. The question then
becomes what is the loan repayment rate, and unlike soybeans
and corn and all of the other commodities, there are no cash
prices for peanuts. What is one going to use as the loan
repayment rate?
Well, we think that after a while, after the industry is
allowed to adjust to the new program, there will be cash
markets emerge and that we will have reliable cash prices that
can be used to determine the LDPs or the loan repayment rate,
just like for the other commodities.
In the meantime, as you have suggested, that has forced us
to try to develop some sort of composite or national posted
price to determine the loan repayment rate. Frankly, we called
in all of the various portions of the industry. We have heard
from them. We have heard from their experts. I am aware of the
problem with trying to make our products competitive to try to
get to the export market, and that too is our objective. I
mean, we certainly want to do that, and we understand that that
was the objective in basically reformulating this program. We
have to go through this transition period here in which the
markets begin to operate.
In the meantime, we are publishing, as you noted, this
weekly price. We use a whole variety of sources. We explored
sources for peanuts, peanut prices all around the world. As you
can imagine, for the European price, the prices of our
competitors, they varied greatly by quantity, quality, type,
and reliability of the price estimates are not always very
good. We talked to a lot of traders. We talked to a lot of
people who prepare the prices in Rotterdam and other places,
and they tell us they are subject to manipulation. We couldn't
just very well take one of those prices with any confidence.
What we have done is to utilize information from a whole
variety of sources. We get every transaction that we possibly
can on peanuts in the United States for all purposes, those
that are sold into the export market, those that are sold for
the domestic crush for every single purpose. We try to take
into account the prices of Argentinean peanuts and others in
that formula.
Now, this is not a formula that I can write down and hand
to you. It has quite a bit of judgment in it. We call, we ask
about transactions, and if we think that there is something
suspicious about those, we exclude them. We are doing the very
best we can in this interim period here to indicate what we
think are the value of peanuts at this point in reference to
this loan rate, and I note that our formula--we have published
four now--has moved around a fair bit, several dollars a ton,
and that we think that after a while it will begin to reflect
the true cash prices. Not many of the new crop peanuts have
been sold into the market yet, so we are waiting to see that.
Senator Miller. Let me try to get this question in before
my time runs out. We all agree that the goals associated with
the loan repayment rate are to minimize potential loan
forfeitures and to minimize accumulation of stocks and to
minimize the cost of storage and storage.
Does the administration agree that the current repayment
rate will lead to large government stocks of peanuts and
increased cost to the Government?
Mr. Penn. Well, we are certainly aware of that problem, and
the last thing we want is for a big portion of this year's crop
of peanuts to go under loan and to be forfeited to the
Government. I mean, we don't want to be in the inventory
management business. We want those peanuts to go into the
market.
We are going to try our best to make sure that that
happens, and the loan repayment rate, as I noted, is changed
every week. As there are more transactions of new crop peanuts
that are in the harvest process now, we think that a cash price
will soon be established, and that that will reflect the
opportunities to sell peanuts in the foreign markets and for
the different purposes in the U.S. market. Our objective is the
same as yours. We don't want any peanuts. We want to expand our
exports. We want this new program to work for this industry
because it is very market-oriented, it is a step in the right
direction.
Senator Miller. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Miller.
Let's see. Senator Hutchinson.
Senator Hutchinson. Thank you, Mr. Chairman.
I agree with my colleagues in recognizing the great
challenges the Department has and am sympathetic with the short
timeframe and the great pressures that you are under to get
this done.
One of the questions that my farmers have raised that I
would like if you could give us some help on, for the five
options producers are given for base acres, is the Department
willing to look at regulations with regard to crops that are
rotated or are taken out of production for a year? In Arkansas,
if a farmer rotates rice acres into soybean acres due to red
rice infestation, my understanding is they would then have to
average a zero year for their rice base. In Freedom to Farm,
farmers were led to believe that they could shift planting
choices and not be penalized for doing so. Rotating rice with
soybeans or not planting now causes the resulting base to be
substantially reduced. At one time this acreage could have been
declared considered planted for program purposes, but under the
new regulations, only a prevented planting declaration can be
used in determining planting acreage and determining those base
calculations.
Obviously, having to figure in a zero because you are doing
some good conservation practices, that creates a real problem
in using that option. Is there any flexibility, is there any
way to address this concern that our farmers have, Dr. Penn?
Mr. Penn. Senator, yes, we are very much aware of that
problem of the planted or considered planted portion of the
regulation.
There are several of these situations that are very
particular to certain areas, certain kinds of rotations, corn-
soybean rotations where the whole farm is in a rotation, that
just weren't anticipated, in the broad regulations that were
promulgated and issued. There is some flexibility. We are
looking at this. I understand the argument, and we are going to
try to have an answer on this fairly soon.
Senator Hutchinson. Could you let me know what is going on?
We are getting a lot of calls on that concern.
Mr. Penn. We will keep you posted.
Senator Hutchinson. Many of the farmers in my State are
concerned about having to get a new power of attorney to make
decisions for the new Farm bill. As you know, they cannot make
decisions or receive payments until those documents are
available, and farmers only have, I understand, until April 1,
2003, to get that done, to get all the paperwork finished.
Are there any plans or contingencies for farmers who have
difficulty dealing with out-of-State landowners, which is a big
problem in Arkansas?
Mr. Penn. Well, on that one, let me say as well that we
have heard concerns expressed, and in every opportunity where
we can explain what our objectives are, most people, most of
the farmers agree that a little bit of extra trouble is
probably worth the effort.
The last time we requested that the powers of attorney be
updated was 1996. That was a fairly simple farm bill, as you
know. This one is much more complex, and it requires decisions
to be made on updating the acreage bases and the yields where
the farmers only get one chance to make that decision for the
entire life of the Farm bill. These are too important to not be
taken very seriously, and what we want to avoid is a case where
a year later somebody comes in and says, Why am I in this
situation? Who made that decision for me? It was done under an
old power of attorney.
When we explain to farmers that this is something they need
to do, that it is really important, that we need to get the
records updated, that there are new programs and new decisions
in this farm bill that were never envisioned under the previous
farm bill and under the old power of attorney, that we really
do need to have the new up-to-date legal records. It is well
worth the effort.
It is some difficulty, I know, for people to chase dow
numerous landowners or to go to the nursing home to find people
because there are a lot of landlord-tenant situations. It will
be well worth the effort in this case.
Senator Hutchinson. Madam Secretary, in making many of the
decisions on commodity options, there is a need to access the
Internet so they can use the various models to determine which
option is going to be the best that is going to serve them the
best.
In Arkansas, only 26 percent of the State has Internet
access, and most of that Internet access is in the urban areas,
not out with our farmers. What is the USDA doing, what efforts
are you undertaking to make these resources available to these
rural areas? Are there alternative forms or means by which the
best option can be determined for our farmers?
Secretary Veneman. Well, Senator, it is an important
question, and there are a couple of things I would like to
bring up in that regard. One is that we have tried to put
together some Internet programs so that you can actually try to
figure out which scenario is best for the particular farmer. It
works like retirement planning programs that you can get on
Quicken or something. That is an important tool for farmers and
ranchers, something we have not been able to do in farm bill
implementation before.
Now, we can make these programs accessible through the Farm
Service Agency office for people who don't have their own
Internet access. This also brings up another important part of
the Farm bill, and that is, in the rural development title,
there is a recognition that rural America should not be left
behind with regard to Internet access, broadband availability
and so forth. In that regard, we are also working to try to
bring some of these services to rural America, but in the
meantime we will work through our Farm Service Agency offices
to work with farmers who don't have the availability in their
own operations.
Senator Hutchinson. Well, thank you. That is the key. Most
of what I am hearing is that implementation of the Farm bill,
the time allowed, the paperwork required, while trying to
operate their farm operations, that it is just very, very
difficult unless there is going to be assistance and
flexibility shown by the Department. That is my plea. Thank
you, Mr. Chairman.
The Chairman. Thank you, Senator Hutchinson.
Senator Wellstone.
Senator Wellstone. Thank you, Mr. Chairman.
First of all, Mr. Chairman, let me ask to have a complete
statement in the record.
The Chairman. Without objection.
Senator Wellstone. Second of all, let me just take note of
the fact that my colleague Senator Dayton would be here, but
there is a Senate Armed Services security closed hearing with
Secretary Rumsfeld and others, and that is why he is not here,
and he wanted me to make that clear to you, Madam Secretary.
As long as we are talking about Senator Hutchinson's last
question, don't forget the telework provisions in this bill,
too, which are really going to be important to greater
Minnesota and rural America in terms of making sure that we are
not left behind in this information technology economy.
I want to, first of all, say to you, I want to thank all of
you for being here. I want to really echo the words of Senator
Leahy on dairy and just make the following request rather than
getting into a big battle with you, which is, first of all we
are now 950 and we need to get these countercyclical payments
out ASAP; and, second of all, to call on you to really make
some adjustments here in terms of the formula because I really
do think that the mid-sized dairy producers are now at a
disadvantage in terms of the formula you have, and I that is a
big mistake, and it goes against what we clearly intended, the
legislative intent. I would urge you all to take that into
account.
