[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




                       FULL COMMITTEE HEARING ON
                         FOOD PRICES AND SMALL
                               BUSINESSES

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 15, 2008

                               __________

                          Serial Number 110-94

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director
                 Adam Minehardt, Deputy Staff Director
                      Tim Slattery, Chief Counsel
               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               VERN BUCHANAN, Florida, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)
























           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida

                                 ______

            Subcommittee on Rural and Urban Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DAVID DAVIS, Tennessee
HANK JOHNSON, Georgia

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLIE GONZALEZ, Texas              MARY FALLIN, Oklahoma, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)













                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2

                               WITNESSES

Buis, Mr. Tom, President, National Farmers Union.................     3
Tracy, Mr. Geoff, Chef Geoff's, Washington, DC, On behalf of the 
  National Restaurant Association................................     5
Formica, Mr. Frank, Formica Brothers Bakery, Atlantic City, NJ, 
  On behalf of the American Bakers Association...................     7
Thomas, Mr. Daryl, Senior Vice President Sales and Marketing, 
  Herr Foods, Inc., Nottingham, PA, On behalf of the Snack Food 
  Association....................................................    10
Dinneen, Mr. Bob, President, Renewable Fuels Association.........    11

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    28
Chabot, Hon. Steve...............................................    30
Altmire, Hon. Jason..............................................    31
Braley, Hon. Bruce...............................................    32
Buis, Mr. Tom, President, National Farmers Union.................    34
Tracy, Mr. Geoff, Chef Geoff's, Washington, DC, On behalf of the 
  National Restaurant Association................................    40
Formica, Mr. Frank, Formica Brothers Bakery, Atlantic City, NJ, 
  On behalf of the American Bakers Association...................    48
Thomas, Mr. Daryl, Senior Vice President Sales and Marketing, 
  Herr Foods, Inc., Nottingham, PA, On behalf of the Snack Food 
  Association....................................................    55
Dinneen, Mr. Bob, President, Renewable Fuels Association.........    59

Statements for the Record:
National Cattlemen's Beef Association............................    67
25x'25 National Steering Committee...............................    70
American Farm Bureau Federation..................................    75
National Association of Wheat Growers and U.S. Wheat Associates..    85
The American Bakers Association..................................    90

                                  (v)








 
                     FULL COMMITTEE HEARING ON FOOD
                      PRICES AND SMALL BUSINESSES

                              ----------                              


                         Thursday, May 15, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:06 a.m., in Room 
1539 Longworth House Office Building, Hon. Nydia Velazquez 
[chairwoman of the Committee] presiding.
    Present: Present: Representatives Velazquez, Altmire, 
Cuellar, Clarke, Hirono, Chabot, Gohmert and Fallin.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velazquez. Good morning. I call this hearing on 
food prices and small business to order.
    From coast to coast, Americans are seeing continued 
increases in the cost of food items. According to the U.S. 
Department of Agriculture, the average price of such basic 
staples as bread, milk and eggs increased over 30 percent 
during 2007. That was the largest annual jump in price in 
almost two decades. But the trend is projected to continue 
during the current year. Such increase have undeniable 
repercussions on consumers, small businesses and the U.S. 
economy as a whole.
    Today we will discuss the relationship between food prices 
and the entire economic chain from farm to grocer, to 
restaurant and to home. We will also explore the various 
factors contributing to the rising costs of food products and 
examine the specific effect on family farmers and 
entrepreneurs. It is an admittedly complex task that requires 
carefully considering a full range of viables.
    Some may be tempted to point fingers at a single industry 
or sector, but there are many contributing factors to the 
perfect storm that is driving food prices upwards. We need to 
be mindful of every piece of this puzzle and gauge the specific 
and collective impact. That holds true whether we are talking 
about the corn used to make ethanol, the wheat used to make 
bread, or the produce that is purchased in bulk by grocers.
    As we will hear today, a number of troubling developments 
are coming to a head simultaneously. For starters, rising 
unemployment and fallout from the subprime mortgage crisis have 
left our economy in a weakened state. This creates a difficult 
environment for businesses. Consumers have less disposable 
income, and tightening credit markets make it difficult for 
small firms to access capital.
    Restaurants, grocers and other food entrepreneurs are also 
having to pay more for their raw materials. It now costs each 
of them a great deal more money to bring the same products to 
market. Their customers meanwhile have less to spend, and they 
are more resistant than ever to paying higher prices. It is an 
economic Catch 22 that hits small businesses from both 
directions.
    The problem is compounded further by rising global demand 
for agriculture foods. Developing economies such as China and 
India are putting new strains on supply and weather-related 
production shortages of wheat, rice and other crops are making 
these products more expensive for everyone, including American 
firms.
    Last, but certainly not least, the weakened U.S. dollar and 
the continuing climb of oil prices have a sizeable effect on 
what small businesses pay for basic staples. Just a few weeks 
ago, this Committee delved into the economic implications of 
the $115 barrel of oil. As we push north of the 120 mark, the 
impact on food prices and the entrepreneurs who must bear them 
continues to deepen.
    The challenges posed by such a dramatic combination of 
factors is considerable, but they are not insurmountable. As 
history has demonstrated time and time again, our Nation's 
small business economy is remarkably resilient. Entrepreneurs 
can help us get things back on track. So we should not be 
discouraged. Instead we should lend them our support. That 
means continuing to focus on the root causes of these problems 
and understanding how the many variables interact with one 
another. With a clear sense of those dynamics, we can set about 
formulating and implementing solutions that allow the market to 
restore economic strength. It is a time-tested and commonsense 
approach.
    Arriving at policy solutions will require a comprehensive 
dialogue. I am very pleased that to help us in that discussion, 
we have a diverse range of perspectives represented on today's 
panel. I want to thank each of today's witnesses for joining us 
today. I am looking forward to your testimony and its many 
insights into this critical issues.
    With that I now yield to the Ranking Member Mr. Chabot for 
his opening statement.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. I thank the Chairwoman for yielding, and I 
thank her for holding this hearing on food prices and small 
business. I think this is a very important hearing this 
morning. This is a critical issue affecting not only American 
families, but also, as was mentioned, American small 
businesses.
    I also thank our witnesses for taking the time out of their 
very busy schedules to be with us here today. I know we all 
appreciate that very much.
    Anyone who has been to a grocery store recently to purchase 
basic consumer staples has noticed that the price of food has 
been rising, and oftentimes quite substantially. According to 
the Department of Labor, last month food prices edged up .9 
percent to almost 1 percent, driven by increases in numerous 
products including bread, and butter, and coffee, and 
margarine, and milk and other products.
    American families are paying more for food, and so are 
America's small businesses. Small restaurants, grocers and food 
manufacturers are also feeling the squeeze, forcing them to 
raise their prices oftentimes. According to the Department of 
Agriculture's Economic Research Service, the cost of food is 
expected to continue to rise this year by 4 to 5 percent.
    What is behind these increases? Rising demand for energy 
and ethanol has caused the price of grain to jump. China, India 
and other countries are consuming more of our grain and our 
meat and other products, and the weakness of our dollar has 
made our exported products an even better value.
    This hearing is an excellent opportunity to examine how 
small businesses are being affected by food price increases and 
explore possible solutions to these challenges. Again, I would 
like to thank the Chairwoman for holding this hearing and look 
forward to hearing from our panel of experts.
    One thing I might mention is I am the Ranking Member also 
of this Committee and the Antitrust Task Force, and we have got 
an important hearing. John Conyers, the Chairman of the 
Judiciary Committee, is the full Chairman. I am the Ranking 
Member. We have a hearing at 11:00. So I believe Congressman 
Gohmert is going to fill in for me at that point.
    I yield back.
    Chairwoman Velazquez. Thank you, Mr. Chabot.
    Now it is my pleasure to welcome Tom Buis. Tom Buis is the 
president of the National Farmers Union, and Mr. Buis 
represents farmers and ranchers in all States with organized 
chapters in 32 States. As president, Mr. Buis oversees the 
Government Relations Office which advocates the interests of 
family farmers in Congress.
    Welcome. Congratulations on the farm bill. And, sir, you 
have 5 minutes to make your testimony.

