[Senate Hearing 109-640]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-640
 
             REGIONAL FARM BILL FIELD HEARING: ANKENY, IOWA

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION


                               __________

                         Monday, July 24, 2006

                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry


  Available via the World Wide Web: http://www.agriculture.senate.gov


                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
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_____________________________________________________________________________
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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                   SAXBY CHAMBLISS, Georgia, Chairman

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

            Martha Scott Poindexter, Majority Staff Director

                David L. Johnson, Majority Chief Counsel

              Vernie Hubert, Majority Deputy Chief Counsel

                      Robert E. Sturm, Chief Clerk

                Mark Halverson, Minority Staff Director

                                  (ii)

  
                            C O N T E N T S

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                                                                   Page

Hearing(s):

Regional Farm Bill Field Hearing: Ankeny, Iowa...................    01

                              ----------                              

                         Monday, July 24, 2006
                    STATEMENTS PRESENTED BY SENATORS

Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman, 
  Committee on Agriculture, Nutrition, and Forestry..............    01
Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, 
  Committee on Agriculture, Nutrition, and Forestry..............    03
Boswell, Hon. Leornard, Congressman, Third Congressional District 
  of Iowa........................................................    06
Grassley, Hon. Chuck, a U.S. Senator from Iowa...................    08
Judge, Hon. Patty, Secretary of Agriculture, State of Iowa.......    05
                              ----------                              

                               WITNESSES
                                Panel I

Brockshus, Bruce, Representing Assiciated Milk Producers, Inc....    13
Heck, Ron, Representing the Iowa Sotbean Association.............    10
Ousley, Charlotte, Representing the Canned and Frozen Food 
  Growers Coalition..............................................    12
Sexton, Keith, Representing the Iowa Corn Growers Association....    09

                                Panel II

Hill, Craig, Representing the Iowa Farm Bureau Federation........    23
Johnson, Paul....................................................    26
Peterson, Chris, Representing the Iowa Farmers Unoin and the 
  National Farmers Union.........................................    24
Rosmann, Ron, Representing the Sustainable Ag Coalition..........    25

                               Panel III

Dean, Jim, Representing United Egg Producers.....................    39
Kerns, Steve, Representing the Iowa Pork Producers Association...    40
Nelson, Eric, Representing R-CALF, USA...........................    37
Scheitler, Bill, Representing the Iowa Cattlemen's Association...    36
                              ----------                              

                                APPENDIX

Prepared Statements:
    Grassley, Hon. Chuck.........................................    50
    Brockshus, Bruce.............................................    74
    Dean, Jim....................................................   121
    Heck, Ron....................................................    60
    Hill, Craig..................................................    79
    Johnson, Paul................................................    98
    Kerns, Steve.................................................   127
    Nelson, Eric.................................................   111
    Ousley, Charlotte............................................    63
    Peterson, Chris..............................................    81
    Rosmann, Ron.................................................    86
    Scheitler, Bill..............................................   101
    Sexton, Keith................................................    56
Document(s) Submitted for the Record:
    Statement of Cathlic Charities...............................   134
    Statement of Corn Refiners Association.......................   136
    Statement of George Naylor, President, National Family Farm 
      Coalition..................................................   138
    Statement of Hon. Thomas Valsack.............................   140
    Statement of Hunger and Environmental Nutrition..............   144
    Statement of Iowa Dietetic Association.......................   150
    Statement of Society of American Foresters...................   154
    Statement of Michael R. Rosmann, Ph.D........................   156
    Statement of Pennington Forestry Service.....................   159
    Leter from Shawn Larison in responce to the 2007 Farm Bill...   161
    Letter from William J. Smith in responce to the 2007 Farm 
      Bill.......................................................   162



             REGIONAL FARM BILL FIELD HEARING: ANKENY, IOWA

                              ----------                              


                         MONDAY, JULY 24, 2006

                                       U.S. Senate,
         Committee on Agriculture, Nutrition, and Forestry,
                                                         Ankeny, IA
    The Committee met, pursuant to notice, at 9:10 a.m. on the 
campus of Des Moines Area Community College in Ankeny,
    Iowa, Hon. Saxby Chambliss, chairman of the committee, 
presiding.
    Present: Senators Chambliss, Harkin, and Grassley.

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

    The Chairman. Good morning. First I would like to thank our 
panel members who in a lot of instances have traveled great 
distances to be here. We appreciate very much you taking time 
to come share some thoughts with us, as we look forward to 
moving ahead with writing the next Farm Bill. I, first of all, 
want to say to Greg Martin, the Vice President of Des Moines 
Area Community College, how much we appreciate your hospitality 
here. I understand that your President, Mr. Denson, is away 
because he's having a grandchild and that's the best reason for 
him not to be here. And I say that as a grandparent myself. So 
we do thank you on behalf of the Senate Ag Committee for your 
great hospitality. What a great facility to have this in--
beautiful campus as we came in, too.
    And I'm pleased to be back in Iowa. I've been here on a 
number of occasions, primarily to go pheasant hunting with my 
good friend, Tom Latham from up in Alexander. And I just want 
you to know as a member of the Senate, I'm traveling to Iowa to 
request of Senator Harkin and Senator Grassley. I am not 
running for President.
    [Laughter.]
    The Chairman. I may be the only member of the Senate not 
running. But I am here, because we're going to talk about 
agriculture, this morning. I am particularly pleased to be here 
with my two good friends, Tom Harkin and Chuck Grassley.
    You know, the Ag Committee has always been a very 
bipartisan committee. And Tom and I have had a great working 
relationship. We have different interests, obviously from an Ag 
perspective, but he has been very supportive of me, and my 
interests, and likewise, I have of him. But the most important 
thing is that we both believe in a strong agricultural America. 
It's the number one industry in our country. It's the heart and 
soul of the economy of our country, and as we move into the 
writing of the next Farm Bill, you're going to hear us talk a 
lot about agriculture now becoming a National Security issue.
    So to Tom and to Chuck, both of whom have been my great 
friends, I say thank you for letting me come to Iowa. You know, 
Chuck and I have gotten to be very good friends over the years 
and I know him just like the folks in Iowa know him. He's prone 
not to spend a lot of money wherever he goes. He reads used 
newspapers. He's so cheap.
    [Laughter.]
    The Chairman. And when I was coming in from the airport 
last night, I asked Keith, I said now, where are we staying? 
Please tell me that Harkin picked out the hotel and not 
Grassley.
    [Laughter.]
    The Chairman. Otherwise, I would have been in a camper on 
the lake somewhere. Chuck is a great American and thank 
goodness he is as fiscally responsible as he is. Being Chairman 
of the Finance Committee, that's where we need him.
    We are holding today our fourth field hearing. We have 
previously held hearings in Georgia, Missouri, and 
Pennsylvania. We leave here to hold four more hearings in 
Oregon, Nebraska, Montana, and Texas. These hearings are 
intended to provide farmers, ranchers, and family foresters an 
opportunity to directly share their thoughts with the committee 
on the direction of the next Farm Bill. By the time we have 
finished the field hearings the committee will have a thorough 
record to guide us, as we write the legislation that ultimately 
sets our farm policy for the next several years.
    Iowa is part of the Bread Basket of America. Your state is 
well known for it's more than 20 million corn and soybean acres 
in production, 16 million hogs, and a multitude of ethanol 
plants. Yet, Iowa is not blessed with the ability to produce 
cotton and peanuts, like we are in Georgia and I thank the Lord 
for that.
    However, even though you may not know it, cotton actually 
plays a very important role right here in Iowa. At the John 
Deere Plant not too far from here, the plant's 1,400 employees 
recently celebrated the 1 millionth engine that rolled off the 
assembly line. This engine was put into a brand new cotton 
picker. Forty-five percent of this plant's production is cotton 
pickers and most of that heads to the Southeast.
    Another bit of good news from Iowa, just last week the 
Senate passed the Water Resources Development Act that will 
authorize the construction of seven new locks on the Upper 
Mississippi River. This will keep American agriculture products 
competitive in the world market and provide jobs for thousands 
throughout the region.
    I know that the corn and soybean grower associations and 
the Iowa Farm Bureau have worked to see this legislation passed 
for 6 years. It's taken a long time, but we ended up with a 
good bipartisan bill that addresses water infrastructure and 
environmental restoration needs.
    I'd like to thank the witnesses here today for taking time 
to provide testimony and answer our questions. And again, to my 
colleagues and my friends from Iowa, Senator Grassley and 
Senator Harkin, thank you for hosting us in your wonderful 
state and for your work of the Senate Agriculture Committee on 
behalf of all agriculture.
    Again, I want to thank President Rob Denson for the use of 
this facility. And last, I want to recognize Ellen Huntoon with 
Senator Harkin's Iowa stay. Without Ellen, this hearing would 
not have been possible. So to Ellen, we thank you very much for 
all of your hard work in putting this together. Now, let me 
turn to Senators Harkin and Grassley for any opening statements 
they would like to make. Senator Harkin?

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

    Senator Harkin. Well, thank you very much, Mr. Chairman for 
coming to Iowa to hold this hearing here. In the interest of 
full disclosure I do want you to know that I reciprocated. 
You've come here to Iowa to hunt pheasants. I've gone to 
Georgia to hunt quail. So your quail's pretty good eating, but 
so is our pheasants and come back again this fall. We'll have 
plenty of corn fed pheasants. Just don't go to South Dakota to 
hunt pheasants. They got sand fed pheasants out there. We have 
corn fed pheasants here.
    But, I'm also pleased that we're joined by Senator 
Grassley. It's nice having two Iowans on the Agriculture 
Committee, like Congressman Boswell from the House, and Iowa 
Secretary of Agriculture Patty Judge, and many others in the 
audience, and on the panels.
    Farmers in all of rural America face some real challenges 
ahead. Primarily, because of stronger competition and 
increasingly global economy, or the world is flat as Tom 
Friedman said. And I think the future holds tremendous 
opportunities for agriculture in rural communities. That's why 
I'm optimistic about the future of rural America. We continue 
to lead the world in productivity, Ag productivity across the 
board. We're now just at the beginning of a whole new world of 
biotechnology, bio fuels, bio-based products, farm based 
renewable energy.
    I think our biggest challenge for the next Farm Bill is a 
bold and creative vision for U.S. agriculture. One that 
promotes diversity, enhances profitability, protects the 
environment, encourages rural economic development, and a 
quality of life in rural America. The Farm Bill is called upon, 
both to deal with the immediate challenges that we face and 
look farther ahead to build and respond to this vision. It's 
critical to our children and our grandchildren.
    The Farm Bill needs to promote a better and broader based 
farm income, rural economic growth and jobs, conservation of 
natural resources, Ag productivity, trade. And as I said, it 
needs to help preserve and in fact, improve the unique quality 
of our rural way of life.
    Overall, I think the 2002 Farm Bill has worked well for 
farmers in rural America. I'm proud of what we accomplished in 
that legislation. Yet, we are continually called upon to deal 
with changing circumstances, new information, new perspectives. 
Our farm in rural policy has evolved over time and it will 
undoubtedly continue to do so. So farm commodity programs will 
continue to change. We may or may not have a Global Trade 
Agreement within the next few months. I hope we do. However, 
it's clear our international commitments and responsibilities 
make change inevitable.
    Also here at home, the commodity programs are being more 
closely scrutinized and reexamined. So, there will be changes. 
Now, that doesn't mean we can't provide Federal Assistance. We 
can still have a good system of income protection with counter- 
cyclical functions. Support to conservation, farmer owned value 
ad adventures, rural development, farm based renewable energy 
in agriculture research are all allowed under our Trade 
Agreements, present ones, or anything on the horizon.
    So we made some progress in those areas in the 2002 Farm 
Bill. Unfortunately we've lost much of the funding we dedicated 
to them, because of the Federal Budget situation. The 
Conservation Security Program, for example, has been cut way 
back and we simply have to regain some of the ground that we've 
lost since 2002.
    As the Chairman has noted, we will also examine in the 
future the nutrition program's part of the Farm Bill in a 
future hearing. And we're going to hold some more hearings on 
rural economic development. We should address in the next Farm 
Bill the dramatically changing economic structure of 
agriculture and agricultural markets. We have to make sure that 
USDA has adequate authority and that it's enforcing the law to 
keep those Ag markets fair and honest.
    So again, I want to thank all of you who are here, 
especially those of you who have come a great distance and for 
your excellent testimony. I spent a lot of time yesterday on 
airplanes and sitting in airports, because of weather. So I had 
the chance to read all of your testimonies. I want you--I made 
enough notes on your testimonies to keep my staff busy for a 
long time getting the information.
    Let me again thank Greg Martin, the Vice President of DMACC 
and for hosting us here. Jack Payne, Vice Pro-host of extension 
representing ISU. Where's Mr. Payne? I know he was supposed to 
be here. Well, maybe not here yet. I also want to introduce the 
first person I'd ever worked for in Congress, and the author in 
1968 of the Wholesome Meat Act, which really did so much to 
make sure that knowing we had wholesome meat, that the 
consumers of America knew that they could rely upon clean 
wholesome meat when they went to the store to buy it. I think 
it has done wonders for our whole economy, and he's been a 
farmer all his life, and he's still with us, and that's our 
former Congressman Neil Smith right up here. Congressman Smith.
    [Applause.]
    Congressman Harkin. Thank you. I want to thank the Iowa 
corn growers, the Iowa Soybean Association, Associated Milk 
Producers for the food and beverages outside. I want to mention 
that after this hearing, the three of us, or four of us, well, 
anyone that wants to go. We're going to go to the Kum and Go 
Station right up the street here for a little bit of filling up 
the Iowa Corn Growers vehicle with E-85 and talk a little bit 
about the future of E-85 before we have to get to the airport 
to take off. That will be right after the hearing. We'll be 
down there. You're all welcome to that.
    Let me ask one other question. We have a deaf interpreter 
here and I'm going to ask her to ask, does anyone need 
interpreting services? Is there anyone here who needs to have 
an interpreter? If not, I will thank the interpreter for being 
here and excuse her at this point in time then.
    And last let me introduce for brief comments and a welcome, 
our Iowa Secretary of Agriculture, Patty Judge.
    [Applause.]

STATEMENT OF HON. PATTY JUDGE, SECRETARY OF AGRICULTURE, STATE 
                            OF IOWA

    Ms. Judge. Thank you, Senator. And this is very 
extemporaneous; because when I came this morning I was not 
aware that I was going to speak to you. But it is very nice to 
be able to be here this morning to see so much interest in the 
formation of the next Farm Bill, to see so many people in the 
audience that are known in Iowa as leaders, people that have 
opinions and ideas and are here to share those with you.
    We believe, of course, that agriculture not only is today's 
leading industry in Iowa, but it will be the leading industry 
in Iowa in the future. We have a big stake in making certain 
that the next Farm Bill is done correctly. We understand the 
challenges. We understand the pressures and those are issues 
that have to be worked through.
    Agriculture is not one size fits all and we are very much 
aware that what works in Iowa may not work in the Senator's 
area of the country. So, you gentlemen have a lot of work ahead 
of you. We did a pretty good job last time and I hope that 
we'll do that again.
    I would like to say that if I were here and able to give 
testimony today that I would say let's be sure that we don't 
forget the needs of the environment. We really must take in 
consideration working to make certain that we are protecting 
the water, we're protecting the soil, and that farmers have 
some help doing that. That costs money. That digs into the 
bottom line and we have to make certain that those resources 
are there for them to do the job that they want to do. Because 
I want to say very clearly, farmers are good stewards and they 
want to be good stewards in the future.
    And finally, I'm glad you're going to fill those vehicles 
up, Senator, before you take off. We believe very firmly here 
in Iowa that we have a great opportunity in the arena of 
renewable energy: ethanol, soy diesel, wind energy. Those are 
things that are just now taking their place in our state 
economy and we need to be certain that we continue to nurture 
those farmer-based industries.
    I wish I could stay all day. I can't. I've also got to make 
a trip to Washington today. I sit on a Homeland Security 
Commission that is meeting and of course, that is vitally 
important to us, and I hope that also is part of your Farm Bill 
discussions, because the protection of agriculture and 
agricultural interest needs to be taken into account.
    So, you've got a big task. I think you're up to it. And 
good luck and I'm sure you'll have a good session today.
    The Chairman. Thank you very much.
    Ms. Judge. Thank you.
    The Chairman. Have a safe travel.
    Ms. Judge. Thank you.
    The Chairman. Thank you very much.
    [Applause.]
    The Chairman. And I'd like to recognize and ask to make a 
few comments, the Congressman who represents this district in 
which we now sit, Congressman Leonard Boswell. Leonard?
    [Applause.]