Madam Secretary, the big question I have for you as a
Senator from Minnesota goes to the vote last week on the Senate
floor, which was 79 to 16, 31 Republicans voting for the
disaster relief bill. I want to try to get you on the record
and see where you stand in relation to this. I was in northwest
Minnesota this weekend, and time is not neutral. People are
absolutely desperate and, of course, there was such support for
this because in a lot of parts of the country it is the same
story.
The one quote I have here is from White House spokesman
Scott Stanzel, and I quote from the article, and he says, ``We
support the disaster aid, but it's going to come out of the pot
of money earmarked for subsidies for Midwest corn, soybeans,
and wheat, and for rice and cotton grown in California, Texas,
Arkansas, and Louisiana.''
My question for you is whether or not you support the
disaster relief assistance that passed in the Senate because
that is disaster relief assistance taken out of the Farm bill.
That is the way we always do disaster relief assistance. We
take it out of general revenue. We don't take it out of
agriculture. We don't take it out of highway.
Do you or do you not support this vote in the Senate, this
effort to get the money to farmers?
Secretary Veneman. Senator, let me say a couple things
about the disaster situation, and as I said in my opening
statement, both in the written one as well as my oral one, we
recognize the severe drought situation in the country.
Senator Wellstone. In our case it is flooding. In other
cases it is fire.
Secretary Veneman. We have certainly had to deal with a lot
of fires this year as well, as you know.
The administration has made it clear that we do support
disaster relief, particularly for those who don't have risk
management tools available. As I indicated in my opening
statement, about 80 percent of the cropland is covered by crop
insurance, so we are really looking primarily at those
producers, especially in the livestock area, that don't have
the risk management tools available that others have.
We have also--and I want to reiterate what I did in my
statement, the proactivity that this administration has taken
with regard to the drought. Early on we began designating
disaster areas as quickly as possible so that low-interest
loans would be made available. We did CRP haying and grazing
very early on. We then extended that from August 31st to
November 30th. Then just a week or so ago we extended that to
the entire country.
We have had the Emergency Conservation Program funds for
States to develop water resources. We just announced yesterday
another $10 million in EQIP funds for severely affected States.
We announced this innovative 150----
Senator Wellstone. Could I interrupt you just for 1 second,
Madam Chair, because I am going to run out of time. I
appreciate what you have done, but there is a disconnect here.
First of all, even for those producers that have crop
insurance, they are lucky if it covers 70 percent; a 30-percent
loss is the end for a lot of our independent producers.
My question is whether or not--I understand some of the
things you have done, but it doesn't, frankly, have any bearing
on what we are dealing with in northwest Minnesota. My question
is: A, do you support the Senate amendment? Are you going to
support this disaster relief assistance, 79 votes? Yes or no?
Secretary Veneman. We have----
Senator Wellstone. You are the Secretary of Agriculture.
Secretary Veneman. The Senate amendment that was passed, we
did send a letter to Senator Daschle which clearly lays out the
administration's position on that. This is not a bill that is
passed out of both Houses of Congress and is on the President's
desk to sign. We don't have a bill that has been passed and is
conferenced, and we will continue to work with the Congress for
appropriate disaster assistance within the principles that we
have laid out as an administration.
Senator Wellstone. Can I just take 30 more seconds? I know
there are lots of people here that are interested and there are
journalists, and I am not trying to grandstand, and I will try
to say it quietly. I just think this is disingenuous--not
dishonest. You are not a dishonest person and you work hard.
The administration--this is a little disingenuous because if
you as the Secretary of Agriculture support this amendment
passed by 79 Senators, with only 95 there and we all know darn
well that the House will move this forward. We need your
support now. I can't for the life of me understand your
resistance.
I will tell you--I mean, I don't know, maybe you could
start outlining exactly how much you are going to take out of
corn, how much you are going to take out of soybeans, how much
you are going to take out of wheat, how much--CBO won't let you
do it, anyway. I mean, you are not going to be able to get the
scoring that way. You could support this. You won't. If we
don't get the support from the President and from the Secretary
of Agriculture, I am really worried that the help will not be
there for people. Then they will go under.
Are you sure you can't today say ``I support this,'' it had
strong bipartisan support, it is the right thing to do? You
can't do that as Secretary of Agriculture?
Secretary Veneman. I understand your concern, Senator, and,
again, I will reiterate that the President has been clear on
the principles that he had laid out for disaster assistance,
and we continue to want to work with the Congress on disaster
relief which is consistent with those principles.
The Chairman. Thank you.
Senator Fitzgerald.
Senator Fitzgerald. Thank you, Mr. Chairman. Following up
on Senator Wellstone's questioning, I just want to say I
disagree with Senator Wellstone, and I actually agree with the
administration. I want to compliment you for having the courage
to say that we ought to give this relief within certain
principles, and there is no easier way to score political
points in Washington than just giving money to everybody.
Everybody who comes in my office every day wants more money.
Everybody wants more money. Somebody has to pay for it, and the
money that we are giving out around here is not manna from
heaven. It actually comes from the taxes and paychecks of
people who work every day, and so we have a responsibility to
treat that money very carefully and not just get out the ladle
and not ask questions. I want to compliment you for your very
careful approach in that regard.
Madam Secretary, I authored a section of the new Farm bill
that establishes a commission on the application of payment
limits for agriculture, and it required the members of the
commission be appointed 60 days after enactment, and I believe
it was enacted July 13th. I am wondering if your Department has
turned its attention to the appointment of commission members,
and would you be able to give me an update on where the USDA is
in the nomination process?
Secretary Veneman. I would be happy to, Senator. As you
know, this is a commission that is going to consist by law of
ten members, one of whom the Congress appointed itself, and he
is sitting right next to me. We do have one member appointed,
but they are appointed three by the Senate, three by the House,
and three by the Department of Agriculture.
I can tell you that with regard to the--we have not
received any announcement on the three by the Senate or the
House. I have had meetings with my staff just this week on this
very issue. We are very close to making final selections on
individuals that we believe will do a good job on this
commission. We would hope to be able to announce the USDA
selections in the very near future.
Senator Fitzgerald. Well, I appreciate that, and I am glad
you are on top of it, and I just thought I would ask.
I had hoped that the Farm bill would have included stronger
limitations that I sponsored with Senator Grassley, and I do
think it is at least good that we are having a commission to
look into the effect of essentially unlimited payments to
certain very large farmers.
It has been called to my attention that the USDA has been
in the business of buying mountains of nonfat dry milk that
costs--we were talking a little bit earlier about it costing
the taxpayers. This is costing the taxpayers millions of
dollars every week for purchases and for ongoing storage. While
the USDA has the authority to adjust the tilt twice a year,
many have been surprised that the Government instead has chosen
to continue to buy milk powder. My question is, Madam
Secretary, when, if ever, will USDA decide to get out of the
nonfat dry milk business?
Secretary Veneman. Well, Senator, as you say, we do have
mountains of it. We have over a billion pounds, maybe 1.4.
Mr. Penn. 1.3.
Secretary Veneman. 1.3 now, 1.3 billion pounds of nonfat
dry milk in storage. I use this a lot when I talk to people,
and they are shocked. I have actually been out to Kansas City
and seen some of this milk stored in the caves. It only stays
in condition about 3 years, and then we have to sell it for
pennies on the dollar for pet food.
Fortunately, we were very innovative--and I commend our
staff at USDA for coming up with this Livestock Feed Assistance
Program where we have been able to use just a small fraction of
that milk, but it was an innovative way to help our livestock
farmers and use some of that milk.
We have issues like the tilt under consideration constantly
at USDA. As you know, there is a tremendous amount of interest
in this by various groups within the industry, the broad sense
of the industry, from producers to processors and so forth. It
is an issue that we continue to take under consideration, and
even I have had some of the producers come to me as well and
say we do need to figure out a way to get a handle on the
amount of nonfat dry that is going into storage because it is a
cost to the Government and the taxpayer, and so we are
continuing to look at that very carefully.
Senator Fitzgerald. Why do we buy it?
Secretary Veneman. Why do we buy it?
Mr. Penn. Well, this is a price support program. As you
know, the Congress mandates that we support the price of milk
at $9.90 a hundredweight, and since we can't physically buy
milk, we have to buy products. We buy nonfat dry cheese and
butter as a way to hold the price of fluid milk at $9.90. This
is a price support program like any other, and the Government
is the market of last resort.
Unfortunately, these products, much like we were talking
about loan rates, each product has its own set of market
fundamentals, and oftentimes they get out of whack and they
need to be adjusted. Nonfat dry is a case where we have had an
excess supply, more supply than was demanded. The Government
has been the market for that.
If we adjust, we have to be careful that we don't adjust
too far in the other direction. Then we just buy cheese or
butter instead of nonfat dry. It is a very precarious balance
that we are trying to maintain there, and we are watching this
very closely, as Secretary Veneman said.
Senator Fitzgerald. Well, if there anything we can do to
help you get off this treadmill, please let us know. I
certainly would be glad to assist you.
