[Senate Hearing 109-644]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-644
 
                   REGIONAL FARM BILL FIELD HEARING: 
                          GREAT FALLS, MONTANA

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION


                               __________

                            AUGUST 17, 2006

                               __________

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


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



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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY,



                   SAXBY CHAMBLISS, Georgia, Chairman

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

            Martha Scott Poindexter, Majority Staff Director

                David L. Johnson, Majority Chief Counsel

              Vernie Hubert, Majority Deputy Chief Counsel

                      Robert E. Sturm, Chief Clerk

                Mark Halverson, Minority Staff Director

                                  (ii)

  
                            C O N T E N T S

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                                                                   Page

Hearing(s):

Regional Farm Bill Field Hearing: Great Falls, Montana...........     1

                              ----------                              

                       Thursday, August 17, 2006
                    STATEMENTS PRESENTED BY SENATORS

Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman, 
  Committee on Agriculture, Nutrition, and Forestry..............     1
Baucus, Hon. Max, a U.S. Senator from Montana....................     2
Burns, Hon. Conrad, a U.S. Senator from Montana..................     4
Salazar, Hon. Ken, a U.S. Senator from Colorado..................     3
Schweitzer, Hon. Brian, Governor of the State of Montana.........     5

                                Panel I

Belcourt, Tony, Intertribal Agriculture Council, Box Elder, 
  Montana........................................................    10
Doheny, Eric, Montana Farmers Union, Dutton, Montana.............     9
Henderson, Dave, National Barley Growers Association, Cut Bank, 
  Montana........................................................    11
McClure, Dave, Montana Farm Bureau, Bozeman, Montana.............     7
Schuler, Dale, President, National Association of Wheat Growers, 
  Carter, Montana................................................    10
Tyler, Paul, U.S. Canola Association, Moore, Montana.............    12

                                Panel II

Beltz, Michael, U.S. Dry Bean Council, Hillsboro, North Dakota...    23
Bonestroo, Gary, Dairy Producers of New Mexico, Clovis, New 
  Mexico.........................................................    25
Evans, Jim, USA Dry Pea and Lentil Council, Genesee, Idaho.......    22
Schutter, Sid, National Potato Council, Manhattan, Montana.......    26

                               Panel III

Donald, Bill, National Cattlemen's Beef Association and Montana 
  Stockgrowers Association, Mellville, Montana...................    36
McDonnell, Leo, R-Calf USA, Columbus, Montana....................    38
Sampsel, Betty, Montana Wool Growers Association, Stanford, 
  Montana........................................................    37
Wendland, Mike, National Association of Conservation Districts 
  and Montana Conservation District, Rudyard, Montana............    35
                              ----------                              

                                APPENDIX

Prepared Statements:
    Belcourt, Tony...............................................    46
    Beltz, Michael...............................................    51
    Bonestroo, Gary..............................................    58
    Doheny, Eric.................................................    62
    Donald, Bill.................................................    67
    Evans, Jim...................................................    72
    Henderson, Dave..............................................    76
    McClure, Dave................................................    78
    McDonnell, Leo...............................................    84
    Sampsel, Betty...............................................    94
    Schuler, Dale................................................    96
    Schutter, Sid................................................    99
    Tyler, Paul..................................................   103
    Wendland, Mike...............................................   105
Document(s) Submitted for the Record:
    American Honey Producers Association, Inc....................   108
    Cascade County Conservation District.........................   113
    Food Policy Council, Montana Food Bank Network...............   115
    Montana Action For Healthy Kids..............................   118
    Montana Dietetic Association.................................   121
    Montana School Boards Association............................   124
    Montana School Nutrition Association.........................   127
    Standley Brothers Partnership................................   128
    Statement from Henry L. Armstrong............................   129
    Statement from Irma J. Tweedy................................   130



                   REGIONAL FARM BILL FIELD HEARING: 
                          GREAT FALLS, MONTANA

                              ----------                              


                       THURSDAY, AUGUST 17, 2006

                                       U.S. Senate,
           Committee on Agriculture, Nutrition and Forestry
                                                    Great Falls, MT
    The committee met, pursuant to notice, at 9:50 am at the 
University of Great Falls, Hon. Saxby Chambliss, chairman of 
the committee, presiding.
    Present: Senators Chambliss, Baucus and Salazar. Also 
present: Senator Burns.

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

    The Chairman. This meeting will come to order and let me 
welcome all of our witnesses as well as all of our other guests 
here today. I can't tell you how pleased I am, as Chairman of 
the Senate Ag Committee, to be back in Montana. You have a 
beautiful state out here. I'm somewhat familiar with the type 
of agricultural industry that you have in this state but I am 
excited as I can be to have the opportunity to dialog with 
farmers and ranchers from this part of the world as we prepare 
to write the next farm bill in 2007. I want to first of all say 
that I apologize significantly for a little problem that we 
have run into, from a time constraint standpoint. We travel 
back and forth for these hearings on a military aircraft and we 
thought we were all squared away so we wouldn't be under as bad 
of a time constraint as it turns out that we are but 
unfortunately, the plane that was coming to get us broke down 
this morning in Washington. Thank goodness it broke down in 
Washington instead of in Montana. But in any event, we have 
another plane that is on the West Coast that is going to stop 
by and pick up the staff and myself to head back to Washington 
and because of the down time for the pilots, this plane has to 
be wheels up from here in Great Falls at 12:54. So it is going 
to curtail us a little bit but we're going to do our best to 
speed things up on our end and make sure that we get into the 
record absolutely everything that Montana and western farmers 
and ranchers want to get into the record and you'll have an 
opportunity to add anything that you want to into the record as 
I will explain in just a few minutes. You know, we have a 
significant drought going on in Georgia and I want you all to 
know the sacrifice I have made to bring rain to Montana instead 
of directing it to my home state but I sure hope I carry some 
of this home with me when I get back there tomorrow. I am 
indeed pleased to be here with my colleagues, Senator Burns and 
Senator Baucus and Senator Salazar.
    We are--you just don't know in Montana here how important 
your senators are when it comes to agriculture. They are two 
great men and two folks who really make sure that the 
agricultural interests of Montana are well preserved and well 
taken care of. Ken Salazar is one of our freshmen members of 
the senate, and freshman members of the Committee, obviously, 
from the great State of Colorado, and we are particularly 
pleased that Ken was able to come over today and join us for 
this hearing.
    This is the seventh hearing that we have held thus far 
outside of Washington. We have held hearings in Georgia, 
Missouri, Pennsylvania, Iowa, Oregon and Nebraska, and our 
final field hearing will be in Texas on September the 8th. With 
the 2002 Farm Bill expiring in 2007, the Committee has the 
responsibility of writing the farm bill next year. A number of 
factors influence the development of a farm bill. And one of 
the most important of those is the input we receive from 
farmers and ranchers in these regional field hearings. This 
testimony will establish a record of the regional variations 
and the operations and use of farm programs which will greatly 
assist us in the development of a farm bill that will work for 
all of us in American agriculture. We appreciate the 
information received and testimony delivered in our hearings so 
far, and we look forward to hearing from our witnesses today.
    For those of you who are not witnesses, but are interested 
in submitting comments to the Committee related to the farm 
bill, our website has guidelines for providing written 
statements for the record and a web form for informal comments. 
Comments received during the re-authorization process will be 
considered as well. I appreciate the University of Great Falls 
and President Eugene McAllister for hosting us today, and what 
a beautiful campus you've got here, and this is a certainly a 
great facility in which to hold this hearing. His staff has 
been particularly helpful to us and I also want to thank my 
colleagues from Montana, Senator Burns, Senator Baucus and 
their staffs for providing great support for the Committee for 
this hearing. We have got a lot of ground to cover today in a 
relatively short amount of time. So I will now recognize my 
senate colleagues for brief opening remarks. I will turn to 
Senator Baucus first as a member of the Senate Ag Committee. 
Max?

   STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM MONTANA

    Senator Baucus. Thank you very much, Mr. Chairman On behalf 
of all of us in Montana, we very much appreciate your accepting 
my invitation for you to come to Montana for an Ag Committee 
field hearing. We did not do that in the last farm bill, we are 
now leading up to this farm bill, we deeply appreciate, Mr. 
Chairman, your holding a hearing here. This is an opportunity 
for everybody to kind of tell-it-like-it-is-for-Montana 
perspective. You know, don't pull any punches, it's a--this is 
real, this has got real bullets here, as we write a new farm 
bill. As the only member of the Montana congressional 
delegation on the Agricultural Committee in the Congress, it's 
an opportunity for you to let me know what you think, and the 
Chairman to know what he thinks, and so we can get this thing 
written. So thank you very much, Mr. Chairman, for holding this 
hearing.
    I also want to thank my good friend from Colorado, Senator 
Salazar. He is a rancher, he is a farmer on the Committee, and 
also my good friend from--my colleague, Conrad, even though he 
is not a member of the Committee, he has taken the time out to 
be here, and work in a bipartisan way, which is really very 
helpful. I see the Governor here, and that's great, too. A 
couple of just main points, to be very quick here. I have had a 
lot of listening sessions around the state in the last week, 
about a thousand miles traveling around our state and a couple 
things that have come up, one is keep a strong safety net. We 
got to have that strong safety net, and that, to a large 
degree, means a good countercyclical program.
    There is some concern that wheat doesn't get quite as good 
a break, Mr. Chairman, as, say, corn or some other commodities, 
when it comes to countercyclical, that we in Montana need a 
strong countercyclical program, because of the vagaries of 
prices and production and so forth. And the second main point 
is there is a great opportunity here, because so much has 
changed in the last four or 5 years. And the opportunity for 
change is energy. Energy prices are so high now, it's making a 
huge problem for our producers, clearly, fertilizing costs, et 
cetera.
    But also it's an opportunity for oil seed crops for energy 
crops, for camolina, for example, which is becoming very 
popular in Montana, as well as cellulosic ethanol. We just need 
to help wean ourselves away from OPEC as a country. A good way 
to do that is to give more impetus in the next farm program, to 
the crops--to alternative crops to help us accomplish that 
objective. And I think we will hear a lot from our producers 
about that as this hearing goes along. Again thanks for having 
this hearing here, it makes a big difference.
    The Chairman. Thanks, Max. Senator Salazar.

  STATEMENT OF HON. KEN SALAZAR, A U.S. SENATOR FROM COLORADO

    Senator Salazar. Thank you very much, Chairman Chambliss, 
for holding this hearing, and Senator Baucus, my good friend, 
thank you so much for inviting the Senate Agricultural 
Committee to come here to Montana to hold this hearing, and to 
my colleague Senator Burns, thank you for joining us. Governor 
Schweitzer, we appreciate your leadership especially on the 
whole arena of alternative fuels, and the whole set of energy 
issues that I know are going to be part of this farm bill as 
well. Let me make just two quick comments: First, the 
importance of this bill is cannot be understated for rural 
America. There are some that will criticize this farm bill for 
its expense, and yet when you look at what we have spent on the 
farm programs out of this--out of the farm bill, we spend less 
than 1 percent of the entire Federal budget. And it's my view 
that those of us in Washington ought not to forget, but some 
people have forgotten, that is forgotten America, and what it 
is that rural America contributes to our national security.
    In my time as attorney general in Colorado, I had a sign, 
No Farms, No Food, and I have that same sign on my desk in 
Washington DC. It's something we need to continuously remind 
the Nation about.
    Second, there has been some positions already taken by some 
agricultural organizations that we simply ought to extend the 
farm bill. Maybe that will happen, as we wait until we see what 
the outcomes are of the WTO negotiations.
    But at the end of the day, I think it's important for us to 
have these hearings, so that we can figure out what's working, 
what could be working better, how we can fix the problems that 
we currently have. And when we talk, for example, about the CRP 
Program, I know that both here in Montana as well as in 
Colorado, I hear many concerns from rural communities about how 
we might be able to do this CRP Program differently. Well, if 
we can do it better, we ought to do it better. I think that's 
one of the opportunities we have in this Committee, see how we 
can do things better.
    The energy title of this bill, which was put into the bill 
in 2002, I think creates great opportunities, we see more 
energy and more ideas on energy in Washington D.C. and in our 
capitols across this country than we ever have before. So I 
think alternative fuels is going to be one of the key 
components we can work on. We cannot wait to work two or 3 
years to work on that particular title. So, Mr. Chairman, thank 
you again for coming here to this wonderful state, to Great 
Falls, and holding the hearing here.
    The Chairman. Thank you. Senator Burns.

  STATEMENT OF HON. CONRAD BURNS, A U.S. SENATOR FROM MONTANA

    Senator Burns. Thank you very much. I want to thank the 
Chairman and members of the Committee for allowing me to join 
them. I am not a member of the Committee, but I appreciate your 
courtesy, and when you go on the Commerce Committee, I will 
return the favor, if you ever have to come over there.
    I just want to mention, or throw some questions out today. 
The improvement in the safety net, I think that's very 
important, because that's what I hear too as I drive across the 
State of Montana, how energy will play a role in our farms and 
our ranches, and how we can play a role in the energy crisis 
that we find ourselves in today. And are we willing to go 
through the pains of changing our transportation fuels. Young 
farmer programs, think about those, if we decide to rewrite the 
farm bill or extend, and at new approaches to how we 
regionalize some of the benefits that we--that the farm bill is 
supposed to provide for us farmers and ranchers. You know there 
are new--we know more about our planet earth now than ever 
before. When I was chairman of the Science Technology in Space 
on the Commerce Committee, we started the low orbit programs, 
looking at our earth.
    And now--and with those came programs that we could tell a 
lot of things about where we farm and where we ranch, measured 
accuracy down to a meter. And that allowed us now, I think, and 
when we fashion this farm legislation, to regionalize more than 
we ever have before. The biggest problem in agriculture and 
food policy is that we write one, and one size is supposed to 
fit all.
    And it just does not serve agriculture very good, because 
we are regionalized. We are different than South Georgia, below 
the gnat line. And we have different challenges and different 
problems, different crops. But now with data bases, and new 
science, and new technologies, we can start to look at a 
regionally focused kind of farm policy that will serve our 
producers better. So I just want you to think about those, 
because I come today to listen, and I know that's what the 
chairman has done, and it's very, very important that we take 
all the information that we gather now, and it will be a part 
of how we'll face the challenge of the future.
    Agriculture does have a bright future. There is new 
elements moving in every day, and the way we take advantage of 
those, it is very important that we hear some of that from you. 
And thank you, Mr. Chairman, for allowing me to join this 
Committee today.
    The Chairman. Thank you. And while Conrad is not a member 
of the Committee, he is what we call the sheriff of the posse, 
which is a group of senators that are non-Ag committee members 
that meet on a regular basis, and Senator Roberts suggested 
this idea, and Conrad has done a great job of chairing that 
group, and Roberts and I meet with them regularly to make sure 
that they understand what's happening within the Committee and 
to get the ideas from folks from other parts of the country 
that are interested in agriculture that aren't on the 
Committee. So thanks, Conrad.
    We, as is our practice, invite all of our Governors of the 
states that we go to, and I can't tell you how pleased I am 
today to have a chance, first of all, to meet Governor 
Schweitzer, but most importantly to have him come be with us 
today, and share a few thoughts with us. So Governor Brian 
Schweitzer, welcome very much to the Ag Committee hearing, and 
we look forward to hearing some comments from you.