  STATEMENT OF MR. TOM BUIS, PRESIDENT, NATIONAL FARMERS UNION

    Mr. Buis. Thank you, Madam Chair, for holding this hearing, 
and other members of the Committee. It is a real honor to come 
to the Small Business Committee to testify.
    We would like to say we represent farmers and ranchers, but 
they are small businesses, and I want to state for the record 
probably one of the biggest concerns that I hear around the 
countryside is this concern over the higher commodity prices 
and higher food prices. And a lot of people want to seem to 
point their finger at the farmers, but like any business, we 
have to make a profit. And if you look at commodity prices over 
the last 20 years, you will find very few years where our 
industry has been able to get back the cost of producing the 
commodities that we produce. In fact, over time, the average 
rate of return for our business is less than 2-1/2 percent 
return on investment. So it is not like every farmer is out 
there going to the bank and getting rich.
    Over the past 2 years, we have seen our input costs rise 
faster than the price of the commodities. If you look at all 
the energy that it takes to produce a kernel of wheat, a bushel 
of corn or whatever, it is tremendous. John Kennedy once said 
farmers are the only people who buy retail, sell wholesale and 
pay freight both ways. That needs to be updated and modernized 
to say we are also the only industry that pays the fuel 
surcharge both ways. We are price takers, not price makers. We 
can't pass on those costs. We are totally at the mercy of the 
marketplace.
    Having said that--I did put some extensive testimony 
together on what we see as the causes, and I would be glad to 
answer any questions. But roughly you can't blame corn ethanol, 
and for those people who do--number one, have you ever tried to 
eat field corn? The primary use for field corn is animal feed. 
And if you want to look at the price paid to farmers on 
livestock, dairy, it has all gone down in the past year. So 
when people try to blame corn ethanol for all of the increase 
in food prices, I think they are just using us as a strawman. 
It no doubt has increased the price of commodities, which 
needed to be, because the previous 10 years we averaged 
producing feed for animals at 27 percent below the cost of 
production. There was a very good study done by Tufts 
University showing the real beneficiaries of that. It wasn't 
the family farmers.
    Energy. Energy has such a direct input--impact on food. 
From the very start, all the fuel, the fertilizer, the 
pesticides, the storage, the drying, the handling is a big part 
of the farmers' input costs. But when it leaves the farm, then 
it is transported somewhere, more fuel. Then it is processed, 
which uses energy to process the product, whether it is corn 
flakes or ethanol or livestock feed. After it leaves there, it 
has to be trucked back to--either the distribution chain or the 
retail chain or elsewhere. And by the time that consumer gets 
it, the cost of $127-a-barrel energy is at least twice what the 
impact of that raw commodity is.
    Second big factor, weather-related production problems. 
Wheat is a commodity that is used for food, primarily for food, 
and last year in the growing season, we had worldwide weather 
production problems in all the major wheat-growing countries of 
the world. It wasn't that a bunch of wheat acres came out to go 
into corn ethanol. It was Mother Nature.
    Cause number three: the weak dollar. Since we left the gold 
standard in the early 1970s under President Nixon's 
administration, you can track high commodity prices with the 
value of the dollar. When the dollar is weak--and we reached 
30-year lows recently--commodity prices go sky high. Investors 
want to put money in to hedge against inflation. Other 
countries want to buy it with the cheap dollars that we are 
sending for their trade deficit; makes it an attractive buy and 
cheaper than it was when the dollar was strong.
    Four, speculators in the commodity markets. If you look at 
the real high, the record high commodity prices that we have 
reached, they occurred when farmers didn't have the grain. They 
didn't have the commodity. They occurred in a time period when 
farmers were thinking about planting or waiting for the winter 
wheat harvest. And those prices have now moderated in the 
production of wheat as we are getting ready to have a good crop 
in areas like Oklahoma, where we had a bad crop last year, and 
Kansas and elsewhere. So we will see those prices come down. 
And today the price of wheat in central Oklahoma is $7.70 a 
bushel, not the $15 that a lot of people will quote.
    I have got a lot in here I won't touch, and I know I am out 
of time. Let me offer a few suggestions for how we address it.
    Number one, we have to get a handle on the price of energy. 
I have read a lot of people's statements saying corn ethanol is 
the only thing we have any control over. I think that is 
totally false. I think that is a cop-out. We can do something 
about the high oil prices. We have recommended shutting off the 
purchases for the Strategic Oil Reserve. We have recommended 
opening the Strategic Oil Reserve. If it is not a crisis when 
gasoline is $4 a gallon, I don't know what is.
    And we also advocate for hunger, And the farm bill that was 
passed yesterday makes the largest commitment ever in our 
Nation towards hunger and nutrition programs. It needs to be. 
There are 26 million people in the United States that 
participate in these programs, and as a farmer I have to say I 
am ashamed that anyone goes hungry, because year after year, 
except in rare cases, we overproduce.
    Thank you, Madam Chair. I appreciate the opportunity and 
would be glad to answer any questions.
    [The prepared statement of Mr. Buis may be found in the 
Appendix on page 34.]

    Chairwoman Velazquez. Thank you, Mr. Buis.
    Our next witness is Mr. Geoff Tracy. Geoff Tracy is 
established in Washington, D.C. He is testifying on behalf of 
the National Restaurant Association. The NRA was founded in 
1919, and it is the leading business association for the 
restaurant industry. The NRA represents an industry comprised 
of 945,000 food service outlets employing 13 million people.
    Welcome, sir.

    STATEMENT OF MR. GEOFF TRACY, PROPRIETOR, CHEF GEOFF'S, 
    WASHINGTON, D.C., ON BEHALF OF THE NATIONAL RESTAURANT 
                       ASSOCIATION (NRA)

    Mr. Tracy. Thank you. Chairwoman Velazquez and Ranking 
Member Chabot and members of the Small Business Committee, 
thank you for the opportunity to testify today regarding food 
prices and the impact on small businesses like mine.
    My name is Geoff Tracy. I own three restaurants all within 
6 miles of where we sit here today. I believe in many ways I 
represent the American dream. I have combined hard work, 
education and an entrepreneurial spirit to create a small, 
successful business that employs over 200 people and serves 
more than half a million guests each year.
    I am here today on behalf of the National Restaurant 
Association, and I also serve on the board of directors of the 
Restaurant Association of Metropolitan Washington. As you know, 
restaurants have a huge impact on the U.S. economy. I am one of 
over 13 million people who work in restaurants in this country. 
And other than the government, we are the largest employer in 
the United States. Sales for 2008 are estimated to be $550 
billion. The industry serves 133 million guests a day, and 
every dollar spent dining out generates $2.34 in business for 
other industries.
    In short, we buy and sell a lot of stuff, creating a 
paycheck for a lot of Americans, and generating a ton of tax 
revenue. I am told that the total economic impact is $1.5 
trillion. That is a little bit beyond my scope of 
understanding. And in a world of big business; in a nation 
where big corporations outsource jobs to foreign countries; we 
remain an industry of small businesses and local operators. We 
are rooted in communities and our neighborhoods. Seven out of 
ten restaurants are single-unit operators, and if you have been 
to a charity gala and made a bid at a silent auction or looked 
at the sponsor of your child's Little League team, you know 
that restaurants contribute generously to the community. And, 
yes, there is a Chef Geoff Little League team.
    Right now we are facing a big challenge. The price of food 
is going through the roof. Food and beverage costs are one of 
the most significant line items for a restaurant in our P&L, 
accounting for approximately 33 cents of every dollar in sales. 
Profit margins are not big in the restaurant world; 9 out of 10 
restaurants don't survive the first 2 years of business. And 
those that do, the average restaurateur earns about a nickel on 
every dollar in sales.
    An increase in food costs can have a dramatic impact on the 
bottom line. The wholesale food price inflation we are 
currently experiencing is the highest it has been in 27 years. 
Last year wholesale food prices jumped 7.6 percent, and on a 
2008 year-to-date basis through March, wholesale food prices 
continue to rise at 8.5 percent.
    While the industry is used to fluctuations, recent 
increases are creating significant challenges. When I check the 
food deliveries in the morning and review the invoices, the 
numbers are not good. This year flour has risen 87 percent, 
eggs 73 percent, cooking oils 49 percent, cheese--one of my 
favorites--27 percent, rice 25 percent and milk 20 percent. 
This is on top of double-digit cost increases in the previous 
year.
    I am doing everything I can to keep my menu prices in line 
with what my guests perceive as value. I am switching around 
menus, modifying portion sizes, heckling my vendors. But I am a 
chef, not a magician. With skyrocketing wholesale food prices, 
the bottom line is going to get even smaller, or Americans will 
have to dig a bit deeper into their wallets to enjoy a meal.
    My vendors give me all the reasons why these prices are 
going up so dramatically, and I am always talking to my 
vendors. They tell me energy prices make it more expensive. 
They tell me that billions of people in China and India want 
the same items that I want, increasing demand and increasing 
price. They tell me it is the weather. My produce vendor is 
always giving me some excuse about the weather somewhere. My 
cheese guy tells me it is the weak U.S. Dollar, and my nice 
cheeses are going to cost me a few more bucks this year. And 
many of my vendors tell me it is about the corn and the grain, 
and that a larger share of the grain market is being diverted 
into ethanol and biodiesel production. And since the chickens 
and the pigs and the cows all eat the stuff, the price of my 
eggs, milk, cream, cheeses, oils, flours and seemingly 
everything else is going up and up.
    While many of these factors are out of our control, there 
are U.S. Government policies in place that are contributing to 
food price inflation. Food-to-fuel mandates and subsidies that 
encourage the use of grains for fuel instead of food should be 
revisited. These policies pit Americans' need for food against 
our need for fuel. While both are important priorities for the 
Nation, the restaurant industry supports the development of 
efficient, renewable fuels, including the promotion of the use 
of recyclable restaurant oils, something I do, while 
safeguarding against price distortions in the food supply. 
These price distortions have and will continue to impact our 
customers and small businesses. We urge Congress to examine the 
impact the food-to-fuel price mandates and subsidies have had 
on price increases.
    In conclusion, the NRA urges Congress to examine the impact 
of these mandates and subsidies in the context of national and 
global priorities. There are certainly many factors 
contributing to the sharp increases in wholesale food prices, 
but this is one within our control.
    Thank you again for the opportunity to testify today, and I 
appreciate all the time. I would be happy to answer any 
questions at the appropriate time.
    [The prepared statement of Mr. Tracy may be found in the 
Appendix on page 40.]