It looks like I am running out of time, so I just want to
thank you very much, Madam Secretary. I really appreciate your
hard work. You weren't given a lot of time to implement this
farm bill, so I want to compliment you and your staff for all
that you have done to implement a very complex bill under a
very short, tight deadline. We thank you for your good work for
our Nation's farmers. Thank you, Madam Secretary.
The Chairman. Thank you.
Senator Stabenow.
STATEMENT OF HON. DEBBIE STABENOW, A U.S. SENATOR FROM MICHIGAN
Senator Stabenow. Well, thank you, Mr. Chairman.
First I would ask that an opening statement be inserted in
the appropriate place in the committee's minutes, and thank you
for holding the hearing.
First, to Madam Secretary and your staff, I have heard many
positive comments about your website, so I want to thank you
for putting that together. It has been something that people in
Michigan have found very helpful, and I hope you will continue
to expand that.
Michigan, because of its diversity, is impacted by every
title in the Farm bill. Every provision, what colleagues have
raised as issues are of concern to me in a wide variety of
ways. I won't speak to other things that colleagues have
raised, but I do want to emphasize the disaster bill, and also
the impact that it has on the one question that I wanted to
focus on.
When we look at disaster relief and, Madam Secretary, when
you talk about crop insurance and 80 percent of the insurable
land being in crop insurance, the problem is that we have
uninsurable land. In a State like Michigan, with a high level
of specialty crops, our fruit and vegetable farmers do not have
a comprehensive program. We have a few pilot programs that we
are experimenting with that I was involved in helping to create
in the last number of years, but we are talking about part of
agriculture that doesn't have the full, comprehensive impact of
crop insurance, which is of great concern to me. In Michigan,
we have seen not one but 2 years for our grape growers now that
are devastated, apples, cherries. In some cases on our
orchards, we literally do not have enough cherries for one
cherry pie, which is--it is incredible what is happening for
folks.
We are very much impacted. We appreciate in Michigan low-
interest loans but our farmers, frankly, have enough loans.
This disaster package is very, very important.
As it relates to the Farm bill--and I realize it is
complicated in many provisions, and I appreciate the hard work
that it takes to put it together. I share the concern about
provisions in the Farm bill where we were very clear and where
our expectation is that, in fact, these will be implemented. I
speak, as no surprise, to areas of specialty crops and the
commodity purchase. I am pleased to be co-chair of the Produce
Caucus along with Senator Gordon Smith. We have faxed a letter
to you signed by 31 Senators expressing great concern that the
commodity purchase provisions that really are historic--
because, again, fruits and vegetable growers are not part of
the Farm bill traditionally. They are not program crops, as you
know. This commodity purchase is very important to them, and it
was historic that we were able to get this into the Farm bill.
I am concerned that--we said two things in there. We said
that there would be a minimum of a $200 million purchase made
every year, and in addition to that, we were very clear--and I
would read--``The managers' intend that the funds made
available under this section are to be used for additional
purchases of fruits and vegetables over and above the purchases
made under current law.'' This is very important. We know that
there are purchases made every year under Section 32, and we
want to make sure that this is a new program of an additional
amount of $200 million a year. I would like to know from you
if, in fact, you intend to follow through on this provision
that is in the Farm bill, that is so important to a group of
people who aren't covered on other pages of this document and
who also find themselves in disaster situations where they
aren't covered by crop insurance, and then they get hit on all
sides. This is a very important part of agriculture in
Michigan. While we are very diverse, this is an important part
of agriculture for us. I am going to do everything in my power
to see that the Department follows through on this language in
the Farm bill as it relates to the commodity purchase, and I
would like to know your intent.
Secretary Veneman. Well, thank you, Senator. As someone who
comes from California, you know that in my home State we hear a
lot of the same concerns about some of the specialty crops that
you are expressing from your constituents in Michigan.
Let me first address the crop insurance issue that you
raised. One of the things that we have continued to do since
the implementation of the 2000 crop insurance reform and
through our Crop Insurance Board, which we just appointed in
the last several months, which is very active, looking at new
products, new tools for crop insurance. Dr. Collins has been
very involved since the 2000 bill was implemented and could
comment more if you would like, as well as Dr. Penn, who
oversees the Risk Management Agency.
I do appreciate your issues about crop insurance. Crop
insurance has been expanded to more and more commodities. We
are constantly looking at new tools both in the specialty crop
areas as well as the livestock areas, because these are--we do
need to look at risk management opportunities here.
With regard to the purchases, I am aware of your letter and
the number of people who have signed it and the concern. As you
know, we purchase a tremendous amount of product under Section
32, primarily for our school lunch programs. My information is
that for 2002 we have purchased $187 million already, as well
as another $50 million through DOD for fruits and vegetables,
and we are going to continue to purchase the maximum amount
that we can through Section 32.
I understand the managers' language, and there has been
some disagreement about what this means in terms of the
language of the bill versus the managers, but we are continuing
to work that out with our lawyers.
Senator Stabenow. Well, if I might just say, traditionally
in the Congress language put in through the managers has been
followed as a part of the statute. My position is that that is,
in fact--we agreed, everyone sat around the table and agreed
that, in fact, this was in addition. This is $200 million in
additional dollars, and it is very, very important that this be
viewed in that light.
Let me also just say, back to crop insurance and all of the
areas that are being looked at now, I know that there has been
some discussion saying that our specialty corps could qualify
under NAP. Let me just also say on their behalf that these
farmers don't normally go to the FSA office, so they are not
aware of what is available there. We had only 20-some farmers,
20 or so that signed up through there because that is not the
structure through which they work. It is very important in
looking at these farmers to do this in a way where they are
informed, where it is really something that is going to work
for them, and we are not yet there. I really encourage you, as
we are expanding crop insurance, to be aware of those
mechanisms.
Finally, I would just say--and I know my time is up. I
would just say that from my perspective and on behalf of the
fruit and vegetable growers that we are very concerned that
there be a maintenance of a strict enforcement under
restrictions that were in the 1996 bill and in the 2002 bill as
it relates to planting fruits and vegetables on program crop
acres. I know I have a different position than the leadership
on the committee, but I have to say on behalf of our fruits and
vegetable growers, they are very concerned that the
restrictions and the enforcement of those remain in place.
Thank you, Mr. Chairman.
[The prepared statement of Senator Stabenow can be found in
the appendix on page 56.]
The Chairman. Thank you, Senator Stabenow.
Senator Crapo.
Senator Crapo. Thank you very much, Mr. Chairman. In fact,
I am going to follow-up. My very first question was exactly
what Senator Stabenow just finished on, and that is, the
question of the prohibition on the planting of fruits and
vegetables on acres enrolled in commodity payment programs. As
you know, that was in the 1996 Farm bill. We continued it in
the Farm bill we just passed. I am disturbed by reports that I
am hearing that the USDA may be considering weakening those
rules and the regulations and penalties relating to that
prohibition. Can you provide me assurance that the USDA is not
intending to weaken these prohibitions?
Secretary Veneman. On the----
Senator Crapo. This is the prohibition on planting of
fruits and vegetables on acres that are enrolled in the
commodity payment programs.
Secretary Veneman. Right. We are maintaining the
restrictions that were in the 1996 Act. I know there has been a
lot of concern about that, but we are continuing to maintain
those restrictions because we believe that is the intent of
Congress.
Senator Crapo. Good. I appreciate that. I just wanted to be
sure that I covered that with you.
Let me move to pulse crops next. On September 3 of this
year, the USDA announced the loan rates and loan repayment
rates for peas, lentils, and chickpeas. You know where I am
headed. Unfortunately, it appears that the loan rates are based
on No. 1-graded products, whereas Congress spoke clearly in
establishing the loan program that it should be based on feed
peas, No. 3 grade lentils, and on No. 3 grade chickpeas.
Congress based these rates on these lower grades to provide a
broader safety net and to create a system with less forfeiture
and prevent the need for discount schedules. Growers recognized
the need for a broader, less disruptive safety net and
supported this approach.
It is troubling to me that the USDA is acting contrary to
congressional direction and without consultation with the pulse
industry, and I would like to ask you what steps you are going
to take to reverse this announcement on September 3 and do what
Congress directed in the Act.
Secretary Veneman. Again, as Dr. Penn pointed out maybe
before you got here, there has been a complex calculation on
the number of loan rates that we have had to do in USDA, and I
am going to have him comment directly on the way that we
arrived at the pulse loan rates and how we calculated those.
Senator Crapo. Dr. Penn.
Mr. Penn. Well, let me say that this is the first time ever
that pulses have been included in the loan program.
Senator Crapo. Correct.
Mr. Penn. Most of this crop is contracted, and it is not a
set of crops that USDA normally gathers information for because
it has been contracted. There is not very much information
available on acreage, on production, on prices, on utilization.
To start a loan program from scratch, required that we have
to go and find all of the information that we possibly could.
