[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


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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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