     STATEMENT OF HON. LEONARD BOSWELL, CONGRESSMAN, THIRD 
                 CONGRESSIONAL DISTRICT OF IOWA

    Congressman Boswell. Well, thank you Senator Saxby, I 
appreciate having you here and Senator Grassley. We work 
together in the House. I've noticed we have--where did these 
peanuts come from?
    The Chairman. Display those prominently there, Leonard.
    Congressman Boswell. George peanuts.
    The Chairman. We need some of those Iowa.
    Congressman Boswell. We have a supply of those in the 
cloakroom in Iowa, in the House of Representatives. So thank 
you for keeping those--that supply there.
    I look around the audience for the first time I guess, 
since I've come in, the great turn out. I appreciate that. Last 
Saturday, John Hall who I think is in the audience, works for 
me and our State Director, we went up to Marshall, Minnesota 
for a hearing. I'll be very interested to see how we pick up on 
matters here, as we did there. It's a very, very important 
time. So, I appreciate being here and having a chance to say a 
couple remarks.
    I know from my own hands-on experience as a farmer and et 
cetera as many of you that I recognize in the audience feel the 
same thing, we have to make a profit. We have to cash-flow. 
Those of us who went through the farm crisis not too many years 
ago, know how--what it means to go to the bank, and sit down, 
and work out your cash-flow statement. We understand that. And 
so, we have to keep that mind. And the Chairman mentioned Ellen 
for doing her good job of setting this meeting up. She and I 
stood--she was representing Senator Harkin--he was there a 
number of times too. But we stood in some communities where the 
bank closed during the Agriculture Crisis and it's like having 
a death in the family. And some of you understand that. You 
were there, too. And I'm not here to discuss that. I just want 
to make the point that agriculture has to cash-flow. We have to 
have a profit.
    Now, in the world economy, it's very important. We're a 
great producer. We all know that, so I won't speak to that, but 
it's important that we be productive and do it in a reasonable 
way. It's also very important to our security. I just think 
about that. I could talk on that for quite a little while. It's 
extremely important to our security in our state or country 
that we have available, and reliable, and safe food. And so, 
that's all-important.
    We're into an energy time of energy crisis. I was just 
telling Senator Harkin I filled up my little puddle jumper 
airplane yesterday, and it doesn't hold a lot of gasoline, but 
it cost me $283 dollars and I thought wow. And the farm truck, 
I filled it up over the weekend and I think it cost me $75 
dollars to fill it up. So there's--this is--it's a concern out 
there for the farmers going to the field, or under combines to 
put the crop in, to take care of it, and take it out. It's a 
very big part of it. So--but, we're in a positive time with 
that and so I hope there will be an energy title that will 
address that. Because we, in this state, have lead out in 
alternatives and we know how to grow it out of the ground and 
then we know how, also to process it, and make it work, and 
provide the energy we need. Not only in the farm machinery and 
vehicles around the farm, but also for everybody else, include 
heating homes. So it's a big thing.
    So, I'll close with this. I know that it's my opinion the 
current Farm Bill is working. I would be interested how the 
discussion might go, that maybe we need to keep it going until 
these trade talks get settled, so we don't get caught in the 
crossfire on that situation. So it'll be interesting what we 
say here today.
    Our Chairman Goodlatte from the House raised a question in 
Marshall on Saturday. With the situation with budget and so on, 
what if we had to make a choice, farmers, between Direct 
Payment LDP, or counter-cyclical? And it was a quite 
interesting discussion. They seemed to hold up direct payment 
there, in that meeting, as most desirable. But I'll also give 
credit to the corn growers and soybean growers, at least and a 
couple others. No, we want to keep all three. And I understand 
that too. But that might be something worth thinking about, 
because we have a terrible deficit situation.
    So with that, I, again, thank you for being here. I see 
many of you in the audience that have a lot of appreciation for 
farming is important. I guess I'd say this in closing, Mr. 
Chairman We could stand--we could use a few more farmers in the 
Congress, as we try to keep this bit that's going called 
agriculture. I appreciate your being here and I'm going to take 
one package of peanuts and take my place.
    Senator Harkin. Again, I just want to thank you, Mr. 
Chairman for being here today. And really for being an 
outstanding Chairman and I say that in all candor and all 
truthfulness. I couldn't ask for a better Chairman of the 
Agriculture Committee. Well, unless I was the Chair.
    [Laughter.]
    Senator Harkin. I'm just kidding. Couldn't ask for a better 
Chairman. You've been extremely fair and open in all of our 
dealings. It's just been a great relationship. Your staff has 
been wonderful to work with and our staff. And I just think 
it's a mark of Saxby's real interest in agriculture that he's 
taking these hearings all over America. Believe me, I think 
Chuck and I both know the demands on our time as Senators. It's 
incredible and to go to Pennsylvania, to Iowa, to Missouri, 
Oregon, all the places he's taken the Ag Committee, I think it 
really speaks very highly to the fact that he is focused on 
this Farm Bill. And Mr. Chairman, I just want to thank you for 
that. Having served as Chairman during the last Farm Bill, 
myself, all I can ask is may God grant you patience. It's going 
to--it takes a lot of patience to get through this, but I know 
you're going to do it and I just offer you whatever help and 
support that we can give you from this side. Thank you very 
much.
    The Chairman. Well, thank you, Tom. You've been a great 
shotgun rider and we look forward to moving ahead with this 
over the next several weeks and months.
    Now, my good friend Chuck Grassley, Chuck, again, I'm 
pleased to be in Iowa.

   STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM IOWA

    Senator Grassley. Yes, and we're glad to have you here and 
thank you for coming. As Tom has said, and thanks for all the 
witnesses, these and the ones on the second and third panel, 
I'm not going to read my long statement, because it is long. 
But I want to highlight some things. Number 1, is to highlight 
the fact that as we consider the next Farm Bill, as has been 
the case with most Farm Bills, we have to think about having an 
environment so that the next generation of young people will be 
able to farm, as well. And with a son and a grandson in our 
family farming operations, I appreciate how difficult that is. 
But I also appreciate how important the farm program is to 
making that happen.
    We traditionally look at the Farm Bill as farm safety net, 
but connected with it are issues about--that I'm interested in 
and other people as well, opportunities that a Farm Bill brings 
up to make sure that we have more competition in agriculture 
and to limit concentration and consolidation within 
agriculture. And one of these issues is, not only the issue of 
whether or not 10 percent of the largest farmers ought to get 
72 percent of the benefits out of the farm program, which I 
think is ridiculous, but also to make sure that we keep a 
political environment in Washington where the public at large, 
meaning those in New York City, as well as Iowa are going to 
support a Farm Program or we're not going to have any Farm 
Program. And farm programs are really under scrutiny now in 
Washington, D.C. not just because of the 10 percent of the 
farmers getting 72 percent of the benefits. But just recently 
in three different programs that are in the Farm Bill, I would 
hold up the Washington Post, July the 18th: No Drought Required 
for Federal Drought Aid. An article about abuse of the Farm 
Program, from July the 19th: Aid to Ranchers was diverted for 
big profits, tons of powdered milk ended up on the market. And 
then, Farm--on July the 2nd: Farm Program Pay one and three 
tenths Billion Dollars to People Who Don't Farm. So, we're 
under scrutiny and the point is to make sure that we're able to 
keep the Farm Program for the benefit of farmers and the good 
of America.
    Another one from July the 3rd: Growers Reap Benefits Even 
in Good Years. So it's very much an issue that we have to be 
cognizant of, as we write the next Farm Bill to make sure that 
the Farm Bill is for farmers and for farmers that need the 
safety net, and not for just a few. So the next Farm Bill, will 
obviously entail a look at all of these abuses and a look to 
make sure that the Farm Program is directed toward those who 
need the help.
    And also of interest to me, on a second point, and also an 
interest to the Agriculture Committee, but secondary to my 
committee, because the Finance Committee has jurisdiction over 
all international trade and that is something that Congressman 
Boswell and others have alluded to, to make sure that we have a 
trading environment where we have market access. And one of the 
major issues in Geneva right now is to make sure that we do not 
give up anything on our Farm Program without having market 
access. And that market access is basically the figure of the 
United States having an average of 12 percent tariffs. The 
world average on agriculture tariffs of 62 percent, hence, 
foreclosing of markets, opportunities for our farmers, they 
having market opportunities in the United States, and getting 
that 62 percent down closer to our 12 percent, and making sure 
that we have a level playing field for farmers.
    Of Chairman of the Senate Finance Committee, I have told 
our negotiators don't bring an agreement to my committee that 
is not going to have market access, because we're not going to 
even bother to look at it. We're not going to give up any of 
our safety net, until we get a level playing field for American 
farmers.
    And then last, I would just emphasize a couple things that 
have already been said and there's no sense of my saying it 
twice, or three times. But the point of value added 
agriculture, rural economic development, so that we broaden 
opportunities for farmers here. Not only for the benefit of 
American agriculture, but for the benefit of the entire economy 
that's very closely tied to agriculture as the foundation of 
our State's economy. Thank you.
    [The prepared statement of Senator Grassley can be found in 
the appendix on page 50.]
    [Applause.]
    The Chairman. Thank you, Senator Grassley. We will now move 
to our first panel: Mr. Keith Sexton from Rockwell City, Iowa, 
representing the Iowa Corn Growers Association; Mr. Ron Heck 
from Perry, Iowa, representing the Iowa Soybean Association; 
Ms. Charlotte Ousley of Alexandria, Indiana, representing the 
Canned and Frozen Food Growers Coalition, accompanied by Mr. 
Steve Smith; and Mr. Bruce Brockshus of Ocheyedan. I hope I got 
that right. Representing the Associated Milk Producers, Inc.
    Ladies and gentlemen, we are pleased to have you all here. 
We are happy to submit your entire statement for the record. I 
would ask that you keep any opening comments to 3 minutes. 
Thank you and we'll start with you Keith.

   STATEMENT OF MR. KEITH SEXTON, REPRESENTING THE IOWA CORN 
 GROWERS ASSOCIATION, PRESIDENT AND FARMER, ROCKWELL CITY, IOWA

    Mr. Sexton. Thank you, Senators, for this opportunity to 
present input on the 2007 Farm Bill from the Iowa Corn Growers 
Association and our 6,000 farmer members.
    ICGA started nearly 2 years ago, looking at the 1902 Farm 
Bill for modifications to enhance long term profitability for 
producers. This morning, I will mention four of the issues we 
wish to see debated: First, the commodity title. We believe 
that a safety net based on revenue rather than price has 
significant advantages especially for new entrants into 
farming. We are aware that talk of a revenue program 
immediately brings visions of unilateral cuts and support that 
would remove bargaining chips from our negotiators at WTO 
talks.
    Idaho Corn Growers support a revenue program that can 
provide the same, or a higher, level of support as we currently 
have. Yet, the slight modifications could provide a WTO 
compliant, but still very effective safety net. This type of 
program can work with nearly any crop and should eliminate the 
need for disaster payments.
    At our corn grower--National Corn Grower Policy session, a 
couple weeks ago, the vote to focus on such a revenue based 
program passed with an overwhelming 75 percent majority. This 
illustration graphically depicts when producers receive 
payments under both, a revenue base and a price-based system.
    The advantage of a revenue based system over the current 
LPD and counter-cyclical program is simple. Benefits are 
received when they are most needed--years of reduced crop 
income. Farmers' support for retaining the current programs 
likely come from those producers with substantial equity who 
feel that sticking with the current program is just plain 
easier. Given our organizations long terms vision and desire to 
see beginning farmer coming into our production industry, we 
come down firmly on the side of a revenue program.
    Item 2, we think the direct, decoupled payment program 
should be continued pretty much as is, with the delivery of 
these payments modified, so at least part of them could be 
targeted towards activities that will help improve the farm, 
it's management or rural communities.
    Item 3, the Farm Bill must contain a strong conservation 
title. The current title includes a number of programs and I 
will mention two of them. The CSP Program has a worthy intent 
of rewarding the best and incenting the rest. However, funding 
cuts have drastically changed the program.
    We realize there is insufficient funding to provide 
acceptable payments to all target producers, but the program is 
now implemented in such a manner that it is not as useful as 
envisioned. If CSP could be revised to adequately fund more 
farmers on a more consistent less restrictive basis, this 
program should be continued in the next Farm Bill.
    Also, we believe the EQIP program provides an essential 
service of assisting producers, especially livestock producers, 
with installing the structures necessary to help meet clean 
water guidelines and it should be continued.
    Item 4, we think there's an overwhelming need to discuss 
capital gains issues during the Farm Bill debate even if there 
is no tax title. There are two reasons: First, 1031 exchanges 
artificially increase the value of farmland and consequently 
farm costs to farmers. Second, there should be a viable 
alternative for farmers to transfer control of assets to the 
next generation of producers during their lifetime rather than 
through their estate by which time that next generation is 
nearing retirement age.
    Other topics are addressed in my written text. And thank 
you for this opportunity to comment on behalf of the Iowa Corn 
Growers Association.
    [The prepared statement of Mr. Sexton can be found in the 
appendix on page 56.]
    The Chairman. Thank you. Mr. Heck?
    [Applause.]

      STATEMENT OF MR. RON HECK, IOWA SOYBEAN ASSOCIATION

    Mr. Heck. Good morning, Mr. Chairman, and Members of the 
Committee. I am Ron Heck, a soybean and corn farmer from Perry, 
Iowa and at current Iowa Soybean Association Director. I am a 
Past President of the American Soybean Association and served 
on their Board of Directors, until last week.
    I must say I don't deserve your praise for traveling a 
great distance. I ate breakfast at home, got in my car, and 
arrived early. I appreciate you traveling to Iowa to be here 
for the hearing today and it's always a pleasure to see Iowa's 
two Senators on the Ag Committee. Thank you.
    Mr. Chairman, soybean producers in the Midwest, as well as 
other regions of the country, support the safety net we now 
have under the 2002 Farm Bill and would support extending 
current programs.
    Unfortunately, the current budget baseline may not 
accommodate expected outlays based on current support levels. 
Budget factors alone are likely to force Congress to look at 
changing the current farm program in the next year's Farm Bill.
    A second reason to look farm programs is the potential for 
additional WTO challenges of the current program. We are 
watching the current WTO negotiations which I understand, did 
not go well in yesterday's talks. Last October, the 
Administration offered to make a 60 percent reduction in 
outlays permitted under the most production and trade-
distorting programs, including the Marketing Loan and dairy and 
sugar price supports. ASA and other farm organizations are 
insisting that importing countries make equally aggressive 
reductions in their tariffs, and that world class exporting 
developing companies be subject to similar production subsidy 
disciplines.
    To explore alternatives, ASA organized a Farm Bill Task 
Force last year, which has been working with other farm 
organizations to look at so-called Green Box programs that 
would be considered non-trade distorting under the WTO.
    The draft results of this analysis indicate a variety of 
options that would guarantee 70 percent of historical income 
and still be WTO-compliant. Neither ASA nor any other 
organization participating in this analysis has endorsed the 
revenue guarantee concept. We are working to have 
recommendations to put forward to the Committee sometime this 
fall.
    Mr. Chairman, ASA is also very supportive of proposals to 
strengthen the conservation, energy, research, and trade titles 
in the 2002 Farm Bill. ASA urges Congress to authorize and fund 
a bio diesel energy program in order to compete with imports of 
already subsidized bio diesel that will undermine the U.S. 
industry since the imports are eligible for our tax incentives.
    We are concerned by recent actions that have depleted 
funding for conservation and research programs in order to pay 
for disaster assistance, or to cover budget reduction 
commitments. ASA supports increased funding for conservation 
payments to producers on working lands such as through the 
Conservation Security Program. We also believe that a 
significant number of acres currently locked up in the 
Conservation Reserve Program could now be farmed in an 
environmentally sustainable manner. Finally, we strongly 
support maintaining funding for trade promotion activities 
under the Foreign Market Development and Market Access 
Programs, and for international food aid.
    Thank you again Mr. Chairman, for the opportunity to appear 
today.
    [The prepared statement of Mr. Heck can be found in the 
appendix on page 60.]
    The Chairman. Ron, thank you very much. Ms. Ousley?