We were not able to implement this program in the same detail
that we would have liked to, and so we announced the national
loan rate, no regional loan rates for these products, but we
intend to do that in 2003, and we have announced that we are
going to have a series of meetings with the various
stakeholders, the producers, the processors, the contractors
and others to try to develop this information and to try to
make regional loan rates where possible. That is part of the
background.
To get to the specific point, this is another one of those
topics that Senator Conrad and I have had some discussions
about, and he has expressed the same concerns that you have.
I have to tell you that there is an honest misunderstanding
with the respect to the pulse loan rate. For instance, the
$6.33-number that is put in the statute as the loan rate for
dry peas is way above the market price for this crop for a long
time. I mean, it has been several years since this crop reached
that price. In fact, it has only been at that level in 2 out of
the last 11 years. Because that was so much above the market
prices, we thought that was the food price, rather than the
feed price. We thought that was the price of, No. 1, dry peas,
rather than feed quality peas.
What we want to do, in establishing the loan rate, is to
make sure that we have the loan rate and the repayment rate the
same. We set the loan rate and said that is for food quality,
and then we set a loan repayment rate for food quality as well.
Senator Crapo. What you are saying is you do not believe
that Congress clearly directed that we focus on feed peas, and
No. 3-grade lentils, and No. 3-grade chickpeas?
Mr. Penn. I understand that is what is in the managers'
report, but I am saying because that price, the $6.33 was so
far above where market prices had been, we thought that was the
food-grade price, rather than the feed-grade price.
Senator Crapo. Well, you are hearing from us that that is
not what we meant.
Mr. Penn. Well, as I said, we are trying to work with the
various producers and with the trade association for this set
of crops and to gather information so that in 2003 we can make
changes in this program as are required.
Senator Crapo. Do I understand you to say, then, that you
are intending to move in 2003 to the feed peas, No. 3-grade
lentils, and No. 3-grade chickpeas?
Mr. Penn. We certainly want to follow the intent of the
Congress, as Senator Conrad reminds me over and over. We
certainly do. In this particular case, unlike the sunflower
case, I mean, it was just a misunderstanding about that.
Because these prices are so high, I mean, you understand it is
going to cause acreage distortions, it is going to distort the
economics among the various crops, it is going to draw acreage
perhaps from wheat and other things because the guaranteed
price is so high. We just did not think that that would be the
intent, to tell you the truth.
Senator Crapo. I understand. There can be quite a debate on
what the impact of your decision will be as well, and the
program was put together with a lot of careful facts. I
appreciate your comments, and I am going to work together with
my colleagues to see that we get this where we intended it with
Congress.
One last quick question. First of all, I have a lot of
questions I will not get to, and I would appreciate the chance
to submit them to you for response.
The last quick question is that I do commend you for your
implementation, Madam Secretary, of the sugar program. There is
one part of that implementation I am a little concerned about,
and that is that in the Farm bill, Congress eliminated the 1-
percent surcharge on CCC interest rates on sugar nonrecourse
loans. Unfortunately, it appears that in implementing this
rule, USDA has not eliminated the sugar loan rate.
Do you intend to take action to correct that?
Mr. Penn. No, Senator. This is a case where again, there is
going to be a disagreement as to what is allowable in terms of
implementation, but if I remember correctly, the statute allows
us the discretion as to whether or not to lower this interest-
rate charge by 1 percentage point, 100 basis points.
In effect, when the CCC operates the loan program, the 1996
Farm bill obligated us to increase the interest rate by 1
percentage point over the cost of borrowing money from the
Treasury, and we do that for every commodity, and it is
required in the law. It is only for sugar and only in this farm
bill that the language was changed that you may not charge that
for sugar.
Because we wanted to keep consistency and fairness among
all of the crops, and we wanted simplicity in implementing the
program, we elected to leave it as it had been in the past.
Senator Crapo. Even though Congress directed that we
eliminate the surcharge, because we did not specify the loan
rate, you are going to continue to apply the surcharge?
Mr. Penn. It said we may or may not charge the additional 1
percent. It did not mandate that we do that, Senator.
Senator Crapo. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Crapo.
[The prepared statement of Senator Crapo can be found in
the appendix on page 58.]
Senator Conrad.
Senator Conrad. Thank you, Mr. Chairman.
I would like to go back to the pulse-rate question and put
up--again, I hope you understand the frustration, after
spending hundreds of hours writing this farm bill, and
basically you all fought us every step of the way, we get the
job done in a way that we intended, and now we see you undoing
what we spent hundreds of hours crafting.
On the pulse crops, Senator Crapo has raised, and I
appreciate, Senator, your raising the subject because it is
another example of defying the intent, a clear intent of
Congress.
This is the managers' language with respect to the pulse
crops, and this is language that I wrote. I do not know how it
could be more clear. The conference substitute established a
marketing assistance loan program for pulse crops, dry peas,
lentil and small chickpeas. The loan rate for dried peas is
based on U.S. feed pea prices. The loan rate for lentils is
based on the price of U.S. No. 3 lentils, and the loan rate for
small chickpeas is based on the price of chickpeas that drop
below a 20/64 screen.
That is what Congress said. That is what Congress directed.
The statute specifies the rate, but that is not what you have
done. You have created this differential.
Now I heard in the responses to Senator Crapo what I hope
to be an opening here. Madam Secretary, will you reconsider the
actions that have been taken with respect to the so-called
pulse crops?
Secretary Veneman. Well, as Dr. Penn indicated, that it is
clear from his answer that we will take another look at this,
as we look at these for the 2003 crop year.
Senator Conrad. You will not reconsider for 2002.
Secretary Veneman. Well, we are in a position where we have
tried to implement this farm bill, as has been indicated by a
number of the members here, in a very short amount of time. Our
people have done yeoman's work trying to do that and make the
calculations. We are learning things from it, and we will
reconsider certain things for the 2003 crop year. There is no
question about it. Dr. Penn has indicated that.
Let me----
Senator Conrad. Can I just ask why were those of us who
wrote it not asked? We are a phone call away. The intent of
Congress, you have already acknowledged, should prevail. Why
did anybody from the Department not pick up the phone and call
us up, if you were confused about it, and just ask?
Secretary Veneman. Let me just say, Senator, and this is
very important, every meeting that our folks have had on the
implementation of this farm bill has been attended by our
lawyers. We are doing nothing contrary to what our lawyers
advise that we can do with regard to the implementation of this
farm bill. I just do not want people to get the impression that
we are not following the law here because we are taking every
action.
There is, as I said before, a lot of discretion that the
Department has to determine with regard to this farm bill, but
I feel very strongly about getting legal advice, and our folks
have had lawyers at every single meeting.
Senator Conrad. You have said, Madam Secretary, you have
said the lawyers disagreed. There was a disagreement among the
lawyers. The lawyers do not run USDA, you run USDA. You make
the decision, you have been appointed by the President,
confirmed by the Congress to make those decisions.
I would say to you, Madam Secretary, if you have lawyers
that are confused on this point, you need new lawyers. It could
not be----
Secretary Veneman. I did not say lawyers were confused on
this point. I talked about lawyers not agreeing on the Section
11 issue with regard to technical assistance, and that was
not----
Senator Conrad. Are you saying that your lawyers
consistently have advised you, all of your lawyers are telling
you that what you have done is what Congress intended on
sunflowers, on pulse crops? All of your lawyers are telling you
that that was the intent of Congress?
Secretary Veneman. Our lawyers are telling us that what we
are doing is within the scope of the law that has been passed
by Congress.
Senator Conrad. Well, I will tell you, that is truly, it is
unbelievable to me. I mean, I have read from the statute with
respect to the oilseeds. I have read to you from the managers'
report with respect to pulse crops. I wrote the section. There
is no question whatever on what was intended. Everybody who
participated in those talks knows what was intended, but that
is not what you have done, and I find that very troubling
because you have decided just to go your own way and defy what
Congress has said.
It is pretty clear you took $165 million out of this farm
bill that Congress intended farmers to receive. Because when we
went to CBO and asked them what it would cost to reverse
course, they said it is $165 million. You took, on your own,
$165 million right out of the minor oilseeds. I do not know
what other conclusion one can come to. That is, this
administration, through you, this department, you, you are the
one that made these decisions, saying to Congress, ``We do not
care what you guys say. We have our own view of what makes
sense,'' and that is wrong.
Mr. Penn. Senator Conrad, let me just respond that it is
certainly not our intent--you talk about the intent of the
Congress--but it is not our intent to violate the intent of the
Congress. I mean, what we are trying to do, as the Secretary
said, is implement these programs in the most fair, equitable,
efficient way that we can.
This conference was a long, drawn-out, protracted process.
We had people in the conference, in all of the sessions. We had
lawyers there. We had program analysts there. All of our people
were privy to all of the discussions, and as Secretary Veneman
said, our lawyers are not saying go against the intent of the
Congress, we are just trying to interpret the statutes in the
best way we can and use the flexibility that we have to try to
put together these programs in a way that makes sense, and so
we are trying to carry out the intent of the Congress. It is
just that we do not always agree as to exactly what you
intended, and there is not always unanimous intent among the
Members of the Congress as to what was intended.