    Chairwoman Velazquez. Thank you, Mr. Tracy.
    Our next witness is Mr. Frank Formica. Frank Formica is the 
third-generation owner and operator of Formica Brothers Bakery 
in Atlantic City, New Jersey. Mr. Formica will be testifying on 
behalf of the American Bakers Association. ABA is a voluntary 
trade association designed to represent the interests of the 
wholesale baking industry at the national and State levels.
    Welcome.

   STATEMENT OF MR. FRANK FORMICA, FORMICA BROTHERS BAKERY, 
  ATLANTIC CITY, NEW JERSEY, ON BEHALF OF THE AMERICAN BAKERS 
                          ASSOCIATION

    Mr. Formica. Thank you, Madam Chairman Velazquez, Ranking 
Member Chabot, members of the House Committee on Small 
Business. Thank you for holding this critically important 
hearing on the impact of high food prices on small businesses.
    The current crisis has greatly impacted my business. I hope 
that today we can explore realistic solutions to the current 
situation.
    My name is Frank D. Formica, an Italian American baker 
proudly continuing over a century of family tradition in the 
baking industry. I am the owner of Formica Brothers Bakery in 
Atlantic City, New Jersey. Over the past 92 years, millions of 
customers have eaten sub sandwiches and bread made from Formica 
Brothers Bakery, including Frank Sinatra, the Beatles, Jay-Z 
and Garth Brooks, to name a few.
    On behalf of myself and the American Bakers Association, I 
appreciate this opportunity to highlight the critical status of 
our economy and the epidemic that is afflicting bakers and our 
customers across the country. In my case, over a century of 
family tradition is at risk of becoming extinct.
    The Formica Brothers legacy began over 100 years ago in the 
year 1900 when my grandfather Francesco and my grandmother Rosa 
emigrated from Sicily, Italy, and realized their American dream 
by building Formica's Bakery in Atlantic City, New Jersey. I 
grew up baking Italian bread alongside my grandfather, my 
father and uncles, and today we produce 40,000 pieces of bread 
a day, creating roughly 200 different varieties of handcrafted 
European breads, which are sold both wholesale and retail in 
the greater Atlantic City market.
    Yes, I am one of the vendors he tries to get down, but I 
don't deserve him.
    Our daily retail base of over 500 retail customers and 300 
wholesale customers and roughly 55 families who work for our 
bakery depend on Formica staying in business, a responsibility 
that I do not take lightly, and now one, quite frankly, that 
keeps me awake at night.
    Let me share a couple of examples of how the current 
conditions are impacting Formica's and our customers. Formica 
uses 50,000 pounds of flour a week. The price of flour had been 
relatively stable over a 20- to 30-year period, between about 
11 and 17 cents, an average of 14 cents. Starting in September 
of 2007, the price jumped until it reached a peak of over 60 
cents a pound. What did that mean for me? A year ago we paid 
$7,000 a week, $364,000 a year for flour. Today we are paying 
$20,000 a week, $1,040,000 a year for the same amount of flour.
    In addition to flour, all other ingredients have 
substantially increased. On top of the ingredients, the cost of 
distributing our products has soared. Further threatening my 
business and livelihood of the families--and my family, my 
employees are the fact that we use 600 gallons of fuel oil to 
deliver gasoline to our wholesale customers. Last year those 
costs averaged 1,200 a week, 62,000 a year. This year it is 
2,000 a week as we speak, $104,000 a year.
    In addition to the increased cost of flour and fuel, we 
have seen prices increase the entire inventory in products and 
services that we depend on to run our business. We have been 
able to pass on some of these increases to our customers 
through higher prices, but we absorb the majority of the cost, 
which has crushed our profit margin, a profit margin that I am 
fighting to keep above water for the first time in 92 years, 
and that includes the years of the Great Depression, which we 
operated straight through.
    Last year Formica successfully marketed high-protein whole 
wheat products to a school program manufacturer that was 
distributing to over 267 school districts on the east coast. We 
invested a half a million dollars in equipment and facilities 
to support this increase in business. As the price of 
commodities jumped, especially flour, and we had to pass these 
costs along to the manufacturer, the cost of producing these 
healthier products outstripped the already strained school 
budgets, and schools cancelled the program. As a result, I had 
to lay off many employees, try to recoup the costs associated 
with this lost contact.
    Other bakers have had similar experiences trying to provide 
healthy, low-cost meals to schools. High food and commodity 
prices have caused many factors--caused by many factors, 
including increased worldwide demand, a weakened dollar, 
adverse weather conditions such as last year's drought in 
Australia. We can't control them. We can't control the weather. 
We can control government programs such as the ethanol program, 
which distorts the marketplace by subsidizing crops for fuel 
versus food. Also in our control, are government programs that 
pay farmers not to farm land.
    On behalf of my customers, my employees, my family and my 
community, I ask that you consider and adopt the American 
Bakers Association action plan to ease the pressure on our 
foodstocks. Number one, the ABA urges Congress to ease ethanol 
mandates by immediately waiving the renewable fuel standard. 
That, coupled with eliminating the import tariff and the 
blenders' credit on ethanol, will allow our country to make 
progress towards renewable fuels, which we support wholly, but 
not at the price of sacrificing foodstocks.
    At this time with the worldwide food shortages, why is the 
government continuing to incentivize corn for ethanol and not 
corn for food uses? The U.S. has a finite number of acres to 
use for farming, and fuel crops have taken over many acres that 
were previously used to grow food. Where will the land come 
from to grow more crops to meet ethanol mandates? U.S. cropland 
is already stretched to the limit.
    The ABA urges Congress to consider the needs of consumers 
when supplies of wheat and other commodities drop to 
dangerously low levels. Historically U.S. Wheat stocks have 
averaged a 3-month supply. Current estimates have our wheat 
stocks down to 24 days, which means there is 24 days' worth of 
wheat based on our present demand, with an ever-increasing 
worldwide demand, the lowest amount since 1948. While recent 
USDA reports that the projected wheat plantings will increase 
by over 4 million acres, the USDA recognizes that any increase 
will be more than offset by the increased use and trade 
prospects which this government supports; meaning that the more 
wheat entering the food chain that we projected this year will 
do little to alleviate the current food crisis, let alone 
return us to the historical average stockpile, which was our 
cushion for bad weather.
    All of these assume normal weather patterns, but as farmers 
can tell you--I am sure they can--there is no such thing as a 
normal weather pattern. In fact, in March of 2007, the USDA 
projected similar positive outlooks; but that Easter weekend, a 
heavy freeze hit the Wheat Belt and devastated much of the 
anticipated crop. Unfortunately, our margin for error is gone.
    Lastly, the ABA urges Congress to address the increasing 
pressure on available farmland in the U.S. Currently 34.6 
million acres of U.S. cropland lay idle through a conservation 
reserve program, a noble cause. A significant portion of CRP 
acreage is located in large wheat-producing States. ABA 
believes that as much as one-third of the acres under contract 
for CRP could be returned to production without sacrificing the 
environmental goals.
    [The prepared statement of Mr. Formica may be found in the 
Appendix on page 48.]

    Chairwoman Velazquez. Thank you. Thank you, Mr. Formica.
    Our next witness is Mr. Daryl E. Thomas. Mr. Thomas is 
senior vice president of sales and marketing for Herr's Foods, 
Inc., in Nottingham, Pennsylvania. Herr's Foods, founded in 
1946, is a leader in the snack food industry. Mr. Thomas will 
be testifying on behalf of the Grocery Manufacturers 
Association. For 90 years, GMA's business initiatives have 
represented the industry interests.
    Welcome.