   STATEMENT OF MS. CHARLOTTE OUSELY, CANNED AND FROZEN FOOD 
       GROWERS COALITION; ACCOMPANIED BY: MR. STEVE SMITH

    Ms. Ousley. Mr. Chairman, Member of the Committee, my name 
is Charlotte Ousley. Together with my son, Jay, we farm 270 
acres of processing tomatoes in Elwood, Indiana. We rent nearly 
all the land we farm.
    My husband, Herb, tragically was killed in a farming 
accident in September 2003. Since his death, Jay and I have 
made every effort to keep our traditional family farming 
operation viable, in spite of incredible obstacles we 
encountered as a result of the massive extension of the Fruit 
and Vegetable Planting prohibition contained in the 2002 Farm 
Bill when soybeans became a program crop.
    Operating as sole proprietor for over 40 years, my husband 
maintained all ASCS reporting under his name. Shortly after his 
death, I contacted FSA for clarification about the status of 
the producer history that my husband worked his whole life to 
accumulate. I had no reason to believe anything other than 
Herb's history, as a tomato producer would transfer to my son 
and me. This producer history is essential under the 2002 Farm 
Bill for us to rent the land needed for annual production, 
since processing tomatoes and good management practices require 
rotations, unlike traditional cash grain crops grown on farms 
in our area. Our principal landlord possesses farm history so 
we could continue to produce on that land, but that farm alone 
is not enough and must be supplemented with other rental land 
to support the size of operation required to be financially 
viable.
    Because Herb possessed producer history, he was always 
allowed to rent the land he needed rental land from friends and 
neighbors to supplement our primary landlord's acreage.
    Needless to say, I was shocked when FSA informed us that my 
husband's producer history had been lost with his untimely 
death and cannot be transferred to his widow or his son. As a 
result, we have found it increasingly difficult or impossible 
to find enough land on our annual basis that will accommodate 
our contractor's requirement of a minimum 3-year land rotation 
for production for processing tomatoes.
    The negative effects of the widely expanded reach of fruit 
and vegetable prohibitions are for the most part, limited to 
producers in the Midwest. This is because of double-cropping 
exclusions afforded to southern states and the fact that 
program acres are concentrated in the Midwest, and not so much 
in the West.
    Reliance upon producer history as a basis for continued 
fruit and vegetable production is simply inadequate. Not only 
for producers' history not transferable between husbands and 
wives, it is not transferable to the next generation of farmers 
desiring to enter fruit and vegetable farming and maintain the 
traditions established by generations of family farms. Fruit 
and vegetable growers have safely fed this nation with an 
abundant supply of nutritious and affordable canned goods 
Family farmers presently are not free to run their businesses 
in the most efficient fashion because of the inability to 
transfer producer history. The next generation of farmers needs 
to be protected and preserved.
    The solution to these problems is simple: allow fruits and 
vegetables to be grown on program acres by taking an acre-for- 
acre reduction in program payments. I ask for NO subsidies on 
our production. I do not want to receive government payments; I 
simply want the opportunity to grow tomatoes. Even if my 
neighbor decides, they simply are restricted from renting land 
to me for fruit and vegetable production under current law and 
still maintain their program eligibilities. My husband could, 
but my son and I are prevented from doing that.
    Thank you for allowing me this opportunity to tell you my 
story. If you have technical questions beyond how this has 
affected my son and me, Steve Smith from Red Gold here with me, 
and can help shed a wider insight of the industry. Thank you 
for allowing me this opportunity to tell you. I appreciate 
Senator Harkin when this issue for submerged. And now, I 
respectfully request the Committee's inclusion of the language 
in the next Farm Bill, which will correct these unfortunate 
inequities. Thank you kindly.
    [The prepared statement of Ms. Ousley can be found in the 
appendix on page 63.]
    The Chairman. Thank you very much. Mr. Brockshus?

     STATEMENT OF MR. BRUCE BROCKSHUS, MILK PRODUCERS, INC.