 STATEMENT OF HON. BRIAN SCHWEITZER, GOVERNOR OF THE STATE OF 
                            MONTANA

    Governor Schweitzer. Well, thank you and thank you for 
coming up here and thank you for taking the time, and, of 
course, Senator Salazar, my good friend, thanks for coming up 
from Colorado. We share a lot of concerns, we have a lot of the 
same crops, and our producers are facing many of the same 
challenges.
    And I want to thank Senator Baucus for being a leader for 
farmers and ranchers in Montana for 30 years. And Senator 
Burns, Senator Chambliss when he mentioned that you were the 
sheriff of the posse, he probably doesn't know the story about 
the Plummer Gang and the Vigilantes here in Montana. Things 
didn't end well in Montana for the sheriff. So we don't want to 
bring up the posse in Montana, the Vigilantes actually won that 
one.
    Senator Burns. Just be aware of it, though, just be aware 
of it.
    Governor Schweitzer. Well again, welcome to Montana, and, 
of course, in Montana we face a lot of challenges. And one of 
them that I would like to address is in the cattle industry, is 
that we are faced with the largest border in America with 
Alberta and the challenges that Alberta has had as a center of 
BSE, and this border that is open some days and partially open 
other days, and the concerns that our cattle industry has 
commingling that Alberta beef with our beef.
    So we are going to need a little help in managing disease. 
Of course, in northern Alberta, their buffalo have brucellosis, 
and in the Yellowstone Park area, there is brucellosis as well, 
and so we are trying to manage not one just one disease, 
brucellosis, but two, BSE. So please pay attention to our 
cattle industry in Montana.
    We in Montana recognize our opportunities. Our 
opportunities are that we are a long ways away from the ocean, 
but we are also a long ways away from imported oil. It's kind 
of perverse, because Montana farmers work for 364 days a year, 
and they load their crop on a railroad on 1 day and they give 
35 percent of the value of that crop to the railroad.
    Now that grain is shipped to the port, put on ships, and 
it's sent over high seas, all the way over to some place in the 
Third World. At the same time, in the Third World, they are 
loading a boat full of oil, and out on the high seas, that big 
ship loaded with grain coming from Montana meets a big ship 
with oil that comes to our ports and then refines the product 
and ships that fuel inland where we use that diesel to produce 
the crop. And the farmers, by the way, pay the freight both 
ways. It is time that we take a proactive stand in producing 
our biofuels in this country. Just to give you a little example 
about mixed signals that we get out here in the country, the 
National Governors Association meetings over the last year, we 
have had folks come and speak to us from the major oil 
companies, and they showed us the charts, they say that 30 
years from now, 1 percent of our fuel portfolio will be 
alternative fuels, all alternative fuels, 1 percent. At the 
last National Governors Association, a member of the Bush 
Administration came from the Department of Energy, and said, by 
the year 2030, 30 percent of our portfolio will be ethanol.
    So these are mixed signals that we are getting, we are 
getting industry saying it's going to be one percent, and the 
administration says it's going to be 30 percent. Let's focus on 
what's realistic. If we converted all 58 percent of the bushels 
of wheat that we export from this country, and all 34 percent 
of the soy beans and all 18 percent of the corn to biofuels, we 
get to maybe 20 percent. So we have to be realistic on what we 
can do. And if we are going to do it, first off, we have to go 
out to farmers and say, you are growing wheat right now, we'd 
like you to produce a biofuel, then we'd better have an 
insurance program that makes sure that they are protected, so 
that when they go to their bank, and that's what we do in the 
spring, we go to our bank and we say, now we want to borrow our 
production costs, and the bank says, we will loan to you what 
the Federal crop insurance is.
    Farmers are faced with that every day. The farmers say I 
would like to try some biofuels, and the banker says you better 
stick with wheat. So we need to have a safety net that sends 
direction to our farmers to produce biofuels. We need to say to 
our farmers that we are going go change our price stability 
system, not just for the crop that you grow, but the fuel that 
you produce. We have had a price stability system for our major 
crops in this country for 50 years. If we want these farmers to 
be partners in producing the fuel, and we need them to be 
partners, because that's where the value of this crop is, in 
the fuel, not the crop itself, then we need to say to them, we 
will have loan guarantees for producing the plants, and we will 
have loan guarantees for you on the production end of that 
fuel.
    We have opportunities, we talked about camolina in Montana, 
this is just one of our crops, this is a biodiesel we produce 
in Montana. We need to be realistic, but we need to send 
signals to the market that we are serious about biofuels. Once 
again, thank you for coming to Montana.
    The Chairman. Thank you very much, Governor. At this time I 
am going to call our first panel up. We have Mr. Dave McClure 
from Bozeman, Montana representing the Montana Farm Bureau, Mr. 
Eric Doheny from Dutton, Montana, representing the National 
Farmers Union, Mr. Tony Belcourt from Box Elder, Montana, 
representing the Intertribal Agricultural Council, Mr. Dale 
Schuler from Carter, Montana, representing the National 
Association of Wheat Growers, Mr. Dave Henderson from Cut Bank, 
Montana, representing the National Barley Growers, Mr. Paul 
Tyler from Moore, Montana, representing the U.S. Canola 
Association. Gentlemen, thank you all very much for being here 
today. We have your prepared statements which will be submitted 
in full for the record. We are going to limit--we are going to 
be very strict in this--your opening comments to three minutes 
each, but we look forward to hearing your comments, and then to 
hearing your responses to the questions.
    So, Mr. McClure, we will start with you, and Mr. Doheny, we 
will go right down the line. Mr. McClure?

   STATEMENT OF DAVE McCLURE, MONTANA FARM BUREAU, BOZEMAN, 
                            MONTANA

    Mr. McClure. Yes, thank you, Mr. Chairman, and also I would 
like to thank you for sharing your thoughts with the Council of 
Farm Bureau Presidents just last month in Washington, D.C., I 
appreciate you sharing that with us.
    I am Dave McClure, president of the Montana Farm Bureau 
Federation, and a farmer from Lewistown, Montana. Our state 
office is in Bozeman. Thank you for this opportunity to testify 
concerning the upcoming farm bill debate. On behalf of our 
members, board of directors and staff, the Montana Farm Bureau 
welcomes the Senate Ag Committee to the Big Sky State and is 
pleased to be able to make these comments. Two major factors 
influencing the farm bill discussions are the Federal budget 
deficit and the stalled WTO talks. These factors make it 
difficult to justify major changes in U.S. farm policy at this 
time. Farm Bureau supports an extension of the current farm 
bill until a new WTO agreement is reached or at least extending 
concepts of the Farm Security and Rural Investment Act of 2002 
in the next farm bill.
    It's vital that we do not reduce domestic farm support so 
that our trade negotiators have the leverage necessary to 
improve world trading rules, reduce foreign import tariffs that 
limit our ability to export, and stopping the unfair export 
subsidies by our competitors is a worthy cause.
    We applaud the aggressive efforts to create opportunities 
for our producers. Our present farm policies evolve from 
earlier efforts to set aside and limit production to set 
aside--and divert acres. It became apparent in the 80's, as we 
cut back, our competitors worldwide increased their production 
and our price support programs gave them a safety net and the 
opportunity to take away our markets.
    As a member and chairman of the Montana ASC State Committee 
in the mid 70's, I became acutely aware of the inefficiency of 
the supply management programs. It took at least 20 percent 
set-aside to achieve 11 percent reduction in production. We 
must not return to supply management programs or attempt to 
store our way to prosperity. I commend the Congress and the 
senate for their recognition of this fact, and that those 
programs of the past were not working and for crafting recent 
laws that increase producer reliance on the market place rather 
than fixed price supports.
    The producers of program crops generally liked the 2002 
Farm Bill because it works and they have the flexibility to 
decide on their own what crops to grow. And certainly the 
discussion on ethanol and biodiesel, we need to have that 
opportunity to change grounds.
    It's vitally important we maintain the safety net of 
deficiency payments and countercyclical compensation, although 
some tweaking may be needed. The increased cost of fuel and 
fertilizer is ample evidence that funding for commodity 
programs should not be reduced but should be increased. Those 
costs are eating our lunch and limiting our ability to pay 
debts and replace equipment. It's in the national interest to 
keep our food production sector competitive and profitable. 
More importantly, a case can be made that farm bill benefits 
outweigh the costs. While spending on non-farm programs in the 
farm bill, about two-thirds of the funding, is costing what was 
projected, spending on the three farm program components, 
commodities, conservation and export programs is well below the 
estimates made in 2002; in fact, 19 billion less than projected 
over the first four years of the farm bill.
    How many farm programs stay below budget at that expense? 
So we think that the current farm bill has proven to be a good 
investment for America. Farm Bureau opposes any changes in the 
current farm bill payment limitations. One of the primary 
objectives of the 2000 Farm Bill was to improve the financial 
safety net available to farmers.
    If limitation and benefits are made more restrictive, a 
significant number of farmers would not benefit from the 
improved safety net. Simply stated, payment limitations bite 
hardest when commodity prices are lowest. Our Federal crop 
program is based on production. Time and time again, this has 
proven to be the best manner for distributing assistance to 
families most responsible for producing this nation's food and 
fiber. Thank you for the opportunity.
    [The prepared statement of Mr. McClure can be found in the 
appendix on page 78.]
    The Chairman. Yes, sir. OK. Guys, here is our rule. This 
light right here means you have gone two minutes; this yellow 
light means you have got one minute left. When the red light 
goes off, that's it. That's the way we operate in the senate. 
Mr. Doheny----
    Senator Baucus. Sometimes.
    The Chairman. We are pleased to have you with us, we look 
forward to your testimony.

   STATEMENT OF ERIC DOHENY, MONTANA FARMERS UNION, DUTTON, 
                            MONTANA

    Mr. Doheny. Thank you. My name is Eric Doheny, and I am a 
fourth generation producer from Dutton, Montana.
    I am a member of the Montana Farmers Union, and believe 
that family farmers and ranchers at a critical juncture in our 
existence. State and Federal programs need to be structured to 
benefit and protect the family farm.
    That being said, I want to reiterate what Senator Baucus 
has said, and if we had a higher price for our wheat, a lot of 
this would be moot. We have got the tightest world stocks of 
wheat known to man, and we are at upper to middle three- dollar 
wheat, and now I will proceed on, but holding no punches, I 
wanted to put that out there. Farmers Union believes the 2007 
Farm Bill should include a permanent weather-related disaster 
assistance program.
    A plausible funding solution for offering a permanent 
disaster program would be to replace decoupled payments to 
producers with permanent nationwide disaster assistance. In the 
current farm bill, the countercyclical safety net and direct 
payment works and should be continued. We support the full 
funding of CSP. Continuing CRP only on the most environmentally 
sensitive lands and offering shorter-term CRP contracts for 
specific conservation needs. Enrollment of whole farm CRP 
contracts should be prohibited due to the detrimental effects 
on rural communities.
    Free trade and fair trade are incongruent terms in today's 
world. Trade negotiations must include labor and environmental 
standards as well as currency manipulation. Free trade 
establishes a race to the bottom. Fair trade ensures an 
adequate, high quality, safe and affordable food supply. We 
call for a thorough analysis of current agricultural trade 
agreements to determine their success at meeting their stated 
goals before any new bilateral or regional trade agreements are 
negotiated. The measure of the success of a trade agreement has 
to be its benefit to agriculture and producers' net income. 
Mandatory COOL was to be enacted in 2004, but as yet to be 
implemented. We support and are working toward a new 
sustainable economy that would rely increasingly on renewable 
sources of energy, such as wind, solar, biomass, anaerobic 
digesters, ethanol and cellulosic ethanol and biodiesel. We 
need that renewable fuel standard.
    The measure of success of any farm bill has to be the level 
of net income for producers. Farm policy should not be 
developed for multinational corporations, processors, 
exporters, integrated livestock producers, and firms who profit 
from low commodity prices. Farm policy should not be developed 
for multinational corporations, processors, exporters, 
integrated livestock producers, and firms who profit from low 
commodity prices. We expect higher loan rates, better targeting 
and oversight of farm program payments to family farms, Federal 
agricultural policy with strong conservation and energy 
components that prioritizes the interests of independent family 
farmers and ranchers. It is not vital just to the people on the 
land, but to our country.
    It is our hope that the Committee will keep this mind as it 
works to prepare future policy. I wish to thank the Committee 
for this opportunity to testify.
    [The prepared statement of Mr. Doheny can be found in the 
appendix on page 62.]
    The Chairman. Thank you. Mr. Belcourt.

 STATEMENT OF TONY BELCOURT, INTERTRIBAL AGRICULTURE COUNCIL, 
                       BOX ELDER, MONTANA

    Mr. Belcourt. Thank your, Mr. Chairman. I am here on behalf 
of the Intertribal Agricultural Council. We are an organization 
that represents Indian tribes across the country. And I guess 
with our unique government status as tribes across the country, 
it also creates unique disadvantages and advantages in relation 
to the farm bill.
    There is a lot of mention of farm programs and safety nets 
and whatnot, but if you don't have an Indian farmer or rancher, 
them are all fruitless. So, you know, we got to create some 
direction for the Bureau of Indian Affairs, they are a trustee 
of ours that signs off on all these things that we do on trust 
land. When is the last time we ever seen the Bureau of Indian 
Affairs sign off on a contract guaranteeing production in 
agriculture. I think the farm bill needs to be rewritten, but I 
think we need some help in rewriting that with the Intertribal 
Agricultural Council, we need to be given direction on things 
that work for Indian country, it ain't working right now.
    I think the biggest factor we have is educating our 
producers. We have a 20 billion dollar Indian gaming industry, 
but if we can't get that product to them, it is fruitless. We 
are still sitting here struggling trying to get our youth 
established, trying to get farmers to be farmers.
    As an affiliate member of R-CALF U.S.A, we appreciate 
pushing on for the country of original labeling. Indian casinos 
are demanding Indian products, but we can't deliver. So with 
that, I thank you, and I'd be happy to answer any questions.
    [The prepared statement of Mr. Belcourt can be found in the 
appendix on page 46.]
    The Chairman. You are under the clock, so we appreciate you 
very much. Dale, it's good to see you again. I look forward to 
your testimony.

