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

                         REVIEW OF ECONOMIC IMPACTS OF
                        ORGANIC PRODUCTION, PROCESSING,
                            AND MARKETING OF ORGANIC
                             AGRICULTURAL PRODUCTS

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

                                    HEARING

                                   BEFORE THE

              SUBCOMMITTEE ON HORTICULTURE AND ORGANIC AGRICULTURE

                                     OF THE

                            COMMITTEE ON AGRICULTURE
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 18, 2007

                                   __________

                               Serial No. 110-11

              Printed for the use of the Committee on Agriculture
                           www.agriculture.house.gov

                        U.S. GOVERNMENT PRINTING OFFICE
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                            COMMITTEE ON AGRICULTURE

                    COLLIN C. PETERSON, Minnesota, Chairman

    TIM HOLDEN, Pennsylvania             BOB GOODLATTE, Virginia
        Vice Chairman                        Ranking Minority Member
    MIKE McINTYRE, North Carolina        TERRY EVERETT, Alabama
    BOB ETHERIDGE, North Carolina        FRANK D. LUCAS, Oklahoma
    LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
    JOE BACA, California                 ROBIN HAYES, North Carolina
    DENNIS A. CARDOZA, California        TIMOTHY V. JOHNSON, Illinois
    DAVID SCOTT, Georgia                 SAM GRAVES, Missouri
    JIM MARSHALL, Georgia                JO BONNER, Alabama
    STEPHANIE HERSETH SANDLIN, South     MIKE ROGERS, Alabama
    Dakota                               STEVE KING, Iowa
    HENRY CUELLAR, Texas                 MARILYN N. MUSGRAVE, Colorado
    JIM COSTA, California                RANDY NEUGEBAUER, Texas
    JOHN T. SALAZAR, Colorado            CHARLES W. BOUSTANY, Jr.,
    BRAD ELLSWORTH, Indiana              Louisiana
    NANCY E. BOYDA, Kansas               JOHN R. ``RANDY'' KUHL, Jr., New
    ZACHARY T. SPACE, Ohio               York
    TIMOTHY J. WALZ, Minnesota           VIRGINIA FOXX, North Carolina
    KIRSTEN E. GILLIBRAND, New York      K. MICHAEL CONAWAY, Texas
    STEVE KAGEN, Wisconsin               JEFF FORTENBERRY, Nebraska
    EARL POMEROY, North Dakota           JEAN SCHMIDT, Ohio
    LINCOLN DAVIS, Tennessee             ADRIAN SMITH, Nebraska
    JOHN BARROW, Georgia                 KEVIN McCARTHY, California
    NICK LAMPSON, Texas                  TIM WALBERG, Michigan
    JOE DONNELLY, Indiana
    TIM MAHONEY, Florida

                               Professional Staff

                         Robert L. Larew, Chief of Staff

                         Andrew W. Baker, Chief Counsel

                William E. O'Conner, Jr., Minority Staff Director

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

                                   __________

              Subcommittee on Horticulture and Organic Agriculture

                    DENNIS A. CARDOZA, California, Chairman

    BOB ETHERIDGE, North Carolina        RANDY NEUGEBAUER, Texas
    LINCOLN DAVIS, Tennessee                 Ranking Minority Member
    TIM MAHONEY, Florida                 JOHN R. ``RANDY'' KUHL, Jr., New
    JOHN BARROW, Georgia                 York
    KIRSTEN E. GILLIBRAND, New York      VIRGINIA FOXX, North Carolina
                                         KEVIN McCARTHY, California
                                         K. MICHAEL CONAWAY, Texas

                    Keith Jones, Subcommittee Staff Director

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

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page
    Cardoza, Hon. Dennis A., a Representative in Congress from the
      State of California, opening statement.........................     1
        Prepared statement...........................................    47
    Neugebauer, Hon. Randy, a Representative in Congress from the
      State of Texas, opening statement..............................     3
        Prepared statement...........................................    49
    Peterson, Hon. Collin C., a Representative in Congress from the
      State of Minnesota, prepared statement.........................    50
    Goodlatte, Hon. Bob, a Representative in Congress from the
      Commonwealth of Virginia, prepared statement...................    52

                                   Witnesses

    Wilcox, Ms. Caren, Executive Director and CEO, Organic Trade
      Association, Greenfield, Massachusetts.........................     4
        Prepared statement...........................................    81
    Marqusee, Mr. Robert B., Director, Department of Rural Economic
      Development, Woodburry County, Sioux City, Iowa................     5
        Prepared statement...........................................   113
    James, Ms. Bea, Category Leadership Program Manager, National
      Cooperative Grocers Association, St. Paul, Minnesota...........     7
        Prepared statement...........................................   120
    Lipson, Mr. Mark, Policy Program Director, Organic Farming
      Research Foundation, Santa Cruz, California....................     9
        Prepared statement...........................................   126
    Vieira, Mr. Manuel, Owner, A.V. Thomas Produce, Livingston,
      California.....................................................    20
        Prepared statement...........................................   133
    Martens, Ms. Mary-Howell R., Lakeview Organic Grains, Penn Yan,
      New York.......................................................    21
        Prepared statement...........................................   137
    Lively, Mr. Scott, President and CEO, Dakota Beef, LLC, Howard,
      South Dakota...................................................    23
        Prepared statement...........................................   141
    Pike, Mr. Robert, Vice President/General Manager, Braswell Foods/
      Glenwood Foods, Nashville, North Carolina......................    24
        Prepared statement...........................................   149
    Marquardt, Ms. Sandra, President, On the Mark Public Relations,
      Silver Spring, Maryland, on behalf of Ms. La Rhea Pepper,
      President, Organic Essentials, Inc., O'Donnell, Texas..........    36
        Prepared statement...........................................   152
    Clarkson, Mr. Lynn, President, Clarkson Grain Company, Inc.,
      Cerro Gordo, Illinois..........................................    37
        Prepared statement...........................................   161
    Ghilarducci, Mr. Rich, President and CEO, Humboldt Creamery,
      Fortuna, California............................................    39
        Prepared statement...........................................   166
    Dawes, Ms. Nicole Bernard, President and COO, Late July Snacks,
      Hyannis, Massachusetts.........................................    40
        Prepared statement...........................................   170

                               Submitted Material

    Behar, Mr. Harriet and Mr. Aaron Brin, Sweet Earth Farm, Gays
      Mills, Wisconsin...............................................    54
    Birmingham, Ms. Dierdre, Owner-operator, Somerset Orchard and
      Farm, Mineral Point, Wisconsin.................................    56
    Brushaber, Mr. James R., Organic Producer, Beaverton, Michigan...    58
    Butterfield, Ms. Brenda A., Butterfield Organic Growers,
      Pittsfield, New Hampshire......................................    59
    Conner, Dr. David S., Ph.D., Researcher, East Lansing, Michigan..    61
    Diffley, Ms. Atina, Gardens of Eagan Organic Farm, Farmington,
      Minneosta......................................................    62
    Hildebrand, Mr. Stanley J., Organic Producer, Rutledge, Missouri.    66
    Kelly, Mr. Dan, Blue Heron Orchard, Canton, Missouri.............    67
    Lipson, Mr. Mark, Policy Program Director, Organic Farming
      Research Foundation, Santa Cruz, California....................    68
    Lubbert, Mr. and Mrs. Walter and Joyce, Organic Farmers, Mendon,
      Illinois.......................................................    70
    Martinell, Ms. Bonnie, CEO, On Thyme Gourmet Inc., Co-owner, Boja
      Farm, Bridger, Montana.........................................    71
    Miller, Mr. Tim P., Millberg Farm Certified Organic, Kyle, Texas.    73
    Rogers, Mr. David L., Farm Policy Advisor, Northeast Organic
      Farming Association of Vermont.................................    74
    Wilcox, Ms. Caren, Executive Director and CEO, Organic Trade
      Association, Greenfield, Massachusetts.........................    79

     HEARING TO REVIEW ECONOMIC IMPACTS OF ORGANIC PRODUCTION, PROCESSING,
                 AND MARKETING OF ORGANIC AGRICULTURAL PRODUCTS

                                  ----------

                           WEDNESDAY, APRIL 18, 2007

                      House of Representatives,
                              Committee on Agriculture,
           Subcommittee on Horticulture and Organic Agriculture
                                                        Washington, DC.
        The Subcommittee met, pursuant to call, at 10:00 a.m., in
    Room 1300 of the Longworth House Office Building, Hon. Dennis
    A. Cardoza [Chairman of the Subcommittee] presiding.
        Members present: Representatives Cardoza, Etheridge, Davis,
    Gillibrand, Peterson (ex officio), Neugebauer, Kuhl, and
    McCarthy.
        Staff present: Tyler Jameson, Keith Jones, Scott
    Kuschmider, Merrick Munday, John Riley, Sharon Rusnak, April
    Slayton, Debbie Smith, John Goldberg, Alise Kowalski, Pam
    Miller, and Jamie Weyer.

       STATEMENT OF HON. DENNIS A. CARDOZA, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Cardoza. Good morning. This hearing of the Subcommittee
    on Horticulture and Organic Agriculture, to review economic
    impacts of organic production, processing and marketing of
    organic agricultural products, will come to order.
        I want to thank you all for being here today, attending our
    hearing and taking time from your busy schedules to testify
    about the economic impacts of organics on agriculture. I want
    to acknowledge the absence of one witness from Mr. Conaway's
    district today. Mrs. La Rhea Pepper is unable to be here with
    us due to the passing of her husband, after a lengthy illness.
    The members of the Subcommittee extend our sympathy to Ms.
    Pepper and her family. In her absence, her oral testimony today
    will be read into the record by Mrs. Sandra Marquardt.
        Ladies and gentlemen, this is a historic hearing. Today
    marks the first hearing on organic agriculture ever to be held
    in the House Agriculture Committee. I am proud to be chairing
    this Subcommittee as we engage, for the first, time organic
    producers, processors, and manufacturers, in a substantial
    discussion of the challenges and opportunities facing the
    industry. But I must also commend Chairman Peterson for his
    leadership in acknowledging the important role that organic
    agriculture has to play in ensuring a prosperous U.S. farm
    sector by creating a Subcommittee to specifically monitor this
    industry as we write the 2007 Farm Bill.
        In 2005, the U.S. organic market grew 17 percent to reach
    $14.6 billion in retail sales. Organic food's share of the
    total retail food sales has reached 2.5 percent. Certain non-
    food sectors show even more remarkable growth. Organic fiber
    sales have grown over 44 percent in the past year; organic
    flour sales, over 50 percent; and today, organic products are
    rapidly becoming mainstream staples in high-end restaurants,
    sports venues, university cafeterias, club stores and other
    mass-market retailers. This broad acceptance and perception of
    quality is a far cry from where organic was just 20 years ago.
    It was once the domain of ugly broccoli, dried up apples and
    wormy tomatoes. Today, the industry offers to the American
    consumer high-quality produce, innovative salad mixes, full
    lines of convenience foods and dairy items. The product
    diversity represented here today by producers and processors
    witness a testimony in and of itself. Organic has arrived in
    the hearts and minds of the American consumer.
        Today, all the members at their daises are provided with
    cookies from the Late July organic company, and they were
    provided today by a witness on one our panels, Nicole Bernard
    Dawes, the President of Late July, who will be testifying
    later.
        There are, however, significant challenges to maintaining
    the growth and reputation of the U.S. organic sector. The first
    and perhaps foremost challenge is ensuring the continued
    integrity of the USDA organic seal. Consumers look to the
    USDA's green and brown seal as their assurance of the highest
    quality in organic products. In order to maintain its well-
    deserved consumer confidence, the National Organic Program must
    be adequately staffed so that it can provide the industry with
    timely responses to its questions and calls for new standards
    to exercise the appropriate oversight of accredited certifying
    agents, and to engage in the proper enforcement of regulatory
    violations.
        Furthermore, the rapid growth and demand for organic
    products in the United States has not gone unnoticed by other
    countries. Producers abroad are vying to meet the demand for
    organic products created by the U.S. consumer. I am extremely
    concerned that foreign imports, especially from those rising
    from agricultural giants like China, claim to be organic when
    they are failing to meet some basic standards for organic
    agriculture. The rapid increase in these so-called organic
    imports is further straining NOP's limited resources. As I am
    sure we will hear time and time again from the panel today, the
    integrity of the organic label is the most important, if not
    the only symbol, for consumer confidence. Any cracks in that
    system from products at home or abroad can cause significant
    damage to the industry and must be rectified immediately.
        Finally, we in Congress must work to ensure that organic
    agriculture is better integrated into USDA as a whole.
    Technical assistance for organic producers, through USDA
    extension programs, is often sporadic and its availability is
    uneven among extension agents. Organic farmers can be penalized
    simply for being organic farmers when assessing crop insurance.
    And finally, we must ensure the sector receives the research it
    badly needs to continue its remarkable growth.
        I look forward to hearing from the panels today and
    especially from one of my hometown constituents and dear
    friend, Mr. Manuel Vieira, from Livingston, California. With
    that, I now I yield to the Ranking Member, Mr. Neugebauer, the
    time for him to make his opening statement.

        STATEMENT OF HON. RANDY NEUGEBAUER, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. Neugebauer. Well, thank you, Chairman Cardoza. And of
    course, this is my first time to be in these new facilities
    here and I might add that we have traded up.
        Mr. Cardoza. We have moved up in the world.
        Mr. Neugebauer. Thank you for calling today's hearing on
    organic agriculture. I didn't realize that this was the first
    time a Committee had heard that, and so it is an honor to be a
    part of this very historic day, as we talk about the expanding
    organic industry.
        The National Organic Program is a successful voluntary
    marketing program, through standards that all producers and
    processors follow certification enforcement processes.
    Consumers know that when they purchase goods with the USDA
    organic seal, they are purchasing food that has been grown or
    raised in a certain manner. I emphasize that the NOP is a
    marketing program and it is voluntary, because I believe that
    these two features of the program have contributed to its
    success. For organic producers and processors, the demand for
    their products has been growing by nearly 20 percent a year.
    Entrepreneurs have realized this demand and have invested in
    supplying this growing market and they are receiving a price
    premium for their products. I understand that those in organic
    agriculture have a number of priorities for the 2007 Farm Bill,
    and I am interested in learning more from the industry on these
    proposals, given our limited resources and also given the fact
    that the marketplace has been good to the organic producers.
        There is an appropriate USDA role when it comes to
    maintaining the standards and certification behind the USDA
    organic label. USDA has the responsibility to ensure that the
    label means what it says. There is also an appropriate role for
    research and extension, and organic producers also benefit from
    the research and conversation programs that are available to
    all farmers. However, I am cautious about increasing the role
    of USDA in the organic marketplace and in producers' decisions
    on whether or not to engage in organic agriculture.
        I look forward to hearing more about your ideas for the
    2007 Farm Bill and learning from the organic producers and
    processors here today about the growth and changes in the
    market for organic products. Thank you, Mr. Chairman.
        Mr. Cardoza. Thank you, Mr. Neugebauer. The chair would
    request other members to submit their opening statements for
    the record so that witnesses may begin their testimony and we
    ensure that there is ample time for your questions. We want to
    start with panel one and we would like to welcome you all to
    the table. We will start with Mrs. Caren Wilcox, Executive
    Director and CEO of the Organic Trade Association, from
    Greenfield, Massachusetts. Welcome. Mr. Robert Marqusee,
    Director of the Department of Rural Economic Development,
    Woodbury County, Sioux City, Iowa. Thank you for being here,
    sir. Ms. Bea James, Category Leadership Program Manager,
    National Cooperative Grocers Association, St. Paul, Minnesota;
    and Mr. Mark Lipson, Policy Program Director of the Organic
    Farming Research Foundation, from Santa Cruz, California. Ms.
    Wilcox, please begin when you are ready. Each panelist will
    have five minutes. You are welcome to summarize your written
    testimony so that we can get to your questions as soon as
    possible.

