[Senate Hearing 109-642]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-642
 
           REGIONAL FARM BILL FIELD HEARING: REDMOND, OREGON

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION


                               __________

                            AUGUST 15, 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

                              ----------                              
                                                                   Page

Hearing(s).

Regional Farm Bill Field Hearing: Redmond, Oregon................     1

                              ----------                              

                        Tuesday, August 15, 2006
                    STATEMENTS PRESENTED BY SENATORS

Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman, 
  Committee on Agriculture, Nutrition, and Forestry..............     1
Smith, Gordon, a U.S. Senator from Oregon........................     2
                              ----------                              

                               WITNESSES
                                Panel I

Bushue, Barry, Oregon Farm Bureau Federation, Salem, Oregon......     5
Livingston, Sharon, Oregon Cattlemen's Association, Salem, Oregon    10
Reese, Sherman, National Association of Wheat Growers, Pendleton, 
  Oregon.........................................................     7
Souza, Ray, Mel-Delin Dairy, Turlock, California.................     8

                                Panel II

Brentano, Pete, Oregon Nurserymen Association, Wilsonville, 
  Oregon.........................................................    22
Gallo, Ernest, Wine Institute and California Association of Wine 
  Grape Growers, Modesto, California.............................    23
Koompin, Klaren, Potato Growers of Idaho, American Falls, Idaho..    20
Lorensen, Ted, Oregon Department of Forestry, Salem, Oregon......    18

                               Panel III

Bernau, Jim, Willamette Valley Vineyards, Turner, Oregon.........    32
Euwer, Jennifer, Pear Bureau Northwest and Northwest Horticulture 
  Association, Hood River, Oregon................................    34
Krahmer, Doug, Oregon Blueberry Commission, St. Paul, Oregon.....    35
Wettstein, Mark, Nyssa-Nampa Beet Growers Association, Ontario, 
  Oregon.........................................................    37

                                APPENDIX

Prepared Statements.
    Wyden, Hon. Ron..............................................    48
    Bushue, Barry................................................    51
    Bernau, Jim..................................................    56
    Brentano, Pete...............................................    59
    Euwer, Jennifer..............................................    65
    Gallo, Ernest................................................    70
    Koompin, Klaren..............................................    79
    Krahmer, Doug................................................    83
    Livingston, Sharon...........................................    92
    Lorensen, Ted................................................    98
    Reese, Sherman...............................................   114
    Souza, Ray...................................................   117
    Wettstein, Mark..............................................   123
Document(s) Submitted for the Record.
    Connecticut Association for Human Services, Hartford, CT.....   146
    Mallorie's Dairy, Inc........................................   149
    Oregon Cattlemen's Association...............................   152
    Oregon Dietetic Association..................................   155
    Oregon Women for Agriculture.................................   158
    The Linn Soil and Water Conservation District................   161
    Tipping Tree Country Eggs....................................   163
    Washington State Potato Commission...........................   166
    Statement from Larry Bishop a farmer from Oregon.............   169
    Statement from Nels Iverson a farmer from Oregon.............   172





















           REGIONAL FARM BILL FIELD HEARING: REDMOND, OREGON

                              ----------                              


                            AUGUST 15, 2006

                                       U.S. Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                        Redmond, OR
    The committee met, pursuant to notice, at 9 AM at the 
Deschutes Fair and Expo Center, Hon. Saxby Chambliss, chairman 
of the committee, presiding.
    Present. Senators Chambliss and Smith.

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

    The Chairman. The hearing of the Senate Committee on 
Agriculture, Nutrition and Forestry will come to order.
    Let me welcome all of you here today, particularly to our 
witnesses who are going to be testifying and providing us 
information. We do especially welcome you, and I can't tell you 
how pleased I am to be in Oregon. I have been out here a couple 
of times, visiting my good friend Senator Smith. But this has 
given me an opportunity to come out a day or so early and do a 
little agricultural experiment on some green grass and whatnot 
that we've seen around Oregon for the last couple of days. And 
what a beautiful part of the world.
    This is our fifth Farm Bill hearing. We've had hearings in 
Georgia, Missouri, Pennsylvania and Iowa, and we will hold two 
more hearings this week in Nebraska and Montana, followed by a 
final field hearing in Texas on September the 8th.
    With the 2002 Farm Bill expiring next year, the committee 
will be heavily involved in drafting a new law that will 
reflect the needs of farmers across the country.
    We have a number of factors that will influence the next 
Farm Bill, and one of those is the input we are receiving from 
our witnesses in these regional field hearings.
    Agriculture in the United States is very diverse. Different 
areas of the country view our farm programs in their own 
distinct way. Today we hope to gain a better understanding of 
the unique nature of the agriculture industry in the western 
part of the United States.
    The witnesses on the three panels today will provide us 
with a unique perspective and appropriately reflects the 
diversity of the crops raised in this region.
    We have appreciated the information received and the 
testimony delivered in our hearings so far and look forward to 
hearing from our witnesses today. The statements we hear today 
will play an integral role in helping the committee construct 
farm policy for the future. It will assist us in providing a 
safety net that works for farmers and ranchers while taking 
into account the likely impact of the budget deficit and 
international trade negotiations.
    For those of you who are not witnesses but are interested 
in submitting comments to the committee related to the Farm 
Bill, the committee's website has guidelines for providing 
written statements for the record and a web form for informal 
comments. Comments received will also be considered during the 
reauthorization process.
    I appreciate Senator Gordon Smith hosting us here today and 
the hard work of his D.C. and his Oregon State staff. Matt 
Hill, Jason Billencort, and Susan Fitch have been particularly 
helpful to my staff over the last several weeks in putting this 
hearing together.
    I understand that Jason could not be with us here today, 
and on behalf of the Senate Agriculture Committee, we send our 
condolences to him and has family during this very difficult 
time.
    I commend all of you for your hard work on behalf of all 
Americans and I look forward to hearing your testimony.
    And now before I turn it over to Senator Gordon Smith, let 
me just say that the greatest thing about serving in public 
office is having the opportunity to be associated with people 
that you grow to have such admiration for and respect for. And 
Senator Smith and I have become very fast friends during my 
short time in the U.S. Senate. We sort of knew each other 
during my House days, but we immediately became very close 
personal friends.
    His wife Sharon is such a delightful lady. And he married 
way over his head. He freely admits that. That's one good thing 
about him.
    But Gordon Smith is just one of those class individuals 
that makes serving in the U.S. Senate a pleasure for somebody 
like me. And I can't over-emphasize to you folks in Oregon what 
an important role he plays in the U.S. Senate. He's not a 
member of the Ag Committee, but he regularly gives me advice 
about what we need to be doing in agriculture. And I respect 
him for it, because I know his background in agriculture. And 
it's just a real pleasure to have the privilege to serve with 
him.
    Ron Wyden and I serve on the Intelligence Committee 
together, and Ron is a terrific individual. And I've grown to 
have great respect for him. And I'm sorry Ron couldn't be with 
us today, but I know he has some staff representing him here 
today. So, with that, I want to turn to Senator Smith for any 
comments that he wishes to make in the form of opening 
statement, and to recognize anybody here today.

   STATEMENT OF HON. GORDON SMITH, A U.S. SENATOR FROM OREGON

    Senator Smith. Thank you very much, Mr. Chairman. We are 
honored to have you in the state of Oregon.
    As I have done my research, I believe this is the first 
time in the history of our state that the Senate Agriculture 
Committee has come here to have a hearing on a Farm Bill. And 
so we are all a little part of history today. But Senator 
Chambliss and I share several things in common. And first among 
them is a warm friendship. Second is that he married over 
himself as well. Juliane is his better, as Sharon is mine. And 
we are very thankful that you are here, and I am anxious for 
you to get a better sense of the unique agricultural community 
we have here in the state of Oregon.
    Oregon's agricultural story is one that began over 200 
years ago. You might think, well, no, that's Lewis & Clark, 
they didn't do much ag here. Actually, it began with a British 
ship in 1796 that came up the Columbia River. It was a ship 
owned by the Hudson Bay Company. And they began farming at Fort 
Vancouver, which was at the time part of the Oregon territory. 
They planted wheat, potatoes, and I was relieved to see peas.
    Soon after Oregon officially became part of the United 
States territory, and lured by lush, fertile valleys, throngs 
of wagon trains rolled from the East into the setting sun here 
in Oregon. Plows dug into the rich fertile soil of the 
Willamette Valley where glacial floods deposited blankets of 
nutrients thousands of years prior.
    By 1850 all of the best agricultural lands that they were 
obvious were claimed, but this did not stop the Oregon Trail 
from bringing thousands more, who spread throughout the state, 
looking for water and pasture. The same determination that 
brought them across the great plains and over the Rockies gave 
them the drive to make farming and ranching a common practice, 
even in tough territory.
    That spirit is why agriculture remains a leading Oregon 
industry here in Oregon, and why it's so fitting to have one of 
these hearings here in this great state. Our state's 
agriculture is second only to California in crop diversity. 
Over 250 different crops are grown in Oregon. Oregon 
agriculture output reached a record $4.1 billion in 2004. One 
in 12 Oregonians is employed in agriculture.
    Oregon is also vital to the success of agriculture across 
the Northwest and Midwest because its geographic advantages are 
so apparent. The Columbia River is the United States' largest 
wheat export system, with 40 percent of all wheat exports 
shipped through Oregon's ports. This reminds us of the 
importance of trade to Oregon agriculture. No one wants the 
United States to be a net food importing country. It is a 
national security as well as an agricultural security issue. 
Already we are rapidly seeing our import numbers approaching 
our export numbers, and this is of real concern to me. The U.S. 
agricultural trade surplus continues to fall. Between 2004 and 
2005 it fell by nearly $4 billion.
    Farming is not unlike logging or fishing. If government 
regulation and unfair competition make life difficult, we will 
lose the next generation of farmers. Oregon farmers can compete 
any against any country's farmers, but not against other 
governments or the cheap labor, high tariffs and minimal 
regulations of some countries.
    Since most of Oregon agriculture is not subsidized, we must 
be more creative about competing in the world. And that's the 
importance of marketing, conservation and research. We must 
continue to strengthen these programs to remain competitive in 
the world.
    I also want to make mention of the nutrition title of the 
Farm Bill. Oregon has suffered very high rates, amazingly, in 
the category of hunger. This was a statistic by the U.S. 
Department of Agriculture which really surprised many of us in 
Oregon, when we live in a land of such abundance, both quality 
and quantity. And for that reason, I formed the Senate hunger 
caucus, and was joined by many colleagues, to try to help find 
better ways to get our good food to people in need.
    So, I want to thank Chairman Chambliss for his work in 
preserving funding for food stamps. We sometimes don't 
understand or remember how critical the Food Stamp Program is 
to so many Oregon commodities, and certainly how important it 
is to the poor. So I look forward to working with the Chairman 
and the entire Senate to promote additional programs that help 
the less fortunate, as well as the farmer.
    We have assembled here a diverse representation of the 
Pacific Northwest agriculture, and we welcome very much your 
thoughts, your contribution today, and the Senate will be the 
better for it. More importantly, the 2007 Farm Bill will be 
better still because of the input that you make here today. We 
will remember your testimony. We will try and reflect it into 
our policy. And ultimately make--do our part in government to 
help you be competitive. I have always taken enormous pride not 
just in the diversity of our agriculture but frankly in its 
abundance and its quality.
    I have been to many agricultural shows. I have seen 
Northwest products cut against those of other regions, 
excepting Georgia, and we always come out on top. Senator 
Chambliss is an unabashed fan of Oregon Penoir, and I don't 
drink a drop, but he more than makes up for everything I don't 
drink. So, he knows something of the quality of Oregon 
agriculture.
    Senator, thank you for your coming this long way over the 
Oregon Trail a lot faster than they used to come here, but 
thank you for including Oregon in the Agriculture Committee's 
consideration.
    Senator Chambliss and I office next to each other in the 
Russell Building. And when he was elected to the U.S. Senate, 
the quality of our effort and our work went up measurably. That 
will be evident to you when you hear his words and see his 
wisdom today. So we are thankful that you are here and thank 
you all for participating.
    The Chairman. Senator Smith, thank you very much for those 
generous words and, again, for being here today. You're right, 
I have a great affinity, as I mentioned to Jim a little 
earlier, for Oregon Pinot Noir, and I try to do my best to keep 
the economy of the agriculture community in Oregon moving 
ahead. And I appreciate, I'm not sure who's responsible for 
that table back there, but I've already told my staff that I 
want one of each when we leave here to take on the plane with 
us. We've already got some wheat and a great cookie there. I'm 
enjoying Sharon's jerky up here. So, we're going to eat during 
the whole hearing. We're not going to let you all interrupt our 
appetite.
    One thing you don't find back there that we grow a lot of, 
and we always have at our ag hearings, are good Georgia 
peanuts. So I want to make sure that all of these peanuts get 
eaten while we are here, so you all feel free to come up here 
and we will be happy to share these with you. Our first panel 
today consists of, Barry, I hope to get this right, Bushue from 
Salem, Oregon, representing the Oregon Farm Bureau Federation; 
Sherman Reese of Pendleton, Oregon, representing the National 
Association of Wheat Growers; Ray Souza of Turlock, California, 
representing the Mel-Delin Dairy, and Sharon Livingston of 
Salem, Oregon, representing Oregon's Cattlemen--the Oregon 
Cattlemen's Association.
    Again, welcome to each of you. Thank you for coming and 
sharing some thoughts with us today. We look forward to your 
comments.
    I would ask that you keep your opening statements brief. 
We'll be happy to submit your full written statement for the 
record. And, Barry, we are going to start with you, and we will 
go right down this way. Again, thanks for being here and for 
your comments.

