[Senate Hearing 109-643]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-643
 
                   REGIONAL FARM BILL FIELD HEARING:
                         GRAND ISLAND, NEBRASKA

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION


                               __________

                            August 16, 2006

                               __________

                       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,



                   SAXBY CHAMBLISS, Georgia, Chairman

RICHARD G. LUGAR, Indiana            TOM HARKIN, Iowa
THAD COCHRAN, Mississippi            PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky            KENT CONRAD, North Dakota
PAT ROBERTS, Kansas                  MAX BAUCUS, Montana
JAMES M. TALENT, Missouri            BLANCHE L. LINCOLN, Arkansas
CRAIG THOMAS, Wyoming                DEBBIE A. STABENOW, Michigan
RICK SANTORUM, Pennsylvania          E. BENJAMIN NELSON, Nebraska
NORM COLEMAN, Minnesota              MARK DAYTON, Minnesota
MICHEAL D. CRAPO, Idaho              KEN SALAZAR, Colorado
CHARLES E. GRASSLEY, Iowa

            Martha Scott Poindexter, Majority Staff Director
                David L. Johnson, Majority Chief Counsel
              Vernie Hubert, Majority Deputy Chief Counsel
                      Robert E. Sturm, Chief Clerk
                Mark Halverson, Minority Staff Director

                                  (ii)





















                            C O N T E N T S

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                                                                   Page

Hearing(s):

Regional Farm Bill Field Hearing: Grand Island, Nebraska.........     1

                              ----------                              

                       Wednesday, August 16, 2006
                    STATEMENTS PRESENTED BY SENATORS

Hon. Saxby Chambliss, a U.S. Senator from Georgia, Chairman, 
  Committee on Agriculture, Nutrition, and Forestry..............     1
Hon. Ben Nelson, a U.S. Senator from Nebraska....................     3
Hon. Chuck Hagel, a U.S. Senator from Nebraska...................     3

                                Panel I

Ebke, Steve, President, Nebraska Corn Growers Association, 
  Daykin, Nebraska...............................................     6
Hilferty, David, Nebraska Wheat Growers Association, Grant, 
  Nebraska.......................................................     9
Nagel, Doug, National Sorghum Producers, Davey, Nebraska.........     8
Wellman, Steve, American Soybean Association, Syracuse, Nebraska.     7

                                Panel II

Kristensen, Duane, Chief Ethanol Fuel, Inc., Hastings, Nebraska..    31
Nuttleman, Doug, Dairy Farmers of America, Stromsburg, Nebraska..    27
Olsen, Keith, Nebraska Farm Bureau, Grant, Nebraska..............    28
Stoltenberg, Roy, Nebraska Farmers Union, Cairo, Nebraska........    30

                               Panel III

Hanna, Jim, Independent Cattlemen of Nebraska, Brownlee, Nebraska    41
Luckey, Bill, Nebraska Pork Producers Association, Columbus, 
  Nebraska.......................................................    42
Tisdale, Dwight, Nebraska Sheep and Goat Producers, Kimball, 
  Nebraska.......................................................    44
Wolf, Jay, Nebraska Cattlemen, Inc., Albion, Nebraska............    40
                              ----------                              

                                APPENDIX

Prepared Statements:
    Nelson, Hon. Ben.............................................    54
    Ebke, Steve..................................................    59
    Hanna, Jim...................................................    62
    Hilferty, David..............................................    72
    Kristensen, Duane............................................    75
    Luckey, Bill.................................................    77
    Nagel, Doug..................................................    93
    Nuttleman, Doug..............................................   102
    Olsen, Keith.................................................   109
    Stoltenberg, Roy.............................................   115
    Tisdale, Dwight..............................................   120
    Wellman, Steve...............................................   124
    Wolf, Jay....................................................   127
Document(s) Submitted for the Record:
    Center for Rural Affairs.....................................   132
    Contract Agriculture Reform Program RAFI-USA.................   137
    Improvements to the Next Farm Bill...........................   140
    Lyndon LaRouche Political Action Committee...................   141
    Midwest Association of Fish and Wildlife Agencies............   146
    Mountain State Beet Growers Association......................   149
    National Drought Mitigation Center...........................   151
    Nebraska Appleseed Center for Law in the Public Interest.....   157
    Nebraska Dietetic Association................................   161
    Nebraska Sugarbeet Growers Association.......................   165
    Nebraska Women Involved in Farm Economics....................   167
    Statement from Hon. Adrian Smith a Senator from Nebraska.....   170
    Statement from Len Schropfer.................................   173
    Statement of Dennis Demmel a farmer from Nebraska............   174
    Statement of John M. Dittrich a farmer from Nebraska.........   178
    Statement of Kevin Raun a farmer from Nebraska...............   183
    Statement of Scott Kinkaid and Mike Korth, farmers from 
      Nebraska...................................................   185













        REGIONAL FARM BILL FIELD HEARING: GRAND ISLAND, NEBRASKA

                              ----------                              


                      WEDNESDAY, AUGUST 16, 2006,

                                       U.S. Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                   Grand Island, NE
    The committee met, pursuant to notice, at 9:04 a.m. in the 
Hornady-Marshall Theatre, College Park, 3180 West Highway 34, 
Grand Island, Nebraska, Hon. Saxby Chambliss, chairman of the 
committee, presiding.
    Present: Senators Chambliss and Nelson.
    Also present: Senator Hagel.

        OPENING STATEMENT OF HON. SAXBY CHAMBLISS, U.S. 
   SENATOR FROM GEORGIA, CHAIRMAN, COMMITTEE ON AGRICULTURE, 
                    NUTRITION, AND FORESTRY

    The Chairman. This hearing is called to order. I welcome 
everybody here to this facility as we prepare to write the 2007 
farm bill. I want to thank College Park for allowing us to use 
the Hornady-Marshall Theatre and to Randy Blair, who is 
Executive Director here at College Park. What a great facility 
this is and they have certainly been most accommodating to us 
in preparation for this hearing today.
    I also want to thank my colleagues, Senator Chuck Hagel and 
Senator Ben Nelson, for hosting us in the great State of
    Nebraska. As everyone in this room knows, both of these men 
sitting next to me are champions of agriculture and the 
interests of farmers and ranchers in Nebraska are certainly 
represented well in Washington because of them. They remind me 
every day abou't the fact that you all grow a lot of crops in 
Nebraska that we don't grow in Georgia and as Chuck has 
reminded me again, we always carr'y on about the Georgia 
peanuts that are hard to grow. Thank goodness you all can't 
grow them in Nebraska because you all are pretty prolific.
    Agriculture in the United States is very diverse and in 
different areas of the country, they view our farm programs in 
their own unique way. Today, we hope to gain a better 
understanding and establish a record of the unique nature of 
the agriculture industry in the Midwestern United States.
    This is the sixth in a series of regional field hearings we 
will hold in preparation for the next farm bill. We have held 
hearings to date in Georgia, Missouri, Pennsylvania and Iowa.
    Yesterday we had a hearing in Oregon and tomorrow we will 
be in Montana. Our final farm bill hearing will be held in
    Lubbock, Texas on September 8. These hearings are intended 
to provide American producers with an opportunity to explain 
how the farm bill programs have worked for them, particularly 
relative to the 2002 farm bill and what changes we should make 
in these programs as we prepare to the new farm bill in 2007.
    This is an important exercise because it allows farmers and 
ranchers to provide Members of Congress with direct input that 
we will utilize during the development of the next farm bill.
    As many of you know, American agriculture will face 
tremendous challenges in the coming years. One need point no 
further than the recent suspension of the Doha round of World 
Trade
    Organization negotiations. In addition, we will most likely 
write the next farm bill in a climate of deficit reduction.
    This Committee is readying itself to take on those 
challenges and with your help and input, we can provide a 
safety net for
    America's farmers that will assist them during times of 
need, while keeping them competitive in international 
marketplace and being fiscally responsible at the same time. 
Developing the next farm bill is a tremendous responsibility 
and as
    Chairman of the Committee on Agriculture, Nutrition and 
Forestry, I understand the importance of hearing the first-hand 
experience and input of actual farmers and ranchers who work 
the fields, herd the cattle and help provide this country with 
the most abundant, affordable and safest supplies of food this 
planet has ever known. I commend all of you for your hard work 
on behalf of all Americans and I look forward to hearing your 
testimony. For those of you who are not witnesses but are 
interested in submitting your thoughts to the Committee, the 
Committee's website has guidelines for providing written 
statements for the record in a web form for informal comments. 
Any comments received will also be considered during the re-
authorization process. I would like to remind our witnesses 
that each has 3 minutes to present testimony, followed by the 
opportunity to answer questions and we will certainly take your 
full statement and submit it for the record. Senator Nelson, 
who is a very valuable member of the Ag Committee, has 
obviously joined as has Senator Hagel and these two gentlemen 
are not only strong advocates of agriculture but they are my 
good personal friends. Senator
    Nelson and I serve on the Ag Committee together and we also 
serve on the Armed Services Committee together. Senator Hagel 
and I serve on the Intelligence Committee; in fact, we're 
neighbors on the Intelligence Committee. At a recent hearing, 
where we were, I think, working on the confirmation of 
somebody, the New York Times put the picture of Chuck and I in 
and I'm sitting there listening very intently to him and there 
was a caption under there or something to the effect that
    Senator Hagel visits with Senator Chambliss about something 
relative to this very important nominee. Actually, we were 
sitting there talking about Nebraska football.
    [Laughter.]
    But I thank both of these gentlemen and as a member of this 
Committee, I recognize Senator Nelson first.

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

    Senator Nelson. Thank you, Mr. Chairman. First of all, let 
me welcome you to Nebraska. We're delighted to have you here. 
We appreciate the fact that you have included Nebraska in your 
journeys. This is the second time you and I have had hearings 
in Nebraska. The previous time was in connection with the Armed 
Services. So I am just happy to have you back.
    I want to thank you for holding this hearing, particularly 
to get the input from Nebraska's farmers and ranchers and 
agricultural producers. Hosting a field hearing in Nebraska is 
important to our farmers and ranchers because it allows them to 
have this opportunity to provide input to help shape what will 
be a very important project for us this coming year and that is 
putting together a farm bill. In a state where one in five 
jobs, at least, is related to agriculture and nine in ten acres 
of land is farm and ranch land, today's hearing is significant 
because so much that affects the daily operations and the 
bottom line for our farmers and ranchers is intricately 
involved in the policy set at the Federal level and especially 
in the next farm bill. Agriculture is the
    No. 1 industry in Nebraska and our farmers and ranchers 
lead the Nation in many areas of production. They are in the 
trenches, producing our food and our fuel. Their input is 
extremely valuable and I appreciate your recognition of that 
fact in agreeing to hold this hearing in Grand Island and I 
thank you for granting my request for this field hearing. As 
you'll be able to see, this hearing is very important because 
the next farm bill, which I prefer to call the Food and Fuel
    Security Act of 2007, because of its potential to feed the 
nation but also fuel our energy needs affects so much of the 
state. I'm pleased that Nebraskans will be able to provide this 
valuable information today. This input is great to have an 
opportunity for local viewpoints to be heard in Washington and 
bring Washington to Nebraska. So I'm looking forward to the 
testimony of all the witnesses here today and I ask that the 
rest of my testimony be included as part of the record.
    We have some additional testimony from others who were 
unable to be here or were unable to be on the list of 
testifiers and
    I would ask that those comments also be included in the 
record.
    The Chairman. Without objection, they'll be included.
    Senator Nelson. Thank you, Mr. Chairman.
    [The prepared statement of Senator Nelson can be found in 
the appendix on page 54.]
    The Chairman. Thank you. Now, to my friend, Senator
    Hagel.

   STATEMENT OF HON. CHUCK HAGEL, U.S. SENATOR FROM NEBRASKA

    Senator Hagel. Mr. Chairman, thank you. Welcome to
    Nebraska. We are always grateful for a fresh supply of
    Georgia peanuts. Senator Chambliss has been very generous 
over the years in supplying Congress with Vidalia onions and
    Georgia peanuts.
    Also, there is a very strong intellectual basis of 
leadership in the Congress that we get from Georgia and we are 
grateful that you would include our state in your series of 
hearings around the country, which you have noted. I want to 
also thank our witnesses, all three panels, the organizations 
that you represent, the producers that you represent. We could 
not do this job without your input, without your valuable 
counsel. We will go deeper into that treasure box of wise 
counsel and advice as we shape and mold and craft and 
hopefully, write, a new farm bill, which I think we desperately 
need. And as always, Mr. Chairman, it is good to see you.
    Nebraska producers consistently rank among the top five in 
the production of live animals and meat products, feed grains, 
soybeans and ethanol and other renewable fuels. The upcoming 
farm bill will significantly impact our state, our country and 
the world and we appreciate the opportunity to share our views 
here in the state with the Senate Agriculture
    Committee.
    Mr. Chairman, there are 99 new members of the House of
    Representatives and 21 new senators since Congress voted on 
the last farm bill in 2002. The Doha round of trade 
negotiations, which you have noted, has stalled over the last 
month and the outcome remains unknown.
    The Secretary of Agriculture, Mike Johanns, who we are all 
very familiar with, was in Lincoln yesterday. I was with him 
most of the day and he addressed the Doha round issue and it 
will obviously be part of this hearing this morning in more 
detail.
    The current drought conditions that you are very familiar 
with, Mr. Chairman, across the Midwest, specifically here in 
the State of Nebraska, budget constraints, global market 
access, the availability and cost of energy and many other 
issues will provide the backdrop for the 2007 farm bill debate.
    I voted against the farm bill in 2002. Our Federal farm 
policy, in my opinion, has drifted far from where it was 
originally intended to be 70 years ago. We need to re-evaluate 
the current system and adjust our farm policy for 21st century 
challenges and opportunities. Currently, about 70 percent of 
farm payments go to roughly 10 percent of producers. The 
lopsided payments keep commodity prices low, drive up land 
prices, and allow large landowners to buy up small agricultural 
producers with taxpayer dollars. I am an original co-sponsor of 
the Rural American Preservation Act, which would lower farm 
payment limits from $360,000 to $250,000. Risk management must 
be a focus of the next farm bill. Some parts of Nebraska are 
suffering from their eighth year of continuous drought. Instead 
of a safety net already in place, agriculture producers are 
forced to rely on Congress to pass emergency disaster 
assistance each year. As I noted in Lincoln yesterday, we chase 
our tails around and around and around every year. The next 
farm bill needs to address this issue. We know that natural 
disasters will continue to occur.
    Why shouldn't we anticipate them in a forward-thinking, 
visionary new farm bill? The 2002 farm bill has done little to 
promote rural development. We need to help rural communities 
jumpstart their economies with incentives that will keep 
talented Nebraskans right here in our state, using provisions 
like those in the new Homestead Act, which Senator
    Dorgan and I introduced in the last two Congresses. The new
    Homestead Act would provide multiple tax credits, loan 
guarantees and other incentives to attract individuals and 
businesses to rural areas.
    Energy must be a primary focus of the next farm bill. We 
need to increase exploration for oil and natural gas but we 
also need to do everything possible to expand the production 
and use of renewable energy sources like ethanol, biodiesel, 
solar, wind, geothermal and biomass. Renewable energy means 
less dependence, obviously on foreign oil and more jobs at 
home, both on and off the farm.
    Trade--trade will continue to play a central role in the 
world of agriculture. The future of agriculture lies is 
international markets. The recent setbacks in the Doha round of 
global trade negotiations are disappointing but we must 
continue to push for greater access to more worldwide markets.
    There is an irresponsible and dangerous protectionist 
streak growing in the Congress of the United States that be 
dealt with. It must be dealt with directly. Global trade has 
always meant for opportunities for America's consumers and 
producers and I don't know of an industry that has benefited 
more from global trade than agriculture.
    Conservation must be an important focus of the new farm 
bill. Conservation has been instrumental in reducing soil 
erosion and improving water and air quality. The biggest issue 
facing the State of Nebraska, Mr. Chairman, over the next few 
years, will be water. Water! Additionally, with the ongoing 
drought limiting the availability of water, conservation will 
take on an even greater significance. The 2007 farm bill will 
affect the relationship between the government and agricultural 
producers and you noted this, Mr.
    Chairman in your opening remarks. It will be critical that
    Nebraska's agricultural producers get involved in the 
debate and sharply, deeply, involved in this debate. Lawmakers 
will rely heavily on the participation and the advice of our 
producers. We appreciate, Mr. Chairman, the efforts of this 
committee and your leadership because it will be continuously 
important to have your structured hearings as well as your 
involvement and attention if we, in fact, are to produce a 
relevant, meaningful farm bill next year. I look forward to 
today's hearings and our witnesses, their testimony and again, 
thank you, Mr. Chairman, for being here and including me in the 
hearing.
    The Chairman. Thank you, Senator Hagel, as well as you,
    Senator Nelson. We're excited about being here because we 
know we're in the breadbasket of agriculture in America. I 
particularly look forward to hearing our witnesses today and 
gentlemen, our format will be, we will start with you, Mr.
    Ebke and we'll move down the row for your opening 
statements. First panel consists of Mr. Steve Ebke, from 
Daykin, Nebraska, representing the Nebraska Corn Growers; Mr. 
Steve Wellman of
    Syracuse, Nebraska, representing the American Soybean
    Association; Mr. Doug Nagel of Davey, Nebraska representing 
the National Grain Sorghum Producers; and Mr. Dave Hilferty, of 
Grant, Nebraska, representing the National Association of
    Wheat Growers. Gentlemen, welcome. We look forward to your 
comments. Mr. Ebke?