 STATEMENT OF DALE SCHULER, PRESIDENT, NATIONAL ASSOCIATION OF 
                 WHEAT GROWERS, CARTER, MONTANA

    Mr. Schuler. Thank you, Mr. Chairman, members of the 
Committee. My name is Dale Schuler. I am a wheat farmer from 
Carter, Montana, and I'm currently serving as president of the 
National Association of Wheat Growers.
    I thank you for this opportunity to discuss our members' 
concerns about the current and future farm programs. Effective 
farm legislation is essential, not only for wheat growers, but 
also our rural economies, and also the American consumers.
    Farm programs were designed to cushion the boom and bust 
cycles that are inherent to agricultural production and to 
ensure a consistently safe, affordable and abundant food supply 
for the American people. The 2002 Farm Bill has strong points, 
and the wheat growers that I represent here today believe that 
the next farm bill should build on these strengths. But while 
wheat growers generally support the current policy, much of the 
safety net provided in the 2002 bill has not been effective for 
wheat producers.
    Since 2002, wheat growers have received little or no 
benefit from the two key components of the current bill. The 
countercyclical program and the loan deficiency payment program 
for two main reasons. The loan program and the LDP are useless 
when producers suffer crop failures, and second the target 
price on the countercyclical program was set too low. As a 
result, there has been very little support in the form of 
countercyclical payments or loan deficiency payments. The 
support level for wheat compared to some of the other 
commodities for the 2002 to 2005 crop years as a percentage of 
production cost is relatively low. We believe that wheat 
producers deserve to have a viable safety net also.
    There is no doubt that American farmers would rather depend 
on the market place than the government for their livelihoods, 
but the current economic and trade environments do not offer a 
level playing field in the global marketplace. Many of our 
trading partners support their farmers at a much higher level 
than we do here in the United States. At the same time, we face 
continually increasing production and transportation costs. 
Fuel and fertilizer prices are estimated to increase 24 to 27 
percent for wheat growers just from last year, as estimated by 
a recent FAPRI report. These issues, along with potential 
changes in the WTO rules must dictate that we look at different 
options in the 2007 Farm Bill.
    Also our members would like to see conservation programs 
continue as presently authorized, but funding should allow all 
of our producers the opportunity to participate in these 
valuable programs. We also believe strongly in the pursuit of 
renewable energy from agricultural sources and support 
additional incentives for further research and development of 
renewable energy initiatives, specifically cellulosic ethanol. 
In closing, I must state that we firmly are committed to 
developing an effective 2007 Farm Bill, and welcome the 
opportunity to work with you to do so. Thank you for this 
opportunity.
    [The prepared statement of Mr. Schuler can be found in the 
appendix on page 96.]
    The Chairman. Thank you. Mr. Henderson.

     STATEMENT OF DAVE HENDERSON, NATIONAL BARLEY GROWERS 
                 ASSOCIATION, CUT BANK, MONTANA

    Mr. Henderson. Mr. Chairman, members of the Committee, 
thank you for the opportunity to appear before you today. My 
name is Dave Henderson and I farm near Cut Bank, Montana, where 
we grow irrigated barley, spring wheat, and alfalfa. I have 
been a director on the National Barley Growers Association 
board since 2003. NBGA has serious concerns regarding the level 
of support barley receives, relative to other crops in the 
current farm program.
    We believe barley has lost significant competitiveness in 
its traditional growing regions, due in part to distortions and 
Federal farm support levels. Acreage trends certainly 
underscore our concerns. The NASS June 2006 acreage report 
barley seeded at 3.5 million acres, a 10-percent decline from 
2005, and the lowest planting since estimates began in 1926. I 
want to thank the Committee for its support in honoring our 
request for FAPRI analysis, to look into the root cause for our 
barley acreage decline, specifically if the farm bill might be 
contributing to it.
    According to preliminary findings, marketing loan benefits 
have clearly favored corn and soy beans over barley and wheat. 
In the northern plains, marketing loan benefits the last 5 
years averaged $4 per acre for wheat, $8 for barley, $12 for 
soy beans and $21 for corn. At the national level, the 
combination of marketing loan benefits and market returns 
explained the increase in national corn and soy bean acreage 
and the decline of small grain production.
    However NBGA does support the continuation of the marketing 
loan program, at equitable levels amongst the program crops. If 
the marketing loan were diminished or eliminated due to WTO 
concerns, a similar provision, such as the Viable Revenue 
Assurance Program would need to be developed to take its place 
to continue providing a viable safety net for producers during 
downturns in prices or production. We also support continuation 
of the Direct
    Payment Program, which is the best means to get much needed 
operating money into the hands of producers. We also support 
continuation of the planting flexibility provisions that have 
been in place since 1996. NBGA believes better risk management 
programs are also needed that will adequately address multiyear 
losses, as well as provide a safety net for the high 
deductibles we face under current crop insurance policies.
    We currently have a barley risk management task force 
working hand in hand with RMA on innovative ways to address 
these challenges. With regards to the ongoing drought in much 
of the country, we support disaster assistance for the 2005-06 
crop losses and encourage debate for a permanent disaster 
provision in the next farm bill. Thank you again for the 
opportunity to testify.
    NBGA fully understands the challenges you face as you write 
the next farm bill, however, farmers must continue to be 
offered a viable safety net if the United States is to maintain 
a safe, home-grown supply of food. We are ready and willing to 
work with the
    Committee in the coming years to develop provisions to 
address these needs. Thank you.
    [The prepared statement of Mr. Henderson can be found in 
the appendix on page 76.]
    The Chairman. Thank you. Mr. Tyler.