    Mr. Brockshus. I appreciate the Committee's invitation for 
me to come here today and present my views on dairy in regards 
to the 2007 Farm Bill. My name is Bruce Brockshus and I'm a 
dairy producer from Ocheyedan, Iowa, and a member of the 
Associated Milk Producers Board of Directors representing the 
more than 4,000 dairy farmers in the Upper Midwest which 
collectively owns 13 manufacturing plants, four of them here in 
the State of Iowa.
    My wife Sue and I, along with two sons have gradually 
expanded our dairy to its present size of 325 cows. Growing 
with us is AMPI, the manufacturing co-op in which we are 
stakeholders.
    But as members of this Committee, you understand the 
challenges faced by Upper Midwest dairy producers. There are 
fewer cows, fewer dairy producers, fewer manufacturing plants.
    To reverse this trend we must have a sound dairy policy 
that will encourage both producers and their co-ops to invest 
in infrastructure. Dairy producers need the price support 
system. In fact, that is AMPI's top priority for the 2007 Farm 
Bill.
    Let me share four ways to strengthen the existing program. 
First, we need to increase the support price. The current $9.90 
support price is inadequate and has not been changed since the 
1980's.
    Second, we must have a support price system that works as 
Congress intended. The USDA's Commodity Credit Corporation must 
increase the milk price equivalent it is paying to remove 
products from the open market. Because of increased 
manufacturing costs, the manufacturing make allowance in the 
support program yields as much as $1 dollar less than the 
Congress intended when enacting the support program.
    Third, we must provide counter-cyclical payments. AMPI and 
the Midwest Dairy Coalition believe the Milk Income Loss 
Contract is needed to give producers a better chance of 
surviving for the market collapse, at least in the 2.4 million 
pounds as is presently allowed under the law.
    Finally, we must manage dairy import products to make 
support price effective. The CCC should not be buying the 
world's milk surplus under our support price system.
    I ask you to consider these four points and know that a 
minimum price assurance is needed for a product that is 
perishable and demands a large, long-term investment to 
produce. In addition, the USDA, at the request of AMPI and 
several other co-ops, held hearings in January to review the 
make allowances in the Federal order Class III and IV formulas. 
Testimony at this hearing was overwhelmingly supported the need 
for emergency action on this issue.
    However, the USDA has not only not acted to announce--not 
acted on this, they have announced plans to reconvene public 
hearing sometime after September. Such a delay will have 
negative long-term impacts in the Midwest dairy industry.
    We ask you to urge the USDA to immediately adopt, on an 
interim basis, updated make allowances based on the January 
hearings. This is not an extraordinary request as the USDA has 
frequently implemented changes to the order system on an 
interim basis.
    The points I have raised today are tightly intertwined. 
Both involve the USDA--asking USDA to update manufacturing make 
allowances that will make the price support and the Federal 
Order System more realistic and effective. I hope this hearing 
will be a significant step in engaging policymakers and 
industry stakeholders in discussion focused on a strong dairy 
industry.
    Thank you for the opportunity. I'll be happy to answer your 
questions.
    [The prepared statement of Mr. Brockshus can be found in 
the appendix on page 74.]
    The Chairman. Thank you very much, Mr. Brockshus and all of 
our witnesses. Mr. Brockshus, I'll have to tell you that I got 
a call about 12:30 this morning, after I got here, from 
Secretary Johann's who is over in Geneva right now. And I told 
him where I was and he said, well you know I grew up on a dairy 
farm in Iowa and I got a lot of kinfolks back there. So to all 
of his cousins who may be listening on our website, or be here 
today, your cousin, Secretary Johann's is doing a heck of a job 
and ya'll gave him very good training on a dairy farm right 
here in Iowa.
    I have a series of questions that I'm asking in every 
hearing as we get around the country, that I want to go to 
commodity folks, to Keith and to Ron. And we'll direct these 
first few to you. And I would ask that you be as brief as 
possible in your answers, so we can make this record.
    First of all, how would you prioritize the Farm Bill 
programs generally and the commodity titles specifically? How 
would you rank the relative importance of the Direct Payment 
Program, the Marketing Loan Program, and the Counter-cyclical 
Payment Program? Keith? Mr. Sexton. Well, Iowa Corn Growers 
would rank the commodity title as the most important. The 
second level of importance would be conservation, rural 
development, trade, and then research. Third level would be 
credit, energy, and miscellaneous, then followed by forestry 
probably bringing up the rear just because of where we're 
located.
    Relative to the commodity title, because of the 
consequences of not being in WTO compliance, we would probably 
rank under the existing Farm Bill, the Direct Payment as most 
important and the Marketing Loan which is the most egregious, 
under WTO as the least important. And were cut should be make 
first.
    But more importantly, we support as I mentioned in my 
comments, a revenue program that would replace the marketing 
loan and counter-cyclical payments.
    The Chairman. Mr. Heck?
    Mr. Heck. Certainly the commodity payments that we have now 
are of extreme importance to us in the Farm Bill. We recognize 
the problems with the WTO. As it currently stands, if the 
current system would be allowed to continue the Direct Payments 
are most beneficial to landowners and those people who are 
paying for land. The Marketing Loan is the most important for 
the farmers who are on the land, but also causes the most 
trouble with the WTO. And the Counter-cyclical is somewhere in 
between those.
    I agree with Keith that moving to a revenue based program 
that solves the WTO problem might be the system we are forced 
to go into and it could be acceptable too. It might be a very 
good system.
    The Chairman. OK. We can expect an effort to further reduce 
payment limits in the next Farm Bill. Do payment limits need to 
be modified in the next Farm Bill and why? Keith?
    Mr. Sexton. Well, this is one area that's probably the most 
contentious of the whole Farm Bill within our association. We 
do come down when the dust clears on the side of meaningful 
payment limits. And when I say meaningful, I mean that having a 
payment limit on marketing loan gain is not meaningful if it 
can be circumvented with commodity certificates or loan 
forfeitures.
    I guess we feel that as operations grow there is a point 
that is reached when the operation should no longer need 
government support.
    Mr. Heck. Both of the Iowa Soybean Association and American 
Soybean Association support the payment limits that are 
currently in the 2000 Farm Bill. I personally, I have a problem 
with the payment limitations. When families want to work 
together it's difficult to find business structures that will 
work when a group of relatives want to work together. I would 
like to see some more work on the definitions of what 
constitutes a person. Some of my relatives believe they are 
persons. They work full time on the farm, but yet don't have a 
separate limit.
    The Chairman. OK. The DOHA round of negotiations seeks to 
provide additional market access for U.S. agriculture goods in 
exchange for reductions in domestic farm payments. How 
important are exports to the future of farmers?
    Mr. Sexton. Iowa Corn Growers believe that exports are 
extremely important to Iowa producers, whether they realize it 
or not. Not only are corn and soybeans exported, and if fact 
right now, one reason why they think that maybe a lot of 
farmers see decreased value in exports, is because the ethanol 
industry is consuming more corn--as much or more corn than 
exports.
    However, we need to keep in mind that the value added crops 
are processed into meat and one of the bi-products of ethanol 
production is DDG's, and both meat and DDG's are exported. So 
from that respect they're very essential.
    Mr. Heck. Exports are still vital for U.S. agriculture. Our 
productivity continues to increase faster than our population. 
Exports may very well become more important in the future than 
they are now. That's why we're so closely watching the WTO 
round and insisting on market assess.
    The Chairman. Should an increase in conservation or energy 
programs come at the expense of commodity programs?
    Mr. Sexton. It--we think that the commodity--current 
commodity programs, if cuts are in fact imposed upon us, that 
conservation and energy programs should be the beneficiary of 
those cuts and pick up the slack--or the funding that was cut 
from those programs.
    We think that increased funding for energy programs; vital 
energy products will gain support of the American consumers. 
And in fact, it is a very important to all American consumers. 
And as was mentioned earlier, it's important to our National 
Security.
    Mr. Heck. I would say that this is not necessarily a choice 
we have to make. And if we do have to make it the commodity 
title is still extremely important, particularly, if the WTO 
talks fall apart for some reason. We still face international 
trade restrictions in subsidized products. And the purpose of 
the commodity title is, at a large part, to address those 
disadvantages that we face.
    On the other hand, it is entirely possible that the energy 
part of the Farm Bill could be used as an offset with a larger 
domestic energy market. The commodity safety net may not be 
triggered as often.
    So I'm not sure it's an either/or choice. I think we can 
work to find a way to maintain both a safety net, and increased 
conservation, and energy at the same time.
    The Chairman. Thank you. Ms. Ousely, in your testimony you 
mentioned the impact planting flexibility restrictions have had 
on your ability to grow tomatoes here in the Midwest. You 
mentioned S. 1038 as a proposed solution which allows fruits 
and vegetables for processing to be grown on program acres, in 
return for an acre-for-acre reduction in program payments. Do 
you believe the farm service agency has the expertise and the 
resources to adequately enforce such a proposal that applies to 
processed rather than fresh market fruits and vegetables? If 
this proposal is adopted and not enforced appropriately, how 
would this impact the market for fresh fruits and vegetables?
    Mr. Smith. Mr. Chairman, we believe that the impact on 
fresh fruits and vegetables would be minimum as evidenced by 
the fact after the 1996 Farm Bill was put into place, that 
there was no problems with distortion between the fresh and 
process markets. Those markets are distinct and different. 
Under the 1996 Farm Bill when soybeans were not a program crop, 
the available acres were there for all fruit and vegetable 
growers to produce in basically, unlimited amounts; and yet no 
market distortion was observed.
    So we think that under the Senate Bill 1038, that those 
market distortions would not come about, and that the acre-for- 
acre reduction actually proposes a budgetary savings, according 
to the CBO. So we can actually help save a little bit of money 
in the way that it works.
    As far as the FSA is concerned, currently under the 
structure, the FSA has an enormous workload to keep track of 
producer histories and farm histories, and with extra 
recombinations in tearing apart of farms for no other reason 
than to try to be able to accumulate acres on a particular farm 
where fruits and vegetables can be grown.
    And so, we actually think that it would reduce the workload 
for the Farmer Service Agency.
    The Chairman. OK. As we think about this in the next Farm 
Bill, I know this is going to be a very contentious point. I 
just--I want to give you the benefit of my thought in this, 
because I do, have a dog in this fight. We grow a lot of 
vegetables, as you know down our way. And what I hear from my 
fruit and vegetables growers is, that look, basically what you 
want--what we want you to do is to leave us alone. Don't let 
the government come in looking over our shoulder. We're not 
asking for any money, other than continue to do research from a 
fruit and vegetable standpoint. But we don't want the price 
cabbage to go to $20 dollars a box and all of sudden everybody 
that was growing soybeans at home, puts that soybean acres into 
cabbage production for the next year and opts out of the 
soybean program. And then the next year, cabbage goes to $2 
dollars a box and they opt back in to the soybean program.
    This is going to be a real dilemma for us as we talk about 
this during the preparation for the next Farm Bill. So we're 
sure looking to ya'll for some help there.
    Mr. Smith. Could I comment on that?
    The Chairman. Absolutely.
    Mr. Smith. One of the big differences between the fresh 
market, fruit and vegetable production, and processing which is 
the reason Senate Bill 1038 only refers to processing, is 
because these market distortions that you just spoke about, are 
limited from the processing side, because you only produced a 
processing crop when there is a market demand as for that 
contract.
    For example, a farmer in Indiana would not just go out and 
say soybeans are a little bit cheap this year, so I'm going to 
produce processing tomatoes. They would only produce processing 
tomatoes if they had a contract to do such a thing. Whereas in 
the fresh market world, it's typically smaller acreage, someone 
will set up a fruit stand. There's no organized limitations 
about what production would be.
    And so, we believe that the differences between the fresh 
market industry and the processing industry will self-take care 
of that situation, because you will not go produce extra 
cabbage for processing, unless a processor has contracted you 
to do that.
    The other thing on that is that the flow of product between 
the processing industry and the fresh marketing industry is---- 
effectively has a barrier, because of differences in varieties. 
For example, the fresh market tomato industry would not even 
recognize what we do in the processing tomato industry, and so 
the varieties will not transfer back and forth.
    And there's one other ironic benefit of the Senate Bill 
1038, and that is, that it actually creates a barrier for the 
fresh market folks from a protection standpoint in the fact 
that if were--certified your land for processing production and 
then tried to sell it on the fresh market, since it was 
certified as processing, you would then be in violation. 
Because you sold it as a fresh market and not as a processed 
commodity, so there is an actual barrier being raised between 
the fresh market and I think it's processing with Senate 1038.
    The Chairman. I look forward to telling Patrick Mabley you 
explained that well.
    Mr. Smith. Thank you.
    The Chairman. Mr. Brockshus, 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 non-cooperative dairy producers also be able to 
utilize this risk management tool?
    Mr. Brockshus. I believe it does provide some benefit. But 
it kind of goes back also to the Class III prices that are set 
on the Board of Trade, are effected to buy our make allowances. 
Which if the make allowances are understated, those Class III 
prices are overstated. It disadvantages the manufacturing co-
ops in that market. And it's difficult to determine what that 
actual market is, but yes obviously forward contracting is a 
way of stabilizing the market somewhat.
    The Chairman. All right. Well, how about the part of it 
that I asked, relative to co-ops being the only entity able to 
utilize that now? Should we extend that to every dairy 
producer, whether he's a member of cooperative or not?
    Mr. Brockshus. Well, I guess I don't see a problem with 
anybody forward contracting. Many of the forward--many of the 
contracts--well, there are two ways that we do--that we can 
contract. As a member of a co-op we can contract through our 
co- op who has arranges for us, that has done a contract. Or, 
as far as I know, that anyone would be able to go on the Board 
of Trades to do that.
    The Chairman. OK. Senator Harkin?
    Senator Harkin. Thank you very much, Mr. Chairman and I 
thank you, those questions, I know you asked it of all the 
panels. This is a good basis for us on which to proceed. I just 
have a couple of questions that I'm going to ask every panel. 
Just a little bit--I'm sorry. Am I on now? I also have a 
question I'd like to ask every panel. So those that are coming 
up can think about it.
    In this testimony, we'll have a witness coming up later on 
one of the panels--Ron Rosmann. I read his testimony yesterday 
and one of the things that struck me is that he said that we 
now have twice as many farmers over age 65, as under 35. And 
half of all our farmers are over age 55. So my question for you 
and the next panelists, do our present Federal Agriculture 
Policies help, or hinder young people who want to get a start 
in the business whether it's in crops, livestock, dairy, 
poultry, vegetables, fruits, whatever? That's one.
    And second, what are the most important things that we 
should do in the next Farm Bill, if we want to foster 
opportunity for the next generation in agriculture? Just your--
whatever thoughts you have and if you think of more later on, 
send them into me, but Keith?
    Mr. Sexton. We think that by being able to have a revenue 
based commodity title that it would help bring young people 
into production agriculture. Because they would be assured and 
their bankers would be assured that there would be some 
additional revenue support in years of low crop revenue, which 
is not necessarily the case with the current program.
    We also think that by being able to target some of the 
direct payments to a variety of programs, such as value added 
investments that it may help young producers who are--actually, 
they would already be in production agriculture. But it may 
help them participate a little bit more in value added aspects 
of farming.
    And I think probably the greatest thing we could do to help 
new entrants would be review the capital gain structure. As I 
mentioned earlier, we think the 1031 exchanges artificially 
inflate the value of farmland, which consequently raises the 
cash rents. And also, by--if we have some mechanism where older 
farmers could transfer their control of the operation to the 
next generation rather than going through an estate without a 
large capital gains penalty, that it would help facilitate 
young farmers having an interest in coming in to agriculture.
    Senator Harkin. Very good. Ron?
    Mr. Heck. Yeah, absolutely. On the last point for example, 
my grandmother is willing to sell to me, but she can't. I want 
to buy her land. She wants to sell it to me, but we can't do 
it. That's an excellent point.
    The Chairman. Why is that?
    Mr. Heck. Capital gains tax.
    The Chairman. Oh.
    Mr. Heck. And then second, my son-in-law is home working 
today, so I could be here. I can't help him start farming, 
because we are thrown together with one payment limit when we 
do that. So all I can do is give my operation to him. I can't 
help him go out and get established on his own. As soon as we 
share equipment or money, we run into person definition 
problems. So that is an impediment.
    Another impediment is that the overall return for assets in 
agriculture is generally smaller than the interest payments. So 
if a young man can't borrow money and make it pay, because the 
return is lower than the interest payments, and his family 
can't help him because of person definition problems, how would 
he get started then?
    Senator Harkin. In your area of vegetables.
    Mr. Smith. Senator Harkin, we appreciate that question, 
because it speaks at the very heart of Ms. Ousley testimony was 
concerning the role of the FSA rules about fruit and vegetable 
production. While the other panelists have talked about 
hindrances to transfer to the next generation, it's mainly a 
tax situation where portions of the family farm would be 
removed, because of estate taxes. In the situation with the 
fruit and vegetable restrictions, this is actually a barrier to 
young people becoming producers in a diverse agriculture. And I 
noticed that both yourself and Senator Grassley mentioned 
diversity a better and broader agriculture base critical to our 
children and grandchildren. And Senator Grassley, the next 
generation of farmers and we want to broaden opportunities. The 
restriction of fruit and vegetables production actually 
eliminates the possibility of another generation taking over a 
fruit and vegetable operation.
    It's that way, not only in our particular industry of 
processing tomatoes, but the sweet corn people in all the 
Midwestern states--green beans, peas, pumpkin, they all suffer 
the same problems. When the ability to actually rent ground is 
limited, unless you have your own personal producer history. 
And so, for that reason, that's a--you're question speaks to 
the very heart of our issue, and as what Charlotte has tried to 
describe upon the death of her husband.
    Senator Harkin. The dairy side.
    Mr. Brockshus. It's interesting that you would pose that 
question. It's one of the things that some of the organizations 
I belong to struggle with a lot. Now in our area, there are a 
number of young people that would like to get into dairy. The 
problem is they can't afford a new facility and the old 
facilities have been basically, allowed to depreciate out by 
the present owner. If there was some way to incent that 
producer, if he doesn't have a son that's willing to come up, 
they depreciate it out. If we could incent that producer to 
keep that facility viable, so it's salable at the time of his 
retirement instead of junk, we would have much better 
opportunity to bring young people in at a size of operation 
that they could afford to operate.
    The other--you know major expansions are done by the---- by 
larger operators that are well funded and you know on maybe the 
mid-sized farm, which I guess I consider myself, then you run 
into some of the capital gains issues, also.
    Senator Harkin. Uh-huh (Affirmative).
    Mr. Brockshus. But I don't have the silver bullet for that, 
but it's a major problem for getting young dairy farmers 
started.
    Senator Harkin. Well, I think that's the only question I'll 
ask of this panel in the interest of time, but I hope others 
think about it. Some of the responses obviously are areas that 
are outside our jurisdiction. You know, capital gains and state 
taxes and things that are outside the Farm Bill jurisdiction.
    I want to look at things that what do we need to do in 
other areas? I mean, as you know, more into alternative crops 
for energy production. Is there some avenue there for young 
people that might be able to get in? What do we need to do in 
terms of beginning farmer programs that we've tried to have in 
the past? I think they've worked somewhat. Maybe somewhat they 
haven't. Longer term, lower interest rates, as you point out, 
return on investments lower than the--the return is lower than 
the interest rates. Are there areas of specialty crops and 
things like that--bio-based, we're going to see more demand for 
bio-based products in the future? So is there--are there niche 
areas there where a young person could get started and perhaps 
start small and still expand and grow in the future, like many 
of our older farmers have done in the past? These are the kind 
of things that I'd like to get answers to from all of you, and 
the rest of you here in the audience, and the panels that have 
come up.
    While I appreciate what we got to do on capital gains, and 
the state taxes, and things, that's just not something we can 
deal with. But what else can we do within the jurisdiction that 
we have? I thank you very much. Thank you, Mr. Chairman.
    The Chairman. Well, we got the man that can handle capital 
gains, and state tax. He's right here, Tom. Senator Grassley?
    Senator Grassley. I've got some answers, and then I don't 
have answers, too. But since so much of this discussion, 
particularly the last series of questions have involved S. 
1031, estate tax, capital gains, and stuff like that, maybe I 
ought to take advantage of this opportunity, instead of asking 
questions, to encourage greater participation by the panelists 
and organizations in this effort with my committee.
    I would point out and I hope this isn't just a Grassley 
approach to young people getting started farming, but it's 
something that I've seen over three generations in our family. 
Or, I guess if you consider my dad, it'd be four generations. 
It may not have been true when my dad started farming, but at 
least when I started farming, it seemed like you needed three 
things. One, obviously a banker. Number 2, maybe the previous 
generation leaving some money in the family farming operation, 
maybe in the way of land and cash granting, things of that 
nature. And thirdly, not all farm income. I remember spending 
10 years on an assembly line while I started farming, in order 
to get a family farming operation going. When my son started 
farming 22 years after I did, he worked for another farmer, so 
non-farm income. I left my investment in the farming operation. 
And number 3, he had a banker. And when my grandson is in a 
very low level now, starting into that farming operation, you 
know he's got some non- farm income. In fact, his new wife's is 
working off the farm. He has--obviously, has to have a banker. 
And there are some generations of capital left in the farming 
operation before. So I don't know whether things have changed 
much in the last 40 years or not, or are any tougher. They 
probably are tougher, because of the price of farmland and all 
that. But maybe on a proportionate basis, they might not be a 
lot tougher. But--so that's the way I look at it. Now, maybe 
you'd say Grassley, you'd be a better farmer if you spent all 
your time farming. But if I spent all my time farming, I 
wouldn't be farming.
    [Laughter.]
    Senator Grassley. So with that thought in mind, this---- 
we've looked into 1031s in our committee. You know originally 
you think; well you just ought to repeal it. But then you look 
at the history of it; it's been on the books since the 1920's. 
It serves some purpose. It's only been within the last few 
years we've been hearing something about it. It's been 
connected mostly with agriculture.
    So we're looking at where there are abuses of it. And maybe 
that's not the only place to zero in, but we have found some 
places where the light kind of changes, really haven't and then 
the light kind of changes and tightening that down to some 
extent. And if you have any thoughts on that, I'd invite you to 
contact Elizabeth Paris of the Finance Committee Staff.
    On a state tax we're within one vote of getting a bill 
through the Senate on a state tax, that would have a $5 million 
dollar exemption stepped up basis, 15 percent of rate between 
there and $30 million dollars, 30 percent rate above $30 
million dollars. That would take care of 99.7 percent of the 
estates. And I think that would take care of the situation for 
most family farmers, not all of them, but most of them. One 
vote short in the U.S. Senate getting that passed.
    The repeal of it, we couldn't get passed. That was--we were 
four votes short. I guess, three votes short of accomplishing 
that. I have great deal of sympathy for the capital gains 
issues that you brought up to start young people into farming. 
The problem is when you change the capital gains tax; you don't 
do it just for agriculture. You do it, to some extent, with--
and it's very difficult. We were trying to make just a small 
farmer and small business exemption from all estate tax with--
still maintain the estate tax. Senator Lincoln worked hard on 
that. And it was just very difficult to find a description that 
would work. That wouldn't be a statutory nightmare to enforce. 
But we're still looking at some things we can do in that area.
    I think all my questions have been asked. So I think, just 
make that comment. I thank my colleagues for covering all the 
areas of questioning that I was going to cover.
    The Chairman. Thank you and let me thank our panelists. And 
Senator Harkin raises a very good question there. The average 
age of a farmer in my state is about 58 years of age now. And 
my son-in-law is the exception; Joe has come back to their 
family farm and is enjoying working with his dad on that farm. 
But we sure don't have a lot of incentives to bring young folks 
back to the farm. I go back to this engine that was made here, 
that was put in this John Deere Cotton Picker, it was 
manufactured right down the road by Deere, right here in 
Ankeny. In the article in the Des Moines Register, on June the 
7th, it says that the cotton farmer who purchased this machine 
paid $340,000 dollars for it. Now, that's one cotton picker and 
that's all that machine can do is pick cotton. You can't afford 
that kind of machine without payment limits. You can't, as a 
young farmer, jump in, buy land, buy tractors, and buy a 
$340,000 dollar cotton picker.
    And I'm not sure what the answer to it is, but I look 
forward with working with Senator Harkin and Senator Grassley 
to make sure that we establish some policy that will be long 
term policy, so that when Chuck's grandchildren and my 
grandchildren decide they want to come back to the farm, at 
least they'll have the option of doing that. And it's going to 
be very difficult.
    But again, to this panel, thank you very much for being 
here. We appreciate your attention and the great testimony you 
have provided to us.
    We'll move now to our next panel, which--we're, going to 
take a little break right now though, aren't we? Yeah, we're 
going to take about a 10-minute break and then we'll come back.
    [Recess].
    The Chairman. We're pleased to welcome our second panel 
here today. First of all, Mr. Craig Hill of Milo, Iowa, 
representing the Iowa Farm Bureau Federation; Mr. Chris 
Petersen of Clear Lake, Iowa, representing the Iowa Farmers 
Union and the National Farmers Union; Mr. Ron Rosmann from 
Harlan, Iowa, representing the Sustainable Ag Coalition; and 
Mr. Paul Johnson from Decorah, Iowa.
    Gentlemen, we are pleased to have you all hear, this 
morning, and we look forward to your comments. And we'll start 
with you, Mr. Hill.

STATEMENT OF MR. CRAIG HILL, IOWA FARM BUREAU FEDERATION, MILO, 
                              IOWA

    Mr. Hill. All right. Thank you. My name is Craig Hill. I'm 
a family farmer from Milo, Iowa. I farm about 1,200 acres in 
corn, soybean rotation. We have a few pheasants, too many deer, 
and I also have a farrow-to-finish hog operation with about a 
200 sow herd. On behalf of the Iowa Farm Bureau Federation, my 
Farm Bureau members, myself, my family, I want to thank you for 
this opportunity to talk about the 2007 Farm Bill.
    Our farmers are interested in earning a fair wage for their 
labor and an adequate return on their capital investment. Iowa 
farmers would likely agree that the perfect vision of 
agriculture would include a level playing field, a chance to 
compete in open markets where there are no such things as 
tariff barriers, export subsidies, currency manipulations and 
perhaps, even without domestic supports. This seems like the 
perfect goal for the 21st century. However, the reality is, 
this concept is just beginning to materialize.
    Trade Ambassadors representing the United States recently 
laid a bold proposal before our partners in the WTO. To date, 
our WTO counterparts deny their own Ag policy shortcomings and 
insist that the only path to freer trade is one that requires 
the United States to unilaterally disarm. This concept is 
flawed. As a farmer, it troubles me greatly to imagine 
implementation of such a one-sided policy.
    Until WTO negotiations yield real market access and 
material gains in net farm income we need to continue with an 
effective safety net that provides support in times of low 
income. Iowa farmers firmly believe that this safety net should 
be consistent with our international trade obligations that are 
spelled out in the current WTO agreement. But to be clear, I 
feel that the next Farm Bill should be extended and extend to 
the concepts of the Food Security--or Farm Security and Rural 
Investment Act of 2002 until a new WTO agreement is reached. 
Our negotiating position in the WTO can only be weakened by 
moving away from farm policy that has largely worked.
    Farmers will be willing to move away from amber box 
policies when WTO negotiations yield economically proportionate 
increases in market access and reductions in foreign export 
subsidies. I will repeat that. When the negotiations yield 
economically proportionate increases in market access and 
reductions in foreign export subsidies. If this occurs, amber 
box reductions should be replaced with an equal increase in 
green and blue box eligible programs. Greater emphasis could be 
placed on working lands conservation, direct payments or 
enhanced crop insurance as we've heard about revenue assurance 
today. Iowa farmers are optimistic about the future of 
agriculture in this great State of Iowa. We'd rather rely less 
on government and increasingly more on the strong markets. 
Recent growth in renewable energy markets is strengthening 
rural Iowa one community at a time. Perhaps it will help us 
take us more toward a vision of agriculture where markets 
provide ample opportunities. Until that occurs, the safety net 
provided by the Farm Bill of 2002 remains a necessity.
    On behalf of myself, Farm Bureau members, I want to thank 
you for this opportunity to address the panel. I look forward 
to working with you as we consider the next Farm Bill.
    [The prepared statement of Mr. Hill can be found in the 
appendix on page 79.]
    The Chairman. Thank you very much. Mr. Petersen?