    STATEMENT OF CAREN WILCOX, EXECUTIVE DIRECTOR AND CEO, ORGANIC
                           TRADE ASSOCIATION

        Ms. Wilcox. Thank you, Mr. Chairman, good morning, and
    Ranking Member Neugebauer and members of the Subcommittee. I am
    Caren Wilcox, Executive Director of the Organic Trade
    Association, OTA for short, the 1600 member business
    association representing all aspects of the organic chain,
    including farming, processing, distribution and retailing of
    food, organic textiles and personal care products. Thank you
    for this historic hearing. We do agree with you that it is
    historic. It has been my great opportunity to lead the Organic
    Trade Association for the last year, following a long career in
    the private and public sectors, almost exclusively involved
    with food and agriculture.
         You will hear today from several OTA members, who will
    talk about their individual experiences of going organic and
    how they have literally built their businesses often from the
    ground up. Perhaps the most important thing you will hear from
    many of them is the impact that organic agriculture has had,
    not only on their own wellbeing, but also on the economic
    growth of their communities.
        Certified organic production and processing starts with a
    positive system of farming that maintains and replenishes soil
    fertility without the use of toxic and persistent pesticides
    and fertilizers. It includes a system of production from farm
    to fork, so that we may maintain the organic integrity that
    begins on the farm. Organic foods must be produced without the
    use of antibiotics, synthetic hormones, sewage sludge,
    irradiation, genetic engineering and other excluded practices;
    and cloning animals or using their products is considered
    inconsistent with organic practice. For products that use at
    least 95 percent organic ingredients, the USDA organic seal may
    be used on a voluntary basis. You will see it on the Late July
    products, and we included it in our testimony.
        OTA studies the marketplace because USDA does not have the
    authority to do so comprehensively. And as the Chairman said,
    food and beverage sales were about $14.6 billion in 2005 and
    occupied about 2.5 percent of the retail marketplace. The
    fastest growing organic product categories include meat, dairy
    and condiments. Fruits and vegetables, many from California,
    Mr. Chairman, represent the largest dollar value category in
    the organic sector. Pet food was growing as a category even
    before the latest tragic recalls and it is growing even faster
    now.
        Now, I do want to talk about farmland, which is not growing
    as fast in terms of certification. ERS tells us that .5 percent
    acreage of cropland and .5 percent of pastureland are certified
    organic acres. The national standards were implemented in 2002,
    so we hope that additional acreage is now reaching certified
    organic status after its 3-year conversion. But it is clear,
    U.S. farmers are not keeping up with consumer demand for
    organic products in the United States, and the government does
    not collect import data on organic goods, but imports must be
    substantial. We want to enhance the ability of U.S. farmers to
    provide as much organic food, fiber and other organic products
    as possible for our country. To that end, we have four
    objectives in the farm bill: providing technical and conversion
    assistance and cost-share certification for farmers; we also
    need to overcome hurdles of data collection, including organic
    prices, markets, crops, farms, processors and crop loss
    experience. It is almost entirely absent now from the USDA's
    lexicon and this data is critical for organic growth, not only
    for its own sake, but because we need it for our crop insurance
    and banking needs. USDA is known across the world for research
    and you will hear a little bit more about that later, but we
    only get a tiny share. And finally, we need to be sure that
    USDA, in general, and the National Organic Program,
    specifically, have the resources to keep up with the dramatic
    growth that organic certification programs demand. Consumers
    need to have confidence in the label and USDA's attention to
    NOP will ensure that fact. We need your help with this.
        Organic offers rural America's farmers, and its shoppers
    alike, a choice of wonderful products, while contributing to
    the protection of our land, air and water. Frankly, what we
    need is parity of resources to build sound infrastructure as we
    compete in the marketplace with conventional food and products
    of biotechnology. We look forward to working with the members
    of the Subcommittee and the Full Committee to achieve great
    results. That you for this opportunity.
        [The prepared statement of Ms. Wilcox appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you, Ms. Wilcox. Next for the panel we
    have Mr. Robert Marqusee, Director of the Department of Rural
    Economic Development. Sir, welcome to our panel and please
    proceed with your testimony.

    STATEMENT OF ROBERT B. MARQUSEE, DIRECTOR, DEPARTMENT OF RURAL
                          ECONOMIC DEVELOPMENT

        Mr. Marqusee. Thank you very much. My name is Robert
    Marqusee and I am the Director of Rural Economic Development
    for Woodbury County, Iowa, which is the Sioux City area. I want
    to thank the Chairman and the Ranking Member and the entire
    Committee for this awesome responsibility to communicate to
    this group and to the government the devastating effects of
    subsidized industrial farming and what those effects are on the
    rural landscape, and what we in Woodbury County have done by
    way of local policies promoting organic agriculture to
    counteract those impacts.
        When I began my position in March of 2005 as Rural Economic
    Development Director, our rural communities were long in
    decline. The average loss of population in our rural non-
    bedroom communities was about 25 percent and the folks who
    remained in those communities were aging. This is typical of
    rural communities throughout the State of Iowa, where the
    average age of the farmer is 55 to 60 years old, most of the
    land is cash-rented, 25 percent of the land is owned by
    individuals aged 75-plus, and farms are getting larger and
    larger, a 78 percent increase in farms exceeding 1,000 acres,
    pushing out the small to midsized farm operations. As the Des
    Moines Register concluded in a special 2-part report, the
    continued industrialization of farming will promote fewer
    owners of land, faster decline in rural populations, less
    income and a strain on the environment.
        I quickly discovered that the reason for this sad state of
    affairs was twofold. Federal farm subsidies, in the advent of
    chemical farming, encouraged large corporate farms that produce
    less diversified crops with less labor, higher input and
    environmental costs, all of which shattered the previous local
    agricultural economies. A lot of money was flowing out of the
    county. The results of that policy have been the consolidation
    of farms and the elimination of next-generation farmer. In
    addition, I found that 10 percent of the farmers receive
    approximately 80 percent of the subsidies. Despite millions of
    subsidy dollars being paid to farmers, there was a net loss
    growing the directed corn and soybean. In other words, I found
    our rural communities in crisis and I expect at least half of
    our rural communities to disappear within the next 10 years.
    There is no debate as to the cause of this decline.
        So Woodbury County enacted two policies, trying to reverse
    the fortunes of the rural communities. We needed to recreate
    the economic dependencies of producers, local markets,
    distribution and storage. Our only option was to counter the
    negative economic forces that was creating the problem. We
    passed the first policy in the Nation that provides a hundred
    percent real-property tax rebate to any farmer who converted
    from conventional to organic farming practices. Then we passed
    a mandatory local food purchase policy requiring the county to
    purchase locally-grown organic food for its jail, juvenile
    detention center, and work release program. We now have a local
    organic food restaurant, a market store, farmers market, a
    local foods broker and soon-to-be-announced regional foods
    brand. A neighboring county has enacted the Woodbury organics
    conversion policy and two others have indicated that they will
    adopt a similar policy this year.
        A major problem has been in supply and this is really the
    crux of the matter. While the demand is high, our aging farmers
    are trapped in the subsidy treadmill. There are few young
    farmers left in these communities and most economic development
    activities focus on erecting ethanol plants. It should be noted
    that the rush to ethanol as a prime economic development tool
    does nothing but put industrial farming on steroids. The
    monetary incentives associated with high corn prices is to
    eliminate crop rotations, level scenic hills in search of more
    producing land, increases land prices, has higher input costs,
    most of the benefits going to the landowner and not the cash-
    rent farmer. As for the supply of organic products, it is hard
    to compete with a system of Federal and market supports so
    totally dedicated to industrial agriculture. The demand is
    there. Organic food is the only growing segment of the food
    industry, yet Federal policy does not promote, on equal
    footing, the organic food industry. Therefore the trade
    imbalance will continue to grow while consumers demand the
    better organic choice. This situation simply does not make
    sense.
        We in Woodbury County are doing everything we can to
    reverse the trends in our rural communities. However, without a
    significant modification of Federal farm policy, the picture of
    rural America will be bleaker and beyond repair in the very
    near future. I have submitted written testimony which contains
    a coherent detail of what I have said today and I request that
    it be accepted for the record. Thank you very much.
        [The prepared statement of Mr. Marqusee appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you, sir. Your testimony will be
    included in the record.
        Mr. Marqusee. Thank you.
        Mr. Cardoza. Next, we have Bea James from St. Paul,
    Minnesota. Welcome. Thank you very much for being here and
    please proceed with your testimony.

     STATEMENT OF BEA JAMES, CATEGORY LEADERSHIP PROGRAM MANAGER,
                NATIONAL COOPERATIVE GROCERS ASSOCIATION

        Ms. James. Mr. Chairman and members of the Subcommittee,
    good morning. My name is Bea James and I want to thank you for
    giving me the opportunity to speak to you today. My testimony
    will provide a brief overview of the delicate integral working
    relationship between local organic farmers and retail
    cooperatives, as well as the thriving economic results produced
    by this relationship.
        I have worked in the natural organic food industry for more
    than 20 years and have a variety of combined experience,
    including distribution, production and purchasing in mass
    market as well as co-op store formats. I currently manage the
    Category Leadership Program for the National Cooperative
    Grocers Association, NCGA. I also hold the retailer seat on the
    USDA National Organic Standards Board, although my comments
    today do not represent those of the NOSB. I am a member of the
    Minnesota Department of Agriculture Organic Advisory Task
    Force. Although I am not an economist, I would encourage you to
    read Bill McKibben's book Deep Economy. His book offers
    compelling economic facts about the current need to pursue
    prosperity in a more local direction, with communities
    producing more of their own food.
        My point today is simple, so I will make it right off. The
    local organic farmer, as an individual and as a member of a
    larger community, has a positive impact on the thriving success
    of our communities, our economy and the integrity of organic
    agriculture. I am here before you today on behalf of the NCGA,
    a business services cooperation for natural food co-ops located
    throughout the United States, which include more than 130
    independent co-op storefronts where you will find beautiful
    broccoli and not rotten tomatoes, fresh and beautiful, in 32
    States, with combined annual sales of nearly $800 million.
        Organic agriculture is undoubtedly a bright spot in
    agriculture today. Despite the difficulties in making the shift
    to organic farming, the rewards are great for those farmers who
    truly make the commitment to do so. But the rewards for organic
    farmers are dependent on consumer acceptance and access to
    their product. And here is where the role of the NCGA starts.
    NCGA is working to provide markets for small, local sustainable
    and organic farmers. This partnership not only ensures
    consumers have a broad array of organic products available in
    their stores, but also makes sure that the infrastructure of
    this symbiotic relationship is contributing to a thriving
    community of economic growth and development.
        In a general survey conducted by the NCGA, we learned that
    many of our co-ops are sourcing over 15 percent of their
    products from local producers. As a group, in the Minneapolis/
    St. Paul area, 12 co-ops alone have estimated that almost 19
    percent of their retail sales come from local purchases. The
    NCGA works with thousands of local farmers and producers across
    North America and we are proud that our co-op members have a
    first-name working relationship with them and their families. I
    would like to share with you 1 of 3 economic success stories
    that I have submitted in my written testimony to illustrate the
    symbiotic relationship between farm and community.
        In New Prague, Minnesota, the Minar's third-generation farm
    is thriving, but this would not have happened without the co-op
    partnership. The Minar family farm goes as far back as 1926 and
    7 years ago the Minars decided to commit to sustainable
    agriculture and began selling their milk in glass jars to only
    6 co-ops in the Twin Cities area. In 2004, they became USDA
    certified organic and today their Cedar Summit Farm products
    can be found in more than 90 retail outlets throughout the
    Midwest. As Dan Minar put it, ``we would not be where we are
    today if it was not for the co-ops. Our sales started with them
    and our success is because of them.'' There are two other
    examples that I have submitted and I encourage you to please
    read them. There are hundreds of other examples that I could
    refer to. I hope that you value how these examples illustrate
    what is clearly a win-win-win situation for the farmer, the co-
    ops and the consumer.
        Organic consumers have a strong philosophical desire to
    support local agriculture and value the quality and freshness
    they receive in doing so. Organic consumers also appreciate the
    smaller ecological footprint the distribution of local organic
    food makes, enjoy knowing organic farmers and value the
    connection their purchases given towards the food they are
    eating. The small, local organic farm adds to the integrity and
    value of the organic label by creating these hands-on
    experiences in their communities. If we are to maintain the
    hope and promise that organic agriculture has become, it is
    critical that we meet the consumer demand with ample supply and
    continued standards based in organic integrity. Simply put, we
    need more organic farms and continued government funding for
    expanding the organic sector in agriculture. The circle of life
    illustrated in my examples depends on it.
        Attached to my written testimony is a summary of the NCGA
    and the National Organic Coalition 2007 Farm Bill priorities,
    on a wide range of issues and programs and I urge your strong
    consideration of these proposals. Mr. Chairman and members of
    the Subcommittee, I thank you and I encourage you to recognize
    that local organic farms are vital to the success of the
    communities we all live in.
        In conclusion, my point today still remains, the local
    organic farmer, as an individual and as a member of a larger
    community, has a positive impact on the thriving success of our
    communities, our economy and the integrity of organic
    agriculture. Thank you.
        [The prepared statement of Ms. James appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you very much. Next up on our panel is
    Mark Lipson from Santa Cruz, California. Mark has testified at
    one of my listening sessions in California previously and we
    welcome you to Washington, sir. Please proceed.