   STATEMENT OF STEVE EBKE, PRESIDENT, NEBRASKA CORN GROWERS 
                 ASSOCIATION, DAYKIN, NEBRASKA

    Mr. Ebke. Thank you, Senators, for this opportunity to 
present input on the 2007 farm bill on behalf of Nebraska Corn
    Growers Association and our nearly 1,700 farmer members. 
It's not the same nation or the same world as it was 4 years 
ago when the 2002 farm bill went into effect. The 2007 farm 
bill needs to reflect these changes and anticipate challenges 
to come. We believe that the agricultural safety net should 
have a component based on net revenue, not price alone. A 
revenue-based program could help moderate the fluctuations in 
farm payments that occur from year to year and it is hoped, 
reduce the frequency of emergency payments for program crops 
and the impact we have on the Federal budget. Resistance to 
change, comfort and familiarity with the current program, 
waiting until WTO talks are complete--these are some of the 
reasons suggested for maintaining the status quo. However, the
    Nebraska Corn Growers believe that the 2007 farm bill 
should represent the next step in the evolution of commodity 
support, improving on previous programs and addressing the 
concerns that producers have voiced over the past several 
years. We want to move forward involving a 2007 farm bill that 
at least maintains the current level of support, delivered 
through a revenue-based safety net that protects America's 
farmers from events beyond their control. A revenue-based 
program can be in compliance with the current WTO provisions 
and would have the flexibility needed to adapt to potential 
changes in WTO rules. Most importantly, the revenue-based 
commodity title program makes better use of taxpayer dollars by 
investing government resources when and where they are needed 
most by
    American farmers.
    Nebraska Corn Growers are advocates of a strong 
conservation title. Under funding of the Conservation
    Security Program or CSP, has meant that the original 
concept of rewarding the best and motivating the rest simply 
cannot be accomplished by the reasons outlined in my written 
testimony.
    We've seen only sources of funding for CSP and do not favor 
a shift of funding from the commodity title. Our recommendation 
is that the CSP not be included in the 2007 farm bill. We 
support reallocation of the CSP budget to the EQIP program and 
to the NRCS to provide more technical assistance to farmers.
    The EQIP program, a program with proven benefits, supports 
the livestock sector and in particular, the largest customer of 
corn and a critical market for the storage grains produced by 
the ethanol industry.
    The Nebraska Corn Growers Association believes that the 
2007 farm bill offers the opportunity for us to rethink our 
nation's approach to commodity support and rural development.
    We believe that the changes suggested in my remarks today 
as well as others in my written testimony, can lead to a 2007 
farm bill that strengthens America's leadership in agriculture 
and makes sense for America's taxpayers. Thank you again for 
this opportunity to comment on behalf of the Nebraska Corn
    Growers Association.
    [The prepared statement of Mr. Ebke can be found in the 
appendix on page 59.]
    The Chairman. Thank you. Mr. Wellman?

   STATEMENT OF STEVE WELLMAN, AMERICAN SOYBEAN ASSOCIATION, 
                       SYRACUSE, NEBRASKA

    Mr. Wellman. Good morning, Mr. Chairman. It is my pleasure 
to represent the American Soybean Association today.
    Mr. Chairman, soybean producers support the safety net we 
have under the 2002 farm bill and most soybean producers would 
also support extending these programs. However, the current 
budget baseline for farm program spending declines over the 
next ten years and will probably not accommodate outlays based 
on current support levels. With the collapse of the WTO 
negotiations, there will not be a new agreement in place before 
your Committee writes the 2007 farm bill. Yet we want to avoid 
putting programs in place that are vulnerable to future WTO 
cases. Also, farmers need the certainty, for decisionmaking 
purposes, that a long-term farm bill provides.
    Given these circumstances, ASA's policy for the 2007 farm 
bill is there be no further cuts in the budget baseline for 
agriculture spending, that farm programs do not distort 
planting decisions and that future programs are WTO compliant.
    To explore alternatives, ASA has been working with other 
farm organizations to look at Green Box programs. The results 
of this analysis indicate a variety of options that would 
guarantee 70 percent of historical income and still meet WTO 
compliant. These options include covering only program crops or 
all crops plus livestock and basing the guarantee on gross or 
net income. This revenue guarantee could be combined with other 
programs to create a more effective safety net. We are working 
to have recommendations to present to your full committee by 
this fall. Mr. Chairman, ASA is also very supportive of 
proposals to strengthen the energy, trade and conservation 
titles in the farm bill. We support the 25x25 vision to enable 
agriculture to address our energy needs. We are especially 
interested in programs that would support soybeans as a 
renewable energy source. Specifically, these would promote 
domestic biodiesel production. The CCC Bio----
    Energy program has provided payments to biodiesel producers 
who utilize domestic feed stock such as soybean oil. This 
program has helped expand our domestic biodiesel production but 
the program sunsets after 2006. Therefore, ASA urges
    Congress to authorize and fund a biodiesel bio-energy 
program.
    A higher premium should be placed on domestic biodiesel 
production and expansion. The prospective cost of this program 
could be offset by reduced outlays from the soybean marketing 
loan and counter-cyclical programs.
    Related to trade promotion, we strongly support maintaining 
funding for foreign market development and market access 
programs, along with international food aid. With regard to 
conservation and research, we are concerned by recent actions 
that have depleted funding for these programs.
    ASA supports increased funding for conservation payments on 
working lands. In closing, ASA supports a bill that strengthens 
our rural economy by supporting farm income, renewable fuels, 
foreign trade and conservation on working lands and is WTO 
compliant. Thank you.
    [The prepared statement of Mr. Wellman can be found in the 
appendix on page 124.]
    The Chairman. Thank you. Mr. Nagel?

  STATEMENT OF DOUG NAGEL, NATIONAL SORGHUM PRODUCERS, DAVEY, 
                            NEBRASKA

    Mr. Nagel. I would also like to thank the senators,
    Senator Chambliss, Senator Nelson and Senator Hagel for 
being here and listening to my testimony. A little bit about 
me---- my name is Doug Nagel and I farm with my father in 
Davey,
    Nebraska. We raise 500 acres of sorghum, 600 acres of corn 
and about 900 acres of soybeans. The eastern part of the state, 
while it usually receives about 26 1/2 inches of rain a year, 
but we have to keep in mind that Nebraska is a semi-arid 
region. So there are years like this when adequate rain does 
not fall or it does not fall in a timely manner. During those 
drought years, sorghum is the most consistent yielding crop 
that we raise on our farm. Last week I was able to forward 
contract sorghum for 11 cents more a bushel than I could for 
bushels of corn in Lincoln. Feed exports and markets like the
    IAM pet food plants are contributing to strong demand for 
my grain sorghum. Looking at the current farm program, direct 
payment and marketing loan programs, provide our operation with 
the most protection. We live in a time where day-to-day market 
volatility decides whether or not we can make a profit.
    Currently we have high prices on the board of trade but the 
loan rate happens to be within reach due to local cash price 
differences, high basis. This is mainly due to high shipping 
costs, high fuel costs and fuel surcharges. If Congress changes 
our farm programs because of WTO or budget constraints, I would 
ask that the Committee preserve the equitable relationships in 
loan rates between all grains that was achieved in the 2002 
legislation and any new farm programs need to have a safety net 
for all farmers.
    Regarding conservation programs, sorghum is a water-sipping 
crop and it uses less water and nitrogen than other crops in my 
rotation. If a greener farm bill is to be developed, I ask that 
the program reward crops that use an overall lower quantity of 
water and require fewer inputs. For example, the EQIP program 
works well but I'm told by other sorghum growers that they have 
seen an overall water use increase rather than a decrease. 
Also, any new program needs to be distributed evenly and fairly 
to all farmers based on production and not just on the method 
that it is produced by.
    Finally, sorghum can and does play an important role as a 
feedstock in the renewable fuels industry. Currently, 15 
percent of grain sorghum is used in the ethanol industry 
throughout the Midwest. In the future, sweet sorghum may be an 
option for farmers. Rather than the grain starch juices 
extracted from the stock, sugars from the stock are fermented 
and ethanol is made from that. Also, forage sorghums can be 
used as biomass production and this uses the whole plant where 
tons of convertible biomass per acre would also help drive the 
feed stock equation. So the next farm bill needs to expand the 
role of all types of sorghums in the move for renewable energy 
and let's not overlook preserving and conserving our valuable 
natural resources. We look forward to working with you and I'd 
be glad to entertain your questions in a minute.
    [The prepared statement of Mr. Nagel can be found in the 
appendix on page 93.]
    The Chairman. Thank you. Mr. Hilferty?