   STATEMENT OF BARRY BUSHUE, OREGON FARM BUREAU FEDERATION, 
                         SALEM, OREGON

    Mr. Bushue. Mr. Chairman and Senator Smith, I wanted to 
thank you for the opportunity to testify here today, especially 
here in Oregon.
    My name is Barry Bushue and I am honored to serve as 
President of the Oregon Farm Bureau Federation. We have the 
largest agricultural organization in the state. And our 
interests are wide and diverse.
    In light of the suspension of the World Trade Organization 
talks, Oregon Farm Bureau supports an extension of the 
framework of the current Farm Bill. Despite an ambitious offer 
by the United States to reduce spending on trade distorting 
domestic supports, no progress was made to increase market 
access for American food and fiber products.
    Extending this current farm program with some changes to 
take into account recent trade rulings and new opportunities, 
will help ensure U.S. farmers have the support they need to 
survive in today's contentious global trading environment. This 
is not the time to reinvent the wheel. Mr. Mendelson, chief 
negotiator for the European Union, was quoted as demanding that 
the President veto any Farm Bill that resembles 2002.
    I hope we do not allow the European Union to dictate 
America's agricultural policy.
    The Chairman. We won't.
    Mr. Bushue. The conservation programs, Title 2, within the 
current Farm Bill are extremely important for Oregon producers. 
The Conservation Security Program rewards producers who are 
meeting the highest standards of conservation and environmental 
management by providing payments for a wide range of structural 
and land management practices. Additionally, CRP, EQIP, and 
WHIP are all examples of how government and private landowners 
can work together.
    The Market Access Program encourages the development, 
maintenance and expansion of commercial export markets for 
agricultural commodities. All regions of the country benefit 
from this program's employment and economic effects from 
expanded agricultural export markets.
    Energy issues are very important in the next Farm Bill. 
Farmers are facing increased expenses due to energy prices. 
This is not only felt from energy our farms directly consume, 
but in price increases on production inputs. Oregon agriculture 
sees an exciting opportunity in the development of renewable 
energy resources. However, we need a continued investment in 
technology development along with grants and loans programs 
promoting farmer investments.
    The fruit and vegetable industry is very important to 
Oregon's economy. It is a very fragile industry that has not 
traditionally been part of the Farm Bill structure. The 
planting prohibition on base acres has been the only benefit. 
That appears to be in jeopardy, and I encourage you to address 
this issue and make these growers whole.
    Crop insurance is an important safety net but the program 
needs an overhaul in order to better address the diversity of 
crops and plant varieties in a diverse state like Oregon. In 
addition, disaster payments need to be funded outside of the 
Farm Bill.
    This is an exciting time for United States agriculture. So 
much of what happens in Congress has a direct impact on the 
industry. As farmers and ranchers continue to utilize cutting 
edge technology, yields will increase while maintaining our 
international reputation of providing Americans with the lowest 
cost of food in the world.
    Finally, I would like to take a moment to thank the Chair 
and Senator Smith for their leadership in providing agriculture 
with a Guest Worker Program as part of a Comprehensive 
Immigration Reform Bill.
    It is with sincere gratitude that I thank you not only for 
the opportunity to share with you the many challenges facing 
agriculture today but also for the great work you folks do day 
in and day out in our behalf.
    [The prepared statement of Mr. Bushue can be found in the 
appendix on page 51.]
    The Chairman. Barry, thank you. Mr. Reese.

   STATEMENT OF SHERMAN REESE, NATIONAL ASSOCIATION OF WHEAT 
                   GROWERS, PENDLETON, OREGON

    Mr. Reese. Mr. Chairman and Senator Smith. My name is 
Sherman Reese. I am a wheat farmer from Echo, Oregon. I am 
currently serving as the past-President of the National 
Association of Wheat Growers.
    I thank you for this opportunity to discuss our members' 
concerns about the current Farm Bill and our thoughts on the 
1907 Farm Bill. Effective farm legislation is essential not 
only for wheat growers but also for rural economies and 
American consumers. Farm programs are designed to cushion the 
boom and bust cycles that are inherent to agricultural 
production, and to ensure consistently safe, affordable and 
abundant food supply for the American people.
    The 2002 Farm Bill has strong points and the wheat growers 
that I represent here today believe that the next Farm Bill 
should build on these strengths. But while wheat growers 
generally support current policy, much of the, quote, safety 
net provided by the 2002 Bill has not been effective for wheat 
farmers. Since 2002 wheat growers have received little or no 
benefit from two key components of the current Bill, the 
Counter Cyclical Program and the Loan Deficiency Payment 
Program, for two main reasons.
    First, severe weather conditions for several consecutive 
years in many wheat states have led to significantly lower 
yields or total failure. The loan program and the LDP are 
useless when you have no crop.
    Second, the target price in the Counter Cyclical Program 
for wheat was set considerably lower than the market and 
conditions indicated, and severe weather conditions in some 
areas have created a short crop, which has led to higher prices 
in other areas.
    As a result, there's been very little support in the form 
of counter cyclical payments. As you can see by the chart in my 
testimony, the support level for wheat as compared to other 
commodities for the 2002 to 2005 estimated crop years even as a 
percentage of production costs is relatively low. We are not in 
any way suggesting that other crops receive too much support. 
Far from it. They face the same problems our growers face and 
rely heavily on this safety net.
    We are simply stating that wheat producers need a viable 
safety net also. There is no doubt that America's farmers would 
rather depend on the markets than the government for their 
livelihoods, but the current economic and trade environments do 
not offer a level playing field in the global market place. 
Many of our trading partners support their farmers at much 
higher rate than the U.S.
    At the same time we face continually increasing production 
and transportation costs. Fuel and fertilizer prices are up an 
estimated 24 to 27 percent for wheat growers just from last 
year, it is estimated in a recent FABRI report. And the current 
disaster situation, including droughts, floods and fires has 
been especially troubling for our members.
    In my own farm my costs for anhydrous has gone from 28 
cents to 48 cents. Also our members would like to see the 
conservation programs continue as presently authorized with 
full funding, would like to explore opportunities to streamline 
the program sign-up to be less consuming and more producer 
friendly. We believe in the pursuit of renewable energy from 
agricultural resources support additional incentives.
    In closing I must state that we are firmly committed to 
developing an effective 2007 Farm Bill and welcome the 
opportunity to work with you to do so.
    Thank you for this opportunity. Thank you for coming to 
Oregon, Mr. Chairman, Senator Smith, thank you for the 
opportunity to testify. I will be happy to answer any 
questions.
    [The prepared statement of Mr. Reese can be found in the 
appendix on page 114.]
    The Chairman. Mr. Souza.

           STATEMENT OF RAY SOUZA, MEL-DELIN DAIRY, 
                      TURLOCK, CALIFORNIA

    Mr. Souza. Good morning, Chairman Chambliss and Senator 
Smith. Thank you for holding this western field hearing and 
allowing me the opportunity to testify on behalf of Western 
United Dairymen, which is California's largest trade producers, 
producer trade association.
    I'd like to begin by telling you that my name is Ray Souza. 
I own Mel-Delin Dairy in California and have a milking herd of 
about 1200 total head of dairy animals.
    First of all, let me begin by telling you that there are 
many good things in our current Farm Bill. The Dairy Providers 
Support Program came into play early in the life of the Farm 
Bill and was not used at all during the middle of the 5-year 
period of the Bill.
    But unfortunately it has been reactivated during the past 
few months. But our producer members overwhelming support 
continuing the use of the Dairy Support Program.
    But there are four major points I'd like to remind you 
about in that Price Support Program. First of all, it has cost 
far less than the projected number at the original time the 
Bill was passed.
    Second, at the current level of 9.90 support for the 
program does not simulate any new production, for 9.90 is far 
below the actual cost of production. And in 2002 and early 
2003, a period of the lowest prices in a generation, it did 
help keep the bottom from completely falling off, although I 
will tell you that implementation of the program could have 
clearly been improved, since the price got as low as $8.47 in 
California, while Californians intended that the program not 
allow prices to fall before the 9.90 support.
    The fourth point I would like to make is that this is a one 
farm safety program written that allows the Treasury to recoup 
its costs. The government either sells the surplus dairy 
products back to the commercial market when prices rise or use 
them for nutritional assistance programs, both domestically and 
abroad.
    So, not only are farmers supported when the prices are 
headed down, but consumers also benefit when the prices are 
headed back up as the stored product comes back into the 
commercial market, helping stabilize the price.
    Given the fact that a new WTO agreement seems very 
unlikely, there is no reason that the Dairy Price Support 
Program should not be continued.
    Given the history of the expenditures of the Farm Bill, the 
fact that the cost is recovered, and what appear to be far 
higher input costs for dairy farmers in the perceivable future, 
the score of this program in the next Farm Bill should be 
significantly lower if the cost level of 9.90 remains the same.
    The 2002 Farm Bill also includes authorization and funding 
for the Dairy Export Incentive Program for DEIP. DEIP is our 
counter to the European Union's aggressive support subsidies 
that are often responsible for keeping world dairy products 
prices artificially low.
    It is fully WTO legal, authorized and funded by Congress 
and signed into law by the President of the United States.
    Mr. Chairman, during that period of the extremely low 
prices in 2002 and 3 the Department only released DEIP bonuses 
for a small amount of butter.
    So far in 2006, again with very low prices and much 
economic pain for dairy farmers, there is nothing on DEIP.
    Something this committee could do tomorrow to help farmers 
in the rural communities nationwide is to ask the Secretary of 
Agriculture to authorize some DEIP bonuses as our hopes for a 
successful outcome in the Doha Round, have all been evaporated 
and this would be an appropriate time to pursue our export 
goals aggressively, using all available legal tools. DEIP is 
one of those tools.
    I'd also like to just briefly touch on the conservation 
title. The conservation title includes a very important program 
for western dairymen.
    The EQIP program has worked very well within California, 
and dairymen in my state have been very involved in the EQIP 
program. We have a very good relationship with NRCS chief Bruce 
Knight in Washington, D.C., and state conservationist Lincoln 
Burton. Mr. Burton was especially helpful in developing ways to 
move funds from counties where EWIP was under-subscribed to 
counties where the program was over-subscribed. This resulted 
in the additional completion of 21 critically important 
projects without requiring any additional funding for EQIP.
    This exemplifies the importance of local control to the 
success and efficiency of the program.
    Mr. Chairman, in the interests of time I will conclude my 
testimony, but I have provided additional comments in the 
testimony provided to you and the committee. Thank you again 
for holding this hearing and allowing me to testify. I will be 
happy to answer any questions you or other members of the 
committee may have about these issues.
    [The prepared statement of Mr. Souza can be found in the 
appendix on page 117.]
    The Chairman. Thank you very much.
    Ms. Livingston.