Senator Conrad. I could just say to you, in conclusion,
with respect to these provisions, I was there for every minute.
I wrote these provisions. It is just as clear as it can be what
was intended. The language is clear, and I hope we are able to
resolve it.
Mr. Collins. Could I just join this party for 1 second? I
am not going to comment on your legal interpretation, Senator
Conrad, but the impacts that you have described are something
that I am not sure that we would agree with. We have been
fortunate, for perhaps unfortunate reasons, to have very high
oilseed prices this year, prices that are above loan rates.
The description you gave earlier of a farmer who is losing
quite a large amount of money because of this decision or the
costs that you just gave of our decision, in terms of leaving
$160 million on the table, quite frankly, I do not think I
could support those kinds of estimates.
Senator Conrad. That is what you told CBO.
Mr. Collins. I never told CBO any such thing.
Senator Conrad. Well, USDA told CBO that it would cost $165
million. That is where the number came from.
Mr. Collins. That may be somebody's version of baseline
scoring, but in the real world, oilseed prices are well above
loan rates right now, and we are not going to see those----
Senator Conrad. Well, I will tell you it would be helpful
if you had not told when Congress moved to put in place what
they intended in the first place, that you did not act to
subvert it by putting in a high score. You told them it would
cost $165 million.
The Chairman. Senator Lincoln.
STATEMENT OF HON. BLANCHE LINCOLN, A U.S. SENATOR FROM ARKANSAS
Senator Lincoln. Thank you, Mr. Chairman.
Once again, Mr. Chairman, thank you for bringing us here
this morning and for your continued leadership on the Farm bill
process.
Thanks to our panel, particularly Secretary Veneman, for
coming to the Hill today to visit with us and answer our
concerns about the Farm bill implementation process. We have
all spent some months at home in August with our farmers and
our agricultural industries, and we are full of questions and
concerns, and we do want to work together to resolve them.
Like all of my colleagues here on the committee, I have
been watching closely the Department's efforts to put our farm
bill back into action. Farmers in Arkansas have been waiting
anxiously for an implementation process that accurately and
faithfully reflects the Farm bill that Congress passed; the
reason being is that we worked closely with our producers when
we were working hard on that farm bill.
When we came to those committee meetings and when we came
to those conference meetings, we came with the concerns of our
producers and our agricultural workers. Many of those farmers
really have made their planting and financing decisions based
on what we discussed and what we fought hard for. That is where
a lot of our really deep concerns come from is that we fought
these battles based on what our farmers told us they absolutely
had to have. They based their decisions on the fact that we
passed that, and so here we find ourselves in a situation where
we want to do what is best for the producers and the
agricultural community of our country.
Now we have the harvest is already upon our farmers in many
parts of the country. Ours comes earlier than most in planting,
and now we are already at harvesting. It is vitally important
that the implementation rules be made and set into motion. If
there is anything that frustrates farmers, it is being left in
limbo, and for years they have been left in limbo, and that is
what we want to resolve.
The crisis that spurred Congress to an early rewrite of the
old Farm bill still exists. These farmers are still confused.
They are still not sure. They are still doubtful that
Government understands their concerns and their problems. It
has only been further exacerbated by the natural disasters that
we have talked about. You have mentioned drought, flood,
disease, of which we are all very, very aware.
The anxiety that is surrounding the implementation process
comes on top of all of these other existing problems, and being
a farmer's daughter and from a seventh-generation Arkansas farm
family, I know what it does to the family and to everybody else
in the community when these crises exist, as well as these
anxieties build.
Farmers from my State are increasingly alarmed by the
direction implementation seems to be taking in the Farm bill.
Frankly, many of them are wondering what kind of farm policy
the USDA is going to give them, and our hope is that you will
work with us for a better understanding of what our intent was.
Again, that intent definitely comes from the work that we have
done with our producers and the constituency that we serve, and
our hope is that you would want to serve that same constituency
and making sure that we do implement it in a way that is
consistent with what our intent was.
They are still hurting, just as they were last year, and
they wonder if the new farm policy is going to help them out.
There is not a great deal of faith in the ag community as to
what Government is going to provide them.
With this in mind, I would like to voice my concerns about
some specific implementation issues. I am sorry. I came
earlier, I had to leave, and I am back, and I know everybody
has been here for a long time. If I can just touch on a few of
these, if you have some answers there. If there are others, we
can certainly submit them in writing.
One issue that many farmers back home are very worried
about, and I believe Senator Hutchinson may have been brought
this up earlier, was in regard to the calculation of updated
base acreage, particularly involving soybeans. The point of
including soybean acreage into an updated base plan was to
enable the support payments to reflect the crop a current
farmer would grow, a current farm would grow.
It is vitally important that USDA try to get a fair picture
of oilseed acreage history so that a farmer can receive the
full support intended for him or her by the Farm bill.
I also strongly urge you to work with farmers and help them
come up with a fair way of updating their base. We had a few
panic attacks when we were home in August with farmers who had
gotten word that they were going to have to have their updated
base acreage in by the end of August. Then we found out later,
that that was just the beginnings of the process and that the
deadline was not until later in early spring. Still, they are
going to have to have the assistance of FSA and USDA to help
them work through that.
Similarly, I also want to urge you to work with farmers to
find the fairest way of providing updated yields. That is going
to be a critical part of what they have to do as well. Again,
it is your field staff that is out there working with them, and
I hope that they are going to get the correct directive from
you.
There are a variety of ways to indicate reliably a farm's
production of a given crop from past years, so it seems really
unnecessary to restrict the types of records that a farmer can
use to do so. I hope that you will be flexible in that and you
can work with them.
I am also concerned about the ongoing problems with
payments from settlement of the Pickford lawsuit. I do not know
if anyone else has brought that up; the minority class action
lawsuit that was settled a couple of years ago. To me, this is
precisely the sort of issue for which we created a new
Assistant Secretary of Civil Rights position. I would really
like to know where the administration is in filling this new
position. Are we moving forward?
I know that there have been some demonstrations of the
minority community of how important this is to them at your FSA
offices and other places. I do not understand why we cannot
move forward and resolve some of this and certainly find
someone for that position. We created it. Let us utilize it.
Finally, while I was pleased to see that the administration
agreed to indemnify the poultry growers whose flocks were
destroyed due to the avian influenza outbreak, I am extremely
disappointed that USDA will apparently withhold a large portion
of the money that was originally approved for the
indemnification.
Given the degree of damage this outbreak has unleashed, I
urge you to review your decision on that, and release the full
amount that was dedicated. This is a critical case where
something could just devastate us. It did in many regions. If
we do not act promptly on these, if the growers do not act
promptly, it can become a nightmare nationwide, and many of
them did act quickly, and we want to make sure that they know
that USDA and the Government supports them in taking the
correct kind of action.
Just a short list of my concerns, Mr. Chairman. I am sorry.
I know my time is up, and I just wanted to bring them up to you
face-to-face, and if we have time, you can answer any of those
or if you would like, you can also write me.
The Chairman.
The Chairman. Thank you, Senator.
[The prepared statement of Senator Lincoln can be found in
the appendix on page 60.]
The Chairman. Senator Crapo, do you have any follow-up
questions?
Senator Crapo. Yes, Mr. Chairman. I have a bunch, but I
will submit them. I just have one I would like to ask.
Madam Secretary, the 2002 Farm bill creates a National
Dairy Market Loss Payment Program, as you know. Also, as you
know, I strongly opposed this program. I continue to have
strong reservations that this program is not going to help
dairy producers, and that recent studies lend credence to these
criticisms that this program will result in lower prices for
dairy producers, increased cost for the taxpayer, and sadly
will do nothing to stop the number of failing dairies in the
Northeast and the Midwest.
Nonetheless, if we are to be saddled with this program,
that its implementation ought to be fair. One of the concerns I
have--I understand it has been raised, an issue that has been
raised earlier by Senator Leahy--that in the outyears, you have
indicated that the dairy producers will be allowed to choose
the month at which they will begin the program.
The question I have is with regard to the transition period
and why that same approach will not be utilized in this initial
transition period because it seems to me that it discriminates
against the mid-sized dairies, the very ones that the argument
was made it should have been created for.
Is there anything that is going to be done to allow
producers to choose the month that their payments begin in the
transition period?
Secretary Veneman. Senator, Dr. Collins addressed the dairy
program in some detail, but the thing that we tried to do with
regard to the transition period is make it the most fair that
we possibly could, and so the decision was made to go back to
December of 2001, which is the retroactive period for this
particular program, the only one that is retroactive in
operation.
The fairness issue revolved around the fact that you
already knew the prices, when you have a retroactive program,
and that we do not do that with any other program, and that is
why we said it would be fairest to everyone to put them back to
the initial time period, and so that is why there was not a
choice, and yet for 2003, and beyond, the producers will be
able to choose because they will not have the benefit of
knowing what the price is already going to be for the
subsequent months, and so that is why the decisions were made.
Dr. Collins went into that in much more detail, and we can have
him do that again if you would like.
Senator Crapo. Go ahead.