STATEMENT OF MR. DARYL E. THOMAS, SENIOR VICE PRESIDENT, SALES 
 AND MARKETING, HERR FOODS, INC., NOTTINGHAM, PENNSYLVANIA, ON 
              BEHALF OF THE SNACK FOOD ASSOCIATION

    Mr. Thomas. Thank you very much. Madam Chair Velazquez, 
Ranking Member Chabot and other distinguished members of the 
Committee. We thank you for the opportunity to come and to 
share with you today. I am also here today--I currently serve 
as chairman of the Snack Food Association, And so I am also 
representing those constituents.
    To do some background on Herr's, Herr's is a family-owned 
and -operated food company that was started 62 years ago by 
James S. Herr, my father-in-law. He too. Served as chairman of 
the Snack Food Association, and more recently served at 
chairman of the National Federation of Independent Business.
    Herr's employs 1,250 full-time employees. We are a full-
line manufacturer of salty snacks, including potato chips, 
corn-based tortilla chips. And I will say that the corn we use 
to make our tortilla chips looks like that corn, except it is 
off the cob. So it is a corn product like that. Our wheat 
flour-based pretzels--our company and our industry manufactures 
a broad spectrum of products, using the raw materials of wheat, 
corn, vegetable oil. Our products are affordable nutrition for 
consumers. They provide energy and also pleasure. I am here 
today to share the impact of rising fuel and commodity prices 
are having on our industry and on our business.
    Our cost to manufacture is skyrocketing. Consumer prices, 
as a result, are going up. Job security is being threatened, 
and, quite frankly, as a privately held company, one of the 
things we pride ourselves in is being very generous in support 
of charities and different causes, And that, too, is feeling 
the pressure of these higher costs.
    Herr's and our industry currently are facing unprecedented 
commodity price increases. Typically we have seen a 2 to 3 
percent increase over the years in rising costs, and in a 
pretty predictable fashion have been able to pass a lot of that 
on to the consumers to protect our bottom line and the well-
being of our shareholders and our stakeholders at Herr's. This 
year our costs are up 15 percent. Corn itself is up 30 percent. 
Vegetable oils that we cook with is up 124 percent, and wheat 
flour is up 82 percent. So all these commodities are seeing a 
dramatic increase. This current situation demands that we pass 
these higher costs of doing business on to our customers and 
the consumer.
    Thus far this fiscal year that we are in, we had to 
increase our prices 3 percent and anticipate another 5.6 
percent on top of that to just break even on our commodity 
prices that have skyrocketed. There has been a number of 
factors that are contributing to this such as the weather, 
surging economies around the world, market speculation. These 
things are beyond our control and not necessarily all 
unwelcomed. However, there is one thing that is most 
controllable and we believe requires immediate attention, and 
that is the Federal food-to-fuel or biofuels mandate.
    Last year the U.S. devoted roughly one-quarter of its corn 
harvest to ethanol production. That number is expected to 
surpass 30 percent this year and will keep growing if the 
alternative fuel mandates are met. Displacing such large 
quantities of our corn harvest in the fuel production is 
clearly having an impact on the stability of our food supply. 
If there are to be any additional unforeseen shortfalls, we do 
fear that there could be food shortages in the U.S. and around 
the world, as some countries are seeing already.
    Today as a representative of Herr's, of the Snack Food 
Association and the Grocery Manufacturers Association, I am 
hopeful that Congress and our legislatures will act quickly to 
revisit the mandate schedule and bring relief to the food 
manufacturers and consumers.
    I appreciate the opportunity to come and share with you, 
And I look forward answering any questions that you might have. 
Thank you.
    [The prepared statement of Mr. Thomas may be found in the 
Appendix on page 55.]

    Chairwoman Velazquez. Thank you, Mr. Thomas.
    Our next witness is Mr. Bob Dinneen. Mr. Dinneen is the 
president and CEO of the Renewable Fuels Association, the 
national trade association for the U.S. ethanol industry. Mr. 
Dinneen became president of RFA in July of 2001. Organized in 
1981, RFA provides advocacy and industry data to its members, 
Congress and Federal and State government agencies.
    Welcome, sir.

    STATEMENT OF MR. BOB DINEEN, PRESIDENT, RENEWABLE FUELS 
                          ASSOCIATION

    Mr. Dinneen. Thank you very much, Madam Chair and members 
of the Committee. Thank you for the opportunity to be here 
today and perhaps shed some light on solutions that we ought to 
be looking at in terms of food price inflation.
    I am very sympathetic to the plight of the witnesses here. 
I have been to Chef Geoff's restaurant. I disagree with him. I 
think he is a magician. And Mr. Thomas the snack food 
association has no bigger fan than Bob Dinneen. Their pain is 
real. The solutions they are suggesting are misplaced.
    As has been discussed already today, including in the 
Chair's opening remarks, the causes of food price inflation are 
several. It is indeed rising demand. It is indeed weather-
related issues, droughts in Europe and Australia last year that 
impacted wheat supplies. It is speculation in the marketplace. 
It is a result of the falling dollar that has encouraged 
greater exports. And it is most definitely the rising price of 
oil. You can't grow $2.50 corn on $4.50 diesel. And the fact of 
the matter is eliminating the "food-to-fuel" mandates, which 
might be a very clever phrase that some high-priced PR firm 
came up with, is really not based in reality.
    The production of ethanol is actually producing food and 
fuel because we are only using the starch in the production of 
ethanol. What is left from that ear of corn when we are done 
with it is all the protein, all the vitamins, all the minerals, 
and much of the feed value, which is then fed to livestock and 
poultry markets across this country. That is a very important 
point, because it is not simply we are utilizing so much of the 
corn crop, we are passing along most of the feed value from the 
corn that we are utilizing.
    Eliminating the renewable fuel standard, as has been 
suggested, would be moving in the exact opposite direction of 
what we need to do. We need to recognize the role of oil in 
inflation all across this country, including most specifically 
food price inflation, and recognize that the only thing that we 
have available to us to address that effect are biofuels. 
Ethanol is here today. The ethanol industry today is 147 small 
businesses across this country that are producing 8-1/2 billion 
gallons of high-quality renewable fuels that are blended into 7 
percent of the Nation's motor fuel--I am sorry, 70 percent of 
the Nation's motor fuel. Ethanol itself represents 7 percent of 
the U.S. motor fuel supply. If you were to eliminate that 
supply, the price of oil, the price of gasoline would skyrocket 
even further.
    A Merrill Lynch analysis that was quoted a few weeks ago 
suggested that crude oil prices would increase about 15 percent 
without world biofuel supplies. This morning we are looking at 
the highest gasoline prices in our Nation's history, on average 
$3.77. Where would they be were it not for the supplies of 
ethanol across this country? An Iowa State University analysis 
completed a couple of weeks ago showed that gasoline prices 
across the country would be 30 to 40 cents higher today if it 
were not for ethanol being blended into gasoline.
    Just yesterday the International Energy Administration 
noted that 63 percent of the increased demand for oil supplies 
was being met by world biofuels, and they expressed a great 
deal of concern about the backlash against biofuels, because 
frankly, there isn't anything to replace it. A refinery hiccups 
in this country, and gasoline prices skyrocket. Take 7 percent 
of the U.S. motor fuel market off of the supply, and you will 
see gasoline prices go through the roof, and that will hurt 
Chef Geoff, it will hurt food companies all across this 
country, it will hurt consumers directly, and hurt poor 
consumers most specifically.
    We have to continue the movement that this country has 
made, the commitment that this country has made to domestically 
produce renewable fuels like ethanol. It is the only tool that 
we have to provide a hedge against skyrocketing energy prices 
across this country.
    Thank you.
    [The prepared statement of Mr. Dinneen may be found in the 
Appendix on page 59.]