      STATEMENT OF MARK LIPSON, POLICY PROGRAM DIRECTOR, ORGANIC
                      FARMING RESEARCH FOUNDATION

        Mr. Lipson. Thank you very much, Mr. Chairman, and thank
    you, Mr. Ranking Member. My name is Mark Lipson and I represent
    the Organic Farming Research Foundation, which was founded in
    1990 by organic farmers to promote the improvement and
    widespread adoption of organic farming practices.
        The Nation's 10,000 certified organic farmers are the
    leading innovators of ecologically-based agriculture. Their
    entrepreneurship is the foundation of the economic success that
    organic foods and fiber are enjoying in the marketplace. These
    organic farmers are in every State and region of the country.
    They grow every type of crop and livestock that is produced in
    the United States. On behalf of these producers, I thank the
    leaderships of the Full Committee and the Subcommittee for this
    historic opportunity. We respectfully look forward to building
    the information record with you and doing our part to craft
    Federal policy that contributes to the wellbeing of all of the
    food and farming system in the United States.
        Organic agriculture makes strong and unique contributions
    to all of the strategic goals for agriculture, productivity,
    conservation, rural development, health and safety and trade.
    Because of these multiple benefits, support for improving and
    expanding organic agriculture is one of the best investments
    that you can make with the limited resources available to you.
    The highest payoff target in this investment strategy is
    organic research and education. Organic agriculture is based on
    natural processes of soil fertility and ecological management
    of pests and diseases. Most agricultural technology is directed
    at simplifying the farm landscape. Organic systems require
    complexity and diversification. Successful organic management
    is information-intensive. There is no simple recipe but
    knowledge is always the key ingredient.
        Lack of research and education in organic agriculture is
    inhibiting growth of this sector. There is an accelerating
    decline of the U.S. share in the rapidly growing domestic
    markets. Notably, this lack of research and education applies
    both to new and novice farmers making the transition, as well
    as veteran growers facing technical limits to their expansion.
    The lack of statistical data and current market information is
    hurting organic producers and inhibiting growth in several
    ways. Capital and credit be difficult to obtain because there
    isn't reliable data to back up business plans and budgets.
    Organic producers are currently charged a 5-percent surcharge
    on crop insurance premiums.
        It is also notable that the regulatory program for the
    organic label is affected by the lack of research support. The
    National Organic Program within USDA/AMS is trying to solve
    some complex regulatory questions that were not fully
    anticipated in the 1990 law. All of these issues need but
    severely lack scientific data to inform the policy formulation.
    In producing, in marketing and in maintaining the integrity of
    the label, information is a limiting factor to growth and
    success.
        Now, deliberate Federal investment in organic agriculture
    research and extension did not begin until 2001 and it remains
    miniscule. USDA's total spending for research, education and
    economics is about $2 billion a year. Less than one percent of
    that now is specifically directed at the needs of organic
    production. With these very small resources, there is excellent
    work being done in each of the USDA's research agencies, and in
    my written testimony, I have summarized some of this and I will
    be happy to talk about that more. Overall, these programs have
    succeeded at creating a good set of prototypes scattered around
    different parts of the country, good models, but we have only
    begun to address the backlog of basic and applied organic
    systems research.
        OFRF has provided recommendations for policy targets and
    program objectives in the 2007 Farm Bill that are attached to
    our testimony. There are a variety of ways to meet these
    targets. We look forward to discussing these as the Committee
    proceeds to work on specific legislative proposals.
        America wants organic foods and fiber. America wants
    organic family farms in the landscape. Beginning farmers want
    to participate in the organic market. Our country needs a
    diversity of approaches to the very serious challenges we face
    in dietary health, energy and environmental conversation and
    rural economic development. Relatively modest investments in
    scaling up organic agriculture can help provide solutions in
    all of these areas and provide a tremendous return to our land,
    our health and our economy. Thank you very much for the
    opportunity to testify today, and I do ask that I may revise
    and extend these comments in the written record with additional
    data.
        [The prepared statement of Mr. Lipson appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you very much. You will be able to add
    to your testimony as we go forward. I just want to make a
    personal note that my wife is a family doctor. For several
    years now, she has moved the family into a more organic mode.
    In fact, we get a box of fresh fruits and vegetables delivered
    to our house every week, all organic, and it has helped my
    children, who shun fruits and vegetables of all kinds, to now
    appreciate it more, as we require them to finish the box before
    they can go on to other things.
        We will now move on to questions and the chair would like
    to remind members that they will be recognized for questions in
    order of seniority, for members who were here at the start of
    the hearing. After that, members will be recognized in order of
    arrival, and I appreciate the members understanding. I would
    like to start. Well, at least let me acknowledge Chairman
    Peterson's arrival.
        Mr. Peterson. Well, Mr. Chairman, thank you for that and I
    want to thank you and the Ranking Member for your leadership.
    And we are, you know, going to put some focus on this issue in
    this Committee and I think there are lots of opportunities here
    for folks in agriculture, especially young people, and so we
    appreciate your leadership and we appreciate you holding this
    hearing.
        Mr. Cardoza. Thank you, Mr. Peterson. I want to recognize
    that you have been an outstanding Chairman on how you have
    conducted the Committee so far this year and we look forward to
    big things in the farm bill, accomplishments that will largely
    be at your direction. One of them is this historic hearing
    today, where you have set up this Subcommittee and led us on a
    new path and we thank you for that.
        I will kick off the questions, then I will turn it over to
    my colleague, Mr. Neugebauer, to ask a set of his own
    questions. I would like to start with Ms. Wilcox, in my first
    question. In your written testimony, ma'am, you highlight the
    difficulties with crop insurance for the organic industry.
    Could you expand on this issue?
        Ms. Wilcox. Yes, Mr. Chairman. As my colleague Mark Lipson
    said and as we say in our written testimony, farmers have a
    very difficult time with crop insurance. Initially, they
    weren't permitted to get Federally covered crop insurance at
    all. And then there was a ``remedy'' for that, where they are
    now permitted to pay an extra five percent and be compensated
    at the conventional rate if they have a loss. So they have
    inputs that are more comprehensive than a conventional farmer
    would have and yet, if they have a loss, they do not get that
    compensation. There are also some problems in them being
    covered by the NAS Census, which impedes some of their disaster
    assistance, also. But just on the crop insurance issue, that is
    why we are very, very concentrated on trying to get good data.
    We are told that one of the reasons is that, of course, we need
    to have actuarial data in order to write an insurance product.
    And having worked at the Department, I do understand that the
    Department does have some criteria for that. I think we have a
    good chance, if we can get the data, to have a good analysis
    done in the Department, a quick one, that will permit crop
    insurance to be issued on a much more equitable basis, with
    parity toward the conventional and biotech community, which
    doesn't pay five percent and gets compensated for their loss.
        Mr. Cardoza. Thank you. As a follow up, again, in your
    written testimony you state that the 3-year transition period
    is essential to create a working organic farm, yet you
    acknowledge the difficulties new entrants face during the
    transition period. Is this a technical assistance issue? Is it
    a financial assistance issue? What are the challenges that you
    are facing?
        Ms. Wilcox. Well, the farmers report to us and I think that
    Mark would probably want to comment on this, too. They report
    to us that the conversion process can be quite daunting. First
    of all, as you acknowledged, it is very difficult for them to
    find advisors, in terms of going to organic. The extension
    system is very uneven in that process. We have a couple of
    States where extension is very pro organic and they have a lot
    of good information. But we also have areas where extension has
    actually issued information that is contrary to organic. And so
    we have to find mentors for or farmers have to find mentors for
    themselves. They also do have financial challenges because of
    the banking system. Without actuarial data, again, the bankers
    tend to say to that people that they may not be able to finance
    them as carefully. We actually have board members of OTA who
    are helping with the financing of their supplying farmers as
    they go through conversion. So there are a host of needs. A
    farmer has to look at the whole process before he goes and gets
    a certifier. He has got to have a business plan. He has got to
    have a credit plan. He has got to understand the marketplace,
    in terms of the products where he can really know that he will
    have a market. And all of that takes some technical assistance
    and advisory work.
        Mr. Cardoza. Thank you. Mr. Lipson, I want to follow up on
    your point in your testimony. You note that the National
    Organic Program, and I assume, the National Organic Standards
    Board, are wrestling with regulatory questions. More research
    could assist in forming these regulatory responses. Can you
    expand on that point?
        Mr. Lipson. Yes, sir. One example is the effort right now
    to develop regulations for pasture requirements for organic
    dairy animals. There is a great deal of difficulty that the
    program is having in figuring out how to define, in an
    enforceable way, what is adequate nutrition from pasture in
    order to write a regulation that meets the spirit and letter of
    the 1990 law. In order to do that, they are relying primarily
    on anecdotal information from the producers, who have a very
    sophisticated idea of how those requirements can be met. But in
    order for the regulatory program to put that into a legalistic
    framework, they are straining to find scientific data that
    backs them up and gives them a strong legal foundation for
    making those changes. Now there is good work in the research
    pipeline, now being done that could help with that, but it is
    coming very late in the process. There are other issues such as
    production of organic seed in order to meet a full enforcement
    of the organic seed requirement, a whole number of areas where
    there just isn't yet good scientific information that an agency
    typically would rely on in writing these regulations.
        Mr. Cardoza. Thank you. Thank you very much. I will now
    call on my colleague, the Ranking Member of the Committee, Mr.
    Neugebauer, for five minutes of questioning.
        Mr. Neugebauer. Well, thank you, Mr. Chairman. I guess
    first to Ms. Wilcox. There has been a great deal of discussion
    about technical assistance to producers during this transition
    period. While many organizations have advocated that the USDA
    should provide this technical assistance, I was wondering why
    this shouldn't come from the trade associations. Would they be
    better able to provide that? Could you kind of share that with
    me?
        Ms. Wilcox. Well, we do think that the technical assistance
    should be multi-faceted and diverse, and OTA is actually
    preparing some opportunities that will help, we hope, with
    technical transition. But since we have a very large land grant
    system with extension and we have many NGOs out in the
    countryside that are familiar with the steps that need to be
    considered prior to going into transition, into conversion, we
    do believe that there is a role for USDA to play, either in
    direct technical assistance through extension, but also through
    contracting with various NGOs, who are not terribly prosperous
    in terms of trying to expand their operations but who have the
    knowledge that can be given to, for instance, young farmers who
    really want to explore conversion but don't know about rotation
    of crops that they might want to pursue, some of the manure
    management that they may want to do, that they do have to do in
    terms of organic farming, some of the technical things that
    need to be done and we do believe that there is a role. As you
    well know, USDA gives a lot of technical advice about a lot of
    things and we think organics should have a little bit of a
    share.
        Mr. Neugebauer. This is really a question for the panel and
    maybe you could just kind of go down there. But obviously, one
    of the things that is important is the certification process
    and the enforcement process, if you are going to have a
    certification process and the enforcement. What is the general
    consensus right now of how that process is working, both from
    the certification side and the enforcement side? And Mr.
    Lipson, we will start down on your side and we will move to
    your right.
        Mr. Lipson. The Certification and Accreditation Program run
    by USDA is the standard for the world. There is no question
    about that. And the integrity that has been built is absolutely
    critical to the consumer demand, but the system is strained. It
    is being strained by the growth right now and the very
    understaffed condition of that program is a complete bottleneck
    for the rulemaking that everybody needs to have out in the
    open, in order to maintain that consumer confidence.
        Mr. Neugebauer. So is it the rules or is it just the
    ability to get certain products certified?
        Mr. Lipson. Well, it is both. There are parts of the
    standards that are incompletely implemented. The pasture and
    grazing requirements for dairy animals is probably the biggest
    one on the table right now. But there are other areas of the
    standards, aquaculture, honeybees, mushrooms, where there isn't
    even a standard, even a draft rule, yet in place. And so there
    are years worth of work stacked up that the National Organic
    Program simply does not have the staff to address in a timely
    way.
        Mr. Neugebauer. Okay. Ms. James?
        Ms. James. Currently the situation with the certification,
    from my point of view, is there is, number one, a demand in the
    industry for more organic products. There is a lack of those
    products being grown and produced, and the weight of having
    those items available relies on there being ample support in
    the certification part of the industry. And as new regulations
    become developed for these areas that need to have
    certification processes, such as pasture and aquaculture, the
    weight of that comes down on to the certification process.
    There is no other audit trail or process currently in place in
    order to make sure that organic products are truly organic. The
    certifier is the one who has the weight of a lot of that. And I
    know also that there is a shortage of certifiers to work for
    the certification agencies as well.
        Mr. Neugebauer. Mr. Marqusee?
        Mr. Marqusee. The certification process for what we need in
    the county, actually, it is very helpful for the county,
    because the county doesn't have to do the enforcement. We just
    rely on the NOP and the certification. But what we did at
    Woodbury County was, from a local policy perspective and local
    foods policy perspective, is to allow transitional products to
    be sold within our local food systems from the local food
    purchase plan and various other things that we have gotten. So
    we are trying to ease the transition costs for the 3-year
    period traditionally for crops by accepting those in the system
    initially for sale, but they have to be on the track for
    certification at the end of year 3. Under our organics
    conversion policy, if at the end of three years they are not
    certified, they have to hand back the taxes that they have been
    rebated. But I have nothing specific in terms of the actual
    certification process.
        Mr. Neugebauer. Thank you.
        Ms. Wilcox. The certifiers, of course, are private or state
    entities and they operate as agents of USDA and USDA has a
    responsibility to accredit them and they have a process for
    that. But what we have to look at is that the NOP itself, the
    National Organic Program office has only about six people and
    that is all FTEs. That is not just professionals. And they
    don't have a full-time rule writer, for instance, so we have
    this backlog of rules. But the same people who have to be
    looking at the rules, also have to be looking at the
    accreditation process for the certifiers and they also need to
    be making sure that produce that is being produced offshore is
    done by accredited certifiers and that there is oversight
    there, and that any problems that emerge in the certification
    process, because we are all learning new things and there are
    new products that are asked to be certified, then any of those
    can be resolved and that all of the certifiers can be informed
    of any policy changes. So it is a very complex area and it is
    one that we are increasingly alarmed about because our industry
    is growing so fast and NOP is not able to keep up right now.
        Mr. Neugebauer. Thank you very much.
        Mr. Cardoza. Thank you, Mr. Neugebauer. Ladies and
    gentlemen, rank has its privileges and I will now recognize the
    Chairman of the Committee, Mr. Peterson, for questions.
        Mr. Peterson. Well, thank you, Mr. Chairman. I want to
    delve into this transition period a little more. You know, we
    have been having some conferences and meetings back in my
    district and it comes up about this transition period. You
    know, the industry is, as you say, growing faster than any
    other sector, so I am kind of trying to get a hand on just what
    the Chairman was talking about earlier. But these 3 years, what
    do you do with that land during those 3 years, does it just sit
    there or they are growing these crops during that period of
    time but they are just not certified, is that what the
    situation is?
        Mr. Marqusee. Well, I would say that, typically, they will
    do a cover crop and try to get their land prepared for the
    crops later. They can grow crops during that period, but their
    yields will be significantly lower.
        Mr. Peterson. Right. And so this cover crop, if they are
    just doing that, that is not saleable, there is no income off
    of it. You have got, apparently, a program in your county to
    help this?
        Mr. Marqusee. That is correct.
        Mr. Peterson. Yes. But there isn't any Federal help for
    this, right?
        Mr. Marqusee. No, there isn't and the problem that we have
    had is struggling is because of the age of the farmer.
        Mr. Peterson. Yes.
        Mr. Marqusee. It is pretty hard. We are trying to attract
    younger people back to our county.
        Mr. Peterson. Right. So what if we, for example, took the
    CSP program and we said that one of the things that we would do
    with that would be to have some kind of help to transition,
    would that be something you think would make sense?
        Mr. Marqusee. I do, yes.
        Mr. Peterson. Would this cause a problem in making it too
    easy and we end up getting too many people in organic and
    collapse----
        Mr. Marqusee. I guarantee you that won't----
        Mr. Peterson. That is not going to happen?
        Mr. Marqusee. No.
        Mr. Peterson. We have got a bigger market out there, then.
    In that regard, the other thing that came up is as we were
    planning this conference that we had, and we have an organic
    dairy that was set up in my district and the guy at the meeting
    says he has a lot more market than hes got producers. Even
    though he is paying 25 bucks a hundred, he can't get enough
    people to transition. Another guy that is an organic beef
    herder, grass-fed beef, can't buy enough cattle to fill his
    market. I think to some extent it seems to me that in a dairy,
    a lot of these producers are 55, 60 years old. They are not
    going to convert unless they have a young son or daughter who
    wants to come back. So I am just trying to get my hands around
    what would be the best policy to try to move this along and you
    think technical assistance is a big part of this, as opposed to
    taking away these barriers or I guess it is a combination of
    both?
        Mr. Marqusee. I think technical assistance is very
    important and I would mirror what has been said by Ms. Wilcox.
    We have created a network of existing organic farmers as
    mentors, but of course, that is a very difficult program
    because they are busy working on their farms, so they don't
    want to travel all over the place, but we have created that
    kind of resource for those who convert. I would like to
    indicate that we have had younger people moving into our county
    as a result of this policy. What the county could really use is
    local money to facilitate, identify and create markets, for
    instance, and that is precisely what we were doing. My job at
    the county level has been to find markets for those producers.
    So we have demand. You know, it is tremendous demand. The
    problem is that I just don't have supply and it is really hard
    for me to convince a 60-year-old farmer to start doing
    organics.
        Mr. Peterson. Yes. The other thing that I read about, and
    it was somewhat the focus of what we were looking at in my
    district, is local foods. Now how does local foods fit in with
    organic? Is there some kind of a differentiation here?
        Mr. Marqusee. It is the same coin and then they are both
    complimentary.
        Mr. Peterson. But what I am getting is, is there some kind
    of effort going on to label things local as opposed to organic,
    you know?
        Ms. James. Actually, in the State of Minnesota, the
    Minnesota Department of Agriculture is currently looking at a
    way to label things as grown in Minnesota. One of the
    distinguishing differences between a locally-produced product
    and one that isn't, is the ecological footprint that happens
    between the community, that it really is a very sustainable
    system when you have a local organic farm selling to an outlet,
    a farmers market or a small cooperative and then those
    consumers coming, and I know I mentioned that in my testimony,
    but I think it is really important to recognize that symbiotic
    relationship with the consumer experiencing that really adds to
    the value and integrity of the organic seal, because they have
    a firsthand experience with being able to meet that farmer and
    understand exactly how they benefit from purchasing those
    products.
        Mr. Peterson. Anybody else?
        Mr. Lipson. Mr. Chairman, the baseline for a robust,
    diversified, local food economy is going to have to be organic.
    The local environmental impacts, the interaction between the
    community and the farm, if we are going to keep building this
    movement for local food, having that production based on local
    inputs for fertility and a healthy environment, doing the pest
    management, that is just going to be the baseline of those
    kinds of systems.
        Mr. Peterson. Thank you. Thank you very much, Mr. Chairman.
        Mr. Cardoza. Thank you, Mr. Chairman. I would now like to
    recognize Mr. Robert Etheridge for five minutes of questioning.
    Thank you.
        Mr. Etheridge. Thank you, Mr. Chairman, and thank you for
    holding this hearing. Let me thank each of you for coming
    today. Ms. Wilcox, let me ask you a question, because you
    pointed out, in your written as well as in your oral testimony
    before the Committee, and almost all of you have touched on
    this, that this industry is the fastest growing segment of
    agriculture today, and one of the main recommendations for the
    farm bill is that technical assistance be made available for
    producers to convert to organic production. My question would
    be, how do you see this technical assistance working within the
    framework of current organic production? And I guess, why do
    you think it should be one of the highest priorities in the
    2007 Farm Bill?
        Ms. Wilcox. Well, Mr. Etheridge, obviously, we would like
    to increase the amount of organic production in the United
    States. We know the consumers are demanding a very high amount
    of organic in the marketplace and we want a lot more acreage to
    be here in the United States. I am not opposed to imports.
    About half of our food is imported now, but it would be much
    better for our environment and for our consumers if it was
    grown here. So then we have to look at what are the impediments
    to going to certification, and when we tried to look at that,
    we found that the actual facing about whether you will decide
    to try to go organic is a daunting kind of a task. People are
    asking themselves the question, what do I do in the three
    years, like the Chairman asked. What do I do about working
    without the pesticides that I have always worked with? How do I
    learn about managing pests, there is a perfectly good way to
    learn that, but it is a whole new way of farming than they may
    have been taught in ag school and certainly that they may have
    been taught by their neighbors or their parents. And so we do
    believe that there are certain things that need to be done,
    including looking at rotation requirements, soil preparation,
    the manure and the handling of animals, which is done in a much
    different way in organic. There are just a myriad of things
    that need to be done or looked at before you decide to go ahead
    and convert your farm, because that is a big decision. And then
    there is a need for technical assistance and mentoring while
    you are doing that because, as my colleague here said, there
    can be a diminution of production during the three years. It is
    not as dramatic in some cases as has been portrayed by
    conventional agriculture, but there can be a diminution,
    because you are learning also about rotation and about growing
    several crops instead of one row crop, and you are learning
    about a lot of new things.
        Mr. Etheridge. How does the United States stack up
    internationally in terms of development of organic markets? Any
    data on that you are aware of?
        Ms. Wilcox. The Department reported. They did a very good
    study, it is a couple of years old now, between the EU and the
    United States, and the EU, just in the 15, you know, original
    countries in the EU had about 5 times the amount of acreage
    converted in 2003, so I have no idea now what that number may
    be. And of course, we do know, although anecdotally, that other
    countries are responding to the organic demand in great numbers
    and there is a lot of conversion going on.
        Mr. Etheridge. Good. Thank you. Ms. James, you raised the
    concern of synthetic or non-organic products being used as
    substitutes in organic products because of lack of organic
    ingredients. Can you be a bit more specific on the issue, and
    can these organic ingredients be produced in the United States?
        Ms. James. Currently the National Organic Program
    Regulation 205.606, 605, 604, you will find a list--National
    list of allowed synthetic and nonsynthetic agricultural and
    nonagricultural products. At a current NOSB meeting that was
    held, there was a significant amount of agricultural products
    that were being petitioned--non-organic agricultural products
    that were being petitioned to be listed on the National List.
    And in my opinion, I believe that if our organic farming
    situation in the United States was thriving and we had more
    government support for growing these agricultural products, we
    would not have to be listing things that should be able to be
    grown organically and be in organic products. Does that answer
    your question?
        Mr. Etheridge. Partially. I may come back to that later.
    Thank you, Mr. Chairman. I will yield back. I see my time has
    expired.
        Mr. Cardoza. Thank you, Mr. Etheridge. I would now like to
    call on Mr. Kuhl for five minutes of questions.
        Mr. Kuhl. Thank you, Mr. Chairman, and I thank all of the
    panel members for coming and testifying. A question for you,
    Ms. Wilcox, first. In my years of dealing with organic
    agriculture at the State level, I have noticed that the general
    population has a very difficult time really kind of
    differentiating the difference between organic and regular
    produce. I have noted that there has been some advertising in
    recent cases, particularly as it relates to dairy products,
    where there have been some organic producers advertising as
    being pesticide-free and/or antibiotic-free, and I am curious
    as to--I think that sends the wrong message, certainly,
    because, as you know, the Federal regulations require all
    products to be essentially pesticide-free and antibiotic-free,
    and I think that does a disservice to organic farming. I am
    curious as to what the Organic Trade Association is doing to
    try to control what I would call non-misleading advertising
    practices within the organic industry?
        Ms. Wilcox. Well, as you know, probably controlling members
    is just about as hard as controlling constituents, Mr. Kuhl,
    but we certainly do put out what we regard as factual and
    important marketing messaging that is truthful and complete. We
    try to make that available to our members so that they
    understand that sometimes misstatements are made, but we are
    not in a position to police their advertising. I don't review
    their advertising. When I was at Hershey Foods, I reviewed all
    of the advertising so I knew what was there. But we don't do
    that, so we have to rely on our members to comply with the law,
    which is an important thing in this country. We do have truth-
    in-advertising laws. In the area of antibiotics, I think it is
    important to realize that, in fact, while the phrase you
    described may raise a question for you, animals that are raised
    in the United States on an organic ranch or farm are not
    treated with antibiotics. And if, for humane reasons, they
    became so ill that they had to be treated with an antibiotic,
    they would be removed from the organic herd and placed into a
    conventional herd. So the organic dairy or organic farmer is
    absolutely not using antibiotics or synthetic hormones in their
    animals and that is in contrast many times to conventional.
        Mr. Kuhl. Yes. Is there some sort of advertising promotion
    that you send out to your members to suggest that they follow?
        Ms. Wilcox. No.
        Mr. Kuhl. Okay.
        Ms. Wilcox. No, at our annual meetings, we hold seminars
    for people to learn about marketing techniques and of course,
    we emphasize truth in advertising at those.
        Mr. Kuhl. Okay. And a question for the panel. I am
    disappointed that the Chairman had to leave, but as you all
    know, because I was looking for a commitment from him that
    there wouldn't be any kind of shrinking baseline for the farm
    bill overall, and that there would be increased kind of assets
    available, particularly as it relates to this Subcommittee. But
    I think most of us understand that there probably is going to
    be less money available and therefore we are going to have to
    prioritize requests from the ag community for specific kinds of
    things, and I am curious. If you had to pick 2 areas, each one
    of you, just 2 areas that this Subcommittee should kind of
    prioritize for the furtherance of organic agriculture, what
    would they be? We will start with Mr. Lipson.
        Mr. Lipson. Very clear, the research and extension are the
    limiting factors to growth. It has all of these secondary
    impacts that I have tried to outline. I think that is going to
    be the biggest payoff for investing resources.
        Mr. Kuhl. Okay. Ms. James?
        Ms. James. Organic conversion assistance and organic
    certification cost-share assistance.
        Mr. Kuhl. Okay.
        Mr. Marqusee. I would say crop insurance is probably the
    biggest, and market development.
        Mr. Kuhl. Okay. And Ms. Wilcox?
        Ms. Wilcox. Well, we need conversion, absolutely, and we
    also need data because it leads to all the other things that
    can help with conversion.
        Mr. Kuhl. Okay, thank you all.
        Mr. Cardoza. Thank you. Mr. McCarthy.
        Mr. McCarthy. Thank you, Mr. Chairman. I appreciate you
    holding this hearing. In my district out in the California, I
    have seen organics grow, especially in the carrots and
    continuing in expanding. I was just listening to the last
    question about organic conversion, so my first question is, how
    much of organic product is exported right now? Is there any?
        Ms. Wilcox. Yes, there is. I don't think that I have that
    number with me and I would be glad to provide it for you. OTA
    actually participates in the Market Access Program, the MAP
    export program, and there is a substantial but not a huge
    amount of product that is exported mostly to very high income,
    you won't be surprised, areas that would like to buy our
    processed organic product, and then there is some other
    production that is----
        Mr. McCarthy. Because the reason I ask, I heard organic
    conversion the most and if we were to do something in the farm
    bill, many of those that grow organic now get a premium price.
    I am wondering if there is a program, if you are thinking of
    one on the conversion, if it should be a sliding scale in,
    should it be by different product, so not everybody switches
    within a certain market and the price comes down. Those that
    got in before conversion are somehow penalized because
    government helped another. Has anyone put any thought to, when
    say conversion, a program for conversion?
        Mr. Lipson. Mr. McCarthy, the strategy that we need is one
    that takes regionally resources in terms of research and
    extension and market development, looks at the specific
    opportunities that match markets to production capacities and
    puts together that puzzle in terms a diversified approach to
    conversion in an area. In California, there is obviously huge
    trade opportunities in the Pacific Rim. You know, we do have a
    long way to go towards fulfilling the domestic growth in
    demand, but there are very important opportunities in
    international trade as well and those can be matched up with
    production capacities, but it is going to be different in every
    region of the country, so what we need is a strategy like they
    are doing in Woodbury County. It takes all the pieces in terms
    of market development and technical information, local demand
    as well as export opportunities, to try to craft a strategy
    that way.
        Mr. McCarthy. And so I understand the whole matrix you do,
    but would you pick all products and converge over by region and
    you would say which ones by market size?
        Mr. Lipson. Well, I think there is definitely, with more
    market analysis, we would have better information about how
    much room there is to grow in different areas. I mean----
        Mr. McCarthy. So prior to do any conversion, the number one
    would be the data and the market analysis?
        Mr. Lipson. We need business plans, for sure, and you have
    got to have good data in order to be able to build those.
        Ms. Wilcox. The OTA does do market surveys because USDA is
    not authorized at this time to do a comprehensive market
    survey, and one of the questions we ask is if you could get
    more how many of you could market more product if you could get
    more certified ingredients? And over 50 percent of our
    respondents say that they would have a shortfall. And I think
    it is important for you to realize that, of course, you come
    from the strongest organic State, California. We have only
    achieved having reports of organic in all 50 States in the last
    year and we have, you know, as I said in my testimony, .5
    percent of cropland and .5 percent of pastureland has been
    certified. While consumer demand this year, we believe, will be
    3 percent or more, it will actually be 3 percent in the retail
    store. So consumer demand is going up like this and organic
    production is, frankly, in the United States, not going up like
    that.
        Mr. McCarthy. Thank you, Mr. Chairman. No further
    questions.
        Mr. Cardoza. Okay. Mr. Etheridge, did you have a follow-up
    that you wanted----
        Mr. Etheridge. No.
        Mr. Cardoza. Okay. I think the members will have some
    follow-up questions and they will contact you individually to
    get those answers. Thank you very much for your testimony.
        Mr. Lipson. Thank you very much.
        Mr. Cardoza. Thank you. We would now like to invite to the
    dais the second panel. We would like to invite up today Mr.
    Manuel Vieira, Owner of A.V. Thomas Produce, from Livingston,
    California; Ms. Mary-Howell Martens from Lakeview Organic
    Grains in Penn Yan, New York; Mr. Scott Lively, President and
    CEO of Dakota Beef, from Howard, South Dakota; and Mr. Robert
    Pike, Vice President and General Manager of Braswell Foods and
    Glenwood Foods in Nashville, North Carolina. Welcome to all.
    Mr. Vieira, a special welcome to you, all the way from
    California. You have been a dear and old friend and you have
    done a fantastic job in growing your organic business, and
    please feel free to proceed with your testimony.