            STATEMENT OF SHARON LIVINGSTON, OREGON 
             CATTLEMEN'S ASSOCIATION, SALEM, OREGON

    Ms. Livingston. Chairman Chambliss, Senator Smith. Thank 
you for allowing me to be here and speak for the Oregon cattle 
industries' perspective on the upcoming 2007 Farm Bill.
    I am Sharon Livingston. I live in Long Creek, Oregon. I am 
current President of the Oregon Cattlemen's Association.
    And my grandmother came to Long Creek, across the Oregon 
Trail, with two very, very small children, and she settled in 
Long Creek, and I'm proud to still be there.
    The American public wants quality food and open spaces. 
Livestock producers provide quality food and open spaces.
    With regulations imposed by the Endangered Species Act, 
Clean Water Act, Clean Air Act and others, it is becoming 
increasingly difficult for producers to comply and still stay 
in business.
    Most areas, many areas are being turned to development, and 
good ag production land is lost. Livestock producers provide 
watershed, wildlife protection and habitat for numerous 
species.
    In turn, ranchers need to be rewarded for their 
environmental improvements and contributions. Programs such as 
EQIP and WHIP are most utilized by ranchers. We must have 
strategically located offices and qualified, credible personnel 
to aid in applying for and implementing these programs.
    Ongoing research into environmental issues and best grazing 
management practices is essential. We rely a great deal on 
Oregon State University for much of this research, and dollars 
need to be made available for continuing programs.
    Our association and industry just voted a 50 cent increase 
in our beef check-off, and ten cents of each goes to research 
for grazing and ten cents for animal science. We feel we're 
stepping up to the plate.
    I can't say enough about alternative fuel sources and the 
need to relieve livestock producers from the dependence upon 
foreign fuel. All you had to do was see the news this morning.
    Diesel's not available. I buy my hay, and it has to be 
trucked in a minimum of 112 miles.
    The Market Access Program, I echo what Mr. Bushue said. We 
need to develop our markets and regain for Oregon the export 
market that we had to Japan.
    Country of origin labeling could go hand in hand with 
national animal I.D. They are not the same thing, however. I 
think it's time that our people know where their beef is bred, 
fed and processed.
    Thank you for the opportunity to be here. I will answer any 
questions. The livestock industry is important to Oregon, and I 
appreciate your support in Congress.
    [The prepared statement of Ms. Livingston can be found in 
the appendix on page 92.]
    The Chairman. Thank you. I thank all of you very much for 
that very informative testimony.
    Let me start, Mr. Bushue, Mr. Reese, with a set of 
questions that we've asked in each hearing, and we will 
continue to ask as we go through this. And these are on some 
very basic issues of the current Farm Bill, and will help us 
prepare for, or how we need to address these issues in the next 
Farm Bill.
    First of all, how would you prioritize Farm Bill programs 
generally and the commodity title specifically and how would 
you rank the relative importance of the Direct Payment Program, 
the Marketing Loan Program, and the Counter Cyclical Payment 
Program. Mr. Bushue?
    Mr. Bushue. That's a tough question to ask the President of 
a general farm organization, so I will pass that one off by 
basically saying, for as diverse of agriculture as Oregon has, 
it is difficult for us to prioritize. They all play a very 
significant role in various types of products and commodities 
that we raise here. So, we wouldn't prioritize. We'd merely 
fund them at a higher level.
    The Chairman. OK. Mr. Reese?
    Mr. Reese. Well, I'll go out on a limb. The wheat farmers, 
as my testimony indicated, feel that the last few portions of 
the LDP Marketing Loan Program and counter cyclical have not 
been helpful.
    We would prioritize the direct payment as being the most 
important, in terms of cash-flow and in terms of making your 
banker comfortable with an operating loan, the last two are 
maybes and the first one is for sure.
    So, for us the direct payment is most important, followed 
by the marketing loan, LDP program, and then last, counter 
cyclical.
    The Chairman. OK. We can expect an effort to further reduce 
payments limits in the next Farm Bill. The payment limits need 
to be modified in the next Farm Bill, and why?
    Mr. Bushue. I think from the Farm Bureau's perspective, the 
Farm Bureau has always supported the current Farm Bill and 
there have been payment limitations in place I believe since 
the 1970's.
    We would not effectively ask for any change in that or 
reduction certainly.
    The Chairman. Mr. Reese?
    Mr. Reese. We feel the same way. Obviously, farms have 
gotten bigger, and those payment limits need to be commensurate 
with increased farm size.
    If we are going to look at increasing the direct payment, 
that portion of the commodity title is going to have to be 
increased as well, something up from the current 40,000 per 
unit.
    As far as the overall size, we would probably support, we 
do support keeping it where it is, the current limit, overall 
limit.
    The Chairman. OK. The Doha Round of negotiations seeks to 
provide additional market access for U.S. agriculture goods in 
exchange for cuts in domestic farm payments.
    Is this a reasonable exchange for farmers?
    Mr. Bushue. Well, it would be nice if the Doha Round had 
been completed, but certainly Americans produce a lot more than 
they are able to consume, and sometimes up to 30 percent of our 
agricultural products need to be exported, so trade is 
absolutely critical to the future of agriculture, not only in 
Oregon but in the United States.
    And I think if we could have gotten by with reducing 
domestic supports, mostly agricultural industry supported that, 
but only in a tradeoff for increased market access. And since 
that didn't happen, I think it's going to make your job as a 
Chairman of the Agriculture Committee considerably harder, but 
we'll support you where we can.
    Mr. Reese. As far as wheat's concerned, I think we're in a 
more critical situation than probably almost any crop.
    In Oregon, as most of the people in the audience know, 85 
percent of our wheat is exported. The figure drops to about 50 
percent nationwide. So we are heavily dependent upon exports to 
keep wheat viable.
    At the same time a lot of our members across the Nation and 
in Oregon are hanging on by the finger tips, and these direct 
support payments that we are getting are in some cases the only 
profit margin the farmer has left.
    So, to trade that away for a hope in increased market 
access is a gamble we're willing to make, but only if we can 
find a way to make it a quid pro quo. We haven't found that yet 
obviously.
    The Chairman. Some organizations have explored the 
possibility of a revenue based approach for the commodity 
title.
    What are your thoughts on a revenue based approach as a 
safety--revenue based approach to a safety net as a replacement 
for the current commodity programs?
    Mr. Bushue. It is my understanding the corn industry is 
looking into this very strongly, but I think at this stage, 
going back to my comment about reinventing the wheel, I think 
it is an awfully large fundamental shift in the way in which 
Farm Bill programs are funded, and I don't know that we would 
support that wholly at this stage. Maybe for 2007 or later on, 
after we have extended this Farm Bill.
    But I think at this stage we had probably better stay where 
we are, because I'd be concerned about what revenue base would 
affect on the conservation programs, crop insurance and maybe 
even Title 1. So I think at this stage the Oregon Farm Bureau's 
preference would be to say no to that one.
    The Chairman. OK. Mr. Reese?
    Mr. Reese. Well, Mr. Chairman, we've been looking at that 
concept internally within NAWG, and can't find yet a way to 
make it work across the board.
    The most we've been able to see is 70 percent support.
    We're wondering what happens with the other 30 percent. Do 
you fill that with crop insurance? Do you fill that with 
another direct payment?
    We farm in such a low margin level to begin with, that to 
have only 70 percent direct support for us probably would not 
work.
    The Chairman. OK. Last, should an increase in conservation 
or energy programs come at the expense of commodity programs?
    Mr. Bushue. You know, that's another difficult one. We 
think that energy in the state of Oregon, and of course 
nationwide, is a huge issue and a huge cost to agriculture.
    But to take money from commodity payments to fund 
conservation seems like robbing Peter to pay Paul.
    I guess like most farmers, we want as much as we can get in 
terms of trying to make sure we have a safety net, because food 
security is clearly a national security issue. I'm not 
convinced that the tradeoffs would be worth it in terms of the 
agricultural industry as a whole. So, I would say no.
    Mr. Reese. Perhaps over time that concept would work. Right 
now I don't believe it would.
    And one of the main reasons is, if you look at conservation 
and also energy crops, not every farm is blessed with the 
opportunity to participate in conservation programs. They're 
very unequally spread.
    And so from that standpoint, I think there's an inequality 
there that has to be addressed before that kind of fund 
transferable is even considered.
    Other than that, I think we still need to keep with the 
current commodity situation as it already is with the funding.
    The Chairman. Mr. Souza, the 2002 Farm Bill, as you know, 
included the Milk Income Loss Contract program to assist dairy 
producers when prices were low. This has been a somewhat 
controversial program.
    But should Congress extend this program, or are there other 
remedies low commodity prices that you would recommend?
    Mr. Souza. The MILC program is not something that's worked 
very well for the western dairy producers.
    We feel that continuation of the program, you should do a 
couple things.
    One would be, it has to become more equitable. It's very--
discriminates toward western producers, family farmers in the 
West. As you know, it basically sets a cap of about 200 cows--
or 150 cows. And on the West Coast, out here, Oregon included, 
our numbers are much bigger.
    So we are not covered, as some of the smaller herds are. So 
we think any continuation of the MILC program or likewise 
program, should be less discriminatory, it should embrace all 
dairy producers, not just a select few.
    The Chairman. OK. Currently only dairy producer 
cooperatives have the ability to forward contract with their 
members.
    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 noncooperative dairy producers also be able to 
utilize this risk management tool?
    Mr. Souza. Well, just a couple of things. One is that 
forward contracting really does not work very well with the 
concept of pooling.
    It does affect those people that prefer to stay, to take 
the pool price for their milk.
    Second, it was part of the 2002 Farm Bill as a pilot 
project. It was not driven by producers. It was primarily 
pushed by the processors. It has not been popular with 
producers. We had a very low participation in the pilot 
project.
    And the analysis shows that those producers that did 
participate in forward contracting actually fared less than 
those that did not, fared better than those that did.
    I don't believe that it has a real value for long-term 
stability for producers. It may have that for the processors.
    Mr. Chairman. Ms. Livingston, what effect would bans on 
packer ownership and forward contracting of cattle and 
mandatory country of origin label have on livestock producers 
in this part of the country?
    Ms. Livingston. There is no definitive answer. I spent some 
time the last week speaking with major cow/calf and feedlot 
people, and we know that in order to get our product to the 
final market, we must have packers. When packers don't have a 
supply, then they shut down. We lost a facility in the Pacific 
Northwest that was a major part of our marketing of cull cows. 
You know what those are. They are a major part of our income. 
Now when I sell a cull cow, or anyone in Eastern Oregon, I 
believe they go to Fresno, California, for slaughter.
    We must have our packing houses. I prefer to work through 
collaboration, consultation, and cooperation, rather than 
litigation and legislation.
    I think we have legislation on the books. Let's enforce it. 
We don't need anymore laws.
    Now, it's a Catch-22, and here I sit telling you this. But 
it's a serious issue. There will always be ways for packers to 
own cattle. We're not going to stop that. And I don't believe 
in whipping them to death, because we do need them.
    The Chairman. OK. Talk for a minute about mandatory price 
reporting. We have been trying to get this reorganized in 
Congress now for a couple of years. The House passed a 5-year 
reauthorization. We passed a 1-year. And we've been unable to 
agree with the House on a compromise on that issue.
    Mandatory price reporting is operating on a voluntary basis 
now. How is that working and what are your thoughts on whether 
or not we should reauthorize the legislation, requiring 
mandatory price reporting.
    Ms. Livingston. The people that I spoke with said they 
thought it was working. It's like anything that's voluntary.
    But when you force people, it seems there are always ways 
to avoid this.
    So, at this point I can't give you a definitive answer on 
that, and I apologize. But it's a very complicated, complex 
issue. And we'll just have to live with it. And we don't have 
the voice that some of the people in the Midwest do. And that's 
where much of this takes place.
    The Chairman. From an Oregon Cattlemen's Association 
standpoint, what's your most pressing environmental issue and 
what's your most important conservation program?
    Ms. Livingston. Anything to do with the Endangered Species 
Act is pressing. We can use the EQIP. I personally have used 
EQIP. We can use WHIP.
    Anything that rewards our people for their good 
conservation practices is important.
    The Chairman. OK. Senator Smith?
    Senator Smith. Thank you, Mr. Chairman. I think as I am 
understanding these mikes, you've got to be close to them or 
you'll be cutoff.
    I know this hearing is on the Farm Bill. But two of the 
committees, or at least one of the committees I serve on, the 
Finance Committee, deals with an issue that I believe has a 
great impact on the future of farming and ranching in this 
state. And that is the issue of the estate tax.
    So I wonder, Barry, if you, speaking for farmers generally, 
can you give us some idea what will be the impact to future 
farmers and ranchers if we don't come up with some compromise 
that the President can sign?
    This is an issue that's often described as something done 
for the rich. Are your members all rich, Barry?
    Mr. Bushue. We only wish we were, sir.
    The death tax, as we prefer to call it, has been a critical 
issue for agriculture, not only in Oregon but nationwide, and 
we were very frustrated and frankly very upset that we weren't 
able to get some kind of rationale, common sense solution to 
the problem through the Senate.
    Of course, full repeal is where we would like to be.
    But frankly, we were looking for a solution, and solution 
appeared to be in the Thomas Bill.
    It was somewhat frustrating, I guess, just being blunt as I 
usually am, that there was a number of other issues thrown in 
there for reasons of trying to gain votes.
    The minimum wage issue was put in there. I understand that 
had some obvious problems.
    But getting right to the nuts and bolts of it, in order to 
pass on a family farm, and there's folk in this room right here 
that are trying to do that today, they're not wealthy people, 
they're not big farmers, they're family farmers that have 
invested their lives and their lifestyles in agricultural 
operations, and they are trying to pass it on to their 
children.
    To be faced with huge tax liabilities in the event of their 
unfortunate death, to pass it on to their children makes it 
almost impossible to pass some of these operations on and keep 
them in family farming.
    And when you look at agriculture as a whole nationwide, 
virtually all farms are family farms. I think the exact figure 
is 95 and a half percent or something like that, are family 
farming operations.
    Oregon has made a huge investment in its land use policies 
to try and maintain an agricultural land base. Nationally there 
is a need for an agricultural infrastructure to maintain 
agriculture without an opportunity to pass those family 
operations on and face these families with tax debts that the 
only way they can pay them is to sell land and their other 
assets, which land is their main one, seems somewhat short-
sighted and very narrow minded, frankly.
    And I know where your support has been, and I'm sure 
Senator Chambliss shares that.
    And so, any voice you can use to rectify this situation is 
going to be not only welcome but absolutely critical to the 
survival of agriculture and the small farms that make up the 
bulk of agriculture in the United States.
    Senator Smith. One of the most contentious issues that I 
have ever dealt with and have done so for the last 10 years in 
the U.S. Senate is the issue of immigration.
    I have, as people in this community know, I have been a 
sponsor of a Guest Worker Program from the first year I was in 
the Senate.
    And yet we seem to be at logger heads as a nation.
    But I wonder if Barry or any of you can speak to the issue, 
what it would mean to Oregon agriculture if we just passed the 
House Bill, which is a fence, security only, and fining 
employers.
    What would it mean to horticulturalists, nurserymen, 
wineries, farms in general?
    Mr. Bushue. Well, with the help of Senators such as 
yourselves, we have long tried as an agricultural organization, 
both statewide and nationally, to make sure we had a legalized 
work force.
    This isn't something new to agriculture, and it frustrates 
us I guess that the American public seems to have taken this up 
as an issue as something that's new. It's not new to us. It 
certainly isn't new to you, sir, by the fact that you've been 
so involved in this over the last 10 to 12 years.
    An enforcement only bill such as passed by the House would 
put us in the position of being law breakers and put us in the 
position of having to create a work force from nothing.
    We currently have a work force, some of which is legal. All 
of mine are, of course. But it does, it puts us in a bad 
position of trying to find a work force which cannot be filled 
from outside the place we have them now.
    If you look at the employment rate, the unemployment rate 
in the United States is rated somewhere around 4 percent. Many 
economists will tell you that that is full employment.
    If you were to deport 11 to 15 million people tomorrow, 
there aren't enough American citizens left to fill that void 
that are employable. Let alone the rhetoric that we hear about 
people lining up to take these jobs, if only we paid enough. 
There isn't enough profit in agriculture to pay 20 and $30 an 
hour for labor.
    Senator Smith. Barry, on that point, I want to emphasize 
something. I often hear on talk radio in Oregon it said that 
all you have to do is pay them $50 an hour and you'll get 
Americans to do this work.
    But assume, if you did that, say you were a pear grower in 
Medford or in Hood River, and you paid $50 an hour for your 
labor, doesn't that just mean you wouldn't grow pears and 
produce these commodities in Hood River or Medford?
    Mr. Bushue. It just means I wouldn't produce them at all.
    Senator Smith. It would go to another country.
    Mr. Bushue. Absolutely.
    Senator Smith. OK.
    Mr. Bushue. And I think if I could just take liberty here, 
I seldom listen to talk radio because you get exactly what you 
pay for.
    Senator Smith. Well, you know, I don't in any way want to 
discount the security concerns our country has, and the 
legitimate demand the American people make that we secure our 
border. I think that those things are essential, and have so 
voted.
    But I think to stop there without a Guest Worker Program 
would be economically and humanitarilly damaging to this 
country, and this state in particular, in ways that are not 
comprehended by all.
    And I just simply hope that the American people will 
understand that we can't stop there. And I'm not talking about 
a path to citizenship. I'm talking about a Guest Worker 
Program, at a minimum, beyond the House Bill, must be 
ultimately enacted, or it will be damaging to people on both 
sides of the issue.
    Thank you, Mr. Chairman.
    The Chairman. Well, thank you, and, you know, you raise one 
of the most significant issues that we have faced in this 
country, and certainly your tenure in the U.S. Senate and my 
tenure in the U.S. House and in the Senate. The immigration 
issue is the most volatile, most explosive, most politically 
charged issue that I've ever seen.
    And I have been a strong advocate of reforming the current 
H2A Program for agriculture, because it is too expensive and 
too cumbersome.
    And we've got to have a temporary worker program of some 
sort that will allow everybody at this table and every farmer 
and rancher across America the opportunity to have a pool of 
workers who are here legally from which to choose. And we're 
going to continue to work on this very sensitive issue.
    Also a couple of you have mentioned Doha, and let me just 
say that Gordon's exactly right, we're going to write the Farm 
Bill. We're not about to let Europeans dictate to us or 
participate in the writing of that Farm Bill.
    As I have so often said around the country, I'm a lot more 
concerned about farmers in Paris, Texas, than I am farmers in 
Paris, France.
    And I'm still very hopeful that we can reach some sort of 
agreement within Doha, because, again, each of you express how 
valuable it is to export your products, which we know are the 
finest agricultural products grown anywhere in the world.
    But unless we achieve the market access and unless the 
Europeans quit being protectionists, as frankly my friend Mr. 
Mendelson, who likes to criticize us, but the truth of the 
matter is, they have been extremely protectionists of their 
farmers. And we'll never have an agreement unless they decide 
to get reasonable and give us true market access.
    Senator Smith. Mr. Chairman, isn't it true that U.S. levels 
of agricultural subsidies are about a third what European 
subsidies are?
    The Chairman. That is exactly right. They just provide them 
in a different way. Ours are more market oriented, which is why 
we think the 2002 Farm Bill policy has worked very well.
    We've got some shortfalls, as our wheat growers across the 
country have reminded us everywhere we have been.
    Mr. Reese. And will continue to do so.
    The Chairman. We will continue to look at that particular 
policy as we go forward with the next Farm Bill.
    So, again, thank all of you for being here. We appreciate 
it very much.
    And we will now ask that our second panel to come forward. 
Mr. Ken Lorensen, Salem, Oregon, representing the Oregon 
Department of Forestry; Mr. Klaren Koompin, I hope I've got 
that right.
    Mr. Koompin. You did well, sir.
    The Chairman. From American Falls, Idaho, representing the 
Potato Growers of Idaho; Mr. Pete Brentano of Wilsonville, 
Oregon, representing the Oregon Nurserymen Association; Mr. 
Ernest Gallo, Modesto, California, representing the Wine 
Institute and California Association of Wine Grape Growers.
    So, gentlemen, thank you very much for being here. We will 
follow the same format of taking opening statements from you, 
and again I would remind you that we will accept your full 
written statement for the record.
    Mr. Lorensen, we will start with you.