   STATEMENT OF PAUL TYLER, U.S. CANOLA ASSOCIATION, MOORE, 
                            MONTANA

    Mr. Tyler. Mr. Chairman, members of the
    Committee, my name is Paul Tyler, I'm a third generation 
plow horse from Moore, Montana. I raise wheat, barley, hay, 
kids, cows and canola, and sometimes beef if the antelope are 
in a good mood.
    I have been a producer board member on the U.S. Canola 
Association since 1999, and thank you for allowing me to speak 
on their behalf. I would also like to thank our representatives 
for a chance to host a meeting of this importance in our own 
state.
    Canola is the healthiest vegetable oil produced today. It's 
got a saturated fat content of only seven percent, along with a 
total oil content of 43 percent, which in turn also qualifies 
it as an excellent feedstock for biodiesel and bio-oils.
    The U.S. grows about a million acres of canola today, which 
isn't enough to supply our needs. We import twice as much as we 
produce.
    The USCA urges the Committee to work toward preserving the 
budgetary baseline for the farm bill. A viable safety net for 
producers will not be able to be provided by the next farm bill 
if further funding cuts take place. The USCA urges the 
Committee to construct the supports provided by the next farm 
bill in a manner that is equitable amongst the eligible crops 
to insure that farmers receive their planting signals from the 
marketplace, and not the FSA office.
    We also support continuing the full planting flexibility 
that was introduced in the 1996 Farm Bill.
    The 2002 Farm Bill supports canola and other oil seeds, 
primarily through the marketing loan program, which we strongly 
support and also the direct payments, of course, understanding 
the restraints of the WTO concerns, and the planting 
restrictions for fruits and vegetables, which will have to be 
dealt with. At this time the USCA does not have a formal 
position regarding the revenue-based program options that are 
being bandied about, but we are certainly willing to take a 
look at them. And as a producer, I am especially interested in 
the concept of that, because for the first time it brings an 
input cost to the equation.
    The USCA does support the development of a permanent 
disaster provision in the next farm bill, and to help the U.S. 
decrease its energy dependence on imported crude oil, the USCA 
also supports a stronger energy title in the next farm bill, 
maybe even a consideration of an energy incentive for planting 
a biofuel crop.
    In closing, I would like to say USCA understands with the 
WTO negotiations and budget deficits that we to have deal with, 
it's going to be a tough, tough battle, but we are prepared to 
work with Congress and you as the Committee, and look forward 
to the challenge. Thank you.
    The Chairman. Thank you very much to all of you.
    We have a couple of questions that we have asked to each of 
our commodity panels, as we travel around the country, and I 
would like to start with you, Mr. McClure, and have you give us 
a very quick answer to a couple of questions. First of all, how 
would you prioritize the programs of the farm bill generally, 
and the commodity titles specifically; how would you rank the 
relative importance of the direct payment program, the 
marketing loan program and the countercyclical payment program.
    Mr. McClure. These are important comments, but some 
statements have been made here, we may not be on an equal basis 
with some other crops. We think that tweaking on those 
adjustments within the program are necessary. It's important to 
have the countercyclical program so that when prices are low, 
then the payments kick in. We have had a pretty good 4 years, 
as I mentioned, with less expenditures than what the Congress 
anticipated.
    [The prepared statement of Mr. Tyler can be found in the 
appendix on page 103.]
    The Chairman. So how would you rank those programs?
    Mr. McClure. Well, I think direct payment and 
countercyclical are probably at the top of the list. But 
because of the 7 years or so of drought in Montana, our average 
yields are lowering and we are suffering because of that. So we 
need to work on that area, as well as the Federal crop 
insurance, so that we can insure for our total costs that we 
have put into the crop.
    The Chairman. Mr. Doheny?
    Mr. Doheny. I would have to agree with Mr. McClure, I think 
the direct payment and the countercyclical are right up there 
at the top of the heap, we need to make sure we have assurance, 
if we have bad years and drought and low prices that we can 
sustain for those hopeful bust years.
    Mr. Belcourt. I guess mine would probably be the 
conservation programs, I think they would probably be the top 
of our list. You know, getting back to direct and 
countercyclical payments, without those histories and basis and 
stuff, tribes are at a disadvantage, because we haven't been 
participating in farm programs. So we don't even have a basis, 
and that is what puts us at a disadvantage in getting into 
those payments and stuff he was talking about. So conservation 
programs is No. 1 priority.
    Mr. Schuler. Mr. Chairman, all the programs under the farm 
bill, we think are very essential. Commodity, conservation, 
energy and also the nutrition programs we think serve a vital 
role to our society. But for our members, the commodity title 
is of course of most importance. And of the components of the 
commodity title, we would rank those as being the direct 
payment being most important, the countercyclical being second, 
and the marketing loan, LDP programs, as our third priority.
    The Chairman. Mr. Henderson.
    Mr. Henderson. A survey of barley growers, the direct 
payment is definitely the most important of the three. It's 
reliable, it's budgetable, you can take it to the bank, and 
it's non-trade distorting. Second most important was our 
marketing loan program, and the third the countercyclical.
    Mr. Tyler. I guess I would basically echo what these folks 
have said. Commodity title is very important, we don't want to 
lose that, and to rank them, it's really hard to do, but 
probably direct payments, and similar to what these guys have 
said.
    The Chairman. We talked a lot about energy, and we are 
definitely going to expand the energy title in the next farm 
bill, we don't know to what extent and just how we are going to 
do it yet, but should any expansion of the energy title or the 
conservation title come at the expense of the commodity title. 
Mr. McClure.
    Mr. McClure. No, I don't believe so. But times are 
changing, I think the fact that we are having production of 
ethanol and biodiesel is helping Montana, even though it's not 
occurring here. The conversion of sugar cane in some South 
American countries, for instance, is taking some of that sugar 
off the market, and our sugar producers in Montana are enjoying 
an increase in cost.
    So as we convert some of these crops that are in surplus 
into energy production, that's going to help all of us. I think 
the next farm bill should encourage that, but not take away 
from the present commodity programs.
    Mr. Doheny. I would like to correct myself from that last 
statement, for those boom years, not those hopeful bust years, 
sorry.
    But, no, I don't believe that we should cut commodity 
programs, in the effort of energy programs either. But I think 
the energy programs have the most--they are most optimistic for 
the State of Montana. I think the energy renewable resources 
has potentially the best economic benefit this state has ever 
seen, if we can get it up and running. We need help to get it 
up and running.
    We need those people, just as Schweitzer was saying, to 
allow farmers and ranchers to take a chance when their banker 
right now won't allow them to. We need some incentives and some 
loan programs to help us to get our feet off the ground. Mr. 
Belcourt?
    Mr. Belcourt. I agree. I think one of the ways we can do 
that is the value added component of the farm bill. You know, 
we grow these crops, if we can get another value out of them, 
such as ethanol or wheat gluten. I think that would just 
further enhance our productivity and give us another safety net 
to fall back onto. So--I guess I go back to tribal governments, 
and how they utilize the farm bill, that language is not 
available at this present time to get into those markets.
    Mr. Schuler. We don't think that the commodity program 
should be compromised to fund energy or conservation programs, 
although we are very interested in the possibilities under an 
energy title of the farm bill that would help wheat growers 
contribute both grain products and biomass to meet our nation's 
growing demands for renewable energy. These issues I think are 
of a national priority, and new funding should be provided to 
them, and not take funding away from the commodity programs. We 
encourage programs that help us produce more of our energy 
domestically, but we don't feel that we should sacrifice food 
security for energy independence.
    Mr. Henderson. We encourage properly implementing the CSP 
program, and being an FSA committeeman, I am aware that there 
is a tremendous backlog of conservation programs that are 
sitting idle, they don't have the money to begin them. So there 
is a tremendous amount of importance for conservation, and the 
demand that's coming for ethanol, very important. But if these 
energy programs are successful, we believe that they will 
support the decoupled payments--the coupled payments.
    Mr. Tyler. We're of course extremely interested in any 
energy incentives, but I think the main concern here is that if 
the commodity title was sent to another title, that it not get 
diluted amongst other appropriators, and just kind of get lost 
in the shuffle. So I think it's pretty important that we 
maintain the commodity title.
    The Chairman. Senator Baucus.
    Senator Baucus. Thank you, Mr. Chairman. As we pursue ways 
to boost renewable energy crops, and so forth, this Committee, 
the farm bill this Committee writes has a lot to say about 
that.
    But there are also a lot of other provisions of the law 
which are not privy to this Committee, and one is tax 
incentives. Currently the law, the provisions in the last 
couple years, there is a fifty cent per gallon tax credit for 
the production of ethanol.
    There is also currently in law a one dollar tax credit per 
gallon for the production of biodiesel fuel. Now, I am asking 
the general question, in addition to that, or whatnot, what is 
the best way in your judgment here in this farm bill to give 
the real boost to alternative energy crops. You know, some 
don't have the protection of insurance, crop insurance, some do 
have the protection, but just if you were to kind of sit back a 
little bit and say, OK, we in Montana, and as a nation, but 
right now we are in Montana, want to give a real boost to 
production of these biodiesel and ethanol, and all these crops, 
what changes would you make in the current farm bill to help 
that happen anybody? Let's go the other way, we will go down 
this way this time.
    Mr. Tyler. I think that----
    Senator Baucus. Well, let's start the other way then. 
Anybody that wants to, raise his hand.
    Mr. Doheny. I think that if we had a loan rate for these--
--
    Senator Baucus. I am sorry?
    Mr. Doheny. A loan rate, if we had a loan rate for your 
camolinas, and maybe a higher loan rate for your canola, to get 
biodiesel out of that, et cetera, et cetera, these crops that 
we have unforeseen, if we can get a loan rate and get assurance 
that I can go to my banker and say you know what, I don't want 
to spend all my money on fertilizer, and the input cost that 
I've been putting in the last 30 years ago, and I don't want to 
give $50 or this year, 70, $80 an acre to BNSF to get it to the 
port. And to go to my banker and say I want to spend this money 
and try to help the whole nation, help our county, our state, I 
think if I can go to my banker and say, I am not going to put 
in wheat, I am going to put in camolina, and we have some 
assurance that I can cover my loan.
    Senator Baucus. It's a loan rate you want.
    Mr. Doheny. Yes, I am referring to my banker's operating 
note as well. I think we need that to be able to go in and 
actually put it in and say I'm not going to.
    Senator Baucus. Any other?
    Mr. Belcourt. New market tax credits, I know incentives out 
there right now, but when you get to tribal governments, they 
don't apply to--we are doing an ethanol project right up here, 
and we are working with new market tax credits with a company 
out of Minneapolis, when there's one that's got some go-zone 
tax credits 90 miles away. So expanding that a little bit and 
allowing tribal governments to participate would be a big help 
in our area.
    Mr. Schuler. I think that tax credits are an excellent idea 
to help a developing ethanol industry get started, especially 
new technology, like cellulosic ethanol. There also needs to be 
some research dollars directed toward developing new 
technologies for processing biomass, whether it be wheat straw, 
barley straw or switch grass, other types of crops we can grow 
here in Montana, to get those to where they are profitable for 
these entities that might be developing these plants.
    Senator Baucus. Other thoughts?
    Mr. McClure. Well, I agree with your other comments on tax 
incentives and research and probably demonstrating projects are 
essential, but it has to make economic sense. And if you can't 
attract outside private investments, then might be 
questionable. I think we ought to do everything we can to 
produce our own energy in this country, and hopefully some of 
that will be in Montana.
    Mr. Tyler. I know some of the struggles we have, the U.S. 
Canola Association is a little bit unique, because it's not 
just producers, every facet of the industry sits at the table. 
And one of the things we go around about is, of course, for the 
guys with producers hats on, it all starts right there, if the 
producers don't make any money, nobody else can add value down 
the road.
    And so we struggle with how do we do that. And I think 
there has to be some kind of an incentive, a grower incentive 
or some such thing that entices growers to try it, and there is 
a lot of interest in the biofuels, and the bio-based crops, but 
it's got to start at the producer level.
    Senator Baucus. I would like to ask a question about trade. 
As you know, we Americans our average import duty on 
agricultural products coming into the United States is quite 
low; I think it's around 12 percent. In Japan, I think it's 60 
percent, something like that, and Korea, it's like 50, in the 
European Union, the average is about 35 percent, India is about 
112 percent. So as we look toward the future, and get better, 
you know, revenue for our crops, clearly we have got to sell 
more, and knock down those trade barriers, because the Doha 
Round, it's all hung up now and nothing is happening, it kind 
of ties into the next question when we extend or rewrite the 
farm bill, I am curious, the thoughts you have on what we 
should do about the imbalance in trade, that is with other 
countries is so unfair, how aggressively should we do something 
about that interim.
    And the second is, looking down the road, should we write 
the farm bill, do we just pretend like coupled programs are 
just as good as decoupled programs, that is WTO, you know, 
inconsistent programs are just as good as consistent programs? 
Your thoughts, anybody on that one.
    Mr. McClure. Thank you, Senator. And I think you're 
pointing out something important here. The farm bill and farm 
policy is important, but just as important is trade agreements, 
energy policy and tax policy; we need to work on all those. But 
on the trade agreements, in my view, the only reason to oppose 
negotiations is if everything is perfect. And it's not. So it's 
a valuable exercise to pursue these agreements that will knock 
down some of these trade barriers and give us opportunities.
    We'd also request the senate to move quickly to reinstate 
the trade promotion authority which expires next year. At some 
point, WTO talks will resume, we are assuming, and for our 
negotiators to have credibility, they need to have that trade 
promotion.
    Mr. Schuler. Trade is very important to us; 50 percent of 
the wheat that's produced in this country is exported, and from 
Montana somewhere around 80 percent. And since the vast 
majority of the world's population lives outside of this 
country, that offers the greatest growth potential for our 
market. Just because the Doha Round has stalled does not 
insulate us from litigation from trading partners, as you well 
know. So we need to design a farm program, even in the absence 
of the Doha agreement that takes into consideration some of 
these restrictions on trade-distorting program payments.
    So we think that going with a decoupled direct payment 
would be the best option for that, while still utilizing some 
of those amber box or minimally trade distorting subsidies.
    The Chairman. Senator Salazar.
    Senator Salazar. Thank you very much, Mr. Chairman Let me 
just put a major underscore on the question that Senator Baucus 
asked, and that is to start getting specific on what kinds of 
energy ideas we should include in this new energy title of the 
farm bill. It's the talk of the town, it's the talk of the 
nation, it's a national imperative. But we need to get down to 
the conceptual ideas that we are talking about figuring out how 
we are going to make it work on the ground.
    I heard you talk about tax credits and incentives, research 
dollars for cellulosic ethanol and the like demonstration 
projects, grower own concepts, to make sure that it benefits 
the growers. But I think as we move forward, not only this 
Committee, but also the Energy Committee that I sit on and 
other committees, it's going to be something that's going to be 
very important to the country, so the more specific you can get 
on those kinds of ideas in response to Senator Baucus's 
questions, it will be very important.
    Let me ask a question relating to the Conservation Reserve 
Program. I know there is a lot of acreage we have in CRP, right 
here in Colorado from some of our producers fear that they're 
concerned that much of the money that is going into CRP is 
actually going to New York, Dallas, Fort Worth and other 
places, and that it is having a negative impact on rural 
communities, and part of what I think we are trying to do in 
this farm bill is making sure that we have the rural landscape 
rural communities on the radar screen.
    Mr. Doheny, you talked a little bit about the whole farm 
concept. Are there changes that we have to be looking at with 
respect to CRP so we don't have a negative impact for that 
program on rural communities.
    Mr. Doheny. I believe National Farmers Union has in their 
resolution that they would like to see 25 percent of a farm 
rather than 25 percent of a county. If you could do that, then 
the rest of that 75 percent of a farm or a farmer that wanted 
to retire and go to Fort Worth, that money stays, and the rest 
of that land be can be leased out, it can be sold to younger 
producers, it has opportunity to stay and generate money in the 
local community, I think that would be great. Twenty-five 
percent of the county can really devastate one small four or 
500 population town within a county, if the location is 
correct.
    Senator Salazar. Do some of the rest of you have 
suggestions on how we might be able to revise the CRP Program 
to address that issue?
    Mr. Schuler. I agree with Eric on his comments about 
limiting the participation per farm, but also I believe that 
CRP rental rates should never exceed what typical cash rental 
rates for farm ground are in a particular area. Farmers should 
not have to compete against the government to expand their 
operations, or for young producers to get in involving in 
farming should not have to compete against the government for 
payment.
    Senator Salazar. Mr. McClure does the Farm Bureau have a 
position on this issue?
    Mr. McClure. Well, we do, but if I could back up a little, 
you know, we are talking about 25 percent limitation, but I 
think the major problem sometimes in Montana is that those 
counties, and their local FSC requested extensions to go beyond 
the 25 percent limit.
    And they were granted those, especially Daniels and 
Sheridan County, I think they are in the, you know, 40 or 50 or 
more percent. So we didn't stick with the 25 percent 
limitation, it went beyond it when it was requested. So I think 
if we had stuck with that, it may well have--not be such a 
problem today. Now, there is a problem with taking 25 percent 
of a productive farm. You need to utilize all of your base to 
have an efficient operation.
    So there are farms, I guess, where if you've got some land 
that is highly erodible or subject--might be put in for a 
payment, but to take part of a productive unit out, you have a 
problem then in being an efficient operation. So I think there 
is going to be a lot of discussion on this, but I would like to 
emphasize that one of the big problems is we didn't stick with 
the original intent of 25 percent per county, went beyond that 
it would cause problems.
    Senator Salazar. I appreciate those responses. For me, in 
Colorado, it will be a major issue, because I keep hearing 
about it so much from not only from farmers and ranchers that 
want to bring up the next generation, but also school boards 
and county commissioners are very concerned.
    Let me ask just another quick question. Some of you in your 
testimony referred to the need for having some kind of program 
within the new farm bill that deals with disaster emergency 
payments for the--a more permanent way than we have in the last 
several years.
    Many of us here around this table join in trying to get ag 
disaster emergency money made available to be the last 
emergency supplemental. We did not succeed. Many of us are 
going to fight back, to do the same thing when we get back in 
September. But what is your concept on how we ought to deal 
with this issue going forward with the new farm bill?
    Mr. Belcourt. I guess on our behalf, I don't think you need 
to have a disaster, I think it should be a continuous sign-up. 
I mean every time you go sign up for a disaster, it's 2 years 
down the road.
    And like in our case, in tribal governments, we are not 
even eligible for disaster assistance, because we are a tribal 
entity. So I mean, you're--it's a fruitless effort to go sign 
up, because you are not eligible anyway. So that eliminates the 
thing. But I think you need to have it year around. Nobody 
knows when somebody is going to get a fire or disaster, or, you 
know, I think it should be a year-round sign-up, instead of as 
disaster strikes, because it takes a year to get their program 
running.
    Senator Salazar. A couple of other of quick thoughts before 
my time runs out.
    Mr. Schuler. It's a complicated issue, and some permanent 
mechanism would certainly be helpful. Crop insurance 
improvements have helped, but there still needs to be more to 
our crop insurance programs. If they were more effective, we 
would not need disaster assistance as frequently. Also if we 
could set up something like a farm revenue savings account, 
where agricultural producers could put away money when they did 
have good years to cover losses when they had bad years.
    If we could do that on a tax-deferred basis, that would be 
helpful, and if the government would participate in a program 
that would encourage that type of farm savings account, I think 
that would be helpful also.
    Senator Salazar. Thank you very much. Thank you,
    The Chairman. Senator Burns.
    Senator Burns. With regard to crop insurance,
    Dale, you bring up a good point. Should crop insurance be 
mandatory in your operation?
    Mr. Schuler. I think it should be, because many times we 
have seen disaster programs where producers who do not buy crop 
insurance come in and get equal or greater benefits from those 
disaster programs than producers who spent their own money to 
buy crop insurance to cover their risk. So I think for 
producers that participate in government programs, they should 
be required to buy crop insurance.
    Senator Burns. Would you--would you also--and anybody else 
that wants to comment on this--support the idea that the 
government participation in that premium, that be increased in 
order to make that happen?
    Mr. Schuler. For producers to afford the higher levels of 
coverage that are required to cover our increasing operating 
expenses, coverage levels typically above 70 percent right now 
are not affordable. The premiums just get too high. So 
increased participation of the government in those higher 
coverage levels would be useful.
    Senator Burns. Anyone else have a comment on that?
    Mr. Doheny. I agree with Dale.
    Mr. Belcourt. Agreed.
    Senator Burns. That's the only question I have.
    Everybody else asked my questions awhile ago. But I think, 
you know, if we approach the new risk management sort of in 
three different directions as your cost of production, 
factoring in energy costs and everything else, I think we can 
come up--I think we can underwrite, and write our policies, and 
our--a little more refined now than we ever could before, 
because I think we've got a better handle on the cost of 
production now than we've ever had before. So--and I thank you 
for your comments on that.
    The Chairman. Well, I thought somebody else would ask this, 
but since they didn't, I've got one other question. Should 
payment limits be changed?
    Mr. Henderson. Yes, sir, they should; they really should. 
They haven't been changed in a number of years and with 
inflation and the cost of living the way it is, there is a room 
for a definite increase. They do have to be looked at.
    Mr. McClure. Sir, I would have to disagree. I think that 
those larger operations also have larger expenses and larger 
risks, and Farm Bureau is opposed to raising those, or changing 
those payment limitations.
    The Chairman. Even increasing them?
    Senator Baucus. He's wants to increase. You don't want an 
increase?
    Mr. McClure. Yes, we are against reductions. Then I don't 
disagree.
    The Chairman. Anybody else want to respond?
    Senator Burns. I hadn't heard that before.
    The Chairman. I knew Montana was different, but
    I didn't understand--I understand you didn't hear him 
correctly, but Dale?
    Mr. Schuler. Yes, Mr. Chairman, I think they need to be 
modified, I think they need to be increased, because of the 
increase in cost of production, especially because of energy-
related expenses, I think we need to increase or at least 
restructure the payment limitation. As they are now, we have 
seen the largest payment limitations under the loan programs, 
the next highest payment limitation is under countercyclical. 
The smallest payment limitation is for direct, and that's the 
only program that wheat producers have been able to participate 
in. If we work toward a more direct payment-oriented farm 
program, we need to increase that payment limitation.
    Mr. Doheny. I would have to agree with Dale
    Schuler on that, as well as let's know who we're giving the 
money to. There's a lot of your Tysons, and those kind of 
people that aren't your family farms that are getting the huge 
monies that are--I think we need to be more specific on who we 
are giving the money to.
    Mr. Belcourt. I agree with that, because we need to get the 
future farmers. I mean I am a younger gentleman, I guess, and 
I'm probably the oldest one on the reservation that's farming. 
And we need to get the kids farming, and the grandpas are 
setting this stuff in payment limitation, and their payment 
limitation out, so they just get another entity and they start 
another corporation, and so it just gets out of hand. They are 
farming the program too much, I think.
    Senator Baucus. So what about absentee owners, no 
limitation there either?
    Mr. Schuler. You know--that's a difficult question to 
answer.
    Senator Baucus. That's why I asked it.
    Mr. Schuler. Some absentee landowners offer crop share 
lease agreements where they get a percentage of the farm 
program, other absentee landowners work on cash leases.
    If they shift it to a cash lease, they typically just 
adjust the cash rent to account for the amount of government 
payments that are provided. So that's difficult to try to 
exclude them from the program payments. That's what makes that 
so difficult. But certainly, if the producer is taking the risk 
in producing that crop, then the program payments should go to 
that producer.
    The Chairman. Gentlemen, that is a difficult question to 
always answer in every farm bill, and what we have tried to do, 
and Max was a member of the Conference Committee like I was 
last year, this was a huge argument about how we develop a 
policy that limits government payments to those folks who are 
working on the farm.
    And you're exactly right, if you're going to crop share, 
you may have a landlord that lives in Chicago who has got risk, 
because of that crop share, and do you deny him the ability to 
participate.
    So it's a difficult question to answer, and unfortunately 
it's one of the areas where we get highly criticized as 
policymakers, because of the few, and I emphasize that, few 
high-profile limited number of individuals who might receive a 
payment, but they are at risk to some extent. Well, again, 
thank you very much for being here today. We appreciate very 
much the opportunity to dialog with you, and we look forward to 
staying in touch. And we will call our next panel to the front, 
Mr. Jim Evans, Genesee, Idaho, representing the U.S.A Dry Pea 
and Lentil Council, Mr. Michael Beltz of Hilsboro, North 
Dakota, representing the U.S. Dry Bean Council, Mr. Sid 
Schutter, Manhattan, Montana, representing the National Potato 
Council, and Mr. Gary Bonestroo of Clovis, New Mexico, 
representing the Dairy Producers of New Mexico. Gentlemen, good 
morning. And we welcome you to the panel, we look forward to 
your testimony, we will follow the same procedures.
    Mr. Evans, we will start with you, and I will remind you of 
the 3 minutes, and if you would just keep an eye on the light, 
and try and stick by the time, we'd appreciate it.