  STATEMENT OF MR. CHRIS PETERSEN, IOWA FARMERS UNION AND THE 
                     NATIONAL FARMERS UNION

    Mr. Petersen. Thank you, Chairman Chambliss and Senator 
Harkin, for bringing this hearing to Iowa. Thank you, Senator 
Grassley, for being present. And Representative Boswell and all 
the people out in the audience, greatly appreciated by Iowa 
Farmers Union. I am an independent family farmer. I have been 
in Farm Bills. I don't know how many of them--a lot of them and 
we need to change some things. That's for sure. And basically, 
I am part of a shrinking pool of independent family farmers 
across America and I speak with the best interest of all these 
producers from the heart.
    We as family farmers, when we own the land and the animals, 
we are by far better stewards of the earth and the animals. We 
can do a better job than anybody raising food. And stirring 
from this proven structure of family farms spread all out 
across the United States, independent family farm agriculture 
jeopardizes national strategic security, Homeland Security, 
Antiterrorism Protection, the environment, and rural economic 
development, food safety, food quality, and now energy 
independents. The family farm structure has worked for decades. 
Actually, since this country came into being. It's a very good 
structure. We have never went hungry in this country.
    So as a hog producer and in relationship to family farm 
agriculture, I was very disappointed that the final version of 
the 2002 Farm Bill did not include a full a competition title. 
I believe addressing anti-trust, restoring competitive markets, 
and including a competition title in the next Farm Bill is a 
must to addressing what I see as the big problem in agriculture 
and the resulting symptoms.
    Without competitive markets, independent producers like me 
will continue to be pushed off the land or turned into low wage 
employees by--as an example, corporate industrialized animal 
agriculture. I encourage the Committee to include a strong 
competition title in the next Farm Bill.
    And you guys, I won't go through all of that. It's in my 
written testimony. But as a--you know, I just want to 
reinforce--the enforcing the Sherman Antitrust Act, Packer 
Stockyards Act. All these issues are very, very important, and 
another one in addition to competitive--anti-competitive 
markets. Most contract producers are bound by clauses in their 
contracts that prevent them from pursuing legal redress. I'm 
talking about the contract growers of livestock. And I could go 
on and on here, but I want to emphasize family farm 
agriculture. We've had some good things in Farm Bills, but it's 
not quite working what we want out of it. Thank you.
    [The prepared statement of Mr. Petersen can be found in the 
appendix on page 81.]
    The Chairman. Thank you. Mr. Rosmann?

   STATEMENT OF MR. RON ROSMANN, THE SUSTAINABLE AG COALITION

    Mr. Rosmann. Good morning. My name is Ron Rosmann. Along 
with my wife Maria and our three sons, we operate a 600-acre 
certified organic crop and livestock farm near Harlan, Iowa. We 
have a stock cowherd of 90 cows and 50 sows in a farrow-to-
finish operation. Maria operates our private label organic meat 
business under the label of Rosmann Family Farms.
    I testify today on behalf of the Sustainable Agriculture 
Coalition, a network of farm, rural, and conservation 
organizations. I am also associated with the Organic Farming 
Research Foundation, the Practical Farmers of Iowa, and the 
newly formed Iowa Organic Association.
    I will speak this morning about the areas of the Farm Bill 
that I have worked the most closely with: research, plant and 
animal breeding programs, beginning farmer programs, 
conservation, and payment limitations.
    I last testified about a Farm Bill in the 1990's. A lot of 
good outcomes have emerged since then for both sustainable Ag 
and organic Ag. Thank you, Senators, for your efforts to make 
that happen. So much more needs to be done, however.
    Organic Ag markets have grown at a remarkable rate of 20 
percent annually over the last 10 years. Consumer demand is far 
outpacing supply. We are beginning to lose organic markets to 
foreign competition because of our failure to fully endorse 
organic Ag. We should set an ambitious goal--to supply 10 
percent of our Nation's food supply from organic farms within 
10 years and then develop the good policy to help achieve it.
    In that context, then, I would like to comment on the 
Research Title. Federal Ag research dollars dedicated to 
organdies is disproportionately low in relation to the organic 
industry. Only since 1998 has it been funded at all. A 
framework of fair share funding of organic research calls for 
at least a 5-fold increase, to at least $25 million or more 
dollars annually.
    Since 2003, I have been in a part of a national steering 
committee for Seeds and Breeds for the 21st Century, which is 
an initiative to re-invigorate public plant and animal breeding 
capacity. We are encouraged by the Senate language that directs 
the Department to establish a specific category of grant 
application requests for classical plant and animal breeding.
    The most needed but often ignored question related to the 
Farm Bill is asking where the next generation of farmers is 
going to come from. Will they come from family farmers, or will 
mega farms and corporations be in control? Our second oldest 
son graduated from Iowa State this past winter and has chosen 
to join the farming operation with us. We are delighted, but 
also realize farm succession and farm entry has become 
increasingly difficult.
    We desperately need the Beginning Farmer and Rancher 
Development Program that was passed in the last Farm Bill. 
Sadly, your House counterparts stripped the funding. I urge you 
to right this wrong and to launch this program.
    It is worth noting that the Organic Valley Cooperative to 
which we belong, the average age of the farmer is 45 years of 
age. One of the best ways to create opportunities for beginning 
farmers is through the Conservation Security Program. CSP 
should be fully funded and available to everyone who qualifies. 
CSP should provide the foundation for an overhaul of our 
agricultural entitlement programs.
    You are probably thinking how are we going to pay for these 
proposed programs and the ones that have not been fully 
implemented or funded? Well, I believe there should be strict 
farm program payment limitations with the savings going to help 
support the programs that I have mentioned.
    Current farm programs reinforce declining rural 
communities. It is no wonder that rural decline in commodity 
program payment concentrations go hand in hand. Farm programs 
help mega farms drive family farms out of business by bidding 
land away from. As long as these farms are promised more 
government money for every acre they add, virtually all farm 
payments will be bid into higher cash rents and land purchase 
prices.
    It's interesting to note that 81 percent of farmers 
nationwide in the last Farm Bill, including 70 percent of 
southern farmers, support effective targeting of payments to 
small and mid-size farms. While I would hate to see something 
other than a strong national payment limit standard, if it 
takes a dual standard to save family agriculture in the 
heartland, than perhaps that must be done. Any dual standard 
would need to include comprehensive across the board closing of 
loopholes to ensure that meaningful limits apply at some level 
to all commodities. And it would have to achieve proportionate 
savings across commodities.
    In closing, I would like to say please say no to extend the 
2000 Farm Bill beyond its 2007 expiration. It provides money, 
but no solutions, short-term survival, but little vision for 
the future. It is continuing to destroy family farming and 
sapping the lifeblood out of rural America. We can certainly do 
better than that. Thank you.
    [The prepared statement of Mr. Rosmann can be found in the 
appendix on page 86.]
    The Chairman. Thank you. Mr. Johnson?