         STATEMENT OF TED LORENSEN, OREGON DEPARTMENT 
                   OF FORESTRY, SALEM, OREGON

    Mr. Lorensen. Chairman Chambliss, Senator Smith, thank you 
very much for being here today and inviting me to testify.
    I notice from the introduction that the focus has been on 
agriculture and its importance to Oregon.
    I just want to talk a little bit about forestry and its 
importance to Oregon and the West as well.
    And before I get to that, I want to mention that I think 
that in the context of the Farm Bill, there's some perspective 
at least in the West Coast that forestry is often the poor 
cousin to agriculture in that context. But at least in the West 
Coast and in Oregon I think there needs to be a very strong 
marriage between forestry and agriculture. Many of our 
producers do both types of activities. And having both means 
success is important to their overall health.
    Within Oregon 57 percent of Oregon's forest land is owned 
by the Federal ownership. Both the Forest Service and Bureau of 
Land Management. But 85 percent of Oregon's timber harvest 
comes from private lands. Oregon's the nation's largest 
producer of lumber. And we have been in that capacity for a 
long time.
    In the context of the Nation and forestry security, for a 
long time imports have been a big portion of how we've met our 
wood products demands. Now 30 percent of the nation's demand 
for wood products, is met by foreign imports, mainly from 
Canada and increasingly from other nations, including nations 
such as South American countries and New Zealand.
    It's very true that family forest lands are extremely 
important and vulnerable part of the land base, that's been 
assisted by Farm Bills in the past.
    Nationally 40 percent of the nation's forest lands are 
family owned forests. In Oregon that's only 20 percent. But yet 
85 percent of the wood products provided by Oregon's landowners 
come from private lands. Increasingly the family forest lands 
are critically important to that 85 percent of the harvest.
    In some Eastern Oregon counties, particularly like Baker 
County, Malheur County, family forest landowners now make up 
the largest share of the timber harvest, even though they are 
only 20 percent of the ownership.
    And, again, Eastern Oregon's fairly unique in the sense of 
Oregon forestry, but I think that it is important to think 
about the difference as you look at Oregon's forests from the 
dry east side to the wetter west side.
    So, forests are very important to Oregon from an economic 
standpoint. They provide 85,000-plus jobs that are direct and 
over 190,000 indirect and direct jobs, because of a higher 
multiplier effect that occurs with the higher paying forestry 
type jobs.
    In terms of economic output, Oregon's forest sectors 
provide $22 billion of output, 11 percent of the total value of 
goods and services produced in Oregon.
    Again, that's disproportionate because of the higher labor, 
higher prices for labor paid for those sector jobs.
    In the last several years we have done some fair amount of 
work looking at what the contribution to Oregon's forests can 
add to Oregon's economy.
    And I've provided a fair amount of information on some 
studies done by the Oregon Forest Resource Institute that 
really concluded that without major change in Federal timber 
harvest, the statewide Oregon harvest can be increased by 25 
percent, or an additional 20,000 forest sector jobs.
    The Farm Bill can contribute greatly to that kind of 
success, if it was written well. And in our opinion the Farm 
Bill needs to think about a broader policy perspective that we 
call sustainable forest management, that tries to integrate in 
a cohesive way environmental, economic and social values that 
come from our forest lands.
    Such a policy, to be undertaken, would include a number of 
concepts.
    I want to express the importance of a sustainable forestry 
management policy across all ownerships, including Federal, 
state, and other public, industrial and family forest lands. It 
would encourage and promote a dialog around establishing such a 
national policy. It would encourage new and innovative policies 
and create new nonregulatory programs. It would clarify and 
enhance the rolls of Federal, state and local governments, 
respectful of the delegation of powers, promote regional 
collaboration and joint planning and program delivery.
    It would respect the critical role of private forest 
ownership in our country while striving to conserve in a fair 
and equitable manner the public benefits they provide.
    And very importantly, it would recognize the Federal lands 
must better contribute to the goals of sustainable forests in a 
coordinated manner across landscapes, that in some parts of the 
country these lands have a pervasive influence on 
sustainability of all forest lands.
    I do know that you flew yesterday, looked at some of the 
fires, and again in the context of fire protection in Oregon, 
if the Federal lands cannot provide good fire protection, 
private lands will be at such risk, they will disinvest in 
those lands and convert them to other uses. And we're seeing 
that happen across portions of Eastern Oregon and Southern 
Oregon.
    Sustainable forestry policy needs to promote new and 
creative delivery systems. Need to encourage reason in the 
forest tax policy. Again, the death tax was talked about 
earlier, but I think that's equally important for forestry. And 
it does need to recognize the local influences that impact U.S. 
forests and how we need to be able to compete fairly and 
equitably.
    I do want to make the point in that context, that the 
National Association of State Foresters and Society of American 
Foresters are both working on these ideas and invite you to 
join them to further develop them as you develop the Farm Bill.
    Forestry needs to continue to be a part of the Farm Bill, 
and I know you're probably going to ask the question, how do 
you prioritize things.
    But the bottom line, the Farm Bill needs to place a higher 
priority on forest lands than currently exists and needs to 
encourage better participation by forest landowners.
    I do want to make one point with regard to the Western 
States, particularly the coastal states, is that most of our 
states have regulatory forest practices acts.
    And as a principle that could be looked at, I think it's 
important to think about in the Farm Bill, is to try and reward 
those states that are doing the most.
    And I think in the past there's been a little bit of 
inequity in how some of the Farm Bill programs have treated 
forestry and often rewarded those that have done the least.
    As a simple example, in Oregon we require that landowners 
reforest after timber harvest. As a result of the requirement 
to plant, that makes those sorts of activities ineligible for 
Federal cost share programs. And we do provide cost share, 
Federal cost share dollars to land owners that plant at higher 
levels than what the regulation requires.
    But again those kind of concepts, as you get into wildlife 
issues, Federal ESA issues, those sorts of things, as a 
principle make a lot of sense to us.
    It's very true that the Farm Bill has been very successful 
and education's very important to that part, and we hope to 
continue that as well. Thank you.
    [The prepared statement of Mr. Lorensen can be found in the 
appendix on page 98.]
    Mr. Chairman. Thank you very much.
    Mr. Koompin.

STATEMENT OF KLAREN KOOMPIN, POTATO GROWERS OF IDAHO, AMERICAN 
                          FALLS, IDAHO

    Mr. Koompin. You did very well. Chairman Chambliss, I'm 
going to attempt to poke five pounds of wisdom this three pound 
bag we've go, and I can see it's pretty difficult, but I'm 
going to take off here.
    You did a great job with my name. I'm from American Falls, 
Idaho. We're representing not only PGI but also the National 
Potato Council.
    I've served as President of the PGI as well as Executive 
Director of the United States Potato Board, as well as 9 years 
on county committee, FSA committee of Prior County. You can 
tell our name went from, start out of school, caboose, we hit 
Ellis Island, we went from Greek to Dutch just by the stroke of 
a pen.
    So that's going to bring me into one of my first critical 
issues that probably transcends above all titles in the Farm 
Bill, and that is the labor shortage, immigrant shortage of 
farm workers here in the United States.
    As potato growers, we are very dearly affected by this. We 
applaud the vision of the Senate in passing a somewhat ag jobs 
bill by Senator Craig that we supported very well, and after 
listening to Senator Crapo's statement in Moscow, I believe he 
softened his stance a little bit also, and is leaning that 
direction, so you might want to ask him if that's still true.
    It will become very critical, and we need to solve it. We 
also need to give those people a pathway to citizenship.
    With respect to any other titles of the Farm Bill, we have 
to always keep cognizant that we do not put one farmer at an 
advantage over another one. And specifically talking about the 
CSP program.
    Any time you have the ability to pertain $40,000 more per 
year than your next door watershed neighbor, so to speak, and 
you're going to do that for it looks like now maybe forever, 
because there will be watersheds that will never be eligible 
for the CSP, that's a distinct economic disadvantage that the 
government has set up for one farmer versus another.
    And anything in the Farm Bill that puts an advantage of one 
area over another must never happen.
    The same with the RMA. There are provisions in that, as far 
as the AGR, it has been studied now for 5 years, and it either 
needs to be implemented across the country, as the CSP must be, 
or eliminated. It cannot be targeted to one area versus the 
other, and have that opportunity for one farmer and not the 
other.
    Getting to the Farm Bill titles. I think the first one the 
potato growers are most concerned with are obviously the 
planting flexibility.
    We all know that was specifically mentioned in the 
Brazilian case, and we all know that it didn't--you know, it 
was not illegal. It was only said that this is obviously an 
amber box payment, not a green box payment.
    We cannot allow specialty crops, particularly potatoes, to 
be raised on base acre government subsidized soybean/corn 
acres. And we do not want any payments from the government, 
potatoes growers never have, and will not.
    But we feel very strongly that we do not want to subsidize 
potato crops on those soybean or corn acres also. And in fact 
that's exactly what it is. And you've got my written testimony.
    Mentioned the only other one is transportation. It is 
absolutely critical. All 50 states trade with each other. We 
trade with the world. We need two tracks. We need an evening of 
the wage law between Washington, Oregon, New York, Florida. I 
believe a repeal of the 1975 law that fixed the weight limits 
would automatically terminate that, or allow a heavier load.
    Right now we're working with an 80,000 limit. We should be 
able to go to 102. We have states that go from 80 to 146. You 
might be interested to know that the highest weight law in the 
states is 146. That's New York. The 80,000 ones are pretty much 
stretched through the Midwest. All trucks have to go through 
the Midwest from coast to coast. So, they are limited to 
80,000. That in itself would probably show, what, 15, 20, 30 
percent savings in transportation costs. So that is something 
that has to be done. Thank you.
    [The prepared statement of Mr. Koompin can be found in the 
appendix on page 79.]
    The Chairman. Thank you very much.
    Mr. Brentano.

  STATEMENT OF PETE BRENTANO, OREGON NURSERYMEN ASSOCIATION, 
                      WILSONVILLE, OREGON

    Mr. Brentano. Chairman Chambliss and Senator Smith, my name 
is Pete Brentano of Brentano's Tree Farm, and thank you for the 
opportunity to testify here today.
    I am co-owner of our family farm in Oregon's Willamette 
Valley where we grow shade and ornamental trees as well as a 
variety of other specialty crops.
    And I have the pleasure this year to serve as the President 
of the 1500 member Oregon Association of Nurseries which 
represents Oregon's nursery and greenhouse industry, which is 
the state's largest sector of agriculture with annual sales in 
excess of $840 million.
    Today I want to focus most of my talk on plant pest and 
disease issues.
    Plant pest and diseases threaten West Coast nursery growers 
with serious economic harm due to crop loss, closed markets, or 
burdensome regulatory restrictions.
    In this respect we differ little from growers of Florida 
citrus or soybean farmers. What's popularly known in the press 
as sudden oak death threatens to result in very restrictive and 
expensive regulations for West Coast nursery growers.
    A more effective approach to nursery regulation and 
inspection is needed. And one that relies on nurseries to 
develop and implement a system to prevent the introduction 
pests and diseases onto the nursery.
    We believe the next Farm Bill must provide for a multi-
pronged effort as follows. Authorize and direct research on 
systems of nursery production and measure their efficacy in 
preventing the introduction and spread of plant pest and 
disease problems; develop and pilot test systems of production 
for various types of nurseries in different geographic regions 
of the United States; establish definite time tables for the 
dissemination and adoption of the new systems of production; 
and establish definite time tables for the implementation of 
regulatory programs, based on these new systems of production.
    We at the OAN believe tremendous opportunity exists to 
improve and enhance nursery regulation and inspection, and the 
Farm Bill should establish clear and overarching goals to guide 
development of new regulatory policy, based on a comprehensive 
program of research, demonstration and extension.
    And I've included with my testimony a brief discussion 
paper describing that position.
    Quickly I want to call your attention to several other 
issues that merit our attention. Water quantity and 
availability. Based on a Federal and state partnership study 
the availability of water for western agriculture and develop 
an inventory of potential new water stored sites, soil 
conservation and habitat restoration, support research and 
incentives to assist nurseries with soil erosion, water 
conservation and efficiency, create a specialty crop title in 
the Farm Bill.
    We want to see emphasis and organization of farm policy for 
the benefit of specialty crop agriculture. We don't want 
subsidies but we have very focused issues and concerns. Support 
the industry's growing partnership with USDA rural development 
in our joint effort toward energy efficiency.
    And even though it's not a part of the Farm Bill, 
agriculture needs a comprehensive immigration reform bill that 
embraces a Guest Worker Program because frankly without labor, 
the nursery industry would not survive.
    Thank you for listening to my testimony today.
    [The prepared statement of Mr. Brentano can be found in the 
appendix on page 59.]
    The Chairman. Thank you. Mr. Gallo.