Mr. Collins. If I could, at the risk of stepping into one
more controversial issue. A criterion that people are using to
judge our decisions as being unfair is the statement that large
producers are benefiting more than small- and medium-sized
producers.
Senator Crapo. Right.
Mr. Collins. Unfortunately, the way this program is
constructed, that is the expected case no matter what you do,
not only for this year, but for future years as well.
Senator Crapo. I agree with you on that.
Mr. Collins. The reason for that, of course, is that there
is a 2.4-million-pound eligibility cap, not a payment limit.
Congress could have chosen a dollar payment limit. Instead they
chose a volume cap. That means, for a large producer, they are
going to reach their cap within 1 or 2 months. By giving a
large producer, and all producers, an opportunity to choose the
starting month so that they can maximize their payment, guess
what? The large producers market the whole 2.4 million pounds
in the months with the weakest prices. They will choose April
and May or whatever to start the clock under 2.4 million
pounds.
It is inevitable that the expected value of this program is
the large producers will have a higher average payment rate
than small- and medium-sized producers. There is no way around
that. People keep criticizing us for that being an outcome of
this program; it is endemic, it is inherent in the way the
program was constructed.
Senator Crapo. Doctor, I understand that. In fact, when we
debated this, that was one of the arguments I made about the
unfairness of the program and the impact that it was going to
have.
That having been said, it seems to me that at least we
ought to try to do what we can within the flexibility of the
program to minimize that impact, and that is the reason for my
question.
Mr. Collins. Fair enough.
Senator Crapo. Thank you, Mr. Chairman.
Secretary Veneman. Senator or Mr. Chairman, if I might,
just for a minute, respond to Senator Lincoln's questions just
quickly, and we can provide more for the record.
I absolutely agree with you. We want to do the right thing
with regard to implementation and do it as fairly as possible.
Obviously, we are having to work under very quick time frames.
Your colleague from Arkansas, Mr. Hutchinson, raised some of
these issues as well, and we responded that we are working
through our FSA offices to help producers make the kind of
decisions that you have talked about in terms of bases and
yields and the kinds of things that need to be updated and that
they will need assistance from FSA.
We have computer programs. Senator Hutchinson brought up
the fact that not everybody has access to computers, but we can
make that available through FSA, and we will do that and work
with our FSA folks.
Senator Lincoln. Even our FSA offices, some of their
computers does not even coincide with the software that you
send them, so they have to take it home.
Secretary Veneman. We have a massive undertaking in terms
of common computing environments. As I have testified at some
other hearings, where USDA was on just computer hardware and
software, I mean, we have a long way to go, but it is a very
big focus, and one of the main reasons for the focus is
because, if we do it right, we can better deliver programs to
farmers, and we need to make them farmer friendly. That is a
big area of concern.
You raised the poultry issue, and I have to say, with
regard to this avian influenza, USDA stepped in and took over
basically the control of this disease because it was so quickly
spreading. I have to say that I believe that was the right
decision. It is normally left to the States to deal with this,
but because of the speed with which this disease was spreading,
we came in and took that over.
We are now in the process of compensating the producers who
were impacted, and there were, in terms of the amount of money
that OMB approved, it actually anticipated that we had
slaughtered more birds than we actually did in the end, which
is why there is some discrepancy.
I just want to emphasize that I could not agree with you
more that these programs of eradication are absolutely critical
to what we do in this country in agriculture. Whether it is
avian influenza or it is a Medfly outbreak or it is the threat
of foot and mouth disease, this is a major focus of what we do
at USDA. We are working to do everything we can to make sure
that the affected producers get their payments, and we are
going to continue to do that.
Senator Lincoln. Can I just comment that that is so
important because it builds the faith so that the next time, if
we go to, and we need the eradication, they actually believe
that we are going to come through for them after they eradicate
their----
Secretary Veneman. We need to continue to work with
industry so we do not get these outbreaks again because, as you
know, it affects our exports and a whole variety of other
things that we do, and so it is critical.
The Pickford settlement issue has been something we put a
tremendous amount of focus on, and I want to commend so many
people, including FSA, and my chief of staff, Dale Moore, who
have spent a tremendous amount of time on not only the Pickford
settlements, but dealing with some of the civil rights issues
because we take them very seriously.
We are restricted, in many ways, on these Pickford
settlements, by the very terms and the structure of the
settlement itself. It is not a USDA issue as much as the
structure of the settlement. Within the structure of that
settlement, we are doing absolutely everything we can to get
everything done as quickly as possible.
We have spent millions of staff hours or thousands of staff
hours and millions of dollars in trying to get these cases
settled and this behind us and move on, and we are looking at
new and innovative programs. I just set up, having met with
some of the affected farmers, I know that they are concerned
about whether or not they can get the kind of information they
need from their FSA offices, so we have set up a hotline so
they can call Washington directly.
We are trying to address the issues in every way that we
can, and we do take them very seriously.
Senator Lincoln. How about the appointments?
Secretary Veneman. Oh, I am glad you brought that up again.
Civil rights, I have been interviewing candidates. We have not
yet selected a candidate, but I started interviewing candidates
probably 6 weeks ago, if not 2 months ago. We have been
actively engaged.
The Chairman. Thank you. Thank you.
Madam Secretary, I want to pick up a little bit on the
point that Senator Conrad has been making, and I want to focus
it on the conservation provisions. Now I heard you talking
about some discrepancy in the legal opinions regarding
conservation or Section 11. Well, let us walk through it. Dr.
Penn, Dr. Collins, let us walk through this.
In the 1996 bill, Section 11 was added or created. At that
time, EQIP was taken out and was not subject to the cap under
Section 11 for technical assistance. It was specifically
provided for EQIP and the authority separate from Section 11.
Do we agree on that point? I just want to make sure we
agree as we go down this ladder here.
In the 2002 bill, we put all of the conservation programs
on the same footing as EQIP by specifically providing the
technical assistance apart from Section 11. Hence, all programs
are exempt from any Section 11 cap on technical assistance, as
long as the technical assistance money is provided through the
authority separate from Section 11.
Now, again, I am going to read a couple of things; one, the
law. Section 1241. ``For each of fiscal years 2002 to 2007, the
Secretary shall use the funds, facilities and authorities of
the Commodity Credit Corporation to carry out the following
programs under Subtitle (d), including the provisions of
technical assistance,'' and then we list them all.
``Conservation Reserve Program, Wetlands Reserve Program,
Conservation Security Program, Farmland Protection Program,
Grasslands Reserve Program, Environmental Quality Incentives
Program, and the Wildlife Habitat Incentives Program.''
Now there is a paragraph (b). It says that ``Nothing in
this section affects the limit on expenditures for technical
assistance imposed by Section 11 of the Commodity Credit
Corporation Charter Act.''
This was added to say that, when we talked with your people
while we were developing this, we wanted to make it as clear as
possible, and that is why we separated out and listed them
separately, the conservation programs. That is why we said in
the opening paragraph, including the provision of technical
assistance for all of those programs and then we added
paragraph (b).
Paragraph (b) provides technical assistance under CCC for
other things, for computers and other kinds of things outside
of conservation. We asked for, and we obtained, from your
general counsel, the memorandum to you, dated August 15th--
(Nancy Bryson).
``In passing the 2002 act, Congress intended to provide a
new funding authority for the technical assistance that is to
be made available to the participants in the seven listed
programs,'' which I read for you. ``That is, funding from the
program funds authorized by Section 1241(a).'' That is what I
read. They intended an ``adequate level of funding...'' That is
our wording. ``...not one subject to the arbitrary limit
contained in Section 11 of the CCC Charter Act.''
``The conference managers rejected the Senate's approach of
leaving technical assistance funding under Section 11, but
exempting such funding from the cap to obtain adequate funding
levels. Instead, they took as their guide,'' and this is key,
``the funding mechanism for technical assistance under EQIP,
which was outside of and not restricted by Section 11. Not only
is this apparent from the text of Section 1241(a) `including
the provision of technical assistance,' but it is stated as the
intent of the conferees in the conference report accompanying
the Conference Bill H.R. 2646.''
``It is clear from the text of Section 1241(a) and the
underlying legislative history, that Congress intended the
various programs made available under the section to be the
primary source of funding for the technical assistance related
to the respected programs.''
Now I will say that in the back of this is an addendum from
OMB saying they disagree, but you run the Department of
Agriculture. I want to know why the legal opinion of the USDA
general counsel is invalid and why it is disregarded by you in
this provision.
Secretary Veneman. Mr. Chairman, I have not disregarded the
opinion of our general counsel. As you point out, you have the
documents. There is a disagreement between the general
counsels, and we have tried----
The Chairman. Between the general counsel and whom? There
is no disagreement. I just read it to you. I have the whole
thing from the general counsel. There is no disagreement.
Secretary Veneman. Well, you said you had another memo that
disagrees from OMB.
The Chairman. That is from OMB. That is right. I am just
talking about why you are disagreeing with your general
counsel's position.
Secretary Veneman. I am not disagreeing with my general
counsel, sir.
The Chairman. You agree with general counsel.