    Chairwoman Velazquez. Thank you very much to all of you for 
being here this morning and providing important insights into 
this important issue.
    Let me just say that the role that this Committee plays 
goes beyond small businesses sometimes, and in the sense that 
anything that is happening in Congress regarding legislation 
that is considered in other Committees where we can show that 
it impacts small businesses, we can play a role, and we can 
seek referral of those legislation to this Committee. And as an 
example, I will mention that both myself and my colleague, 
Ranking Member Chabot. We both were conferees on the farm bill.
    So with that, I just would like to begin asking each 
panelist to take a moment to discuss your thoughts as to what 
is driving the higher food prices. Some will point--and we have 
seen it this morning--to one particular thing, while others 
will suggest it is many different factors creating the perfect 
storm. So what do you believe is causing high food prices? And 
what do you see as an immediate solution? Mr. Buis?
    Mr. Buis. Thank you, Madam Chair. And thanks for all your 
hard work on the farm bill, you and Mr. Chabot. We appreciate 
it.
    I mean, you have to look at a variety of factors, and you 
have to address a variety of factors. Again, the price of oil, 
the price of gasoline, the price of diesel fuel is driving up 
everyone's costs. And food is very energy intensive from the 
farm all the way to the consumer.
    The second thing is definitely weather on wheat. You know, 
I hear about egg prices going up. I don't think anyone 
mentioned that. That was a disease in the laying industry that 
caused a lot of chickens to be put into the food system as 
opposed to use for laying eggs. It is not corn ethanol again.
    I also think you have got the problem with the weak dollar, 
without a doubt. We set record export levels on most 
commodities this year at the same time we had record high 
commodity prices. But those countries--other countries are 
actually paying less for our products because they are buying 
with the cheap, weak U.S. dollar.
    So I think that is the big factors. You can't--you can 
control a lot of them. I mean, by the time that food gets to 
the chef's table, there is also a lot of other factors, labor 
costs, health care. We can do something about health care in 
this Nation. We have ignored that for decades as well as the 
energy policy.
    Chairwoman Velazquez. But do you see any type of action 
that can be taken to address any of those factors that we are 
seeing?
    Mr. Buis. Absolutely. Again, open the Strategic Oil 
Reserve. Dip into it. Take that pressure off of an already 
short market.
    Number two, I think you can start to address some of the 
factors of distribution. We are getting ready to start a wheat 
harvest here in 2 weeks. We are going to have a good wheat 
crop, which will take pressure off of wheat, which is in short 
supply because of the weather. You know, sometimes you kind of 
have to be a little patient.
    One response to roll back the RFS would be the biggest 
mistake that Congress could make, because, number one, 30 years 
ago we had this wake-up call when we had the oil embargo from 
OPEC. We did nothing about it. We went to sleep time after time 
after time. Brazil, they took action. They became energy 
independent. It won't happen overnight. And if we pull the plug 
now, we will be pulling the plug on those future-generation 
biofuels feedstocks like cellulosic.
    Chairwoman Velazquez. Mr. Tracy.
    Mr. Tracy. Well, I am a chef, business owner. I don't 
understand these global economic situations. It is a very 
complex situation. I just know how it impacts me. And I guess 
if there is anything that can be done, I would ask people to 
consider every single option and--because it is multifaceted. 
And look at every single one. And the National Restaurant 
Association is saying in addition to looking at some of the 
other ones is to look at the renewable fuel production from 
nonfood sources, nonfood sources.
    So that is just--I just keep looking at these numbers, and 
they keep going up, and they are really aggressively going up, 
and ultimately I have to pass these prices on as a business 
owner because otherwise I am just not--I am not going to stay 
in business. Otherwise I am taking it out of the pocket of 
every American.
    Chairwoman Velazquez. Mr. Formica.
    Mr. Formica. Thank you again, Madam Chairman.
    Again, I just think it is simple. It is supply and demand. 
If there is not enough acres to grow the wheat here, and we are 
exporting it under our programs, and the demand is high, we 
have got to find a way to grow more wheat. To grow more wheat 
we need more acres.
    I want to make one statement about weather. Last year we 
came down here, March 12th, and we met with the USDA--I guess, 
department--Mr. Schafer--and he told us that we need--we need 
good weather. That will help us. But weather is not a solution. 
Last year we were told not to buy our wheat at 18 cents because 
it went up from 16, and we are going to get a good crop; 3 
devastating months later it was at 36. So weather is no the 
solution.
    And I think definitely relieving tariffs on importing 
ethanol is hurting the objective. If that is our objective is 
to get more ethanol-dependent in this country to get off of 
foreign imports, then why wouldn't we relieve the tariff on 
that as well as the blenders' credit? I think that will solve a 
lot of problems for both of us.
    Chairwoman Velazquez. Thank you.
    Mr. Thomas, do you have any comments?
    Mr. Thomas. Yes, thank you, Madam.
    I think the idea of reducing our dependency on foreign fuel 
and coming up with an alternative commodity is a commendable 
endeavor. I think the problem is that there was a failure to 
accurately assess the cost of that strategy.
    You know, there is a lot of things that have been listed as 
causes for the current situation that we are reporting to you 
on today. It has been described as the perfect storm with 
surging demand, weather, speculation, you know, all of these 
things have contributed. But to me one of the basic things that 
comes to mind is we are taking 30 percent of our corn crop and 
moving it out of the food supply. That has to have an effect on 
the prices of corn. When you take that much out of the market, 
there is going to be a shortage of corn. That is going to drive 
the price up, supply and demand. As the price went up, farmers 
are changing--naturally so--they are changing their crop 
strategy. They are moving from growing corn--or from wheat into 
these other products. And it has been exacerbated by the 
weather and the droughts that we have seen around the world.
    There is a lot of--all these things probably go together to 
contribute to the problem that we face, and the question in my 
mind is how can we quickly respond and bring relief to food 
companies, to consumers, because I think that we are on an 
upswing here, and I don't think anybody here has any idea today 
what this means going forward.
    But just from our vantage point as a small business, we 
can't take price increases fast enough to cover our costs, and, 
I mean, it really--it is diluting our bottom line, and I think 
it is going to have dramatic impacts that we are not going to 
like, and it is just going to continue to get worse unless we 
take a quick response. The easing of the mandate, I think, is 
the quick response that makes sense.
    Chairwoman Velazquez. Thank you.
    Mr. Dinneen.
    Mr. Thomas. Madam Chair, just quickly, because I know it is 
not Mr. Thomas' wheelhouse, but it wasn't actually 30 percent 
of the corn crop last year; it was 22 percent. And again, that 
is of corn use. And you have to consider the feed value as 
well, and that is ignored in that comment.
    In terms of what we can do, $125 barrel oil, that is what 
this is about. This isn't about food to fuel. It is about the 
crude-to-food connection.
    Chairwoman Velazquez. Let me ask you, either Mr. Dinneen or 
Mr. Buis. And you mentioned it, but it caught my attention, 
that Brazil, while we were sleeping at the switch, they were 
producing ethanol and invested a lot of money and effort and 
research in achieving energy independence. Can you--do you have 
any insight as to how is the situation in Brazil with food 
prices at this point?
    Mr. Buis. What it would put the prices at?
    Chairwoman Velazquez. On food.
    Mr. Buis. They are a big food producer, as we are, but you 
have to keep in mind also we are also big food exporters. And 
while Mr. Thomas, with all due respect, is talking about how we 
shorted the food market on corn, that is just not true. We 
produced the largest corn crop in our Nation's history last 
year in terms of acreage and in terms of volume, almost 3 
billion bushels more. Now, that equates to about the amount 
that went into ethanol. But on top of that, we exported the 
largest amount of corn ever in our Nation's history, almost 2-
1/2 billion bushels of corn. We can produce.
    An older farmer once told me the best solution for higher 
prices is higher prices, and we are going to see it. You are 
seeing transformation of corn acreage back to bean acreage this 
year. So soybean prices will come down. You saw more acreage go 
into wheat. Madam Chair, we can do all. And for those naysayers 
that say the sky is falling from corn ethanol, they need to 
take a long, hard look at the real facts.
    Chairwoman Velazquez. Thank you.
    Mr. Chabot.
    Mr. Chabot. Thank you, Madam Chair.
    Let me begin by just asking Mr. Buis on behalf of the 
farmers union and Mr. Dinneen on behalf of the Renewable Fuels 
Association--let me make sure I have got this straight. Both of 
you gentlemen believe that the--one of the major reasons for 
prices going up on food and wheat and everything else we have 
talked here, you would dispute the fact that diverting a 
significant amount of the corn crop and other crops is one of 
the principal reasons that the prices have gone up, having that 
go to ethanol basically. You would--you disagree with that 
premise; is that correct?
    Mr. Dinneen. Let me be clear. Certainly the increased 
demand for grain for ethanol production has had an impact,but 
the impact pales in comparison to all of those other factors 
that have been discussed today.
    Mr. Chabot. So an impact, but not a significant impact when 
you compare it to the other things?
    Mr. Dinneen. Nowhere close. And again, it gets right back 
to oil as being the driving force.
    Mr. Chabot. And I will get to that.
    Mr. Buis, you would agree with that?
    Mr. Buis. I do agree. I testified over in the Senate a few 
weeks ago, and next to me was the chief economist at USDA who 
said the same thing.
    Mr. Chabot. Mr. Tracy and Mr. Formica and Mr. Thomas, you 
gentlemen don't buy that, correct? You believe that is a 
significant part of it, the diversion into ethanol and others?
    Mr. Formica. Based upon the fact of how many acres that 
were planted by corn that previously were wheat, I mean, it is 
just a question of supply.
    Mr. Dinneen. Wheat acres actually went up last year, 
though. And they went up the last 3 years.
    Mr. Chabot. Let me get the other two gentlemen.
    Mr. Tracy. I guess on my side I think there are many, many 