         STATEMENT OF ERNEST GALLO, WINE INSTITUTE AND 
       CALIFORNIA ASSOCIATION OF WINE AND GRAPE GROWERS, 
                      MODESTO, CALIFORNIA.

    Mr. Gallo. Chairman Chambliss and Senator Smith, thank you 
for the opportunity to appear before you today and present to 
you some key facts of the wine and wine grape industry.
    I'm proud to represent both the Wine Institute, 
California's public policy advocacy association, of over 900 
wineries and associated businesses, and the California 
Association of Wine Grape Growers, also known as CAWG, which is 
the California advocacy group for our wine grape growers.
    I am a third generation to be involved with the family 
winery, the E&J Gallo Winery of Modesto, California.
    The California vintners face increasingly competitive 
environments. I'd like to share with you some of the key trends 
in our industry and propose solutions that rely upon the 
cooperation of the industry, state and Federal Governments.
    In the context of the Farm Bill, I believe laying out this 
information will help to convince you as policymakers that our 
industry is dynamic and could be a great fuel for the United 
States 21st Century agricultural economy, if given the proper 
support for research and development.
    Imports as of 2005 data represent more than 27 percent of 
the wine consumed in the U.S. today. Since 1984 the value of 
imported wines has grown from 954 million to 3.8 billion in 
2000. This dramatic rise represents a structural shift from old 
world European wines to new world wines, particularly 
Australia.
    Australia surpassed France 2 years ago and is poised to 
overtake Italy as the No. 1 importer into the United States. 
Australia's success reflects skilled marketing in a focused 
export driven campaign strongly supported by government and 
well organized industry.
    A partnership between the industry and the government has 
also created one of the best research programs for viticultural 
knowledge in the world. Their research program is seen as a key 
driver for improving quality and marketability of their wine 
into the export market.
    California's home, and so is Oregon, to the most productive 
agriculture in the world. It is also the most urbanized and 
fastest growing state. These are pressures that our growers 
face on a day-to-day basis, and the pressures are increasing 
all the time.
    The Farm Bill debate is a perfect forum for this discussion 
to really come to fruition.
    To that end, several of us in the grape industry have 
developed an industry paper that I have submitted to the 
committee into the record with my full written testimony, which 
outlines more fully for you what we would like to see in the 
next Farm Bill to ensure the grape industry's place as the 
sixth largest crop in America and the largest specialty crop.
    And this is by date value, not the added value that comes 
with the industry which is three times as much.
    Thank you for the opportunity to comment, and I'm delighted 
to answer any questions you may have. Thank you.
    [The prepared statement of Mr. Gallo can be found in the 
appendix on page 70.]
    The Chairman. Thank you very much, Mr. Gallo. And as I 
mentioned to you before the hearing, are the namesake of a very 
famous family that we're all familiar with in the winemaking 
industry. And we're very pleased that you're here. I don't 
limit myself to Oregon Pinot Noir, I want to assure you of 
that.
    Mr. Lorensen, you mention this fire we saw yesterday. I 
picked up the paper this morning, and, gee whiz, boy, when I 
look at something like that, what a gosh awful sight. Senator 
Smith and I got to see it up close and personal yesterday. And 
a couple of comments about it.
    Senator Smith has a bill, and we also passed a bill, the 
Healthy Forest Act, a couple years ago, that we've had some 
problems in the implementation of. But those types of measures, 
particularly the bill that Congressman Walden and Senator Smith 
have been working on, appear to be the types of measures that 
will not only help you here but even in our part of the world, 
where we have significantly less percentage of our land in the 
hands of the government. Most of it private lands, where we can 
do a lot of management practices.
    Let me just ask you about the types of practices you use to 
limit the possibility of disasters like this fire that's 
ongoing right now at Lake George and your comments relative to 
the legislation that we have passed, and has it been a help to 
you, or are there other things that we need to do in that 
respect?
    Mr. Lorensen. Chairman Chambliss and Senator Smith, good 
question, and I know you both worked on this issue in terms of 
Senator Smith's Healthy Forest Restoration Act. It has been 
very helpful. There has been a lot of thinning work, forest 
health work has improved the stand conditions so they will be 
survivable in the context of a fire.
    There's been a lot of work around communities, developing 
community welfare protection plans and implementing projects 
around those.
    But at the pace we're going, we're basically not catching 
up to the problem. And I know that Healthy Forest Restoration 
Act programs are being reviewed in terms of how we can improve 
the efficiency on those.
    In Oregon we have had very little success in using the 
stewardship agreements to do work on Federal lands that would 
protect the adjacent private lands.
    There's lot of things we are trying to implement, but it's 
been a struggle. And I guess one general comment, to the extent 
that those programs can be delivered through Farm Bill like 
programs rather than through a Federal agency where you might 
then have ESA consultation, those sorts of things, that would 
be an efficiency.
    Senator Smith. Mr. Lorensen, to follow up on Senator 
Chambliss' question, we saw land burning yesterday that was 
primarily Federal, but there was clearly some private land 
being burned.
    From what you observed over the years, after this fire is 
extinguished, what will be the treatment on one versus the 
other?
    Mr. Lorensen. There will often be very different levels of 
treatment. Typically, on the Federal lands, time will become a 
huge factor and process will most often result in their 
inability to salvage timber, if that's an allowed----
    Mr. Smith. But will you see timber salvaged on private 
land?
    Mr. Lorensen. On private lands, you will see salvage almost 
begin immediately.
    And in fact, to use an example, on state owned lands, where 
we had fire, we had a timber sale up within 3 weeks after a 
fire. So, a huge difference.
    Federal lands, it might be 3 years, and then the value 
becomes a huge issue on whether there's a competitive 
opportunity----
    Senator Smith. And how about replanting of new seedlings?
    Mr. Lorensen. Same sort of thing. With private lands, if 
they do salvage, which almost always will occur, they will have 
to plant, by law, in Oregon. We can provide some----
    Senator Smith. They have to replant, whether you cut it or 
whether you salvage it?
    Mr. Lorensen. If they salvage it, they have to cut. If they 
don't do any salvage work, they wouldn't have to reforest. But 
again I've never seen any private landowner not reforest.
    Senator Smith. And how much sooner do they have a new 
forest versus----
    Mr. Lorensen. Typically the seedlings will be free to grow 
in three to 5 years, which means they will be up above the 
brush and moving toward a timber crop.
    The Chairman. Let me ask you about your soft wood forests 
in this part of the country. We have seen--My home state 
happens to be, as you well know, a large timber producing 
district, large timber producing part of the world, primarily 
soft wood timber.
    We have seen the export of the pulp wood timber industry 
outside of the United States over the last several years, it is 
virtually non-existent now.
    But I was at Georgia Tech last week and had a chance to 
visit with a number of professors there and researchers who are 
very, very close, and I mean very close, within a matter of 
months now, rather than years, of developing a process for the 
conversion of soft wood timber into ethanol.
    Is there similar research going on in this part of the 
world relative to the use of your timber products for the 
manufacture of alternative energy?
    Mr. Lorensen. Chairman Chambliss, there is, and indeed we 
have been doing a lot of work, and a study will be presented 
next week with regard to opportunities around bio-energy in 
Oregon.
    But there's a huge opportunity in Oregon, not just to 
create ethenol, but to burn wood for the generation of heat and 
energy, and at least in this context, the Western States, that 
represents really what I call a quadruple win, and again if it 
gets into the Farm Bill, can provide support for that, that 
would be a big help.
    But in terms of bio-energy, the potential there, if 
successfully implemented, results in healthy forests, obviously 
provides energy and jobs, but it also would reduce CO2 
emissions greatly.
    Again, you saw a lot of emissions yesterday, and I 
apologize for the smoke, but it's really a choice of how you 
want to oxidize your forests, and you can oxidize them in a way 
that will produce energy and jobs, or you can oxidize them in 
the way that causes the Federal treasury to spend a lot of fire 
suppression dollars.
    The Chairman. Mr. Koompin, proposals have been made to 
provide more money to specialty crop industry, as we have been 
around the country talking with farmers relative to specialty 
crops. These proposals range from state block-grants to 
research money to some type of Counter Cyclical Program.
    Which of these ideas or others do you think would benefit 
the industry most, and do you have any particular ideas you 
want us to put in the world?
    Mr. Koompin. Yes. I think the block-grant programs for the 
States work very well, here 4 years ago, when that was 
authorized. That works very well. We definitely need more 
dollars for research. And that can be very broad or very 
narrow.
    Just the introduction of the energy problem that we're 
facing today is going to help any specialty crop. The nice 
thing about specialty crop production is you have the ability 
to raise a multitude of crops, given our environmental 
parameters or frost dates and so forth.
    But, you know, you may envision the day that we are back in 
the late 1940's and early 1950's where I think the latest 
statistics I read that fully 50 percent of the farm ground in 
the United States was dedicated to energy production; and in 
the form of grasses, grains, hays, for the horse feed.
    And maybe life is a full circle and we will come back to 
that. So any kind of research.
    Potatoes lend themselves very well to research manipulation 
and direction.
    With that being said, the Russet Burbank is still the 
largest potato plant and he's been around for 105 years, so 
history's with us. Continuation of the MAP funds.
    Anything that would help us export our products, that's a 
new growth area for potatoes, has been and will be. We survived 
the low carb diet, but we did take a little hit. But we're 
coming back and rebounding nicely.
    Any investment in prevention from introduction of pests; 
with trade, we know it is going to be a two-way street. We have 
to be critical that we don't let anything in that devastates 
not only the potato industry but horticulture of any kind.
    And then of course any kind of transportation relief that 
can be handled by the Federal Government, and that truly is a 
Federal Government problem. We have 50 states with 50 different 
laws. And the interstate system has to be our artery. And so 
any of those above mentioned, Chairman Chambliss, would be 
greatly appreciated by the potato industry.
    The Chairman. My son-in-law is a vegetable grower. He 
prides himself in the fact of being a specialty crop producer, 
that he doesn't look to the government for help with respect to 
farm payments.
    But he and I have talked from time to time about this issue 
of planting flexibility, and you addressed it in your opening 
comments.
    What would be the result, do you think, in the specialty 
crop industry in this part of the country if we changed our 
planting flexibility provisions in the next Farm Bill?
    Mr. Koompin. Mr. Chairman, I can't give you a specific 
figure, but I will be able to give you a specific figure in a 
month, and it may be available now.
    The National Potato Council has hired a private economic 
firm to ferret that number out. It would be in the hundreds of 
millions.
    We've got approximately a two billion dollar industry in 
the state of Idaho, as far as potatoes. That's total processing 
value added as well as farm gate. And I can assure you 
nationwide that if planting flexibility changed, it again puts 
one farmer, without redoing the whole Farm Bill, because if 
you're going to subsidize a potato crop in Indiana, or tomato 
crop in Indiana, by not taking away either base acres or farm 
program payment, and that's what happens now.
    And so it's somewhat controlled. But if you eliminate that, 
then you are in effect subsidizing that crop of tomatoes or 
potatoes, on what used to be soybean, corn ground. And if you 
are going to subsidize that acre of potatoes in Indiana, you 
are definitely probably going to have to subsidize the crop in 
Idaho, Washington or in Oregon, and you can do that in lots of 
different ways, I guess.
    You can create--increase everybody's base acres across the 
nation. And we have to make sure that whatever provision we do, 
we do not jeopardize one farmer's ability to compete with the 
government subsidy to another farmer.
    The Chairman. Mr. Brentano, you indicate support of 
conservation programs in your testimony. What's the right 
balance between land retirement programs like the CRP and 
working land programs like EQIP?
    Mr. Brentano. All in all, I guess I believe that it's not 
an either/or issue. One is a conservation program and one is a 
program within the conservation title which helps farmers and 
ranchers to comply with all the laws.
    A program like EQIP, which is far more technical and helps 
with the best management practices and is quite project 
specific, is the way we like to see things. We like to see the 
land being in production and we think that that's probably the 
best way to go about things for us.
    The Chairman. You mention the need for new regulatory 
structure for addressing plant, pest and disease issues at the 
USDA, and you specifically note that the basic features of 
HACCP could apply to the nursery industry.
    How much would compliance with this new system cost the 
industry?
    Mr. Brentano. Right. Much like HACCP, we like to look at a 
new system, which is based on the system's approach where we're 
looking at the way that the production is done rather than an 
end regulation point.
    As far as the cost to industry, right now we have a test 
pilot in Oregon that we've done with core nurseries. The costs 
to the industry vary greatly. Some of our nurseries are 
showing, and they're fairly large nurseries, but anywhere from 
18 to $20,000 a year, up to one of our larger nurseries, 
showing it to be closer to $80,000 a year for their costs.
    What the cost would be to government is really hard to tell 
at this point. But I think that's why we're pushing for some 
research and a science-based program which would have a big 
test pilot element to it.
    Frankly, right now our system is somewhat broken, if you 
look at issues that have come up, like Emerald Ash Borer or the 
Phytophthora ramorum. These can be quite devastating and close 
the market.
    So perhaps the system where we are looking at what we're 
doing in the fields and preventing and not allowing in the 
disease or the pest could be actually less costly in the end.
    The Chairman. Mr. Gallo, your comments and your numbers 
relative to the increase in imports into this country are 
particularly interesting.
    I don't know whether you have any similar numbers to tell 
us what sales of domestic wines, what's happened to the sales 
of domestic wines, whether we've seen a huge increase in that 
over the last several years, during that same period of 
increasing imports, but I would suspect it probably is, it's 
your industry, thanks to any number of reasons, most 
importantly the quality of products that your winery and other 
wineries around the country are producing now.
    But the Market Access Program, which you mention in your 
testimony, has been a critical program, and is one that as we 
reauthorize the Farm Bill, we will be talking a lot about, 
particularly as we talk about trade. How has the Market Access 
Program affected your industry? Is it something we ought to 
expand on in general? Tell me your thoughts relative to that.
    Mr. Gallo. Thank you, Mr. Chairman. MAP, for the wine 
industry, is really the U.S. version of what every other major 
wine producing country offers their producers to help fund the 
promotion of exports.
    What does that mean? What that means is for the producer, 
it allows them to attend trade shows, it allows them to taste 
retailers and import trade on their products, it allows them to 
bring visitors to their wine country, and if you look at all 
our competition, all our competition enjoys similar programs. 
However, they tend to be funded at higher levels and supported 
by their governments.
    Now, let me address the benefits of MAP and what return we 
have seen in this country as a result of it.
    First off, MAP has been very successful in introducing our 
wines to international importers, consumers and retailers. I 
think the success is best illustrated by the growth of our 
exports over the last decade.
    In 1994 the value of our exports was about $196 million, 
the value of California wine exports outside the United States.
    By the year 2004, 10 years later, that value had swelled to 
$808 million.
    Now, there's still a lot of work to do. There's still a lot 
of opportunity. Because even with that success, we only have a 
5 percent market share of the global wine export market.
    So, to answer your question, I believe that the success of 
the program should justify that, A, it should continue, and 
more importantly, it should be increased as the expanding needs 
of all the participants demand it.
    Senator Smith. Mr. Gallo, though I'm a teetotaler, Oregon's 
wine industry is such an important part of our agriculture, 
I've had to learn a little bit about winemaking from Jim Bernau 
and others.
    I have recently read an article that talked about France is 
actually taking acreage out of grapes, and the point of their 
doing that is to keep their prices high.
    And as you noted in your opening testimony about 
Australia's success, and I would probably throw New Zealand in 
that as well, it seems that it isn't just the government 
involvement but also they are meeting quality standards 
comparable to those in Europe, and they're doing so at 
dramatically lower prices.
    Is that what, in your view, is that part of the equation 
here?
    Mr. Gallo. Which part? The lower prices?
    Senator Smith. The lower prices and equal quality.
    Mr. Gallo. Quality is what this business is all about. This 
isn't a commodity business. This is a specialty crop. And 
specialty crop is all about value added, value added either in 
the product itself, quality, being can you offer the same 
quality at a given value, or can you offer a wine style or 
taste that can't be offered somewhere else, it's no longer a 
commodity because you can't compare the price, or whatever 
other type of value adding you can add to it, such as if people 
come and visit the wine country, they leave with an experience 
that is beyond the product itself.
    Now, just to address, you know, the French comment that you 
made, you know, they state that they're taking out acreage to 
raise prices.
    I think more than anything else, that may be true. But 
however the biggest driver is they have a tremendous surplus in 
Europe. And right now you're seeing that the government is 
actively spending dollars to buy the grapes to distill into 
fuel ethanol, which I can assure you, you know, grapes should 
not be used by the Farm Bill for any sort of ethanol 
production. It is not the most cost-effective means of fuel.
    So I think----
    Senator Smith. Some of my colleagues seem to live on it. 
Pretty good fuel.
    Mr. Gallo. Human fuel versus automobile fuel.
    Senator Smith. You know, it is interesting, and I 
understand obviously there's expensive ones and there's Two 
Buck Chuck.
    One of the investors in Two Buck Chuck told me that he 
moves 2,000 cases a day through Costco. And I know the 
industry's expanded dramatically in California.
    I'm from Eastern Oregon, and I never thought I would see 
what I see today, and that is hundreds, maybe thousands of 
acres of potato, wheat land, it's all in vines now. And I'm 
wondering if the industry isn't in danger of becoming a 
commodity.
    Is there a glut? I mean, that's what makes it a commodity 
ultimately on a world market.
    Mr. Gallo. Worldwide, there is a surplus of grapes in the 
ground. Hands down, there is a tremendous surplus out there.
    But yet those producers who focus on quality, who focus on 
investment in new process technology, investment in new 
viticultural technology, investment in just simply how you run 
a fermentation so you can have a clean fermentation, all leads 
to a better product, and it's rewarded by the consumer. So even 
in a commodity----
    Well, let me step back. Even in a surplus situation, if 
you're competing on quality, it doesn't matter if there's a 
surplus out there.
    Now, the issue with Two Buck Chuck is a little more 
complicated. Let me talk about the subtlety of Two Buck Chuck.
    Senator Smith. That fellow told me after the first drink he 
couldn't tell the difference between one versus the other 
anyway. I don't know, but that's what he said.
    Mr. Gallo. It depends on the size of his drink. Two Buck 
Chuck was the result of a planting boom in California that went 
through the 1990's.
    In grapes, unlike most commodity crops, but I'm sure a lot 
of specialty crops, especially tree fruits follow this way, is 
that you don't get your first crop, and you don't get a full 
crop until your third year of production.
    So there is a lag effect. And as a result, if you see a 
trend and it's trending upwards, like any agricultural 
situation, you know, farmers look at their neighbors and they 
say, you know what, this is a good business to be in, you can 
make more money, they jump on board.
    It doesn't become apparent, it's not visible, what are the 
supply and demand, because you have hidden supply coming on 
line. Once that comes--So you had a lagging supply curve, and 
it would further cause problems, we had a slight slowdown that 
followed the bust of 2000, which was the internet bust, and 
combined resulted in a glut in California, but the market 
forces did self-correct it, and we are now in balance.
    So, just in four or five short years, the industry was able 
to get in balance.
    How do you do it? Some vineyards came out of the ground. 
And some entrepreneurs, like my Uncle Fred, Two Buck Chuck, 
managed to find that he can buy wine, and buy grapes cheap, 
during that glut period.
    Senator Smith. And that's going away, so that will go away, 
too?
    Mr. Gallo. I think Two Buck Chuck has evolved. In the 
beginning it was literally a better opportunity than putting it 
to the still.
    And then now with Two Buck Chuck specifically, it's a 
partnership with Trader Joe's, and as a result, they have a 
longer term contract and with that, you can assign supply to 
that program and you work on thinner margins with a guarantied 
supply, or guarantied volume.
    Senator Smith. Well, I thank you for helping me to 
understand that.
    Mr. Koompin, I was one of the creators of the Conservation 
Security Program. And I'm certainly open to changes and 
expansions.
    And I'll tell you a part of what has driven my involvement 
in it. I have seen my farmer neighbors for years be penalized 
by the cost of environmental farm practice regulation.
    What I was trying to do was reward them for it, and to help 
have the dual benefit to the environment and without the 
penalty to the farmer.
    But I know it's a very limited program, it's frankly very 
underfunded, even at the authorized levels, it is nowhere near 
funded by the USDA.
    But my motive in being involved in it was frankly my fear, 
and I say this for the education of those who are here, if you 
read the New York Times, the Washington Post, was it the 
Journal of Constitution in Atlanta?
    The Chairman. Communist.
    Senator Smith. The communist. The support for agriculture 
mirrors the population of those involved in agriculture. It's 
probably 2 percent, if you want to be liberal right now, in 
terms of how you calculate it. And these farm programs are 
deeply unpopular.
    What is popular is environmental issues.
    And so my thinking was, how could I help my farmers get 
ready for the world of tomorrow, because if there is not public 
support for farm programs, farm programs are in jeopardy every 
time a new one comes up, and everyone has said they need more; 
and the world community, and you have my commitment, you have 
the Chairman's commitment, we're not going to let Paris, 
France, determine the ag policy for Paris, Texas.
    But the facts are that our country, long before Saxby and I 
showed up in the Senate, we became members of the WTO, and WTO 
rules are going to tighten and tighten and tighten, ultimately 
even reducing European subsidies, which are two-thirds more 
than ours, and frankly their taxpayers can't afford what their 
current programs are, but they're going to tighten.
    And a lot of these things will lose public support, these 
farm programs, unless we can find some replacement.
    So, what I'm simply saying, and stating, is that we need 
your help to look for other ways consistent with WTO rules and 
regulations that will allow us to be helpful to the farm 
community. CSP, I believe is one of those. And so it's simply 
an invitation for you to be open with my office, to make it 
bigger, to make it better. It is consistent with the WTO 
regulations.
    Mr. Koompin. I can address that real quick, Senator Smith, 
and due to lack of time, my comments on the great vision of the 
CSP program was cut out, but now maybe it is a good time to say 
the idea, the principle, the vision of the CSP program, we 
realize in the farming community, is the way government support 
of agriculture is probably heading, if you followed it at all 
in the last 20 to 30 years, and especially since the WTO.
    So, you know, our thanks and pat on the back for that 
program as far as it was envisioned. The problem with the CSP 
program is of course the implementation of the funding.
    Senator Smith. Yeah.
    Mr. Koompin. So, do we think that, are we going to look 
better in the eyes of the nation? Yes, we are. And can we make 
that CSP program or something like it work? Yes, we can.
    But it cannot target watersheds and for the most part I 
envision that there will be areas that will never, ever be 
able. So that how do you----
    Then you get back to the questions we raise, how can we 
justify a $40,000 payment to Joe in watershed A, and the poor 
guy raising the same crop in a different state or in the same 
state, or in the same county, does not get that.
    So, that's a definite problem. But we do, our hands would 
be ready to help work out any program you come up with, and we 
will be after some ideas.
    Senator Smith. We will need your help, because I think you 
are right to perceive it as the future.
    Rather than ask more questions of more panelists, Mr. 
Chairman, I will ask it through written, through the record.
    But I do want to make note for the record the presence of 
Katie Koba. Katie, there you are. Katie is the Director of 
Oregon Department of Agriculture, and we're honored to have you 
here, Katie.
    The Chairman. Thank you. Mr. Lorensen, I can't help but 
note, as we are sitting here talking, we are hearing those 
airplanes take off, and I suspect that maybe a hundred percent 
of them are heading toward that fire out at Lake George.
    As Senator Smith and I flew over that yesterday, when those 
airplanes take off from here, they are a mighty big looking 
piece of equipment, but when you look at them dropping the 
retardant and the water on that fire, they pale in comparison 
to the size of that fire. But hopefully we're going to see that 
controlled short term.
    To all of you, again, thank you very much for being here. 
We look forward to continuing to dialog with you, and we would 
like to be able to use all of you as a resource as we move into 
the writing of this next Farm Bill. So, thank you very much.
    We will now move toward panel three, if these members will 
come forward, Mr. Jim Bernau, Turner, Oregon, representing the 
Willamette Valley Vineyards; Jennifer Euwer Hunt from Hood 
River, Oregon, representing the Pear Bureau of the Northwest 
and Northwest Horticulture Association; Mr. Doug Krahmer from 
St. Paul, Oregon, representing the Oregon Blueberry Commission; 
and Mr. Mark Wettstein, Ontario, Oregon, representing the 
Nyssa-Nampa Beet Growers Association.
    Again, we'll follow the same format. Mr. Bernau, welcome to 
our panel, and we'll start with you to take any opening 
comments from you.