         STATEMENT OF MANUEL VIEIRA, OWNER, A.V. THOMAS PRODUCE

        Mr. Vieira. Thank you, Mr. Chairman. My name is Manuel
    Vieira. I am from Livingston, California, in Merced County,
    where I own my company, A.V. Thomas Produce. We grow, pack and
    ship organic yams and sweet potatoes. We started with 10 acres
    of organic sweet potatoes in 1988. Now we grow over 1500. We
    ship our organic product all over the United States, Canada and
    Europe. A.V. Thomas Produce has been in business since 1960.
        I would like to start by first expressing my thanks to
    Chairman Cardoza and Ranking Member Neugebauer and the rest of
    the Subcommittee for your commitment and dedication to
    agriculture as a whole and especially to organic farming. I
    would also like to express thanks to our organic Subcommittee
    for holding this hearing so that all may have a better
    understanding on how truly important organic farming is for the
    future and the wellbeing of all.
        Organic integrity, responsibilities and requirements are
    tested and inspected by our dual-certifiers, COFA, California
    Organic Farmers Association, and OCIA, Organic Crop Improvement
    Association. Each year our operation goes through a rigorous
    and intensive inspection at our farm and our processing and
    packing entities. Each field has a complete file of all the
    previous three years of activities. Each of our farms has a
    list of requirements to be met. These requirements are all
    enforced to the year. The rules and regulations of organic
    farming are set by certification and verification programs that
    we apply through our certification bodies. We are currently
    accredited through the USDA National Organic Program, NOP,
    certification program. We are also accredited by the European
    Union verification program, which allows us to export our sweet
    potatoes and yams to Europe.
        The NOP was mandated by the Organic Food Production Act of
    1990. This provided a uniform organic standard. The NOP
    accredited certifying agencies, such as COFA and OCIA, it
    confirms that the certifiers understand and is using the
    national standard and also confirms that the certifier can
    conduct business of certification properly.
        Mr. Cardoza, I would like to conclude once again by
    thanking you and the members of the Subcommittee for the
    opportunity to share a little about our organic commitment.
    Thank you all.
        [The prepared statement of Mr. Vieira appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you, Mr. Vieira. Next up we have Ms.
    Mary-Howell Martens from Penn Yan, New York. Welcome.

      STATEMENT OF MARY-HOWELL R. MARTENS, LAKEVIEW ORGANIC GRAINS

        Ms. Martens. Thank you very much, Mr. Chairman, thank you
    to Mr. Kuhl, he is my district representative, and to Mr.
    Etheridge, because I am a horticulture major from North
    Carolina State, so I have connections to several things.
        I am going to go ahead and start with part of my testimony
    and it is a quote. ``I wish you didn't have to do that.'' I was
    saying that to my husband as I was standing by the kitchen
    door, several months pregnant with my second child, watching my
    husband go out to battle the weeds, all dressed up in his white
    zoot suit, his Tyvek suit, heavy green gloves. He was out to
    fight the enemy. Me too, but what choice do we have? It was
    1991, the first year after we had split up the farm partnership
    with Klaas' two brothers. It is not easy farming over 600
    acres, just the two of us. Farm prices are never good, weather
    is always risky, but at least we had one advantage over most of
    our neighbors. Weed control was rarely a problem because Klaas
    was very good at planting herbicide combinations and
    fertilizers. In my job in the grape breeding program at the New
    York State Agricultural Experiment Station, I was responsible
    for planting the grape spray program for the breeding
    vineyards, and so Klaas and I had many romantic moments during
    our early marriage discussing the relative merits of this
    chemical and that chemical.
        How do two people so apparently committed to the
    agribusiness ideal of American agriculture end up operating a
    large organic farm not very many years later? We truly believe
    that we were like many conventional farmers, using chemical
    fertilizers and pesticides simply because we thought there was
    no other way, but very concerned what it was doing to us, our
    family, our land, our environment and our community. We are now
    farming over 1400 acres of certified organic crops, corn,
    soybeans, small grains, red kidney beans, cabbage, hay, and for
    every crop, there is a good, profitable organic market.
        All three of our children are active on the farm. In
    addition to working on our farm, our son Peter, who is 18, has
    rented 250 acres of his own land is farming that organically
    and is earning good profit to buy farm equipment and pay for
    his college education. Our 15-year-old daughter Elizabeth, who
    is here today, has purchased heifers with her USDA/FSA youth
    loan and is transitioning them to organic and is learning a lot
    from those cows every day, things that she could learn no other
    way. Eleven-year-old Daniel works on the farm and helps on the
    farm in every way he can. All three children are proud to be
    involved in our farm and proud to be organic farmers.
        In the mid 1990s, Klaas and I began grinding organic feed
    from our own grains, for several nearby dairy farmers. In 2001,
    our business had grown enough to justify purchasing the local
    feed mill and with the help of a USDA Rural Development grant,
    we converted it to a fully-organic feed mill that is now known
    as the Lakeview Organic Grain. This operation is now employing
    7 full-time employees and 2 full-time truck drivers, and now
    serves over 300 organic animal farmers in New York and
    Pennsylvania. We also supply organic crop seeds and other
    organic inputs and a whole lot of information. I spend probably
    most of every day on the phone talking to people. We talk about
    resources. Well, a lot of people come to us and we help them
    with weed control, soil fertility management, animal
    management. We are now grinding more feed at our feed mill than
    Agway ever did when they ran it previous to us, and we are even
    grateful for some competition entering the business, because
    the pie is big enough for all of us.
        We have learned that, while many outside the organic
    community may define us by what we don't do, we don't do
    pesticides, we don't do antibiotics, all that we were talking
    about earlier, we would rather define ourselves by what we do
    do, crop rotation, soil fertility, soil health management,
    managing our farm for health, soil health, plant health, animal
    health, so that intervention isn't needed, that we don't need
    to rely on outside inputs.
        Where do we go from here? At this time in New York alone,
    there are over 600 certified organic farms, 125 in our district
    alone, more than 250 organic dairy farms and over 100,000
    certified organic acres. The National Organic Program needs
    help. They do a fine job and we fully support them, but they
    are woefully understaffed and underfunded. We need help. We
    need to get them more money so that they can have at least--
    well, all organic funding should be at least the same
    percentage that organic agriculture has in the United States.
    We need more help for NRCS personnel so that they can do a
    better job of improving our farmland, informational services,
    like ATTRA and SARE, need more funding so that they can
    distribute useful information to researchers, to farmers, to
    extension agents. We need more help for transition farmers so
    that we have more supplies. We would buy more grain from New
    York if we had it, but there isn't enough.
        In conclusion, I want to thank all of you for forming this
    Subcommittee and for listening to us today. Agriculture in the
    United States is diverse, but organic is no longer a minor
    niche just for the counterculture or the extremely affluent. It
    is creating a lot of opportunities for many people, hope for
    many people, and that needs your help.
        [The prepared statement of Ms. Martens appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you. Next, we have Mr. Scott Lively from
    South Dakota. Welcome, sir, and please proceed with your
    testimony.