    STATEMENT OF JIM EVANS, USA DRY PEA AND LENTIL COUNCIL, 
                         GENESEE, IDAHO

    Mr. Evans. Thank you, Mr. Chairman. The first thing I would 
like to show you is one of our new products. This is an energy 
bar. This one is specifically our peanut butter pretzel bar, 
and I guarantee you it is used with Georgia peanuts also.
    The Chairman. There you go. This is one of the best pieces 
of edible product I've ever eaten, I promise you.
    Senator Salazar. Does it work on an airplane?
    Mr. Evans. I know all you guys have eaten at fine 
restaurants back in Washington, so we would really encourage 
you to have a bite of these and we will take a poll of you guys 
after the hearing to see how good you think they are. My name 
is Jim Evans, I am chairman of the U.S.A Dry Pea & Lentils 
Council, farmer from Genesee, also in the audience joining me 
today is vice chair of the council, Greg Johnson, who owns a 
large pulse processing facility in Minot, North Dakota.
    If U.S. farmers are to compete against subsidized 
competition, high tariffs and phyto-sanitary barriers and 
government intervention, the following farm programs must be 
included in the next farm bill. Title I, commodity programs, 
marketing loan, LDP programs. The Marketing Loan Program is the 
single most important farm program tool used on farms. This 
program provides some protection when prices go in the tank and 
pays us nothing when prices are good.
    The program allows producers to take advantage of market 
opportunities and satisfies the banker's need for some downside 
risk protection. We believe the marketing loan program should 
be made a key component in the 2007 Farm Bill. Direct and 
countercyclical payments. We totally support the continuation 
of the direct and countercyclical payments, and we would like 
to have in the 2000 Farm Bill, peas and lentils, chickpeas 
included in the direct and countercyclical payment. Planting 
flexibility. Planting flexibility must be continued and 
expanded in the next farm bill.
    Chickpeas, for example, are currently considered a 
vegetable crop. They are not the eligible to be planted under 
farm program rules. We support including chickpeas as an 
eligible farm program crop in the 2007 Farm Bill. CRP, we 
support CRP, but it needs to have some changes. It hurts rural 
America, it hurts young farmers, it just needs to be changed. 
CSP needs to be fully funded and we support the program to be 
fully funded. WTO, we support the WTO program, but want an 
equal playing field for all commodities. We can't have an 
unequal advantage from one country to another.
    We support the extension of the 2000 Farm Bill until a fair 
WTO agreement is reached. Cuba, Cuba imports over 200,000 
metric tons of peas a year, mostly from Canada. A year ago our 
industry shipped over 50,000 metric tons of peas to Cuba, 
mostly from Montana and North Dakota. This year the 
administration modified the rules of payment and dry sales have 
plummeted. I would like, in closing, we support food aid, MAP 
and FMD, the phyto-sanitary barriers are one of the worst with 
India, we're also having problems with selenium in China.
    These things need to be addressed on the WTO playing field, 
so we don't have these other trade restrictions coming into 
play. We support research and our land grant colleges, we 
support an energy program, but we also think that peas and 
lentils, because they are a natural nitrogen fixing plant, they 
put nitrogen back into the soil, that we should get a benefit, 
a payment of some kind for growing those energy saving 
commodities, transportation, rail issues, port issues, barge 
issues are all to our things. I will answer any question now. I 
appreciate the opportunity to testify in front of you today.
    [The prepared statement of Mr. Evans can be found in the 
appendix on page 72.]
    The Chairman. Thank you. Mr. Beltz.

 STATEMENT OF MICHAEL BELTZ, U.S. DRY BEAN COUNCIL, HILLSBORO, 
                          NORTH DAKOTA

    Mr. Beltz. Good morning, Mr. Chairman, members of the 
Committee. My name is Mike Beltz, I am a farmer from Hillsboro, 
North Dakota. I am here to testify in that capacity and on 
behalf of the United States Dry Bean Council. I currently serve 
as Chairman of the North Dakota Dry Bean Council and serve as 
the vice chairman of the U.S. Dry Bean Council's Ag Issues/
Government Affairs Committee.
    Mr. Chairman, I am pleased to have this opportunity to 
present views on the upcoming farm bill as it relates to our 
domestic dry bean industry, both from the perspective of a 
grower and on behalf of the domestic dry bean industry as 
represented by U.S.DBC.
    By way of background, U.S.DBC is a trade association 
representing farmers, processors, canners, dealers, 
distributors, and others involved in the U.S. dry bean 
industry. Nearly 20 different classes of dry beans are grown in 
the U.S., including pinto, navy, kidneys, blacks, great 
northern, small red, pink, lima, and other classes of dry 
beans. Dry beans are grown in about 20 states with major 
production areas being in North Dakota, Michigan, Nebraska, 
Minnesota, Colorado, Idaho, and California.
    In 2005, USDA NASS statistics indicate that harvested U.S. 
dry bean acreage was 1.57 million acres, and that production 
was about 1.37 million metric short tons. Annually, about 30 
percent of dry bean production is exported with major importing 
countries for U.S. dry beans being Mexico, the UK and Japan. In 
looking at the upcoming farm bill, the dry bean industry in 
general, and growers specifically, are primarily interested in 
maintaining equity and a level playing field among commodities 
as it relates to dry beans.
    We feel strongly that the farm bill should provide a 
foundation for maintaining the present stability for dry bean 
growers and the industry, and for achieving long-term growth 
and health for both growers and the industry. Above all, we 
believe it should do no harm to any commodity or producer 
group, and that it should provide fair and equitable treatment 
to all segments that comprise the commodities that make up U.S. 
ag. In this regard, it should be kept in mind that dry beans 
are not a program crop, and that dry bean growers are not 
presently receiving support payments from the government.
    In fact, dry bean growers have strongly opposed 
establishing a loan or other support program in previous farm 
bills. And we remain opposed to loans and LDPs. We strongly 
support the maintaining of status quo for dry bean growers, 
which includes retention of planting restrictions of non-
program crops, non-program crop acres for producers, who 
receive program payments on those acres.
    Because of the unique situation of growing dry beans, any 
change in the present status quo will require establishing 
offsetting direct economic compensation to historical dry bean 
producers to maintain fairness and equity. We support the farm 
bill and believe it should provide adequate mandatory annual 
funding for existing programs that benefit fruit and vegetable 
producers, and should also establish and fund new programs that 
are devoted to dry bean research, nutrition information, 
consumer education, promotion, risk management, conservation 
practices and other related activities that sustain the 
vitality of ag generally and dry beans specifically.
    My time is out, so I am going to wrap this up real quick. 
The upshot of the deal is we want to maintain the planting 
restriction on fruits and vegetables, and if that's not 
possible due to WTO or other pressures, we just think that 
something needs to be done on our behalf and for us if such 
case arises. We also support maintaining the market access 
program and FMD, food aid programs are also very important to 
us, the funding and establishing of Specialty Crop 
Competitiveness Act of 2004.
    In summary, Mr. Chairman, the dry bean industry and its 
growers believe the next farm bill should strive to provide 
equity among commodities while maintaining stability for 
growers, both now and in the future. Being a non-program crop, 
we are especially concerned that actions not be taken that are 
perceived to be solutions to problems facing program crops, but 
that will have serious unintended consequences and 
repercussions on non-program crops such as dry beans.
    Should that occur, equity will demand that offsetting 
actions must be taken to minimize the harm to growers of other 
commodities, such as dry beans that will be impacted. Thank you 
again for the opportunity to express these views on behalf of 
the U.S. dry bean industry and especially its growers. And I 
apologize for going over time.
    [The prepared statement of Mr. Beltz can be found in the 
appendix on page 51.]
    The Chairman. That's all right. We will excuse you. Mr. 
Schutter--excuse me, Mr. Bonestroo.

  STATEMENT OF GARY BONESTROO, DAIRY PRODUCERS OF NEW MEXICO, 
                       CLOVIS, NEW MEXICO

    Mr. Bonestroo. Thank you, Chairman Chambliss, and members 
of the Committee. My name is Gary Bonestroo and I'm a dairyman 
from Portales, New Mexico. My wife and I own and operate the 
dairy. I am president of Dairy Producers of New Mexico.
    Dairy Producers of New Mexico is a voluntary organization 
of New Mexico and West Texas; we represent 80 percent of the 
region's producers. Dairy Producers of New Mexico has been very 
active in the debate of national dairy policy, especially on 
the matters which impact prices via dairy farmers.
    If I could define two central realities our members want 
Congress to consider as they examine the dairy programs they 
are that we operate in a national, not regional, market. And 
the protection that the dairy farmers need from the government 
in 2006 is vastly different from the protection that dairy 
farmers needed in 1936. The role of Federal Government will 
have included providing government oversight through ensuring 
all producers receive a fair price for their milk. Audits and 
inspections to ensure that all pricing is done in accordance 
with contracts empowering the USDA to participate in quick, 
early and effective negotiations, mediations and binding 
reparations of producer's disputes. Sorry, I scratched some 
out, so I got lost.
    Government policy should be used to encourage and support 
the development of cooperative agencies such as greater 
southwest milk marketing agency to allow negotiations--
negotiate a price between that agency and its markets become 
the basis for any government role in the terms of enforcement, 
prices and fairness. We have demonstrated that producers and 
processors can bargain without intensive government 
intervention.
    What dairy farmers need are markets, not government 
payments. These markets are not just Class I markets that have 
driven our industry for nearly a century, but all markets of 
all kinds of dairy products, and products that use dairy--that 
use ingredients that come from milk. We need markets in both 
the United States and internationally. We need markets for 
traditional dairy products and markets for our ingredients. 
Some of these new products, are nutritional bars, power drinks 
and other products. Producers should have a greater role in 
establishing the way milk is marketed. The greater southwest 
market needs to use one such producer-driven practice that has 
been beneficial to the producers and processors.
    National Milk Producers Federation CWT program is another 
producer-funded and run program that reduced production and 
opened up international markets. Dairy producers have been a 
strong supporter of the Federal order system and has actively 
participated in the hearings regarding pricing issues and the 
order program, but because of the market conditions that 
existed during the Great Depression do not exist today, unless 
they are changed, the Federal order risks hamstringing future 
producer success.
    Currently there is a fight over the Class III and Class IV 
make allowance. The Secretary properly found that those wanting 
higher make allowances, which means lower producer price, 
failed to provide evidence in support of the program. All of 
the milk in the southwest is priced on that index of those 
prices. Every penny that the Class III or Class IV price drops, 
we would see a penny drop in our price. The proposed 
regulations, if adopted, would reduce producer income in our 
region alone by over five million dollars a month. With rising 
energy costs and low milk prices and other stress-related 
reductions in production, we are already in a tight economic 
situation. Our experience would have been shared the same way 
throughout the Nation by all producers. Thank you.
    [The prepared statement of Mr. Bonestroo can be found in 
the appendix on page 58.]
    The Chairman. Mr. Schutter?