 STATEMENT OF JIM BERNAU, WILLAMETTE VALLEY VINEYARDS, TURNER, 
                             OREGON

    Mr. Bernau. Mr. Chairman Chambliss, Senator Smith, thank 
you for supporting the wine industry each in your own way.
    My name is Jim Bernau, and I am the founder and CEO of 
Valley Vineyards, a publicly held Winery in Turner, Oregon. Our 
winery currently farms over 250 acres of vineyard land and we 
sold last year about 140,000 cases of wine.
    I also serve as the Chair of the Legislative Committee of 
the Oregon Wine Growers Association and am here on their 
behalf.
    At $3.5 billion grapes the sixth largest crop in the United 
States, research conservatively estimates, that the production 
of wine and wine grapes and their related industries produced 
more than $90 billion of economic value to the U.S. economy in 
2004.
    Our industry accounts for over a half a million full-time 
jobs, and roughly 18 billion in annual wages. Additionally 
about 30 million tourists visit wineries each year, spending 
approximately $2 billion. The industries pays 4.3 billion in 
Federal taxes and almost five billion in local and state taxes.
    Almost 10 percent of the approximately 3,500 wineries in 
the United States are in Oregon.
    Oregon's focus is on a high quality wine and wine grapes 
that translate into high quality of life for our neighbors and 
our communities. We're environmental stewards of the land. Over 
37 percent of our acreage is farmed with certified sustainable 
practices.
    Despite our growth, we have tens of thousands of marginal 
acres of land lying fallow, under-used, some with dying fruit 
and filbert trees on them.
    A 2005 study of the Oregon wine grape industry found our 
economic impact was about 1.4 billion. We generate about 8,500 
jobs and pay more than 200 million in wages. We attract high 
value tourists who spend more than the average tourist, 
boosting hotel and restaurant sales.
    In 2004 our wineries generated tourism revenue that 
approached $100 million.
    As you heard from Mr. Gallo, over 25 percent of the wine 
consumed in the United States is imported, supported by well 
financed foreign government programs, a threat to the 
development of the Oregon wine industry.
    Our industry respectfully asks that the 2007 Farm Bill 
finance greater support of specialty agriculture. We have 
several specific suggestions.
    One, sustain and grow the funding of the Northwest Center 
for Small Foods Research.
    Two, provide continued support for the Market Access 
Program.
    Three, we appreciate your role in creating the Conservation 
Security Program and ask that you expand it.
    Authorize mandatory funding of the $5 million a year from 
the Commodity Credit Corporation to establish the national 
clean plant network.
    Expand the state block-grants for specialty crops program.
    Provide a funding mechanism to support industry-government 
research partnerships.
    And, seven, we appreciate our growing partnership with 
rural development. The Oregon Wine Board has applied for a 
value-added producer grant to support our efforts to increase 
the sale of Oregon wine out throughout the nation. The State of 
Oregon constitutes approximately 1 percent of the nation's 
population but accounts for nearly half of all of Oregon wine 
industry sales.
    Thank you very much for the opportunity to testify before 
you today.
    [The prepared statement of Mr. Bernau can be found in the 
appendix on page 56.]
    The Chairman. Thank you. Ms. Euwer.