     STATEMENT OF SCOTT LIVELY, PRESIDENT AND CEO, DAKOTA BEEF, LLC

        Mr. Lively. Thank you very much, Mr. Chairman and members
    of the Subcommittee. I want to thank you for holding this
    hearing. I have been very impressed so far with the level of
    questions. I kind of thought this would be huge educationally,
    from our point, and you guys are clearly well educated and
    asking great questions and I appreciate that. It shows how
    serious you are taking this. I know what a huge task you have
    with the farm bill and I appreciate this being such a serious
    section of it.
        As you stated, my name is Scott Lively. I am the CEO and
    Chairman and the founder of Dakota Beef, LLC. I have been
    active member of the organic food industry for seven years.
    Exactly seven years ago this summer, I founded Dakota Beef,
    along with my wife, purely because she had her second child and
    took off on an organic zealot tangent and decided that our kids
    were going to consume nothing but organic dairy, fruits and
    vegetables forever and we went pretty much cold turkey
    overnight. I knew nothing about the industry nor did I really
    care much about it. I was a meat-eating, potato-eating guy from
    Chicago. Nevertheless we went out and bought 30 head of cattle
    in Seward, Illinois, we processed them locally, all at one
    time, and sold them door to door in Chicago restaurants out of
    the back of her Volvo, mostly white tablecloth and gourmet
    restaurants. Seven years later, we are clearly the largest
    organic certified beef company in the Nation. We are in all 48
    States, with the exception of North and South Dakota. I don't
    understand why, being called Dakota Beef. And we ship hundreds
    of thousands of pounds of beef per month.
        This market is clearly a consumer-driven market. It is
    affecting the economy in many ways. The small town in South
    Dakota where we are headquartered had roughly 1200 working
    adults, 65 of which now work for our beef plant, and we employ
    another 15 employees across the United States in 5 different
    States, in sales, marketing, research and development and
    whatnot.
        Going back to this being a consumer-driven industry, I
    think a lot of people would like to pretend this industry
    didn't exist and that is more concentrated on that crunchy
    granola, whole food shopper. It clearly is not. As you guys
    have stated yourselves, this industry is growing at a dramatic
    rate. Seventy percent of the consumers in America report that
    they purchase organic products at least occasionally. This
    industry has grown consistently at 20 percent a year for the
    last 10 years. In my opinion, it is rapidly approaching a $40
    billion industry over the next couple of years.
        In my opinion, this symbol that the USDA/NOP has put out is
    clearly arguably the strongest process claim ever made in USDA
    history. It is a claim that has never, ever been made of how a
    product is processed, from the way it is raised, if a livestock
    or farm, the way it is handled, the way it is shipped to the
    facility that it is processed in, and what I would encourage
    you to look at is why consumers are purchasing this. What is
    causing this growth? What is causing the 20 percent a year? It
    is a perceived notion, in my opinion, that these consumers
    believe that when it has this symbol, which has become a brand
    in itself, that they perceive it is better for the environment,
    that it is better for their health, and that they perceive that
    it supports small, local farmers.
        As you work on the 2007 Farm Bill, I encourage you to look
    at the following: continue to improve USDA oversight for the
    NOP. I think that a stricter standard is not necessarily the
    answer right now, and I certainly wouldn't encourage lightening
    the standard, but enforcing the current standard, enforcing the
    rules in the national list is clearly what needs to happen.
    Elevate the compliance and the assessment inspections,
    particularly around, but not limited to, imported organic
    agricultural products. I think that the paper trail on imported
    beef, particularly for my industry, is pretty thin and I think
    that when we are going out to these foreign countries and
    bringing in certified organic grass-fed beef or whatever it is,
    there just needs to be a little more oversight on that. We
    particularly focus on grain-fed choice-graded beef in the
    United States and there is nothing wrong with the imports, but
    it has got to be regulated and we have got to make sure that
    the consumer believes in this brand, that they believe in that
    symbol. The only way this is going to be done is stronger
    resources and funding to the USDA's NOP. I think last year the
    funding was about $2.1 million and I am speaking from memory
    and a guess, and that is to basically oversee an industry that
    is approaching $40 billion. Consumer confidence in this sector
    is a direct result of organic product integrity, which in turn
    is dependent on NOP oversight and enforcement.
        I look forward to your questions and I really appreciate
    the time to address you.
        [The prepared statement of Mr. Lively appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you. Next up we have Mr. Robert Pike
    from Nashville, North Carolina. Welcome, sir.