      STATEMENT OF DAVID HILFERTY, NEBRASKA WHEAT GROWERS 
                  ASSOCIATION, GRANT, NEBRASKA

    Mr. Hilferty. Mr. Chairman, Senator Nelson and Senator
    Hagel, and members of the Committee, my name is David 
Hilferty and I am a wheat farmer from southwestern Nebraska and 
I thank you for this opportunity to summarize my written 
statement.
    The wheat growers that I represent here today believe that 
the 2002 farm bill has many good features and the next farm 
bill should build on those strengths. While I don't want to pit 
any one commodity against another, but I'd like to quote what 
the Secretary of Agriculture Mike Johanns said when he was 
asked, are we going to have a new farm bill or are we going to 
have the 2002 farm bill extended? He says, First thing is, you 
have five major program crops: corn, wheat, rice, cotton and 
soybeans and they get 93 percent of the subsidies. But when you 
really kind of peel through the layers, one of those crops, 
wheat, has really had a rather challenging time of it.
    Wheat tends to be grown in more drought-prone areas; 
therefore a wheat crop can be very dependent upon what the 
drought conditions really are. In the current farm bill, you do 
not collect payments like LDP and often times, counter cyclical 
if you've lost a crop. The other thing with wheat, you don't 
collect LDP and counter cyclical with this farm bill. I don't 
think they've collected in any year since this farm bill has 
been passed. You may prove me wrong here or there, but they 
have really been on the short side of this farm bill. So to go 
to that fifth major crop, wheat, and say, are you satisfied? 
And do you want to re-extend it word for word, letter for 
letter, period for period? I think you'd get a very interesting 
discussion and debate there.
    Well, Mr. Chairman, I believe Secretary Johanns was 
probably looking at my farm when he made that comment because
    I'm in the fifth year of a moderate to severe drought and 
my farm income reflects exactly what the Secretary was alluding 
to. So the Domestic Policy Committee of the National Wheat
    Growers Association is recommending that the fixed payment 
be one dollar instead of fifty-two cents and the counter 
cyclical target price be five-fifty instead of three ninety-
two. Those two changes will provide equity with the other four 
major crops. A higher fixed payment would also be more WTO 
compliant. Operating credit would be easier to obtain with a 
larger fixed payment and we also believe that conservation 
programs should continue as authorized, especially the
    Conservation Security Program and we also recommend that 
these programs be fully funded so that when a farmer does sign 
up, for say, CSP, that he knows he's in for the long term. I 
thank you again for this opportunity and I'd be happy to answer 
any questions you may have.
    [The prepared statement of Mr. Hilferty can be found in the 
appendix on page 72.]
    The Chairman. Thank you very much, gentlemen. I want to 
start out by asking five questions that we've asked every 
panel, every commodity panel, as we've been around the country 
and these are questions that relate to particular parts of our 
current farm bill and issues that are important to all farmers 
and ranchers. First of all, Mr. Ebke, we'll start with you.
    How would you prioritize the programs in the farm bill 
generally and the commodity titles specifically? How would you 
rank the relative importance of the Direct Payment
    Program, the Marketing Loan Program and the Counter 
Cyclical
    Payment programs?
    Mr. Ebke. Thank you, Senator. I think as far as 
prioritizing, I think most producers are going to, if you're 
looking at titles, they are going to prioritize the commodity 
title as the main thing and as we alluded to, the other ones, 
conservation seems to be important. People, farmers will 
embrace those programs and again, probably then looking at 
trade and energy, and similar in that respect. As far as within 
the commodity title, I think the list would probably be the way 
most producers would rank them. The Direct Payment
    Program is widely accepted and probably the next thing, 
funds are very adaptive and the Marketing Loan Program has 
provided them with tools for marketing and they become used to 
those.
    If we were to maintain that program as it is, that would 
probably be the second thing of importance as far as the 
commodity title is concerned, counter cyclical probably ranking 
last.
    The Chairman. OK. Mr. Wellman?
    Mr. Wellman. I believe the Soybean Association would 
prioritize, we would begin with the commodity title also, as 
the top priority and maybe look at energy as their second 
priority and trade issues, third. There is still a big portion 
of the soybeans that gets exported out so that is a big issue 
for soybean producers. Within the Commodity
    Program, the commodity title itself, payments that can be 
directed into the Green Box would be our priority. It would 
help ease our issue of being WTO compliant. Marketing Loans, at 
times, works well but it is something that doesn't really 
affect soybeans at all and also, that is based on for sure that 
you have to have production. So the years that we have a 
drought situation and not very much production, that is not a 
big component. I guess that takes it back to either Direct
    Payments or some other type of issue that could be 
developed to fit in the Green Box.
    The Chairman. OK. Mr. Nagel?
    Mr. Nagel. I would have to agree with my two counterparts 
here. When it comes to the farm bill, the National Sorghum 
Producers, of course, we're looking at commodity title. That's 
very important to us and then energy is right up there. I don't 
know how you prioritize one over the other. I think you have to 
have one with the other because that's--we're depending on that 
internal drive in the United States nowadays. We can talk all 
we want about trade. When I was in college, they talked about 
China was going to open up their doors and we're going to feed 
the world--you know, feed the world. Well, that hasn't happened 
yet and I was talking to my uncle about it and in the 1960's, 
that same topic was coming up. So trade--it's a big deal and I 
hope it comes to par some time but I think we need to protect 
ourselves internally right at the moment and that would be 
through energy legislation. Like I said, all--we have different 
kinds of sorghums to kind of fit that bill. We're getting into 
biomass production, we're getting into sugar production. So I 
think it would be good. But commodity title is the big deal. 
Third, I would rank the conservation title.
    In the State of Nebraska right now, there are regions in 
the area that have CSP or people are able to sign up for them.
    It's been nothing but frustrating. That's going to have to 
be re-vamped and it's going to have to be fine-tuned in order 
for more people to take part in that because right now, it's 
very constraining. The rules and regulations are very hard to 
live by and there are a lot of things in the paperwork right 
now about it, so I don't know where it's going or where it will 
end up, but that's going to be the last priority. As far as 
commodity title goes, I would rank Direct Payments first 
because whether we produce a crop or not, we do get that.
    Nebraska, as I said earlier, is a semi-arid country. LDPs, 
sometimes they land when we don't need them. Last year, we were 
producing a lot of corn. We had low prices and man, we were 
getting some big LDP checks. That's no secret to anybody out 
there. This year it is just the opposite. We're going to need 
the money. The crops aren't going to be there in northern 
Lancaster County. LDP payments are going to be fairly low. So 
that's my second priority. Counter Cyclical,
    I think that's our third and I don't really have much to 
expand on that.
    The Chairman. Mr. Hilferty?
    Mr. Hilferty. I believe the commodity title is very 
important and probably second would be the conservation area of 
that. Within that, I think the direct payments would be our top 
priority and the counter cyclical part would be number two. The 
Marketing Loan program would be No. 3. I'd go back to the 
direct payments. Direct payments are reliable and they are able 
to be budgeted. They are all compliant with
    WTO and they don't evaporate during a drought.
    The Chairman. Great. The second question. We can expect an 
effort to further reduce payment limits in the next farm bill. 
Do payment limits need to be modified in this next farm bill. 
Mr. Ebke?
    Mr. Ebke. Our organization has struggled with payment 
limitations for a number of years. We've had numerous policy 
discussions amongst the delegates at our annual meeting. We 
support payment limitations. What we've had difficulty with is 
assigning a dollar value and that seems to always be the 
situation. We'll see how it plays out this year at our delegate 
session but at this point in time, we do believe that they 
should exist. We do not have a target number. One thing, when 
we talk about payment limitations and Senator
    Hagel quoted some statistics. I think we need to be 
cautious sometimes with those statistics. Tuft University had a 
study recently that talked about or tried to analyze some of 
the public comments made by environmental working groups' data 
and so forth, about the percentage receiving payments and the 
percentage of the payments they received. I'll have to admit 
that I have looked at their website and when I see that in my 
county, those people receiving payments and we won't talk about 
the dollar amount because that's where you come into where to 
cap it. But those people receiving the majority of the payments 
are those who are actively engaged in farming as their primary 
occupation and when you get down to the end of the list, you 
find my dad and my mother, who are receiving funds because they 
happen to own some land and are willing to rent it to me. So I 
do think, when we look at that and we look at some of those 
numbers and the percentages, we need to maybe dig a little 
deeper and sort through some of that information to find out 
where those payments truly are going.
    There may be some very egregious situations, I won't deny 
that. But I think the bulk of the payments today are received 
by family farmers or individuals who are attempting to make 
their livelihood from the farm and they are not--if you want to 
call it recreational farms and whatever.
    The Chairman. Not Hollywood movie stars. Mr. Wellman?
    Mr. Wellman. I would agree with Mr. Ebke and their 
association, that very similar circumstances with the American
    Soybean Association in discussions about payment limits and 
where it should be set at and if there should be any.
    Currently, the American Soybean Association still has their 
long-standing policy that there be no payment limitations. We 
believe that the payments should follow where the production is 
at. It's always a big headline in the news, with people drawing 
the big dollars and so I did a little research. I looked up the 
University of Minnesota Fin-Bin website where they do financial 
analysis and they had records there of a 3,200 farms out of 
four states. In 1997 to 2002, the average government payment 
per farm, per year was $32,000 dollars.
    That represented 77 percent of the net income for those 
farms.
    So a large portion of those farms' net income came from 
government payments. From 2002 to 2005, the annual government 
payment actually decreased. The average was $30,105 dollars and 
that represented 46 percent of their net income. Over that 
timeframe, that 5-year difference, the gross income for those 
farms grew by $100,000 dollars. So the gross, obviously went 
up, farm program payments went down, the percentage of net 
income decreased. Those are real numbers from real farms and 
the Nebraska Farm Business Association of
    Nebraska have data going back on that for 10 years and the 
average government payment there was about $40,000, which 
represents 74 percent of the net income over those last ten 
years. That isn't anywhere close to the payment limitations 
we're talking about and we can see that it definitely plays a 
big role in keeping these farms vitally functional and 
profitable.
    The Chairman. Mr. Nagel?
    Mr. Nagel. I think these two have covered everything that 
needs to be said amply. As far as the way it affects my farm 
and my neighbors, payment limitations is not an issue.
    We're not even bumping up on them on a yearly basis. So it 
doesn't affect me. As far as the National Association goes, if 
we were to move this geography into Texas, we have a whole 
different situation and I'll let them do the explaining on that 
but one thing I do know is you've got--I've got a few landlords 
that I do some farming for that were kept out of the program 
because you've got the million dollar rule written in there 
right now. I think that might go a long way as far as keeping 
people that don't need the income out of the program.
    Me, it will be a long time before I make a million dollars, 
so we'll have to see how that works.
    The Chairman. Mr. Hilferty?
    Mr. Hilferty. I have to agree somewhat with most of the 
other three members of the panel but the National Association 
of Wheat Growers believe that the payment limitation may need 
to be raised because of inflation and cost of diesel fuel and 
cost of fertilizer, which have gone up tremendously in the past 
two or 3 years, especially this last year. I personally believe 
that alluding back to what Senator Hagel said about the lion 
share of these payments going to a small percentage of farmers, 
I believe that is very true and I think you need to work on a 
method by which some of that income could be transferred back 
to the smaller and intermediate family farms. I think that 
would be a priority to me.
    The Chairman. Great. The Doha round of negotiations has 
sought to provide additional market access for U.S. agriculture 
goods in exchange for cuts in domestic farm payments. How 
important are exports to the future of farmers?
    Some of you have alluded to that already, so don't worry 
about repeating yourselves, but how important are exports, Mr. 
Ebke?
    Mr. Ebke. Sometimes in Nebraska, we tend to think that they 
are not very important. Most of our products are used 
domestically or are moved within the relatively close area to 
our state. However, when you really do look at the broad issue, 
exports are important in Nebraska. No. 1, we found and have 
found in the past that if for some reason,
    Illinois and Iowa can't move products down the river, they 
are very ingenious and they find ways to get into our market. 
So it does have a significant impact on us. So I think the
    Nebraska Corn Growers realize the importance of trade and 
the importance of exports, particularly when we look at what is 
happening with the ethanol industry and the fact that 
distillers greens are going to become a large volume item that 
we are going to need to handle and we're assuming and we hope 
that with some research and so forth, that those become an 
export item that is going to be desired by our foreign trade 
partners. So we are interested in trade but we would not be 
willing to trade domestic supports without very solid 
assurances that the trade access that we receive are going to 
benefit us, come back to us. So that would be a word of 
caution.
    The Chairman. Mr. Wellman?
    Mr. Wellman. The U.S. produces 40 percent of the world's 
soybean supply and we export a great deal of that. The
    American Soybean Association, International Marketing
    Division, currently has nine worldwide offices to expand 
and develop export markets for our products. We recently 
celebrated 50 years of our office in Japan. So we've been at it 
for a long time and it has been a very big part of the 
expansion of our marketing and any kind of market competition 
we can get, I think is to get a good price for soybeans. It 
reduces the need for maybe some commodity payments and that 
type of issue. So I think it is going to play a big part, 
still. Currently we have some issues, the European Union has 
some biotechnology labeling laws that keep us out of their 
market and India and Russia are working on some very similar 
type of labeling requirements. We can have the trade agreements 
written but then they find some way to keep our product out. So 
that is an issue we would agree that we don't want to 
substitute trade policy for domestic programs because those 
foreign export markets may be kind of iffy at times and we 
can't always still have access to those markets that have been 
agreed upon.
    The Chairman. Mr. Nagel?
    Mr. Nagel. Grain sorghum, right now, we probably export 55 
percent of our grain and we do enjoy access to places where 
other commodities don't get right at the moment. We export to 
the European Union because we are not a GMO type of crop and we 
like that. If those tariffs go down in the European Union, that 
may end up hurting us overall, for our exports. But we're going 
to have side agreements because right now, we look at the 
Philippines, India and a few of those other places that still, 
like he says, don't want GMO issues. We should have market 
access there, whether there is a Doha agreement or not.
    We like our side agreement.
    The Chairman. Mr. Hilferty?
    Mr. Hilferty. Wheat is in a unique situation. Most of all, 
it is only used for human consumption and only about 50 percent 
of the wheat raised can be used in the United States so of 
course, that leaves 50 percent that has to be exported.
    We live and die by the export market and when it comes to 
WTO negotiations, we would rather have a good deal than no deal 
at all. So I guess it has worked out probably better to have 
unilateral trade agreements than multi-lateral. We rely on our 
negotiators to get us a good deal but we want a good deal 
rather than--I mean, I would just as soon they would cancel out 
as to getting a poor deal.
    The Chairman. Mr. Ebke and Mr. Wellman, you have mentioned 
a revenue based approach for the commodity title as a 
possibility and Mr. Ebke, we have seen the preliminary paper 
from the National Corn Growers so I won't ask you to repeat 
what you've said or maybe what it's there, but what are your 
thoughts on a revenue based approach as a safety net 
replacement for the current commodity programs?
    Mr. Ebke. As you've suggested and as my counterparts in
    Nebraska, we've looked at that and we believe that concept 
should be explored and that exploration, flushing out of a 
proposal is in the process. We're not radically changing the 
way we approach things now but we're looking at maintaining a 
direct payment. We're looking at having a basic revenue 
insurance program that would generate approximately 70 percent 
of net revenue and we're looking at a counter cyclical 
component to cover that upper end. So we're using some of the 
things that are in the current program, just reshaping them, 
making them more available. On the surface, I think it will 
provide a more consistent safety net and eliminate some of the 
difficulties that have been mentioned as far as LDPs and so 
forth, where sometimes those producers who really need the help 
because of production problems and possibly shortcomings within 
their own crop insurance coverage, they've missed out and 
others have maybe had support when it wasn't necessarily 
needed. So in looking at a revenue-based proposal, we think it 
will even things out and help those individuals who need the 
help.
    The Chairman. Mr. Wellman?
    Mr. Wellman. I won't add very much to what Mr. Ebke said. I 
just believe that it addresses the need to be WTO compliant and 
it could possibly support income in a manner that we haven't 
seen before and if we can some way work in it with other 
programs and give a good safety net for net income, then it 
would take away some of the problems we have with marketing 
loans, when it comes in effect, the times we don't need it or 
it's not there when you do need it. So, I think it is something 
that we need to really look at.
    The Chairman. Mr. Nagel?
    Mr. Nagel. Most revenue insurance work is being conducted 
on major crops like corn and soybeans so I don't have any good 
numbers for grain sorghum right at the moment.
    The first--what we have to remember is that a crop needs to 
be produced to collect payment and if we're having an insurance 
type of situation--when I pay my premiums, when I do all that 
stuff for my insurance, if I have 2 years of drought, my 
guarantee goes down after 2 years or 3 years or for instance, 
back in his area, it is 5 years of drought. So what is our 
revenue that we're going to cover?
    That's the main questions that we have. So right now, we're 
a little bit iffy. We will have to put some numbers on it but 
to me, it doesn't sound like a very good idea. It would be 
great for irrigators. It would be great for Iowa and Illinois 
but here in Nebraska, I don't know.
    The Chairman. Mr. Hilferty?
    Mr. Hilferty. I do know that wheat growers believe that a 
revenue based program would be better in some instances, 
especially in drought, than we currently now have but it would 
be a very tough program to implement. For example, compliance 
with WTO rules requires that no more than 70 percent of the 
crop value can be covered with a revenue-based program. That 
top 30 percent is when a real loss occurs. In fact, our 
insurance kind of covers that bottom 70 percent anyway but I do 
believe that the revenue-based theory is probably the best in 
the long run.
    The Chairman. I think I know the answer to this question. 
You've all spoken directly or indirectly to it, as a matter of 
fact, but just a quick answer. Should an increase in 
conservation or energy programs come at the expense of 
commodity program?
    Mr. Ebke. Well, again as I mentioned, all members would 
probably not support that. We support conservation but the 
commodity title seems to be pretty sacred for most producers 
and I'm not sure that they are willing to give that up at this 
point. I suppose it would depend upon the proposal and how that 
then might fall back to them as far as moving funds out of the 
commodity title. At this point in time, that would not be 
something that a Nebraska Corn Grower member would accept.
    The Chairman. Mr. Wellman?
    Mr. Wellman. With the current CSP program and the funding 
that has been stripped away from that program, and the way that 
it has been administered, I can't see that we can---- unless 
there has been drastic changes to the way that program is--or a 
similar program is implemented. I can't see where it would take 
the place of the commodity program that we have now. It has 
actually caused problems between neighbors because one neighbor 
can qualify for the program and the other one hasn't because of 
lack of funding and things like that.
    It's definitely a situation that would have to be changed.
    The Chairman. Mr. Nagel?
    Mr. Nagel. Well, I mean, the commodity title is sacred and 
as a I said earlier, the energy title should be right up there 
and that should be looked at a national issue, too, national 
security issue, rather. What more can I say about it? The 
conservation CSP, I hit on that earlier and rather than repeat 
myself, there are just a lot of issues that we need to work out 
with that, too. I think energy is the way to go. I'm pretty 
high on energy.
    The Chairman. Mr. Hilferty?
    Mr. Hilferty. Myself, I'd answer no, would not like to see 
the transfer from one program to another but we're interested 
in the energy problem. There should be more money spent there. 
As far as taking money from commodity programs, there is 
already a backlog of un-funded conservation programs.
    So where does it end if you start taking money away from 
the commodity programs?
    The Chairman. All right. Senator Nelson?
    Senator Nelson. Thank you, Mr. Chairman. Mr. Wellman, in 
your testimony, you mentioned offsetting funding for biofuels 
research and development by reducing outlays from the commodity 
credit appropriation. What are your thoughts on how you do 
this. How would you make the reduction and balance that out? Do 
you have any thoughts that might help us as we look at that?
    Mr. Wellman. I think the theory there is that with 
increased biodiesel production, they would drive the price of 
soybeans up, therefore lowering the cost of the marketing loan 
program and the counter cyclical program.
    Senator Nelson. That would be the assumption. If you didn't 
have that happen for whatever reason, it might not be such a 
good idea because all of you recognized the importance of the 
commodity program. So that would be your assumption, that if 
you didn't have the prices go up, this would be a good way to 
offset it. Is that fair?
    Mr. Wellman. Yes.
    Senator Nelson. OK. And then, the Corn Growers,
    Steve, the Revenue Protection programs have been an 
interesting idea for reforming the farm safety net and one 
thing that jumps out at me is the concerns that many farmers 
have expressed to me about needing the payment limitations.
    Will the program be better equipped to help small and 
medium sized farmers stay in business and stay competitive if 
we are able to figure out the level of payment limitations?
    Mr. Ebke. I would expect that it would be supportive of all 
farmers. Small, medium-sized, depending upon their situation at 
this point in time, but it would provide them with that basic 
coverage, similar to a revenue insurance program, plus then we 
add that 30 percent, would be covered with some sort of a 
counter cyclical field similar to GLIP insurance. But depending 
upon the situation, I think it will do more for them than what 
we have today. Again, some of that comes down to economically 
viable units and I'm not sure if we can develop any program 
that will help you if you're not a viable enterprise. I think 
that this will do more than what we have today, as far as 
leveling it out and providing support in those years when the 
LDPs might not be available because of production problems.
    Senator Nelson. I'd like to concentrate on drought issues a 
little bit more. I think you've all mentioned it and we've all 
talked about it to one degree or another. Can you help us 
understand what might be the viable options to begin to deal 
with the impacts of drought? How reasonable is it to consider 
helping farmers transition toward growing more drought-
resistant crops. You hear that. If we're going to have to have 
a multi-year drought situation and maybe we ought to mitigate 
against that. I've been working with the
    University of Nebraska and we'll have, I think, some 
testimony about drought mitigation. But just from your 
perspective, is it reasonable for us to talk about that? Will 
people change their direction in agriculture based on 
recognizing the impacts of drought? Are farmers open to that 
suggestion? I guess I'd like to get your thoughts individually 
about that.
    Let's just go down the line there. I know you may have your 
own concerns about it because you get a little bit more rain 
than Mr. Hilferty. But Steve, would you start off for us?
    Mr. Ebke. I think certainly that agriculture producers are 
going to be open to that. They're very innovative.
    They're going to take advantage of what is offered and if, 
in the years that we have more moisture, maybe it's normal---- 
maybe it was above normal. I don't know. You can look at all 
kinds of charts and try----
    Senator Nelson. It's hard to understand what normal is 
anymore.
    Mr. Ebke. That's the point. When it was adequate, there 
were transitions of crops that used more water. I don't think 
there is any doubt that if this continues to persist, we're 
going to see a transition to crops that are more resistant to 
drought, that tolerate it--whatever, and that farming practices 
will change. They've been adapting for years.
    Technology may provide some help in that aspect. There are 
things that are being promised but they are always another 
couple 3 years away and we'll see how that develops. I think 
those things will be--if those things come to the market, they 
will be adapted rapidly. I think the producers are very 
adaptive and so they are going to figure out how to make the 
most of what they have.
    Senator Nelson. Yes.
    Mr. Wellman. I believe that in the past and in the future, 
farmers will be very flexible as to the crops that they can 
produce. Even in my area, we are 100 percent non-irrigated and 
as I look back when my father farmed a lot of grain sorghum and 
wheat and corn in that area. Over time, it has changed to more 
soybeans and corn. On my operation, we still don't raise any 
milo at the current time but we still produce wheat and we have 
some cattle. I think it will be important for farmers to look 
at other options and diversify themselves. It may just be a 
matter of survival. If you can't make the change, then--it's 
just going to be necessary to make the change, I guess, to 
farming a product that we can grow and a field to grow it and 
still make a profit.
    Mr. Nagel. You've heard us say it before, we always refer 
to milo as a water sipping crop and if there ever was a year 
that you could see a difference between a grain sorghum field 
and a cornfield on a dry land basis in Lancaster County, it's 
this year. I do have neighbors right now that are chopping corn 
for silage. The appraiser has been out and they are looking at 
corn maybe in the mid-thirties, 30 bushel per acre. I am 