           STATEMENT OF JENNIFER EUWER, PEAR BUREAU 
 NORTHWEST AND NORTHWEST HORTICULTURE ASSOCIATION, HOOD RIVER, 
                             OREGON

    Ms. Euwer. Good morning, Chairman Chambliss. I am Jennifer 
Euwer, a fruit grower in the Hood River Valley. My husband 
Steve Hunt and I farm a total of 240 acres of--Is this on?
    The Chairman. I think it's just quit on you.
    Ms. Euwer. Is that better?
    The Chairman. No. Let's stop for a minute.
    Ms. Euwer. My husband Steve Hunt and I farm a total of 240 
acres of pears and cherries and apples. My family has grown 
pears in Oregon since 1912, the Columbia Red Anjou variety 
being initially discovered in one of our orchards.
    I appreciate this opportunity to provide comments about the 
importance of several components of the 2007 Farm Bill. 
Nutrition, the MAP program and research.
    The 2007 Farm Bill provides an excellent opportunity to 
bring agricultural policy in line with Federal health and 
nutrition recommendations.
    A strong fruit and vegetable agricultural policy will 
benefit tree fruit growers while at the same time make it 
easier for Americans to benefit from consuming a diet rich in a 
variety of fruits and vegetables.
    The 2005 dietary guidelines issued jointly by USDA and the 
Department of Health and Human Services recommends that all 
Americans eat five to 13 servings of fruits and vegetables a 
day. These guidelines are the strongest statement ever about 
the need to increase consumption of fruits and vegetables, 
recommending that Americans double their consumption of 
produce.
    For children, making fruits and vegetables more readily 
available at locations where kids spend a lot of their time, 
such as in schools, is one of the most effective means of 
increasing their consumption of produce.
    I believe that the upcoming Farm Bill should include 
language to expand the successful fresh fruit and vegetable 
snack program to all 50 states, including Oregon, and to double 
funding for the Department of Defense's fresh fruit and 
vegetable program for schools.
    This would go a long way to promoting the health of the 
nation's school children, while improving the economic health 
of the nation's fruit and vegetable farmers.
    The USDA's Market Access Program is another initiative that 
deserves to be fully funded in the new Farm Bill. It benefits 
growers and allows for USA pears or other U.S. agricultural 
products to be more competitive in overseas markets.
    By helping expand USA pear exports the MAP program helps 
stimulate more demand and therefore stronger overall returns 
for my fellow pear growers and me.
    With the help of the MAP funded promotional activities, 
U.S. pear exports have established a record value in each of 
the past seven seasons. Prior to the inception of the MAP only 
10 percent of the crop was exported. Today that percentage is 
closer to 35 percent.
    I see the MAP program as a vital part of the upcoming Farm 
Bill and something that is ideally suited to support high value 
products such as pears and cherries and maintaining the export 
competitiveness of U.S. products.
    Agricultural research funding at both land-grant 
institutions and USDA's agricultural research service should 
also be a major focus of the next Farm Bill. We need advances 
in technology, especially labor-saving devices, if we are to 
remain competitive on a world market. And I'll point out that I 
brought the cherries in the back of room, and I grew them, but 
they were bred in Canada.
    The Chairman. This country of origin, labeling issue is 
tough.
    Ms. Euwer. Well, I just planted some more that were bred in 
Europe. The best way I can see to keep our fruit growers 
producing--the nutritional fresh produce that they provide for 
America is to provide an environment conducive to their 
profitability.
    Fully funding MAP to help our exports, expanding produce 
consumption through good and extensive nutrition programs, and 
providing for increased agricultural research funding are three 
specific policy objectives that I think Congress should achieve 
during its work on the next Farm Bill.
    Thank you, Mr. Chairman. I am happy to answer any 
questions, especially about what would happen if I had to pay 
$50 an hour as a pear grower in Hood River.
    [The prepared statement of Ms. Euwer can be found in the 
appendix on page 65.]
    The Chairman. Thank you very much. Mr. Krahmer.

  STATEMENT OF DOUG KRAHMER, OREGON BLUEBERRY COMMISSION, ST. 
                          PAUL, OREGON

    Mr. Krahmer. Thank you, Mr. Chairman, and Senator Smith. My 
name is Doug Krahmer. I'm co-owner of Blue Horison Farms in St. 
Paul, Oregon.
    On our farm we produce a variety of commodities, including 
blueberries, grass seed, hazel nuts, clover, wheat, flower 
seeds and fresh cut flowers.
    The produce industry has experienced tremendous changes 
over the last several years. We've worked hard to remain 
profitable, satisfied consumer demands and conform to and 
develop new technology and compete in an increasingly global 
marketplace.
    Many of our products are highly perishable and are driven 
by risk taking entrepreneurial spirit that we produce in the 
produce industry continue to engage in. We take tremendous risk 
each year, not knowing if Mother Nature, retail channels, and 
the marketplace or any other number of issues will or will not 
stand in the way and cause us to lose or gain in the investment 
we have made.
    Our markets is highly volatile. Yet we have never relied on 
traditional farm programs to sustain our industry. Instead, we 
look to each other to promote efficiency and reward market 
competition that so marks our industry.
    Unfortunately, the marketplace in which we operate is 
becoming less neutral and even handed. Regulations driven by 
food safety concerns, responses to food defense requirements, 
and other very legitimate consumer and customer needs, are 
placing more and more burdens on farmers and their partners who 
pack and ship perishable agricultural commodities.
    In our effort to respond to these needs, we are obligated 
to introduce costly measures and undertake expensive actions.
    Farmers shoulder the responsibility of supplying high 
quality food that is safe, and nutritious, while not being too 
expensive for the consumer. We work hard at this, helping to 
continue to ensure the miracle of abundant fresh food 
production in the United States at prices the American--that 
are low to the American people by world standards.
    We do not support the extension of the 2000 Farm Bill. We 
believe government policy should provide incentives for private 
investment, tools to increase profitability, and help to those 
producers who are committed to constant improvement to better 
serve consumer needs.
    We do not want policies that sustain yesterday's business. 
We want investment in the future. Ultimately the goal of any 
farm policy should be to enhance the tools necessary to drive 
demand, utilization, and consumption of our products, and not 
distort the production of those products with respect to 
domestic and international markets.
    The 2002 Farm Bill began to make progress toward those 
objectives and was further enhanced through the Child Nutrition 
Reauthorization Act of 2004, and the Specialty Crop 
Competitiveness Act which we signed into law in December of 
2004.
    The fruit and vegetable industry strongly supports 
maintaining or strengthening the current U.S. planting policy 
which restricts producers from growing fruits and vegetables on 
acres receiving program payments.
    Fruit and vegetable producers are concerned that any 
alterations in this provision would allow commodity producers 
to mitigate any startup cost or mitigate risk inherent to fruit 
and vegetable production resulting in unfair competition.
    I would refer you to my written comments, and I thank you 
for the opportunity to testify here today.
    [The prepared statement of Mr. Krahmer can be found in the 
appendix on page 83.]
    The Chairman. Thank you very much, Mr. Krahmer.
    Mr.Wettstein.