STATEMENT OF SID SCHUTTER, NATIONAL POTATO COUNCIL, MANHATTAN, 
                            MONTANA

    Mr. Schutter. Mr. Chairman, welcome to Montana.
    I appreciate the opportunity to provide input to your 
Committee.
    My name is Sid Schutter. I am a potato grower from 
Manhattan, Montana. I also grow rotational crops, such as 
wheat, barley, edible peas and alfalfa.
    My family is committed to agriculture, and providing the 
opportunity for our sons to continue to farm and farm 
profitably. Today I am representing the National Potato Council 
which I am a member of the board of directors.
    I want to highlight the involvement of the NPC with fruit 
and vegetable and speciality crop growers from all areas of the 
country in a joint effort to develop a consensus of the needs 
of our varied industries. In developing our priorities for the 
2007 Farm Bill, I will address these needs. I want to be 
perfectly clear on the type and nature of involvement of potato 
growers who will be looking to the Congress to provide. Potato 
growers do not want nor are we seeking direct payments on 
potato acreage. Currently the farm bill legislation contains 
language and creates balance, and applies a sense of fairness 
between those producers who receive direct program payments on 
acres that have a history of being planted to program crops.
    It is critical that your Committee understands clearly the 
importance of these provisions to potato growers. The demand 
for potatoes is very inelastic. Small changes in supply can 
result in dramatic reductions in price. We believe it is a 
fundamental issue of fairness to preserve the restrictions that 
prevent the planting of fruits and vegetables on acres that are 
the basis for direct, indirect or countercyclical payments to 
growers.
    We strongly support maintaining the planting flexibility 
provisions contained in the current farm bill. We are asking 
the Congress to provide indirect support to improve the 
combativeness of our industry by funding the following 
programs: Nutrition programs; we strongly support the new focus 
in the 2007 Farm Bill on increasing the access and availability 
of fruits and vegetables, particularly to children. State block 
grants; to wide diversity and localized needs and speciality 
crop production, state departments of agriculture are uniquely 
able to assist local growers.
    Invasive pest and diseases; new investments are needed in 
the prevention of the unintentional introduction of plant pests 
and diseases. Prevention is much more cost effective than 
mitigation. Research; we need more research in our diseases 
that affect our crops, and in the breeding programs.
    International trade; we need more access and more help in 
dealing with our trade partners, and try to get away from trade 
barriers based on phyto-sanitary issues. Conservation programs; 
we would like to see more programs such as the CSP program. 
Thank you for your time.
    [The prepared statement of Mr. Schutter can be found in the 
appendix on page 99.]
    The Chairman. Thank you very much. Mr. Evans, why do you 
believe the next farm bill should provide direct and 
countercyclical payments for pulse crops? I say why do you 
believe the next farm bill should provide direct and 
countercyclical payments for pulse crops?
    Mr. Evans. Right now, we are the only crop that aren't--
that don't have a countercyclical and direct payment, we just 
have a loan program. And with the rising fuel costs, energy 
costs, I think it would be beneficial if we were all on the 
same level playing field.
    The Chairman. To Mr. Beltz and Mr. Schutter, proposals have 
been made to provide more money to the speciality crop 
industry. What ideas would benefit the industry the most, and 
what ideas do you have for funding such proposals?
    Mr. Beltz. Do you want to start first?
    Mr. Schutter. Go ahead.
    Mr. Beltz. It's only fair. I threw it to him, he should 
throw it back. Our biggest thing right now is the nutrition 
side of it. The health benefits of consumers eating beans is a 
big deal. I mean, we have dietary guides mentioned--mentioned 
twice on the new food pyramid. Beans are a healthy food, and 
they do a lot for our producers that grow at a decent price and 
do a lot for consumers.
    So in that aspect, you know, there is importance in 
developing programs for the consumer education, promotion of 
risk management, conservation practices, and nutrition 
information like I mentioned.
    Sources of funding, that's a good question. I'm not here--I 
have a chart back here that I couldn't use because of time. But 
I am not here to gore anybody else's ox. I mean, I am not 
looking to steal from somebody else's pot. I guess it's your 
guys' job to weigh the benefits as opposed to the cost. If you 
feel it is a benefit that you can justify the cost of, you 
know, then it needs to be supported and funded. If you can't, 
then it's your job not to do that. I guess that's my case.
    The Chairman. That's the best answer you could give. Mr. 
Schutter.
    Mr. Schutter. I would like to see more funding going to 
nutritional programs. It certainly benefits the potato grower, 
but it also benefits the general public, clearly the school 
children, go to the school, because potatoes are such a 
nutritious crop, vegetable. That's where I would like to see a 
lot more funding go to.
    The Chairman. Do your schools--and I will ask this to 
anybody--do your local schools take advantage of the 
opportunity to buy local products to feed children?
    Mr. Schutter. I am not aware either of that, because the 
school I am associated with is not a public school my kids go 
to. I am not certain. I think that they get so much money from 
the state, and they get kind of told where to buy their produce 
from.
    Mr. Beltz. I am not aware of any funding for such--for 
dried beans to be procured for schools or whatnot. I 
shouldn't--technically I shouldn't answer that question, 
because I am not 100 percent sure, but my guess is they are 
not.
    The Chairman. We have a pilot program out there that we are 
going to expand this year that I hope ultimately will go 
nationwide, where we encourage our local school systems and 
provide some additional funding for their use in purchasing 
local products. And it's working very well, but we have just 
got to continue down the road to get all 50 states included.
    Mr. Bonestroo, the 2002 Farm Bill includes MILC income loss 
contract program to dairy producers when prices were low. 
What's your thought on the MILC program, and should we extend 
it?
    Mr. Bonestroo. I believe we should not extend it, because 
when the milk price goes down, obviously there is too much milk 
in the nation. So when you guys give these payments out, this 
enables the producers to buy more cows, and expands production. 
So it actually extends the low milk price for a longer period 
of time, which we are into right now, and that is how it was 
back 2 years ago when we had low milk prices for over 18 
months.
    That's the whole thing, and, you know, I milk 3,000 cows, 
so I've got limitations on payments, so it's like a day and a 
half of money for me, where the hundred-cow dairyman, it's a 
whole 13th check, a whole month. That's a big difference. For 
me, I buy a couple loads of grain with it, you never know it 
came. I mean, yeah, it's still like $30,000, but it doesn't 
work. It's not fair for us, and it's not fair--it's not a 
market-driven--it hurts the market, because it allows people 
to--you know, we have to be efficient in the western states.
    And, you know, it's spreading all over. Indiana has got 
bigger dairies. You see it all across the nation, people are 
having bigger dairies, they are coming in. We have to have 
bigger dairies to be more efficient, because we are getting 
paid the same now----I am getting paid--netting under ten bucks 
a hundredweight.
    It was that way 30 years ago, when I was 10 years ago, ask 
my dad, you know. That's the problem, that's why we have to 
milk more cows, because the price of milk is the same--well, in 
the stores it's a little more, but for us, it's the same as 
it's been for the last three decades.
    The Chairman. What about forward contracting, should that 
be available to individual farmers rather than having to go 
through a cooperative as is currently the law?
    Mr. Bonestroo. Well, it is available, but I am a producer 
of Dairy Farmers of America, so we have a thing called price 
differential, and producer paid price differential, and it's 
always negative. It's the cost--you have so much money, you 
know, you sell all your different products, butter, powdered 
cheese, bottled milk, so all that money gets put into a pool 
and distributed to the dairyman, right.
    And so not all the milk is sold on Class I or on cheese, of 
course, powdered milk is less, so that's how you come up with 
the price differential, which is less. So you contract that for 
$13 on the future board. So you think, well, that's pretty 
good, and then all of a sudden you get your check, they still 
take that $1.50 or $2 or $1 minus the differential off of 
there, and all of a sudden you are looking at 11 bucks or 
11.50, basically 11 bucks is break even. Right now I'm losing 
money every day.
    The Chairman. OK. Senator Baucus.
    Senator Baucus. Thank you, Chairman. Obviously, there are a 
couple, three basic components in profitability; one is your 
cost, and there is your revenues, your sales, and volume of 
sales, and another is productivity.
    And I frankly believe very strongly, not only in 
agriculture, but most every other arena, we in America don't 
spend enough time on research and development compared with 
other countries.
    Other countries, China, India, spend much more on R and D, 
Canada, European countries do, I think the time has come, we 
have got to step up and spend a lot more on research to boost 
our productivity, and find new ways to add value to products 
generally. In agriculture, research has been--there's been no 
increase in real terms since the 70's. We keep up with 
inflation, that's all, we don't spend anymore on research. My 
question to you, if we were to raise more, spend more money on 
research, what--where would you advise we spend it, how, where?
    I know you talk about disease, I know if we spend a little 
bit more on--control our disease a little bit more we'd have 
more disease- resistant crops, there is value added, lots of 
other ways to increase the productivity. So I am just giving 
you an open-ended opportunity to indicate to us how much more 
could reasonably be spent on research and where might it be 
directed?
    Mr. Bonestroo. Well, we already have our 15-cent checkoff 
that goes to advertisement, you know, there is some money there 
already. And on our Greater Southwest Milk Marketing
    Agency, mainly Select milk producers cooperative, they have 
been doing research and development just on their own, and it's 
really, you know, been beneficial. We are actually making 
products, and it's in--you can read through the whole statement 
thing, and you will see it, but the old-fashioned way, as far 
as making the products, a lot of these processors were 
producing--manufacturing products that they can sell to CCC, 
but that's just the wrong way to look at it.
    We want to look at products we can sell overseas, proteins 
and stuff like that. Like China is a big market, they are 
trying, you know, trying to--doing really good economically, 
and we think there is a good market here for our product.
    Senator Baucus. Other research opportunities, anybody?
    Mr. Evans. Research I think is the key to agriculture. It's 
the thing that's got us on the grain revolution, the low hybrid 
wheats, the hybrid corns, the stuff like that. I think we need 
to go into--we are involved in the pulse industry with the bean 
people, the potato people, and the genomics initiative.
    I think we need to go into a lot more stuff--that type 
stuff. We need to go more into applied research on the farms 
and in the universities. I think it's a shame we have so many 
land grant universities across the country, and we are not 
fully using the facilities because we don't have the money for 
the programs. The same way with keeping good key people on 
board, because each year we have to go back and secure money 
from you guys for positions that the administration cuts out. 
So you have this gray cloud hanging over researchers' heads on 
whether they are going to be funded or not. Like the CSP 
program, we need to fully fund research.
    Senator Baucus. Where is the genomic research being 
conducted? You mentioned some genomic research, where is that 
being conducted?
    Mr. Evans. It's an individual grant--I don't know if you 
are familiar with the Scarapini Initiative that we have. It's a 
joint thing with alfalfa people and us, and it's administered 
by a committee, and then each individual group competes for the 
money. We got five million dollars from the Science Foundation 
for that.
    Senator Baucus. You're right about the land grant colleges.
    Mr. Evans. I think one thing specifically for pulses, 
beans, peas, lentils, where they fix nitrogen into the soil, if 
we could ever find that key and put that into other crops, 
think of the amount of energy savings that we could do, and 
help the environment.
    Senator Baucus. Sid, where would you spend research 
dollars?
    Mr. Schutter. Historically, most of the research dollars 
have been spent in a reactive manner to different diseases, and 
with a global economy now and global trading, it's imperative 
that more monies get designated on the proactive side of things 
to prevent different diseases from coming in on that basis. In 
the potato industry, I think probably 90 percent of the 
research money is reacting to a current or a new disease.
    Senator Baucus. Rather than proactive--get ahead of the 
game.
    Mr. Schutter. Yes.
    Senator Baucus. My last question, too, for alternative 
crops, for energy crops, clearly a lot more research dollars 
can be spent there. That's clear to me. I think we have to 
figure out a way to do so.
    Mr. Bonestroo. Well, we are--with the dairy industry with 
the biomass, that's really taken off.
    We actually have a cooperative in central New Mexico in the 
Roswell area. And so with the tax credits for that, it would be 
equal to--like we are at 30 percent compared to----
    Senator Baucus. While we are on that subject, tax credits, 
this is the Ag Committee, we don't have jurisdiction over 
taxes, however, tax credits are really important, can be very 
important, in various areas.
    I am the senior Democrat in the Finance Committee that has 
jurisdiction over taxes. So I encourage you, and all the other 
panel up here, to be thinking about tax policy that might help 
agriculture too. It's not just important programs, it's also 
the tax policy. Financially also jurisdiction over trade, we 
have got trade issues, think about that, too. We are all 
working together here, all the committees here, there are lots 
of different committees that are part of the agricultural 
components, and I encourage you to keep that in mind.
    Mr. Beltz. If I could make a comment about the energy part 
of that. Dried beans really aren't involved in that whole 
crop--whole scheme of things, because our highest and best use 
is as a food.
    Nutritionally we're a good product and it's good for people 
to eat our product. So we don't fit into an energy scheme.
    What concerns us and concerns other people, I believe, at 
the same time, is that right now energy is the hot button 
issue, and there does need to be a lot of energy and time and 
money spent on that.
    But at the same time, we are scared that we don't get 
overlooked, that we don't spend so much time and resources on 
that. That some of the----
    Senator Baucus. That's absolutely clear, absolutely.
    Mr. Beltz. It scares some of the people that are growing 
food, and it's our only--you know, our biggest claim to fame is 
we are a good food.
    Senator Baucus. And I hear all over in the listening 
sessions that I had. It's a very real concern.
    The Chairman. Senator Salazar.
    Senator Salazar. Let me ask you a question about value 
added initiatives with respect to the different crops you 
represent.
    Sid, for example, you know, my native valley, the southern 
part of Colorado, I think it's the third or fourth largest 
potato producing region in the country. One of the things 
farmers there are always talking about how they can add value 
to a fresh product, potatoes they are shipping to the market.
    For all of you in the industry you are in, what would you 
advise the Committee to be looking at in terms of producing 
value added initiatives to the farm bill as we look ahead?
    Mr. Evans. One of the things is, like our energy bar, I 
mean most small commodity organizations don't have the money, 
we need quality labs, so we know what the qualities of peas and 
lentils are for a given year. So when companies ask us for the 
numbers we can have them.
    We need the tools for quality labs, we need some marketing 
experience, and some stuff, and some grant money so when we do 
come up with a good idea, like this particular bar, it has six 
grams of protein, four grams of fiber, it will go into the 
school lunch program. This will actually go into the school 
vending machines. But I mean, to get the money to get this out 
the door----
    Senator Salazar. So you would say, Jim, grant programs for 
value added initiatives might be helpful to this.
    Mr. Evans. Something similar to our Map funding oversees, 
so when you do programs there that you can get--make it 
competitive to a certain extent, but you can come up with a 
good you idea, you can get the funding to carry it through.
    Senator Salazar. Other ideas?
    Mr. Beltz. There's no doubt that product development is not 
a cheap process, I mean, it all comes back to funding. Lack of 
resources to do that kind of work, it is a very important path 
to the future, for any group to find new uses for their 
products that consumers use to benefit themselves, and our 
industry as well.
    Senator Salazar. Any other ideas?
    Mr. Schutter. The potato industry, there has been a fair 
amount of work done on that, most of it being funded by the 
individual state check-off system.
    So some of it's been done just on the fresh side of 
potatoes and then a lot has been done on the dehy, or the 
frozen, which is probably more beneficial to the industry, 
because of the storability.
    But quite often, the industry can do it, but the grocery 
stores and so forth are reluctant to deal with any of this, 
because of floor space. So it would be rather cumbersome to 
include them in the farm bill. But if we can get more of a 
national focus on it, from the industry, instead of a 
segmented, either your area or the Pacific northwest would be 
very beneficial.
    Senator Salazar. Just a general question to any of you with 
respect to this farm bill, and specialty crops, what are the 
specific kinds of initiatives we could take on as a committee 
that might be able to assist the speciality crops that aren't 
the program crops that take up so much of our time and our 
resources.
    Mr. Evans. One of the issues, I mean, which are a 
speciality crop, we are kind of a unique crop, it is planting 
flexibility.
    Right now, if you grow over your limit on chickpeas, you 
have to pay back your direct payment. That's bad enough, but I 
can take that hit. But because of the legislation in the bill, 
the way it's written, you actually have to pay--legally pay 
back the value of that crop that you planted. So in Whitman 
County in Washington, that figure is $240 an hour. So not only 
do you lose your direct payment, you lose another $240. I don't 
think that's the way the Committee designed that part of the 
program.
    Senator Salazar. Other thoughts?
    Mr. Beltz. Our biggest issue on the farm bill being a non-
program crop at the present time is the planting restrictions. 
You know, our stance is maintaining planting restrictions. If 
due to outside forces we lose that or it's forced upon us that 
we have to give that up.
    There are things in the program crops and in the fruits and 
vegetables that have been brought forward that are interested 
in taking that place. But right now, for our producers, that is 
one of our key elements is that planting restriction.
    Senator Salazar. Sid, how about the potato world?
    Mr. Schutter. The main thing would be to continue the same 
language that's in the current bill and not provide direct 
payment to acres--not provide direct payment on acres and then 
have those people put in--plant potatoes if they don't have a 
history of it, because it would distort our market so much.
    Senator Salazar. One final question, Mr. Evans, in your 
opening comments, you said that we ought to provide incentives 
for energy savings crops as part of our energy initiatives, as 
we look at that part of the farm bill. And I know you plant 
alfalfa or you plant peas, you don't have to go out and buy the 
nitrogen as you do with other kinds of crops.
    But what kind of a program would you be suggesting to the 
Committee that would create those kind of incentives for energy 
savings for crops?
    Mr. Evans. I think you should get some kind of credit or 
some kind of payment. I mean one of the things if you grow 
specifically in the midwest here, Montana, North Dakota, where 
people are moving to direct seeding and getting--saving fuel 
costs and environmental costs, putting peas and lentils in your 
rotation, you can extend not having to use fertilizer.
    You plant peas 1 year and then come back the next year, you 
can plant spring wheat or spring barley without having to put 
any fertilizer on, so you can get by 2 years without applying 
any fertilizer. And that's very environmental friendly, and, 
cost-saving-wise because every time you put fertilizer on, you 
are burning natural gas, I mean it's very expensive to make 
fertilizer. So cost wise, I think we figure in the $20 to $30 
an acre range, depending on what your yield is, and what you 
are putting back in the soil.
    Senator Salazar. I agree with you with that reality. The 
question is, how do you in a farm bill encourage those kinds of 
energy savings measures to take place?
    Mr. Evans. I am not----
    Senator Salazar. If you have some ideas, we will appreciate 
your recommendations.
    Mr. Evans. I will get back to you on that.
    Senator Salazar. Thank you, Mr. Chairman.
    The Chairman. Senator Burns.
    Senator Burns. Two questions, then we'll move along. Mr. 
Evans, if you took a look and wanted to get some kind of credit 
for your peas and lentils, as a legume, do you think all legume 
crops should be treated the same way, as far as replenishment 
of the nitrogen back in the soil?
    Mr. Evans. Yes, because I think we are saving energy, I 
think it's beneficial to the country.
    Senator Burns. We'd probably treat that the same way as 
carbon sequestration, you know----
    Mr. Evans. Something similar to that. I think the Dry Bean 
Association, didn't you have an initiative?
    Mr. Beltz. Well, the same with the soil tests, it gets back 
to basic, when you soil test, you've got nitrogen credit for 
having legumes on crops the previous year. A legume is a 
legume, wether--there are differences in amounts, but, you 
know, the same philosophy applies to all.
    Senator Burns. Okay. Now, I think all of you are in 
specialties, you talk about China as a market for dairy 
products. What do they--do they want fresh milk, powdered milk, 
what's the highest demand?
    Mr. Bonestroo. We don't want to send fresh milk over there. 
We have already developed concentrated milk that we can 
reconstitute it, it's amazing, they have done even taste tests 
in San Luis Obispo, California and actually the judges picked 
this milk that was reconstituted.
    And when he found out, he was--they were a little upset, 
because it wasn't part of the program, but they just stuck it 
in there, this reconstituted, ultra-filtrated milk, but the 
technology is so much better. Powdered milk back in the days, 
you could tell right off the bat, it was awful. But now, it's 
good. So those--but there are proteins in this concentrate, 
they are reconstituted, you can make cheese back out of it, it 
was just amazing. But, you know, the development is started, 
but it's still on a small scale. But that's where we need help, 
as far as R and D goes there.
    Senator Burns. That wasn't the case when I was in the 
Marine Corps in Okinawa.
    Mr. Bonestroo. You would be amazed how it tastes now, it's 
just----
    Senator Burns. Now, do any of you, your association or your 
organization, maintain kitchens or do a lot of work in one 
central area on product development? Do you do--does a dairy--
does the American Dairy Association or through any kind of a 
check-off program, do you maintain kitchens or do research on 
product development?
    Mr. Bonestroo. They do, we do in our industry. I don't have 
all that information for you right now, but I can get that for 
you.
    Mr. Beltz. In our case, it just doesn't happen.
    We're a small enough industry, the funding is the issue. 
There are efforts being made, but, you know, it's----
    Mr. Evans. With this energy bar, we contracted with Turro 
and Strause Company to develop this, the energy bar.
    Senator Burns. That was done through an outside contract.
    Mr. Evans. Yeah, we still have the contract. As
    Mr. Beltz says, it's very expensive.
    Senator Burns. Mr. Schutter, about your potatoes?
    Mr. Schutter. Yes, the United States Potato Promotion Board 
does do some work on that, but it's pretty minimal.
    Senator Burns. I thank you very much, and I thank you for 
your information.
    The Chairman. Yes. Thank you very much. We appreciate very 
much your input, and we look forward to continue to stay in 
touch as we prepare for the next farm bill. Our last panel that 
we would ask now to come forward is Mr. Mike Wendland of 
Rudyard, Montana, representing the National Association of 
Conservation Districts and Montana Association of Conservation 
Districts. Bill Donald of Melville, Montana, representing the 
National Cattlemen's Beef Association and Montana Stockgrowers 
Association.
    Betty Sampsel from Stanford, Montana, representing the 
Montana Wool Growers Association, and Mr. Leo McDonnell of 
Columbus, Montana, representing R-CALF U.S.A. Miss Sampsel and 
gentlemen, welcome to the Committee. You have seen the process 
that we have been following, and Mr. Wendland, we are going to 
start with you, and go right down the line, and we look forward 
to your comments and your full statement will be inserted into 
the record.