       STATEMENT OF ROBERT PIKE, VICE PRESIDENT/GENERAL MANAGER,
                     BRASWELL FOODS/GLENWOOD FOODS

        Mr. Pike. Thank you. Well, good morning, Mr. Chairman and
    Ranking Member and especially my congressman, Mr. Etheridge,
    that we have so enjoyed having him even to our facilities in
    Nash County.
        Braswell Foods is a family-owned company that produces,
    processes and distributes eggs and feed in the Mid-Atlantic
    region. We are owned by Scott Braswell, who is the third-
    generation owner. The company's heritage can be dated back to
    1834 to a small water-powered corn milling operation in Nash
    County, North Carolina. From that small beginning, the Braswell
    family has grown the company to one of the largest egg and feed
    producers in the Mid-Atlantic region. Our current operations
    consist of 5 operating companies with over 150 employees, and
    contracts with 23 family-owned organic farming operations.
        In 1996, Braswell acquired Glenwood Foods in Jetersville,
    Virginia. Glenwood Farms was an established egg producer and
    marketer to the Virginia region. Just prior to our acquisition,
    the previous owners had seen the need to start producing and
    marketing organic eggs. They were true pioneers, because this
    was before it was cool to be organic and long before the USDA
    certification requirements that prevented fraudulent marketing
    of organic products.
        Beginning with a flock of 15,000 birds, our flock size now
    is approaching 400,000. These birds produce about 10 million
    dozen eggs per year under the brands of Eggland's Best and
    other branded labels that can be found in most of the retail
    natural food stores from Maine to Florida. We also export
    product to Canada and Bermuda. Braswell is a fully-integrated
    organic egg producer. We have our own feed milling, pullet
    growing, liquid egg product and distribution operations. All of
    our operations have been certified by QAI, Quality Assurance
    International, from day one. The Braswell family of companies
    enjoy a reputation, being one of the country's premier organic
    egg and feed providers with sales over $20 million per year.
        Our feed-milling operation not only supplies feed to our
    own birds, but to other organic livestock operations. We
    purchase organic corn from 7,000 acres and soybeans from 6,000
    acres of certified land. Most of the grain that we buy is from
    the Midwest, but we have also established buying programs to
    encourage grain farmers in our local area to convert to organic
    production by paying premiums for the grain during the
    transition period of 3 years, in exchange for the following 3
    year's crops. We traditionally pay from 50 to 100 percent
    premiums for these crops over the regular commodity crops, with
    today's pricing of organic corn being anywhere from $10 to $12
    a bushel and bean meal over $600 a ton.
        It is a concern that the 2006 crop will not be enough to
    supply the demand until the new crop is available. One of our
    main suppliers of organic grains has told us that, because of
    the increased demand from organic livestock, there will be a
    major shortage in a large part of 2007 and into 2008. Producers
    will have to look for offshore supplies, such as China and
    Europe, to fill the gap. This shortage will limit our
    industry's growth.
        Organic production has also had a great influence on our
    conventional operations. We have implemented many of the third-
    party certification principles in our food safety, animal
    welfare and environmental programs. Braswell is the first and
    only ISO 14001 certified egg company, which shows the continual
    commitment to produce the best products while striving to
    improve our environment.
        As part of our rapidly growing organic community, we have
    seen many changes and challenges as we strive to serve the
    customers' demand for organic products. One key event that has
    helped committed organic producers, such as Braswell, was the
    implementation of the USDA certified organic program. For the
    most part, this program has leveled the playing field for fair
    competition and has provided assurance to the consumer that
    organic products are what they say they are. This program has
    been government at its best, but it still needs Congress'
    support as demand for more certification of both domestic and
    foreign supplies increase. For example, China is making organic
    soybean meal available to us in North Carolina at 25 percent
    less value versus Midwest meal. As the U.S. demand increases
    and the U.S. farmer does not put more acres in to organic,
    supplies of organic products will be needed and more grain
    supplies will be needed to fill the gap from offshore. These
    suppliers will need to be held to the same high standards that
    our domestic suppliers are and USDA will need more resources to
    ensure the process.
        Another area of concern and challenge is somewhat of a
    paradox, is the use of organic fertilizers, livestock waste, on
    our croplands while some of our environmentalist friends have
    targeted this practice as not good for the environment. Some
    even said that organic materials should be classified as
    ``hazardous waste.'' As treated as other waste, it would fall
    under the Superfund law. If our laws prevent the use of this
    natural product, which has been used to grow crops since the
    beginning of time, the organic food industry would collapse.
        The Braswell family would hope that if you have not tried
    some of our eggs, that you will in the future, and invite you
    to see our operations in North Carolina and Virginia and again,
    thank you for the privilege of being here today.
        [The prepared statement of Mr. Pike appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you very much to our entire panel. I
    have to say that you are quite impressive, all of you, in both
    the scope and commitment of your endeavors. I am very
    impressed. I want to start the questioning with Mr. Vieira.
        Sir, you are truly one of the American success stories in
    farming in organics. I think you arrived here in the United
    States in 1968 and have grown your business. I toured it
    recently. It is fantastic and so impressive, the commitment and
    the innovation that you have brought to the industry. My dad
    and grandfather used to be sweet potato growers, as you know,
    and they were pioneers in their time, but nothing compared to
    what you have done in your industry.
        I was very interested in your testimony. You talk about the
    conversion process going to organics. I would like you to
    elaborate a little bit about that. And also what is entailed
    for your particular industry in converting to organics? Then I
    also would like you--you mentioned in your testimony that you
    also are certified for the EU to export to them and I would
    like to know what differences there currently exists between EU
    certification and USDA certification?
        Mr. Vieira. Thank you, Mr. Chairman. First of all, it was
    not easy when, in 1988, our company decided to start planting
    organic yams and sweet potatoes. And as I said, we started in a
    very small scale, only 10 acres it and was a process of
    learning and getting beat once in a while. But every year, we
    had the commitment and we decided to keep going and we
    increased from one year to the other. And in 19 years we went
    from 10 acres to over 1500. One of the most difficult things is
    land. We have to have three years of doing almost nothing. You
    can plant rye or you can leave it just open. We have to have a
    strong commitment for organic, as we did.
        Like I said, the three years we have without anything or we
    rent most of our ground, so we have to have affidavits from
    neighbors, from the county, from anyone if this pasture, as you
    know, in our area is lot of land has been in just pasture that
    nothing has been doing for a long time around Livingston,
    Atwater, Stevenson and when we find the ground we would work it
    is like vision ground. And like I said, finding the proper
    ground, going into the process according to the laws, rules,
    regulations, is one of the most difficult things we have.
        As far as the requirements to go to Europe, it is more or
    less the same as here. We have two independent entities that
    give a certification and when we present to them our history,
    what we have been doing for almost 20 years, we present every
    single document that they ask us, it has been no problem to
    ship to Europe. Because we have been having enough market in
    this country and Canada to ship our sweet potatoes, we are not
    so crazy to ship to Europe if we have the market here. But we
    ship a few to a few good clients.
        Mr. Cardoza. Thank you. Ms. Martens, one thing that you
    mentioned at some length was the fact that you used to spray
    herbicides and now you are not. I will tell you that I am an
    avid family gardener in my home and I am so interested to
    figure out how you can control those darn weeds without using
    herbicides. Could you elaborate a little bit on your technique?
    This is really not for the Committee's purposes, but for my
    personal purposes.
        Ms. Martens. I would be happy to. Looking at weed control
    is probably our major challenge on a crop farm. We don't have
    the insects and diseases that would be in a vegetable farm, but
    weed control is a challenge, but it is not an impossible one.
    In fact, once you get your system, it is not that difficult. We
    separate it into two distinct categories; the cultural weed
    control, where by rotating your crops, enhancing soil health,
    soil fertility management, you really, truly limit and control
    the amount of weeds and the species of weeds that are present
    so that you can then go in with mechanical tools that are
    appropriate and do not require a great deal of labor or
    petroleum that are timed correctly for effective weed control.
        On our row crops, if we can get in with what is called a
    coil tine harrow, which are thin wire tines that shake the
    ground, aerate it and allow for weed seedlings to desiccate, to
    dry out. If we can get in twice, once right around emergence
    and once right after emergence and then go in twice with a
    field cultivator or an in-row, between-row cultivator, four
    passes will do weed control sufficient to make our fields look
    as if they had been sprayed with herbicide. It isn't that
    difficult, it isn't rocket science. It is more timing and
    having the right tools and having your soil in good shape and
    having your crop rotations in good shape.
        Mr. Cardoza. Yes, I have a follow-up question. Do you have
    that rotten nut grass in your area? Because that is a blight in
    my area.
        Ms. Martens. We do have nut sage, we did. One of the things
    we found that a lot of the rhizome weeds, like nut sage and
    crabgrass, that we expected to be problems when we went organic
    stopped being problems, mainly because of the microbial
    activity in the soil. When you change your soil conditions, you
    change your weed populations and the things that you think are
    going to be a problem aren't necessarily.
        Mr. Cardoza. That is interesting. Thank you. I would like
    to talk to you more about that.
        Ms. Martens. All right.
        Mr. Cardoza. I am going to ask a little indulgence. There
    is one question I would like to ask the entire panel. Can you
    comment on the effects of imports on your business and the
    sufficiency of oversight by USDA? I am concerned, frankly, that
    in some other countries we are simply not getting the oversight
    that protects the consumer. You all have built up such a high
    standard and high bar in our country. We do have high oversight
    here. And I am just afraid that the further you get from
    Washington or U.S. borders and as you get to other countries,
    we are simply seeing a lack of oversight in those areas.
        For example, in some countries, application of water that
    is polluted from the rivers in that country are a huge concern
    to me where you wouldn't allow a pesticide but yet there might
    be pesticides or other chemicals in the water that is being
    applied to organic farms. Can you all speak to that? Do you
    have any knowledge of that? And what is the effect of imports
    on your industry and whether you believe that oversight is high
    enough, a high enough bar? I will start with Mr. Pike.
        Mr. Pike. Well, at this time, as I said in my testimony, we
    are being offered organic soybean meal out of China and after
    just recently adopting a little girl from China and seeing the
    vastness of that country, I can't imagine some of the
    certification efforts that has to go on there. But it is being
    offered. The certifiers are assuring us that the product is
    certified properly. There is a concern there, but more
    importantly it is limiting the growth of our own industry and
    our own farming community to be able to convert to organics. As
    in eggs, eggs are a fairly perishable item. There is not any
    pressure at this point in time.
        Mr. Cardoza. Thank you.
        Mr. Lively. It is a great question and I am so glad you
    brought it up. I would say that the single biggest competitive
    issue facing the organic beef producer is foreign beef both
    economically and for the oversight and paper trail you are
    discussing. In the supply chain of livestock, you have got many
    layers. It is not just that a guy raises an animal, sells an
    animal, it gets processed. There is genetics. There is a cow-
    calfer that breeds and then your next step is to lay a
    background or spend some time with the animal until the animal
    is up to an age where it can be fed or finished on high protein
    grains to get that lush flavor we all like.
        Each one of those steps in the organic agriculture for
    livestock has to be certified organic and watched. The field
    that the animal grazes in has got to be certified organic with
    soil samples, with the three year wait and whatnot, as well as
    any added feeds; corn, soy, flax, barley, wheat, whatever else
    is put in that animal's diet. I can't imagine that it is being
    managed or the oversight is--in my opinion, there is clearly
    not the same standard being held to the U.S. beef as there is
    to foreign beef and it is purely an opinion there.
        But I can't imagine that an entire supply chain is being
    tracked along with the processing. Once it turns from a
    livestock product to a food product that is actually being
    handled, that process is being tracked and then it is put on
    some big cargo freighter and trucked over with here with
    diesels and call it sustainable meat. So my issue is that you
    are correct. I think the oversight on foreign beef could be a
    lot tighter, but my only information is anecdotal and opinion
    right now.
        Mr. Cardoza. Something that I think this Committee is going
    to have to really look at even more is exactly what you just
    talked about and something else that was talked about, and I
    don't want to divert from the question, I want to get back to
    the panelists, but I am very concerned that the organic label,
    as someone said previously, is also sort of a moniker for
    sustainable.
        Mr. Lively. Yes.
        Mr. Cardoza. And I am not sure that all countries have the
    same view on this as we do and that we are employing
    sustainable practices.
        Mr. Lively. If I could make one more point on that and I
    will pass in a second here, is that when we process an animal
    at Dakota Beef in Howard and that animal becomes a carcass and
    is now become a food product and the USDA gives the thumbs up
    that this is a sanitary, clean--and by the way, the USDA does a
    great job keeping, you know, food safe, clean and moving, but
    they are not overly educated on the organic standard. We spent
    our first year of production teaching our USDA inspector how to
    monitor us for organic rules and now he is great. He has done
    his own research.
        But we spray that carcass with organic citric acid or hot
    water, things that are allowed. What foreign countries might
    use on a beef carcass, who knows what the allowed substances
    would be? How would you even track it? How would you know what
    the source of that product is? And that is, indeed, where all
    pathogens are removed and it is given the thumbs up; this is
    clean, move it into the cooler and start processing it.
        Mr. Cardoza. You have instructed us to instruct our staff
    to start looking at this right away. Thank you.
        Ms. Martens. Just briefly. At our feed mill, we have a
    commitment to buy first, New York grown grain for feeding New
    York dairy cows. Because for two reasons. One is that we know
    the farmers growing them and so therefore we know what
    practices they are using and their integrity. But we also want
    the income, the wealth to stay in New York as best we can. This
    is community development, because the money that is generated
    in New York benefits not just agricultural businesses, but
    bounces around the community in many different ways.
        If we cannot get what we need from New York, and we can't.
    New York doesn't grow anywhere near enough grain for our needs.
    Then we will go Midwest or western Canada, Ontario and then, as
    a last ditch source, we will go outside the country. We will be
    bringing in some sunflower meal in from South America later
    this year because there isn't enough. I feel that the integrity
    issue is a big one, but community development and keeping the
    benefits of organic farming here in the United States to
    benefit both the suppliers and the users is very, very
    important. And so if we can put emphasis on that, we will not
    only solve the integrity and the traceability, but we will also
    help American farmers.
        Mr. Cardoza. Thank you. Mr. Vieira.
        Mr. Vieira. Mr. Chairman, I think your question was a great
    one. The other day I saw, in our district, the city of Merced,
    California, a can of yams from China, which makes me very
    nervous. They were conventional, non-organic, but even
    conventional, I hope that those countries that grow any type of
    produce, it doesn't matter if it is organic or conventional,
    that they follow the same rules, strict rules and regulations
    as this country. Thank you, sir.
        Mr. Cardoza. Thank you. I will now turn it over to my
    Ranking Member, Mr. Neugebauer, for his question period.
        Mr. Neugebauer. Thank you, Mr. Chairman, and thank you for
    that last question. That was a very good question, very
    interesting response from our folks. This transition period
    that we have been talking about, I want to kind of explore that
    a little bit more. Is the three years, is that kind of a set-
    in-stone number and if it is, can you explain to me kind of
    what is going on there?
        Ms. Martens. The rule says that there has to be 36 months
    between last prohibited material and harvest, so that is, in
    effect, three years. We have taken many acres through
    transition and we have never grown nothing for three years. And
    I think it is a really important point to say that you don't do
    nothing, you don't leave that land idle, you don't get no
    income off of it. You just have to use organic practices for
    those 36 months and you cannot sell the crop as organic. But
    you can grow conventional hay, you can grow conventional
    soybeans, which work very well under organic management; just
    can't use GMO varieties.
        Many people that we work with have hay land, CRP land,
    other idle land coming out that can be organic immediately
    because nothing has been applied on them for the previous three
    years. They don't need to go through a three-year deliberate
    transition if nothing has been applied. So yes, it is three
    years, but there are many ways to do it where you don't lose
    income during that time nor do you lose a crop.
        Mr. Neugebauer. So would it be a fair assessment to say
    that the transition period, because it is three years, is not
    an impediment, necessarily, for if I am conventional farming,
    to move to organic farming, Mr. Lively?
        Mr. Lively. I don't think it is an impediment, no. I think
    that there are a few factors and I am going to speak from the
    corn industry because I know cattle and corn is about the only
    two crops that I focus on. Typically, when someone is doing
    what is called the transition crop, during those three years
    they might experience a slight loss in yield because they are
    not using the chemical fertilizers and whatnot they are used to
    using. But it is a great training ground for them and a period
    for them to learn how to do organic agriculture.
        I have never, and I have probably worked with
    certifications on over 60,000 acres of certified organic corn
    in South Dakota in the last year. I have never seen a producer
    lose money on a transition. I have seen him have less yield and
    have down years but never lose money and I have always seen the
    banks being willing to lend against it. The struggle is getting
    the bank to understand the process once it is organic and hey,
    this is a much higher margin, more expensive crop with higher
    input cost.
        But as Ms. Martens has mentioned, the idea of CRP land is
    becoming a phenomenal route for people wanting to get into the
    organic industry quicker. A lot of these are ranchers and
    farmers have huge tracts, quarters and quarters of CRP land and
    they are getting, you know, a nice annual fee for keeping it as
    CRP land. Maybe there is quite a bit of CRP land out there, I
    am not sure. I know how much there is in South and North
    Dakota. This land, if it has been treated according to CRP
    standards, would certify organically almost instantaneously.
        Now granted, a lot of CRP land was put in that is not
    farmable, which defeats the whole purpose, in my opinion, but
    that land would certify overnight, quickly, and what we are
    really talking about is an affidavit and the producer is
    willing to sign his affidavit saying hey, listen, it has been
    three years. I have been solid. I have done a good job. Here is
    my backup and management proof. There are a lot of guys that
    could go organic much quicker than they think.
        Another market for that transition corn would be the all-
    natural cattle industry. There is a significant difference
    between all-natural and 100 percent organic and we need to be
    very clear on that. The standards are clearly different. A lot
    of these all-natural producers would like to buy transition
    corn because they are basically buying what is organic corn for
    commodity prices during that time. So there are options for
    them and no, it is not sitting stagnant.
        Mr. Neugebauer. And you mentioned another important piece
    of that is the capital. Is there recognition in the capital
    markets, the lending markets, that this is, you know, a better
    opportunity economically for some of our producers and is the
    lending, farm lending industry, as a whole, fairly responsive
    to that?
        Mr. Lively. I would say that has been slow in coming, but
    it is coming. There is a lot of private equity capital coming
    into the space. A lot of these hedge funds that are sitting on
    tons of cash and have nothing to do with it are getting into
    the space. A few progressive banks, such as the Bank of
    Oklahoma and Rabobank, are putting some time around this and
    seeing the value for what it is. But as a whole, I would say
    the bank industry has not jumped on board yet. They are still
    very much tied to the commodity industry.
        Mr. Neugebauer. Anybody else want to respond to that?
        Ms. Martens. We have an organic farmers group that gets
    together during the winter for day-long meetings and pretty
    often, we have conventional farmers who are thinking about
    going organic bring their banker or their loan officer to the
    meetings so they can learn about organic farming and see what
    real organic farmers look like. And they usually go away
    feeling pretty comfortable with the whole situation because we
    don't look weird and we don't act weird. We act pretty
    responsible. And so it is an educational process, but bankers
    are generally fairly open to seeing successful farms because
    they see so many farms that are not successful, conventional
    ones.
        Mr. Neugebauer. Mr. Vieira.
        Mr. Vieira. Another type of crop, sweet potatoes, in our
    area is like a nematode and worms. And because there is no
    chemical to use for organic, we have to have at least one,
    sometimes two years of what we call dry farming or oats or
    winter rye. No irrigation. In our area, usually, from April to
    October, we have no rain that we like. We don't want rain at
    the time, so because there is no needing that at the time,
    during that period of time, so the nematodes and the white
    worms go away. So there are reasons why we don't farm during
    those three years. One is the requirement, by the rules, and
    the other one is to benefit us because we could farm something,
    but if we do farm, we have to irrigate and we are going to keep
    those pests alive, which we don't want to. Thank you.
        Mr. Neugebauer. Thank you very much.
        Mr. Cardoza. Thank you, Mr. Neugebauer. Mr. Etheridge.
        Mr. Etheridge. Thank you, Mr. Chairman, and thank you for
    this hearing. Let me thank all of the panelists and especially
    my friend, Mr. Pike, from Nashville, North Carolina. And I have
    had a chance to tour their operation and I would tell you that,
    and this was several years ago, they do an outstanding job,
    they really do. Mr. Pike, let me ask you a question. You
    mentioned your concern that you had about the U.S. organic
    market becoming reliant on organic feedstock from abroad and
    each one of you discussed it a little bit, specifically China
    and given what has happened in recent days with feedstock for
    pets and even today they pull more product off the shelves.
        My question is, and you had indicated that feedstock is
    about 25 percent less than domestic feedstock. In your opinion,
    does this call into question the quality standard for these
    products? You alluded to it. I am going to give you a chance to
    talk about it a little bit more. And finally, how can we be
    sure that these foreign grains are actually organic? And after
    you answer, I may give someone else a chance to comment because
    I have one more question for you.
        Mr. Pike. As Ms. Martens mentioned, we also prioritize our
    purchases in terms of local areas, branching out and of course,
    it would be the importation of product. Even at significant
    reduction in cost, we put that down on an as-needed basis. From
    the standpoint of quality, we test all of our ingredients for
    various and sundry protein, all the normal things and from what
    we have indicated, the quality has been at standard.
        It has not been above and it has not been below, but it has
    been at standard and so from that standpoint in our
    formulations, we do make any adjustments for that. But in terms
    of guaranteeing that it was organic, we rely strictly on the
    certification agencies, which are approved by our certification
    agency as a reliable source of the whole process, that any
    organic soybean farmer in our case, would go through.
        One of the things that I mentioned in my testimony, too, is
    the transition issue. That would also be a question of how they
    transition in these foreign markets and these are some of the
    things I would be interested in understanding.
        Mr. Etheridge. Let me have one follow-up with you and then
    I will ask some others to comment. What percentage of Braswell
    products are currently organic and in your opinion, are we
    still expecting to see this demand continue to grow as we have
    seen it over the last number of years?
        Mr. Pike. Yes. Currently our total organic production is
    roughly 30 percent of our total flock. In our feed milling
    operations, this represents close to 35 percent. We continue to
    see the growth. We supply feed to some broiler operations, as
    well as other egg operations. Our egg demand for branded egg
    products, as well as some of the house brands that you see in
    major grocery stores has continued to grow.
        It has been phenomenal. It just continues to blow our socks
    off every year when we do our market projections and budgets.
    Our limiting factor today is our supply of organic grains to
    keep our animals fed. One day without organic feed and our
    birds are no longer organic and the investment that we have in
    our birds, which is double of conventional, goes away
    overnight.
        Mr. Etheridge. You indicated poultry operations and other
    operations in the area that are organic, other than egg
    operations?
        Mr. Pike. Yes, there are some broiler operations over near
    Siler City that are growing. They are looking to double their
    production this year, as well, because of the demand for the
    product.
        Mr. Etheridge. Just so everyone will know, the poultry
    operation in North Carolina is substantial. Ms. Martens, you
    mentioned in your testimony the difficulty organic producers
    face in obtaining bank loans and other sources of financing.
    Can you just share with us briefly the help you may have
    received from USDA's rural development in obtaining your
    additional loan in getting your feed mill up and running?
        Ms. Martens. Well, we were very fortunate to get a rural
    development loan. It is a good program that stimulates rural
    development in that it requires that farmers or other managers
    work together in groups and develop ideas that will help the
    community, itself, into a business plan. We did get that. It
    was not a substantial amount of financing for the mill.
    Fortunately, we bought the mill at a time when the market was
    expanding, so we haven't needed a whole lot of financial
    assistance because we have had such a vastly expanding market
    simultaneously.
        There is money available. The bankers we work with are very
    interested in the whole organic process and the opportunities
    and they have been very good to us, very good to work with and
    we will help other farmers get into contact with the same
    bankers. So I have not seen that to be a major impediment for
    most people if they can document that they are good farm
    managers. Because one thing I want to emphasize is it really
    takes a superior farmer to be an organic farmer.
        It takes somebody who is willing to not just find
    organically approved substituted materials, but to really
    change their management style, become a lot more skilled at
    observation and decision making and timing. And so for a banker
    to be willing to extend credit, they have to see that the
    person does have those skills and has a good track record and a
    good possibility of being a skilled organic farmer.
        Mr. Etheridge. Thank you. You are attentive to detail. Let
    me thank each of you and I yield back.
        Mr. Cardoza. Thank you, Mr. Etheridge. Mr. Kuhl.
        Mr. Kuhl. Yes, Mr. Chairman. Just a quick question to the
    panel. We spent a lot of time on this transition period.
    Obviously, that is very important and seems like to expand the
    markets, we have got to do more there, from a Committee
    standpoint. What was the most difficult part of the transition
    for each one of you in your business? And keep in mind that I
    am interested in that aspect that we can be helpful with from a
    Committee standpoint.
        Ms. Martens. I think the biggest impediment for transition
    is thinking that you can do it. It is a mental thing more than
    any kind of operational thing. Believing that it is possible
    and then finding other people that you can talk to and learn
    the tools and the techniques and have somebody there for
    support to say okay, yes, you do have a few weeds. That is not
    going to kill you, you are still going to get a good crop. So
    as far as you are concerned, we need strong organizational
    support for programs like SARE, like ATTRA. They are
    information, but they also fund programs that will help farmers
    to help other farmers.
        We need a sense that there are other people in the area
    that are going to be helping them. So I think mentoring
    programs make a lot of sense if farmers can take time out of
    their busy schedule to do that. What I see is that just
    throwing money at organics isn't necessarily the solution. It
    has to be focused in ways where farmers who are wanting
    information can get that information and can put it to use. So
    when there are problems or mistakes or insecurities, there is
    someone there to talk to.
        Mr. Kuhl. Thank you.
        Mr. Lively. I would say that, you know, the obstacles are
    there and the issues are there, but after seven years, it has
    just kind of become a cost of doing business. You deal with it.
    From my personal experience on the cattle side, we have one of
    the largest organic ranches in the Nation in eastern Oregon,
    about 155,000 acres; 90,000 of which is BLM land. This ranch
    covers two different counties and two different BLM districts.
    One district has been unbelievably cooperative about working
    with us in co-managing the land, not spraying, allowing us to
    do the weed control.
        The other district has been somewhat impossible to deal
    with and telling us that they have absolutely no willingness at
    all and they are going to spray where they want to spray and it
    is their land, although we are stuck in a 99 year lease with
    them and we are trying to graze organic cattle there. So I
    would say that the challenges would be getting more cooperation
    from the other agencies, such as the BLM and I really do
    believe there is a huge opportunity in the CRP program. I think
    it is a very untapped resource where there is, I wouldn't use
    the word cheap, but available low-cost organic land.
        Mr. Kuhl. Mr. Pike.
        Mr. Pike. You know, one of the things that the Committee
    needs to understand is that organics is not only herbicide and
    pesticide issues. It also pertains to environmental as well as
    animal care guidelines and one of the things that took our
    company in making the transition from our normal cage laying
    operations was going to a free roaming mode of production. For
    our people, it was more of a mindset, accepting these whole new
    ways of doing things. In terms of our transition and our
    livestock, the three years doesn't really apply, but it is a
    definite change in how we manage our birds. But, again, working
    back with the corn farmers and helping them and educating them
    is part of our process, as well.
        Mr. Vieira. Sir, in the sweet potato and the yam industry,
    one of the most difficult things has been convincing the sweet
    potato costs of California or everybody involved in investing
    more money in developing new types of sweet potatoes like pox
    resistant or nematode resistant or white worm resistant. That
    has been one of the most difficult things. In our industry, we
    would like to have the help for research and new varieties and
    new types of sweet potatoes that can resist all the types of
    pests that we have in our soil in our area. Thank you, sir.
        Mr. Kuhl. Thank you. All right, Mr. Chairman, I yield back.
        Mr. Cardoza. Thank you. Clearly, this is a panel of
    innovators and pioneers. You have all mentioned research at one
    point or another and that is something that this Committee has
    consistently heard from panelists across the spectrum,
    conventional and organic farmers. We are going to be doing a
    hearing on a bill about specialty crops that most of the
    members of this panel are co-signers on and it will be done in
    Mr. Holden's Subcommittee, but it will include all these
    concerns for research.
        And the commitment of this Committee has been as we go
    forward and write the farm bill, that we are certainly going to
    be very sensitive to making sure that whatever we write in
    every section of the bill also applies to organic producers, so
    you will, for the first time, be included in all aspects of the
    bill. Thank you so much for your testimony. You have done a
    great job today. I would like to call up the third panel at
    this time.
        Today we have, as I said previously, Ms. Sandra Marquardt,
    President of On the Mark Public Relations, Silver Spring,
    Maryland on behalf of Ms. La Rhea Pepper, President of the
    Organic Essentials, Inc. of O'Donnell, Texas. We have Mr. Lynn
    Clarkson, President of the Clarkson Grain Company from Cerro
    Gordo, Illinois. We have Mr. Rich Ghilarducci, President and
    CEO of the Humboldt Creamery in Fortuna, California and we have
    Ms. Nicole Bernard Dawes, President and COO of Late July snacks
    from Hyannis, Massachusetts. I want to thank you again for the
    snacks. I have been munching them all morning and it is
    probably going to effectively be my lunch today, so thank you
    for the sustenance here.
        I also want to mention that, as you can note, a number of
    the panel and Committee members have had to transition to other
    meetings. That in no way should discourage your comments
    because they will all review and get transcripts of this
    hearing and I will make sure to pass on your comments to them.
    You comments are very important to this Committee.
    Unfortunately, members in the Congress have to multi-task and
    when you get near the lunch hour, we have several meetings that
    sort of trigger that second round of meetings they have to
    attend to, so I apologize for the lack of members, but they
    will, in fact, review your testimony. And would you please
    start, Ms. Marquardt?