causes. And I just think that the ethanol issue, the corn-
driven ethanol as opposed to other nonfood sources of ethanol, 
is just one reason.
    Mr. Chabot. Would you say a significant reason?
    Mr. Tracy. I have no idea.
    Mr. Chabot. Mr. Thomas?
    Mr. Thomas. I would say it is a significant reason. When 
you look at the crop reserves, they are at an all-time low. 
That went someplace. And it obviously has an effect on supply 
and demand on driving the price up.
    Mr. Chabot. Let me just stop there. I have got another 
question now.
    So there is just a disagreement on that particular issue 
relative to the fact that oil being so high right now, $125, 
$126 a barrel right now. It has been going up when people--it 
was thought that it could actually get to $100 a barrel, and we 
are beyond that now, and it wasn't that long ago. But obviously 
that is running up the price at the gas pump that consumers are 
paying.
    But the fact that oil is so high, then--that we are so 
reliant upon foreign energy, you would all agree that that is a 
big problem; is that correct? I am noting by the nodding of the 
heads that everybody agrees with that. Also you, Mr. Dinneen?
    So that is a problem. And I would argue--not necessarily 
argue, but make the point that I think to a great extent we are 
reaping really bad decisions that our government, whether they 
were Presidents or Congress, made over the years in doing a 
number of major things, one being restricting where we can go 
after energy that we have under our control, for example, in 
ANWR up in Alaska and the Outer Continental Shelf; that we have 
made it virtually impossible to build refineries in this 
country. We haven't built one since 1976. So even if we have 
the crude, we can't refine it quickly enough to actually 
utilize it. Boutique fuels, having to have this one in this 
State and that area makes it tougher to get the supply around 
efficiently. Not building nuclear power plants in 20 years in 
this country. France has 75 percent of their electricity 
generated by such facilities. So a number of decisions that the 
government made up here in Washington, D.C. That has affected 
these.
    Is there anybody that would disagree with the premise that 
that is one of the major problems that we are all facing now in 
these high costs at the gas pump, heating our homes, and what 
we are paying for food, a restaurant, whatever? Is there any 
disagreement on that point amongst the panel members here? Does 
everybody agree basically? I think everybody is affirming that 
they do.
    Let me--if I go to the restaurant industry, Mr. Tracy, how 
significant did the minimum wage increase have on your 
business? Was it a factor? Was it insignificant? What would you 
say?
    Mr. Tracy. I am--fortunately my wages are well above the 
minimum wage for all of my employees, and, you know, with the 
exception of if it had increased dramatically for tipped 
employees, which earn a lot more than minimum wage, but that 
has always been kept down to a level--a dollar increase on 
tipped employees would be a very significant cost. But over the 
last 5 to 6 years, there hasn't been any dramatic effect. Our 
wages have stayed well above minimum wage.
    Mr. Chabot. In your conversations with others in the 
restaurant industry, do you believe there has been an impact?
    Mr. Tracy. Minimum wage is something that the restaurant 
industry on a whole is concerned about. We have a lot of sort 
of beginning, entry-level members of our workforce.
    Mr. Chabot. Thank you.
    Mr. Formica, I think you were going to say something there.
    Mr. Formica. Similarly, we are well above minimum wage, and 
we have 300 accounts that are restaurants or delis or grocery 
stores, and it has never been discussed as a major issue.
    Mr. Chabot. Okay. And I am almost out of time here, but I 
do want to mention--I know we have been getting a lot of 
letters and phone calls from our local bakers making us aware--
not that we are not aware of it, but making us even more aware 
of the impact that the high cost of wheat--I think you 
mentioned on average 14 cents, and now it is up to 60 plus.
    Mr. Formica. It was 60. It is 40 right now. But I 
appreciate that.
    Mr. Chabot. So I would commend your colleagues for their 
effort to make us aware of it.
    I can't honestly say that Congress has acted to the degree 
it really needs to act to do really do something about that, 
but I would completely agree with the entire panel here that I 
think it is our responsibility to do something about these high 
gas prices.
    I know in Cincinnati, for example, Monday when I came up 
here, I bought gas in the morning, and it was like 3.69 a 
gallon. By the time I went to the airport a few hours later, 
all the ones that I had passed had gone up to $3.95 in 
Cincinnati, and it is really hurting an awful lot of people, 
and we absolutely need to do something about it. So thank you 
very much, and I yield back, Madam Chair.
    Chairwoman Velazquez. Thank you.
    Ms. Hirono.
    Ms. Hirono. Thank you, Madam Chair. Is this on? Thank you 
very much.
    I think one thing that this panel does point out is I think 
there is general--there is agreement that the high cost of oil 
is really driving much of everything, including gasoline, cost 
of fuel, transportation, all of that. And there may not be 
agreement on what part ethanol production has, et cetera. So I 
think it is really important as we proceed that we need to have 
fact-based solutions. We should not go charging off into so-
called solutions that really may not address the problem 
accurately.
    I do want to note that Mr. Buis--is that how you pronounce 
your name?
    Mr. Buis. Buis. You can tell I am bias.
    Ms. Hirono. Yes. I noted that you suggested that one of the 
things we should do is cut the subsidies, multibillion-dollar 
subsidies, to Big Oil, and that is a start. I would be curious 
to know what the other panelists think about that as an 
immediate kind of a thing that Congress could do.
    Mr. Tracy. Well, again, energy policy is not my level of 
expertise, but, you know, again, I think a comprehensive review 
of all of the factors is very critical. And as you said, so 
that we have some hard numbers and some real data so that we 
don't just act and then have to deal with the, you know, 
negative or positive results down the line, that we make some 
real positive and sort of long-term plans.
    Ms. Hirono. And that is what we are attempting to do in 
many of our Committees, not just this Committee, but the 
Transportation and Infrastructure Committee, the Energy 
Committee, all of these Committees. But as a start in a 
situation where Big Oil is making multibillion dollars in 
profit, record profits, does it make sense to you that we 
continue to give them huge subsidies, taxpayer subsidies?
    Mr. Formica. It depends if the subsidies were put in place 
for them to perform in the marketplace. They were supposed to 
go out and find other sources, find other resources, do 
search--I mean, I would not know, again, similar to a 
restaurant owner or the baker owner, not having the expertise, 
but certainly knowing good business practice, if the government 
put those subsidies in place so that it could stabilize our oil 
supply, maybe it is just the enforcement of what they are 
getting the subsidies for that would solve the problem.
    Mr. Dinneen. I guess I am shocked to hear the bakers defend 
subsidies to oil and at the same time be suggesting that we 
should be eliminating subsidies for the domestic renewable 
energy industry. I find that hard to believe when we are 
looking at $125-a-barrel oil.
    I agree with you, Congresswoman. We ought to be looking at 
this issue and from a fact-based standpoint. But as some people 
have suggested on this panel, and Governor Perry from Texas has 
called for eliminating the renewable fuel standard as the thing 
that is going to help reduce food price inflation--in fact, we 
looked at that very closely, and we determined that if you were 
to eliminate the renewable fuel standard in the way that 
Governor Perry from Texas has requested, gasoline prices would 
actually increase from $3.68 to $4.79. Now, I got into this 
business because I was never very good at math. But I think 
that is $1.11 on top of record-high gasoline prices. That will 
impact consumers. That will impact each one of these gentlemen 
and their businesses in a very meaningful way.
    Ms. Hirono. Mr. Thomas, did you want to add something to 
this discussion?
    Mr. Thomas. I would just echo that that is not my area of 
expertise either. I think any and all things should be looked 
at, and I think your point of the fact-based--there is 
information that I think at--we need to also keep in mind with 
the biofuel issue, and one of the points that was not brought 
up that I would like to just mention is that there is a lot of 
question around the efficiency of that as a real fuel source. I 
have seen a study reported on CNN that it requires over 20 
percent more fossil fuel to manufacture, refine and actually 
burn one of these biofuels.
    So I think the other piece is looking at the shortage. We 
can say that it is all of these petroleum products and the 
profits that these companies are making that is driving the 
fuel--the food price up, but the fact of the matter is there is 
a shortage. We have an all-time low reserve on our grain 
products. In fact, it was just recently reported that a 
national retailer is having to ration some of their products to 
their customers and stuff. I think there is a shortage, and it 
comes back to the supply and demand thing.
    Mr. Buis. I have to correct the record. There is not a 
shortage. In fact, we added to the surplus of production almost 
every year. We are short in wheat. We are short in some 
specialty rice that is imported into this country, not because 
of our production of rice. We have more rice than we have had 
in the last 3 years in the United States.
    Ms. Hirono. I think my time is almost up. Again, this 
discussion we are having points out how important it is to get 
our facts straight. I appreciate your comments.
    Mr. Formica. Just one comment, Madam Chair. I am just 
surprised that the Renewable Fuel Association wants to get rid 
of the subsidies for the oil companies, but wants to keep them 
for themselves, and I find that making my argument. Thank you.
    Chairwoman Velazquez. Ms. Fallin?
    Ms. Fallin. Thank you, Madam Chair.
    It is an interesting discussion. We appreciate all you 
gentlemen joining us here today. It is quite evident that the 
cost of food is rising for our families and our consumers and 
our businesses and the cost of fuel--
    I am one of those people who believe that we have to 
diversify our fuel sources and use all sources of fuel. And I 
am very concerned that our Nation spends so much money--it is 
estimated to be about $500 billion--in buying foreign energy 
from foreign countries and that we import about 62 percent of 
our energy needs for our country. To me, that is a national 
security threat and an economic threat to your businesses and 
our country itself.
    But I am very concerned about the cost of food and families 
and the price of gasoline and how it is affecting everyone. So 
I am interested in all your discussions about do we have enough 