Secretary Veneman. Well, my counsel has given me that
advice, and I do not disagree with the advice.
The Chairman. Then what you are saying is that for those
seven programs, that they do not fall, and according to you,
they do not fall under Section 11 caps.
Secretary Veneman. That is the advice we have been given by
our general counsel.
The Chairman. You agree with that advice.
Secretary Veneman. I have no reason to disagree with that
advice.
The Chairman. Well, then, why was technical assistance then
provided for EQIP and WHIP, two of them that were listed here,
but not for the WRP and the Farmland Protection Program? USDA
requested it, by the way. Why was it not?
Secretary Veneman. Mr. Chairman, as I indicated, there has
been a disagreement among the lawyers of the two, of USDA and
OMB, on the interpretation of this section, and as a result of
that disagreement, a compromise was worked out for the 2002
year because the time was growing very short, and we would
welcome the opportunity to continue to work with you and other
Members of Congress to try to resolve this issue for the
outyears, but we felt it was in the best interests of getting
some of this technical assistance out to agree to this
compromise for the 2002 year because of the shortness of the
time.
The Chairman. Well, this letter from Phillip Perry, whoever
he is, at OMB, I hope he is not a lawyer. He is doing a
disservice to his law school wherever he went, if he is indeed
a lawyer, because he says, in his response to you, he refers to
a colloquy between me, Senator Lugar and Senator Cochran. ``I
assured Senator Lugar, on this colloquy on the floor,'' and he
puts it here, ``that funding for technical assistance will no
longer be affected by Section 11, as it pertains to these
programs.''
Then this guy, whoever he is, Phillip Perry, he says that
``Although this colloquy adequately reflects the Senate's
position and its version of the bill, the Senate's position had
already been rejected by the Conference Committee, which
dropped the Senate's amendment to Section 11 and added language
that Section 11 limitation was not affected.''
Is Phillip Perry sitting here? Well, maybe we have to have
him up here. That is not worth the paper it is printed on as an
opinion. Your general counsel is absolutely right. Senator
Lugar believes that and so does Senator Cochran. Like I said,
we sent a letter earlier last month. We sent it to OMB, and
they have not responded. OMB will not respond to a letter sent
joint by Senator Lugar.
Now what am I to take of this? What is going to happen with
the CRP program next year? Will the CRP program fall under
Section 11 cap? Can you tell me?
Secretary Veneman. Again, Senator, we are continuing to
work on this issue with regard to 2003. As I indicated before,
we would be happy to work with you and other Members of
Congress to try to resolve this issue. Again, the reason we
wanted to work out an agreement for the 2002 year is because
the time was running short.
We cannot spend the money without OMB's approval because
they have to sign the apportionment, and therefore we thought
it was in the best interests of the farmers and ranchers who
are going to depend on this technical assistance, to get some
agreement on the 2002 year, rather than sit at a stalemate
because of the inability to come to agreement.
Now, for the 2003 year, we will work with you and other
Members of Congress to try to get this straightened out.
The Chairman. Madam Secretary, we are going to have a real
problem here, and it is a problem for Senator Conrad. I mean,
we know what we wrote. We wrote a letter to OMB. Now what does
Congress do? I am speaking past you, now, but what is Congress
to do when the executive branch, through OMB, thumbs its nose
at what we said, wrote, and what we clearly intended? What do
we do?
This is very frustrating. It is very frustrating. Maybe I
should come to some conclusions that the administration, A,
does not support conservation; that this administration, for
all of their talk about supporting conservation, really does
not support conservation, and this is the way they are going to
get at it. They are going to bleed it dry because they will not
provide the technical assistance mandatory that we provided in
the bill. Again, I am talking past you.
I hope that the people at OMB hear this, and if I have to,
we will have them down here, and we will subpoena them. If they
will not come, we will bring them down here, and I want this to
be loud and clear. This is unconscionable what they have done
in this.
You are right. You are right, and your counsel is right.
Senator Lugar, Senator Cochran, I found no disagreement on this
in the way we structured this and what we intended. I do not
find one disagreement in it. I cannot speak for the House side,
but I do not find one disagreement over here.
Again, I just wonder is CRP going to be subject to the cap
for next year? Will the Conservation Security program be
subject to the cap next year? That was never our intent. We
have a real problem here when OMB just thumbs its nose at you
and at us. I mean, you guys can fight amongst yourself, I mean,
the administration, but when they thumb their nose at us, then
we have a real problem.
It is just frustrating, and I do not know that much about
the pulse crops and everything, but I am sure that that must be
frustrating for Senator Conrad, also.
Let me pick up a couple of other things before I end my
time here.
Senator Hutchinson brought up this point about the rotation
with the rice and the soybeans. Well, we have a similar problem
with soybeans and corn. I have made the suggestion--I make it
to you openly now--it seems to me, and I have asked our staff,
and our legal people here, to see if there is any problem with
this. They tell me there is not. Why do you not just use the 4
years? Rather than trying to segment it year after year after
year, why do you not just take the 1998 to 2001 and just
average it over the 4 years? It would seem to me that would
give you a better reflection of the base that you need for the
program crop, in our case corn; evidently, in their case rice.
Why can we not just use the 4 years?
Mr. Penn. It would probably cost more money, and OMB would
not let us do it.
[Laughter.]
The Chairman. Now there is an honest man.
[Laughter.]
Mr. Penn. That was a joke.
[Laughter.]
Mr. Penn. I am aware of that issue, and just like the
question of the rice, soybean, wheat rotation in Arkansas, we
are looking at that. We will try to find something practical. I
mean, our objective is the same as yours. I mean, we have all
of these rules and regulations, and we always find situations
that do not exactly fit, and we want to do what is practicable
and workable, so we will take a look at that.
The Chairman. Well, I do not know, if we have to do
something, maybe we will have to do it, maybe we can do it in
Ag Appropriations or something, but it just seems to me the 4
years makes sense. It makes sense to everyone I have talked to.
It seems to be the most equitable way of doing it because then
you do not penalize someone for maybe doing a total rotation
every year rather than a 50/50 rotation every year.
It just seems to me to make sense, and the most equitable.
I do not know. Maybe we will have to get a cost estimate on it
or something. I do not know, but it seem so to me that we have
to work on that, and I look forward to working with you to find
out how we answer that.
On the drought bill, again, I will only say this. I read
your letter, Madam Secretary, that you sent up on the drought
assistance measure. I know a lot has been talked about here, 79
votes here in the Senate. In it--I do not have it in front of
me--but in it you stated it was the administration's position
not to exceed the $180 billion that was in the Farm bill for
the 10-year period of time.
I did not ask you to bring this with you, but do any of you
here have some estimate now, a later estimate of about how much
we are going to save on LDPs this year? The last I saw it was
$5.6 billion. Is that still ballpark, maybe a little bit more?
Mr. Penn. The number that Senator Conrad obtained is the
last one that I have seen.
The Chairman. Is that about right?
The point I made at the time is it seems to me then what we
envisioned in the Farm bill is working, that we have a
countercyclical payment, that our farmers, and some, God bless
them, are going to get good prices for their corn and their
beans in Iowa and other States this year--in Illinois, too, and
other places--so then we do not pay them Government payments.
That is the way we intended for this to work. If the prices are
high, you get it from the marketplace, no Government payments.
In the savings that accrue if there are some farmers
hurting someplace because of acts of God, because of droughts,
and floods, and tornadoes, and hurricanes and whatever else
not, that it would seem to me we could take that savings, and
rather than putting it back in the general fund, use that
savings. We had $180 billion allotted to agriculture. Why could
we not take that savings and apply it to the drought, which is
estimated to be around about $6 billion?
What I am saying to you, Madam Secretary, is that I do not
believe we are going over the $180 billion. We are simply using
it to respond to a legitimate hurt and a legitimate need that
many farmers and ranchers have in this country. That is why I
was a little dismayed at the letter. I was dismayed because it
was opposing it, but to say that somehow we were not going to
exceed the $180 billion. Why should the General Treasury take
back the savings in LDPs? Why can we not use that for farmers
that are hurting?
It is just an open question? Why can we not use the savings
from the LDP?
Secretary Veneman. Well, again, these are complicated
scoring issues that involve CBO and what can be counted as a
saving and what cannot be counted as a saving, much beyond my
capability to explain at this point. Again, we have laid out
fairly clear principles for the drought assistance both in the
letter and in numerous comments that we have made, including at
this hearing, and we want to assist the producers that are most
in need.
It is important to point out, as I did in my testimony,
that the Congress hasn't passed a drought relief bill, but what
the USDA has done in the absence of a bill is we have taken
every tool that we possibly can find to try to provide as much
relief as we can under the circumstances. That is what we have
continued to try to do at USDA, and we are continuing to look
at even more tools if they are available.
For example, this $150 million Feed Assistance Program was
very unique. It was very innovative. It helped, as was brought
up earlier, to use some of our dairy stocks. Everyone from--it
is the first time haying and grazing has ever been opened up
nationwide.
We have tried to be very flexible in what we have done to
try to address the issues of particularly the drought this year
but other disasters as well.