currently out working with my grain sorghum. We have to do a 
few extra steps. That's why people don't like it but I work 
hard at it and I keep it looking nice. I'm hoping for 100 to 
120 bushel of sorghum, maybe more. I think we have some guys in 
Thayer County in the same situation. Corn is burned up and milo 
has never looked better. Timing is an issue when you get 
rainfall. Corn needs it earlier. Sorghum can use it earlier but 
it is able to put itself into a mode where it can just not take 
so much water until a rain comes and then, poof! The head comes 
out and you've got a lot of them.
    We've also done some studies on irrigation. By no means am 
I ever going to advocate replacing irrigated corn acres with 
sorghum acres because the yield won't be there but maybe there 
should be a transition for some guys on saving water.
    We know that grain sorghum uses approximately 30 percent 
less water than corn. We know it uses a lot less in soybeans 
and it is just a hair below wheat. That's according to studies 
that have been done in Bushland, Texas. Maybe we need to 
transition some of these irrigated corn acres into sorghum 
acres by using a little enticement somehow, go with corn rental 
rates and milo rental rates and pay the difference between them 
to get farmers to switch. It will save irrigation water--there 
is no doubt about it. You've seen my written testimony that if 
we do switch pivots in western
    Kansas or in Texas and those areas, the amount of water 
that we will save in 50 years time can definitely provide water 
for a city the size of San Antonio. So it is a big deal and I 
think farmers, they are always waiting for that new technology 
for corn. They say there is going to be a drought-tolerant----
    I don't know. I've got corn that has spread up next to me.
    They say it is better than milo but--I've got them in my 
pocket right now. Sorghum is a good deal, a good option.
    Senator Nelson. Thank you, Doug. Dave?
    Mr. Hilferty. In my area, they call it drought-resistant 
wheat. They're working on it. It may be 10 years away but it 
might be less. It's more like drought-tolerant rather than 
drought resistant and wheat growers are working closely with a 
private company and I'm sure some of universities are working 
on this drought-resistant wheat. They can't tell you whether it 
is going to increase your yield by 10 percent, 20 percent or 30 
percent. They really won't give you a figure on that so
    I don't know exactly how much it would benefit us but I 
know when we have a dry year, it's definitely going to help, 
even if it is a little 10 or 20 percent. I would like to see 
more research done on that.
    Senator Nelson. Just a general question. I mentioned the 
Drought Mitigation Center, where we're pushing real hard at the 
University to try to get more research to get more information 
so that we can get word out to our farmers and ranchers, to 
what the expectation is about the next year or for two or 3 
years, whether they are going to be the driest or less dry and 
to help, I think, producers understand.
    Do you think that you will make planting decisions if you 
can get that kind of information, which would--not only a 
single year but perhaps, multiple years in giving you the best 
expectation as to what the future holds? Would that help you 
make planting decisions for what you're going to do? Just any 
one of you, just a couple.
    Mr. Nagel. I base my planting decisions on what happens 
before. I didn't expect a drought this year. We had an 
extremely wet spring and I'm out there, planting milo. I'm 
thinking, my goodness! I'm giving up a lot of income here when 
in the end, it ended up being all right. That's what we're 
dealing with in a semi-arid state like Nebraska. That's why I 
said in my intro, we plant about an even amount of sorghum to 
corn and then a lot of soybeans on top of that.
    I'm going to keep doing that until something persuades me 
differently and I wasn't persuaded this year. You'll see more 
milo in northern Lancaster County next year.
    Mr. Ebke. Senator, I would think that any information that 
could be made available will be assessed. It still comes down 
to individual gut feelings or whatever but I think the 
producers are going to look at that information and certainly 
take that into account.
    Senator Nelson. Thank you. Thank you, Mr. Chairman.
    The Chairman. Senator Hagel.
    Senator Hagel. Thank you, Mr. Chairman. Gentlemen, thank 
you. Mr. Hilferty, you talked a little bit about your 
experiences in representation that you provide for your 
industry. Over the last few weeks, I've had some opportunities 
to be in southwest Nebraska and see some of those wheat fields. 
They're in as bad as shape as probably they've been in, in 
many, many years and the yield and all the measurements that 
you respond to and deal with. For you, I would start with this 
question and then, I would appreciate answers from the other 
panel members. It really is precipitated by a number of 
comments that were made to me over the last few weeks by wheat 
farmers, that our crop insurance programs will not help them 
and partly that's a result, as you know, and a consequence of 
where you have to have a crop and the 5 years and all the 
things that you talked about.
    Here's the question. What changes should we be making to 
our crop insurance programs, if any? And the second part of 
that is and I'd like a response from each of you, going back to 
a comment that I made in my opening statement. Should we 
include in the new farm bill, some new crop insurance/disaster 
assistance programs in anticipation of what we know comes every 
year, whether it is a flood, whether it is disease, whether it 
is drought, whether it's fire--every year, we face something. 
Those are the two questions, starting with you, Mr. Hilferty.
    Mr. Hilferty. I know from my own experience, from the fifth 
year of the drought, my APH on my insurance has dropped so bad 
that insurance is not even a good safety net. I don't know if 
it is a way of changing the way they figure APHs over this 10-
year theory that you can drop, having such poor crops for 5 
years, this is going to ruin your APH and your coverage just 
isn't there. I don't know how you get around that unless you 
can not drop or be able to drop more of those low years, would 
be the way to get around that, I think.
    Senator Hagel. So, we should change it? Not change it?
    Should there be some kind of a disaster assistance program 
written into the new farm bill? Should we take a different 
approach, a new approach? Change the approach?
    Mr. Hilferty. I don't think there would be any need for a 
disaster payment in there all time if you went to a revenue-
based type of fund program.
    Senator Hagel. Thank you. Mr. Nagel?
    Mr. Nagel. Grain sorghum, as far as insurance goes, we've 
got a lot of questions on that and it all gets back to how the 
crop was reported to begin with. When a farmer sits down in 
Lancaster County right now, we've got an assigned yield to 
our--if you haven't got a base built up, you get an assigned 
yield of your base on your crop insurance. Right now, corn sits 
at 106 bushel an acre. Milo is about 20 bushel to the acre less 
than 80. I find these numbers troubling. In my operation, I 
equal corn and this year, I'll supercede corn and my base, on 
my personal crop insurance, makes it worthwhile for me to take 
it out. But corn--they start out with a high base, it drives 
farmers into that arena of planting corn because they started 
out at 106, they are guaranteed 80. Milo--we can't live on 70 
percent of a crop.
    We're always striving for that 30 percent extra crop. So 
the first thing that we need to work on, that the national 
program has been working on, is data that is collected and 
where these sorghum yields come from. That's our biggest gripe 
right now.
    As he said, if you get your crop insurance, if you are 
collecting on it every year, your base goes down. I don't know 
how you make that better. I mean, if you are 5 years drought 
and your corn base is now 50 instead of 100--that tells me you 
need to switch practices. You need to think outside the box and 
maybe sorghum isn't outside the box enough. Maybe it is 
sunflowers, maybe it is something else.
    You just have to think of something different once in a 
while,
    I guess. That's kind of where I'm coming from on insurance.
    Senator Hagel. So you would not necessarily see a need to 
make any specific changes, alterations as we look at----
    Mr. Hilferty. For crop insurance, just equalizing, I mean--
determining the data is what we have to do. And if we can get 
people into growing more grain sorghum and having that 
insurance of a drought-hearty crop out there instead of corn, 
that's where we need to make the changes.
    Senator Hagel. Thank you. Mr. Wellman?
    Mr. Wellman. With the current crop insurance situation and 
it always has been based on yield, and that has always been a 
problem, is how that yield is figured out. In the years, like 
was mentioned, the yield before and you continually drop that 
basis for your protection. So I think a revenue package and 
then there is revenue assurance, crop insurance now, that 
still, one of the factors is the yield factor for the last 10 
years. I believe yes, there needs to be some changes there and 
there needs to be, based on revenue and the question is, how do 
you get a consistent revenue that will actually support and 
back the producer in the year when he needs it. I'd carry crop 
insurance and it's one of those things that we're on such tight 
budgets that if you do have a yield where you have a total crop 
failure, like in my instance, was 2002, crop insurance was a 
very big part of my income that year. I didn't make any money 
out of it but it kept me in business and kept me going to the 
next year. So to answer your question directly, I believe there 
can be, there should be changes to it and I will have to agree 
with Mr. Nagel--part of the reason that I don't produce sorghum 
right now is because of the guarantee that is assured me under 
the crop insurance program for corn. I maybe don't quite agree 
with Doug on the yield. I have raised milo in the past. I think 
the last time I raised it was 3 years ago, which happened to be 
the highest corn yielding year we had so milo didn't compare 
very favorably that year. But I think there definitely can be 
some changes made to improve it and make it a better program.
    Senator Hagel. Thank you. Mr. Ebke?
    Mr. Ebke. As has been expressed, the APH erosion has been a 
continuing problem. There are a lot of people who have 
addressed it. I'm not sure that anyone necessarily has come up 
with a solution at this point. They just continue to beat the 
revenue-based program--that still would have a component in it 
that would be based on production. So we still have to wrestle 
with that. I'm not sure what the answer is.
    Sometimes--well, I shouldn't say sometimes--I'm thinking a 
little bit along the group risk programs that are available, 
somewhat new to Nebraska but they are available and in those 
cases, an expected yield is determined by using some math 
numbers and so forth. Those will erode too, if you experience 
drought, those numbers will erode so I'm not sure how you go 
about holding a base under those APHs. I know that there is a 
lot of effort being put forth to attempt to come up with some 
sort of solution that will prevent that. I don't have an answer 
for you, Senator, I guess. I would say that there is a problem 
and we need to continue to look at it and see if we can find a 
way to prevent that erosion. Again, we go back to--maybe some 
people might think it is a cynical view but if you continue to 
encounter those types of situations, then it is time to become 
innovative and look for something that fits your climate at 
this particular time. Again, talking about the provision for 
emergency disaster programs, we're going to continue to make 
the statement that we believe a revenue-based program available 
to all producers will reduce the frequency and the need for 
emergency, now, in program crops. I'm not talking about 
livestock. But in the cropping area, we think that will help 
out. But as far as livestock is concerned, that is a whole 
different game and there may need to be something allocated for 
that so we don't have to continually rob another program or 
whatever. I know it has been expressed several times that we 
have some hurricane aid. It doesn't seem to have to be offset 
by some other budget item. Yet when we look at agriculture, we 
always are expected to see some sort of budget offset. So in 
that respect, it might be good to allocate something for that.
    Senator Hagel. Well, I--and I appreciate the answers but I 
go back to something that the Chairman noted in his remarks and 
he is exactly right. He made the comment, in a fiscally tight 
environment and I don't have to remind any
    American citizen what kind of deficits we're running in 
Washington. When we're looking at new programs, spending money 
on any new program next year and the on years, it will be an 
issue. The smarter we can be on this, obviously the better off 
we're going to be because the American people are not going to 
continue to accept these kind of deficits and we're already 
seeing political consequences and we'll probably see some 
significant consequences on Election Day on November 7th over 
this, in both parties, we're talking about. And this will drive 
much of this farm bill. We need to be very smart on this and 
get ahead of it and that's why you all will be critical to this 
and the Chairman noted it earlier. A couple of other questions, 
quickly--energy. Mr. Nagel, you mentioned energy a couple of 
times, how important it is and should be in this farm bill. 
Give me a couple of examples and suggestions that you think 
should be included in this new farm bill and if the three of 
you in addition to Mr. Nagel, would like to offer anything for 
the record as well, I would appreciate it.
    Mr. Nagel. Well, of course, we've got the ethanol right now 
and it is mainly done from the start standpoint, from the grain 
that we get from either corn or sorghum--I believe you can make 
it out of any grain, for that matter. As I said earlier in my 
testimony, we are looking at some field trials in Florida, 
using sweet sorghum. Now, sweet sorghum might be an option. We 
know it is a lot like grain sorghum. It uses less water but the 
potential for producing ethanol out of sweet sorghum is 
extremely high. They are already using that technology in China 
and India right now and from what I understand, you're looking 
at maybe 2 1/2 times more ethanol per acre being produced out 
of an acre of sweet sorghum than you are for an acre of 
irrigated corn. The problems that we have with that in the 
future, is going to be where is the market going to be? Who is 
going to be able to handle these big bales of sweet sorghum or 
how are we going to extract the sugars? Right now, I think it 
is a very expensive situation but technology is going to get it 
into a little bit better of a situation coming down the road. 
Other types of sorghum fit there well. I think you hit on it 
earlier. I think solar is a very good option. I think wind 
turbines are a very good option. I've always had it in the back 
of my mind, if I ever own a piece of ground in Lancaster 
County, would it be of benefit for a farmer to go ahead and put 
a wind farm up? Sell the electric back to the big city or have 
another option there. Maybe have a 40-acre solar panel. I don't 
know how you would fund that and how I would go about 
implementing that on my farm is a whole different situation. It 
sounds kind of expensive. But I'm tired of depending on foreign 
oil. We're looking at some huge, huge fuel bills coming up here 
for harvest. We just got through a busy irrigation season. 
There are guys who have doubled and tripled their fuel bills.
    They're talking $15,000 dollar bills a month for diesel and 
a few years ago, it was one-third of that. To fill my semi up 
to go to town right now, we're looking at $3.40. You talk about 
revenue--I'm worried about the input side. How much revenue are 
we going to need in the future to cover all that stuff? So 
energy--I'm getting off the subject here a little bit but I 
like all your ideas on energy and sorghum can fill that need, 
too.
    Senator Hagel. Thank you. Gentlemen, any additional 
comments?
    Mr. Hilferty. There is a lot of possibility with wheat 
straw in the biomass field, rice straw, wheat straw and even 
wood chips. There is a lot of room for expansion on ethanol if 
you go through the biomass method. But I think one thing that 
would help, if we can go back to a conservation program.
    And this maybe could go under the energy title. There has 
to be a method by which the Congress can encourage no-tell 
farming and you can save a lot of diesel fuel with the use of 
chemicals. So that would be one way to look at it--that could 
be part of the energy title.
    Senator Hagel. Thank you.
    Mr. Wellman. I have one additional comment. I believe the 
renewable fuels can play a big part in our energy situation in 
the United States but it is going to take many different 
aspects of it. I don't believe that just ethanol is the answer 
or biodiesel is the answer. I think it is a combination of any 
renewables that we can produce here and the other key to that 
is, our livestock producers and the relationship that we have 
between the corn, the commodity growers and the livestock 
producers because they are going to play a big part in using 
the co-products that come out of a lot of this manufacturing of 
renewables.
    Senator Hagel. Thank you. Mr. Ebke?
    Mr. Ebke. Briefly a comment. You know, the cellulosic 
ethanol seems to have the spotlight right now and it's in the 
future and I think it is going to be a major component. I guess 
we would look at continuing research, not only in that area but 
not to forget some of the processes that we're utilizing today 
and looking for ways to make those more efficient. I think the 
farmer will benefit from all of those avenues, whether it is a 
cellulosic, whether it is corn-based, whether we are looking at 
the biodiesels. The farmer stands to play an important role in 
that so I think the research components on those are going to 
be very valuable as far as farm income in the future.
    Senator Hagel. I've got one last question, Mr. Chairman, to 
each of you. Future generations. I'm going to read just one 
sentence from a letter I received from a Nebraska farmer after 
the 2002 farm bill was passed and he said this: This farm bill 
is the same old thing and will do nothing to reverse the trend 
of fewer and fewer farmers on our land. You know the numbers. 
We are losing farmers at significant numbers, rates every year, 
in Nebraska and across the country. Is that just going to 
happen? Should it happen? Is it evolutionary?
    Anything we can do to stop it? Should we stop it? I think, 
when we are talking about farm policy in this country and we're 
talking about a significant amount of investment that needs to 
be made in our agriculture community and all the dynamics that 
are included, which you all have covered rather well this 
morning, this question needs to be dealt with and certainly it 
cuts right to payments and can you afford to stay on the land 
and the next level of that, what about the young people? There 
is a very limited opportunity for entry into your business 
unless you are the son or daughter of a farmer or a producer. I 
hear this, as do my colleagues, all the time. Is it a matter of 
your industry just now being essentially closed to anybody who 
wants to get into it? I'll start with you, Mr. Hilferty.
    Mr. Hilferty. The trend started in the twenties and 
especially in the thirties, that the small farmers disappeared 
and that trend has just continued. There are fewer and fewer 
farmers and I'm not real sure what we do about that, whether 
changing the structure of government payments, trying to 
restructure it back to the small farmers and the medium-sized 
farmers, might reverse that trend. But in my own case, I know--
my wife and I have four kids and at this point, I wouldn't 
recommend any one of them to come back and farm. They can make 
more money elsewhere.
    Mr. Nagel. It's getting to easy to leave. Agriculture, as 
you know, is very capital-intensive. I have a magazine article 
here and it is talking about new combines that are coming out: 
bigger, better, stronger. Three hundred thousand dollars! You 
need trucks, you need planters, you need big tractors, you need 
all that stuff. If anybody wants to put themselves under that 
kind of stress, more power to them but
    I'm not happy about doing it any more. I'm almost 40. I 
live just a few minutes from Lincoln, where I know I can go to 
town and make a lot more money and go home at 5 o'clock at 
night and kick my feet up. I have brothers who do that, I have 
brother-in-laws, and man, I'll tell you. It is pretty dog gone 
tempting. You know--they don't care if it is raining or if 
there is a drought or anything like that. When my situation is 
good, the farm pays for itself. OK? This year might be a little 
different. I'm going to have to chop the numbers on that but 
usually the farm paid for itself. But what I do have, is off-
farm income because my wife works in town. She is buying the 
groceries, she is paying the rent, she is taking care of the 
kids. I have two boys that are 3 and 2 right now. They love the 
farm. They like to go out and walk in the corn and I'd love 
nothing more for them to do that in 10 or 15, 20 years or 
whenever they could take it over but it's just too capital 
intensive and it's too easy to make money if you go to town.
    Senator Hagel. Well, life agrees with you, Mr. Nagel, You 
don't look 40, if that helps you.
    [Laughter.]
    Mr. Wellman?
    Mr. Wellman. These are excellent points brought out and
    I don't have the answer on how to necessarily stop that 
process of losing producers. In my situation, I joined my 
father on the farm and we expanded together and then, before 
you know it, he's retirement age or has a health problem and so 
he's not involved anymore and I'm still earning the same amount 
of acres and I hired some labor to replace him, and so it's 
still basically the same. I've grown some since he retired, the 
size of the operation has, but basically it is the same 
operation that him and I had. But now, when we go back and look 
at payment limits, he is not involved anymore so then it is 
just myself that is drawing the payments on that.
    I do have a sister and we separated off part of that and 
that brings up an issue with estate planning and what we can do 
with the state tax to make that more affordable to pass on 
operations that have been grown over the years, to future 
generations so it isn't maybe so costly, at least for the 
initial investment, if there is somebody to take over the 
operation. And if there isn't anyone, it would be nice to some 
way have some type of program for a young individual to get 
started in agriculture and part of that goes back to maybe 
guaranteed loans and programs that have--well, they've been 
around a long time, through the farm credit and that type of 
situation but if there is a way to strengthen those programs.
    The bottom line is that it still comes down to 
profitability.
    If the farm isn't profitable, nobody is going to be 
interested in being there anyway. So whatever we can do to 
increase market share, increase our revenue from our products, 
find new products and maybe--I don't know what the water usage 
is for peanuts but maybe that can be moved up into Nebraska or 
something like that. We need to be looking at whatever we can 
to make sure that we can stay profitable.
    Senator Hagel. Thank you. Mr. Ebke?
    Mr. Ebke. I could add a lot to what has already been said. 
It is capital intensive and there is no question about it. You 
look at those types of industries and access to those is 
somewhat limited unless you've got a tie. The other point that 
was made and I agree with it, it does take a certain type of 
personality to be an agricultural producer. It's not for 
everyone and so I think those who seem to have an aptitude, I 
would hope that we would continue to have programs that may 
allow them to enter the system and as Mr. Wellman has talked 
about, expand those. It's still going to probably take a 
mentor. If someone does not have the family ties, they are 
probably going to have to have a mentor and there have been 
some programs to try to allow for that to happen in Nebraska.
    There have been some tax proposals put forward that might 
help an older generation transition to a younger generation who 
might not have an heir of their own, find a unrelated party and 
help them out. I think those things need to be continued.
    But with the nature of the industry, it's probably going to 
continue to consolidate and it's probably going to consolidate 
within families.
    Senator Hagel. Thank you. Mr. Chairman, thank you very 
much.
    The Chairman. Thank you. Well, we came out here to hear the 
issues and you all have laid a lot of them out there, let me 
tell you. This will be my third farm bill and I also was a 
member of the House Ag Committee when we reformed the crop 
insurance programs and this issue, Mr. Hilferty, relative to
    APH, comes up every single farm bill, every time we talk 
about crop insurance and we are never able to determine what is 
the right answer there. I have different parts of counties in 
my home state that historically don't get rain so it's the 
county average. It helps in some instances but yet it hurts 
those farmers that have had great production and see their 
county average down. Whether you talk about farm history or 
whether you talk about county history, it is always an issue 
and we struggle with it and I really don't know what the answer 
is.
    Mr. Nagel, you make a good point in responding to Chuck's 
last question there. I have--my son-in-law is a farmer and I 
have two grandchildren that are growing up on that farm and I 
often talk about the fact that I don't know how long I'm going 
to be in Congress but when I leave here, I want to make sure 
that we've got long term farm policy in place that will allow 
those kids, if they want to come to the farm, to be able to do 
so. But I was in Iowa a couple of weeks ago at one of these 
farm bill hearings and there is a John Deere plant there.
    They were celebrating the one millionth engine that had 
come out of this one plant. It would have to go into a cotton 
picker. The cost of that cotton picker was $375,000 dollars.
    Now, that situation is an issue not just for folks coming 
back to the farm but for payment limits, for LDPs versus direct 
payments and I don't know what the answer to that is. So we're 
very appreciative if you guys for taking your time.
    This has been extremely insightful and what we always find 
is, you all don't grow peanuts, you don't grow cotton, but you 
have the exact same issues that we have with our rope crops.
    So we're very appreciative of you being here. Thanks for 
the insight and we'll look forward to continuing the dialog 
with you. Thank you very much. We're going to take a quick 
break before we move to our second panel.
    [Recess]
    The Chairman. Before we move to our second panel, Senator 
Nelson and Senator Hagel and I would be quick to tell you that 
we don't function very well in Washington without great staff 
and they have to spoil us. We make them spoil us but they 
always do. And coming to Nebraska, I happen to have a staffer 
who grew up here in Nebraska and is one of your native sons, 
Cameron Burke. Cameron, stand up, buddy and let them see a real 
Nebraskan that works for me.
    [Laughter and applause.]
    Cameron is from Omaha and his mother, Mathea Sanders, is 
here also. Mathea? Let us recognize you.
    [Applause.]
    I have my staff director, Mumscott Sacerly, who is a 
Mississippian that has been with me for almost all of my twelve 
years in Washington and does a great job and we also have 
Senator Harkin, who is my Ranking Member on the Ag Committee, 
his staff director, Mark Halvorson, is with us. Folks, thank 
you all very much for being here.
    Senator Nelson. Do you want me to introduce mine?
    The Chairman. Yes.
    Senator Nelson. Well, I'm not going to be outdone. I don't 
know how we let Cameron get away from us but we have Jonathon 
Compus, who handles the legislative assistants. Of course, 
there is Dale Williamson, who works with us on Agriculture. 
Jonathon, if you would stand up and Dale----
    [Applause.]
    He'll be back. Thanks very much.
    The Chairman. I've got some others here but those native 
sons, we always like to make sure we recognize. Our second 
panel today consists of Mr. Doug Nuttleman from Stromsburg, 
Nebraska, presenting the Dairy Farmers of America; Mr. Keith 
Olsen from Grant, Nebraska, representing the Nebraska Farm 
Bureau; Mr. Roy Stoltenberg from--in Georgia, we would say, 
Kero and in Egypt, they say, Kiro. So I'm going to assume that 
you adapt to the Georgia name of Cairo, Nebraska, representing 
the Nebraska Farmers Union; and Mr. Duane Kristensen of 
Hastings, Nebraska, representing Chief Ethanol Fuel, Inc. 
Gentlemen, thank you very much for being here.
    We'll follow the same format. We would ask you to hold your 
opening statements to 3 minutes. We will submit your full 
statement to the record. We'll start with you, Mr. Nuttleman.