corn? Do we not have enough corn? Are we taking away from the 
wheat market and the land that is producible for wheat? And is 
that driving up the cost that affects the food supply and 
everything else?
    But I was interest in your comment a minute ago--is it Mr. 
Dinneen?
    Mr. Dinneen. Dinneen.
    Ms. Fallin. Tell me again the costs if you were to 
eliminate ethanol corn production. You said the price of 
gasoline would go from $3 something to $4 something?
    Mr. Dinneen. When the analysis was run, the price of 
gasoline was $3.68 a gallon. That was a week ago. It is now 
$3.77. It was run based off of Governor Perry's request, which 
would be to eliminate 4.5 billion gallons of the 9 billion 
gallon renewable fuels standard. So only half. Some of the 
gentlemen have today testified that it should all go away, but 
just eliminating half of that and having to find 4.5 billion 
gallons of replacement energy would drive up gasoline prices 
$1.11 in the near term.
    In the longer term, the marketplace would adjust and the 
impact would only be about 13 percent. But, nonetheless, it 
would still have a dramatically negative impact, and the 
skyrocketing effect in the beginning would be very painful.
    Ms. Fallin. Well, my question was, in looking at $1.14, and 
I hope I read your--I was trying to follow the testimony. But 
didn't someone say that ethanol makes up about 7 percent of the 
fuels in the United States?
    Mr. Dinneen. Yes. I did.
    Ms. Fallin. So if it makes up 7 percent of the fuels, why 
would we have such a large increase in the cost of gasoline if 
we did away with it or even cut it in half?
    Mr. Dinneen. Because refinery supplies are so tight. There 
just isn't an additional 4.5 billion gallons of fuel supply to 
suddenly satisfy the increased demand.
    Ms. Fallin. And we have been talking about the increased 
demand of fuel.
    I have a report here--it is kind of interesting that it is 
from the U.S. Energy Information Administration--that states 
that if we discovered the renewable oil in ANWR it would give 
the United States 10.4 billion barrels of economically 
recoverable oil, which is twice the proven oil reserves in all 
of Texas, Mr. Gohmert. And I guess my question is, do you feel 
that if we were to allow more exploration production in the 
United States that it would help reduce the price of fuel, open 
up more supply in the marketplace and maybe have an effect upon 
food costs?
    Mr. Dinneen. Well, I absolutely believe that we need to be 
encouraging all forms of energy, particularly renewables, but 
all forms of energy. And our energy crisis right now is so 
significant we need to take aggressive steps to assure that we 
are maximizing supplies.
    I do think, though, that with respect to ANWR it would be 
10 years before you would see any gasoline from that region; 
and you have to look at what is available in the near term and 
what the consequences of actions might be in the near term.
    Ms. Fallin. You know, it is interesting that you say that. 
I was reading some reports from 1991, 1994 and debates in 
Congress about whether we should drill in ANWR or not; and back 
then one of the congressmen said that it is not economically 
feasible to drill in ANWR because a barrel of oil is $17. Well, 
if you look at it 10 years today when we didn't do it 10 years 
ago, now it is $124 a barrel. And 10 years ago we didn't think 
it would be worth it then, and here we are today in the mess we 
are in.
    Mr. Dinneen. Good point.
    Ms. Fallin. And, actually, we did pass it in Congress; and 
it was vetoed in 1994.
    Mr. Dinneen. And in 1990 they also didn't envision a 
renewable energy industry in this country as significant as it 
is today. But, thankfully, we made the investment then; and we 
need to continue it.
    Ms. Fallin. That is right.
    I think my time has run out. Thank you.
    Chairwoman Velazquez. Mr. Gohmert.
    Mr. Gohmert. Thank you, Madam Chair.
    Let me ask, you use the 10-year figure. I am on the 
National Resources Committee as well. And the most recent data 
that we have gotten makes me ask you, how recent is your data 
that says 10 years? That has been said for 10 years, but that 
is not the most recent data. How recent and current--I mean, 
you were testifying that 10 years--how recent is that 
information that you have?
    Mr. Dinneen. I think the last time I saw a figure might 
have been a month ago. But I would defer to your expertise on 
that. The fact of the matter is, it wouldn't happen in the near 
term.
    Mr. Gohmert. People in Alaska have said we now have a 
pipeline 74 miles from there, and we could have it online in 3 
years now. So that was the most recent information in the past 
week that I have heard. And I didn't know if yours was more 
recent than that.
    We just this week did a nice thing. We passed a bill that 
would hold up putting any--you know, 40,000 barrels a day into 
the Strategic Oil Reserve. Nice gesture. If we brought ANWR 
online, then you have a million to a million and a half barrels 
a day.
    We are playing around the edges with this thing. Natural 
gas--national farmers, you know what that does to the price of 
fertilizer. I mean, I am hearing from my farmers, the 
fertilizer is killing us. It is not just the corn that has 
gotten more expensive. The fertilizer is more expensive. And in 
some areas we have had too much rain; other areas we have had 
drought.
    In my area, we have more livestock, raise a lot of 
chickens, a lot of beef. Not so much the row agriculture.
    But it just seems that we have kind of a perfect storm 
right now between fuel costs and our refusal to deal with what 
we have before us. Some of the information that I have heard in 
the last few weeks, it is no secret that some--that the so-
called experts are saying 20, 30 percent of the price of a 
gallon of gasoline is speculation, and the speculators aren't 
stupid. They are looking at what we have done in the last 17 
months and they are saying, gee, everything you are doing puts 
your own energy off limits.
    We have made it more difficult to go after coal. We have 
put more of that off limits.
    We had a report in the last couple of weeks--some indicate 
there may be a trillion barrels of oil left in the entire 
Middle East. Schlumberger says if they would be allowed to go 
for it, they can recover 3 to 5 trillion barrels of oil from 
the shale in Colorado, Utah and Wyoming.
    We have got people that we thought were going to be onboard 
for doing what France did. And I am not an advocate for doing 
what France does on anything, but nuclear seems to work over 
there. And we have made that too difficult. We keep making it 
harder and harder to bring refineries online.
    So I did want to ask--and tell me how you pronounce your 
name.
    Mr. Buis. Bias.
    Mr. Gohmert. You touched on this in the written statement, 
it seemed. But how much acreage of corn is used for food stock 
versus that used for energy production right now? Do you know?
    Mr. Buis. Last year, it was 22 percent used for corn 
ethanol of which you still had a third of that value that went 
back into livestock feed. There is about I think 8 or 9 percent 
that goes into food uses. The biggest food use is fructose corn 
syrup.
    You know, I think, contrary to a lot of public opinion, 
what we are talking about using for ethanol is not sweet corn. 
It is not canned corn. There may be some tortilla snack food 
chips made. But tortillas and that tortilla protest in Mexico 
last year that corn ethanol got blamed for it, it is made out 
of white corn. And the United States is prohibited from 
providing Mexico with any more than 2 percent of their white 
corn needs under trade agreements.
    It is not used to make beer. Last year, before the Fourth 
of July, which is probably the biggest beer-drinking holiday in 
America, the beer breweries all blamed corn ethanol for raising 
the price of beer. Beer is made out of rice and barley. I am a 
corn farmer originally from Indiana, and I know they make 
drinking spirits out of corn. It is called whisky. It is not 
called beer.
    Mr. Gohmert. And it depends on the beer.
    Mr. Buis. Right.
    Mr. Gohmert. I don't drink alcohol, but I had a friend that 
said they sent in some beer--they were concerned about it--to 
be analyzed. And a report came back, we are sorry to inform you 
your horse has diabetes. So you never know what is in this 
stuff.
    But, anyway, this hearing is short. You have come a long 
way to give us your time and your information, and we will be 
looking at that. But it doesn't have to stop at this hearing; 
and I know, Madam Chair, we welcome their input after the 
hearing. Please don't let your thinking stop here. We need your 
help. We need your information. Put it together and try to come 
up with something that helps all of us. Thank you for your 
time.
    Thank you, Madam Chair.
    Chairwoman Velazquez. I have some other questions.
    Mr. Formica, in the Farm Bill that we passed yesterday, 
there is a program called the Conservation Reserve Program, 
which is a land retirement program. Farmers agree to not 
produce crops on this land for a duration of time because that 
land previously had been overused. There has been a lot of talk 
lately about opening acreage of that land to plant crops. Would 
you favor that?
    Mr. Formica. Absolutely.
    Chairwoman Velazquez. And do you believe that that will 
help alleviate some of the pressure on the market by planting 
the crop?
    Mr. Formica. Just by the mere fact we are only at a 24-day 
wheat supply when we usually depend on 3 months, that would 
have to add to our cushion in the case of another perfect storm 
down the line that we could depend on.
    Chairwoman Velazquez. Does any person on the panel have a 
different perspective?
    Mr. Buis. Absolutely, Madam Chair.
    The Conservation Reserve Program was created in the mid-
1980s to stop soil, wind and water erosion on farms. Much of 
the land that has been removed from production was done so 
because it wasn't suitable for farming. And now we have had 
some land come out of production. It is not at its all-time 
high. We are probably at the limit of what could come out and 
be reasonably farmed.
    That is not the cause of today's crisis. If you really want 
to look at wheat production, and despite what these gentlemen 
have been told, that corn is displacing wheat acres, that has 
occurred since the 1980s. Where a farmer can plant a higher 
value commodity like corn or soybeans or rice or cotton, they 
will do so because of the economics of it. And I don't know how 
you force people to plant a crop that they are not going to 
make a decent return on their investment.
    The wheat acreage that is displaced by corn is very 
minimal; and to open up the Conservation Reserve Program would 
open our country up to a lot more environmental challenges, 
whether it is silt running into the rivers, the tremendous 
erosion that occurs. You know, it was done for a purpose; and 
just opening up without looking at it I think is a big mistake.
    If the market says to that producer, I can make more money 
growing wheat than I can make growing corn, the farmers will 
grow wheat. We have just subsidized the end user of wheat for 
so many years. And we can see by that chart on the bagel. Even 