     STATEMENT OF MR. PAUL JOHNSON, DECORAH, IOWA PRODUCER

    Mr. Johnson. Thank you, Senator Chambliss, and Senator 
Harkin, Senator Grassley. It's good to have you here with us 
today. Last night I went on line and Googled a air photo of my 
home place and your home place in Southern Georgia just to see 
how we compared. And I--the maps I put in front of you and we 
look very similar. We look--we have land that is very, very 
similar. So as we travel around the country and as you look 
down over the country, I think you'll realize that we probably 
have as much in common as--or even more in common when it comes 
to land and the care of land, than we have peanuts and corn, 
perhaps or something to argue about. But we have a lot in 
common.
    All water that falls in Georgia, just about all of it falls 
through farms. All the water that falls in Iowa falls through 
farms and it's going to be clean if farmers make it so, it 
won't be otherwise. Conservation programs are so very important 
for this.
    When I looked at the maps and I saw your home place and 
mine, I realized that--or I thought what if in the 1930's we 
had not put together our conservation programs? I have a 
feeling we wouldn't be farming in my home place nor in yours 
today, without that.
    So I guess the one point I really want to stress, is the 
importance of conservation on private lands. Eighty-eight 
percent of the precipitation in this country falls on private 
lands and we've got to take good care of it.
    We often look at the commodity programs and we forget that 
good water and the quail and pheasants are commodities as well. 
They're not on the Chicago Board of Trade, but nonetheless, we 
and the American public need them and want them, and so do our 
children. And so, as you deal with this Farm Bill I would urge 
to put that No. 1 and other good things will follow. There 
isn't a person in this room that doesn't believe that 
conservation is extremely important on our farmlands. And yet, 
it always seems to be No. 2 or No. 3 and I would urge you to 
rank it up there as No. 1.
    The second thing I'd like to mention is that fact that over 
the years, we've had a lot of good programs to help fix 
problems that we've caused on land, whether it be soil erosion, 
or loss of bio-diversity, or things like that. We've had very 
few programs, almost none that reward farmers for good 
stewardship right up front. The Conservation Security Program 
is the very first real strong program to do that. And I want to 
really urge you to support it as much as we possibly can. Keep 
working on it. Make it simpler. It tends to be somewhat 
complex, but every farmer that I've talked to that has had any 
knowledge of it, really wants that program. And as we look to 
the future, I think it is a very, very important part of our 
toolbox.
    We have a number of other programs and I don't think we 
need to invent a lot of new ones. I think that whether it be 
the Wetland Reserve, or the Conservation Reserve, or buffers, 
or you could go down the list, we have a good set of tools. The 
Conservation Security Program gives us the opportunity to take 
that toolbox to the farmer or to the rancher and utilize it.
    Very quickly, a third issue that I'd like to mention is the 
issue of energy and the importance of agriculture in energy. We 
in Iowa today are moving very, very rapidly into bio-fuels and 
I think that's great. But I would urge us to look at where we 
are today as a first generation and start looking to the 
future. And that means putting a lot more money into research, 
into looking at ways in which we can produce ethanol, for 
example from perennial poly cultures rather than from strictly 
an annual row crop.
    So I would urge you to take this seriously. This will be a 
very important part of our future; one that I think that 
American agriculture could really help us with.
    [The prepared statement of Mr. Johnson can be found in the 
appendix on page 98.]
    The Chairman. OK. Gentlemen, thank you very much. Mr. Hill, 
how would Iowa farmers in your opinion, prioritize Farm Bill 
programs generally in the commodity title--same question I 
asked earlier, how would you rank the relative importance of 
the direct program, marketing loan program, counter-cyclical 
payment program?
    Mr. Hill. Well, I think that--you know considering what 
we're talked about with the WTO or we can think about those 
other titles of the Farm Bill, not just commodity title--Title 
I. There's a lot of opportunities to take advantage of in those 
other titles.
    In the Commodity I Title, specific to your question, I 
think the direct payments are needed to be kept. I think the 
direct payments--Ben Greenbox for one. Also, they could be tied 
to risk management. Now, there's a lot of private tools. 
There's RMA reinsured tools through the USDA that farmers can 
purchase. And that direct payment can go a long ways toward 
risk management solving some of those concerns.
    The CC payment, I would be probably the one that I would 
first discard. It's difficult and cumbersome to calculate what 
the benefits will be as the year progresses. The marketing loan 
is pretty precise. It gives a marketing plan some precision in 
knowing what harvest prices could be expected. It makes it easy 
for lenders to anticipate. So that's how I would rank them, 
direct first to be saved and then of course, the marketing loan 
gains, and third being CC payments.
    The Chairman. We heard from the soybean and the corn folks 
from this part of the world relative to exports, but from an 
overall Ag perspective and coming Farm Bureau, how important 
are exports to agriculture here in Iowa?
    Mr. Hill. Well, tremendous. The last 15 years, I think 30 
percent of our net farm receipts have been derived from an 
export. Iowa's the second most export dependent state in the 
country. I'm a producer of pork. An illustration on my own farm 
in 1994, I recall the time when we did not have any exports of 
pork. In 1994 we passed that threshold and we began exporting 
pork. And I think today we're about 12 percent of our 
production is exported which amounts to about $22 dollars on 
every pig. Now, that's more than the profit margin. So exports 
are critically important to Iowa.
    The Chairman. OK. Mr. Petersen, should an increase in 
conservation in our energy programs come at the expense of 
commodity programs?
    Mr. Petersen. In certain instances, yes. Energy independent 
is very important. So yes, commodity programs are also 
important, but we need to look at ways to reward the farmer for 
taking care of the land, passing it down to the next 
generation. I believe it's an investment in this country by the 
taxpayers when you tie environmental issues like keeping the 
land--you know, up to par for production for the next 
generation to feed ourselves. And so, yes, that's very 
important.
    And as I said, commodity programs are important, but we 
have to get a price, and I mean a price out of the marketplace 
here. As what's going in Congress, Senator Grassley holding up 
those newspapers, we're under the microscope and we need to 
clean up the Farm Bill, and the waste in it, and get some money 
to the family farm producers that need it while we hopefully, 
get competition and break down these monopolies. So the farmer 
can get a price out of the marketplace with some assistance 
from the Federal Government tied to conservation, taking care 
of the land. I think it's the only way we have to go in this 
country if we want to keep localized family farm agriculture 
alive and thriving.
    The Chairman. Mr. Rosmann, I'm curious. What all crops do 
you produce on your farm?
    Mr. Rosmann. Somewhat very typical. You know I was a 
conventional farmer the first 10 years, from 1973 to 1983, 
until we started pursuing this kind of agriculture. So we raise 
corn and soybeans, but mostly for human consumption, soybeans 
for soymilk and soy tofu. We also grow flax for flax oil 
production, barley and oats as a soil--you know, with legumes 
for soil conserving crops, because crop rotations are very 
important to help with our soil fertility and minimize soil 
loss. So you know, we really are looking at the long-term 
sustainability. And we also have 90 Red Angus cows and 50 
Berkshire Cross sows, and I think that--those are the main 
crops.
    You might be interested in noting that some of our white 
corn goes to make organic vodka down in Kentucky. If you're 
interested, I could arrange to get a bottle to you sometime.
    The Chairman. You--yeah, Chuck makes me drink ethanol in 
Washington.
    [Laughter.]
    The Chairman. Maybe we could mix them. I spent a week at 
Ron's----
    Mr. Rosmann. Well, that's sort of the same thing you know, 
only a little more concentrated.
    The Chairman. Should Congress shift funding from land 
retirement programs to working lands programs or visa versa to 
achieve a better balance among them?
    Mr. Rosmann. Oh, I'm sorry. Could you repeat that question 
please?
    The Chairman. Should Congress shift funding form land 
retirement programs to working lands programs or vice versa to 
achieve a better balance among them?
    Mr. Rosmann. I believe there's some merit to that in terms 
of working with changing the whole structure to reward the good 
stewardship of the land and farming the land. You know, we 
desperately need production because of the world increase in 
population. But we need to do a better job of taking care of 
the land that we have had in production and that we've taken 
out of production to put into CRP.
    You know, a lot of that CRP land should never have been in 
row crops, for instance. It should be livestock grazing of some 
kind, or in bio fuels now. So, there needs to be a balance I 
think. But you know, until we look at this whole commodity 
structure of who gets subsidized for what, and replace that 
with some sort of conservation green payment, I don't know. I 
think we're only working around the edges you know and not 
doing enough.
    The Chairman. Let me ask that same question to you, Mr. 
Johnson.
    Mr. Johnson. I was hoping you would. I think we need to 
look at land retirement programs a little differently than we 
have. They came into existence primarily as supply control 
programs if you go back to 1985 in the Farm Bill then. And so, 
we expected of farmers that they set aside this land. Not farm 
it. It's always bothered me that that means--or that's the 
major program we've had. We've told farmers that if you don't 
farm, you're a good farmer--or a good conservation farmer 
essentially. And if fact, it's put whole communities out of 
business in some cases.
    We need to look at land retirement as one of the tools. And 
it should go all the way; it seems to me, from setting aside 
completely to some partial use perhaps and not just in 
disasters. I don't think we've used our imaginations very well 
in that regard.
    But we should also look at land retirement programs as 
producing things, as well. I can't stress enough the importance 
of looking at good conservation and the results of good 
conservation producing commodities, as well. Whether it be 
clean water, or wildlife, pheasants, and quail if you will, or 
bio- diversity in general. There are so many things that could 
come off of that land and if we enter a contract with a farmer 
to set aside for 10 years or 5 years, it shouldn't be just OK, 
leave it alone. Plant it in grown grass and walk away. But 
rather, produce conservation commodities from it.
    I think we have the knowledge or we could certainly gain 
the knowledge to get a much greater abundance of good off of 
retirement--land that we retire if we start looking at the 
results of good conservation as commodities, as well.
    And remember it's--there's no world marketplace for that. 
That's why the world trade talks allow us to do it. But yet, 
there are terrific markets here at home. I think the average 
American would much rather--would look much more favorably on 
farm programs if he or she realize that we're getting better 
water because of the way we're doing it, or we're getting 
better air quality, or we're getting more pleasing landscapes, 
things like that.
    The Chairman. Given the budget restraints that we are now 
working under, where should we in this next Farm Bill focus our 
resources from a conservation standpoint?
    Mr. Johnson. Well, I'd like to--I hate to see that dilemma 
that you're in, you know we are giving in American tax dollars 
about $13 to $14 dollars per acre on public lands to care for 
those lands. That's our parks, and our forests, and so on. And 
I am in no way saying we should take from that. We probably 
should give more to that. And yet when it comes to our private 
lands which are 75 percent of our land in this country and the 
richest part of it at that, we're putting less than $2 dollars 
an acre it when you look at all of our conservation programs.
    So I--then we're faced with the dilemma. Do we take it from 
out traditional food and fiber commodity programs? And I think 
we need to make a very strong case for the fact that, America 
cannot be healthy unless private lands are healthy, and that 
that is every bit as important as public lands.
    Again, I do not want to be quoted as saying we should take 
from our public lands. I just came from the boundary orders in 
Minnesota and I can tell you it was good. But we need to get 
the American public to understand that it's the American farmer 
that we use the conservation carpet on which we stand. And we 
are not going to have clean water, or good air, or bio-
diversity in this country unless it's the American farmer who 
produces it. And that can't just happen. We need to reward them 
for it.
    So I would strongly resist this argument that it has to be 
one or the other. If you look to the future, it seems to me 
that our one hope for maintaining strong taxpayer support for 
rural America is to produce more and more conservation 
commodities.
    The Chairman. Senator Harkin?
    Senator Harkin. Thank you, Mr. Chairman. I want to get back 
to the question I asked the other panel about beginning 
farmers. But as long as we're on conservation, and it has some 
connection also with maybe beginning farmers too, in this way. 
Obviously entering a whole new era of bio-fuels and bio-based 
economy. Not just fuels--ethanol and bio-diesel, but bio-based 
products. Making things from starches, for example, that 
replace everything from--a lot of things from plastic plates 
and stuff, to solvents, to all kinds of different things--
hydraulic fluids made from soil oil, grease.
    So I'm wondering about this in terms of also connecting 
with conservation. You said a lot of land shouldn't have been 
put away on CRP because it should've been farmed in the first 
place. But there's a lot--because we base CRP that every county 
had to have some, there's some land in CRP that's good 
producing land. But what if we were to--and we know that we can 
take CRP land and we can grow conserving crops on it, the most 
popular being switch grass right now.
    We had a project down in Southeast Iowa. Leonard Boswell 
and I were involved in back when you represented that area down 
there and we had that switch grass operation down there and 
John Deere made equipment for it. And we proved that you could 
raise switch grass on CRP land. It's a perennial crop. You cut 
it once a year. You don't have to fertilize it very much and 
you can keep the CRP land, but you can get crop off of it for 
energy production.
    So what I'm thinking about, is you're thinking about 
commodities, Paul Johnson, you said about thinking of 
conservation as producing commodities. Well, how about thinking 
of conserving lands where you might be able to produce certain 
bio-based--certain crops that are convertible into bio-based 
products and yet, still keep the land conserving. Is that 
another way of which we might be able to focus some of our 
scarce dollars in that kind of an area? And I'd just ask all of 
you to think about that? Craig?
    Mr. Hill. OK. Well, I think you're right. And in Iowa that 
CRP totals about 5 percent of our land. And if we targeted 
those specific areas that were erosive or needing of 
retirement, it may only be one or 2 percent of that land. And 
so much of that could be brought back into production and still 
adhere to some of our environmental standards that we have.
    Right now, with this explosion in bio-energy we're 
harvesting embryos. You know, like the corn seed and the 
soybean seed, and we're processing it and extracting oil 
energy. But the future will be biomass, cellulosic materials, 
whether that's five years or a 10-year transition, I don't 
know. But we can only grow so much energy harvesting embryos 
and maybe that's 10 or 12 billion gallons. But we could go to 
50 or 60 billion gallons if we use biomass--switch grass.
    Senator Harkin. That's right.
    Mr. Hall. Other products. So that really is the future and 
some of those commodities that we grow, the biomass commodities 
are very sustainable for soil, erosion soil control, and et 
cetera.
    Senator Harkin. Chris?
    Mr. Petersen. Thank you, Senator Harkin. Yes, I agree with 
that as long as it doesn't affect our pheasant population too 
much. Having said that, this land can be utilized again, in 
energy independents. We need to do things like this. And it's 
going to put money into the farmers' pockets, number 1. You 
know in corn and all of these products going into ethanol, 
switch grass, some of these other types of crops you get so 
much more energy out of them. So you know, the name of the game 
here is achieving energy independence as much as we can. So, I 
totally agree with that.
    And again, this would tie into what I believe is a lot of 
the problems in Iowa of getting beginning farmers started 
farming. You know this should give them more money, you know to 
work with. And you know, this is still only one of the very few 
occupations I know that, gee, go to town and get a job. You 
know, if you can't get price out of the marketplace your 
product and that don't work send your wife to town and get the 
health insurance.
    And you know we have to get away from that. And the last 
thing I want to see with beginning farmers is them turned into 
contract growers who basically get a wage for raising somebody 
else's livestock. The family farm is all about independence. 
That's what's working this country. Also, low interest loans 
for beginning farmers. That's crucial. True value adding where 
a rightful share of the value added money gets back to the 
family farmer, whether he's a beginning family farmer or an 
established farmer.
    Again, competition title--money--a price. We need a price. 
We've got to get a price.
    Senator Harkin. By the way, you know we had to have a 
competition title in the Senate Bill.
    Mr. Petersen. Exactly.
    Senator Harkin. Senator Grassley supported that, we 
supported that. We lost it in the House, that's the problem. 
Ron?
    Mr. Rosmann. I've got two thoughts on this. First, you know 
we have to have the infrastructure be willing to work with some 
of the bio-fuels. You know we've got all this interest now with 
this first generation of ethanol plants. But I think, you know 
they need to recognize that there are some inefficiencies with 
using just corn. They need to look at the whole corn plant and 
you know--or some crop residues. And then what Paul was saying, 
you know looking at switch grass and other more efficient bio-
fuels. But you know the present oil industry negotiates with 
the ethanol folks----
    Senator Harkin. Uh-huh (Affirmative).
    Mr. Rosmann. - to decide how many gallons become 10 percent 
ethanol.
    Senator Harkin. Yeah. I guess what I'm reaching at in this 
question Paul, is that--is there an opportunity--we've put the 
first energy title in the Farm Bill last time, so we can build 
on that. Is there an opportunity to use that energy title as 
the basis for more bio-based products, coupled with 
conservation, and the Conservation Security Program that also 
answers another part of the problem that I wanted to ask you 
about; and that is getting funds to young beginning farmers to 
get them going. Can you kind of pull all that together? Do you 
see a synergism to use 50-cent word I guess on that, yes?
    Mr. Rosmann. Well, I think there's terrific opportunities 
there. Imagine a--of Iowa, in the future, where a part of our 
land and we're always, I think, going to be producing some of 
the traditional commodities, but a part of it, at least, is now 
in a complex of plants, what's called a perennial poly culture. 
Perennial meaning we don't have to plow the land every year. 
And if fact, if we don't, then the soil is completely occupied 
with roots. You can add your animal manures to that land and it 
does not leach through, and out, and into the Gulf of Mexico. 
So that has certainly a benefit. And you could do that with a 
simple plant such as switch grass. But you could also do it 
with a complex.
    Iowa was once a tall grass prairie state. Today it's the 
most endangered ecosystem in our country. We have almost no 
tall grass prairie left today. There were 100's and 100's of 
species occupying an acre of land when we first started plowing 
this ground. I'm not suggesting we'll get back there, but we 
certainly can have a complex.
    We farmers have a tendency to want to simplify the earth 
and simplify the land. And one crop we can handle that or one 
plant, for example. And we are really good at it. Take a look 
at the average cornfield out there today. You won't see a more 
proud crop.
    On the other hand I think if we set our minds to it, we 
could add a lot more diversity to the landscape. That brings 
back bio-diversity. It brings back wildlife. It brings back 
better water quality. And if we put that into the mix of our 
national system of fuels and of plastics, and things like that, 
I think for the first time, we really do have an alternative 
crop. And we've been talking about that forever, haven't we? 
All we need is an alternative crop. It used to be Belgian 
endive. Remember that?
    Well, here's one that will really work. But we're going to 
have to really focus on it I think.
    Senator Harkin. Well again, a bottom line is profitability. 
I mean, as long as you can do it and still maintain a profit.
    Mr. Rosmann. But once the American public realizes all the 
benefits that are coming off of that land, I think of course, 
it's up to us to convince them that it's worthwhile doing. But 
I think it'd be a lot easier than the course that we're now on.
    Senator Harkin. I used up all my time. So I won't go on to 
the second--did--Ron, did you have one last----
    Mr. Rosmann. Well, I was just going to say I could envision 
where farmers have a whole farm plan in the CSP and a portion 
of that could be devoted on their steeper slopes highly 
erodible land devoted to what you're talking about. That you 
know, as part of their whole farm plan, part of it would be 
bio- fuels.
    Senator Harkin. Well, we're going to move ahead 
aggressively in cellulosic conversion. That's kind--that's your 
next generation. I just talked to a scientist last week, who 
told me that they're making great breakthroughs in cellulosic 
conversion into ethanol. Switch grass, as you know, about an 
acre of switch grass has about as much protein as an acre of 
soybeans, twice as much energy as an acre of corn. Now, we're 
going to use corn as ethanol, because we have the--and it's 
getting more efficient too, by the way. It's getting very much 
more efficient. But the cellulosic conversion of that could 
lead to again, utilizing some of this land that, as I've said, 
every county has got to have CRP. Well, I don't know that 
that's really necessary. I mean, some of the highly erodible 
land you need it, but some of this other could be used for some 
of this other production perhaps.
    Thank you. I--again, keep in mind my other question, so if 
you want to write me or something like that about getting young 
people in. How do we get young people going in agriculture? 
I've used up my time, Mr. Chairman, on other things.
    The Chairman. Senator Grassley?
    Senator Grassley. I'd like to ask Mr. Hill and Mr. Petersen 
if their organization supports the revision of the caps, so we 
have a hard cap, so that there can't be legal subterfuge of 
those caps? And right now, the figure floating around 
Washington is $250,000 dollars, which probably most Iowan's 
think is too much. But regardless of the figure, you know the 
approach that we're using whether it's a $250,000 or some other 
figure in that neighborhood, do the Farm Bureau and do the 
Farmers Union, and NFO support that? And anybody else that 
wants to answer, but I think it's more the general farm 
organization?
    Mr. Hill. Senator Grassley, you know my difficulty in 
answering that question. The American Farm Bureau does not 
subscribe to payment limitations. It's not been a policy of the 
American Farm Bureau to support payment limitations. However, 
the American Farm Bureau did support the 2002 Farm Bill and the 
$360,000 dollar limits that are there. So, we do have support 
for that measure.
    Iowa Farmers however, and we've taken this policy from Iowa 
to the American convention year after year, do believe there 
should be further constraints on the limitations--or on the 
payments to farmers. And what that number should be, maybe it's 
$250,000, I don't know. You won't accomplish much though; by 
just setting a limitation without enforcing and making certain 
that it's done that way. And that's probably more important 
than setting the limit, is making sure that there is a true 
limit.
    Senator Grassley. That point--the latter point is well 
taken and I agree with you. Mr. Petersen?
    Mr. Petersen. Yes, Senator Grassley. Yeah, we support caps. 
We believe they should be a lot lower than $250,000. We believe 
a good component of good farm policy is to have more farmers on 
the land, not less. You know this kind of reflects on the 
concentration issues. And as I spoke earlier of all the 
competition stuff in this Farm Bill and our State Board, we 
voted on a $100,000 dollar cap. It's what we felt was the best 
for rural Iowa. And personally, I have no problem with big 
farmers farming a lot of land. But what's in the best interest 
of this country number 1, and rural communities. If these guys 
want to farm all this land, welcome to capitalism. Go talk to 
your bank.
    Senator Grassley. Go ahead.
    Mr. Hill. I'd just like to comment briefly. If we take the 
savings from having strict caps and put them into beginning 
farmer initiatives as the tradeoff, well then we are addressing 
two problems with one solution. Because if we continue to go 
down this same road, there are not--there's not going to be a 
next generation of family farmers. There just plain isn't. The 
entry rate is so small and because of this, we're seeing all 
these complicated corporate farms entities move in right into 
Shelby County, for instance. So, it's very real. It's happening 
and you know, unless we do something quickly, you know time 
is---- you know, been running out for quite some time to 
reverse these things. These 30-year trends really, since I came 
back and started farming in 1973, and Earl Butts said, farm 
fence roll to fence roll. You know, it's been happening.
    Senator Grassley. Uh-huh (Affirmative). The next issue I 
bring up and this will be my last one, is--it was going to be 
what if the WTO trade talks fell through. But I see from our 
email that they announced this morning that they were going to 
be suspended. So the question is now, if they--and I guess 
according to what I'm reading, it's very pessimistic about 
whether or not they'll come up and particularly, with the 
President's authority, to negotiate trade running out next 
July. And if we're going to do something, we have to do it well 
before July.
    Then, what would suggest, Mr. Hill or Mr. Petersen, would 
be our attitude toward reducing barriers to trade now if the 
DOHA Round is not going to be successful?
    Mr. Hill. Well, with a lack of a DOHA agreement, I think we 
do have to maintain the Farm Act that we're working with 
currently. I would like to think prospectively about a day when 
we did have market access and we've talked about that. I think 
there's grand options for us in the other titles of the Farm 
Bill, to work for farmers. But until the concessions are made 
by the Europeans and that's what it boils down to. I mean, 
you've mentioned it yourself, Senator. Sixty-two percent of the 
tariffs posed on U.S. goods and 12 percent that we impose on 
others is quite a difference.
    There's great opportunities for Iowa with regards to bio- 
energy, and with livestock, and the crops that we grow. But 95 
percent of the world's customers are outside of our boarders. 
And until we can accomplish that problem, I don't know that we 
can look forward to new policy positions.
    Senator Grassley. Mr. Petersen?
    Mr. Petersen. Thank you, Senator. National Farmers Union, 
we're a strong position of fair trade. And yeah, you know we 
have to reduce barriers, and this, and that, and grow trade. 
But I think it's very clear now that trade and exporting are a 
way to prosperity is not quite working the way we envisioned 
it.
    And the WTO, who's benefiting off all this so-called free 
trade or trade? You know I make the comment that the WTO is not 
part of the U.S. Congress. I believe it's Congress's charge 
regardless of the outcome of the WTO to take care of our form 
of agriculture and our producers first. And I believe the 
wrong---- one of the things about market barriers and market 
access in other countries, the last thing I want to see is 
massive--goes to the food sovereignty issues, that massive 
amounts of family farm producers in other countries being 
forced off the land.
    Look what's going on in Mexico, with NAFTA. You know, and 
then you know it ties into the immigration problems and all 
that. All these people that were sustainable in their own 
countries producing food, they were doing something. They were 
busy. They were contributing to their country's better health. 
And so, trade's a very tricky issue. The WTO's a very tricky 
issue. And bottom line, we have got to take care of ourselves 
first.
    Senator Grassley. Unless somebody else wants to comment, 
I'll yield now.
    The Chairman. OK. Well gentlemen, again, thank you very 
much for being here. Thanks for your very splendid testimony. 
We look forward to staying in touch. We'll take one more 10-
minute break as our next panel comes forward.
    [Recess].
    Senator Chambliss. We're very pleased to have on our third 
panel; Mr. Bill Scheitler from LaMars, Iowa representing the 
Iowa Cattlemen's Association, Mr. Eric Nelson from Moville, 
Iowa representing R-CALF, USA, Mr. Jim Dean from Oskaloosa, 
Iowa representing the United Egg Producers and Mr. Steve Kerns 
Clearfield, Iowa representing the Iowa Pork Producers 
Association.
    Gentlemen, welcome, we look forward to your testimony and 
Mr. Scheitler, we'll start with you.