    STATEMENT OF DOUG NUTTLEMAN, DAIRY FARMERS OF AMERICA, 
                      STROMSBURG, NEBRASKA

    Mr. Nuttleman. Thank you very much, Senator Chambliss,
    Senator Nelson, too. If I needed to bring snacks, I would 
have sent somebody out for cheese and crackers.
    [Laughter.]
    I'm Doug Nuttleman. I'm a dairy farmer from Stromsberg, 
Nebraska. My wife, Gloria and my three sons and I operate a 175 
cow dairy farm and approximately 2,000 acres. We produced about 
3.5 million pounds of milk over the last 12 months. We have 
been in the dairy business ourselves for 20 years. My father-
in-law was there 20 years before that and my sons will be the 
fourth generation on our farm. I represent my fellow dairymen 
on various state and regional organizations by serving on the 
National Dairy Board. While organizations that I serve have not 
officially established a position for all of the 2007 farm bill 
issues, I would like to share my thoughts on some of these 
items. Because we do not think there will be any radical shifts 
in policy directions as a result of the 2007 farm bill, we 
support first the view that the extension of the current farm 
bill, which will work well for the nation's dairy families. We 
need to have a more clear view of the Doha rounds and the WTO 
trade talks. We can see no reason to change our programs at the 
present time until we know what the rules are and who will be 
playing for those rules. We feel that the next farm bill should 
maintain some form of economical safety net for dairy farmers. 
Safety nets prevent prices from falling so low that businesses 
cannot become viable. Because dairy farmers produce such an 
excellent source of nutrition for our nation and due to the 
high fixed cost of becoming a dairy farmer, and the fact that 
most production assets have limited use in any other 
agriculture enterprises, past Congresses have maintained a 
safety net for the dairy industry. We hope this Congress will 
continue to do that.
    The most important safety net that we have in the dairy 
policy program right now is our price support program. We favor 
continued operation of the price support program at a target of 
$9.90, although that target price was set clear back in the 
eighties and has survived several farm programs, for the cost 
of operating a dairy farm, most dairymen would tell you they 
cannot operate a farm based on $9.90.
    Up until the present time, the CCC has purchased some non-
fat dry milk, doing what safety nets are supposed to do. The 
last time milk prices fell to this safety net was in 2002, when 
the average Class 3 price for milk was at $9.74, which our 
support was at $9.80. The 10-year average price for this was 
$12.62, which we can live with. The second safety net provision 
is the Milk Income Loss Compensation--MILC---- program. My farm 
is affected by the payment limitations, restricting my ability 
to fully take advantage of this program. Like the Price Support 
program, I view the MILC program as a very good safety net for 
producers. Its key benefits are that it puts cash in the hands 
of dairy farmers at a very important time when prices are very 
low. In general, the guidelines for a safety net program should 
be that they do not discriminate between farmers of different 
sizes, they do not discriminate between farmers in different 
regions of the country and they are not high enough to 
encourage additional milk production. I guess I would note that 
under the current farm bill, our MILC payments run out a month 
before the farm bill expires and to be part of any type of 
extension, we would need to pass that as part of getting an 
extension policy.
    I would like to touch on just one area quickly and that is 
our CWT program. I don't know if you are aware of it, but 
farmers have established a self-help program by contributing 
ten cents a hundred, to actually try to control the dairy herds 
within the United States and also by exporting products. So I 
thank you for listening to my remarks.
    [The prepared statement of Mr. Nuttleman can be found in 
the appendix on page 102.]
    The Chairman. Gary Hanman reminds me of that.
    Mr. Nuttleman. Yes, he does. I think he is a good friend 
here.
    The Chairman. He is. Mr. Olsen?

STATEMENT OF KEITH OLSEN, NEBRASKA FARM BUREAU, GRANT, NEBRASKA

    Mr. Olsen. Thank you. My family and I operate a dry land 
farm in southwest Nebraska. We raise wheat and corn. I 
appreciate you coming to Grand Island today to listen to the 
views of a Nebraska producer and I'm glad you brought your good 
friends, Senator Nelson, to keep you straight, or maybe keep 
the Committee straight.
    [Laughter.]
    The Chairman. Both of them.
    Mr. Olsen. The landscape of agriculture is constantly 
changing and this is very true since the enactment of the 2002 
farm bill. Unpredictable weather conditions, markets, 
uncertainty with international trade, and variable input costs 
have produced turbulent times for production agriculture.
    This year has been particularly difficult for Nebraska 
producers as we continue to have a widespread drought in the 
main parts of the state, and lately have been hit with some 
very severe fires. This will result in severe losses of crop, 
hay and livestock production. In addition, production costs 
have significantly increased due to skyrocketing costs of fuel, 
fertilizers and other energy related inputs.
    Our long-term goal is to have a level playing field, around 
the world, so that farmers and ranchers can compete in open 
markets without tariff and non-tariff barriers, without export 
subsidies, without currency manipulations and without 
production-distorting domestic subsidies. To get to that goal, 
there is a gap between where we are now and where we want to be 
in the future and it will take some time and it will take some 
transitional policies. The short-term reality is that we need a 
safety net in years when revenues decline due to low yield or 
low prices. The American Farm Bureau is taking the position 
that because of the collapse of the WTO talks, that we would 
support an extension of the current farm bill for at least 1 
year, understanding that certain adjustments have to be made in 
the current farm bill to meet recent WTO rulings. We believe 
that the United States should not unilaterally disarm our farm 
program or give up negotiating opportunities when our trading 
partners remain unwilling to take the same steps. While we 
support the one-year extension, we understand the need, in the 
long-term, to look at a new farm bill. One of the keys that we 
think needs to be continued in the new farm bill is a good 
safety net. We talked about that with the past panel 
substantially. When you developed the 2002 farm bill, we talked 
substantially about a safety net, which were loan deficiency 
payments and counter cyclical payments but we kind of forgot 
about the people who have crop failures. What safety net is 
there for them? I understand that the farm bill and the Crop 
Insurance bill are two different bills in the past and talked 
about in different times. I think they need to be combined. 
They need to be hooked together when revenue insurance comes 
into effect.
    Just on my own farm, a quick example. On some of my fields, 
my wheat guaranteed bushels have dropped from 31 bushels to 24 
bushels. Yesterday, I dealt with the my crop insurance, trying 
to settle up for my crop that I lost a substantial amount on 
this year and I lost $33 dollars an acre in coverage from where 
I would have been 5 years ago.
    My time is up. I appreciate you being here. My full 
comments have been submitted to the Committee. Thank you.
    [The prepared statement of Mr. Olsen can be found in the 
appendix on page 109.]
    The Chairman. Great. Thank you. Mr. Stoltenberg?

            STATEMENT OF ROY STOLTENBERG, NEBRASKA 
                 FARMERS UNION, CAIRO, NEBRASKA

    Mr. Stoltenberg. Senators and guests, thank you for the 
opportunity to participate in your hearing today. I would like 
to start by stating that since the WTO talks are in limbo, now 
is not the time to make drastic concessions but to write a farm 
bill that works for our own country. We thank you for your 
efforts in the last farm bill. The direct payments and counter 
cyclical payments in the past have supplied some cash-flow and 
target prices to shoot for but it is not always wise to bet the 
farm on income transfers. Receiving a larger share from the 
marketplace would be a better practice.
    Recent price increases in crop inputs have eaten up our 
chances of showing a profit and the past farm bills have 
eliminated programs that producers could use to impact the 
market. While we support the efforts to increase exports, the 
facts also show that for feed grains, they have been flat for 
years, while domestic use has really increased, not only as 
feed but in the last few years, as a fuel. I believe we can 
supply our livestock and ethanol industry and exports while 
letting our producers gain some extra revenue in the 
marketplace. The following are some suggestions I have.
    A farmer-owned reserve should be established with storage 
payments starting upon enrollment. With the aggressive use of 
our current storage program through FSA, we could have a steady 
supply of quality grain for our end users. Temporary ground 
piles at our local elevators are very susceptible to spoilage 
and weather problems. Reserve storage payments would build more 
permanent, producer-owned bins and would allow producers to 
market their products where and when needed.
    Flexible fallow--with today's technology of grid samples 
and yield monitors, we know where the spots are in our fields 
that do not return enough to cover our cost of production. We 
need incentives by conservation payments for producers who want 
to use this technology and identify those sandy knobs or alkali 
holes to produce forage for livestock. This program is very 
compatible with wildlife programs and would be a series of 1-
year contracts so we could change, depending on demands and 
input costs. Country of origin labeling, which was introduced 
in the last farm bill, must be enforced. By putting your name 
and reputation on the label, consumers have more information to 
make an informed purchasing decision. A packer ban on long-term 
ownership of live cattle--most of our livestock producers in 
Nebraska are family owned and operated and those livestock 
receipts are a large part of our economy. We do not want to 
packers telling us, sorry we are out of the market for a time 
while we butcher our own cattle. Most producers own their 
animals. They raise their own feed and are proud of the high 
quality product they produce. They will also agree that low-
priced feed grains will eventually lead to low-priced 
livestock. Research dollars to develop use for wet distiller's 
grains--you don't need to waste more energy driving this stuff 
down when it is already a good product the way it is. We just 
need some more uses for it.
    Encourage farmer ownership of renewable energy projects, 
either individually or through our local co-ops. These would 
include ethanol, bio-diesel or wind generation. These 
community-based plants would add greatly to the local economy. 
Payments limits are there to help family sized farms. It is 
time to be tough on enforcing these limits so that we don't 
lose valuable programs for all producers. Thank you for your 
time.
    [The prepared statement of Mr. Stoltenberg can be found in 
the appendix on page 115.]
    The Chairman. Thank you. Mr. Kristensen?

