[Senate Hearing 109-643]
[From the U.S. Government Publishing Office]
S. Hrg. 109-643
REGIONAL FARM BILL FIELD HEARING:
GRAND ISLAND, NEBRASKA
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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
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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
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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
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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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A P P E N D I X
August 16, 2006
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DOCUMENTS SUBMITTED FOR THE RECORD
August 16, 2006
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