 STATEMENT OF MR. BILL SCHEITLER, PRESIDENT, IOWA CATTLEMEN'S 
                   ASSOCIATION, LAMARS, IOWA

    Mr. Scheitler. Thank you, Mr. Chairman. Mr. Chairman and 
members of the Committee, thank you for the opportunity to 
present our ideas on the 2007 Farm Bill from the perspective of 
the members of the Iowa Cattlemen's Association and many other 
Iowa cattle producers. My name, as you said, is Bill Scheitler, 
I'm a cattle producer from northwest Iowa and I'm currently 
President of the Iowa Cattlemen's Association.
    As the nation's largest segment of agriculture, the cattle 
industry is focused on; continuing to work toward agriculture 
policy that minimizes direct Federal involvement, supports the 
reduction in the Federal deficit, preserves the right of 
individual choice in the management of land, water and other 
resources, provides an opportunity to compete in foreign 
markets and does not favor one producer or commodity over 
another.
    For the U.S. beef producer, we believe trade is the single 
most important issue affecting the cattle industry today. Iowa 
cattle producers are strong believers in international trade. 
We support aggressive negotiating positions to open markets and 
to remove unfair trade barriers to our products. We also 
support Congressional and regulatory action to address unfair 
international trade barriers that hinder the exportation of 
U.S. beef.
    The Iowa Cattlemen's Association supports sanctions against 
Japan due to unreasonable hindrance of our U.S. beef exports. 
In trying to deal with and mitigate the effects of animal 
health emergencies in our business and trade, we believe in 
participating in a privately held animal identification system. 
That system now exists and is under the administration of the 
U.S. Animal Identification Organization. It is administering an 
animal movement data base that has the ability to work with 
animal identification service providers across the country to 
collect animal movement data and serve as the single point of 
contact in the event of an animal health emergency.
    The Iowa Cattlemen's Association has provided an electronic 
identification program for mid-western producers for the past 
eight years. The ICA program was the first in the country to 
include EID as part of the states brand law as a legal form of 
identification. One concern we have about the USDA National 
Animal Identification System is that it is not moving at a pace 
it should be. Currently the NAIS system in this country is just 
treading water. We want it to progress faster. The NAIS program 
may need some impetus as to encourage more participation.
    Conservation and the environment are also an important 
issue. Our livelihood comes from the lands, so careful land 
stewardship not only makes good environmental sense, it is also 
fundamental to keep our industry strong. One program cattle 
producers value and participate in across the country is the 
EQIP program. A problem encountered with EQIP is that by 
arbitrarily setting numerical caps that render some producers 
eligible and others ineligible, the success of the program is 
somewhat limited.
    Other programs many cattle producers would like to enroll 
in to reach environmental goals includes the CSP and the CRP. 
However, to enroll, producers must stop productive economic 
activity on the land enrolled. We must support the addition of 
provisions in the next Farm Bill that would allow increased 
managed grazing on land enrolled in the CRP.
    In terms of energy, we believe the Farm Bill can help to 
provide research funding for integrated production systems and 
innovative business models to manage risk and attract new 
capital. Due to the construction of many new ethanol plants in 
Iowa and the coal products that are a high source of good 
protein livestock feed, the Iowa cattle industry is poised at a 
brink of major expansion. Energy policy that provides research 
funding and supports renewable fuels, such as ethanol, will 
help young people enter agriculture, improve our local 
economies and revitalize our rural communities.
    Thank you very much for your time today.
    [The prepared statement of Mr. Scheitler can be found in 
the appendix on page 101.]
    Senator Chambliss. Thank you. Mr. Nelson.

STATEMENT OF MR. ERIC NELSON, DISTRICT 7 DIRECTOR, R-CALF USA, 
                         MOVILLE, IOWA

    Mr. Nelson. Good morning, Chairman Chambliss, Ranking 
Member Harkin and Senator Grassley. I'm Eric Nelson, District 7 
Director with R-CALF USA and along with my wife, Carol, and our 
five children; we own and operate a beef feedlot along with a 
cow-calf and farming operation near Moville, Iowa in Woodbury 
County. I appreciate the opportunity to provide comments on the 
development of the 2007 Farm Bill.
    We believe the Farm Bill should make progress in five key 
areas; honest competition in the domestic livestock market, 
animal health and safety, consumer information, international 
trade and the development of initiatives to sustain a more 
prosperous and competitive cattle and beef sector.
    As our sector faces many challenges, the Farm Bill should 
contain a separate beef and cattle chapter encompassing each of 
these issues. My entire testimony addressing these issues has 
been submitted to the record and during my remaining time, I 
will present facts on competition in the marketplace.
    Consolidation in the meat packing industry has grown at an 
alarming rate over the past few decades, as have abusive 
contracting practices. Concentration among meat packers has 
more than tripled since the late 1970's, and today just four 
packing companies control more than 83 percent of the beef 
industry.
    While the meat packing industry has seen dramatic 
consolidation, packers have also increasingly use non-
traditional contracting and marketing methods that further 
erode the selling power of cattle producers. Such methods 
include; purchasing cattle more than 14 days before slaughter 
or packer fed cattle, forward contracts and exclusive marketing 
and purchasing agreements.
    Together the four largest packing companies employed such 
forms of captive supply contracting methods for a full 44.4 
percent of all cattle they slaughtered in 2002. That figure is 
for a whole year, but if packers acquire large amounts of 
supply in advance for one timeframe, damage can be done. As 
recent as this past February, there were nearly 4 weeks without 
a cash market in my part of the world. As the packers had 
acquired enough inventory in advance through forward and 
formula contracts with many of these cattle coming from Canada. 
And when trade did resume, the market had lost nearly $10 a 
hundredweight.
    The impact of packer concentration and abusive contracting 
practices is also evident in the declining share of each beef 
retail dollar that actually reaches producers. With the 
producers' share of each retail dollar earned on beef being 47 
cents in 2005, down from 56 cents in 1993. Slaughter cattle I 
am selling now are bringing about $1,000 a head and take about 
16 months of care and feed to get them to that point. After a 
packer buys that same animal for $1,000, roughly in the next 
week, the packer and the retailer resale that same animal for 
$2,100. The Farm Bill should ensure that anti-trust and 
competition laws are effectively and vigorously enforced.
    In closing, I would like to mention a few issues that are 
in dire need of being addressed before the 2007 Farm Bill due 
to potential delays. First, there was a precipitous drop in the 
U.S. fed cattle prices that began in late January of this year 
and continues through today despite widespread reports of tight 
supplies and strong beef demand, demonstrating the need to 
immediately preauthorize livestock Mandatory Price Reporting in 
accordance with recommendations recently made by the GAO. We 
support the recommendations proposed by Senators Grassley and 
Harkin and trust that transparency in the market can be 
improved by expanding and strengthening mandatory livestock 
price reporting as quickly as possible.
    Second, the current import and volatile market situation 
highlights the need to implement the 2002 mandatory country 
boards and labeling law as soon as possible. It breaks my heart 
that as a producer, we can produce the best product in the 
world and then have U.S. consumers buying Japanese or Argentine 
beef, all the while paying top dollar, thinking it's U.S. beef. 
With importers pocketing huge profits.
    Next, we can immediately increase packer competition and 
limit concentration by passing S. 3519, the Agriculture Small 
Business Opportunity Enhancement Act, which would allow 
interstate sales of state inspected meat and poultry.
    Finally, as we push to reopen our export markets to U.S. 
beef, we must remember that the customer is king and allow 
individual packers to voluntarily test for BSE. The future of 
the cattle industry will be bright as long as the needs of 
independent producers are watched out for. Thanks for allowing 
me to provide input at this important hearing.
    [The prepared statement of Mr. Nelson can be found in the 
appendix on page 111.]
    Senator Chambliss. Thank you. Mr. Dean.

   STATEMENT OF MR. JIM DEAN, FREMONT FARMS, OSKALOOSA, IOWA 
               REPRESENTING UNITED EGG PRODUCERS

    Mr. Dean. Thank you, Mr. Chairman. I am Jim Dean of Fremont 
Farms in Oskaloosa, Iowa. We are egg producers and we very much 
appreciate the chance to testify before the Committee on the--
and offer some ideas on the 2007 Farm Bill.
    I am honored to testify on behalf of United Egg Producers. 
UEP is a cooperative whose members independently market about 
90 percent of the nation's eggs. Since 1968, UEP has provided 
leadership in the U.S. egg industry, not only performing the 
functions of a trade association, but also providing a number 
of other services, including facilitating the trading of eggs, 
and arranging direct export sales and overseas--to overseas 
customers.
    The U.S. egg industry generates several billion dollars a 
year in cash farm receipts and creates jobs and economic 
opportunity in rural America. There is some egg production in 
nearly all states, but about half of all layers are in five 
states; Iowa, Ohio, Indiana, Pennsylvania and California. The 
next five largest states are Texas, Nebraska, Florida, 
Minnesota and Georgia. These top 10 states account for nearly 
three- quarters of the laying hens in the country. Our industry 
is honored that six of the 10 states are represented by this 
Committee.
    U.S. table egg production for 2005 is 213 million cases, 70 
percent were sold into retail stores, 31 percent destined for 
breaking and further processing as food ingredients for other 
value-added uses. A little more than 8 percent was sold to 
food- service outlets and other institutional users. Under 1 
percent was exported, but the industry is somewhat more export-
dependent than implied by this statistic, which does not 
include exports of further processed eggs.
    The egg industry neither receives nor seeks direct income 
or price supports. However, our industry has several concerns 
that we hope you will consider addressing in the 2007 Farm 
Bill. The remainder of my testimony will cover these specific 
points.
    Avian influenza--we ask to provide in the Farm Bill that 
indemnities for LPAI are to be paid at 100 percent of the 
properly assessed production value of any birds that must be 
destroyed and should also cover expenses involved in the 
vaccination, cleaning, disinfections and other measures that 
state or Federal officials may require to be taken by 
production of an outbreak.
    Controlling LPAI is directly relevant to our efforts to 
prevent high-path avian influenza. Low-path viruses can mutate 
and in the past have mutated into highly pathogenic forms. The 
largest previous outbreak of high-path avian influenza in the 
United States was in the northeast in 1983 and 1984 involved in 
a virus that started low-path and mutated into high-path.
    Also that we ask that in the--as far as the flock 
identification and National Animal Identification System, that 
we'd protect the identities as much as possible for the 
protection of information submitted by producers under the NAIS 
system. Also, we request that in the 2007 Farm Bill authorize a 
program to research on air emissions mitigation technologies, 
emphasizes on on-farm applications, with particular attention 
to the technologies' efficacy in reducing emission rates, 
operational feasibility and affordability.
    And finally, UEP asks the members of the Committee to 
oppose the inclusion of any provisions in the Farm Bill that 
would harm our industry. For example, legislation has been 
introduced in the House of Representatives that would require 
all Federal food procurement to be conditioned on animal 
welfare standards, specified in the text of the legislation, 
not through any objective scientific procedure.
    In the case of egg--in the case of the egg industry, the 
legislation appears to require all Federal purchases to be 
limited to cage-free or free-range eggs and similar production 
systems. As an organization, we are not opposed to those 
systems, and indeed some of our members operate them. But eggs 
produced in this way are typically two to three times as 
expensive as conventional produced. The result of the 
legislation--not just for eggs, but for milk production.
    In conclusion, as an Iowan, I am proud to be part of U.S. 
agriculture in this new century. I am also honored that this 
Committee came to Iowa for this hearing. Coming from a variety 
of states, you are well aware of producers' concerns about 
similar--are similar across the country. We look forward to 
working with the Committee on a sound--on a sound forward- 
looking farm policy for coming years. Thank you.
    [The prepared statement of Mr. Dean can be found in the 
appendix on page 121.]
    Senator Chambliss. Thank you. Mr. Kerns.