         STATEMENT OF DUANE KRISTENSEN, CHIEF ETHANOL 
                 FUEL, INC., HASTINGS, NEBRASKA

    Mr. Kristensen. Welcome to south-central Nebraska and thank 
you for the opportunity to speak to the Committee. I'm proud to 
say that Chief Ethanol was the only ethanol facility operating 
when Senator Nelson began his term as Governor and we're still 
running today, but at a sixfold increase from where we were at 
that time. Presently, we are at some heady times in the ethanol 
industry. The current geo-political climate proves true what 
some of us have been saying in the industry for a long time, 
that ethanol has a place in the transportation fuel industry in 
the United States. Ethanol is economically viable and 
environmentally friendly while being a tremendous economic 
driving force on Wall Street as well as, in my estimation, in 
rural areas such as we see here in Nebraska. At the outset, 
let's be clear about the evolution of the Renewable Fuel 
Standard. The policy initiative responsible for ethanol growth 
was based upon the role of ethanol as an oxygenate. In that 
context, the Senate Environmental Public Works had jurisdiction 
over the issue because of the EPA administrative Clean Air 
programs. During debate over our efforts last year, members of 
the Energy Committee were actively involved because it was an 
issue that evolved into an energy program and a course was 
ultimately enacted as the Energy Provision and EPACT 2005. 
Today, we are clearly focused on the role agriculture can play 
in supporting domestic renewable energy development. DarFS may 
indeed be an ag issue today in addition to being an 
environmental and energy issue. That being the case, I 
encourage all of you and members of the Senate Energy 
Committee, as well, to take an aggressive position with regard 
to the key role biofuels can play in our agriculture future as 
well as our energy and environmental future. As a former member 
of the Senate Energy Committee, Senator Hagel previously 
proposed an RFS of 13 billion gallons. He stated, If we are 
going to adopt this policy of a renewable fuel standard, let's 
make sure it is a meaningful policy and one that makes a 
meaningful contribution to our energy supply. At that time, 13 
billion gallon RFS was considered by some to be a preposterous 
goal, a goal that could not be reached any time in the next 
decade. Today, that 13 billion gallon figure is a meaningful 
figure and one that could serve as a potential floor and not as 
a ceiling.
    If changes are contemplated in the RFS, they should be 
based on practical limitations. If 15 billion gallons of grain-
derived ethanol is considered to be a practical limit for grain 
ethanol in the near-term, Congress should consider the 
contribution of cellulose-derived ethanol and biodiesel. 
Congress may also wish to consider a specific RFS for E85. This 
approach would encourage a greater total contribution from 
biofuels and therefore, a more meaningful contribution to the 
ag sector.
    Just the same, the important contributions of biofuels 
generally and ethanol specifically, it is important to have a 
stable public policy, especially on tax issues. The Federal 
Ethanol Tax Incentive, available to fuel marketers who blend 
ethanol is set to expire in 2010. This incentive has proved to 
be an effective, flexible mechanism that helps stimulate 
ethanol marketing and the use of ethanol-based fuels.
    Congress should consider authorizing an extension for this 
incentive in the 2007 session. Delays in extending this 
mechanism will generate uncertainty in the financial community. 
If changes are contemplated to this tax policy, they should be 
gradual and certain. The incentive has gradually been reduced 
from $.60 cents a gallon for ethanol blended in gasoline to 
$.51 cents. Gradual changes can be accommodated in the 
marketplace. The ag sector has and will respond to the energy 
challenges we face today by providing challenging goals and a 
stable policy and we can continue to play an increasingly 
important role in the demand for renewable transportation 
fuels. Thank you.
    [The prepared statement of Mr. Kristensen can be found in 
the appendix on page 75.]
    The Chairman. Thank you very much. Mr. Nuttleman, the 
reported aggregate measure of support for dairy totals $4.5 
billion. If the WTO negotiations resume and are successful, the 
United States will be restricted to $7.6 billion in the Amber 
Box. These reductions will require proportional cuts in all 
commodities, including dairy. How would dairy be able to adjust 
to that kind of scenario?
    Mr. Nuttleman. I guess it would be my hope that we could 
maybe look at putting dairy in several different boxes, not 
only just the Amber box. If there was some type of program that 
could be in some of the other boxes, like the other commodity 
prices and maybe a program that could focus on dairy farmer 
income, as many of the panels before talked about as far as 
revenue goes, rather than on certain commodities. I know dairy 
has, in the past, used up quite a bit of the Amber box but when 
supports aren't used, we really don't use it.
    It's in there as part of the payment. I think since I've 
been a dairy farmer, we've only used the support program 
probably about three different times in my 20 years. So I think 
by being able to move some of it out of the Amber box and into 
some other boxes when it is needed, and would be useful to 
dairy farmers.
    The Chairman. You mentioned MILC program in your opening 
comments. As we move to the next farm bill, is that the type of 
program that you would like to see continued or are there some 
other programs that we might ought to think about relative to a 
figure when commodity prices get lowered for small dairy 
farmers?
    Mr. Nuttleman. For my particular farm operation, the MILC 
is a good form of a price safety net because when prices are 
triggered and they are a little lower, that money actually gets 
put back into my pocket, as a dairy farmer. I can use it to pay 
bills, I can use to pay input costs, and stuff like that. The 
MILC program, at its current level, the limitations are pretty 
low. I think we need to be able to look at Dairy Farmers of 
America which favors no caps. But we need to have a program 
that does not--incentivize over-production. But yet, at my 
family farm size, I'm only allowed to get about half of those. 
So we need to look at expanding that cap or putting it in an 
area where the family farm can still maintain an income from 
that program. Then again, as I mentioned before, if we need to 
extend that MILC program, if you would look at extending the 
current farm bill. I think the MIC program is a good program.
    The Chairman. Currently only dairy producer cooperatives 
have the ability to forward contract with their numbers. Does 
forward contracting provide producers with an additional risk 
management tool to manage price and income volatility in the 
marketplace? And should this option remain available only to 
dairy producer cooperatives or should processors and non-
cooperative dairy producers also be able to utilize this 
management tool?
    Mr. Nuttleman. I think forward pricing and the ability to 
contract your product is very vital to us. I use commodities, 
as far as options go. I guess I wasn't aware that maybe just 
co-ops had that particular provision but I think even if I 
didn't market my milk through a co-op, there are times I have 
used options and futures contracts. Every producer does have 
the opportunity to lock in prices. I forward contract a lot of 
my cheese and everything else. I think dairy farmers should all 
have that option, to be able to forward contract their prices. 
I think if the statement says we are limited to co-ops doing 
that, I think there are other alternatives out there that allow 
dairy farmers to do the same as anybody that is with a co-op.
    The Chairman. Mr. Olsen, how would Iowa farmers, prior to 
the last farm bill programs generally and to commodity titles 
specifically? The same question I asked the previous panel and 
how would you rank the relative importance of those programs 
within the commodity titles?
    Mr. Olsen. Well, since we are in Nebraska today, I don't 
know how the Iowa farmers would answer that.
    The Chairman. Did I say Iowa?
    [Laughter.]
    The Chairman. Like I say, we have great staff.
    [Laughter.]
    Mr. Olsen. I think my members would respond pretty much 
like the first panel did. I think the direct payment is a very 
important program. The farmers appreciate getting it in the 
springtime, when they can use those funds to pay for their 
expenses they incur in the spring. A lot of them would like to 
get it all at once instead of getting it two different times. 
The Marketing Loan program or Loan Deficiency Payment are 
extremely important to producers, especially in a year like 
last year when we had the really large corn crop. The prices 
went very poor. It gave farmers the opportunity to get some 
protection using the Loan Deficiency payment. Some of them were 
fortunate to contract corn at a little bit better price than 
that, so any price that they received for their corn was good. 
The counter cyclical payment--I don't think it is a real big 
item because it hasn't been used a whole lot.
    We get a little bit of the payments. I am more of a wheat 
farmer and we've gotten very little payments out of that. In 
fact, since 2002, we've gotten very little payment from loan 
deficiency payments for wheat producers. But I think that is 
the way we prioritize the different levels of opinions.
    The Chairman. From a Farm Bureau perspective, on the issue 
of reduction in domestic support and as compensation for that, 
we receive access to European markets and the markets in Asia 
and South America. Do you think that is a fair compensation for 
a farmer?
    Mr. Olsen. If we are allowed to move into foreign countries 
and hopefully increase our exports and in exchange, get less 
government payments, hopefully the market will reflect the 
increased exports. The challenges may be--and I'll use wheat as 
an example--A number of years ago, when I started farming, we 
would export close to 1.6 billion bushels of wheat some years. 
Lately we have been fortunate. We export 800 million bushels of 
wheat and I cannot see exports of wheat increasing 
substantially because wheat can be grown in a lot of different 
countries, a lot of areas and farms in other areas are getting 
very good at producing wheat. That particular commodity, I 
don't know if there is much hope for an increase in exports. 
But those other commodities, I think it is very real and 
especially true if we can export meats.
    When we export a cow, we export pork, we are exporting our 
corn and we are exporting our soybeans. So it is extremely 
important that we have every opportunity possible to export 
agriculture commodities and the farmers of the United States 
will react to the effect that those exports have on the 
marketplace and we'll be supported there.
    The Chairman. Mr. Stoltenberg, let me ask you that same 
question. Is it fair if compensation for our farmers for a 
reduction of domestic support, particularly by the 60 percent 
that has been proposed, to get access to foreign markets?
    Mr. Stoltenberg. I guess in my opinion, exports are pretty 
fickle markets. They are there 1 year, they're gone the next. I 
like the idea of exporting cattle and hogs because it adds 
value to what we do, when they export those. But as far as the 
raw products, to give up our domestic support, which are banker 
and everybody here, our ag suppliers, we all rely on those. I 
suppose the last I saw, the biggest exports numbers we had was 
in 1995 and 1996, for corn, anyway, when we had $5 dollar corn. 
People around the world, if they need it, they'll buy it. But 
we need programs in place so that we can isolate these products 
and demand a little more from the marketplace instead of just 
turning it over to somebody that can ship it around the world.
    The Chairman. Should an increase in conservation or energy 
programs come at the expense of commodity programs.
    Mr. Stoltenberg. No, I don't think they should. Energy is a 
national concern. Why should farmers be cut back because we 
want the Nation to be more independent? So we can raise the 
grain and produce ethanol but we shouldn't be asked to foot the 
whole bill on that.
    The Chairman. Mr. Kristensen, there is significant 
potential for all segments of agriculture to help supply the 
nation's energy needs. Where should Congress focus its efforts 
and limited resources of the farm bill to help farmers across 
the Nation participate in this potential growth?
    Mr. Kristensen. I think the Committee is in a unique 
situation here, as we go through these times, where the 
Agriculture Committee can take a very positive and prominent 
position in the energy situation and what is going on in this 
country, along with the Senate Energy Committee and the House, 
obviously. But I think there are a number of things that we 
need to look at. The renewable fuel standard--you can see by 
our production that the ethanol industry and agriculture 
overall, has responded to where these fuel prices are and we're 
growing at a very rapid pace. We will be beyond any of our set 
points for the RFS substantially, as we go forward. So we need 
to revisit RFS and increase the RFS. Also, when we are looking 
at, the tax policy and provisions, I think we need to look at 
that and extend them out to make sure that we have a steady 
playing field as we go forward. There are a lot of things that 
are involved in the ethanol industry.
    The Chairman. How should Congress balance agriculture's 
potential in renewable energy production with wildlife, 
environmental and feed stock concerns?
    Mr. Kristensen. I think that we are sitting, again, in a 
position here in agriculture, that we have tremendous 
opportunities to produce crops and not only just the 
fundamental basic crops but also producing the energy crops, 
too. I think there are a lot of things that can be done in 
conjunction. Obviously, a lot of play has been on the 
cellulose, which is still a little ways a way, a number of 
years, before it economically works into it. But by taking some 
of the CRP ground and mowing them. That grass comes back 
stronger and better than what it was before. I don't see tying 
up assets that we have out here and not being able to use to 
its maximum potential.
    The Chairman. Some have suggested that in the next farm 
bill, Congress should provide production incentives for other 
feedstock, such as switch grass, to be used to make ethanol. 
You addressed this somewhat, but in your opinion, do you 
believe we are ready for that and does technology exist now, to 
allow us to do that?
    Mr. Kristensen. I've been in the ethanol business for over 
20 years and it continues to be more efficient, more cost 
effective every year that we go forward. Cellulose is not here 
today, economically but it will be. I believe there are some 
breakthroughs that could come. I think we need to look at an 
overall, comprehensive program. Grain-derived ethanol cannot 
meet enough of the needs of this country to supply the fuel but 
we certainly are a very important part that works today. Some 
of the other switch grass initiatives and some of the other 
products that we are looking at, I think certainly have their 
place. Which one will play out 5 years down the road, 10 
years--I don't know if any of us know that. But I think the Ag 
Committee and
    Congress overall, should be aggressively looking at this. I 
would prefer and I think most people would prefer that the 
money to stay in Grand Island and in this audience, as opposed 
to being shipped over to Iran or someplace.
    The Chairman. We don't have the capability of growing corn 
with the yields that you did here in the Midwest but we do have 
an awful lot of soft wood timber and I was at Georgia Tech last 
week, visiting with those folks and they are on the verge, at 
Georgia Tech, of developing the technology to allow soft wood 
timber, in particular, for which we have lost our market over 
the years, into ethanol. And it is pretty exciting stuff. I 
imagine 20 years ago, you were still on the real initial stages 
of developing that here. So it is exciting for us to see what 
you all have done relative to the production of ethanol and to 
look forward to the day when we are producing it over our way, 
also.
    Mr. Kristensen. I think that points out something very 
interesting. We are seeing that the ethanol industry is 
evolving into taking waste products, like pulp or like paper, 
and there are some real interesting things that have gone down 
because I could break down cellulose, the switch grass is 
getting a lot of attention, but that's exactly what you have 
here and that's exactly what you have in the waste trees.
    So there are an amazing amount of things going on right 
now.
    The Chairman. Senator Nelson?
    Senator Nelson. If we re-write Title I of the farm bill 
because of either a Doha round agreement or anticipated 
agreement, or because of trade litigations similar to Brazil's 
successful challenge on cotton programs, what do you think 
would be the best approach that we could make in trying to 
protect ourselves but also put forward a farm bill. Would it be 
an extension of where we are or are there steps that we could 
take as initial steps? We'll start with Mr. Nuttleman.
    Mr. Nuttleman. At the present time, I would hope that it 
would just be an extension until it would be looked at more in-
depth. As far as dairy goes, the dairy industry, in the United 
States, of what we produce, about 92 percent of the product is 
consumed at home. Eight percent of our product is exported and 
our exports are growing. About 2 years ago, we exported about 5 
percent of our products and our co-op is working on joint 
ventures in other countries to see how we can do that. When it 
comes to dairy products, if we're going to compete--I'm not 
going to say Brazil and some of them are going to be our 
competitors but our competitors are actually going to be New 
Zealand and Australia because they have to export about 90 to 
94 percent of their product. So just to have level playing 
field for them as far as to get our products in, without 
tariffs or the same amount of tariffs as what they could bring 
their products in right now. In the past, we've looked at 
trying to get tariffs on MPC that come into our country. There 
is no tariff on MPC so right now we do have an open door policy 
on the MPCs that come into our country. I know we've tried to 
get legislation through to get some type of tariff but dairy 
can compete very well in the open market. Right now, non-fat 
dry milk is trading at $.88 to $.90 cents, which is just a hair 
above what our price support program is. So right now, our non-
fat dry milk is going into the world market. We just need a 
level playing field. I think we need to focus on the ones that 
challenge us the most, which is New Zealand and Australia, 
right now. I don't know if that answered your question.
    Senator Nelson. Yes, it did. Thank you. From the standpoint 
of the Farm Bureau, facing a drought as we have for multiple 
years, you and I have talked about it, Keith, on so many 
occasions. Unfortunately, we like to think that the 
conversation will end but it doesn't seem to end quickly. What 
are your thoughts about how we should deal with drought? We 
have crop insurance on the one hand, payments on the other and 
you've some of the problems that we have. Do you have any 
wisdom that you can share that we might consider in putting 
together this program?
    Mr. Olsen. That's a tough question. The drought, as we 
talked about before, has been going on for many years.
    Senator Nelson. I even named the drought to try to give it 
some significance, like hurricanes.
    Mr. Olsen. In 1998, I went to McCook with Congressman 
Barrett, to talk about drought. He's been out of office now 
about eight, 9 years. I went back there this spring with the 
Governor, talking about drought again, in McCook. So those 
areas have been hurt hard for many, many years and I have spent 
a lot of time thinking, what do we do about this issue? How do 
we handle it? I can tell you how we're trying to do it on our 
farm, right in the middle of the drought area.
    We've gone to 100 percent no-till operation. I mean we 
reduced our diesel purchases to what would amount to about 
$25,000 dollars this year. Of course, we increased our chemical 
costs. We bought a new header for our combine to leave our 
straw in the field instead of clipping it and it deteriorating, 
which will give us more cover for the shade, it will cover the 
soil and keep the soil cooler. Hopefully, it can conserve the 
moisture. There are things like that we can do but you're 
looking at different crop practices but I live in that area. 
Normally--we used to be a wheat area. Now we raise wheat, corn, 
sunflowers, millet--or I should say, we attempt to raise 
because of the drought. None of the crops are working this year 
for most producers. Occasionally, we get a cup of rain, you 
have a crop. Maybe we're having a permanent change in the 
weather and I think we need to look back at putting the ground 
into pasture, like we did 100 years ago. But so many pastures 
dried up this year, too. So it is really a frustrating 
situation we're in and I don't have a real good answer, but I 
think the role that the government needs to play--and I get 
this thought back from when I was in a class a few years ago. 
The instructor talked about the farm programs that evolved 
after the country went through the thirties. It was to make 
sure the farmers would not go through the same turmoil that 
they went through in the thirties. I think we have failed. I 
think a lot of farmers are going through the same turmoil that 
the farmers went through in the thirties. The answer--you know, 
we can work together and hope we come up with a solution. If I 
had the answer, I would be writing books or making talks and 
getting rich. But I don't have the answers but together we can 
try to find those answers. I think the government needs to play 
a major role in providing a safety net and maybe we use that 
term too often but that's what we need. We need that from the 
government.
    Senator Nelson. Well, would you suggest that the last thing 
we need to do is to eliminate the safety net? So we do need to 
have a program that will protect America's capability to 
produce its own food. The second thing, as part of that, is 
that you've heard some discussion about how we structure the 
crop insurance program. In a multi-year drought, the base just 
keeps getting smaller so that the insured has a smaller base 
and as things get worse, there is less protection for them. So, 
would you agree that maybe structuring something that takes 
into account revenue as well as maybe yields, might be a good 
way to look at it so that we've got factors, more than one 
factor in calculating what the base is, so that if crop 
insurance is, indeed, a risk management tool, as it should be, 
that it is a better risk management tool?
    Mr. Olsen. I absolutely agree with that. We need to have 
the ability to have a crop insurance program or revenue 
insurance program, whatever you want to call it, not to 
necessarily make a profit.
    Senator Nelson. No.
    Mr. Olsen. But at least a guarantee that we can continue to 
stay in production. I don't care if you are a livestock 
producer or a crop producer, even a peanut producer, we need to 
allow the farmers the right to be able to maintain their 
business. You know, you want to make a profit, that's what we 
are in business for. But the government shouldn't always 
guarantee a profit.
    Senator Nelson. Mr. Stoltenberg, in terms of specific 
ideas, do you have any workable solutions to make sure that 
farmers share in the benefits of biofuels production? One of 
the things that I've been noticing as I always like to point 
out and Duane did too, that when I started as Governor, we had 
one plant, the Chief plant and when I left, we had seven. There 
are 12-14 now. We've seen the increase and many of these are 
farmer invested, farmers are invested at the local level. Is 
there any other way to make sure that farmers can share in the 
benefits of ethanol and biofuels overall production?
    Mr. Stoltenberg. I guess besides being an investor in one 
of these plants, the next best thing would be to hold your 
grain on the farm because in Nebraska, we're just about going 
to have every bushel of corn raised in Nebraska almost run 
through an ethanol plant in the next few years and there is 
going to be tremendous competition to get that grain, 
especially in the summer--the July, August period when the only 
ones left are the stuff that are in the corners of the grain 
bins. So that's why I mentioned if we could get a producer on 
reserve, we could hold that off the market and the farmer would 
benefit from that competition between ethanol plants, to secure 
their fuel needs.
    Senator Nelson. You run the risk of gambling multiple years 
on when you should hold and when you should sell, but do you 
think that the risk is--the reward is certainly there to take 
care of that risk. Would you agree?
    Mr. Stoltenberg. I believe it is. That's why when I propose 
these things, the competition, I believe, will offset the cost 
of the program because of lower counter cyclical payments, 
which we really kind of enjoy because when the price is low, we 
need that extra income. If it wasn't that high, then we're 
responsive to the taxpayers. We don't take as much money from 
the government that way. I believe the competition going to 
these plants and through our livestock, will raise that floor 
on its own, eventually, and we won't need those payments, near 
as much anyway.
    Senator Nelson. Mr. Kristensen, as you look out in the 
future and you see the ethanol industry in Nebraska, you did 
mention that the future for other cellulosis production---- 
we're not quite there yet. What do you project that we would 
have in the way of production of ethanol just using corn-based 
production right now, what is the maximum, the ultimate that 
you would expect that we could do in Nebraska if we--and I say 
this to the cattle feeders--close your ears for a minute--every 
kernel is ground into ethanol?
    Mr. Kristensen. I don't think the cattlemen need to close 
their ears because I'm a good proponent of why the ethanol 
industry really makes a good fit for Nebraska and states like 
us because we do have a good steady supply of corn--and when I 
say, corn--you don't have to exclude other things--grain 
sorghum is used in the ethanol production but there is a 
tremendous corn crop that is being grown here every year and it 
is a very high quality and steady crop so we know consistently 
what we are using year to year. I was kind of pointing back to 
a little bit of what Mr. Stoltenberg said about having corn 
retained on the farm. That we see one of the advantages that 
you have on using feed grains and corn to be your feed stock, 
is that the corn quality is as good in July and August as it 
is. At the end of the growing season people do an extremely 
good job of maintaining the quality of corn. The benefits that 
we get and one of the things that we see in the transition over 
the years, is on our by-product.
    Back in the late eighties and early nineties, we dried all 
of the feed. By drying all of the distiller's grain it is used 
as a protein source and we shipped almost all of that out of 
this state, predominantly California with a dairy industry 
because they were looking for proteins. We started a transition 
in the mid-nineties to wet ditillers and presently we don't dry 
at all. We're making all wet feed, which goes directly to the 
cattle industry, which the wet feed is sold more as an energy 
source and offsets corn. The cattle industry is very critical 
and vital for the ethanol industry. In fact, just from my own 
personal standpoint with this drought issue but we were out of 
grass early because we had an extremely dry spring and we spent 
the bulk of--this summer supplementing our cattle, our cows and 
calves, on grass with distillers grains. So it is a very 
advantageous thing that we have here in this state. When we 
talk about going into other forms of ethanol production one of 
the benefits that we're going to get is, that there is a 
certain portion of the corn kernel and grain sorghum that just 
takes a ride through the plant and it ends up being into the 
feed. So there is a moderate amount of fiber and bran that ends 
up being in the distiller greens. With cellulosic enzymes that 
can break this down, all the sudden you are upping our ethanol 
yield on what we're getting through our plants.
    Our yield has consistently increased over the 20-plus years 
that we've been producing. We're growing well over a billion 
bushels of corn in this state. We're 2.75 to 2.8 pretty 
consistently on ethanol yields. It's going to climb up over 
three with cellulose enzymes in there. We're going to get 
higher yields on that. You're going to see, things that are 
coming on this corn production is phenomenal. We're seeing 
yield curves increase relatively rapidly. I think we are going 
to see that continue. Talking to some of the companies, the 
genetics---- there is a tremendous potential out here for 
yields yet, this drought-tolerant gene is going to be out here 
for less water use. So, depending on how we want to structure 
all the acres, but there are a number of acres that will 
convert back over to corn if the incentive is there. I don't 
know if I have a specific hard number but I can tell you that 
we are a longs way from it.
    Senator Nelson. Thank you very much, Mr. Chairman.
    The Chairman. Gentlemen, thank you. We could sit here and 
talk with you all day as we could with the commodity guys. But 
unfortunately, we have to move on. Thank you very much for 
being here, for your very insightful testimony and we'll look 
forward to staying in touch and dialog as we continue forward. 
At this time, I'd like to ask our next panel to come up. Mr. 
Jay Wolf of Albine?
    Mr. Wolf. Albion.
    The Chairman. Albion, Nebraska representing the Nebraska 
Cattlemen; Mr. Jim Hanna of Brownlee, Nebraska, representing 
the Independent Cattlemen of Nebraska; Mr. Bill Luckey of 
Columbus, Nebraska representing the Nebraska Pork Producers 
Association; and Mr. Dwight Tisdale of Kimball, Nebraska 
representing the Nebraska Sheep and Goat Producers. Gentlemen, 
likewise to you as with the other panels, we appreciate you 
taking time to be here with us today to share some thoughts 
with us and we look forward to your comments. We'll insert your 
full statement in the record. Mr. Wolf, we'll start with you.