     STATEMENT OF SANDRA MARQUARDT, PRESIDENT, ON THE MARK PUBLIC
    RELATIONS, ON BEHALF OF MS. LA RHEA PEPPER, PRESIDENT, ORGANIC
                            ESSENTIALS, INC.

        Ms. Marquardt. Good morning, Mr. Chairman. It has been a
    wonderful, wonderful hearing. Thank you very much for hosting
    it. My name is Sandra Marquardt and I thank you for allowing me
    to testify on behalf of La Rhea Pepper, who wishes she could be
    here but cannot. I will be talking about the burgeoning organic
    fiber sector and by that, I am referring to organic cotton,
    such as this, the organic wool, organic silk and really, any
    natural fiber that is grown in an organic manner. I will do my
    best to represent La Rhea Pepper, but she will be coming here
    to Washington, D.C. this summer and maybe you two can chat
    directly.
        Mr. Cardoza. Absolutely.
        Ms. Marquardt. Thank you. So La Rhea Pepper is the CEO of
    Organic Essentials in O'Donnell, Texas. Organic Essentials
    manufactures organic cotton personal care products, such as
    cotton balls and swabs and cotton rounds and until recently,
    feminine hygiene products. She is also an organic cotton grower
    farming 1100 acres of organic cotton near Lubbock, Texas. Given
    La Rhea and her husband Terry's concern about the extensive use
    of pesticides on the approximately 3.5 million acres of cotton
    around them, the Peppers became certified organic farmers in
    1991 and were certified by the Texas Department of Agriculture.
        In 1993 they and a handful of other family farmers created
    the Texas Organic Cotton Marketing Cooperative, which is also
    called TOCMC. And TOCMC has since expanded to 30 family farmers
    growing 8,000 acres of organic cotton and this has enabled the
    high plains of Texas to become the number one organic
    production area in the United States and one of the top 4
    production areas for organic cotton in the world. TOCMC created
    Organic Essentials in 1996 to market value added products using
    a short, staple length fiber that otherwise falls outside of
    the spinning qualifications for yarn, et cetera, and which was
    otherwise sold at low prices on the conventional market. These
    products are now available everywhere from Whole Foods to
    places like CVS and even Wal-Mart.
        In the late 1990s, La Rhea joined the Organic Trade
    Association's board of directors where she spearheaded the
    effort to create cutting edge standards for the processing,
    such as dyeing and printing, finishing of organic fiber
    products. This would enable a product to be considered organic
    from field to finished product. In 2002 La Rhea helped co-found
    a non-profit organization called the Organic Exchange, which is
    based in California, in Oakland, and it facilitates expansion
    of the global organic fiber industry.
        Now, expansion is really what we have seen. Globally, sales
    of organic cotton products increased an average of 35 percent
    annually to $583 million in 2005 and these sales are
    anticipated to skyrocket to $2.5 billion by the end of next
    year, reflecting an average income or an average annual growth
    rate of 116 percent, which is unprecedented in the conventional
    sector, that is for sure.
        Companies using organic fiber today include such well known
    brands as Nike, Patagonia, Nordstrom, again, Wal-Mart, as well
    as more than 1200 small and medium size brands, retailers and
    well-known designers such as Paul McCartney's daughter, Stella.
    The irony is that as we have heard before, for a number of
    other crops, organic crops, there isn't enough organic cotton
    to go around for the number of brands that want to use it.
    Another irony, the United States used to be tied with Turkey as
    the largest organic cotton production area in the world, but
    the growth today is happening in Turkey, India and China;
    everywhere else but the United States.
        Now why is this incredible growth opportunity bypassing the
    United States? Well, U.S. farmers face barriers such as a five
    percent higher insurance premium for the same coverage. Again,
    we talked about that earlier. And new organic cotton growers
    face having their crops decertified is sprayed by conventional
    insecticides as part of the Boll Weevil Eradication Program.
    Lastly, while we thank Cotton Incorporated for it annual
    financial survey support of OTA's organic cotton acreage
    survey, we asked that it provide the same kind of support for
    technical research, education and promotion of organic cotton.
        Mr. Chairman, I thank you again for your interest in
    organic production and we look forward to working with you in
    any way possible to help grow the organic fiber market. Thank
    you again.
        [The prepared statement of Ms. Pepper appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you. Mr. Clarkson.

    STATEMENT OF LYNN CLARKSON, PRESIDENT, CLARKSON GRAIN COMPANY,
                                  INC.

        Mr. Clarkson. Mr. Chairman, I would like to introduce
    myself as Lynn Clarkson, President of Clarkson Grain Company in
    Illinois. I would like to thank you and your Committee for your
    delightful interest in organic and I would like to encourage
    that.
        My company works with farmers throughout the United States,
    mostly in grains and oils, oil seeds, which means we are
    operative between the Alleghenies and the Rockies and from the
    Gulf of Mexico to the Canadian border. We work with corns,
    white, yellow and blue; soybeans and wheat, but primarily corns
    and wheat. Those are the farmers who are at the foundation
    level of the growth in meats and dairy products. Those are also
    the farmers who almost all have products that have to go
    through a conversion process. They are not selling directly to
    consumers. They are selling inputs to other parts of the
    industry.
        Almost every panelist here has underlined the major
    challenge as a supply challenge. Our industry has done a
    phenomenal job in finding demand. To satisfy demand, we have to
    have supply and we are not doing so well here. I would like to
    give my version of Economics 101 for organic agriculture. When
    I left my office yesterday, we were paying approximately $3.50
    a bushel for conventional corn delivered to central Illinois.
        At the same time, we were paying over $7 a bushel for
    organic corn at the farm, almost anywhere in the Midwest. We
    were paying approximately $7.50 for conventional soybean
    delivered into central Illinois and probably a minimum $14 a
    bushel for any organic soybean. The soybean doesn't even have
    to have a lot of self-respect to garner the $14. We will take
    almost any quality at that level and we are lucky to get it.
        Now, prices don't mean a lot without a consideration of
    yield. And many pundits have suggested that the organic farmer
    can't raise yields competitive with his conventional neighbor.
    Approximately 158 replicated studies by Iowa State University
    would indicate that on the average, organic farmers should
    expect between 90 and 95 percent of the yield of his
    conventional neighbor.
        What are his costs? His costs are no higher than his
    conventional neighbor. So what does that mean for the net
    effect on his finances? They are significantly better. They are
    so much better that the best organic farmers in their pursuit
    of land are offering premiums to land owners of $20 to $50 an
    acre to allow them to rent land and convert it to organic.
        So if what I said is true, why are we having difficulty in
    finding farmers willing to convert? Why are we having
    difficulty in finding additional land? There is a host of
    reasons varying from simple to complex and many of those
    reasons go to stepping into the unknown. Others have asked for
    help through extension to remove some of the risks of going
    into the unknown. There is a new level of selling not to the
    neighborhood elevator. We frequently have to sell to companies
    located hundreds of miles away.
        Also in the organic world there are not a lot of elevators
    dedicated so your buyers will expect you to hold your crop on
    the farm until the buyer needs it. That is an inconvenience
    factor. There are several inconvenience factors. And then we
    step up to today's reality where we have ethanol changing the
    face of rural America. We are now paying more for conventional
    corn than we were for organic corn a year and a half ago. We
    have essentially doubled the price of conventional corn.
        With the conventional farmers now making or looking at the
    potential of profits down the road, the highest in their lives,
    we are finding extreme difficulty in convincing anyone to do
    anything that is inconvenient. Even though the net return to
    the farm might be between 50 and 100 percent higher, there are
    inconvenience factors here. So one of the unintended
    consequences of the U.S. ethanol policy is a restriction on
    what we can do in the organic world.
        There are infrastructure issues, too, and I would like to
    leave you with one thought about blue corn. I hope that you
    have enjoyed a blue corn chip at someplace in your diet. And
    you and I both know it is corn, but there is one large
    organization that doesn't claim it is corn. That is the USDA. A
    blue corn farmer technically cannot seal his crop because it is
    not considered to be corn. Now why isn't it corn? Because USDA
    relies on GIPSA, the grain inspection, stockyards and packers
    administration, to define corn. If they don't define it, it is
    not corn. To add insult to injury, under current grading rules
    of the USDA, blue corn is 100 percent damaged because the blue
    color suggests mold.
        So there are some things that could be done fairly cheaply
    here to adjust the bureaucracy to some of the nuances of our
    world. Thank you very much, Mr. Chairman.
        [The prepared statement of Mr. Clarkson appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you. Go ahead, sir.

      STATEMENT OF RICH GHILARDUCCI, PRESIDENT AND CEO, HUMBOLDT
                                CREAMERY

        Mr. Ghilarducci. Good morning, Chairman Cardoza and members
    of the Subcommittee. My name is Rich Ghilarducci and I am
    President/CEO of Humboldt Creamery Association, a dairy
    cooperative owned by over 50 dairy families located along the
    north coast of California. With the milk that our dairy
    families produce, our processing facilities, which are member
    owned, manufacture both organic and conventional ice cream,
    fluid milk and powdered milk products. Today we employ over 250
    people and our products are sold in all 50 States and
    international markets.
        Humboldt Creamery Association's organic program started in
    2001 with three dairy families representing less than 5 percent
    of our milk supply. Today, organic milk production represents
    60 percent of our milk supply from 30 dairy families. I would
    like to thank the Subcommittee for the opportunity to testify
    in this groundbreaking hearing about organic agriculture, which
    is an important topic for our members, our region and consumers
    throughout the United States.
        Humboldt Creamery Association was founded in 1929. We are
    the oldest dairy cooperative in the State of California. Most,
    if not all, of our 50 member/owner families are direct
    descendants of the 152 founding members of the cooperative. In
    the last few years, some members of the Humboldt Creamery
    Association were forced to leave the dairy business because it
    was no longer financially feasible to maintain their family
    dairies.
        It is especially disappointing to know that this decision
    was often made when the dairy was to be transitioned from one
    generation to the next. Not only for Humboldt Creamery
    Association, but throughout the United States, succession is
    one of the leading factors in the declining number of family
    farms. However, during the same period of time, something very
    positive happened within our cooperative. Over 25 of our family
    farms transitioned from conventional dairy operations to
    organic dairy operations. In 2006 alone, 15 of our member-owned
    dairies converted to certified organic.
        A cornerstone of organic dairy management is pasture
    grazing, which our members do throughout most of the year
    except for during the most inclement weather. Another is a
    natural preventative approach to livestock healthcare, as
    opposed to the use of antibiotics and other synthetic
    treatments. These techniques of pasture and livestock
    management have been the method of dairying in our region for
    generations. So for many of the cooperative families, organic
    certification is a validation of a dairy in practice. It has
    been their daily routine for many years.
        We request that this Subcommittee recognize the enormous
    opportunity that organic agriculture offers family farmers
    throughout the United States to once again fill a role that has
    been vanishing, that of the entrepreneurial family farm which
    contributes to the United States economy. In order to do this,
    infrastructure must be supported by the United States Congress
    to ensure the industry's growth.
        Humboldt Creamery Association believes there are two key
    topics that need to be supported by this Subcommittee;
    increased funding for the USDA National Organic Program and
    financial support for technical assistance in transition from
    conventional to organic. The USDA Organic seal is recognized by
    consumers to mean strict production and environmental
    standards, are behind every product labeled organic. It is up
    to the USDA to ensure the credibility of the organic label.
    Funding and staffing at the USDA National Organic Program must
    keep pace with the growing marketplace.
        Making the transition from conventional to organic dairying
    can be cumbersome to a dairy farmer. It requires specific
    knowledge of growing organic crops to feed their dairy animals,
    as well as specialized livestock management techniques. In
    order to ease this transition and help farmers with the change,
    Humboldt Creamery urges the Subcommittee to support
    authorization for educational programs and technical training
    in organic production.
        The SARE, the ATTRA programs have been successful in this
    area in the past. EQUIP has also been successful. More
    ambitious organic transition programs, at least in dairy,
    should be carefully scrutinized by this Committee to ensure
    that they will not disrupt the orderly development of the
    organic milk supply and allow economics to dictate supply. For
    Humboldt Creamery Association, the growing organic dairy market
    has provided an exciting, viable opportunity for future
    generations.
        In conclusion, I want to thank Chairman Cardoza and the
    House Subcommittee and I am a firm believer in the United
    States organic industry and the important role that the USDA
    plays in the integrity of the industry. I would be pleased to
    answer any questions.
        [The prepared statement of Mr. Ghilarducci appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you very much, sir. Ms. Dawes.