STATEMENT OF MR. STEVE KERNS, REPRESENTING IOWA PORK PRODUCERS 
                 ASSOCIATION, CLEARFIELD, IOWA

    Mr. Kerns. Chairman Chambliss, Senators Harkin and 
Grassley, welcome. Thank you for the invitation to this 
hearing. My name is Steve Kerns; I'm the immediate past 
President of the Iowa Pork Producers Association and a current 
Chairman of the Public Policy Committee. I'm a pork producer 
from southwest Iowa in Clearfield.
    As you know, pork producers are generally not the largest 
recipients of any of the Farm Bill provisions. However, we do 
have many policy implications which could be discussed and 
therefore, we would follow the Farm Bill discussions closely on 
behalf of our members.
    One issue that should not wait until next Farm Bill is MPR. 
Currently the Mandatory Price Reporting system for livestock 
has lapsed and negotiations are ongoing between the Senate and 
the House over the new language. The Iowa Pork Producers 
Association is on record favoring the Senate version over the 
House. I thank the Senate, and especially Senators Harkin and 
Grassley, for their work on this issue and urge the Congress to 
adopt the Senate version as soon as possible. This issue is too 
important to wait for the next Farm Bill consideration.
    What livestock producers need is more transparency in the 
marketing process. We don't need to know the price each 
producer received for his livestock, but we do need to know how 
the prices are settled and negotiated, are compared to the rest 
of the market.
    Regardless of the discussions or timing of the new Farm 
Bill, Congress should extend TPA for the President. It is very 
important for the Agriculture trade that future administrations 
have the ability to negotiate the finer details of trade 
agreements.
    Packers and Stockyards is one area of that competition 
which needs attention. It needs to be revised. The OIG report 
on GIPSA noted that change is needed within the agency. Senate 
Bill 2307 is a good start at this process. This bill would 
authorize USDA to establish an Office of Special Counsel whose 
sole responsibility will be to investigate and prosecute law 
violations. Based on the OIG report, Senate file 2307 adds 
important provisions and improvements to this current process.
    Packer feeding and contracting in agriculture is becoming 
more commonplace. In Iowa, our Attorney General has been 
negotiating with individual processors to resolve legal 
challenges to Iowa' packer feeding laws. Many of the agreements 
between the AG and individual firms discuss contracting issues. 
One provision important to producers is the state in which the 
legal challenges are resolved, also known as venue. It makes 
sense to most producers that the state in which the production 
takes place should be the state where legal disputes are 
resolved. This is important for both production contracts and 
marketing agreements. In Iowa, most packers involved with 
negotiating with the AG, have this language in part of their 
agreement with the state of Iowa.
    Iowa is one of the pilot states for whole farm insurance 
coverage, which includes livestock. In most cases, livestock 
revenue assurance together with crop insurance can reduce the 
premiums compared to insuring enterprises separately. It has 
worked relatively well but the usage rate could be increased.
    Federal renewable fuels targets should result in putting 
more grain into ethanol production and this could impact the 
price of corn and or feed costs. We are hearing more and more 
from pork producers concerned about the price and availability 
of grain for livestock feed. Therefore, we continue to advocate 
safety values in the national policy, which allows for 
suspension of mandated programs when feedstock supplies are 
low.
    Furthermore, more research needs to be conducted to 
evaluate the consistency and nutritional value ethanol by- 
products in order to develop feeding recommendations for 
livestock. Under the Conservation title, Congress should modify 
the EQIP program to be more usable to pork producers. Second, 
unless done beforehand, Congress should clarify that animal 
manure was never intended to be a hazardous waste.
    Third, the 2002 Farm Bill included a new Conservation 
Security Program, which was a step in the right direction and 
needs further consideration and funding. And finally, various 
conservation programs have assisted farms in reducing soil 
erosion on farms, not much is known about a concentrated or 
coordinated effort to target and solve water quality issues 
within an entire watershed. We should begin to evaluate a 
watershed approach to agricultural water quality impacts. 
Several Federal agencies and their programs could be targeted 
to pilot watersheds, with cooperation of the area farmers and 
other landowners.
    We can envision combining the strengths of individual 
programs within on watershed called the solar and water 
quality. This could include programs like GRP, CRP, CSP, EQIP 
and WREP. While even these combined programs cannot be expected 
to solve all pollution events, coordinating and concentrating 
these programs could have a big impact on one watershed.
    Furthermore, it would be a new cooperative approach with 
potentially more success than the traditional carrot and stick 
approach.
    Thank you for considering our thoughts.
    [The prepared statement of Mr. Kerns can be found in the 
appendix on page 127.]
    Senator Chambliss. Gentlemen, thank you all very much. You 
mentioned Mandatory Price Reporting and we have been working to 
get Mandatory Price Reporting reauthorized but frankly, we have 
run into some significant roadblocks, which actually arose from 
concerns right here in Iowa.
    Currently, the program's working on a voluntary manner, as 
you know. However, many folks want to see this program 
reauthorized, and because it is a law that has expired, as 
Chairman of the Ag Committee, I think it's incumbent upon me to 
push this forward to hopefully get it reauthorized. The House 
has reauthorized a package that had several changes in it that 
were recommended by several national livestock groups, and 
frankly, my two friends here--and I don't have dog in this 
fight, so I can talk about this--my two friends here decided 
that was not the way we needed to go and the Senate bill 
reauthorized the bill--the law as written for a 1-year period 
of time, the House is 5 years--the bill that we authorized---- 
reauthorized had no changes in it.
    So, we're at loggerheads right now as to whether or not, 
No. 1, and changes ought to be made, second whether it ought to 
be for 1 year or 5 years and we have not been able to make any 
headway whatsoever. So, Mr. Scheitler, Mr. Nelson, Mr. Kerns, 
let me ask you three gentlemen just to comment on this. What do 
we need to do, because I would like to get this done? You all 
tell these two guys what they need to do, so we can do.
    Mr. Scheitler. Mr. Chairman, we're very fortunate to have 
these two gentlemen representing us.
    Senator Chambliss. Boy, if that's not a political answer--
--
    Mr. Scheitler. We truly want do reauthorization of 
Mandatory Price Reporting. There's no question about it and I 
really believe that we've got the two best-qualified 
individuals at this table to work that out if it needs to be 
some sort of compromise. Under no circumstances should it be 
put off. If anything it should be refined, implemented right 
away and hopefully more detailed and better price reporting.
    Senator Chambliss. OK. Mr. Nelson.
    Mr. Nelson. I haven't actually read the legislation and I'm 
not sure really where the holdups are, but I know we're more 
than willing to do anything that we can behind the scenes to 
try to push this piece of legislation through, it is very 
critical. Giving the examples that I stated with some of the 
goings on in the marketplace today, we need to be able to have 
that transparency and follow the current state of the markets.
    Senator Chambliss. Mr. Kerns?
    Mr. Kerns. Yes, I think you know our position. We fully 
support the Senate version. We've worked with Senators Harkin 
and Grassley and we appreciate what they've done to make the 
bill more transparent. But the House bill doesn't--little to 
solve the transparency of problems that were existent and are 
existent with the current bill. Therefore, we feel provisions 
need to be made adopted fairly quickly.
    Senator Chambliss. OK, and for 5 years?
    Mr. Kerns. I believe that we could--we need livestock price 
reporting forever. I mean, I think that we can have maybe for 1 
year if that's what's necessary to get it implemented and 
reauthorized right away. Five years would be better. But, I 
think the fact that we need mandatory livestock price reporting 
in place----
    Senator Chambliss. But if we can get the bill right, I 
don't think there's a problem whether it's 1 year or five 
years. One year basically was to try to get us to a point where 
we could get some input from a GAO report. So, that's not 
really fair.
    Last, Mr. Dean, in your testimony, you mentioned some 
measures the egg industry is taking to address animal welfare 
standards, particularly United Egg Producers certified program. 
How does this program go above and beyond the animal welfare 
standards, which are already in place?
    Mr. Dean. What we did was put a group from academia 
together, from the scientific community together, and had them 
do studies and research for us. We've taken our cage density to 
a different level. We're using sound science in our program 
rather than other situations and right now, 90 percent of the 
industry is on that type of program where we use sound science 
to try and come up with the needed benefit--welfare benefits 
for the animals.
    We don't necessarily agree with the free-range concept. 
It's a practice that's used but that then can lead into issues 
with avian influenza, where they can go and intermingle with 
migratory birds and ducks and so we don't necessarily feel 
that's a wise approach to take to in the industry. Europe has 
gone into certain countries have actually banned cages 
completely. The scientific community will tell you that banning 
cages is not the way to go and not in the best for the animals 
and the livestock.
    Senator Chambliss. OK, Senator Harkin.
    Senator Harkin. All right, thank you very much Mr. Chairman 
Let me first thank you all for being here. I'd get back to 
Mandatory Price Reporting thing that Senator Grassley and I 
have worked together on, in harmony on this thing.
    As you know, we ask for a GAO study of this. We've got the 
GAO study; we ask only that the findings of the GAO basically, 
be incorporated in what we propose. We are at a sticking point 
with the packers right now. One of the GAO findings was that we 
needed to have compliance reports and how they were complying 
with this. The packers are objecting to that and we're trying 
to find some way to work that out now. Because we expressly put 
in our bill that it couldn't include proprietary information. 
They were concerned about that, well, we agree, we don't want 
proprietary information, what we do need to know, whether or 
not they are complying and what the patterns are and that type 
of thing so that we have some basis on which to know, whether 
they're doing the thing right or not.
    Well, that's just where we are. I don't know where we go 
from here and what kind of compromise we can work out, but so 
far, we're sort of at loggerheads on that. The bill isn't worth 
anything unless we have compliance reports and compliance 
audits that we know to go in and check on them--on these 
packers and, well, I don't know how we're going to be able to 
work it out. But, we're working on it. I didn't mean to get off 
on all that, now. But it was a big issue there on that.
    Country of origin labeling. Now, are you in favor of 
country of origin labeling and I just want to ask Mr. Nelson 
that, too? I mean, you know, we had in our bill it was supposed 
to be implemented by 2004 we're now 2006, we're 2 years past 
that and we can't seem to quite get it done yet.
    Mr. Scheitler. That's correct, Senator. Actually the Iowa 
Cattlemen's Association has policy supporting mandatory country 
of origin labeling. But, we currently have some problems with 
the bill at hand. We believe that it should include all species 
of animals and the meat derived from it and also it should 
include the meat at retail level in food service. The current 
bill probably would only cover 30 to 40 percent of the meat 
that's sold in this country and I think that if we were to 
encompass all meat and actually the food and the meat at retail 
level and food service that is currently the policy of the Iowa 
Cattlemen's Association.
    Senator Harkin. You say the present bill would only cover 
30 to 40 percent of all the meat involved.
    Mr. Scheitler. Yes, it does not cover any meat that is 
handled through food service or the restaurant industry or 
anything like that. It basically--the only products that are 
covered are whole muscle meat in the meat case. If it's been 
processed in any way shape or form, it does not pertain to that 
meat.
    Senator Harkin. Mr. Nelson.
    Mr. Nelson. Yeah, R-CALF's position is, you know, we're 
definitely in favor of mandatory country of origin labeling and 
he does speak correctly there, that it's mainly at the retail 
meat cases where the rule, as it's written, would take effect. 
And we think that's great; let's get it enforced. If it needs 
to be enhanced and expanded, then maybe let's do that down the 
road, but there's been, obviously, numerous years of foot 
dragging in trying to get this bill--law implemented.
    Senator Harkin. Pork Producer, Steve.
    Mr. Kerns. Well, Iowa Pork Producers Association delegates 
strongly endorse mandatory country of origin.
    Senator Harkin. Country of origin labeling, yeah. And Mr. 
Dean, I don't know if you have a dog in this fight.
    Mr. Dean. No.
    Senator Harkin. Really, you don't have one on that. 
Concentration issues--avian flu, I did want to touch on that a 
little bit with you, Mr. Dean. The issue of low pathogenic 
avian influenza and the indemnity issue--I wear another hat in 
the Senate and that is on the Health Committee--Health 
Committee and we're looking a lot at this whole avian flu and 
what we need to do to beef up our, no pun, what we need to 
strengthen our public health infrastructure to get ready for 
this.
    A lot of it is overlooking the animal side of this. And so 
it's become apparent to us on the health side that we need to 
do something to protect in terms of the low pathogenic that can 
mutate into the high pathogenic, I'm getting really into the 
weeds here on this. But would you, again, for the record tell 
us what you believe we ought to do on the animal side in terms 
of indemnification for flocks with low pathogenic avian 
influenza.
    Mr. Dean. Right now there is no provisions for 
indemnification of low-path avian influenza.
    Senator Harkin. Why is that a problem?
    Mr. Dean. Well, low-path can mutate into high-path.
    Senator Harkin. If it's low-path, it doesn't harm anything, 
does it? I mean----
    Mr. Dean. You run the risk of--where you run the risk is 
you do not know when or that it's going to mutate and low-path, 
there's very few clinical signs when you have low-path avian 
influenza and we would be in favor of testing flocks for low-
path and we feel that it's--strongly that it's a big enough 
issue that they could turn high-path at any point in time and 
then once they turn high-path, they're so highly contagious 
that like, in the state of Iowa that's got 51 million chickens, 
you could virtually wipe out the entire industry before you 
could quarantine it and stop it. So, the only way, I feel, that 
we can at least get a handle on it, is eliminate it at the low-
path level before it does mutate.
    Senator Harkin. And if there are not indemnification fears, 
then people won't report.
    Mr. Dean. People aren't going to be prepared to test their 
flocks and aren't going to be prepared to eradicate and 
eliminate the birds.
    Senator Harkin. I think that's a very important point. 
Steve Kerns, just one last thing on pork production that you 
mentioned about your concern about ethanol and about the amount 
of corn that we're taking for ethanol and the fact that the by- 
products are, of course that the dried grains are OK for 
cattle, but not too good for pork; two interesting things, as 
you know, we're doing some research at Iowa state on that and 
we need to put more money into that research.
    But I ran into an individual last week who's putting money 
into research and claims that they, and he's a scientist that 
they're going to be able to take hog manure and make it into 
ethanol. Now, you've probably have heard about that, but 
another cash crop for the State of Iowa.
    Well, thank you all very much, gentlemen, thank you for 
being here today and your testimony.
    Senator Chambliss. Senator Grassley.
    Senator Grassley. Yeah, on a couple of issues that some of 
the panelists brought up about concentration and animal i.d. 
We're going to have an opportunity in this committee on 
Wednesday, we have the new Undersecretary for Marketing and 
Regulatory programs, Bruce Knight coming before our Committee 
and we'll have a chance to press him on those issues and I 
intend to do that.
    In regard to, you know--it was kind of an if question---- 
if we had a DOHA round or where we were headed in a DOHA round, 
which we aren't going to have now, but for Mr. Scheitler, what 
do you believe should be the highest trade priorities that we 
have since 10 percent of our beef is exported, it's a very--I'm 
sure it's a very big issue for your organization.
    Mr. Scheitler. It certainly is, Senator. To be honest about 
it, trade negotiations in getting our beef export market opened 
up had been quite frustrating and I don't need to tell you 
that. At some point in time, we have to address this, probably 
I believe in a more forceful manner. We do need to--and we do 
support some sort of trades, sanctions or retaliation against 
the Japanese.
    Clearly that's not a food safety issue, it's a political 
issue and we need to address that as that. I mean, world trade 
especially in the beef industry's extremely important. And, it 
seems the more we give, the less we get when it comes to 
negotiations especially with the Japanese. We can agree to 
about anything they want to at some point in time, but they 
always seem to come along with another factor or something to 
keep that market from opening.
    To be quite frank about it, we're getting frustrated, that 
marked needs to be opened up and they need to realize that 
we're not going to stand for it as a public and a cattle 
industry in this country.
    Senator Grassley. And Mr. Nelson, you spoke some in your 
testimony about allowing voluntary BSE by U.S. packers, I 
presume that's a Creekstone issue?
    Mr. Nelson. Correct.
    Senator Grassley. Which I have written to the Department of 
Agriculture about it. Based on supporting that, what effect do 
you think that private testing would have on domestic and 
foreign beef meat markets, would it provide U.S. supplier with 
a greater ability to compete in the market.
    Mr. Scheitler. We believe that it would, when foreign 
countries have asked to, you know--as a condition of making 
beef purchases, if the beef was accompanied by a test, then 
they in fact would be purchasing beef and they're not today, we 
think that it's done great harm to our industry. In a normal 
year you mentioned that 10 percent level of exports of our 
beef, but in the last year it was down closer to 4 percent and 
at the same time we're continuing to import at about 18 percent 
of what we consume in this country.
    So, when we lose, even just 1 percent of the export, it 
depresses our beef price here domestically by about 1 percent. 
So, the net swing is at about--we have about 10 percent lower 
market level for live cattle due to the reduction in beef 
exports.
    Senator Grassley. I have no further questions.
    Senator Harkin. I want to follow up on one thing in both 
your testimonies, Mr. Nelson, Mr. Scheitler. It seems that in 
your testimony, Mr. Nelson, you are capital but more, 
obviously, more concerned about the concentration issue. Seems 
to me that Mr. Scheitler then you were in your testimony, I 
could be misinterpreting that.
    Mr. Nelson pointed out something interesting in his written 
testimony, he said the share--the producer's share of the beef 
market has gone from 56 cents a dollar in 1993 down to 47 cents 
last year. To me, that's alarming, so if we continue on that 
path, we just can't continue on that path, so I'm perhaps 
concerned about this concentration issue, too and this is a 
kind of a question I wanted to ask and I lost my point in your 
testimony. But the fact that if packers were so concentrated in 
packers bill that they can use imports then, you see, and they 
can use imports to keep down the price to our local producers. 
Then, it takes away more and more share of the consumer dollar 
from our producers. And I just wonder if you could address 
yourself to that, it's a concern that I have on the whole 
concentration issue.
    Mr. Scheitler. Yes, Senator I'd like to. There's no 
question about the fact that anything that would reduce the 
farmers share or the cattlemen's share, concerns us greatly, 
there's no question about that. On the same token, we need, and 
I think as you have proven with this packers and stockyards 
issue and stuff that we have, and I want to thank you, by the 
way, for your efforts in that.
    We need more enforcement, we need agencies and we need PNS 
to be effective in what they do. We would, obviously, prefer to 
have many more packers, many, many more packers. And, yet 
reality tells us that that's difficult, but at the same time, 
it's very important to see to it they are not abusing the 
system and that is partly what PNS was designed to do.
    Senator Grassley. And we do need to enforce it, thank you 
for that. Mr. Nelson, anything else on that?
    Mr. Nelson. I would actually like to relate it to your 
question about, how do we bring young people back into 
agriculture? If we have a competitive beef industry--cattle 
industry in this country, it's not an integrated industry to 
this--to date. Although, there are integrators that would like 
to vertically integrate the cattle production end of the 
business.
    You can go to counties in Iowa that have eight or 10 times 
more cattle than other counties and those counties are very 
prosperous and they have a large population of young people 
that are involved in agriculture. So, I don't think we can have 
one without the other. You know, we've got tremendous 
opportunities with distillers, grains here in Iowa to enhance 
cattle production. But, if we don't competitive markets, I 
think we'd just be kidding ourselves and kidding the young 
people to want to get them back involved in the cattle business 
without providing them competitive markets to be able to market 
their products.
    Senator Grassley. Mandatory pressure point transparency, 
transparency, transparency. Thank you all, thank you Mr. 
Chairman
    Senator Chambliss. Thank you, let me just make a quick 
comment relative to this issue of exported beef to Japan, there 
are not two stronger supporters of U.S. beef than Senator 
Grassley and Senator Harkin. We have had several different 
meetings within the Ag Committee with the Japanese Ambassador. 
We have strongly emphasized to him that we are not going to let 
this arbitrary decision on their part continue on.
    You're exactly right, this is not a food safety issue. This 
is a health issue and if it were a food safety issue, the 
Japanese would not be eating their own beef, because they've 
had 26 cases of BSE that they've discovered in Japanese calves 
and we've got one, and that was a cow that came here from 
Canada.
    So, let me just say that these two guys, along with all 
members of the Committee are really working hard to make sure 
that we get that market reopened or we're going to look very 
strongly at the imposition of sanctions against the Japanese.
    And last, let me just say country of origin labeling is an 
issue that has been very controversial for some time. It sounds 
like it ought to be a very easy provision to implement, but Mr. 
Scheitler, I'd go back to the example of a cow that came down 
through Canada for the last couple of months to Mr. Nelson's 
feedlot. That cow was a product of a heifer that was born in 
Mexico that was sold to a producer in Canada and that heifer 
was artificially inseminated by a bull from Argentina.
    Now, where the heck is that beef coming from? So, it's a--
-- it's not an easy issue to deal with even at the retail 
level. But, we're going to keep working at it and you all could 
not have two better people working for you on the Senate side 
than these two guys.
    I want to thank the witnesses--all the witnesses for their 
testimony today as it helps us prepare for the reauthorization 
of the Farm Bill. I encourage anyone, any of you who are 
interested in submitting a written statement for the record, to 
visit the Committee's website, which is agriculture.senate.gov 
for details. We can accept written statements up to five 
business days after this hearing.
    Thank you for your interest in agriculture policy. This 
hearing is now adjourned.
    [Whereupon, at 12:21 p.m., the Committee adjourned.]


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                             July 24, 2006



      
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