   STATEMENT OF JAY WOLF, NEBRASKA CATTLEMEN, INC., ALBION, 
                            NEBRASKA

    Mr. Wolf. Mr. Chairman, Senator Nelson, I am Jay Wolf, 
third generation cattle rancher and feeder from Albion, 
Nebraska. I currently serve as President Elect of the Nebraska 
Cattlemen and I am board member of the National Cattlemen's 
Beef Association. I will provide comments this morning 
representing NC on several important issues. The Conservation 
Program--NC supports continuation of provisions that allow 
haying and grazing of the CRP acres at a reduced rate for that 
year. During times of drought, such as now, the opportunity to 
utilize grass on the CRP has helped cattle producers survive. 
It is the most common, effective disaster program the Federal 
Government has and we strongly advocate that these provisions 
continue. EQIP has been a very effective program for ranchers 
as it provides critical assistance in developing grazing and 
water management. This is especially true during these drought 
years. I can personally attest to the meaningful benefits of 
EQIP, as my ranch has received less than 20 percent of normal 
rainfall during the growing season. Yet EQIP has been 
instrumental in helping me maintain both the cattle herd and 
the health of the range. The use of EQIP to assist feedlots in 
constructing better waste management controls has been far less 
effective.
    NRCS requires extra expense and bureaucracy over and above 
what ETA requires, therefore the costs become greater than the 
benefits. We welcome the opportunity to work with NRCS to 
streamline and harmonize feed lot EQIPS so that it can be as 
effective as the grazing program. We encourage the Senate to 
continue and strengthen EQIP, as it is truly a program that 
helps producers make positive, long-term changes in the 
environment. It is a classic win-win. Disaster assistance and 
relief--failure to plan means planning to fail. Cattlemen need 
a drought relief program that is preplanned rather than 
reactive and ad hoc. It needs to be effective, efficient and 
funded.
    Title 10--COOL is a marketing program that would best be 
served outside the farm bill. While NC supports mandatory COOL, 
we cannot support the legislation as it is currently written, 
because it is seriously flawed. Language contained in the 2002 
farm bill imposed unnecessary costs on the entire beef 
production system. Also, COOL prohibits use of mandatory animal 
live heat, which is illogical. Research--we need to possess 
research dollars, research funds will be needed to develop new 
uses for ethanol by-products and to develop ways to use these 
valuable co-products without threatening the environment. We 
need continued research to control or eradicate animal 
diseases. Johne's Disease is one priority in need of expanded 
funding, to find a cost effective way to eradicate it. 
Additional NC priorities include re-authorization of mandatory 
price reporting, exempting manure from Super Fund regulations 
and exempting ag dust from EPA's coarse particulate matter 
regulations.
    Thank you for providing the opportunity to testify and I'll 
be happy to respond to questions.
    [The prepared statement of Mr. Wolf can be found in the 
appendix on page 127.]
    The Chairman. Thank you. Mr. Hanna?

              STATEMENT OF JIM HANNA, INDEPENDENT 
           CATTLEMEN OF NEBRASKA, BROWNLEE, NEBRASKA

    Mr. Hanna. Good morning, Senator Chambliss and Senator 
Nelson. My name is Jim Hanna. I am a fifth generation cow/calf 
producer from Brownlee, Nebraska. I appreciate the opportunity 
to provide comments on the development of the 2007 farm bill. 
The goal of any farm legislation should be to enhance the 
climate for America's farmers and ranchers. With all due 
respect, Congress must understand that discussions of 
government subsidization, rural development and the like, are 
secondary to the more pressing problem of the lack of 
profitability we see in agriculture today. Until we come to 
grips with creating a business climate in which the income 
generated by the sales of our farm and ranch products is 
sufficient to pay for the land, cover the operating debt and 
the overhead and provide a modest profit, we will never attract 
young people back to the land or reverse the decline of our 
rural communities. U.S. consumers have access to the safest, 
most diverse and inexpensive food supply in the world.
    However, they must understand that the cost to produce to 
it is constantly on the rise. While it is true that cattle have 
reached new but certainly not unreasonable price levels, it 
should be noted that the percentage of the cost of beef at 
retail attributable to the cost of the animal continues to 
decline. In other words, cattle producers are receiving an 
ever-smaller share of each dollar generated by the retail sale 
of beef. With these comments in mind, the following items are 
critical for inclusion in the 2007 farm bill. First, a 
comprehensive competition title must be drafted in order to 
ensure that the more concentrated segments of our industry do 
not unduly influence the independent business structure that is 
the hallmark of our farmers and ranchers. This title, at a 
minimum, should address topics such as limits on a meatpacker's 
ability to own and control cattle in excess of 14 days prior to 
slaughter, prohibiting discriminatory pricing and enacting 
reforms that would end unfair practices in agricultural 
contracts. It is important to note that currently, cattle 
markets are at the mercy of packers voluntarily reporting price 
information. Therefore, before the 2007 farm bill is written, 
we need the immediate re-authorization of the Livestock 
Mandatory Price Reporting bill, including the provisions 
proposed by Senators Grassley and Harkin. Our second concern is 
that at least cost and logical mandatory country of origin law 
remains as part of the farm bill package. Recent free trade 
agreements continue to expose the domestic live cattle industry 
to greater and greater threats from imports of cattle and beef 
products. U.S. producers must be given a tool to delineate and 
differentiate their product. Implementation costs can be 
lowered if processors can distinguish U.S. and foreign cattle 
entering into production lines. Currently, all cattle from 
Canada and Mexico are branded for health and safety reasons. 
Allowing packers to rely on these markings will greatly lower 
the cost of COOL. Immediately removing cattle from the J-List 
will make such marking of imports permanent and universal, 
while cutting the cost for COOL and simplifying animal trade 
pacts.
    In closing, thank you, Mr. Chairman and Senator Nelson, for 
taking the time to listen to the concerns of the Nebraska 
Cattle Producers here today. I welcome your comments and your 
questions.
    [The prepared statement of Mr. Hanna can be found in the 
appendix on page 62.]
    The Chairman. Thank you. Mr. Luckey?

            STATEMENT OF BILL LUCKEY, NEBRASKA PORK 
           PRODUCERS ASSOCIATION, COLUMBUS, NEBRASKA

    Mr. Luckey. Good morning, Chairman Chambliss, Senator
    Nelson. I am Bill Luckey, a pork producer from Columbus, 
Nebraska. Along with our swine operation, we also have a cow/
calf herd and a small feedlot and we produce row crops. I am 
currently the President of the Nebraska Pork Producers 
Association and we are very grateful to you for holding these 
field hearings and for this opportunity to provide you with the 
pork industry's views on what is working and what we need to 
improve upon as you consider the re-authorization of the farm 
bill. Pork producers have actively been engaged in discussions 
relating to the crafting of the 2007 farm bill.
    We have organized the 2007 farm bill Policy Task Force that 
is in the process of reviewing and evaluating many of the farm 
bill issues that will affect our industry. As pork producers, 
our livelihood is tied to many of the agricultural commodities. 
This morning, I would like to share some of the general 
comments and thoughts of the nation's pork producers we have on 
the 2007 farm bill. Pork producers make an investment in the 
industry to maintain a competitive edge domestically and 
globally. The 2007 farm bill should also make an investment in 
competitiveness by increasing and encouraging research, open 
access to new markets, enhancing conservation efforts and 
rewarding producers for good practices. Taking these important 
steps will maintain a vibrant agricultural sector that provides 
a safe and secure food supply, innovative fuel options using 
our natural resources and continued abundant feed for our 
animals. We know that the members of this Committee understand 
better than anyone, the significant economic contribution the 
pork producers make to the U.S. agriculture sector, how 
important it is to grow our international markets and maintain 
our global competitiveness. The U.S. pork industry enjoyed its 
15th consecutive year of record exports in 2005. These exports 
amounted to $25.44 per dead slaughter. Pork producers, along 
with other livestock and poultry producers are the single 
biggest customer for U.S. feed grain producers.
    Our single largest expense by far is the feed we purchase 
for our animals. USDA estimates that livestock feed will 
account for six billion bushels, over 50 percent of the total 
corn usage and livestock will use the majority of the domestic 
beans produced in 2005. Pigs consume just over one billion 
bushels of corn and the meal from nearly 418 million bushels of 
soybeans. Pork producers are strong and vital contributors to 
the value-added agriculture in the U.S. and we are deeply 
committed to economic health and vitality of our businesses and 
the communities that our livelihood helps support. The pork 
industry has changed dramatically in this country since the 
early and mid 1990's. Technology advances and new business 
models changed operation size, production systems, geographic 
distribution and marketing practices. The demand for meat 
protein is on the rise in much of the world. Global 
competitiveness is a function of production, economics, 
environment regulation, labor costs and productivity. The 
United States must continue to be a leader in food production 
and meet the needs of increased consumer demands. As the pork 
industry evaluates the re-authorization of the 2002 farm bill, 
we have formulated some guiding principles for consideration.
    The next farm bill should help the U.S. pork industry 
maintain its current points of competitive advantage. These 
include low production costs, unparalleled food safety, further 
advances in animal health and consumer driven for the 
processing. The next farm bill should strengthen that position 
by expanding and including such elements as trade assistance, 
research, risk management tools, science-based conservation 
programs and EQIP regulations. Finally, the farm bill should 
not harm the competitive position of the U.S. pork industry by 
imposing costs on the industry by restricting its ability to 
meet consumer demand in an economical manner.
    Government intervention should not stand in the way of 
market-based demands. In conclusion, while my comments today 
have been preliminary, together I believe we can craft a farm 
bill in 2007 that meets our objectives of remaining competitive 
producers in both domestic and world markets. We look forward 
to the journey and believe your leadership will allow the U.S. 
agricultural sector to continue and prosper for many years to 
come. Thank you.
    [The prepared statement of Mr. Luckey can be found in the 
appendix on page 77.]
    The Chairman. Thank you. Mr. Tisdale?