    STATEMENT OF NICOLE BERNARD DAWES, PRESIDENT AND COO, LATE JULY
                                 SNACKS

        Ms. Bernard Dawes. Chairman Cardoza, Ranking Member
    Neugebauer and members of the Subcommittee, I want to thank you
    for inviting me to this historic hearing.
        My name is Nicole Bernard Dawes and I am the President and
    COO of Late July Organic Snacks. Our factory and company
    headquarters are located on Cape Cod in Massachusetts and on
    any given day, we have three generations at our family
    business, including my father, who is my business partner and
    here today, and at least one of my young children is regularly
    at the office with us. We employ 30 people and manufacture
    exclusively USDA Certified Organic products. Our products are
    available in all 50 States, as well as internationally, and we
    are working on expanding our export program.
        Since our founding in 2003, we have grown over 40 percent
    annually and our current run rate has us at over $7 million in
    annual sales. This is the third national food company started
    by my family. The first was Cape Cod Potato Chips and the
    second was Chatham Village Foods. I am here today to discuss
    the incredible opportunity this new industry represents, the
    challenges that we face, how organic products benefit our
    country and specific ways that Congress can help us.
        I have spent my entire life in the food business; first as
    a child at my mother's natural food store in the 1970s and
    later at my parents' businesses and now at Late July Organic
    Snacks. I believe our nation is at a major turning point with
    our food supply and this Congress has an incredible opportunity
    to change, for the better, the future of our food supply by
    becoming advocates for organic agriculture.
        Recent events have underscored to people the need to care
    about where their food comes from, what is in it and the impact
    their buying choices have on the food chain. Parents are
    checking ingredients before they pack their kids' lunch and
    this generation of kids are learning to ask questions about
    their food. The National Organic Program created a level
    playing field, enabling companies like Late July to compete
    equally against much larger companies. It established a rigid
    set of standards that gave our industry credibility in the
    marketplace.
        Now everybody carrying the USDA seal is in the same boat.
    We are all subject to the same strict standards. I believe that
    organic agriculture is the gold standard for the food business.
    It offers family farms an economically viable alternative,
    produces innovation and most importantly, provides an
    opportunity for businesses and individuals to put environmental
    stewardship into action.
        For all these reasons, organic production is a worthwhile
    endeavor for food entrepreneurs like myself and not
    coincidentally, it is also the fastest growing segment of the
    food industry. But there are challenges. For us, namely, cost.
    At Late July, our ingredients can be up to 10 times the price
    of one of our conventional competitors and supply shortages are
    at the root of that. We also have to spend significantly for
    research and development. And while we try to keep our prices
    competitive with the conventional brands, we do still have to
    charge more.
        We are also finding that some channels, like school lunch
    programs, would like to offer more organic products but can't
    afford the higher costs. We are also facing confusion with all-
    natural or conventional in the marketplace. Higher costs are
    acceptable to shoppers as long as they know and understand what
    the USDA Organic seal stands for, but we are finding, as we
    branch out into more and more mainstream accounts, the USDA
    Organic seal and its meaning needs a significant amount of
    explaining.
        Late July and companies like ours are major customers for
    organic commodities and we need to broaden our customer base in
    order to grow the industry. But we need to do this while
    maintaining the same strict standards that we have so our
    industry never loses the credibility we have worked so hard to
    build. Why does all this matter? Organic agriculture reduces
    the amount of persistent pesticides in our country's air and
    groundwater. Organic farmers don't use petrochemical based
    fertilizers and have a lower carbon footprint per pound.
        So much today is said about reducing our impact on the
    environment and making better food choices, but as individuals,
    it is hard to know where to start. Organic products are a
    gateway. That is why organic farming is such an important
    practice to encourage in the U.S., something you can do when
    you are shopping for your food and when you are making
    Congressional policy decisions.
        As a child of the 1970s natural food movement, I was teased
    for the contents of my lunchbox. My mother would pack carob
    coated rice cakes and miso soup and it was products like these
    that created the old stereotype that organic products don't
    taste very good. The National Organic Program was the real
    impetus we needed to create the kind of organic products I
    could only dream about as a child. And while it has been a
    groundbreaking initiative, it still needs much support.
        I am here to ask for: increased funding for the National
    Organic Program so it can be fully implemented, effectively
    enforced and better understood; the removal of export barriers
    and oversight on imports; assistance in getting organic
    programs to school lunch programs; support for the Organic
    Trade Association's recommendations. Finally and most
    importantly, I ask you to take a position in favor of organic
    agriculture.
        I reiterate that we are on the verge of a major turning
    point in our food supply and this Congress has a real
    opportunity to make a difference. Thank you so much for this
    honor.
        [The prepared statement of Ms. Bernard Dawes appears at the
    conclusion of the hearing:]
        Mr. Cardoza. Thank you very much. I have less questions and
    I have a couple answers in statements that I want to present.
    First of all, Mr. Clarkson, I was fascinated with your story
    about the blue corn not being recognized as corn. I do enjoy
    blue corn tortillas and chips. I think it is emblematic of how
    we oftentimes have a disconnect from the real world to USDA and
    how come we can't bridge that gap more readily than we do
    sometimes is frustrating to both farmers and to members of
    Congress. I am going to ask my staff to prepare a letter from
    this Committee to USDA to ask that this particular issue be
    resolved forthwith and hopefully we will have some impact. If
    not, please feel free to contact us soon.
        Mr. Ghilarducci, I hope I haven't butchered your name too
    badly. I have a history of butchering names.
        Mr. Ghilarducci. Been worse.
        Mr. Cardoza. You mentioned, as Ms. Dawes does and others
    today, that funding for the USDA program for timely answers and
    timely issues is critically important and I think you have
    really hit on something that we are going to have to pursue and
    hopefully the work that we are going to do in this farm bill
    will have some impact on that, but I am going to have a
    conversation again with Ms. DeLauro, who is the Chairwoman of
    the Ag Appropriations Subcommittee here in the House. I know
    she is incredibly supportive of organics in general. Even
    though she comes from more of an urban setting than a rural
    setting, she is a fabulous champion for agriculture in so many
    ways and really works very hard to make sure that we do the
    right thing in this area of the Appropriations Committee. We
    will be communicating with her either through letter or private
    communication to try and see that we get organics fully funded
    in this farm cycle and so that is another area that we will
    pursue.
        Finally, Ms. Dawes, you mentioned the importance of the
    organic seal as part of your testimony and I will tell you that
    is something of incredible concern to me as we go forward.
    Making sure that seal that you have worked so hard to build
    maintains its value and only a few bad actors or a few
    violations could really destroy something that you have worked
    so hard to build up and the value of that. And I think it is
    going to be one of the top priorities of this Committee to
    continue to do oversight in this area, whether it be in
    international imports and whether or not they meet the same
    standards or whether or not there are a few bad actors in the
    industry that could harm or damage the work that you have so
    diligently put in.
        I just want to make one final observation before I ask my
    colleague, Ms. Gillibrand, if she would like to ask some
    questions. I have been incredibly impressed with the
    entrepreneurial spirit, with the commitment and frankly, the
    successful nature that the folks who have testified in all
    three panels today have exhibited. I am very impressed with
    that and I encourage you; you don't need much encouragement
    from Congress, but you have done it of your own spirit and your
    own hard work. It reminds me of that kind of spirit that my
    grandparents had when they came to this country and farmed the
    land in a natural way. It was just the way they knew, was to
    not use pesticides or things, but they just did it mainly
    because that was what they could afford and that was what they
    knew from the old country. And I see that same kind of spirit
    in so many of you and it makes me feel good about the future of
    agriculture.
        Ms. Gillibrand, it is all yours.
        Ms. Gillibrand. Thank you, Mr. Chairman. Thank you all for
    coming. I really appreciate your dedication and your commitment
    to organic farming. I come from a district in upstate New York
    and we have a lot of organic farming, a lot of agriculture, a
    great history in agriculture and I am very worried about the
    future of agriculture in this country.
        I am very worried about our dairy farms, which are dying
    because the price of milk is too low and the price of gas is
    too high and the price of feed is too high and they are really
    having a tough time sustaining their business. So I want to
    focus a bit on some of the challenges that you have, to hear a
    little bit more about them.
        Ms. Dawes, you talked about trade being an impacting
    effect. You said there are problems with the export laws and
    the import laws. Can you elaborate on the effects they have on
    you and what laws you would want changed and how?
        Ms. Dawes. Certainly. I will say, at our two previous
    businesses, Cape Cod Potato Chips and Chatham Village Foods,
    exports represented a significant portion of our revenue. But
    at Late July at the moment, our primary exports are to Canada
    and a few spotty locations around the world. There are some
    inconsistencies between the NOP rules and in other organic
    rules in, say, the EU which makes it very difficult for us to
    produce products that meet both standards.
        We are working on that now, but we are a small family
    business and to have to spend, you know, significantly to
    research how to do what we do here in another country and also,
    you know, all the other costs that are associated with that, I
    mean, despite the huge opportunity it represents, it is
    something that, while we would like to do it right now, I think
    we are probably still a few years away from really benefiting
    from it.
        On the import side, really, the oversight on the imports
    is, from my perspective, just critically important to
    maintaining the integrity of our industry. People have to feel
    that every single organic product that they buy is filled with
    ingredients that maintain our strict NOP standards.
        Ms. Gillibrand. So it is your sense that in the imports
    markets that our oversight is insufficient, that there is not
    enough testing of other brands that come in or what type of
    oversight would you like to see more of?
        Ms. Dawes. I think that it is just so new and as the market
    is growing so fast, we need to make sure that we maintain that
    strict oversight and that strict oversight is communicated to
    the public.
        Ms. Gillibrand. Okay. And then on the export side, what
    regulations are too expensive or difficult for you to meet that
    the European Union requires?
        Ms. Dawes. We are having trouble right now finding a dairy
    ingredient that we can use in our products to sell in the
    European Union. All of our dairy ingredients are from some of
    the best dairy farms in this country. But there are some
    differences in the regulations between our production practices
    and the EU production practices that make it impossible for us
    to market those ingredients in Europe right now.
        Ms. Gillibrand. What production practices?
        Ms. Dawes. I think a dairy producer would probably be more
    qualified to talk about that.
        Ms. Gillibrand. Is it that dairy is not organic?
        Ms. Dawes. No, no. Absolutely not. The dairy meets all of
    our strict organic; it is more on the processing side.
        Ms. Gillibrand. Okay. Okay, that is helpful. Have any of
    you been non-organic and moved towards organic, or have you all
    started your farms as organic farms?
        Mr. Ghilarducci. For our members, dairy members, initially
    they were all conventional dairies and I shouldn't say all of
    them. Which is kind of a breath of fresh air. Three of our
    members are first generation farmers that actually started in
    the dairy industry and that is something very unique, to see
    people enter the industry and the only way they have been able
    to do that is through organics. But all of our dairies, the
    others besides those three, have converted from conventional to
    organic.
        Ms. Gillibrand. What kind of support or ideas do you have
    for us, as legislators, to facilitate a farmer to move from
    regular farming to organic farming, because I know that is a
    very, very costly effort, and what kind of legislative changes
    or supports would you see would be valuable to facilitate that
    if a farmer chooses to become an organic farmer?
        Mr. Ghilarducci. For us in the dairy sector, what I see is
    education is the most important thing, through the ATTRA
    program or the SARE program. And when I say that it is obvious
    there is an initial up-front cost, but if we can work with them
    to become efficient in their new practices of organic dairying
    long-term, that is what is sustainable for their businesses.
    And I would also caution, as far as direct payments for
    conversion. I think the marketplace has taken care of that and
    recent history has shown, in the dairy sector, that has worked
    adequately to convert dairies.
        Mr. Clarkson. Might I offer you a couple comments in
    response to some of your questions? Many of the U.S. feed
    producers, corn, soybean, soybean meal, technically meet all
    European standards, but they don't file as if they meet them.
    You can't use Chilean nitrate for fertilizer under the European
    rules; under the U.S. rules, you can. So we have to get an
    affidavit from the farmer saying that he doesn't. I don't know
    if you have ever tried to chase a farmer down to get him to
    sign a document. It is difficult.
        Ms. Gillibrand. I can imagine.
        Mr. Clarkson. It is extremely difficult. I want to second
    my colleague's comments about the service of ATTRA and others
    in providing information. Much of the difficulty is in helping
    people step into the unknown. It is not a system they are used
    to and in conventional farming, you can lay off responsibility
    of third party quite easily. You write a big check and that
    party takes care of the nutrition and the weed and pest
    control.
        In the organic world, the farmer has to do it himself.
    There are no third parties there today; 10 years from now there
    may be. But there is more individual responsibility. And what I
    would ask you for help in, my company exports to Japan, Taiwan,
    Korea, western Europe, sometimes South America and Canada. The
    biggest difficulties we deal with in sending an organic product
    aren't strictly about organics. It is about GMO contamination.
        The Koreans, for instance, have the tightest standard in
    the world, I might say an absurd standard. It is 0. And 0 is a
    long, long way. The testing is done when containers or
    shipments arrive in Korea. I would like to see some negotiation
    so we can test and decide whether it is acceptable or
    rejectable before we invest in international freight. So that
    is a conversation I would like to see moved to a conclusion.
        Ms. Gillibrand. Thank you.
        Mr. Cardoza. Thank you. I want to thank everyone for your
    time and for your extremely thoughtful testimony on the state
    of organic agriculture in the United States. This hearing was
    long overdue, as organics have become an increasingly powerful
    force in agriculture and one that truly deserves our full
    attention and respect. Again, I must give credit to Chairman
    Peterson for not only creating this Subcommittee for specific
    oversight responsibility over organics, but for also
    recognizing the value of including more stakeholders in writing
    the farm bill than in previous years.
        We heard from a number of people in the organic industry
    today from nearly every region of the country, representing
    nearly all the major organic commodities. There are certainly
    challenges that organic agriculture is facing, including lack
    of research and adequate crop insurance, highland values and
    countless other challenges. However, it seems clear that
    despite these obstacles, organic agriculture is growing with
    leaps and bounds, providing high-quality products for a
    demanding consumer.
        But there is more work for this Subcommittee to do,
    clearly. First and foremost, we must maintain the integrity of
    the organic seal we just spoke about. Without this seal, the
    unparalleled confidence it brings, consumers cannot
    differentiate between the products that have met our most
    stringent standards and those that are only claiming to do so.
        This is especially important for the imports of organic
    products. I am extremely concerned that small fissures in the
    confidence of organic products from foreign countries can and
    will have a disastrous effect on the domestic organic industry
    if we are not careful. Furthermore, we must look closely at the
    transition procedures for moving from conventional to organic
    agriculture and how these rules and regulations are working in
    the real world and out in the field.
        Also, there is obviously a need for more research dollars
    for organic agriculture to identify better farming methods and
    plant resistant stocks. However, as we move into the 2007 Farm
    Bill, we face a number of these challenges, not the least of
    which is finding ways to pay for new and expanded programs for
    organics, for specialty crops, for bio-energy and other sectors
    of agriculture that have not been well-represented in previous
    farm bills.
        I urge you all to be careful in evaluating your asks. So
    are we are going to have to be fiscally responsible and as we
    move forward, we have to look for ways to maximize every dollar
    the Federal government expends. I say that in every committee
    that I serve on. I say it in all areas. Frankly, we are far to
    stretch, with our Federal budget, to be able to do all the
    things that we want to do and we are going to have to be very
    strategic in what we ask for.
        This hearing was an important first step in that process
    and I truly thank you all for your obvious commitment to
    organic agriculture. I look forward to working with you as we
    continue our farm bill discussions and beyond, as we bring
    organics fully into the fold of Federal programs and the
    Federal agricultural community. I am very pleased that you all
    were here today. Thank you very much. Under the rules of this
    Committee, the record of today's hearing will remain open for
    10 days to receive additional material and supplementary
    written responses from witnesses to any question posed by a
    member of the panel. This hearing of the Horticulture and
    Organic Agriculture Subcommittee is hereby adjourned.
        [Whereupon, at 12:45 p.m., the Subcommittee was adjourned.]

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