The Chairman. I compliment you on that. You have acted
aggressively within whatever things you have available to
address these issues on haying and grazing. Quite frankly,
there needs to be some funds out there, too, because no matter
how much haying and grazing you open up this year we still have
the problem of last year's, both prevented planting and drought
that we had last year that we tried to put in the Farm bill. We
didn't get it in. We thought we were going to come back again
and we did. There are a lot of farmers today still paying
interest rates and paying back loans that they took out last
year because they thought they were going to get a drought or a
prevented planting assistance last year. They didn't get it,
and then they thought, well, they were going to get in the Farm
bill, and they didn't get it, and so there is still that 2001
that has to be taken care of, and there is nothing you can do
about that unless we have the money.
Secretary Veneman. Well, and as you know, the
administration supported drought assistance within the context
of the Farm bill. We made that clear last year--or during the
farm----
The Chairman. We don't want to get into that.
[Laughter.]
Secretary Veneman. OK.
The Chairman. We just really don't want to go down that
road.
Let me ask you about the Conservation Security Program. Can
you assure us that USDA is moving forward with implementation
of the Conservation Security Program as an uncapped national
program consistent with the Farm bill's legislative language
and congressional intent?
Secretary Veneman. We are moving ahead to implement this
provision. I might ask Bruce Knight to talk about what our
timeframe is on this provision, but we are looking at all of
the various issues that needed to be resolved in order to
implement this program.
Mr. Knight. We are continuing to move forward on
implementation in keeping with the direction that was provided
to us in the law. As we proceed forward with this, it is a very
innovative, very new program. Every step we uncover more areas
that we have to look at. We are now looking wide-ranging at
what sort of standards need to be reviewed internally both for
CSP and other programs that may result of having to look at
these things, going through systematically to ensure that any
efforts and every decision that is done here has to be done
right. We believe strongly that it is more important to do it
correctly than to do it rapidly and are trying to move forward
in a very responsible, fiduciary manner in developing all these
rules and regulations.
The Chairman. Can you give us some idea of when we might
see the first proposed rules? Because the final rules under the
law are supposed to be issued next February. Do you have some
idea of when we might see some proposed rules?
Mr. Knight. Quite honestly, sir, I have been much more
focused on getting the dollars out on the 2002 programs than
moving forward with 2003 in the priorities that were provided
by Congress in the direction that they had given--you had given
us with the third-party technical service providers, then
following systematically with those in as rapid a manner as we
can. In that context, the CSP on the publication status that we
have thus far appears that we should be able to come out with
proposed rules late fall of this year.
The Chairman. That would be good. Will your staff work with
my staff to keep my office up-to-date on the schedule for
implementation and developments in the process and so forth on
this. I appreciate that.
Regarding on the Grasslands Reserve Program, there is a lot
of interest in the Grasslands Reserve Program. Have you made
any decisions as to what agency is actually going to administer
this?
Secretary Veneman. No, we--someone else brought that up as
well, Senator, and we are in the process of having FSA and NRCS
work together on that issue and make the determinations of how
the agency responsibilities will be defined, and I am sure we
will get that decided in very short order.
The Chairman. A lot of interest in that.
One last thing here. Someone mentioned the website. Very
good. Excellent. I compliment you highly on that. It is very,
very good. Of course, there are a lot of people out there who
don't have Internet access, but we did put something in there
to expand broadband access, so I hope that is going ahead.
This is a question that I encounter all the time. What is
the mechanism in place for a local FSA official to forward a
farmer's comment and/or questions on to the appropriate bodies
within USDA? If, for example, the FSA official does not know
the answer or it is a comment or suggestion for implementation,
I have had a lot of farmers say, well, we went to the FSA
office and we asked this question and they didn't know, but
they were going to find out, and we have never heard back. Do
you have a mechanism in place so that farmers, when they go
into the FSA office and ask a question and this question has
gone up the ladder, they get a return on it somehow? Do you
have a mechanism in place for that?
Mr. Penn. Well, Senator, I don't know if we have a formal
mechanism that has a name, but----
The Chairman. No, I don't care about that, just as long
as----
Mr. Penn. All of the people in the county FSA offices have
been urged to send questions for which they don't have answers
to Washington. They can do that through the State Executive
Director, or they can pick up the phone and send it directly.
Now, of course, with e-mail they can certainly send them in. We
have been taking special pains, when we see two or more
questions on the same topic, to try to as quickly as we can
prepare an answer, get it back to the people who posed the
question, but, more importantly, put it on the FSA website in
the Q&A column there so that it is available to everybody all
over the country.
We appreciate your compliments on the website because we
have really tried to use that as a new medium this time to
disseminate information.
The Chairman. Good.
Mr. Penn. It gets picked up by the press. It is picked up
by the extension services. It is utilized by lots of people.
I don't know if we have a formal mechanism, but we have
encouraged everybody when they run into something they don't
know about to get it to somebody who does, and we try to
prepare an answer and make it available widely.
The Chairman. I appreciate that.
I just have two other things. One, on the Rural Business
Investment Program--and I am concerned about how we are moving
ahead on that. The Farm bill has been passed now 4 months. I
understand that USDA still has not signed an interagency
agreement with the SBA toward development of rules and
management of this important program. Again, can you give me
some idea of how we are moving on that? I know you have a lot
on your plate. I understand that. The need for investment
capital in rural America is drastic. Can you give me some idea
of how we are progressing with the SBA on this?
Secretary Veneman. Senator, we will get you a response on
this issue. I can't give you an exact timeframe, but I know
that you and I agree on the importance of these rural
development programs and investment in rural America. You
mentioned our Broadband Program which is new in the Farm bill.
We have a tremendous number of grants out with new funds that
were provided by the Farm bill in the rural development areas,
and we will check on this and get an answer back to you as to
what timeframe.
The Chairman. OK. I appreciate that. I have some, again in
my own State--that is what happens when you go out for a month.
You hear all these things, and what I heard was that people are
looking at this provision and they want to know when they can
start applying for some of this assistance. We have had some
farm credit organizations, even some banks in Iowa, have asked
me about it. I said, well, we just--I am sure that soon we will
have some regulations out on it and get this agreement made
with the SBA to move ahead on it. I hope that, again, your area
of rural development that is doing this will move ahead
expeditiously, working with the SBA to get this agreement made.
I will close on a good note. I just want to personally
thank you and your staff, particularly those at the Food and
Nutrition Service, for your outreach and preliminary
implementation work on the nutrition title. I have heard back
really good things on it. You have made some terrific strides
in simplifying program rules and expanding food stamp benefits.
Now just make sure States know about the various options
available to them and implement the food stamp changes and
other programs like the free fruits and vegetables. I am
getting a lot of interest in this free fruits and vegetables
program, and, again, my staff has told me and I have
experienced it at least a couple of times where your people in
FNS have been really very good at getting information out and
support and that type of thing. Thank you for that.
Well, Madam Secretary, do you have anything else that you
would like to add before I adjourn?
Secretary Veneman. Well, Mr. Chairman, I would just like to
thank you for holding this hearing. Again, I know there are
disagreements in some areas, but I just want to say that the
USDA staff at every level, from the top to the county office
staff, have done a tremendous amount of work to implement this
Farm bill in a very short amount of time, and our farmers and
ranchers and all of us owe them a tremendous amount for
everything they are doing to try to do the best job they
possibly can.
The Chairman. Well, I thank you. I would just note for the
record that in your statement you said the bill includes 10
titles and over 400 pages. I just want you to feel good. The
1990 Farm bill had 25 titles and 751 pages.
[Laughter.]
The Chairman. We are making some progress, I guess.
Well, thank you very much, Madam Secretary. We look forward
to working with you, but we do have these problems in terms of
carrying out what we believe is the law and the intent. Senator
Conrad went over his; I went over mine, my problems with OMB,
and this cannot stand. This cannot stand. Our Government
operates--I am not going to give you a lecture on Government.
You have been in it as long as I have, practically speaking. We
only operate on comity and recognizing our spheres and where we
act. We pass laws, and we put our intents. We write our reports
to give clear indication of what we intended. If the
administration--and I don't mean this one, any administration--
thumbs its nose at us, that breaks down the structure of our
Government, breaks down the structure in which we operate. I
don't like to see a Government operate where we are clashing
all the time and continue to clash. That just breaks down, the
very structure that has enabled our Government to succeeed for
so long. OMB is on a dangerous course here. To the outside
observer, that might seem small, well, this is just
agriculture, what the heck? I am telling you, it is big. We are
going to have to have some real serious meetings with OMB to
get them to understand this.
Thank you very much, Madam Secretary.
Secretary Veneman. Thank you, Senator.
[The prepared statement of Secretary Veneman can be found
in the appendix on page 62.]
The Chairman. Thank you. The committee will stand
adjourned.
[Whereupon, at 12:48 p.m., the committee was adjourned.]
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A P P E N D I X
September 17, 2002
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DOCUMENTS SUBMITTED FOR THE RECORD
September 17, 2002
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QUESTIONS AND ANSWERS
September 17, 2002
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