STATEMENT OF DWIGHT TISDALE, NEBRASKA SHEEP AND GOAT PRODUCERS, 
                       KIMBALL, NEBRASKA

    Mr. Tisdale. Thank you, Senators. I appreciate the 
opportunity to speak today. I am representing the Nebraska
    Sheep and Goat Producers and the American sheep industry. 
There are approximately 68,000 farms and ranch families 
producing lamb and wool, driving about a $500 million dollar 
industry. That's not a large industry compared to my colleagues 
here. I feel a little bit like the low end here but 
nevertheless, these producers have aggressively developed 
programs to strengthen domestic industry, like the $2 million 
dollar a year Lamb Board check-off program, promoting American 
lamb--not New Zealand or Australia but American lamb and the 
American Wool Counsel, which has helped develop some flame-
retardant, exceptional combat clothing for our Armed Services.
    The Wool Loan Retention Program has been effective in 
helping the promotion and retention of ewe lambs and the growth 
of the industry and we want to continue that growth. The Wool 
Loan Deficiency has provided the only--and I repeat--the only 
safety net for the sheep industry business. I encourage the 
Committee to re-authorize the Wool Loan Deficiency payments at 
a base loan rate of $1.28 a pound, not the dollar that it is 
now. This would provide the benefit of the programs as 
originally intended. The sheep industry actively participates 
in the USDA Foreign Market Development, Market Access programs 
and Quality Sample programs and encourages the inclusion of 
these in the next farm bill. The National Sheep Industry 
Improvement Center was established to provide loans and grants 
to improve the industry's infrastructures. Continued funding of 
the National Sheep Industry Improvement Center is vital and 
beneficial to the industry. That is the only place where places 
like packing plants, wool warehouses, etcetera, can go borrow 
money to develop these infrastructures. Our industry submitted 
in 2005, to USDA, the Lamb Risk Program. The lamb industry has 
no price risk tool available, unlike the cattle and the pork. 
We need this pilot program implemented. Our industry needs 
mandatory price reporting. The stop gap voluntary program was 
reporting something close to half the sales. That is not a 
reporting system. We need your help in re-authorizing this 
mandatory price reporting. Thank you very much for your time.
    [The prepared statement of Mr. Tisdale can be found in the 
appendix on page 120.]
    The Chairman. Thank you, each of you. We appreciate your 
very insightful testimony. I know all of you have environmental 
and conservation issues in your respective industry and I'd 
like to ask you to each address what is your No. 1 
environmental or conservation issue to current conservation 
programs, address that issue and what do we need to think about 
as far as improvement of the conservation title to address your 
issues. Mr. Wolf?
    Mr. Wolf. The EQIP program would be near the top of our 
list. It works well for the ranching program. We would want to 
see that maintained and as I mentioned, we need to improve how 
it can be used by the feedlots. That's important because we're 
continuing to see added pressures constantly from EPA and we 
need an effective EQIP program for feed yards so that they can 
come into compliance. We talk about what is putting small 
producers out of business. We would start with the EPA and that 
is not in the farm bill but here's a tool that can help us try 
to comply with some of their regulations that we're not 
utilizing as well as we should. On the CRP, we really like the 
hay and grazing provisions for dry years. We would like to 
continue to find ways where we can streamline and simplify that 
so that it can be done quickly enough in dry years. You have a 
limited time horizon that you can do it effectively. You don't 
want the delays to take you outside that effective window and 
furthermore, we want to find ways, if we can, to open up CRP 
acres that are in areas that have had sufficient rainfall but 
are within the transportation distance of the dry areas because 
often, that is where the feed is. You're opening up CRP in dry 
areas and it is limited there. Those would be some of the 
environmental or the conservation thoughts that I have.
    The Chairman. Mr. Hanna?
    Mr. Hanna. From strictly a cow/calf producer's point of 
view, the conservation programs that Jay alluded to may be 
aren't as sharp of a focus for us. We see through feedlot's 
ability to access money to do some of their manure control and 
some of those kind of things. For myself, EQIP funds have not 
been anything that we've pursued. They just aren't there to do 
the kind of things that we need to do. But as far as other 
things that would help us access more feed, opening up CRP, as 
Jay alluded to, would certainly benefit cow/calf producers.
    Mr. Luckey. On the pork production side, the EQIP funds, we 
haven't been getting very much money coming into that program 
for the pork producer. A lot of it seems to be going into the 
cow/calf side or to the feedlot side, probably more so than 
what we've ever gotten for the pork industry. There are quite a 
few bells and whistles, so to speak, to jump through and some 
timing issues. Sometimes when you have a building construction 
going on, you need some answers a little bit quicker than what 
the government seems to be able to help you out with. I know of 
one producer who has used some money for some manure facilities 
and they said it has taken several years to get that but he 
waited for it. And it would be nice to move a little bit 
faster, possibly, to get these EQIP funds for the manure 
management program to utilize different types of facilities, 
whether it be lagoon or deep pits, things like that and 
possibly something also into a little research to help with 
some odor and control, research into those programs also.
    The Chairman. Mr. Tisdale?
    Mr. Tisdale. Thank you. I'd like to speak from two 
perspectives. We have a farm in Kimball, Nebraska, raising 
things like sugar beets, edible beans, malt barley, wheat and 
corn. We farm for a living. When we talk about conservation, we 
raise corn, wheat and the barleys not as a revenue crop but to 
remain in conservation compliance with the present farm 
programs so that we can raise edible beans and we can raise 
sugar beets at a profit. Our farm has been working and works 
well with the present farm programs as they are written. As far 
as what is my most pressing concern, I'd have to say that water 
is at the top of the list. Water is our environment and our 
environment feeds the American people. They talk about water 
and drought. We are in the midst of a drought. I think it is 
going to here for a long time. We've gone from 12 to 14 inches 
of precipitation in Kimball County to I'm guessing an average 
around 7 or 8. You cannot raise a crop on dry land there, I 
don't care what it is and return a decent amount for your 
investment for the risk involved. Because water is where it is 
in my environment, I use irrigation water. Everything we raise 
is under irrigation. Water is being taken from agriculture. 
It's been taken for things like to water the yards in San Diego 
or to build lakefront property in Phoenix.
    I'm talking about the Colorado River. Water priorities have 
become turned upside down. Doesn't it count that the American 
farmer feeds the American people but we have to give up our 
water for recreation?
    The last thing I have under environmental and conservation 
concerns is the American farmer. You know, he feeds all the 
people in the United States and it sounds to me like we're 
going to have to produce the energy for the United States. We 
need to have a little protection in the United States of our 
water and our livelihood. Now, speaking from a standpoint of 
the sheep industry, the existing programs----
    EQIP, etcetera are OK. Sometimes it is hard to fit those 
programs into your exacting environment. There needs to be more 
flexibility. And before you ever write the program, please fund 
it first because I hate to apply for a program and then finding 
out 2 years later, I'm finally going to get the money when I 
needed it 2 years ago. That does not work. I don't know how it 
works in your cash-flow, but it doesn't work in mine.
    The Chairman. Thank you. We are constantly remind the 
appropriators that we need money to fund our programs, I assure 
you. All of you have mentioned mandatory price reporting as a 
necessity in your respective industry and as you probably know, 
we are kind of at loggerheads right now. The House passed a 5-
year mandatory price reporting bill and we passed a 1-year 
because of some concerns that Senator Grassley and Senator 
Harkin have relative to that particular issue. But I hear all 
of you saying that it is important to your respective 
operations that we have mandatory price reporting. Talk for a 
minute if you will, each of you, about forward contracting, as 
well as country of origin labeling.
    Mr. Luckey and Mr. Hanna mentioned COOL but I'd like for 
you to amplify on that in any way and particularly with respect 
to the funding of the cost of it, because what we have always 
seen at our level, from the policy level, that when we mandate 
these programs, that the folks that market the product, the 
folks that are putting it out in the grocery stores are not 
going to pay for that. The folks who deliver it to the grocery 
stores are not going to pay for that and it always comes back 
down to the farmer paying for it. That concerns me, for us to 
mandate a program and at the same time, we're hearing you guys 
talk about what tough times you're having and here we're going 
to put another expense into your operation that you didn't 
anticipate before. So if you will, talk to us a little bit 
about that and try to help us think through those respective 
issues.
    Mr. Wolf. Well, when it comes to COOL, when the rules were 
written, it was almost written in a way that there would be no 
possible way for the program to work. Big fines for retailers, 
especially small retailers would be, I think, very reluctant to 
support a program or even carry beef for those types of owners, 
penalties hanging over their heads. So you really need to think 
about turning that around and looking at from the producer's 
standpoint and making it the producer's responsibility to 
produce a U.S. product and be able to verify to buyers of our 
products that it is a U.S. product if it is going to be labeled 
that way. There was a real complex set of label rules written. 
It seemed way more complex than we ever anticipated or desired. 
It just got to be a bureaucratic nightmare, you're absolutely 
right. So if there is going to be a COOL program, it's got to 
be scaled way back and simplified, one that retailers would 
look at as an advantage rather than something that would be a 
penalty to try and utilize.
    Mr. Hanna. Senator, you asked a number of questions and we 
could probably spend all day talking about them. In the 
mandatory price-reporting field, of course, it is important to 
us in our cattle industry that we have transparency in that 
marketplace. Right now, I think we are lacking some of that. 
There are too many loopholes in that program as it has been 
administered. We need to take a strong look at the J-O 
recommendations and those recommendations of Senators Grassley 
and Harkin as well. As far as tightening up some of the 
requirements, making sure that we have a good feel for what our 
market is doing. An awful lot of our business--Jay's business 
and my business--are decisions that we make, are dependent on 
what is going on in the current marketplace. And if that is not 
transparent to us, if we don't have a good understanding of 
that cash marketplace, our forward contracting, our futures 
markets, don't operate in a logical manner either. So it is 
critical that we are able to put together a price-reporting 
package that gives us a good feel, a good sense, of what is 
going on in the marketplace. Forward contracting, I think we've 
got two issues that we need to touch on in that arena. In 
restricting the use of contracts, I think it is important that 
the rules be written so that those contracts are handled in a 
fair manner so that certain entities in our business are not 
using leverage that they have to force producers into contracts 
that are essentially not good for their bottom lines. We need 
to make sure that we don't confuse that with the idea of 
forward contracting through the use of futures markets. That is 
a viable thing for our industry and we need to maintain that 
ability to access those futures and options contracts. As far 
as COOL is concerned, COOL has been the cornerstone of our 
Independent Cattlemen's Organization and the R-Calf 
organization as well.
    Certainly we agree with Jay that the rules as promulgated 
are unworkable. They definitely need to be revisited. There are 
a number of ways that we feel country of origin labeling, could 
be handled in order to address some of those. One of those I 
alluded to in my testimony, which would be removing beef from 
the J-List, recognizing it as being a cyclical and perishable 
item. Then we could use it to mark our imported beef as well. 
As far as the cost, I think we need to recognize that right 
now, the consumer doesn't have a good concept of what it is 
that they are able to purchase. We're able to apply a USDA 
grade stamp to nearly all the product that comes into the U.S., 
so there is no differentiation. We believe and our 
organizations believe that given the choice, if the markings 
are there, that the consumer will be willing to pay a higher 
price for those products, so much so that we firmly believe it 
is a necessary part of the farm bill and something that we are 
going to continue to pursue aggressively.
    Mr. Luckey. As far as the price reporting, mandatory price 
reporting, we are in favor of that again. The one thing that we 
have a little concern about is Nebraska. Actually, we have a 
law here in Nebraska, I believe, that states if we don't have 
the mandatory price reporting at the Federal level, that 
Nebraska has to come up with our price reporting system. And if 
that be the case, we're going to have to hire more people and 
have an extension here in Nebraska. Right now, we can utilize 
the Federal program to satisfy this need. Right now, the 
voluntary work that is being done is good for now but in the 
future, we're going to have to be aware of that, if this sort 
of is put on the back burner or eliminated, Nebraska has to 
come up with the funds, the personnel and the resources to 
handle this price reporting in the State of Nebraska. It would 
just be a lot better to have the Federal Government do it 
instead of a lot of little pieces all over the place, little 
entities doing it all over. Just have it come from one source. 
As for the forward contracting aspect, the pork producers 
associations that producers should be able to have the 
marketing opportunities that they need to remain profitable. 
Let those producers figure out what they need to remain 
competitive. As far as the COOL situation, I'm going to be a 
little bit of the odd one up here, I think. We're looking more 
for a voluntary COOL program instead of the mandatory. When the 
program first came out, we were for mandatory COOL but when you 
started to really dig into it and you saw the expense, the 
regulations, and paperwork---- everything going on, we thought, 
is this really to the benefit of our producers and to the 
consumer. If the consumer wants to have basic knowledge of 
where their product came from, let them pay for it. If a 
producer can receive a penny more a pound, then let that go 
back to the consumer and have the consumer help pay for that. 
If it is a really big thing that has taken off, you'll have 
everyone doing it, if there is an economic impact for us. In 
order to make a few extra bucks, we'll gladly do it but when 
you look at single-family households, living on a real strict 
budget, do we need to increase their expenses for food? We 
really want to maintain a key food supply, basically. Where 
else in the world can we go and have what--11 percent, I think, 
of our disposable income is spent on food. We don't want to 
have to increase these food prices for people on fixed incomes. 
So that is one thing we would like to see. A voluntary--it 
becomes a marketing program then, basically or let the 
marketplace dictate the prices.
    I kind of think enough has been said about the mandatory 
price reporting. We really need it. As far as the sheep 
industry having any protection with the Board of Trade, there 
is none. We have no forward contracting. We have no insurance. 
We're out there on our own and I'll give you a little example 
of what we're fighting. The European Union provides subsidies 
over $2 billion a year to their sheep producers and maintains 
strict and effective tariffs. This has created an unfair 
advantage for import lamb and made the U.S. the target for 
Australia and New Zealand lamb. Our industry looks to you to 
fix this problem. As far as country of origin labeling is 
concerned, we produce a far superior product than what 
Australia and New Zealand does. Country of origin label is a 
sales tool that we need. Besides that, if you are going to sell 
to the major food stores like Wal-Mart, you're going to have to 
do it or they are not going to buy our products. Thank you.
    The Chairman. Thank you. Senator Nelson?
    Senator Nelson. Well, to Jay and Jim, I'm nixing that about 
grinding the last kernel of corn to get your attention but I've 
never felt that is much of a threat or something we have to be 
concerned about. But clearly, the corn that is grown in 
Nebraska has always in our mind, been for two sources: one to 
export any surplus but for value added purposes to our 
livestock industry. We recognize that is the case and so we all 
have an interest in making sure that the conservation programs 
that are in place for production agriculture, in turn for 
crops, are appropriate but also the production of your business 
also has to have appropriate conservation programs. You 
mentioned a need to streamline the conservation programs. I 
might not have picked up exactly whether you had some 
specifics, but maybe it would be helpful to us to have a couple 
of ideas of what we might do to have them more streamlined. 
Jay, let's start with you.
    Mr. Wolf. I know that Nebraska Cattlemen's staff has been 
working on those recommendations, Senator and I will have them 
forward them to you.
    Senator Nelson. Would you get those?
    Mr. Wolf. Yes.
    Senator Nelson. I think it would be very helpful because 
there are different kinds of conservation programs and we want 
to make sure that what we do is that we don't have a one size 
fits all. We ought to have it industry specific. Jim, you 
stressed confrontation and market consolidation issues. Do you 
think that these are the major problem you're facing within 
your industry right now. You mentioned them but are there 
others as well? Or are these the primary?
    Mr. Hanna. I guess from our organization's standpoint and 
from my standpoint personally, I would probably rank those 
competition issues first and then probably following that quite 
closely would be environmental issues, water issues and some of 
those kind of things. Essentially, we're looking at a situation 
right now where we have four companies in the beef packing 
industry that control over 80 percent of the production. 
Generally, economists will you tell when you have a four-firm 
concentration over 40 percent, you need to start scrutinizing 
those industries very carefully for the kind of leverage and 
power that they are holding over the rest of the industry. I 
think it is just critical to the survival of independent, small 
farms and ranches here in the State of Nebraska, that we make 
sure that we're being dealt with fairly, that all the 
transactions are open and available to all producers. It's just 
a critical item on our list.
    Senator Nelson. I would have thought that CIRCLA might have 
been a bigger factor but I didn't hear anybody focusing on it. 
Maybe I missed that in terms of trying to make animal waste 
into hazardous waste, for purposes of the EPA's consideration. 
Since virtue can't be the only reward in this business, I 
wanted to point out that I'm one of the co-sponsors of the 
legislation that would stop that from happening but maybe you 
can give us your concerns about environmental challenges that 
you face in terms of regulation, current regulation but also 
what you worry about on the horizon and what that will do for 
or to your industry, including Bill. I know you've already been 
down that pike.
    Mr. Wolf. You're not going to turn the red light on me?
    Senator Nelson. No, I won't.
    Mr. Wolf. OK. This could take a while. With EPA, it just 
goes on and on. Most recently, with the coarse particulate 
matter regulations, they are going to make dust illegal. Their 
own advisory group told the EPA that the science didn't justify 
these regulations yet. Yet, EPA has gone ahead and gone forward 
with it. They've talked a little bit about an inclusion of 
agriculture and mining but we are not at all taking any comfort 
in that. That is one. Another one is, as you mentioned and I 
mentioned in my remarks, was the Super Fund. That's insane, to 
try and list manure as a toxic waste or treat it like Love 
Canal. It's insane but it is a tremendous threat to our 
industry. The K-4 rule, where it is one size fits all. You talk 
about something that is driving small producers out of 
business, that would be top on my list because small producers 
pose smaller risks to the environment yet they are all being 
required, basically, to meet the same standards. It is 
illogical. Like I said, I could go on and on. I'll stop there.
    Mr. Hanna. Certainly from my point of view, I don't own a 
feedlot. I don't have cattle in confinement at any time during 
the year but what affects the small feedlots, what affects Jay 
and family feeders around the state and nationwide, affects my 
bottom line as well. If they are spending more money to get 
into compliance with these EPA regulations, they don't have 
money to spend on cattle, very simply. So it's important that 
those regulations be drafted appropriately and with these 
things in mind that Jay has mentioned. A concern to those of us 
in the cow/calf industry and like I said, we don't have cattle 
in confinement right now but it is how those definitions of 
confinement get drafted.
    There has been some question about if you have cattle, say 
a number of cows in a lot during the springtime for calving, 
does that get defined as a confined animal feeding operation?
    And if it does, here again, trying to bring us into 
compliance with those regulations is ludicrous. We don't have 
the ability to do that. We see small feeders around the state. 
A gentleman in the panhandle, who I fed cattle with for a 
number of years--or that back grounded cattle for me, I should 
say. Finally just went out of business. It was not a good 
financial decision for him to bring his yard up to compliance. 
He was over the number; he was over 5,000 head. It was going to 
cost him between a quarter and a half of million dollars to 
bring that lot into compliance and that lot wasn't returning 
the kind of money to justify putting that expense in.
    Senator Nelson. Bill?
    Mr. Luckey. As far as these programs, I think the little 
lights may have curtailed some of our comments on that. We 
would have gotten into that possibly, had we a little more time 
but right now with--when we came in and talked to you, I 
believe that spring and when you agreed to sign on to that and 
we appreciate that but right now in our area, fertilizer is 
almost considered a commodity. I have neighbors who call me up 
and say, hey, if you don't have time to haul the manure or 
something, why, we'll gladly do it if we can have it. And 
basically, it is treated almost as a commodity in some 
locations, especially in Iowa. But in Nebraska, on my own 
fields, we apply manure and we get to reduce the commercial 
fertilizers that we put on greatly. There are times when we 
haven't put on any commercial fertilizer at all. This isn't 
something that you put it on today and it's going to be used up 
in 1 year. It's going to stay in the soil and in coming years, 
it will still be available. It is all organic. It is a natural 
product and it is something that we produce in our own 
operations. Also, as far as other issues, things affecting us, 
I left one figure out of my presentation and it was about 
Special Interest groups or activist groups getting into the 
farm bill, about trying to regulate our production and the care 
of our animals, how we do these kinds of things.
    These are some of the things that we have to keep out of 
the farm bill. We know how to produce animals very well and we 
take great pride in doing that. I don't think some activist 
group should be out here telling us how to produce the animals 
that we have in our care.
    Senator Nelson. Dwight, do you want to finish up?
    Mr. Tisdale. I don't believe there are any sheep feed lots 
in Nebraska large enough to come under this rule, however 
speaking from the standpoint of Colorado and Wyoming feedlots, 
there are and it is ridiculous. I think that is the easiest way 
to put it. Speaking from the standpoint of an irrigation 
farmer, manure is an absolute necessity for continued 
fertilization of your land because you cannot put on enough 
artificial fertilizers to duplicate what manure will do. Thank 
you.
    Senator Nelson. Thank you very much, gentlemen. Thank you, 
Mr. Chairman.
    The Chairman. Well, gentlemen, we haven't even gotten to
    Japan and Korea that we can certainly talk about. But 
again, we appreciate very much your being here and particularly 
somebody like me. People ask me all the time, why do you go 
around the country and hold these farm bill hearings? Well, we 
could probably fit most of our cattle in Georgia in your 
feedlots and in your pastures. We are just not big livestock 
producers like you are here and that is why it is so critically 
important that folks like me have more of an understanding of 
not just the way you have to operate everyday but these rules 
and regulations that I happen to agree with you, are ridiculous 
but unfortunately, some of them we have to live with. So I 
thank you very much for being here and for giving us your input 
as we move forward with re-authorization.
    I encourage anyone who is here who did not have the 
opportunity to testify, as I stated in my opening comments, to 
visit the Committee's website and if you'd like to submit 
testimony, you can find out very easily how to do that. This 
hearing will be open for five business days for any additional 
comments that we might receive. I want to thank Farm Credit 
Service, particularly Mr. James Nigren for providing our coffee 
and pastries back there. We appreciate that very much and I 
want to thank all of you for showing up today to show your 
interest and express your concerns about the farm policy. With 
that, this hearing is concluded.
    [Whereupon, at 12:17 p.m., the hearing was adjourned.]
      
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