      STATEMENT OF MIKE WENDLAND, NATIONAL ASSOCIATION OF 
   CONSERVATION DISTRICTS AND MONTANA CONSERVATION DISTRICT, 
                        RUDYARD, MONTANA

    Mr. Wendland. Mr. Chairman, good morning. My name is Mike 
Wendland. Senator Salazar, Mr. Chairman, welcome to Montana. 
Senator Burns, thank you for putting this hearing together, 
Senator Conrad Burns, thank you.
    I thank you for the opportunity to speak before you today. 
I am a fourth generation farmer from Rudyard. I have farmed 
drylands and some livestock. My comments today are my own and 
do not necessarily reflect all conservation concerns. I have a 
CSP contract, I have land in CRP, but also some of my 
agriculture production is at my own expense as most Montana 
producers would be. I have planted field wind breaks in the 
past, and most recently I have incorporated minimum till and no 
till practices in my operation. Some of these decisions have 
come about because of the extended drought in the area, but 
they have shown great benefits, most in wind erosion savings 
and wild life habitat. Components of the conservation title of 
the farm bill have been very important to me. I am a 
conservation district supervisor at the local level.
    I am involved at the state level and at the national level. 
I'm part of the NACD Farm Bill Task Force, and we have some 
ideas that we have submitted. My submitted testimony today is 
too long to include here, but in the few minutes I have, I 
would like to highlight a couple things I believe that are 
important we consider in the next farm bill. Technical 
assistance, there is a strong demand and need for technical 
assistance. It's vital if the NRCS and technical service 
providers are to continue to work at the local level with 
landowners, conservation districts and other partners.
    Limited staffing in local field offices is often a problem 
that leads to program delivery and implementation problems. 
Financial assistance--the financial assistance component of the 
working lands conservation program should be kept at the 
current level. It is often the incentive that brings producers 
into the NRCS and conservation district offices, and enables 
producers to make many changes on their own.
    Education and outreach are, to the land owners and general 
public, are important for successful delivery of the 
conservation title of the next farm bill. Education and 
outreach are areas where conservation districts have been able 
to assist in the delivery of the farm programs. Through 
workshops and tours, we are able to show farm producers and 
operators hands-on results of the farm program.
    In Montana youth education is also a very strong part of 
our education process. The Envirothon and the Montana Youth 
Range Camp are two of the examples that have been very 
successful in Montana. Local input, I feel local input is 
essential and, that local priorities be integrated into Federal 
conservation programs. Local work groups and state tech 
meetings are important in accomplishing this task.
    One final concern--I see the red light is on--is noxious 
weeds and invasive species that threaten the production 
agriculture, including my operation. It is important to control 
them, not only on our home places, but on public lands. I thank 
you for your the opportunity, and would answer any questions.
    [The prepared statement of Mr. Wendland can be found in the 
appendix on page 105.]
    The Chairman. Thank you. Mr. Donald.

STATEMENT OF BILL DONALD, NATIONAL CATTLEMEN'S BEEF ASSOCIATION 
    AND MONTANA STOCKGROWERS ASSOCIATION, MELLVILLE, MONTANA

    Mr. Donald. Mr. Chairman, members of the Committee, thank 
you very much for the opportunity to speak to you today. My 
name is Bill Donald, I'm a third generation cattle rancher from 
Mellville, Montana. I currently serve as the president of the 
Montana Stockgrowers Association for which nearly 125 years has 
designed policy that minimized direct Federal involvement in 
our operations and our ranches, and preserved our right to 
independent ranchers to choose the best management practices 
for our land, water and livestock.
    The free market system is critical to the long- term 
sustainability of cattle ranching. Our 2007 Farm Bill testimony 
addresses seven areas, the next generation, marketing and 
competition, conservation programs, Yellowstone Park 
brucellosis, Montana State University Bioscience Complex, the 
Endangered Species Act, and noxious weeds. Today I will just 
touch on a couple of those issues.
    One of the major challenges facing the next generation in 
ranching in Montana is the price of land is far valued above 
the production value, it is valued on recreational and scenic 
get-away values.
    There is a couple things that could be included in the farm 
bill that might help alleviate this. One of them would be tax 
incentives to landowners or ranchers who would be willing to 
sell or lease to young producers, and also streamlining the 
process and cutting the red tape for the--required for young 
producers to obtain loans for the FSA would be helpful. 
Concerning marketing and competition, we contend that the role 
of the Federal Government is to provide effective oversight to 
ensure the true competitive market complex for cattle and beef. 
And this is done by strictly enforcing the Packers and 
Stockyards Act of 1921.
    It's not the role of the Federal Government to prohibit or 
limit a cattleman's right to pursue markets. Marketing 
opportunities are designed to capture a larger portion of the 
beef dollar. The government's role is not to guarantee 
livestock producers a profit, but rather the opportunity to 
profit and succeed.
    The best mechanism to achieve conservation and 
environmental goals in our mind is working landscapes. The 
working lands support rural communities and economies, provide 
food and fiber and nature, and nurture abundant wildlife 
habitat. The programs that have been effective maintained, like 
EQIP and CSP. With respect to CRP, there is some damaging, 
unintended consequences with young agricultural people wanting 
to get into business, and also the detrimental impact it has on 
some of the rural economies and communities.
    Conservation objectives can be achieved in conjunction with 
economic activity of the land and should be encouraged. And we 
would like to see some of these lands coming out of CRP that 
are too fragile to farm. They would not be too fragile to be 
grazed. And some of the conservation ideas could be used to 
help develop water and fences to utilize those lands. We look 
forward to working with you and appreciate the opportunity to 
be here. Thank you.
    [The prepared statement of Mr. Donald can be found in the 
appendix on page 67.]
    The Chairman. Thank you. Miss Sampsel.

 STATEMENT OF BETTY SAMPSEL, MONTANA WOOL GROWERS ASSOCIATION, 
                       STANFORD, MONTANA

    Ms. Sampsel. On behalf of the 1,200 sheep producers in 
Montana, I am very appreciative of this opportunity. I am Betty 
Sampsel, President of the Montana Wool Growers Association. And 
I can report to the Committee, as well as the Chairman, that 
the priorities are shared by a majority of the sheep producers 
in Montana and the American Sheep Industry Association.
    The American Wool Council launched a wool production 
information marketing program for the American wool in early 
2001. Our national incentives have improved competition for 
American wool. International marketing programs have exposed 
U.S. wools to the world and exports have grown rapidly to over 
60 percent of our annual production today.
    Total exports represented less than a third of production 
prior to our programs. We now sell into eight or more 
international markets each year. The Wool Loan Deficiency, the 
LDP program provides the only safety net for producers in our 
business. I encourage the Committee to reauthorize the wool LDP 
and at a base loan rate of $1.20 per pound in order to provide 
the benefit of the program as intended.
    While nine loan rates are available, essentially all wool 
LDP applications are in one non-graded rate category. The 
research and industry testimony provided in 2002 supported 
$1.20 per pound base loan rate and authorization of the wool 
LDP at this rate should provide opportunity for all producers 
to participate in the program as intended. I urge the Committee 
to support reauthorization of the National Sheep Industry 
Improvement Center. As established in the 1996 farm bill in the 
Rural Development Program of USDA, the National Sheep
    Industry Improvement Center provides loans and grants to 
business ventures for financing programs which normal 
commercial credit or funds were not available.
    The Secretary conducted a number of field hearings last 
year on the farm bill. There is strong support by producers in 
support of a retained ewe lamb program in the next farm bill. 
The growth of the U.S. sheep industry can in part be credited 
to the USDA retained ewe lamb program that was in effect for 
2002-2004.
    The incentive payment to producers to keep ewe lambs in 
their breeding herd rather than sell them for slaughter 
encouraged producers to expand breeding herds which, in the 
longer term, will provide increased market lambs to help U.S. 
producers maintain and increase their share of the American 
meat case. Thank you, Senator Baucus, for extending the Wool 
Trust Fund.
    Senator Baucus. You bet.
    Ms. Sampsel. And thank you for the opportunity to provide 
the sheep industry priorities for the next farm bill.
    [The prepared statement of Ms. Sampsel can be found in the 
appendix on page 94.]
    The Chairman. Thank you. Mr. McDonnell.