     STATEMENT OF MARK WETTSTEIN, NYSSA-NAMPA BEET GROWERS 
                  ASSOCIATION, ONTARIO, OREGON

    Mr. Wettstein. Senator Chambliss and Senator Smith, members 
of the committee, thanks for this opportunity.
    My parents moved from Utah in the winter of 1946 and I was 
born that spring, and my mother at 91 told me this spring how 
big the sugar beets were that year.
    I farm with my brother Louis. We farm 1200 acres. 350 acres 
is in sugar beets, 175 acres is in onions, and the rest is 
divided among alfalfa, wheat and corn.
    Eight years ago there was 1200 growers that bought 
Amalgamated Sugar Company, also known as White Satin. These 
sugar growers are in Magic Valley and the Treasure Valley.
    And in order to raise the capital to buy that company, it 
cost us $400 a share, which allowed us to grow one acre. We 
purchased 350 shares, so we could grow 350 acres of sugar 
beets, at a cost of $140,000. Minus our tractors, the equipment 
to plant, cultivate, and harvest sugar beets, would be another 
hundred thousand.
    If the sugar beat industry went south, we would lose at 
least $200,000. That investment would just be gone.
    Once an industry like sugar beets leaves an area, it never 
comes back.
    Idaho and Oregon is the second largest producer of sugar 
beets in the United States.
    There are thousands of jobs that rely on this crop, and it 
has an economic return of almost two billion dollars.
    Six miles from our farm is a little town called Nyssa, 
Oregon, population, 3,000. And in 1938 the sugar factory was 
built there, and 2 years ago this factory closed because of 
economic reasons. It wasn't ready to cave in. It was well run, 
well maintained, and very efficient, but it just wasn't 
economical. 300 people worked there. The payroll was 12 
million, and another million-and-a-half went into the local 
economy for parts and services.
    But there are two forces at play on sugar. One is the food 
producers who have put pressures on sugar to keep it low, and 
in the last 20 years, ice cream, candy and bakery products has 
gone up between 30 and 50 percent, where the return to the 
sugar grower has gone down 20 percent.
    The other force are the trade deals, that we've allowed too 
much sugar into this country. We are the fifth largest producer 
of sugar. Also the fifth largest consumer. Yet we are the 
second largest importer of sugar.
    And so we are able to produce sugar for the U.S. market. 
But because of the trade deals, there's too much sugar on the 
market.
    And so we support the Farm Bill because we hope that that 
would give us some guaranties against the glut that would come 
in from NAFTA, CAFTA, Columbia and Peru. This has operated at 
no cost to the taxpayers. And we feel that the American 
consumer doesn't want to be in a position to have to rely on 
foreign sugar.
    And I have a longer version of our industry's position that 
I'd like to submit, and I thank you for this opportunity.
    [The prepared statement of Mr. Wettstein can be found in 
the appendix on page 123.]
    The Chairman. Thank you, and certainly your statement will 
be included in the record.
    Mr. Bernau, during the consideration of the 2002 Farm Bill 
there it was much discussion of increasing our investment in 
the development of rural America, and specifically how wineries 
might contribute to this goal through the value added producer 
grant program that you alluded to.
    Has your industry been able to take advantage of the value-
added producer grant program and if so, what types of 
investments and rural development have been made by the 
beneficiaries?
    Mr. Bernau. Chairman Chambliss, first of all we do view 
this program to be very important. We have not had an 
opportunity yet to receive funding, but we have made 
application for funding.
    A $265,000 value added producer grant has been requested. 
It has the support of our Oregon rural development. We estimate 
that this will increase the sale of Oregon wine by 117,000 
cases, generating $16 million in revenue.
    So, it will pay for itself many times over if we're able to 
obtain the grant and implement this plan.
    The Chairman. Proposals have been made to provide more 
money to the specialty crop industry, and these proposals range 
from state block-grants to research money to counter cyclical 
programs.
    You alluded to the state block-grants which have been 
received very favorably in this part of the country.
    Which others would benefit the wine industry the most and 
what ideas do you have about the funding of those proposals?
    Mr. Bernau. The state block-grant program has been helpful 
to us. We actually did receive some money to expand our out-of-
state sales. It was a small amount of money, which we matched 
with industry money, and increased our presence in specific 
markets. So that has been very beneficial.
    You know, I spent a considerable amount of my time in my 
earlier testimony talking about the economic impact of our 
industry.
    When I was just getting my first grapes off of my vineyard, 
and when Senator Smith first entered the Oregon State Senate, 
our industry was very small. Generating very little tax money.
    But just my little company last year paid $237,000 in 
Federal excise tax and $625,000 in Federal Income Tax. When 
that piece of ground I'm on, paid nothing. It was an abandoned 
plume orchard. So, the leverage is remarkable, when you apply 
these funds to these programs.
    The Chairman. This year you mentioned the importance of 
nutrition-related programs, export market development programs 
and research programs.
    Given the current budget situation of many competing 
priorities in the next Farm Bill, which of these do you believe 
will most directly benefit producers of specialty crops?
    Ms. Euwer. I wouldn't rank them. I think they are all very 
important. The nutrition program in particular is so 
beneficial, both to the producers and to the consumers, that it 
seems clearly important to fund that.
    Market Access Program looks to me to be very valuable in 
helping both the producers and the import/export balance in the 
United States. And research is always very important.
    My point about the cherries was simply that these are 
things that are being done in other places, Breeding programs, 
for example, and we need research in the United States. It's 
harder and harder to come by research money, and very important 
for our industry.
    The Chairman. Our school lunch programs all across the 
country are taking more and more advantage of the local crops 
grown in certain areas.
    Do you find that the school lunch programs in Oregon are 
taking advantage of buying specialty crops that you grow or 
folks in your organization grow?
    Ms. Euwer. I don't really know.
    Senator Smith. Ask blueberry guy.
    Mr. Krahmer. Blueberries, they do.
    Ms. Euwer. I think they do some, but I don't know to what 
extent.
    The Chairman. Well, I will ask Mr. Krahmer, relative to 
blueberries, are school lunch programs taking advantage of 
blueberries?
    Mr. Krahmer. Yes. I think they have been. You know, 
blueberries over the last few years have certainly been higher 
priced than some of the other berry crops in Oregon, but I 
know, even our Marion blackberries and some of the other 
specialty berry crops in Oregon have used the school lunch 
programs to get some of their excess fruit out of the market 
and into the schools where it can be used for nutrition.
    The Chairman. OK. Let me address this again to you, Mr. 
Krahmer, and Ms. Euwer. A broad coalition of specialty crop 
interests have formed the Farm Bill Working Group and include 
within their 2007 Farm Bill priorities mandatory allotment of 
funding for specialty crop production within the EQIP program.
    Given the current participation levels by the specialty 
crop industry and conservation programs, such as EQIP, will the 
industry be able to utilize the mandated increase access?
    Mr. Krahmer. I can answer that. Yeah. Our industry is 
strongly in favor of both the EQIP program and CSP.
    EQIP program, for example, I planted some berries in the 
last few years that I've used the EQIP program to help fund a 
drip system, and it does a variety of things.
    Number 1, it reduces the amount of water that I'm pulling 
out of the rivers to irrigate that crop. It allows me to put 
the water only where the plant needs it. It allows me to better 
utilize my fertilizers and my disease control methods.
    I don't--I'm not putting water on the bush and encouraging 
disease up in the bush.
    And so, yeah, we're--we use that program. We believe that 
it's very advantageous for our industry to be able to afford 
some of these new technologies to better the environment.
    The other thing on the CSP is many of the specialty growers 
have put in these conservation practices, from sod, waterways, 
minimizing irrigation, doing integrated pest management, all of 
these kind of things on our own.
    And what CSP does, as Senator Smith alluded to earlier, is 
it comes in and it actually rewards us for having used those 
practices in the past.
    Ms. Euwer. I would answer much the same in our area. There 
are many, the CSP is in effect in Hood River, and we are being 
rewarded for the things that we were already doing. And I think 
that that was a very good way to address that problem.
    And EQIP, while I have not used it personally, many of my 
neighbors have, to do much of the same, water--specialty water 
irrigation, and I just don't happen to be as close to a stream 
as other people.
    But even those of us who haven't participated in it 
directly have seen what the other farmers are doing, and people 
are doing it on their own because they're seeing it 
demonstrated, and so it is actually benefiting I believe even 
people who aren't directly involved in it.
    The Chairman. Mr. Wettstein, you mentioned trade agreements 
and their affect on the current sugar program, and frankly your 
comments reflect one reason that I have been saying that the 
extension--or an extension of the current Farm Bill is really 
impractical because what's going to happen is that beginning 
January 1, 2008, which would be within 3 months of the 
expiration of the current Farm Bill, we will see imports from 
Mexico being increased under NAFTA.
    We also have some other agreements that will allow 
additional imports of sugar.
    And just recently USDA and OMB have come out with some 
numbers which suggest that the current No Net Cost Program, the 
current No Net Cost Sugar Program, will all of a sudden have a 
cost that will begin at about $30 million a year and very 
quickly will go to possibly as high as about $300 million a 
year. Now, that's from a cost standpoint, what it will do. So 
that's going to be a problem.
    What will the additional imports that are going to be 
allowed under our trade agreements, including NAFTA, do from a 
practical standpoint to the sugar industry in this country?
    Mr. Wettstein. Well, first off, the sugar industry is not 
happy at all with any of its trade policies. It allows more 
sugar into this country, which makes it so we have to produce 
less, and because of the over-supply, we are paid less.
    But with the NAFTA agreement and some of the other 
agreements, when that expires, we're unclear exactly just how 
that will affect us, because we don't know how much sugar they 
will bring into this country, will export into us. We don't 
know ourselves what our market will be doing in this country, 
how much sugar we will be using.
    And the problem with Mexico is they have never played by 
the rules. They have denied a side letter to the agreement on 
sweeteners, and they have a soda tax. So that stops our supply 
of sweeteners into their country.
    So, if we just have a glut of sugar come into this country, 
we're done. The producers of sugar in this country are through.
    The Chairman. Well, I'm sure you're familiar with the fact 
that the USDA and USDR just recently entered into an agreement 
with Mexico relative to the export in the United States of high 
fructose corn syrup down there, which is going to have a 
significant impact.
    I realize that that decision is not popular in your 
industry, and I guess we'll have to see how it affects it over 
the next several months, as we get into the Farm Bill.
    Last, Mr. Wettstein, what is your industry's outlook for 
commercial production of ethanol from sugar, and do you 
envision a market for ethanol from sugar in this country?
    Mr. Wettstein. The USDA was supposed to have conducted a 
study that was to be completed in July on this very topic. And 
I haven't seen that report.
    But Luther Markwart in Washington, D.C., has I think seen 
it. And I talked with him yesterday, and he said that it was 
just not economical right now to convert sugar into ethanol 
without it being highly subsidized.
    I think it is like Ernest Gallo said, it would be like 
converting grapes into ethanol. It could be done, and probably 
the only place that it's viable at this point would be Hawaii. 
But until technology is developed and commercialized, it 
probably won't be viable for at least 10 years.
    The Chairman. OK. Senator Smith?
    Senator Smith. Mr. Wettstein, as I believe I understand, 
the plant that you spoke of that closed, that was the former U 
& I Sugar, or White Satin, is that the plant you are speaking 
of?
    Mr. Wettstein. It was one of--Amalgamated Sugar. 
Amalgamated Sugar had four factories, four refineries, and this 
was one of them. This was the fourth one.
    Senator Smith. The other four are open?
    Mr. Wettstein. The others are open. And so our beets are 
transloaded and shipped to Nampa, Idaho, to be processed.
    Senator Smith. So that plant is still open in Nampa?
    Mr. Wettstein. Yes.
    Senator Smith. OK. The plant that closed, and the others 
that are still open, are they making money?
    Mr. Wettstein. You know, it's interesting what happens in 1 
year. A year ago we had 500,000 tons of sugar in storage, and, 
a hurricane in Louisiana and Florida devastated the sugar cane 
industry, and so the USDA came to Amalgamated and said, you can 
put that sugar on the market.
    Senator Smith. So it got valuable all of a sudden.
    Mr. Wettstein. Right.
    Senator Smith. But that's an aberration. Katrina I hope 
doesn't come every year, for their sakes, not for yours.
    Obviously, some of these plants, and the industry as a 
whole, were in extremous long before NAFTA and CAFTA, is that 
an accurate statement, but those have complicated it?
    Mr. Wettstein. It's complicated it. This plant closure was 
not an isolated case. In the last 10 years one-third of all the 
U.S. mills and refineries have closed.
    Senator Smith. I'm aware of that. And certainly in Hawaii, 
there's very little cane sugar done there now. Many mills have 
closed there.
    How uncompetitive are sugar beets to sugar cane? Or to high 
fructose corn? What's the cheapest producer of sugar?
    Mr. Wettstein. I think it's more economical to produce 
sugar cane, because of the process. We are the world's most 
efficient at producing sugar, and we're doing that on top of, 
high labor cost and environmental regulations.
    We can compete with any country in the world. We just can't 
compete with their sugar that's highly subsidized.
    Senator Smith. And how much of a damage do things like 
Splenda and Aspertain, these various nonsugar sweeteners, how 
much of a factor is that to the industry's difficulties?
    Mr. Wettstein. I think that's sort of cyclical. It's 
something sort of fad-ish. It's like using margarine and 
butter. Some people will use Splenda and some will use sugar, 
and I think it is just a matter of taste, but I don't think it 
has had a real huge impact on our industry.
    Senator Smith. Ms. Euwer, do you employ people in your pear 
business?
    Ms. Euwer. Yes.
    Senator Smith. Are any of them migrant workers?
    Ms. Euwer. T1Yes.
    Senator Smith. As you employ them, I imagine you're very 
careful to look at their documentation?
    Ms. Euwer. Yes.
    Senator Smith. And is it hard to tell which are legitimate 
or which are fraudulent?
    Ms. Euwer. Yes.
    Senator Smith. Should you be fined if one of them, you 
learned months later, from the Social Security Administration, 
that a number doesn't check out?
    Ms. Euwer. No.
    Senator Smith. Do you have a way to determine in advance, 
is there anything you could do as an employer of migrant 
laborers to determine the legality when they first show up to 
work?
    Ms. Euwer. Not that I know of.
    Senator Smith. I don't know of anything either.
    So I agree with your statement, and I think the reason I 
have asked you that is to demonstrate just how unfair some of 
the proposals are to American agriculture and other employers 
who make a good faith effort to comply but have no government 
system by which to determine legality now.
    And frankly, the INS tells me it would be years before they 
could ever determine or develop such a system. And I simply 
state that for the record, to show the unfairness of some of 
the demagogoery that you hear on the radio waves.
    Do you pay the minimum wage?
    Ms. Euwer. No.
    Senator Smith. What do you pay?
    Ms. Euwer. We may $8.00 an hour in general, and we picked 
our cherries by the hour this year because we didn't think we 
were in full production, although it turned out we almost were. 
But we paid $12 an hour for that.
    And when people are picking during our harvest period, 
they're making 14, $15 an hour, plus the housing that's 
provided to them, they have housing provided for both them and 
their families and their utilities.
    Senator Smith. So, you pay, when you factor in all the cost 
of employment----
    Ms. Euwer. I try not to think about it.
    Senator Smith. You pay well above the $7.50 Oregon minimum 
wage?
    Ms. Euwer. Yes.
    Senator Smith. Way above. What do you think of the proposal 
by some that you ought to pay $50 an hour so you can hire--you 
could be certain that you could get American born citizen 
labor?
    Ms. Euwer. That would put the fruit industry out of 
business. And in Hood River, the development pressures are so 
great that that land, once it went out of fruit production, 
would be lost, paved over, never to be seen again in the form 
of agriculture.
    Senator Smith. Where would American pears come from? Where 
would pears come from that Americans would then eat?
    Ms. Euwer. The largest source of pears I think that we eat 
right now are from South American, from the Rio Negro Valley in 
Argentina.
    Senator Smith. So those who cavalierly throw out the 
suggestion for you, really what they're advocating is the 
destruction of your industry, of your business, and frankly 
Oregon agriculture as well as many other industries.
    Ms. Euwer. Yes. But I don't think people realize that.
    Senator Smith. I don't think they do either. Has the debate 
made it difficult for you to find employees, anyone at this 
point?
    Ms. Euwer. We personally have not had difficulty finding 
employees. We've had the same people working for us for a very 
long time.
    Senator Smith. Have you heard that in your industry?
    Ms. Euwer. Yes. Especially, you know, for people that don't 
have housing. Smaller farmers who can't afford to have as much 
housing, yes. And as we get into cherries, too, it's different 
than pears. Pears, we can pick pears for 2 months. We had to 
pick our cherries in 4 days. So you need a lot more people. And 
that's something that we hadn't really experienced before this 
year. And that is a different situation than we have been in 
the past.
    Senator Smith. Have you ever had a green pea and pear 
salad. I'm trying to promote----
    Ms. Euwer. I had a delicious pea salad the other day at the 
deli on Mt. Hood.
    Senator Smith. Did you put pears in it?
    Ms. Euwer. No. I just ate the peas. I love peas.
    Senator Smith. Oh, you are a great American.
    The Chairman. Did you ever try peanuts in that salad?
    Ms. Euwer. I take peanuts in my salads, too.
    Senator Smith. Mr. Bernau, have you ever tried Two Buck 
Chuck?
    Mr. Bernau. Yes, I have.
    Senator Smith. Are yours better than that.
    Mr. Bernau. The Two Buck Chuck has introduced many, many 
new consumers into the world of wine. And they're trading up. 
They're trading up. Once they've tried the wine, they're 
looking for wines of higher quality.
    And so the glut of wine that produced the Two Buck Chuck 
has produced a whole new set of customers for us.
    Senator Smith. I only asked that for the sake of humor, but 
I really do renew my question to you as to Mr. Gallo, do you 
see the vintner industry in danger of becoming a commodity, or 
do you see it as a value-added quality, ultimately can keep--
can make a difference?
    Mr. Bernau. Your line of questioning is excellent. Because 
it does reflect on what's happening internationally. And that's 
why I modified my first remarks to add the point of difference 
about the land that's planted.
    The land that's planted in Spain and France and other areas 
that are affected by the new world wines of Australia, are in 
the many, many hundreds of thousands of acres, planted for a 
long, long time.
    What we have here in Oregon is only about 14,500 acres 
planted, a very small amount of acreage. And I pointed out that 
many more acres are still available for planting.
    We produce products of high quality, which consumers are 
trading up to.
    Just because consumers are trading away from low quality 
wines doesn't mean there's an excess or a surplus. What it 
really means is that consumers are changing their habits. 
They're drinking less, which is good. They're moderating their 
lifestyles, which is good. They're concerned about health and 
safety. And so they're drinking less, but they're drinking 
higher quality.
    The wine sales in Oregon are very high. Just our own 
depletions from our distributors to their customers are up over 
130 percent year-to-date. What this means is there is a 
substantial opportunity for the American public, the taxpayer, 
and the Congress. Very small amounts of investment that allow 
us to grow, will leverage a great deal of economic activity, 
provide a lot of opportunity.
    Senator Smith. Well, I wish you well, and all of you. Thank 
you so very much for your contribution to the Senate record. 
You have added measurably to our understanding. And we 
compliment you for what you do, and we thank you, on behalf of 
the Nation that is well fed because of folks like you.
    We've got to improve nutrition, work on obesity, and it's 
ironic that on the one hand we are trying to reduce hunger and 
yet reduce obesity. So we've got to find that balance, I 
suppose.
    But I think the things that you produce by and large are 
good for people, and certainly we hope they're good for your 
families and your businesses, and all the best to you.
    The Chairman. Well, to this panel, as with our other two 
panels, thank you very much for your great input. We again wish 
to continue to dialog with you, use you as a resource as we 
move toward writing this Farm Bill. And thank you for taking 
time to come to Redmond today to spend some time with us and to 
really open our eyes to western agriculture. So, again, thank 
you for being here.
    Senator Smith. Mr. Chairman, may I say again on behalf of 
Oregon agriculture how much we appreciate the Chairman of the 
Agriculture Committee. As I said, this is the first time in 
history an Ag Chairman's come to Oregon to hold a Farm Bill 
hearing, so how about a round of applause for Chairman 
Chambliss.
    [Applause.]
    The Chairman. Well, you're kind. Thank you very much. And, 
again, thanks to all of you in the audience who came out today 
to participate and to listen to the testimony that we've had.
    I would remind you that if any of you are interested in 
submitting a statement into the record, as we move forward with 
writing the next Farm Bill, you're certainly welcome to do so, 
by just going onto our website at Senate Ag Committee, you can 
find exactly how to do that.
    I want to say to the folks here at the Deschutes Fair and 
Expo facility, thank you for being great hosts to us. Boy, what 
a magnificent facility this is. I am very impressed with it. 
And particularly thanks to Roxie Toteroff, I hope I've said 
that right, Roxie, to Lois Tillman and to Grover Earp, who I 
understand is a relative of Wyatt Earp.
    I assume, Grover, your family migrated here from Dodge 
City, Kansas, because we all know that that is the home of the 
gun fight at O.K. Corral.
    We in Georgia are pretty proud of the fact that Valdosta, 
Georgia, which is very close to my home town, is the home of 
Doc Holiday. So Doc and Wyatt and all the Earp family out there 
did pretty well at the O.K. Corral.
    But we're pleased that you all would extend such 
hospitality to us today. And we thank you for that.
    The record for this hearing will remain open for 5 days, 
and I wish to note specifically that we have a statement from 
Senator Wyden that without objection will be added into the 
record.
    And with that, thank you very much for being here. Thanks 
for your participation. And this hearing will now be closed.
    [The prepared statement of Senator Wyden can be found in 
the appendix on page 48.]
    [Whereupon, at 11.30 a.m., the hearing was adjourned.]
      
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