at today's record high prices on wheat, we are 7 cents out of 
that 95 cents. And the reason I used the bagel was The 
Washington Post had a headline story complaining that a bagel 
shop in Bethesda was going to have to raise the bagels from 95 
cents to $1.15 because of corn ethanol. No connection 
whatsoever. We could give them the wheat. They were raising it 
by more than that.
    Chairwoman Velazquez. Mr. Formica.
    Mr. Formica. I just wanted to ask, we are talking about two 
things. The Conservation Reserve Program is an environmentally 
sensitive program, is that not correct? So I am not talking 
about replacing wheat for corn. We are talking about farmers 
getting subsidized not to plant on their land at all. And 
studies have shown by smarter gentlemen than me and ladies than 
me that some of this land can be released out of the program 
for wheat production. I don't see how that impacts, you know, 
the corn for fuel program.
    And my question is--and I will defer to Mr. Buis--are there 
not farmers right now contracted in the reserve program that 
now at the price of wheat per bushel could make money by 
farming that for wheat?
    Mr. Buis. If you guaranteed them that speculative price we 
had in February and March, you might have. But, right now, 
wheat prices are barely above the cost of production.
    Mr. Formica. There was some interest in that not only 6 
weeks ago.
    Mr. Buis. This has to be factual based, and anyone who 
thinks that every farmer is getting $20 a bushel for their 
wheat is mistaken. The price in central Oklahoma today is 
$7.80.
    Chairwoman Velazquez. I will be the one asking questions.
    Mr. Formica, let's go back to corn and ethanol. Yesterday, 
in the Farm Bill that we passed, there is a provision contained 
in the Farm Bill that reduces the ethanol tax incentive by 6 
cents and creates a program for cellulosic ethanol made from 
grasses and biomass. Wouldn't this approach encourage 
alternative inputs by taking pressures off corn markets?
    Mr. Formica. Well, I don't pretend to understand the 
mechanics of that. But if anything--I don't know--it would seem 
that it would when I read this report. And I just was curious 
as to if we relieve the tariff import on ethanol, we really 
wanted to relieve the stress of this country, dependent on 
taking the 7 percent and maybe getting it to up 9 percent, 
couldn't that be done by importing through ethanol?
    Chairwoman Velazquez. Okay. Mr. Dinneen, do you believe 
this will solve part of the problem, by shifting from corn to 
alternative imports?
    Mr. Dinneen. There is no question that the industry is 
continuing to evolve. The foundation of the industry today is 
providing the base upon which a cellulosic second-generation 
ethanol industry will indeed develop. The legislation that you 
have introduced will encourage research into cellulosic 
ethanol, will certainly help.
    I would point out, however, that you are not going to have 
a second-generation ethanol industry if you don't have a first-
generation ethanol industry providing the markets, providing 
the infrastructure upon which that next-generation industry can 
grow.
    And just really quickly, because Mr. Formica has mentioned 
the secondary tariff on ethanol a couple of times, you should 
know that we actually do import a fair amount of Brazilian 
ethanol today. We imported about 450 million gallons last year. 
We are likely to import significantly more this year.
    The secondary tariff is not there as any barrier to entry. 
It is only there to offset the tax incentive that they then 
get. And if you were to eliminate the secondary tariff as he is 
suggesting, it just means that the U.S. taxpayer is subsidizing 
already highly subsidized Brazilian ethanol, and I am not sure 
that makes a great deal of sense.
    Chairwoman Velazquez. Okay. Mr. Gohmert, do you have any 
other questions?
    Mr. Gohmert. Yes. Thanks, Madam Chair. Just to follow up. 
And, actually, you stopped them going between themselves. I was 
enjoying them doing it instead of us up here.
    Chairwoman Velazquez. We will be here tomorrow at this 
time.
    Mr. Formica. We might still be here ourselves.
    Mr. Gohmert. But it does point out the problem we have. I 
mean, we disagree on the different ways to do things, but 
everybody here wants to be able to say we had the successful 
plans. So it is not like anybody is going into anything to 
fail. Everybody wants it to work. And you know, there is a 
great point that if the money is there, people are going to 
grow the crop.
    I have seen a presentation on Jatropha. Have you heard of 
that? It is a plant that grows in some areas where a lot of 
stuff won't grow, supposedly 10 times more efficient at 
producing ethanol. It is an impressive presentation. But I am 
sure there is a disagreement over that, too.
    But any solutions anybody has to propose we would welcome. 
Because one thing seems clear. It is going to take everything--
there is no one silver bullet. It is going to take everything 
we can.
    With regard to--I mean, coming back to the corn again, I 
mean, obviously, that has caused a great disagreement. And we 
have people on both sides of the aisle that disagree on that as 
well. I would just like to figure out what the truth is.
    So I would like to ask, any other thoughts?
    Yes, sir, Mr. Thomas.
    Mr. Thomas. Just one of the things that occurs to me--I 
mean, it is interesting. We are all sitting here, and with due 
respect to each of our individual organizations and companies, 
I mean, there is an economic incentive that, you know, we all 
have to kind of, you know, see the prices either come down or 
to protect income.
    I think the Farmers Union, obviously, their position is 
that they are getting a higher price for their grain products; 
and they want to protect that. I think the Renewable Fuels 
Association is likewise protecting the interests of their 
industry.
    It is interesting that I think that we are sitting here, 
though, and the argument today is about corn. And just a simple 
fact of supply and demand is, if the supply is as plentiful as 
is being suggested, I wouldn't think we would be having this 
argument. So I do think there is a force out there that has 
absolutely reduced the supply of corn. It is driving the prices 
up.
    And, Madam Chair, you mentioned about it, some suggestions, 
some ideas as to alternative things we might do. The concern is 
is that the mandate says 25 percent I think this past year, 30 
percent this year, and that number continues to go up, whether 
or not those ideas will help to ease the burden.
    But there is also going to be an increasing burden as we go 
along, and I would just plead for a quick response in whatever 
manner we can to bring the relief to the industry. But you 
know, I think, we appreciate your taking the weight of our 
concern; and it seems like you have personalized it as well. So 
thank you.
    Mr. Gohmert. Well, and I appreciate that.
    One of the things that seems could be the most immediate 
effect on the price of gasoline would be if the people who are 
driving the price up by 20 or 30 percent by speculating that it 
is going to go up were all of a sudden to think, uh-oh, 
Congress is really getting serious about this. They are really 
going to address this. Well, then the speculation takes the 20 
to 30 percent out, you know, in a week's time.
    So it would be nice if we could come up with a game plan 
that the leaders in Congress, Speaker Pelosi and Leader Reid, 
could announce that might just take that dollar off of gasoline 
right off the top quickly.
    But, Mr. Formica, do you have a--
    Mr. Formica. I appreciate it once again.
    I think it is great. I mean, at the end of the day 
everybody here has an interest that has to do not only with 
money but with families and lives and livelihoods. And on my 
mother's side of the family--I told you about my father's side. 
We had the largest farm in western South Jersey at the turn of 
the century. So we come from farmers on my mother's side, 
bakers on my father's side.
    I am sure, regardless of what anybody doesn't like about 
fuel industries, Mr. Dinneen's business has to do with that, 
too, but I just think that we have to come up with a solution 
when it comes to the food prices that are affecting us at the 
very base level of society, something necessary. If Congress 
was to come up with something that would at least put in a stop 
gap, when we go below 23 days, 20 days, whatever the 
intelligent people tell us, that Congress will step in and 
maybe do something about the speculating for commodity wheat. 
You know, I am even talking about corn or fuel now. I am just 
saying that we have got to do something that can maybe 
interlace all of the programs to stop the supplies from getting 
low.
    Mr. Gohmert. Regarding the bakers, one of the concerns that 
I hear--and we have really diverse interests up here pushing 
both sides--sugar. Any comments about that?
    Mr. Formica. Well, sugar right now is like people do not--
unfortunately, everybody can't just raise their prices and pass 
them on. People are changing recipes, getting out of 
different--making products. Sugar looks like it is going to go 
through the roof based on the most recent bill passed. And I 
can't even begin to, you know, know what prices are going to 
do. But, yes, it is a huge concern.
    Mr. Gohmert. Are you talking about the Farm Bill yesterday?
    Mr. Formica. Right. Right. What was done with sugar in that 
Farm Bill, again, just coming out as a reader of it, not an 
architect of it, looks unconscionable for people that depend on 
that commodity.
    Mr. Gohmert. Thank you, Madam Chair.
    Chairwoman Velazquez. Mr. Buis?
    Mr. Buis. I would like to comment about the sugar program. 
Actually, the way it is designed we are about to have a flood 
of imported sugar from Mexico because of the NAFTA agreement. 
And to help not disrupt the U.S. sugar production, that is 
going to be diverted to ethanol production. It is going to go 
into corn ethanol or to help relieve the pressure on corn.
    So, you know, we hear these fears all the time about high 
sugar prices; and you know it is--it is a domestic industry 
that has been here a long time. And just to displace it with 
imported sugar that is produced with labor standards way below 
the United States, environmental standards and health and 
safety standards that are not up to par with us does not make a 
lot of sense either.
    Chairwoman Velazquez. Okay. Mr. Cuellar, do you have any 
questions at this point?
    Well, gentlemen, let me just say that this has been one of 
the most exciting, enthusiastic, spirited hearings that we have 
held in this committee; and definitely we will continue to 
monitor the food price situation.
    Also, we will look at exercising our oversight role 
regarding some of the Farm Bill implementation impacting 
farmers and impacting small businesses.
    I want to thank you all for being here today, and I ask 
unanimous consent that members will have 5 days to submit a 
statement and supporting materials for the record.
    Without objection, so ordered.
    This hearing is now adjourned. Thank you.
    [Whereupon, at 11:34 a.m., the committee was adjourned.]

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