   STATEMENT OF LEO McDONNELL, R-CALF USA, COLUMBUS, MONTANA

    Mr. McDonnell. Good morning, Chairman Chambliss,
    Senator Baucus and Senator Burns and Senator Salazar.
    My name is Leo McDonnell. I am a cow-calf producer, feed 
lot producer, and feed stock producer. And we sell bulls both 
domestically and into the international markets. I appreciate 
the opportunity to provide comments on the development on the 
2007 Farm Bill.
    Chairman Chambliss, you have provided great leadership on 
the Senate Ag Committee, thank you. Senator Baucus and Senator 
Burns have been champions for U.S. agriculture and Montana 
agriculture. And
    Senator Salazar, it's good to have a ranch family on the 
U.S. Senate. Historically, cattle producers have not asked for 
price assistance, and I hope we keep it that way. But today 
independent cattle producers are facing significant obstacles. 
Barriers to our exports and mismatched import standards have 
created a large U.S. trade deficit in cattle and beef. 
Meanwhile here at home, cattle producers must negotiate in a 
market that is terribly distorted at times, with increase in 
concentrations and poor marketing practices.
    And we are unable to differentiate our product even though 
we are in an increasing global market. It hardly makes sense. 
The 2007 Farm Bill does give us an opportunity to address some 
of these problems. First, the farm bill should offer a 
competition chapter that addresses price- distorting practices, 
such as captive supplies, non-price negotiated forward 
contracts, exclusive marketing and purchasing agreements, and 
maybe even packer ownership.
    Concentration should be revisited and transparent market 
information should be a priority. You know, capitalism comes in 
many forms. A free and competitive enterprise is a founding 
value in this country, and that's what's made us the greatest 
country in the world, let's not lose it.
    Second, address the impact of current U.S. trade policy. 
You know, we went from a 24 billion dollar trade surplus back 
in the 90's until last year, our trade deficit, according to 
the Department of Commerce, and the cattle and beef industry 
had over a three billion dollar trade deficit last year. USDA 
is involved in trade negotiations at times and they need 
clearer policy from the industry.
    For example, we had special rules for perishable and 
cyclical Ag products, passed through TPA and signed into law. 
Yet USDA held back on getting that information, and when we 
finally got to the Doha----
    Senator Baucus, correct me if I am wrong--I believe the 
special rules were tabled for agriculture, but cattle and beef 
were left out. So we have some real problems there. Also you 
might want to look, with all the distortions we have in the 
global and beef cattle, it is the most distorted, maybe looking 
at tax offsets, maybe a capital gains or maybe running a 
special little deal on estate tax relief until these 
distortions are addressed.
    Third, you know, a couple years ago we put together one of 
the largest coalitions in the history of this country and 
passed county of origin labeling. It was signed into law and 
needs to be honored.
    We have three of our extended over in Iraq and Afghanistan, 
fighting for democracies over there. We need to honor the ones 
here. So we look forward to your help. Both Senator Baucus and 
Senator Burns have been champions for COOL, and stay in there 
for us. As we found out in the fish rules, it's not all that 
bad.
    [The prepared statement of Mr. McDonnell can be found in 
the appendix on page 84.]
    The Chairman. Thank you very much. I will defer to my 
colleague, Senator Baucus.
    Senator Baucus. Thank you, Mr. Chairman. I guess, the first 
thing that comes to my mind is briefly, over the last couple, 3 
weeks, I have heard a lot of producers talk about the need for 
conversation--conservation programs, EQIP, but a lot about CSP. 
And I wonder if anybody could address the need for CSP, and how 
CSP is a good program, but needs a few more dollars to make it 
work a little bit better. If anybody wants to jump in there.
    Mr. Wendland. Mr. Chairman, Senator Baucus. The CSP Program 
is probably a good program, but it is not fully funded.
    Senator Baucus. I agree it's nearly as funded as it should 
be.
    Mr. Wendland. It's a very important program, but the sign-
up process for the CSP program was very cumbersome. It was a 
real problem, a bottleneck in the CSP program.
    Mr. Donald. I think while it has potential, there are some 
logistic problems, and then also the funding. I think the sign-
up procedure can be streamlined, and of course if there is not 
funding, then it gets to the point of who qualifies and who 
doesn't, then that could be detrimental.
    Senator Baucus. Do wool growers use it? Betty, do you use 
it?
    Ms. Sampsel. No.
    Senator Baucus. Not at all?
    Mr. McDonnell. We don't use it personally. I am great 
believer that if you have a healthy economy, healthy market, 
that's kind of our responsibility, but I appreciate what 
conservation programs bring to us. As you are talking about 
that, I would like to express the concern about the Grazing 
Reserve Program, which was put in the last farm bill. There is 
a clause in there which provides for permanent GRP, and I think 
it's a great mistake for cattle producers to allow the 
government to come in and manage your business on a permanent 
basis.
    Senator Baucus. While you are here, Mr. Chairman I would 
like to put in a plug for something else in Montana, and that's 
the Montana State Bioscience Complex that Bill McDonald raised. 
We are hoping Montana State University could be the place in 
the country, the center for genomic research of livestock, 
especially for the beef industry. For all the reasons that are 
apparent, and Nebraska has helped us out, the only competition 
we have is from Texas. So not only we here in Montana are 
enlisting your support in our efforts to get that passed, I 
think it's about 34 million is what it is.
    The Senate Subcommittee--Senate Appropriations Committee I 
think passed 16 million, it got through the Senate floor, 
probably get back somewhere, somehow, there is nothing in the 
House side for it. But it's clear to me, as we work a lot more 
research, genomic research is really the key and I just want 
you to know about that, and thank Bill and others that help put 
that together.
    Mr. Donald. That has the potential to take the cattle 
industry in this country to the next level, and I think looking 
at the future my kids have, and my grandkids have, I think 
that's something that really has some potential to help.
    The Chairman. Well, I have sampled some of your product as 
of last night, I think it was a whole half a cow they served me 
at Eddie's Supper Club, whatever you induced into it, it was 
very, very good.
    Senator Baucus. So that's where you were last night. I was 
thinking of going out there last night, too, I was thinking of 
going to Eddie's. We should have gone there.
    The Chairman. You should have.
    Senator Baucus. We went someplace else.
    The Chairman. It was a great steak, I'll say that.
    Senator Baucus. Or you could have gone to Black Eagle, 
Borrie's.
    The Chairman. I think we could have thrown darts.
    Senator Salazar. We discovered they had pizza in Montana. 
We didn't know. We thought it was going to be a beef steak.
    Mr. Donald, very quickly--I know the Chairman has a plane 
he has to catch--but on CRP and the impact that it's having on 
ranchers, and especially young ranchers coming in with more and 
more of our land being put into CRP, what would you do, Mr. 
Donald, you were testifying to that point, I think you were as 
well, Mr. McDonnell, what would you do to change the CRP 
Program to address the concern that you have that it is 
becoming one of those barriers for ranchers to continue to 
ranch.
    Mr. Donald. Well, one of the things that come to mind is 
ensuring that whole farms or ranches aren't put into the CRP 
Program that can have detrimental impact on communities, and 
without the thriving rural communities, it's that much harder 
to maintain and to have young people come into the program. 
Also that becomes the base level for leases, and it puts some 
of those leases out of the reach for the young producers. So I 
think there are two things there, limiting the number of acres 
is one thing, but limiting the number of acres in a community 
is something that maybe has been overlooked, and the whole farm 
process might be something to look at in that.
    Senator Salazar. Did you have anything to add to that, Mr. 
McDonnell?
    Mr. McDonnell. Well, I agree with Bill. And I would like to 
add, and possibly another thing to bring into it, maybe CRP 
payments should be made only to active producers. I mean we 
have people taking CRP payments that are retired and in some 
cases living in another country and living off these payments 
that are blocking our kids getting in here. You might also look 
at some kind of assistance for young farmers and ranchers when 
they have to purchase these units that definitely inflated in 
true value. There's a couple shots.
    Senator Salazar. I appreciate the comments. I will tell you 
from my being in Colorado, when I've looked at some of the 
counties that have been most affected by CRP, also some of the 
counties that are most economically withering on the vine, and 
part of it the very life blood, economically those communities 
have been taken away to people who might happen to live in 
Dallas, Fort Worth, New York City, so it's an issue.
    I am certain this Committee will have discussions about it. 
Where we go with it, I don't know, but we certainly look 
forward to hearing your points of view on how we ought to 
change it. Thank you very much.
    The Chairman. Senator Burns.
    Senator Burns. Thank you very much, Mr. Chairman and I 
would advise Mr. McDonnell over there, that we are finally 
making headway, finally got the USDA by letter to revise their 
estimates of cost based on the seafood experiment.
    Mr. McDonnell. Thank you.
    Senator Burns. And country of origin labeling, we are 
making a little headway, be it slow, but we will continue to do 
that. Well--I am sure this will be in the debate, whenever we 
go into the new farm bill, I'm sure it will be, but we've got 
to have better figures coming out of the USDA, and we've also 
got to have a USDA that's willing to follow the law; it's the 
law, we passed it, and to write the rules. So we are going to 
continue to do that. I was going to ask--I will tell you, I 
know there is a lot of us concerned about invasive weeds, and 
whenever--I will tell you whenever you go to 1Washington, D.C. 
and want to talk about weeds, you'll find out you're standing 
on the street corner yourself. There's not a lot of people in 
that 17 square miles of logic-free environment that are 
concerned about weeds. But I happen to think they are very 
important. And Miss Sampsel, you're an industry that probably 
has a secret to our weed problem, and so I would urge you to--
your new program that we've--come with your new labs for the 
sheep industry, I think is doing very well, and we appreciate 
working with those folks also.
    Do you have any--on conservation, and I am really glad to 
hear that we're starting to talk about CRP, no matter if it's 
range land or cropland, in probably a common sense kind of way. 
We have talked about this, the Chairman and I have talked about 
it many times, and that we should take a look at that program 
to make sure the government is not in competition with those 
young people who want to expand their operation, and also the 
remuneration, and also the limits that we have put on it. But 
in areas of conservation, we're very supportive of conservation 
programs and how they are implemented. We can streamline the 
applications and who qualifies and who does not. I am very 
supportive of that, as we move this legislation forward. If we 
could do one thing in the livestock industry, if we had one 
part to reform, would you say that we take a look at P and S, 
the Packers and Stockyards Act, or where would it be?
    Mr. McDonnell. I would the say competition is probably No. 
1, but long-term trade is going to have an impact on us, I 
think; it's those two issues.
    Mr. Donald. Well, I guess when I look at the generations 
coming down the road and I look at the amount of tax planning 
we go through on our operation, I have two sons that are on the 
ranch with us, and have some grandkids, that hopefully they'll 
see the benefits of the ranching life-style, how we get that 
transferred over, we are spending a lot of money on tax 
accountants, insurance, and tax lawyers for planning, in order 
to be able to pass that ranch on to our kids.
    That's money that comes out of production. We could be 
using that to enhance production and we're spending it on 
insurance companies, lawyers and accountants. As much as I like 
my accountant, I just as soon not give him that money. I think 
that's one of the things, the estate, and I really applaud 
Senators Baucus and Senator Burns for your work on trying to 
get that repeal made permanent, and I think that is something 
that's going to be necessary.
    Senator Burns. Miss Sampsel.
    Ms. Sampsel. I agree with Bill. We need help on 
transferring our land to the next generation, because we--they 
can't go out and compete against investors that are coming here 
to buy land.
    Senator Burns. Thank you. You got another question?
    Senator Baucus. No, I was going to say, I think we'll 
finally get that resolved hopefully the rest of this year, I 
don't know for sure, but soon. Members of the Senate and House 
know how important that is. They don't know as much as they 
should, but they still know how important it is. Sometimes 
things take a little while, but I think we will get that very, 
very soon resolved, so you don't have so much time on 
accountants and lawyers, and our places can be passed on to our 
kids. It's slow in coming, but we will get there.
    Mr. Wendland. Mr. Chairman, one final comment on the CRP, 
if we were to get parity for our product, that issue would go 
away, I think.
    Senator Baucus. Parity, I haven't heard that in a while.
    The Chairman. Well, to each of you, thank you very much for 
being here. Your input into this is very valuable, and we look 
forward to continuing the dialog with you, as with the other 
witnesses that preceded you here. And to all of our witnesses 
for the testimony today, we say thank you for your input, and 
for the taking of your time to be here today. I want to thank 
Senators Baucus and Burns for inviting us here today, and for 
the great hospitality on the part of this university for 
hosting us. It's been our pleasure to be here.
    I also want to thank Senator Craig Thomas of Wyoming and 
Senator Mike Crapo of Idaho for their assistance in helping 
provide witnesses that have given us very valuable testimony 
today. I again would encourage anyone interested in submitting 
a written statement for the record or informal or comments to 
visit the Committee's website, which is agriculture.senate.gov 
for details. We can accept written statements for up to five 
business days after this hearing.
    Thank you for your interest in agriculture policy, and 
gentleman, thank you for taking your time.
    Senator Baucus. Mr. Chairman, we appreciate it very much.
    The Chairman. We're going to come back to Montana, I 
promise you. It's a beautiful place. Thank you very much. This 
hearing is adjourned.
    [Whereupon, at 12:10 pm the hearing was adjourned.]
      
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                            A P P E N D I X

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                   DOCUMENTS SUBMITTED FOR THE RECORD

                            August 17, 2006



      
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